DATE:	October 2, 2008
TO:	Office of Commission Clerk (Cole)
FROM:	Office of the General Counsel (Miller, Cibula) Division of Economic Regulation (Hewitt) Office of Strategic Analysis and Governmental Affairs (Chase, Harlow, Futrell, Trapp)
RE:	Docket No. 080503-EI – Establishment of rule on renewable portfolio standard.
AGENDA:	10/14/08 – Regular Agenda – Rule Proposal – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Argenziano
CRITICAL DATES:			02/01/09 (Section 366.92(3), F.S., requires the Commission to provide a rule to the Legislature by 2/1/2009.)
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\GCL\WP\080503.RCM.DOC

 

 Case Background

            During the 2008 Regular Session, the Florida Legislature amended Section 366.92, Florida Statutes (F.S.), in House Bill 7135, Chapter 2008-227, Laws of Florida, to require the Florida Public Service Commission (Commission) in consultation with the Department of Environmental Protection and the Florida Energy and Climate Commission to adopt rules to establish a renewable portfolio standard (RPS).  The RPS rules are to require each investor-owned electric utility (IOU) to supply a percentage of retail electricity sales from renewable energy sources located in Florida.  The Commission is required to submit the rule to the Legislature for ratification by February 1, 2009. 

 

Recent Legislation to Promote Renewable Energy

 

            The 2005 Legislature established Section 366.91, F.S., requiring IOUs and two large municipal utilities to provide by January 1, 2006, a continuous offer to purchase power from renewables with a minimum term of ten years.  To facilitate implementation of the legislation, staff held a workshop in which the IOUs agreed to revise existing standard offer contracts to comply with the requirements of the new legislation.  On December 27, 2005, the Commission approved the revised tariffs, and also ordered that an additional workshop be held to determine whether rulemaking or other proceedings to implement the provisions of 366.91, F.S. should be pursued.  Following the March 6, 2006 workshop, the Commission initiated a rulemaking proceeding.  The Commission adopted, in December 2006, Rules 25-17.200-.310, Florida Administrative Code (F.A.C.), which set forth the requirements for IOUs with regard to contracts for the purchase of renewable energy from non-utility renewable generators.  These rules provide: (1) contracts for the purchase of renewable capacity and energy must be continuously offered; (2) a separate standardized contract is required for each avoidable generating technology type in a utility’s Ten-Year Site Plan; (3) renewable generators have the option to select a contract term from ten years up to the life of the avoided unit; (4) renewable generators may select a pricing option in which a portion of the energy payment is fixed; and (5) renewable generators or the IOU may reopen the contract if significant new environmental regulations are enacted, such as carbon legislation.

 

            In 2006, the Legislature enacted an omnibus energy bill (SB 888).  Section 366.92, F.S., expressed the Legislature’s intent to promote the development of renewable energy, protect the economic viability of Florida’s existing renewable energy facilities, diversify the types of fuel used to generate electricity, lessen Florida’s dependence on natural gas and fuel oil, minimize the volatility of fuel costs, encourage investment in the state, improve environmental conditions, and minimize the costs of electricity for customers.  The legislation also gave the Commission authority to adopt appropriate goals for increasing the use of existing, expanded and new Florida renewable energy resources. 

 

            In response, the Commission began a broad initiative to further explore the opportunities for development of renewable energy in Florida.  In January 2007, the Commission held a workshop to explore how to further encourage the development of renewable energy.  At that workshop, parties discussed renewable resources available in Florida, and mechanisms to help develop these resources.    At the January 2007 workshop, the parties discussed how an RPS can be used to further encourage renewable energy development.  The mechanisms also discussed included net metering and expedited interconnection of customer-owned renewable generation.  These discussions ultimately led to a rulemaking proceeding in which the Commission adopted amendments to Rule 25-6.065,  F.A.C.  This rule requires the IOUs to expedite the interconnection of customer-owned renewable generation, and allows customers to retain additional value of excess generation through net metering.

 

            In July 2007, the Commission  held a workshop to gather information on the design of an RPS for Florida.  Over 30 speakers participated from the renewable industry, electric utilities and state and federal governmental entities.  Based on the discussions from the July workshop, Commission staff conducted follow-up technical workshops in August, September and December 2007, to explore a number of specific elements of an RPS in more depth, including the establishment of goals, applicability, eligible resources, compliance, verification and tracking mechanisms, mechanisms to encourage specific resources, and RPS activities in other states.  At these workshops, comments were received from a wide range of stakeholders.[1]

 

House Bill 7135 - Amendments to Section 366.92, F.S.

 

House Bill 7135 (HB 7135), Chapter 2008-227, Laws of Florida, enacted by the 2008 Florida Legislature, is a comprehensive state energy bill.  HB 7135, in part, requires the Commission to adopt RPS rule and submit to the Legislature by February 1, 2009 for ratification.  As part of the rule development process, the Commission is to evaluate the current and forecasted installed capacity in kilowatts through 2020, and current and forecasted levelized cost in cents per kilowatt-hour through 2020, for each renewable energy resource.  The Commission staff has been collecting data on the number, type and output of existing renewable generators to establish a baseline for determining growth in renewable generation as part of the exploration of the RPS.  Recently, the Commission, in cooperation with the Governor’s Energy Office and the Lawrence Berkeley National Laboratory, has engaged Navigant Consulting, Inc. to perform an assessment of renewable energy resources that are currently operating in Florida and could potentially be developed in Florida through the year 2020.  Funding for this study will be provided through a grant from the U.S. Department of Energy. The renewables assessment to be completed in December 2008 will provide a source of information and data to verify the final percentages and timing of the renewable portfolio standards.

 

           In addition to establishing the RPS percentages and timing, Section 366.92, F.S., requires that the Commission’s RPS rule include the following:

 

·    Methods of managing the cost of compliance with the RPS, whether through direct supply or procurement of renewable power or through the purchase of renewable energy credits (RECs).  The Commission is authorized to provide for annual cost recovery of compliance with the RPS and adjustments to a utility’s return on equity to incentivize renewable energy;

 

·    Appropriate compliance measures and conditions under which non-compliance can be excused when the supply of renewable energy is not adequate or the cost of securing renewable energy is cost prohibitive;

 

·    Appropriate period of time for which RECs may be used for purposes of compliance with the RPS;

 

·    Monitoring procedures for compliance with and enforcement of the RPS;

 

·    A means of ensuring that energy credited toward compliance with the RPS may not be used for any other purpose;

 

·    Procedures to track and account for RECs, including ownership derived from customer-owned renewable energy facilities as a result of an action by a customer of an electric power supplier independent of a program sponsored by the supplier; and

 

·    Provisions for the repeal or amendment of the rule in the event new federal law supplants or conflicts with the rule.

 

            The Commission may give added weight to energy provided by wind and solar photovoltaic over other forms of renewable energy in developing its RPS rule. 

