# appendicesr — Utilities Commission v. Tampa Electric Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** appendicesr
- **Published:** January 1, 2001
- **Citation:** 532 U.S. 905

## Text

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APPENDIX A

SUPREME COURT OF FLORIDA
Nos. SC95444; SC95445; SC95446

TAMPA ELECTRIC CO.; FLORIDA POWER CORP.;
and FLORIDA POWER & LIGHT Co.,

Appellants,
vs.

Jor GARCIA, et al., as the FLORIDA PUBLIC SERVICE
COMMISSION; UTILITIES COMMISSION, CiTy OF NEW
SMYRNA BEACH; and DUKE ENERGY NEW SMYRNA BEACH
POWER Co., LTD., LLP.,

Appellees.

[April 20, 2000]
[Rehearing Denied September 28, 2000]

REVISED OPINION
PER CURIAM.

These consolidated cases are before the Court on appeal
from an order of the Public Service Commission (PSC or—
Commission). We have jurisdiction. Art. V, § 3(b)(2), Fia.
Const. The issue presented concerns the statutory authority of
the PSC to grant a determination of need under the Florida
Electrical Power Plant Siting Act (Siting Act)' and the
Florida Energy Efficiency & Conservation Act (FEECA) * for
an electric power company’s proposal to build and operate a

' § 403.501-.518, Fla. Stat. (1997).
2 88 366.80-.85, 403.519, Fla. Stat. (1997).

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merchant plant in Volusia County.’ We reverse the order of
the PSC for the reasons stated herein.

The construction of any new electrical power generating
plant as defined by section 403.503(12), Florida Statutes, that
is not otherwise exempted by Florida law, is required to be
certified in accord with the various requirements of the Siting
Act in chapter 403, Florida Statutes.* As part of the process,
an applicant seeks a determination of need from the PSC for a
proposed power plant. See § 403.519, Fla. Stat. (1997).° The
PSC’s granting of a determination of need for a proposed.
power plant creates a presumption of public need. See
§ 403.519, Fla. Stat. (1997). This determination serves as the

> The PSC defines “merchant plant” as a power plant with no rate base
and no captive retail customers.

* Section 403.506, Florida Statutes (1997), provides in relevant part:

(1) The provisions of this act shall apply to any electrical power
plant as defined herein, except that provisions of this act shall not
apply to any electrical power plant or steam generating plant of less
than 75 megawatts in capacity or to any substation to be constructed
as part of an associated transmission line unless the applicant has
elected to apply for certification of such plant or substation under
this act.

* Section 403.519, Florida Statutes (1997), provides in relevant part:

On request by an applicant or on its own motion, the commission
shall begin a proceeding to determine the need for an electrical
power plant subject to the Florida Electrical Power Plant Siting Act.
. .. The commission shall be the sole forum for the determination of
this matter, which accordingly shall not be raised in any other forum
or in the review of proceedings in such other forum. In making its _
electric system reliability and integrity, the need for adequate
electricity at a reasonable cost, and whether the proposed plant is
the most cost-effective alternative available. The commission shall
also expressly consider the conservation measures taken by or
reasonably available to the applicant or its members which might
mitigate the need for the proposed plant and other matters within its
jurisd*ction which it deems relevant.

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PSC’s report required by section 403.507(2)(a)2, Florida
Statutes (1997), as part of the permitting procedure.

On August 19, 1998, the Utilities Commission of the City
of New Smyrna Beach (New Smyma), and Duke Energy New
______Smyrna-_Beach Power Co., Ltd. (Duke) filed in the PSC a
joint petition for determination of need for the New Smyma
Beach Power Project, a proposed natural gas fired combined
cycle generating plant with 514 megawatts of net capacity to
be built and operated by Duke in-New Smyma Beach. Duke
is not presently subject to PSC regulation as a public utility
authorized to generate and sell electric power at retail rates to
Florida customers. Duke is a subsidiary of an investor-owned
utility based in North Carolina. As a company offering
electrical power for sale at wholesale rates, Duke is subject to
the regulatory jurisdiction of the Federal Energy Regulatory
Commission (FERC) and is classified as an exempt wholesale
generator (EWG).° New Smyma is a Florida municipal
electric utility that directly serves retail customers.’ In the
present petition for determination of need, Duke proposed to
build a 514-megawatt plant, with thirty megawatts of that
Capacity and associated energy committed to be sold to New
Smyma and the remaining megawatts uncommitted and
intended to be made available for sale at competitive
wholesale rates to utilities that directly serve retail customers.

Prior to filing the present joint petition, Duke and New-
Smyrna entered into an agreement requiring Duke to finance,
design, build, own, and operate the plant and to sell to New
Smyma thirty megawatts of Duke's proposed plant's capacity
at a discount wholesale rate. New Smyma agreed to provide
the site for the plant, a wastewater treatment facility, water, F
and .ax reductions. New Smyma intends to sell to its retail

® See 15 U.S.C. § 792-5a (1994).

’ New Smyrna is regulated by the PSC pursuant to section 366.04(2),
Florida Statutes (1997).

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customers the energy it has committed to purchase from
Duke. The agreement also provides that Duke will make
available for sale the remaining 484 megawatts of power in
the competitive wholesale electrical power market primarily,
but not exclusively, for ultimate use in Florida.

The seven intervenors as to the petition included present
appellants Tampa Electric Co. (Tampa Electric), Florida
Power Corp. (FPC), and Florida Power & Light Co. (FP&L).
After a hearing in December 1998, three members of the
Commission voted to deny motions to dismiss by FPC and
FP&L and voted to grant the joint petition. /n re Joint
Petition for Determination of Need, No. PSC-99-0535-FOF-
EM (March 22, 1999) (Order). Commissioner Clark
dissented, concluding that Duke was_not a proper applicant.
Commissioner Jacobs concurred and dissented, stating that he
believed Duke was a proper applicant but that Duke had not
proven its proposed plant to be the most cost-effective option.

In this appeal, appellants are public utilities that are
regulated and authorized by the PSC to generate and sell
electrical power to users of the power in Florida. Appellants
designate themselves as Florida retail utilities. Appellants
contend that section 403.519, Florida Statutes, from its initial
adoption in 1980 through subsequent legislative changes and
up to the present date, does not authorize the PSC to grant a
determination of need to an entity other than a Florida retail
utility regulated by the PSC whose petition is based upon a
specified demonstrated need of Florida retail utilities for
serving Florida power customers.

Appellants point out that the recent national movement
toward the construction of power plants intended to generate
power to be sold in competitive wholesale markets stems
from recent federal legislative initiatives. This movement
began with the Public Utilities Regulatory Policies Act of

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1978 (PURPA).*® Subsequent relevant federal legislation
includes the Energy Policy Act of 1992,’ which exempts
certain wholesale generators from some _ regulatory
requirements, Another milestone is a FERC order issued in
1996 which affects power distribution.'° Appellants note that
these federal initiatives occurred subsequent to the
Legislature’s enactment of the Siting Act of 1973. Appellants
also emphasize that the Legislature has not amended section
403.519 to authorize the PSC to grant a determination of need
for a power plant in Florida that would generate power
intended to be sold in the competitive wholesale market
which is developing as a result of these federal legislative and
regulatory changes.

Appellants contend that Duke is not an authorized
applicant under section 403.519 because Duke is not a Florida
retail utility. Appellants contend that joining with New
Smyrna, which is a proper applicant, does not cure-the fact
that Duke is not a proper applicant in view of the
commitment to New Smyrna of just thirty megawatts of the
514-megawatt capacity of the plant.'’ Appellants contend that

* Pub. L. No. 95-617, 92 Stat. 3117 (1978) (codified as amended at 16
U.S.C. §§ 2601-2645 (1994)). See also Jeffrey D. Watkiss & Douglas W.
Smith, The Energy Policy Act of 1992-A Watershed for Competition in
the Wholesale Power Market, 10 Yale J. on Reg. 447 (1993).

” Pub. L. 102-486, 106 Stat. 2776 (1992) (amending the Federal Power
Act, codified at 16 U.S.C. §§ 791a-825u (1994)).

'° Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery of
Stranded Costs by Public Utilities and Transmitting Utilities, Order No.
888, 61 Fed. Reg. 21,540 (1996), [Regs. Preambles Jan. 1991-June 1996]
F.E.R.C. Stats. and Regs. 31,036, clarified, 76 F.E.R.C. 61,009 & 76
F.E.R.C. 61,347 (1996) (known as Order 888).

