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State of Florida |
Public Service Commission Capital Circle Office Center ● 2540 Shumard
Oak Boulevard -M-E-M-O-R-A-N-D-U-M- |
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DATE: |
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TO: |
Office of Commission Clerk (Teitzman) |
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FROM: |
Division of Economics (Hampson, Coston) Office of the General Counsel (Osborn, Crawford) |
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RE: |
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AGENDA: |
04/01/21 – Regular Agenda – Tariff Filing – Interested Persons May Participate |
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COMMISSIONERS ASSIGNED: |
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PREHEARING OFFICER: |
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SPECIAL INSTRUCTIONS: |
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On September 14, 2020, Florida Public Utilities Company (FPUC), Florida Public Utilities - Indiantown Division (Indiantown), Florida Public Utilities Company-Fort Meade (Ft. Meade), and the Florida Division of Chesapeake Utilities Corporation (Chesapeake) (jointly, Companies) filed a joint petition requesting approval to consolidate the Companies' four different Commission-approved tariffs to the extent possible, without modification to any of the four utilities’ rates and charges. In addition, the Companies have proposed to implement modifications to the terms and conditions under which the Companies provide transportation service to customers and to revise the swing service rider.
Chesapeake is an operating division of Chesapeake Utilities Corporation and FPUC is a corporate subsidiary of Chesapeake Utilities Corporation, which is headquartered in Dover, Delaware. In 2010, FPUC acquired Indiantown Gas Company and in 2013, FPUC acquired the Fort Meade gas system. The Companies are local distribution companies (LDC) subject to the Commission’s regulatory jurisdiction pursuant to Chapter 366, Florida Statutes (F.S.).
The Companies provide natural gas service under four separate Commission-approved tariffs. The Companies state that they have taken steps over the past few years to address inconsistencies between the Companies' tariffs, consolidate programs, and allocate costs, where appropriate, across the four utilities. In 2014, the Commission approved consolidation of the Companies’ conservation programs.[1] In 2015, the Commission approved a modified cost allocation methodology and revised Purchased Gas Adjustment (PGA) calculation to enable the Companies to have the ability to better balance the costs of individual projects across its entire system, rather than on a system-by-system basis.[2] In 2016, the Commission approved a modification to the swing service rider to allow the Companies to allocate costs in a more equitable manner across customer classes (2016 Swing Service Order).[3] In 2019, the Commission approved modifications to the transportation imbalance tariffs of FPUC and Ft. Meade to allow the Companies to have consistent tariff provisions across their Florida business units.[4]
By Order No. PSC-2020-0472-PCO-GU, issued November 23, 2020, the Commission suspended the proposed tariffs to allow Commission staff sufficient time to review the petition. During the evaluation of the petition, staff issued one data request to the Companies for which responses were filed on December 28, 2020. In response to staff’s data request, the Companies filed revised tariff sheet Nos. 6.580 and 7.602 to address input received from pool managers regarding the proposed tariffs’ provision on performance penalties.[5] No comments have been received from customers or pool managers, as of the filing of this recommendation.
Issue 1 addresses the Companies’ proposal to consolidate the tariffs and Issue 2 addresses the Companies’ proposal to modify the swing service rider. Attachment A to this Recommendation contains the proposed tariff sheets. Attachment B to this Recommendation is a schedule of the tariff sheets with the proposed implementation dates, which the Companies provided to staff. The Commission has jurisdiction over this matter pursuant to Section 366.06, F.S.
Issue 1:
Should the Commission approve the Companies’ proposal to consolidate and make modifications to the Companies’ tariffs?
