Case Background
On June 10,
2019, 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 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 proposed Agreement as it does not fit any of the
criteria enumerated in the tariff for which Commission approval would not be
required. The parties 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 A to the recommendation), Peninsula will
construct and operate natural gas pipelines in western Palm Beach County.
During its evaluation of the petition, staff issued two data requests to the
parties for which responses were received on July 2 and July 15, 2019. 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 May 17, 2019?
Recommendation:
Yes, the Commission should approve the proposed
Agreement between Peninsula and FPUC dated May 17, 2019. (Guffey)
Staff Analysis:
FPUC provides natural gas service to residential, commercial,
and industrial customers in Palm Beach County and receives deliveries of
natural gas to serve these customers from the Florida Gas Transmission (FGT)
interstate pipeline. The petition explains that the proposed Agreement has been
necessitated by a request for service by FPUC to enable FPUC to provide service
to existing and future customers in this area, specifically the Florida
Research Park and four new residential developments that plan on utilizing
natural gas. The four residential developments are in various stages of
development. The parties project that the new developments will serve
approximately 10,000 residential, commercial, and industrial customers. In
addition, the parties explained, the proposed pipeline interconnections will
enhance FPUC’s ability to provide industrial customers in the area with higher
natural gas pressure.
To address the increase in customers and demand, the parties
entered into the proposed Agreement. The proposed Agreement specifies an
initial term of 20 years and thereafter shall be extended for additional
10-year increments, unless either party gives no less than 180 days written
notification of termination. Pursuant to the proposed Agreement, Peninsula will
undertake the three new projects described below and shown in Attachment B to
the recommendation.
First, Peninsula would construct an interconnection with
the Florida Southeast Connection, LLC, (FSC)
along State Road 710 near the Florida Research Park in Palm Beach County. The
FSC is a wholly owned subsidiary of NextEra Energy, Inc., and owns and operates
natural gas pipelines in central Florida. The FSC pipeline connects to the
interstate Sabal Trail Pipeline and became operational in June 2017. Peninsula would then construct 4,000 feet of 6
inch steel pipeline to a new custody transfer point with FPUC’s distribution
system to serve, among other things, the Florida Research Park.
Second, Peninsula would construct an interconnection with
the FSC near the Florida Turnpike. From this interconnection point, Peninsula
would build 30,000 feet of 8 inch steel pipeline, 300 feet of 4 inch steel
pipeline, and 1,000 feet of 2 inch steel pipeline to two new custody transfer
points with FPUC’s distribution system to serve the Avenir and Ancient Tree
residential developments.
Finally, Peninsula would construct an interconnection with
Florida City Gas. From
this interconnection, Peninsula would construct approximately 18,000 feet of 12
inch steel pipeline to a new custody transfer point with FPUC’s distribution
system to serve the Arden residential development. Peninsula would also
construct approximately 32,000 feet of 8 inch steel pipeline and 6,000 feet of 6
inch polyethylene pipeline to serve the West Lake residential development.
In response to staff’s first data request, the parties
state that FPUC did not issue a Request for Proposals (RFP) to obtain bids from
other entities to construct the pipeline. However, Peninsula did engage in a
conversation with the FSC regarding the possibility of FSC building the
pipeline in south Florida. According to Peninsula, FSC declined to bid on the
pipeline construction portion of the project citing laterals of this size and
operational specifications are not something they are interested in pursuing.
The parties assert that the negotiated monthly reservation
charge in the proposed 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 is proposing to recover its payments to
Peninsula through the Purchased Gas Adjustment (PGA) and the swing service rider
mechanisms, consistent with other gas transmission pipeline costs incurred by
FPUC. The swing service rider allows FPUC to recover intrastate capacity costs
from their transportation customers and is a cents per therm charge that is
included in a monthly gas bill of transportation customers. FPUC provided
information showing that the impact on the PGA will be minor ($0.01823 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 the three
projects, which in turn protects FPUC’s ratepayers. Peninsula stated that
engineering and permitting is currently underway with construction projected to
be completed by January 2020. Approval of this petition would also allow FPUC
to transport gas via the FSC interstate pipeline and Florida City Gas pipeline,
in addition to the FGT pipeline.
Conclusion
Based on the petition and the parties’ responses to staff’s
data requests, 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 the parties dated May 17, 2019.
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.
(Simmons)
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.
