Case Background
On August 16,
2022, Florida Public Utilities Company (FPUC) and Peninsula Pipeline Company,
Inc. (Peninsula) (collectively, Petitioners) filed a petition seeking approval
of a firm transportation service agreement (proposed Agreement) to reflect
expansion of the Wildlight development in Nassau County. Peninsula operates as
an intrastate natural gas transmission company as defined by Section
368.103(4), Florida Statutes (F.S.). FPUC is a local distribution company
subject to the regulatory jurisdiction of the Commission pursuant to Chapter
366, F.S. The Petitioners are both subsidiaries of Chesapeake Utility
Corporation.
By Order No.
PSC-07-1012-TRF-GP, Peninsula 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. Peninsula provides transportation service and does not engage in
the sale of natural gas. Pursuant to Order No. PSC-07-1012-TRF-GP, Peninsula is
allowed to enter into certain gas transmission agreements without prior
Commission approval. However, Peninsula 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. Furthermore, agreements between affiliated
companies must be approved by the Commission pursuant to Section 368.105, F.S.,
and Order No. PSC-07-1012-TRF-GP.
In
accordance with the proposed Agreement, Peninsula will construct, own, and operate
natural gas pipeline extensions, two new regulator stations, and a natural gas
injection interconnect in Nassau County. The Petitioners state that the
proposed Agreement reflects FPUC’s ongoing efforts to extend natural gas
service to meet needs associated with anticipated growth in Nassau County.
The
Commission has previously approved transportation and territorial agreements
involving FPUC, Peninsula, and Peoples in Nassau County. In 2012, the
Commission approved transportation agreements between FPUC and Peninsula and
between Peoples and Peninsula, as well as a territorial agreement between
Peoples and FPUC. In 2014, the Commission also approved an
agreement between the Petitioners to further extend facilities in Nassau
County. In 2015, the Commission approved an
amendment to the transportation agreement between Peninsula and Peoples. Finally, in 2019, the Commission approved
further restructuring of the agreements to reflect the new Callahan intrastate
pipeline, which expanded natural gas service in Nassau and Duval Counties.
During
the evaluation of the petition, staff issued one data request to the
Petitioners, for which responses were received on September 8, 2022. The
proposed Agreement is included with this recommendation as Attachment A.
Attachment B provides a description of the proposed expansion project pipeline
routes. The project maps, identifying the proposed construction projects, are
included as Attachment C. The Commission has jurisdiction over this matter
pursuant to Sections 366.05(1), 366.06, and 368.105, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve the proposed
transportation service agreement between Peninsula Pipeline Company and Florida
Public Utilities Company dated July 8, 2022?
Recommendation:
Yes, the Commission should approve the proposed
transportation service agreement between Peninsula and FPUC dated July 8, 2022.
The proposed Agreement is reasonable and meets the requirements of Section
368.105, F.S. Furthermore, staff agrees that the proposed Agreement is in the
public interest, because it facilitates the delivery of natural gas to areas in
Nassau County that currently do not have access to natural gas service. (Hampson)
Staff Analysis: The Petitioners have entered into the proposed Agreement to enhance
FPUC’s ability to provide and expand natural gas service for the Wildlight
community in Yulee, Florida. The facilities contemplated in the proposed
Agreement will allow delivery of natural gas to areas in Nassau County that
currently do not have access to natural gas service.
The proposed Agreement specifies an initial term of 20
years and thereafter shall be extended on a year-to-year basis, unless either
party gives no less than 90 days of written notification of termination. If
either party desires to negotiate modifications to the rates or terms of this
Agreement, they may do so no less than 120 days prior to expiration of the
current active term. The proposed expansion project is discussed below and the
project maps are included as Attachment B to this recommendation.
In order to build alongside the construction and
development of the area, the proposed project would be constructed in two
phases. Attachment B provides a description of each phase of the proposed
expansion project pipeline routes. Attachment C shows the proposed expansion
project in Nassau County.
Anticipated System Benefits
The Petitioners state that the proposed Agreement will
further enhance FPUC’s ability to expand service for the growing Wildlight
Community, located in Yulee, Florida. The petition states that there are two
residential developments in the process of planning and construction. The
Petitioners assert that, in total, the proposed facilities would provide
natural gas service to over 5,978 homes, along with the commercial and
industrial customers that may come as the area develops. Additionally,
according to the proposed Agreement, Peninsula would construct a gas injection
interconnect. The Petitioners state the gas injection interconnect would ensure
FPUC has the ability to access gas quantities at an additional point on the
line to provide additional reliability for customers.
In response to staff’s data request, FPUC stated it did
not obtain a formal Request for Proposals (RFP) responses from other entities.
The Petitioners explained that the facilities to be installed will be extended
from facilities that are already owned and operated by Peninsula. Furthermore,
the Petitioners explained in their response that the proposed project would
improve service, reliability, and overall operation benefits and does not
require coordination with other parties and operators.