 

            The statute also requires annual reporting to the Commission by each electric IOU of its compliance with the RPS in the previous year and how it plans to comply in the upcoming year.   The municipal electric utilities and rural electric cooperatives are also required to develop standards for the promotion, encouragement, and expansion of the use of renewable energy resources and energy conservation and efficiency and to file an annual report with the Commission.

 

Commission RPS Rulemaking Process

 

           Subsequent to the 2008 legislative session, the Commission held a workshop on July 11, 2008, to provide a forum to discuss issues relevant to the development and implementation of an RPS for Florida that is consistent with the provisions of Section 366.92, F.S.  At that workshop, the Commission heard from 16 speakers from renewable energy providers, the electric utilities, and other interested parties.  Post-Workshop Comments were filed by 14 stakeholders.  On August 20 and 26, 2008, Commission staff held workshops to discuss staff’s strawman draft RPS rules.  The topics in the strawman draft included:  Rule 25-17.400 – Renewable Portfolio Standard design; Rule 25-17.410 – Renewable Energy Credit Market; and Rule 25-17.420 – Reporting requirements for municipal electric and rural electric cooperatives.  Written Post-Workshop Comments were received from 29 parties.[2]  A discussion of the comments is contained in the body of the staff recommendation along with the discussion of the relevant section of the draft rules.

 

           The Commission has jurisdiction pursuant to Sections 350.127(2), 366.05(1), 366.02(2), 366.04(2)(f) and (5), 366.041, 366.05(1), 366.81, 366.82(1) and (2), 366.91(2), and 366.92, F.S.   

Executive Summary

 

            Staff is proposing three draft rules to implement the provisions of Section 366.92, F.S.  Rule 25-17.400, F.A.C., Renewable Portfolio Standards, would establish uniform mandatory standards for the IOUs, and a procedure to review and, if appropriate, modify the RPS at least every five years.  Rule 25-17.410, F.A.C., Florida Renewable Energy Credit Market, would require the establishment of a renewable energy credit (REC) trading market to facilitate compliance with the RPS.  Finally, Rule 25-17.420, F.A.C., Municipal Electric Utility and Rural Electric Cooperative Renewable Energy Reporting, would establish reporting requirements for the municipal and cooperative electric utilities. 

 

I. Rule 25-17.400, F.A.C., Renewable Portfolio Standards

 

Renewable Portfolio Standards Proceeding - The rule establishes that the Commission would hold a proceeding at least once every five years to review and, if appropriate, modify the renewable portfolio standards.  In such a proceeding, the renewable portfolio standards are to be based on an analysis of the technical and economic potential for Florida renewable energy resources.

 

            Initially, the rule establishes the following percentages of the prior year’s retail sales for each IOU to be provided by Florida renewable energy resources:

 

                        1. By January 1, 2017: 5 percent;

            2. By January 1, 2025: 10 percent;

            3. By January 1, 2033: 15 percent; and

            4. By January 1, 2041: 20 percent.

 

            These percentages are based on an estimate of currently available renewable energy resources, which is approximately 3.61 percent, and their potential expansion to 2017 with a doubling of the percentage standards every eight years.  These preliminary standards should be contingent on the analysis of the technical and economic potential for Florida renewable energy resources currently being undertaken by Navigant Consulting, Inc.  The Governor’s Energy Office and staff are working cooperatively with Navigant which is under contract with the Lawrence Berkeley National Laboratory through a grant from the U.S. Department of Energy.  Navigant is to conduct a renewable assessment to analyze the technical and economic potential for renewable energy technologies currently available in Florida and that could be developed through the year 2020.  The results of this assessment are expected to be completed in December 2008, prior to the culmination of the rulemaking process and will be available to verify the reasonableness of the initial RPS standards and timing.

 

Encouragement of Wind and Solar – Section 366.92(3)(b)3, F.S., states that the Commission’s rule may provide added weight to energy produced by wind and solar photovoltaic generation.  Staff believes it is appropriate to provide additional encouragement in the rule for these zero-greenhouse gas emitting resources.  Accordingly, the rule would require that at a minimum 25 percent of the RPS be provided from wind and solar resources.  In addition, 75 percent of revenues available for renewable energy credits would be dedicated to solar and wind resources.

Florida Renewable Energy Resources – Only in-state renewables, as defined in Section 366.92(2), F.S., are eligible to be used for compliance under the rule.  The statute promotes renewable energy resources that produce electrical, mechanical, and thermal energy from hydrogen, biomass, solar, geothermal, wind, ocean, waste heat or hydroelectric power.

 

Implementation Plans – Each IOU would be required to submit to the Commission within 180 days of the effective date of the rule, its plan for meeting or exceeding the RPS.

 

Compliance – The rule would require renewable energy credits (RECs) to be the sole means by which to comply with the RPS.  This makes implementation and accounting easier than accounting for a mix of energy and RECs.  Section 366.92(2), F.S., defines a REC as a product representing  the renewable attribute of renewable energy produced in Florida and is equivalent to one megawatt-hour (MWh) of electricity.  IOUs may either purchase RECs from Florida renewable energy resources owned by third parties, or use RECs certified from Florida renewable resources owned by the IOU.  Staff believes there will be increased efficiency in tracking compliance if only RECs are used, rather than a combination of energy and RECs.

 

Rewards/Penalties – Staff believes that IOUs will be incented to construct renewables in two ways: (1) self-build renewable projects would add to rate base on which the IOU would have the opportunity to earn a return; and (2) the costs for these facilities would be recovered through a newly created dedicated cost recovery clause, the Renewable Energy Cost Recovery clause (RECR).  The return on equity for self-build renewables would be determined by the Commission in the RECR proceeding in which the Commission would take into consideration relevant risk and rewards.  The rule also provides conditions under which an IOU may be excused for non-compliance as required by the statute.  These conditions include insufficient supply of Florida renewable energy resources or prohibitive cost.  If an IOU is not excused from compliance, the rule provides that an IOU which fails to meet the RPS shall be subject to a penalty up to 50 basis points of the IOU’s approved rate of return on equity.  The penalty would be assessed as a reduction in the amount of recoverable costs in the RECR clause, as discussed below.

 

Cost Caps - The rule also recognizes the Legislature’s intent to minimize the cost of power supply to consumers by establishing cost caps that would limit the total cost of compliance to a total of two percent of each IOU’s total annual revenue from retail sales of electricity.  To further encourage solar and wind resources, the costs of complying with the RPS are allocated with 1.50 percent going to wind and solar, and 0.50 percent going to all other Florida renewable energy resources.

 

Renewable Request for Proposals – Each IOU would be required to biennially issue a request for proposals (RFP) for Florida renewable energy resources and factor the results of renewables purchased in the IOU’s Ten-Year Site Plan.  Thus the need for new power plants would be reduced by: (1) conservation; and (2) cost-effective renewable purchases.  This will provide an organized, predictable process to encourage renewable developers to participate in the Florida market.  The biennial RFP would be in addition to the opportunity for individual negotiations between renewable developers and the utilities, as well as the renewable energy contracts required by Rule 25-17.200-.310, F.A.C.

