|
|
Public Service Commission
Capital Circle Office Center ● 2540 Shumard
Oak Boulevard
Tallahassee, Florida 32399-0850
-M-E-M-O-R-A-N-D-U-M-
|
|
DATE:
|
May 23, 2018
|
|
TO:
|
Office of Commission Clerk (Stauffer)
|
|
FROM:
|
Division of Engineering (Wooten, Ellis, Wright)
Division of Economics
(Wu)
Office of the General
Counsel (Murphy)
|
|
RE:
|
Docket No. 20180073-EQ – Petition for
approval of amended standard offer contract (Schedule COG-2) based on a
combustion turbine avoided unit, by Duke Energy Florida, LLC.
|
|
AGENDA:
|
06/05/18 – Regular Agenda – Proposed Agency Action – Interested
Persons May Participate
|
|
COMMISSIONERS ASSIGNED:
|
All Commissioners
|
|
PREHEARING OFFICER:
|
Administrative
|
|
CRITICAL DATES:
|
None
|
|
SPECIAL INSTRUCTIONS:
|
Staff recommends the
Commission simultaneously consider Docket Nos. 20180073-EQ, 20180081-EQ, 20180082-EQ,
20180083-EQ, and 20180091-EQ.
|
|
|
|
|
Case Background
Section
366.91(3), Florida Statutes (F.S.), requires that each investor-owned utility
(IOU) continuously offer to purchase capacity and energy from renewable energy generators
and small qualifying facilities. Florida Public Service Commission (Commission)
Rules 25-17.200 through 25-17.310, Florida Administrative Code (F.A.C.),
implement the statute and require each IOU to file with the Commission, by
April 1 of each year, a standard offer contract based on the next avoidable
fossil fueled generating unit of each technology type identified in the Utility’s
current Ten-Year Site Plan. On March 29, 2018, Duke Energy Florida, Inc. (DEF)
filed a petition for approval of its amended standard offer contract and rate
schedule COG-2 based on its 2018 Ten-Year Site Plan.
DEF uses a value
that is filed with the Federal Energy Regulatory Commission (FERC) every year
on May 1 as a component of the delivery voltage adjustment factors found on Sheet
9.458 of its standard offer contract. While this value has historically been
available for DEF’s standard offer contract filing, this year the value was
calculated after the April 1 filing deadline. On May 8, 2018, DEF provided
revisions to Sheet 9.458 containing updated delivery voltage adjustment factors
reflecting the newly calculated value filed with FERC. On May 16, 2018, DEF also filed revisions
to Sheet 9.415 correcting the cost of the avoided unit’s variable operation and
maintenance from 0.0931 cents per kilowatt-hour (¢/kWh) to 0.931 ¢/kWh.
In addition to
the above revisions, DEF’s standard offer contract and rate schedule COG-2 include
updates to avoided unit specifications, calendar dates, and a monthly capacity
payment example and its accompanying capacity payment parameters. Also included
are typographical corrections, updates to position titles, and a change to
DEF’s name from Duke Energy Florida, Inc., to Duke Energy Florida, LLC.
The Commission
has jurisdiction over this standard offer contract pursuant to Sections 366.04
through 366.06 and 366.91, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve the amended standard
offer contract and associated rate schedule COG-2 filed by Duke Energy Florida?
Recommendation:
Yes. The provisions of DEF’s amended standard offer
contract and associated rate schedule COG-2, as filed on March 29, 2018, and as
modified by the revisions to Sheet 9.458 filed on May 8, 2018, and Sheet 9.415
filed on May 16, 2018, conform to all requirements of Rules 25-17.200 through
25-17.310, F.A.C. The amended 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. (Wright)
Staff Analysis:
Rule 25-17.250, F.A.C., requires that DEF, 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 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 a 226 megawatt (MW) natural
gas-fueled combustion turbine (CT) as its next planned generating unit in its
2018 Ten-Year Site Plan. The projected in-service date of the unit is June 1,
2027.
Under DEF’s standard offer contract, the RF/QF operator
commits 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, 2027), and thereafter begin
receiving capacity payments in addition to the energy payments. If either the
early or early 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 payments 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 contains estimates of the annual payments for each payment option
available under the amended standard offer contract to an operator with a 50 MW
renewable 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 2027,
reflecting the projected in-service date of the avoided unit (June 1, 2027).
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)
|
$(000)
|
|
2019
|
8,553
|
-
|
-
|
-
|
-
|
|
2020
|
6,683
|
-
|
-
|
-
|
-
|
|
2021
|
5,323
|
-
|
-
|
-
|
-
|
|
2022
|
5,589
|
-
|
-
|
-
|
-
|
|
2023
|
6,343
|
-
|
-
|
-
|
-
|
|
2024
|
7,655
|
-
|
-
|
-
|
-
|
|
2025
|
9,068
|
-
|
-
|
2,157
|
2,455
|
|
2026
|
10,200
|
-
|
-
|
2,211
|
2,459
|
|
2027
|
11,473
|
1,695
|
1,906
|
2,266
|
2,462
|
|
2028
|
12,305
|
2,978
|
3,272
|
2,323
|
2,466
|
|
2029
|
13,014
|
3,053
|
3,277
|
2,381
|
2,470
|
|
2030
|
13,993
|
3,129
|
3,282
|
2,441
|
2,474
|
|
2031
|
14,108
|
3,207
|
3,287
|
2,502
|
2,478
|
|
2032
|
14,427
|
3,288
|
3,293
|
2,564
|
2,482
|
|
2033
|
15,380
|
3,370
|
3,298
|
2,628
|
2,486
|
|
2034
|
16,430
|
3,454
|
3,304
|
2,694
|
2,491
|
|
2035
|
16,682
|
3,540
|
3,310
|
2,761
|
2,495
|
|
2036
|
18,141
|
3,629
|
3,316
|
2,830
|
2,500
|
|
2037
|
18,727
|
3,720
|
3,322
|
2,901
|
2,504
|
|
2038
|
20,057
|
3,813
|
3,328
|
2,974
|
2,509
|
|
Total
|
244,151
|
38,875
|
38,195
|
35,632
|
34,731
|
|
NPV (2018$)
|
114,628
|
14,718
|
14,718
|
14,718
|
14,718
|
Source: DEF’s response to staff’s
first data request.
The type-and-strike format versions of the amended
standard offer contract and associated rate schedule COG-2, including the most
recent revisions to Sheet 9.458 filed on May 8, 2018, and Sheet 9.415 filed on
May 16, 2018, 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 avoided unit specifications, calendar dates,
and a monthly capacity payment example and its accompanying capacity payment
parameters. Also revised are delivery voltage adjustment factors reflecting
DEF’s 2017 line loss analysis. In addition, there are a number of unsubstantial
changes including typographical corrections, updates to position titles, and a
change to DEF’s name from Duke Energy Florida, Inc., to Duke Energy Florida,
LLC.
Conclusion
The provisions of DEF’s amended standard offer contract
and associated rate schedule COG-2, as filed on March 29, 2018, and as modified
by the revisions to Sheet 9.458 filed on May 8, 2018, and Sheet 9.415 filed on
May 16, 2018, conform to all requirements of Rules 25-17.200 through 25-17.310,
F.A.C. The amended 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 the revisions to the rate schedule and standard offer contract be
approved.
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.
