Discussion
of Issues
Issue 1:
Should the Commission
approve the amended standard offer contract and rate schedule COG-2 filed by
Duke Energy Florida, LLC?
Recommendation:
Yes. The provisions of DEF’s amended standard offer
contract and associated rate schedule COG-2 conforms 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. DEF has
identified a 214 megawatt (MW) natural gas-fueled combustion turbine (CT) as
the next avoidable planned generating unit in its 2022 Ten-Year Site Plan. The
projected in-service date of the avoided CT is June 1, 2029, with planned
construction beginning in July 2026.
Under DEF’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, 2029), 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 DEF’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 95 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, 2029) and continue for 10 years, while early and early
levelized capacity payments begin two years prior to the in-service date, or
2027 for this example.
Table 1 - Estimated Annual Payments to
a 50 MW Renewable Facility
(95% Capacity Factor)
|
Year
|
Energy Payment
|
Capacity Payment
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2023
|
13,273
|
-
|
-
|
-
|
-
|
|
2024
|
11,866
|
-
|
-
|
-
|
-
|
|
2025
|
10,656
|
-
|
-
|
-
|
-
|
|
2026
|
10,581
|
-
|
-
|
-
|
-
|
|
2027
|
10,470
|
-
|
-
|
2,547
|
2,698
|
|
2028
|
11,411
|
-
|
-
|
2,574
|
2,701
|
|
2029
|
11,299
|
1,922
|
2,027
|
2,600
|
2,704
|
|
2030
|
11,637
|
3,328
|
3,478
|
2,627
|
2,707
|
|
2031
|
12,013
|
3,362
|
3,482
|
2,654
|
2,710
|
|
2032
|
12,180
|
3,397
|
3,485
|
2,681
|
2,713
|
|
2033
|
12,243
|
3,432
|
3,489
|
2,709
|
2,716
|
|
2034
|
13,149
|
3,468
|
3,493
|
2,737
|
2,719
|
|
2035
|
13,820
|
3,503
|
3,497
|
2,765
|
2,722
|
|
2036
|
14,812
|
3,540
|
3,501
|
2,794
|
2,726
|
|
2037
|
16,109
|
3,576
|
3,506
|
2,823
|
2,729
|
|
2038
|
16,187
|
3,613
|
3,510
|
2,852
|
2,732
|
|
2039
|
17,432
|
3,651
|
3,514
|
2,882
|
2,736
|
|
2040
|
18,447
|
3,689
|
3,519
|
2,912
|
2,740
|
|
2041
|
18,936
|
3,727
|
3,524
|
2,942
|
2,743
|
|
2042
|
19,130
|
3,766
|
3,528
|
2,973
|
2,747
|
|
Total
|
275,652
|
47,975
|
47,554
|
44,075
|
43,543
|
|
Total (NPV)
|
147,062
|
21,236
|
21,236
|
21,236
|
21,236
|
Source: DEF’s Response to Staff’s First Data Request
DEF’s standard offer contract, in type-and-strike format,
is included as Attachment A to this recommendation. The changes made to DEF’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. In addition, the language in Section
14(g), Sheet No. 9.428, was revised to now require that the RF/QF maintain the
licensing and certification approvals necessary to operate the facility and
failure to do so constitutes a default. Previously, the language required
licensing and certification approval be achieved to initiate construction of
the facility by no later than the Completed Permits Date and failure to do so
constituted a default. Section 10.5.4, which is unchanged, already requires the
RF/QF to operate and maintain the facility to meet applicable laws, which would
include licensing and certification. Staff believes the change to the language in
Section 14(g) is reasonable and consistent with Section 10.5.4 of DEF’s
existing standard offer contract.
Conclusion
The provisions of DEF’s amended standard offer contract
and associated rate schedule COG-2 conforms 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, DEF’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, DEF’s standard offer contract may
subsequently be revised.
