DATE:	July 31, 2014
TO:	Office of Commission Clerk (Stauffer)
FROM:	Division of Economics (Garl) Office of the General Counsel (M. Brown) Office of Industry Development and Market Analysis (B. Crawford)
RE:	Docket No. 140070-EI – Petition for approval of voluntary solar partnership pilot program and tariff, by Florida Power & Light Company.
AGENDA:	08/12/14 – Regular Agenda – Tariff Filing – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Brown
CRITICAL DATES:			12/02/14 (8-Month Effective Date)
SPECIAL INSTRUCTIONS:			None

 

 Case Background

On April 2, 2014, Florida Power & Light Company (FPL) filed a petition requesting Commission approval of a three-year Voluntary Solar Partnership (VSP) Pilot Program.  The new program would offer all FPL customers an opportunity to participate voluntarily in a program designed to contribute to the construction and operation of solar photovoltaic generation facilities located in communities throughout FPL’s service territory.  The renewable energy generated from these solar facilities would provide power to all FPL customers and displace energy that would otherwise be produced from fossil fuels. 

On May 22, 2014, the Commission suspended FPL’s proposed tariff in Order No. PSC-14-0253-PCO-EI.[1]  During its evaluation of the petition, staff issued two data requests to FPL.  The questions posed by staff were to clarify financial matters of the proposed program.  The Commission has jurisdiction in this matter pursuant to Sections 366.05, 366.06, and 366.075, Florida Statutes (F.S.).

 

 

Discussion of Issues

Issue 1: 

 Should the Commission approve the proposed VSP Pilot Program and tariff?

Recommendation: 

 Yes.  The Commission should approve FPL’s VSP Pilot Program and associated tariff.  The tariff should be effective May 1, 2015, with enrollments beginning in January 2015.  (Garl, B. Crawford)

Staff Analysis: 

  FPL’s proposed VSP Pilot Program offers customers an opportunity, for $9.00 per month, to voluntarily contribute towards the construction and operation of supply-side solar generation facilities owned by FPL in its service territory.  The program would be available to all residential, commercial, and industrial customers.  FPL would use the voluntary contributions to support the net revenue requirement (revenue requirements minus avoided fuel and emissions costs) of constructing and operating relatively small solar generating facilities.  The revenue requirement includes a return, depreciation, operations and maintenance (O&M) expenses, and other costs such as property taxes and insurance.  O&M expenses include site monitoring and repairs, vegetation management, and maintenance.  The electricity generated by the solar generation facilities would displace fuel that otherwise would have been used for generation, resulting in avoided fuel and emissions costs.  The size of the solar projects would be determined by the contributions received.  The VSP Pilot Program period will be three years to allow FPL to gather information on participation, revenue generation, and costs to operate the program to determine the appropriate direction for the program thereafter. 

In analyzing the VSP Pilot Program, staff focused on ensuring both participants and non-participants are protected from unintended consequences of the program.  Participants must have some assurance that their $9.00 per month contributions are used as intended.  Nonparticipants must be shielded from subsidizing the program.

Participant protection

FPL has incorporated numerous features in the VSP Pilot Program that will provide a level of comfort to participants that the program will function as designed.  These features include:

·        Participation in the VSP Pilot Program will be voluntary.

·        The VSP Pilot Program will be offered on a month-to-month basis.

·        Customers may enroll or cancel their enrollment at any time.

·        Participation could be continued to a new service address, at the customer’s request, if the customer moves within FPL’s service territory.

·        Participation will not change the participants’ monthly electric bill, other than the voluntary contributions.

·        Marketing and administrative expenses are capped at 20 percent of participant contributions.  Any marketing and administrative expenses above the 20 percent cap will be borne by FPL shareholders.

·        Each quarter, FPL will provide participants a report on the amount of energy the program produced.

·        Participants may go to the program website to see how much electricity is produced from the solar facilities and the corresponding fuel and environmental benefits.

With respect to the marketing and administrative expenses, FPL states that it intends to actively encourage enrollment in the VSP Pilot Program through various means.  Marketing expenses include internal labor that is not recovered in base rates, email, newsletters, and digital channels.  Administrative costs include a project manager, financial reporting, and customer service.  FPL expects initial marketing and administrative expenses to exceed 20 percent of the revenues; however, FPL committed to recording below-the-line any such expenses above the 20 percent threshold.   FPL will manage the program with FPL employees and use Florida-based contractors to build the solar facilities.

