DATE:	October 12, 2006
TO:	Director, Division of the Commission Clerk & Administrative Services (Bayó)
FROM:	Office of the General Counsel (Brubaker, Jaeger) Division of Economic Regulation (Daniel, Redemann, Rieger)
RE:	Docket No. 060489-GU – Joint petition for approval of territorial agreement whereby Florida Public Utilities Company would provide service to customers within a development bounded by Indiantown Gas Company, Inc.'s current service area.   Docket No. 060492-GU – Petition for approval of firm transportation service agreement between Indiantown Gas Company and Florida Public Utilities Company.
AGENDA:	10/24/06 – Regular Agenda – Proposed Agency Action - Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Arriaga (060489-GU) Administrative (060492-GU)
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\GCL\WP\060489.RCM.DOC

 

 Case Background

On July 7, 2006, Indiantown and Florida Public Utilities Company, Inc. (FPUC) filed a petition for approval of a Territorial agreement (Docket No. 060489-GU) whereby FPUC will provide natural gas service to approximately 97 future residential customers in a planned development which is bounded by Indiantown.  On July 12, 2006, Indiantown and FPUC filed a petition for approval of a Firm Transportation service Agreement (Docket No. 060492-GU) which contains the rates, terms, and conditions by which Indiantown will receive and deliver natural gas to FPUC to serve the new development.

FPUC provides natural gas service to customers in Palm Beach, Seminole, and Volusia Counties.  Within its service areas, FPUC provides transportation and distribution of natural gas to residential and commercial customers and an optional transportation only service to commercial customers.

Indiantown’s service area includes the Indiantown Urban Services area as designated by Martin County.  By Order No. PSC-02-1655-TRF-GU,[1] dated November 26, 2002, the Commission approved a petition by Indiantown to convert all of its remaining sales customers to transportation service and to terminate the merchant function by Indiantown.  Thus, Indiantown does not sell natural gas to its customers, but is primarily a transporter.  Its customers receive gas supply service through a pool manager.

Several additional areas in Indiantown’s current service area are expected to be developed in the near future.  However, Indiantown does not intend to extend its facilities to serve the new development at this time.  Therefore, Indiantown and FPUC have entered into an agreement whereby Indiantown will transport gas from Florida Gas Transmission lines on lines owned by Indiantown to FPUC.  FPUC will construct, own, and maintain the distribution facilities needed to serve customers in the area addressed in the agreement.

The Commission has jurisdiction pursuant to sections 366.04, 366.05, and 366.06, Florida Statutes.

Discussion of Issues

Issue 1: 

 Should the Commission approve the Territorial Agreement filed by Indiantown Gas Company, Inc. and Florida Public Utilities Company?

Recommendation: 

 Yes.  The Territorial Agreement filed by Indiantown Gas Company, Inc. and Florida Public Utilities Company is in the public interest and should be approved.   The Agreement should become effective upon the expiration of the appeal period following the issuance of the Consummating Order in this docket.  Indiantown and FPUC should be required to file revised tariffs within 30 days following the Consummating Order which reflect the approved territorial descriptions.  (Redemann, Rieger)

Staff Analysis: 

 On July 7, 2006, Indiantown and FPUC filed a petition for approval of a Territorial Agreement shown in Attachment A, pursuant to section 366.04(3)(a), Florida Statutes, and Rule 25-7.0471, Florida Administrative Code.  According to the petition, the Indiantown area in general and the area subject to this Agreement is and will be experiencing additional growth and a corresponding increase of new residential and commercial natural gas customers.  To enable as many customers as possible to receive natural gas service and to avoid any unnecessary duplication of facilities, the Agreement provides that FPUC will provide natural gas service to customers in the area which is bounded by Indiantown.  FPUC has executed a Development Agreement with the homebuilder in anticipation of providing service to approximately 97 future residential customers in the planned development known as Sandy Oaks.  The construction schedule indicates active gas service will be required in January 2007.

The petition states that since receiving approval to exit the merchant function pursuant to Order No. PSC-02-1655-TRF-GU, Indiantown has focused it efforts on gas transportation service.  An extensive plant expansion by Indiantown would be difficult with Indiantown’s limited financial resources.  This agreement allows Indiantown to continue the gas transportation service, while allowing FPUC to utilize its resources to serve customers within the planned development.  FPUC will construct and own the gas distribution facilities within the development and Indiantown will transport gas from the Florida Gas Transmission lines to FPUC’s facilities.

