Florida PSC defers decision on Scherer coal unit being in Gulf Power’s rate base

The members of the Florida Public Service Commission Sept. 13 unanimously voted to kick the can down the road on the question of whether Gulf Power should be allowed to include its ownership share of the coal-fired Scherer Unit 3 in its retail rate base.

A vote sheet from the Sept. 13 meeting shows the commission accepted this staff recommendation: “The Commission should order Gulf to file two separate monthly Earning Surveillance Reports (ESRs). Pursuant to Rule 25-6.1352, Florida Administrative Code, (F.A.C.), and in accordance with Order No. 23573, the Company should continue to make adjustments to its monthly ESRs to remove Scherer Unit 3 ‘s related investment and expenses from the retail jurisdictional rate base. In addition, Gulf should recognize its share of Scherer Unit 3’s related investment and expenses that are not currently committed to offsystem sales in a separate concurrently filed monthly ESR. Gulf retains the opportunity to seek approval to include its share of Scherer Unit 3 in retail jurisdictional rate base in a future regulatory proceeding.”

Gulf Power, a subsidiary of Southern Co. (NYSE: SO), has owned 25% (223 MW) of Scherer Unit 3 for a number of years. But it has contracted out that capacity to third parties since then. With those contracts now expiring, Gulf Power on May 24 asked that this capacity be included in its rate base. The Scherer plant is operated and co-owned by Southern’s Georgia Power subsidiary.

That move provoked opposition from the Sierra Club, which said in part that this move would impede any Gulf Power efforts to develop clean energy.

In a July 28 fling, commission staff wrote: “Gulf’s petition to include Scherer Unit 3 in retail jurisdictional rate base should be fully vetted in a future regulatory proceeding. In accordance with Order No. 23573, the Company should continue to make adjustments to its monthly Earnings Surveillance Reports (ESRs), and all other regulatory filings with the Commission, to remove Scherer Unit 3’s related investment and expenses from the retail jurisdictional rate base.”

PSC staff added: “In its petition, the Company stated that the first of three existing long-term off system sales contracts expired at the end of 2015, releasing approximately 52 percent of Gulf’s ownership in Scherer Unit 3, and an additional contract expiring in May 2016, releasing an additional 24 percent of Gulf’s ownership in Scherer Unit 3 to be used in serving its native load customers. The final long-term contract is set to expire in December 2019, which will then enable Gulf to dedicate 100 percent of the capacity of its ownership in Scherer Unit 3 to serving its native load customers. Gulf also stated that its ownership interest in Scherer Unit 3 has always been to ultimately serve its native load customers, and the long-term off system sales contracts served to bridge the gap in time between the commercial operation date of Scherer Unit 3 and the anticipated need of the generation to serve native load customers.

“In its petition, the Company cites two Commission Orders in support of its assertion that its ownership interest in Scherer Unit 3 was deemed prudent by the Commission in lieu of constructing new generating assets at its Carryville site, and that it was always intended to serve native load customers. Staff agrees that the Commission has acknowledged in previous Orders that the decision to not construct a new generating asset at the Carryville site, and purchase an ownership interest in Scherer Unit 3 was found to be reasonable. However, with the passage of time since those Orders were issued, Gulf is situated differently from a generation standpoint. Therefore, staff believes that the inclusion of Scherer Unit 3 in retail jurisdictional rate base should be fully vetted in a future regulatory proceeding. A formal hearing on this matter would afford all parties an opportunity to fully litigate the matter.”

The 3,600-MW Scherer plant is located in Juliette, Ga., just north of Macon and approximately 70 miles south of Atlanta. The four-unit plant is co-owned by Georgia Power, Oglethorpe Power Corp., Florida Power & LightMunicipal Electric Authority of Georgia, Gulf Power, Jacksonville Electric Authority (JEA) and Dalton Utilities. The plant is one of the nation’s largest single users of Powder River Basin coal.

Gulf Power’s May 24 filing in this case said: “During the period that Gulf’s ownership of Scherer has been committed to interim long-term off system sales, the Company has retired seven of its older and smaller fossil-fired generation units. Between 2003 and 2006, Gulf retired Crist Units 1, 2 and 3 representing approximately 94 megawatts of generating capacity (Generation Maximum Nameplate capacity as reflected in Gulf’s Ten Year Site Plan filings). Between April 2014 and April 2016, Gulf retired its two oldest coal-fired generation units (Scholz 1 and 2) and the two coal-fired units at Plant Smith (Smith 1 and 2), representing approximately 397 megawatts of generating capacity. Gulf’s Scherer Unit 3 is effectively the long-term replacement for approximately 45 percent of this retired generation (approximately 223 megawatts replacing approximately 491 megawatts measured on a Generation Maximum Nameplate basis).”

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.