Cost Recovery – The rule provides for cost recovery of reasonable and prudent costs associated with the purchase of RECs, including administrative costs, and costs associated with IOU-owned renewable facilities.  The RECR clause would be created to allow for Commission review and approval of reasonable and prudent costs associated with RECs, IOU-owned renewable facilities, and capacity and energy purchased through tariffs or contracts with Florida renewable energy resources.  The Commission would also establish the appropriate return on equity associated with IOU-owned Florida renewable energy resources.

 

Reporting Requirements – Each IOU would be required to provide an annual report to the Commission by April 1 as part of its Ten-Year Site Plan.  The specific data to be provided by each IOU in these reports will facilitate the Commission’s evaluation of utility efforts and costs associated with the RPS, and efforts to track the development of renewable energy in Florida.

 

II. Rule 25-17.410, F.A.C.  - Renewable Energy Credit Market

 

Establishment of a REC Market – The REC market allows for the certification and accounting of RECs that may be used by the IOUs to meet the requirements of the RPS.  The rule directs the IOUs to establish a REC market and select an independent third party REC market administrator, subject to Commission approval.  The REC market will allow the IOUs to generate their own, buy, sell, and trade the RECs needed to comply with the RPS, and allow for owners of Florida renewable energy resources to benefit from the sale of RECs.  The rule would require the establishment of a group to act as technical advisors to the REC market administrator in the areas of governance and market rules.  The IOUs, municipal electric utilities, rural electric cooperatives, and Florida renewable energy resource providers are to make up the advisory group.  As part of the IOUs’ request for Commission approval of the REC market structure and governance, provisions shall be made to facilitate both short-term purchases of RECs, and long-term bilateral contracts for RECs between IOUs and Florida renewable energy providers.

 

Full Transparency – The rule provides for full oversight of the REC market by the Commission in several ways: (1) the REC market administrator must be approved by the Commission; (2) the rule requires Commission approval of all of the practices and procedures of the REC market; and (3) all records of the REC market must be fully transparent and open to the Commission for inspection and audit.  While not specifically identified in the draft rule, complaints are subject to Commission resolution pursuant to Rule 25-22.032, F.A.C, Customer Complaints, or Rule 25-22.036, F.A.C., Initiation of Formal Proceedings.

 

Eligible Facilities – Renewable facilities that are eligible to produce RECs must be certified by the REC market administrator.  The rule lists eligible facilities, which include (1) all utility-owned Florida renewable energy resources, (2) non-utility owned renewables for which the capacity or energy is under contract to a utility or pursuant to an approved tariff, (3) non-utility owned renewables greater than two megawatts, that offset all or part of the customer’s electrical needs, and (4) customer-owned renewables, two megawatts or less, that have not received an incentive from an IOU pursuant to a Commission-approved energy efficiency program.

 

Treatment of RECs – The rule would require that the REC is retained by the owner of the eligible Florida renewable energy resource, unless sold or transferred.  The rule also would ensure, pursuant to statute, that RECs credited toward RPS compliance are not credited toward any other purpose.  To prevent double counting, the rule requires that RECs produced by Florida renewable energy resources used to comply with Florida’s RPS or any other state’s RPS must be retired and not used for compliance with another state or regional RPS.

 

III. Rule 25-17.420, F.A.C. - Municipal and Rural Electric Cooperative Reporting

 

Reporting Requirements – The municipal and cooperative electric utilities would be required to report annually to the Commission the efforts to develop standards for the promotion, encouragement, and expansion of the use of renewable energy resources, and energy conservation and efficiency measures as required by Section 366.92(5), F.S.  Also, these utilities are required to submit additional data to facilitate the Commission’s efforts to track the development of renewable energy in Florida.

Discussion of Issues

Issue 1: 

 Should the Commission propose the adoption of Rule 25-17.400, F.A.C., entitled "Florida Renewable Portfolio Standard”?

Recommendation: 

 Yes, the Commission should propose the adoption of the rule as set forth in Attachment A.  Rule 25-17.400, F.A.C., establishes an RPS for Florida’s investor-owned utilities that offers a balanced approach to encouraging the development of renewable resources in Florida, while providing sufficient ratepayer safeguards.  The rule establishes reasonable initial standards that increase over time to 20 percent of each IOU’s retail sales.  The rule contains two primary components to protect ratepayers from high rate impacts: (1) a  procedure for the Commission to review at least every five years and modify the standards, if appropriate, and (2) a cost cap based on two percent of each IOU’s annual revenues from retail electric sales.  The rule is consistent with the requirements of Section 366.92, F.S.  (Harlow, Futrell, Miller)

Staff Analysis: 

 

 

Overview of Draft Rule 25-17.400, F.A.C.

 

            The draft rule establishes initial uniform numerical renewable portfolio standards for each Florida investor-owned utility, and includes a procedure for the Commission to review and update these standards, as necessary, not less than every five years.  The rule implements an RPS with standards that ramp up over time and are based on a percentage of each utility’s previous year’s sales.  The draft rule contains a broad range of eligible renewables, as defined by Section 366.92(2), F.S., and includes electrical, mechanical, and thermal processes.  The draft rule gives added weight to solar and wind technologies through a 25 percent carve out, coupled with a 75 percent share of the two percent cost cap.

 

            IOUs are required to submit implementation plans within 180 days of the effective date of the rule.  This information must be updated in annual reports to be filed concurrently with each IOU’s Ten-Year Site Plans.   Compliance with the RPS is accomplished  by each IOU through producing or purchasing sufficient renewable energy credits (RECs) to meet each year’s RPS.  Only in-state renewable facilities are eligible to create RECs that may be used for compliance by the IOUs.  As provided for by Section 366.92(3)(b)2, F.S., the rule establishes the reasons under which a utility that makes a good faith effort to comply may be excused, including: (1) a lack of sufficient supply of RECs and (2) prohibitive compliance costs greater than two percent of an IOU’s annual retail revenues.  The rule incents IOUs to construct renewables by allowing full cost recovery including an appropriate return on equity.  The draft rule also provides for penalties of up to 50 basis points if a utility fails to meet the RPS standard and is not excused from compliance.

 

            The draft rule requires each IOU seeking to construct a renewable facility to select the  option most likely to result in the least cost for ratepayers, and requires utilities to conduct a biennial request for renewable proposals.  The draft rule establishes a new cost recovery clause and proceedings for IOUs to recover reasonable and prudent costs associated with self-build facilities, RECs, the Florida Renewable Energy Credit Market, and renewable purchased power.  The rate of return on equity for self-build renewable facilities will be determined by the Commission in the annual cost recovery proceeding.  The Commission may also consider whether to include incentives for meeting or exceeding the RPS standard.

 

Discussion of Draft Rule Provisions and Comments by Interested Persons

 

            The major provisions of the draft rule and related Post-Workshop Comments are discussed in detail below.

