DATE:	June 13, 2013
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Engineering (Graves, Buys) Division of Economics (Garl) Office of the General Counsel (Corbari, Tan)
RE:	Docket No. 130068-EI – Petition for approval of amended standard offer contract (Schedule COG-2), by Progress Energy Florida, Inc.   Docket No. 130069-EI – Petition for approval of new standard offer contract (Schedule COG-2A), by Progress Energy Florida, Inc.
AGENDA:	06/25/13 – Regular Agenda – Proposed Agency Action - Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Edgar
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\ENG\WP\130068.and 130069.RCM.DOC

 

 Case Background

Section 366.91(3), Florida Statutes (F.S.), requires that each investor owned electric utility (IOU) continuously offers to purchase capacity and energy from renewable energy generators.  Commission Rules 25-17.200 through 25-17.310, Florida Administrative Code (F.A.C.), implement the statute, and require each IOU to file with the Commission by April 1 of each year a standard offer contract based on the next avoidable fossil fueled generating unit of each technology type identified in the utility’s Ten-Year Site Plan.  On March 28, 2013, Progress Energy Florida, Inc. (PEF) filed a petition for approval of amended standard offer contract, based on a combined cycle avoided unit, and a petition for approval of a new standard offer contract, based on a combustion turbine avoided unit.  On April 30, 2013, PEF filed a notice that it has changed its name to Duke Energy Florida, Inc. (DEF).  Also, on April 29, 2013, DEF re-submitted portions of its previous filings to reflect the new company name and logo.  On June 4, 2013, DEF filed a correction to one page in both dockets.

The Commission has jurisdiction over these standard offer contracts pursuant to Sections 366.04 through 366.06 and 366.91, F.S., and Commission Rules 25-17.200 through 25-17.310, F.A.C.

 

Discussion of Issues

Issue 1: 

 Should the Commission approve the amended standard offer contract filed by Duke Energy Florida, Inc. in Docket No. 130068-EI?

Recommendation: 

 Yes.  The provisions of the amended standard offer contract and associated schedules, as filed on April 29, 2013, including the amendment filed on June 4, 2013, conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C.  The amended 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.  (Buys, Graves)

Staff Analysis: 

 Because DEF is an IOU, Rule 25-17.250, F.A.C., requires that it continuously make available a standard offer contract for the purchase of firm capacity and energy from renewable generating facilities (RF) and small qualifying facilities (QF) with design capacities of 100 kilowatts (kW) or less.  Pursuant to Rule 25-17.250, F.A.C., the standard offer contract must provide a term of at least ten years and be based on the utility’s next avoidable fossil-fueled generating unit identified in its most recent Ten-Year Site Plan or, if no avoided unit is identified, its next avoidable planned purchase.  DEF has identified a 1,189 megawatt (MW) natural gas-fired combined cycle unit as its next fossil-fueled generating unit in its 2013 Ten-Year Site Plan.  The projected in-service date of this unit is June 1, 2018.

Revised Standard Offer Contract

The RF/QF operator may elect to make no commitment as to the quantity or timing of its deliveries to DEF, and to have a committed capacity of zero (0) MW.  Under such a scenario, the energy is delivered on an as-available basis and only an energy payment is made.  Alternatively, the RF/QF operator may elect to commit to certain minimum performance requirements based on the avoided unit, such as being operational and delivering the agreed upon amount of capacity by the in-service date, and thereby become eligible for capacity payments in addition to those made for energy.  If the RF/QF operator wishes to have contract terms that are different from those offered under the standard offer contract, the parties may enter into a negotiated contract instead.

In order to promote renewable generation, the Commission requires the IOU to offer multiple options for capacity payments, including the options to receive early or levelized payments.  If the RF/QF operator elects to receive capacity payments under the normal or levelized contract options, it will receive as-available energy payments only until the in-service date of the avoided unit (June 1, 2018), and thereafter begin receiving capacity payments in addition to the energy payments.  If either the early or early levelized option is selected, then the operator will begin receiving capacity payments earlier than the in-service date of the avoided unit.  However, payments made under the early capacity payments options tend to be lower in the later years of the contract term because the net present value (NPV) of the total payments must remain equal for all contract options.  In addition, any capacity payments made which are greater than those called for under the normal option require additional performance security from the RF/QF operator. 

