Discussion
of Issues
Issue 1:
Should the Commission approve the revised standard
offer contract and associated rate schedule QS-2 filed by Florida Power &
Light Company?
Recommendation:
Yes. The provisions of FPL’s revised standard offer
contract and associated rate schedule QS-2 conform to all requirements of Rules
25-17.200 through 25-17.310, F.A.C. The 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. (Kistner)
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’s submitted 2020 Ten-Year Site Plan does not feature
an avoidable fossil-fueled generating unit or planned purchases that could be
deferred during the planning period, FPL could opt to offer only a standard
contract for energy payments based on its as-available energy cost. However, to
encourage renewable generation, FPL has identified a 1,991 megawatt (MW) natural
gas-fired combined cycle unit (CC) as the next planned generating unit. The
projected in-service date of the unit is June 1, 2030. The Commission has
approved using a unit outside of the Ten-Year Site Plan planning period
previously.
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, 2030), 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 unit (June 1, 2030), while early and early
levelized capacity payments begin in 2026 for this example.
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)
|
|
2021
|
6,908
|
-
|
-
|
‐
|
‐
|
|
2022
|
6,933
|
-
|
-
|
‐
|
‐
|
|
2023
|
8,038
|
-
|
-
|
‐
|
‐
|
|
2024
|
8,709
|
-
|
-
|
‐
|
‐
|
|
2025
|
9,648
|
-
|
-
|
‐
|
‐
|
|
2026
|
10,212
|
-
|
-
|
1,975
|
2,217
|
|
2027
|
10,639
|
-
|
-
|
2,014
|
2,217
|
|
2028
|
11,517
|
-
|
-
|
2,054
|
2,217
|
|
2029
|
11,540
|
-
|
-
|
2,095
|
2,217
|
|
2030
|
11,625
|
3,263
|
3,574
|
2,137
|
2,217
|
|
2031
|
11,910
|
3,332
|
3,574
|
2,180
|
2,217
|
|
2032
|
12,556
|
3,402
|
3,574
|
2,223
|
2,217
|
|
2033
|
12,862
|
3,473
|
3,574
|
2,268
|
2,217
|
|
2034
|
13,404
|
3,546
|
3,574
|
2,313
|
2,217
|
|
2035
|
13,035
|
3,620
|
3,574
|
2,359
|
2,217
|
|
2036
|
13,102
|
3,696
|
3,574
|
2,407
|
2,217
|
|
2037
|
12,370
|
3,774
|
3,574
|
2,455
|
2,217
|
|
2038
|
12,076
|
3,853
|
3,574
|
2,504
|
2,217
|
|
2039
|
13,828
|
3,934
|
3,574
|
2,554
|
2,217
|
|
2040
|
13,613
|
4,016
|
3,574
|
2,605
|
2,217
|
|
Total
|
224,525
|
39,908
|
39,316
|
34,143
|
33,253
|
|
Total (NPV)
|
105,773
|
13,601
|
13,601
|
13,601
|
13,601
|
Source: FPL’s Amended Response to Staff’s First Data
Request
FPL’s standard offer contract, in type-and-strike format,
is included as Attachment A to this recommendation. The changes made to FPL’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 FPL’s revised standard offer
contract and associated rate schedule QS-2 be approved as filed. The provisions
of FPL’s revised standard offer contract conform to all requirements of Rules
25-17.200 through 25-17.310, F.A.C. The 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.
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. (Weisenfeld)
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.