 

Section (1)  Application and Scope (Attachment A, page 56, lines 2 through 9) – Section (1) of staff’s draft Rule 25-17.400, F.A.C., delineates the purpose of the Florida Renewable Portfolio Standard rule, which is to establish a procedure for the Commission to review and, if appropriate, update the RPS standards at least every five years.  Pursuant to Section 366.92, F.S., the purposes of the standards are those specified by statute and include promoting the development of renewable energy, protecting the viability of existing renewable facilities, increasing fuel diversity, reducing dependence on fossil fuels, minimizing volatility of fuel costs, encouraging investment in Florida, improving the environment, and minimizing costs to consumers.

 

Post-Workshop Comments

 

            In Post-Workshop Comments, several stakeholders recommend that the Application and Scope section should be clarified to state that the RPS should be uniform for each IOU.  [See Post-Workshop Comments by Florida Crystals, Wheelabrator, Covanta, the Southern Alliance for Clean Energy (SACE), and Florida Power and Light Company (FPL).]  Staff has proposed that the initial RPS standards be uniform.  Each IOU is required to meet the same minimum percentage standard for each year.  The Commission should have the flexibility, however, in subsequent review proceedings, to determine whether going forward, the RPS standards should continue to be uniform to reflect the unique circumstances of each IOU.

 

            The Florida Industrial Cogeneration Association (FICA) states that the Application and Scope section should state that the standards are mandatory.  Staff agrees subject to the provisions discussed below on excusal from compliance.

 

            The Florida Industrial Power Users Group (FIPUG) recommends that Section (1) should state that the standards are minimum requirements for each IOU.  Staff agrees that the standards required by Section (3) are minimum standards, as reflected in Subsection (3)(a), which states “Each investor-owned electric utility shall meet or exceed the following renewable portfolio standards….”  The addition of penalties to the rule also reflects that these are not only minimum, but mandatory standards, unless the Commission excuses performance for an IOU within a compliance period.  Therefore, staff believes the draft rule clearly reflects that these are minimum standards and that no revision to Section (1) is necessary.

 

            FPL states that the intent language of Section (1) should place primary focus on the promotion of clean energy and the reduction of greenhouse gases.  Staff disagrees as the statutory intent is much broader and includes fuel diversity, economic development, and environmental improvements.  FPL’s definition of clean energy includes nuclear power, as well as generation and transmission efficiency improvements.  As discussed further below, resources eligible for compliance in the RPS are limited to renewables and do not include nuclear generation, generation efficiencies, or demand-side management programs.  Staff has conformed the definition of eligible resources with the direction provided by the Legislature.  Further, staff does not believe it is necessary to add language stating that an additional purpose of the RPS is the reduction of greenhouse gases.  This goal is already reflected in the language, “improve environmental conditions,” taken from the statute.

 

            COB Creations, LLC, (COB) suggests language to reflect that the Commission “shall establish an RPS rule that is equitable to ratepayers, utilities and renewable energy resources….”  Staff addressed this suggestion by making revisions to Section (3) that clearly state that the Commission sets the standards, rather than the utilities.  COB also states that language should be added to Section (1) to reflect that costs of the RPS should be minimized for all classes of ratepayers.  Staff does not believe it is necessary to make COB’s suggested change because equitable treatment of all rate classes will be addressed in the cost recovery proceedings contained in Section (7) and by normal Commission ratemaking policy.

 

            Staff’s strawman draft rule contained two additional subsections under Application and Scope.  These subsections described the proceedings for the Commission to review and, if appropriate, modify the standards at least every five years.  The language also stated that a proceeding would be held to review the standards upon petition by a substantially affected person or utility.  Staff revised these subsections to address the Post-Workshop Comments and moved the revised language to Section (3), because the language relates to the process of reviewing the initial renewable portfolio standards.  Staff received numerous comments regarding these provisions of the strawman draft rule, which will be addressed in the discussion of Section (3).

 

 

Section (2)  Definitions  (Attachment A, page 56, line 10, through page 58, line 3) – Section (2) defines certain terms used in draft Rules 25-17.400, 25-17.410, and 25-17,420, F.A.C.  The following is a discussion of several of those definitions, upon which there was disagreement among the workshop participants.

 

Eligible Renewables – Florida Renewable Energy Resources

 

            Staff adopted the language for the definitions of the terms, “Florida renewable energy resources,” “renewable energy,” and “biomass,” directly from the statutes. These concepts are used in the draft rule in defining the resources eligible for compliance with the RPS.   Section 366.92(2)(a), F.S., defines “Florida renewable energy resources” as renewable energy, as defined in Section 377.803, F.S., that is produced in Florida.  Section 377.803, F.S., refers to electrical, mechanical, or thermal energy produced from a broad range of renewable fuels, including hydrogen, biomass, solar energy, geothermal energy, wind energy, ocean energy, waste heat, or hydroelectric power.  Staff used the term Florida renewable energy resources throughout the rule to indicate those resources that are eligible for compliance with the RPS. 

 

            Staff believes it is appropriate to use the term Florida renewable energy resources to define eligible resources, rather than the term renewable energy, as defined by Section 366.92(2)(c), F.S., for several reasons.  First, the Legislature clearly indicated in the term Florida renewable energy resources that all renewable facilities eligible to meet the standards must be located within Florida.  Staff believes it is appropriate that resources are located in Florida in order to provide ratepayers with the greatest potential benefits of renewables, including enhanced fuel diversity, economic development and environmental benefits.  Second, the term renewable energy, as defined in the statute, does not include thermal and mechanical technologies.  Staff believes that the inclusion of thermal and mechanical technologies, along with electrical technologies, will increase the potential for the development of a wider variety of renewable projects in the state.  Staff believes that a broad definition of both the eligible technologies and fuel sources will increase competition among renewable providers, and therefore reduce costs for ratepayers.

 

Post-Workshop Comments

 

            The Florida Municipal Electric Association supports the use of the term and definition of Florida renewable energy resources because they agree that solar thermal should be eligible for RPS compliance.  Both Sarasota County and the Sarasota Chamber of Commerce agree with the importance of including solar thermal systems among the eligible resources for the rule, and stress that the inclusion of solar thermal systems will be critical in helping the community achieve its solar thermal goals.  Sterling Planet, Inc. also recommends retaining solar thermal technologies for compliance.

 

            Gulf Power Company (Gulf) recommends deleting the use of the term Florida renewable energy resources in order to eliminate eligibility of thermal resources.     Gulf states that the term Florida renewable energy resources is orphaned in the statute because the term is not used in the body of the statute.  Gulf believes that both mechanical and thermal resources are best handled under the conservation goal requirements of the Florida Energy Efficiency and Conservation Act (FEECA).  Tampa Electric Company (TECO) recommends that behind-the-meter solar thermal (solar water heaters) should not be included in the RPS, but rather should be counted as an energy efficiency measure under conservation goals.  As discussed above, staff believes that the inclusion of thermal technologies is appropriate because it conforms with the intent of Section 366.92, F.S., when it is read in its entirety, and will potentially reduce costs for ratepayers.  As discussed further in Issue 2, staff has addressed the potential for overlap of solar thermal water heaters used in compliance with the FEECA goals and the RPS standards in draft Rule 25-17.410, F.A.C.

