Case Background
By Order No.
PSC-2017-0456-S-EI, issued on November 27, 2017, the Florida Public Service
Commission (Commission) approved Tampa Electric Company’s (TECO or Company)
Amended and Restated Stipulation and Settlement Agreement (2017 Settlement).[1] The 2017 Settlement allows for the
inclusion into base rates of up to 600 megawatts (MW) of solar projects which
meet certain criteria through a Solar Base Rate Adjustment (SoBRA) mechanism.
On June 5, 2018,
the Commission approved TECO’s First SoBRA tranche which consisted of two solar
projects, Payne Creek and Balm, with a total installed capacity of 144.7 MW.[2] On December 7, 2018, the Commission
approved TECO’s Second SoBRA tranche which consisted of five solar projects,
Lithia, Grange Hall, Bonnie Mine, Peace Creek, and Lake Hancock, with a total
installed capacity of 261.3 MW.[3] On November 12, 2019, the Commission
approved TECO’s Third SoBRA tranche which consisted of two solar projects,
Wimauma and Little Manatee River, with a total installed capacity of 149.3 MW. A Fourth tranche of 50 MW is available contingent
upon meeting certain criteria tied to the projects in the First and Second
SoBRA tranches, which is addressed in Issue 1.
By Order No.
PSC-2020-0224-AS-EI, issued June 30, 2020, the Commission approved TECO’s 2020
Settlement Agreement (2020 Settlement). The 2020 Settlement addressed, among other
issues, how to calculate the average installed costs for the First and Second
SoBRA tranches. On September 4, 2020, the Commission approved TECO’s true-up of
the First and Second SoBRAs in Order No. PSC-2020-0303-PAA-EI (True-Up Order),
which include a reduction in revenue requirements to be implemented along with
the TECO’s Fourth SoBRA revenue requirement calculation.
On February 27,
2020, as required by the 2017 Settlement, TECO notified the Commission that it
intended to seek approval of a Fourth SoBRA tranche. On July 31, 2020, TECO
filed a petition for approval of the Fourth SoBRA tranche, the last allowed by
the 2017 Settlement, which consists of one solar project, Durrance, with a
total installed capacity of 45.7 MW. The Commission has jurisdiction pursuant
to Sections 366.06 and 366.076, Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Is the Fourth SoBRA project proposed by TECO
eligible in its entirety for treatment pursuant to paragraph 6 of the 2017
Settlement?
Recommendation:
Yes. TECO is eligible for cost recovery of the
Fourth SoBRA project, Durrance, under the conditions outlined in paragraph 6 of
the 2017 Settlement and paragraph 3 of the 2020 Settlement, on the requested
45.7 MW portion of its solar capacity. (Phillips)
Staff Analysis:
Paragraph 6 of the 2017 Settlement outlines the conditions
under which TECO may seek cost recovery of certain solar facilities for all
SoBRA tranches, with additional requirements for the availability of the Fourth
SoBRA tranche. The requirements for system cost-effectiveness and average
installed cost, respectively, for all SoBRA tranches are discussed in Issues 2
and 3, respectively.
The Fourth SoBRA tranche consists of a single solar
project, Durrance, located in Polk County, with a projected in-service date on
or before January 1, 2021. While the Durrance project will be installed at a
total capacity of 60.1 MW, TECO is only seeking recovery of 45.7 MW through the
SoBRA mechanism. Staff notes that the Commission has previously approved a
portion of a solar project for recovery through the 2017 Settlement in a
stipulation approving the Second SoBRA Tranche for the Lake Hancock Solar
project. The
recovery for the remaining 14.4 MW may be addressed in a future docket.
Subparagraph 6(c) of the 2017 Settlement outlines the
conditions under which TECO may seek cost recovery of a Fourth SoBRA tranche
with up to an additional 50 MW of solar capacity. These conditions include that
the projects from the First and Second SoBRAs are in-service and operating as
designed by December 31, 2019, and the average installed cost is no more than
$1,475 per kilowatt of alternating current capacity (kWac). Pursuant
to paragraph 3 of the 2020 Settlement, the weighted average installed cost is
determined by the average of the First and Second SoBRA installed costs taken
together. The First and Second SoBRA projects’ actual in-service dates were no
later than April 25, 2019, and the weighted average installed cost was $1,448/kWac.
