Case Background
On February 7,
2024, Peninsula Pipeline Company, Inc. (Peninsula) filed a petition for
approval of a firm transportation service agreement between Peninsula and
Florida Public Utilities Company (FPUC) for Plant City and Lake Mattie system
expansions. The completion of the Plant City and Lake Mattie system expansions
are intended to enhance delivery of natural gas to FPUC’s natural gas systems
in the service territory in Hillsborough and Polk County. FPUC is a local
distribution company subject to the regulatory jurisdiction of the Commission
pursuant to Chapter 366, Florida Statutes (F.S.) Peninsula operates as an
intrastate natural gas transmission company as defined by Section 368.103(4), F.S.
Peninsula
provides gas transportation service only; it does not engage in the sale of
natural gas to customers. By Order No. PSC-07-1012-TRF-GP (2007 Order),
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. Pursuant to the 2007 Order, Peninsula is
allowed to enter into gas transmission agreements that meet certain criteria without
prior Commission approval. However, Peninsula is requesting
Commission approval of this proposed agreement as it does not fit any of the
enumerated criteria. Additionally, Peninsula and FPUC
(collectively “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 the 2007 Order.
The proposed
agreements would be effective for 20 years after its date of execution, and
extended on a year-to-year basis after this initial term, unless either party
chooses to terminate via written notice submitted 90 days prior to the expiration
of the current term. Either party may request modification of the rates or
terms of the agreement, to be made effective in the next renewed term, no less
than 120 days before the expiration of the current term. However, the parties
acknowledge that any amendments to the proposed agreements would require
further Commission approval.
The parties
assert that Peninsula would recover the pipeline and district regulator
construction costs through the monthly reservation charge to FPUC as shown in
Exhibit A to the proposed agreements. The monthly reservation charge is
designed to recover costs such as, but not limited to, engineering, permitting,
materials, and installation costs associated with 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.
FPUC would
recover its payments to Peninsula through the Purchased Gas Adjustment (PGA)
and swing service mechanisms. The PGA allows FPUC to periodically adjust the
price of natural gas supplied to its customers 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 this service expansion, new load added to the system would 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 new natural gas pipelines and acquire from
FPUC existing assets to allow them to more adequately provide service to Plant
City and Lake Mattie. Maps of the proposed projects are included in Attachment
C to this recommendation.
During the
evaluation of the petition, staff issued two data requests to the parties for
which responses were received on April 2 and 8, 2024. Staff and the parties held a phone
conference on April 17, 2024, to ask further questions and discuss the proposed
agreement. On April 18, 2024, the parties filed a revised transportation
service agreement related to the Lake Mattie project and revised Exhibit A to
the transportation service agreement, as well as a revised map for the Lake
Mattie project. On April 22, 2024, the parties filed a second revised Exhibit A
to correct an error in a confidential number contained in Exhibit A filed on
April 18, 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 Plant
City transportation service agreement and expansion project?
Recommendation:
Yes, the Commission should approve the Plant City
transportation service agreement between Peninsula and FPUC, dated January 30,
2024, included as Attachment A to the recommendation. The proposed agreement is
reasonable and meets the requirements of Section 368.105, F.S. Furthermore, the
proposed agreement benefits FPUC’s current and potential future customers by
extending to new delivery points that would permit FPUC to serve both existing
residents and planned developments. (McClelland, Hampson)
Staff Analysis:
Proposed Plant City Expansion Project
The parties have entered into the proposed firm
transportation service agreement to enable FPUC to increase capacity to meet
current and future demand needs in Plant City.
The petition states that the proposed Plant City expansion
project would consist of approximately 2.4 miles of 4-inch coated steel
pipeline, three new delivery points, a new interconnect with Florida Gas
Transmission (FGT), and Peninsula’s acquisition of assets from FPUC. The
acquired assets from FPUC consist of about 1,700 feet of 4-inch coated steel
pipeline located near the planned interconnect with FGT. This project is
expected to be completed by the end of 2024.
The parties explain in paragraph 12 of the petition that
the Plant City expansion would begin with the acquisition of about 1,700 feet
of 4-inch coated steel pipeline from FPUC, which Peninsula would interconnect
with FGT using a newly constructed gate station. From the acquired assets,
Peninsula would build three extensions leading to three new delivery points,
for a total of approximately 12,225 feet.
Anticipated System Benefits
The parties assert the proposed Plant City transportation
service agreement and expansion project would help FPUC serve current demand,
as well as meet demands of projected growth. Future developments are planned
along both Sam Allen Road and Wilder Road, both of which are proposed to
receive natural gas access per the expansion outlined in the petition. The
project is expected to provide an additional 5,000 dekatherms of natural gas
capacity per day.
Negotiated Monthly Reservation Payments to
Peninsula
In paragraph 23 of the petition, the parties assert that
the negotiated monthly reservation charge listed in Attachment A is consistent
with market rates, within the guidelines of Section 368.105(3)(b), F.S. The
costs to Peninsula associated with constructing the expansion would be
recovered through use of the monthly reservation charge. Peninsula would
purchase the assets from FPUC for their net book value of $174,008.97. FPUC
customers would pay for their use of these assets through this monthly
reservation charge alone, which was calculated using an engineering estimate
placing the assets at a lower value of $147,000. The
assets discussed above were not included in FPUC’s rate base during the latest
rate case proceeding in 2022; therefore, FPUC’s general body of ratepayers are currently
not paying for those assets. Therefore, staff recommends that the parties’
initial firm transportation agreement is appropriate as proposed.
