Discussion
of Issues
Issue 1:
Should the Commission approve the revised standard
offer contract and schedule REF-1 filed by Gulf Power Company?
Recommendation:
Yes. The provisions of Gulf’s revised standard offer
contract and schedule REF-1 conform to all requirements of Rules 25-17.200
through 25-17.310, F.A.C. Gulf’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. Staff
recommends that Gulf’s revised standard offer contract and schedule REF-1 be
approved as filed. (Wooten, Wright, Higgins)
Staff Analysis:
Rule 25-17.250, F.A.C., requires that Gulf, 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. Gulf has identified a 595
megawatt (MW) dual-fuel 1-on-1 combined cycle generating facility as its next
planned fossil-fueled generating unit in its 2018 Ten-Year Site Plan. The
projected in-service date of this facility is June 1, 2024.
The RF/QF
operator may elect to make no commitment as to the quantity or timing of its
deliveries to Gulf, 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 the 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, contains estimates of 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 88 percent, and meeting the minimum
requirement specified in 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
88% Capacity Factor
|
Year
|
Energy Payment
|
Capacity Payment (By Type)
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2019
|
10,391
|
-
|
-
|
3,881
|
4,291
|
|
2020
|
11,355
|
-
|
-
|
3,963
|
4,322
|
|
2021
|
11,860
|
-
|
-
|
4,045
|
4,353
|
|
2022
|
12,272
|
-
|
-
|
4,130
|
4,385
|
|
2023
|
12,831
|
-
|
-
|
4,216
|
4,417
|
|
2024
|
13,601
|
4,156
|
4,478
|
4,304
|
4,450
|
|
2025
|
14,554
|
7,190
|
7,689
|
4,394
|
4,484
|
|
2026
|
14,739
|
7,303
|
7,710
|
4,486
|
4,519
|
|
2027
|
15,526
|
7,420
|
7,732
|
4,580
|
4,554
|
|
2028
|
15,939
|
7,538
|
7,754
|
4,676
|
4,590
|
|
2029
|
16,690
|
7,659
|
7,777
|
4,773
|
4,627
|
|
2030
|
17,476
|
7,783
|
7,801
|
4,873
|
4,664
|
|
2031
|
18,181
|
7,909
|
7,825
|
4,975
|
4,703
|
|
2032
|
19,031
|
8,038
|
7,849
|
5,079
|
4,742
|
|
2033
|
20,101
|
8,170
|
7,874
|
5,185
|
4,782
|
|
2034
|
21,450
|
8,304
|
7,899
|
5,293
|
4,822
|
|
2035
|
22,340
|
8,441
|
7,925
|
5,404
|
4,864
|
|
2036
|
23,352
|
8,581
|
7,952
|
5,517
|
4,906
|
|
2037
|
24,213
|
8,725
|
7,979
|
5,632
|
4,950
|
|
2038
|
25,493
|
8,871
|
8,006
|
5,750
|
4,994
|
|
Total
|
341,396
|
116,087
|
114,249
|
95,159
|
92,420
|
|
NPV (2019$)
|
171,285
|
50,546
|
50,546
|
50,546
|
50,546
|
Source:
Gulf’s Response to Staff’s First Data Request
Gulf’s standard offer contract and schedule
REF-1, in type-and-strike format, are included as Attachment A. All of the
changes made to the tariff sheets are consistent with the updated avoided unit.
Revisions include updates to dates and payment information which reflect the
current economic and financial assumptions for the avoided unit costs.
Additional language was included on Sheet
9.82 that detailed if a Facility elected to make no commitment for quantity or
timing of its deliveries to the Company it would have a Committed Capacity of 0
MW in its Renewable Standard Offer. In response to a staff data request, Gulf
explained the language was included to clarify that generators electing to make
no commitment would not be entitled to receive capacity payments under the standard
offer contract or associated rate schedule. This language was consistent with
Gulf’s 2017 renewable standard offer contract which was approved by the
Commission.
Conclusion
The provisions of Gulf’s revised standard offer contract
and schedule REF-1 conform to all requirements of Rules 25-17.200 through
25-17.310, F.A.C. The 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. Staff recommends
that Gulf’s revised standard offer contract and schedule REF-1 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, Gulf’s standard offer contract may subsequently
be revised. (Dziechciarz)
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, Gulf’s standard offer contract may
subsequently be revised.
