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Case Background
This recommendation addresses amendment of two rules as
follows:
Rule 25-6.0423 Nuclear Power Plant Cost Recovery.
In 2006, the Florida Legislature enacted section 366.93,
Florida Statutes, Cost recovery for the siting, design, licensing, and
construction of nuclear power plants. Subsection (2) of the statute required
the Commission to adopt rules to establish “alternative cost recovery
mechanisms for the recovery of costs incurred in the siting, design, licensing
, and construction of a nuclear power plant.” The stated objective of such
rules was “to promote utility investment in nuclear power plants and allow for
the recovery in rates of all prudently incurred costs . . . .”
Consistent with the legislative directive of section 366.93,
the Commission adopted Rule 25-6.0423, Florida Administrative Code. The Rule
details the various filing, accounting and reporting requirements for nuclear
cost recovery as directed by the statute.
In 2007, the Legislature added integrated gasification combined
cycle (IGCC) power plants to those eligible for cost recovery under the
alternative cost recovery mechanisms adopted in 2006 for nuclear power plants.
The 2007 amendments require the Commission to adopt rules to implement cost
recovery for IGCC plants. Accordingly, staff has amended Rule 25-6.0423 to
extend the alternative cost recovery mechanisms of that rule to IGCC plants.
As required by section 120.54(2), Florida Statutes, a notice of rule
development was published in the August 31, 2007 edition of the Florida Administrative Weekly. Commission notice was separately distributed by the Office
of Commission Clerk on August 23, 2007. No request for a rule development
workshop was received.
Rule 25-22.081 Contents of Petition
In 2006, the Legislature also amended section 403.519,
Florida Statute, Exclusive forum for determination of need, to add specific
procedures for need certification of a nuclear power plant. The amendments
recognized the cost recovery mechanisms for nuclear plants set out in 366.93,
Florida Statutes (2006) and added “fuel diversity” as a factor to be
specifically considered by the Commission in ruling on a petition for
determination of need.
In response to the 2006 amendments to section 403.519, the
Commission adopted amendments to Rule 25-22.081, Florida Administrative Code,
which sets forth the required contents of a petition for determination of
need. Consistent with the statutory changes, the amendments listed additional
filing requirements for nuclear power plants and added “fuel diversity” to the
criteria to be considered by the Commission for all types of power plants.
In 2007, the Legislature again amended 403.519 to bring
IGCC plants under the procedures previously adopted for nuclear plants.
The statute was also amended to require the Commission to consider “whether
renewable energy sources and technologies, as well as conservation measures,
are utilized to the extent reasonably available” in making its determination of
need for all power plants. Staff has developed amendments to Rule 25-22.081 to
implement the 2007 statutory changes.
A notice of rule development for Rule 25-22.081 was
published in the Florida Administrative Weekly on August 31, 2007. The Commission Clerk’s notice was published on August 23, 2007. One request for a rule development workshop was initially filed, but later withdrawn after
clarification from staff on the intent of the rule changes.
STATEMENT OF ESTIMATED REGULATORY COSTS SUMMARY
Since the two proposed rules are related, a combined
Statement of Estimated Regulatory Costs (SERC) was prepared by the Division of
Economic Regulation. A copy is appended as Attachment 3.
The SERC concludes that the two rule amendments could
result in some additional incremental cost to the Commission in implementing
the alternative cost recovery mechanisms for IGCCs. No significant incremental
benefits to the Commission were identified.
Utilities should have no significant additional costs as a
result of the rule, since current practices require detailed filings in need
determinations and cost recovery proceedings. Recovery of preconstruction
costs for an IGCC plant would benefit the electric utilities.
Customers, including local governments and small
businesses, as well as local ratepayers may incur higher energy bills and as a
result of preconstruction cost recovery for IGCCs. However, those costs could
be mitigated by diversification of fuel supply which should reduce future
impacts from fuel price volatility.
Discussion
of Issues
Issue 1:
Should the Commission propose amendments to Rule
25-6.0423, Nuclear Power Plant Cost Recovery, to include integrated gasification
combined cycle plants for alternative cost recovery?
Recommendation:
Yes, rulemaking is required by the 2007 changes to
section 366.093, Florida Statutes.