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 Plant City
project between Peninsula and FPUC, dated January 30, 2024, included as
Attachment A to the recommendation. The firm transportation service agreement
is reasonable and meets the requirements of Section 368.105, F.S. Furthermore,
the proposed agreement benefits FPUC’s current and potential future customers
by extending to new delivery points that would permit FPUC to serve both
existing residents and planned developments.
Issue 2:
Should the Commission approve the proposed Lake
Mattie transportation service agreement and expansion project?
Recommendation:
Yes, the Commission should approve the Lake Mattie
transportation service agreement between Peninsula and FPUC, dated April 18,
2024, including the second revised Exhibit A, included as Attachment B to the
recommendation. The proposed agreement is reasonable and meets the requirements
of Section 368.105, F.S. Furthermore, the proposed agreement would benefit
FPUC’s current and potential future customers by interconnecting the Lake
Mattie system with the Florida Southeast Connection pipeline, and ensuring FPUC
would be able to meet the demands of projected future growth. (McClelland,
Hampson)
Staff Analysis:
Proposed Transportation Service Agreement for
Lake Mattie
The parties have entered into the proposed firm
transportation service agreement to enhance FPUC’s diversity of gas supply to
Polk County. The parties state that FPUC’s current service would be
strengthened by introducing multiple sources of gas from interstate pipelines
in the area. Paragraph 20 of the petition states that, “Through working with
the Economic Development Council of Haines City, FPUC projects significant new
demand consisting of a mix of customer demand over the next 10 years in Haines
City that FPUC’s system in the area is not currently capable of serving without
additional access to interstate capacity provided by this project.”
Proposed Lake Mattie Expansion Project
Peninsula proposes construction of 13.8 miles of 4-inch
coated steel pipeline, an interconnect with the Florida Southeast Connection
pipeline, three district regulator stations, and the acquisition of assets from
FPUC, as discussed below. Peninsula explained that all phases of the project
are expected to be completed by the third quarter of 2025.
The parties explain in paragraph 17 of the petition that
the expansion would first begin by acquiring certain assets from FPUC.
Peninsula would acquire a city gate and 1.2 miles of 4-inch steel pipe from
FPUC at book value. Peninsula would construct a new district regulator system
at the end of the acquired assets. This acquisition is necessary for Peninsula
to upgrade the systems to be able to handle a greater volume.
The second phase of the expansion would begin with
Peninsula building an extension of 4.5 miles of new 4-inch coated steel, and
building a new interconnect with the existing Lake Mattie system. At the end of
the extension, Peninsula would build a new district regulator system.
The final phase of the expansion would begin with
Peninsula building an interconnect with the Florida Southeast Connection
pipeline, and 4.5 miles of 4-inch coated steel which would connect to an
existing district regulator that interconnects with the existing Lake Mattie
system.
Anticipated System Benefits
The parties assert that this expansion project is
beneficial to FPUC’s customers. The planned expansions are intended to enhance
the diversity of gas supply, as well as provide additional gas to meet
projected future growth. The Lake Mattie project is expected to supply an
additional 8,700 dekatherms of capacity per day, which would enable FPUC to
meet its current and future customer demand.
Negotiated Monthly Reservation Payments to
Peninsula
In paragraph 23 of the petition, the parties assert that the
negotiated monthly reservation charge shown in Attachment B to the petition is
consistent with market rates, within the guidelines of Section 368.105(3)(b),
F.S. The costs to Peninsula associated with constructing the expansion would be
recovered through use of the monthly reservation charge. Peninsula would
purchase the assets from FPUC for their net book value of $276,126.15. FPUC
customers would pay for their use of these assets through this monthly
reservation charge alone, which was be calculated using the net book value.
Revised Monthly Reservation Payments to
Peninsula
Staff conducted a phone conference with the parties to
clarify the parties’ responses provided to staff’s second data request. Through
discussion with staff, the parties clarified that the assets discussed above are
currently in FPUC’s rate base and would remain until the next rate proceeding,
at which point the assets would be removed from rate base to reflect the asset
transfer. The parties filed an amended agreement
and amended Exhibit A to remove the net book value purchase price from the
calculation of the reservation charge and avoid the recovery of these assets
through base rates as well as the PGA and swing service rider. Staff has
reviewed the amended Exhibit A and agrees with the parties that the revisions
to the agreement are appropriate.
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 Lake Mattie
project between Peninsula and FPUC, dated April 18, 2024, including the second
revised Exhibit A, included as Attachment B to the recommendation. The firm
transportation service agreement is reasonable and meets the requirements of
Section 368.105, F.S. Furthermore, the proposed agreement would benefit FPUC’s
current and potential future customers by interconnecting the Lake Mattie
system with the Florida Southeast Connection pipeline, and ensuring FPUC would be
able to meet the demands of projected future growth.
Issue 3:
Should this docket be closed?
Recommendation:
If no protest is filed by a person whose substantial
interest is affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a Consummating Order. (Brownless)
Staff Analysis:
If no protest is filed by a person whose substantial
interest is affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a Consummating Order.