Recommendation:
Yes. The Commission should approve the Companies’ proposal to consolidate and make modifications to the Companies’ tariffs. The proposed revisions eliminate inconsistencies across the tariffs, without changing customer rates, and would allow the Companies to operate under a consolidated tariff. Attachment A to this Recommendation contains the proposed tariff sheets. Attachment B to this Recommendation provides a schedule of the tariff sheets with the proposed implementation dates, which the Companies provided to staff. Staff requests administrative authority to work with the Companies on the implementation dates of the proposed tariffs and to cancel the corresponding current tariffs. (Hampson)
Staff Analysis:
The Companies currently have in place four utility-specific Commission-approved tariffs. The Companies stated that operating under four separate tariffs has presented a variety of administrative and operational challenges for the utilities and their customers. In this petition, the Companies request consolidation of these tariffs into a new Original Volume 1 Tariff that would apply to all four utilities. The Companies stated that the proposed tariff consolidation is the next step in an ongoing effort to reduce and eliminate business inconsistencies across their Florida platform. While the Companies anticipate requesting consolidated rates in a future filing with the Commission, this petition does not propose any changes to customer rates. Staff believes that if the Commission were to approve the Companies’ proposal, there would be more consistency and efficiency across the Companies.
Proposed Consolidated Original Volume 1 Tariff
The Companies have proposed to consolidate tariff sections related to the title page, miscellaneous and general information, and the system maps and communities served, which would result in no modifications other than to update addresses and communities served. Regarding the technical terms and abbreviations section, the Companies have proposed to adopt terms from either one of the four existing Companies’ tariffs. Staff agrees that the adopted terms represent the most appropriate and accurate descriptions of terms used in the tariffs.
The Companies stated the proposed consolidated rules and regulations section language most effectively conforms to Commission rules while reflecting industry norms. In addition, the Companies have adopted the proposed language from one or more of the current, individual approved tariffs. The Companies argue that the modifications and consolidations proposed will provide more clarity for customers, as well as provide a more streamlined business process and reduce administrative burden. In a few instances, these modifications include a change for one or more of the utilities. These changes are discussed below.
Maximum Allowable Construction Cost
Rule 25-7.054, Florida Administrative Code (F.A.C.), provides utilities’ obligations to provide service extensions to connect a new customer to the distribution system at no charge. Pursuant to the rule, the Maximum Allowable Construction Cost (MACC) is the maximum capital investment made by the utility without cost to the customer. Any investment above the MACC must be borne by the customer benefiting from the service extension. The MACC should be equal to four times the estimated annual gas revenue derived from the facilities, less the cost of gas. Pursuant to Rule 25-7.054(3)(c), F.A.C., the rule does not prohibit utilities from adopting extension policies more favorable to customers, i.e. utilities are allowed to establish a MACC period that is greater than four years. Ft. Meade, Indiantown, and Chesapeake currently have a Commission-approved MACC equal to six times the estimated annual gas revenue, while FPUC’s MACC remains at four times the estimated annual gas revenue.
In proposed tariff sheet No. 6.150, the Companies requested to adopt a MACC that equals six times the estimated annual gas revenue from the requested extension. The Companies state that by adopting a consistent MACC calculation for all four utilities, FPUC customers would have greater opportunity to receive natural gas service while still adequately protecting the remaining body of ratepayers from uneconomic system expansion. Staff believes that the Companies’ proposed revision to the MACC for FPUC is reasonable and consistent with the MACC calculations previously approved by the Commission for Ft. Meade, Indiantown, and Chesapeake.
Area Extension Program
The Area Extension Program (AEP) is a Commission-approved tariff designed to provide the Companies with an optional method to recover the capital investment necessary to extend natural gas service to new customers in a discrete geographic area. The AEP tariff provides for the determination of a monthly charge applicable to all natural gas customers located in the geographic area over an amortization period of up to 10 years. The AEP charge is applied as a fixed dollar amount for FPUC’s and Ft. Meade’s AEP customers, while for Chesapeake and Indiantown, the AEP charge is applied on a variable per therm basis. The AEP charge is calculated by a formula based on the amount of investment required and the projected gas sales and resulting revenues collected from customers in the AEP area. The AEP tariff specifies the formula to calculate the charge; the AEP charge itself does not require Commission approval. In addition to the AEP charge, AEP customers pay all other tariffed charges.