'' New Smyrna’s committed power purchase could be satisfied by a
power plant that is exempt from obtaining a determination of need
because a plant with a capacity of less than seventy-five megawatts is

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the proposed plant is not authorized by section 403.519
because all but the thirty megawatts that New Smyma has
agreed to buy is uncommitted. Therefore, there is no
demonstrated specific need committed to Florida customers
who are intended to be served by this proposed plant.

In support of their position, appellants cite PSC orders in
proceedings that led to this Court’s decisions in Nassau
Power Corp. v. Beard, 601 So. 2d 1175 (Fla. 1992) (Nassau
I), and Nassau Power Corp. v. Deason, 641 So. 2d 396 (Fila.
1994) (Nassau IT) (collectively, the Nassau cases).

In the proceedings below, the five members of the PSC
were divided in their conclusions as to the decision to grant
the determination of need. The three-member maijority’s
rationale is presented by the PSC as an appellee in this Court.
In the PSC order at issue here, the PSC majority finds that
Duke and New Smyma are proper applicants pursuant to the
Siting Act, FEECA, and the Florida Administrative Code.
Order at 18-29. The majority construes section 403.519 as
requiring, pursuant to section 403.503(4), Florida Statutes
(1997), that an applicant may be any “electric utility.” /d. at
19. Utilities are defined in section 403.503(13), Florida
Statutes (1997), as “regulated electric companies.” /d. The
majority finds that Duke is a regulated electric company
pursuant to federal regulatory statutes because the statutes do
not expressly provide that “regulated electric companies” are
to be state-regulated. /d. at 20. The majority finds that even
though Duke is not a Florida retail utility, it is a regulated
electric company subject to federal regulation and certain
other Florida regulation. /d. at 19, 22-24. The majority also
finds that a determination of need properly could be based
upon the projected needs of utilities throughout peninsular
Florida rather than committed megawatt needs of specific
retail utilities. Jd. at 53-54. The majority finds the Nassau

exempt from the need determination requirement. § 403.506, Fla. Stat.
(1997).

Ta

Cases not to be on point here because those cases concerned a
wholly different issue. Jd. at 29-32. In the Nassau cases, the
PSC was asked to determine the need and standing of
qualified facilities under PURPA, the federal law regulating
cogenerators. The PSC points out that it specifically limited
its decision to the facts of those qualified-facilities cases. Id.
at 32.

In her dissenting opinion, Commissioner Clark construes
the Siting Act and FEECA to mean that a proper applicant
under section 403.519 is defined for purposes of FEECA, of
which section 403.519_is a part, as “any person or entity of
whatever form which provides electricity or natural gas at
retail to the public.” Order at 58 (quoting Ch. 80-65, § 5 at
214, Laws of Fla.) (alteration in original). She concludes that
a utility’s sale of electrical power must be a retail sale in
order for that utility to be subject to PSC regulatory authority.
Id. at 66. She notes that “wholesale sales are a matter within
the sphere of federal regulation.” Jd. Commissioner Clark
cites this Court’s Nassau cases in support of her interpretation
of the term “applicant” in section 403.519. /d. at 68. She finds
those cases to be relevant in that this Court’s rationale
focused on the types of entities enumerated in section
403.503, Florida Statutes, and “concluded that the common
denominator present in each was an obligation to serve
customers.” /d. at 68. Thus, “the need to be examined under
section 403.519, Florida Statutes, was a need resulting from
the duty to serve those customers.” Jd. Commissioner Clark
concludes her dissenting opinion by stating:

Our task in this case was to decide what the law is, not
what it ought to be. In my view, the law is clear that
Duke New Smyma is not a proper applicant under
section 403.519, Florida Statutes, and the petition must
be dismissed. We should, however, move forward with
our workshop so that we can make recommendations to
the Legislature as to what the law ought to be.

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Order at 71. In his dissenting opinion, Commissioner Jacobs
agrees with the majority that Duke is a proper applicant but
finds that Duke and New Smyma “failed to provide the
weight of evidence required to depart from the Commission’s
long-standing policy of relying on its own cost effectiveness
analysis of a proposed plant.” Order at 74.

In this Court, Duke and New Smyrna, who are joint
appellees with the PSC, argue that a need determination as
part of the permitting process for the proposed Duke plant
does fall within the parameters of section 403.519. They
argue that the primary determinant as to Duke’s applicant
status is whether Duke is a regulated utility. The appellees
maintain that Duke qualifies as a regulated utility because it is
regulated under federal regulatory procedures, and if Duke
receives permits to operate its proposed plant in Florida, the
plant’s operation will be regulated in part by the PSC. Duke
and New Smyma maintain that the Nassau cases were
decided in the context of need for power demonstrated by
cogenerators and that those cases do not apply here. The
appellees also rely upon the fact that Duke has filed a ees
application with New Smyma. v0

New Smyrna additionally presents two constitutional
arguments and argues that prohibiting Duke from applying
directly for a need determination would violate the dormant
Commerce Clause of the United States Constitution because
such action would unconstitutionally discriminate against out-
of-state commerce and burden interstate commerce. New
Smyrna also argues that any state requirement that Duke first
obtain a contract with a retail utility to build the project is
preempted by the federal Energy Policy Act of 1992, which
mandates a robust competitive wholesale market.

We conclude that this case is resolved on the threshold
legal issue of whether the PSC exceeded its statutory
authority in granting the present determination of need. As we

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stated in United Telephone Co. of Florida v. Public Service
Commission, 496 So. 2d 116 (Fla. 1986):

We note preliminarily that ‘orders of the Commission
come before this Court clothed with the statutory
presumption that they have been made within the
Commission's jurisdiction and powers, and that they are
reasonable and just and such as ought to have been
made.’ General Telephone Co. v. Carter, 115 So. 2d
554, 556 (Fla.1959) (footnote omitted). See also Citizens
v. Public Service Commission, 448 So. 2d 1024, 1026
(Fla. 1984).

Such deference, however, cannot be accorded when
the commission exceeds its authority. At the threshold,
we must establish the grant of legislative authority to act
since the commission derives its power solely from the
legislature. See Florida Bridge Co. v. Bevis, 363 So. 2d
799, 802 (Fla. 1978). As we said in Radio Telephone
Communications, Inc. v. Southeastern Telephone Co.,
170 So.2d 577, 582 (Fla.1964): ;

[O]f course, the orders of the Florida
Commission come to this court with a presumption
of regularity, Sec. 364.20, Fla. Stat., F.S.A. But we
cannot apply such presumption to support the
exercise of jurisdiction where none has been
granted by the Legislature. If there is a reasonable
doubt as to the lawful existence of a particular
power that is being exercised, the further exercise
of the power should be arrested.

496 So.2d at 118.
The precise question we consider here is:

Does section 403.519, Florida Statutes, authorize the
granting of a determination of need upon an application
for a proposed power plant for which the owner and

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operator is not a Florida retail utility regulated by the
PSC and for which only thirty megawatts of the plant’s
514-megawatt capacity have been committed by contract
to be sold to a Florida retail utility regulated by the PSC?

While we recognize that the PSC is correct in pointing out
that the Nassau cases were decided upon different facts and
were intended to resolve different issues, we conclude that
our analysis of the Siting Act, articulated in those decisions,
is applicable to the present case. In Nassau II, we stated:

In Nassau Power Corp. v. Beard, 691 So. 2d 1175,
1176-77 (Fla.1992), we recently explained:

The Siting Act was passed by the legislature in
1973 for the purpose of minimizing the adverse
impact of power plants on the environment. See §
403.502, Fla. Stat. (1989). That Act establishes a
site certification process that requires the PSC to
determine the need for any proposed power plants,
including cogenerators, based on the criteria set
forth in section 403.519, Florida Statutes (1989).
Section 403.519 requires the PSC to make specific
findings for each electric generating facility
proposed in Florida, as to (1) eléctric system
reliability and integrity, (2) the need to provide
adequate electricity at a reasonable cost; (3)
whether the proposed facility is the most cost-
effective alternative available for supplying
electricity; and (4) conservation measures
reasonably available to mitigate the need for the
plant.

(Footnote omitted)... .

