Discussion
of Issues
Issue 1:
Should the Commission approve the Companies'
proposed swing service rider rates and tariffs for the period January through
December 2022?
Recommendation:
No. The Commission should deny the proposed swing
service rider rates and tariffs for the period January through December 2022,
as filed. However, the Companies should be given the option to file revised
rates and tariffs within 10 days of the Commission’s vote, for administrative
approval by staff, that reflect the removal of $8,093 in legal fees from the
calculation, for the period January through December 2022. (Guffey, Coston)
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 pipeline 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.
Updated 2022 Swing Service Rider Rates
The updated 2022 swing service rider rates were calculated
based on the same methodology approved in the 2016 swing service order. As stated
in paragraph 9 of the Companies’ instant petition, the total intrastate
capacity costs for the period July 2020 through June 2021 are $25,538,406. 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, and legal consulting fees.
Of these costs, $6,443,673 will be billed directly to
certain large special contract customers. The remaining costs of $19,094,732 are
allocated between sales and transportation customers and will be recovered
during the period January 1, 2022 through December 31, 2022.
The Companies used actual therm usage data for the period
July 2020 through June 2021 to allocate the intrastate capacity costs. Based on
the usage data, the appropriate split for allocating the cost is 69.3 percent
or $13,233,244 to transportation customers and 30.7 percent or $5,861,488 to
sales customers. The transportation customers’ share of $13,233,244 is allocated
to the various transportation rate schedules in proportion with each rate
schedule’s share of the Companies’ total throughput. The sales customers’ share
of the cost of $5,861,488 is embedded in the PGA.
To calculate the swing service rider rates, the transportation
customers’ share of the cost is allocated to each rate schedule and is divided
by the rate schedule’s number of therms. The swing service rider charge is
billed directly to the customers. The swing service revenues the Companies are
projected to receive in 2022 is a total of $13,233,244.
Credit to the PGA
The total intrastate capacity costs are embedded in the
PGA with the projected 2022 swing service rider revenues incorporated as a
credit in the calculation of the 2022 PGA. The amount credited to the 2022 PGA
is $13,233,244 plus $6,443,673 received from special contract customers, for a
total of $19,676,917.
COVID-19 Regulatory Asset Settlement Agreement
The Companies, in their 2022 Swing Service Rider
calculation, included additional costs in accordance with the COVID-19
Regulatory Asset Settlement Agreement (Agreement) approved in Order No. PSC-2021-0266-S-PU. This
Agreement allows FPUC’s natural gas utilities and electric division to recover,
over the next two years, a total of $2,085,759 of incremental expenses for
costs incurred due to COVID-19. Of this amount, $731,659 ($365,830 annually) is
attributable to natural gas customers, while the remainder ($1,354,120) is attributable to FPUC’s
electric division. Using
the same allocation methodology in the calculation of the swing service rider,
69.3 percent, or $507,040 ($253,519 annually), will be allocated to the
transportation customers and 30.7 percent, or $224,619 ($112,309 annually) will
be allocated to sales customers and recovered through the PGA over the next two
years. The proposed swing service rider rates include both the intrastate
capacity costs and the Covid-19 costs approved in the Agreement.
Legal Fees
The calculation of the proposed swing service rider rates
includes $17,054 in legal fees to Gunster Yoakley & Stewart, P.A., one of
the law firms that the Companies engage to provide advice and file petitions. The
Companies are currently allowed legal fees in the amount of $8,227. In response
to staff data requests regarding the increase of the legal fees from the
currently approved $8,227 to $17,054, the Companies responded that the increase
was attributable to assistance the law firm provided to the consolidation of
the natural gas tariffs the Commission approved in Order No.
PSC-2021-0148-TRF-GU (consolidation docket).
Specifically, $16,187 of legal costs related to the consolidation docket was
included in the instant petition. The remaining $867 in legal fees are related
to the swing service rider and are appropriate for inclusion in the calculation
of the swing service rider rates as those costs were not included to establish
current base rates.
