Discussion
of Issues
Issue 1:
Should the Commission approve TECO’s proposed DC
Pilot program?
Recommendation:
Yes, the Commission should approve the proposed DC
Pilot program with the following modifications: 1) costs associated with the DC
Pilot program should be capped at $1.99 million, and 2) the Company should
provide annual reports to the Commission as detailed in the petition as well as
a survey, in year three, of the DC Pilot on the participants’ willingness to
pay a monthly surcharge for increased reliability. While participating
customers will not realize direct energy savings similar to traditional customer-owned
or leased solar installations, the participants may experience a slightly
higher level of reliability when compared to other customers in the same
sub-division. In addition, the potential system benefits of the DC Pilot
program as proposed are dependent on participating customers’ willingness to
pay a premium for incremental reliability benefits. Staff recommends that the
Pilot commence on the date the consummating order is issued and terminate four
years from that date, if no request for hearing is timely filed. If a request
for hearing is timely filed, the Pilot shall be held in abeyance pending final
hearing. (Wooten, Doehling, Mouring, Wu)
Staff Analysis:
Description of Proposed DC Pilot Program
Under the proposed DC Pilot, TECO will contract with ETFI
to install and operate battery storage and solar PV equipment at approximately
37 single family detached houses within a particular sub-division. The housing
development will be connected by the underground DC microgrid, in addition to
the traditional alternating current (AC) distribution system (AC grid).
Pursuant to the Addendum included in the purchase and sale agreement, customers
who purchase a home in the development will be required to participate in the
DC Pilot at no additional cost. The terms of the Addendum are further discussed
below.
Each house participating in the DC Pilot would have an
inverter installed to convert the DC microgrid power to AC for the house, along
with an average of 7.8 kilowatts (kW) of solar photovoltaic (PV) panels and
17.7 kilowatt-hours (kWh) of standard battery storage. Each house would have a
device called a Block Box, which contains the inverter, battery storage, and
related control equipment. The Block Box will connect the house with the solar
PV array and the DC microgrid.
In addition, TECO would install 240 kWh of battery storage
and a pair of reciprocating natural gas generators totaling 350 kW at a
location called the CEP.
The housing development is also connected to TECO’s AC distribution system to
provide power in the event of any failure of the BES.
The Block Box control equipment and CEP are connected by
fiber optic cables to the housing development’s network and will automatically
manage power using a control algorithm. The control algorithm seeks to optimize
power generation and delivery. For example, TECO stated that if one home’s
Block Box battery is depleted, the BES can deliver excess power from other
homes or the CEP. Similarly, the control algorithm can also dispatch the CEP
natural gas generators or import power from the AC grid if the solar panels or
batteries are not able to meet demand. In addition, TECO stated the algorithm
could be set to prioritize exporting power from the BES to support reliable
operation of the AC grid, or could isolate the BES in the event of widespread
AC grid outages.
Under the DC Pilot, a participant’s energy consumption will
be measured by a single meter and participants will be billed under the
standard residential tariff rate. As such, their bills will be no different
than if they were not participating in the DC Pilot. As the solar PV arrays are
owned and operated by TECO, participants would not be able to claim any higher
renewable energy usage. This is because all the assets installed under the DC
Pilot are front-of-the-meter (Company owned), whereas customer-owned or leased
roof top solar resources are behind-the-meter. In a traditional customer-owned
or leased solar PV system and behind-the-meter battery storage, the customer
can offset all or part of their energy usage and receive bill credits for
excess generation. Such customers are also able to claim they produced
renewable energy, such as through renewable energy credits. Under the proposed
pilot, any excess generation beyond what is required to charge the Block Box
and CEP batteries will be exported to the AC grid for the benefit of
non-participants. However,
as the DC Pilot is sized to meet the needs of the participants, staff believes
this benefit to be minimal.
The proposed length of the DC Pilot is four years, if the
Commission grants approval of the DC Pilot. TECO has communicated to staff that
as of March 1, 2021, one home is occupied and that the BES is prepared to be
energized at this time. Although the term of the DC Pilot is four years, TECO
intends for the BES to be the permanent electric supply for the homes in the
community and it is designed to last for decades. In the event of equipment
failure or if a customer leaves the DC Pilot, TECO is building out redundant AC
infrastructure in the housing development, including manual switches that would
allow each house to transfer from the BES to TECO’s traditional infrastructure.
If TECO determines at the end of the Pilot that the DC Microgrid is not
effective, the DC infrastructure will be removed and the Company will continue
to utilize the CEP. Therefore, staff recommends that the DC Pilot be approved
for a four year period beginning on the date the Commission’s consummating
order is issued.
