Case Background
On December 14,
2023, Peninsula Pipeline Company, Inc. (Peninsula) filed a petition seeking
approval of two firm transportation service agreements (Agreements) between
Peninsula and Florida Public Utilities Company (FPUC), collectively the Parties.
The purpose of the Agreements is to increase supply capability and enhance
reliability in Boynton Beach and New Smyrna Beach, Florida. Peninsula operates
as an intrastate natural gas transmission company as defined by Section 368.103(04),
Florida Statutes (F.S.). FPUC is a local distribution company
subject to the regulatory jurisdiction of the Commission pursuant to Chapter
366, F.S. FPUC provides natural gas service to residential, commercial, and
industrial customers in Palm Beach and Volusia County, and receives deliveries
of natural gas to serve these customers over interstate transmission pipelines
owned by Florida Gas Transmission Company, LLC (FGT).
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 gas transportation service only; it does not engage in the sale of
natural gas to customers. 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 the proposed Agreements
as they do not fit any of the criteria enumerated in the tariff for which
Commission approval would not be required.
The Parties are subsidiaries of Chesapeake Utility Corporation, and 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.
FPUC has proposed to recover its payments to Peninsula
through the Purchased Gas Adjustment (PGA) and swing service rider mechanisms.
The PGA allows FPUC to periodically adjust the price of natural gas supplied to
its customer 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 their transportation customers and is a cents
per therm charge that is included in the monthly customer gas bill of
transportation customers. While FPUC would incur costs associated with these
service expansions, new load added to the system should help spread the costs over
a larger customer base.
Pursuant to the proposed Agreements (Attachments A and B
to this recommendation), Peninsula would construct, own, and operate a new
natural gas pipeline and acquire from FPUC an existing gate station with FGT
for the Boynton Beach Project. The proposed projects would enable FPUC to serve
Boynton Beach and New Smyrna Beach and potential future gas customers in Palm
Beach and Volusia County, respectively. Furthermore, maps of the proposed
projects are included in Attachment C to this recommendation.
During the evaluation of the petition, staff issued a data
request to the Parties for which responses were received on February 7, 2024. 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 firm
transportation service agreement dated December 11, 2023, between FPUC and
Peninsula?
Recommendation:
Yes, the Commission should approve the proposed firm
transportation service agreement associated with the Boynton Beach project dated
December 11, 2023, between FPUC and Peninsula. The firm transportation service agreement
is reasonable and meets the requirements of Section 368.105, F.S. Furthermore,
the proposed firm transportation service agreement benefits FPUC’s current and
potential future customers by ensuring that there is a sufficient supply of
natural gas to Boynton Beach, Florida. (P. Kelley, Hampson)
Staff Analysis:
Proposed Transportation Service Agreement for
Boynton Beach
The Parties have entered into the proposed firm transportation
service agreement to enable FPUC to reinforce its Boynton Beach distribution
system and meet increased natural gas demand in Palm Beach County. The proposed
Agreement has the added benefit of providing FPUC with an additional source of
gas (via the Peninsula pipeline) and enhancing an existing gate station.
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, subject to Commission approval of the amendment
Proposed Boynton Beach Expansion Project
Referring to the map of the proposed project, phase 1 of
the project, as shown by the red line, starting at an upgraded Peninsula gate
station interconnection with FGT, Peninsula would construct 3 miles of 4-inch
coated steel pipeline traveling east along Boynton Beach Blvd which would
conclude at a Peninsula District Regulator Station (DRS).
Phase 2 of the project, as depicted by the pink line, would
start at the Peninsula DRS. Peninsula would construct 2 miles of 4-inch coated
steel pipeline traveling east along Boynton Beach Blvd, and would conclude at
the FPUC DRS. Both phases are projected to be completed in the first quarter of
2025.
In response to staff’s data request, the Parties stated
that FPUC did not issue Formal Request for Proposals to other entities.
FPUC explained that in previous discussions and requests with FGT for other
projects, FGT has declined to bid on projects related to constructing, owning,
and operating laterals such as the proposed expansion project in this petition,
which are not a focus of FGT’s expansion activities.
Anticipated System Benefits
In paragraph 2 of the petition, the Parties assert that
the proposed project is needed to ensure sufficient additional gas supply and
would provide operational support to FPUC’s system. The Parties explained that
construction of the pipeline is necessary because the existing infrastructure is
not adequate to serve the current communities. The Parties further explained
that the proposed project would reinforce FPUC’s Boynton Beach distribution
system with an additional source of interstate gas with the potential to
provide nature gas service to future customers in Palm Beach County.
Negotiated Monthly Reservation Payments to
Peninsula
In paragraph 23 of the petition, the Parties expressed
that the negotiated monthly reservation charge contained in the proposed
Agreement is consistent with market rates, because the rates are substantially
the same as rates set forth in similar agreements as required by Section
368.105(3)(b), F.S. The Parties explained that Peninsula would recover the
pipeline construction costs through the monthly reservation charge to FPUC, as
shown in Exhibit A to the proposed Agreement. The monthly reservation charge is
designed to recover costs such as, but not limited to, engineering, permitting,
materials, and installation costs associated with the pipeline and related facilities,
ongoing maintenance including Pipeline and Hazardous Materials Safety
Administration compliance, safety requirements, property taxes, gas control,
and Peninsula’s return on investment.
