Florida Public Service Commission native order document 08720-2024

OCR transcription for search; preserved printed pages are authoritative

FILED 8/28/2024
DOCUMENT NO. 08720-2024
FPSC - COMMISSION CLERK

BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION

In re: Petition for rate increase by St. Joe DOCKET NO. 20240046-GU
Natural Gas Company, Inc. ORDER NO. PSC-2024-0379-PCO-GU
ISSUED: August 28, 2024

The following Commissioners participated in the disposition of this matter:

MIKE LA ROSA, Chairman
ART GRAHAM
GARY F. CLARK
ANDREW GILES FAY
GABRIELLA PASSIDOMO

ORDER SUSPENDING FINAL RATES
AND GRANTING INTERIM RATES

BY THE COMMISSION:

Background

On May 29, 2024, St. Joe Natural Gas Company, Inc. (SJNG or Company) filed a
petition seeking our approval to increase rates and charges. SJNG provides sales and
transportation of natural gas and is a public utility subject to our regulatory jurisdiction under
Chapter 366, Florida Statutes (F.S.). SJNG currently serves approximately 3,186 residential and
commercial customers in Gulf and Bay Counties. In its petition, SING requested an increase of
$1,043,838 in additional gross annual revenues. The requested increase, according to SJNG, will
provide the Company with an opportunity to earn an overall rate of return of 6.05 percent on the
Company's plant and property used to serve its customers based on a midpoint return on equity
of 11.00 percent. The Company based its request on a 13-month average rate base of $3,381,746
for the projected test year ending December 2024. SJNG is also proposing to restructure its
residential service class to reduce stratification within the residential classes. Per Rule 25-
7.140(1)(d), Florida Administrative Code (F.A.C.), SING has elected to use the five month
Proposed Agency Action process authorized in Section 366.06(4) F.S.

SJING‘s last approved rate case was in 2008 in Docket No. 20070592-GU.! More
recently, in Docket No. 20230022-GU, we approved new depreciation rates with an
implementation date of January 1, 2023. Notably, in Docket No. 20160033-GU,? we approved
SJNG's request to reallocate the $285,011 annual revenue deficiency resulting from the

‘Order No. PSC-2008-0436-PAA-GU, issued July 8, 2008, in Docket No. 20070592-GU, Jn re: Petition for rate
increase by St. Joe Natural Gas Company, Inc.

Order No. PSC-2016-0297-PAA-GU, issued July 27, 2016, in Docket No. 20160033-GU, Jn re: Petition for limited
proceeding to restructure rates by St. Joe Natural Gas Company, Inc.

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU
PAGE 2
permanent loss of its largest customer, the Arizona Chemical Company, to the remaining
customer classes. Also, in Docket No. 20200039-GU, 3 we approved a temporary storm cost
recovery surcharge to deal with Hurricane Michael recovery.
The Utility stated that the key drivers for the proposed rate increase are: current rates not
recovering its property tax expense or property insurance expense, increases to rate base
associated with extensions to serve new customers, increasing operating expenses reflecting
nearly 16 years of inflation, and increases in regulatory costs, particularly federal pipeline safety
regulations.
In its petition, the Company also requested an interim rate increase of $612,209 based on
a historic test year ended December 31, 2023. Section 366.071, F.S., addresses interim rates and
procedures and requires us to authorize within 60 days of a filing for an interim rate increase the
collection of interim rates. On May 29, 2024, the Company waived the 60-day provision of
Section 366.071(2), F.S., and agreed to defer implementation of the proposed interim rates until
the issue could be addressed at the scheduled August 6, 2024, Commission Conference.4 Due to
Tropical Storm Debby, the Commission Conference scheduled for August 6, 2024, was
rescheduled to August 8, 2024. This order addresses the requested interim revenue increase and
rates and the suspension of the Company’s requested permanent rate increase. We have
jurisdiction over this request under Sections 366.06 and 366.071, F.S.
Decision
I. 	Suspension of Permanent Rates
The requested permanent increase in rates and charges shall be suspended for SJNG to
allow our staff time to analyze the case. Pursuant to Section 366.06(3), F.S., we may withhold
consent to the operation of all or any portion of a new rate schedule, delivering to the utility
requesting such a change, a reason, or written statement of good cause for doing so within 60
days. On May 29, 2024, the Company waived the 60-day provision of Section 366.071(2), F.S.,
and agreed to defer the file and suspend requirements until the issue could be addressed at the
scheduled August 6, 2024 Commission Conference.5 Due to Tropical Storm Debby, the
Commission Conference scheduled for August 6, 2024, was rescheduled to August 8, 2024. We
find that the reasons stated above are good cause consistent with the requirements of Section
366.06(3), F.S.
II. 	Interim Rate Base
In its filing, the Company proposed an interim 13-month average rate base of $3,186,767
for the period ended December 31, 2023. Pursuant to Section 366.071(5)(a), F.S., the Company
is permitted to elect either an average or year-end rate base to calculate its interim revenue
3Order No. PSC-2021-0196-AS-GU, issued June 3, 2021, in Docket No. 20200039-GU, In re: Petition for approval
to implement a temporary storm cost recovery surcharge, by St. Joe Natural Gas Company, Inc.
4Document No. 04381-2024, filed May 30, 2024.
5Document No. 04381-2024, filed May 30, 2024.

