NRG Energy (NYSE: NRG) and Calpine (NYSE: CPN) both filed Aug. 1 prehearing statements at the Florida Public Service Commission saying that if Duke Energy Florida needs new capacity, their power plants should supply it.
NRG and Calpine filed comments in two separate dockets where Duke Energy Florida is seeking commission approval of: in one case, the new, gas-fired Citrus County power plant to supply new capacity over the long-term; and in another case, the uprate of two existing gas-fired plants, called the Suwannee Simple Cycle Project and Hines Chillers Power Uprate Project, to supply short-term capacity (out to 2018). The utility says these projects are needed to meet future power demand over the short- and long-terms.
Both cases are due for hearing at the commission on Aug. 26.
Duke’s proposed plans for its generation fleet as described in both the dockets represent an “extreme makeover” of its generation portfolio, NRG said. “Duke appears intent on building its rate-base and substantially increasing its retail rates,” NRG added.
“Duke’s load forecast may indicate a need for additional capacity, but given the uncertainties associated with electric use and load forecasts, Duke’s plan exposes itself and its customers to unnecessary risks by committing large amounts of capital over a long period of time,” NRG said. “Duke’s forecast is largely driven by a projection that wholesale and peak loads will increase by more than 1000 MW in 2014-2015. Because this is far more peak load growth than Duke has experienced in any two consecutive years since 2005, there is significant risk that load growth could be less than Duke projects. If the projected load growth fails to materialize, Duke’s already high retail rates could rise even further because the costs of Duke’s extreme makeover would be spread over a lower kWh sales base, thus creating the potential for further constrained load growth, and increasing the probability that rates could spiral even higher.”
NRG said that its existing Osceola facility in Florida at 465 MW in size would provide more incremental capacity at a far lower cost than Duke’s proposed self-build projects. Osceola would provide sufficient capacity to meet Duke’s forecasted capacity needs prior to 2018, it added. Duke’s own analysis shows that the 30-year cumulative net present value revenue requirement (NPVRR) of acquiring NRG Osceola is $49m less than Duke’s self-build projects, NRG argued.
“Other alternatives, including NRG Osceola – which is an existing, operational facility of similar technology and fuel supply – can provide the same attributes in a less risky and cost effective manner, without the construction risk and unnecessary duplication of generating facilities that would result from the Duke self-build projects,” NRG said. “Osceola’s dual-fuel capability allows it to operate on both natural gas and oil, enhancing fuel diversity over a natural-gas only alternative.”
NRG said that the commission should require Duke to engage in further negotiations with NRG about the Osceola plant and to report the results to the commission within 90 days.
Calpine says its Osprey plant fits Duke’s needs
Calpine Construction Finance Co. LP said in an Aug. 1 brief in the Suwannee/Hines case about its own power plant alternative: “The Osprey Energy Center (the ‘Osprey Facility’) is a proven, efficient combined cycle power plant in Auburndale, Florida, that has operated reliably for more than ten years, providing cost-effective wholesale power to Seminole Electric Cooperative, Tampa Electric Company, Progress Energy Florida (now Duke Energy Florida, Inc., hereinafter ‘Duke’) and other utilities for resale to their customers. Calpine has offered to make the capacity and energy output of the Osprey Facility available to Duke through various combinations of power purchase agreements (‘PPAs’) and asset sale structures, at prices that are extremely favorable to Duke’s customers as compared to the Suwannee Peaker Project and the Hines Chillers Project for which Duke seeks the Commission’s approval in this docket.”
Calpine added: “As compared to Duke’s self-build option, the Suwannee Peakers, the Osprey Facility is approximately 30 percent more efficient than the Suwannee Project. In addition, the Osprey Facility is capable of providing at least 515 MW of capacity both in the summer and in the winter; whereas the Hines Chillers, due to the technology, are unlikely to contribute any capacity to serve customers during winter peaking conditions. This is important to maintaining Duke’s system reliability, because Duke’s winter peaks are greater than its summer peaks.”
The Suwannee Simple Cycle project involves two dual-fuel F class combustion turbine generators that will be purchased and installed together with two generator step-up transformers to generate an estimated 320 MW.
The Hines Chillers Power Uprate project involves the installation of a chiller system on all four existing natural-gas fired, combined-cycle power blocks, Hines Units 1-4, located at the Hines plant in Polk County. Hines Units 1-4 are four 2×1 F class combined-cycle power blocks with a total installed capacity of about 1,900 MW. The chillers project will increase the summer capacity by approximately 220 MW.
Duke says its self-build options are the better choice
Duke Energy Florida said in its Aug. 1 prehearing brief: “[B]ased on DEF’s internal, rigorous process, and the competitive market process of the 2018 RFP, the Citrus County Combined Cycle Power Plant is the most cost effective generation resource (by more than $470 million as compared to the closest third-party bid proposal resource option), and the right choice for DEF’s customers. DEF needs additional generating capacity by the summer of 2018 to maintain system reliability and integrity to reliably serve its customers, and to meet its commitment to maintain a 20 percent Reserve Margin.”
The Citrus County plant, with a 1,640 MW summer rating and an 1,820 MW winter rating, would be built next to the existing Crystal River power plant.
About the two uprate projects, Duke said: “It is the net impact of the Company’s expected load growth and generation facility retirements that drive the need for additional generation capacity on DEF’s system by the summer of 2018 to meet the Company’s reliability needs. Through the Company’s IRP process DEF developed the Company’s Base Generation Expansion Plan to meet this need. The Plan includes the addition of the Suwannee Simple Cycle Project, involving the construction of two new combustion turbine units at the existing Suwannee power plant site in 2016, and the Hines Chillers Power Uprate Project at the Hines Energy Complex by 2017.”
Said Duke about competing bids and bidders for this new capacity: “No third party bidder in response to the 2018 RFP proposed a plant that came close to matching the benefits of the Citrus County Combined Cycle Power Plant for DEF’s customers. The Citrus County Combined Cycle Power Plant is a highly efficient, state-of-the-art, natural-gas fired combined cycle generation plant. This high efficiency yields relatively lower production costs than any other option, creating significant relative fuel savings benefits for DEF’s customers.”
Duke also explained why renewables are not part of this picture, even in sunny Florida. “Renewable resources such as wind, solar, and bio-mass are not commercially available on a utility-scale for generation capacity at a cost-effective price. DEF has held open a Request for Renewables (‘RFR’) for renewable generation resources for years and DEF has not received a utility-scale, commercially viable solar or wind proposal that has actually achieved commercial operation. In addition, DEF’s 2018 RFP was open to all proposals for additional firm, dispatchable generation capacity and the only proposals DEF received were for gas-fired generation (with the exception of a small, existing municipal waste renewable generation facility). DEF will continue to solicit renewable projects through its RFR, however, large scale, commercially viable and economic generation capacity renewable projects cannot be reasonably expected at this time.”