Staff Analysis:
The proposed amendments to Rule 25-6.0423 do not
make substantive changes to the rule; they simply include IGCC plants in the
cost recovery process that was developed for nuclear plants. A summary of the
changes shown in Attachment 1 is as follows:
The title of the rule is amended to read “Nuclear or Integrated
Gasification Combined Cycle Power Plant Cost Recovery.”
Subsection (2) of the rule, “Definitions”, is modified to
recognize its applicability to IGCC plants. Specifically, a definition of an “integrated
gasification combined cycle power plant,” as set out in 366.93(1)(c) Florida
Statutes, is added to the rule in paragraph (2)(b). A new definition of “power
plant” is added in paragraph (2)(c) to encompass both nuclear and IGCC plants.
That definition is substituted for “nuclear plant” throughout the rule.
Subsection (2), paragraphs (b)-(g), are renumbered
(d)-(i).
Integrated gasification combined cycle is inserted as
appropriate in renumbered paragraphs (2)(e); (2)(g); (2)(h), and (2)(i).
Susbection (5)(b)(1) is amended to reflect the AFUDC rate
effective on the date of the statutory change, June 12, 2007.
STATUTORY AUTHORITY
As noted in the Background section above, 2007 changes to
366.93 include IGCC technology in the statutory provisions that directed the
Commission to develop alternative cost recovery mechanisms for nuclear plants.
The rule changes implement the legislative directive. The Commission has
specific authority to adopt rules for regulation of electric utilities in
sections 350.127(2) and 366.05(1), Florida Statutes, as well as in the amended
statute itself.
Issue 2:
Should the Commission propose amendments to Rule
25-22.081, Contents of Petition, to require electric utilities seeking a
determination of need for an integrated gasification combined cycle plant to
file information paralleling that required for nuclear plants and to require
all applicants to submit information to allow the Commission to evaluate the
use of conservation measures and renewable generation resources in the need
determination process?
Recommendation:
Yes, the 2007 amendments to sections 366.93 and
403.519 require these changes to the Rule.
Staff Analysis:
As noted above in the Background section, the
Legislature has chosen to put IGCC technology on the same footing as nuclear
technology for purposes of a determination of need and subsequent cost
recovery. It has also required the Commission to take into account an
applicant’s utilization of conservation measures and renewable generating
resources in evaluating the need for a new power plant. A summary of the
needed changes to Rule 25-22.081 as shown in Attachment 2 is set forth below:
Subsection (1) of the rule is amended to read: “Petition
for Fossil, Integrated Gasification Combined Cycle, or Nuclear Fuel
Electric Plants.” “Integrated gasification combined cycle” is inserted in the
text of the subsection. To capture the legislative directive to consider
conservation measures and renewable generation resources in evaluating the need
for a new plant, the last full sentence of the first paragraph is amended to
read:
To allow the Commission to take
into account the need for electric system reliability and integrity, . . .
and the need to determine whether renewable energy sources and technologies, as
well as conservation measures are utilized to the extent reasonably available,
the petition shall contain the following information . . . .
Paragraphs (2)(g) is amended to insert “integrated
gasification combined cycle” in subparagraphs (a), (b) and (c).
STATUTORY AUTHORITY
The Commission has statutory authority to enact rules for
regulation of electric utilities in sections 350.127(2) and 366.05(1), Florida
Statutes. The law implemented are the 2007 amendments to section 403.519,
Florida Statutes.
Issue 3:
Should this docket be closed?
Recommendation:
Yes, if no requests for hearing or comments are
filed, the rule amendments as proposed can be filed for adoption with
the Secretary of State, and the docket should be closed.
Staff Analysis:
Unless a hearing is held or comments filed, the rules
will become final as proposed and may be filed for adoption without further
action by the Commission. The docket can then be closed.
DES
Attachments
Rules
SERC
25-6.0423
Nuclear or Integrated Gasification Combined Cycle Power Plant Cost
Recovery.
(1) Purpose. The purpose of this rule is to establish
alternative cost recovery mechanisms for the recovery of costs incurred in the
siting, design, licensing, and construction of nuclear or integrated
gasification combined cycle power plants in order to promote electric
utility investment in nuclear or integrated gasification combined cycle
power plants and allow for the recovery in rates of all such prudently incurred
costs.
