CPUC Approves Gas Storage to Mitigate Volatility

Even though natural gas prices have moderated, the California Public Utilities Commission said that a vote to permit the new Lodi Gas Storage facility would save ratepayers money. Commissioner John Bohn noted that approving the permit on March 2, instead of delaying the vote, would increase gas storage by 1 billion cubic feet (bcf) this year. The commission also voted to start a new phase of hearings to implement its California Solar Initiative. Lodi Gas received a certificate of public convenience and necessity after the CPUC concluded that potential noise and emission impacts from building the 128-acre storage facility on agricultural land, and a six-mile pipeline, could be adequately mitigated. Construction, which will also include an interconnection site with Pacific Gas & Electric, is expected to take up to eight months. Regulators also agreed to allow the company to charge market-based rates to promote competition in gas storage facilities. Bohn said the facility will allow for "lower and less volatile gas prices and greater supplies." The facility's capacity will be up to 7 bcf, with about 1.5 bcf in cushion gas. Initial withdrawals are estimated to be in the range of 50 million cubic feet a day. Injections and withdrawals are expected to grow up to 100 MMcfd. In other regulatory action, a new rulemaking was launched for the solar initiative to evaluate how to optimize the program's effectiveness, including developing performance-based subsidies. It will also factor the federal tax production credit into the incentive calculations. A week after lawmakers raised concerns about the $2.5 billion solar program's 10-year price tag, commissioner Rachelle Chong said she would do her part to make sure the regulatory version of the Million Solar Roofs bill is cost-effective. She urged the commission at this week's meeting "to stay focused on the program's goal - increasing actual solar power." She added that the funds should not be subsidizing the solar industry for its own sake. Photovoltaic panels "should not be in the garage, should not be on the north side of the roof, or deep in a redwood forest." Last week, the Senate Energy, Utilities, and Commerce Committee pressured CPUC president Mike Peevey to include safeguards to ensure that the program stays on track (Circuit, Feb. 24, 2006). The CPUC staff is holding a March 16 workshop on the development of solar performance-based standards to replace the capacity-based incentives. The capacity incentives have left the industry open to criticism because panels do not always deliver what their nameplate capacity allows. The new rulemaking will also include evaluating whether to tie the solar rebate to efficiency standards, considering other solar technologies, and assessing whether to provide no- or low-cost financing to ensure that low-income solar projects materialize. Although the solar initiative is a big focus of the new proceeding, it is not the sole one. The new rulemaking will also evaluate the Self-Generation Incentive Program, which provides subsidies to renewables projects larger than 30 kW. The program ceases at the end of 2007. Another debate will be whether to continue the self-generation subsidy for renewable distributed projects and, if so, at what level. Also in play will be evaluating the feasibility of counting subsidized distributed generation toward investor-owned utilities' renewables portfolio standard requirements.

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CPUC Approves Gas Storage to Mitigate Volatility

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