Case Background
The Florida
Public Service Commission (Commission) is the exclusive forum for the
determination of need and necessity for additional generating units under the
Florida Electrical Power Plant Siting Act (PPSA), as established in Section
403.519, Florida Statutes (F.S.). As part of PPSA, the Commission must take
into account whether a unit is necessary given (a) the need for electric system
reliability and integrity, (b) the need for adequate electricity at a
reasonable cost, (c) the need for fuel diversity and supply reliability, (d)
whether the proposed plant is the most cost-effective alternative available,
and (e) whether renewable energy sources and technologies, as well as
conservation measures, are utilized to the extent reasonably available.
The Commission
adopted Rule 25-22.082, Florida Administrative Code (F.A.C.), also referred to informally
as the Bid Rule, which requires investor-owned electric utilities to issue a
request for proposal (RFP) for the selection of generating capacity that would
be subject to the PPSA. The RFP process assists in the determination of whether
a unit is the most cost-effective alternative by publishing the electric
utility’s requested needs and opening the process to competitive proposals.
Rule
25-22.082(18), F.A.C., provides an exemption from the requirement to issue an
RFP if the Commission finds that certain showings are met by an electric
utility. On May 22, 2017, Florida Power & Light Company (FPL or Company)
filed a petition to request exemption from the RFP requirement under Rule 25-22.082(18),
F.A.C., for its modernization of the Lauderdale plant, which is to be renamed
the Dania Beach Clean Energy Center (Dania Beach Project or Project).
The Commission
has jurisdiction in this matter pursuant to Sections 366.05 and 403.519, F.S.
Discussion
of Issues
Issue 1:
Should the Commission grant FPL's petition for
exemption from the RFP requirement of Rule 25-22.082, F.A.C., for the
modernization of the Lauderdale Plant?
Recommendation:
Yes. The Dania Beach Project meets the requirements
for exemption under Rule 25-22.082(18), F.A.C., by reusing the existing
Lauderdale plant site and related facilities for a newer, larger, and more
efficient unit. Granting the exemption will not relieve the Company of any
requirements during a future PPSA need determination proceeding, including a
demonstration that the project is the most cost-effective source of power or
whether conversion or renewable generation can mitigate the need for the modernization
of the Lauderdale Plant. (Ellis, Murphy)
Staff Analysis:
Rule 25-22.082(18), F.A.C., states:
Upon a showing by a public utility and a finding by the
Commission that a proposal not in compliance with this rule’s provisions will
likely result in a lower cost supply of electricity to the utility’s general
body of ratepayers, increase the reliable supply of electricity to the
utility’s general body of ratepayers, or otherwise will serve the public
welfare, the Commission shall exempt the utility from compliance with the rule
or any part of it for which such justification is found.
As set forth below, staff believes that the Dania Beach
Project meets all three criteria for an exemption from the Bid Rule by reusing
the existing Lauderdale plant site and related facilities for a newer, larger,
and more efficient unit.
Project Description
The Dania Beach Project will retire and remove Lauderdale
Units 4 and 5 from FPL’s Lauderdale plant in Broward County. These units are
natural gas-fired combined cycle units in a 2x1 configuration with a combined
summer peak capacity of 884 megawatts (MW). The two steam generators were built
in 1957 and 1958, respectively, and were converted to combined cycle units with
the addition of four combustion turbines installed in 1993. The Dania Beach
Project would replace these units with a single natural gas-fired combined
cycle unit in a 2x1 configuration with a peak capacity of 1,163 MW with an
in-service date of June 2022.
A central component of FPL’s argument for the exemption from
the RFP requirement is that FPL’s reuse of an existing plant site provides
numerous economic and qualitative benefits that would be unmatched by any
potential RFP respondent. The Lauderdale site currently features access to
transmission, natural gas pipelines, and water supply facilities near a major
load pocket that can be utilized by the new generating unit. Staff agrees that
it is unlikely that a respondent to an RFP could provide similar benefits, but the
Commission has the opportunity to formally review these facts in a future PPSA need
determination proceeding, as outlined below.
