PG&E has announced that it will sell its Pleasant Creek natural gas storage field, has retained an investment banker, and is now publicly soliciting bids. But who will buy the 400 acres of land located between Sacramento and the Bay Area (and relatively near Lake Berryessa)?
Located partly in the City of Winters and partly in unincorporated Yolo County, the Pleasant Creek natural gas storage field started as a production field in 1948. Converted to a storage field in 1960, PG&E now utilizes Pleasant Creek for a miniscule 2 percent of its total storage inventory capacity and has formally deemed it unnecessary (and California's regulators have agreed) to provide reliable service to its customers.
PG&E's sale of Pleasant Creek has been in the works for some time now. In September 2019, the California Public Utilities Commission (CPUC) authorized PG&E to sell both the Pleasant Creek and the Los Medanos natural gas storage facilities. Over the last few years, PG&E has engaged in similar sales processes to dispose of its older, smaller, and generally less efficient hydroelectric facilities.
While PG&E is quick to note that this sale is unrelated to the utility's bankruptcy, there does seem to be a broader strategy at play for PG&E post-bankruptcy. That approach appears to be to evaluate and shed legacy assets that it has held on to and that may simply be more hassle than they are worth to continue to hold.
In the case of Pleasant Creek, PG&E appears to be selling these assets so that the utility does not have to bear the decommissioning and remediation costs. However, the embattled Fortune 500 company may also part with Pleasant Creek due to pressure from external forces as well.
PG&E has been roundly criticized by legislators, regulators, and investors for simply being too large and needing to focus more on its core safety and reliability functions. Shedding unnecessary assets like this one appears to respond to that criticism.
In recent years, DWT has served as counsel for numerous parties bidding on former PG&E assets, helping these parties understand the regulatory landscape and assisting them to complete the necessary diligence of the assets before entering into a transaction with PG&E. The pace of these asset sales has picked up since PG&E went into bankruptcy.
So even if this sale of the Pleasant Creek natural gas storage field was not technically precipitated by the bankruptcy, the reality is that the solicitation follows the trend that we have seen of PG&E streamlining its assets to shed future liabilities.