Table of Contents
Issue Description Page
Case Background. 3
2M 2017 SoBRA Factor 4
2N 2018 SoBRA Factor 7
2P 2019 SoBRA Cost Effective Issue. 8
2Q 2019 SoBRA Revenue Requirement 15
2R 2019 SoBRA Base Rate Percentage Increase. 17
2S Tariff Approvals for 2019 SoBRA Factors. 18
36 Close Docket 20
Case
Background
As part of the continuing fuel and
purchased power adjustment and generating performance incentive factor clause
proceedings, an administrative hearing was held on November 5-6, 2018. At the
hearing, all stipulated issues for Duke Energy Florida, LLC. (DEF), Florida
Public Utilities Company (FPUC), Gulf Power Company (Gulf), and Tampa Electric
Company (TECO) were approved by bench decisions. Although the Commission
approved many stipulated issues for Florida Power & Light Company (FPL or
Company) at the hearing, Florida Industrial Power Users Group (FIPUG) requested
the opportunity to file briefs on Issues 2M, 2N, 2P, 2Q, 2R, and 2S, which are
company-specific issues pertaining to solar generation base rate adjustment (SoBRA) considerations.
Issues
2M and 2N address the recovery of construction costs for solar generation
facilities that were recently constructed, and are currently operating. Issues 2P,
2Q, 2R, and 2S pertain to FPL’s Miami-Dade,
Interstate, Pioneer Trail, and Sunshine Gateway solar generation facilities which are currently being constructed and
scheduled to be operating on March 1, 2019 (2019 SoBRA projects). Collectively,
all of the SoBRA-related issues resulting from FPL’s
2016 rate case Stipulation and Settlement Agreement approved by Order No.
PSC-2016-0560-AS-EI (the 2016 Agreement). This
post-hearing memorandum addresses those identified issues.
On November 16, 2018, FIPUG and FPL filed post-hearing
statements and briefs for Issues 2M, 2N, 2P, 2Q, 2R, and 2S. On November 19,
2018, FIPUG filed a Notice Of Correction of Post-Hearing Position for two
issues.
The Commission has jurisdiction over this
subject matter pursuant to the provisions of Chapter 366, Florida Statutes
(F.S.), including Sections 366.04, 366.05, and 366.06, F.S.
Issue 2M:
What is the appropriate revised SoBRA factor for the
2017 projects to reflect actual construction costs that are less than the
projected costs used to develop the initial SoBRA factor?
Recommendation:
This issue is not ripe for consideration during the hearing
cycle for 2018, and should be addressed in Docket No. 20190001-EI. (Barrett,
Brownless)
Position of the Parties
FPL: The total costs of the 2017 SoBRA
Project are not yet final. FPL anticipates that final costs will be known by
the third quarter of 2019, and that the issue will be ripe for consideration
during the 2019 Fuel Docket cycle.
FIPUG: As the SoBRA projects are neither
cost effective nor needed, no new rates should be recovered.
Staff Analysis:
This issue addresses calculating the appropriate
revised SoBRA factor based upon actual construction costs.
Parties’ Arguments
FPL
As the result of discussions among and between the parties in advance of
the hearing, an agreement was reached to excuse all of the FPL witnesses that
addressed this issue. In its brief,
the Company asserted that final construction costs for the 2017 SoBRA Project
are not yet known, and thus, cannot be resolved in this hearing cycle. The
calculation and resulting factor, however, could be addressed in 2019. In its
brief, FPL stated that although not final, the preliminary information
indicates that final costs will be lower than the cost estimates that were used
to develop the revenue requirements and cost recovery factors for these
projects. (FPL BR 20) Citing paragraph 10(g) of the 2016 Agreement, FPL asserted
that if actual capital expenditures
are less than the projected costs used to develop the initial SoBRA factor, the
lower figure will be the basis for the full revenue requirements, and a
one-time credit will be made through the Capacity Cost Clause. (FPL BR 20,
emphasis in original)
FIPUG
FIPUG did not sponsor a witness to address this issue nor
specifically address this issue in its post-hearing brief. FIPUG’s post-hearing
brief, as modified by its Notice of Correction of Post-Hearing Position, addresses
Issues 2M-2S, 24D and 24E. Issue 2O
was approved as a Type 2 stipulation at final hearing when FIPUG failed to
timely provide a final position.
Although briefed, Issues 24D and 24E were also approved by bench vote at final
hearing as Type 2 stipulations since FIPUG took no position on those issues.
