Discussion
of Issues
Issue 1:
Should the Commission approve the
amended standard offer contract and rate schedule COG-2 filed by Duke
Energy Florida, LLC?
Recommendation:
Yes. The provisions of DEF’s amended standard offer
contract and associated rate schedule COG-2 conform to all requirements of
Rules 25-17.200 through 25-17.310, F.A.C. The amended 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. (Kistner)
Staff Analysis:
Section 366.91(3), F.S., and Rule 25-17.250, F.A.C.,
require that DEF, 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. DEF has
identified a 226 megawatt (MW) natural gas-fueled combustion turbine (CT) as
the next planned generating unit in its 2020 Ten-Year Site Plan. The projected
in-service date of the unit is June 1, 2027.
Under DEF’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, 2027), 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 DEF’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 95 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 unit (June 1, 2027).
Table
1 - Estimated Annual Payments to a 50 MW Renewable Facility
(95% Capacity Factor)
|
Year
|
Energy Payment
|
Capacity Payment (By Type)
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2021
|
8,128
|
-
|
-
|
1,378
|
1,521
|
|
2022
|
7,385
|
-
|
-
|
1,397
|
1,522
|
|
2023
|
7,242
|
-
|
-
|
1,417
|
1,523
|
|
2024
|
7,601
|
-
|
-
|
1,437
|
1,524
|
|
2025
|
8,419
|
-
|
-
|
1,457
|
1,526
|
|
2026
|
9,352
|
-
|
-
|
1,478
|
1,527
|
|
2027
|
10,771
|
1,575
|
1,699
|
1,499
|
1,528
|
|
2028
|
12,633
|
2,738
|
2,915
|
1,520
|
1,530
|
|
2029
|
13,544
|
2,777
|
2,918
|
1,541
|
1,531
|
|
2030
|
14,492
|
2,816
|
2,920
|
1,563
|
1,533
|
|
2031
|
15,257
|
2,856
|
2,923
|
1,585
|
1,534
|
|
2032
|
16,232
|
2,896
|
2,925
|
1,608
|
1,536
|
|
2033
|
16,164
|
2,937
|
2,928
|
1,631
|
1,537
|
|
2034
|
16,414
|
2,979
|
2,931
|
1,654
|
1,539
|
|
2035
|
16,905
|
3,021
|
2,934
|
1,677
|
1,541
|
|
2036
|
17,209
|
3,064
|
2,937
|
1,701
|
1,542
|
|
2037
|
18,791
|
3,107
|
2,940
|
1,725
|
1,544
|
|
2038
|
19,563
|
3,151
|
2,943
|
1,750
|
1,546
|
|
2039
|
20,224
|
3,196
|
2,946
|
1,774
|
1,548
|
|
2040
|
20,926
|
3,242
|
2,950
|
1,800
|
1,550
|
|
Total
|
277,254
|
40,357
|
39,809
|
31,592
|
30,683
|
|
Total (NPV)
|
132,483
|
16,702
|
16,702
|
16,702
|
16,702
|
Source: DEF’s Amended Response to Staff’s First Data
Request
DEF’s standard offer contract, in type-and-strike
format, is included as Attachment A to this recommendation. The DEF’s amended tariff
sheets are consistent with the updated avoided unit. In addition to changes
associated with the avoided unit, DEF made other revisions to its tariff
sheets. These include clarifying potentially ambiguous terminology, modifying
force majeure language, and dispute resolution terms.
In order to clarify potentially ambiguous terms,
DEF made various language changes. These include a change from “Prudent Utility
Practices” to “Prudent Regulated Utility Practices”, found on Sheet Nos. 9.411,
9.419, and 9.424, which DEF states was done to ensure that RF/QF’s are held to
the same standards as DEF and other IOUs in Florida. Another addition is “and
maintain” to the Conditions Precedent on Sheet No. 9.416, which DEF states was
made to avoid any doubt that the RF/QF must maintain the various conditions
past the Drop Dead Date, unless stated in writing by DEF on or before the Drop
Dead Date. This clarification was due to feedback DEF had received from an
RF/QF which did not believe it had to maintain the conditions after the Drop
Dead Date.
DEF made revisions to the Force Majeure and
Dispute Resolution sections to provide uniform language to coincide with other
IOU’s in Florida. The changes to the Force Majeure section found on Sheet Nos.
9.431 and 9.432 include a more focused definition of epidemic, which must be
recognized by a health agency authority and have a mandated quarantine that
directly impacts the RF/QF, and additional circumstances which are not
considered Force Majeure such as performance failure of another entity and
interruption of fuel supply. Last, the Dispute Resolution section found on
Sheet No. 9.438 was rewritten to use adjudication by the United States District
Court located in Hillsborough County rather than arbitration. Overall, these
modifications seem reasonable as they align with the IOU’s requirements and do
not place a disproportionate burden on the RF/QF.
Conclusion
Staff recommends that the amended standard offer contract
and rate schedule COG-2 be approved as filed. The provisions of DEF’s amended
standard offer contract and associated rate schedule conform to all
requirements of Rules 25-17.200 through 25-17.310, F.A.C. The amended 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.
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, DEF’s standard offer contract may
subsequently be revised. (Murphy)
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, DEF’s standard offer contract may
subsequently be revised.
