Case Background
On August 31,
2020, 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 2021. 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 2021 swing service
rider rates for Commission approval by September 1, 2020. The January through
December 2020 swing service rider rates were approved in Order No.
PSC-2019-0491-TRF-GU. 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 2021 swing service rider rates.
On
September 8, 2020, the companies waived their 60-day file and suspend provision
of Section 366.06(3), F.S., via an e-mail, which has been placed in the docket
file. During its evaluation of the petition, staff issued a data request to the
companies for which responses were received on September 14, 2020 and on
September 28, 2020. The updated swing service rider rates and 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 the companies' proposed
swing service rider rates and tariffs for the period January through December
2021?
Recommendation:
Yes. The Commission should approve the companies’ proposed
swing service rider rates and tariffs for the period January through December
2021. The costs included are appropriate and the methodology for calculating
the swing service rider rates is consistent with the swing service order.
(Guffey)
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. 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.
Types of Natural Gas 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. Of the joint petitioners in the instant docket, only Florida Public
Utilities Company and Florida Public Utilities Company – Fort Meade have sales
customers.
Transportation customers receive natural gas from third
party marketers, also known as shippers
and, therefore, do not pay the PGA charge to the LDC. The companies’
transportation customers can be categorized as Transitional Transportation
Service (TTS) or non-TTS. TTS program shippers purchase gas in aggregated
customer pools for residential and small commercial customers, who do not
contract directly with a shipper for their gas supply. Of the joint petitioners
in the instant docket, 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 costs
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 for 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 can
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 2020 swing service charges included an 80 percent
allocation of intrastate capacity costs to the non-TTS customers; the instant
petition includes a 100 percent allocation of intrastate capacity costs to the
non-TTS customers. The allocation to the non-TTS customers will remain at 100
percent in future petitions.
Updated 2021 Swing Service Rider Rates
The updated 2021 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
2019 through June 2020 are $18,173,823. The total intrastate capacity costs
reflect payments by the companies to intrastate pipelines for the
transportation of natural gas, pursuant to Commission approved transportation
agreements. In addition, the intrastate capacity costs include payments to
outside contractors the companies hired to provide expertise on the purchase of
commodity and capacity.
Of these costs, $6,082,989 will be billed directly to
certain large special contract customers. The remaining costs of $12,090,834 are
allocated between sales and transportation customers and will be recovered
during the period January 1, 2021 through December 31, 2021.
The companies used actual therm usage data for the period
July 2019 through June 2020 to allocate the intrastate capacity costs. Based on
the usage data, the appropriate split for allocating the cost is $8,571,149 (70.9
percent) to transportation customers and $3,519,684 (29.1 percent) to sales
customers. The sales customers’ share of the cost is embedded in the PGA.
The transportation customers’ share ($8,571,149) is
allocated to the various transportation rate schedules in proportion with each
rate schedule’s share of the companies’ total throughput. To calculate the
swing service rider rates, the cost allocated to each rate schedule is divided
by the rate schedule’s number of therms.
As stated earlier, TTS customers are charged an allocated
portion of the intrastate capacity costs, while non-TTS customers were subject
to a phased implementation in the 2017 through 2020 swing service rider rates.
Since non-TTS customers are allocated 100 percent of the total intrastate
capacity costs in 2021, the swing service revenues the companies are projected
to receive is a total of $8,571,149.
Credit to the PGA
The total intrastate capacity costs are embedded in the
PGA with the projected 2021 swing service rider revenues incorporated as a
credit in the calculation of the 2021 PGA. The amount credited to the 2021 PGA
is $8,571,149 plus $6,082,989 received from special contract customers, for a
total of $14,654,138.
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 2021. 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. (Brownless)
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.
