Discussion
of Issues
Issue 1:
Should the Commission approve Peoples' proposed modifications
relating to the Company’s gas service facilities tariff?
Recommendation:
Yes, the Commission should approve Peoples’ proposed
modifications relating to the Company’s gas service facilities tariff, as
reflected in Attachment A, effective May 4, 2017. (Rome)
Staff Analysis:
The current wording of Peoples’ Tariff Sheet No.
5.601-1 does not allow the Company to seek reimbursement for customer-requested
modifications to the Company’s gas service facilities. The proposed tariff
revisions would allow Peoples to be reimbursed by customers who request
modifications to the Company’s gas service facilities, including those
customers who request the installation of an excess flow valve (EFV) on an
existing service line pursuant to the new PHMSA rule discussed below.
PHMSA Changes to Pipeline Safety Rules
Peoples is required by PHMSA to comply with federal Rule
49 C.F.R. § 192.383 (2017). As originally adopted, the rule required the
installation of an EFV on any new or replaced service line serving a
single-family residence after February 12, 2010, subject to certain exceptions.
An EFV is a device designed to shut off automatically when the natural gas flow
exceeds certain limits, such as when a service line is damaged due to
excavation or other activities. Thus, the EFV provides safety benefits by
limiting the risk of escaping gas due to third party damage or a pipe failure.
EFVs do not protect against gas leaks occurring in piping behind the customer’s
gas meter. Most service lines serving non-residential customers deliver in
excess of 1,000 standard cubic feet per hour and are fitted with curb valves
that are shut off manually.
PHMSA adopted amendments to 49 C.F.R. § 192.383 (2017), which
took effect on April 14, 2017. Among other things, the rule revisions, subject
to certain exceptions, provide for the following: (a) “operators” such as
Peoples are required to notify customers of their right to request installation
of an EFV, (b) if a service line customer requests an EFV installation, Peoples
must install the EFV at a mutually agreeable date, and (c) the question of who
bears the cost of the requested EFV installation is left to the “operator’s
rate-setter”. These
three key elements are discussed individually below.
Regarding customer notification, PHMSA determined that
notification through broad electronic means, including website postings, was
acceptable. In Peoples’
petition, the Company asserted that it is prepared to provide such notification
as is required by the amended rule. In response to a staff inquiry, Peoples provided
staff with a draft of the information to be posted on the Company’s website.
The website posting will include information such as the function and benefits of
an EFV and answers to “Frequently Asked Questions” regarding EFVs, including
potential cost estimates for EFV installations and a point of contact for
interested customers.
Regarding EFV installation, Peoples represented in its
petition that the Company has been installing EFVs on new and replaced service
lines since February 2010 and will continue to do so. Peoples stated that for a
new service line, the average cost of the EFV itself is approximately $30 and
is included in the calculation of the Maximum Allowable Construction Cost
(MACC) for purposes of determining whether a
contribution-in-aid-of-construction would be required of the customer for the
installation of the service line and other appurtenances necessary to provide
gas service.
However, Peoples represented that the situation is
considerably different in the case of an existing customer that requests an EFV
installation on a line that may have been installed many years before, and that
may require extensive excavation and restoration. Peoples estimated that in
most cases, the cost of retrofitting an EFV on a typical existing service line
would be between $1,200 and $1,800, depending on the excavation and restoration
required in connection with the installation.
According to the rulemaking record published in the Federal Register, PHMSA
opined that customer-initiated EFV installations on existing lines would not be
a circumstance with which operators would be dealing in significant numbers;
however, PHMSA opted to retain the right for existing customers to request an
EFV installation with the recognition that some individual households might
have a high willingness-to-pay for EFVs due to risk aversion and other factors.
Peoples suggested that it would be inappropriate for
existing customers, who either already have an EFV installed on their service
lines or who do not request that an EFV be installed, to subsidize the installations
of EFVs for customers who request them. Peoples further stated that the costs
of installing EFVs on existing service lines would not be incurred by Peoples
but for the customers’ requests, and such costs should be borne by the affected
customers.
The rulemaking record published in the Federal Register
also devoted considerable discussion to the appropriate regulatory entities
which would be responsible for determining who should pay for the costs of EFV
installations on existing service lines. PHMSA considered stakeholder comments
and ultimately “left the question of who bears the cost of installing EFVs on
service lines not being newly installed or replaced to the operator’s
rate-setter.”
Conclusion
Based upon the information provided by Peoples and a
review of the PHMSA rulemaking record published in the Federal Register, staff
agrees with Peoples’ assertion that the Commission is Peoples’ “rate-setter”
for purposes of the federal rule. Staff also believes that it is appropriate
for customers who request modifications to gas service facilities, such as the
installation of EFVs on existing service lines, to bear the cost of the modifications
and that such costs should not be subsidized by the general body of ratepayers.
Therefore, staff recommends that the Commission approve Peoples’ proposed
modifications relating to the Company’s gas service facilities tariff, as
reflected in Attachment A, effective May 4, 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. (Janjic)
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.
