The state of Washington’s Utilities and Transportation Commission (UTC) recently approved an all-party settlement agreement with conditions to protect Puget Sound Energy (PSE) customers related to the company’s proposed LNG facility at the Port of Tacoma.

The approval allows PSE’s parent company, Puget Energy, to create a wholly owned subsidiary, named Puget LNG LLC. Puget LNG will be a limited liability company, the sole purpose of which will be to own, develop and finance the Tacoma LNG facility.

Under the settlement agreement, PSE and Puget LNG will operate the Tacoma LNG facility under a joint ownership agreement that the companies are required to file with the commission if the project goes forward.

The commission determined that the provisions of the settlement will allow PSE’s ratepayers to continue to have the same, or even enhanced, level of protection from financial liability that might result from Puget Energy owning an unregulated subsidiary, or from the activities of Puget LNG.

The non-utility business of the Tacoma LNG plant will not be a function of PSE’s regulated operations per the settlement.

In addition to the company and commission regulatory services staff, the Northwest Industrial Gas Users, Industrial Customers of Northwest Utilities and the Public Counsel Unit of the Attorney General’s Office also signed the settlement agreement.

“The settlement pertains only to the formation of a new corporate structure and not to the prudency of the Tacoma LNG investment. The UTC determines the prudency of infrastructure investments after a facility is constructed,” the UTC explained in a statement.

“PSE will be required to include the regulated portion of costs for this investment for consideration in a future rate proceeding. This agreement will not impact PSE’s regulated customer rates until the commission reviews and authorizes the costs of the investment to be included in rates,” the UTC noted.

The commission’s Pipeline Safety Section is also conducting a review of the safety of the proposed Tacoma LNG facility, which will be considered in a separate proceeding.

In August 2015, PSE filed a proposal with the UTC regarding the development of the LNG facility at the Port of Tacoma. The initial proposal requested to have part of the facility treated as a piece of PSE’s regulated utility business. In response, the parties entered into mediation in May 2016 in order to resolve disputed matters regarding the corporate structure and impact on regulated customers. The all-party settlement agreement was filed with the commission in September.

The commission conducted an evidentiary hearing on Oct. 17 and held a public comment hearing on Oct. 19. About 60 people attended the public comment hearing. The commission also received 142 written comments regarding the filing: 12 in favor and 130 opposed.

The proposed $275-million Tacoma LNG facility will be capable of receiving nearly 21,000 decatherms per day (Dth/day) of natural gas from which it can produce about 250,000 gallons (gal) of LNG when liquefying at capacity. The facility will be capable of storing around 8 million gal of LNG.

According to PSE, Washington state’s oldest energy utility, the facility will supply fuel to Totem Ocean Trailer Express Inc. (TOTE); provide fuel for sales to other marine vessels or other purchasers; and serve as a peaking resource for PSE’s core natural gas customers. The project is expected to be completed and fully operational by early 2019, according to PSE.

Bellevue-based PSE operates a 12,000-mile natural gas distribution system and supplies natural gas to 785,000 customers, primarily in the Puget Sound area of Washington state.

The UTC regulates the rates and services of investor-owned electric utilities, natural gas and water companies, telecommunications companies, garbage collection haulers, household goods movers and charter bus companies, commercial ferries, pipeline companies and a low-level radioactive waste repository.

Bryan Sims can be reached at bsims@hartenergy.com and @bsimshart.