Case Background
On April 19,
2016, Duke Energy Florida, LLC (Duke) filed a petition for approval of
modifications to its standby generation program tariff and program participation
standards (program standards).
The standby
generation program is one of several commercial/industrial programs the
Commission approved in 2015 as part of Duke’s Demand Side Management (DSM) plan
and associated tariffs. The standby generation program is designed
to reduce Duke’s peak demand based on control of customer equipment. The
program is voluntary and is available to all commercial and industrial
customers that have on-site generation capability and are willing to reduce
their Duke demand when required by initiating their own generation. The program
is offered through rate schedule GSLM-2, and provides monthly credits based on
the participants’ ability to reduce demand.
Based on Environmental
Protection Agency (EPA) regulations regarding emission standards for standby
generation equipment in effect in 2015, Duke’s standby generation program was
split into two options: Schedule A (emergency standby generation) and Schedule
B (non-emergency standby generation). Schedule A was open to customers whose standby
generation equipment was not compliant with EPA regulations, but could be
dispatched by Duke up to 100 hours during emergency situations (i.e., severe
capacity constraints on Duke’s system). Schedule B was open only to those
customers whose equipment was compliant with EPA regulations and could be
dispatched by Duke any time.
Effective May 1,
2016, revised EPA regulations require owners of generators to comply with new
emission standards for hazardous air pollutants. Therefore, customers with
standby generation equipment that is not compliant with EPA regulations face
more restrictions on operation, which limits the ability of Duke to dispatch
them as necessary. Duke’s proposed tariff modifications
update the tariff to conform with the revised EPA regulations and allow
non-compliant (i.e., Schedule A) customers to remain on the tariff until
December 31, 2016, so that those customers have time to bring their generation
equipment into compliance.
Duke’s original April
19, 2016 proposed tariff revisions reference specific EPA rules with which customers
with standby generation must comply. On May 11, 2016, Duke filed revised tariff
pages that substituted generic language for the technical language used in the
original filing. On May 13, 2016, Duke filed revised
program standards consistent with the revised tariff pages filed on May 11,
2016. Attachment 1 contains the May 11 proposed tariff. Exhibit D to the
petition contains a sample copy of the letter Duke sent to its standby
generation customers. The Commission has jurisdiction over this matter pursuant
to Sections 366.03, 366.04, 366.05, and 366.06, Florida Statutes.
Discussion
of Issues
Issue 1:
Should the Commission approve Duke’s proposed
modifications to its standby generation tariff and program standards effective
December 31, 2016, and allow Schedule A customers to remain on the tariff until
December 31, 2016, to bring their generation equipment into compliance with the
revised EPA rules?
Recommendation:
Yes, staff recommends that the Commission approve Duke’s
proposed modifications to its standby generation tariff and program standards
effective December 31, 2016, and allow current Schedule A customers to remain
on the tariff until December 31, 2016, to bring their generation equipment into
compliance with the revised EPA rules. (Ollila, Wooten)
Staff Analysis:
Duke’s proposed modifications update its standby tariff
and program participation standards to conform with current EPA regulations. Customers
with standby generation include grocery stores and hospitals. Duke currently
has 288 customers on the standby tariff.
Duke’s original proposed modifications contained language
specific to the applicable federal regulation. In the May 11 revisions, Duke
removed language referring to specific EPA requirements and replaced it with generic
terms, i.e., applicable federal, state, and local codes and rules. The revision
also includes language stating that customers are responsible for ensuring that
equipment remains compliant with all applicable federal, state, and local codes
and rules.
Beginning in April 2016, Duke contacted its standby
customers by letter, email, telephone calls, and face-to-face meetings to
explain the EPA rule changes and Duke’s proposals. The letter explained the
rule changes and the customers’ options. The letter asked that the customer
provide Duke with notice of whether or not the customer’s equipment is
compliant by May 31, 2016. If the equipment is not compliant, the letter asked
if the customer intends to upgrade its equipment, and if yes, asked the
customer to attest to that compliance prior to December 31, 2016. For customers
who are not compliant, Duke proposes that they be given until December 31, 2016
to comply. Duke reported that as of June 15, 2016, 141 of the 288 customers
participating in the standby program comply with current EPA regulations, 10 are
not compliant but intend to upgrade, 15 are non-compliant and do not intend to
upgrade, and 122 responses are pending.
Customers who are not compliant by December 31, 2016 will
be removed from the standby generation tariff. Customers will need to provide
certification that their generation equipment is compliant with all applicable
federal, state, and local codes and rules in order to continue participation in
the standby generation program and tariff.
All customers are credited a monthly amount based on their
standby generator rating (capacity) as well as an amount when the standby
generator is used. Customers who do not certify that their equipment is
compliant will continue to be credited the monthly amount based on their
standby generator rating until they are removed from the tariff effective
December 31, 2016.
Schedule A customers who certify that their equipment is
compliant will receive an increase in the per kilowatt hour (kWh) credit from
$0.05 to the Schedule B credit of $0.50 per kWh. Providing a greater credit per
kWh, according to Duke, serves as an incentive for Schedule A customers to
become compliant, which in turn provides Duke with more flexibility in its use
of standby generation.
The only change to the current program standards is in Section
3, which was made to be consistent with the tariff language.
Conclusion
Staff believes that current regulations necessitate Duke’s
tariff modification and that Duke’s more generic wording is reasonable and likely
to promote efficiency by requiring fewer tariff changes in the future. The
proposed change to the program participation standards comports with the tariff
modifications. Staff believes it is reasonable to give customers who are not
compliant an opportunity to upgrade their equipment in order to become
compliant and that Duke’s proposed effective date for customers to become
compliant is also reasonable.
Staff recommends that the Commission approve Duke’s
proposed modifications to its standby generation tariff and program standards
effective December 31, 2016, and allow current Schedule A customers to remain
on the tariff until December 31, 2016, to bring their generation equipment into
compliance with the revised EPA rules.
Issue 2: Should this
docket be closed?
Recommendation:
If Issue 1 is approved and no timely protest is
filed, this docket should be closed upon the issuance of a consummating order.
(Brownless)
Staff Analysis:
If Issue 1 is approved and no timely protest is
filed, this docket should be closed upon the issuance of a consummating order.