The in-service date and installed cost for each project in the First and Second
SoBRAs are listed in Table 1-1.
Table 1-1
In-Service Dates and Installed Costs for
First and Second SoBRA Projects
|
Project Name
|
In-Service Date
|
Installed Cost ($/kWac)
|
|
First SoBRA
|
|
Payne
Creek Solar
|
September
1, 2018
|
1,342
|
|
Balm
Solar
|
September
27, 2018
|
1,478
|
|
Second SoBRA
|
|
Lithia
Solar
|
January
1, 2019
|
1,481
|
|
Grange
Hall Solar
|
January
2, 2019
|
1,430
|
|
Peace
Creek Solar
|
March
1, 2019
|
1,479
|
|
Bonnie
Mine Solar
|
January
23, 2019
|
1,496
|
|
Lake
Hancock Solar
|
April
25, 2019
|
1,459
|
Source: Order
No. PSC-2020-0303-PAA-EI, issued September 4, 2020 in Docket No 20200144-EI,
In re: Petition for limited proceeding to true-up
first and second SoBRA, by Tampa Electric Company
Conclusion
TECO is eligible for cost recovery of the Fourth SoBRA
project, Durrance, under the conditions outlined in paragraph 6 of the 2017
Settlement and paragraph 3 of the 2020 Settlement, on the requested 45.7 MW
portion of its solar capacity.
Issue 2:
Is the Fourth SoBRA project proposed by TECO cost-effective
pursuant to subparagraph 6(g) of the 2017 Settlement?
Recommendation:
Yes. The 45.7 MW portion of the Durrance project
included in TECO’s Fourth SoBRA will lower the Company’s projected system costs
as compared to the system without the solar project; therefore, the Fourth
SoBRA is considered to be cost-effective under subparagraph 6(g) of the 2017
Settlement. (Phillips)
Staff Analysis:
Subparagraph 6(g) of the 2017 Settlement states that
the cost-effectiveness for SoBRA project(s) shall be evaluated based only on
whether the projects in the SoBRA will lower the Company’s overall projected
system cumulative present value revenue requirement (CPVRR) as compared to the
system without the SoBRA project(s). This compares the cost of the added
generation, transmission, operations and maintenance (O&M) and other
expenses of the proposed solar project(s) to the avoided traditional
generation, transmission, fuel, and O&M expenses that would otherwise have
been incurred if the facilities had not been constructed.
Overall, TECO estimates that the 45.7 MW portion of the
Durrance project included in the Fourth SoBRA produces projected system CPVRR
savings of $31.0 million without accounting for costs associated with carbon
emissions. Using TECO’s base case estimate for avoided carbon costs would
increase system savings by $7.2 million to a total of $38.3 million, while its
high scenario would increase system savings by $24.2 million to a total of
$55.2 million. Even if the total 60.1 MW capacity of Durrance project is
considered, the project still produces savings of $39.9 million without
consideration of carbon costs.
As part of its analysis, TECO used a non-standard value of
deferral for avoided generation. As discussed in the stipulations approving
each of the prior SoBRA tranches, the parties agreed to use a pro-rata share of
the avoided generation benefits of the full 600 MW of all SoBRAs combined. As
TECO witness Aponte admits in his testimony, the Fourth SoBRA project does not
avoid any generation, but credits the unit for $34.5 million in savings based
on its share of the 600 MW SoBRA capacity. This value was calculated based on
the Company’s current avoided unit, a reciprocating engine. Staff notes however
that at the time of approval of the 2017 Settlement, and in its three prior SoBRA
dockets, TECO used a combustion turbine as the avoided unit, which has a lower
capacity cost. If this change in unit type did not occur, the value of deferral
would be reduced by $10.3 million to $24.3 million in savings. Even with this
reduction, the Fourth SoBRA is projected to be cost-effective and reduce system
costs by $20.8 million without consideration of carbon costs. The results of
each of the carbon scenarios and the avoided unit comparisons are summarized in
Table 2-1.