Conclusion
Based on the petition and the Parties’ responses to
staff’s data request, staff recommends that the Commission should approve the
proposed firm transportation service agreement associated with the Boynton
Beach project, dated December 11, 2023, between FPUC and Peninsula. The firm
transportation service agreement is reasonable and meets the requirements of
Section 368.105, F.S. Furthermore, the proposed firm transportation service
agreement benefits FPUC’s current and potential future customers by ensuring
that there is an uninterrupted supply of natural gas to Boynton Beach, Florida.
Issue 2:
Should the Commission approve the proposed amendment
to the firm transportation service agreement associated with the New Smyrna Beach
project, dated December 11, 2023, between FPUC and Peninsula?
Recommendation:
Yes, the Commission should approved the proposed amendment
to the firm transportation service agreement associated with the New Smyrna
Beach project dated December 11, 2023, between FPUC and Peninsula. The amendment
to the firm transportation service agreement is reasonable and meets the
requirements of Section 368.105, F.S. Furthermore, the proposed amendment to
the firm transportation service agreement benefits FPUC’s current and potential
future customers by ensuring that there is a sufficient supply of natural gas
to New Smyrna Beach, Florida (P. Kelley, Hampson)
Staff Analysis:
Proposed Amendment to the Transportation Service
Agreement for New Smyrna Beach
By Order No. PSC-2017-0498-PAA-GU, Peninsula received
approval of a firm transportation service agreement that allows it to construct
a natural gas pipeline in the New Smyrna Beach area and relocate an existing
gate station. The
proposed New Smyrna Beach project and associated Agreement are an amendment to
the 2017 firm transportation agreement.
The Parties have entered into the proposed amendment to
the 2017 firm transportation service agreement to enable FPUC to reinforce its
New Smyrna Beach distribution system and meet increased natural gas demand in
Volusia County. The proposed Amendment has the added benefit of providing FPUC
with an additional source of gas (via the Peninsula pipeline), an additional
interconnect, and four new DRSs.
The proposed amendment 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 amendment,
they may do so no less than 120 days prior to expiration of the current active
term, subject to Commission approval of the amendment.
Proposed New Smyrna Beach Expansion Project
Referring to the map of the proposed project, starting at
a new DRS interconnection with FGT on South Ridgewood Ave in Volusia County,
Peninsula would construct 14.8 miles of 4-inch coated steel pipeline and four
new DRSs as shown on the red line. The project is projected to go in-service in
the first quarter of 2025. The Parties assert that the selected route of the
New Smyrna Beach expansion project provides the largest benefit to the area, to
FPUC, and its customers.
In response to staff’s data request, the Parties stated
that FPUC did not issue Formal Request for Proposals to other entities.
FPUC explained that in previous discussions and requests with FGT for other
projects, FGT has declined to bid on projects related to constructing, owning,
and operating laterals such as the proposed expansion project in this petition,
which are not a focus of FGT’s expansion activities.
Anticipated System Benefits
In paragraph 17 of the petition, the Parties expressed
that this new project builds upon the original Peninsula pipeline system in
order to reinforce portions of FPUC’s system in the southern portion of New
Smyrna Beach, as well as areas along the project route that have also
experienced growth since the approval of the original project. The Parties
assert that construction of the pipeline is necessary because the existing
infrastructure is not adequate to serve the current community. The Parties
assert that the proposed project would reinforce FPUC’s New Smyrna Beach
distribution system with an additional source of interstate gas with the
potential to provide nature gas service to future customers in Volusia County.
FPUC explained that during the high demand months of the
winter, it currently does not have sufficient capacity to meet its design-day
needs in New Smyrna Beach. The New Smyrna Beach system experiences low pressure
issues, therefore, FPUC is using compressed natural gas (CNG) to supplement
supply in the area during the high demand months to ensure adequate supply. The
Parties expressed that the Peninsula expansion of the existing service would
provide a long-term solution for the system in New Smyrna Beach, reducing the
need for seasonal CNG support in the area.
Negotiated Monthly Reservation Payments to
Peninsula
In paragraph 23 of the petition, the Parties assert that
the negotiated monthly reservation charge contained in the proposed amendment
is consistent with market rates, because the rate are substantially the same as
rates set forth in similar agreements as required by Section 368.105(3)(b),
F.S. The Parties explained that Peninsula would recover the pipeline and DRS
construction costs through the monthly reservation charge to FPUC as shown in
Exhibit A to the proposed Agreement. The monthly reservation charge is designed
to recover costs such as, but not limited to, engineering, permitting,
materials, and installation costs associated with the pipeline and related
facilities, ongoing maintenance including Pipeline and Hazardous Materials
Safety Administration compliance, safety requirements, property taxes, gas
control, and Peninsula’s return on investment.
Conclusion
Based on the petition and the Parties’ responses to
staff’s data request, staff recommends that the Commission should approve the
proposed amendment to the firm transportation service agreement associated with
the New Smyrna Beach project, dated December 11, 2023, between FPUC and
Peninsula. The firm transportation service agreement is reasonable and meets
the requirements of Section 368.105, F.S. Furthermore, the proposed firm
transportation service agreement benefits FPUC’s current and potential future
customers by ensuring that there is a sufficient supply of natural gas to New
Smyrna Beach, Florida.
Issue 3:
Should this docket
be closed?
Recommendation:
Yes. If no protest is filled 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. (Dose)
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 be closed upon the issuance of a Consummating Order.
