DATE:	June 7, 2012
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Regulatory Analysis (Graves) Office of the General Counsel (Robinson)
RE:	Docket No. 120072-EQ – Petition for approval of renewable energy tariff and standard offer contract, by Florida Power & Light Company.
AGENDA:	06/19/12 – Regular Agenda – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Administrative
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\RAD\WP\120072.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.  Florida Power & Light Company (FPL or Company) filed its petition for approval of an amended standard offer contract on April 2, 2012.

 

The Commission has jurisdiction over this standard offer contract pursuant to Sections 366.04 through 366.06 and 366.91, F.S.

Discussion of Issues

Issue 1: 

 Should the Commission approve the standard offer contract and the associated renewable energy tariff filed by Florida Power & Light Company?

Recommendation: 

 Yes.  The revised standard offer contract and related tariffs filed on April 2, 2012, comply with Rules 25-17.200 through 25-17.310, F.A.C.  (Graves)

Staff Analysis: 

 Because FPL is an IOU, Rule 25-17.250, F.A.C., requires it to 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 kilowatts or less. 

            FPL’s 2011 standard offer contract, filed on April 1, 2011, was based on a 1,191 megawatt (MW) natural gas-fired combined cycle unit with an in-service date of June 1, 2016.  The Commission approved FPL’s 2011 standard offer contract on October 4, 2011.[1]  On November 21, 2011, FPL filed a petition seeking an affirmative determination of need for modernization of its Port Everglades Energy Center with a proposed in-service date of June 1, 2016.  The Port Everglades Energy Center (1,277 MW) represented FPL’s natural gas-fired combined cycle unit, previously identified in its 2011 standard offer contract.   

            With the filing of the need determination, FPL’s next avoided unit changed and most of the cost data in its 2011 standard offer contract had to be revised to reflect the new next avoided unit.  On November 28, 2011, FPL filed a revised 2011 standard offer contract which was based on a 1,262 MW combined cycle unit at a greenfield site with an in-service date of June 1, 2021.  The Commission voted to approve FPL’s determination of need for the Port Everglades Energy Center as well as the revised standard offer contract on March 27, 2012.[2] 

FPL’s 2012 Ten-Year Site Plan (TYSP), filed with the Commission on April 2, 2012, does not contain the aforementioned 2021 combined cycle unit or any other avoidable fossil fueled generating unit.  Pursuant to Rule 25-17.250(1), F.A.C., each investor-owned utility with no planned generating unit identified in its Ten-Year Site Plan shall submit a standard offer contract based on avoiding or deferring a planned purchase.    Relying on updated analyses using updated assumptions FPL determined that a need for additional capacity in 2021 remains, however, the Company is currently assuming its 2021 need will be met with a one-year, 250 MW, power purchase agreement.  Table 1 below, summarizes FPL’s recent standard offer contract related filings.

Table 1:  Summary of Recent Filings

Following the one-year power purchase agreement the projected addition of Turkey Point Nuclear Units 6 and 7 will provide an additional 1,110 MW of capacity in 2022 and 2023 thus maintaining FPL’s 20 percent reserve margin.  Subsequent to the addition of Turkey Point Units 6 and 7 FPL’s next avoidable fossil fuel-fired generating unit has a projected in-service date in 2025 which is beyond the ten-year planning horizon.  

In its petition, FPL submitted a total of 5 revised tariff sheets, including 1 revised sheet of FPL’s renewable standard offer contract and 4 revised sheets corresponding to FPL’s QS-2 rate schedule.  All of the revised sheets reflect changes associated with the planned purchase.  Beyond these revisions, all other terms, such as provisions for performance, payment, and security are retained from the 2011 standard offer contract and related tariffs.  The revised tariff sheets filed by FPL are included in Attachment A, to this recommendation.

A renewable generator can elect to have no performance requirements and simply deliver energy on an as-available basis.  If the renewable generator commits to certain performance requirements based on the planned purchase, 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.  Because the planned purchase is for one year only, election of a normal capacity payment would result in a capacity payment for only one year, and revenue for all other years would be received based on as-available energy payments.  This is illustrated in Table 2 below.  Staff would note that standard offer contracts often serve as a starting point for negotiated contracts by providing information regarding payments.            

To promote renewable generation, the Commission requires multiple options for capacity 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 planned purchase.   

If Early or Early Levelized capacity payments are selected, those payments would begin at an earlier date but tend to be less in the outer 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 2 estimates the annual payments that would be made to a renewable facility of 50 MW running at a 94 percent capacity factor, with an in-service date of 2012.

 

Table 2 - Estimated Annual Payments to a 50 MW Renewable Facility (94% Capacity Factor)

Conclusion

The provisions of the 2012 standard offer contract and related tariffs conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C.  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.  As such, staff believes the revised standard offer contract and related tariffs filed on April 2, 2012, by FPL 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 related tariffs submitted by FPL, and no person whose substantial interests are affected requests a hearing to address this matter, then Docket No. 120072-EG should be closed, and the standard offer contracts and related tariffs submitted by FPL 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 tariffs should remain in effect pending resolution of the protest.  Potential signatories to the standard offer contract should be aware that FPL’s tariffs and standard offer contracts may be subject to a request for hearing, and if a hearing is held, may be subsequently revised.  (Robinson)

Staff Analysis: 

 If the Commission approves staff’s recommendation to approve the proposed standard offer contract and related tariffs submitted by FPL, and no person whose substantial interests are affected requests a hearing to address this matter, then Docket No. 120072-EG should be closed, and the standard offer contracts and related tariffs submitted by FPL 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 tariffs should remain in effect pending resolution of the protest.  Potential signatories to the standard offer contract should be aware that FPL’s tariffs and standard offer contracts may be subject to a request for hearing, and if a hearing is held, may be subsequently revised.