Discussion
of Issues
Issue 1:
Should the Commission approve the revised renewable
energy tariff and standard offer contract filed by Florida Power & Light
Company?
Recommendation:
Yes. The provisions of FPL’s revised renewable
energy tariff and standard offer contract conform to all requirements of Rules
25-17.200 through 25-17.310, F.A.C. FPL’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 FPL’s revised renewable energy tariff and standard
offer contract be approved as filed. (Thompson)
Staff Analysis:
Section 366.91(3), F.S., and Rule 25-17.250, F.A.C.,
require that FPL, 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 Rules 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. FPL has
identified a 1,886 megawatt (MW) natural gas-fired combined cycle (CC) as its
next fossil-fueled generating unit in its 2019 Ten-Year Site Plan. The
projected in-service date of this unit is June 1, 2026. Staff believes this
unit is sufficient as the avoided unit for standard offer purposes; however, FPL’s
projected reliability need in 2026 is only 106 MW. Staff would note that
approval of a standard offer contract is not an approval to construct future
generating units.
Under FPL’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 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, 2026), 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 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
contains FPL’s 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 94 percent, which is the minimum
capacity factor required under the contract to qualify for full capacity
payments. Normal and levelized capacity payments begin with the projected
in-service date of the avoided CC unit (June 1, 2026).
Table 1 - Estimated Annual Payments to
a 50 MW Renewable Facility
(94% Capacity Factor)
|
Year
|
Energy Payment
|
Capacity Payment (By Type)
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2020
|
8,328
|
-
|
-
|
-
|
-
|
|
2021
|
7,973
|
-
|
-
|
-
|
-
|
|
2022
|
7,790
|
-
|
-
|
2,059
|
2,439
|
|
2023
|
8,020
|
-
|
-
|
2,110
|
2,439
|
|
2024
|
8,920
|
-
|
-
|
2,163
|
2,439
|
|
2025
|
10,151
|
-
|
-
|
2,217
|
2,439
|
|
2026
|
10,696
|
3,270
|
3,746
|
2,272
|
2,439
|
|
2027
|
11,045
|
3,352
|
3,746
|
2,329
|
2,439
|
|
2028
|
11,213
|
3,435
|
3,746
|
2,387
|
2,439
|
|
2029
|
11,663
|
3,521
|
3,746
|
2,447
|
2,439
|
|
2030
|
12,237
|
3,609
|
3,746
|
2,508
|
2,439
|
|
2031
|
12,943
|
3,700
|
3,746
|
2,571
|
2,439
|
|
2032
|
13,837
|
3,792
|
3,746
|
2,635
|
2,439
|
|
2033
|
13,592
|
3,887
|
3,746
|
2,701
|
2,439
|
|
2034
|
13,972
|
3,984
|
3,746
|
2,769
|
2,439
|
|
2035
|
13,261
|
4,084
|
3,746
|
2,838
|
2,439
|
|
2036
|
13,353
|
4,186
|
3,746
|
2,909
|
2,439
|
|
2037
|
14,435
|
4,290
|
3,746
|
2,981
|
2,439
|
|
2038
|
13,925
|
4,398
|
3,746
|
3,056
|
2,439
|
|
2039
|
15,361
|
4,508
|
3,746
|
3,132
|
2,439
|
|
Total
|
232,717
|
54,015
|
52,442
|
46,084
|
43,897
|
|
NPV (2020$)
|
106,878
|
20,069
|
20,069
|
20,068
|
20,067
|
Source: FPL’s
Response to Staff’s First Data Request
FPL’s revised renewable energy tariff and standard offer
contract, in type-and-strike format, are included as Attachment A to this
recommendation. Revisions include updates to the avoided unit, dates, and
payment information which reflect the current economic and financial
assumptions for the avoided unit costs.
Conclusion
The provisions of FPL’s revised renewable energy tariff
and standard offer contract conform to all requirements of Rules 25-17.200
through 25-17.310, F.A.C. FPL’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 FPL’s revised renewable energy tariff and standard offer
contract 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, FPL’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, FPL’s standard offer contract may
subsequently be revised.