According to the petition, this arrangement is the most efficient and effective arrangement in that it allows each of the parties to pursue their service focus and insures that customers within the development receive the benefits of reliable natural gas service.  While the arrangement may result in adjacent customers being served by different utilities, the rates are similar and the economics with FPUC providing the service are such that both customer groups derive benefit from the Agreement.  Indiantown customers benefit through the additional revenues generated by the transportation service and FPUC customers realize the benefits of growth.  Further, Indiantown and FPUC represent that approval and implementation of the Agreement will not cause a decrease in the availability or reliability of natural gas service to Indiantown, FPUC, or the existing or future ratepayers of either company.  The Agreement does not provide for or involve the transfer of any customers or facilities.

The Agreement will remain in effect for 30 years from the effective date and will be automatically renewed for successive ten year periods unless either party gives at least one year’s written notice of intent to terminate.   According to the Agreement, any modification of the service areas must be reviewed and/or approved by the Commission.  In addition, prior to the second anniversary of the Commission’s approval of the Agreement, and no less frequently than every five years thereafter, the parties will meet to review the status of the Agreement and will provide a written status report to the Commission.  Attachments B and C contain detailed legal descriptions of Indiantown’s and FPUC’s resulting service territories in Martin County.

Based on the above, staff recommends that the Territorial Agreement filed by Indiantown and FPUC is in the public interest and should be approved.  The legal description of the agreed service territories, the boundary between those service areas, and a map depicting the territories are included in Exhibit A of the Agreement.  The Agreement should become effective upon the expiration of the appeal period following the issuance of the Consummating Order in this docket.  Indiantown and FPUC should be required to file revised tariffs within 30 days following the Consummating Order which reflect the approved territorial descriptions contained in Attachments B and C.

Issue 2: 

 Should the Commission approve the Firm Transportation Service Agreement filed by Indiantown Gas Company, Inc. and Florida Public Utilities Company?

Recommendation: 

 Yes.  The Firm Transportation Service Agreement filed by Indiantown Gas Company, Inc. and Florida Public Utilities Company is in the public interest and should be approved.  The Agreement should become effective upon the expiration of 30 days after the final order approving the Agreement.  (Daniel)

Staff Analysis: 

 On July 12, 2006, Indiantown and FPUC filed a petition for approval of a Firm Transportation Service Agreement, pursuant to Chapter 366, Florida Statutes, and Rule 25-9.034, Florida Administrative Code.  The Agreement, shown in Attachment D, provides that Indiantown will receive and deliver natural gas to FPUC on a firm basis at a delivery point in Indiantown.  At the delivery point, the gas will then be delivered to customers through FPUC’s distribution lines.

The Transportation Agreement, which has an initial term of 30 years and automatic renewals thereafter, contains provisions addressing the responsibilities of the parties as to points of delivery, quantity, scheduling, ownership, remedies and similar contractual provisions.  The Agreement provides for a sufficient quantity of gas for current and anticipated needs and also contains the rates to be charged for the transportation service to be provided.  The rates, shown in Exhibit A to the Transportation Agreement, consist of a Reservation Charge of $0.04 multiplied by the Maximum Daily Transportation Quantity (500 decatherms) multiplied by the number of days in a billing month (approximately $600 per month), and a Firm Transportation Charge of $0.15 per therm measured at the Delivery Point.  The developer plans to construct 97 single-family homes in the area subject to this agreement.  The annual gas consumption per residence is estimated to average 230 therms.  Total annual revenues would equal approximately $10,000 per year to Indiantown for its transportation service and approximately $20,000 per year to FPUC for retail service.  If approved, the agreement would become effective upon the expiration of 30 days after the final order approving the Agreement.

According to the petition, these rates generate revenues in excess of the cost to serve and have been arrived at through negotiation and reflect terms that are fair and reasonable to both Indiantown, FPUC, and the customers of each utility.  Approval of the Transportation Service Agreement provides benefits to Indiantown and its customers through the revenue derived from the transportation service provided.  FPUC and its customers receive benefits through having a means of transporting gas for customers and expanding its customer base without the necessity of constructing facilities which duplicate Indiantown’s existing facilities.

Based on the above, staff recommends that the Commission should approve the Firm Transportation Service Agreement shown in Attachment D filed by Indiantown and FPUC.  The Agreement should become effective upon the expiration of 30 days after the final order approving the Agreement.

