Case Background
On March 28,
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), (jointly, the parties). The
transportation agreement will permit Peninsula to provide transportation
service for FPUC along the Pioneer Supply Header Pipeline (Pioneer Header),
therefore allowing FPUC to continue serving customers in Palm Beach County,
provide reinforcement, and allow for future expansion. FPUC is a local
distribution company (LDC) 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 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 Pioneer
Header was constructed by Florida City Gas (FCG) to provide itself and other
local distribution companies (LDC) and industrial customers with natural gas
supply in the area in and around Palm Beach County. Currently, pursuant to a
transportation agreement between FCG and FPUC, FCG provides transportation
service on the Pioneer Header pipeline to FPUC.
As addressed in
Docket No. 20240051-GU, the Pioneer Header is being transferred from FCG to
Peninsula. This sale of the asset does not require Commission review; however,
the sale will not take place until after Commission approval of the
transportation service agreement between FCG and Peninsula addressed in Docket
No. 20240051-GU. Following the transfer of the Pioneer Header from FCG to
Peninsula, Peninsula would own the pipeline. With this petition, Peninsula is seeking
approval of a transportation agreement with FPUC to provide natural gas
transportation service along the Pioneer Header to FPUC. The proposed
transportation agreement and project map are shown as Attachments A and B to this
recommendation.
During the
evaluation of the petition, staff issued a data request to the parties for
which responses were received on June 14 and on June 19, 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 service agreement with FPUC?
Recommendation:
Yes, the Commission should approve Peninsula’s
transportation service agreement with FPUC, dated March 18, 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 through the
activation of two additional delivery points. (McClelland)
Staff Analysis:
The parties have petitioned the proposed firm
transportation agreement to maintain and enhance service to the West Palm Beach
area currently provided by FCG. The parties state that proposed agreement will
allow Peninsula to serve FPUC with 900 dekatherms per day of firm transportation
at three delivery points. The parties further assert that this level of service
is needed for FPUC to serve current customers and expand to serve potential new
customers with the addition of two delivery points.
The proposed firm transportation agreement between FPUC
and Peninsula is contingent on the transfer of the Pioneer Header from FCG to
Peninsula. This transfer would be completed following the Commission review and
approval of the transportation service agreement between FCG and Peninsula
addressed in Docket No. 20240051-GU.
Paragraph 11 of the petition states that the proposed
monthly reservation charge that FPUC would pay to Peninsula is similar to the
rate FPUC is currently paying to FCG. In the parties’ joint responses to
staff’s first data request, the parties clarified that the rates have been
calculated using the same methodology. However, the proposed monthly
reservation charge is higher than the current rate because Peninsula has
factored in activation of two additional delivery points to provide service to
FPUC.
The proposed agreement 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.
FPUC would recover its monthly reservation charge payments
to Peninsula through the purchased gas adjustment
(PGA) and swing service rider. 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. In a bill calculation provided
by FPUC, a residential RES-3 customer using 21 therms would see an increase of
$0.07.
Conclusion
Based on the petition and the parties’ responses to
staff’s data request, staff recommends that the Commission should approve Peninsula’s
transportation service agreement with FPUC, dated March 18, 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 through the
activation of two additional delivery points.
Issue 2:
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. (Sandy)
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.