 

            FPL adds the term “Florida clean energy resources,” which is defined by FPL as new nuclear facilities (post 2006), including uprates of existing nuclear units, energy efficiency measures, fossil units with full/partial carbon capture and sequestration and grid improvements implemented post 2006.  FPL also adds the term “energy efficiency measures,” which includes measures or programs that increase the efficiency of energy consumption or production or increase energy conservation.  This term includes power plant efficiency improvements and grid efficiency improvements in addition to traditional customer conservation programs.  Staff disagrees with FPL because they are not included in the statutory definition of Florida renewable energy resources or renewable energy.  While staff agrees with FPL that the inclusion of these resources could potentially reduce costs for ratepayers and improve environmental conditions; these are only two of the goals set forth in the legislative intent of Section 366.92, F.S.  The legislative intent also lists promoting of the development of renewable energy and protecting the economic viability of existing renewable energy facilities.  It is clear from the definitions contained in Section 366.92, F.S., that the Legislature intended for only renewable resources to be eligible for compliance with the Commission’s RPS rule.  The Florida Renewable Energy Producers Association (FREPA) agrees that the inclusion of nuclear energy is outside the Commission’s legislative authority under Section 366.92, F.S.

 

            The Florida Municipal Electric Association believes that the definition of biomass should be clarified to include “yard waste.”  Progress Energy, Florida (PEF) suggests that “dedicated energy crops” should be added to the definition of biomass.  COB Creations, Inc., states that “agricultural, horticultural, or industrial BTU convertible waste streams” should be added.  Staff believes no change should be made to the definition for biomass in the draft rule.  The definition was taken directly from the statute and it is clear that the resources mentioned above qualify as biomass.

 

            TECO recommends deleting the text of all definitions contained in the draft rule that are taken directly from the statutes and instead, citing the statute.  Staff believes that for clarity and ease of use, it is appropriate to include the text of the definitions in the rule.

 

Class I and Class II Renewables

 

            Section 366.92(3)(b)3, F.S., states that the Commission’s rule “may provide added weight to energy provided by wind and solar photovoltaic over other forms of renewable energy….”  The draft rule defines two classes of renewables, Class I and Class II, to facilitate the special treatment of wind and solar resources in Subsection (3)(b).  The draft rule defines Class I as Florida renewable energy resources derived from wind or solar energy systems, while Class II contains all other eligible renewable resources.  Staff notes that Class I includes both solar photovoltaic and solar thermal resources.  Staff believes that the inclusion of thermal technologies for added weight is appropriate because it conforms with the intent of Section 366.92, F.S., when it is read in its entirety and it will potentially reduce costs for ratepayers.  Solar thermal systems can range from customer-owned solar water heaters to large scale projects such as FPL’s recently proposed 75 MW solar thermal project.  The capital costs of solar thermal systems are often lower than current solar photovoltaic costs.  Staff believes that in addition to wind resources, it is appropriate to provide added weight to both solar photovoltaic and solar thermal resources.  Including solar thermal systems will provide consumers and renewable producers with additional flexibility to build solar facilities, and will potentially reduce the cost of the carve out for Class I resources contained in Subsection (3)(b).  The weighting given to Class I solar and wind resources is discussed in Subsection (3)(b) of the draft rule.

 

Post-Workshop Comments

 

            The Florida Alliance for Renewable Energy (FARE) recommends that if special treatment is given to specific resources, such as the carve out for Class I in the draft rule, the Commission should consider limiting these resources to smaller commercial systems and excluding utility scale projects.  Staff disagrees that Class I resources should be limited in capacity size.  The Legislature did not specify in Section 366.92(3)(b)3, F.S., that the Commission should limit any added weight to wind and solar projects based on the size or ownership of each project.  Further, limiting the capacity of eligible Class I projects would reduce the potential for economies of scale and lead to increased ratepayer costs associated with the draft rule’s carve out for these resources, as contained in Subsection (3)(b).

 

            Waste Energy Solutions recommends that anaerobic digestion should qualify for Class I to receive added weight under the RPS.  Staff disagrees.  The Legislature limited the resources that should be considered for extra weight to wind and solar in Section 366.92(3)(b)3, F.S.

 

            Several comments suggest that Class I or II resources should be based on the specific characteristics of renewable technologies.  For example, COB Creations, LLC, states that Class I should also include low emission resources that do not require an air permit within Florida.  In addition, Sunshine State Solar Power suggests that Class II should be further segregated by characteristics of renewables so that preference could be shown based on the characteristics of particular Class II technologies.  Sunshine State Solar Power suggests categories within Class II resources based on each project’s (1) emissions, (2) technological status (developmental versus mature), and (3) project vintage.  Staff disagrees that the rule should consider these additional characteristics of various Class I and Class II renewable technologies.  The statute did not provide express authority for the Commission to provide preference for resources other than wind and solar.  In addition, ranking Class II resources based on the characteristics suggested by Sunshine State Solar Power would result in a complex and potentially subjective process of selecting eligible projects.  Staff believes it will reduce costs for ratepayers if utilities have the flexibility to produce or purchase RECs from the least cost Class II renewable projects.

 

            The strawman draft rule used the term “emitters” in describing Class II resources.  Florida Crystals does not agree with the use of this term.  Staff agrees with Florida Crystals that some Class II resources produce low or zero greenhouse gas emissions, and did not include the term in the definition of Class II resources in the draft rule.

           

            FPL suggests that the definitions for Class I and Class II resources be deleted because the company recommends that no special treatment should be afforded to solar, wind, or any other specified resources.  As discussed further below (see discussion of Section 3), staff believes it is appropriate for the rule to provide added weight to wind and solar resources, as provided for in Section 366.92, F.S.  Therefore, the definitions for Class I and Class II resources should be retained to facilitate the carve out contained in Subsection (3)(b) of the draft rule.

 

Renewable Energy Credits and Renewable Portfolio Standard

 

            The definitions for both renewable energy credit and renewable portfolio standard were taken directly from Section 366.92(2)(d), F.S.  As discussed further below, RECs are used as the sole method of compliance in the draft RPS rule.

 

 

Post-Workshop Comments

 

            FPL recommends expanding the definition of RECs to include certified renewable attributes from United States’ renewable facilities.  FPL also suggests text stating that a REC is valid for five years after the month and year of generation.  Staff disagrees with FPL’s revisions of the definition of RECs contained in the draft rule.  The definition for RECs is taken directly from Section 366.92, F.S., which excludes compliance with RECs from renewable facilities outside of Florida.  Staff addressed the life of a REC in Section (7) of draft Rule 25-17.410, F.A.C., which is addressed in Issue 2.

 

Solar Definitions

 

            Staff included definitions of several terms regarding solar energy and thermal systems in the draft rule.  These terms are used in the draft rule to facilitate the use of solar photovoltaic and solar thermal systems toward the carve out required by Subsection (3)(b).  The definition of the term equivalent solar thermal energy is used in Rule 25-17.410, F.A.C., in the discussion of the creation of  RECs from solar thermal systems, which do not create, but rather avoid, the use of electricity.