(2) Definitions. As used in this rule, the following
definitions shall apply:
(a) “Nuclear power plant” or “plant” is an
electrical power plant that utilizes nuclear materials as fuel, as defined in
Sections 403.503(13) and 366.93(1)(c) , F.S.
(b) “Integrated gasification combined cycle power
plant” is an electrical power plant that uses synthesis gas produced by
integrated gasification technology, as defined in Sections 403.503(13) and
366.93(c), F.S.
(c) “Power plant” or “plant” means a nuclear power
plant or an integrated gasification combined cycle power plant.
(d)(b) “Cost” includes, but is not
limited to, all capital investments including rate of return, any applicable
taxes and all expenses, including operation and maintenance expenses, related
to or resulting from the siting, licensing, design, construction, or operation
of the nuclear or integrated gasification combined cycle power plant as
defined in Section 366.93(1)(a) , F.S.
(e)(c) “Site selection.” A site will be
deemed to be selected upon the filing of a petition for a determination of need
for a nuclear or integrated gasification combined cycle power plant
pursuant to Section 403.519 , F.S.
(f)(d) “Site selection costs” are costs
that are expended prior to the selection of a site.
(g)(e) “Pre-construction costs” are
costs that are expended after a site has been selected in preparation for the
construction of a nuclear or integrated gasification combined cycle
power plant, incurred up to and including the date the utility completes site
clearing work.
(h)(f) Site selection costs and
pre-construction costs include, but are not limited to: any and all costs
associated with preparing, reviewing and defending a Combined Operating License
(COL) application for a nuclear power plant; costs associated with site and
technology selection; costs of engineering, designing, and permitting the
nuclear or integrated gasification combined cycle power plant; costs of
clearing, grading, and excavation; and costs of on-site construction facilities
(i.e., construction offices, warehouses, etc.).
(i)(g) “Construction costs” are costs
that are expended to construct the nuclear or integrated gasification
combined cycle power plant including, but not limited to, the costs of
constructing nuclear power plant buildings and all associated permanent
structures, equipment and systems.
(3) Deferred Accounting Treatment. Site selection and
pre-construction costs shall be afforded deferred accounting treatment and
shall, except for projected costs recovered on a projected basis in one annual
cycle, accrue a carrying charge equal to the utility’s allowance for funds used
during construction (AFUDC) rate until recovered in rates.
(4) Site Selection Costs. After the Commission has
issued a final order granting a determination of need for a nuclear
power plant pursuant to Section 403.519, F.S., a utility may file a petition
for a separate proceeding, to recover prudently incurred site selection costs.
This separate proceeding will be limited to only those issues necessary for the
determination of prudence and alternative method for recovery of site selection
costs of a nuclear power plant.
(5) Pre-Construction Costs and Carrying Costs on
Construction Cost Balance. After the Commission has issued a final order
granting a determination of need for a nuclear power plant pursuant to
Section 403.519 , F.S., a utility may petition the Commission for recovery of
pre-construction costs and carrying costs of construction cost balance as
follows:
(a) Pre-Construction Costs. A utility is entitled to
recover, through the Capacity Cost Recovery Clause, its actual and projected
pre-construction costs. The utility may also recover the related carrying
charge for those costs not recovered on a projected basis. Such costs will be
recovered within 1 year, unless the Commission approves a longer recovery
period. Any party may, however, propose a longer period of recovery, not to
exceed 2 years.
1. Actual pre-construction costs incurred by a
utility prior to the issuance of a final order granting a determination of need
pursuant to Section 403.519, F.S., shall be included in the initial filing made
by a utility under this subsection for review, approval, and a finding with
respect to prudence.
2. The Commission shall include pre-construction
costs determined to be reasonable and prudent in setting the factor in the
annual Capacity Cost Recovery Clause proceedings, as specified in subparagraph
(5)(c)3. of this rule. Such costs shall not be subject to disallowance or further
prudence review.
(b) Carrying Costs on Construction Cost Balance. A
utility is entitled to recover, through the utility’s Capacity Cost Recovery
Clause, the carrying costs on the utility’s annual projected construction cost
balance associated with the nuclear power plant. The actual carrying
costs recovered through the Capacity Cost Recovery Clause shall reduce the
allowance for funds used during construction (AFUDC) that would otherwise have
been recorded as a cost of construction eligible for future recovery as plant
in service.
