Chesapeake Utilities advances Eight Flags cogen project in Florida

Chesapeake Utilities Corp. (NYSE: CPK) announced March 4 that the Florida Public Service Commission has approved the Purchased Power Agreement (PPA) between Chesapeake subsidiaries Florida Public Utilities Co. (FPU) and Eight Flags Energy LLC.

Eight Flags is developing a combined heat and power plant (CHP) in Fernandina Beach on Amelia Island in Nassau County, Florida.  The plant will produce approximately 20 MW of baseload power, which FPU will purchase for distribution to its electric retail customers. The PPA is for a 20-year term and is expected to generate approximately $28 million in total net present value (NPV) savings to FPU’s ratepayers over the life of the PPA.

Eight Flags’ combined heat and power plant, fueled by natural gas, will be built on a site leased from Rayonier Performance Fibers LLC, a subsidiary of Rayonier Performance Materials Inc. The plant will generate steam for sale to Rayonier Performance Fibers for use in the operation of its cellulose specialties production facility. Construction is scheduled to commence in early 2015, with commercial operation expected to commence in July 2016.

The FPSC also approved the extension of an existing renewable energy power purchase contract between FPU and Rayonier Performance Fibers. Boilers at the Rayonier site currently provide steam and generate electricity used to operate the cellulose specialties production facility, and Rayonier sells the excess electricity generated to FPU. The original contract has been in place and produced savings for FPU customers for two years. The approved extension will extend the term of the original contract for an additional 14 years, from October 2022 to September 2036, generate an estimated NPV savings of $8.2 million for FPU customers over the amended contract term and align the term of this contract with that of the PPA.

“The FPSC approvals are major milestones for Eight Flags’ combined heat and power project, which will benefit our customers and Rayonier in many ways. For our Amelia Island customers, it will provide reliable environmentally friendly electricity with substantial cost savings over the life of these contracts. For Rayonier Performance Fibers, LLC, additional steam will be generated, creating greater operational flexibility for its production facility,” said Michael P. McMasters, President and CEO of Chesapeake Utilities Corporation.

FPU’s President, Jeffry M. Householder, added: “The savings to our customers are twofold. In addition to their electricity cost savings from the new PPA associated with the combined heat and power plant being developed, they will experience additional savings through the extension of the existing energy power purchase contract. We are pleased with the results of this joint effort with Rayonier.”

The Florida Department of Environmental Protection on Feb. 26 issued the final air construction permit for the Eight Flags CHP. The plant will consist of an electric/steam cogeneration system, including a nominal 21.7-MW natural gas-fueled turbine and a heat recovery steam generator (HRSG). The HRSG will have duct burners fired with natural gas for supplemental heat, in order to generate additional steam when necessary.

Chesapeake Utilities is a diversified energy company engaged in natural gas distribution, transmission and marketing; electricity distribution; propane gas distribution and wholesale marketing; and other related services.

Florida Public Utilities is a wholly-owned subsidiary of Chesapeake Utilities. Headquartered in West Palm Beach, Florida, FPU distributes natural gas and propane and provides electric services to approximately 100,000 customers in markets throughout Florida.

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.