Staff Analysis
With regard to the remaining
issues addressed in FIPUG’s brief, Issues 2M, 2N, 2Q, 2R and 2S, FIPUG has made
several arguments. First, that the Commission is specifically required by
statute to make findings that the 2018 and 2019 solar projects for which cost
recovery is sought are both prudent and needed. (FIPUG BR 4-5) Second, that
Commission approval of a negotiated settlement agreement executed by a limited
number of parties cannot substitute for the required findings of prudence and
need. (FIPUG BR 5-6) Third, that the use of projected carbon dioxide (CO2)
tax costs in FPL’s cost effectiveness analysis is improper for two reasons: no
carbon dioxide tax is currently imposed, nor likely to be imposed in the
future, and the carbon dioxide tax amount is based on uncorroborated hearsay. (FIPUG
BR 6) Fourth, that recovery of capital costs through the fuel cost recovery
docket is improper. (FIPUG BR 6-7)
FIPUG’s first and second
arguments are essentially attempts to revive two issues previously raised by
FIPUG and excluded by the Prehearing Officer at the Prehearing Conference. Nothing has changed since the Prehearing
Conference and the determination that the terms of FPL’s 2016 Agreement,
approved by Order No. PSC-2016-0560-AS-EI,
control and limit the issues regarding FPL’s solar generation projects to the
cost-effectiveness issues stated in Issues 2P, 2Q, 2R and 2S continues to be
valid.
One could also conclude that FIPUG’s arguments are an attempt to collaterally
attack Order No. PSC-2016-0560-AS-EI’s approval of the SoBRA process outlined
therein. (FPL BR 11-13) FIPUG, as a
party to the 2016 rate case, had an opportunity to appeal Order No. PSC-2016-0560-AS-EI
and failed to do so. FIPUG’s right to
contest the 2016 Agreement, and any of its terms and conditions, has passed.
FIPUG’s third argument will be addressed in Issue 2P.
FIPUG’s fourth argument appears to be that use of the fuel
cost recovery clause factors to recover FPL’s proposed solar generation capital
costs is improper. However, FPL is not seeking to recover its proposed solar
generation capital costs through fuel charge factors. As the 2016 Agreement
clearly states, the capital costs associated with the proposed solar generation
projects are rate base adjustments which
are made to FPL’s books at the time the solar projects are placed into service. Staff agrees with FPL that the fuel cost
recovery docket was simply used for administrative and procedural efficiency
since it is an annual proceeding with a relatively fixed filing schedule. (FPL
BR 15-16) Further, if the filing schedule for the fuel cost recovery docket is
used, increases in base rates as a result of the approval of SoBRA projects can
be coordinated with projected fuel costs which include those units.
This issue
involves a mathematical calculation that depends on information that is not yet
available. For that reason, staff believes this issue cannot be resolved in the
current hearing cycle.
Conclusion
Staff
recommends that this issue is not ripe for consideration during the hearing
cycle for 2018, and should be addressed in Docket No. 20190001-EI.
Issue 2N:
What is the appropriate revised SoBRA factor for the
2018 projects to reflect actual construction costs that are less than the
projected costs used to develop the initial SoBRA factor?
Recommendation:
This issue is not ripe for consideration during the hearing
cycle for 2018, and should be addressed in Docket No. 20190001-EI. (Barrett,
Brownless)
Position of the Parties
FPL: The total costs of the 2018 SoBRA
Project are not yet final. FPL anticipates that final costs will be known by
the third quarter of 2019, and that the issue will be ripe for consideration
during the 2019 Fuel Docket cycle.
FIPUG: As the SoBRA projects are neither
cost effective nor needed, no new rates should be recovered.
Staff Analysis:
This
issue is substantially similar to Issue 2M, as it addresses calculating a
revised SoBRA factor based upon actual construction costs. Issue 2M addresses
the 2017 projects and Issue 2N addresses the 2018 projects.
Parties’ Arguments
As the result of discussions among and between the parties in advance of
the hearing, an agreement was reached to excuse all of the FPL witnesses that
addressed this issue. In its brief,
the Company asserted that final construction costs for the 2018 SoBRA Project
are not yet known, and thus, cannot be resolved in this hearing cycle. The
calculation and resulting factor, however, could be addressed in 2019. In its
brief, FPL stated that although not final, the preliminary information
indicates that final costs will be lower than the cost estimates that were used
to develop the revenue requirements and cost recovery factors for these
projects. (FPL BR 20) Citing paragraph 10(g) of the 2016 Agreement, FPL
asserted that if actual capital
expenditures are less than the projected costs used to develop the initial SoBRA
factor, the lower figure will be the basis for the full revenue requirements,
and a one-time credit will be made through the Capacity Cost Recovery Clause. (FPL
BR 20, emphasis in original)
FIPUG did not sponsor a witness to address this issue nor
specifically address this issue in its post-hearing brief. The legal arguments
raised by FIPUG relative to this issue are discussed in Issue 2M above.
