Case Background
On March 28,
2017, the Florida Division of Chesapeake Utilities Corporation (Chesapeake or
Company) filed a petition requesting approval to modify Phase Two of the
Company’s Transitional Transportation Service (TTS) program. Specifically, the proposed modification
would suspend the annual Open Enrollment process and the associated annual
report contained in Phase Two.
In 2000, the
Commission adopted Rule 25-7.0335, Florida Administrative Code (F.A.C.), which
required each local gas distribution company to offer gas transportation
service to non-residential customers. The Commission approved Chesapeake’s
natural gas transportation service tariff as part of Chesapeake’s rate case in the
same year. By the end of 2001, according to the
Company, over 40 percent of non-residential customers were utilizing
transportation service. The remaining customers, who were still buying gas from
Chesapeake, were primarily small commercial and residential customers.
Customers buying gas from the utility are referred to as sales customers.
The Company
petitioned the Commission in 2002 to approve the TTS program in order to move
all remaining sales customers to transportation service, thus enabling
Chesapeake to exit the merchant function. In Phase One of the TTS program,
Chesapeake used a bid process to select a gas shipper (also known as a marketer)
to serve as pool manager for the TTS program and moved all sales customers to
the TTS program. In Phase One, 9,587 residential customers
and 552 small commercial customers were assigned to the selected shipper.
Phase Two, the
subject of this proceeding, was approved by the Commission in 2007. Phase Two expanded the choices available with
customers having the ability to choose between two pool managers. Phase Two also
includes an annual Open Enrollment period that provides customers with the
ability to change their TTS shipper or select alternate pricing options. The Company
has also been filing annual reports on Phase Two of the TTS program and the
Open Enrollment. The most recent annual report is contained in Attachment A to
the petition.
In a March 30,
2017 email (subsequently filed in the docket), Chesapeake waived the 60-day
suspension deadline, pursuant to Section 366.06(3), Florida Statutes (F.S.).
Chesapeake responded to staff’s first data request on April 28, 2017. The revised
response, filed on the same day, includes corrected proposed tariff page 11. The
Company’s 35 tariff pages proposed for Commission approval include non-substantive
changes, e.g., replace placeholder with order number and renumbered pages in
addition to pages pertinent to Open Enrollment. Chesapeake’s proposed tariff
pages (legislative format) specific to the suspension of Open Enrollment (Tariff
Sheets Nos. 28 – 29) are contained in Attachment 1 of this recommendation. The
Commission has jurisdiction over this matter pursuant to Sections 366.03, 366.05,
and 366.06, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve Chesapeake’s petition
to suspend the Phase Two Open Enrollment process and associated annual report?
Recommendation:
Yes, the Commission should approve Chesapeake’s
petition to suspend the Phase Two Open Enrollment process and associated annual
report, effective June 5, 2017. (Ollila)
Staff Analysis:
The shippers provide the natural gas, while
Chesapeake provides the distribution system to transport the gas to the
customer. Chesapeake recovers the cost of providing the distribution system
through tariffed base rates. The Commission does not regulate the prices
shippers charge customers for gas. However, since the shippers do not have
access to Chesapeake’s customer database, the Company bills the customers for
the natural gas on behalf of the shippers. TTS customers are divided between
two shippers with new customers assigned to the shippers on an alternating
basis and paying the shippers’ standard price option under which the price of
gas is updated each month to reflect the market price of natural gas.
As discussed in the case
background, under the current Phase Two of the TTS program Chesapeake
administers an annual Open Enrollment process, which includes mailing shipper
advertisements and Open Enrollment forms. During the Open Enrollment period
customers may change shippers and choose alternate pricing options offered by
the shippers, such as a 12-month fixed price option and per therm discounts.
The discounts are available to seniors over 50, military, and veterans. Customers
who do not respond during Open Enrollment remain with their current shipper and
remain on the standard price option. Customers must re-enroll every year in
order to retain the fixed price option and/or receive discounts. The fixed
price option and any discounts offered by the shippers are only available
during Open Enrollment for customers to select. To illustrate, a customer who
first became a Chesapeake customer in January 2016, was assigned by Chesapeake
to one of the two shippers and billed under the standard rate plan for natural
gas. Only during the Open Enrollment period in June 2016 did the customer have
an opportunity to select an alternate pricing option offered by a shipper.
