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DATE: |
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TO: |
Office of Commission Clerk (Cole) |
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FROM: |
Division of Engineering (Ellis) Division of Economics (Garl) Office of the General Counsel (Tan) |
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RE: |
Docket No. 130073-EQ – Petition for approval of revisions to standard offer contract and rate schedules COG-1 and COG-2, by Tampa Electric Company. |
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AGENDA: |
06/25/13 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate |
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COMMISSIONERS ASSIGNED: |
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PREHEARING OFFICER: |
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SPECIAL INSTRUCTIONS: |
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FILE NAME AND LOCATION: |
S:\PSC\ENG\WP\130073.RCM.DOC |
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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 or Company) filed its petition for approval of an amended standard offer contract on April 1, 2013.
TECO’s standard offer contract is based on an unsited natural gas-fired combustion turbine (CT) with a 2020 in-service date. This unit is included in the Company’s proposed 2013 Ten-Year Site Plan.
On May 13, 2013, TECO submitted a revised tariff sheet to correct an error in the determination of annual scheduled maintenance.
The Commission has jurisdiction over this contract pursuant to Sections 366.04 through 366.06 and 366.91, F.S., and Rules 25-17.200 to 25-17.310, F.A.C.
Issue 1:
Should the Commission approve the standard offer contract and related rate schedules filed by Tampa Electric Company?
Recommendation:
Yes. The revised standard offer contract and related rate schedules conform to all the requirements of Rules 25-17.200 through 25-17.310, F.A.C., and reflect the economic and technical assumptions of the avoided unit, a 2020 CT. The standard offer contract provides flexibility for developers of renewable generation in payments and other terms. Staff recommends that the revised standard offer contract and related rate schedules filed by TECO be approved. (Ellis)
Staff Analysis:
Pursuant to Rule 25-17.250, F.A.C., an IOU 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 kilowatt (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.
TECO’s standard offer contract is based on its proposed 2013 Ten-Year Site Plan which includes two generating unit additions, the Polk 2-5 combined cycle (CC) conversion in 2017 and an unsited CT in 2020. On January 8, 2013, the Commission granted the determination of need for the Polk 2-5 CC conversion.[1] Based on Rule 25-17.250(2), F.A.C., the Polk 2-5 CC conversion is not avoidable for purposes of the standard offer contract. TECO’s proposed 2013 standard offer contract is based on an unsited 190 megawatt (MW) natural gas-fired CT with an in-service date in May, 2020.
Revised Standard Offer Contract
A renewable generator can elect to have no performance guarantees 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 payments, it would receive those payments starting on the in-service date of the avoided unit, May 2020. If early or early levelized capacity payments were selected, those payments would begin at an earlier date. Early or early levelized payments 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 security from the renewable generator. Table 1 below estimates the annual payments that would be made to a renewable facility of 50 megawatts (MW) running at a 90 percent capacity factor, with an in-service date of January 1, 2014.
Table 1 – Estimated Annual Payments to a 50 MW Renewable Facility (90% Capacity Factor)
Year |
Energy Payment |
Capacity Payment by Type |
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Normal |
Levelized |
Early |
Early Levelized |
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($000) |
($000) |
($000) |
($000) |
($000) |
|
2014 |
14,734 |
- |
- |
2,258 |
2,736 |
2015 |
15,701 |
- |
- |
2,323 |
2,744 |
2016 |
17,700 |
- |
- |
2,391 |
2,752 |
2017 |
14,949 |
- |
- |
2,461 |
2,760 |
2018 |
15,719 |
- |
- |
2,532 |
2,769 |
2019 |
16,944 |
- |
- |
2,606 |
2,778 |
2020 |
17,879 |
3,104 |
3,592 |
2,682 |
2,786 |
2021 |
19,255 |
4,792 |
5,404 |
2,760 |
2,796 |
2022 |
19,254 |
4,932 |
5,421 |
2,841 |
2,805 |
2023 |
22,627 |
5,075 |
5,438 |
2,924 |
2,814 |
2024 |
23,966 |
5,223 |
5,455 |
3,009 |
2,824 |
2025 |
24,257 |
5,375 |
5,473 |
3,097 |
2,834 |
2026 |
23,780 |
5,532 |
5,491 |
3,187 |
2,845 |
2027 |
27,384 |
5,693 |
5,510 |
3,280 |
2,855 |
2028 |
28,004 |
5,859 |
5,529 |
3,376 |
2,866 |
2029 |
28,436 |
6,030 |
5,548 |
3,474 |
2,877 |
2030 |
28,719 |
6,206 |
5,568 |
3,575 |
2,888 |
2031 |
31,969 |
6,387 |
5,589 |
3,680 |
2,900 |
2032 |
33,415 |
6,574 |
5,610 |
3,787 |
2,912 |
2033 |
33,740 |
6,766 |
5,631 |
3,898 |
2,924 |
Sum |
458,432 |
77,550 |
75,259 |
20,139 |
56,465 |
NPV |
201,198 |
27,588 |
27,588 |
27,588 |
27,588 |
TECO’s revised tariff sheets reflect changes associated with the economic and technical parameters of the 2020 CT as compared to the previous avoided unit. Some maintenance costs were shifted from variable operations & maintenance (O&M) to fixed O&M, based on TECO’s use of service contracts for periodic CT maintenance. On May 13, 2013, TECO submitted revised tariff sheets to reflect updated information regarding the maintenance schedule of the 2020 CT.
TECO’s proposed standard offer also includes two revisions related to indemnification and insurance required for interconnection. The first revision references state and federal law relating to government entities, and acknowledges that in the event of a claim, legislative action may be required above certain amounts. The second revision allows for a self-insurance option for companies upon approval by TECO, with an annual requirement for the renewable generator to demonstrate its continued ability to self-insure. The option to self-insure increases the flexibility of the standard offer for renewable generators. Beyond these revisions, all other terms, such as performance, payment, and security are retained from the previous 2012 standard offer contract and related rate schedules. The proposed revised tariff sheets are attached to this recommendation in type and strike format as Attachment A.
Conclusion
The revised standard offer contract and related rate schedules conform to all the requirements of Rules 25-17.200 through 25-17.310, F.A.C., and reflect the economic and technical assumptions of the avoided unit, a 2020 CT. The standard offer contract provides flexibility for developers of renewable generation in payments and other terms. Staff recommends that the revised standard offer contract and related rate schedules filed by TECO be approved.
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, TECO’s standard offer contract may subsequently be revised. (Tan)
Staff Analysis:
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, TECO’s standard offer contract may subsequently be revised.
[1] See Order No. PSC-13-0014-FOF-EI, issued January 8, 2013, in Docket 120234-EI, In re: Petition to determine need for Polk 2-5 combined cycle conversion, by Tampa Electric Company.