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 April 2, 2018, Tampa Electric Company (TECO)
filed a petition for approval of its revised standard offer contract and rate
schedule COG-2 based on its 2018 Ten-Year Site Plan.
In its petition,
TECO erroneously identified a 220 megawatt (MW) natural gas-fueled combustion
turbine (CT) with an in-service date of January 1, 2023, as its next avoidable
unit. On April 9, 2018, TECO filed a letter which corrected its petition to
reflect a 245 MW natural gas-fueled CT with an in-service date of January 1,
2023, bringing the petition in-line with TECO’s revised standard offer contract
and its 2018 Ten-Year Site Plan. Revisions to TECO’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.
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 revised standard
offer contract and associated rate schedule COG-2 filed by Tampa Electric
Company?
Recommendation:
Yes. The provisions of TECO’s revised standard offer
contract and associated rate schedule COG-2, as filed on April 2, 2018, 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. (Wright)
Staff Analysis:
Rule 25-17.250, F.A.C., requires that TECO, 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. TECO has identified a 245 MW
natural gas-fueled CT as its next planned generating unit in its 2018 Ten-Year
Site Plan. The projected in-service date of the unit is January 1, 2023.
The RF/QF operator may elect to make no commitment as to
the quantity or timing of its deliveries to TECO, 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 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 January 1, 2023), 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 revised standard offer contract to an operator with a 50 MW
renewable facility operating at a capacity factor of 80 percent, which is the
minimum capacity factor required under the contract to qualify for full
capacity payments. Normal and levelized capacity payments begin in 2023,
reflecting the projected in-service date of the avoided unit (January 1, 2023).
Table 1 – Estimated Annual Payments to
a 50 MW Renewable Facility
(80% Capacity Factor)
|
Year
|
Energy Payment
|
Capacity Payment (By Type)
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2019
|
9,115
|
-
|
-
|
1,953
|
2,301
|
|
2020
|
10,135
|
-
|
-
|
2,000
|
2,306
|
|
2021
|
10,036
|
-
|
-
|
2,048
|
2,311
|
|
2022
|
10,469
|
-
|
-
|
2,097
|
2,316
|
|
2023
|
10,988
|
1,980
|
2,266
|
2,147
|
2,321
|
|
2024
|
11,216
|
3,017
|
3,404
|
2,199
|
2,327
|
|
2025
|
12,235
|
3,090
|
3,412
|
2,251
|
2,332
|
|
2026
|
12,763
|
3,164
|
3,420
|
2,305
|
2,338
|
|
2027
|
13,223
|
3,240
|
3,428
|
2,361
|
2,344
|
|
2028
|
14,749
|
3,318
|
3,436
|
2,417
|
2,350
|
|
2029
|
15,509
|
3,397
|
3,444
|
2,475
|
2,356
|
|
2030
|
16,982
|
3,479
|
3,453
|
2,535
|
2,362
|
|
2031
|
17,767
|
3,562
|
3,462
|
2,596
|
2,369
|
|
2032
|
19,476
|
3,648
|
3,471
|
2,658
|
2,375
|
|
2033
|
19,982
|
3,735
|
3,480
|
2,722
|
2,382
|
|
2034
|
21,772
|
3,825
|
3,489
|
2,787
|
2,389
|
|
2035
|
22,629
|
3,917
|
3,499
|
2,854
|
2,396
|
|
2036
|
23,259
|
4,011
|
3,509
|
2,922
|
2,403
|
|
2037
|
25,072
|
4,107
|
3,519
|
2,993
|
2,410
|
|
2038
|
24,658
|
4,206
|
3,529
|
3,064
|
2,418
|
|
Total
|
322,037
|
55,694
|
54,218
|
49,384
|
47,105
|
|
NPV (2018$)
|
159,833
|
26,401
|
26,401
|
26,401
|
26,401
|
Source: TECO’s revised response
to staff’s first data request.
The type-and-strike format versions of the revised standard
offer contract and associated rate schedule COG-2 are included as Attachment A
to this recommendation. All of the changes made to TECO’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.
Conclusion
The provisions of TECO’s revised standard offer contract
and associated rate schedule COG-2, as filed on April 2, 2018, 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 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, TECO’s standard offer contract may
subsequently be revised. (DuVal)
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, TECO’s standard offer contract may
subsequently be revised.
