Case Background
On March 14,
2025, Peninsula Pipeline Company, Inc. (Peninsula) filed its petition for
approval of an amendment to a transportation service agreement between
Peninsula and Florida City Gas (FCG). Peninsula states that it has received
notice of a mandatory relocation by the Florida Department of Transportation
(FDOT) for a road enhancement project. Peninsula has been mandated to relocate
approximately 6,000 feet of 6-inch steel gas pipeline from the public right of
way in Indian River County. The proposed amendment to the transportation
service agreement is a result of the mandatory relocation by FDOT.
Peninsula, a
wholly owned subsidiary of Chesapeake Utilities Corporation (Chesapeake),
operates as an intrastate natural gas transmission company as defined by
Section 368.103(4), Florida Statutes (F.S.). FCG is a local distribution company, and
is also a wholly owned subsidiary of Chesapeake, 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. The Parties are subsidiaries of
Chesapeake, and agreements between affiliated companies must be approved by the
Commission pursuant to Section 368.105, F.S.
In July 2024,
the Commission approved Peninsula’s petition for approval of transportation
service agreements between Peninsula and FCG. As described on page 5 of the 2024 Order,
the Indian River agreement also consolidated certain pre-existing agreements,
which had been entered into before FCG was acquired by Chesapeake and therefore
were not subject to the approval of the Commission. The pipeline segment FDOT
has now required Peninsula to relocate was initially constructed pursuant to a 2012
agreement and was consolidated in the 2024 agreement, as discussed on page 5 of
the 2024 Order.
During
the evaluation of the petition, staff issued one data request to Peninsula, for
which responses were received on April 28, 2025. The proposed amendment to the
transportation service agreement is included in the recommendation as
Attachment A. This proposed amendment also includes Exhibits A, B, and C to the
transportation service agreement. 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 amendment
to the transportation service agreement between Peninsula and FCG, dated
February 14, 2025?
Recommendation:
Yes, the Commission should approve the proposed amendment
to the transportation service agreement between Peninsula and FCG, dated February
14, 2025. The proposed Total Monthly Reservation Charge for Segment I, as shown
on Exhibits A and C to the transportation service agreement, is reasonable and
meets the requirements of Section 368.105, F.S. (Hampson)
Staff Analysis:
Peninsula initially received notice from FDOT of the
road enhancement project in Indian River County on May 24, 2024. As
described in Peninsula’s notice to FCG, this road enhancement project requires
Peninsula to relocate approximately 6,000 feet of 6-inch steel gas pipeline
from the public right of way. Peninsula stated that the relocation of the
pipeline segment is expected to be completed by November 2025. Section
4.3 of the 2024 transportation service agreement allows Peninsula to adjust the
Monthly Reservation Charge to recover the cost of mandatory relocations of
pipeline facilities. Section
4.3 of the 2024 agreement states:
“If, at any time after the Execution Date and
throughout the term of this Agreement, [Peninsula] is required by any
Governmental Authority… asserting jurisdiction over this Agreement and the
transportation of Gas hereunder, to incur additional capital expenditures with
regard to the service provided by [Peninsula] under this Agreement… including,
without limitation, mandated relocations of [Peninsula’s] pipeline facilities
serving [FCG’s] facility…, then [FCG’s] Monthly Reservation Charge shall be
adjusted and Exhibit A updated accordingly, and the new Monthly Reservation
Charge shall be implemented immediately upon the effective date of such action,
subject to Commission approval of the amendment.”
Peninsula states the revised monthly reservation charge in
the proposed amendment is appropriately modified to include the incremental
costs required to relocate the pipeline segment. Peninsula provided a breakdown
of the incremental capital costs to be incurred in response to staff’s first
data request. In its
response, Peninsula stated that the pipeline relocation would total
approximately $3.1 million in capital costs, which includes $1.3 million in
materials, supplies, and contingency, $940,000 in contractor labor, and $366,000
in inspections. Peninsula also provided in its responses the inputs used to
calculate the incremental monthly reservation charge, which includes interest
expense and return on equity, book depreciation, incremental operations and maintenance,
and tax expense associated with the capital costs.
In addition to the revised Monthly Reservation Charge on
Exhibits A and C to the agreement, Peninsula has also updated Exhibit B to
include Pivotal Utility Holding, Inc. to Florida City Gas’s name in the title. No
other modifications to Exhibit B have been proposed.
Conclusion
Based on the information provided in the petition and
Peninsula’s responses to data requests, staff recommends the Commission should
approve the proposed amendment to the transportation service agreement between
Peninsula and FCG, dated February 14, 2025. The proposed Total Monthly
Reservation Charge for Segment I, as shown on Exhibits A and C to the
transportation service agreement, is reasonable and meets the requirements of
Section 368.105, F.S.
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. (Dose)
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.
