Case Background
On September 1,
2022, Florida City Gas (FCG or utility) filed a petition for approval of its
safety, access, and facility enhancement program (SAFE) true-up and 2023 cost
recovery factors. The SAFE program was originally approved by the Commission in
Order No. PSC-15-0390-TRF-GU (2015 order) to recover the cost of relocating on
an expedited basis certain existing gas mains and associated facilities from
rear lot easements to the street front. In the 2015 order, the Commission found
that the relocation of mains and services to the street front provides for more
direct access to the facilities and will enhance the level of service provided
to all customers through improved safety and reliability. The SAFE factor is a
surcharge on customers’ bills.
The Commission
ordered the utility to file an annual petition, beginning in 2016, for review
and resetting of the SAFE factors to true-up any prior over-or under-recovery
and to set the surcharge for the coming year. The SAFE program is a 10-year
program that started in 2015 and should finish in 2025. The utility’s annual
progress in the SAFE program is shown in Attachment A to the recommendation.
The current 2022 SAFE factors were approved by Order No. PSC-2021-0430-TRF-GU
(2021 order). The proposed 2023 SAFE factors are shown
in Attachment B to the recommendation on Tariff Sheet No. 79.
In the pending
rate case, Docket No. 20220069-GU (2022 rate case), FCG has proposed to move
the SAFE investment and related expenses as of December 31, 2022, from clause
recovery to base rates, in compliance with the 2015 order. Specifically, the 2015 order stated that
“…if FCG files a base rate case prior to 2025, the then-current SAFE surcharge
program would be folded into any newly approved rate base, and the surcharge
would begin anew.” The direct testimony of FCG witness
Fuentes filed in the 2022 rate case supports the calculations of the SAFE
investments ($42.7 million plant-in-service balance as of December 31, 2022)
and $5.7 million transfer of SAFE revenue requirement from SAFE factor recovery
to bases rates in the 2023 test year.
Accordingly, the
SAFE tariffs provided in the petition, and shown in Attachment B to the
recommendation, have been calculated using the assumption that the Commission
would approve FCG’s request to roll SAFE investments into rate base. If the
Commission has not made a decision in the 2022 rate case prior to the January
1, 2023 effective date of the proposed SAFE factors, then any SAFE revenue
requirement not collected in 2023 would be trued-up in the next SAFE filing.
Consistent with
the 2015 order, the SAFE program activities would be scheduled to terminate at
the end of 2025. However, FCG has proposed in its 2022 rate case to continue
the program to replace approximately 150 miles of additional mains and services
and to expand the program to replace approximately 160 miles of early vintage
polymer pipelines and mains. FCG Witness Howard explains in his direct
testimony filed in the rate case that, if approved in the 2022 rate case, FCG
will update the SAFE program in its next annual filing in September 2023 for
2024 factors to reflect the continuation and expansion of the SAFE program.
On September 15,
2022, FCG waived its 60-day file and suspend provision of Section 366.06(3),
Florida Statutes (F.S.), via an e-mail, which has been placed in the docket
file. During the review process of the petition, staff issued one data request
and responses were received on October 10, 2022. The Commission has
jurisdiction over the matter pursuant to Sections 366.03, 366.04, 366.05, and
366.06 and Chapter 368, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve FCG’s proposed SAFE
tariff for the period January through December 2023?
Recommendation:
Yes. The Commission should approve FCG’s proposed
SAFE tariff for the period January through December 2023. After reviewing FCG’s
filings and supporting documentation, the calculations of the 2023 SAFE factors
appear consistent with the methodology approved in the 2015 order and are
reasonable and accurate. (Hampson)
Staff Analysis:
Under the SAFE program, FCG was ordered to relocate
or replace 254.3 miles of mains and 11,443 associated service lines from rear
property easements to the street over a 10-year period, ending in 2025. The
utility began its mains and services replacements at the end of 2015. The
surcharges have been in effect since January 2016. During 2022, the utility has
replaced 36.5 miles of mains and 1,503 services, as shown in Attachment A to
the petition.
True-ups by Year
As required by the 2015 order, the utility’s calculations
for the 2023 revenue requirement and SAFE factors include a final true-up for
2021, and an estimated/actual true-up for 2022, and projected costs for 2023.
Final True-up for 2021
FCG stated that the revenues collected for 2021 were
$2,615,885, compared to a revenue requirement of $3,016,838, resulting in an under-recovery
of $400,953. Adding the 2020 final over-recovery of $90,225 and the $400,953 under-recovery
of 2021, including interest, results in a final 2021 under-recovery of $326,217.
Actual/Estimated 2022 True-up
FCG provided actual revenues for January through June and
forecast revenues for July through December 2022, totaling $4,616,422, as
compared to a projected revenue requirement of $4,223,438, resulting in over-recovery
of $392,984. Adding the 2021 under-recovery of $326,217 to the 2022 over-recovery
of $392,984, the resulting total 2022 true-up, including interest, is an
over-recovery of $74,528.
Projected 2023 Costs
The utility’s projected investment for 2023 is $11,679,589
for its projects located in Miami-Dade County. The revenue requirement, which
includes a return on investment, depreciation, and taxes is $714,310. The
return on investment calculation includes federal income taxes, regulatory
assessment fees, and bad debt. After adding the 2022 over-recovery of $74,528,
the total 2023 revenue requirement is $639,783. Table 1-1 displays the
projected 2023 revenue requirement calculation.
Table 1-1
2023 Revenue Requirements
Calculation
|
2023 Projected Investment
|
$11,679,589
|
|
Return on Investment
|
$466,970
|
|
Depreciation Expense
|
140,344
|
|
Property Tax Expense
|
106,996
|
|
2023 Revenue Requirement
|
$714,310
|
|
Minus 2022 Over-recovery
|
$74,528
|
|
Total 2023 Revenue Requirement
|
$639,783
|
Source: Attachment C of the
petition and Attachment 1 in response to Staff’s First Data Request No. 3
Proposed 2023 SAFE Factors
The SAFE factors are fixed monthly charges. FCG’s cost
allocation methodology was approved in the 2015 order and was used in the
instant filing. The approved methodology allocates the current cost of a 2-inch
pipe to all customers on a per customer basis and allocates the incremental
cost of replacing a 4-inch pipe to customers who use over 6,000 therms per
year. For customers who require 4-inch pipes, the cost takes into account that
the minimum pipe is insufficient to serve their demand, and therefore,
allocates an incremental per foot cost in addition to the all-customer cost.
The resulting allocation factors are applied to the 2023 total revenue
requirement to develop the monthly SAFE factors.
The proposed fixed monthly SAFE factor is $0.44 for customers
using less than 6,000 therms per year (current factor is $3.17). The proposed
fixed monthly SAFE factor for customers using more than 6,000 therms per year
is $0.98 (current factor is $6.39). The proposed 2023 SAFE factors decreased
because as discussed in the case background FCG assumed the SAFE investment as
of December 31, 2022 was moved from SAFE factor recovery to base rates and the
SAFE factors are beginning anew.
Conclusion
The Commission should approve FCG’s proposed SAFE tariff
for the period January through December 2023. After reviewing FCG’s filings and
supporting documentation, the calculations of the 2023 SAFE factors appear
consistent with the methodology approved in the 2015 order and are reasonable
and accurate.
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. (Watrous)
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.