Analysis
This issue
involves a mathematical calculation that depends on information that is not yet
available. For that reason, staff believes this issue cannot be resolved in the
current hearing cycle.
Conclusion
Staff
recommends that this issue is not ripe for consideration during the hearing
cycle for 2018, and should be addressed in Docket No. 20190001-EI.
Issue 2P:
Are the 2019 SoBRA projects (Miami-Dade, Interstate,
Pioneer Trail, and Sunshine Gateway) proposed by FPL cost effective?
Recommendation:
Yes. Based on the evidence contained in the record,
FPL’s proposed 2019 solar generation projects are projected to produce savings
under multiple scenarios and therefore are cost effective. The 2019 solar
generation projects have also met the terms of the 2016 Agreement in regards to
keeping construction cost under the $1,750 per kilowatt alternating current (kWac)
cost cap. (Wooten, Brownless)
Position of the Parties
FPL: Yes. FPL undertook a comprehensive solicitation
process to ensure that the cost of the 2019 Project is reasonable and well below
$1,750 per kW. In addition, the 2019 Project
is cost-effective and is estimated to result in $40 million (CPVRR) of customer
savings.
FIPUG: No.
Staff
Analysis:
Parties’
Arguments
FPL
Pursuant
to the 2016 Agreement, FPL proposed to construct and operate 298 MW of solar
generation by 2019. FPL stated that an economic analysis was performed to
determine the technology with the greatest value for customers. (FPL BR 4) FPL
asserted that the 2019 SoBRA projects are projected to result in $40 million
Cumulative Present Value Revenue Requirement (CPVRR) of customer savings and
that the costs for the 2019 projects are reasonable and fall below the $1,750
per kWac cost cap. (FPL BR 2) FPL asserted that the 2016 Agreement
provides that the 2019 projects are cost effective if they lower the system
CPVRR without them, which FPL claims the 2019 projects do. (FPL BR 8)
FPL stated that the Commission is not required to
determine need or separately evaluate prudence, which would cast aside the terms
of 2016 Agreement. (FPL BR 12) FPL claimed that, similar to the previous SoBRA
proceedings, the Commission is not basing its decision on carbon cost
forecasting, but the expert testimony of witness Enjamio. (FPL BR 13)
FIPUG
FIPUG did not sponsor a witness to address this issue. The
FIPUG brief presented broad arguments about its objections to FPL’s SoBRA
projects, which staff addressed in Issue 2M above. (FIPUG BR 1-2) Additionally,
FIPUG raised the argument that the carbon dioxide tax projections prepared by
ICF and used by FPL in its CPVRR analysis are based on uncorroborated hearsay.
Analysis
2016 Settlement
Agreement
The 2019
solar generation projects for which FPL is seeking approval for cost recovery
are specifically provided for in the 2016 Agreement approved by Order No.
PSC-16-0560-AS-EI. The
2016 Agreement allows FPL to construct up to 300 MW per calendar year of solar
capacity during the period 2017-2021 and to recover through base rates the
incremental annualized base revenue requirement for those facilities for the
first 12 months of operation commencing when the facilities are placed into
service. There
are several conditions that must be met for recovery in this case. First, FPL
must request recovery for these projects during the term of the 2016 Agreement,
or prior to December 31, 2020. Second, the cost of the components, engineering,
and construction for any solar project is capped at $1,750 kWac. Third,
for projects less than 75 MW (as are all of the projects proposed in this
case): 1) the request for base rate recovery must be filed in the Fuel Clause
docket as part of its final true-up filing; and 2) the issues are “limited to
the cost effectiveness of each such project (i.e., will the project lower the
projected system CPVRR as compared to each CPVRR without the solar project) and
the amount of revenue requirements and appropriate percentage in base rates
needed to collect the estimated revenue requirements.”
If the project meets these requirements, the terms of the 2016 Agreement have
been met.
