PUC May Tighten Rules on Natural Gas Storage

The California Public Utilities Commission may enact rules to prevent companies that store natural gas in the state from manipulating prices for the fuel, the commission’s president said.

The commission has recognized “that we needed to begin looking at our rule-making regarding storage,” Loretta M. Lynch said in an interview at a conference in Calgary, Canada. “We have not put that on the agenda yet, but I would expect it to be a priority for us next year.”

Gas producers increasingly own storage facilities, raising the potential for price manipulation. Storage companies were previously exempt from rules prohibiting market manipulation because the majority of storage had been owned by utilities and not gas producers. The commission, which regulates storage companies, doesn’t approve the prices they charge or their customers.

EnCana Corp., Canada’s biggest gas producer, received approval this year to more than double the capacity of its Wild Goose storage facility to 29 billion cubic feet by 2003. Wild Goose, north of Sacramento, currently holds about 14 billion cubic feet of gas in underground caverns.

During the Wild Goose approval process, the commission decided to review the rule regarding storage companies, which had been set by previous members, Lynch said.

“That rule is at least 5 years old, and we’ve seen all kinds of market manipulation in the gas area,” Lynch said. “It’s time to revisit that exemption” and “see if that works for California.”

Lynch was in Calgary to speak at a gas markets conference organized by consultant Ziff Energy Group.