Case Background
On
March 11, 2020, Peoples Gas System (Peoples) and the City of Leesburg
(Leesburg), collectively the joint petitioners, filed a petition seeking
Commission approval of a Territorial Agreement delineating their respective
service boundaries in Sumter County, Florida. Staff notes that South Sumter Gas
Company, LLC, although listed in the title of the petition, is not a party to
the proposed Territorial Agreement. The proposed Territorial Agreement and a
map depicting the current service territories and proposed changes, and
boundary areas to be served by Peoples and Leesburg are provided in Attachment A
to this recommendation.
On
February 23, 2018, Peoples filed a petition in Docket No. 20180055-GU, requesting that the Commission resolve a
territorial dispute between Peoples and Leesburg and/or South Sumter Gas
Company, LLC. The Petition alleged that Peoples and Leesburg and/or South
Sumter Gas Company, LLC were in a dispute as to the rights of each to provide
natural gas services to the customers in Sumter County, including The Villages.
The area in dispute is characterized by residential areas of varying density,
interspersed with commercial support areas, and is referred to as Bigham North,
Bigham West, Bigham East (Bigham developments).
On
August 21, 2018, the Commission referred the dispute to the Division of
Administrative Hearings (DOAH). DOAH assigned an Administrative Law Judge (ALJ)
for the purpose of conducting an administrative hearing and issuing a
Recommended Order on the territorial dispute. The
administrative hearing was held from June 24 to 27, 2019, and a Recommended Order was issued on September 30, 2019. In that Order, the ALJ awarded
Peoples the disputed territory encompassing the Bigham North, Bigham East, and
Bigham West developments in the Villages in Sumter County. The ALJ’s Order did
not award any other territory to any of the parties. At the January 14, 2020 Commission
Conference, the Commission adopted the ALJ’s Recommended Order without
modification by final Order No. PSC-2020-0052-FOF-GU.
The proposed Territorial Agreement in the
instant docket incorporates the Commission’s decision in Order No.
PSC-2020-0052-FOF-GU, a separate Settlement Agreement between the parties addressing
the transfer of infrastructure from Leesburg to Peoples, and establishes new service boundary lines between the joint
petitioners for the remaining portions of the county. The referenced Settlement Agreement is not subject to Commission
approval, and hence was provided to staff for informational purposes only upon
request. The joint petitioners believe the Territorial Agreement
will avoid future litigation and territorial disputes in Sumter County and
enhance natural gas service for customers.
During the review of this joint petition,
staff issued two data requests to the joint petitioners on March 20, 2020 and
April 15, 2020, for which responses were received on April 3, 2020 and May 1,
2020, respectively. The Commission has jurisdiction over this matter pursuant
to Section 366.04, Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Should the
Commission approve the proposed Territorial Agreement between Peoples and Leesburg
in Sumter County?
Recommendation:
Yes,
the Commission should approve the proposed Territorial Agreement between
Peoples and Leesburg in Sumter County. The proposed Territorial Agreement is in
the public interest and it will enable Peoples and Leesburg to avoid
duplication of facilities and serve their customers in an efficient manner. (Guffey)
Staff Analysis:
Pursuant
to Section 366.04(2)(d), F.S., and Rule 25-6.0440, Florida Administrative Code
(F.A.C.), the Commission has the jurisdiction to approve territorial agreements
between and among rural electric cooperatives, municipal electric utilities,
and other electric utilities. Unless the Commission determines that the
agreement will cause a detriment to the public interest, the agreement should
be approved.
Peoples and Leesburg Territorial Agreement
The proposed Territorial Agreement
between Peoples and Leesburg was executed on March 9, 2020, and would continue
to be in effect until modification by mutual agreement by the parties and
approved by the Commission or until termination or modification mandated by
court order, as stated in Section 1.1 of the territorial agreement.
The joint petitioners stated that
as a result of Order No. PSC-2020-0052-FOF-GU, 3,625 (includes 3,615
residential and 10 commercial customers) Leesburg service customers in Bigham
North, Bigham West, and Bigham East will be transferred to be served by
Peoples, effective June 1, 2020. Pursuant
to the proposed Territorial Agreement in the instant docket, the joint
petitioners will also transfer three additional customers (fire station, a
district building, and The Villages Grown–a hydroponic and aeroponic farm)
located adjacent to Bailey West Development to Peoples. Section 2.1 of the
proposed Territorial Agreement also includes additional areas in Sumter County
to be served by Peoples in the future. The joint petitioners also stated that
any new customers taking service within the areas contained in Article II –
Boundary Provisions of the proposed Territorial Agreement will be served by
either Peoples or Leesburg according to the future service areas identified in
the map (Attachment A to this recommendation).
During the pendency of Docket No.
20180055-GU, Leesburg filed a territorial dispute petition in Docket No.
20180185-GU against Peoples regarding its natural gas service to Suwannee
American Cement Company, LLC in Sumter County. This petition is still pending
before the Commission. Pursuant to Section 2.1 of the proposed Territorial
Agreement and pursuant to the Settlement Agreement, the Suwannee American
Cement Company, LLC will continue to be served by Peoples. In response to
staff’s first data request, the joint petitioners stated that the unresolved
issues in Docket No. 20180185-GU will be resolved if the proposed Territorial Agreement
is approved by the Commission and Leesburg will voluntarily dismiss its petition
in Docket No. 20180185-GU.
