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DATE:

July 9, 2015

TO:

Office of Commission Clerk (Stauffer)

FROM:

Division of Engineering (Matthews)

Office of the General Counsel (Corbari)

RE:

Docket No. 150101-EQ – Petition for approval of standard offer for purchase of firm capacity and energy from renewable energy facilities and approval of tariff schedule REF-1, by Gulf Power Company.

AGENDA:

7/21/15Regular Agenda – Proposed Agency Action – Interested Persons May Participate

COMMISSIONERS ASSIGNED:

All Commissioners

PREHEARING OFFICER:

Administrative

CRITICAL DATES:

None

SPECIAL INSTRUCTIONS:

Staff recommends the Commission simultaneously consider Docket Nos. 150101-EQ, 150104-EQ, 150105-EQ, and 150106-EQ.

 

 Case Background

Section 366.91(3), Florida Statutes (F.S.) requires that each investor-owned utility (IOU) continuously offers to purchase capacity and energy from renewable energy generators. Commission Rules 25-17.200 through 25-17.310, Florida Administrative Code (F.A.C.), implement the statute and require each IOU to file with the Commission by April 1 of each year, a standard offer contract based on the next avoidable fossil fueled generating unit of each technology type identified in the utility’s current Ten-Year Site Plan. On April 1, 2015, Gulf Power Company (Gulf) filed a petition for approval of its standard offer contract and associated rate schedule REF-1 based on its 2015 Ten-Year Site Plan. The Commission has jurisdiction over this standard offer contract pursuant to Sections 366.04 through 366.06 and 366.91, F.S.


Discussion of Issues

Issue 1: 

 Should the Commission approve the revised standard offer contract filed by Gulf Power Company?

Recommendation: 

 Yes. The provisions of the revised standard offer contract and related rate schedule conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C. The revised standard offer contract provides flexibility in the arrangements for payments so that a developer of renewable generation may select the payment stream best suited to its financial needs. Staff recommends that the revised standard offer contract and related rate schedule REF-1 submitted by Gulf be approved as filed. (Matthews)

 Staff Analysis: 

 Rule 25-17.250, F.A.C., requires that Gulf, an IOU, continuously makes 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 Rule 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 Ten-Year Site Plan or, if no avoided unit is identified, its next avoidable planned purchase.

Gulf has identified a natural gas-fired facility consisting of four combustion turbine (CT) units totaling 866 MW, as its next planned fossil-fueled generating unit in its 2015 Ten-Year Site Plan. The projected in-service date of this facility is June 1, 2023.

The RF/QF operator may elect to make no commitment as to the quantity or timing of its deliveries to Gulf, and to have a committed capacity of zero (0) MW. Under such a scenario, the energy is delivered on an as-available basis and the operator receives only an energy payment. Alternatively, the RF/QF operator may elect to commit 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 can 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 the 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, 2023), and thereafter begin receiving capacity payments in addition to the 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 payments 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 estimates the annual payments for each payment option 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 in 2023, reflecting the projected in-service date of the avoided unit (June 1, 2023).

 

 

Table 1 – Estimated Annual Payments to a 50 MW Renewable Facility

(95% Capacity Factor)

Year

Energy Payment

Capacity Payment (By Type)

Normal

Levelized

Early

Early Levelized

$(000)

$(000)

$(000)

$(000)

$(000)

2016

13,024

-

 

1,223

1,418

2017

14,337

-

 

1,254

1,425

2018

15,062

-

 

1,285

1,434

2019

16,115

-

 

1,318

1,442

2020

16,911

-

 

1,351

1,451

2021

17,774

-

 

1,385

1,459

2022

18,472

-

 

1,420

1,468

2023

19,761

1,599

1,767

1,456

1,478

2024

21,113

2,795

3,043

1,493

1,487

2025

22,052

2,866

3,061

1,531

1,497

2026

23,447

2,939

3,080

1,570

1,507

2027

24,456

3,013

3,099

1,609

1,517

2028

25,781

3,089

3,119

1,650

1,527

2029

27,034

3,167

3,139

1,692

1,538

2030

28,674

3,247

3,160

1,735

1,549

2031

30,188

3,330

3,182

1,778

1,561

2032

31,469

3,414

3,203

1,823

1,572

2033

32,943

3,500

3,226

1,869

1,584

2034

34,938

3,589

3,249

1,917

1,596

2035

36,046

3,679

3,272

1,965

1,609

Total

469,599

40,227

39,600

31,324

30,119

NPV (2016$)

227,276

16,081

16,081

16,081

16,081

 

The type-and-strike format versions of the revised standard offer contract and associated rate schedule REF-1 are included as Attachment A to this recommendation. All of the changes made to the tariff sheets are consistent with the updated avoided unit. Notable revisions include an updated example of monthly capacity payments, updates to calendar dates, as-available energy costs, and estimated fuel costs.

Conclusion

The provisions of Gulf’s revised standard offer contract and associated rate schedule, as filed on April 1, 2015, conform to all requirements of Rules 25-17.200 through 25-17.310, F.A.C. The revised standard offer contract provides flexibility in the arrangements for payments so that a developer of renewable generation my select the payment stream best suited to its financial needs. Staff recommends that Gulf’s revised standard offer contract and related rate schedule REF-1 be approved as filed.


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, Gulf’s standard offer contract may subsequently be revised. (Corbari)

 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, Gulf’s standard offer contract may subsequently be revised.