Discussion
of Issues
Issue 1:
Should the Commission approve DEF's Second SoBRA
Tranche, which includes the Jumper Creek, Turnpike, Lonesome Camp, and Banner
solar projects?
Recommendation:
Yes. The Second SoBRA Tranche: 1) lowers DEF’s
system Cumulative Present Value Revenue Requirements (CPVRR) by approximately
$117.5 million; 2) shows benefits beginning in 2033; 3) has a total benefit to
cost ratio of 1.165; and, 4) is 100 percent dedicated to serving DEF’s retail
load. Therefore, the Second SoBRA Tranche is reasonable and cost-effective in
accordance with the criteria of subparagraph 16(c) of the 2024 Settlement and
should be approved for inclusion in base rates through the SoBRA mechanism.
(Sanchez)
Staff Analysis:
In its petition, DEF proposes the addition of four
solar generating facilities, with three facilities rated at 74.9 MW, and one
rated at 74.5 MW. Table 1-1 lists the capacity, location, estimated in-service
dates, estimated rate effective date, and the estimated installed cost for each
project. Staff notes that the installed costs of each project below are
inclusive of transmission network upgrades associated with the facilities,
which ranged from $1.5 million for Jumper Creek to $53.3 million for Turnpike.
These upgrades are necessary for designated resource status and for a new
switching station that will serve as the Turnpike site’s point of
interconnection.
Table 1-1
Second SoBRA Tranche
Projects
|
|
Jumper Creek
|
Turnpike
|
Lonesome
Camp
|
Banner
|
|
Size (MW)
|
74.9
|
74.9
|
74.9
|
74.5
|
|
County
|
Sumter
|
Osceola
|
Osceola
|
Columbia
|
|
In-Service Date
|
June 2026
|
December 2026
|
February 2027
|
March 2027
|
|
Rate Effective Date
|
July 2026
|
January 2027
|
March 2027
|
April 2027
|
|
Installed Cost ($M)
|
$123.3
|
$191.9
|
$166.5
|
$125.7
|
Source: Document No. 14969-2025
Subparagraph 16(c) of the 2024 Settlement states that the
reasonableness and cost-effectiveness of the SoBRA project(s) shall be
evaluated based only on whether the projects in the SoBRA will (1) lower the
projected system CPVRR as compared to a system CPVRR without the solar projects
(also known as the ‘base case’); (2) whether the CPVRR of the solar projects
show positive benefits that exceed costs within ten years; (3) whether the
solar projects meet a 1.15 to 1 benefit to cost ratio; and (4) whether the
solar projects are 100 percent dedicated to serve DEF’s retail load.
The CPVRR compares the cost of the added generation,
transmission, operations and maintenance (O&M), and other expenses of the
proposed solar project(s) to the avoided traditional generation, transmission,
fuel, and O&M expenses that would otherwise have been incurred if the
facilities had not been constructed. In response to staff’s first data request,
DEF produced resource plans for both the SoBRA case and the Base Case used as
part of its analysis, including additions of solar, batteries, combined cycle,
and combustion turbines as future units.
Exhibit No. BMHB-4 of DEF’s petition shows a net system
benefit of $117.5 million over the life of the Second SoBRA Tranche. In
response to staff’s first data request, DEF provided the annual values for each
category. The data indicates that, on a CPVRR basis, the solar projects become
cost-effective in 2033 and provide a lower projected system CPVRR due to
lowered fuel costs, lower generation capital costs due to the deferral of a
combustion turbine unit, and additional production tax credits (PTCs), meeting
the first and second requirements. Exhibit BMHB-4 shows that the projects
provide an approximate $661.4 million in avoided costs (including fuel,
emissions, O&M, gas transportation, and capital) and $167.3 million of PTCs
for an approximate total of $828.6 million in benefits. This compares to the
approximately $711.1 million cost of the solar projects (including fuel,
emissions, O&M, gas transportation, and capital), resulting in a benefit to
cost ratio of 1.165 which satisfies the third requirement of the 2024
Settlement. Finally, DEF stated in its response to staff’s first data request
that the solar projects will be included in DEF’s overall system service
provided to all retail customers and will not be included in any stratified
sale to a wholesale customer, meeting the fourth and final requirement.
Conclusion
The Second SoBRA Tranche: 1) lowers DEF’s system CPVRR by
approximately $117.5 million; 2) shows benefits beginning in 2033; 3) has a
total benefit to cost ratio of 1.165; and, 4) is 100 percent dedicated to
serving DEF’s retail load. Therefore, the Second SoBRA Tranche is reasonable
and cost-effective in accordance with the criteria of subparagraph 16(c) of the
2024 Settlement and should be approved for inclusion in base rates through the
SoBRA mechanism.
Issue 2:
What is the estimated annual revenue requirement
associated with DEF’s Second SoBRA Tranche which includes the Jumper Creek,
Turnpike, Lonesome Camp, and Banner solar projects?