Lower Cost
Supply of Electricity
FPL states that the Lauderdale Units 4 and 5 are at the
bottom of FPL’s combined cycle fleet dispatch order. Data provided shows that
the Lauderdale units had the highest average net operating heat rates, a
measure of fuel efficiency, of FPL’s 16 combined cycle units, using approximately
8,000 British Thermal Units (BTU) of fuel per kilowatt-hour (kWh) of energy
produced. By comparison, the Dania Beach Project will have a heat rate of approximately
6,120 BTU/kWh, which will result in a considerable fuel savings over the life
of the Dania Beach unit compared to the existing Lauderdale units. Staff
believes that while RFP respondents may be able to match the fuel efficiency of
the proposed Dania Beach Project by using similar generating technologies, they
would likely experience higher total costs to acquire a plant site and install
the necessary infrastructure such as transmission, fuel transportation and
storage, and water supply.
FPL notes an alternative to new generation would be
operating the existing Lauderdale units uneconomically to maintain system
reliability. However, FPL states that its proposed Project represents a savings
of $400 million in net present value for the Dania Beach Project from fuel
savings, O&M savings, and avoided capital replacement costs over this
alternative. A second alternative is the construction of additional
transmission facilities to import more electricity from outside of the
Broward/Miami-Dade area, but the Company asserts that this is likely to be more
expensive than the proposed Project. Respondents with proposed facilities outside
the Broward-Miami/Dade area would also see higher costs associated with
additional transmission needed to deliver the power to customers. Based on the
above, the Dania Beach Project meets the standard in that it is likely to
result in a lower cost supply of electricity to the Company’s general body of
ratepayers. Regardless of the alternative considered, the Commission has an
opportunity in a future PPSA need determination proceeding to review whether these
and other options are the most cost-effective alternative, along with the need
for adequate electricity at a reasonable cost.
Increase
Reliability
In its Petition, FPL asserts that no other viable sites
are available to economically provide generating capacity within the company’s Southeastern
Florida service area where the Company is projecting transmission constraints.
As noted above, the modernization of the Lauderdale site to the Dania Beach
Clean Energy Center would increase the generating capacity of the facility by
approximately 280 MW with minimal additional transmission facilities. This will
allow FPL to defer or reduce the amount of transmission upgrades necessary to
provide reliable service to the area. Therefore the Dania Beach Project meets
the standard as it is likely to increase the reliable supply of electricity to
the Company’s general body of ratepayers. The Commission will still have an
opportunity in a future PPSA need determination proceeding to review whether
there is a need for the generation for electrical system reliability and
integrity, and whether renewable energy sources and technologies, as well as
conservation measures, are utilized to the extent reasonably available to meet
reliability needs.
Other Public
Benefits
The use of an existing site with a more efficient unit has
several public benefits, including; reduced emissions related to energy
production, temporary construction jobs, and reduction of land impact for the
facility and related infrastructure. FPL estimates that nitrogen oxides would
be reduced by 95 percent and carbon dioxide reduced by 25 percent. Construction
of the facility would temporarily create up to 650 jobs at its peak. Similar
benefits would be available to an RFP respondent for emissions and construction
jobs, but an RFP respondent is unlikely to provide the same benefits associated
with reuse of an existing plant site by not requiring additional land being
disturbed for generation, transmission, fuel transportation and storage, or
water supply. As a result, the Dania Beach Project meets the standard as it is
likely to provide other benefits to the public. As with the other factors, the
Commission will still have an opportunity to review these in a future PPSA need
determination proceeding, and any other matters the Commission may determine to
be relevant.
Similar Prior
Orders
The Commission previously has granted exemptions from the
Bid Rule for the modernizations of FPL’s plants at Cape Canaveral, Riviera
Beach, and Port Everglades.
The circumstances of each of these were similar in that they involved the replacement
of existing power plants with new, more efficient facilities and reusing
existing support infrastructure. A primary difference between these prior
dockets is that the prior projects were replacing fossil steam generators,
while the instant docket replaces older combined cycle units.
Conclusion
The Dania Beach Project meets the requirements for
exemption under Rule 25-22.082(18), F.A.C., by reusing the existing Lauderdale
plant site and related facilities for a newer, larger, and more efficient unit.
Therefore staff recommends approval of FPL’s petition for exemption from the
RFP requirements of the Bid Rule for the modernization of the Lauderdale plant.
Granting the exemption will not relieve the Company of any requirements during
a future PPSA need determination process, including a demonstration that the
project is the most cost-effective source of power or whether conversion or
renewable generation can mitigate the need for the modernization of the
Lauderdale Plant.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, this docket should be closed upon the issuance of a
consummating order. (Murphy)
Staff Analysis:
At the conclusion of the protest period, if no
protest is filed this docket should be closed upon the issuance of a
consummating order.
