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. (Sanchez)
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 RFs and QFs 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. In its 2024
Ten-Year Site Plan, DEF has identified a 215 megawatt (MW) natural gas-fueled
combustion turbine as the next avoidable planned generating unit. This unit has
a projected in-service date of June 1, 2032, with planned construction
beginning in July 2029.
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. In this way, the RF/QF
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, 2032). Thereafter, they 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, 2032), and continue for 10 years, while early and early
levelized capacity payments begin two (2) years prior to the in-service date,
or 2030 in this case.
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)
|
|
2025
|
14,256
|
-
|
-
|
-
|
-
|
|
2026
|
13,941
|
-
|
-
|
-
|
-
|
|
2027
|
13,342
|
-
|
-
|
-
|
-
|
|
2028
|
12,710
|
-
|
-
|
-
|
-
|
|
2029
|
12,567
|
-
|
-
|
-
|
-
|
|
2030
|
12,243
|
-
|
-
|
5,354
|
5,359
|
|
2031
|
12,297
|
-
|
-
|
5,358
|
5,362
|
|
2032
|
12,057
|
4,120
|
4,123
|
5,362
|
5,365
|
|
2033
|
12,351
|
7,068
|
7,073
|
5,366
|
5,369
|
|
2034
|
12,159
|
7,074
|
7,077
|
5,371
|
5,372
|
|
2035
|
14,750
|
7,080
|
7,082
|
5,375
|
5,376
|
|
2036
|
15,729
|
7,085
|
7,087
|
5,380
|
5,379
|
|
2037
|
16,487
|
7,091
|
7,092
|
5,384
|
5,383
|
|
2038
|
16,827
|
7,097
|
7,096
|
5,389
|
5,387
|
|
2039
|
17,572
|
7,103
|
7,102
|
5,394
|
5,391
|
|
2040
|
18,299
|
7,110
|
7,107
|
5,399
|
5,395
|
|
2041
|
19,724
|
7,116
|
7,112
|
5,404
|
5,399
|
|
2042
|
20,039
|
7,123
|
7,117
|
5,409
|
5,403
|
|
2043
|
21,483
|
7,129
|
7,123
|
5,414
|
5,408
|
|
2044
|
21,970
|
7,136
|
7,129
|
5,419
|
5,412
|
|
Total
|
310,801
|
89,333
|
89,320
|
80,776
|
80,759
|
|
Total (NPV)
|
154,468
|
34,569
|
34,569
|
34,569
|
34,569
|
Source:
DEF’s Response to Staff’s First Data Request
DEF’s standard offer contract as revised on May 6, 2024,
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.
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. Therefore, the
Commission should approve the amended standard offer contract.
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. (Farooqi)
Staff Analysis:
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.
