Florida utility to buy, quickly phase out the coal-fired Cedar Bay plant

Florida Power & Light (FPL) said March 6 that it has filed a petition with the Florida Public Service Commission (PSC) to request approval to acquire a coal-fired power plant that it has had under a long-term contract to purchase power since 1988.

Upon taking ownership of the Cedar Bay Generating Plant, a 250-MW coal-fired facility located in Jacksonville, Fla., FPL plans to immediately terminate the contract and reduce the plant’s operations by 90%, with the intention of eventually phasing the plant out of service. This plan is projected to save FPL customers an estimated $70 million and prevent nearly 1 million tons of carbon dioxide emissions annually.

“Although years ago it made sense to buy this plant’s power to serve our customers, times have changed. We have invested billions of dollars to improve the efficiency of our system, reduce our fuel consumption, prevent emissions and cut costs for our customers,” saidEric Silagy, president and CEO of FPL. “Now we’re in a position to take ownership of the facility and effectively buy out an outmoded contract with the goal of ultimately phasing the plant out of service, which will mean reduced carbon emissions and millions of dollars in savings for our customers. This proposal is another smart step forward in our ongoing effort to serve our customers with affordable clean energy now and in the future.”

In 1988, the PSC approved a long-term purchased-power agreement between FPL and the direct owner of the Cedar Bay plant, Cedar Bay Generating Co. LP. The contract was based on the cost of power at the time; however, today FPL can generate electricity at a much lower cost. Also, while the Cedar Bay plant is well-run, it nonetheless emits very high rates of CO2 compared with FPL’s current generation fleet, which has an overall CO2 emissions rate much lower than the national average.

Under the existing purchased-power agreement, fixed payments for capacity and operating and maintenance total more than $120 million a year currently with annual increases until the contract’s expiration in 2024. Like other purchased-power agreements, the fixed payments are paid for by customers through their rates, in addition to the cost of energy when the plant is operating.

The buyout cost is $520.5 million

In its filing with the PSC, FPL proposes to purchase CBAS Power Inc., the indirect owner of the plant, from CBAS Power Holdings LLC, for a price of $520.5 million. FPL would then terminate the purchased-power contract, avoiding the fixed payments that customers would otherwise pay through their rates over the remaining life of the contract.

Upon taking ownership, FPL expects to decrease plant operations by about 90% so that it operates no more than about 5% of the time based on its true economics. Based on acurrent analysis of operational needs, FPL expects to permanently decommission the Cedar Bay plant within the next two to three years. In 2017, when Florida’s access to clean natural gas is expected to be enhanced by the new interstate natural gas pipeline entering commercial operation, FPL said it believes that the Cedar Bay plant will no longer be economic to dispatch or needed for reliability, and therefore would be retired nearly eight years sooner than it otherwise would have been.

FPL is requesting PSC approval of the purchase by July 31 so that the purchase can be completed as soon as possible to maximize customer savings. The fixed payments under the existing purchased-power contract are paid for through the capacity cost recovery clause on a customer’s electric bill, and FPL requests that the costs and customer savings associated with its proposal be handled through the same mechanism. Compared with the current fixed payments, the net cost is expected to be slightly higher during approximately the first three years, but then significantly lower over the remaining life of the contract – producing total projected net savings of approximately $70 million for customers.

Since 2001, FPL’s investments in high-efficiency natural gas generation have enabled the company to cut its use of foreign oil by more than 99% – from more than 40 million barrels of oil in 2001 to less than 1 million barrels annually today. FPL has been strategically phasing out older, less efficient fossil fuel plants and replacing them with new, high-efficiency natural gas energy centers that use approximately one-third less fuel per megawatt-hour. The company has also invested heavily to increase its use of zero-emissions nuclear and solar energy and recently announced plans to triple its solar capacity by the end of 2016.

Thanks in large part to the company’s affordable clean energy strategy FPL said it is well-positioned to meet the EPA’s proposed Clean Power Plan targets for reductions in CO2 emissions – with no expected additional costs.

Cedar Bay is a fairly new plant using fluidized-bed combustion technology

A May 2014 renewed air permit for the Cedar Bay plant from the Florida Department of Environmental Protection says: “Emissions unit numbers 001, 002 and 003 are Pyroflow® Circulating Fluidized Bed (CFB) dry bottom boilers designated as “CFB Boiler A”, “CFB Boiler B” and “CFB Boiler C”, respectively. CFB Boilers A, B and C, are each rated at a maximum heat input of 1,063 million Btu per hour (MMBtu/hour) when firing crushed coal, petroleum coke, and tire-derived fuel (TDF). Also, CFB Boilers B and C are each allowed to burn short fiber recycle rejects from the RockTenn CL, LLC recycling process. No. 2 fuel oil is used as an auxiliary fuel in all three boilers, normally only for start-ups.”

The permit added: “Cedar Bay is a facility impacted by [the federal Mercury and Air Toxics Standards]. As such, the facility will have a new regime of compliance testing effective April 16, 2015. Filterable PM will be the facility’s surrogate for non-mercury HAP metals. The PM limit in Subpart UUUUU is 0.03 lb/MMBtu compared to Cedar Bay’s BACT PM limit of 0.018 lb/MMBtu. Additionally, the facility will be obligated to demonstrate that each of the three combustors is a low-mercury emitter. Cedar Bay will be obligated to have mercury testing (Method 30B for 30 operating days per boiler) for three successive years and once every three years following the annual requirement. Cedar Bay will utilize PM as a surrogate for non-mercury HAP metals and will also use SO2 as a surrogate for HCl.”

The permit says the maximum coal charging rate of each CFB shall neither exceed 104,000 lbs/hr, 39,000 tons per month (30 consecutive days), nor 390,000 tons per year (TPY). This reflects a combined total of 312,000 lbs/hr, 117,000 tons per month, and 1,170,000 TPY for all three CFB units. Tire-derived fuel (TDF) may be utilized as a co-firing fuel and can’t exceed 5% fuel input by weight on a daily basis. Petroleum coke may be utilized as a co-firing fuel and can’t exceed 35% fuel input by weight on a daily basis.

U.S. Energy Information Administration data shows that the coal supplier to the plant in 2014, under a contract due to expire at the end of 2015, was eastern Kentucky coal producer Nally & Hamilton out of its Balkan operation. 

Florida Power & Light is the third-largest electric utility in the United States, serving more than 4.7 million customer accounts across nearly half of the state of Florida. FPL is a subsidiary of Juno Beach, Fla.-based NextEra Energy (NYSE: NEE).

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.