Under Chesapeake’s proposal to suspend Open Enrollment, Chesapeake
will continue to bill customers on behalf of the shippers and customers will be
allowed to change selection of their shipper without charge once within a 12-month
period. However, Chesapeake will no longer mail shipper advertisements as it
currently does during the annual Open Enrollment and shippers are not able to
solicit TTS customers directly. Therefore, with the proposed suspension of the
Open Enrollment, the alternate pricing options offered during Open Enrollment
will no longer be available to TTS customers to choose from.
To support its petition, Chesapeake stated that although
the number of TTS customers has increased since 2011, the Open Enrollment
response rate has dropped as shown in Table 1-1 below. The current number of
customers is 16,092.
Table 1-1
Open Enrollment Response
Rate 2011 - 2016
|
Year
|
Offers Mailed
|
Response Rate
|
|
2011
|
13,972
|
11%
|
|
2012
|
14,125
|
14%
|
|
2013
|
14,380
|
14%
|
|
2014
|
14,682
|
11%
|
|
2015
|
16,221
|
9%
|
|
2016
|
15,637
|
10%
|
Source: Petition, paragraph 14
The procedural and administrative tasks of Open Enrollment
include the issuing of shipper advertisements, responding to customer telephone
inquiries in the Company’s call centers, and processing customer responses. The
Company asserts that in spite of increased call volumes, few customers
ultimately change their shipper or pricing plan. For example, Chesapeake reported
that three percent of customers have selected the fixed price option. The
Company characterizes the percentage of customers who respond to the Open
Enrollment solicitations as declining even as the number of TTS customers
increase.
According to the Company, the low response rate suggests
that a majority of customers do not view participation in Open Enrollment as
having benefits that compensate for the effort to respond. Chesapeake asserts
that it has had no indication that the participation rates will improve and believes
they are likely to continue to decline. In its response to staff’s first data
request No. 12(c), Chesapeake estimates the costs of the Open Enrollment
process to be in excess of $16,000 per year, with the majority of costs
attributable to outside contractors for mailing. Chesapeake notified the
shippers of the proposed suspension of Open Enrollment in January 2017.
According to Chesapeake, the shippers agreed with the Company that Open
Enrollment provides little or no reward.
In view of what Chesapeake characterizes as waning
customer response to the Open Enrollment process, the Company believes the
benefits of Open Enrollment no longer outweigh the costs to administer the
program. Chesapeake asserts that the suspension will promote administrative
efficiency within the Phase Two program without detriment to TTS customers. In
response to staff’s data request, the Company stated the proposed suspension is
part of its continuing efforts to consolidate the natural gas business units
for Chesapeake and Florida Public Utilities Company.
Current TTS customers will remain with their current
shipper under the standard price option. For those customers currently
receiving seniors over 50, military, or veterans discounts, Chesapeake stated
that the shippers have committed to continuing the discounts for the
foreseeable future. Those customers receiving discounts will not need to
re-enroll to receive the discounts. Staff notes, however, that the shippers have
the discretion to discontinue the discounts at their option at any time. Customers
who chose the one year fixed rate option during the 2016 Open Enrollment will
be moved to the standard rate plan effective with the first billing cycle in
August 2017 (i.e., the expiration of the one year fixed rate option that began
in August 2016). As it is current practice, new TTS customers will be assigned
to the shippers on an alternating basis under the standard rate plan. Current
and new customers will be allowed to change selection of their shipper without
charge once within a 12-month period.
Chesapeake plans to inform customers about the proposed
suspension of the annual Open Enrollment using a bill message that will refer
TTS customers to the company’s website. TTS customers who chose during the 2016
Open Enrollment the 12-month fixed rate option will be notified via a bill
insert that the 12-month fixed rate option will expire at the end of July 2017,
and effective with the first billing cycle in August 2017 customers will be
billed under the standard rate plan. Chesapeake will provide a copy of the bill
insert to staff for review prior to mailing.
Conclusion
After reviewing Chesapeake’s petition and its responses to
staff’s data request, staff believes that Chesapeake’s proposal to suspend the
Open Enrollment program and the associated annual report is reasonable. Staff
recommends that the Commission approve Chesapeake’s petition to suspend the
Phase Two Open Enrollment process and the associated annual report, effective June
5, 2017.
Issue 2:
Should this docket be closed?
Recommendation:
If no protest is filed by a person whose substantial
interests are affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a Consummating Order. (DuVal)
Staff Analysis:
If no protest is filed by a person whose substantial
interests are affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a Consummating Order.
