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Florida PSC Approves Surcharges for Pipeline Replacement

Utilities in Florida have received approval from the state's Public Service Commission (PSC) to bill customers surcharges to cover the cost of replacing aging cast iron and bare steel natural gas distribution pipelines.

Accelerated replacement of aging pipelines at the three natural gas utilities -- Peoples Gas System, Florida Public Utilities Company (FPUC), and the Florida Division of Chesapeake Utilities Corp. -- "will increase the safety of Florida's pipeline infrastructure," the PSC said. By allowing the companies to recover their costs for aging pipeline replacement, the projects are expected to be completed within 10 years.

An annual mechanism and quarterly reports to track actual replacement costs, savings in operations and maintenance expense, and depreciation is required for the pipeline improvement programs. A typical Peoples' residential bill for a customer using 20 therms will reflect a 22-cent surcharge, starting in January. Typical FPUC customers will see a 32-cent surcharge, and Chesapeake customers will see a 44-cent surcharge.

The PSC first approved the utilities pipeline replacement programs, which are designed to replace pipes susceptible to corrosion, in August 2012. Since then, Peoples and FPUC have each replaced 36 miles of pipes and Chesapeake has replaced 22 miles of pipes.

Department of Transportation Secretary Ray LaHood issued a Call to Action in March 2011 urging states to promote pipeline safety awareness and pipeline operators to accelerate efforts to repair, rehabilitate, and replace higher-risk pipeline infrastructure – including cast iron pipelines, which have been at the heart of several tragic incidents that caused injuries and claimed lives. In January, President Obama signed the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, which called for the DOT to conduct a state-by-state survey on the progress of cast iron pipeline replacement (see Daily GPI, Jan. 4, 2012).

The amount of cast and wrought iron pipeline in use has declined significantly in recent years, thanks to increased state and federal safety initiatives and pipeline operators' replacement efforts. Some states have completely eliminated cast or wrought iron natural gas distribution lines within their borders, including Alaska, Arizona, Hawaii, Idaho, Montana, North Dakota, New Mexico, Nevada, Oregon, South Carolina, Utah, Vermont, Wisconsin and Wyoming.

Earlier this year, the Government Accountability Office called on DOT to develop guidance for natural gas pipelines enabling them to conduct safety inspections of their systems beyond a fixed interval of seven years in highly populated areas (see Daily GPI, July 10).

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