Discussion
of Issues
Issue 1:
Should the Commission approve the amended standard
offer contract and rate schedule COG-2 filed by Tampa Electric Company?
Recommendation:
Yes. The provisions of TECO’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 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 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.
TECO has identified a 18.5 megawatt (MW) natural
gas-fueled internal combustion reciprocating engine (IC) as the next avoidable planned
generating unit in its 2020 Ten-Year Site Plan. TECO states that it selected
the ICs over either combustion turbines or combined cycles to better match the
size of its 2021 reserve margin need, and that ICs offered reliability benefits
over other unit types. While there are no preset subscription limits under Rule
25-17.260, F.A.C., and an RF/QF may contract for more than the amount of the avoided
unit, TECO must petition the Commission if it receives a standard offer
contract that is not needed for reliability or would increase costs to the
general body of ratepayers.
The projected in-service date of the avoided unit is
December 1, 2021. This unit is one of five 18.5 MW ICs scheduled to enter
service in December 2021, with construction commencing in December 2020. Pursuant
to Rule 25-17.250, F.A.C., when this unit is no longer available to be used for
the standard offer contract, such as when the utility commences construction,
TECO must file a revised standard offer contract based on the next unit of the
same generating type, if any. Based on TECO’s 2020 Ten-Year Site Plan, the next
avoidable unit would be an IC with an in-service date of January 2025.
Under TECO’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 December 1, 2021), 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 TECO’s estimates of the annual payments for the normal and levelized
capacity payment options available under the revised standard offer contract to
an operator with a 50 MW 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. Due to the upcoming 2021 in-service date of
the avoided unit, no annual examples of early payments are provided. Early
payments, if applicable, would be made for months avoided. Normal and levelized
capacity payments begin with the projected in-service date of the avoided unit
(December 1, 2021).
Table 1 - Estimated Annual Payments to
a 50 MW Renewable Facility
(80% Capacity Factor)
|
Year
|
Energy Payments
|
Capacity Payments
|
|
Normal
|
Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
|
2021
|
9,516
|
5,403
|
5,867
|
|
2022
|
9,983
|
5,513
|
5,890
|
|
2023
|
9,437
|
5,626
|
5,914
|
|
2024
|
10,123
|
5,740
|
5,938
|
|
2025
|
10,786
|
5,857
|
5,963
|
|
2026
|
12,338
|
5,977
|
5,988
|
|
2027
|
12,361
|
6,099
|
6,014
|
|
2028
|
12,992
|
6,223
|
6,041
|
|
2029
|
13,728
|
6,350
|
6,068
|
|
2030
|
15,129
|
6,479
|
6,095
|
|
2031
|
15,771
|
6,612
|
6,124
|
|
2032
|
16,415
|
6,746
|
6,152
|
|
2033
|
16,836
|
6,884
|
6,182
|
|
2034
|
18,363
|
7,024
|
6,212
|
|
2035
|
19,149
|
7,168
|
6,243
|
|
2036
|
20,040
|
7,314
|
6,274
|
|
2037
|
21,631
|
7,463
|
6,307
|
|
2038
|
22,260
|
7,615
|
6,339
|
|
2039
|
23,129
|
7,771
|
6,373
|
|
2040
|
24,434
|
7,929
|
6,407
|
|
Total (Nominal)
|
323,810
|
131,794
|
122,393
|
|
Total (NPV)
|
179,896
|
65,718
|
65,718
|
Source: TECO’s Response to Staff’s First Data
Request
TECO’s standard offer contract, in type-and-strike format,
is included as Attachment A to this recommendation. The changes made to TECO’s
tariff sheets are consistent with the updated avoided unit. Revisions include
updates to calendar dates and payment information which reflect the current
economic and financial assumptions for the avoided unit.
Conclusion
Staff recommends
that the amended standard offer contract and rate schedule COG-2 be approved as
filed. The provisions of TECO’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, TECO’s standard offer contract may
subsequently be revised. (Passidomo)
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.
