CS for SB 1238 First Engrossed (ntc) 20171238e1 1 A bill to be entitled 2 An act relating to utility investments in gas 3 reserves; amending s. 366.04, F.S.; revising the 4 jurisdiction of the Public Service Commission over 5 public utilities to include the approval of cost 6 recovery for certain gas reserve investments; 7 requiring the commission to adopt, by rule, standards 8 by which it will determine the prudence of such 9 investments; requiring each public utility to file 10 with the commission a comparison of all gas reserve 11 projects entered into on behalf of the utility and any 12 affiliate or subsidiary of the parent company as part 13 of its risk management plan; specifying the 14 requirements of the filing; requiring the use of a 15 third-party auditor for audits of associated 16 transactions for a gas reserve project; requiring a 17 public utility entering into a gas reserves project to 18 have a transportation path between the project and the 19 utility’s service territory; specifying the accounting 20 of the costs of any new transportation in the economic 21 analysis of projects; providing an effective date. 22 23 Be It Enacted by the Legislature of the State of Florida: 24 25 Section 1. Present paragraphs (d), (e), and (f) of 26 subsection (2) of section 366.04, Florida Statutes, are 27 redesignated as paragraphs (e), (f), and (g), respectively, and 28 a new paragraph (d) is added to that subsection, to read: 29 366.04 Jurisdiction of commission.— 30 (2) In the exercise of its jurisdiction, the commission 31 shall have power over electric utilities for the following 32 purposes: 33 (d) To approve cost recovery by adjustment clause for a 34 public utility’s prudent investments, including rate of return, 35 and for prudently incurred expenses associated with such 36 investments, in natural gas reserves if the utility has at least 37 65 percent natural-gas-fueled generation. The commission shall 38 adopt by rule no later than December 31, 2017, standards by 39 which it will determine the prudence of such gas reserve 40 investments. The standards must include, at a minimum, all of 41 the following: 42 1. A requirement that each natural gas reserve investment 43 be projected to generate savings for customers over the life of 44 the investment. 45 2. A requirement that the total volume of natural gas 46 produced from all of a utility’s natural gas reserve investments 47 not exceed the following percentages of the utility’s average 48 projected daily burn of natural gas: 49 a. 7.5 percent in 2018; 50 b. 10 percent in 2019; 51 c. 12.5 percent in 2020; and 52 d. 15 percent in 2021 and thereafter. 53 3. A requirement that each investment be made in natural 54 gas projects that have at least 50 percent of the wells within 55 the project classified as proved gas reserves and the remaining 56 wells within the project classified as probable gas reserves by 57 the Securities and Exchange Commission. 58 4. A prohibition against the recovery by a utility of the 59 costs of natural gas extracted from the state by means of any 60 well stimulation treatment, including hydraulic fracturing, acid 61 fracturing, and matrix acidizing. 62 5. A prohibition against the recovery by a utility of the 63 costs of natural gas extracted from the waters of the state, 64 from the waters of the United States, or from international 65 waters. 66 67 No provision of this chapter shall be construed or applied to 68 impede, prevent, or prohibit any municipally owned electric 69 utility system from distributing at retail electrical energy 70 within its corporate limits, as such corporate limits exist on 71 July 1, 1974; however, existing territorial agreements shall not 72 be altered or abridged hereby. 73 Section 2. (1) Annually, each public utility shall file 74 with the Public Service Commission a detailed comparison of all 75 gas reserve projects entered into on behalf of the utility and 76 any affiliate or subsidiary of the utility’s parent company as 77 part of its risk management plan. The information must be the 78 same for each gas reserve project entered into by any affiliate 79 or subsidiary which was used to support or justify the 80 appropriateness of each gas reserve project entered into during 81 the reporting period. The filing must: 82 (a) Show all material assumptions relied upon to support 83 each gas reserve project, including the capital investment 84 amount; 85 (b) Calculate the associated revenue requirement for each 86 gas reserve project; and 87 (c) Provide the net present value savings for each gas 88 reserve project entered into by any affiliate or subsidiary of a 89 parent company. 90 (2) For any gas reserve project, the utility shall use an 91 independent third-party auditor in performing audits of the 92 associated transactions. Subaccounts that correspond on a one 93 on-one basis with the oil and gas system of accounts shall be 94 established and used by the utility for each investment in a gas 95 reserve project. 96 (3) A public utility may enter into a gas reserves project 97 only if there is a transportation path available to deliver the 98 gas produced from that project to the public utility’s service 99 territory. The costs of any new transportation needed to deliver 100 gas from a gas reserve project must be taken into consideration 101 when analyzing the economics of that project. 102 Section 3. This act shall take effect July 1, 2017.