 

Issue 3: 

 Should this docket be closed?

Recommendation: 

 Yes.  If no protest is filed by a substantially affected person within 21 days of the date of the Proposed Agency Action Order, this docket should be closed upon the issuance of a Consummating Order.  If a protest is filed by a person whose substantial interests are affected within 21 days of the Order the docket should remain open.  (Brubaker, Jaeger)

Staff Analysis: 

 If no protest is filed by a substantially affected person within 21 days of the date of the Proposed Agency Action Order, this docket should be closed upon the issuance of a Consummating Order.  If a protest is filed by a person whose substantial interests are affected within 21 days of the Order the docket should remain open.

Florida Public Utilities Company

 

Martin County

 

Gas Service Area for Sandy Oaks

A parcel of land located in the Northwest one-quarter (NW ¼) of Section 5, Township 40 South, Range 39 East, and in the Southwest one-quarter (SW ¼) of Section 32, Township 39, Range 39 East, Martin County, Florida, being more particularly described as follows:

From the Northeast corner of said Northwest one-quarter, bear South 89°20’20” West, along the North line of said Northwest one-quarter of Section 5, a distance of 681.63 feet to the intersection with the West line of the Third Addition To Indiantown Park as recorded in Plat Book 5, Page 21, Martin County, Florida, Public Records, and the Point of Beginning; thence South 00°39’40” East, along said West line of the Third Addition To Indiantown Park, a distance of 305.00 feet; thence North 89°20’20” East, along the South line of said Third Addition To Indiantown Park, a distance of 148.19 feet; thence South 00°01’20” East, along the West line of said Third Addition To Indiantown Park, a distance of 1227.44 feet to the beginning of a curve concave to the Northwest having a radius of 125.00 feet, the chord of which bears South 17°52’50” West a distance of 76.85 feet; Thence Northwesterly along the arc of said curve through a central angle of 35°48’20”, a distance of 78.12 feet; Thence South 35°47’00” West, along the tangent line of said curve, a distance of 231.80 feet to the intersection with a curve concave to the Southwest, having a radius of 3115.00 feet, the chord of which bears North 60°49’26” West a distance of 716.84 feet; Thence Northwesterly along the arc of said curve through a central angle of 13°12’52.4”, a distance of 718.44’ and whose center bears South 35°47’00” West; Thence North 78°43’03.7” West, a distance of 25.49 feet; thence North 00°01’20” West, a distance of 1464.85 feet; thence North 89°20’20” East, a distance of 658.07 feet; thence South 00°39’40” East, a distance of 35.00 feet to the Point of Beginning.

Together with a parcel of land adjacent to the South, being more particularly described as follows:

Beginning 1429.85 feet South of and 1339.7 feet West of the Northeast corner of the Northwest one-quarter of said Section 5, thence run Southwesterly 250.12 feet to the North right-of-way of Cherokee Drive; thence run Southeasterly 684.62 feet along the said North right-of-way of Cherokee Drive; thence run Northeasterly 250.12 feet along the Northwesterly right-of-way of Lee Avenue to the intersection with a curve concave to the Southwest, having a radius of 3115.00 feet, the chord of which bears North 60°49’26” West a distance of 716.84 feet; Thence Northwesterly along the arc of said curve through a central angle of 13°12’52.4”, a distance of 718.44’ and whose center bears South 35°47’00” West;  Thence North 78°43’03.7” West, a distance of 25.49 feet to the Point of Beginning. 

Indiantown Gas Company, Inc.

Martin County

Gas Service Area

A parcel of land located in Martin County, Florida being more particularly described as follows:

 

