Case Background
On November 15,
2022, Duke Energy Florida, LLC (DEF or Company) filed a petition for approval
of its Clean Energy Impact (CEI) Program and associated tariff. The Program
would provide DEF customers the opportunity to purchase renewable energy certificates
(RECs) directly from the Company. RECs are a tradeable market-based
verification unit which are certified by a third party entity to represent renewable
attributes of electricity generated from a renewable source, typically in
increments of 1,000 kilowatt-hours (kWh). RECs are generally purchased to
comply with regulatory requirements, to support renewable energy claims, or to
meet voluntary renewable energy targets. When a REC is purchased and retired,
it can no longer be traded but the purchaser of the REC can claim the
environmental aspects of the energy produced. For the CEI Program, DEF proposes
to use RECs generated by its renewable resources, which currently includes 13
solar facilities. The Company will retire RECs as the purchases are completed.
On December 15,
2022, DEF waived the 60-day file and suspend requirement pursuant to Section
366.06(3), Florida Statutes (F.S.). After the filing of DEF’s original
petition, staff requested further information via data requests to clarify
terms of the proposed program and tariff language. On April 3, 2023, staff met
with DEF and informed the Company of concerns surrounding the proposed tariff
language. In response to staff inquiries and the informal meeting, on April 14,
2023, DEF filed an amended petition and amended tariff. This recommendation
addresses the amended petition and associated tariff.
The Commission has
jurisdiction under Sections 366.04, 366.05, 366.91, and 366.92, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve DEF’s petition for the
Clean Energy Impact Program and associated tariffs, as amended on April 14,
2023?
Recommendation:
Yes. DEF’s proposed CEI Program provides DEF
customers an opportunity to voluntarily demonstrate support for renewable
energy through a mechanism that provides a benefit to the general body of
ratepayers. Net program revenues from REC sales should be included as a credit
in the Fuel and Purchased Power Cost Recovery Clause (Fuel Clause), offsetting
other fuel expenses. In addition, staff recommends that DEF provide a summary
of program costs and benefits as a part of its annual Fuel Clause filing. The
proposed tariffs, as provided in Attachment A, should become effective upon
issuance of a Commission Order approving the CEI Program and tariff. (Wooten,
Hampson)
Staff Analysis:
Currently, customers interested in demonstrating
support for renewable energy can purchase RECs from one of several tradeable
markets. RECs purchased on the market are retired in the name of the purchaser,
who is then the only person entitled to claim credit for the attributes of the
renewable energy represented by the REC. A REC that has been purchased and
retired can no longer be traded and cannot be sold again.
The CEI Program provides DEF customers the option to
purchase RECs directly from the Company. Handling REC sales through a tariff
allows the company to charge customers conveniently as a line item on their
utility bill and allows DEF the opportunity to provide sales of smaller REC amounts
to residential customers. RECs purchased under the CEI Program would be
generated by DEF owned renewable facilities, currently comprised of 13 solar
facilities. These 13 facilities are separate from the 10 solar facilities associated
with DEF’s Clean Energy Connection (CEC) program, as RECs generated by those
facilities will be retired by DEF on behalf of the CEC participants.
The voluntary REC purchases would allow DEF to generate
additional revenue from assets already part of DEF’s rate base. The Company is
not using and does not need the environmental attributes associated with these
RECs for any regulatory compliance purposes. The Company will retire RECs
purchased by non-residential customers in their names, and will retire annually
all RECs purchased by residential customers in the name of the Company.
Program participation would be limited by the number of
RECs available, which DEF would annually estimate based on a percentage of RECs
expected to be generated for the year. If REC demand exceeds supply, the
proposed amended tariff also allows DEF to implement an annual random selection
process or wait list system at the Company’s discretion. In response to staff
concerns regarding the lack of specificity for REC allocation, DEF revised its
tariff and included language that describes the planned reservation of RECs
based on customer class. Annually, 10 percent of available RECs will be
reserved for the residential customer class, with the caveat that if the
reserved amount is not fully purchased by September 30, then the remaining
available RECs will be available for sale to all customer classes until the end
of the year. The remaining 90 percent of available RECs reserved for
non-residential customers would also be subject to the same rules regarding unpurchased
REC allocations. Program participants can purchase RECs that exceed their
electric usage but are restricted by REC availability and reserved customer
class allocation amounts.