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU
PAGE 3
request. We reviewed the rate base adjustments made in the current interim filing for consistency
with 	the 	Commission-approved 	adjustments 	in 	SJNG’s 	last 	rate 	case 	proceeding, 	where
appropriate, as well as other applicable dockets.6 Based on our review, it appears that the
Company made applicable adjustments that are consistent with our prior orders. However, the
Company made adjustments to plant and accumulated depreciation based on its non-utility
allocation percentage from 2022. Therefore, we shall make adjustments to decrease plant and
accumulated depreciation by $58,773 and $38,974, respectively, to reflect non-utility allocation
for the proper 2023 interim test year. As such, $3,166,968 is the appropriate amount of rate base
for the historical interim test year ended December 31, 2023. The calculations are shown in
Attachment A to this order.
III. 	Interim Return on Equity
For purposes of its interim rate request, SJNG used an overall cost of capital of 5.46
percent based on a return on equity (ROE) of 11.00 percent. The Company reflected a capital
structure for the 13-month average historical interim test year ended December 31, 2023. Several
adjustments are necessary.
Pursuant to Section 366.071(2)(a), F.S., the appropriate ROE for purposes of determining
an interim rate increase is the minimum of the Company’s currently authorized ROE range. In its
last rate case, SJNG’s ROE midpoint was set at 11.00 percent, with a range of plus or minus 100
basis points. Therefore, we find that an ROE of 10.00 percent is appropriate for the purpose of
determining interim rates.
In the last rate case, we made an adjustment to limit the Company’s equity ratio to no
more than 60 percent equity as a percentage of investor sources of capital.7 In the present filing,
SJNG’s equity ratio exceeds 60 percent. Therefore, we find that an adjustment to the capital
structure to limit the equity ratio to 60 percent equity as a percentage of investor capital is
appropriate.
Additionally, MFR Schedule F-8 reflected total capital that was not equal to the rate base
that we determined. Therefore, we made pro rata adjustments to the investor sources of capital to
reconcile to rate base. These adjustments result in an overall cost of capital of 4.81 percent.
We find that the capital structure of SJNG for the historical interim 13-month average test
year shall reflect an ROE of 10.00 percent resulting in an overall cost of capital of 4.81 percent.
Attachment B to this order details the calculations of the overall cost of capital.
IV. 	Interim Test Year Net Operating Income
The proposed net operating income for SJNG of negative $284,430 is the twelve-month
amount for the historical interim test year ended December 31, 2023. We reviewed the net
6Order No. PSC-2008-0436-PAA-GU.
7Order No. PSC-2008-0436-PAA-GU.

