Regulators ready to weigh Martin County power plant deal

Posted at 12:06 PM, Sep 13, 2016
and last updated 2016-09-13 12:06:10-04

TALLAHASSEE, Fla. (The News Service of Florida) With Florida Power & Light saying the deal would ultimately save money for customers and provide environmental benefits, state regulators next month will consider a proposal by the utility to pay $451 million for a coal-fired power plant in Martin County.

But in documents filed last week, attorneys for consumers and major commercial electricity users questioned the deal, including raising concerns about risks for FPL ratepayers.

The Florida Public Service Commission is scheduled Oct. 3 to begin a two-day hearing on the proposal, which involves FPL buying the 330-megawatt Indiantown Cogeneration facility from Calypso Energy Holdings, LLC.

The deal is rooted in a long-term contract, known as a power purchase agreement, that FPL has to buy electricity from the plant. The utility contends that parts of the agreement now require it to pay above-market prices and that buying the plant and the contract could provide $129 million in long-term savings for customers.

Also, it argues in documents filed with the Public Service Commission that the purchase would provide environmental benefits because FPL would reduce the amount of electricity generated at the coal-fired plant.

"Through its ownership of the facility, FPL will have sole discretion to make operational and environmental decisions, including early retirement or repurposing of the facility," Robert Barrett, vice president of finance for FPL, said in written testimony submitted in June to the Public Service Commission. "For instance, although this coal unit has no real economic value to the FPL system as demonstrated by its very low capacity factor, the site is suitable for future gas or solar generation given the transmission infrastructure and proximity to a natural gas pipeline. By acquiring the PPA (power purchase agreement) and acquiring the asset, FPL will be able to control all economic and environmental decisions regarding the facility."

But the state Office of Public Counsel, which represents consumers on utility issues, and the Florida Industrial Power Users Group, which represents major commercial customers, filed documents Friday that raised objections to the proposed deal.

The Office of Public Counsel said it acknowledges "that the proposal before the commission appears to provide material incremental benefit to customers above and beyond the level of total payments that would have been made" under the existing agreement. But attorneys for the office questioned whether the proposal was the best deal possible.

"(The Office of Public Counsel) does not believe that FPL has met its burden to prove that the method used to eliminate the PPA is the most cost effective one available, that the proposed buyout price is the lowest possible buyout price, and that this transaction is in the best interest of FPL's customers, and thus is prudent," the document said.

Similarly, attorneys for the Florida Industrial Power Users Group pointed to concerns about risks for ratepayers.

"Coal-fired generating plants are currently facing many challenges, including market, environmental, regulatory and economic pressures," the business group said in a pre-hearing document. "The risks associated with these challenges should not be shifted to FPL's ratepayers, and if done so, FPL should ensure that ratepayers risk is limited in a meaningful and measurable way."

The proposal is similar to a deal that the Public Service Commission approved in 2015 for FPL to buy the coal-fired Cedar Bay power plant in Jacksonville. FPL cited that decision in its effort to win commission approval of the Indiantown deal.

"Like the Cedar Bay transaction, the (Indiantown Cogeneration) transaction involves the acquisition of a coal generating facility in order to alleviate an unfavorable power purchase obligation," the utility said. "Moreover, the commission found in the Cedar Bay order that the agreed-upon accounting and recovery treatment created customer savings, and stated that the transaction served to 'mitigate the impact on customers of the Cedar Bay power purchase obligation, and (was) reasonable, cost-effective, and prudent."

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