Case Background
On April 19,
2024, Florida City Gas (FCG or Utility) filed its petition requesting
Commission approval of modification to its safety, access, and facility
enhancement (SAFE) program and associated cost recovery mechanism. In 2015, the
Commission approved the original SAFE program and associated cost recovery
mechanism. The purpose of the original SAFE program
was to relocate certain existing gas facilities located in or associated with
rear lot easements to the street front through a separate surcharge on the
customers’ bill. In the Order approving the SAFE program, the Commission found
that the relocation of existing gas facilities was in the public interest to
improve the safety of Florida’s natural gas infrastructure. In Order No.
PSC-2015-0390-TRF-GU, the Commission required FCG to file an annual petition
for a review and reset of the surcharge factors, true-up of any over or under
recovery, and update the ad valorem rate, debt, and equity cost rates. At the time of Commission approval, the
total estimated SAFE investment from 2015 through 2025 was approximately $105
million.
During the
Utility’s 2022 rate case, the Commission approved a stipulation for the expansion
of the SAFE program in Order No. PSC-2023-0177-FOF-GU. The Commission further required FCG to
propose a new investment/construction schedule and term for the SAFE program in
its next applicable annual SAFE filing. Subsequently, the Utility proposed and
the Commission approved a 10-year investment and construction schedule through
2035 for the SAFE program projects. As of FCG’s most recent true-up filing,
the estimated total investment of the SAFE program was approximately $102
million.
In a recent
assessment using its Distribution, Integrity, and Management Program (DIMP),
the Utility identified additional risks that were not contemplated in its
expanded program related to problematic pipe and equipment. Natural gas
distribution pipeline operators, such as natural gas distribution companies are
required by Department of Transportation to develop, write, and implement a
distribution integrity management program with the following elements:
knowledge, identify threats, evaluate and rank risks, identify and implement
measures to address risks, measure performance, monitor results, and evaluate
effectiveness, periodically evaluate and improve program; and report
results.
While additional
risks have been identified, the Utility stated the systems are safe. However,
FCG would like to expeditiously address the identified risks and reduce any
unnecessary risk to the public. The proposed modification to the SAFE program
would include the replacement of the following types of facilities in which FCG
has identified safety risks: (i) replacing of span pipe; (ii) burying shallow
and exposed pipelines; and (iii) replacing of obsolete pipe and related
facilities.
During the evaluation of the petition, staff issued two
data requests. Responses from FCG were received on May 24 and August 1, 2024. The
Commission has jurisdiction over this matter pursuant to Sections 366.04,
366.05, and 366.06, Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Should the Commission approve FCG's proposed
modifications to the Safety, Access, and Facility Enhancement program?
Recommendation:
Yes, the Commission should approve FCG’s proposed modifications
to the SAFE program and its associated components to include: (i) replacing of
span pipe; (ii) burying shallow and exposed pipelines; and (iii) replacing of
obsolete pipe and related facilities. The proposed program modification should
improve the safety of FCG’s natural gas infrastructure and reduce risk to life
and property, and is consistent with the Commission’s prior Orders. (P. Kelley,
Thompson)
Staff Analysis:
Replacement of Problematic Pipe and Facilities
As mentioned in the case background, FCG states that during
a recent risk assessment using its DIMP, it identified various types of
problematic pipe and facilities that pose safety risks to its system. As such,
FCG is requesting to address these risks on an expedited basis. The problematic
pipe and facilities FCG intends to include for replacement under its SAFE
program are previously unidentified bare steel mains, steel tubing, span pipe,
shallow and exposed pipe, and other obsolete pipe and related facilities, all
of which are currently included in Florida Public Utilities Company’s (FPUC’s) Gas
Utility Access and Replacement Directive (GUARD) program. FCG is requesting to
more closely align its SAFE program with FPUC’s GUARD program, which was
approved by the Commission in Docket No. 20230029-GU.