Table 2-1
Cost-Effectiveness Analysis Results
|
CO2
Emissions
|
Avoided Unit and Capacity Comparisons
|
|
Reciprocating Engine (45.7 MW)
|
Reciprocating Engine (60.1 MW)
|
Combustion Turbine (45.7 MW)
|
|
CPVRR
($ Millions)
|
|
Low
|
31.0
|
39.9
|
20.8
|
|
Base
|
38.3
|
50.9
|
28.0
|
|
High
|
55.2
|
77.2
|
45.0
|
Source: Exhibit JAA-1 from Document No.
04171-2020 and TECO’s Response to Staff’s Second Data Request.
Conclusion
The 45.7 MW portion of the Durrance project included in
TECO’s Fourth SoBRA will lower the Company’s projected system costs as compared
to the system without the solar project; therefore, the Fourth SoBRA is
considered to be cost-effective under subparagraph 6(g) of the 2017 Settlement.
Issue 3:
Is the projected installed cost of the Fourth SoBRA
project proposed by TECO less than or equal to the Installed Cost Cap of $1,500
per kWac pursuant to subparagraph 6(d) of the 2017 Settlement?
Recommendation:
Yes. The estimated installed cost of the Durrance
project in the Fourth SoBRA is $1,500 per kWac, which is equal to the installed
cost cap specified in subparagraph 6(d) of the 2017 Settlement. (Phillips)
Staff Analysis:
Subparagraph 6(d) of the 2017 Settlement specifies a
$1,500 per kWac installed cost cap for each SoBRA project. The estimated direct
installed cost of the Durrance project is $66.7 million, or approximately $1,460
per kWac. In addition, TECO is claiming Allowance for Funds Used During
Construction (AFUDC) of approximately $1.9 million. The total all-in-cost is
$68.6 million or $1,500 per kWac which is equal to the $1,500 per kWac
installed cost cap specified in subparagraph 6(d) of the 2017 Settlement. The
projected installed costs for the Durrance project are listed in Table 3-1 by
subcategory.
Table
3-1
Projected
Installed Cost for Fourth SoBRA
|
Projected
Cost
|
Cost ($
Million)
|
Cost ($
per kWac)
|
|
Major Equipment and Balance of System
|
55.3
|
1,210
|
|
Development
|
1.6
|
35
|
|
Transmission Interconnect
|
3.0
|
66
|
|
Land
|
5.8
|
127
|
|
Owner’s Cost
|
1.0
|
22
|
|
AFUDC
|
1.9
|
41
|
|
Total
|
68.6
|
1,500
|
Source: Exhibit MDW-1 from
Document No. 04171-2020
Conclusion
The estimated installed cost of the Durrance project in
the Fourth SoBRA is $1,500 per kWac, which is equal to the installed cost cap
specified in subparagraph 6(d) of the 2017 Settlement.
Issue 4:
What is the estimated annual revenue requirement
associated with TECO's Fourth SoBRA project?
Recommendation:
The estimated annual revenue requirement associated
with TECO’s Fourth SoBRA project is $7,534,000. (Higgins)
Staff Analysis:
In 2017, TECO received authorization for a framework
to recover costs associated with the construction and operation of a
then-conceptual series of solar generating facilities.
The framework included conditions by which the Company can petition the
Commission to implement project-specific estimated annual revenue requirements,
beginning on specified dates, subject to certain agreed-upon conditions. In
particular, the effective date of the Fourth SoBRA’s rate adjustment can be no
earlier that January 1, 2021, and that incremental annual revenue requirement
may not exceed $10.2 million.
The Company is requesting the Commission approve an
estimated annual revenue requirement based on the projected installed cost of
the single project comprising the Fourth SoBRA, Durrance. The projected annual
revenue requirement for the Fourth SoBRA project also includes a relatively
minor revenue requirement revision stemming from the Company’s “trued-up” First
and Second SoBRA projects. This amount, $77,000, identified in the True-Up
Order, was ordered to be carried forward and applied to the Company’s Fourth
SoBRA/instant request.
The cumulative Fourth SoBRA
annual revenue requirement is initially formulated using an estimated capital
cost (Issue 3). Other delineated components of the revenue requirement include operation
and maintenance expenses, depreciation expense, financing costs, insurance
costs, and taxes. The proposed estimated total annual revenue requirement associated
with TECO’s Fourth SoBRA is $7,611,000. This amount consists of an estimated
capital cost of $6,802,000, an annual fixed operation and maintenance expense
of $244,000, and land-associated costs in the amount of $564,000. However,
after the incorporation of the revenue requirement revision identified in the
True-Up Order, the annual revenue requirement associated with TECO’s Fourth
SoBRA project is $7,534,000.
