Discussion
of Issues
Issue 1:
Should the Commission approve the revised standard
offer contract and schedule COG-2 filed by Duke Energy Florida, LLC.?
Recommendation:
Yes. The provisions of DEF’s revised standard offer
contract and schedule COG-2 conform to all requirements of Rules 25-17.200
through 25-17.310, F.A.C. DEF’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 DEF, 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 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 identified
in its most recent Ten-Year Site Plan or, if no avoided unit is identified, its
next avoidable planned purchase.
DEF has identified an 849 megawatt (MW) natural gas-fueled
combustion turbine (CT) facility as its next planned generating unit in its
2016 Ten-Year Site Plan. The projected in-service date of the unit is June 1,
2024.
The RF/QF operator may elect to make no commitment as to
the quantity or timing of its deliveries to DEF, 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 an 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 each 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, 2024), and thereafter begin
receiving capacity payments in addition to the energy payments. If either the
early or 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 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 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 capacity factor of 95 percent, which is the minimum capacity factor
required under the contract to qualify for full capacity payments. Normal and
levelized capacity payments begin in 2024, reflecting the projected in-service
date of the avoided unit (June 1, 2024).
Table 1 – Estimated Annual Payments to a 50 MW
Renewable Facility
(95%
Capacity Factor)
|
Year
|
Energy Payment
|
Capacity Payment
(By Type)
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2017
|
15,088
|
-
|
-
|
-
|
-
|
|
2018
|
15,560
|
-
|
-
|
-
|
-
|
|
2019
|
15,690
|
-
|
-
|
-
|
-
|
|
2020
|
16,384
|
-
|
-
|
-
|
-
|
|
2021
|
18,086
|
-
|
-
|
-
|
-
|
|
2022
|
20,049
|
-
|
-
|
2,185
|
2,510
|
|
2023
|
21,004
|
-
|
-
|
2,239
|
2,513
|
|
2024
|
21,877
|
1,688
|
1,917
|
2,295
|
2,517
|
|
2025
|
22,502
|
2,967
|
3,291
|
2,352
|
2,521
|
|
2026
|
23,457
|
3,041
|
3,296
|
2,411
|
2,525
|
|
2027
|
23,553
|
3,117
|
3,301
|
2,472
|
2,529
|
|
2028
|
24,388
|
3,195
|
3,306
|
2,533
|
2,533
|
|
2029
|
25,442
|
3,275
|
3,311
|
2,597
|
2,537
|
|
2030
|
25,801
|
3,356
|
3,317
|
2,662
|
2,542
|
|
2031
|
26,813
|
3,440
|
3,323
|
2,728
|
2,546
|
|
2032
|
27,531
|
3,526
|
3,328
|
2,796
|
2,551
|
|
2033
|
28,505
|
3,614
|
3,334
|
2,866
|
2,555
|
|
2034
|
29,647
|
3,705
|
3,340
|
2,938
|
2,560
|
|
2035
|
30,825
|
3,797
|
3,347
|
3,011
|
2,565
|
|
2036
|
31,837
|
3,892
|
3,353
|
3,087
|
2,570
|
|
Total
|
464,040
|
42,614
|
41,764
|
39,172
|
38,073
|
|
NPV (2017$)
|
235,340
|
17,211
|
17,211
|
17,211
|
17,211
|
DEF’s revised tariff sheets of the standard offer
contract, in type-and-strike format, are included as Attachment A to this
recommendation. All of the changes made to DEF’s 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 costs. Other changes are primarily intended
for clarification purposes.
Conclusion
The
provisions of DEF’s revised standard offer contract and schedule COG-2 conform
to all requirements of Rules 25-17.200 through 25-17.310, F.A.C. DEF’s revised
standard offer contract provides flexibility in the arrangements for payments
so that a developer of renewable generation my select the payment stream best
suited to its financial needs. Staff recommends that DEF’s revised standard
offer contract and related rate schedule 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, DEF’s standard offer contract may subsequently be revised. (Murphy)
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, DEF’s standard offer contract may
subsequently be revised.