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU
PAGE 4
operating income adjustments made in the current interim filing for consistency with the
Commission-approved adjustments in the last rate case proceeding, as well as other applicable
dockets.8 Based on our review, it appears that the Company made applicable adjustments that are
consistent with our prior order. However, MFR Schedule F-4 failed to reflect the Company’s
adjustment to depreciation expense based on its non-utility allocation percentage. Therefore, we
shall make an adjustment to reduce depreciation expense by $34,073 to reflect the appropriate
2023 allocation. We also made adjustments to rate base in Section II and cost of capital in
Section III. These adjustments have fallout effects which have altered the proposed net operating
income for SJNG.
We find that negative $250,357 is the appropriate amount of net operating income for the
historical interim test year ended December 31, 2023. The calculations are shown in Attachment
A to this order.
V. 	Interim Net Operating Income (NOI) Multiplier
On MFR Schedule F-6, SJNG calculated an interim NOI multiplier of 1.3356 based on a
revenue expansion factor of 74.8744 using a 21 percent federal income tax rate, a 4.458 percent
state income tax rate, a 0.3 percent bad debt rate and a 0.5 percent factor for regulatory
assessment fees. However, the appropriate state income tax rate for the interim test year is 5.5
percent. 	Therefore, 	we 	find 	that 	1.3503 	is 	the 	appropriate 	interim 	NOI 	multiplier. 	The
calculations are shown below.
Table 1
Interim NOI Multiplier
Description
Revenue Requirement 	100.0000%
Regulatory Assessment Fee 	-0.5000%
Bad Debt Rate 	-0.3000%
Net Before Income Tax 	99.2000%
State Income Tax @ 5.5% 	-5.4175%
Federal Income Tax @ 21% 	-19.6862%
Revenue Expansion Factor 	74.0578%
NOI Multiplier (100/74.0578) 	1.3503
VI. 	Interim Revenue Increase Request
SJNG requested interim rate relief of $612,209 for the historical test year ended
December 31, 2023. As discussed in Sections II, III, IV, and V, we made adjustments to the
Company’s rate base, cost of capital, NOI, and NOI multiplier. These adjustments result in
fallout adjustments to the total interim revenue increase for SJNG. As such, we find that the
appropriate revenue increase is $543,665 for the historical test year ended December 31, 2023.
8Order No. PSC-2008-0436-PAA-GU.

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU
PAGE 5
The interim revenue increases allow SJNG an opportunity to earn an overall rate of return
of 4.81 percent based on the minimum range of return on equity of 10.00 percent.
After a determination of the permanent rate increase has been made, the interim rate
increase will be reviewed to determine if any portion should be refunded to customers. The
calculation of interim rate relief is shown in Table 2.
Table 2
Interim Revenue Increase
Description
Jurisdictional Adjusted Rate Base 	$3,166,968
Overall Rate of Return 	4.81%
Jurisdictional Net Operating Income 	$152,268
Jurisdictional Adjusted Net Operating Income 	($250,357)
Revenue Deficiency 	$402,625
Net Operating Income Multiplier 	1.3503
Interim Revenue Increase 	$543,665
Base Rate Revenues 	$1,293,560
Recommended Percentage Increase Factor 	42.03%
VII. 	Interim Rates and Associated Tariffs
As discussed in Section VI, we made adjustments to the interim revenue request by
SJNG. Attachment C to this order provides the allocation of the interim increase. Furthermore,
Attachment C provides the resulting cents-per-therm increase to be applied to the rate classes to
recover the interim revenue increase. These increases were calculated using the methodology
contained in Rule 25-7.040, F.A.C., which requires that any increase be applied evenly across the
board to all rate classes based on their base rate revenues.
The interim rates shall be made effective for all meter readings occurring on or after
thirty days from the date of our vote. The Company included proposed interim tariff sheet No. 84
in its petition. The Company shall file a revised interim tariff for administrative approval by our
staff. Pursuant to Rule 25-22.0406(8), F.A.C., the Company shall provide notice to customers of
the revised rates. The notice must be approved in advance by our staff and provided to the
customers with the first bill containing the new rates.
VIII. 	Security to Guarantee Amount Subject to Refund
We find that all funds collected subject to refund shall be secured by a corporate
undertaking. The criteria for a corporate undertaking include sufficient liquidity, ownership
equity, profitability, and interest coverage to guarantee any potential refund. SJNG requested an
interim revenue increase of $612,209. In Section VI, we found an interim revenue increase of
$543,665. Based on an estimated eight-month collection period of interim rates, we calculated
the maximum amount of revenues that may need to be protected is $364,256. We reviewed