Table 4-1 displays the total estimated annual Fourth SoBRA
revenue requirement by cost category, as well as the estimated-to-actual annual
revenue requirement revision from the First and Second SoBRA projects.
|
Table 4-1
Fourth SoBRA Estimated Annual
Revenue Requirement
|
|
Plant Durrance
|
Revenue
Requirement ($000)
|
|
Capital
|
$6,802
|
|
Fixed
Operation & Maintenance
|
244
|
|
Land
|
564
|
|
Fourth
SoBRA Revenue Requirement Subtotal
|
7,611
|
|
True-Up
|
($77)
|
|
Grand
Total*
|
$7,534
|
Source:
Prepared Direct Testimony and Exhibit of TECO witness Jose A. Aponte, Exhibit
(JAA-1),
Document
No. 3.
*May not compute exactly due
to rounding.
Conclusion
The estimated annual revenue requirement associated with
TECO’s Fourth SoBRA project is $7,534,000.
Issue 5:
Should the Commission approve the tariffs for TECO
reflecting the base rate increase for the Fourth SoBRA project determined to be
appropriate in these proceedings?
Recommendation:
Yes. The Commission should approve the tariffs and
base rates as shown in Attachment A to the recommendation effective with the
first billing cycle in January 2021. The base rate increase was calculated in
accordance with the 2017 Settlement. (Forrest)
Staff Analysis:
TECO Witness Ashburn in his testimony filed on July
31, 2020, provides the proposed tariffs and base rates to reflect the annual
revenue requirement increase of $7,534,000 as recommended in Issue 4. Witness
Ashburn states that the base rate increase was allocated to the rate classes as
required by the 2017 Settlement. For a residential customer using 1,000
kilowatt-hours, the base rate increase will be $0.44. Commercial customers will
see base rate increases between 0.5 and 1 percent, depending on usage.
Staff recommends that the Commission should approve the
tariffs and base rates as shown in Attachment A to the recommendation effective
with the first billing cycle in January 2021. Staff reviewed the calculations
provided by Witness Ashburn and believes that the base rate increase was
calculated in accordance with the 2017 Settlement.
Issue 6:
Should this docket be closed?
Recommendation:
If a protest is filed within 21 days of the issuance of the
order, the tariffs 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. (Stiller,
Trierweiler)
Staff Analysis:
If a protest is filed
within 21 days of the issuance of the order, the tariffs 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.
[1] Order No. PSC-2017-0456-S-EI, issued November 27,
2017, in Docket No. 20170210-EI, In re:
Petition for limited proceeding to approve 2017 amended and restated
stipulation and settlement agreement, by Tampa Electric Company, and Docket
No. 20160160-EI, In re: Petition for
approval of energy transaction optimization mechanism, by Tampa Electric
Company.
[2] Order No. PSC-2018-0288-FOF-EI, issued June 5, 2018,
in Docket No. 20170260-EI, In re: Petition for limited proceeding to approve
first solar base rate adjustment (SoBRA), effective September 1, 2018, by Tampa
Electric Company.
[3] Order No. PSC-2018-0571-FOF-EI, issued December 7,
2018, in Docket No. 20180133-EI, In re: Petition
for limited proceeding to approve second solar base rate adjustment (SoBRA),
effective January 1, 2019, by Tampa Electric Company.
Order No. PSC-2018-0288-FOF-EI, issued June 5, 2018,
in Docket No. 20170260-EI, In re: Petition for limited proceeding to approve
first solar base rate adjustment (SoBRA), effective September 1, 2018, by Tampa
Electric Company. Order. No. PSC-2018-0571-FOF-EI, issued December 7, 2018,
in Docket No. 20180133-EI, In re:
Petition for limited proceeding to approve second solar base rate adjustment
(SoBRA), effective January 1, 2019, by Tampa Electric Company. Order No.
PSC-2019-0477-FOF-EI, issued November 12, 2019, in Docket No. 201900136-EI, In re: Petition for limited proceeding to
approve Third solar base rate adjustment (SoBRA), effective January 1, 2020, by
Tampa Electric Company.