Transfer
of Assets
The joint petitioners, in paragraph 10 of the petition and
in paragraph 9 of the Territorial Agreement, stated their intention to provide
an orderly transfer of assets in the Bigham developments without the need for
further litigation. Rule 25-7.0471(2)(a), F.A.C., requires the Commission to
consider the reasonableness of the purchase price of any facilities being
transferred.
In response to staff’s first data request, the joint
petitioners stated that Peoples will be paying for the infrastructure for the approximately
3,625 Bigham development customers to be transferred to Peoples. South Sumter
Gas Company, LLC, was retained by Leesburg to act as a construction company
which constructed the infrastructure to serve the Bigham developments. Peoples
will pay $5,000,000 to South Sumter Gas Company, LLC, with $500,000 to be to be
retained by Peoples to pay for warranty claims. The balance will be paid to South
Sumter Gas Company, LLC, in one year less claims for warranty issues related to
the infrastructure being transferred. This payment amount would result in a per
customer amount ranging between $1,241 to $1,379 depending on the reduction for
warranty expenses. Through its adoption of the ALJ’s Recommended Order, the
Commission concluded in Order No. PSC-2020-0052-FOF-GU that “the cost-per-home
for Leesburg and SSGC to provide service in Bigham is $1,800. In addition,
Leesburg will be installing automated meters at a cost of $72.80 per home. The
preponderance of evidence indicates that PGS cost-per-home is $1,579.”
The per customer purchase price stated above is less than the
cost determined by Order No. PSC-2020-0052-FOF-GU. The joint petitioners also
stated that no purchase price has been affixed to Leesburg’s transfer of its Bigham
development infrastructure, as Leesburg did not incur significant costs in
installing infrastructure in the Bigham developments.
Staff believes the negotiated infrastructure transfer cost is reasonable and
approximates the cost established in Order No. PSC-2020-0052-FOF-GU.
Customer Deposits and Notification
Leesburg notified its affected
natural gas customers via a letter dated April 1, 2020 (Attachment B to this
recommendation), which stated that their customer deposit will be applied
towards the final bill or outstanding balance, and any remaining deposit amount
will be directly refunded to the customer by check within 30 to 45 days of the
date of transfer (June 1, 2020). Of the 3,625 Leesburg customers to be
transferred to Peoples, per Commission Order PSC-2020-0052-FOF-GU, 1,909
customers have a deposit on file with Leesburg. Leesburg’s
customer deposit is $50.
Peoples is proposing a $50
deposit for Leesburg customers transferred to Peoples. After 12 months of
service, Peoples will reassess the deposit amount in accordance with 366.05(1),
F.S. According to Peoples’ customer notification (Attachment C), it will
collect the deposit in its first bill in July 2020 and return the deposit with
interest after 23 months of continuous service and no more than one late
payment. Peoples’ tariff allows transferred customers to request a credit check
to evaluate if the customer would qualify to have the deposit waived. Peoples
included information in its customer notification (Attachment C) on how
customers can request the credit check to determine if the deposit can be
waived.
Pursuant to the proposed
Territorial Agreement, three additional commercial customers will be transferred
to Peoples. These three customers currently are being served by Leesburg and
are located outside of the area ordered to be transferred to Peoples in Order
No. PSC-2020-0052-FOF-GU. The parties have agreed to transfer these customers
to Peoples in the proposed Territorial Agreement. In
response to staff’s second data request, Peoples stated that it will contact the
three additional customers individually to discuss the transfer and applicable
billing rates.
Conclusion
Through the proposed Territorial
Agreement, the joint petitioners will be able to serve customers within clearly
defined service areas, comport with the requirements of Order No.
PSC-2020-0052-FOF-GU, resolve the dispute in Docket No. 20180185-GU, avoid
future litigation, eliminate any
potential uneconomic duplication of facilities, and serve current and future
customers without service disruption.
After review
of the joint petition and the petitioners’ joint responses to Commission staff’s
data requests, staff recommends that the proposed Territorial Agreement is in
the public interest and will enable Peoples and Leesburg to serve their current
and future customers efficiently. It appears that the proposed Territorial Agreement
eliminates any potential uneconomic duplication of facilities and will not
cause a decrease in reliability of natural gas service. Pursuant to the joint
petition and response No. 3 to Commission staff’s first data request, the petitioners
stated that approval of this Territorial Agreement will establish definitive
service boundaries and avoid future litigation. Additionally, as stated in the
petition and in response to Commission staff’s first data request No. 6,
Leesburg will withdraw its counter-petition in Docket No. 20180185-GU to
resolve the territorial dispute related to the Suwannee American Cement, if the
Commission approves the proposed Territorial Agreement. As such, Commission staff
believes that the proposed Territorial Agreement between Peoples and Leesburg
will not cause a detriment to the public interest and recommends Commission
approval.
Issue 2:
Should this docket be closed?
Recommendation:
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. (Trierweiler)
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.
