Florida Public Service Commission native order document 02217-2024

BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION
In re: Petition for approval of limited variance
from area extension program (AEP) tariff, by
Florida Public Utilities Company.
DOCKET NO. 20230124-GU
ORDER NO. PSC-2024-0115-PAA-GU
ISSUED: April 22, 2024
The following Commissioners participated in the disposition of this matter:
MIKE LA ROSA, Chairman
ART GRAHAM
GARY F. CLARK
ANDREW GILES FAY
NOTICE OF PROPOSED AGENCY ACTION
ORDER APPROVING LIMITED VARIANCE FROM AREA
EXTENSION PROGRAM TARIFF
BY THE COMMISSION:
NOTICE is hereby given by the Florida Public Service Commission that the action
discussed herein is preliminary in nature and will become final unless a person whose interests
are substantially affected files a petition for a formal proceeding, pursuant to Rule 25-22.029,
Florida Administrative Code (F.A.C.).
Background
On November 3, 2023, Florida Public Utilities Company (FPUC or the utility) filed a
petition for approval of a limited variance from its existing area extension program (AEP) tariff.
In accordance with Rule 25-7.054, F.A.C., the AEP tariff applies to new customers or areas that
require an extension of gas distribution facilities to receive service. FPUC seeks our approval of
a limited variance from the AEP tariff to allow it to: (a) include expenses related to acquiring and
converting facilities related to mains, services, and behind-the-meter facilities, in the investment
costs for the AEP calculation for certain communities; and (b) to charge the AEP surcharge
based on a volumetric basis, as opposed to a fixed amount.
We first approved the AEP tariff in 1995. 1 The tariff is designed to provide FPUC with
an optional method for funding main and service extensions for customers who would otherwise
not be served with natural gas. The AEP tariff provides an alternative option for FPUC to
recover the cost of main extensions as required by Rule 25-7.054, F.A.C.
1 Order No. PSC-95-0162-FOF-GU, issued February 7, 1995, in Docket No. 941291-GU, In re: Petition for
approval of modification to tariff provisions governing main and service extensions by Florida Public Utilities
Company.

ORDER NO. PSC-2024-0115-PAA-GU
DOCKET NO. 20230124-GU
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The AEP tariff provides for the determination of a surcharge applicable to each
designated expansion area. Once set, the AEP surcharge will remain constant for the projected
term of the collection period. Pursuant to the tariff, the monthly AEP surcharge is applied on a
fixed basis and added to the applicable transportation charge of the monthly rate for each
respective customer. The AEP surcharge is calculated by a formula based on the amount of
investment required and the projected gas sales and resulting revenues collected from customers
in the AEP area. The AEP tariff specifies the formula to calculate the surcharge. The AEP
surcharge itself does not require our approval. The amortization period is applied individually to
each premise and shall not exceed 72 months, or six years.
Florida City Gas (FCG) has a similar AEP tariff. We have approved variances from the
AEP tariff for FCG in previous orders.2 Our staff issued five data requests for which responses
were received January 10, February 19, March 1, March 18, and March 19, 2024. In addition,
our staff and the utility discussed this matter on conference calls held on February 12 and March
15, 2024.
We have jurisdiction over this matter pursuant to Sections 366.04, 366.05, 366.06,
Florida Statutes (F.S.).
Decision
Newberry Community Gas Systems
In 2023, we approved a firm transportation service agreement between FPUC and
Peninsula Pipeline Company (Peninsula).3 The agreement facilitates the construction of a natural
gas pipeline to be used by FPUC to provide natural gas service to the City of Newberry
(Newberry) in Alachua County, Florida. Currently, Newberry does not have natural gas service
and residential customers have utilized propane to meet their energy needs. To facilitate delivery
of propane to these customers, propane companies have developed Community Gas Systems
(CGS’s) in some residential communities. A CGS operates in a similar manner to a natural gas
system by delivering propane directly to a customer’s home through an underground pipeline
system.
In the instant petition, the utility explained that CGS’s can be converted and utilized to
deliver natural gas to customers. In a discussion with our staff, the utility stated that Peninsula
estimates the Newberry pipeline to be completed by the third quarter of 2024, but natural gas
service could be available as soon as the second quarter of 2024. The utility explained that work
done in the third quarter of 2024 will consist of restoration and other ancillary work.
2 Order No. PSC-16-0066-PAA-GU, issued February 5, 2016, in Docket No. 150232-GU, In re: Petition for
approval of variance from area extension program (AEP) tariff to delay true-up and extend amortization period, by
Florida City Gas; and Order No. PSC-2021-0416-PAA-GU, issued November 8, 2021, in Docket No. 20210126-
GU, In re: Petition for approval of variance to modify the Sebastian area extension program true-up and extend the
amortization period, by Florida City Gas.
3 Order No. PSC-2023-0212-PAA-GU, issued July 25, 2023, in Docket No. 20230063-GU, In re: Petition for
approval of transportation service agreement with Florida Public Utilities Company by Peninsula Pipeline
Company, Inc.