Project Descriptions
FPL
witnesses Brannen and Enjamio provided testimony and exhibits concerning FPL’s
proposed 2019 SoBRA projects, including cost effectiveness and the ability to
meet the $1,750 per kWac cost cap. As described in the testimony of
witness Enjamio, FPL is proposing to construct and operate four solar
generation centers with a total nameplate capacity of 298 MWac (each
project is 74.5 MWac) with an in-service date of March 1, 2019. (TR 175)
Construction of the 2019 SoBRA projects began on September 29, 2017. (EXH 32)
The proposed 2019 SoBRA projects are fixed-tilt systems with an average
projected first year net capacity factor of 26.5 percent. (EXH 30, TR 177)
There are no upgrades to existing transmission infrastructure required as part
of the construction of the 2019 SoBRA projects. (TR 167)
The four
proposed construction sites for the 2019 SoBRA projects are Miami-Dade in
Miami-Dade County, Interstate in St. Lucie County, Pioneer Trail in Volusia
County and Sunshine Gateway in Columbia County. (TR 164) All parcels are new
purchases, and the land costs are included in the cost of the 2019 SoBRA
projects. (TR 167, EXH 76) Staff recognized that
not all land for the four newly purchased sites was being used for the 2019
solar generation projects. In response to a staff interrogatory, it was
disclosed that unused areas could include both usable and unusable areas for
future solar development. (EXH 76) To develop a better understanding of the
ratio of land that could be used for future development, staff requested a more
detailed breakdown of each site. This breakdown included four categories: total
acreage, acreage used by the projects (Site Acreage), non-usable land, and
usable land. Usable land consists of property that could possibly be used for
future solar developments on the site, and for sites with adequate amounts of
usable land, FPL will consider leasing land to third parties. Any revenue from
the usable land leased to third parties will be credited to FPL ratepayers via
an offset to the revenue requirement associated with the 2019 solar generation
projects. (EXH 76) The land usage of each site is illustrated in Table 2P-1:
Table 2P-1
Land Usage
|
Site Name
|
Total Acreage (acres)
|
Site Acreage (acres)
|
Non-Usable Land (acres)
|
Usable Land (acres)
|
|
Miami-Dade
|
465.1
|
425.1
|
0
|
40.0
|
|
Interstate
|
539.0
|
522.8
|
16.2
|
0
|
|
Pioneer Trail
|
1,189.6
|
438.6
|
398.0
|
353.0
|
|
Sunshine
|
954.4
|
547.2
|
407.2
|
0
|
Source: EXH
76, 77
2019 Solar Generation Projects Evaluation
Economic Assumptions
The resource planning document
filed with FPL’s petition included FPL’s three reliability criteria: 20 percent
total reserve margin, 10 percent generation-only reserve margin (GRM) and loss
of load probability. (EXH 77) Because FPL’s GRM criterion has not been relied
upon by the Commission in previous proceedings, staff requested a revised
resource planning document that did not incorporate the GRM criterion in the
2019 SoBRA project resource planning. (EXH 77) FPL’s revised resource planning
document includes two resource plans that form the basis of the cost
effectiveness analysis that the Company performed. These two resource plans are
called the No Solar Plan and 2019 Solar Plan. The No Solar Plan includes the
2017 and 2018 SoBRA projects and assumes that further resource needs will be
met by combined cycle (CC) units and short term purchase power agreements
(PPAs) through the year 2031. The 2019 Solar Plan includes the 2017 and 2018
SoBRA projects and takes into account the four 2019 SoBRA projects, which
initially defer the 2028 CC unit and reduces the size of the CC unit projected
for 2031. (TR 177) This resource plan is shown in Table 2P-2:
Table 2P-2
Resource Plan (w/o GRM)
|
Year
|
No Solar Resource Plan
|
2019 Solar Resource Plan
|
|
2018
|
2017/2018 596 MW
SoBRA
|
2017/2018 596 MW
SoBRA
|
|
2019
|
Okeechobee Energy
Center; 1-year 476 MW PPA
|
2019 298 MW SoBRA; Okeechobee
Energy Center; 1-year 311 MW PPA
|
|
2020
|
1- year 470 MW PPA
|
1- year 305 MW PPA
|
|
2021
|
1- year 717 MW PPA
|
1- year 553 MW PPA
|
|
2022
|
Dania Beach Energy
Center
|
Dania Beach Energy
Center
|
|
2023
|
1- year 215 MW PPA
|
1- year 52 MW PPA
|
|
2024
|
1 Greenfield 3x1 CC
Unit
|
1 Greenfield 3x1 CC
Unit
|
|
2025
|
|
|
|
2026
|
|
|
|
2027
|
1- year 75 MW PPA
|
|
|
2028
|
1 Greenfield 3x1 CC
Unit
|
1- year 337 MW PPA
|
|
2029
|
|
1 Greenfield 3x1 CC
Unit
|
|
2030
|
|
|
|
2031
|
Equalizing 578 MW
CC Unit
|
Equalizing 419 MW
CC Unit
|
Source: EXH
77
In completing the analysis, FPL
considered multiple components to determine cost effectiveness: solar revenue requirements,
avoided generation costs, and avoided system costs. For the proposed solar
facilities, the revenue requirements included fixed operation and maintenance
(O&M), equipment, installation, land cost, and transmission interconnection
cost. The avoided generation cost component considered avoided generation
capital, avoided fixed O&M, avoided transmission interconnection, avoided
capital replacement, incremental gas transport, and short-term purchases. The
avoided system cost component considers the factors of fuel savings, avoided
variable O&M, and emission cost savings. (EXH 77)
FPL witness
Enjamio stated that the emission cost savings consideration did not incorporate
CO2 pricing until 2028. (TR 176) FPL witness Enjamio identified ICF
International’s (ICF) CO2 emissions cost forecast as a major
assumption in FPL’s economic analysis of its proposed 2019 solar generation
projects. (TR 176) The CO2 cost projections used in FPL’s
cost-effectiveness analyses are based on ICF’s CO2 emission cost
forecast dated January 31, 2018. (TR 176) ICF is a consulting firm with
extensive experience in forecasting the cost of air emissions and is recognized
as one of the industry leaders in this field. (TR 176) No intervenor offered
testimony rebutting FPL’s CO2 emission cost forecast or provided any
alternative emission cost forecast. Staff believes that the CO2 cost
projections FPL used in this docket are appropriate.