Beginning at the Northeast corner of Section 24, Township 39 South, Range 39 East; Thence West along the North lines of Sections 24, 23, 22, 21, 20, and 19, Township 39 South, Range 39 East, to the Northwest corner of  said Section 19; Thence, along the North lines of Sections 24 and 23, Township 39 South, Range 38 East, to the Northwest corner of said Section 23; Thence South, along the West lines of Sections 23 and 26, Township 39 South, Range 38 East, to the intersection with the Northeasterly right-of-way line of State Road 710 (Warfield Boulevard); Thence Northwesterly along said Right-of-Way line, to the intersection with the West line of Section 22, Township 39 South Range 38 East; Thence South along the West lines of Sections 22, 27, and 34, Township 39 South, Range 38 East, to the Southwest corner of said Section 34; Thence South along the West line of Section 3, Township 40 South, Range 38 East, to the intersection with the South line of the St. Lucie Canal as described in Plat Book 2, Page 35 and Plat Book 10, Page 84, of the public records of Martin County, Florida; Thence Easterly along said South Right- of-Way line of the St. Lucie Canal through Sections 3, 10, 11, and 12, Township 40 South, Range 38 East; Thence continue along said South Right-of-Way line through Sections 7 and 8,  of Township 40 South, Range 39 East, to the intersection with the Southerly Right-of-Way line of State Road 710 (Warfield Boulevard); Thence Southeasterly along said Southerly right-of-way line 4110 feet more or less to a point of intersection with the Southerly prolongation of the Easterly Right-of-Way line of S.W. Indiantown Avenue; Thence Northeasterly perpendicular to the last described line 425 feet more or less to a point on the Northerly Right-of-Way line of said State Road 710 (Warfield Boulevard); Thence Northwesterly along said Northerly Right-of-Way line and the Easterly Right-of-Way line of S.W. Indiantown Avenue to a point on the Southerly right-of-way line of aforementioned St. Lucie Canal; Thence Northeasterly, along said Right-of-Way line through Sections 8, 9, 4, 3, and 2, Township 40 South, Range 39 East and Sections 35 and 36, Township 39 South, Range 39 East to the intersection with the East line of said Section 36; Thence North along the East line of Sections 36, 25, and 24, Township 39 South, Range 39 East to the Northeast corner of said Section 24 and the Point of Beginning.

 

Less and Except the next two parcels.

 

A parcel of land located in the Northwest one-quarter (NW ¼) of Section 5, Township 40 South, Range 39 East, and in the Southwest one-quarter (SW ¼) of Section 32, Township 39, Range 39 East, Martin County, Florida, being more particularly described as follows:

 

From the Northeast corner of said Northwest one-quarter, bear South 89°20’20” West, along the North line of said Northwest one-quarter of Section 5, a distance of 681.63 feet to the intersection with the West line of the Third Addition To Indiantown Park as recorded in Plat Book 5, Page 21, Martin County, Florida, Public Records, and the Point of Beginning; thence South 00°39’40” East, along said West line of the Third Addition To Indiantown Park, a distance of 305.00 feet; thence North 89°20’20” East, along the South line of said Third Addition To Indiantown Park, a distance of 148.19 feet; thence South 00°01’20” East, along the West line of said Third Addition To Indiantown Park, a distance of 1227.44 feet to the beginning of a curve concave to the Northwest having a radius of 125.00 feet, the chord of which bears South 17°52’50” West a distance of 76.85 feet; Thence Northwesterly along the arc of said curve through a central angle of 35°48’20”, a distance of 78.12 feet; Thence South 35°47’00” West, along the tangent line of said curve, a distance of 231.80 feet to the intersection with a curve concave to the Southwest, having a radius of 3115.00 feet, the chord of which bears North 60°49’26” West a distance of 716.84 feet; Thence Northwesterly along the arc of said curve through a central angle of 13°12’52.4”, a distance of 718.44’ and whose center bears South 35°47’00” West; Thence North 78°43’03.7” West, a distance of 25.49 feet; thence North 00°01’20” West, a distance of 1464.85 feet; thence North 89°20’20” East, a distance of 658.07 feet; thence South 00°39’40” East, a distance of 35.00 feet to the Point of Beginning.

 

Together with a parcel of land adjacent to the South, being more particularly described as follows:

Beginning 1429.85 feet South of and 1339.7 feet West of the Northeast corner of the Northwest one-quarter of said Section 5, thence run Southwesterly 250.12 feet to the North right-of-way of Cherokee Drive; thence run Southeasterly 684.62 feet along the said North right-of-way of Cherokee Drive; thence run Northeasterly 250.12 feet along the Northwesterly right-of-way of Lee Avenue to the intersection with a curve concave to the Southwest, having a radius of 3115.00 feet, the chord of which bears North 60°49’26” West a distance of 716.84 feet; Thence Northwesterly along the arc of said curve through a central angle of 13°12’52.4”, a distance of 718.44’ and whose center bears South 35°47’00” West;  Thence North 78°43’03.7” West, a distance of 25.49 feet to the Point of Beginning.