Participation requirements under the CEI Program vary
based on customer class. Residential participants would be able to purchase
portions of RECs in increments of 250 kWh, which is the required monthly
minimum purchase amount according to the tariff. Participating residential
customers can cancel with 30 days notice to the Company. Non-residential
participants would be required to enter into a service agreement and purchase a
minimum of 1,000 RECs to participate in the CEI Program. The service agreement
that non-residential customers enter would be offered on an annual basis with a
service term up to 5 years. Staff notes that program participants who are
delinquent in their payments for the CEI Program could not be disconnected from
electric service, provided they had paid the remainder of their bill, but could
be removed from the CEI Program.
DEF would annually set the rate for RECs based upon market
REC pricing, plus an administrative fee to cover expenses related to the
program. The Company intends to choose a tradeable market that will be used to
determine REC pricing for the proposed program, but has yet to finalize its
tradeable market choice. The Company will set REC pricing based upon the
previous 12 months monthly average price at DEF’s chosen tradeable market. The
Company will provide the annual calculation of customer REC pricing and blocks
of RECs, via its website for both customer classes, with the website links shown
in the amended tariff.
The administrative fee would be set annually by DEF and be
based on estimated administrative expenses and the estimated RECs to be sold
during the year. Per the proposed tariff, the administrative fee would not be
allowed to exceed 20 percent of the market REC price. DEF estimated the annual
program administrative expenses to be approximately $400,000, and are comprised
of program labor costs, marketing expenses, IT/software expenses, and REC
registration fees. Based on DEF’s estimates and the administrative fee limit,
the minimum market REC price to breakeven would be $3.30 per REC in 2023,
decreasing to $2.48 by 2028.
In DEF’s original petition, program revenues and expenses
were intended to be included in base rates; however, in response to staff
concerns, the petition was amended to include revenues, net of expenses, in
DEF’s Fuel Clause filings. Staff believes that including net revenues through
the Fuel Clause allows the Commission to ensure that the program continues to
generate benefits for the general body of ratepayers that are reflected in
rates on a more timely basis. Staff also believes that passing revenues generated
from REC sales through the Fuel Clause is appropriate because RECs are
generated from energy produced from utility-owned generation resources whose
costs are recovered from DEF’s general body of ratepayers.
DEF proposes to provide an annual program report within
its annual Fuel Clause filings, including a summary of annual sales, by
customer class, of RECs for the previous year. Staff recommends that DEF’s
proposed summary should also include, at a minimum, the number of program
participants in total and by customer class, the amount of RECs generated by
DEF, the amount of RECs made available to the CEI Program, the amount of
revenue generated both in total and by type (REC sales and administration
fees), and the total program administrative expenses. Staff believes that these
reporting requirements will provide the Commission additional information to
ensure the program is continuing sustainably and is providing a net benefit to
the general body of ratepayers.
Conclusion
DEF’s proposed CEI Program allows customers to voluntarily
demonstrate support for renewable energy while providing a benefit to the
general body of ratepayers. Net program revenues from REC sales should be
included as a credit in the Fuel Clause, offsetting other fuel expenses. In
addition, staff recommends that DEF provide a summary of program costs and
benefits as a part of its annual Fuel Clause filing. The proposed tariffs, as
provided in Attachment A, should become effective upon issuance of a Commission
Order approving the CEI Program and tariffs.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If Issue 1 is approved and a protest is filed
within 21 days of the issuance of the order, the tariff should remain in
effect, with any revenues held subject to refund, pending resolution of the
protest. If no timely protest is filed, this docket should be closed upon the
issuance of a consummating order. (Stiller)
Staff Analysis:
If Issue 1 is approved and a protest is filed within
21 days of the issuance of the order, the tariff should remain in effect, with
any revenues held subject to refund, pending resolution of the protest. If no
timely protest is filed, this docket should be closed upon the issuance of a
consummating order.