Hearsay
Staff does not find FIPUG’s
argument, that carbon dioxide tax projections prepared by ICF and used by FPL
in its CPVRR analysis is based on uncorroborated hearsay, to be persuasive.
(FIPUG BR 6) Section 120.57(1)(c), F.S., states that “[h]earsay evidence may be
used for the purpose of supplementing or explaining other evidence, but it
shall not be sufficient in itself to support a finding unless it would be
admissible over objection in civil actions.” Section 90.704, F.S., allows the
use by an expert of “facts or data [that] are of a type reasonably relied upon
by experts in the subject to support the opinion expressed” even if the facts
or data are not admissible in evidence. Smith
v. State, 7 So. 3d 473, 501 (Fla. 2009); Geralds v. State, 674 So.
2d 96, 100 (Fla. 1996)(expert allowed to base opinion on cause of death on
materials prepared by another doctor).
FPL identified witness Enjamio as
an expert in the field of resource planning and the cost-effectiveness of FPL’s
2019 Solar Project.
FIPUG objected to any witness being considered an expert witness unless the
witness states the subject matter areas in which he or she claims expertise,
and voir dire, if requested, is permitted. However, FIPUG failed to comply with
the requirements of Section VI.A(8) of Order No. PSC-2018-0079-PCO-EI, that a
party identify each witness the party wishes to voir dire and specify the
portions of the witness’ testimony to which it objects. For that reason, FIPUG
was prevented from challenging the expertise of any witness at the final
hearing.
Witness Enjamio’s testimony is
that ICF is recognized as an industry leader in the field of forecasting the
cost of air emissions and that its cost projections have been used for many
years in FPL’s resource plans and economic analyses, i.e., FPL’s 2018 Ten Year
Site Plan. (TR 176) It is important to note that it is witness Enjamio’s expert
opinion that ICF’s projection of carbon dioxide costs should be included in
FPL’s cost effectiveness analysis for the 2019 SoBRA projects. FIPUG did not
present any evidence to support the exclusion of these costs or to refute ICF’s
expertise in projecting air emission costs. Based on this record, ICF’s carbon
dioxide tax costs do not constitute uncorroborated hearsay and can be used in
FPL’s cost effectiveness calculation.
CPVRR Analysis
FPL’s CPVRR analysis assumed that
each project had an actual life of 33 years, with the analysis ending in 2050.
(EXH 77) Staff reviewed FPL’s CPVRR for the 2019 SoBRA projects that produced a
savings of $40 million for the base fuel and environmental forecasts. (EXH 36)
This calculation included the previously mentioned CO2 pricing in
2028. FPL’s CPVRR analysis in support of its 2019 Solar Plan included
assumptions related to future fuel prices. The Company employed its standard
fuel forecasting methodology to produce its long-term fuel price forecast. (TR 176,
EXH 34) Staff believes the forecasted fuel prices used in the Company’s CPVRR
analysis associated with its current proposal are reasonable. (EXH 36)
FPL’s provided CPVRR for the 2019 SoBRA
projects includes the FPL GRM criteria, which has not been relied upon by the
Commission in previous proceedings. In response to a staff interrogatory, FPL
provided a CPVRR analysis that excludes this GRM criterion and economically
evaluates the solar projects based upon FPL’s remaining reliability criteria.
(EXH 77) The resulting CPVRR produced a savings of $39.9 million for the base
fuel and environmental forecasts, a slight decrease from the $40 million
savings that included the GRM criterion. (EXH 77) As noted above, FPL’s GRM
criterion was not relied upon by the Commission in previous proceedings;
therefore, staff believes that this criterion is not a critical component to
the overall cost-effectiveness of the 2019 SoBRA projects.
