IV. Need for the Kirby Hills Facility
LGS asserts that under D.93-02-013, the so-called Storage Decision,5 "a traditional showing of need [is] no longer critical to an analysis of competitive storage projects" like Kirby Hills, because the owners of such projects operate at their own financial risk. (Id. at 18, citing 48 CPUC2d at 118-119.) Nonetheless, LGS argues that the current situation in California demonstrates the need for the additional gas storage that the Kirby Hills Facility will provide. After noting that a "key action" identified in the June 2005 Draft Energy Action Plan II is the "encourage[ment of] the development of additional in-state natural gas storage to enhance reliability and mitigate price volatility,"6 In its application, LGS argues that the Kirby Hills Facility will serve this goal:
"Capacity at the Lodi Facility is currently fully subscribed through a combination of short-term and long-term contracts with a variety of market participants. In May of this year LGS conducted an open season for up to 5 Bcf of additional working capacity with 100 MMcf/d of firm injection and withdrawal capacity . . . At the end of [the open season,] Bid Response Forms from 6 market participants with indications of demand for 7.3 Bcf of storage capacity were received and LGS is in the process of negotiating storage services agreements with those parties.
"In addition to this direct expression of market interest for incremental storage capacity, there are also other indications that the energy market in California, and especially in Northern California, has a need for incremental gas storage capacity. In March [2005,] PG&E filed [A.]05-03-001 wherein it proposes to add incremental firm core storage capacity to meet a 1-day-in-10-year peak standard. Adoption by the Commission of this reliability standard would add approximately 100 MMcf/d of storage withdrawal capacity and 2-3 Bcf of storage capacity.
"[In March 2005] PG&E [also] issued a Request for Offers for up to 2200 megawatts of dispatchable capacity between 2008 and 2010. A requirement for this capacity is that firm physical delivery of the generation must be accomplished within the north of Path 15 region as presently designated by the California Independent System Operator. The increase in regional generating capacity, much of it natural gas fired requiring swing gas supplies, will add to the demands placed on California's existing natural gas infrastructure. The draft Energy Action Plan II notes this factor when it calls on the State to promote infrastructure enhancements, including `increased use of intrastate storage.' Increasing load area high-performance gas storage infrastructure enhances the ability to efficiently and cost-effectively use the existing utility gas infrastructure in a time of rising natural gas demand, particularly swing demand." (Id. at 19-20; footnotes omitted.)
5 48 CPUC2d 107.
6 The final version of Energy Action Plan II adopted by this Commission and the California Energy Commission (CEC) in October 2005 retains this language (at page 13) as Key Action No. 4 under the discussion of Natural Gas Supply, Demand and Infrastructure.
