DATE:	January 28, 2010
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Regulatory Analysis (Ellis, Brown) Office of the General Counsel (Fleming)
RE:	Docket No. 090122-EG – Petition for approval of modifications to approved energy conservation programs, by Associated Gas Distributors of Florida.
AGENDA:	02/09/10 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Klement
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\RAD\WP\090122.RCM.DOC

 

 Case Background

The Associated Gas Distributors of Florida (AGDF) is a trade association that represents the seven investor-owned natural gas utilities: Florida City Gas (FCG), Chesapeake Utilities Corporation (Chesapeake), Florida Public Utilities Company (FPUC), Indiantown Gas Company (Indiantown), Peoples Gas System (PGS), Sebring Gas System (Sebring), and St. Joe Natural Gas Company (St. Joe).  These companies are also collectively referred to as Local Distribution Companies (LDCs) and are all subject to the jurisdiction of the Florida Public Service Commission (Commission).

On March 12, 2009, AGDF filed a petition on behalf of the above-mentioned LDCs seeking modification of their energy conservation programs. Specifically, AGDF sought the adoption of a Conservation Demonstration and Development (CDD) Program and Propane Distribution System Conversion Program.  According to AGDF, the CDD Program would support research and development, demonstration and monitoring projects designed to promote energy efficiency, conservation, and reductions in climate change emissions.  It also included a list of example measures including monitoring of existing programs and compressed natural-gas (CNG) vehicles, a transportation measure.  The Propane Distribution System Conversion Program would support the conversion of existing and future propane distribution systems to natural gas through a rebate allowance.

On July 27, 2009, AGDF withdrew a portion of the petition associated with the proposed Propane Distribution System Conversion Program.  On December 17, AGDF filed a supplement to its petition for approval of the Conservation Demonstration and Development Program.  Included in the supplemental filing were sheets for each AGDF member LDC to be filed with their demand-side management programs and a list of eligible measures for the CDD Program.  Staff notes that the list of possible measures does not include CNG vehicles or other transportation-related measures.

The Commission has jurisdiction over this matter pursuant to Sections 366.81 and 366.82, Florida Statutes (F.S.).

 

Discussion of Issues

Issue 1: 

 Should the Commission approve the Associated Gas Distributors of Florida's petition to add the proposed Conservation Demonstration and Development Program to their member LDC's conservation programs?

Recommendation: 

 Yes.  The proposed Conservation Demonstration and Development Program will allow the member LDCs of AGDF to pursue opportunities for individual and joint research and development of new natural gas conservation programs.  These funds should not be used for any expenditures more appropriately included in other programs, nor for load-building or transportation measures.  Expenditures for each member LDC’s program should feature a five year cap, with an individual project cap not to be exceeded without Commission approval, as outlined below.  (Brown, Ellis)

 

Staff Analysis: 

 The petition by AGDF requests the establishment of a CDD Program for each of AGDF’s member LDCs.  PGS is the only AGDF member LDC that has a similar existing program, which would be modified to match the proposed uniform program.  The use of uniform programs across all AGDF members has been previously approved by the Commission, with the establishment of uniform rebates for residential new construction, appliance replacement, and appliance retention programs.[1]

The Commission has historically supported reasonable research and development activities for the investor owned electric utilities.  Rule 25-17.001(5)(f), Florida Administrative Code (F.A.C.), encourages the development of various methods to increase energy efficiency, stating that electric utilities should engage in programs that:

…aggressively pursue research, development and demonstration projects jointly with others as well as individual projects in individual service areas. In this context, the Commission anticipates that an aggressive research program would include both technological research, research on load behavior and related problems and market-related research.

Staff believes it is appropriate for the same general principles to apply to the natural gas utilities, which can also benefit from joint research and development programs.