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU
PAGE 6
SJNG’s three most recent annual reports filed with us (2023, 2022, and 2021) to determine if the
Company can support a corporate undertaking to guarantee the funds collected during the interim
collection period. SJNG’s financial information demonstrates the Company has acceptable levels
of liquidity, ownership equity, and interest coverage to support a potential refund of $364,256.
SJNG has adequate resources to support a corporate undertaking in the amount found in
Section VI. Based on this analysis, we find that a corporate undertaking of $364,256 is
acceptable. This brief financial analysis is only appropriate for deciding if the Company can
support a corporate undertaking in the amount requested and shall not be considered a finding
regarding our position on other issues in this proceeding.
Based on the foregoing, it is
ORDERED 	by 	the 	Florida 	Public 	Service 	Commission 	that 	St. 	Joe 	Natural 	Gas
Company, Inc.’s requested permanent rate increase is suspended pending further review. It is
further
ORDERED that the appropriate interim rate base for St. Joe Natural Gas Company, Inc.
shall be $3,166,968. It is further
ORDERED that the appropriate return on equity for St. Joe Natural Gas Company, Inc.
shall be 10.00 percent and the overall cost of capital shall be 4.81 percent for purposes of
determining interim rates. It is further
ORDERED that the appropriate historical base year ended December 31, 2023, net
operating income for St. Joe Natural Gas Company, Inc. shall be negative $250,357. It is further
ORDERED that St. Joe Natural Gas Company, Inc. shall be granted an interim net
operating income multiplier of 1.3503. It is further
ORDERED that the appropriate interim revenue increase for St. Joe Natural Gas
Company, Inc. shall be $543,665. It is further
ORDERED that St. Joe Natural Gas Company, Inc. shall file a revised interim tariff for
administrative approval by our staff. The interim rates shall be made effective for all meter
readings occurring on or after thirty days from the date of our vote, August 8, 2024. In addition,
pursuant to Rule 25- 22.0406(8), F.A.C., the Company shall provide notice to customers of the
revised rates. The notice must be approved in advance by our staff and provided to the customers
with the first bill containing the new rates. It is further
ORDERED that the Company shall furnish a corporate undertaking subject to refund in
the amount of $364,256. It is further
ORDERED that this docket shall remain open pending our final resolution of the
Company’s requested rate increase.

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU
PAGE 7
By ORDER of the Florida Public Service Commission this 28th day of August, 2024.
DD
Florida Public Service Commission
2540 Shumard Oak Boulevard
Tallahassee, Florida 32399
(850) 413-6770
www.floridapsc.com
Copies furnished: 	A copy of this document is
provided lo the parties of record at the time of
issuance and, if applicable, interested persons.
The Florida Public Service Commission is required 	by Section 	120.569( I), Florida
Statutes, to notify parties of any administrative hearing or judicial review of Commission orders
that is available under Sections 120.57 or 120.68, Florida Statutes, as we ll as the procedures and
time limits that apply. 	This notice should not be construed to mean all 	requests for an
administrative hearing or judicial review 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.
Any party adversely affected by this order suspending the permanent rates, which is
preliminary, procedural or intermediate in nature. may request: ( 1) reconsideration within I0
days pursuant to Rule 25 -22.0376, Florida Administrative Code; or (2) judicial review by the
Flo rida Supreme Court, in the case of an electric, gas or te lephone utility, or the First District
Court of Appeal, in the case of a water or wastewater utility. 	A motion for reconsideration shall
be tiled with the Office of Commission Clerk, in the form prescribed by Rule 25-22.0376,
Florida Administrative Code. Judicial review of a preliminary, procedural or intennediate ruling
or order is available if review of the final action will not provide an adequate remedy. 	Such
review may be requested from the appropriate cou11, as described above, pursuant to Rule 9.100,
Florida Rules of Appellate Procedure.
Any party adversely affected by this order approving interim rates, which is non-final in
nature, may request ( 1) reconsideration within IO days pursuant to Rule 25-22.03 76, Florida
Administrative Code, or (2) judicial review by the Florida Supreme Court, in the case of an

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU
PAGE 8
electric, gas or telephone utility, or the First District Court of Appeal, in the case of a water or
wastewater utility. 	A motion for reconsideration shall be filed with the Office of Commission
Clerk, in the form prescribed by Rule 25-22.0376, Florida Administrative Code. Citizens of the
State of Florida v. Mayo, 316 So.2d 262 (Fla. 1975), states that an order on interim rates is not
final or reviewable until a final order is issued. 	Such review may be requested from the
appropriate court, as described above, pursuant to Rule 9.100, Florida Rules of Appellate
Procedure.