1. For nuclear power plant need petitions
submitted on or before December 31, 2010, the associated carrying costs shall
be computed based on the pretax AFUDC rate in effect on June 12, 200719,
2006;
2. For nuclear power plant need petitions
submitted after December 31, 2010, the utility’s pretax AFUDC rate in effect at
the time the petition for determination of need is filed is presumed to be
appropriate unless the Commission determines otherwise in its need
determination order;
3. The Commission shall include carrying costs on the
balance of construction costs determined to be reasonable or prudent in setting
the factor in the annual Capacity Cost Recovery Clause proceedings, as
specified in paragraph (5)(c) of this rule.
(c) Capacity Cost Recovery Clause for Nuclear or
Integrated Gasification Combined Cycle Power Plant Costs.
1. Each year, a utility shall submit, for Commission
review and approval, as part of its Capacity Cost Recovery Clause filings:0
a. True-Up for Previous Years. By March 1, a utility
shall submit its final true-up of pre-construction expenditures, based on
actual preconstruction expenditures for the prior year and previously filed
expenditures for such prior year and a description of the pre-construction work
actually performed during such year; or, once construction begins, its final
true-up of carrying costs on its construction expenditures, based on actual
carrying costs on construction expenditures for the prior year and previously
filed carrying costs on construction expenditures for such prior year and a
description of the construction work actually performed during such year.
b. True-Up and Projections for Current Year. By May
1, a utility shall submit for Commission review and approval its actual/estimated
true-up of projected pre-construction expenditures based on a comparison of
current year actual/estimated expenditures and the previously-filed estimated
expenditures for such current year and a description of the pre-construction
work projected to be performed during such year; or, once construction begins,
its actual/estimated true-up of projected carrying costs on construction
expenditures based on a comparison of current year actual/estimated carrying
costs on construction expenditures and the previously filed estimated carrying
costs on construction expenditures for such current year and a description of
the construction work projected to be performed during such year.
c. Projected Costs for Subsequent Years. By May 1, a
utility shall submit, for Commission review and approval, its projected
pre-construction expenditures for the subsequent year and a description of the
pre-construction work projected to be performed during such year; or, once
construction begins, its projected construction expenditures for the subsequent
year and a description of the construction work projected to be performed
during such year.
2. The Commission shall, prior to October 1 of each
year, conduct a hearing and determine the reasonableness of projected
pre-construction expenditures and the prudence of actual pre-construction
expenditures expended by the utility; or, once construction begins, to
determine the reasonableness of projected construction expenditures and the
prudence of actual construction expenditures expended by the utility, and the
associated carrying costs. Within 15 days of the Commission’s vote, the
Commission shall enter its order. Annually, the Commission shall make a
prudence determination of the prior year’s actual construction costs and associated
carrying costs. To facilitate this determination, the Commission shall conduct
an on-going auditing and monitoring program of construction costs and related
contracts pursuant to Section 366.08, F.S. In making its determination of
reasonableness and prudence the Commission shall apply the standard provided
pursuant to Section 403.519(4)(e) , F.S.
3. The Commission shall include those costs it
determines, pursuant to this subsection, to be reasonable or prudent in setting
the Capacity Cost Recovery Clause factor in the annual Fuel and Purchased Power
Cost Recovery proceedings. Such prior year actual costs associated with nuclear
power plant construction subject to the annual proceeding shall not be subject
to disallowance or further prudence review.
4. The final true-up for the previous year,
actual/estimated true-up for the current year, and subsequent year’s projected nuclear
power plant costs as approved by the Commission pursuant to subparagraph
(5)(c)2. will be included for cost recovery purposes as a component of the
following year’s capacity cost recovery factor in the Fuel and Purchased Power
Cost Recovery. The utility must file all necessary revisions to the fuel and
purchased power cost recovery filings no later than October 15 of the current year.
5. By May 1 of each year, along with the filings
required by this paragraph, a utility shall submit for Commission review and
approval a detailed analysis of the long-term feasibility of completing the power
nuclear plant.
