Case Background
On March 8, 2017,
the Florida Division of Chesapeake Utilities Corporation (Chesapeake or
Company) filed a petition to amend the 2017 gas reliability infrastructure
program (GRIP) factor for commercial customers in rate class FTS-9 and to allow
the Company to issue refunds to the affected customers. The GRIP program allows
Chesapeake to recover the cost of accelerating the replacement of cast iron and
bare steel distribution mains through a surcharge on customers’ bills. The 2017
GRIP factors were approved in Order No. PSC-16-0567-TRF-GU. Rate class FTS-9, which currently has six
customers, is for customers whose annual therm usage is between 400,000 and
700,000 therms (compared to about 240 therms per year for residential
customers).
Chesapeake
responded to staff’s first data request on March 28, 2017 and filed revised
responses on March 30, 2017. The proposed (legislative) tariff page is
contained in Attachment 1 to the recommendation. The Commission has
jurisdiction over this matter pursuant to Sections 366.03, 366.04, 366.05, and
366.06, Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Should the Commission approve Chesapeake's petition
to amend the 2017 GRIP factor for rate class FTS-9 customers and issue refunds
to FTS-9 customers?
Recommendation:
Yes, the Commission should approve Chesapeake’s
petition to amend the 2017 GRIP factor for rate class FTS-9 customers effective
on the date of the Commission’s decision and issue refunds in the form of bill
credits to the FTS-9 customers. Within 30 days of the issuance of the bill
credits, Chesapeake should notify staff that the refunds have been completed.
(Ollila)
Staff Analysis:
After a customer questioned Chesapeake about the
$0.14596 per therm GRIP factor for the FTS-9 rate class, the Company determined
that the GRIP factor was incorrect and should have been $0.08359 per therm.
Chesapeake proposes to amend the GRIP factor to $0.08359 per therm and provide
refunds using a bill credit to FTS-9 customers. Chesapeake estimated that the refunds
will total approximately $71,500.
GRIP Factor
The 2017 GRIP factor was developed by forecasting the 2017
GRIP revenue requirement and allocating the revenue requirement to each rate
class using the same methodology used for the allocation of mains and services
in the cost of service study used in Chesapeake’s most recent rate case.
The revenue requirement allocated to each rate class is then divided by
Chesapeake’s forecast of therms for that rate class, resulting in the per therm
GRIP factor for each rate class.
Chesapeake explained that the projected therm usage used
to calculate the 2017 factor for FTS-9 was understated compared to historical
therms and previous projections, resulting in the higher GRIP factor. Chesapeake
revised its 2017 FTS-9 therm forecast and used that forecast to develop the
amended GRIP factor of $0.08359 per therm. Chesapeake has since reviewed all
GRIP factors for Chesapeake, Florida Public Utilities Company (FPUC), and FPUC
– Fort Meade and concluded that there were no significant therm over- or
understatements used in calculating the 2017 GRIP factors.
In response to staff’s data request, Chesapeake explained
that in future proceedings, it plans to thoroughly review the projected annual
therms and GRIP factors for reasonableness for each rate class. This review,
according to the Company, will enable it to identify and investigate any
anomalies in the therm forecast as well as the GRIP factors.
Corrected Billing and Refunds
In its petition, Chesapeake proposed that the corrected
GRIP factor for the FTS-9 rate class be effective upon Commission approval. The
Company explained to staff that the May billing cycle will begin after May 4,
the date of the Commission’s decision; therefore, all FTS-9 customers will be
billed the corrected FTS-9 GRIP factor beginning with the May billing cycle.
Chesapeake stated it believes that it is prudent to
address the over-recovery of dollars through a correction to the FTS-9 GRIP factor
and the issuance of refunds rather than to use the true-up process contained in
the annual GRIP filing. The true-up process would have served to reduce
Chesapeake’s 2018 GRIP factors for all rate classes; however, FTS-9 customers
would not have received the benefit of a refund nor would the lower 2018 GRIP
factor have offset the amounts FTS-9 customers overpaid in 2017. Chesapeake
proposes to refund the difference between the approved 2017 GRIP factor for
FTS-9 customers ($0.14596 per therm) and the amended GRIP factor ($0.08359 per
therm), resulting in a refund of $0.06237 per therm for January through April,
2017.
Since all FTS-9 customers are current Chesapeake
customers, refunds will be processed using bill credits. The credits will
include refunds for any applicable taxes/fees, which will be computed when the
refunds are processed through the billing system. Rule 25-7.091, Florida
Administrative Code (F.A.C.), requires that interest be paid on all refunds,
excluding deposit refunds and refunds associated with adjustment factors. FCG
explained in its revised response to staff’s first data request that its
interpretation is that Rule 25-7.091, F.A.C., does not apply to the GRIP
factor, which it considers an adjustment factor; however, the Company intends
to include interest in the calculation of the refund. The refunds will be
included with the June billing cycle and the Company informed staff that it
plans to notify the affected customers by separate letter once refunds are
processed. The Company agreed to notify staff when the refunds are complete.
Conclusion
Staff believes it is reasonable to amend the FTS-9 GRIP
factor and to issue refunds to the FTS-9 customers who have been billed the
incorrect 2017 GRIP factor.
Staff recommends
that the Commission approve Chesapeake’s petition to amend the 2017 GRIP factor
for rate class FTS-9 customers effective on the date of the Commission’s
decision and issue refunds in the form of bill credits to the FTS-9 customers.
Within 30 days of the issuance of the bill credits, Chesapeake should notify
staff that the refunds have been completed.
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 tariff should remain in effect,
pending resolution of the protest. If no timely protest is filed, this docket
should be closed administratively after Chesapeake notifies staff that the
refunds are complete. (Janjic)
Staff Analysis:
If Issue 1 is approved and a protest is filed within
21 days of the issuance of the order, the tariff should remain in effect,
pending resolution of the protest. If no timely protest is filed, this docket
should be closed administratively after Chesapeake notifies staff that the
refunds are complete.