In response to a staff
interrogatory, FPL provided a CPVRR analysis with both fuel and environmental
compliance sensitivities. (EXH 77) In FPL’s analysis, a Low, Medium, and High
Fuel Forecast and ENV I, ENV II, and ENV III compliance costs were considered.
ENV I assumes an annual $0/ton cost for CO2 pricing and low
environmental compliance costs, ENV II assumes a most likely cost, and ENV III
assumes high environmental compliance costs. (EXH 77) While this analysis
includes FPL’s GRM criterion, it is assumed there would be a similar negligible
effect on the other sensitivities as it did on FPL’s base case forecast. The
range of savings is illustrated in Table 2P-3:
Table 2P-3
CPVRR Analysis including GRM
|
|
Environmental Compliance Cost Forecast
|
|
Fuel Cost Forecast
|
|
ENV I
|
ENV II
|
ENV III
|
|
High
|
($62)
|
($81)
|
($130)
|
|
Medium
|
($19)
|
($40)
|
($89)
|
|
Low
|
$24
|
$4
|
($46)
|
Source:
EXH 77
Table 2P-3
shows that in seven of the nine scenarios, the 2019 SoBRA projects are cost
effective. Notably the base fuel case (medium), ENV I scenario contains no cost
for CO2, but is also cost effective. While examining the forecasted
scenarios, staff observed that in all scenarios avoided fuel costs was the
major driving force in producing overall savings for the projects. This fact
manifested in even the “worst” case scenario of Low Fuel Cost, ENV I, where
there are projected fuel savings in every forecasted year. These cost forecast
scenarios are identical to the ones present in the 2017 and 2018 solar
generation projects in previous proceedings. When investigating the overall
cost effectiveness of the projects, staff observed that the first cumulative
benefit occurred in 2028 in all scenarios. This benefit seems to be driven by the
avoided capital that would be required for the Greenfield 3x1 CC Unit. Staff
has reviewed the CPVRR assumptions discussed and believes them to be
reasonable.
2016 Agreement Threshold
As stated
previously, the 2016 Agreement requires the FPL 2019 SoBRA projects to meet a
$1,750 per kWac cost cap. The estimated total cost to build all of
the 2019 solar generation projects is $1,386 per kWac, falling below
the cost cap. (TR 161) Each of the 2019 solar generation projects also fall
under this threshold when considered individually. The cost per kWac
for the 2019 solar generation projects is illustrated in Table 2P-4:
Table 2P-4
$/kWac Cost Cap
|
2019 Solar Generation Projects Cost per $/kWac
|
|
Site Name
|
Miami Dade
|
Interstate
|
Pioneer Trail
|
Sunshine Gateway
|
|
Cost ($/kWac)
|
$1,460
|
$1,289
|
$1,422
|
$1,374
|
Source: EXH 76
Conclusion
Based on the evidence contained in the record, FPL’s
proposed 2019 SoBRA projects are projected to produce savings under multiple
scenarios and therefore are cost effective. The 2019 SoBRA projects have also
met the terms of 2016 Agreement in regards to keeping construction cost under
the $1,750 per kWac cost cap.
Issue 2Q:
What are the revenue requirements associated with
the 2019 SoBRA projects?
Recommendation:
The jurisdictional annualized revenue requirements
associated with the 2019 SoBRA projects are $51,685,454. (Barrett)
Position of the Parties
FPL: The revenue requirement for the
2019 Project is $51,685,454.
FIPUG: As the SoBRA projects are neither
cost effective nor needed, no new rates should be recovered.
Staff Analysis:
Parties’
Arguments
FPL
According to FPL
witness Castaneda, FPL is authorized to seek recovery of the 2019 SoBRA
projects pursuant to the order in FPL’s most recent rate case proceeding. (TR
154) In its brief, FPL asserted the 2016 Agreement authorized the construction
of up to 300 MWs of new solar generation each year between 2017 and 2020, if
three requirements are satisfied:
1. The total costs of the solar projects do not
exceed $1,750/kWac;
2. The construction, engineering, and component
costs are reasonable; and
3. The solar projects are cost-effective additions
to FPL’s system.