(6) Failure to Enter Commercial Service. Following
the Commission’s issuance of a final order granting a determination of need for
the nuclear power plant, in the event the utility elects not to complete
or is precluded from completing construction of the nuclear power plant,
the utility shall be allowed to recover all prudent site selection costs,
pre-construction costs, and construction costs.
(a) The utility shall recover such costs through the
Capacity Cost Recovery Clause over a period equal to the period during which
the costs were incurred or 5 years, whichever is greater.
(b) The amount recovered under this subsection will
be the remaining unrecovered Construction Work in Progress (CWIP) balance at
the time of abandonment and future payment of all outstanding costs and any other
prudent and reasonable exit costs. The unrecovered balance during the recovery
period will accrue interest at the utility’s overall pretax weighted average
midpoint cost of capital on a Commission adjusted basis as reported by the
utility in its Earnings Surveillance Report filed in December of the prior
year, utilizing the midpoint of return on equity (ROE) range or ROE approved
for other regulatory purposes, as applicable.
(7) Commercial Service. As operating units or systems
associated with the nuclear power plant and the nuclear power
plant itself are placed in commercial service:
(a) The utility shall file a petition for Commission
approval of the base rate increase pursuant to Section 366.93(4), F.S.,
separate from any cost recovery clause petitions, that includes any and all
costs reflected in such increase, whether or not those costs have been
previously reviewed by the Commission; provided, however, that any actual costs
previously reviewed and determined to be prudent in the Capacity Cost Recovery
Clause shall not be subject to disallowance or further prudence review except
for fraud, perjury, or intentional withholding of key information.
(b) The utility shall calculate the increase in base
rates resulting from the jurisdictional annual base revenue requirements for
the nuclear power plant in conjunction with the Capacity Cost Recovery
Clause projection filing for the year the nuclear power plant is
projected to achieve commercial operation. The increase in base rates will be
based on the annualized base revenue requirements for the nuclear power
plant for the first 12 months of operations consistent with the cost
projections filed in conjunction with the Capacity Cost Recovery Clause
projection filing.
(c) At such time as the nuclear power plant is
included in base rates, recovery through the Capacity Cost Recovery Clause will
cease, except for the difference between actual and projected construction
costs as provided in subparagraph (5)(c)4. above.
(d) The rate of return on capital investments shall
be calculated using the utility’s most recent actual Commission adjusted basis
overall weighted average rate of return as reported by the utility in its most
recent Earnings Surveillance Report prior to the filing of a petition as
provided in paragraph (7)(a). The return on equity cost rate used shall be the
midpoint of the last Commission approved range for return on equity or the last
Commission approved return on equity cost rate established for use for all
other regulatory purposes, as appropriate.
(e) The jurisdictional net book value of any existing
generating plant that is retired as a result of operation of the nuclear
power plant shall be recovered through an increase in base rate charges over a
period not to exceed 5 years. At the end of the recovery period, base rates
shall be reduced by an amount equal to the increase associated with the
recovery of the retired generating plant.
(8) A utility shall, contemporaneously with the
filings required by paragraph (5)(c) above, file a detailed statement of
project costs sufficient to support a Commission determination of prudence,
including, but not limited to, the information required in paragraphs (8)(b) –
(8)(e), below.
(a) Subject to suitable confidentiality agreements
or, to the extent necessary, protective orders issued by the Commission, a
utility will ensure reasonably contemporaneous access, which may include access
by electronic means, for review by parties of all documents relied on by
utility management to approve expenditures for which cost recovery is sought.
Access to any information that is “Safeguards Information” as defined in 42
U.S.C. 2167 and 10 C.F.R. 73.21, incorporated by reference into this Rule,
shall only be in accordance with applicable Nuclear Regulatory Commission requirements.
(b) Regarding technology selected, a utility shall
provide a description of the technology selected that includes, but is not
limited to, a review of the technology and the factors leading to its
selection.
(c) The annual true-up and projection cost filings
shall include a list of contracts executed in excess of $1 million to include
the nature and scope of the work, the dollar value and term of the contract,
the method of vendor selection, the identity and affiliation of the vendor, and
current status of the contract.
