DATE:	June 13, 2013
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Engineering (Matthews) Division of Economics (Garl) Office of the General Counsel (Corbari)
RE:	Docket No. 130072-EQ – Petition for approval of renewable energy tariff and standard offer contract, by Florida Power & Light Company.
AGENDA:	06/25/13 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Administrative
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\ENG\WP\130072.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) filed its petition for approval of a renewable energy standard offer contract on April 1, 2013. 

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 revised standard offer contract filed by Florida Power & Light Company?

Recommendation: 

 Yes.  The provisions of FPL’s 2013 standard offer contract and related rate schedule QS-2 exceed the requirements of Rules 25-17.200 through 25-17.310, F.A.C.  FPL does not have any avoidable fossil fueled generating units or avoidable power purchases in the upcoming ten-year planning period.  However, in an effort to encourage renewable generation, FPL has identified its next avoidable unit rather than offer only energy payments in its standard offer contract.  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, the revised standard offer contract and rate schedule QS-2 submitted by FPL should be approved as filed.  (Matthews)

 Staff Analysis: 

 Rule 25-17.250, F.A.C., requires that FPL, an IOU, 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(1), F.A.C., the standard offer contract must provide a term of at least ten years, and the payment terms must 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.

FPL’s 2013 Ten-Year Site Plan does not include any avoidable fossil fueled generating units, nor are there any planned purchases to be avoided or deferred during the 2013-2022 planning period.  As a result of this lack of any avoidable unit or purchase, FPL could opt to offer only a standard contract for energy payments based on its as-available energy cost.  However, in an effort to encourage renewable generation, FPL has identified its next avoidable unit which is a 1,322 MW natural gas-fired combined cycle (CC) unit at a greenfield site with an expected in-service date of June 1, 2025.

Any RF/QF operator may elect to make no commitment as to the quantity or timing of its energy deliveries to FPL, and have a committed capacity of zero (0) MW.  In such a case the energy is delivered on an as-available basis and is eligible for only the energy payment.  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 an agreed-upon amount of capacity by the in-service date, and thereby become eligible for capacity payments in addition to the payments for energy.  The standard offer contract often serves as a starting point for a separately negotiated contract by providing payment information to RF/QF operators that wish to have contract terms which differ from those of the standard offer contract.

To promote RF/QF generation, the Commission requires IOUs to offer multiple options for capacity payments so that an RF/QF operator may select the payment stream that best suits its financial requirements, 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 after the in-service date of the avoided  unit (June 1, 2025), and thereafter will begin receiving capacity payments in addition to the energy payments.  If either the early or the early levelized option is selected, the operator will begin receiving capacity payments sooner than the in-service date of the avoided unit.  However, payments made under either of the early payment 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 each payment option available under the current standard offer contract to an 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 minimum capacity factor required to qualify for full capacity payments.

Table 1-- Estimated Annual Payments to a 50 MW Renewable Facility (94% Capacity Factor)

 

FPL’s petition includes fourteen revised sheets plus two original sheets.  The Standard Offer Contract contains six revised sheets plus one new (original) sheet, and the associated Rate Schedule QS-2 contains eight revised sheets plus one new (original) sheet.  The revisions include updates for the avoided unit, dates, and payment information which reflects the current economic and financial assumptions for the avoided unit.  All of the changes made to the revised standard offer contract and related rate schedule sheets, as well as the economic and financial assumptions used in the contract, are consistent with the updated unit.  The type-and-strike format version of the revised standard offer contract and related rate schedule sheets are included as Attachment A to this recommendation.

The provisions of FPL’s 2013 standard offer contract and related rate schedule QS-2 exceed the requirements of Rules 25-17.200 through 25-17.310, F.A.C.  FPL does not have any avoidable fossil fueled generating units or avoidable power purchases in the upcoming ten-year planning period.  However, in an effort to encourage renewable generation, FPL has identified its next avoidable unit rather than offer only energy payments in its standard offer contract.  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 recommends the revised standard offer contract and rate schedule QS-2 submitted by FPL should be approved as filed.
Issue 2:  Should this docket be closed?

Recommendation: 

 Yes. This docket 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.  Potential signatories should be aware that, if a timely protest is filed, FPL’s standard offer contract may subsequently be revised.  (Corbari)

Staff Analysis: 

 This docket should be closed upon the 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.  Potential signatories should be aware that, if a timely protest is filed, FPL’s standard offer contract may subsequently be revised.