Table 1 estimates the annual payments for all payment options that would be made under the amended standard offer contract to an RF/QF operator with a 50 MW facility and an in-service date of January 1, 2014, operating at a capacity factor of 87 percent, which is the lowest capacity factor required to qualify for a full capacity payment.  The minimum capacity factor required to qualify for any capacity payment is 67 percent.  The capacity factor requirements are based on the projected availability of the avoided unit.  Table 1 includes the net present values, in 2014 dollars, for each of the contract payment options.   

Table 1 – Estimated Annual Payments to a 50 MW Renewable Facility (87% Capacity Factor)

 

DEF submitted a total of twelve revised tariff sheets, including seven revised sheets of the standard offer contract and five revised sheets corresponding to Rate Schedule COG-2.  The type-and-strike format versions of the revised tariff sheets are included as Attachment A to this recommendation.  All of the changes made to the tariff sheets are consistent with the updated avoided unit.  Revisions include an updated example of monthly capacity payments, updates to calendar dates, as-available energy costs, estimated unit fuel costs, line loss data, and performance security.  DEF also made one grammatical change. 

 

Conclusion

The provisions of the amended standard offer contract and related schedules conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C.  The amended 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 amended standard offer contract and related schedules, as filed on April 29, 2013, including the amendment filed on June 4, 2013, should be approved.

Issue 2: 

 Should the Commission approve the new standard offer contract filed by Duke Energy Florida, Inc. in Docket No. 130069-EI?

Recommendation: 

 Yes.  The provisions of the DEF’s new standard offer contract and associated schedules, as filed on April 29, 2013, including the amendment filed on June 4, 2013, 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.  (Graves, Buys)

Staff Analysis: 

 Pursuant to Rule 25-17.250, F.A.C., a separate standard offer contract shall be based on the utility’s next avoidable fossil-fueled generating unit of each technology type.  As described in Issue 1, DEF has identified a combined cycle unit, with a 2018 in-service date, as its next fossil-fueled generating unit.  DEF has additionally projected the need for a 187 MW combustion turbine (CT) unit with a June 1, 2022, in-service date.     

New Standard Offer Contract

Table 2 estimates the annual payments for all payment options that would be made under the new standard offer contract to an RF/QF operator with a 50 MW facility and an in-service date of January 1, 2014, operating at a capacity factor of 94 percent, which is the lowest capacity factor required to qualify for a full capacity payment.  The minimum capacity factor required to qualify for any capacity payment is 74 percent.  As discussed in Issue 1, the capacity factor requirements are based on the projected availability of the avoided unit.  

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

For the CT avoided unit, DEF filed a new standard offer contract and new schedule COG-2A.  The contents of the new standard offer contract are the same as the amended standard offer contract discussed in Issue 1; however, certain performance requirements and payments are different based on the projected generator capabilities of the CT Avoided Unit.  The new standard offer contract and new schedule COG-2A are included as Attachment B to this recommendation.   

Conclusion

The provisions of the DEF’s new standard offer contract and related schedules 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 new standard offer contract and related schedules, as filed on April 29, 2013, including the amendment filed on June 4, 2013, should be approved.

 

 

Issue 3: 

 Should Docket Nos. 130068-EI and 130069-EI be closed?

Recommendation: 

 Yes. These dockets should be closed upon issuance of a Consummating Order, unless a person whose substantial interests are affected by the Commission’s decision files a protest within 21 days of the issuance of the Commission’s proposed agency action order.   If a protest to one docket is filed, the protest should not prevent the action proposed herein from becoming final with regard to the remaining docket.  Potential signatories should be aware that, if a timely protest is filed, DEF’s standard offer contract may subsequently be revised.  (Corbari, Tan)

Staff Analysis: 

 These dockets should be closed upon issuance of a Consummating Order, unless a person whose substantial interests are affected by the Commission’s decision files a protest within 21 days of the issuance of the Commission’s proposed agency action order.   If a protest to one docket is filed, the protest should not prevent the action proposed herein from becoming final with regard to the remaining docket.  Potential signatories should be aware that, if a timely protest is filed, DEF’s standard offer contract may subsequently be revised.