(d) Final true-up filings and actual/estimated
true-up filings will include monthly expenditures incurred during those periods
for major tasks performed within Site Selection, Preconstruction and
Construction categories. A utility shall provide annual variance explanations
comparing the current and prior period to the most recent projections for those
periods filed with the Commission.
(e) Projection filings will include monthly
expenditures for major tasks performed within Site Selection, Preconstruction
and Construction categories.
(f) Annual Reports Required by Rule 25-6.135, F.A.C.
On an annual basis following issuance of the final order granting a
determination of need and until commercial operation of the nuclear
power plant, a utility shall include the budgeted and actual costs as compared
to the estimated in-service costs of the nuclear power plant as provided
in the petition for need determination in its annual report filed pursuant to
Rule 25-6.135, F.A.C. The estimates provided in the petition for need
determination are non-binding estimates. Some costs may be higher than
estimated and other costs may be lower. A utility shall provide such revised
estimated in-service costs as may be necessary in its annual report.
Specific Authority 350.127(2), 366.05(1) FS.
Law Implemented 366.93 FS.
History–New 4-8-07.
25-22.081
Contents of Petition.
(1) Petition for Fossil, Integrated Gasification
Combined Cycle, or Nuclear Fuel Electric Plants. Petitions submitted to
commence a proceeding to determine the need for a proposed fossil,
integrated gasification combined cycle, or nuclear fuel electrical power
plant or responses to the Commission’s order commencing such a proceeding shall
comply with the other requirements of Chapter 25-22, F.A.C., as to form and
style except that a utility may, at its option, submit its petition in the same
format and style as its application for site certification pursuant to Sections
403.501 through 403.517, F.S., so long as the informational requirements of
this rule and Chapter 25-22, F.A.C., are satisfied. The petition, to
allow the Commission to take into account the need for electric system
reliability and integrity, the need for adequate reasonable cost electricity,
the need for fuel diversity and supply reliability, and the need to
determine whether the proposed plant is the most cost effective alternative
available, and the need to determine whether renewable energy sources and
technologies, as well as conservation measures, are utilized to the extent
reasonably available, the petition shall contain the following information:
(a) A general description of the utility or utilities
primarily affected, including the load and electrical characteristics,
generating capability, and interconnections.
(b) A general description of the proposed electrical
power plant, including the size, number of units, fuel type and supply modes,
the approximate costs, and projected in-service date or dates.
(c) A statement of the specific conditions,
contingencies or other factors which indicate a need for the proposed
electrical power plant including the general time within which the generating
units will be needed. Documentation shall include historical and forecasted
summer and winter peaks, number of customers, net energy for load, and load
factors with a discussion of the more critical operating conditions. Load
forecasts shall identify the model or models on which they were based and shall
include sufficient detail to permit analysis of the model or models. If a
determination is sought on some basis in addition to or in lieu of capacity
needs, such as fuel diversity, then detailed analysis and supporting
documentation of the projected costs and benefits is required. Where a
determination is sought for a nuclear or integrated gasification combined
cycle power plant, the nonbinding estimate provided for in paragraph (2)(b)
below shall be considered to be sufficient for purposes of this paragraph.
(d) A summary discussion of the major available
generating alternatives which were examined and evaluated in arriving at the
decision to pursue the proposed generating unit. The discussion shall include a
general description of the generating unit alternatives, including purchases
where appropriate; and an evaluation of each alternative in terms of economics,
reliability, long-term flexibility and usefulness and any other relevant
factors such as fuel diversity and fuel supply reliability. These major
generating technologies generally available and potentially appropriate for the
timing of the proposed plant and other conditions specific to it shall be
discussed. In addition, each investor-owned utility shall include a detailed
description of the selection process used and a detailed description of the
generating unit alternatives proposed by each finalist, if any, selected to
participate in subsequent contract negotiations pursuant to Rule 25-22.082,
F.A.C. No provision of Rule 25-22.082, F.A.C., shall be applicable to a nuclear
or integrated gasification combined cycle power plant sited after June 19, 2006.
(e) A discussion of viable nongenerating alternatives
including an evaluation of the nature and extent of reductions in the growth
rates of peak demand, KWH consumption and oil consumption resulting from the
goals and programs adopted pursuant to the Florida Energy Efficiency and
Conservation Act both historically and prospectively and the effects on the
timing and size of the proposed plant.
