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 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. (Wooten, Buys)
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 TYSP, or if no avoided unit is
identified, its next avoidable planned purchase. While DEF’s 2023 TYSP does not
feature an avoidable fossil-fueled generating unit or planned purchases that
could be deferred during the planning period, DEF has identified a 215 megawatt
(MW) natural gas-fueled combustion turbine (CT) as the next avoidable planned
generating unit based on its current planning process. The projected in-service
date of the avoided CT is June 1, 2034. In order to comply with the rule, the
Commission has previously approved using a unit outside of the TYSP planning
period as the avoided unit for standard offer contract purposes.
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 each 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, 2034), 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, 2034) and
continue for 10 years, while early and early levelized capacity payments begin 2
years prior to the in-service date, or 2032 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)
|
|
2024
|
19,772
|
-
|
-
|
-
|
-
|
|
2025
|
17,188
|
-
|
-
|
-
|
-
|
|
2026
|
16,698
|
-
|
-
|
-
|
-
|
|
2027
|
16,142
|
-
|
-
|
-
|
-
|
|
2028
|
16,912
|
-
|
-
|
-
|
-
|
|
2029
|
16,501
|
-
|
-
|
-
|
-
|
|
2030
|
15,872
|
-
|
-
|
-
|
-
|
|
2031
|
15,302
|
-
|
-
|
-
|
-
|
|
2032
|
14,926
|
-
|
-
|
2,535
|
2,751
|
|
2033
|
15,594
|
-
|
-
|
2,581
|
2,753
|
|
2034
|
16,479
|
2,046
|
2,199
|
2,628
|
2,756
|
|
2035
|
17,615
|
3,571
|
3,773
|
2,676
|
2,759
|
|
2036
|
19,021
|
3,636
|
3,777
|
2,724
|
2,762
|
|
2037
|
19,845
|
3,702
|
3,781
|
2,774
|
2,765
|
|
2038
|
20,910
|
3,769
|
3,785
|
2,824
|
2,768
|
|
2039
|
22,147
|
3,837
|
3,790
|
2,875
|
2,772
|
|
2040
|
22,513
|
3,907
|
3,794
|
2,928
|
2,775
|
|
2041
|
22,595
|
3,978
|
3,799
|
2,981
|
2,779
|
|
2042
|
24,085
|
4,050
|
3,803
|
3,035
|
2,782
|
|
2043
|
24,563
|
4,124
|
3,808
|
3,090
|
2,786
|
|
Total
|
374,681
|
36,618
|
36,309
|
33,650
|
33,208
|
|
Total (NPV)
|
199,751
|
13,501
|
13,501
|
13,501
|
13,501
|
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 on Sheet No. 9.447 was revised to update the project management
activities list to include the decommissioning of the facility. This will allow
DEF to better evaluate the financial and technical ability of the RF/QF to
determine if they are capable of delivering firm capacity for the duration of
the contract. Staff believes the change to Sheet No. 9.447 is reasonable as it
would protect DEF ratepayers from non-viable RF/QFs.
Conclusion
The provisions of DEF’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, DEF’s standard offer contract may
subsequently be revised. (Sparks)
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.