Span pipes are segments of pipe that are susceptible to outside
force damage and corrosion, as they are installed above grade and cross creeks,
rivers, ditches, or highways. Shallow and exposed pipes are segments that are
no longer safely buried due to erosion and other changes in the environment, and
are similarly susceptible to outside force damage and corrosion. Obsolete pipe
includes Aldyl-A, a type of first generation plastic pipe installed prior to
1982, previously unidentified bare steel pipe, steel tubing and orange pipe,
which was approved for replacement in FCG’s SAFE program by the Commission in
Docket No. 20220069-GU. Due
to the evolution of piping materials, construction methods, and standards of
related metering and regulating (M&R) facilities, obsolete pipe and related
facilities may be at risk of third-party damage and failure.
FCG retained the same contractor retained by FPUC for its
GUARD program, R.J. Ruiz and Associates, Inc., to conduct a review of its
natural gas facilities. At the conclusion of the review, the contractor
provided a risk assessment report identifying threats to FCG’s system. The
Utility used this report to identify the following projects: (i) three span
pipe projects, consisting of the replacement of 82 span pipe segments in FCG’s
service area; (ii) three exposed pipe projects; and (iii) 17 projects related
to obsolete pipe and related facilities.
FCG prioritized the facilities for replacement based on the highest risk of failure
identified in the contractor's risk assessment and the Utility’s DIMP, as well
as input from the Utility’s subject matter experts. In response to staff’s
first data request, the Utility provided maps which depict the areas FCG projects
facility replacements will take place.
FCG identified project areas located in Miami-Dade, Broward, and Brevard
Counties.
FCG estimates that the span pipe projects will cost $20
million, the exposed pipe projects will cost $4.1 million, and the obsolete
pipe and related facilities projects will cost $25.7 million, for a total of
$49.8 million over the 2024 through 2035 SAFE program term. The estimated annual
project expenditures range from approximately $2.8 million to $5 million, and
are lowest in the first and last years of the program term.
Staff believes that FCG’s request to modify its SAFE
program to include the expedited replacement of problematic pipe and facilities
is necessary to improve the safety of FCG’s natural gas infrastructure, and to
reduce risk to life and property. Staff believes inclusion of the proposed
projects is also consistent with the Commission’s approval of FPUC’s GUARD
program.
Projected Incremental SAFE Investments
FCG estimated the incremental costs for the SAFE program
modifications to be approximately $49.8 million, as summarized in the table
below:
Table 1-1
Projected 2025-2035 Incremental
SAFE Costs
|
SAFE Project Type
|
Estimated Cost ($ in millions)
|
|
Problematic Mains
|
|
|
Obsolete pipe
replacement
|
$25.7
|
|
Span pipe
replacement
|
$20.0
|
|
Exposed pipeline
burials
|
$4.1
|
|
TOTAL (rounded)
|
$49.8
|
Source: Responses to Staff’s Second Data Request, Document
No. 08145-2024
The Utility believes that the currently approved 10-year term
for the SAFE program is adequate to complete the projects described in this
filing.
In response to staff’s second data request, FCG provided a breakdown detailing
the projected timeline of the projects. According to the Utility, the
modifications to the SAFE program would be approximately $49.8 million in
incremental costs.
In paragraph 13 of the petition, FCG states that it also
proposes to continue to use the cost allocation methodology currently being
utilized. Furthermore, the Utility is not proposing any modifications to the current
surcharge in this petition. Instead, FCG would recalculate the SAFE surcharges
for 2025 in its annual true-up filing. FCG states that if this petition is
approved, it would include the revenue requirement associated with the
additional project categories in its annual true up filings, starting in
September 2024. FCG stated that the surcharge would increase by no more than 10
percent of the program's current charge for 2025, based on the estimate
provided by the contractor.
Staff believes that the proposed expenses are consistent with the approved 2015
SAFE cost allocation methodology and are reasonable.
Conclusion
The Commission should approve FCG’s proposed modifications
to the SAFE program and its associated components to include: (i) replacing of
span pipe; (ii) burying shallow and exposed pipelines; and (iii) replacing of
obsolete pipe and related facilities. The proposed program modification should
improve the safety of FCG’s natural gas infrastructure and reduce risk to life
and property, and is consistent with the Commission’s prior Orders.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If no protest is filed by a person whose
substantial interests are affected within 21 days of the issuance of the Order,
this docket should be closed upon the issuance of a Consummating Order.
(Sparks, Farooqi)
Staff Analysis:
If no protest is filed by a person whose substantial
interests are affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a Consummating Order.