Prior to the consolidation docket, the Companies had in
place four utility-specific Commission-approved tariffs that presented a
variety of administrative and operational challenges for the utilities and
their customers. The Commission approved the consolidation of these tariffs
into a new Original Volume 1 Tariff that applies to all four utilities. The approved
revisions eliminated inconsistencies across the tariffs, without changing
customer rates, and allowed the Companies to operate under a consolidated
tariff. Tariff sections that were consolidated included miscellaneous and
general information, system maps and communities served, rules and regulations,
formatting of the tariffs showing rates and charges, revision to the Area Extension
Program tariff, provisions related to the Maximum Allowable Construction Cost
(MACC), and standard forms.
In addition, as part of their consolidation of tariffs,
the Companies established consistent transportation service programs across the
four utilities to be able to provide a more uniform transportation service.
Allowing transportation customers and pool managers to operate under the same
tariff provisions across the Companies results in a less cumbersome and more efficient
administrative process.
The Companies included all the legal fees incurred for the
consolidation docket for recovery in the instant docket. While swing service is
related to providing transportation services and the legal expenses incurred
for the consolidation docket are not normal recurring legal expenses, the consolidation docket did
not solely focus on transportation service. The Companies didn’t state in the
consolidation docket that they would seek recovery of legal fees associated
with consolidation in this docket. Further, the Companies did not provide support
for their requested legal fees or a breakdown with respect to work done on the
transportation-related tariff changes in the consolation docket and other
tariff changes not related to transportation service. Therefore, staff does not
believe inclusion of the total $16,187 amount is appropriate.
However, staff agrees that some portion of the legal fees
associated with the tariff consolidation were directed to promoting a more
efficient and consistent transportation service across the Companies. Absent an
exact breakdown of the legal cost incurred, staff believes it would be reasonable
to allow recovery of half the legal fees, $8,093 ($16,187 ÷ 2), through the
swing service rider. Staff notes that this would be more in line with the $8,227
of legal fees currently approved in the Companies’ swing service rider rates.
In response to staff’s request for additional information
and discussions with the Companies, the Companies provided the calculation of
the swing service rider rates with the $16,187 removed and with half the amount
removed. The calculations have been placed in the docket file.
The impact on the swing service rider rates, under either calculation, is minor.
Conclusion
The Commission should deny the proposed swing service
rider rates and tariffs for the period January through December 2022, as filed.
However, the Companies should be given the option to file revised rates and
tariffs within 10 days of the Commission’s vote, for administrative approval by
staff, that reflect the removal of $8,093 in legal fees from the calculation,
for the period January through December 2022.
Issue 2:
Should this docket be closed?
Recommendation:
If the Commission approves staff’s recommendation in
Issue 1, the Companies timely file revised rates and tariffs meeting the
conditions of the order, and a protest is filed within 21 days of the issuance
of the order, the revised tariffs should remain in effect, with any revenues
held subject to refund, pending resolution of the protest. If the
Companies timely file revised rates and tariffs and no timely protest is filed,
this docket should be closed upon the issuance of a consummating order.
If the Commission approves staff’s recommendation in Issue
1, the Companies do not timely file revised rates and tariffs meeting the
conditions of the order, and a protest is filed within 21 days of the issuance
of the order, the rates and charges originally requested in the Companies’
August 31, 2021, filing could be placed into effect, with any revenues held
subject to refund, pending resolution of the protest. If the Companies do
not timely file revised rates and tariffs and no timely protest is filed, the
docket should be closed upon the issuance of a consummating order. (Sandy,
Crawford)
Staff Analysis:
If the
Commission approves staff’s recommendation in Issue 1, the Companies timely
file revised rates and tariffs meeting the conditions of the order, and a protest
is filed within 21 days of the issuance of the order, the revised tariffs
should remain in effect, with any revenues held subject to refund, pending
resolution of the protest. If the Companies timely file revised rates and
tariffs and no timely protest is filed, this docket should be closed upon the
issuance of a consummating order.
If the Commission approves staff’s recommendation in Issue
1, the Companies do not timely file revised rates and tariffs meeting the
conditions of the order, and a protest is filed within 21 days of the issuance
of the order, the rates and charges originally requested in the Companies’
August 31, 2021, filing could be placed into effect, with any revenues held
subject to refund, pending resolution of the protest. If the Companies do
not timely file revised rates and tariffs and no timely protest is filed, the
docket should be closed upon the issuance of a consummating order.