Only an “applicant” can request a determination of
need under section 403.519. Section 403.503(4), Florida

'S lla

Statutes (1991), defines the term “applicant” as “any
electric utility which applies for certification pursuant to
the provisions of this act.” An “electric utility,” as used
in the Act,

means cities and towns, counties, public utility
districts, regulated electric companies, electric
cooperatives, and joint operating agencies, or
combinations thereof, engaged in, or authorized to
engage in, the business of generating, transmitting,
or distributing electric energy.

Sec. 403.503(13), Fla. Stat. (1991). The Commission
determined that because non-utility generators are not
included in this definition, Nassau is not a proper
applicant under section 403.519. The Commission
reasoned that a need determination proceeding is
designed to examine the need resulting from an electric
utility's duty to serve customers. Non-utility generators,
such as Nassau, have no similar need because they are
not required to serve customers.

The Commission's interpretation of section 403.519
also comports with this Court's decision in Nassau
Power Corp. v. Beard. In that decision, we rejected
Nassau's argument that “the Siting Act does not require
the PSC to determine need on a utility-specific basis.”
601 So. 2d at 1178 n.9. Rather, we agreed with the
Commission that the need to be determined under
section 403.519 is “the need of the entity ultimately
consuming the power,” in this case FPL. Jd.

641 So. 2d at 397, 398-99 (footnote omitted). Based upon our
Nassau analysis of the Siting Act, we conclude that the
granting of the determination of need on the basis of the
present application does exceed the PSC’s present authority.
A determination of need is presently available only to an
applicant that has demonstrated that a utility or utilities

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serving retail customers has specific committed need for all
of the electrical power to be generated at a proposed plant.

Our decision is founded upon our continuing recognition
that the regulation of the generation and sale of power in
Florida resides in the legislative branch of government.' ? The
PSC, successor to the Florida Railroad and Public Utilities
Commission, is an arm of the legislative branch in that the
Commission obtains all of its authority from legislation.'*
Originally, the Legislature did not include among the PSC’s
responsibilities the authority to approve the siting of new
power plants but left such authority to local government
entities. In 1973, the Legislature enacted the Florida
Electrical Power Plant Siting Act,'* to preempt local
government action and to consolidate approval of most state
agencies into a single license. Within that law was a
requirement that each utility submit a ten-year site plan
estimating the utility’s power generating needs and the
general location of its power plants.'* In enacting the Siting
Act, the Legislature recognized a need for statewide
perspective in selecting sites for power plants because of the
“significant impact upon the welfare of the population, the
location and growth of industry and the use of the natural
resources of the state.” See Ch. 73-33, § 1 at 73, Laws of Fla.
At that time, the role of the PSC was to prepare a “report and
recommendation as to the present and future needs for
electrical generating capacity in the area to be served by the
proposed site.” Jd. at 77.

'? We find the historical context offered by Commissioner Clark in her
dissenting opinion to be helpful. Order at 64-71. The record also contains
a relevant discussion by FPC counsel Gary L. Sasso before the PSC in

proceedings below. Record on Appeal, Vol. I of Hearing Transcript at 21-
50.

'3 § 350.001, Fla. Stat. (1997).
Ch. 73-33, § 1 at 73, Laws of Fla.
'S Ch.73-33, § 1 at 76 (codified at § 403.505, Fla. Stat. (Supp. 1974)).

— 13a

In 1980, as part of the Florida Energy Efficiency and
Conservation Act (FEECA), the Legislature changed the
PSC’s requirement of a “report and recommendation” to “a
proceeding to determine the need for an electrical power plant
subject to the Florida Electrical Power Plant Siting Act.” Ch.
80-65, § 5, at 214, Laws of Fla. (codified at section 366.86,
Fla. Stat. (1981)). By this statutory revision, the PSC was
directed to review the regulated utilities’ proposed new
plants, taking into account the need for system reliability and
integrity, th ‘eed for adequate reasonable-cost electricity and
whether a proposed plant was the most cost-effective
alternative available. See Ch. 80-65, § 5 at 217, Laws of Fla.
The need determination provision at issue in this case was
originally codified at section 366.86, Florida Statutes (1981),
which was part of FEECA. The same provision is now at
section 403.519 but continues to be listed within FEECA,
even though it is codified immediately following the Siting
Act.

The term “utility” was expressly defined for purposes of
FEECA, including section 403.519, as “any person or entity
of whatever form which provides electricity or natural gas at
retail to the public.” Ch. 80-65, § 5 at 214, Laws of Fla.
Section 366.82(1), Florida Statutes (1997), provides: “For the
purposesof §§ 366.80-366.85 [FEECA], and 403.519, ‘utility’
means any person or entity of whatever form which provides
electricity or natural gas at retail to the public.” In 1990,
statutory revisions included an amendment that changed the
term “utility” to “applicant” in the first sentence of section
403.519."°

Our reading of this statutory history leads us to continue to
conclude that the present statutory scheme was intended to
place the PSC’s determination of need within the regulatory
framework allowing Florida regulated utilities to propose new

16 § Ch 90-331, § 24, at 2598, Laws of Fla

~ l4a

power plants to provide electrical service to their Florida
customers at retail rates. This need determination, pursuant to
section 403.519, contemplates the PSC’s express con-
sideration of the statutory factors based upon demonstrated
specified needs of these Florida customers. The need
determination is part of the process that the Legislature
intended by its plain language to balance “the pressing need
for increased power generation facilities” with the necessity
that the state

ensure through available and reasonable methods that
the location and operation of electrical power plants will
produce minimal adverse effects on human health, the
environment, the ecology of the land and its wildlife,
and the ecology of state waters and their aquatic life.

§ 403.502, Fla. Stat. (1997).

Accordingly, we find that the statutory scheme embodied
in the Siting Act and FEECA was not intended to authorize
the determination of need for a proposed power plant output
that is not fully committed to use by Florida customers who
purchase electrical power at retail rates. Rather, we find that
the Legislature must enact express statutory criteria if it
intends such authority for the PSC. Pursuant only to such
legislative action will the PSC be authorized to consider the
advent of the competitive market in wholesale power
promoted by recent federal initiatives. Such statutory criteria
are necessary if the Florida regulatory procedures are
intended {0 cover this evolution in the electric power
industry.'’ The projected need of unspecified utilities
throughout peninsular Florida is not among the authorized

'7Qur conclusion is consistent with the conclusion of the North
Carolina Utilities Commission, which dismissed a similar petition by an
independent power producer that proposed a merchant plant in North
Carolina that was opposed by Duke Power Company. The Commission’s
order was affirmed. Empire Power Co. v. Duke Power Co., 112 N.C. App.
643, 437 S.E. 2d 540 (Ct. App. 1993).

15a

statutory criteria for determining whether to grant a
determination of need pursuant to section 403.519, Florida
Statutes. Moreover, we agree with appellants that the fact of
Duke’s joining with New Smyma in this arrangement for a
thirty-megawatt commitment does not transform the
application into one that complies with the Siting Act and
FEECA. |

We find no merit in the constitutional arguments advanced
by New Smyrna. As to any alleged preemption or interference
with interstate commerce, we find that power-plant siting and
need determination are areas that Congress has expressly left
to the states. '®

Accordingly, we reverse the order of the PSC on the basis
that the granting of the determination of need exceeds the
PSC’s authority pursuant to section 403.519, Florida Statutes
(1997).

It is so ordered.

HARDING, C.J., and SHAW, WELLS, PARIENTE, LEWIS
and QUINCE, JJ., concur.

ANSTEAD, J., dissents with an opinion.
ANSTEAD, J., dissenting.

I cannot concur in the majority’s conclusion that the
Florida Legislature has clearly prohibited the proposed action
of the Commission. Indeed, it appears to me that the
prohibition is based upon a strained and artificial construction

'§ The Energy Policy Act of 1992, Pub. L. 102-486, Title VIII, Subtitle
C, State and Local Authorities, section 731, provides:

Nothing in this title or in any amendment made by this title shall
be construed as affecting or intending to affect, or in any way to
interfere with, the authority of any State or local government
relating to environmental protection or the siting of facilities.

16a

of various provisions of the legislative scheme that have little
bearing on the issue before us today. In fact, even under the
strained construction of the majority the issue would be not
whether the petitioning utilities were proper applicants, but
whether the capacity required should be permitted.