 

Post-Workshop Comments

 

            Gulf and TECO suggest that the definitions for all terms regarding solar energy and thermal systems should be deleted.  As discussed above, Gulf believes that solar thermal resources should not be eligible for compliance with an RPS, but should be addressed in the FEECA goal setting proceeding.  Staff disagrees and believes these definitions should be retained in the rule.  The inclusion of low cost thermal technologies for compliance in the RPS will increase the potential for the development of a wider variety of renewable projects in the state, and potentially reduce costs for ratepayers.

 

 

Section (3)  Renewable Portfolio Standard  (Attachment A, page 58, lines 4 through 23) – This section addresses the mandatory minimum renewable portfolio standards to be met by the IOUs.

 

Standards and Schedule

 

            Section 366.92, F.S., requires the Commission to adopt rules to establish a renewable portfolio standard.  This section further defines the renewable portfolio standard as the minimum percentage of total annual retail electricity sales by an IOU to consumers in Florida that shall be supplied by renewable energy produced in Florida.  Also, the statute requires the Commission, in developing the rule, to evaluate the current and projected availability and costs of renewable energy through 2020.

 

The following table provides staff’s recommended initial standards in comparison to the standards included in the strawman draft rule:

 

 

            The standards are based on an estimate of currently available renewable energy resources, which is approximately 3.6 percent.  This estimate was determined through staff’s data gathering efforts with stakeholders which includes existing renewable resources and self-service generation.  At the beginning of the rulemaking process, the best information available to staff was that renewables in the state made up approximately two percent of annual electricity sales.  This stresses the importance of the work of Navigant to establish data to verify staff’s proposed percentages which are at this point arbitrary at best.

 

            Staff increased its recommended standards compared to the strawman draft rule based on the data provided by the parties.  However, these preliminary standards should be contingent on Navigant’s analysis of the technical and economic potential for Florida renewable energy resources currently available and that could be developed through the year 2020.  The results of this assessment are expected to be completed prior to the culmination of the rulemaking process and the Commission should hold judgment on the standards until the results are available.  The target years 2017 and 2025 reflect the timeline established in Executive Order Number 07-127 for greenhouse gas emission reduction goals.

 

            As noted below, many parties advocate higher percentages as a means of encouraging further renewable energy development in the state.  Staff agrees that the standards should be set to encourage additional renewable development, yet must be reasonable and obtainable taking into consideration the Legislature’s intent to minimize the cost of electricity for consumers.

 

            The following table provides the relative energy that would be represented by the initial standards:

           

 

            In absolute terms and as shown in the table above, supplying 5 percent of 2017’s expected retail electric sales with renewable energy will nearly double the state’s current production of renewable energy from 6,339 gigawatt-hours (GWH) in 2007, to 11,715 GWH in 2017.  Increasing the standards as staff recommends would result in approximately doubling the amount of renewable energy every eight years.

 

            The draft rule would make 2017 the first year the IOUs are required to meet a standard.  Staff is not recommending 2010 for an initial standard due to uncertainty as to when the rule will be effective, and when the Renewable Energy Credit Market will be operational.  As discussed further in the recommendation, the rule contemplates a process for the Commission to approve an administrator, and the structure and governance of the Renewable Energy Credit Market.  Following this process, there would be additional time needed for the market to become operational.  Also, because staff is recommending penalties for non-compliance, a near-term standard when there is uncertainty associated with the establishment of the market and compliance mechanisms may not be appropriate.

 

            Staff’s strawman draft rule also included a provision requiring a proceeding for the Commission to establish standards for each utility for the years not listed in the strawman draft rule.  Based on the discussion at the workshops and Post-Workshop Comments, staff instead proposes that all utilities be subject to the standards listed in the draft rule.  This will remove an administrative burden on the Commission, the IOUs, and stakeholders to hold a proceeding to set interim annual standards.  It will also reduce uncertainty in the renewable energy market as to the standards the IOUs are required to meet.

 

Post-Workshop Comments

 

            Attachment B is a compilation of the parties’ recommended RPS percentages.  Many of the renewable energy advocates state in their comments that the standards and timing in staff’s strawman draft were insufficient.  The draft rule is an attempt to balance the interest to promote renewables with reasonably achievable standards, while being mindful of the cost implications to ratepayers.

 

            In the comments filed by the parties, Commissioner of Agriculture Charles Bronson expresses concerns that if the state is to achieve a meaningful RPS, the percentages and implementation schedule in the strawman draft rule are unacceptable.  Sarasota County and the Sarasota Chamber of Commerce recommend a standard of 20 percent by 2020.  Sarasota County cites an analysis by the Florida Solar Energy Center that this standard is achievable and economical.  The Sarasota Chamber of Commerce recommends that the standard of 20 percent of generation by 2020 be composed of non-petroleum, non-natural gas resources.

 

            The Clean Energy Group states that the targets in the strawman draft would have been the least stringent of the 26 states with RPS policies and notes that many states have recently raised RPS targets.  They state that a recent study by the Lawrence Berkeley National Laboratory shows that the expected bounds of likely rate impacts from state RPS laws are modest.  The Southern Alliance for Clean Energy states the standards in the strawman draft rule were weak and likely would not incent the meaningful type of renewable investment and economic development supported by the intent of the Legislature.  It recommends the Commission move forward with aggressive mandatory goals based on data currently available.  However, they failed to mention that renewables, particularly hydroelectric resources, are more abundantly available in other states.

 

            The Florida Renewable Energy Producers Association states that the strawman draft rule schedule postpones meaningful increase in development of renewables until 2025.  Florida Crystals supports higher standards as listed in Attachment B, and states that the standards in staff’s strawman draft were timid at best and do not meet the Governor’s requirements or the Legislative intent of HB 7135.  It also recommends uniform standards for each utility.

 

            Sunshine State Solar Power advocates that the RPS needs aggressive targets to encourage development of renewables and reduce greenhouse gases as quickly as possible.  The Environmental Defense Fund supports Governor Crist’s statements that the Commission should adopt a 20 percent RPS by 2020.  Also, it believes a ramped-up schedule of investment in renewable energy is the best way to progress to this goal.  The Florida Solar Coalition supports a 20 percent RPS by 2020, and a starting point of January 1, 2010, set at the current level of renewable energy in the state.

 

            Wheelabrator and Covanta state that the Legislature was clear that the viability of existing resources should be protected.  Therefore, the starting point of the RPS should equal the percent of statewide existing resources.  The Florida Industrial Cogeneration Association (FICA) states that it is the responsibility of the Commission under the statute, to propose and adopt by rule the RPS, not the utilities.  It would increase the initial standard to reflect what is thought to be currently in existence in Florida.  FICA also suggests an automatic adjustment to increase renewable requirements as electricity prices increase because renewables present a natural hedge and means of reducing such price increases over the long-term.  COB Creations believes renewables should be given priority over other electric generation resources.