(FPL BR 2, citing the 2016 Agreement
approved in Order No. PSC-2016-0560-AS-EI)
The witness testified that the annualized jurisdictional
revenue requirements for the first 12 months of operations related to the 2019
SoBRA projects are $51,685,454. (TR
154-155; EXH 39, p. 1; FPL BR 17, 21) Witness Castaneda further stated that the
revenue requirement value was calculated by following the methodologies
approved by the Commission for FPL’s 2017 and 2018 solar base rate projects, which
is the same methodology used for the generation base rate adjustments (GBRA)
for Turkey Point Unit 5 and West County Energy Center Units 1 and 2 in Order
No. PSC-2005-0902-S-EI,
West County Energy Center Unit 3 in Order No. PSC-2011-0089-S-EI,
and the modernization projects at Canaveral, Riviera Beach, and Port Everglades
in Order No. PSC-2013-0023-S-EI. (TR 155)
The jurisdictional annualized revenue requirement
calculation for the 2019 SoBRA projects used several inputs, including the most
current estimated capital expenditures presented by FPL witness Brannen. (Castaneda,
TR 154-157; EXH 39, pp.1-5; Brannen, TR
168-171)
FIPUG
FIPUG did not sponsor a witness to address this issue or
specifically address this issue in its post-hearing brief. The FIPUG brief
presented broad arguments about its objections to FPL’s SoBRA projects, which
staff summarized in Issue 2M. (FIPUG BR 1-2)
Analysis
This issue
addresses the revenue requirements associated with the 2019 SoBRA
projects. Staff believes FPL is authorized
to seek recovery of the 2019 SoBRA projects pursuant to the 2016 Agreement.
Staff reviewed the
testimony, exhibits, and calculations used by FPL witness Castaneda for
determining the amount of revenue requirements associated with the 2019 SoBRA
projects and found them to be reasonable. Staff believes the jurisdictional
annualized revenue requirements associated with the 2019 SoBRA projects are
$51,685,454.
Conclusion
Staff recommends that the
jurisdictional annualized revenue requirements associated with the 2019 SoBRA
projects are $51,685,454.
Issue 2R:
What is the appropriate base rate percentage
increase for the 2019 SoBRA projects to be effective when all 2019 projects are
in service, currently projected to be March 1, 2019?
Recommendation:
The appropriate base rate percentage increase (SoBRA
Factor) for the 2019 SoBRA projects is 0.795 percent. (Barrett)
Position of the Parties
FPL: The
appropriate base rate percentage increase for the 2019 SoBRA Project is 0.795%.
The increase is to be effective when the 2019 Project is in service, currently
projected to be March 1, 2019.
FIPUG: As the
SoBRA projects are neither cost effective nor needed, no new rates should be
recovered.
Staff Analysis:
Parties’
Arguments
FPL
According to FPL
witness Cohen, the SoBRA factors are incremental cost recovery factors that
will be applied to base rate charges in order for the Company to collect the
revenue necessary to recover the costs associated with building and operating
the 2019 SoBRA projects. (TR 182) Witness Cohen testified that the SoBRA factor
is equal to the ratio of (1) the Company’s jurisdictional revenue
requirements for the Project and (2) the forecasted retail base revenue from
electricity sales for the first twelve months of operations, expected to begin
March 1, 2019. (Cohen, TR 182; FPL BR
18-19) Witness Cohen also presented an exhibit to demonstrate the inputs
and calculations performed to determine the resulting incremental cost recovery
factor of 0.795 percent for the 2019 SoBRA projects. (EXH 40)
FIPUG
FIPUG did not sponsor a witness to address this issue or
specifically address this issue in its post-hearing brief. The FIPUG brief
presented broad arguments about its objections to FPL’s SoBRA projects, which
staff summarized in Issue 2M. (FIPUG BR 1-2)
Analysis
This issue
addresses the proposed base rate percentage increase associated with the 2019 SoBRA projects. Staff believes that FPL
is authorized to seek recovery of the 2019 SoBRA projects pursuant to the 2016
Agreement, and apply the appropriate base rate percentage increase
(SoBRA Factor) when the plants enter commercial service.
Conclusion
Staff reviewed the
testimony, exhibits, and calculations used by FPL witness Cohen for
determining the appropriate incremental cost recovery factor associated with
the 2019 SoBRA projects. Based on this review, staff recommends that the
appropriate base rate percentage increase (SoBRA Factor) for the 2019 SoBRA projects
is 0.795 percent.
Issue 2S:
Should the Commission approve revised tariffs for
FPL reflecting the base rate percentage increase for the 2019 SoBRA projects
determined to be appropriate in this proceeding?
Recommendation:
Yes. The Commission should give staff administrative
authority to approve the revised tariff sheets for FPL reflecting the base rate
percentage increases for the 2019 SoBRA projects determined to be appropriate
in this proceeding. (Guffey, Barrett)
Position of the Parties
FPL:
Yes.
FIPUG:
No.