I am especially concerned with the majority’s conclusion
that it will not find Commission authority to act absent
“express statutory criteria” for the specific circumstances
presented here. Clearly, the Commission was created to
regulate utilities secking to operate in Florida. In my view
that is precisely what the Commission is doing here.

17a
APPENDIX B

SUPREME COURT OF FLORIDA
Nos. SC95444; SC95445; SC95446

TAMPA ELECTRIC CO.; FLORIDA POWER CORP.;
and FLORIDA POWER & LIGHT Co.,

Appellants,
vs.

JOE GARCIA, ef al., as the FLORIDA PUBLIC SERVICE
COMMISSION; UTILITIES COMMISSION, CITY OF NEW
SMYRNA BEACH; and DUKE ENERGY NEW SMYRNA BEACH
POWER Co., LTD., LLP.,

Appellees.

[September 28, 2000]

In light of the revised opinion, the Motions for Rehearing
filed by Appellees Florida Public Service Commission, Duke
Energy New Smyrna Beach Power Co., Ltd., L.L.P., the
Utilities Commission, City of New Smyrna Beach, and Legal
Environmental Assistance Foundation, are hereby denied.

SHAW, HARDING, PARIENTE, LEWIS AND QUINCE,
JJ., concur.

ANSTEAD, J., dissents.

WELLS C.J., recused as of the date of the filing of the
Motion for Leave to Appear as Amicus Curiae on Rehearing
and Incorporated Motion for Rehearing by Enron North
America (“Enron”), and did not participate in the Motion for
Rehearing.

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The Motion for Leave to Appear as Amicus Curiae on
Rehearing filed by Enron North America (“Enron”) is hearby
granted.

HARDING, ANSTEAD, PARIENTE and LEWIS, JJ., concur

SHAW and QUINCE JJ., dissent.

WELLS C.J., recused as of the date of the filing of the
Motion for Leave to Appear as Amicus Curiae on Rehearing
and Incorporated Motion for Rehearing by Enron North
America (“Enron”), and did not participate in the Motion for
Rehearing. =

The Motion for Rehearing filed by Amicus Curiae, Enron
North America (“Enron”), is hearby denied in light of the
revised opinion.
SHAW, HARDING, LEWIS and QUINCE, JJ., concur.
ANSTEAD and PARIENTE, JJ., dissent.

WELLS, C.J., recused as of the date of the filing of the
Motion for Leave to Appear as Amicus Curiae on Rehearing
and Incorporated Motion for Rehearing by Enron North
America (“Enron”), and did not participate in the Motion for
Rehearing.

A True Copy
Test:

/s/ Thomas D. Hall
THOMAS D. HALL [SEAL] —
Clerk, Supreme Court

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Served:

Richard C. Bellak
Stephen H. Grimes
D. Bruce May
Karen D. Walker
Susan L. Kelsey
Brent C. Bailey
Robert Scheffel Wright
John T. LaVia, I
Alan C, Sundberg
Steven G. Gey
Gail Kamaras
Alvin B. Davis
John T. Butler
Gabriel E. Nieto
Matthew M. Crilds
Charles A. Guyton
Robert Pass

Joseph H. Lang, Jr.
James A. McGee
Jeff Froeschle
Thomas R. Julin
Bill L. Bryant
Katherine E. Giddings
Harry W. Long, Jr.
Lee L. Willis
James D. Beasley

Mark Seidenfeld
Bruce May

Susan L. Kelsey
Daniel S. Pearson
John C. Moyle, Jr.
Robert J. Sniffen
Leslie J. Paugh
Grace A. Jaye
David J. White
William B. Willingham
Michelle Hershel
Terry L. Kammer
Donaid F. Santa, Jr.
Edward M. Mullins
Sandra K. Wolkov
Sylvia H. Walbolt
Gary L. Sasso

20a
APPENDIX C

BEFORE THE FLORIDA PUBLIC SERVICE
COMMISSION

DOCKET NO, 981042-EM
ORDER NO. PSC-99-0535-FOF-EM
ISSUED: March 22, 1999

IN RE: JOINT PETITION FOR DETERMINATION OF NEED FOR AN
ELECTRICAL POWER PLANT IN VOLUSIA COUNTY BY THE
UTILITIES COMMISSION, CITY OF NEW SMYRNA BBACH,
FLORIDA, AND DUKE ENERGY NEW SMYRNA BEACH POWER
COMPANY LTp., L.L.P.

The Following Commissioners participated in the disposition
of this matter:

Jo—E GARCIA, CHAIRMAN, J. TERRY DEASON, SUSAN F.
CLARK, JULIA L. JOHNSON, E. LEON JACOBS, JR.

ORDER GRANTING DETERMINATION OF NEED

BY THE COMMISSION:

ABBREVIATIONS/ACRONYMS

City - The Utilities Commission, City of New Smyrna Beach,

Florida

Commission - Florida Public Service Commission

DEP - Florida Department of Environmental Protection
—DSM - Demand Side Management

Duke New Smyma - Duke Energy New Smyma Beach Power
Company Ltd., L.L.P.

Enron - Enron Power Marketing

21a
EWG - Exempt Wholesale Generator
FEECA - Florida Energy Efficiency and Conservation Act
FERC - Federal Energy Regulatory Commission
FGT - Florida Gas Transmission Company
FMPA - Florida Municipal Power Agency
FPC - Florida Power Corporation
FPL - Florida Power and Light Company
FRCC - Florida Reliability Coordinating Council
IOU - Investor-Owned Utility e
IPP - Independent Power Producer
JEA - Jacksonville Electric Authority

Joint Petitioners - The Utilities Commission, City of New
Smyrna Beach, Florida and Duke Energy
New Smyrma Beach Power Company
Ltd., L.L.P.

LEAF - Legal Environmental Assistance Foundation, Inc.

MW - Megawatt

MWH - Megawatt-hour

OUC - Orlando Utilities Commission

PPSA - Florida Electrical Power Plant Siting Act

Project - New Smyrna Beach Power Project

QF - Qualifying Facility

TECO - Tampa Electric Company : |

UCNSB - The Utilities Commission, City of New Smyma |
Beach, Florida |

22a
CASE BACKGROUND

On August 19, 1998, the Utilities Commission, City of
New Smyma Beach, Florida, and Duke Energy New Smyma
Beach Power Company Lid., L.L.P. filed a Joint Petition For
Determination Of Need For An Electrical Power Plant
pursuant to Section 403.519, Florida Statutes. The proposed -
plant is a 514 megawatt natural gas fired, combined cycle
plant together with a natural gas lateral pipeline and
associated transmission facilities to be located in Volusia
County, Florida, adjacent to Interstate 95. The Utilities
Commission, City of New Smyrna Beach, a municipal
electric utility within the meaning of Section 366.02(2),
Florida Statutes, has an entitlement to 30 megawatts of the
proposed plant’s capacity and energy associated with the
capacity. The City will use the capacity and ciergy to serve
its retail customers. Duke New Smyrna will build, own, ana
operate the plant and will market the balance of the capacity
and energy (approximately 484 MW) on the wholesale power
market. As such, except for the 30 megawatts entitlement
provided to the City, the proposed plant will be a merchant
plant. The term “merchant plant” as used in this order is a
power plant with no rate base and no captive retail customers.

There are seven intervenors and one amicus curiae in this —
docket. The intervenors are: Florida Power & Light Com-
pany; Florida Power Corporation; Tampa Electric Company;
Florida Electric Cooperatives Association, Inc.; Legal
Environmental Assistance Foundation, Inc.; U.S. Generating
Company; and System Council U-4, International
Brotherhood of Electrical Workers. The amicus curiae is
Louisville Gas & Electric Energy Corporation. A hearing
was held on December 2-4 and December 11 and 18, 1998.
On December 2, we heard oral argument on Motions To
Dismiss filed by FPL and FPC and Responses in Opposition
of Joint Petitioners and LG&E Energy. We then heard
testimony of 11 witnesses during the remaining four days of

ieiicas

23a

the hearing. Oral argument on the Motions To Dismiss was
continued to January 28, 1998, following submission of post-
hearing briefs by the parties.

