DATE:	June 7, 2012
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Regulatory Analysis (S. Brown) Office of the General Counsel (Robinson)
RE:	Docket No. 120074-EI – Petition for approval of revisions to standard offer contract and rate schedules COG-1 and COG-2, by Tampa Electric Company.
AGENDA:	06/19/12 – Regular Agenda – Tariff Filing – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Edgar
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\RAD\WP\120074.RCM.DOC

 

Case Background

Section 366.91(3), Florida Statutes (F.S.), requires that each investor-owned utility (IOU) continuously offer to purchase capacity and energy from renewable energy generators.  Rules 25-17.200 through 25-17.310, Florida Administrative Code (F.A.C.), require each IOU to file with the Commission by April 1 of each year a standard offer contract based on the next avoidable generating unit or planned purchase.  Tampa Electric Company (TECO) filed its petition for approval of an amended standard offer contract on April 2, 2012.

TECO’s standard offer contract is based on its proposed 2012 Ten-Year Site Plan (TYSP).  The company’s TYSP includes generating capacity additions in 2017 and 2019.  The 2017 addition is 463 megawatts (MW) of incremental capacity from the conversion of existing combustion turbines (CTs), Polk units 2 through 5, into a combined cycle (CC) unit.  The 2019 addition is a 177 MW CT.  Rule 25-17.250(2) requires that approved standard offer contracts remain open until a request for proposal (RFP) is issued for the utility’s planned generating unit.  Because the 2017 Polk conversion is the subject of an issued RFP, TECO is proposing a standard offer based on the 2019 CT.

On May 1, 2012, TECO submitted responses to Staff’s First Data Request Nos. 1-10 relating to the company’s proposed standard offer contract.  On May 21, 2012, TECO submitted revised tariff sheets and revised responses to correct an error in the calculation of escalation of fixed and variable operation and maintenance (O&M).

The Commission has jurisdiction over this contract pursuant to Sections 366.04 and 366.91, F.S. and Rules 25-17.200 to 25-17.310, F.A.C.

Discussion of Issues

Issue 1: 

 Should the Commission approve the standard offer contract filed by Tampa Electric Company?

Recommendation: 

 Yes.  The standard offer contract and related tariffs comply with Rules 25-17.200 through 25-17.310, F.A.C., and should be approved.  (Brown)

Staff Analysis: 

 Pursuant to Rule 25-17.250, F.A.C., an investor-owned utility must continuously make available a standard offer contract for the purchase of firm capacity and energy from renewable generating facilities and small qualifying facilities with a design capacity of 100 kW or less.  Rule 25-17.250(1), F.A.C., specifies that the standard offer contract must be based on the next avoidable fossil fueled generating unit identified in the utility’s Ten-Year Site Plan (TYSP).  In addition, each investor-owned utility with no planned generating unit identified in its Ten-Year Site Plan, shall submit a standard offer based on avoiding or deferring a planned purchase.

TECO’s proposed 2012 standard offer contract is based on its 2012 Ten-Year Site Plan.  The company’s TYSP includes generating capacity additions in 2017 and 2019.  The 2017 addition is 463 megawatts (MW) of incremental capacity from the conversion of existing combustion turbines (CTs), Polk units 2 through 5, into a combined cycle (CC) unit.  An RFP for the 463 MW of capacity was issued on March 23, 2012.  The list of potential providers from the RFP will be screened, evaluated, and condensed to a short list of finalists that will be announced in June 2012.  TECO’s 2019 addition is a 177 MW CT. 

Rule 25-17.250(2), F.A.C., requires that approved standard offer contracts remain open until an RFP is issued for the utility’s planned generating unit.  As previously mentioned, an RFP has been issued for the conversion of the Polk units, therefore exempting a need for a standard offer contract for the additional capacity.  As such, TECO is proposing a standard offer based on the 2019 CT.

A renewable generator can elect to have no performance requirements and deliver energy on an as-available basis.  If the renewable generator commits to certain performance requirements based on the avoided unit, including being online and delivering capacity by the in-service date, it can receive a capacity payment under the proposed standard offer contract or a separately negotiated contract.  To promote renewable generation, the Commission requires multiple options for capacity payments, including the option to receive Normal, Levelized, Early, or Early Levelized payments.

If a renewable generator elects to receive Normal or Levelized capacity payments, it would receive those payments starting on the in-service date of the avoided unit (2019).  If Early or Early Levelized capacity payments were selected, those payments would begin at an earlier date but tend to be less in the later years as the net present value of payments must remain the same.  In addition, capacity payments greater than those made under the Normal option require additional performance security from the renewable generator.  Table 1 below estimates the annual payments that would be made to a renewable facility of 50 MW running at a 90 percent capacity factor, with the avoided unit in-service date of 2019.

Table 1 - Estimated Annual Payments to a 50 MW Renewable Facility (90% Capacity Factor)

 

 

TECO originally submitted the revised sheets of its renewable standard offer contract and revised tariff sheets corresponding to its COG-1 and COG-2 rate schedules.  On May 21, 2012, TECO submitted revised tariff sheets and revised responses to correct an error in the calculation of escalation of fixed and variable O&M.  Other than these corrections to the originally submitted material, the remainder of the revised tariff sheets reflect changes associated with the 2019 CT’s new economic parameters.  Beyond these revisions, all other terms, such as performance, payment, and security are retained from the previous 2011 standard offer contract and related tariffs.  The proposed tariff sheets are attached to this recommendation in type and strike format as Attachment A.

The provisions of the 2012 standard offer contract and related tariffs submitted by TECO conform to all the requirements of Rules 25-17.200 through 25-17.310, F.A.C.  TECO has filed tariff sheets that reflect the economic and technical assumptions of the 2019 avoided unit.  The standard offer contract provides flexibility in the arrangements for payments so that a developer of renewable generation may select the payment stream best suited to its financial needs.  Staff believes the standard offer contract and related tariffs comply with Rules 25-17.200 through 25-17.310, F.A.C., and therefore should be approved.

Issue 2: 

 Should this docket be closed?

Recommendation: 

 Yes.  If the Commission approves staff’s recommendation to approve the proposed standard offer contract and tariff filed by TECO, and no person whose substantial interests are affected requests a hearing to address this matter, then Docket No. 120074-EI should be closed upon issuance of a consummating order, and the standard offer contract and tariff filed by TECO should be effective as of the date of the Commission’s vote.  If a protest is filed within 21 days of the issuance of the Commission’s Order, the tariff should remain in effect pending resolution of the protest.  Potential signatories to the standard offer contract should be aware that TECO’s tariff and standard offer contract may be subject to a request for hearing, and if a hearing is held, may subsequently be revised.  (Robinson)

Staff Analysis: 

 If the Commission approves staff’s recommendation to approve the proposed standard offer contract and tariff filed by TECO, and no person whose substantial interests are affected requests a hearing to address this matter, then Docket No. 120074-EI should be closed upon issuance of a consummating order, and the standard offer contract and tariff filed by TECO should be effective as of the date of the Commission’s vote.  If a protest is filed within 21 days of the issuance of the Commission’s Order, the tariff should remain in effect pending resolution of the protest.  Potential signatories to the standard offer contract should be aware that TECO’s tariff and standard offer contract may be subject to a request for hearing, and if a hearing is held, may subsequently be revised.