Discussion
of Issues
Issue 1:
Should the Commission approve Florida City Gas’s
proposed SAFE tariffs for the period January through December 2021?
Recommendation:
Yes. The Commission should approve Florida City
Gas’s proposed SAFE tariffs for the period January through December 2021.
(Forrest)
Staff Analysis:
Under the SAFE program, FCG will relocate or replace
254.3 miles of mains and 11,443 associated service lines from rear property
easements to the street over a 10-year period ending in 2025. The utility began
its mains and services replacements at the end of 2015, as provided for in the
2015 order; the surcharges have been in effect since January 2016. As of 2020,
the utility has replaced 165.3 miles of mains and 6,916 services as shown in
Attachment A to the petition.
True-ups by Year
As required by the 2015 order,
the utility’s calculations for the 2021 revenue requirement and SAFE factors include
a final true-up for 2019, an estimated/actual true-up for 2020, and projected
costs for 2021.
Final True-up for 2019
FCG stated that the revenues collected for 2019 were $286,521
compared to a revenue requirement of $419,791 resulting in an under-recovery of
$133,270. Adding the 2018 final over-recovery of $338,722 and the $133,270
under-recovery of 2019, including interest, results in a final 2019
over-recovery of $211,530.
Actual/Estimated 2020 True-up
FCG provided actual revenues for January through June and
forecast revenues for July through December of 2020, totaling $1,434,656,
compared to an actual/estimated revenue requirement of $1,511,621, resulting in
an under-recovery of $76,965. Adding the 2019 over-recovery of $211,530 to the
2020 under-recovery of $76,965, the resulting total 2020 true-up including
interest is an over-recovery of $137,895.
Projected 2021 Costs
FCG in Attachment B of its petition provided an overview
and description of the SAFE pipeline replacement projects undertaken during
2020 and the SAFE projects scheduled for 2021. For 2021, the utility states that
it plans to replace approximately 24 miles of mains in six projects in
Miami-Dade and Port Saint Lucie counties. The number of projected services to
be installed in 2021 is 1,386.
The utility’s projected investment for 2021 is $28,072,875
for its six projects in Miami Dade and Port Saint Lucie counties. The revenue
requirement, which includes a return on investment, depreciation, and taxes, is
$2,699,930. The return on investment calculation includes federal income taxes,
regulatory assessment fees, and bad debt. After subtracting the 2020 over-
recovery of $137,895, the total revenue requirement is $2,562,035. Table 1-1
displays the projected 2021 revenue requirement calculation.
Table 1-1
2021 Revenue Requirement
Calculation
|
2021 Projected Investment
|
$28,072,875
|
|
Return on Investment
|
$1,666,995
|
|
Depreciation Expense
|
612,326
|
|
Property Tax Expense
|
420,609
|
|
2021 Revenue Requirement
|
$2,699,930
|
|
Less 2020 Over-recovery
|
$137,895
|
|
Total 2021 Revenue Requirement
|
$2,562,035
|
Source: Attachment C of the Corrected Petition
Proposed 2021 SAFE factors
The SAFE factors are fixed monthly charges. FCG’s cost allocation method was approved in the
2015 order and was used in the instant filing. The approved methodology
allocates the current cost of a 2-inch pipe to all customers on a per customer
basis and allocates the incremental cost of replacing a pipe larger than 2
inches to customers who use over 6,000 therms per year. For customers who
require 4-inch pipes, the cost allocation takes into account that the minimum
pipe is insufficient to serve their demand and, therefore, allocates an
incremental per foot cost in addition to the all-customer cost. The resulting
allocation factors are applied to the 2021 total revenue requirement to develop
the monthly SAFE factors.
The proposed fixed monthly SAFE factor is $1.84 for
customers using less than 6,000 therms per year (current factor is $1.05). The
proposed fixed monthly SAFE factor for customers using more than 6,000 therms
per year is $3.43 (current factor is $1.96).
Conclusion
Staff has reviewed FCG’s filings and supporting
documentation and believes that the calculations of the 2021 SAFE factors are
consistent with the methodology approved in the 2015 order and are reasonable
and accurate. The utility’s proposed change on Tariff Sheet No. 78 addresses
the return on investment calculation. FCG explained that the other components of capital
structure shown on Tariff Sheet No. 78 pointed to the most recent earnings
surveillance report, while equity did not. Therefore, FCG updated the tariff to be consistent. FCG will continue to use the return on equity
and equity ratio cap from the most recent rate case. Staff recommends approval
of the utility’s proposed SAFE tariffs for the period January through December
2021.
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 tariffs 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. (Osborn, Crawford)
Staff Analysis:
If Issue 1 is approved and 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, this docket should be closed upon the issuance of a
consummating order.
