Duke argues for Osprey power plant buy; with Suwannee expansion the fallback option

A planned purchase of Calpine‘s (NYSE: CPN) Osprey power plant or an expansion of the Suwannee power plant are still the most cost-effective generation alternative to meet remaining need prior to 2018, said Duke Energy Florida in a May 6 pre-hearing brief filed at the Florida Public Service Commission.

The commission plans a June 3 hearing on Duke Energy Florida’s Jan. 30 petition 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 needs 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. 

The Osprey Plant (also called the Osprey Energy Center) is a natural gas-fired, combined cycle facility located 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.

With the Suwannee Simple Cycle Project, two dual-fuel F class combustion turbine generators would be purchased and installed together with two generator step-up transformers to generate an estimated 320 MW. 

Duke said in the May 6 pre-hearing brief that the company’s current and projected customer and peak demand growth, and its existing and planned plant retirements and generation plant capacity reductions, demonstrate a need for additional generation capacity in the summer of 2017. It added: “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. If this occurs, DEF must commence work on that Suwannee Project in time to complete the project to meet DEF’s need for additional generation capacity in the summer of 2017.

“The Osprey Plant will provide DEF’s customers with beneficial combined-cycle generation fuel efficiency and emissions costs at a favorable acquisition price even with the necessary capital maintenance, operations & maintenance, and transmission interconnection investment in the Plant to incorporate it into DEF’s system.

“Another driver in DEF’s need for additional generation is the retirement of or reduction in generation capacity on DEF’s system including the retirement of its Crystal River Unit 3 nuclear power plant, which accounted for approximately 790 MW of summer generation capacity on DEF’s system, and planned retirements of some of DEF’s oldest and least efficient plants. Additionally, the Company’s plan for compliance with the United States Environmental Protection Agency (‘EPA’) Mercury and Air Toxics Standards Rule (‘MATS’) at Crystal River Unit 1 and Crystal River Unit 2 will result in a reduction in their capacity of approximately 130 MW beginning in the spring of 2016. DEF still needs the Osprey Plant or, alternatively, if DEF cannot purchase the Osprey Plant, the Suwannee Simple Cycle Project by the summer of 2017 to meet its 20 percent Reserve Margin Commitment. The Company’s remaining need for additional generation capacity is now approximately 180 MW in the summer of 2017, growing to over 300 MW in the summer of 2018.

“With the Osprey Plant acquisition the Company’s Reserve Margin will be 20.6 percent in the summer of 2017. Alternatively, if DEF builds the Suwannee Simple Cycle Project, the Company’s Reserve Margin will be 20.7 percent in the summer of 2017. Without one of these generation capacity additions, DEF’s Reserve Margin will decrease to 18 percent in the summer of 2017. Accordingly, DEF needs this additional generation capacity, whether it is the Osprey Plant or the Suwannee Simple Cycle Project, in the summer of 2017 to meet its obligation to provide reliable electric service to its customers.”

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.