Program Goals
TECO stated that the purpose of the DC Pilot is to test
the capability of the BES to provide power to residential homes with a high
level of renewable energy as well as superior reliability and resiliency. More
specifically, the goals of the DC Pilot will test the ability of the BES to:
(1) ride through all upstream AC distribution system disturbances with no
interruption to the customer; (2) integrate high levels of renewable energy
targeted to be at least 60 percent of the total energy used by the homes
participating in the DC Pilot; and (3) reduce impacts on the transmission and
distribution system during times of peak demand. TECO asserts that if the DC
Pilot meets these objectives, then the quantifiable benefits would include: (1)
increased renewable penetration, (2) reduced system losses, (3) reduced
generation capacity costs, (4) reduced system transmission and distribution
capacity costs, (5) reduced energy costs, and (6) increased reliability. Staff
believes these goals are reasonable for the DC Pilot; however, staff also
believes that any approval should be clear that participating customers will
not realize any direct energy (kWh) savings, unlike traditional customer-owned
or leased solar installations, and that the benefit of increased reliability
would be marginal compared to the increased reliability resulting solely from
the community being served by the underground AC distribution system.
Reporting Requirements
As described in the Company’s petition, TECO will produce
annual reports during the DC Pilot, to be provided to the Commission. These
annual reports will describe the results as well the successes and failures to
produce the expected benefits of the DC Pilot. In addition to annual reports,
the Company will produce a final report to provide to the Commission. This
final report will be an assessment of the overall DC Pilot and determine the
merits of a possible permanent program to be presented to the Commission.
Within these reports the Company intends to make both quantitative and
qualitative analyses that would: (1) compare the cost of providing local
distribution service from a DC microgrid to the cost of a standard AC system;
(2) describe whether the system performs as expected; (3) describe whether any
incremental operation and maintenance (O&M) expenses may arise; and (4)
describe what benefits the microgrid provided with respect to reliability and
resiliency. These reports will also include input from DC Pilot participants.
In year three of the pilot, staff recommends that TECO survey the DC Pilot
participants on their willingness to pay a monthly surcharge for this premium
service. The results of this survey should be included in the final report.
Terms of the DC Pilot
Terms of the Agreements
The EPC Agreement with ETFI designates that the BES will
initially operate under a one year test year period which TECO can suspend if
certain performance criteria are not met. If the system is suspended within
this one year test period, ETFI would be obligated at their expense to dismantle
the system and TECO would serve the participants with the AC distribution
system.
The CEP would be kept by TECO as a generation resource to be utilized in the
future.
TECO and Metro Development Group (Metro) entered into an
agreement (Developers Agreement) that allows both ETFI and TECO access to the
housing development to install, operate and maintain the system. This
Developers Agreement grants TECO an easement for the CEP and AC distribution
system. TECO and Lennar Homes Inc. (Lennar) entered into an agreement (Builders
Agreement) in which Lennar will build the homes that will be participating in
the DC Pilot. As outlined in the Builders Agreement, TECO will have access to
the BES and traditional AC distribution system in the housing development for
installation, operation and maintenance. Furthermore the Builders Agreement
details that TECO will own, operate, and maintain the solar panels installed on
the roofs of homes in the DC Pilot.
When a homebuyer purchases a home from Lennar, they will
sign a purchase and sale agreement which includes an Addendum. The Addendum
provides the terms of DC Pilot participation and states, in part, that BES
equipment is located on the homebuyer’s lot pursuant to a utility easement. Staff
provided the Company feedback on language referring to a restriction on
customer-owned or leased rooftop solar during the term of the Pilot Program in
the original version of the Addendum. In response, the Company and Lennar
revised the Addendum and removed this restriction. A copy of this revised
Addendum is included as Attachment A. As stated in the Addendum, TECO is
informing participants that the program will “deliver greener and highly
reliable electricity directly to your home.” As discussed above, participating
customers will not realize any direct energy or bill savings. The revised
Addendum also informs homebuyers that, pursuant to Rule 25-6.065, F.A.C., they
have the right to install their own solar PV and net
meter their excess generation. Customers who elect to install their own solar
PV will be removed from the DC Pilot and instead be served by the AC grid.
Regardless, TECO will still retain its easement allowing it to own, operate,
and maintain the BES equipment on the homeowner’s property, including the TECO-owned
rooftop solar panels.
Terms of the Pilot
Suspension
If TECO suspends the system, either after the one year
test period or at the end of the DC Pilot, TECO will either remove the solar
panels from the roofs or sign over ownership of the solar panels to the homeowners.
If the homeowners choose to take ownership of the solar panels, they would
purchase the solar panels from TECO for a nominal value of $1.00 so they could
be repurposed to provide homeowners with solar power that would be subject to an
interconnection agreement with TECO. Because the balance of the BES system
would remain with TECO, the solar panel arrays would need an inverter installed
to convert the solar PV’s DC generation to AC power to allow a proper
connection to TECO’s AC distribution system. This conversion process would have
an estimated cost of $3,000 to $5,000 per home.
This conversion cost would be covered by either ETFI or TECO according to the
terms set forth within the EPC Agreement.
DC Pilot Costs
The estimated installed capital cost for the DC Pilot is
$1.99 million inclusive of the solar panel arrays, Block Boxes, CEP, and DC
Infrastructure required for the system. The redundant AC distribution system
has an estimated capital cost of $60,000, which is similar in costs to a
typically installed AC distribution system, and is separate from the $1.99
million total. The
software provided by ETFI, at no cost to TECO, to operate the system will have
no capital or O&M expenses for the Company. The information learned from
the DC Pilot will be applied in the development of a software maintenance
agreement with ETFI that would be implemented at the DC Pilot’s conclusion. In
response to a staff data request, TECO stated it will not incur O&M costs
for the duration of the DC Pilot.
