Duke seeks Florida approval related to power plant buy from Calpine

Following through on a settlement reached last fall, Duke Energy Florida on Jan. 30 petitioned the Florida Public Service Commission for a determination that its buy of Calpine Construction Finance Co. LP‘s Osprey Plant is one of two ways it can meet its new capacity needs out to 2018.

In 2014, this Duke Energy (NYSE: DUK) subsidiary applied with the commission to upgrade its Suwannee and Hines power plants to meet capacity nedds out to 2018, and to build the 1,640-MW Citrus combined-cycle gas plant next to the existing Crystal River coal/nuclear plant to meet its beyond-2018 needs. As part of the settlement with parties to the case, the commission approved last fall the Hines and Citrus projects, plus the Osprey acquisition, but only if Duke could reach an acceptable agreement with Calpine on that purchase.

Duke Energy Florida (DEF) said in the Jan. 30 application that if it cannot purchase the Osprey Plant, the construction of the Suwannee Simple Cycle Project is still the most cost-effective generation to meet DEF’s remaining need for additional generation capacity prior to 2018. 

Said the application: “DEF needs either the Osprey Plant or, if DEF cannot purchase the Osprey Plant, the Suwannee Simple Cycle Project to meet its remaining need for additional generation prior to 2018. DEF signed an Asset Purchase and Sale Agreement (‘APA’) with Calpine in December 2014 to acquire the Osprey Plant. That acquisition, however, is contingent on various required regulatory approvals, including approval by the Federal Energy Regulatory Commission (‘FERC’), this Commission, and the Department of Justice (‘DOJ’). DEF mitigated this regulatory risk in the APA by preserving for DEF’s customers the benefits of the Suwannee Simple Cycle Project. If the requisite regulatory approvals are not timely obtained, DEF cannot purchase the Osprey Plant and DEF will complete the Suwannee Simple Cycle Project to meet DEF’s remaining generation need prior to 2018. DEF must commence work on that Project in time to complete the Project to meet DEF’s need for additional generation capacity in the summer of 2017.”

The Osprey Plant (also called the Osprey Energy Center) is a natural gas-fired, combined cycle facility located at an existing power plant site with existing land, gas, and transmission infrastructure at the site in Auburndale, Polk County, Florida. The Osprey Plant began commercial operation in 2004. It produces approximately 534 MW on a base load basis and up to 599 MW (nominal) with additional peaking capacity. Osprey is fully dispatchable and it is expected to have high availability on DEF’s system and a capacity factor consistent with other, similar vintage DEF combined-cycle power plants.

The Osprey Plant is fueled by natural gas as the single fuel source and the natural gas is supplied by the Gulf Stream Natural Gas System LLC pipeline through a gas lateral to the plant. Osprey is an advanced class gas turbine, 2 by 1 combined-cycle configuration, which includes two combustion turbines, two heat recovery steam generators, one steam turbine, and generator step up transformers.

$150m project planned to directly connect Osprey to the Duke system

The Osprey Plant is located in the Tampa Electric Balancing Area Authority (BAA). Currently there is partial path firm point-to-point transmission service for 249 MW from the Osprey Plant across Tampa Electric’s BAA to the Duke system. To obtain the full output of the Osprey Plant, DEF currently plans to build transmission network upgrades to directly connect the Osprey Plant to DEF’s system.

These transmission network upgrades were identified using industry-standard transmission screening studies consistent with North American Electric Reliability Corp. (NERC) and Florida Reliability Coordinating Council (FRCC) reliability standards. The estimated cost of these transmission network upgrades is $150m. The transmission network upgrade cost estimates are based on industry-standard transmission facility estimation standards consistent with DEF’s experience with such transmission network upgrades.

DEF and Calpine have agreed to a power purchase agreement (PPA) for the purchase of firm capacity and energy that the Osprey Plant can provide DEF pending receipt of the regulatory approvals for the Osprey Plant acquisition. Calpine further agreed in the APA to continue to prudently operate and maintain the plant during the PPA period.

The closing for the Osprey Plant acquisition is scheduled for Jan. 3, 2017, if the needed regulatory approvals for the acquisition are timely obtained and other conditions in the APA are satisfied.

If DEF cannot purchase the Osprey Plant, it plans to build the Suwannee Simple Cycle Project. Two dual-fuel F class combustion turbine generators will be purchased and installed together with two generator step-up transformers to generate an estimated 320 MW for DEF’s customers. The project will also include fuel oil and demineralized water storage tanks, and related balance of plant facilities, and it will be located at DEF’s existing Suwannee power plant site in Suwannee County, Florida. The Suwannee site has existing combustion turbines fired by gas and oil and existing steam units with supporting pipeline and transmission infrastructure.

DEF estimates that it will cost approximately $195.1m, including the Allowance for Funds Used During Construction (AFUDC), to build the Suwannee Simple Cycle Project. The project is scheduled for commercial operation in June 2017.

Duke noted that its needs new capacity in part due to load growth. “Another driver in DEF’s need for additional generation is the retirement of or reduction in generation capacity on DEF’s system. In February 2013, the Company decided to retire its Crystal River Unit 3 nuclear power plant (‘CR3’). CR3 accounted for approximately 790 MW of summer generation capacity on DEF’s system. The Company’s plan for compliance with the United States Environmental Protection Agency (‘EPA’) Mercury and Air Toxics Standards Rule (‘MATS’) at [the coal-fired] Crystal River Unit 1 (‘CR1’) and Crystal River Unit 2 (‘CR2’) will result in a reduction in their capacity of approximately 130 MW beginning in the spring of 2016. The Company also plans to retire some of its oldest and least efficient plants. The Company’s generation plant retirements and generation plant capacity reductions are significant drivers of the Company’s generation capacity need prior to 2018.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.