There are a broad range of legal, policy and factual issues
in this docket. The Motions To Dismiss will be addressed
first in this order because they represent threshold issues. A
Motion For Reconsideration and a Motion To Strike are
addressed following the discussion of the Motions To
Dismiss. Next, the order addresses factual issues relating to
whether the proposed plant meets the criteria of Section
403.519, Florida Statutes, the adequacy of the ancillary
facilities associated with the plant, and the nature of the
participation agreement between the Joint Petitioners.

MOTIONS TO DISMISS

I. BACKGROUND AND SUMMARY OF HOLDING

On September 8, 1998, Florida Power & Light Company
filed a Motion To Dismiss Joint Petition, Request For Oral
Argument, and Memorandum Of Law Supporting Motion To
Dismiss (FPL Sept. Memorandum). Also on September 8,
1998, Florida Power Corporation filed a Motion To Dismiss
Proceeding (FPC Motion) and Request For Oral Argument.
On September 15, 1998, Joint Petitioners filed a
Memorandum Of Law In Oppositien To Florida Power &
Light Company’s Motion To Dismiss Joint Petition (Joint
Pet. FPL Memorandum). On September 21, 1998, Joint
Petitioners filed a Memorandum Of Law In Opposition To
Florida Power Corporation’s Motion To Dismiss Proceeding
(Joint Pet. FPC Memorandum). On November 23, 1998,
LG&G Energy Corporation filed an Amicus Curiae
Memorandum Of Law in opposition to the Motions To
Dismiss (LG&G Memorandum). Oral argument was heard at

24a

the commencement of the hearing on December 2, 1998, and
again on January 28, 1999, subsequent to the filing of briefs
by the parties. This section of the order addresses the
Motions To Dismiss. This section of the order is divided into
three broad subject-matter categories: statutory and rule
analysis; decisional law analysis; and constitutional law
analysis.

As set forth in detail below, we deny the Motions To
Dismiss because Joint Petitioners have stated a cause of
action upon which relief can be granted. Joint Petitioners
have adequately alleged all of the applicable elements
required for a need determination pursuant to Section
403.519, Florida Statutes. They have also demonstrated that
they are “electric utilities” pursuant to the Power Plant Siting
Act; that Duke New Smyma is an “investor-owned electric
company” pursuant to Chapter 366; and, that the Project is a
“joint electric power supply project” pursuant to Chapter 361,
Florida Statutes. Furthermore, decisional law does not
require dismissal of the petition. Finally, it is not necessary
for us to address on the constitutional issues in order to
adjudicate the Motions To Dismiss.

Il. STATUTORY AND RULE BASES FOR NEED
DETEP.MINATION PROCEEDINGS

Need determination proceedings in Florida are governed by
Section 403.519, Florida Statutes, Exclusive Forum For
Determination Of Need. in order to analyze the extensive
legal arguments made by the parties in conjunction with the
Motions To Dismiss, it is instructive to summarize the terms
contained in the statute relative to entities which may initiate

need proceedings.
Section 403.519, Florida Statutes, provides in pertinent
part:

25a

On request by an applicant or on its own motion, the
commission shall begin a proceeding to determine the
need for an electrical power plant subject to the Florida
Electrical Power Plant Siting Act . . . . The commission
shall be the sole forum for the determination of this
matter... . In making its determination, the commission
shall take into account the need for electric system
reliability and integrity, the need for adequate electricity
at a reasonable cost, and whether the proposed plant is
the most cost-effective alternative available. The
commission shall also expressly consider the conser-
vation measures taken by or reasonably available to the
applicant or its members which might mitigate the need
for the proposed plant and other matters within its
jurisdiction which it deems relevant. The commission’s
determination of need for an electrical power plant shall
create a presumption of public need and necessity. . . .

Section 403.503(4), Florida Statutes, defines an “applicant”
as:

any electric utility which applies for certification
pursuant to the provisions of this act.

“Electric utility” is defined in Section 403.503(13), Florida
Statutes, as follows:

cities and towns, counties, public utility districts,
regulated electric companies, electric cooperatives, and
joint operating agencies, or combinations thereof,
engaged in, or authorized to engage in, the business of
generating, transmitting, or distributing electric energy.

Section 403.519, Florida Statutes, was enacted in 1980,
Chapter 80-65, Laws of Florida, and amended in 1990,
Chapter 90-331, Laws of Florida. The Florida Electrical
Power Plant Siting Act, was enacted in 1973, Chapter 73-33,
Laws of Florida, and amended in 1976, Chapter 76-76, Laws
of Florida, and in 1990, Chapter 90-331, Laws of Florida,

26a

Sections 403.501-403.518, Florida Statutes. Section 403.519,
Florida Statutes, is not part of the PPSA.

Need determination proceedings in Florida are also
governed by Rule 25-22.081, Florida Administrative Code.
The Rule provides in pertinent part:

Petitions submitted to commence a proceeding to
determine the need for a proposed electrical power plant
. . Shall contain the following information:

(1) A general description of the utility or utilities
primarily affected. .. .

(2) A general description of the proposed electrical
power plant. . .

(3) A statement of the _ specific conditions,

_ contingencies or other factors which indicate a need

for the proposed electrical power plant.... Ifa

determination is sought on some basis in addition to

or in lieu of capacity needs, such as oil backout,

then detailed analysis and supporting documen-
tation of the costs and benefits is required.

(4) A summary discussion of the major available
generating alternatives. .. .

(5) A discussion of viable nongenerating alternatives.

(6) -An evaluation of the adverse consequences which
will result if the proposed electrical power plant is
not added. ...

(7) If the generation addition is the result of a
purchased power agreement between an investor-
owned utility and a nonutility generator, the petition
shall include a discussion of the potential for
increases or decreases in the utility’s cost of capital.

27a

Il. SUMMARY OF ARGUMENTS OF THE
PARTIES

A. WHETHER DUKE NEW SMYRNA AND THE
CITY ARE PROPER APPLICANTS PUR-
SUANT TO FLORIDA STATUTES AND
FLORIDA ADMINISTRATIVE CODE

1. FLORIDA POWER & LIGHT COMPANY

FPL argues that the Joint Petition does not meet the
requirements of Florida Statutes or Florida Administrative
Code and therefore, must be dismissed. With respect to
Florida Statutes, FPL states that the Joint Petition fails to
allege with specificity the manner in which it meets the
statutory criteria. With respect to the rule requirements, FPL
argues that the Joint Petition fails to satisfy the criteria of
Rule 25-22.081, Florida Administrative Code.

2. FLORIDA POWER CORPORATION

By contrast to FPL’s criteria-specific attack on the Joint
Petition, FPC’s arguments for dismissal are based on its
global construction of the statutory framework of generation
siting and planning. FPC’s first argument is that the Florida
Energy Efficiency and Conservation Act’s limitation to retail
utilities, likewise limits Section 403.519 to only retail
utilities. Therefore, only retail utilities may be applicants for
a need determination. FPC’s second statutory argument for
dismissal relates to the 1973 enactment of the Power Plant
Siting Act” which included the Ten Year Site Plan (TYSP)
requirements.

' Sections 366.80-366.85 and 403.519, Florida Statutes; Chapter 80-65,
Section 5, Laws of Florida.

? Sections 403.501-403.518, Florida Statutes, Chapter 73-33, Laws of
Florida.

es eee Le or eee
‘ ; ‘ 4 ey SSP RN aE SP, RNS MR et ey i Soe eo
ate RD. PADRE Petes hE ARS Roc oa gy Pe PY ioe ties Ck Satay ¢ Pa Tu We has
INSEE eae I EP ae Coma, Pee Gm EN fv Ros Ns Gale ss a Be r .

28a
3. DUKE NEW SMYRNA/THE CITY

Joint Petitioners advance three argumexts in support of
their position that they are proper applicarits pursuant to
Florida Statutes. First, they maintain that both the City and
Duke New Smyma are proper applicants under Section
403.519, Florida Statutes. Only “electric utilities” may be
“applicants” for a need determination. The City is an
“electric utility” because it is a municipality serving retail
customers. Duke New Smyrna is an “electric utility” because
it is a “regulated electric company”, regulated by the Federal
Energy Regulatory Commission. Joint Petitioners’ second
argument is that they are “electric utilities” pursuant to
Section 366.02(2), Florida Statutes and therefore subject to
the Commission’s Grid Bil? and TYSP jurisdiction. Third,
Joint Petitioners argue that they have standing to pursue the
requested need determination because the project is a “joint
electric power supply project” under Chapter 361, Florida
Statutes. In addition to the statutory arguments, Joint
Petitioners rebut FPL’s and FPC’s assertions that the Joint
Petition does not meet the pleading requirements of Florida
Statutes and Florida Administrative Code.

