DATE:	June 7, 2012
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Regulatory Analysis (Ellis) Office of the General Counsel (Robinson)
RE:	Docket No. 120071-EQ – Petition for approval of new standard offer for purchase of firm capacity and energy from renewable energy facilities or small qualifying facilities and approval of revised tariff schedule REF-1, by Gulf Power Company.
AGENDA:	06/19/12 – Regular Agenda – Tariff Filing – 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\120071.06-07-12.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.  Gulf Power Company (Gulf 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 filed by Gulf Power Company?

Recommendation: 

 Yes.  The proposed standard offer contract and related tariffs submitted by Gulf conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C.  (Ellis)

Staff Analysis: 

Pursuant to the relevant Rule 25-17.250(1), F.A.C., Gulf is required to continuously make available a standard offer contract for the purchase of firm capacity and energy from renewable energy facilities or small qualifying facilities with a design capacity of 100 kilowatts (kW) or less.  Gulf complied with the Commission’s Rule through its standard offer contract and related tariff schedule REF-1.

The standard offer contract’s language is updated on an annual basis to reflect the utility’s next avoidable generating unit on which the contract’s performance characteristics and payments are based.  Based on its 2012 Ten-Year Site Plan, Gulf has not identified any fossil-fueled generating units for the period 2012-2021.  Gulf also has no avoidable purchased power agreements within this period.

As a result, Gulf has the option of offering an energy-only standard offer contract, but to encourage renewable generation, the Company has identified the next avoidable unit.  The unit would be a 349 megawatt (MW) natural gas-fired combustion turbine with a projected in-service date of June 1, 2022.  The proposed modifications to Gulf’s standard offer contract reflect this projected unit.

Gulf’s petition seeks modification to three tariff sheets.  These modifications reflect the change in size of the avoided unit on Sheet No. 9.82, an example capacity payment streams for the new avoided unit on Sheet No. 9.85, and changes in technical and economic characteristics on Sheet No. 9.103.  These changes are reflective of the most recent avoided unit identified by Gulf and the Company’s economic assumptions.  These tariff sheets are included as Attachment A.

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 payments under the normal or levelized option, it would receive capacity payments starting on June 1, 2022.  If the early or early levelized options are selected, capacity payments may begin earlier than June 1, 2022, but the renewable generator is required to provide sufficient security to ensure ratepayers are not impacted in the event of a default.  In all cases, capacity payments over the full term of the standard offer contract are equivalent in terms of net present value, regardless of the option selected. 

Energy payments are based on a comparison of when the avoided unit would have been dispatched, with payments based on the avoided unit’s projected energy rate, and when the unit would not have been dispatched, with payments based on the as-available energy rate.  The renewable generator would receive payments based on the as-available energy rate for the period before the in-service date of June 1, 2022.

Table 1, below, provides an estimate of the firm capacity and energy payments to a renewable generator with a 50 MW capacity, operating at a 90 percent capacity factor, which is the lowest allowable capacity factor to receive the full capacity payment.  For a renewable generator that does not provide firm capacity, it would receive only the energy portion of the payments listed below, which is based on an annual production of 394,200 megawatt-hours (MWh).

Table 1 – Estimated Payments to 50 MW Renewable Generator with 90% Capacity Factor

 

Beyond the revisions discussed above, all other terms, such as provisions for performance, payments, and security, are the same as the 2011 standard offer contract and related tariffs.

The provisions of the proposed standard offer contract and related Tariff REF-1 submitted by Gulf conform to all the requirements of Rules 25-17.200 through 25-17.310, F.A.C.  The standard offer contract offers flexibility in the arrangements for payments so that a developer of renewable generator may select the payment stream best suited to its financial needs.  As such, staff believes the proposed modifications to the standard offer contract and related tariffs submitted by Gulf should be approved as filed.

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 tariff submitted by Gulf, and no person whose substantial interests are affected requests a hearing to address this matter, then Docket No. 120071-EQ should be closed, and the standard offer contracts and related tariff submitted by Gulf 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 Gulf’s tariff and standard offer contract 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 tariff submitted by Gulf, and no person whose substantial interests are affected requests a hearing to address this matter, then Docket No. 120071-EQ should be closed, and the standard offer contract and related tariff submitted by Gulf 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 Gulf’s tariff and standard offer contract may be subject to a request for hearing, and if a hearing is held, may be subsequently revised.