B. Background
As noted above, LGS first received a CPCN from this Commission in D.00-05-048. That authority was to develop, construct and operate an underground storage facility (and ancillary pipeline) for natural gas storage known as the Lodi Facility. The Lodi Facility is located in San Joaquin County, approximately 5.4 miles northeast of Lodi. In D.00-05-048, the Commission authorized LGS to provide both firm and interruptible gas storage services at market-based rates. D.00-05-048 also certified the Environmental Impact Report (EIR) for the Lodi Facility, and conditioned the authority granted therein on compliance with the mitigation measures set forth in the EIR.
The instant application states that the Lodi Facility "began commercial operation in 2002 and has since operated without incident." (Application, p. 2.) The joint applicants state that under LGS's CPCN as amended, the Lodi Facility has a total storage capacity of 21 billion cubic feet (Bcf), and a working capacity of 17 Bcf. The facility also has maximum firm deliverability of 500 million cubic feet per day (MMcf/d), and a maximum firm injection capacity of 400 MMcf/d. (Id.) However, the joint application continues,
". . . all of LGS' current storage capacity is fully subscribed, evidencing a need for development of additional natural gas storage capacity to serve the State's growing energy needs. WHP Acquisition II will provide LGS the necessary financial resources to expand its storage facilities to meet these needs." (Id. at 7-8.)
To meet the need for additional gas storage, LGS proposes to construct and operate the Kirby Hills Gas Storage Facility (Kirby Hills Facility), which is the subject of Application (A.) 05-07-018. The Kirby Hills Facility will be located in Solano County, California, and will have a total storage capacity of up to 7 Bcf, of which about 5.5 Bcf will be working capacity. The new facility's firm injection and withdrawl capacity will be 100 MMcf/d. LGS states that construction of the Kirby Hills Facility will require six to eight months, and that LGS seeks to have the facility operational in time for the 2006-2007 winter heating season.
In addition to the authorization sought here for a change of control, LGS has also filed a third application, A.05-08-030, which seeks Commission authorization for LGS to issue or otherwise incur up to $110 million in long-term debt, and to "enter into one or more contracts for the purpose of managing and hedging the variable interest rate risk association with [LGS's] debt, including, without limitation, interest rate swaps, caps, collars, options" or similar interest rate management methods.3
3 A.05-07-018 and A.05-08-030 are separate proceedings. This decision addresses the merits of A.05-08-031 only.
