Florida Power& Light Co. reached a settlement related to its request toacquire and retire a 330-MW coal plant, but objections by the state publicadvocate and industrial customers remain.
On Sept. 20, FPL filed with state regulators a partialsettlement reached with the Florida Industrial Power Users Group, or FIPUG, andthe state Office of Public Counsel, or OPC, related to its proposed purchase ofthe Indiantown CogenerationFacility in Martin County, Fla.
Three monthsearlier, FPL announced a deal to purchase Indiantown for $451million, including debt, from subsidiaries of Ares Owners Holdings, LP. FPL is under contract to buyall of Indiantown's output through 2025, and if the sale is approved, theNextEra Energy Inc.subsidiary plans to cut the plant's operations and eventually retire it, a movethe utility says will save customers roughly $129 million and prevent more than657,000 tons of CO2 emissions annually.
FPL followed a similar asset acquisition , when it acquired the250-MW Cedar Baycoal plant from The Carlyle GroupLLC for $520.5 million, with the goal of retiring the plant andexiting an expensive contract.
The Florida Public Service Commission's hearing on the plantsale is scheduled for Oct. 3-4. In the Sept. 20 filing, the utility, the OPCand FIPUG said the partial settlement should allow for a "more efficient,streamlined process" to tackle other issues in the plant sale, and thatthe agreement should help avoid "expensive, time consuming litigation."
The issues in the settlement include that FPL will recordthe non-fuel costs of operating Indiantown in base rate accounts, and shouldnot record any amount as "plant in service" for the facility becauseit has no economic value. But FPL will record land for $8.5 million, a rail carlease liability of $9 million and an asset retirement obligation of $9.9million for future dismantlement of the plant. FPL should establish aregulatory asset for Indiantown of $451.5 million, according to the filing.
Additionally, the agreement stipulates the proper rate ofreturn for the Indiantown transaction, if approved, is FPL's overall weightedaverage cost of capital used for clause investments. The PSC approved thistreatment for the Cedar Bay acquisition. FPL will also be required to file withthe PSC the accounting entries to record the Indiantown transaction within sixmonths of the deal being consummated.
But the OPC objects to the transaction at large, writing ina Sept. 16 filing that FPL has not shown its method to eliminate the Indiantownpower purchase contract is the least expensive available, nor shown that theproposed buyout price is the lowest possible price or that the deal is in thebest interest of FPL's consumers. The OPC also noted in the filing that intransactions like Indiantown, there is no obligation on FPL to negotiate thelowest possibly buyout price because "they are provided with the incentiveto maximize shareholder return by converting a portion of the capacity clausepass-through cost stream into a shareholder return that is increased by payingthe seller the highest possible price," that still comes in under certainPPA revenue requirements.
FIPUG raised objections to the deal in a Sept. 9 filingasserting that coal-fired plants face several challenges, including, "market,environmental, regulatory and economic pressures," and these risks shouldnot be shifted to FPL customers unless it is limited "in a meaningful andmeasurable way."
The OPC also said it has no objection to the PSC making adecision from the bench on the Indiantown deal with an oral recommendation fromcommission staff. (Florida Docket No. 160154)