Case Background
Peoples Gas
System (Peoples or company) is a local distribution company subject to the
regulatory jurisdiction of the Commission pursuant to Chapter 366, Florida
Statutes (F.S.), and serves approximately 365,000 natural gas customers across
Florida. On September 19, 2017, Peoples filed a petition for approval of tariff
modifications to accommodate the receipt of renewable natural gas (RNG) on the
company’s distribution system. RNG is biogas that has been processed to meet
pipeline quality standards. Biogas sources include wastewater treatment plants,
landfills, municipal solid waste, livestock manure, agricultural residues, and
energy crops.
According to
Peoples, local distribution companies in other states, e.g., SoCalGas in
California, have begun to accept natural gas into their systems from customers
who produce pipeline-quality natural gas from renewable biomass sources. Exhibit
A attached to the petition contains an article discussing RNG and its
applications in other states and Europe. This is the first tariff filing by a
Florida natural gas utility giving biogas producers the option of delivering RNG
into the utility’s distribution system.
In an email, the
company waived the 60-day suspension deadline pursuant to Section 366.06(3),
F.S. On October 20, 2017, the company filed responses to staff’s first data
request, including a modification to its proposed new tariff sheet No. 7.404-1.
In response to staff’s data request, Peoples also withdrew its proposed
revisions to tariff sheet Nos. 7.101-5 and 7.101-6 as the changes were not
necessary. The proposed tariff sheets are contained in Attachment A. The
Commission has jurisdiction over this matter pursuant to Sections 366.03,
366.04, 366.05, and 366.06, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve Peoples' proposed
tariff modifications?
Recommendation:
Yes, the Commission should approve Peoples’ proposed
tariff modifications, as revised on October 20, 2017, effective December 12,
2017. (Ollila)
Staff Analysis:
Background
In its petition, Peoples stated that it has been
approached by potential customers (e.g., landfill operators and wastewater
treatment plant owners) who wish to deliver RNG into Peoples’ distribution
system. The potential projects are waste-to-energy requests for proposals
(RFPs) issued by local governments including Hillsborough, Polk, and Volusia
Counties, as well as the City of St. Petersburg. According to Peoples, the
potential projects would reuse waste gas that now escapes into the atmosphere
or is flared (burned off).
The biogas producer could use the RNG onsite or contract
with a customer who will purchase the RNG from the biogas producer. Potential
customers may include compressed natural gas (CNG) fill stations and industrial
customers, or Peoples could purchase the RNG, thus displacing a portion of
traditional (geologic) natural gas with RNG.
Proposed Tariff Modifications
Peoples proposed two tariff modifications: (1) modifications
to current tariffs to accommodate the receipt of RNG from biogas producers and (2)
a proposed new rate schedule for Renewable Natural Gas Service (RNGS) for
conditioning services. The two modifications are discussed below.
Modifications to Current Tariffs
Peoples is proposing to modify Rate Schedules GS-3 (50,000
– 249,999 therms per year), GS-4 (250,000 – 499,999 therms per year), and GS-5
(500,000+ therms per year) to add provisions related to Peoples’ receipt of RNG
into its system. Biogas producers, who contract with Peoples to deliver RNG
into Peoples’ distribution system, would be billed by Peoples the otherwise
applicable base rates for the use of Peoples’ distribution system to transport
the RNG. While biogas producers would pay tariffed base rates, biogas producers
would not pay the company’s purchased gas adjustment clause and the energy
conservation cost recovery clause. If the RNG is used on-site only by the
biogas producer, the biogas producer would not pay Peoples’ base rates (i.e.,
GS-3 through GS-5) since there is no transport of RNG on Peoples’ system.
Other proposed modifications to Peoples’ current tariffs
address gas quality. Peoples describes these tariff modifications as relatively
minor since the company believes that the tariff’s existing provisions related
to gas quality are sufficient. Peoples proposes to add a sentence stating that
the company may refuse to accept any gas or RNG tendered by a biogas producer
to Peoples if the gas does not meet the quality standards set out in the
tariff. According to Peoples, the primary goal of these modifications is to
ensure that any RNG delivered into the company’s system by a biogas producer
does not adversely affect the safety or operation of the system.
New Rate Schedule RNGS
Peoples may provide the necessary services to condition or
upgrade the biogas in order to convert the biogas into pipeline quality RNG. The
company explained that each RNG project is expected to vary in scope, site
conditions, and biogas characteristics such as methane content; the company
anticipates that most biogas will require some processing prior to injection
into Peoples’ system. The upgrading services can also be provided by private
companies; in that case, Peoples would only test the quality of the RNG before
it enters its system. If a biogas producer contracts with a private entity to
provide the upgrading services, the RNGS tariff would not apply.
The proposed new RNGS rate schedule will allow Peoples to
recover from biogas producers the cost of upgrading the biogas. The RNGS rate
schedule does not contain standard charges, as the services provided will vary
based on the steps needed to upgrade the biogas to RNG. The monthly services charge
would be equal to a mutually agreed upon percentage (between Peoples and the
biogas producer) multiplied by Peoples’ gross investment in the facilities
necessary to provide biogas upgrading services. The gross investment may include
facilities such as blowers, chillers, condensate removal equipment, quality
monitoring equipment, etc. Peoples explained that the monthly services charge would
be designed to recover the revenue requirement, including the operations and
maintenance costs, associated with constructing and operating the biogas processing
infrastructure.
Under Peoples’ proposal, its RNG service would not include
services related to capturing or producing biogas. In addition, title to the
biogas, both before and after any conditioning necessary to transform it into
RNG, would remain with the biogas producer.
Potential Benefits of RNG
In its petition, Peoples explained that its proposed
tariff modifications address the needs of its customers and are responsive to
inquiries from owners and developers of biogas sources. Peoples asserted that
service under the proposed tariff modifications will cover costs and provide
benefits to Peoples’ system and its general body of ratepayers while maintaining
current safety and operational requirements for the company’s gas distribution
system. Peoples stated that it believes its proposed tariff modifications are
reasonable and consistent with the legislatively expressed state policy of
encouraging the use of renewable fuels.
In response to staff’s request to discuss the potential
benefits to the general body of ratepayers of the proposed RNG tariffs, Peoples
stated that the proposed tariff could provide improved environmental compliance
and new revenue sources for owners and producers of biogas, which could in turn
provide opportunities to stimulate local economies and create jobs. RNG is
interchangeable with pipeline gas; therefore, opportunities may be available for
Peoples to enhance the diversity of its gas supply. In addition, RNG used in
natural gas vehicles furthers the goal of reducing reliance on traditional
liquid fuel sources.
Conclusion
After review of the company’s petition and its responses
to staff’s data request, staff believes that the proposed RNG program and
tariff provisions are reasonable and will cover the associated cost; therefore,
staff recommends approval of the proposed tariff modifications, as revised on
October 20, 2017, effective December 12,
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. (Trierweiler)
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.
