Case Background
On September 20,
2024, Peninsula Pipeline Company, Inc. (Peninsula) filed a petition seeking
approval of a firm transportation service agreement between Peninsula and
Pivotal Utility Holdings, Inc. d/b/a Florida City Gas (FCG). Concurrent with
the approval of the transportation service agreement, FCG would sell three
pipeline assets and associated facilities to Peninsula. Peninsula states that
once completed, the project will provide better options for transporting gas
supplies to the subject area of FCG’s distribution system and more alternatives
for delivering gas point to point on FCG’s system. The project would take place
in Miami-Dade County, in the area referred to as the “Miami Loop.”
Peninsula, a
wholly owned subsidiary of Chesapeake Utilities Corporation (CUC), operates as
an intrastate natural gas transmission company as defined by Section
368.103(4), Florida Statutes (F.S.). FCG, which recently became a subsidiary of
CUC, is a local distribution company subject to the regulatory jurisdiction of
the Commission pursuant to Chapter 366, F.S. FCG provides natural gas service
to residential, commercial, and industrial customers in Brevard, Indian River,
and Miami-Dade Counties, and receives deliveries of natural gas to serve these
customers over the interstate transmission pipelines owned by Florida Gas
Transmission Company, LLC.
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 to customers.
Pursuant to the Order, Peninsula is allowed to enter into certain gas
transmission agreements without prior Commission approval. However, Peninsula is requesting
Commission approval of the proposed firm 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 CUC, and
agreements between affiliated companies must be approved by the Commission
pursuant to Section 368.105, F.S.
In July 2024,
the Commission approved a firm transportation service agreement between
Peninsula and FCG, located in the Miami Loop area. As described on pages 7 and 8 of Order No.
PSC-2024-0271-PAA-GU, the firm transportation service agreement enabled a
producer of Renewable Natural Gas to connect with FCG’s local distribution
system. This previously approved transportation service agreement is referred
to as the Miami-Dade Project, which will connect with the Miami Loop North and
South segments. Furthermore, the Miami-Dade Project is depicted in Attachment B
to the petition as the pink line.
Staff held an
informal conference phone call with Peninsula and FCG on January 21, 2025. Attachment
A to the recommendation is the proposed firm transportation agreement.
Attachment B to the recommendation is the Miami Loop Project map. 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 firm
transportation service agreement between Peninsula and FCG, dated September 18,
2024?
Recommendation:
Yes, the Commission should approve the proposed firm
transportation agreement between Peninsula and FCG, dated September 18, 2024. The
proposed agreement is reasonable and meets the requirements of Section 368.105,
F.S. Furthermore, the proposed agreement benefits FGC’s current and future
customers by increasing system resiliency and reliability. (Hampson)
Staff Analysis:
There are three pipeline segments which are
contemplated in the petition: Miami Loop West, Miami Loop South, and Miami Loop
North. Each pipeline segment and its associated facilities would be acquired by
Peninsula from FCG. In paragraph 13 of the petition, Peninsula explains that
completing the transfer and acquisitions of the pipeline segments will allow it
to enhance these systems with new construction and expansion to provide service
to FCG’s system. Staff notes that these pipeline acquisitions are not subject
to approval by the Commission; however, Peninsula must seek the Commission’s
approval for the resulting firm transportation service agreement which allows
Peninsula to serve FCG through the pipelines.
Article 4.1 of the proposed agreement specifies a term of
20 years and shall be extended year-to-year, unless either party gives written
termination not less than 90 days prior to the expiration of the current term.
Peninsula states that each of the projects associated with the pipeline segments
are estimated to be completed in the third quarter of 2025.
FCG would recover its payments to Peninsula from its sales
customers through the Purchased Gas Adjustment Clause and from its
transportation customers through the Transportation Balancing Charge tariffs.
FCG states that the impact of the proposed agreement would be minimal on the
PGA factor.