(f) An evaluation of the adverse consequences which
will result if the proposed electrical power plant is not added in the
approximate size sought or in the approximate time sought.
(g) If the generation addition is the result of a
purchased power agreement between an investor-owned utility and a nonutility
generator, the petition shall include a discussion of the potential for
increases or decreases in the utility’s cost of capital, the effect of the
seller’s financing arrangements on the utility’s system reliability, any
competitive advantage the financing arrangements may give the seller and the
seller’s fuel supply adequacy.
(2) In addition to complying with paragraphs (1)(a)
through (g) above, a nuclear or integrated gasification combined cycle power
plant petition shall contain the following information:
(a) The description required by Section
403.519(4)(a)2., F.S., including a discussion about how the proposed nuclear or
integrated gasification combined cycle power plant will enhance the
electric supply reliability by reducing the exposure to fossil fuel supply
disruptions;
(b) A description of and a nonbinding estimate of the
cost of the proposed nuclear or integrated gasification combined cycle power
plant, including associated transmission facilities;
(c) The annualized base revenue requirement for the
first 12 months of operation of the proposed nuclear or integrated
gasification combined cycle power plant, based on the nonbinding estimate
of the cost provided pursuant to paragraph (2)(b) above; and
(d) A summary of any discussions with other electric
utilities regarding ownership of a portion of the plant by such electric
utilities.
Specific Authority 350.127(2), 366.05(1) FS.
Law Implemented 403.519 FS.
History–New 12-22-81, Formerly 25-2.133, 25-22.81, Amended 1-10-94, 2-20-07.
State of Florida
Public Service Commission
Capital Circle Office Center ● 2540 Shumard Oak Boulevard
Tallahassee, Florida 32399-0850
-M-E-M-O-R-A-N-D-U-M-
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DATE:
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October 24, 2007
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TO:
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Office of General Counsel (Smith)
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FROM:
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Division of Economic Regulation
(Hewitt)
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RE:
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Statement of Estimated Regulatory
Costs for Proposed Rule Amendments to 25-6.0423, F.A.C., Nuclear Power Plant
Cost Recovery; and, 25-22.081, F.A.C., Contents of Petition
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DETAILED
DESCRIPTION OF THE PROPOSED RULE AMENDMENTS
1. Why it
is being proposed?
New policy
mandated by statue
The proposed amendments
to Rule 25-6.0423, F.A.C, Nuclear Power Plant Cost Recovery, would implement
changes to Section 366.93, Florida Statutes, which adds Integrated Gasification
Combined Cycle (IGCC) plants to the expedited cost recovery.
Rule 25-22.081,
F.A.C., Contents of Petition, implements changes to Section 403.519, Florida
Statutes, which adds IGCC plants. Section 403.519 contains the issues the PSC must take into account when there is a petition or proceeding for determination of need for a
proposed fossil or nuclear fuel electric power plant.
2.
What do the rules do and how do they accomplish the goals?
The current rule
gives detailed requirements for creating an alternative cost recovery mechanism
for all prudently incurred costs for investment in new nuclear plants. These
costs include those expenditures for siting, design, licensing, and
construction of a nuclear power plant. The rule allows preconstruction costs
to be recovered through the Capacity Cost Recovery Clause (CCRC). When a plant
is placed in service, the utility is allowed to increase base rate charges by
the projected annual revenue requirement. The proposed rule amendments would
add IGCC power plants to the allowed recovery process and add “... or
Integrated Gasification Combined Cycle...” to the title of the rule.
The proposed
amendments to Rule 25-22.081, F.A.C., Contents of Petition, would implement the
addition of IGCC plants in the statute and the requirement that the Commission
determine whether renewable energy sources and technologies, as well as
conservation measures, are utilized to the extent reasonably available, by the
applying IOU.
IMPACT ON THE
PSC
Rule implementation and enforcement costs and impact
on revenues
For
the agency and other state and local government entities
Incremental
costs
After the PSC has issued a final order granting a determination of need, a utility planning to build an
IGCC plant would be allowed to petition the PSC for recovery of prudently
incurred site selection costs. After the PSC has issued a final order granting
a determination of need, a utility planning to build an IGCC plant would be
allowed to petition the PSC for recovery of pre-construction costs and carrying
costs of construction cost balances. These additional petitions and subsequent
hearings would add significant additional Commissioners’ and staff time.