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU 	Attachment A
PAGE 9
ST. JOE NATURAL GAS COMPANY, INC.
Docket No. 20240046-GU
Interim Base Year
December 31, 2023
Adjusted Base 	Adjusted Base
Year Per Company 	Adjustments
Year Per
Commission
Rate Base
Plant in Service 	$9,253,814 	- 	$9,253,814
Common Plant Allowed 	(216,805) 	(58,773) 	(275,578)
Accumulated Depreciation 	(6,055,109) 	38,974 	(6,016,135)
Net Plant in Service 	$2,981,900 	(19,799) 	$2,962,101
Construction Work In Progress 	158,646 	- 	158,646
Net Utility Plant 	$3,140,546 	(19,799) 	$3,120,747
Working Capital Allowance 	46,221 	- 	46,221
Total Rate Base 	$3,186,767 	(19,799) 	$3,166,968
Income Statement
Operating Revenues 	$1,652,727 	- 	$1,652,727
Operating Expenses:
Operation & Maintenance 	$1,379,944 	- 	$1,379,944
Depreciation & Amortization 	381,751 	(34,073) 	347,678
Taxes Other Than Income 	175,462 	- 	175,462
Income Taxes - Federal 	- 	- 	-
Income Taxes - State 	- 	- 	-
Total Operating Expenses 	$1,937,157 	($34,073) 	$1,903,084
Net Operating Income 	($284,430) 	$34,073 	($250,357)
Overall Rate of Return 	-8.93% 	-7.91%

ORDER NO. PSC-2024-0379-PCO-GU
DOCKET NO. 20240046-GU 	Attachment B
PAGE 10
ST. JOE NATURAL GAS COMPANY, INC.
Docket No. 20240046-GU
Interim Base Year
December 31, 2023
Jurisdictional
Capital 	Cost 	Weighted
Capital Component 	Structure 	Ratio 	Rate 	Cost Rate
Long-Term Debt 	$49,019 	1.55% 	6.50% 	0.10%
Long-Term Debt – Shoaf Family 	653,242 	20.63% 	6.50% 	1.34%
Customer Deposits 	64,115 	2.02% 	2.00% 	0.04%
Common Equity 	1,053,392 	33.26% 	10.00% 	3.33%
Deferred Income Taxes 	937,870 	29.61% 	0.00% 	0.00%
Deferred Credits – FCPC & GCI 	409,330 	12.92% 	0.00% 	0.00%
Total 	$319,224,069 	100.00% 	4.81%

ORDER NO. PSC-2024-0379-PCO-GU DOCKET NO. 20240046-GU PAGE 11
Attachment C
Calculation Of Interim Rate Relief - Deficiency Allocation Including Commission Approved Adjustments Year Ended 12/31/23
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Rate
Line No.
Schedule
Bills
Therm Sales
Customer Charge
Delivery Charge
Total (4+5)
Dollar Increase
Percent Increase
Cents Per Themm Increase
1
RS-1
13,785
98,200
$179,192
$124,365
$303,557
$127,580
42.03%
$1.2992
2
RS-2
13,932
169,748
223,036
149,354
372,390
156,510
42.03%
0.9220
3
RS-3
8,151
168,591
163,163
121,807
284,970
119,769
42.03%
0.7104
4
GS-1
1,930
132,929
38,590
84,417
123,007
51,698
42.03%
0.3889
5
GS-2
412
209,923
29,260
91,068
120,328
50,572
42.03%
0.2409
6
GS-4
12
95,847
24,000
15,182
39,182
16,468
42.03%
0.1718
7
TS-4
12
164,934
24,000
26,126
50,126
21,067
42.03%
0.1277
8
Total
38,234
1,040,172
$681,241
$612,319
$1,293,560
$543,665
42.03%
$0.5227