Case Background
On February 29,
2024, Peninsula Pipeline Company, Inc. (Peninsula) filed a petition seeking
approval of amendment No. 1 to firm transportation service agreement (amendment)
between Peninsula and Florida Public Utilities Company (FPUC). The purpose of
the amendment is to increase supply capability and enhance reliability in St.
Cloud, Florida. Peninsula operates as an intrastate natural gas transmission
company as defined by Section 368.103(4), 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 Osceola County, and receives deliveries of natural gas
to serve these customers over interstate transmission pipelines owned by
Florida Gas Transmission Company, LLC (FGT).
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 the proposed amendment
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.
In Order No. PSC-2022-0351-PAA-GU, the Commission approved
a firm transportation service agreement between Peninsula and FPUC (2022
agreement). The 2022
agreement was needed in order to allow FPUC to serve Osceola County by
transporting natural gas from an existing city gate interconnection with FGT.
The parties explained that amendment No. 1 reflects the expected new growth in
the St. Cloud area, therefore, they jointly developed the proposed plan to
bring additional natural gas capacity into the area.
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 amendment (Attachment A to this
recommendation), Peninsula would construct, own, and operate two new natural
gas pipelines and a new interconnect with FGT’s system. The proposed project
would enable FPUC to better serve St. Cloud and future potential gas customers
in Osceola County. Maps of the proposed projects are included in Attachment B
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 16, 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 amendment
No. 1 to the firm transportation service agreement dated February 26, 2024,
between FPUC and Peninsula?
Recommendation:
Yes, the Commission should approve the proposed amendment
No. 1 to the firm transportation service agreement dated February 26, 2024,
between FPUC and Peninsula. The proposed 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 having an
additional source of gas for the growing areas in Osceola County. (P. Kelley)
Staff Analysis:
Proposed Amendment to the Transportation Service
Agreement for St. Cloud
The parties have entered into the proposed firm
transportation service agreement to enable FPUC to reinforce its St. Cloud
distribution system and meet expected increased natural gas demand in Osceola
County. The parties argue that the proposed amendment has the added benefit of
providing FPUC with an additional sources of gas (via the Peninsula pipelines)
and building a new interconnection with the FGT pipeline.
In response to staff’s second data request, the parties
stated that they had a desire to amend the 2022 agreement to extend the term of
the agreement. In the
original 2022 agreement, the 20-year term begins on the “In-Service Date.” The
amendment adds an additional term “Segment In-Service Dates” to the agreement. These
dates are tied to the commencement of commercial operations of each new segment.
The parties explained that, in effect, the amendment would extend the original
20-year term by the difference between the original in-service date and the
last segment in-service date.
Pursuant to the 2022 agreement, after the expiration of
the initial term, the agreement and proposed amendment 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 St. Cloud Expansion Project
The parties provided a map of the proposed project, which
is appended to this recommendation as Attachment B. As described in paragraph
12 of the petition, part one the south expansion would begin with Peninsula constructing
a new interconnect with FGT, labeled on the project map as “New St. Cloud FGT
Tap.” Peninsula would then construct 9.18 miles of 6-inch coated steel pipeline
traveling along Canoe Creek Road and concluding at an existing pipeline along
Hickory Tree Road. Part one of the south expansion is shown on the project map
as the longer blue line.
Part two of the south expansion project, as depicted by
the short blue line, would start near the intersection of Canoe Creek Road and
Nolte Road. Peninsula would construct approximately 0.67 miles of 6-inch coated
steel pipeline following the right of way on Canoe Creek Road, and would
terminating at the area of planned new development, Green Island Ranch. The
parties explained in the petition that this development will consist of
approximately 14,000 new homes.
The proposed north expansion project would begin from the
previously discussed New St. Cloud FGT Tap. From this location, Peninsula would
build approximately 3.09 miles of 6-inch coated steel pipeline following north
along Hickory Tree and Narcoossee Road and terminating at a planned new
development, Center Lake Branch. The parties explained in the petition that
this development will consist of approximately 3,900 new homes.
In response to staff’s first 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 10 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. The parties further explained
that the amendment reflects the construction of additional facilities necessary
for FPUC to expand its service to serve new growth in the St. Cloud area. The parties
further explained in paragraph 12 of the petition that the proposed project
would reinforce FPUC’s St. Cloud distribution system with an additional source
of interstate gas with the potential to provide natural gas service to future
customers in Osceola County. In addition to the expected growth in residential
customers discussed above, FPUC also expects approximately 44 commercial
customers and one industrial customer to take natural gas service.
Option for Second Phase of Construction
In paragraph 14 of the petition, the parties discuss an
option for a second phase of construction that can be built off the extensions
of the initial project. FPUC anticipates additional growth in the St. Cloud
area that would likely require additional pipeline capacity. The proposed
optional phase will ensure that, within a timely manner, FPUC is able to
request that Peninsula build the necessary pipeline facilities in the event of
new growth. The rates for the optional second phase are based on current
estimates, but would only be applicable within the defined time frame. If the
optional second phase does materialize, the parties stated that they would
negotiate new rates and file for approval of a new amendment.
Negotiated Monthly Reservation Payments to
Peninsula
In paragraph 17 of the petition, the parties expressed
that the negotiated monthly reservation charge contained in the proposed
amendment 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 B to the proposed amendment. 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 No. 1 to the firm
transportation service agreement dated February 26, 2024, 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 having an additional source of gas for the growing areas in
Osceola County.
Issue 2:
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
(Stiller)
Staff Analysis:
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.