Staff Analysis:
Parties’
Arguments
FPL
FPL witness Cohen
sponsored exhibits that summarize the tariff changes for the 2019 SoBRA
projects, which are scheduled to enter into commercial service on March 1,
2019. (TR 181; EXH 42) Witness Cohen testified that the Company will
formally notify the Commission by letter of the specific in-service dates for
each set of projects, and the base rate changes will become effective on or
after that date. (TR 183)
Bill
Impact
Based on the
approval of stipulations in other issues in this proceeding, new cost recovery
factors will be implemented in the first billing cycle of January 2019. Witness
Deaton provided testimony and schedules that reflect the three billing changes
that customers can anticipate in 2019. Billing changes summarized below are for
a residential customer using 1,000 kWh of electricity per month:
1.
For the
January and February 2019 billing cycles, changes to various cost recovery
factors will increase customer bills by a total of $1.81 per month. (TR 91; EXH 17 (f/k/a, Exhibit RBD-5 (Appendix II – 2019 FCR
Projection for January-February), Page 87 of 91).
2.
The changes
attributable to the 2019 SoBRA projects begin in the March 2019 billing cycle will
increase customer bills by a total of $0.31 per month. (TR 92; EXH 18 (f/k/a, Exhibit RBD-6 (Appendix III – 2019 FCR
Projection for March-May), Page 7 of 7).
3.
A third
change is anticipated for bills in the June 2019 billing cycle, when the
proposed Okeechobee Clean Energy Center enters into commercial service.
This change will increase customer bills by a total of $0.44 per month. (TR 92;
EXH 19 (f/k/a, Exhibit RBD-7 (Appendix IV –
2019 FCR Projection for June-December), Page 7 of 7).
All of these
billing change impacts are shown in Table 2S-1 below:
Table 2S-1
FPL’s Residential Bill Impact for the period January-December,
2019
|
Bill
Components
|
Present
(2018)
|
Proposed
in Projection filing (Jan and Feb, 2018)
|
|
Change
from 2018
|
Proposed
in Projection filing (March-May, 2019), incl. 2019 SoBRAs
|
Proposed
in Projection filing (June-Dec, 2019), incl. SoBRAs and new power plant
|
|
Base Rate Charges
|
$66.88
|
|
$66.88
|
|
$0.00
|
|
$67.41
|
|
$69.46
|
|
Fuel Cost Recovery
|
$22.93
|
|
$24.12
|
|
$1.19
|
|
$23.89
|
|
$22.27
|
|
Capacity Cost recovery
|
$2.34
|
|
$2.58
|
|
$0.24
|
|
$2.58
|
|
$2.58
|
|
Energy Conservation
|
$1.53
|
|
$1.50
|
|
-$0.03
|
|
$1.50
|
|
$1.50
|
|
Environmental
|
$1.22
|
|
$1.59
|
|
$0.37
|
|
$1.59
|
|
$1.59
|
|
Storm Restoration
|
$1.24
|
|
$1.24
|
|
$0.00
|
|
$1.24
|
|
$1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-Total
|
|
$96.14
|
|
$97.91
|
|
$1.77
|
|
$98.21
|
|
$98.64
|
|
Gross Receipts Tax
|
$2.47
|
|
$2.51
|
|
$0.04
|
|
$2.52
|
|
$2.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$98.61
|
|
$100.42
|
|
$1.81
|
|
$100.73
|
|
$101.17
|
Source: EXH 19 (f/k/a, Exhibit
RBD-7 (Appendix IV – 2019 FCR Projections), Page 7 of 7)
FIPUG
FIPUG did not sponsor a witness to address this issue or
specifically address this issue in its post-hearing brief. The FIPUG brief
presented broad arguments about its objections to FPL’s SoBRA projects, which
staff summarized in Issue 2M. (FIPUG BR 1-2)
Analysis
This issue
addresses approving the tariff filings for the 2019 SoBRA projects. As set forth in the preceding issues, staff
observes that FPL’s 2016 Agreement states that the issues for determination are
limited to three principle considerations:
1. The cost effectiveness of the 2019 Projects,
as discussed in Issues 2P.
2. The amount of revenue requirements for the
2019 Projects, as discussed in Issues 2Q.
3.
The appropriate
percentage increase in base rates needed to recover the revenue requirement
amounts identified above. These percentage increases are reflected as recovery
factors, as discussed in Issues 2R.
Conclusion
Based on the
staff’s recommendations in Issues 2P, 2Q, and 2R, staff believes the
Commission should give staff administrative authority to approve the revised
tariff sheets for FPL reflecting the base rate percentage increases for the
2019 SoBRA projects determined to be appropriate in this proceeding.
Issue 36:
Should this docket be closed?
Recommendation:
No. While a separate docket number is assigned each year for
administrative convenience, this is a continuing docket and should remain open.
(Brownless)
Staff
Analysis:
While a separate docket number is assigned each year
for administrative convenience, this is a continuing docket and should remain
open.