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Two of these CGS’s are operated by Crescent Propane, an affiliate of FPUC, and are
located in the communities of Newberry Newtown and Newberry Oaks. These CGS’s currently
serve 380 active residential customers. FPUC and Crescent Propane have reached an agreement
for the sale of the CGS’s existing mains, services, meters, and other facilities to FPUC at fair
market value.
Requested Variance from AEP Tariff
Acquisition and Conversion Costs
The utility stated that it utilized a consultant to conduct an independent assessment of the
systems. In response to our staff’s first data request, FPUC stated that it selected the consultant
due to the firm’s experience providing valuations in the propane industry, and that the cost of the
assessment is not included in the AEP charge calculation. The consultant determined a market
value of $629,607. FPUC stated in its petition that building a replacement system would cost
about $2.7 million. A copy of the assessment is included in Exhibit A of FPUC’s response to our
staff’s first data request.
The AEP tariff is designed for use in financing the construction of new facilities that are
needed to serve new customers or a new area. However, as discussed above, FPUC proposes to
purchase the existing propane infrastructure instead of constructing new facilities, as that would
be more cost effective. The utility’s first request in its petition is to include the expenses related
to the acquisition and conversion of the two CGS’s in the calculation of the investment costs for
the AEP charge for the two communities. The estimated total expense to convert the mains and
services for the two communities is $219,900. In response to our staff’s first data request, the
utility stated that these costs include materials and supplies, contractor charges, direct labor, and
engineering and permitting.
Additionally, the utility is requesting to include the expenses related to behind-the-meter
conversions in its AEP calculation for the two communities. In its petition, the utility stated that
this will include changing propane hookups to common household appliances to facilitate the
delivery of natural gas. In response to our staff’s fifth data request the utility clarified that pool
heaters will be included, but other appliances outside the home such as gas grills and generators
will not be included. FPUC explained that it is limiting the program to common appliances to
decrease the likelihood that all customers in a neighborhood carry the burden of costs to convert
outdoor appliances that only a limited number of customers have. The utility estimates that the
cost for behind-the-meter conversions would be $1,509 per customer for a total estimated cost of
$573,548. The utility is also requesting to include $240,000 of additional construction costs in its
AEP calculation. In response to our staff’s third data request the utility explained that this
expense is for the construction of an approach main needed to reach a CGS community.
Pursuant to the utility’s AEP tariff, the AEP monthly rate shall be calculated by dividing
the estimated amount of additional revenue required in excess of the Maximum Allowable
Construction Cost (MACC) by the number of customer premises to be served at the end of year
six. Pursuant to FPUC’s tariff, the MACC is the maximum capital cost the utility will incur for

ORDER NO. PSC-2024-0115-PAA-GU
DOCKET NO. 20230124-GU
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an extension of facilities, which equals six times the estimated annual revenue less the cost of
gas, taxes, and franchise fees. The MACC for this project is $932,514, with an estimated allowed
cost of capital of $174,089. When combined with the total estimated costs of $1,663,055, the
final AEP recovery amount is $904,630.
In its petition, FPUC explained that it is including behind-the-meter conversion costs in
the AEP calculation because it believes some customers may be unlikely to convert if they were
charged a one-time expense of $1,509. In response to our staff’s second data request, FPUC
clarified that it will keep costs for behind-the-meter facilities in a regulatory asset to be
amortized over a 72-month period. If there is an under-recovery at the conclusion of the 72-
month amortization period, in the absence of any approved extension or other adjustment of the
AEP surcharge, the remaining costs would be recorded below the line and would not flow
through to customers in current or future rates. In response to our staff’s first data request, the
utility stated that because the proposed AEP will be based upon actual customer usage and is
designed based upon existing propane usage, the utility believes that there is a high probability
that it will recover the full amount within the 72-month period.
We find that the inclusion of these costs in the proposed AEP will not impact the general
body of ratepayers considering the savings associated with the conversion of an existing system,
FPUC’s ability to recover AEP costs from existing propane customers, and FPUC’s treatment of
remaining costs in the event of an under-recovery. The calculation of the AEP recovery amount
is shown in Table 1 below.
Table 0
Calculation of AEP Recovery Amount
1. 	Acquisition Price of CGS Communities 	$629,607
2. 	Main Conversion Costs 	$219,900
3. 	Customer Conversion Costs 	$573,548
4. 	Additional Construction 	$240,000
5. 	Total Estimated Costs 	=$1,663,055 (Lines 1+2+3+4)
6. 	Maximum Allowable Construction
Cost
$932,514 (6 Years Estimated Annual Revenue)
7. 	Estimated Allowed Cost of Capital 	$174,089
8. 	AEP Recovery Amount 	$904,630 (Lines (5+7)-6)
Proposed Volumetric AEP Surcharge
FPUC is also requesting in this petition that it be allowed to depart from its current AEP
tariff and utilize a volumetric (per therm) charge for the AEP in the two Newberry CGS
communities. In its petition, the utility stated that a per therm charge would help provide an
immediate savings to more customers and help facilitate their switch from propane to natural
gas. 	In its petition, the utility estimated that approximately 56 percent of customers would see
immediate savings under the proposed per therm charge, as the estimated bills for these
customers would be lower than their current propane bills. Additionally, the utility believes that

