DATE:	June 26, 2014
TO:	Office of Commission Clerk (Stauffer)
FROM:	Division of Engineering (Matthews, Mtenga) Office of the General Counsel (Tan)
RE:	Docket No. 140068-EQ – Petition for approval of a renewable energy tariff and standard offer contract, by Florida Power & Light Company.
AGENDA:	07/10/14 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Administrative
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None

 

 Case Background

Section 366.91(3), Florida Statutes (F.S.) requires that each investor-owned 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 to purchase the capacity and energy from such renewable generators, with estimated payments based on the next avoidable fossil fueled generating unit of each technology type identified in the utility’s current Ten-Year Site Plan.

Florida Power & Light (FPL or Utility) did not have any avoidable fossil fueled generating unit or avoidable power purchases in its 2013 Ten-Year Site Plan.  However, in an effort to encourage renewable generation, in 2013 FPL identified 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, as its next avoidable unit so that capacity payments could be offered in addition to energy payments.  FPL’s 2014 Ten-Year Site Plan includes both CC and combustion turbine (CT) technology; therefore, both units are identified as avoidable units on which to base standard offer contracts.

On April 1, 2014, FPL filed a petition for approval of a revised standard offer contract and associated rate schedule based on a combined cycle avoided unit, and also filed a new standard offer contract and associated rate schedule based on a combustion turbine avoided unit.

The Commission has jurisdiction over these standard offer contracts 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 the revised standard offer contract and related rate schedule QS-2 conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C.  The revised 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.  Staff recommends that the revised standard offer contract and related rate schedule QS-2 submitted by FPL be approved as filed.  (Matthews)

Staff Analysis: 

 Rule 25-17.250, F.A.C., requires that FPL, an IOU, continuously makes 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 Rules 25-17.250(1) and (3), 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 2014 Ten-Year Site Plan includes both CC and CT units, and therefore both types of technology provide the bases for avoided units.  FPL has identified for its CC technology type a 1,337 megawatt (MW) greenfield unit with an in-service date of June 1, 2019. 

The RF/QF operator may elect to make no commitment as to the quantity or timing of its deliveries to FPL, and to have a committed capacity of zero (0) MW.  Under such a scenario, the energy is delivered on an as-available basis and the operator receives only an 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 the agreed upon amount of capacity by the in-service date, and thereby becomes eligible for capacity payments in addition to payments received for energy.  The standard offer contract can also serve as a starting point for negotiation of contract terms by providing payment information to an RF/QF operator, in a situation where one or both parties desire particular contract terms other than those established in the standard offer.

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 (in this case, June 1, 2019), 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 a RF/QF operator. 

Table 1 below estimates the annual payments for each payment option available under the revised standard offer contract to an operator with a 50 MW facility operating at a capacity factor of 94 percent, which is the minimum capacity factor required to qualify for full capacity payments.  Normal and levelized capacity payments begin in 2019, reflecting the in-service date of the avoided CC unit (June 1, 2019).

 

Table 1-- Estimated Annual Payments to a 50 MW Renewable Facility

(94% Capacity Factor)

*Figures in table may not add exactly to totals due to rounding.

The type-and-strike format versions of the revised rate schedule QS-2 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, and estimated unit fuel costs.

Conclusion

The provisions of the revised standard offer contract and related rate schedule QS-2 conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C.  The revised 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.  Staff recommends that the revised standard offer contract and related rate schedule QS-2 be approved as filed.

Issue 2: 

 Should the Commission approve the new standard offer contract filed by Florida Power & Light Company?

Recommendation: 

 Yes.  The provisions of FPL’s new standard offer contract and related rate schedule QS-2A conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C.  The new 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.  Staff recommends that the new standard offer and related rate schedule QS-2A be approved as filed.  (Matthews) 

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, FPL has identified a 1,337 megawatt (MW) greenfield unit with an in-service date of June 1, 2019, as its avoided unit for the CC technology.  However, FPL has also included a CT unit in its current Ten-Year Site Plan, and has therefore identified that unit as an avoidable unit on which to base a standard offer contract.  The CT generating unit is specified to be a 1,005 MW unit in Broward County with an in-service date of January 1, 2018.

Table 2 estimates the annual payments for each payment option available under the new standard offer contract to an operator with a 50 MW facility operating at a capacity factor of 94 percent, which is the minimum capacity factor required to qualify for full capacity payments.  Normal and levelized capacity payments begin in 2018, reflecting the in-service date of the avoided CT unit (January 1, 2018).

The proposed new rate schedule QS-2A is included as Attachment B to this recommendation.  All of the terms and economic assumptions and estimates are consistent with the identified avoided unit.

 

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

 

Conclusion

The provisions of the new standard offer contract and related rate schedule QS-2A conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C.  The new 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.  Staff recommends that the new standard offer contract and rate schedule QS-2A be approved as filed.

Issue 3: 

 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.  (Tan)

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.