On July 27,
1999, the Florida Public Service Commission (PSC) voted to adopt its Staffs
recommendation to deny the petition of Florida Power & Light (FPL) for approval of a
standard offer contract for qualifying cogeneration and small power production facilities,
although FPL may develop an acceptable standard offer contract to comply with Staff
recommendations. The PSC also rejected FPLs "regulatory out" clause, a
clause which would permit FPL to adjust payments to qualifying facilities and small power
producers based on some unforseen regulatory action. The PSC granted FPLs request
for a variance to the administrative rule requiring standard offer contracts to contain a
ten year minimum term, and permitted FPL to have a five year fixed term in its standard
Under Florida and federal law, each investor-owned utility is required to file a standard offer contract with the PSC by which certain smaller qualifying facilities and small power producers may sell power to the utility. Large qualifying facilities and non-utility generators, by contrast, must bid to sell their power to utilities under a request for proposals process. These standard offer contracts satisfy requirements of the Public Utilities Regulatory Policies Act (PURPA) and Florida law, which require promotion of solid waste facilities, energy efficiency, cogeneration, and the use of renewables.
Florida law requires that the rate provided in the contract must be based on the utilitys next planned generating unit addition, which is its "avoided unit." In its filing for approval of a standard offer contract, FPL used a hypothetical 209 MW combustion turbine generating unit with an in-service date of January 1, 2001 as the avoided unit. However, FPLs actual next planned generating unit under its ten year plan is much different: a repowering project in which it will replace existing steam boilers with six 150 MW combustion turbines and heat recovery steam generators with an in-service date of January, 2002. The hypothetical facility also bears no relationship to other projects in FPLs ten year plan.
The purpose of the standard offer contract pricing is to encourage energy efficiency while avoiding or deferring utility generation facility construction. According to the PSC Staff, this purpose is rendered meaningless by the use of a hypothetical next generating unit rather than the use of the actual next planned generating unit. FPL was required to file a revised standard offer contract consistent with this policy.
FPL also requested that the PSC approve a 5 MW subscription limit for its standard offer contract, which would preclude some facilities from selling their full output to FPL. While the PSCs rules do not prohibit such a limitation, the Staff found that the limit could exclude facilities from the standard offer contract and FPL had not substantiated the need for this limit. However, because FPL delayed filing of its standard offer contract until late in the planning of its next generating facility, the standard offer contract was unlikely to avoid or delay construction. Therefore, the standard offer contract, particularly without a subscription limit, could result in FPL purchasing unneeded capacity. Given the "untimeliness" of the filing, the Staff did not recommend a different subscription limit.
FPLs petition for approval of a standard offer contract also included a "regulatory out" clause, which would permit FPL to adjust payments to facilities under the standard offer contract based on unforseen regulatory action. The Staff recommended that this provision be struck, noting that the Florida Supreme Court upheld the PSCs removal of a "regulatory out" clause in an earlier standard offer contract of FPL. The PSCs cited reason for striking the earlier provision is the PSCs "commitment to allow recovery of the mandated payments" and their opinion of such clauses as "unnecessary surplusage."
The PSC rules require that a standard offer contract be for a minimum ten year term. This term was selected because the PSC determined it was of sufficient length to permit cogenerators and utilities to plan. FPL requested a variance from this ten year minimum, seeking instead a five year fixed term in its standard offer contract. FPL argued that the ten year minimum worked a substantial hardship on FPL and that the ten year term would create an unreasonable risk and burden for its customers. FPL claimed as potential hardship that Section 210 of PURPA could be repealed and that the standard offer contract would not avoid or defer construction of generating facilities in any event. While the Staff stated FPL did not meet its burden of proving a substantial hardship, the PSC voted to grant the variance for a five year minimum contract term.
The PSCs Order is expected to be filed August 16, 1999.