Case Background
On June 18,
2019, Florida Public Utilities Company (FPUC or utility) filed a petition for
approval of a non-firm energy pilot program and tariff (pilot program). Under the proposed pilot program, FPUC would
purchase non-firm energy from Florida Power & Light Company (FPL), pursuant
to its wholesale purchased power contract with FPL, and resell the non-firm
energy to qualifying industrial customers who own self-generation. The utility
proposes the pilot to end on December 31, 2020.
On
July 2, 2019, FPUC waived the 60-day file and suspend provision of Section
366.06(3), Florida Statutes (F.S.), until the September 5, 2019 Agenda
Conference. On July 23, 2019, FPUC responded to staff’s first data request. In
its response, FPUC included corrected tariff sheets. Specifically, FPUC removed
the $500 monthly administrative charge that was erroneously included in the
tariffs filed with the petition and corrected a tariff sheet’s numbering. On
August 22, 2019, FPUC filed certain additional minor corrections to the
proposed tariffs. The revised tariff sheets, as filed on August 22, 2019 are
shown in Attachment A to this recommendation. The Commission has jurisdiction
over this matter pursuant to Sections 366.04, 366.05, and 366.06, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve FPUC’s petition for
the approval of its pilot program and associated tariff?
Recommendation:
Yes, the Commission should approve FPUC’s petition
for the pilot program and associated tariff effective September 5, 2019. The
proposed tariff sheets are shown in Attachment A to this recommendation. If
FPUC wishes to extend or make permanent the pilot program, FPUC should petition
the Commission regarding the future of the pilot program prior to the December
31, 2020 expiration date. (Coston, Draper)
Staff Analysis:
FPUC does not generate electricity to serve its
customers; rather, FPUC’s Northeast Division currently purchases power to serve
its customers from FPL pursuant to a wholesale purchased power agreement. FPUC
recovers its payments to FPL from its customers through the fuel and purchased
power cost recovery clause factors (fuel factors) the Commission approves in
the annual fuel hearing.
On April 10, 2017, FPUC and FPL executed a Native Load Firm
All Requirements Power and Energy Agreement (agreement) that includes a
provision allowing FPUC to purchase non-firm energy from FPL pursuant to FPL’s
wholesale TS-1 tariff. The TS-1 tariff is an economy energy tariff under which
FPL sells non-firm energy at FPL’s forecasted incremental fuel cost to
wholesale customers. The TS-1 tariff has been approved by the Federal Energy
Regulatory Commission (FERC).
The proposed pilot program is designed for FPUC to
purchase non-firm energy from FPL pursuant to the TS-1 tariff and sell the
non-firm energy to qualifying industrial customers. Specifically, to qualify
for the proposed pilot program, customers must qualify for FPUC’s General
Service Large Demand (GSLD), GSLD-1, or standby tariffs and own dispatchable self-generation.
The proposed pilot program is limited to a maximum of three customers.
FPUC currently provides service to two industrial customers
that would qualify for the proposed pilot program: Rayonier Advanced Materials
(Rayonier) and WestRock. Both customers produce paper and lumber products and are
operating on Amelia Island. FPUC explained that when the utility discussed with
Rayonier and WestRock the option of being able to purchase non-firm energy from
FPL, both customers expressed interest in a non-firm energy option to add to
their generation mix.
Rayonier and WestRock have on-site generation that
provides the majority of their energy and capacity requirements. FPUC explained
that these two customers use coal, natural gas, or heat from burning wood
by-products to generate electricity. FPUC serves as a back-up energy resource. The
amount of energy Rayonier and WestRock purchase from the utility varies based
on the operational status of the facilities. The utility states that the pilot
program could allow the participants to purchase non-firm energy at a lower price
than the cost to self-generate, which could provide a benefit to the production
costs of Rayonier and WestRock.
Customers who choose to take service under the pilot
program agree to a minimum of 12 months of service; service will continue
thereafter until the customer submits a written notice of termination to FPUC.
Pursuant to the proposed pilot program, FPL will notify FPUC each Friday morning
of the hourly non-firm energy prices starting Sunday at midnight. FPUC will
then notify the participating customers of the non-firm energy prices
(expressed in dollars per megawatt-hour) by 10 am. The customers must submit to
FPUC their non-firm energy purchases, or nominations, for the following week by
2 pm of the same day and FPUC will forward that information to FPL. Participating
customers must purchase a minimum of 1,500 megawatt-hours per year.
The utility explained that Rayonier and WestRock would
immediately benefit from the proposed pilot program. While the proposed pilot program
would be available to three customers, FPUC explained that the utility is not
aware of a third customer who currently would be interested in the pilot
program.
The non-firm energy costs charged by FPL to FPUC will be directly
passed by the utility to the non-firm pilot customers. The utility states it would
not assess any administrative, energy, or demand surcharges under the proposed pilot
program. FPUC explained that it expects its administrative cost to administer
the non-firm pilot to be minimal; however, FPUC would petition the Commission
to modify the pilot program tariff in the future should administrative charges be
appropriate. Additionally, FPUC stated the cost to purchase non-firm energy
from FPL and revenues received from customers participating in pilot program would
not be included in the utility’s Purchased Power Cost Recovery filing, Docket
No. 20190001-EI.
FPUC proposed to offer the non-firm tariff as a pilot in
order to determine whether this energy supply option is beneficial to
participating customers and the utility. FPUC states that the pilot program
will be revenue neutral to the utility and the general body of ratepayers as
the cost of the non-firm energy will be passed directly through to the
customers participating in the pilot.
Furthermore, FPUC explained that the utility’s overall load
factor in its Northeast Division is currently impacted by the demand and energy
purchases from Rayonier and WestRock. When these customers make short term purchases
of electricity from FPUC, it increases FPUC’s monthly maximum demand. However,
this increase in demand does not increase the total energy amount by the same
percentage, which results in a negative impact on the utility’s load factor. FPUC
states that the proposed pilot program would provide participants the incentive
to purchase energy over longer periods of time resulting in a positive impact
on FPUC’s load factor in the Northeast Division. FPUC’s load factor is considered
by wholesale energy providers when negotiating the pricing contained in
purchased power contracts. An improved load factor would benefit FPUC’s general
body of ratepayers through lower fuel factors when future agreements for
wholesale power are negotiated.
Conclusion
The Commission should approve FPUC’s petition for the
pilot program and tariff, as shown in Attachment A, effective September 5, 2019.
This pilot program would allow FPUC to assess the benefits of offering a
non-firm energy program to its industrial customers with self-generation. The
pilot program would be revenue-neutral to the utility and have a potential
benefit to both participants and FPUC’s general body of ratepayers. If FPUC wishes
to extend or make permanent the pilot program, FPUC should be required to petition
the Commission regarding the future of the program prior to the December 31,
2020 expiration date.
Issue 2:
Should this docket be closed?
Recommendation:
If a protest is filed within 21 days of the issuance
of the order, this tariff should remain in effect, with any revenues held
subject to refund, pending resolution of the protest. If no timely protest is
filed, this docket should be closed upon the issuance of a consummating order.
(Brownless)
Staff Analysis:
If a protest is filed within 21 days of the issuance
of the order, this tariff should remain in effect, with any revenues held subject
to refund, pending resolution of the protest. If no timely protest is filed,
this docket should be closed upon the issuance of a consummating order.