Non-participant protection

FPL structured the VSP Pilot Program to preclude non-participating customers from being affected.  First, the VSP Pilot Program is unrelated to FPL’s existing Demand Side Management (DSM) solar pilot program and will not be funded from the general body of ratepayers through the Energy Conservation Cost Recovery Clause.  The program is designed to be a supply-side resource that will be owned and operated by FPL.

Second, FPL will size the solar projects based on the level of participation, so that participant contributions will approximate the project revenue requirement net of estimated avoided fuel and emissions costs.  The estimated fuel and emission savings are $0.05 per kilowatt-hour.[2]  FPL states that its objective is for there to be no remaining costs of the solar facilities to be borne by non-participating customers at the end of the three-year pilot period.  In response to a staff data request, FPL explained that should the VSP Pilot Program be terminated after the three-year trial period, and in the event that the participant contributions and avoided fuel/emission benefits did not cover the remaining revenue requirements, FPL and its shareholders will absorb the difference below-the-line.

Other program features

FPL states that it will begin construction of solar projects in January 2015, in advance of receiving contributions.  The first 300 kW will be comprised of 2 to 5 individual projects ranging from 50 kW to 100 kW in size.  For these initial projects, FPL will construct, operate, and own ground mounted systems or rooftop installations on structures such as commercial parking canopies in several metropolitan areas throughout FPL’s service territory.  FPL states that to the extent possible the solar projects will be located in high visibility areas to further educate customers about and promote solar energy in Florida.   

Since there is no active market for Renewable Energy Credits (RECs) in Florida, FPL has not included REC value in the VSP Pilot Program economics.  If FPL is able to monetize RECs produced by the program, any revenue generated from REC sales will benefit participants by reducing the net revenue requirements that are to be covered by participant contributions.

At the end of three years, FPL will report to the Commission on the data gathered.  The Commission will then determine if the program will be terminated or continued.  If terminated at the end of the pilot period, FPL would cease active enrollment of customers, and would not invest in new solar projects after termination, but would leave the tariff open for existing participants to remain in the program.  Continuing participant contributions will likely cover the declining revenue requirements even with a modest attrition rate.  Eventually, the avoided fuel and emission benefits of the solar energy production will be greater than the revenue requirements of the project, and there would be no additional net costs thereafter.

In its petition, FPL describes an additional incentive to encourage enrollment during the three-year pilot period.  Shareholders of FPL’s parent company, NextEra Energy, Inc. (NEE), through its NEE Foundation, will contribute $200,000 annually for the duration of the pilot program to non-profit organizations dedicated to environmental protection or community development.  VSP Pilot Program participants will vote from a list of Florida-based non-profit organizations or local chapters of national non-profit organizations that are located in or near the communities where the projects are constructed.

If approved, the VSP Pilot Program will be open for enrollment in January 2015, with billing for the monthly contributions to start in May 2015.  FPL requests that the tariff be effective May 1, 2015, with enrollments beginning in January 2015.  The proposed tariff is included as Attachment 1. 

Conclusions

The program appears to provide participants assurance that their voluntary contributions will be used as intended, as well as ensuring that non-participants will not be subsidizing the program.  Staff, therefore, recommends approval of the VSP Pilot Program and tariff.

Issue 2: 

 Should this docket be closed?

Recommendation: 

 Yes.  If Issue 1 is approved, and a protest is filed within 21 days of the issuance of the order, the tariffs should remain in effect, with any revenues held subject to refund, pending resolution of the protest.  If no timely protest is filed, this docket should be closed upon the issuance of a consummating order.  As noted in Issue 1, the tariff will become effective on May 1, 2015.  (M. Brown)

Staff Analysis: 

 If Issue 1 is approved, and a protest is filed within 21 days of the issuance of the order, the tariffs should remain in effect, with any revenues held subject to refund, pending resolution of the protest.  If no timely protest is filed, this docket should be closed upon the issuance of a consummating order.  As noted in Issue 1, the tariff will become effective on May 1, 2015.