B. WHETHER DUKE NEW SMYRNA/THE
CITY ARE PROPER APPLICANTS PUR-
SUANT TO DECISIONAL LAW

1. FLORIDA POWER & LIGHT COMPANY

The foundation of FPL’s argument for dismissal of the
Joint Petition is its assertion that Duke New Smyrna is not a
proper applicant pursuant to decisional law. As authority for
its position, FPL cites In Re: Petition of Nassau Power
Corporation To Determine Need For Electrical Power Plant

>The provisions of Chapter 366, Florida Statutes, referred to as the
Grid Bill consist of Sections 366.04(2), 366.04(5), 366.05(7), and
366.05(8); Chapter 74-96, Laws of Florida.

_—.

29a

(Okeechobee County Cogeneration Facility), Docket Nos.
920769-EQ , 920761-EQ, 920762-E and 920783-EQ, Order
No. PSC-92-1210-FOF-EQ, issued October 26, 1992 (Ark
and Nassau) and Nassau Power Corporation v. Beard, 601
So.2d 1175 (Fla. 1992) (Nassau I). Under FPL’s interpre-
tation of the decisions, no non-utility generator may seek a
need determination without first obtaining a contract with a
state-regulated utility with an obligation to serve. The Ark_
and Nassau decision was appealed by Nassau and upheld by
the Florida Supreme Court. Nassau Power Corporation v.
Deason, 641 So.2d 396 (Fla. 1994). (Nassau IN) According to
FPL, a non-utility generator without a contract with a state-

regulated electric utility is not a proper applicant under the
Siting Act.

2. FLORIDA POWER CORPORATION

Like FPL, FPC argues that the Nassau - decisions
conclusively determine that a need proceeding under Section
403.519 may only be brought by a retail utility or an entity
with a contract with a retail utility. In addition, FPC
acknowledges that controlled overbuilding may be. prudent
because of economies of scale, but that does not negate the
necessity of demonstrating utility specific need for the
reasonably foreseeable future.

3. DUKE NEW SMYRNA/THE CITY

Joint Petitioners distinguish the Nassau cases and state that
the cases do not constitute precedent in this proceeding
because they arose on different facts. The difference is
Captive ratepayers. According to Joint Petitioners, Nassau I
and // represent the law of non-utility generators seeking to
bind retail utilities, and thus captive ratepayers, to long term
power contracts. The Nassau cases addressed need and

30a
standing of qualifying facilities.* The instant petition is
distinguishable according to the Joint Petitioners because
Duke New Smyrna is not seeking to force retail utilities to
purchase the Project’s merchant output.

C. DORMANT COMMERCE CLAUSE AND
FEDERAL PREEMPTION

1. FLORIDA POWER & LIGHT COMPANY

FPL contests Joint Petitioners’ constitutional arguments in
three ways. First, FPL asserts that the Joint Petitioners are
improperly attempting to have the Commission decide
constitutional issues more properly reserved to the courts.
Second, relying on Commonwealth Edison Co. v. State of
Montana, 453 U.S. 609 (1981), FPL argues that general
Congressional policy statements regarding wholesale
competition do not demonstrate preemption of all state
legislation on that subject. Third, relying on General Motors
Corp. v. Tracy, 519 U.S. 278 (1997), FPL asserts that the
dormant Commerce Clause does not create an absolute
restriction on a state’s ability to regulate. Instead, there is a
traditional recognition of state’s dominion over health and
safety issues.

2. FLORIDA POWER CORPORATION

FPC advances three arguments in rebuttal to Duke’s
assertion that application of the Nassau decisions to the
instant petition is preempted by the Energy Policy Act of
1992 under the Supremacy Clause of the United States
Constitution. First, FPC argues that the Legislature’s
reenactment of Section 403.519 and the PPSA subsequent to
the Nassau decisions’ definitive interpretation thereof cannot

“A qualifying facility is defined as a small power producer or
cogenerator that meets the threshold efficiency standards set forth by the
Federal Energy Regulatory Commission pursuant to PURPA, 18 C.F.R.
Sec. 292.201-.211 (1991).

3la

be overturned. Second, FPC argues that an administrative
agency cannot declare a state statute unconstitutional. Third,
FPC argues that federal law does not preempt states’ control
over siting new generation. With respect to the dormant
Commerce Clause, FPC argues that generation siting and
need determination are not areas Congress intended to
regulate. Instead, they have been left to the states. In the
alternative, FPC argues that even if Congress did intend to
regulate need determinations, Florida’s scheme would
withstand constitutional scrutiny.

3. DUKE NEW SMYRNA/THE CITY

Joint Petitioners advance two constitutional law arguments
in support of their position that a contract with a retail utility
is not required to invest them with standing to bring this need
determination proceeding. The first constitutional law
argument is that prohibiting Duke New Smyma from
applying directly for a need determination would violate the
dormant Commerce Clause because such action would
unconstitutionally discriminate against out-of-state commerce
and would unconstitutionally burden interstate commerce.
Relying on Philadelphia v. New Jersey, 437 U.S. 617 (1978)
and Pike v. Bruce Church, 397 U.S. 137 (1970) Duke New
Smyma argues that regulations giving local economic
interests a competitive advantage are uncon-
stitutional. Duke New Smyrna’s second constitutional law
argument is that requiring it to first obtain a contract with a
retail utility to build the project is preempted by federal utility
law which mandates a robust competitive wholesale market.
Relying on Pacific Gas & Electric Co. v. State Energy
Resources Conservation & Dev. Comm., 461 U.S. 190
(1983), Duke New Smyrna maintains that FPL’s and FPC’s
interpretations of “applicant” stand as an obstacle to the
accomplishment of federal purposes.

32a
IV. ANALYSIS

A. STANDARD OF REVIEW

A motion to dismiss raises as a question of law, whether
the petition alleges sufficient facts to state a cause of action.
Varnes v. Dawkins, 624 So.2d 349, 350 (Fla. Ist DCA 1993);
In re: Petition By Tampa Electric Company For Approval Of
Cost Recovery For A New Environmental Program, The Big
Bend Units 1 & 2 Flue Gas Desulfurization System, Docket
No. 980693-EI, Order No. PSC-98-1260-PCO-EI, issued
September 22, 1998, pg. 6. The standard for disposing of
motions to dismiss is whether, with all allegations in the
petition assumed to be true, the petition states a cause of
action upon which relief may be granted. Jd. When making
this determination, the tribunal must consider only the
petition. All reasonable inferences drawn from the petition
must be made in favor of the petitioner. Id.

In order to determine whether the petition states a cause of
action upon which relief may be granted, it is necessary to
examine the elements needed to be alleged under the
substantive law on the matter. All of the elements of a cause
of action must be properly alleged in a pleading that seeks
affirmative relief. If they are not, the pleading should be
dismissed. Kislak v. Kredian, 95 So.2d 510, (Fla. 1957)

The substantive law governing this docket is Section
403.519, Florida Statutes. The Joint Petition For Determi-
nation Of Need For An Electrical Power Plant states a cause
of action upon which relief can be granted because it alleges
all of the required elements. The Joint Petition directly
addresses the five criteria of Section 403.519, Florida
Statutes: 1) the need for electric system reliability and
integrity; 2) the need for adequate electricity at a reasonable
cost; 3) whether the Project is the most cost-effective
alternative available; 4) conservation measures; and 5) other
matters within our jurisdiction. In addition, the Joint Petition

33a

meets all applicable requirements of Rule 25-22.081, Florida
Administrative Code.

In sum, on its face, the Joint Petition withstands the
challenges of the Motions To Dismiss. —It is not necessary for
the Joint Petitioners to have anticipated all conceivable
defenses and allege facts which would be sufficient to negate
or avoid them. 7.B. Fletcher v. Williams, 153 So.2d 759, 764
(Fla. Ist DCA 1963). Taking all the well-pleaded allegations
of the Joint Petition as true, a cause of action has been
adequately alleged to justify denial of the Motions. Jd.