Recommendation:
The estimated annual revenue requirement associated
with DEF’s Second SoBRA Tranche is $53 million. (Dasher)
Staff Analysis:
Pursuant to the 2024
Settlement, DEF was authorized to establish a SoBRA mechanism to recover the
costs associated with constructing 300 MW of solar generation annually, from
2025 through 2027. The SoBRA mechanism allows DEF to file a petition for approval
of groups of solar generation projects in separate dockets, filed closer to
their respective in-service dates, in order to ensure more accurate and current
cost projections.
The Company, in its second SoBRA,
requested the Commission approve an annual revenue requirement based on the projected
installed cost of four projects: Jumper Creek Solar Center, Turnpike Solar
Center, Lonesome Camp Solar Center, and Banner Solar Center. The estimated
in-service dates for the facilities are June 2026 (Jumper Creek), December 2026
(Turnpike), February 2027 (Lonesome Camp), and March 2027 (Banner). The
projected annual revenue requirement includes the Clean Energy Connection
expansion revenues of $7.5 million, pursuant to the 2024 Settlement subparagraph
16(a).
The revenue requirement for DEF’s
SoBRA was based on a projected plant cost to determine rate base and the
required net operating income. The net operating income includes O&M
expenses, depreciation expenses, financing costs, insurance costs, and taxes,
as well as a debit of $7.5 million included in the Jumper Creek Solar Center,
for the Clean Energy Connection, which results in an increase in the revenue
requirement. The proposed annual revenue requirement associated with DEF’s
Second SoBRA is $53 million, based on a total rate base of $573.2 million and a net operating
income of $39.5 million. Table
2-1 reflects each individual project’s calculated revenue requirement.
Table 2-1
DEF Second SoBRA Annual Revenue Requirement ($000)
|
|
Jumper Creek
|
Turnpike
|
Lonesome Camp
|
Banner
|
|
Rate Base
|
$120,909
|
$173,250
|
$155,511
|
$122,900
|
|
Rate of Return
|
6.670%
|
6.700%
|
6.700%
|
6.700%
|
|
NOI Required
|
8,065
|
11,608
|
10,419
|
8,234
|
|
NOI Achieved
|
(4,277)
|
655
|
1,045
|
1,510
|
|
NOI Deficiency/Excess
|
12,341
|
10,953
|
9,375
|
6,724
|
|
NOI Multiplier
|
1.344
|
1.344
|
1.344
|
1.344
|
|
Revenue Requirement
|
$16,583
|
$14,717
|
$12,596
|
$9,035
|
Source: Prepared Direct
Testimony and Exhibit of DEF witness Olivier, Exhibit MJO-1 (Amended 1/13/26.)
Conclusion
The estimated annual revenue requirement associated with
DEF’s Second SoBRA Tranche is $53 million.
Issue 3:
Should the Commission give staff administrative
authority to approve tariffs and associated charges for DEF's Second SoBRA
Tranche, which includes the Jumper Creek, Turnpike, Lonesome Camp, and Banner
solar projects?
Recommendation:
Yes. The Commission should grant staff
administrative authority to approve the tariffs and associated charges as they
are submitted by DEF. DEF should file tariffs and supporting calculations two
months prior to the effective date of each SoBRA. DEF should also submit a
letter to the Commission declaring the commercial operation date of each solar
facility prior to any base rate changes going into effect. (Ward)
Staff Analysis:
Witness Olivier stated in her testimony that DEF
will file the rate adjustments and tariff sheets for Commission confirmation
approximately two months prior to the effective date of each of the rate
adjustments. The expected rate adjustment effective dates for the solar
projects are July 2026 (Jumper Creek), January 2027 (Turnpike), March 2027
(Lonesome Camp), and April 2027 (Banner).
Witness Olivier provided preliminary approximate base rate
increases on the 1,000 kWh residential bill for the four solar projects as
follows: Jumper Creek, $0.49; Turnpike, $0.42; Lonesome Camp, $0.36; and
Banner, $0.26. Witness Olivier additionally stated that each of the solar
projects will provide a fuel savings of approximately $0.17 per solar plant on
the 1,000 kWh residential bill.
Conclusion
The Commission should grant staff administrative authority
to approve the tariffs and associated charges as they are submitted by DEF. DEF
should file tariffs and supporting calculations two months prior to the
effective date of each solar rate base adjustment. DEF should also submit a
letter to the Commission declaring the commercial operation date of each solar
facility prior to any base rate changes going into effect.
Issue 4:
Should this docket be closed?
Recommendation:
No. This docket should remain open pending DEF’s
letters confirming commercial operation. Once these letters have been received,
this docket should be closed administratively. (Bloom)
Staff Analysis:
If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, a consummating order should be issued. This docket
should remain open pending DEF’s letters confirming commercial operation. Once
these letters have been received, this docket should be closed administratively.
