Case Background
On August 29,
2023, Florida Public Utilities Company (FPUC or utility) filed a petition for
approval of revised swing service rider rates and associated tariffs for the
period January through December 2024. The swing service rider is a cents per
therm charge that is included in the monthly gas bill of transportation
customers, who purchase gas from third party marketers, and therefore do not
pay the Purchased Gas Adjustment (PGA) charge. FPUC is a local natural gas distribution
company (LDC) subject to the regulatory jurisdiction of the Commission pursuant
to Chapter 366, Florida Statutes (F.S.).
The Commission
first approved FPUC’s swing service rider tariff in Order No.
PSC-16-0422-TRF-GU (swing service order) and the initial swing service rider
rates were in effect for the period March through December 2017. As required in the swing service order,
FPUC submitted the instant petition with revised 2024 swing service rider rates
for Commission approval by September 1, 2023. The January through December 2023
swing service rider rates were approved in Order No. PSC-2022-0378-TRF-GU, conditional
on Commission approval of FPUC’s pending rate increase. Following the rate increase, which was
approved in Order No. PSC-2023-0103-FOF-GU, the swing service rider tariffs were
updated to reflect a change in the rate classes approved in the rate case.[4]
At the October
3, 2023 Agenda, the Commission suspended the proposed swing service rider
tariffs for further review by staff. During its evaluation of the petition,
staff issued a data request to the utility for which responses were received on
September 21, 2023. Staff met with the utility via telephone on October 23,
2023, after which the utility filed a revised response to staff’s first data
request. The proposed swing service rider rates and associated tariff revisions
are provided in Attachment A to the recommendation. The Commission has
jurisdiction over this matter pursuant to Sections 366.03, 366.04, 366.05, and
366.06, Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Should the Commission approve the utility's proposed
swing service rider rates and tariffs for the period January through December
2024?
Recommendation:
Yes. The Commission should approve the utility’s
proposed swing service rider rates for the period January through December
2024. The costs included are appropriate and the methodology for calculating
the swing service rider rates is consistent with the initial Order approving
the tariff. (McClelland, Hampson)
Staff Analysis:
The utility incurs intrastate capacity costs when
they transport natural gas on intrastate pipelines (i.e., pipelines operating
within Florida only). The utility has two types of natural gas customers: sales
and transportation. 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. Transportation customers receive natural gas from third party
marketers, known as shippers
and, therefore, do not pay the PGA charge to the LDC. The swing service rider
allows FPUC to recover allocations of intrastate capacity costs from
transportation customers.
Updated 2024 Swing Service Rider Rates
The updated 2024 swing service rider rates were calculated
based on the same methodology approved in the 2016 swing service order. As
stated in paragraph 7 of the FPUC’s instant petition, the total intrastate capacity
costs for the period July 2022 through June 2023 are $31,941,095. The total
intrastate capacity costs reflect payments by FPUC to intrastate pipelines for
the transportation of natural gas, pursuant to Commission-approved
transportation agreements.
The proposed intrastate capacity costs include the
purchase of renewable natural gas (RNG) at market price, generated by the New
River Solid Waste Association (New River or landfill). New River is a waste
management company that owns a landfill that produces methane near Starke,
Florida. FPUC purchased the RNG during the period April 2022 through February
2023. New River contracted for the construction of a direct connection pipeline
with Florida Gas Transmission facilities; however, the RNG production facilities
were completed before the pipeline could deliver RNG to market. Therefore, the
landfill’s RNG was undeliverable to market and would have resulted in loss of
revenue and Renewable Energy Credits for the landfill. FPUC offered to purchase
the gas without the Renewable Energy Credits, and in exchange, the landfill
arranged to cover the cost of delivery of the gas via truck to FPUC’s
distribution system. New River mitigated potential losses and, as the landfill
assumed the costs of delivery, FPUC received a savings of $149,538 on 365,159
dekatherms of gas, which is equivalent to a savings of about $0.05 per
dekatherm compared to gas traditionally acquired at market.
In addition, the intrastate capacity costs include
payments associated with a software tool to manage customer usage and assist in
determining the gas supply and capacity needs for FPUC, legal and consulting
fees, and subscription fees to obtain market data and gas daily pricing.
Of these costs, $7,367,169 will be billed directly to
certain large special contract customers. The remaining costs of $24,573,927
will be recovered during the period January 1, 2024 through December 31, 2024.
The utility used actual therm usage data for the period
July 2022 through June 2023 to allocate the intrastate capacity costs. Based on
the usage data, staff agrees that the appropriate split for allocating the cost
is 73.49 percent or $18,060,416 to transportation customers and 26.51 percent
or $6,513,511 to sales customers. The transportation customers’ share of
$18,060,416 is further allocated to the various transportation rate schedules
in proportion with each rate schedule’s share of the utility’s total
throughput. The sales customers’ share of the cost of $6,513,511 is embedded in
the PGA.
To calculate the swing service rider rates, the
transportation customers’ share of the cost is allocated to each transportation
customer class and then divided by the customer class’ number of therms. The
swing service revenues the utility is projected to receive in 2024 totals to $18,060,416.
Credit to the PGA
The total intrastate capacity costs are embedded in the
PGA with the projected 2024 swing service rider revenues incorporated as a
credit in the calculation of the 2024 PGA. The amount credited to the 2024 PGA
is $18,060,416 plus $7,367,169 received from special contract customers, for a
total of $25,427,585.
Conclusion
After reviewing the information provided in the petition
and in response to staff’s data request, staff recommends that FPUC’s proposed
swing service rider reflects the updated cost of swing service for
transportation customers. Staff reviewed the total projected intrastate
capacity costs and verified that the costs included are appropriate. The Commission
should approve the proposed swing service rider rates for the period January
through December 2024. The costs included are appropriate and the methodology
for calculating the swing service rider rates is consistent with the swing
service order.
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:
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.
