DATE:	January 23, 2014
TO:	Office of Commission Clerk (Stauffer)
FROM:	Office of the General Counsel (Young) Division of Economics (King)
RE:	Docket No. 130256-GU – Joint petition for approval of territorial agreement in Duval and St. Johns Counties between Peoples Gas System and the City of Jacksonville Beach d/b/a Beaches Energy Services.
AGENDA:	02/04/14 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Brown
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None

 

 Case Background

On October 18, 2013, Peoples Gas System (Peoples) and the City of Jacksonville Beach d/b/a Beaches Energy Services (BES) filed a joint petition for approval of a territorial boundary agreement for portions of Duval and St. Johns Counties.  The Petitioners own and operate natural gas distribution facilities in Duval and St. Johns Counties, and each is a natural gas utility subject to the Commission's jurisdiction under Section 366.04(3), Florida Statutes (F.S.), for the purposes of resolving territorial disputes and approving territorial agreements.  Peoples provides natural gas service to approximately 20,000 customers in Duval and St. Johns Counties and plans to continue expanding its distribution system in those counties as provided for in its tariff on file with the Commission.  BES also operates a natural gas distribution system in select locations in Duval and St. Johns Counties and plans to continue expanding its distribution system consistent with the demand for natural gas service within its service area.  A copy of the complete Agreement is attached (Attachment A) as well as maps that show the service territory for BES (Attachment B).

Absent the Commission's approval of the agreement, the plans of Peoples and BES for providing retail natural gas service in Duval and St. Johns Counties might overlap.  Therefore, the Agreement will assist in avoiding future disputes, uneconomic duplication of facilities,  and will expedite the handling of applications for service by future potential natural gas customers.  No customers will be transferred upon the approval of the Agreement.  However, pursuant to Section 2.5 of the Agreement, a customer transfer from Peoples to BES may occur in the future.  The Commission has jurisdiction over this matter pursuant to Section 366.04, F.S.

Discussion of Issues

Issue 1: 

 Should the Commission approve the joint petition for approval of a territorial boundary agreement in portions of Duval and St. Johns Counties between Peoples and BES?

Recommendation: 

 Yes.  The territorial boundary agreement between Peoples and BES will not cause a detriment to the public interest and should be approved.  (King)

Staff Analysis: 

 Pursuant to Section 366.04(3)(a), F.S., the Commission has the jurisdiction to approve territorial agreements between and among natural gas utilities. Rule 25-7.0471(2), Florida Administrative Code (F.A.C.), states that in approving territorial agreements, the Commission may consider the reasonableness of the purchase price of any facilities being transferred, the likelihood that the agreement will not cause a decrease in the reliability of gas service to existing or future ratepayers, and the likelihood that the agreement will eliminate existing or potential uneconomic duplication of facilities. Unless the Commission determines that the agreement will cause a detriment to the public interest, the agreement should be approved.  Utilities Commission of the City of New Smyrna v. Florida Public Service Commission, 469 So. 2d 731 (Fla. 1985).

 

            The Petitioners represent that approval and implementation of the agreement will not cause a decrease in the availability or  reliability of natural gas service to the existing or future ratepayers.  No customers of either party will be transferred upon the approval of the agreement. However, Peoples currently provides natural gas service to customers located in Neptune Beach, Florida, which is situated within BES territory according to the pending agreement.  Provided the agreement is in effect, Section 2.5 states that Peoples shall transfer the Neptune Beach customers to BES within 90 days following receipt of written notice from BES that its natural gas distribution system is capable of providing natural gas service to these customers.  At the time of such transfer, Peoples would also convey to BES the facilities necessary to serve  Neptune Beach at the depreciated book value.  Once approved, the Agreement will remain in effect until modifications are mutually agreed upon by the parties and approved by the Commission, or until termination or modification shall be mandated by a governmental entity or court with appropriate jurisdiction.

 

            If Section 2.5 was exercised today, approximately 20 customers (19 primarily small commercial customers and 1 residential customer) would be transferred from Peoples to BES.  These customers were sent notice advising of the possible future transfer and were provided examples of monthly bill calculations under the current Peoples and BES rates.  Customers were also notified that neither Peoples nor BES knows whether or when any such transfer may occur and the current differences in rates may or may not exist in the future.  Since the notices have been sent, neither company has received any calls or inquiries from their customers about the possible transfer. 

 

            Peoples and BES represent that approval and implementation of the territorial agreement will not cause a decrease in the availability or reliability of natural gas service from either company, or to the existing or future ratepayers.  In addition, they assert that approval of the territorial agreement by the Commission will assist in avoiding future uneconomic duplication of facilities by the parties, and will expedite the handling of applications for service by future potential natural gas customers; therefore, the agreement is in the public interest.

 

            It appears that the proposed agreement eliminates the potential uneconomic duplication of facilities and will not cause a decrease in the reliability of gas service.  In addition, the purchase price of the facilities (at their depreciated book value), if transfer occurs in the future,  appears reasonable.  Therefore, based on the above, staff believes that the proposed territorial agreement will not cause a detriment to the public interest and recommends approval.

Issue 2: 

 Should this docket be closed?

Recommendation: 

  Yes.  If no person whose interests are substantially affected timely files a protest to the Commission’s Proposed Agency Action Order, this docket should be closed upon issuance of a Consummating Order.  (Young)

Staff Analysis: 

 If no person whose interests are substantially affected by the Commission’s decision timely files a protest to the Commission’s Proposed Agency Action Order, this docket should be closed upon issuance of a Consummating Order.