Summary of Program

AGDF asserts that the CDD Program could result in the following:  (1) an increase in the number of CDD Projects completed, (2) elimination of duplicate projects, (3) application of a screening method that would ensure priority ranking of potential projects, (4) guarantee a variety of projects that could benefit AGDF member LDCs, and (5) a reduction of administrative costs if joint projects are pursued. 

The Florida Energy Efficiency and Conservation Act (FEECA) established by the Legislature finds that the Commission is the proper agency to approve plans related to the conservation of electricity and natural gas.[2]  AGDF’s proposed CDD Program supports the intent of FEECA by encouraging research into methods to increase the conservation of natural gas.  All specific projects developed under this program should also follow the intent of FEECA to encourage conservation. 

No direct demand savings, consumption savings, or cost-effective analyses were provided for the CDD Program, as it is a research and development program.  Any specific projects associated with the CDD Program will have their cost and benefits judged independently of this program.  Part of the purpose of the CDD Program is to collect actual data with which to conduct cost-effectiveness analysis. 

AGDF contends that a variety of functions and activities could be performed under the proposed CDD Program.  Some of these functions include engineering evaluations, cost/benefit analyses, computer simulations, literature searches, field testing and data collection, product demonstrations, laboratory testing, and building code analyses.  A key component of the program, and an advantage of the uniform approval across all AGDF member LDCs, is the possibility to engage in collaborative research, pooling expenses and research results.  However, this joint participation is not mandatory, and may include LDCs other than those that are AGDF members, as well as possibly including research or testing entities.

On December 17, 2009, AGDF provided a supplement to its petition for the CDD Program, outlining the measures eligible for possible funding.  These include a wide range of technology applications, from refrigeration to thermal energy storage systems and cogeneration.    Staff believes these measures are appropriate for consideration in a research and development program.  Staff notes that this program does not contain or allow any transportation related measures, such as CNG vehicles, which would not be eligible for cost recovery.  Other programs which could be considered load-building would not be eligible for cost recovery, given it is the intent of FEECA to reduce the consumption of natural gas, as well as electric demand.[3]  The CDD Program should not include expenditures related to other programs, such as advertising or monitoring of other programs, as these expenditures should be counted towards the original program.  This is similar to research and development programs approved for electric utilities, which are restricted to a range of technologies and applications.  The program descriptions provided as part of the supplemental filing are provided in Appendix 1.

Impact to Ratepayers

The petition includes a proposal to have a five year cap established for each AGDF member LDC, as well as a project cap that consists of approximately one year’s expenditures.  These funds would be recovered through the Natural Gas Conservation Cost Recovery Clause.  Allocation of the program costs is based upon the size of the utility.  Below is a table which provides the proposed cost caps for each of the AGDF member LDCs, including the average residential monthly bill impact for each LDC’s most populated customer class.

Table 1 - Member LDC Cost Caps

 

Staff believes that this minimal rate impact is worth the potential benefits of any research and development projects that could be authorized as a component of this program.

Conclusion

The proposed Conservation Demonstration and Development Program will allow the member LDCs of AGDF to pursue opportunities for individual and joint research and development of new natural gas conservation programs.  These funds should not be used for any expenditures more appropriately included in other programs, nor for load-building or transportation measures.  Expenditures for each member LDC’s program should feature a five year cap, with an individual project cap not to be exceeded without Commission approval, as outlined in Table 1 above.

Issue 2: 

 Should this docket be closed?

Recommendation: 

 Yes.  If Issue 1 is approved, the program modifications should become effective the March 25, 2010.  If a protest is filed within 21 days of the issuance of the proposed agency action order, the program modifications should not be implemented until after the resolution of the protest.  If no timely protest is filed, the docket should be closed upon the issuance of a consummating order.  (Fleming)

Staff Analysis: 

 If Issue 1 is approved, the program modifications should become effective the March 25, 2010.  If a protest is filed within 21 days of the issuance of the proposed agency action order, the program modifications should not be implemented until after the resolution of the protest.  If no timely protest is filed, the docket should be closed upon the issuance of a consummating order.