II. Background and Summary of Request

LGS seeks authority from the Commission under Sections 816 and 851 of the Public Utilities Code to issue up to $25 million in long-term debt and to secure this debt with its assets, and to encumber LGS' assets as security for the Working Capital facility for a period of three years. LGS' request for financing authority will be used to fund its Kirby Hills Expansion Project and to secure LGS' Working Capital facility with its assets. These requests are in addition to the authority granted to LGS in Decision (D.) 06-06-059 to issue up to $110 million in secured debt financing. Sections 816 and 851 require Commission review and approval before a utility may enter into such transactions. In addition, LGS requests authority to engage in transactions involving contracts for the purpose of managing the variable interest rates associated with its debt. The terms and conditions for the proposed financing are attached to LGS' application in Exhibit C and Exhibit A of its October 30 amendment.

LGS is a Delaware limited liability company that operates a natural gas storage facility (Lodi Facility) which is northeast of the City of Lodi and interconnects with Pacific Gas and Electric Company's (PG&E) intrastate Redwood Pipeline Systems (Line 401) at the Sherman Island Interconnect. Lodi Facility began operation in 2002 after receiving a Certificate of Public Convenience and Necessity from the Commission in D.00-05-048, amended by D.03-08-048 and D.04-05-046. It provides gas storage services at market-based rates to customers who take service voluntarily.

By D.05-12-007, the Commission granted authorization to transfer Western Hub's 50% interest in Lodi Holdings, the parent company of LGS, to WHP Acquisition II. This transfer of control changed the ultimate ownership of LGS and the Lodi Facility, but maintained the terms and conditions under which LGS operates the Lodi Facility.