Case Background
On March 11,
2022, Tampa Electric Company (TECO or Company) petitioned the Florida Public
Service Commission (Commission) to approve the Clean Air Act (CAA), National
Emission Standards Hazardous Air Pollutants (NESHAP) Subpart YYYY Compliance Project
(Project) for cost recovery through the Environmental Cost Recovery Clause
(ECRC). TECO stated that the project is required to comply with the Environmental
Protection Agency’s (EPA) CAA, NESHAP Subpart YYYY standard for stationary,
gas-fired combustion turbines (CTs).
The EPA
promulgated NESHAP for stationary, gas-fired combustion turbines in 2004.
However, that same year, the effectiveness of the rule was stayed by the EPA
specifically for new lean premix gas-fired and diffusion flame gas-fired
turbines. The stay was enacted to avoid unnecessary expenditures related to
compliance with NESHAP in the event that these two subcategories of turbines were
later delisted. In March 2020, the EPA concluded that the risks related to hazardous
air pollutants from combustion turbines were acceptable, even without the
standard in place; however, public commenters subsequently requested that the
EPA reconsider this determination. Additionally, industry interests requested
the EPA completely delist stationary, gas-fired combustion turbines from the
Hazardous Air Pollutant (HAP) program.
On March 9,
2022, the EPA published a Final Rule removing the stay for natural gas-fired,
stationary combustion turbines, but stated that it would continue to evaluate
the delisting petition. Despite the delisting petition still under
consideration, the EPA concluded that even if the petition was granted, a
lengthy rulemaking process would be required following the delisting and
further delay was not warranted in lifting the stay. The Final Rule requires
lean premix and diffusion flame gas-fired turbines located at major sources of
HAP emissions that were constructed or reconstructed after January 14, 2003,
must comply with the formaldehyde standard beginning March 9, 2022. The Final Rule
will also apply to the startup of any future affected units.
Pursuant to
Section 366.8255, Florida Statutes (F.S.), the Florida Legislature authorized
the recovery of prudently incurred investor-owned electric utility
environmental compliance costs through the ECRC. The method for cost recovery
for such costs was first established by Order No. PSC-94-0044-FOF-EI, issued on
January 12, 1994. The Commission has jurisdiction over this
matter pursuant to Section 366.8255, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve Tampa Electric
Company’s petition for approval of the CAA, NESHAP Subpart YYYY Compliance
Project for cost recovery through the Environmental Cost Recovery Clause?
Recommendation:
Yes. Staff recommends that TECO’s CAA, NESHAP
Subpart YYYY Compliance Project is necessary to comply with the EPA’s CAA,
NESHAP Subpart YYYY standard. The Project’s capital expenditures and operation
and maintenance expenses should be allocated to rate classes on an energy
basis. (Knoblauch, Wu)
Staff Analysis:
The Final Rule applies to stationary combustion
turbines located at major sources of HAP emissions. The Final Rule outlines
national emission and operating limitations, and lays out the requirements to
demonstrate initial and continuous compliance with those set limitations. The
emission concentration of formaldehyde for a stationary combustion turbine is
limited to a set threshold, except during turbine startup. If the emissions are
above the threshold level, an oxidation catalyst is utilized to bring emissions
to an acceptable level. If an oxidation catalyst is not required, operating
limitations must be maintained as approved by the Florida Department of
Environmental Protection (FDEP).
In its petition, TECO stated that the CT units that were
subject to the rule were the Big Bend Station CT Units 4A, 4B, 5, and 6. A Compliance
Test Study is required to determine the applicable compliance measures that are
needed at each unit. However, TECO stated that preliminary data indicates oxidation
catalysts will be required at Big Bend CT Units 4A and 4B, and Big Bend CT
Units 5 and 6 will only require lean-premix combustion technology to meet the
standard. To ensure the formaldehyde emissions are within the limitations,
annual performance tests and monitoring will be required and must be provided
to the EPA in accordance with the standard.
Formaldehyde analyzing equipment, Fourier Transform
Infrared Spectroscopy (FTIR), will be used to conduct the annual performance
tests for all units.
The analyzing equipment will consist of one trailer mounted FTIR gas analyzer
that can be mobilized at each site on an as needed basis to conduct the annual
testing. For CT Units 5 and 6, which appear to not require oxidation catalysts,
carbon monoxide (CO) monitoring equipment and a data acquisition system (DAS)
will be utilized to ensure emissions meet the set limitations.
Table 1-1 provides the estimated costs for the Project.