Proposed tariff sheet Nos. 6.152 through 6.154 incorporate FPUC’s and Ft. Meade’s fixed AEP charge for the Companies. The Companies stated that no cross-subsidization would occur between businesses, because the surcharge is calculated for each discrete expansion area. Staff believes that the proposed modification creates a uniform methodology, as well as provides more certainty to collect the cost of the capital investment for Chesapeake and Indiantown because a fixed charge is not dependent on customer usage. Currently, there are no AEP charges applicable to Chesapeake or Indiantown customers.
Quality of Gas Specifications
In the proposed tariff sheet No. 6.20, the Companies have presented modifications to certain gas quality specifications. In this petition, the Companies requested to adjust the lower end of the BTU Heat Value range from 967 to 960 and to increase the allowable oxygen content from 0.1 percent to 0.2 percent. Staff agrees that the proposed specifications are a minor modification and are similar to the gas quality specifications of Florida Gas Transmission and Peoples Gas System. Furthermore, similar to other Commission-approved tariffs, the Companies proposed a provision that reserves their right to waive gas quality specifications on a not-unduly discriminatory basis. [6] In response to staff’s first data request No. 3, the Companies stated that the proposed waiver provision was prompted by the interest in introducing incremental gas supplies delivered by renewable gas suppliers.
Force Majeure Provision
In the proposed tariff sheet No. 6.30, the Companies include a modification to their Force Majeure language to combine the existing language between the four current tariffs and to include government-mandated quarantines associated with epidemics as a qualifying event. In response to staff’s first data request No. 5, the Companies stated that the current COVID-19 pandemic prompted the proposed Force Majeure provision. Staff agrees that the proposed provision would further clarify the existing Force Majeure language.
Rate Schedules and Billing Adjustments
The Rate schedules are shown on tariff sheet Nos. 7.000 through 7.449 and the billing adjustments are shown on tariff sheet Nos. 7.900 through 7.920. The Companies have not proposed to modify any rates or charges in this filing and the proposed tariff includes separate rate schedules for each of the four utilities to show the rates and charges applicable to each utility. Staff believes that consolidating rate schedules and billing adjustments would provide more uniformity and greater clarity for customers.
Transportation Service Related Tariffs
The Companies stated that as part of their consolidation of tariffs, the Companies are also proposing to establish consistent transportation service programs across the four utilities. Pursuant to Rule 25-7.0335, F.A.C., FPUC and Ft. Meade provide sales and transportation service while Indiantown and Chesapeake provide transportation service only. For FPUC and Ft. Meade, the sales customers are primarily residential and small commercial customers that purchase natural gas from the utility; transportation customers receive natural gas from pool managers, also known as shippers or third-party marketers. In a transportation service environment, the utility only transports the natural gas commodity delivered by the pool manager across its distribution system to the customers’ premises. Transportation customers can be in aggregated customer pools or receive individual transportation service (typically available to large commercial customers).
The Commission does not have jurisdiction over pool managers; the Companies typically issue a Request for Proposal to solicit bids from qualified gas marketing companies interested in becoming a pool manager. Selected pool managers must sign a contract with the Companies that defines the terms and conditions under which the pool manager can provide natural gas sales to transportation customers. The Companies state that they began discussions with pool managers regarding their plans to update and consolidate the transportation programs in 2018 and have been in ongoing discussions with the pool managers since then. In response to staff’s first data request, No. 7, the Companies stated that pool managers expressed appreciation for the proposed tariff consolidation, as it would alleviate the administrative burden of operating under four different utility tariffs.[7]
The Companies state that by establishing uniform transportation service rules and processes for each of the utilities it will be able to provide a more uniform transportation service. Additionally, transportation customers and pool managers will operate under the same tariff provisions across the Companies, resulting in a less cumbersome and inefficient administrative process. In many areas, the Companies have incorporated the language from the existing Chesapeake tariffs for use in the consolidated transportation tariffs. The major changes affecting pool managers are discussed below.
