Discussion
of Issues
Issue 1:
Should the Commission approve the renewable energy
tariff and amended standard offer contract filed by Duke Energy Florida, LLC?
Recommendation:
Yes. The provisions of DEF’s renewable energy tariff
and amended standard offer contract meet 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. (Willis)
Staff
Analysis:
Legal Standard
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, 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. Standard offer contracts are further subject to the
applicable provisions of Rules 25-17.082 through 25-17.091, F.A.C. The
Commission’s review of standard offer contracts is in accordance with goals to
integrate nontraditional sources of power pursuant to the Florida Energy
Efficiency and Conservation Act and diversify Florida’s energy generation
portfolio.
Analysis
In DEF’s 2026 TYSP, the first
set of potentially eligible generation units is a pair of 218 megawatt (MW)
Combustion Turbines (CT) with a scheduled in-service date of June 2031. Because
DEF has taken steps to begin construction of these CTs, they are not eligible
for selection as the next avoidable planned generation unit pursuant to Rule
25-17.250(2)(a)2, F.A.C.
Accordingly, DEF identified the second set of undesignated 400 MW natural gas-fueled
CTs with a scheduled in-service date of June 2034, as the next avoidable
planned generation unit. The units have a planned construction start date of
January 2030.
Under DEF’s amended 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, 2034).
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
amended 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 four (4) years prior to the in-service date, or January 2030 in
this case.
Table 1
Estimated
Annual Payments to a 50 MW Renewable Facility
(95% Capacity Factor)
|
Year
|
Energy Payments
|
Capacity Payment
|
|
Normal
|
Levelized
|
Early
|
Early Levelized
|
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
$(000)
|
|
2027
|
14,490
|
-
|
-
|
-
|
-
|
|
2028
|
13,810
|
-
|
-
|
-
|
-
|
|
2029
|
12,606
|
-
|
-
|
-
|
-
|
|
2030
|
11,752
|
-
|
-
|
5,477
|
6,068
|
|
2031
|
11,910
|
-
|
-
|
5,569
|
6,073
|
|
2032
|
13,893
|
-
|
-
|
5,663
|
6,078
|
|
2033
|
16,169
|
-
|
-
|
5,758
|
6,083
|
|
2034
|
18,187
|
5,314
|
5,783
|
5,855
|
6,089
|
|
2035
|
18,819
|
9,263
|
9,922
|
5,954
|
6,094
|
|
2036
|
19,743
|
9,419
|
9,931
|
6,054
|
6,100
|
|
2037
|
20,531
|
9,578
|
9,940
|
6,156
|
6,105
|
|
2038
|
20,637
|
9,739
|
9,949
|
6,259
|
6,111
|
|
2039
|
21,431
|
9,902
|
9,958
|
6,365
|
6,117
|
|
2040
|
22,737
|
10,069
|
9,968
|
6,472
|
6,124
|
|
2041
|
24,357
|
10,239
|
9,977
|
6,581
|
6,130
|
|
2042
|
23,859
|
10,411
|
9,987
|
6,691
|
6,137
|
|
2043
|
23,599
|
10,586
|
9,998
|
6,804
|
6,143
|
|
2044
|
23,173
|
10,764
|
10,008
|
6,919
|
6,150
|
|
2045
|
21,151
|
10,946
|
10,019
|
7,035
|
6,157
|
|
2046
|
21,570
|
11,130
|
10,030
|
7,154
|
6,164
|
|
Total
|
374,425
|
127,360
|
125,471
|
106,766
|
103,923
|
|
Total(NPV)
|
181,118
|
47,972
|
47,972
|
47,972
|
47,972
|
Source:
DEF’s Response to Staff’s First Data Request.
DEF’s amended 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.
Conclusion
The provisions of DEF’s amended standard offer contract and associated
rate schedule COG-2 meet 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. 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. (Sparks)
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.