 

            In response to the above comments, staff would note that the Legislature, in Section 366.92, F.S., does not give the Commission direction on the timing and magnitude of the RPS.  Also, the Governor, in Executive Order No. 07-127 requests the Commission initiate rulemaking to establish a 20 percent RPS, but does not provide a timeframe for the standard.  The Legislature does appear to give preference to the establishment of reasonably achievable standards by requiring the Commission to consider the cost and availability of existing and new renewable resources.  As stated above, the renewables assessment to be performed by Navigant will provide the Commission with the best available data to make an informed decision on the magnitude and timing of the standards.

 

            FPL supports the inclusion of resources such as nuclear energy, energy efficiency measures, fossil units with full or partial carbon capture and sequestration, grid improvements, and out-of-state RECs that result in higher standards.  It states the proposed targets and long-term standards are not aggressive enough to promote sufficient amounts of new generation to meet the goals of reducing emissions, increasing energy security, and reducing price volatility. As discussed above, the definition of Florida renewable energy resources in Section 366.92, F.S., does not include the resources and efficiency improvements contemplated by FPL.  According to staff’s calculation, if FPL included only Florida renewable energy resources, as defined in Section 366.92, F.S., the maximum standard each utility would be required to achieve through these in-state renewable resources would be 6.67 percent by 2030.[3]

 

            PEF and Gulf support the standards in staff’s strawman draft rule.  TECO does not support including percentages or dates at this point in the drafting process until the renewables study has been completed and goals can be properly established.    As discussed above, staff believes that the magnitude and timing of the standards in the draft rule should be considered tentative pending the results of the renewables assessment.

 

            The recommended standards must balance the Legislature’s intent to encourage renewable energy and minimize the cost of power supply to consumers.  The standards established by the Commission should be based on the best available data on existing renewable energy resources in the state, and the potential for expansion of renewable resources.  Also, the standards should be reasonably achievable since, as described further, the draft rule would make the IOUs subject to a penalty in the event of non-compliance.

 

Added Weight for Wind and Solar Resources

           

            Staff believes it is appropriate to provide added weight to wind and solar resources, as provided for in Section 366.92(3)(b)3, F.S.  As noted above, the draft rule defines two classes of renewables, Class I and Class II, to facilitate the special treatment of wind and solar resources in Subsection (3)(b).  The draft rule defines Class I as Florida renewable energy resources derived from wind or solar energy systems, while Class II contains all other eligible renewable resources.    As discussed above, staff believes that the inclusion of thermal technologies for added weight is appropriate because it conforms with the intent of Section 366.92, F.S., when it is read in its entirety and it will potentially reduce costs for ratepayers.  As discussed further below, Section (5) of the draft rule, requires the two percent cost cap of complying with the RPS is to be allocated 1.50 percent to wind and solar, and 0.50 percent to all other Florida renewable energy resources.

 

            Staff’s strawman draft rule contained three policy options for providing added weight to wind and solar resources, two carve out options and one multiplier option.[4]  After reviewing the Post-Workshop Comments, staff included Option I in the draft rule, which provides for a carve out of a minimum of 25 percent of the RPS for wind and solar resources (Class I).  The majority of the Post-Workshop Comments that were in favor of added weight for solar and wind support a carve out, rather than a multiplier approach.  The carve out approach also appears to be easier to administer over time than a multiplier approach, which must be continuously monitored and changed to reflect current market costs.  In addition, a 2007 study by Lawrence Berkeley National Laboratory (LBNL), which reviewed the status of current state RPS programs, found that carve out policies had been more effective in encouraging solar than multipliers.[5]

 

Post-Workshop Comments

 

            Clean Energy Group (CEG) recommends set asides for solar and distributed generation resources, including solar photovoltaic systems, solar thermal electric, solar heating and cooling, and non-photovoltaic distributed generation.  CEG states that there may also be a need for a set aside for higher-cost wind projects, such as offshore wind.  CEG recommends 25 percent of the RPS goal be met with these resources, and within this 25 percent, half must come from on-site solar systems located in residential applications.  Staff believes that additional requirements within a carve out, such as the suggested carve out for residential solar systems, can increase the cost of implementing a carve out for solar and wind and make the RPS overly complicated.  This may be a refinement to be considered at a later date as the renewable energy market in Florida evolves.  Staff believes that in order to reduce ratepayer costs, it is more beneficial to allow competition between all solar and wind applications within the carve out requirement. In addition, CEG believes that significant, long-term solar financial incentives should be offered to customers through a system benefit charge or tariff.  Staff does not believe the Commission has the authority under Section 366.92, F.S., to establish a system benefit charge and apply these funds toward customer incentives.

 

            Sunshine State Solar Power (SSSP) supports carve outs or set asides for wind and solar.  SSSP recommends a two tier structure, with further differentiation of Class II to consider such categories as (1) emission level, (2) technological status (development status), and (3) vintage.  SSSP supports the strawman draft Option II set aside for solar and wind; however, SSSP believes a set aside would not be effective given the proposed cost cap and REC price cap in the strawman draft rule.  If these limiting provisions of the strawman draft rule were not removed, SSSP supports Option III, the multiplier approach.  As stated above, staff disagrees that the rule should consider these additional characteristics of various Class II renewable technologies.  The statute did not provide express authority for the Commission to include preference for resources other than wind and solar.  In addition, ranking Class II resources based on the characteristics suggested by Sunshine State Solar Power would result in a complex and potentially subjective process of selecting eligible projects.

 

            The Florida Solar Coalition (FSC) supports the Option II set aside approach in the strawman draft rule.  FSC modifies this set aside approach to give greater incentives for the development of solar photovoltaic systems due to the higher capital cost of these systems.  FSC also reduces the time period for the Option II set aside requirement to begin on January 1, 2013, rather than January 1, 2017.  FSC adds language which results in a set aside within a set aside, with 10 percent of the set aside reserved for solar photovoltaic systems, 10 percent from solar thermal resources, and an additional 5 percent for wind.  If the wind requirement is not fulfilled, FSC recommends that the utility’s obligation with respect to wind can be met with solar.  The Southern Alliance for Clean Energy supports the same version of a set aside, with the exception of a start date of January 1, 2016.  After considering the Post-Workshop Comments, staff does not support such a “set aside within a set aside” approach.  Staff believes it will reduce costs for ratepayers if utilities have the flexibility to meet the obligations of the set aside by producing or purchasing RECs from the least cost Class I renewable resources.

 

            Florida Crystals also does not agree with the special treatment of certain renewables, and believes this may result in another barrier to renewable development.  However, if the Commission includes special treatment for solar and wind in the rule, Florida Crystals prefers the set aside contained in Option I, with the date pushed out to January 1, 2020.  If a set aside is used, Florida Crystals recommends the funds from the rule’s cost cap should be allocated according to the set aside.  For example, if a 25 percent set aside is included for solar and wind, these resources should be restricted to 25 percent of the funds from the cost cap.  Wheelabrator and Covanta state that the rule should provide separate and distinct requirements for solar and wind, in whatever amount is appropriate, so there is no competition between other resources and solar and wind.  Wheelabrator and Covanta also recommend that if the Commission implements a set aside, the percentage of the funds from any cost cap allocated to Class I resources should be tied to the set aside percentage.  Staff notes that Subsection (3)(b) of the draft rule includes a carve out of a minimum of 25 percent of the RPS is to be provided by Class I renewable resources.  Also, as discussed in Subsection (5) on compliance of the draft rule, the costs of complying with the RPS are to be allocated 1.50 percent to wind and solar, and 0.50 percent to all other Florida renewable energy resources.