In addition to the foregoing analysis, we also deny the
Motions To Dismiss on the specific arguments of the parties.
At issue in this docket is whether an Exempt Wholesale
Generator can be -an “applicant” for a need determination.
Distilled to their essence, the parties’ positions are as follows:
Joint Petitioners allege that they are proper applicants,
individually and collectively, under the plain language of the
governing statutes. FPL and FPC argue that, as to the
merchant portion of the Project’s output, Duke New Smyrna
must have a contract with a retail utility before it can seek a
need determination. This is a case of first impression. We
disagree with the interpretations of statutes and precedent
presented by the movants and agree that the ordinary meaning
of the statutes encompass an EWG applying for a need
determination.

B. DUKE NEW SMYRNA AND THE CITY ARE
PROPER APPLICANTS PURSUANT TO
FLORIDA STATUTES AND FLORIDA
ADMINISTRATIVE CODE

1. Florida Statutes
Joint Petitioners’ arguments supporting their status as
applicants are compelling. Joint Petitioners argue that,
individually and collectively, they are proper applicants
within the broader regulatory framework as well as the

Sa PN PO eM ET) OP re ps ee ae nee Fee Petes TO eee ;'

RELA Cae eV eee

34a

specific provisions of Section 403.519, Florida Statutes. Joint
Petitioners also effectively rebut FPL and FPC’s arguments to
the contrary.

a. Section 403.519, Florida Statutes And the
Power Plant Siting Act

.Jt.icauncontowerted that the Citv is a,prgner applicant for a
need determination. The City is a retail-serving municipal
electric utility and thus, one of the seven enumerated entities
within Section 403.503(13). The City has an entitlement to
30 megawatts of the Project’s capacity and has the con-
tractual right to purchase energy associated with that
capacity. The City will use the capacity and energy to serve
the needs of its retail customers.

Duke New Smyma is also a proper applicant for a need
determination. Duke New Smyma maintains that it is a
proper applicant for a need determination both as a joint
applicant with the City, and individually as a “regulated
electric company”. Duke New Smyrna argues that it is an
“applicant” in its own right based on the plain meaning of the
definitions contained in the PPSA and the Grid Bill. In
addition, Duke New Smyma alleges that the Project is a Joint
Electrical Power Supply Project within the meaning of
Chapter 361, Florida Statutes.

As set forth above, Section 403.503(13), Florida Statutes,
defines “applicant” as any “electric utility” which, in turn, is
defined, among other things, as “regulated electric
companies”. Thus, a regulated electric company is a proper
applicant pursuant to the plain language of the statute.

Duke New Smyma is both “regulated” and an “electric
~~ company” and therefore clearly meets the statutory definition
of applicant. Duke New Smyma is a public utility pursuant to
the Federal Power Act, 16 U.S.C. Sec 824(b)(1) (FPA) and an
EWG pursuant to the Public Utility Holding Company Act of
1935, 15 U.S.C. Secs. 79z-5a. As a public utility and an

35a

EWG, Duke New Smyma is regulated by the Federal Energy
Regulatory Commission.

Ir. addition to being a regulated electric company, Duke
New Smyrna will be engaged in at least one of the qualifying
activities listed in Section 403.503(13). The definition is
phrased in the disjunctive. An “electric utility” is one of the
enumerated enuties which must be engaged in the business of
generating, transmitting, or distributing electric energy. “In
its elementary sense, the word ‘or,’ as used in a statute, is a
disjunctive article indicating an alternative.” TEDC/Shell
City, Inc. v. Robbins, 690 So.2d 1323, 1325 FN4 (Fla. 3rd
DCA 1997) quoting 49 Fla. Jur2d Statutes § 137, at
179(1984). Clearly, the Legislature intended the Power Plant
Siting Act to govern electric utilities performing one or more
of those functions. Duke New Smyrna proposes to engage in
generation, and to a limited extent, transmission, of elec-
tricity. It therefore complies with the functional requirement
of the statute.

FPL’s and FPC’s arguments that Duke New Smyma should
not be granted applicant status require us to add limiting
language to the PPSA statutory definitions. FPL’s argument
is that “regulated electric company” means “state regulated
electric company”. FPC’s argument is that “electric utility”
means “retail electric utility”. In combination, FPL and FPC
would require that in order to build a power plant in the State
of Florida, it is necessary to be a vertically-integrated utility,
serving retail customers, subject to traditional rate regulation
of the Commission. We find that the argument is not
supported by the facts or the law. FPL’s interpretation is
based primarily on its analysis of decisional law and is
addressed in a different section of this order. FPC’s argument
is discussed below.

Section 403,503(13), Florida Statutes, does not use the
word “retail” before the phrase “electric utility”. Yet, FPC
argues that the word “retail” should be read into the statute.

36a

To reach its conclusion, FPC analyzes the enactment of
Florida Energy Efficiency and Conservation Act and submits
an “interchangeable definition” argument. Section 403.519,
Florida Statutes, was enacted in 1980 as part of FEECA.
According to FPC, because Section 366.82, Florida Statutes,
limits the definition of “utility” to a retail provider, that same
limitation applies to the definition of “applicant” as that term
is used Section 403.519, Florida Statutes. “The most --
reasonable construction of these terms is that the Legislature
used the words “electric utility,” “utility,” and “applicant”
interchangeably for purposes of electric industry need
proceedings. . . .”. FPC’s conclusion is that Duke lacks
standing to bring the instant proceeding because it is a
wholesale and not a retail power producer.

FPC’s analysis is incorrect. First, while Section 403.519,
Florida Statutes, is not part of the PPSA, its definitions are
governed by the PPSA, not FEECA. Section 403.519-Florida—
Statutes, states, in part: “On request by an applicant . . . the
commission shall begin a proceeding to determine the need
for an electrical power plant subject to the Power Plant Siting
Act... .” (emphasis added) The PPSA defines and governs
“applicants”. By contrast, FEECA defines and governs
“utilities”. Neither the PPSA nor Section 403.519 Florida
Statutes, use the word “utility” as a defining entity and, thus,
are not governed by the FEECA definition.

Second, FPC’s assertion that “applicants” are the same as
FEECA “retail utilities” utterly disregards the law relative to
entities required to file need determinations under the PPSA.
Section 366.82 of FEECA exempts small electric coop-
eratives and municipalities with sales of less than 2,000
gigawatt hours. The cities of Tallahassee, Lakeland and
Kissimmee, and Seminole Electric Cooperative are all exempt
from FEECA. Notwithstanding that, all four entities must file
for need determinations with this Commission. The City of
Lakeland currently has a petition for need determination

37a

pending before us. (Docket No. 990023-EM) The City of
Kissimmee was granted a need determination in late 1998.
(Docket No. 980802-EM, Order No. PSC-98-1301-FOF-EM,
issued October 7, 1998) The City of Tallahassee was granted
a need determination in the summer of 1997. (Docket No.
961512-EM, Order No. PSC-97-0659-FOF-EM, issued June
9, 1997) Seminole Electric Cooperative was granted a need
determination in 1994, (Docket No. 931212-EC, Order No.
PSC-94-0761-FOF-EC, issued June 21, 1994) Under FPC’s
construction of FEECA, none of these entities would have to
file petitions for need determination. Clearly FPC’s analysis
is inconsistent with the requirements of the PPSA.

Third, the FPC’s interchangeable deiinition argument
ignores two fundamental tenets of statutory construction.
When a definition of a word or phrase is provided in a statute,
that. meaning must be ascribed to the word or phrase
whenever it is repeated in the statute unless contrary intent
clearly appears. Vocelle v. Knight Brothers Paper Company,
Inc., 118 So.2d 664, (Fla. Ist DCA 1960) In addition, when
different definitions are provided for different sections, the
distinctions must be presumed to be intentional. Florida
State Racing Commission v. Bourquardez, 42 So.2d 87 (Fila.
1949)(The presence of a provision in one portion of a statute
and its absence from another are an argument against reading
it as implied by the section from which it is omitted). The
greater weight of authority is clearly in favor of refraining
from amending the statute by administrative decision as
advocated by FPC. Thus, we hold that it is not necessary to be
a retail electricity provider to be an applicant under the PPSA.

b. Chapters 366 and 186, Florida Statutes;
The Grid Bill And TYSP

Duke New Smyrna has not come to this proceeding
seeking to build a power plant while at the same time
exempting itself from ongoing regulatory jurisdiction of the

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Commission. On the contrary, Duke New Smyrna agrees that
it is subject to the Commission’s Grid Bill and TYSP
regulatory requirements. We agree. This fact effectively
negates FPL’s and FPC’s arguments for dismissal that Duke
New Smyrna cannot be an applicant under the PPSA because
it is not subject to the broader regulatory framework. — ay

Duke New Smyma is an “electric utility” pursuant to
Chapter 366 and is, therefore, subject to our Grid Bill
authority. Section 366.02(2) defines “electric utility” as:

any municipal electric utility, investor-owned electric
company, or rural electric cooperative which owns,
maintains, or operates an electric generation, trans-
mission or distribution system within the state.