The Project costs include the Compliance Test Study, capital costs, and operation
and maintenance (O&M) expenses, which include air permitting and
performance testing costs for all units, as well as catalyst testing and
maintenance costs for CT Units 4A and 4B. The Company indicated these estimates
are preliminary and depending on the results of the Compliance Test Study, additional
equipment or compliance measures may be required. TECO anticipates that the
final results of the study will be available no later than September, 2022. TECO
requested the capital expenditures and operation and maintenance expenses be
allocated on an energy basis, which is in line with the Commission’s previous
decision regarding the emission reduction-related compliance cost. Table 1-2 below
shows the estimated annual impact of the Project on residential customer bills.
Table 1-1
Estimated
Capital and O&M Costs
|
|
2022
($000)
|
2023
($000)
|
2024
($000)
|
2025
($000)
|
2026
($000)
|
Total2
($000)
|
|
Compliance
Test Study1
|
45
|
-
|
-
|
-
|
-
|
45
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
Catalyst
Equipment & Installation
|
250
|
-
|
-
|
-
|
-
|
250
|
|
DAS
Installation & Integration
|
50
|
-
|
-
|
-
|
-
|
50
|
|
CO
Monitors Installation
|
150
|
-
|
-
|
-
|
-
|
150
|
|
MKS
Starboost FTIR
|
135
|
-
|
-
|
-
|
-
|
135
|
|
Capital Total
|
585
|
-
|
-
|
-
|
-
|
585
|
|
|
|
|
|
|
|
|
|
In-Service
Annual O&M
|
|
|
|
|
|
|
|
Air
Permitting
|
20
|
-
|
-
|
-
|
-
|
20
|
|
Annual
Stack Tests
|
-
|
40
|
40
|
40
|
40
|
160
|
|
Catalyst
Tests
|
-
|
-
|
-
|
-
|
20
|
20
|
|
Catalyst
O&M (labor & materials)
|
-
|
10
|
10
|
10
|
10
|
40
|
|
Catalyst
Wash (labor & materials)
|
-
|
-
|
-
|
-
|
125
|
125
|
|
Monitor
Maintenance (labor & materials)
|
-
|
20
|
20
|
20
|
20
|
80
|
|
MKS
Starboost FTIR O&M
|
-
|
5
|
5
|
5
|
5
|
20
|
|
O&M Total
|
20
|
75
|
75
|
75
|
220
|
465
|
1 Estimated study costs incurred to ensure that
measures implemented include best available technology to comply with the Final
Rule.
2 The estimated annual O&M expense after the
commercial in-service date will continue through the life of the compliance
equipment.
Source: Document No. 02948-2022, filed May 16, 2022,
TECO’s Response to Staff’s First Data Request.
Table 1-2
Residential Bill Impact
|
Year
|
$ / 1,000 kWh
|
$ / 1,200 kWh
|
|
2022
|
$0.00
|
$0.00
|
|
2023
|
$0.01
|
$0.01
|
|
2024
|
$0.01
|
$0.01
|
|
2025
|
$0.01
|
$0.01
|
|
2026
|
$0.01
|
$0.02
|
Source: TECO’s Response to Staff’s First Data Request No. 4
Based on TECO’s petition and the Company’s responses to
staff’s data requests, staff recommends that TECO’s ECRC Project is necessary
for compliance with the EPA Rule. The Commission’s criteria for ECRC recovery
relevant to this docket, established by Order No. PSC-94-0044-FOF-EI, are:
(1) The
activities are legally required to comply with governmentally imposed
environmental regulation enacted, became effective, or whose effect was
triggered after the Company’s last test year upon which rates are based; and
(2) None
of the expenditures are being recovered through some other cost recovery mechanism
or through base rates.
Staff recommends that the activities proposed in TECO’s
petition meet these criteria. The activities described in the petition are
necessary for TECO to comply with governmentally imposed environmental
regulation. The need for the compliance activities were triggered after TECO’s
last test year upon which rates are currently based.
Specifically, the need for these activities was triggered by the removal of the
stay of the EPA’s CAA, NESHAP Subpart YYYY standard, which requires TECO to
demonstrate compliance within 180 days after the stay was lifted and published
in the Federal Register or by September 5, 2022. Finally, the costs of the
proposed compliance activities are not currently being recovered through some
other cost recovery mechanism or through base rates. Staff notes that the
reasonableness and prudence of individual expenditures related to the Project
will continue to be subject to the Commission’s review in future ECRC
proceedings.
Conclusion
Staff recommends that TECO’s CAA, NESHAP Subpart YYYY
Compliance Project is necessary to comply with the EPA’s CAA, NESHAP Subpart
YYYY standard. The Project’s capital expenditures and operation and maintenance
expenses should be allocated to rate classes on an energy basis.
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
Proposed Agency Action Order. (Imig)
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.