 

            Gulf, PEF, and TECO support versions of the strawman draft rule Option III multiplier approach to encourage solar and wind.  Gulf states that if multipliers have been ineffective in other states, it may be because the multipliers were set too low.  The Florida Renewable Energy Producers Association (FREPA) states that it has never supported tiers with different treatment for specified renewable resources.  If the Commission chooses to provide additional support for solar and wind; however, FPEPA supports Option III in the strawman draft rule, which provides for a multiplier approach, rather than set asides.  FREPA believes that multipliers give utilities and producers more flexibility to respond to market forces.  FREPA also states that the 25 percent set aside proposed in the strawman draft Options I and II is arbitrary.  Upon a thorough review of the comments and RPS policies in other states, staff does not support a multiplier approach.  According to the LBNL report, the multiplier approach has not been as effective in other states as a carve out in encouraging solar development.  Further, a multiplier approach actually reduces each utility’s obligations under an RPS because the utility would receive a multiplied amount of credit for each solar or wind REC.  Given the comments from solar representatives in the Commission’s RPS workshops, staff concludes it is reasonable to believe that the 25 percent carve out in the draft rule can be achieved over time.  If information to the contrary is brought to light as the RPS progresses, the Commission may hold a proceeding to review the RPS and carve out requirements under Subsection (3)(c) of the draft rule.

 

            Several interested parties do not believe the rule should contain special treatment for specified resources, such as solar and wind.  The Office of Public Counsel (OPC) does not support carve outs or set asides, and believes that the market should determine the renewable resources that should be in each utility’s portfolio based on relative economics.  OPC states that in an environment of rapid technological changes, the rule should not favor one technology over another.  The Florida Industrial Cogeneration Association (FICA) and PCS Phosphate – White Springs Agricultural Chemicals, Inc., also do not agree with special consideration for solar and wind, and state that all options for preference for these “high cost” renewables should be deleted from the rule.  FPL also deleted the portions of the strawman draft rule that relate to providing a set aside or multiplier for solar and wind.  Staff disagrees that there should not be added weight for solar and wind resources.  The rule provides sufficient ratepayer protections through a two percent cost cap and future Commission proceedings to modify the RPS if conditions warrant.

 

Proceeding to Modify the RPS

 

            Staff believes that in order to fully balance the interests of encouraging renewables while protecting ratepayers, the final RPS rule must contain a process for the Commission to review the RPS and utility implementation plans on a regularly scheduled basis and as conditions warrant.  The draft rule provides such a process for the Commission to review and modify, if appropriate, the RPS at least every five years.  This is similar to the Commission’s conservation goals proceedings.  This process for review will also allow the Commission to repeal or amend the rule in the event that new provisions of federal law supplant or conflict with the rule.  Pursuant to Section 120.54(7), F.S.,[6] an IOU or other substantially interested person may petition the Commission to initiate a proceeding to modify the rule.  Any modification to the RPS and the IOUs’ implementation plans will not affect existing contracts and commitments.  The draft rule also requires each IOU to provide an analysis of the technical and economic potential for renewables in Florida to the Commission in each review proceeding.

 

Post-Workshop Comments

 

            The Post-Workshop Comments focused on two areas (1) the frequency of the regularly scheduled reviews and (2) the parties that are eligible to petition the Commission to initiate a review.  Sunshine State Solar Power agrees that the RPS rules and procedures should be subject to ongoing review by the Commission, but recommends that the timeline should be reduced to every three years, rather than every five years.  The Florida Solar Coalition (FSC) suggests that the Commission should review and set the RPS for each IOU at least once every two years for the first eight years of the standard.  FSC believes that a shorter time period is needed, especially in the first years of the RPS, for the Commission to respond more rapidly to the developing market for renewable resources.  Southern Alliance for Clean Energy suggests that reviews should be held every three years for the first two proceedings and approximately concurrent with the conservation goals proceedings thereafter.  FPL states that review proceedings should be held every three years.  Staff believes a five year regularly scheduled review proceeding, coupled with the opportunity for utilities or substantially interested persons to petition the Commission to initiate a review at any time is sufficient for the Commission to monitor the RPS.  IOUs will also be required to provide reports to the Commission on an annual basis.  This will provide the Commission with the information necessary to determine whether to initiate a proceeding.

 

            Florida Crystals suggests the addition of “power producer” to the list of entities in the strawman draft rule that can trigger a proceeding for review if a “reasonable showing” is made.  Staff believes it is evident in the draft rule that a substantially interested power producer may petition the Commission to initiate a review of the RPS and therefore no change is needed to the existing language.

 

 

Section (4)  Implementation Plans  (Attachment A, page 59, lines 1 through 14) - The draft rule requires each IOU to provide an implementation plan for meeting or exceeding the RPS within 180 days of the effective date of the rule.  Each IOU must also provide data as a part of the annual reports required by Section (8) and discussed in more detail below.  Section (4) of the draft rule also delineates the information which must be provided in each IOU’s implementation plan.  Staff believes that the implementation plan and annual reports will provide valuable information needed by the Commission to closely monitor the IOUs’ actions regarding renewables, as well as the status of the RPS.  This information can be used by the Commission in evaluating each IOU’s performance, and in determining if a review proceeding is warranted.

 

Post-Workshop Comments

 

            The Florida Industrial Cogeneration Association (FICA) suggests that IOUs should be required to add an evaluation of the long-term rate benefits of renewables for each class of customers in the IOUs’ compliance plans and reports.  FICA believes these rate benefits should be deducted from the cost limitation under the cost cap.  Subsections (4)(c) and (4)(d) of the draft rule require the IOUs to evaluate the effects of a utility’s implementation plan on greenhouse gas reduction and economic development.  Staff disagrees with FICA that the IOUs should be required to evaluate additional long-term rate benefits of renewables.  FICA has not defined these benefits or how they are to be evaluated.

 

            TECO recommends that Subsection (4)(d), which requires each IOU to provide an analysis of the economic development effects of an IOU’s compliance plan, should be deleted.  TECO believes that utilities do not have expertise in performing economic development studies.  Staff believes this information is essential for the Commission to evaluate the results of the RPS over time.

 

            In the Commission’s August 20 and 26, 2008 workshop, the IOUs commented that the 90 day timeline in staff’s strawman draft rule for the initial utility filing is too short to provide a thorough filing.  Staff agrees and increased the filing time for the IOUs’ implementation plans to 180 days after the effective date of the rule.

 

 

<