Discussion
of Issues
Issue 1:
Should the Commission approve Peoples' petition to
modify its tariffs shown in Attachment A for the use of natural gas for GHP systems?
Recommendation:
Yes. The Commission should approve Peoples' petition
to modify its tariffs shown in Attachment A for the use of natural gas for GHP systems.
The proposed tariffs should become effective on August 7, 2018. (Guffey,
Merryday)
Staff Analysis:
Peoples’ proposed tariff modifications provide new residential
and commercial tariff provisions and charges for the use of GHP systems. The
proposed new GHP charges are based upon the cost of providing service and
anticipated GHP customer gas usage. The GHP technology and proposed charges are
discussed below.
Gas Heat Pump Technology
Peoples explained that the GHP technology is new to
Florida and that there is a growing interest in the use of GHPs, particularly from
commercial customers. There are two types of GHP systems: (1) a basic GHP
system that utilizes a natural gas powered engine to drive the compressor for either
cooling or heating a building and (2) a power producing GHP system that includes internal back-up electric generation
ability and can fully operate during electric power loss. Peoples stated that
it had communications with GHP manufacturers and inquiries from residential and
commercial customers, prompting Peoples to develop the proposed tariffs to
serve GHP load.
Peoples stated that the GHP technology provides for
increased energy efficiency when compared to traditional electric heating,
ventilation, and air conditioning (HVAC) systems. The GHP systems can be
installed during construction or as a retrofit to existing buildings. Peoples currently
offers a Commission-approved gas space conditioning program which offers piping
and venting allowances to reduce the generally higher cost of installing gas
space conditioning equipment. However, Peoples’ Energy Conservation Cost
Recovery (ECCR) clause docket filings from 2009 to 2017 indicate that no
customers have utilized the allowance.
In response to staff’s first data request, Peoples
explained that the installed cost for a GHP system ranges between $4,400 and
$8,000 per ton, based on individual design and manufacturer. Peoples stated
that an 8-ton system is expected to satisfy the heating and cooling needs of a
4,000-4,800 square foot house, and expects that customers with larger houses
are more likely to install a GHP system. Peoples stated that currently three GHP
manufacturers are available Peoples’ customers: M Trigen, Yanmar, and Blue
Mountain.
Proposed Residential and Commercial GHP Tariffs
and Charges
Residential Customers
For residential customers utilizing a GHP system, the
proposed new GHP charges are shown on tariff sheet No. 7.201 (Attachment A,
page 4). Current residential customer charges are based on annual usage, with a
$20 customer charge applying to large residential customers (RS-3 billing class
using 250-1,999 therms per year). The current distribution charge is $0.26782
per therm.
Residential customers in the proposed new RS-GHP billing
class will pay a monthly customer charge of $20 and a distribution charge of
$0.0999 per therm. The lower RS-GHP distribution charge reflects the increased
natural gas consumption of a GHP customer compared to a residential customer
who consumes natural gas for traditional gas appliances only. In addition to the
customer and distribution charges, all residential customers pay Commission-approved
ECCR and Cast Iron Bare Steel Replacement Rider clause charges.
Residential customers who have traditional gas appliances
and a GHP system would be billed for all their natural gas usage at the GHP rate.
Peoples explained that by not metering and billing residential GHP usage
separately, the utility can reduce unnecessary metering costs.
The derivation of the proposed
new RS-GHP $0.0999 per therm distribution charge is shown in response to
staff’s first data request No. 17.
The RS-GHP distribution charge is formulated using a weighted average of (1) the
projected cost to provide service to customers who only have a GHP system and (2)
the currently approved cost to provide service to customers with only
traditional gas appliances. This ensures that GHP customers pay the costs
associated with natural gas service, since the RS-GHP distribution charge would
apply to GHP usage and any other natural gas appliance(s) the customer may
have.
To develop the projected cost to provide service to GHP systems,
Peoples utilized the cost of service study approved in the utility’s 2008 rate
case (the
utility’s most recent rate case) and projected residential GHP usage. Based on
information provided by GHP manufacturers, Peoples projects that a residential 8-ton
GHP system would use 160 therms per month. Average monthly residential
consumption for Peoples’ customers without a GHP system is approximately 18
therms.
Currently, residential customers with consumption in
excess of 1,999 therms per year are eligible for gas transportation service.
Under transportation service, the customer purchases the natural gas commodity
from a pool manger (third party marketer). Residential customers taking service
under the GHP rate will also qualify for transportation service if they use
more than 1,999 therms per year.
Commercial Customers
For commercial GHP customers, Peoples proposed a new
Commercial Gas Heat Pump Service (CS-GHP) rate schedule as shown on tariff
sheet Nos. 7.405 and 7.405-1 (Attachment A, pages 6-7). The proposed CS-GHP monthly
customer charge is $35 and the proposed per therm distribution charge is
$0.2063. In comparison, the current the GS-1 distribution charge is $0.2680 per
therm. The derivation of the proposed CS-GHP charges is shown in Exhibit B to
the petition.
The proposed CS-GHP customer charge is set at the same
level as the currently approved GS-1 customer charge ($35). To calculate the CS-GHP
distribution charge, Peoples utilized the cost of service study approved in the
utility’s 2008 rate case and projected commercial GHP natural gas usage. Based
on the information provided by GHP manufacturers, Peoples projects that a
commercial GHP system would use 627 therms per month.
Under the CS-GHP rate schedule, the gas provided for GHP
usage will be separately metered from other natural gas usage and will be a
separate item on customer bills. The utility proposes separate GHP metering for
commercial customers to ensure that the reduced GHP distribution charge is
applied only to GHP consumption, as non-GHP natural gas usage varies
significantly for commercial customers. In addition, GHP use by commercial
customers could vary depending on the type of customer and size of GHP
equipment installed.
Peoples explained that the types of commercial customers
who could take gas service under the CS-GHP tariff would include senior living
facilities, nursing homes, convenience stores, restaurants, or office buildings.
In addition to customer and distribution charges, CS-GHP customers would pay all
other Commission-approved cost recovery clause charges (Purchased Gas
Adjustment, ECCR, Swing Service Charge, Competitive Rate Adjustment, and Cast
Iron Bare Steel Replacement Rider). CS-CHP customers would pay the same cost
recovery clause charges as those approved for the commercial GS-1 rate
schedule.
Customer Notification
The utility proposes to inform its customers of the
availability of the new heating/cooling options via public relations outreach,
advertising, bill inserts, and on the utility’s website. Peoples’ sales team
will communicate with specific commercial and industrial customers and with
distributors, installers, and service contractors to inform them of the
availability of the GHP technology. Peoples stated that the utility will
provide a copy of its customer notifications to staff prior to use.
Conclusion
Based on the
petition and responses to staff’s data request, staff believes the proposed GHP
tariffs are cost-based. Therefore, the Commission should approve Peoples'
petition to modify its tariffs shown in Attachment A for the use of natural gas
for GHP systems. The proposed tariffs should become effective on August 7,
2018.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If Issue 1 is approved, the tariffs should
become effective on August 7, 2018. If 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, the docket should be closed upon the issuance of a consummating
order. (Schrader, Crawford)
Staff Analysis:
Yes. If Issue 1 is approved, the tariffs should
become effective on August 7, 2018. If 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, the docket should be closed upon the issuance of a consummating
order.
