Florida Power & Light to buy, shut another coal-fired power plant

Florida Power & Light (FPL) on June 20 filed a petition with the Florida Public Service Commission (PSC) to request approval to purchase a coal-fired power plant located in Indiantown, Fla., with which FPL has a long-term power purchase contract.

If approved, the proposal is projected to save FPL customers an estimated $129 million and prevent more than 657,000 tons of carbon dioxide emissions annually. Upon taking ownership of the 330-MW Indiantown Cogeneration facility, which is currently owned by Calypso Energy Holdings LLC, FPL plans to immediately reduce the plant’s operations with the intention of eventually phasing the plant out of service. If approved by the PSC, this will be the second coal power plant in two years that FPL has bought to phase out while saving customers money in the process. The other is the 250-MW Cedar Bay plant.

“We are delivering power to our customers that is cleaner and more reliable than ever before at a price that is lower than it was 10 years ago and among the lowest in the nation. That is no accident – it’s because of our forward-looking strategy of smart investments that improve the efficiency of our system, reduce our fuel consumption, prevent emissions and cut costs for our customers,” said Eric Silagy, president and CEO of FPL. “While many years ago it made sense to buy this plant’s power to serve our customers, we’re now able to purchase the facility and phase it out of service, preventing potentially harmful carbon emissions while saving our customers millions of dollars.”

In 1991, the PSC approved a long-term purchased-power agreement between FPL and Indiantown Cogeneration that does not expire until 2025. 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 Indiantown Cogeneration plant is well-run, it nonetheless emits very high rates of carbon dioxide compared with FPL’s current generation fleet, which has an overall carbon emissions rate far lower than the national average, the utility pointed out.

In its filing with the PSC, FPL proposes to purchase the ownership interest in the Indiantown Cogeneration facility for $451 million (including existing debt). FPL is requesting PSC approval of the purchase by December 2016, so that the purchase can be completed as soon as possible to maximize customer savings. Over the remaining life of the contract, which is approximately nine years, FPL is projecting $129 million in customer savings.

FPL plans to decrease the plant’s operations immediately upon taking ownership so that it operates no more than about 5% of the time. Reducing the plant’s operations by this amount will prevent more than 657,000 tons of carbon dioxide emissions every year.

Based on the company’s current analysis of operational needs, FPL expects to operate the facility minimally through the end of 2018, as needed. After the expected addition of a new natural gas pipeline system into Florida in 2017 and with the high-efficiency natural gas-fired FPL Okeechobee Clean Energy Center entering service in 2019, FPL believes that the Indiantown Cogeneration plant will no longer be economic and plans to retire the facility years sooner than it otherwise would have been.

At this time, no decision on future use of the Indiantown plant site has been made. However, the property’s close proximity to the existing Martin Next Generation Clean Energy Center’s solar and natural gas infrastructure provides the opportunity for future solar or natural gas generation.

Last year, FPL bought out its long-term contract with the Cedar Bay coal-fired power plant in Jacksonville, saving customers more than $70 million and preventing nearly 1 million tons of carbon emissions annually.

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.

In 2016, FPL is building three new solar power plants that will be among the largest solar power facilities ever built in the eastern U.S. Comprising more than 1 million solar panels, the new, cost-effective plants will begin powering FPL customers later this year, tripling the company’s use of energy from the sun.

Plant only had a 24% dispatch rate in 2015

The Indiantown facility is an approximately 330-MW, coal-fired, qualifying cogeneration facility located on a 215-acre site in Indiantown, Florida. Commercial operation began in 1995. It is deemed a Qualifying Facility (QF) under the Public Utility Regulatory Policy Act of 1978.

The facility is owned by Indiantown Cogeneration LP, with 100% of the partnership interests held directly and indirectly by two Calypso affiliates: Palm Power LLC and Toyan Enterprises LLC. The facility’s operations are managed by U.S. Operating Services Co. LLC, a wholly-owned subsidiary of Calypso, pursuant to an operation and maintenance agreement. Indiantown sells the electricity produced by the facility to FPL and sells steam to a citrus processing facility sited adjacent to the cogen facility.

FPL’s energy prices under the PPA are based on the unit cost for coal, priced at a published index times a fixed heat rate. In contrast, pursuant to the commission’s rules governing qualifying facilities, FPL’s fixed operations and maintenance expense (O&M) and capacity payments to Indiantown were determined based on the approved “avoided unit” at the time the parties entered the PPA, an integrated coal gasifier combined cycle unit. As a consequence, the fixed O&M and capacity payments are above today’s current and projected market prices and well above FPL’s current avoided costs. To illustrate, in 2015 the “all in” price of energy from the Indiantown facility was over $264/MWh, compared to an average FPL avoided cost of $18/MWh in that same year.

The Indiantown facility is dispatchable by FPL within the operating limits of the facility. FPL dispatched the plant at an annual capacity factor of about 24% in 2015.

Florida Power & Light is the third-largest electric utility in the United States, serving more than 4.8 million customer accounts or more than 10 million people across nearly half of the state of Florida. FPL is a subsidiary of NextEra Energy (NYSE: NEE). NextEra Energy is also the parent company of NextEra Energy Resources LLC, which, together with its affiliated entities, is the world’s largest generator of renewable energy from the wind and sun.

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.