Case Background
On July 28,
2017, Tampa Electric Company (TECO or Company) petitioned the Florida Public
Service Commission (Commission) to approve the second phase of its Coal
Combustion Residuals Compliance Program (CCR Program) for cost recovery through
the Environmental Cost Recovery Clause (ECRC). The first phase of TECO’s CCR Program
was approved in Docket 20150223-EI, and included activities such as dust
control, inspections, groundwater monitoring, and engineering evaluations of
other compliance measures. TECO has determined that the Big Bend
Economizer Ash & Pyrites Ponds (EAPP), one of its CCR management units,
must be closed in order to comply with the provisions of the CCR Rule.
On April 17,
2015, the United States Environmental Protection Agency (EPA) published its CCR
Rule which established the minimum criteria for the safe disposal in new and
existing surface impoundments and landfills of CCR generated from the
combustion of coal at electric utilities and independent power producers. The effective date of the Rule was October
19, 2015, and the Rule is self-implementing. The second phase of TECO’s program
was developed in response to the EPA’s CCR Rule.
In the 2017 Environmental Cost Recovery
Docket, the Commission approved the following stipulation regarding Phase II of
the TECO CCR Program:
Approval of
the projected revenues for the costs associated with the Phase II of the CCR Program
is conditioned on this Commission’s approval of the CCR Program in Docket No.
20170168-EI. To the extent the scope of the CCR Program costs differ from costs
of the approved program in Docket No. 20170168-EI, the revenues collected for
the CCR Program in Docket No. 20170007-EI shall be subject to true-up.
By Section
366.8255, Florida Statues (F.S.), the Florida Legislature authorized the recovery
of prudently incurred environmental compliance costs through the environmental
cost recovery clause. The method for cost recovery for such costs was first
established by Order No. PSC-94-0044-FOF-EI issued on January 12, 1994. The Commission has jurisdiction over this
matter pursuant to Section 366.8255, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve Tampa Electric Company’s petition for
approval of the second phase of its proposed CCR Compliance Program for cost recovery
through the Environmental Cost Recovery Clause?
Recommendation:
Yes. Staff recommends that the Commission approve
TECO’s second phase of its proposed CCR Compliance Program to comply with the EPA’s
CCR Rule. The Economizer Ash Closure Project is a compliance activity
associated with the Company’s previously approved CCR Compliance Program. Staff
recommends that the operations and maintenance (O&M) costs associated with
this project be allocated to rate classes on an energy basis and capital costs
to complete this project should be allocated to appropriate rate classes on a
demand basis. (Mtenga,Wu)
Staff Analysis:
The EPA’s final CCR Rule sets forth the minimum
criteria for the safe disposal of CCR in landfills and surface impoundments at
sites where electric utilities use the combustion of coal as an energy source
to fuel steam generating units, such as TECO’s Big Bend Station. The CCR Rule
applies to new and existing active landfills and surface impoundments that are
used by electric utilities for the purpose of solid waste management of CCR,
including CCR units located off the site of the power plant and certain
inactive CCR impoundments. Inactive impoundments are those that no longer
receive CCR on or after the October 19, 2015, effective date of the final CCR Rule.
The second phase of TECO’s CCR Compliance Program and the
Economizer Ash Closure Project is substantially similar to the compliance plans
filed by TECO in Docket No. 20150223-EI. It is also similar to plans for
compliance with the CCR Rule approved for Florida Power & Light Company,
Duke Energy Florida, LLC and Gulf Power Company in previous ECRC proceedings. At
40 C.F.R. Part 257.60(a), the CCR rule requires a five-foot separation between
the base of any CCR impoundment and the uppermost aquifer. Water level data
that was collected during the first phase of the CCR Compliance Program
indicate the bottom of the EAPP is significantly less than five feet from the
uppermost aquifer. After evaluation of allowable alternatives, TECO decided to
perform closure through removal because the project was the most cost effective
alternative that satisfied the rule requirements. TECO
has proposed the closure of the EAPP by October 19, 2021, with the O&M
expenditures for the project beginning in the fourth quarter of 2017.
The work to be completed includes dewatering and excavation of the site, CCR
transport and disposal, site restoration, engineering, and post closure
groundwater monitoring. The estimated cost for the closure project is
approximately $30 million, as shown below in Table 1-1.
Table 1-1
Estimated O&M and
Capital Costs
|
Description of Work
|
Capital ($)
|
O&M ($)
|
Total ($)
|
|
Dewatering & Excavation
|
-
|
2,714,800
|
2,714,800
|
|
CCR Transport & Disposal
|
-
|
25,752,000
|
25,752,000
|
|
Engineering
|
400,000
|
-
|
400,000
|
|
Site Restoration
|
1,009,000
|
-
|
1,009,000
|
|
Post Closure Groundwater Demonstration/Monitoring
|
-
|
116,400
|
116,400
|
|
Total
|
1,409,000
|
28,583,200
|
29,992,200
|
Source: TECO’s
petition
The costs shown in Table 1-1 above were developed by TECO
based on previous experience with similar work performed at the Big Bend Station,
discussions with professionals knowledgeable in these areas, and guidance
obtained from the CCR Rule. These costs are consistent with costs approved in the
TECO CCR Project in Docket No. 20150223-EI. TECO provided details on the
projects and the development of estimated costs in its responses to Staff’s First
Data Request. Table 1-2 below shows the estimated impact of this project on residential
customer monthly bills.
Table 1-2
Monthly Bill Impact
(1,000 kWh Bill)
|
Year
|
Monthly Impact($)
|
|
2018
|
0.41
|
|
2019
|
0.61
|
|
2020
|
0.43
|
|
2021
|
0.02
|
|
2022
|
0.01
|
Source: TECO’s
responses to Staff’s First Data Request No. 11
Based on
the petition and TECO’s responses to Staff’s First Data Request, staff
recommends that TECO’s second phase of its CCR Compliance Program is necessary
for compliance with the EPA’s CCR Rule. The criteria for ECRC recovery relevant
to this docket, established by Order No. PSC-94-0044-FOF-EI, are:
(1)
The activities are legally required to comply with
governmentally imposed environmental regulation enacted, became effective, or
whose effect was triggered after the Company’s last test year upon which rates
are based; and
(2)
None of the expenditures are being recovered through
some other cost recovery mechanism or through base rates.
Based on staff’s analysis of the docket material, the
activities proposed in TECO’s petition meet these criteria. Based on the
information in the docket file and the CCR Rule, staff recommends these
activities are essential projects that would not be necessary but for TECO’s
obligation to comply with government imposed environmental regulation. The need
for these compliance activities was triggered after TECO’s last test year upon
which rates are currently based. Finally, the costs of the proposed compliance activities
are not currently being recovered through some other cost recovery mechanism or
through base rates. Staff notes that the reasonableness and prudence of
individual expenditures related to the second phase of TECO’s CCR Compliance Program
will continue to be subject to the Commission’s review in future ECRC
proceedings.
Conclusion
Staff recommends that the Commission approve TECO’s second
phase of its proposed CCR Compliance Program to comply with the CCR Rule. The
Economizer Ash Closure Project is a compliance activity associated with the Company’s
previously approved CCR Compliance Program. Staff recommends that the O&M
cost associated with this project be allocated to rate classes on an energy
basis and capital costs to complete this project be allocated to appropriate
rate classes on a demand basis.
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
proposed agency action. (Cuello)
Staff Analysis:
If no timely protest to the proposed agency action
is filed within 21 days, 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
proposed agency action.
