Florida Power works out deal with state Public Counsel on Cedar Bay buyout

Florida Power & Light and the Florida Office of Public Counsel (OPC) on July 24 jointly asked the Florida Public Service Commission for approval of a settlement related to FPL’s plan to buy out its power contract with, and buy outright and then quickly retire, the coal-fired Cedar Bay power plant.

The settlement deal provides, among other things, that:

  • FPL’s entering into the Purchase and Sale Agreement (PSA) with CBAS Power Holdings LLC in order to mitigate the impact on customers of an unfavorable Cedar Bay power purchase obligation is reasonable, cost-effective and prudent.
  • The proposed accounting and cost recovery for the Cedar Bay transaction set forth in FPL’s March 6 petition for approval should be approved with certain exceptions.
  • FPL may recover the $520.5 million purchase price under its deal with CBAS Power Holdings as a regulatory asset, but will apportion recovery between the Capacity Cost Recovery (CCR) Clause and base rates.

Said the July 24 filing: “The Settlement Agreement provides a fair and reasonable basis for FPL to recover the costs of the Cedar Bay Transaction. FPL has estimated that the Cedar Bay Transaction will save customers $70 million on a net present value basis, will provide FPL fuel diversity and reliability benefits from having the Cedar Bay Facility available for operation as needed, and will reduce air emissions from the Facility’s reduced operation and early retirement.”

FPL and the OPC asked that the commission ommence the evidentiary hearing in this case on July 28, as scheduled. They agreed to waive cross examination of all witnesses at that hearing but will present their witnesses to the extent that the commissioners, commission staff and/or the Florida Industrial Power Users Group (FIPUG, the sole non-signatory party) wish to examine them and are so authorized.

Then the settling parties want the state commission to schedule a special agenda conference to consider the proposed settlement, with not less than 14 days’ notice of same to all parties in this proceeding.

In the meantime, the members of the Federal Energy Regulatory Commission on July 2 approved this FPL buy of Cedar Bay. This involves a 250-MW facility located in Jacksonville, Florida. FPL states that it currently buys all the capacity and electric power from the facility pursuant to a long-term power purchase agreement. FPL said that CBAS Power Holdings is a subsidiary of The Carlyle Group, a global alternative investment management firm.

FPL told FERC that the capacity pricing of the Power Purchase Agreement is “far above” market prices and FPL’s avoided costs. FPL stated that it intends to contract with Cedar Bay Operating Services LLC to continue operating the facility and to preserve the corporate legal structure for ownership of the facility, as a protection from any unforeseen contingent losses that could arise from the prior operation of the facility. FPL said it anticipates dispatching the facility until at least 2016, but at an approximately 5% capacity factor instead of at the current approximately 50% capacity factor. Due to the expected availability of a new interstate natural gas pipeline system to fuel its natural gas-fired units, FPL projects that it will retire the Cedar Bay facility in early 2017.

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.