Case Background
On August 31,
2016, Florida City Gas (City Gas or Company) filed a petition for approval of
its safety, access, and facility enhancement program (SAFE) true-up and
associated cost recovery factors. The SAFE program, approved by the Commission
in 2015, is a 10-year program that will relocate mains and associated
facilities from rear lot easements to the street front. According to City Gas, relocation to the
street front provides for more direct access to facilities and will enhance the
level of service provided to all customers through improved safety and
reliability. The Commission ordered the Company to file an annual petition,
beginning in 2016, for a review and reset of the surcharge factors to true-up
any prior over- or under-recovery and to set the surcharge for the coming year.
In its filing,
City Gas waived the 60-day suspension deadline pursuant to Section 366.06(3),
Florida Statutes (F.S.). The Office of Public Counsel (OPC) requested
interested party status in this docket on September 15, 2016. City Gas filed
its responses to staff’s first data request on September 23, 2016, and to
staff’s second and third data requests on October 10, 2016. The proposed tariff
page is contained in Attachment 2. The Commission has jurisdiction over this
matter pursuant to Sections 366.03, 366.04, 366.05, 366.06, and 368, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve City Gas' proposed SAFE
surcharges for 2017?
Recommendation:
Yes. The Commission should approve City Gas’
proposed 2017 SAFE surcharge factors with an effective date of the first
billing cycle of 2017. (Ollila)
Staff Analysis:
Under the SAFE program, City Gas plans to relocate
and replace 254.3 miles of mains and associated facilities from rear property
easements to the street front over a 10-year period, ending in 2025. The
surcharges have been in effect since January 2016; City Gas began its
replacements at the end of 2015, as provided for in the 2015 order.
The Company’s 2015 - 2016 replacement plan includes 10
projects. Six projects are in the Miami area (Cutler Bay, Hialeah, and Opalocka).
Four projects are in Brevard County (Rockledge and three on Merritt Island). Attachment
1 displays City Gas’s replacement progress, both actual and forecasted.
City Gas stated in response to staff’s data request that
its replacement projects are generally prioritized based on the risk assessment
model in its Distribution Integrity Management (DIM) program. Prioritization factors
include, but are not limited to, the location of the pipeline, pipeline
material, leak incident rates, and rear lot pipelines with maintenance access
complications and customer encroachments.
True-up
There is no true-up for 2015; however, the revenue
requirement associated with the net plant in service installed in 2015 was
included in the rates implemented for 2016. The 2016 true-up includes seven
months of actual and five months of estimated 2016 expenses and revenues. The
actual/estimated revenue requirement for 2016 is $736,045 and includes a return
on investment, depreciation, and taxes. The
estimated 2016 revenue is $931,494, resulting in an over-recovery of $195,449
for 2016.
The Company’s total projected expenditures for 2017 are
$9,583,423. The corresponding revenue requirement, which includes return on
investment, depreciation, and taxes, is $2,204,344. After the 2016
over-recovery is subtracted, the 2017 revenue requirement is $2,008,895. Table
1-1 displays the true-up calculation for 2017.
Table 1-1
True-up Calculation for 2017
|
2017 Projected Replacements
|
$9,583,423
|
|
Return on Investment
|
$1,502,702
|
|
Depreciation Expense
|
$547,033
|
|
Property Tax Expense
|
$154,609
|
|
2017 Revenue Requirement
|
$2,204,344
|
|
Less 2016 True-up
|
($195,449)
|
|
Total 2017 Revenue Requirement
|
$2,008,895
|
Source: Schedule
2 of the Petition
Proposed Surcharges
The Company’s cost allocation method was approved in the
2015 order, and according to City Gas, used for the instant filing. The
methodology allocates the cost of a 2-inch pipe to all customers (other than
those with pre-existing contracts) on a per customer basis and allocates the
incremental cost of replacing pipe larger than 2 inches to customers who use
6,000 or more therms per year. For larger customers, the cost pool takes into
account that the minimum pipe is insufficient to serve their demand, and
therefore, allocates an incremental per foot cost in addition to the
all-customer cost. The resulting allocation factors are applied to the revenue
requirement to develop the monthly customer surcharges.
Staff notes that the average residential customer uses 240
therms per year. The proposed fixed monthly surcharge is $1.53 for customers
using less than 6,000 therms per year, compared to the current charge of $0.71
per month. For customers using 6,000 therms or more per year, the proposed
fixed monthly surcharge is $2.77, compared to the current charge of $1.31 per
month. The surcharge is cumulative;
therefore, if City Gas files a rate case before 2025, the then-current SAFE
surcharge program would be folded into any newly approved rate base, and the
surcharge would begin anew.
Conclusion
Staff has reviewed the filing and supporting documentation
and believes that the calculations are consistent with the methodology and are
reasonable and accurate. Therefore, staff recommends approval of City Gas’
proposed 2017 SAFE surcharge factors with an effective date of the first
billing cycle of 2017.
Issue 2:
Should this docket be closed?
Recommendation:
If Issue 1 is approved and a protest is filed within
21 days of the issuance of the order, the tariffs should remain in effect, with
any revenues held subject to refund, pending resolution of the protest. If no
timely protest is filed, this docket should be closed upon the issuance of a
consummating order. (Taylor)
Staff Analysis:
If Issue 1 is approved and a protest is filed within
21 days of the issuance of the order, the tariffs should remain in effect, with
any revenues held subject to refund, pending resolution of the protest. If no
timely protest is filed, this docket should be closed upon the issuance of a
consummating order.
