Case Background
On August 31,
2018, 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
2019. FPUC is a local distribution company (LDC) subject to the regulatory
jurisdiction of the Commission pursuant to Chapter 366, Florida Statutes
(F.S.). FPUC 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., and 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 through December 2017. As required in the swing service order,
the companies submitted the instant petition with revised 2019 swing service
rider rates for Commission approval by September 1, 2018. 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 2019 swing
service rider rates.
During its
evaluation of the petition, staff issued two data requests to the companies for
which responses were received on September 24, 2018 and October 4, 2018. The
proposed revised tariff sheets are shown in Attachment A to the recommendation.
The Commission has jurisdiction over this matter pursuant to Sections 366.04,
366.05, and 366.06, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve FPUC's and
Chesapeake’s revised swing service rider rates for the period January through
December 2019?
Recommendation:
Yes. The Commission should approve FPUC's and
Chesapeake’s swing service rider rates for the period January through December
2019. The costs included are appropriate and the methodology for calculating
the swing service rider rates is consistent with the swing service order. (Doherty)
Staff Analysis:
The companies incur intrastate capacity costs when
they transport natural gas on intrastate pipelines (i.e., pipelines operating
within Florida only). The companies have two types of natural gas customers:
sales and transportation customers. The swing service rider allows the companies
to recover the intrastate capacity costs directly from all transportation
customers as intrastate pipeline projects benefit all customers.
Sales customers are primarily residential and small
commercial customers that purchase natural 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 natural 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 (Indiantown) 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 natural 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 2018 swing service charges included a 40 percent
allocation of intrastate capacity costs to the non-TTS customers; the instant
petition includes a 60 percent allocation of intrastate capacity costs to the
non-TTS customers. Therefore, the proposed 2019 swing service rider rates for
the non-TTS transportation customers increased.
The proposed 2019 swing service rider rates for TTS transportation customers,
on the other hand, decreased as a result of the increased allocation of costs
to the non-TTS customers.
Proposed Swing Service Rider Rates
The proposed 2019 swing service rider rates were
calculated based on the same methodology approved in the swing service order.
As shown in the companies’ petition, the total intrastate capacity costs for
the period July 2017 through June 2018 are $7,396,034. The total intrastate
capacity costs reflect payments by FPUC to intrastate pipelines for the
transportation of natural gas pursuant to Commission approved transportation
agreements. In addition, the intrastate capacity costs include payments for outside
contractors FPUC hired to provide expertise on the purchase of commodity and
capacity.
Some of these costs ($3,620,456) will be billed directly
to certain large special contract customers. The remaining costs, $3,775,578
($7,396,034 - $3,620,456), are allocated between sales and transportation
customers.
The companies used actual therm usage data for the period
July 2017 through June 2018 to allocate the intrastate capacity costs. Based on
the usage data, the appropriate split for allocating the cost is 70.16 percent
($2,648,874) to transportation customers and 29.84 percent ($1,126,704) 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
60 percent of the total intrastate capacity costs, the 2019 swing service
revenues the companies will receive will total $1,702,175; the remaining $946,699
($2,648,874 - $1,702,175) of intrastate capacity costs allocated to
transportation customers will be recovered through the PGA cost recovery clause
from sales customers.
Credit to the PGA
The total intrastate capacity costs are embedded in the
PGA with the projected 2019 swing service rider revenues incorporated as a
credit in the calculation of the 2019 PGA. The amount credited to the 2019 PGA
is $1,702,175, plus $3,620,456 received from special contract customers, for a
total of $5,322,631. 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 requests, staff recommends that the companies’
proposed swing service rider is reasonable. Staff reviewed the total projected
intrastate capacity costs and verified that the costs included are appropriate.
The Commission should approve the proposed swing service rider rates for the
period January through December 2019. The costs included are appropriate and
the methodology for calculating the swing service rider rates is consistent
with the swing service order.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. 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. (Nieves)
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.
