Case Background
On February 19,
2021, SeaCoast Gas Transmission, L.L.C. (SeaCoast), filed a petition seeking
Commission approval of a Firm Service Agreement (Agreement) with Peoples Gas
System (Peoples), collectively the parties. Peoples is a local distribution
company which owns and operates natural gas distribution facilities to serve
retail customers and is subject to the Commission's regulatory jurisdiction
under Chapter 366, Florida Statutes (F.S.). SeaCoast operates as an intrastate
natural gas transmission company as defined in Section 368.103, F.S., and only
transports natural gas.
By Order No.
PSC-08-0747-TRF-GP, SeaCoast 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. SeaCoast provides transportation service
only; it does not engage in the sale of natural gas. Pursuant to Order No.
PSC-08-0747-TRF-GP, SeaCoast is allowed to enter into certain gas transmission
agreements without prior Commission approval. However, SeaCoast 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 TECO Energy, Inc., and agreements
between affiliated companies must be approved by the Commission pursuant to
Section 368.105, F.S., and Order No. PSC-08-0747-TRF-GP.
The proposed Agreement
is contained in Attachment A to this recommendation. During the evaluation of
the instant petition, staff issued a data request to the parties for which responses
were received on April 1, 2021. In addition, staff held an informal conference
call on April 15, 2021, with the parties to discuss specifics of the request. The
Commission has jurisdiction over this matter pursuant to Sections 366.04,
366.05(1), 366.06, and 368.105, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve the February 19, 2021 proposed
Agreement between SeaCoast and Peoples?
Recommendation:
Yes, the Commission
should approve the February 19, 2021 proposed Agreement between SeaCoast and
Peoples. (Ward)
Staff Analysis:
In order to serve
growth and safeguard system reliability for existing and new customers in the
Lakeland and Polk County area, Peoples has entered into the proposed Agreement with
SeaCoast to expand gas flow into this region of its service territory. To
provide intrastate transportation of gas to Peoples, SeaCoast will tap into an
existing four-inch pipeline lateral of Florida Gas Transmission Company, LLC’s
(FGT) system serving Hillsborough County and extend a new 2.5 mile six-inch pipeline
into Peoples’ new high pressure main pipeline at the Polk-Hillsborough County
line. As part of this project, an existing out-of-service gate station that previously
provided gas to an end-use industrial customer will serve as the access point
of the expansion. During staff’s April 15, 2021 call with Peoples, the utility
explained that the recommission process would involve testing and repairing the
gate station to bring it in line with current safety and operational standards.
The cost to recommission the gate station is included in the proposed
Agreement. The map showing the proposed extension and its connections to
existing facilities is contained in Attachment B of the recommendation.
The parties stated that they have completed the
preliminary design for the infrastructure extensions. Pending Commission
approval of the Agreement, the permitting process will be initiated and is
expected to take four to five months. Construction is anticipated to begin in the
third quarter of 2021. SeaCoast estimated that the proposed transmission
pipeline will be completed by the first quarter of 2022. Peoples stated that it
projects approximately 5,480 existing customers, including 4,750 residential
and 730 commercial/industrial customers, would benefit from the expansion
project through increased resiliency and reliability. In
addition, Peoples stated that the proposed project would support additional
customer growth in the Lakeland region.
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 30 days of written notification of
termination. The negotiated reservation charge (confidential) included in the
proposed Agreement is designed to allow SeaCoast to recover its operational and
maintenance costs, depreciation, taxes, and return on investment associated
with the new transmission pipeline. SeaCoast stated that the rate set forth in the
Agreement is a cost-based rate similar to rates set forth in firm service
agreements with its other customers. SeaCoast asserts that the agreement is
just, reasonable and not unreasonably preferential or unduly discriminatory,
and therefore, consistent with Section 368.105(3)(b), F.S. While specific
circumstances vary by projects due to pipe sizing, construction conditions,
permitting, etc., staff believes that the information provided by SeaCoast for
the proposed pipeline appears reasonable and comparable to similar agreements.
Consideration of Potential Alternatives to the
SeaCoast Extension
Peoples stated that it evaluated other options to meet
demand and improve delivery of gas to customers in the Lakeland and Polk County
area, but those alternatives were more expensive and had shortcomings. One option
considered by Peoples was a transmission line that traversed the Lakeland area
with approximately 9 miles of eight-inch steel pipeline serving as the project’s
main line, along with approximately 2.5 miles of six-inch steel pipeline for
the distribution system. The origin point of this alternative was Peoples’
North Lakeland Gate Station, which serves Peoples’ Lakeland and Tampa divisions.
Peoples explained that this alternative line could create competing capacity demands
on its North Lakeland Gate Station, which could limit the efficiency and
effectiveness of that option. Contracting with SeaCoast, as proposed in the
Agreement, would provide Peoples with an alternative access to FGT’s system.
This option would result in improved system resiliency through an additional
gas delivery access point.
In response to staff’s data request, SeaCoast and Peoples
provided a cost estimate for the proposed six-inch SeaCoast transmission
pipeline and stated that this alternative is the most cost- effective.
Peoples also stated that FGT provided a proposal to expand its pipeline in
order to meet the requirements of this project, but the FGT proposal was not
cost-effective in comparison to the proposal from SeaCoast and could not be
completed within the utility’s time requirements.
Peoples’ Cost Recovery of Payments to SeaCoast
Peoples' payments to SeaCoast would be included in the
calculation of the monthly Purchased Gas Adjustment (PGA) factor. Consistent
with the methodology approved by the Commission in Docket No. 20000810-GU, a
portion of the costs would be paid by transportation customers taking service
under Peoples' Natural Choice Transportation Service program via the swing
charge mechanism. Swing
service charge revenues collected from transportation customers would then be
credited back to the PGA. Sales customers purchase their gas from Peoples and
are subject to Peoples' PGA charges. Peoples stated that if this project is
approved it would include the charges in the 2022 PGA cap that would be filed for
Commission review and approval in September 2021. Peoples estimates the impact
on the PGA cap to be $0.0073 per therm.
Conclusion
In 2015
and 2019,
the Commission approved similar transportation agreements between Peoples and SeaCoast.
Based on the petition and the parties' responses to staff’s data request, the
parties have supported the importance of the need for pipeline extensions to
service customers in the Lakeland and Polk County area. Staff believes that the
proposed Agreement is cost-effective, reasonable, meets the requirements of
Section 368.105, F.S., and benefits Peoples’ customers. Staff therefore
recommends approval of the proposed Agreement between the parties dated
February 19, 2021.
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.
(Lherisson)
Staff Analysis:
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.
