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 the requirements of
Rules 25-17.200 through 25-17.310, F.A.C. The amended standard offer contract offers
multiple payment options 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 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 an 18.7 megawatt (MW) natural
gas-fueled reciprocating engine (RE) as the next avoidable planned generating
unit in its 2022 Ten-Year Site Plan. The projected in-service date of the avoided
RE is January 1, 2028, with planned construction beginning in January 2025.
This unit is one of two REs due in service in 2025 for a total of approximately
37 MW. 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. 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 2022
Ten-Year Site Plan there are currently no further avoidable fossil-fueled
generating units identified.
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 January 1, 2028), and thereafter, begin receiving
capacity payments in addition to firm 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. Normal and
levelized capacity payments begin with the projected in-service date of the
avoided unit (January 1, 2028), and continue for 10 years, while early and
early levelized capacity payments begin five years prior to the in-service
date, or 2023 for this example.
Table
1 -
Estimated Annual Payments to a 50 MW Renewable Facility
(80% Capacity Factor)
|
Year
|
Energy Payments
|
Capacity Payment
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2023
|
9,646
|
-
|
-
|
4,839
|
5,654
|
|
2024
|
9,154
|
-
|
-
|
4,937
|
5,654
|
|
2025
|
9,283
|
-
|
-
|
5,037
|
5,654
|
|
2026
|
9,472
|
-
|
-
|
5,140
|
5,654
|
|
2027
|
9,814
|
-
|
-
|
5,244
|
5,654
|
|
2028
|
11,058
|
8,069
|
9,105
|
5,351
|
5,654
|
|
2029
|
11,523
|
8,233
|
9,105
|
5,459
|
5,654
|
|
2030
|
11,565
|
8,400
|
9,105
|
5,570
|
5,654
|
|
2031
|
12,893
|
8,571
|
9,105
|
5,683
|
5,654
|
|
2032
|
13,285
|
8,745
|
9,105
|
5,799
|
5,654
|
|
2033
|
13,512
|
8,922
|
9,105
|
5,916
|
5,654
|
|
2034
|
13,971
|
9,104
|
9,105
|
6,037
|
5,654
|
|
2035
|
14,593
|
9,289
|
9,105
|
6,159
|
5,654
|
|
2036
|
16,243
|
9,477
|
9,105
|
6,284
|
5,654
|
|
2037
|
16,460
|
9,670
|
9,105
|
6,412
|
5,654
|
|
2038
|
18,937
|
9,866
|
9,105
|
6,542
|
5,654
|
|
2039
|
19,590
|
10,067
|
9,105
|
6,675
|
5,654
|
|
2040
|
20,579
|
10,271
|
9,105
|
6,811
|
5,654
|
|
2041
|
21,135
|
10,480
|
9,105
|
6,949
|
5,654
|
|
2042
|
21,560
|
10,693
|
9,105
|
7,090
|
5,654
|
|
Total
|
284,275
|
139,855
|
136,575
|
117,936
|
113,088
|
|
Total (NPV)
|
149,375
|
65,927
|
65,927
|
65,927
|
65,927
|
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
The provisions of TECO’s amended standard offer contract
and associated rate schedule COG-2 conform to the requirements of Rules
25-17.200 through 25-17.310, F.A.C. The amended standard offer contract offers
multiple payment options 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. (Jones)
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.