Negotiated Monthly Reservation Payments to
Peninsula
In accordance with the proposed Agreement, Peninsula would
recover the project construction costs through the monthly reservation charges
to FPUC, as contained in the proposed Agreement. Given that the proposed
projected would be completed in phases, the Petitioners have explained that the
total monthly reservation charge will increase as each portion of the project
goes into service. The monthly reservation charge is designed to recover costs
such as, but not limited to, engineering, permitting, materials, and
installation costs associated with pipeline and related facilities, ongoing
maintenance including Pipeline and Hazardous Materials Safety Administration
(PHMSA) compliance, safety requirements, property taxes, gas control, and
Peninsula’s return on investment.
FPUC is proposing to recover its payments to Peninsula
through Purchased Gas Adjustment (PGA) and swing service rider mechanisms.
The PGA allows FPUC to periodically adjust the price of natural gas supplied to
its customers to reflect the actual cost of gas purchased and delivered on
behalf of the customers. The swing
service rider allows FPUC to recover intrastate capacity costs from its
transportation customers and is a cents per therm charge that is included in
the monthly customer gas bill of transportation customers. While FPUC will
incur costs associated with this service expansion, new load added to the
system will help spread the costs over a larger customer base.
Conclusion
Based on the petition and the Petitioners’ responses to
staff’s data request, staff believes that the proposed Agreement is reasonable
and meets requirements of Section 368.105, F.S. Furthermore, staff agrees that
the proposed Agreement is in the public interest, because it facilitates the
delivery of natural gas to areas in Nassau County that currently do not have
access to natural gas service. Staff therefore recommends approval of the
proposed Agreement between Peninsula and FPUC dated July 8, 2022.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If no protest is filed by a person whose
substantial interest are affected within 21 days of the issuance of the Order,
this docket should be closed upon the issuance of a Consummating Order.
(Rivera-Pacheco)
Staff Analysis:
If no protest is filed by a person whose substantial
interest are affected within 21 days of the issuance of the Order, this docket should
be closed upon the issuance of a Consummating Order.
Proposed
Expansion Project Pipeline Routes
Phase 1A would consist of approximately 7,525 feet of
6-inch steel pipeline and 3,675 feet of 6-inch high-density polyethylene pipe
(HDPE) in total, as well as a regulator station. Beginning at the existing gas
main, Peninsula will construct 6-inch steel pipeline east along State Road 200
to the intersection of State Road 200 and Crosstown Avenue. Peninsula would
then construct 6-inch steel pipeline north, along Crosstown Avenue, and ending
near Curiosity Avenue. Peninsula would also construct a regulator station on
Crosstown Avenue, just north of State Road 200. From the regulator station,
Peninsula would install 6-inch HDPE northwards along Crosstown Avenue
continuing to a point of delivery for FPUC. The Petitioners state that this portion
of the project is contemplated to be completed by the first quarter of 2023.
Phase 1B would consist of approximately 4,000 feet of
8-inch steel pipeline and 500 feet of 2-inch steel pipeline. Peninsula would
construct a new tie-in with existing facilities along State Road 200 and would
build 8-inch steel pipeline north along Felmor Road to the intersection of
Pages Dairy Road. From there, Peninsula would install 2-inch steel pipeline to
the entrance of a new housing development, which would be the new point of
delivery for FPUC. The Petitioners state that Phase 1B is also contemplated to
be completed by the first quarter of 2023.
As mentioned above, Peninsula would also construct a gas
injection interconnect in Phase 1 of the proposed project, which would be
located near the intersection of Radio Avenue and US Highway 17. By serving as
an emergency backup point for injecting gas supplies, the Petitioners state
that the gas injection interconnect will ensure FPUC has the ability to access
gas quantities at an additional point on the line to provide additional
reliability to others.
Phase 1D of the proposed project would consist of
approximately 12,400 feet of 8-inch steel pipeline and 4,400 feet of 6-inch
steel pipeline, as well as a regulator station. Peninsula would begin by
constructing a new regulator station near the intersection of Radio Avenue and
US Highway 17 which would tie into the existing facilities. From the regulator
station, Peninsula would build 8-inch steel pipeline north along US Highway 17
to the intersection of Pages Dairy Road. Peninsula would then construct 6-inch
steel pipeline along Pages Dairy Road, east along State Road 200, and
terminating on Still Quarters Road. The Petitioners state that Phase 1D is
contemplated to be completed by the first quarter of 2024.
For Phase 2 of the proposed project, the Petitioners plan
to construct the pipeline extension in two portions. Page 2 of Attachment C
shows Phase 2 of the proposed project. The first portion of Phase 2 would begin
at the existing facilities near the intersection of State Road 200 and David
Hallman Parkway. From here, Peninsula would install approximately 11,000 feet
of 8-inch steel pipeline along David Hallman Parkway, continuing north onto
Chester Road to Heron Isles Parkway. The Petitioners state that this portion of
the project is contemplated to be completed by the third quarter of 2024.
Finally, the second portion of Phase 2 would continue from
the end of the first portion, along Chester Road and Heron Isles Parkway. The
Petitioners agree that Peninsula would construct approximately 22,000 feet of
8-inch steel pipeline along a road not yet completed named Spine Road. The
Petitioners state that this portion of the project is contemplated to be
completed by the third quarter of 2024.
