Case Background
Florida Public
Utilities Company, Florida Public Utilities-Indiantown Division, Florida Public
Utilities-Fort Meade, and Florida Division of Chesapeake Utilities Corporation
(jointly, Companies) are local distribution companies subject to the
Commission’s jurisdiction pursuant to Chapter 366, Florida Statutes (F.S.). The
Companies serve customers in 26 counties within Florida. On April 21, 2021, the
Companies submitted a joint petition for a new Renewable Natural Gas Service
(RNGS) tariff for biogas producers to allow the Companies to provide
services for the purposes of converting biogas into usable Renewable Natural
Gas (RNG) that meets pipeline quality gas standards. RNG is produced by
cleaning and conditioning biogas in order to meet pipeline quality gas and heat
standards, which can then be used interchangeably with natural gas within a gas
distribution system.
The Commission
has approved similar RNG rate schedules for Peoples Gas System in Order No.
PSC-2017-0497-TRF-GU and for Florida City Gas in Order No.
PSC-2021-0040-TRF-GU. In 2020, the Companies received Commission
approval to modify the quality of gas provisions in their tariff to allow for
the receipt and transportation of RNG.[4]
The proposed
tariff modifications include the new RNGS tariff (tariff sheet Nos.
7.506-7.507) and certain other tariff revisions to include definitions of RNG. During
the review of this petition, staff issued two data requests for which responses
were received on June 22, 2021 and July 23, 2021. On August 24, 2021, the
Companies filed an amended tariff to include additional language concerning
ratepayer protections and to correct a scriveners error in the availability
provision. The proposed RNGS tariffs are included as Attachment A to the
recommendation.
By Order No.
PSC-2021-0239-PCO-GU, issued on July 1, 2021, the Commission suspended the proposed
tariffs pursuant to the 60-day file and suspend provision in Section 366.06(3),
F.S. The Commission has jurisdiction over this matter pursuant to Sections
366.03, 366.04, 366.05, and 366.06, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve the Companies’
proposed new RNGS rate schedule and associated tariff modifications?
Recommendation:
Yes, the Commission should approve the Companies’
proposed new RNGS rate schedule and associated tariff modifications effective
September 8, 2021. The RNGS rate schedule would furnish the Companies with an
opportunity to provide biogas cleaning and conditioning services to interested
customers. The utility demonstrated a reasonable approach to implementing the tariff.
A participating customer would enter into an agreement with the respective
Company and all capital and operating costs associated with the biogas
upgrading and conditioning service would be borne by the customer over the life
of the contract. (Forrest)
Staff Analysis:
The Companies stated in the petition that RNG
captures methane from animal waste and other biomass sources that otherwise
would have directly entered the atmosphere. When it is eventually combusted,
the RNG releases significantly fewer greenhouse gas emissions. Without
the collection of the biogas to be conditioned into RNG, the biogas produced
would escape into the atmosphere or be burned off at the source with emissions
from the burning process released into the atmosphere. Once conditioned, RNG
can be interchangeable with conventional natural gas from other sources and can
be used as a carbon neutral fuel source for a variety of applications by
different types of customers. The Companies explained that not only can RNG be used for
fuel and generation purposes, but also has the opportunity to encourage growth
in the agriculture industry by providing a solution to waste management.
Proposed New RNGS Tariff
Under the proposal, a
biogas-producing customer would enter into a mutually satisfactory RNG Service
Agreement (agreement) with one of the Companies to construct and operate the
RNG facilities on behalf of the customer. In the response to staff’s first data
request, the Companies stated that the estimated cost for biogas conditioning
equipment and facility could range from $2 to $40 million for a single facility
based on size and scope of the project. The
tariff requires that all RNG be conditioned to meet the Companies’ pipeline
quality gas and heat standards. This requirement would ensure that all RNG
produced under the proposed tariff can be safely used without any adverse
impact to the integrity of the customers’ and the Companies’ natural gas
equipment.
The proposed RNGS tariff
provides the terms and conditions under
which the Companies may provide service to biogas producers who wish to convert
their biogas into RNG. These services include upgrading and conditioning biogas to pipeline
quality gas standards that can then be interconnected and injected for delivery
onto the Companies’ distribution system. The terms of this agreement would
include the design, location, quality specifications, operational requirements,
and the required monthly service charge.
The monthly service charge would be designed to cover the
costs of construction, operational costs, and carrying costs of the facilities
that would allow the respective Company to collect a rate of return on the RNG
facility investment. Under the tariff, ownership and title of the RNG remains
with the customer and the customer is solely responsible for determining the
end-user of the RNG. Should the Companies elect to purchase RNG from a biogas
producer, the Companies and the customer would enter into an RNG commodity
purchase agreement.
Impact on the General Body of Ratepayers
The Companies state that the RNGS tariff has essential
safeguards that ensure that the contracting company’s general body of
ratepayers would not subsidize the biogas customers taking service under the
RNGS tariff. Specifically, the Companies stated that they would ensure that
service taken under the proposed RNGS tariff would not affect any ratepayers by
confirming the credit worthiness of the customers taking service under the
tariff. In response to staff’s second data request the Companies stated that they
would do sufficient due diligence to ensure that the non-participants are not
at risk by requiring RNGS customers to provide one of the following options:
(a) a guarantor to secure payment of bills, (b) an irrevocable letter of credit
from a bank equal to two months average bills, (c) a surety bond equal to two
months average bills, or (d) pay a cash deposit.
In the event of default, the Companies stated that they
would discontinue service, terminate the contract, and start all remedies that
are provided in the service agreement. This may include applying any deposit
paid to the customer’s account, seeking payment from a guarantor to cover the
outstanding balance, and pursuing legal or equitable claims against the
defaulting customer. In response to
staff’s second data request, the Companies modified the proposed tariff on August
24, 2021, to incorporate language on tariff sheet No. 7.507 (last paragraph) emphasizing
that the tariff would not cause any additional costs to non-participants.
Staff recommends approval of this petition based, in part,
on the Companies’ assertion that they would implement a thorough and reasonable
process to evaluate the credit worthiness of a potential customer to be served
under the RNGS tariff. Based on this process, the Companies do not anticipate
any cost impact to the general body of ratepayers.
Conclusion
Staff recommends that Commission should approve the
Companies’ proposed new RNGS rate schedule and associated tariff modifications
effective September 8, 2021. The RNGS rate schedule would furnish the Companies
with an opportunity to provide biogas cleaning and conditioning services to
interested customers. The Companies demonstrated a reasonable approach to
implementing the proposed tariff. A participating customer would enter into an
agreement with the respective Company and all capital and operating costs
associated with the biogas upgrading and conditioning service would be borne by
the customer over the life of the contract.
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:
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.
