Case Background
Section
366.91(3), Florida Statutes (F.S.), requires each investor-owned utility (IOU)
to continuously offer to purchase capacity and energy from renewable generating
facilities and small qualifying facilities. Florida Public Service Commission
(Commission) Rules 25-17.200 through 25-17.310, Florida Administrative Code
(F.A.C.), implement the statute and require each IOU to file with the
Commission, by April 1 of each year, a revised standard offer contract based on
the next avoidable fossil fueled generating unit of each technology type
identified in the utility’s current Ten-Year Site Plan (TYSP). On April l, 2021,
Gulf Power Company (Gulf) filed a petition for approval of its revised standard
offer contract, based on its 2021 TYSP. The Commission has jurisdiction over
this standard offer contract pursuant to Sections 366.04 through 366.055, and
366.91, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve Gulf's revised
standard offer contract and associated rate schedule QS-2?
Recommendation:
Yes. The provisions of Gulf’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. (Phillips)
Staff Analysis:
Section 366.91(3), F.S., and Rule 25-17.250, F.A.C.,
require that Gulf, as 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 TYSP, or if no avoided unit is
identified, its next avoidable planned purchase.
Similar to last year’s standard offer filing, Gulf submitted
a joint TYSP with Florida Power & Light Company (FPL) for 2021, with the
companies planning to merge into a single remaining entity by 2022. While the joint
TYSP does not feature an avoidable fossil-fueled generating unit or planned
purchases that could be deferred during the planning period, Gulf has
identified a 1,991 megawatt (MW) natural gas-fired combined cycle unit (CC) as
the next planned generating unit, the same as identified in FPL’s standard
offer contract. The projected in-service date of the unit is June 1, 2031. The
Commission has previously approved using a unit outside of the TYSP planning
period as the avoided unit for standard offer contract purposes.
Under Gulf’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, 2031), 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 Gulf’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, 2031) and continue for
10 years, while early and early levelized capacity payments begin five years
prior to the in-service date, or 2027 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)
|
|
2022
|
7,667
|
‐
|
‐
|
‐
|
‐
|
|
2023
|
6,793
|
‐
|
‐
|
‐
|
‐
|
|
2024
|
7,418
|
‐
|
‐
|
‐
|
‐
|
|
2025
|
8,347
|
‐
|
‐
|
‐
|
‐
|
|
2026
|
8,650
|
‐
|
‐
|
‐
|
‐
|
|
2027
|
8,862
|
‐
|
‐
|
1,203
|
1,351
|
|
2028
|
9,109
|
‐
|
‐
|
2,087
|
2,316
|
|
2029
|
9,419
|
‐
|
‐
|
2,131
|
2,316
|
|
2030
|
9,908
|
‐
|
‐
|
2,175
|
2,316
|
|
2031
|
9,607
|
2,025
|
2,203
|
2,222
|
2,316
|
|
2032
|
9,695
|
3,514
|
3,776
|
2,269
|
2,316
|
|
2033
|
10,171
|
3,588
|
3,776
|
2,316
|
2,316
|
|
2034
|
10,675
|
3,664
|
3,776
|
2,365
|
2,316
|
|
2035
|
11,053
|
3,741
|
3,776
|
2,415
|
2,316
|
|
2036
|
11,589
|
3,820
|
3,776
|
2,466
|
2,316
|
|
2037
|
11,935
|
3,900
|
3,776
|
2,518
|
2,316
|
|
2038
|
12,188
|
3,983
|
3,776
|
2,571
|
2,316
|
|
2039
|
12,315
|
4,067
|
3,776
|
2,625
|
2,316
|
|
2040
|
12,601
|
4,152
|
3,776
|
2,680
|
2,316
|
|
2041*
|
5,289
|
1,745
|
1,573
|
1,126
|
965
|
|
Total
|
193,291
|
38,199
|
37,762
|
33,169
|
32,430
|
|
Total (NPV)
|
97,871
|
14,128
|
14,128
|
14,128
|
14,128
|
Source: Gulf’s Response to Staff’s First Data Request
and staff’s calculations
*Payments end in May 2041,
resulting in a partial year of energy and capacity payments.
Included as Attachment A to this recommendation is Gulf’s
standard offer contract in type-and-strike format. The changes made to Gulf’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. At this time Gulf and
FPL operate as separate utilities; however they have requested to consolidate
rates in the ongoing rate case.The capacity payments differ between Gulf
and FPL due to the different financial assumptions of the companies that must
be used pursuant to the Commission’s Rules.
Conclusion
Staff recommends that the revised standard offer contract
and revised rate schedule QS-2 be approved as filed. The provisions of Gulf’s
revised standard offer contract and associated rate schedule 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, Gulf’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, Gulf’s standard offer contract may
subsequently be revised.