Miami Loop West
As described in paragraph 14 of the petition, the first
pipeline segment and associated facilities to be acquired by Peninsula from FCG
is known as Miami Loop West. Peninsula explains that FCG had purchased the
pipeline segment recently and, as a result, the pipeline segment is not in
service nor included in FCG’s base rates. Due to the pipeline’s inactivity,
Peninsula expects to conduct testing on the facilities of the Miami Loop West
segment. In addition, Peninsula plans additional construction of facilities to
tie-in the pipeline segment to FCG’s distribution system as well as
interconnect the pipeline segment with the Miami Loop South segment.
Furthermore, Peninsula plans to extend the Miami Loop West segment further
west, enabling FCG to serve new commercial customers.
As described above, the Miami Loop West segment is not
currently included for recovery in FCG’s base rates. However, during
discussions with staff, FCG explained that the net book value of the gate
station and meter for the pipeline segment are currently in the utility’s rate
base. As a result, the majority of the net book value associated with the Miami
Loop West segment and associated facilitates would be included in the proposed,
confidential monthly reservation charge. FCG explained to staff that the
marginal change in the monthly reservation charge from before and after FCG’s
next applicable rate case is a result of the gate station and meter currently
in rate base.
Miami Loop South
The Miami Loop South segment would also be acquired by
Peninsula from FCG, as discussed in the beginning of paragraph 17 of the
petition. Peninsula intends to complete work to increase the operating system
pressure, including updating a regulator station and construction of an
additional 2.3 miles of pipeline. Peninsula states that increasing the
operating system pressure will improve service to FCG and its customers served
via the Miami Loop South segment as well as enhance the resiliency of FCG’s
system.
Peninsula explains that, unlike the previously discussed
segment, Miami Loop South is currently included in FCG’s rate base. As shown in
Exhibit A to the proposed firm transportation agreement, Peninsula proposes two
sets of monthly reservation charges to avoid the double recovery of assets. One
set of monthly reservation charges would apply prior to the pipeline segments
being removed from FCG’s rate base. The second set of monthly reservation
charges would apply after FCG’s next rate case, once these assets are removed
from FCG’s rate base. Article 4.3 of the proposed firm transportation agreement
states that if at any time during the term of the agreement the Commission
approves revised customer rates for FCG that reflect the removal of the assets
from FCG’s rate base, then Peninsula would replace the monthly reservation
charge in accordance with Exhibit A to the agreement. During a phone call with
staff, Peninsula confirmed that Article 4.3 of the agreement would be based
upon the issuance of a Consummating Order in FCG’s next rate case.
Miami Loop North
As described in paragraph 20 of the petition, Peninsula
would acquire the Miami Loop North pipeline segment from FCG. Peninsula further
stated that in order to increase system reliability, a new interconnect would
be built to connect the Miami Loop North to the previously approved Miami-Dade
Project. Furthermore, Peninsula explained that connecting the Miami Loop South
and Miami-Dade project will allow for the bi-directional flow of gas to both
the Miami Loop North and South segments, creating increased system resiliency.
Similar to the Miami Loop South segment, the Miami Loop
North segment is also currently included in FCG’s base rates. As such, the
monthly reservation charge in the first set does not include the cost to
acquire the Miami Loop North segment from FCG. Once the assets are removed from
FCG’s rate base in its next rate case, the second monthly reservation charge
would take effect.
Conclusion
Based on the petition and the discussions with staff, the Commission
should approve the proposed firm transportation agreement between Peninsula and
FCG, dated September 18, 2024. The proposed agreement is reasonable and meets
the requirements of Section 368.105, F.S. Furthermore, the proposed agreement
benefits FGC’s current and future customers by increasing system resiliency and
reliability.
Issue 2:
Should this docket be closed?
Recommendation:
If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, this docket should be closed upon the issuance of a
consummating order. (Sandy)
Staff Analysis:
At the conclusion of the protest period, if no
protest is filed this docket should be closed upon the issuance of a
consummating order.