ORDER NO. PSC-2024-0115-PAA-GU
DOCKET NO. 20230124-GU
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the other 44 percent of customers would see savings by the end of the AEP period, as natural gas
is a more “consumer price friendly” fuel source than propane.
The proposed AEP charge is $2.83 per therm. The utility calculated a fixed AEP charge
of $33.064 and divided it by a projected monthly gas usage of 11.7 therms to arrive at the
proposed volumetric charge. FPUC explained in response to our staff’s data request that it
calculated the volumetric AEP based on actual gas usage over a 13-month period of August 2022
to August 2023. The utility provided its calculation of the volumetric AEP charge in Exhibit C to
FPUC’s responses to our staff’s first data request. A customer who uses 20 therms per month
would have a bill impact from the AEP of $56.51 per month, for an average total bill of $132.33.
A bill for a customer who uses the equivalent amount of propane would be $139.29. Once the
six-year AEP period is completed, the per therm AEP charge will be removed from bills.
Billing and Customer Conversions
FPUC estimates that, if we approve the variance, the AEP billing period would begin
between May and June 2024. The charge would be shown on the bill as a line item titled “AEP
Volumetric.” In response to our staff’s first data request, the utility stated that it would notify
customers by mail 4 to 6 weeks in advance of the system conversion. We have reviewed the
customer notice and find that it is informative and accurate. FPUC stated that it estimates it can
convert approximately 50 customers per month. If a customer does not want to convert to natural
gas, they will be free to stay on propane, but they would need to contact a local propane
company for supply. In response to staff’s third data request, the utility clarified that costs to
remain on propane may include tank rental or purchase, tank installation, and tank maintenance
costs.
Conclusion
Based on our review of all materials, we hereby approve FPUC’s request for limited
variance from its AEP tariff to include the expenses related to acquiring and converting facilities
related to mains, services, and facilities located behind-the-meter in the investment costs for the
AEP calculation for certain communities. We also approve FPUC’s request charge the AEP
based on a volumetric basis, as opposed to a fixed amount. We find that FPUC’s proposal to
include costs related to the acquisition and conversion of two Community Gas Systems in
Newberry into the AEP calculation and charge the AEP on a volumetric basis provides benefits
to affected customers.
Based on the foregoing, it is
ORDERED by the Florida Public Service Commission that Florida Public Utilities
Company’s petition for approval of a limited variance from its existing area extension program
(AEP) tariff is approved. It is further
4 $904,630 (AEP Recovery Amount) divided by 27,630 (total number of bills over six years) = $33.06

ORDER NO. PSC-2024-0115-PAA-GU
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ORDERED that the provisions of this Order, issued as proposed agency action, shall
become final and effective upon the issuance of a Consummating Order unless an appropriate
petition, in the form provided by Rule 28-106.20 I , Florida Administrative Code, is received by
the Commission Clerk, 2540 Shumard Oak Boulevard, Tallahassee, Florida 32399-0850, by the
close of business on the date set forth in the "Notice of Further Proceedings" attached hereto. 	lt
is further
SPS
ORDERED that in the event this Order becomes final, this docket shall be closed.
By ORDER of the Florida Public Service Commission this 22nd day of April, 2024.
Florida Public Service Commission
2540 Shumard Oak Boulevard
Tallahassee, Florida 32399
(850) 413-6770
www.Ooridapsc.com
Copies furnished: 	A copy of this document is
provided to the parties of record at the time of
issuance and, if applicable, interested persons.
NOTICE OF FURTHER PROCEED TN GS OR JUDICIAL REVIEW
The Florida Public Service Commission is required by Section 120.569(1 ), Florida
Statutes, to notify parties of any administrative hearing that is available under Section 120.57,
Florida Statutes, as well as the procedures and time limits that apply. 	This notice should not be
construed to mean all requests for an administrative hearing will be granted or result in the relief
sought.
Mediation may be available on a case-by-case basis. 	If mediation is conducted, it does
not affect a substantially interested person's right to a hearing.
The action proposed herein is preliminary in nature. Any person whose substantial
interests are affected by the action proposed by this order may file a petition for a formal
proceeding, in the form provided by Rule 28-106.20 I, Florida Administrative Code. 	This

ORDER NO. PSC-2024-0115-PAA-GU
DOCKET NO. 20230124-GU
PAGE 7
petition must be received by the Office of Commission Clerk, 2540 Shumard Oak Boulevard,
Tallahassee, Florida 32399-0850, by the close of business on May 13, 2024.
In the absence of such a petition, this order shall become final and effective upon the
issuance of a Consummating Order.
Any objection or protest filed in this/these docket(s) before the issuance date of this order
is considered abandoned unless it satisfies the foregoing conditions and is renewed within the
specified protest period.