Case Background
On September 1,
2022, Peoples Gas System (Peoples or utility) filed a petition for approval of
its final 2021 true-up, projected 2022 true-up, and 2023 revenue requirement
and surcharges associated with the cast iron/bare steel replacement rider
(CI/BSR Rider or rider). The rider was originally approved in Order No.
PSC-12-0476-TRF-GU (2012 order) to recover the cost of accelerating the
replacement of cast iron and bare steel pipes through a surcharge on customers'
bills. In the 2012 order, the Commission found
that "replacement of these types of pipelines is in the public interest to
improve the safety of Florida's natural gas infrastructure, and reduce the
possibility of loss of life and destruction of property should an incident
occur." Peoples' current surcharges were approved in Order No.
PSC-2021-0429-TRF-GU (2021 order).
In Order No.
PSC-17-0066-AS-GU, the Commission approved a comprehensive settlement agreement
between PGS and the Office of Public Counsel (OPC). The settlement agreement, in part, added
problematic plastic pipe (PPP) installed in the company's distribution system
to eligible replacements under the rider. PPP was manufactured before 1983 and
has significant safety concerns. In certain areas, the PPP is interspersed
with, or connected to, the cast iron/bare steel pipe that is being replaced
under the rider. As provided for in the settlement agreement, PPP replacements
are included in the calculation of the 2023 rider surcharges.
In Order No.
PSC-2022-0134-PAA-GU, the Commission granted Peoples’ petition to address the
impact of changes to Florida state income tax rates. Specifically, the Commission allowed
Peoples to increase the 2023 rider surcharges by $253,079 to reflect the impact
of the change in Florida income tax rates in 2021 and 2022.
On September 14,
2022, Peoples waived the 60-day file-and-suspend provision of Section
366.06(3), Florida Statutes (F.S.), by email. During the evaluation of the
petition, staff issued a data request, for which responses were received on
October 17, 2022. Attachment B contains the proposed tariff. 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 Peoples’ proposed
CI/BSR Rider surcharges for the period January through December 2023?
Recommendation:
Yes, the Commission should approve Peoples’ proposed
CI/BSR Rider surcharges for the period January through December 2023. (Ward)
Staff Analysis:
The CI/BSR Rider charges have been in effect since
January 2013 and were projected to be in effect for 10 years with replacement
projects completed by the end of 2022. In response to staff’s first data
request, Peoples stated that they need an additional year to complete the cast
iron/bare steel replacements due to complications related to the COVID-19
pandemic. Peoples expects to have 3.4 miles of cast iron/bare steel
replacements remaining in 2023.
Rider PPP charges have been in effect since 2017. In 2022,
Peoples’ cast iron/bare steel replacement activity focused in the areas of Miami,
Tampa, St. Petersburg, Orlando, Eustis, Jacksonville, Lakeland, Daytona, Avon
Park, and Ocala. In 2023, Peoples states it will focus on replacement projects
in Miami, Tampa, St. Petersburg, Orlando, Eustis, Jacksonville, Lakeland,
Daytona, Avon Park, Jupiter, and Ocala. The replacement of PPP is expected to
continue until 2028.
Attachment A to this recommendation contains tables which
display the replacement progress and forecasts for CI/BSR Rider (Table 2) and
for PPP (Table 3). Additionally, Peoples provided Table 1 which consolidates actual
and projected CI/BSR and PPP miles replaced investment and revenue requirements
for each year of the replacement program.
True-ups by Year
Peoples' calculation for the 2023 revenue requirement and
surcharges includes a final true-up for 2021, an actual/estimated true-up for
2022, and projected costs for 2023. Pursuant to the 2012 order, the capital
expenditures for 2017 through 2019 exclude the first $1 million of facility
replacements each year because that amount is included in rate base. Peoples has
included depreciation expense savings as discussed in the 2012 order; however,
the utility has not identified any operations and maintenance savings.
Final True-up for 2021
Exhibit A of the petition shows that the revenues
collected for 2020 were $5,206,120 compared to a revenue requirement of
$1,186,869, resulting in an over-recovery of $4,019,251. The final 2020 under-recovery
of $4,581,212, 2021 over-recovery of $4,019,251, and interest associated with
any over- and under-recoveries, results in a final 2021 under-recovery of
$563,794.
Actual/Estimated 2022 True-up
In Exhibit B of the petition, Peoples provided actual
revenues for January through July and forecast revenues for August through December
of 2022, totaling $5,190,196, compared to an actual/estimated revenue
requirement of $5,092,683, resulting in an over-recovery of $97,513. The final
2021 under-recovery of $563,794, 2022 over-recovery of $97,513, state tax rate
change recovery adjustment of $253,079, and interest associated with any over-
and under-recoveries, results in a total 2022 under-recovery of $721,168.
Projected 2023 Costs
Exhibit C of the petition shows Peoples projects investment
or capital expenditures of $24,817,804 for the replacement of cast iron/bare
steel infrastructure and PPP in 2023. As shown in Table 1 of Attachment A of
the recommendation, this consists of the CI/BSR infrastructure investment of $4,733,434
and the PPP investment of $20,084,370. The return on investment (which includes
federal income taxes, regulatory assessment fees, and bad debt), depreciation
expense (less savings), and property tax expense associated with that
investment are $8,033,927. After adding the total 2022 under-recovery of
$721,168, the total 2023 revenue requirement is $8,755,095. Table 1-1 displays
the 2023 revenue requirement calculation.
Table 1-1
2023 Revenue Requirement
|
2023 Projected Expenditures
|
$24,817,804
|
|
Return on Investment
|
$5,941,404
|
|
Depreciation Expense (less savings)
|
$1,034,085
|
|
Property Tax Expense
|
$1,058,439
|
|
2023 Revenue Requirement
|
$8,033,927
|
|
Plus 2022 Under-recovery
|
$721,168
|
|
Total 2023 Revenue Requirement
|
$8,755,095
|
Source: Page 1 of 2 in Exhibit C in petition (Docket No.
20220152-GU)
Proposed Surcharges
As established in the 2012 order, the total 2023 revenue
requirement is allocated to rate classes using the same methodology that was
used for the allocation of mains and services in the cost of service study used
in Peoples' most recent rate case. After calculating the percentage of total
plant costs attributed to each rate class, the respective percentages were
multiplied by the 2023 revenue requirement resulting in the revenue requirement
by rate class. Dividing each rate class's revenue requirement by projected
therm sales provides the rider surcharge for each rate class.
If the Commission approves this recommendation, the proposed
2023 rider surcharge for residential customers is $0.03111 per therm (compared
to the current surcharge of $0.02014). The 2023 monthly bill impact will be $0.62
for a residential customer who uses 20 therms. The proposed tariff page
provided in the petition is Attachment B to this recommendation.
Conclusion
Staff reviewed Peoples’ filings and supporting
documentation and believes that the calculations are consistent with the
methodology approved in the 2012 order and are reasonable and accurate. Therefore,
staff recommends approval of Peoples’ proposed 2023 Rider CI/BSR surcharges to
be effective for the period January through December 2023.
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 tariff 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 tariff 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.
