Case Background
On September 13,
2022, Peoples Gas System (Peoples) and Florida Public Utilities Company (FPUC)
(jointly, Petitioners) filed a joint petition for approval of a special
contract (contract). Under the terms of the contract, Peoples would provide
FPUC with firm gas transportation service for a nineteen-month term commencing
on November 1, 2022. Peoples and FPUC own and operate natural gas facilities in
Florida and are subject to the regulatory jurisdiction of the Commission
pursuant to Section 366.06, Florida Statutes (F.S.).
During the
evaluation of the petition, staff issued data requests to Peoples and FPUC.
Responses from FPUC were received on September 28, 2022 and responses from Peoples
were received on October 6, 2022. The Commission has jurisdiction over this
matter pursuant to Sections 366.04, 366.05, and 366.06, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve the special contract
between Peoples and FPUC?
Recommendation:
Yes, the Commission should approve the special
contract between Peoples and FPUC as shown in Attachment A to the
recommendation. The contract is reasonable because it facilitates the delivery
of natural gas into Nassau County and benefits FPUC’s and Peoples’ general body
of ratepayers. The contract should be effective November 1, 2022. (Ward)
Staff Analysis:
Existing Agreement
On September 20, 2021, Peoples and FPUC entered into a gas
transportation agreement (2021 agreement) that was subject to termination on
October 1, 2022. The Parties agreed to extend the 2021 agreement until October
31, 2022. The Parties explained that the 2021 agreement did not require
Commission approval since the terms and conditions of the 2021 agreement did
not deviate from Peoples’ Commission-approved tariff. Under the 2021 agreement,
FPUC received service under Peoples’ interruptible (IS) Rate Schedule. Pursuant
to the 2021 agreement, Peoples transported natural gas from the Florida Gas
Transmission’s (FGT) interstate pipeline at the PGS-Jacksonville main gate to
the Radio Avenue Interconnect into the Callahan Pipeline. The Callahan Pipeline
is a 16-inch steel pipeline that was constructed in 2019 to allow FPUC and
Peoples to expand natural gas service in Nassau and Duval counties.
Proposed Contract
In response to staff’s first data request, FPUC stated
that the Transco Zone 5 index represents the prevailing price index for the natural
gas FPUC procures for its operations in Nassau County. FPUC explained that the
Transco Zone 5 market has been disproportionately impacted by price increases
due to natural gas shortages in Europe that have increased domestic exports of
natural gas. As a result of the price increases, FPUC stated that they have
been seeking natural gas supply from alternate receipt locations, such as FGT, that
do not rely on Transco Zone 5.
In June 2022, FPUC contacted Peoples seeking to convert
the 2021 agreement into a new contract for firm service as firm service is
typically preferable to interruptible service. The Petitioners explained that
discussions concerning a new agreement have resulted in the proposed contract. The
proposed contract would allow Peoples to provide FPUC with firm service for a
limited duration and obtain a fixed monthly reservation fee for the service
provided. The term of the contract extends as far into the future as Peoples
has the capability on its infrastructure to offer the service in consideration
of expected future growth on Peoples’ system. FPUC stated that after the
contract expires, FPUC plans to revert to using firm Southern Natural Gas (Sonat)
capacity for its supply requirements. Sonat is an interstate natural gas pipeline
system which brings gas from the Louisiana Gulf of
Mexico coast to the southeastern United States, including
Florida.
Pursuant to the proposed contract, the receipt points,
delivery points, and points of delivery would remain the same as in the 2021
agreement. The contract is for a nineteen-month term commencing on November 1,
2022, and terminating on June 1, 2024. The terms of the contract include a
negotiated monthly charge for the reservation of firm capacity and
transportation service on Peoples’ distribution system and a daily maximum
transportation quantity.
FPUC explained that the alternative supply received under
the contract would benefit the general body of ratepayers by more than $10
million over the nineteen-month term. Peoples explained that the contract would
generate revenues for Peoples, benefiting Peoples’ general body of ratepayers.
The Petitioners explained that FPUC will be able to pay a lower cost per
dekatherm under the special contract in comparison to the 2021 agreement
because of a fixed fee structure. FPUC will recover its payments to Peoples
through the Purchased Gas Adjustment (PGA) and from third-party transportation
customers that utilize the alternative supply into Nassau County.
Conclusion
Based on the review of the petition and responses to
staff’s data requests, staff believes the proposed special contract is
reasonable because it facilitates the delivery of natural gas into Nassau
County and benefits FPUC’s and Peoples’ general body of ratepayers. Staff
therefore recommends approval of the proposed special contract between Peoples
and FPUC effective November 1, 2022.
Issue 2:
Should this docket be closed?
Recommendation:
If no protest is filed by a person whose substantial
interests are affected within 21 days of issuance of this order, this docket
should be closed upon the issuance of a consummating order. (Stiller)
Staff Analysis:
If no protest is filed by a person whose substantial
interests are affected within 21 days of issuance of this order, this docket
should be closed upon the issuance of a consummating order.