The DC Pilot will inform TECO on how to develop an O&M plan to be
implemented at the conclusion of the DC Pilot.
Revenue Requirements
The Company is seeking recovery associated with the DC
microgrid system and AC distribution system to be recovered through base rates,
including O&M expenses incurred by TECO. This recovery request is included in
TECO’s rate increase petition filed in Docket No. 20210034-EI on April 9, 2021.
The two gas-fired generators at the CEP would be
dispatched based on local need instead of traditional least-cost economic
dispatch and will have an annual estimated fuel cost of $11,000 in the pilot’s
first two years and $10,000 for the remainder of the DC Pilot.
The Company is also seeking recovery of the fuel costs associated with the CEP
to be recovered through the fuel adjustment clause. The Company has estimated
total program costs for both capital and fuel, absent consideration of the
recovery of any potential losses from the sale of the equipment at the end of
the program, would equate to approximately a $0.01 per 1,000 kWh on a
residential monthly bill.
Depreciation
TECO states that the DC Pilot involves “new and innovative
technologies,” thus, new categories of plant assets will be installed.
The Company indicated that if the DC Pilot is approved, it will submit a
request to the Commission for establishing several new depreciation
accounts/subaccounts, with corresponding depreciation rates, to record these
plant assets.
Proposed Accounting Treatment
TECO has requested that the capital investment, along with
O&M expenses, associated with its proposed DC Pilot be recorded
above-the-line, and be approved for recovery through base rates. The Company’s
proposed DC Pilot offers participants the option to purchase the rooftop solar
panels installed at their home for a nominal fee of $1.00, in the event that
the Company elects to discontinue the DC Pilot. As outlined in Section 4 of its
proposal, the Company may discontinue the program after review of the final
report. Under this scenario, the losses generated by selling the rooftop solar
panels below the unrecovered net book value would also be recorded
above-the-line in Account 421.2 Loss on Disposition of Property. Further, any
resulting net losses would be recovered through base rates from the general
body of customers. The Company stated that the proposed buyout option would
help to avoid potential removal costs and allow the existing rooftop solar
panels to be repurposed to allow the homeowners to produce solar power for
their own needs. The Company has also stated that removing solar panels that
have already been installed would subvert its goal of increasing cost-effective
solar generation in its service territory.
Conclusion
While the DC Pilot is not currently projected to be cost-effective,
the main benefit of the program is in the form of the data collected regarding
the reliability and costs of the BES. The DC Pilot program would allow the
Company to verify the incremental reliability benefits to participants and
costs to TECO for the BES. This information may then enable the Company to
accurately determine the level of improved reliability and the potential cost
differential in order to develop a future program or tariff offering.
As previously stated, staff believes the system benefits
gained from any excess generation being exported to the benefit of
non-participants to be minimal. Furthermore, as TECO has not claimed that
reliability concerns are a problem in this service area, the benefit of
increased reliability would be marginal compared to the increased reliability
resulting from the community being served solely by the underground AC
distribution system. In addition, participants would not be able to claim any
higher renewable energy usage as all assets are front-of-meter installations.
ETL advertises its BES as a business opportunity for
investor-owned utilities to own and earn a return on equipment at the customer
dwelling that would otherwise be customer-owned or leased and behind-the-meter.
In the current petition, the general body of ratepayers will be paying for the
market research to gather data that could be used to potentially increase
reliability for participating customers. As indicated by the Company, while
current DC Pilot program participants will face no additional charges, future
implementations of the BES concept may require a premium rate structure to
recover an incremental cost of service from participants.
As discussed above, participating customers will not
realize direct energy savings similar to customer-owned or leased solar
installations. However, participants may experience a slightly higher level of
reliability when compared to other ratepayers in the same sub-division. As such,
the potential system benefits of the DC Pilot program as proposed are dependent
on participating customers’ willingness to pay a premium for incremental
reliability benefits. Therefore, the Commission should approve the proposed DC
Pilot program with the following modifications: 1) costs associated with the DC
Pilot program should be capped at $1.99 million, and 2) the Company should
provide annual reports to the Commission as detailed in the petition as well as
a survey, in year three, of the DC Pilot on the participants’ willingness to
pay a monthly surcharge for increased reliability. Staff recommends that the
Pilot commence on the date the consummating order is issued and terminate four
years from that date, if no request for hearing is timely filed. If a request
for hearing is timely filed, the Pilot shall be held in abeyance pending final
hearing.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If no person whose substantial interests are
affected by this proposed agency action files a request for a hearing within 21
days of the issuance of the order, this docket should be closed upon the issuance
of a consummating order. If a request for hearing is timely filed, this
docket shall remain open pending final hearing. (Brownless)
Staff Analysis:
At the conclusion of the protest period, if no
protest is filed, this docket should be closed upon the issuance of a
consummating order. If a request for hearing is timely filed, this docket shall
remain open pending final hearing.
