Case Background
On September 1,
2017, Florida Public Utilities Company, Florida Public Utilities Company –
Indiantown Division, and Florida Public Utilities Company – Fort Meade
(jointly, FPUC), as well as the Florida Division of Chesapeake Utilities
Corporation (Chesapeake) (jointly, Companies), filed a petition for approval of
a revised swing service rider tariff for the period January through December
2018. FPUC is a local distribution company (LDC) subject to the regulatory jurisdiction
of the Commission pursuant to Chapter 366, Florida Statues (F.S.). It is a
wholly-owned subsidiary of Chesapeake Utilities Corporation which is
headquartered in Dover, Delaware. Chesapeake is also an LDC subject to the
Commission’s jurisdiction under Chapter 366, F.S. It is an operating division
of Chesapeake Utilities Corporation.
The Commission
first approved the Companies’ swing service rider tariff in Order No.
PSC-16-0422-TRF-GU (swing service order) and the initial swing service rider
rates were in effect for the period March 2017 through December 2017. As required in the swing service order,
the Companies submitted the instant petition with revised 2018 swing service
rider rates for Commission approval by September 1, 2017. The swing service
rider is a cents-per-therm charge that is included in the monthly gas bill of
transportation customers. This is staff’s recommendation on the 2018 swing
service rider rates.
The Companies
waived the 60-day file and suspend provision of Section 366.06(3), F.S., on
September 18, 2017. During its evaluation of the petition, staff issued a data
request to the Companies for which a response was received on September 29,
2017. On October 23, 2017, the Companies filed a revised petition and
associated tariff sheets to correct certain spreadsheet formulas used to
compute the rates. The correction filed resulted in a minimal change to the
calculations and the proposed rates. The proposed revised tariff sheets are
shown in Attachment A, pages 1-4, to the recommendation. The Commission has
jurisdiction over this matter pursuant to Sections 366.06, 366.04, 366.05, and
366.06, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve the Companies’ revised
swing service rider rates for the period January through December 2018?
Recommendation:
Yes. The Commission should approve the proposed
swing service rider rates, as revised on October 23, 2017, for the period
January through December 2018. (Draper, Doherty)
Staff Analysis:
The Companies incur intrastate capacity costs when
they transport gas on intrastate pipelines (i.e., pipelines operating within
Florida only). The swing service rider allows the Companies to recover the
intrastate capacity costs from their transportation customers as intrastate
pipeline projects benefit all customers. The Companies have two types of natural
gas customers: sales and transportation customers.
Sales customers are primarily residential and small
commercial customers that purchase gas from an LDC and receive allocations of
intrastate capacity costs through the Purchased Gas Adjustment (PGA) charge.
Only Florida Public Utilities Company and Florida Public Utilities Company –
Fort Meade have sales customers.
Transportation customers receive gas from third party
marketers or shippers and,
therefore, do not pay the PGA charge to the LDC. The Companies’ transportation
customers can be categorized as TTS (Transitional Transportation Service) or
non-TTS. TTS program shippers purchase gas for residential and small commercial
customers, in aggregated customer pools, who do not contract directly with a shipper
for their gas supply. Only Florida Public Utilities Company – Indiantown
Division and Chesapeake have TTS customers.
TTS customers receive allocations of intrastate capacity
costs through the swing service rider. Prior to the approval of the swing service
rider, TTS customers received allocations of intrastate capacity cost through
the Operational Balancing Account (OBA) mechanism. The OBA mechanism allowed
Indiantown and Chesapeake to assign intrastate capacity costs to TTS shippers,
who then passed the costs on to the TTS customers for whom they purchase gas.
With the approval of the swing service rider, TTS customers are now charged
directly their allocated portion of the intrastate capacity costs (rather than Indiantown
and Chesapeake charging the shippers who then passed the costs on to the TTS
customers).
Non-TTS customers are primarily large commercial or
industrial customers who contract directly with a shipper for their gas supply.
Prior to the approval of the swing service rider, non-TTS customers were not
paying a share of the intrastate capacity costs. The Commission approved a
stepped implementation process for the swing service rider for non-TTS
customers because the implementation of the swing service rider could have a
significant financial impact on those customers who previously had not been
allocated any portion of the intrastate capacity costs.
Specifically, the swing service order approved a five-year
implementation period for non-TTS customers with a 20 percent per year stepped
allocation. Accordingly, the 2017 swing service charges included a 20 percent
allocation of intrastate capacity costs to the non-TTS customers; the instant
petition includes a 40 percent allocation of intrastate capacity costs to the
non-TTS customers.
Proposed Swing Service Rider Rates
The proposed 2018 swing service rider rates, as revised on
October 23, 2017, were calculated based on the same methodology approved in the
swing service order. As shown in the Companies’ revised petition, the total
intrastate capacity costs for the period July 2016 through June 2017 are
$5,166,583. Some of these costs ($313,726) will be billed directly to certain
large special contract customers. The remaining costs, $4,852,857 ($5,166,583 -
$313,726), are allocated between sales and transportation customers.
The Companies used actual therm usage data for the period
July 2016 through June 2017 to allocate the intrastate capacity costs. Based on
the usage data, the appropriate split for allocating the cost is 70.12 percent
($3,402,998) to transportation customers and 29.88 percent ($1,449,859) to
sales customers. The sales customers’ share of the cost is embedded in the PGA.
The transportation customers’ share is allocated to the
various transportation rate schedules in proportion with each rate schedule’s
share of the Companies’ total throughput. The cost allocated to each rate
schedule is then divided by the rate schedule’s number of therms to calculate
the swing service rider rates.
As stated earlier, TTS customers are charged their
allocated portion of the intrastate capacity costs, while non-TTS customers are
subject to a phased implementation. Since non-TTS customers are only allocated
40 percent of the total intrastate capacity costs, the 2018 swing service
revenues the Companies will receive will total $1,550,837; the remaining $1,852,161
($3,402,998 - $1,550,837) of intrastate capacity costs allocated to transportation
customers will be recovered through the PGA from sales customers.
Credit
to the PGA
The total intrastate capacity costs are embedded in the
PGA with the projected 2018 swing service rider revenues incorporated as a
credit in the calculation of the 2018 PGA. The amount credited to the 2018 PGA
is $1,550,837, plus $313,726 received from special contract customers, for a
total of $1,864,563. At
the end of the stepped implementation period in year five, non-TTS customers
will no longer receive a reduced allocation of the intrastate capacity cost, the
credit to the PGA will increase accordingly, and sales customers will no longer
absorb a portion of the non-TTS intrastate capacity costs.
Conclusion
Based on its review of the information provided in the
petition and in response to staff’s data request, staff believes that the
Companies’ proposed swing service rider is reasonable. Staff recommends
approval of the proposed swing service rider rates, as revised on October 23,
2017, for the period January through December 2018.
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, 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 tariff 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.