Nominations
The Companies proposed to update the nomination process. Specifically, the Companies stated that the current tariff language has not evolved with the industry standards in relation to the timing of nominations. The request for the receipt and delivery of natural gas quantities is referred to as a nomination. Currently, pool managers provide a daily request for the delivery of natural gas, measured in dekatherms, to the interstate pipelines. The interstate pipelines then inform the Companies of all the pool managers’ nominations. The Companies propose to require pool managers to submit their nominations to the Companies simultaneously with any submissions made to the interstate pipelines. This updated nomination process would allow the Companies to receive timely information on all daily scheduled natural gas quantities to be delivered to serve transportation customers. Once a nomination is approved by the pipelines, the natural gas is scheduled for delivery to the Companies.
Capacity Release
The Companies have firm capacity rights on the interstate pipelines and release capacity, on a temporary basis, each month on behalf of transportation customers to pool managers. If a pool manager needs more interstate pipeline capacity, the pool manager is responsible to purchase additional capacity on the secondary capacity market in accordance with Federal Energy Regulatory Commission (FERC) rules. The Companies noted that the current capacity release rates are outdated and vary between utility. For Chesapeake and Indiantown, the Companies release 100 percent of capacity and it is allocated to pool managers based on transportation customers’ usage in 2002; and the pool managers must acquire any incremental capacity needed. For FPUC, utility capacity is released to pool managers based on transportation customers’ seasonal usage. Since the original capacity release rates were designed, the Companies now manage their pipeline capacity portfolio as a whole.
The Companies propose to update their capacity release methodology and release capacity to pool managers in an equitable manner across the four utilities. Specifically, the Companies propose to release monthly capacity based on the transportation customers’ same month prior year billed therm quantities. This will give the pool managers interstate pipeline capacity release rate certainty from year to year. Any natural gas consumed by the transportation customers that is in excess of the natural gas delivered by the pool managers will be addressed by the Companies through the swing service rider, as discussed in Issue 2.
Transportation Service Enrollment Process
The Companies are also seeking approval to modify the enrollment process for the Companies’ transportation service programs to be more consistent across the utilities. Currently, the Companies are administering six different manual enrollments processes, adding to customer confusion. The Companies stated that in certain instances, a customer with multiple locations could have up to three different pool managers, as a result of locations being in different utility service areas. Staff believes that modifying the transportation service enrollment process for consistency will provide a more efficient process for the Companies, pool managers, and customers.
Tariff Implementation
If approved by the Commission, the Companies have requested a phased approach to the consolidation and modification of the Companies’ tariffs. The Companies stated that the phased approach is needed to allow the Companies time to implement a new, consolidated gas management system and to give pool managers adequate time to implement changes that impact their operations. For the transportation service tariffs, the Companies stated that it will require approximately twelve to eighteen months to implement the changes after Commission approval.
The Companies requested that the non-transportation-related consolidation and modifications be effective 30 days from the date of the Commission vote. For transportation-related tariff provisions such as customer enrollment and pool management, nominations and confirmations, imbalance settlement, and operational tools, the Companies requested the implementation to be no sooner than September 1, 2021. The Companies further requested that the remaining transportation service tariff modifications become effective no sooner than May 1, 2022. The schedule of tariff effective dates is shown in Attachment B to this Recommendation.
Conclusion
After review of the instant petition, proposed tariff sheets, and responses to staff’s data request, staff believes that the Commission should approve the Companies’ proposal to consolidate and make modifications to the Companies’ tariffs. The proposed revisions eliminate inconsistencies across the tariffs, without changing customer rates, and would allow the Companies to operate under a consolidated tariff. Attachment A to this Recommendation contains the proposed tariff sheets. Attachment B to this Recommendation provides a schedule of the tariff sheets with the proposed implementation dates, which the Companies provided to staff. Staff requests administrative authority to work with the Companies on the implementation dates of the proposed tariffs and to cancel the corresponding current tariffs.
Issue 2:
Should the Commission approve the Companies' proposal to recover the cost associated with providing day-to-day swing service through the swing service rider?