An additional
incremental cost to the Commission would be the usual costs of promulgating a
rule. The utilities currently file the information required by the rule
changes and the Commission currently considers the petitions for additional
generation need determinations.
Incremental
benefits
Commission
staff would benefit by having the latest statute requirements available in
Commission rules when reviewing a petition for determination of need, along
with the necessary information required of the petition. There should be no
significant impact on FPSC revenues. Other state and local government entities
should not be negatively impacted.
WHO BESIDES
THE PSC WILL BE AFFECTED BY ADOPTION OF THE PROPOSALS
Estimated number of entities required to comply and General
description of individuals affected
Utilities
Any of the five IOUs in Florida that plans to build an IGCC plant
would be under the jurisdiction of the Commission for cost recovery. Electric
cooperatives and municipal operated electric companies that petition the PSC for a need determination must comply with the contents of the petition rule. Only a few of
the 34 municipals and 18 cooperatives currently generate electricity. The
utilities sell electricity to industrial, commercial, and residential customers
throughout the state who may be affected by a new plant.
Customers
All ratepayers
of a utility company that files a request for a determination of need would be
affected when the pre-construction costs are passed through the CCRC and the
construction cost of an IGCC plant is placed into the ratebase.
Impact on small businesses, small cities, or small counties
There should
be no impact from the rule changes on small businesses, small cities, or small
counties
Outside
business and local governments
There should
be no impact from the rule changes on businesses, cities, or counties.
HOW ARE THE PARTIES ABOVE
AFFECTED BY THE ADOPTION OF THE PROPOSAL
Estimated transactional costs to individuals and
entities
Utilities
Section 366.936(2) (a) and (b),
Florida Statutes, provide for the recovery of pre-construction costs and the
carrying costs on the utility’s projected construction costs through the
Capacity Cost Recovery Clause. The rule sets forth the procedure for including
these costs in the annual cost recovery clause proceedings.
IOUs
should have no significant additional costs because of the new rule. IOUs
currently must show that expenditures are reasonable and prudently incurred
before being allowed to be recovered. There would be some additional
accounting and filing costs associated with new IGCC plant planning and
construction expenditures that would be recovered through the CCRC. There
would be additional hearings for Commission review of associated costs of a new
IGCC plant before they are passed through to customers. There would be a
significant benefit for a petitioning utility in being able to collect
preconstruction costs through the CCRC before a plant is in service and in
knowing that reasonable and prudent investment in new IGCC plants will be
allowed to be recovered in rates as well as the recovery of sunk costs if a
plant is not completed. This could encourage the building of new plants. The
only estimated additional costs reported by one company for new nuclear
generation under these rules would be $10,000 per year for on-going costs.
Customers could benefit from an IOU building a nuclear plant
which has lower electricity costs and contributes to fuel diversity. However,
customers could be impacted negatively from preconstruction costs passed
through the CCRC, and if a plant is not completed and they subsequently have to
pay for the sunk costs through their electricity bills.
There should
be no new transactional costs for requiring renewable and conservation issues’
information. IOUs filing a petition of need for a new power plant already
submit information on their efforts in utilizing renewable energy sources and
technologies, as well as conservation measures, to the extent reasonably
available.
Customers
As
a result of this statutory requirement, ratepayers including local government
entities and small businesses would incur higher energy bill costs associated
with the IGCC plant before any benefits of the expected fuel savings from the
plant operation are realized. However, the long term benefits of
diversification of energy supply should mitigate future impacts from fuel price
volatility.
Outside
business including specifically small businesses
Outside
businesses or small businesses would have the same benefits and costs as the
other ratepayers in their rate class.
Local governments
Small cities
or small counties would have the same benefits and costs as the other
ratepayers in their rate class.
ANY OTHER PERTINENT COMMENTS
REGARDING THE APPLICATION OF THE PROPOSED RULE
None.
CH:kb
cc: Mary Andrews Bane
Chuck Hill
Kathy Lewis
Hurd Reeves