Discussion
of Issues
Issue 1:
Should the Commission approve the revised standard
offer contract and schedule COG-2 filed by Tampa Electric Company?
Recommendation:
Yes. The provisions of TECO’s revised schedule COG-2
for the standard offer contract conform to all requirements of Rules 25-17.200
through 25-17.310, F.A.C. TECO’s 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. (Lee)
Staff Analysis:
Rule 25-17.250, F.A.C., requires that TECO, 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 kilowatt (kW) or less. Pursuant
to Rule 25-17.250(1) and (3), F.A.C., the standard offer contract must provide
a term of at least 10 years, and the payment terms must be based on the utility’s
next avoidable fossil-fueled generating unit as identified in its most recent
Ten-Year Site Plan, or if no avoided unit is identified, its next avoidable
planned purchase.
TECO has identified a 220 megawatt (MW) natural gas-fired
combustion turbine as its next avoidable fossil-fueled generating unit in its
2016 Ten-Year Site Plan. The projected in-service date of the unit is May 1,
2020.
The RF/QF operator may elect to make no commitment as to
the quantity or timing of its deliveries to TECO, 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 identified avoided unit, such as being operational
and delivering the agreed upon amount of capacity by the in-service date of the
avoided unit, and thereby becomes eligible for capacity payments in addition to
payments received for energy. The standard offer contract may 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 an 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, May 1, 2020), and thereafter will receive capacity
payments in addition to the energy payments. If either the early or levelized
option is selected, then the operator will begin to receive capacity payments
earlier than the in-service date of the avoided unit. However, payments made under
the early capacity payment option 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 payment options.
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 90 percent capacity factor, which is the minimum capacity factor required
to qualify for full capacity payments. Normal and levelized capacity payments
begin 2020, reflecting the projected in-service date of the avoided unit (May
1, 2020).
Table 1-Estimated
Annual Payments to a 50 MW Renewable Facility
(90% Capacity Factor)
|
Year
|
Energy Payment
|
Capacity Payment
(By Type)
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2017
|
10,372
|
0
|
0
|
2,725
|
3,198
|
|
2018
|
11,101
|
0
|
0
|
2,792
|
3,209
|
|
2019
|
11,770
|
0
|
0
|
2,862
|
3,220
|
|
2020
|
13,625
|
2,562
|
2,937
|
2,933
|
3,232
|
|
2021
|
12,955
|
2,626
|
2,948
|
3,005
|
3,244
|
|
2022
|
13,940
|
2,691
|
2,958
|
3,080
|
3,257
|
|
2023
|
15,560
|
2,758
|
2,969
|
3,157
|
3,269
|
|
2024
|
17,670
|
2,826
|
2,981
|
3,235
|
3,282
|
|
2025
|
17,108
|
2,896
|
2,992
|
3,315
|
3,295
|
|
2026
|
17,309
|
2,968
|
3,004
|
3,398
|
3,309
|
|
2027
|
18,404
|
3,042
|
3,016
|
3,482
|
3,323
|
|
2028
|
22,172
|
3,117
|
3,029
|
3,568
|
3,337
|
|
2029
|
21,170
|
3,195
|
3,042
|
3,657
|
3,351
|
|
2030
|
21,797
|
3,274
|
3,055
|
3,748
|
3,366
|
|
2031
|
24,950
|
3,355
|
3,068
|
3,841
|
3,382
|
|
2032
|
23,237
|
3,439
|
3,082
|
3,936
|
3,397
|
|
2033
|
27,033
|
3,524
|
3,096
|
4,034
|
3,413
|
|
2034
|
28,671
|
3,612
|
3,110
|
4,134
|
3,430
|
|
2035
|
29,198
|
3,701
|
3,125
|
4,237
|
3,446
|
|
2036
|
27,930
|
3,793
|
3,140
|
4,342
|
3,464
|
|
Total
|
385,971
|
53,380
|
51,550
|
69,479
|
66,425
|
|
NPV (2017$)
|
194,138
|
37,369
|
37,369
|
37,369
|
37,369
|
TECO’s revised tariff sheets for the standard offer
contract, in type-and-strike format, are included in Attachment A. All of the
changes made to the tariff sheets are consistent with the updated avoided unit.
Revisions include updates to the avoided unit, dates, and payment information
which reflect the current economic and financial assumptions for the avoided
unit.
Conclusion
The provisions of TECO’s revised schedule COG-2 for the
standard offer contract conform to all of the 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 TECO’s revised tariff sheets for the standard offer contract 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, TECO’s
standard offer contract may subsequently be revised. (Lherisson)
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, TECO’s standard offer contract may
subsequently be revised.
