Case Background
On January 12,
2018, Peninsula Pipeline Company, Inc. (Peninsula) filed a petition seeking
approval of a firm transportation service agreement (Agreement) between
Peninsula and Florida Public Utilities Company (FPUC), collectively the
parties. Peninsula operates as a natural gas transmission company as defined by
Section 368.103(4), Florida Statutes (F.S.). FPUC is a local distribution company (LDC)
subject to the regulatory jurisdiction of the Commission pursuant to Chapter
366, F.S.
By Order No.
PSC-07-1012-TRF-GP, Peninsula received approval of an
intrastate gas pipeline tariff that allows it to construct and operate
intrastate pipeline facilities and to actively pursue agreements with natural gas
customers. Peninsula provides transportation service only; it does not engage
in the sale of natural gas. Pursuant to Order No. PSC-07-1012-TRF-GP Peninsula
is allowed to enter into certain gas transmission agreements without prior Commission
approval. However, Peninsula is requesting Commission approval of this
Agreement as it does not fit any of the criteria enumerated in the tariff for
which Commission approval would not be required. Both Peninsula and FPUC are subsidiaries
of Chesapeake Utility Corporation (Chesapeake), and agreements between
affiliated companies must be approved by the Commission pursuant to Section
368.105, F.S., and Order No. PSC-07-1012-TRF-GP.
Pursuant
to the proposed Agreement (Attachment B to the recommendation), Peninsula will
construct and operate a natural gas pipeline in the West Palm Beach area.
During its evaluation of the petition, staff issued a data request to both
Peninsula and FPUC for which responses were received on February 27, 2018. The
Commission has jurisdiction over this matter pursuant to Sections 366.05(1),
366.06, and 368.105. F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve the proposed Agreement
between Peninsula and FPUC dated January 12, 2018?
Recommendation:
Yes. The Commission should approve the proposed
Agreement between Peninsula and FPUC dated January 12, 2018. (Doherty)
Staff Analysis:
FPUC provides natural gas service to residential and
commercial/industrial customers in the West Palm Beach area. Currently, FPUC receives
deliveries of natural gas to serve its customers in the area over a
transmission pipeline owned by Florida City Gas. This arrangement is referred
to as an LDC to LDC interconnection. City Gas’ pipeline is directly
interconnected with the interstate Florida Gas Transmission (FGT) line. FPUC’s
distribution system interconnects to City Gas’ transmission line at the Benoit
Farm gate station. However, FPUC is restricted to 300 dekatherms (dts) per day
at this delivery point and FPUC stated that the amount of capacity at the
Benoit Farm gate station cannot be increased.
FPUC explained that, in the past, the 300 dts per day capacity
amount was adequate to serve FPUC’s customers; however, in recent years FPUC
has experienced growth in West Palm Beach which has caused FPUC to exceed the
allowed capacity. If an LDC exceeds its allowable capacity from the interstate
pipeline, FGT assesses the LDC penalties. To address the capacity issues and avoid
imbalance penalties, FPUC and Peninsula have entered into the proposed
Agreement.
Pursuant to the proposed Agreement, Peninsula will
construct and own a new pipeline referred to in the Agreement as the Belvedere
Pipeline. The Belvedere Pipeline will interconnect with FGT at the compressor station
located at the Florida Turnpike near Belvedere Road. From this interconnection,
Peninsula will construct two miles of eight inch steel pipeline going west
where it will interconnect with FPUC’s existing distribution system at
Belvedere Road and Sonsbury Way. The Belvedere Pipeline is shown on the map in
Attachment A to this recommendation as the solid red line. This Agreement will
be in effect for an initial period of 20 years and shall be extended for
additional 10-year increments, unless either party gives written notice of
termination.
The parties assert that the negotiated monthly reservation
charge contained in the Agreement is consistent with a market rate since they
are within the ranges of rates set forth in similar agreements as required by
Section 368.105(3)(b), F.S. FPUC did not obtain a Request for Proposals (RFP)
from other entities to construct the pipeline. Peninsula, however, engaged in discussions
with FGT about possibly building the pipeline. FGT declined to bid on the
construction of the project stating that owning and operating laterals such as
the one proposed in this petition are not a focus of their expansion
activities.
FPUC is proposing to recover the payments to Peninsula
under the proposed Agreement from its customers through its Purchased Gas
Adjustment (PGA) and Swing Service Rider
mechanisms consistent with other gas transmission pipeline costs incurred by
FPUC. FPUC provided information showing that the impact on the PGA will be
minor ($0.00579 per therm for 2019). While FPUC will incur costs associated
with this service expansion, any new load will help spread the costs over a
larger customer base.
The benefit of Peninsula, as opposed to FPUC, constructing
the new pipeline, is primarily that Peninsula’s construction and ownership of
the pipeline will avoid FPUC undertaking the costs and risks for this project,
which in turn protects FPUC’s ratepayers.
Conclusion
Based on the petition and responses from Peninsula and
FPUC, staff believes that the proposed Agreement is cost effective, reasonable,
meets the requirements of Section 368.105, F.S., and benefits FPUC’s customers.
Staff therefore recommends approval of the proposed Agreement between Peninsula
and FPUC dated January 12, 2018.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. 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.
(Brownless)
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.
