Case Background
On March 28,
2024, Peninsula Pipeline Company, Inc. (Peninsula) filed a petition for
approval of a transportation service agreement (Transportation Agreement) with
Florida City Gas (FCG) (jointly, the parties). The purpose of the
Transportation Agreement is to ensure continuance of gas service to FCG after
the impending acquisition by Peninsula of certain pipeline facilities in the
area in and around Palm Beach County. Peninsula operates as an
intrastate natural gas transmission company as defined by Section 369.103(4),
Florida Statutes (F.S.).
FCG is a local distribution company (LDC) subject to the regulatory
jurisdiction of the Commission pursuant to Chapter 366, F.S.
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. 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 this proposed Transportation
Agreement as it does 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, a Delaware
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.
The Pioneer Supply Header Pipeline (Pioneer Header) was
constructed by FCG to provide itself and other local distribution companies (LDC)
and industrial customers with gas supply from Florida Gas Transmission Company,
LLC (FGT) in the area in and around Palm Beach County. The pipeline consists of
39.5 miles of 12-inch coated steel and runs from east to west through Palm
Beach County. The pipeline interconnects with FGT at its east end and a pigging
station at its west end near South Bay. The proposed Transportation Agreement
has been necessitated by the transfer of the Pioneer Header from FCG to Peninsula.
Pursuant to the proposed Transportation Agreement, Peninsula will provide
transportation service to FCG, allowing FCG to continue to receive natural gas
in Palm Beach County.
The proposed Transportation Agreement and project map are
shown as Attachments A and B to the recommendation. During the evaluation of the petition, staff
issued a data request for which responses were received on April 29, 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 Peninsula's
Transportation Agreement with FCG?
Recommendation:
Yes, the Commission should approve Peninsula’s
Transportation Agreement with FCG dated March 18, 2024, included as Attachment
A to the recommendation. The proposed Transportation Agreement is reasonable
and meets the requirements of Section 368.105, F.S. Furthermore, the proposed
Transportation Agreement benefits FCG’s current and potential future customers
by ensuring that there is a continuous supply of natural gas to Palm Beach
County. (Ward)
Staff Analysis:
Pioneer Header Acquisition
FCG originally constructed the Pioneer Header to provide service
to itself and additional customers with gas supply from FGT. The Pioneer Header
is being transferred to Peninsula at book value. Peninsula explained in its
petition that it is the preferred owner-operator of this transmission asset
because its core business is being a transmission grade pipeline owner and
operator. Peninsula stated that the Pioneer Header is a natural fit for
inclusion in its existing portfolio because it is a larger-diameter pipeline
that interconnects directly with an interstate pipeline that would allow
Peninsula to bring larger volumes of natural gas to LDCs or large volume
industrial customers.
Peninsula further stated that the Pioneer Header will serve
as the foundation for a larger-scale transmission project designed to reduce
capacity constraints and improve deliverability of gas commodity to the
southeastern portion of the state. Upon acquisition, Peninsula will undertake
the costs associated with the ownership of the planned project protecting FCG’s
general body of ratepayers. Peninsula asserts that the proposed Transportation
Agreement will enable FCG to continue to obtain gas supply from FGT upon
Peninsula’s acquisition of the Pioneer Header.
In response to staff’s first data request, Peninsula
stated that the Purchase and Sale Agreement between FCG and Peninsula for the
Pioneer Header will be signed upon approval of the Transportation Agreement
(discussed below) by the Commission. The
purchase and sale agreement between FCG and Peninsula has been provided in
responses to staff’s first data request; however, Commission approval is not
required of the purchase and sale agreement. The purchase and sale agreement
will be signed upon approval of the proposed Transportation Agreement.
Proposed Transportation Service Agreement
The parties have entered into the proposed Transportation
Agreement to enable FCG to continue to serve natural gas customers in and
around the area of Palm Beach County once Peninsula has acquired the Pioneer
Header. The proposed Transportation 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
Transportation Agreement, they may do so no less than 120 days prior to the
expiration of the current active term.
Pursuant to the proposed Transportation Agreement, Peninsula
will provide 20,000 Dth/day of firm transportation service to FCG for a rate of
$0.00 Dth/day for authorized transportation quantities. In response to staff’s
first data request, Peninsula explained that the rate contained in the
Transportation Agreement will prevent FCG ratepayers from additional rate
impact because the cost of the Pioneer Header is currently included in base
rates. In
its petition, Peninsula indicated that the agreement and rate are somewhat
unique, recognizing the transfer of Pioneer Header.
In FCG’s next rate case, the pipeline will be removed from
rate base. At that time, FCG and Peninsula will negotiate an appropriate transportation
rate and petition the Commission for approval of an amended Transportation
Agreement.
Conclusion
Based on the petition and the parties’ responses to
staff’s data request, staff believes that the proposed Transportation Agreement
is reasonable and meets the requirements of Section 368.105, F.S. Furthermore,
the proposed Transportation Agreement benefits FCG’s current and potential
future customers by ensuring that there is a continuous supply of natural gas
to the area of Palm Beach County. Staff therefore recommends approval of the
proposed Transportation Agreement between Peninsula and FCG dated March 18,
2024.
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. (Thompson)
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.
