The North Carolina Utilities Commission on March 28 issued a final written order partially approving the Asheville coal-to-gas repowering of Duke Energy Progress – with the order also holding the possibility of this Duke Energy (NYSE: DUK) subsidiary signing a contract to buy power from the existing Columbia Energy gas-fired plant in South Carolina.
The commission on Feb. 29 issued an oral decision, with the March 28 order putting that decision into writing.
In December 2015, Duke Energy Progress (DEP) filed a letter giving notice of its intent to file an application on or after Jan. 15 for a certificate of public convenience and necessity (CPCN) to construct a 752-MW natural gas-fired facility consisting of two new natural gas-fired 280-MW (winter rating) combined cycle (CC) units and a natural gas-fired 192 MW (winter rating) simple cycle combustion turbine (CT) unit, each with fuel back up, in Buncombe County near the City of Asheville. In its letter, DEP stated: “The Western Carolinas Modernization Project (Project or WCMP) will enable the early retirement of the 379 MW (winter rating) Asheville 1 and 2 coal units on or before the commercial operation of the new combined cycle units, thereby permanently ceasing operations of all coal-fired units at the site.”
On Jan. 15, DEP filed a verified application for a CPCN to construct up to 746 MW of natural gas-fired capacity consisting of two new natural gasfired 280 MW CC units and a natural gas-fired 186 MW (winter rating) simple cycle CT unit, each with fuel oil back up, and associated transmission in Buncombe County at DEP’s Asheville Plant. The application noted that the need for the 186 MW CT may be avoided or delayed due to the utilization of other technologies and programs to meet the future peak demand requirements of DEP’s customers in the region. The application also includes information about related onsite transmission facilities, DEP’s plans to build up to 15 MW of solar generation at the Asheville Plant and plans to invest in a minimum of 5 MW of utility-scale power storage pilot in the DEP-Western Region.
DEP presently operates two coal-fired units with a combined generating capacity of approximately 379 MW (winter rating) at its Ashville Plant site in Buncombe County. The issuance of the CPCN will enable the early retirement of the two Asheville coal units on or before the commercial operation of the new CC units, thereby permanently ceasing operations of all coal-fired units at the site and reducing CO2 emissions. The CC units are planned for commercial operation in the fall of 2019. The existing on-site CT units will continue in operation.
As load continues to grow, more local generation is required in Asheville to maintain system reliability pursuant to NERC reliability standards. Noted the March 28 order: “DEP cannot rely upon energy efficiency, demand-side management and renewables to eliminate or delay its need for critical generation capacity in the 2019 timeframe. The critical function, nature and location requirements of the CC units require that DEP operate, maintain and control these resources, and therefore DEP’s decision not to evaluate the wholesale market alternative to meet these resource needs was reasonable. Issuing a CPCN for the contingent 186 MW CT unit is not appropriate at the present time.”
Columbia Energy wanted Duke to buy its power instead
Columbia Energy owns an existing 535-MW cogeneration facility in South Carolina which is a qualified facility under the Public Utilities Regulatory Policies Act of 1978 (PURPA), which may be the subject to a future contested case. “The CPCN issued herein is without prejudice to the right of any party to assert its relative rights and obligations under PURPA in any future arbitration or other proceeding relating to the Columbia Energy facility,” the order noted.
It added: “Not granting a CPCN for the additional CT unit will allow time for advances in generation, transmission, and storage technologies that may provide other least cost resource options for the Company to consider should load growth continue as projected without significant reductions in demand as a result of community collaborative efforts with the Company.”
In response to the arguments of Columbia Energy about failed efforts to sell power to the utility, DEP argued that any issues between DEP and Columbia Energy are matters for another docket to resolve issues surrounding any power purchase agreement (PPA) under PURPA. DEP further opined that the proper commission to resolve such issues would be the Public Service Commission of South Carolina as the QF is located in South Carolina approximately 170 miles from Asheville.
DEP indicated that Columbia Energy first approached Duke Energy Carolinas (DEC) in 2015 to ask for some information concerning the company’s avoided cost rates, and that it was only in January 2016 that Columbia Energy first approached DEP. DEP provided Columbia Energy its avoided cost rates in South Carolina because that is where DEP understood the facility would interconnect. DEP indicated it understands now that Columbia Energy is interconnected to the South Carolina Electric & Gas system. DEP’s understanding is that Columbia Energy has submitted a transmission study request into DEP-East in South Carolina, as opposed to Columbia Energy’s assertion that there was a firm transmission request pending.