Recommendation:
Yes. The Commission should approve the proposal to recover expenses incurred by the Companies to provide day-to-day swing service through the swing service rider. These costs are appropriate to be included in the swing service rider as they benefit transportation customers. (Hampson)
Staff Analysis:
The swing service rider is a Commission-approved tariff that allows the Companies to recover intrastate (i.e., pipelines operating within Florida only) capacity costs and LDC interconnection expenses from transportation customers.[8] The swing service rider is a cents per therm charge that is included in the monthly gas bills of transportation customers.
The proposed modifications to the swing service rider
would allow the Companies to also include expenses incurred to provide
day-to-day swing service to transportation customers. The pool managers deliver the
monthly gas supply for their customer pool at a constant level every day even
though customer usage varies. Therefore, the level of gas delivered daily
differs from the quantity actually consumed by the customer pool. To offset
this daily difference, the Companies vary, or swing, the level of gas and
upstream pipeline capacity nominated for delivery to the Companies’ system. The
Companies typically contract with a natural gas supplier to purchase natural
gas, as needed, on a daily basis to meet the excess demand requirements of the
transportation customers. Currently, any cost incurred to manage the daily
customer swing is included in the Purchased Gas Adjustment, which is paid by
the sales customers.
The Companies file annual petitions for revised swing service rider tariffs in September, for tariffs and associated swing service rider rates effective the following calendar year. If approved, the inclusion of these day-to-day swing service costs would be reflected in the swing service rider beginning with the petition to be filed in September 2021.
Conclusion
In 2015, the Commission approved Peoples Gas System’s proposal to include the cost to provide day-to-day swing service in the swing service rider.[9] The Commission should approve the proposal to recover expenses incurred by the Companies to provide day-to-day swing service through the swing service rider. These costs are appropriate to be included in the swing service rider as they benefit transportation customers.
Issue 3:
Should this docket be closed?
Recommendation:
Yes. If Issue 1 and Issue 2 are 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 and Issue 2 are 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.
[1] Order
No. PSC-14-0655-FOF-GU, issued November 6, 2014, in Docket No. 20140004-GU, In re: Natural gas conservation cost
recovery.
[2] Order No. PSC-15-0321-PAA-GU, issued August 10, 2015, in Docket No. 20150117-GU, In re: Joint petition for approval of modified cost allocation methodology and revised purchased gas adjustment calculation, by Florida Public Utilities Company, Florida Public Utilities Company – Indiantown Division, Florida Public Utilities Company - Fort Meade, and Florida Division of Chesapeake Utilities Corporation.
[3] Order
No. PSC-16-0422-TRF-GU, issued October 3, 2016, in Docket No. 20160085-GU, In re: Joint petition for approval of swing service
rider, by Florida Public Utilities Company, Florida Public Utilities Company- Indiantown
Division, Florida Public Utilities Company-Fort Meade, and Florida Division of Chesapeake
Utilities Corporation.
[4] Order
No. PSC-2019-0153-TRF-GU, issued April 24, 2019, in Docket No. 20190036-GU, In re: Petition for authority for approval
of revised transportation imbalance tariffs, by Florida Public Utilities
Company; Florida Public Utilities Company-Ft. Meade.
[5] Response No. 7 to staff’s first data request, Document No. 13762-2020.
[6] Order No. PSC-2020-0485-FOF-GU, issued December 10, 2020, in Docket No. 20200051-GU, In re: Petition for rate increase by Peoples Gas System.
[7] Document No. 13762-2020.
[8] Order
No. PSC-16-0422-TRF-GU, issued October 3, 2016, in Docket No. 20160085-GU, In re: Joint petition for approval of swing service
rider, by Florida Public Utilities Company, Florida Public Utilities Company- Indiantown
Division, Florida Public Utilities Company-Fort Meade, and Florida Division of Chesapeake
Utilities Corporation.
[9] Order
Nos. PSC-15-0570-TRF-GU and PSC-15-1570A-TRF-GU, issued December 17, 2015, in
Docket No. 20150220-GU, In re: Petition
for approval of tariff modifications related to the swing service charge, by
Peoples Gas System.