Case Background
On, May 5, 2024,
Peoples Gas System (Peoples) and Florida Public Utilities Company (FPUC)
(jointly, Petitioners) filed a joint petition for approval of a special contract
(2024 Special Contract). Under the terms of the Special Contract, Peoples would
provide FPUC with firm gas transportation service for a seven-month term
commencing on September 1, 2024, and terminating on April 1, 2025. Peoples and
FPUC own and operate natural gas facilities in Florida and are subject to the
regulatory jurisdiction of the Commission pursuant to Section 366.06, Florida
Statutes (F.S.).
In 2021, Peoples and FPUC had a transportation agreement
(2021 Agreement) that did not require Commission approval because the terms and
conditions did not deviate from Peoples’ Commission-approved tariff. Under the
2021 Agreement, FPUC received service under Peoples’ Interruptible Service (IS)
rate schedule. Pursuant to the 2021 Agreement, Peoples transported natural gas
from the Florida Gas Transmission’s (FGT) interstate pipeline at the
PGS-Jacksonville main gate to the Radio Avenue Interconnect into the Callahan
Pipeline. The Callahan Pipeline is a 16-inch steel pipeline that was
constructed in 2019 to allow FPUC and Peoples to expand natural gas service in
Nassau and Duval counties.
In September of 2022, Peoples and FPUC filed a joint
petition for approval of a special contract (2022 Special Contract). Commission
approval was required because the terms and conditions deviated from Peoples’
Commission-approved tariff. The receipt points, delivery points, and points of
delivery remained the same as in the 2021 transportation agreement. The Special
Contract had a term from November 1, 2022, until June 1, 2024.
The 2022 Special Contract extended the original contract to continue to allow
Peoples to provide FPUC with firm natural gas service for a limited duration
and obtain a fixed monthly reservation fee for the service provided. Upon
the expiration of the existing contract in June, PGS ceased engaging in any
obligations it had under that contract as FPUC has no rights to that capacity
since the contract terminated and FPUC did not arrange a new contract with PGS
in the interim. The Commission approved the Special Contract in Order
No. PSC-2022-0374-PAA-GU.
During the evaluation of the petition, staff issued data
requests to Peoples and FPUC. Responses from FPUC were received on June 27,
2024. Responses from Peoples were received on June 27, 2024. The Commission has
jurisdiction over this matter pursuant to Sections 366.04, 366.05, and 366.06,
F.S.
Discussion
of Issues
Issue 1:
Should the Commission approved the Special Contract
between Peoples and FPUC?
Recommendation:
Yes, the Commission should approve the Special
Contract between Peoples and FPUC as shown in Attachment A to the
recommendation. The contract is reasonable because it facilitates the delivery
of natural gas into Nassau County and benefits FPUC’s and Peoples’ general body
of ratepayers. The contract should be effective September 1, 2024. (P. Kelley)
Staff Analysis: As discussed in the case
background, the Commission approved a 2022 Special Contract between Peoples and
FPUC. In May 2024, with the natural expiration of the 2022 Special Contract
approaching, FPUC sought out Peoples for modification of the 2022 Special
Contract which resulted in the proposed 2024 Special Contract. The term of the
contract is for 7 months with a negotiated monthly charge for the reservation
of firm capacity and transportations service on Peoples’ distribution system
and a daily maximum transportation quantity. The receipt points, delivery
points, and points of delivery remained the same as in the 2022 Special
Contract. Similarly with the 2022 Special Contract, FPUC will recover its
payment to Peoples through the Purchased Gas Adjustment and from transportation
customers that utilize the alternative supply in Nassau County. This contract
would continue to generate revenues for Peoples, benefitting Peoples’ general
body of rate payers.
The purpose of the 2024 Special Contract remains the same
as the prior Commission-approved 2022 Special Contract. Typically, FPUC obtains
its gas from the Transco Zone 5 for its Nassau County operations. In response
to staff’s first data request, FPUC indicated that although the market has
changed since the last transportation agreement, during the winter months it
remains highly volatile. The agreement with PGS allows FPUC an alternative to
Transco Zone 5 with an estimated savings of more than $1 million to FPUC’s
customers and transportation customers over the 7-month term proposed in the
2024 Special Contract.
The proposed 2024 Special Contract for a 7-month term is a much shorter
time period than the 2022 Special Contract term of 19 months. FPUC indicated
that based on the commodity prices it would see savings up to March 2025. For
the time period after March 2025, FPUC will reassess forward commodity prices
and may seek PGS for continued service. If the contract is not renewed, FPUC
indicated it would return to using firm Southern Natural Gas Company (SONAT)
capacity for its supply needs. SONAT is an interstate natural gas pipeline
which brings gas from the Louisiana Gulf of Mexico cost to the southeastern
United States, including Florida.
Conclusion
Based on the
review of the petition and responses to staff’s data requests, staff believes
the proposed Special Contract is reasonable because it facilitates the delivery
of natural gas into Nassau County and benefits FPUC’s and Peoples’ general body
of ratepayers. Staff therefore recommends approval of the proposed Special
Contract between Peoples and FPUC effective September 1, 2024.
Issue 2:
Should this docket be closed?
Recommendation:
If no protest is filed
by a person whose substantial interests are affected within 21 days of issuance
of this 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
interests are affected within 21 days of issuance of this order, this docket
should be closed upon the issuance of a consummating order.