DEP said it further believes that in order to get to DEP-East, Columbia Energy will have to wheel through South Carolina Electric & Gas’ transmission system. Thus, the Columbia Energy facility is two wheels away from the DEP-Western Region. Further, DEP’s understanding is that Columbia Energy has not yet elected to proceed in response to the avoided cost rates provided by DEP, and there have been no negotiations as to a PPA. DEP argued that if Columbia Energy was contemplating building a new transmission line from south of Columbia to Asheville or obtaining transmission into DEP-West, this option would not meet DEP’s reliability needs because the generation is not located in the western region. DEP reiterated that transmission constraints into the western region exist and that voltage requirements require DEP to site the new generation in the Asheville region. DEP argues that if it enters into a PPA with Columbia Energy at some point in the future, this PPA will have no impact on the needs to be served by the Asheville project.
Columbia Energy is concerned that DEP will cite approval of this project to argue in a future case that a PPA for the output of its facility would not avoid capacity costs for the full capacity made available by this QF. Columbia Energy acknowledged that the parties’ potential dispute will be the focus of another docket. However, Columbia Energy indicated it is concerned because DEP has rejected an offer by Columbia Energy and proposed only a short-term PPA with an energy-only rate and no proposal for payment for capacity.
Duke says a deal with Columbia Energy is feasible
DEP indicated that if it is required to enter into a PPA with Columbia Energy pursuant to PURPA obligations, that resource can be used to offset DEP’s future system needs or other contracts that are expiring. Is CPCN application indicates that from a total system perspective, the DEP 2015 Integrated Resource Plan identifies the need for an additional 1,152 MW of new resources by 2020 and 5,099 MW by 2030.
DEP indicated that its understanding is that Columbia Energy has submitted a transmission study request to move power into DEP-East in South Carolina, which contrasts with Columbia Energy’s assertion that it has a firm transmission request pending. DEP asserts that Columbia Energy has not yet elected to proceed in response to the avoided cost rates provided by DEP and, thus, there have been no negotiations yet as to a PPA. As to suggestions by intervenors that DEP rely upon the Columbia Energy natural gas-fired project rather than those proposed by DEP at the Asheville Plant site, the transmission constraint issues DEP has confronted make this alternative problematic.
Said the March 28 order: “Columbia Energy’s concerns relate to a future PPA and avoided cost decisions which seem to be at the preliminary stages and cannot be addressed in this docket. The Commission concludes that such decisions must be made either through negotiations between the parties or in a future Commission proceeding. This decision is without prejudice to such decisions. The Commission urges the parties to work together to resolve any potential future issues in negotiating a PPA.”
The commission decided in the March 28 order that:
- the application filed in this docket shall be, and the same is hereby, approved and a certificate of public convenience and necessity for the two 280 MW CC natural gas-fired electric generating units, with fuel oil backup, along with the associated transmission facilities, is hereby granted;
- the request for a CPCN for the 186 MW CT unit is denied without prejudice to DEP’s right to file a future CPCN application;
- DEP shall retire its existing Asheville coal units 1 and 2 no later than the commercial operation of the two 280 MW CC units;
- DEP shall construct and operate the two 280 MW CC units in strict accordance with all applicable laws and regulations, including the provisions of all permits issued by the North Carolina Department of Environmental Quality;
- DEP shall file with the commission in this docket a progress report and any revisions in cost estimates for these CC units on an annual basis, with the first report due one year from the issuance of this order;
- DEP shall file with the commission a progress report annually in this docket, and the report shall include actual accomplishments to date on its efforts to work with its customers in the DEP-Western Region to reduce peak load through demand-side management, energy efficiency or other measures, and on DEP’s efforts to site solar and storage capacity in the DEP-Western Region, with the first report due one year from the issuance of this order;
- DEP shall conduct an investigation on retrofitting its four Roxboro coal-burning units as proposed by the North Carolina Department of Environmental Quality in its November 2015 draft rule entitled “Standards of Performance for Existing Electric Generating Units Under Clean Air Act Section 111(d),” and submit a report to the commission in the company’s 2016 Integrated Resource Plan regarding the feasibility and cost-effectiveness of conducting such retrofits; and
- the issuance of this order and CPCN does not constitute approval of the final costs associated therewith, and that the approval and grant is without prejudice to the right of any party to take issue with the treatment of the final costs for ratemaking purposes in a future proceeding.