This statute is also worded in the disjunctive. Owning one
of the three electricity functions is sufficient to bring an
investor-owned electric company within its express terms.
Duke New Smyrna is an “investor-owned electric company”
in that it is owned by its partners, Duke Energy Power
Services Mulberry GP, Inc. and Duke Energy Global Asset
Development, Inc. In addition, the Project will be generating
electricity thus meeting the functional requirements.

An important nuance of this argument is that FPL’s and
FPC’s restrictive interpretations have the effect of dimin-
ishing our grid responsibility. Duke New Smyrna interprets
our Grid Bill jurisdiction more broadly:

The Opponents’ argument that one power plant does not
constitute a “system” is spurious and would irrationally
deprive the Commission of jurisdiction over such power
plants. For example, if an existing power plant in
Florida was sold to an EWG that then operated the plant ~
as a merchant facility, the Opponents’ rationale would
leave the Commission without authority or jurisdiction

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to fulfill its Grid Bill responsibilities with respect to such
plant. ;

(Joint Pet. Brief, pg. 18)

We agree with Duke New Smyrna’s interpretation of Section
366.02(2), Florida Statutes. That analysis gives efficacy to
the plain meaning of the whole statute. “When the words of a
statute are plain and unambiguous the courts must give to
them their plain meaning. . .. A statute should be so
construed as to give a meaning to every word and phrase in it
and, if possible, so as to avoid the necessity of going outside
the statute for aids to construction.” Vocelle, at 667.

Like its interchangeable definition argument, FPC’s
statutory analysis relating to the 1973 enactment of the Power
Plant Siting Act is also problematic. The enactment of the
PPSA included the Ten Year Site Plan (TYSP) requirements
now codified at Section 186.801, Florida Statutes. FPC’s
hypothesis is that because the TYSP provisions require each
electric utility to submit plans estimating its generation needs,
TYSP submissions are therefore impliedly limited to retail
utilities because “only a retail utility can have “its” own
power generating needs because only a retail utility is
obligated to sell power to the public.” (FPC Brief pg. 12)
FPC’s logic is that because the PPSA was enacted at the same
time as the TYSP provisions, and the TYSP provisions are by
implication limited to retail utilities, the PPSA is likewise
limited to retail utilities. Thus, notwithstanding the fact that
the PPSA does not use the term “retail” in any of its
provisions, FPC urges us to insert the word into the PPSA.

FPC’s argument fails in two ways. First, as stated above,
Section 403.503(13), Florida Statutes, is worded in the
disjunctive. If the Legislature had intended the PPSA to be
limited to vertically-integrated retail utilities, it would have
used the conjunctive “and” or it would have specified “retail”
utilities. Elsewhere in the statutory regulatory framework, the

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limitation to retail is express.” In the absence of ambiguity, it
is inappropriate for us to look outside the four corners of the
statute for guidance as to its application. Armstrong v. City of
Edgewater, 157 So.2d 422 (Fla. 1963) Second, an electric
utility that is engaged only in generation is necessarily a
wholesale power producer. It is logical that the Legislature
intended to address the broader spectrum of power producers
in order to fully effectuate its purposes of environmental
protection. This position is supported by the fact that the
Legislature has recognized specific exemptions to the
PPSA—steam or solar electrical generating facilities of less
than 75 megawatts in capacity. Section 403.503(12), Florida
Statutes. Obviously, the Legislature was aware of the
different types of generation which may seek to be permitted
under the PPSA. It is inappropriate for us to amend the
statute, as advocated by FPC, by administrative decision in
the absence of ambiguity.

c. Joint Electrical Power Supply Projects
Pursuant To Chapter 361, Part II, Florida _
Statutes

In addition to its arguments that it is an applicant pursuant
to Section 403.519, Florida Statutes, Duke New Smyma
argues that the Project is a Joint Electrical Power Supply
Project pursuant to Chapter 361, Part II, Florida Statutes.
Joint operating agencies are one of the enumerated applicants
under the PPSA. Section 361.12, Florida Statutes provides
that an “electric utility” is authorized to join with a “foreign
public utility’ for the purpose of “jointly financing
constructing, managing, operating, or owning any project or
projects.” “Electric utility” is defined as: ~

* Section 366.82;-Florida Statutes, defines “utility” as an entity that
provides electricity “at retail to the public”.

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any municipality, authority, commission, or other public
body, . . . which owns or operates an electrical energy
generation, transmission, or distribution system within
the state on June 25, 1975.

Section 366.11(12), Florida Statutes.
“Foreign public utility” is defined as:

any person, as defined in subsection (3), the principal
location or principal place of business of which is not
located within this state, which owns, maintains, or
operates facilities for the generation, transmission, or
distribution of electrical energy and which supplies
electricity to retail or wholesale customers, or both, on a
continuous, reliable, and dependable basis; or any
affiliate or subsidiary of such person, the business of
which is limited to the generation or transmission, or
both, of electrical energy and activities reasonably
incidental thereto.

Section 361.11(4), Florida Statutes.

Finally, “project” is described as:

a joint electric power supply project and any and all
facilities, including all equipment, structures, machinery,
and tangible and intangible property, real and personal,
for the joint generation or transmission of electrical
energy, or both including any fuel supply or source
useful for such a project.

Joint Petitioners fit squarely within the definitions
contained in Chapter 361. The City is clearly an entity within
the definition of “electric utility”. And, Duke New Smyma is
a “foreign public utility”. This is so because Duke New
Smyrma is an affiliate of Duke Bridgeport Exergy, L.L.C., a
person (i.e. corporation) with a principal place of business
outside the state which currently owns, maintains and

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operates facilities for the generation of electrical energy and
which supplies electricity to wholesale customers on a
continuous, reliable and dependable basis. In sum, the City,
an “electric utility”, has exercised its authority under Section
361.12, Florida Statutes, to join with Duke New Smyma, a
“foreign public utility” for the purpose of jointly financing
and acquiring a “project”, the proposed plant. As such, the
City and Duke New Smyrna are a “joint operating agency”
and are thus proper applicants for a need determination
pursuant to Section 403.519.

FPL contests the application of Chapter 361 to Joint
Petitioners. FPL’s first argument is that the limiting language
of Chapter 361 to the effect that the statute does not limit or
alter any provisions of any other law, also applies to the
caselaw interpreting the Siting Act, specifically, the Nassau
decisions. FPL’s second argument is that the Joint Power Act
does not apply to Joint Petitioners because they do not
currently own, maintain or operate facilities. (FPL Sept.
Memorandum, pg. 30)

FPL’s arguments are not persuasive. First, the Nassau
decisions were rendered well after the Joint Power Act was
enacted; therefore, the Joint Power Act limiting language
cannot be read to have incorporated those holdings. Second,
FPL’s argument ignores the fact that Duke New Smyrna is an
affiliate of a foreign electric utility, Duke Bridgeport Energy,
L.L.C., which currently owns, maintains and operates
facilities outside the state. Section 361.11(4), Florida Statutes,
specifically provides that a “foreign electric utility” is “a
person . . . or any affiliate or subsidiary of such person, the
business of which is limited to the generation or transmission,
or both, of electrical energy ....” Clearly, Duke New
Smyrna falls within the unambiguous meaning of the
statutory definition.

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2. Florida Administrative Code

One of FPL’s arguments for dismissal of the Joint Petition
construes the provisions of Rule 25-22.081, Florida
Administrative Code, as they relate to, 21d allegedly are not
satisfied by, the Joint Petition. First, FPL alleges, there is no
description of the specific utility or utilities primarily affected
by the proposed plant. Second, according to FPL, the Joint
Petition fails to identify the utility specific conditions or
contingencies, such as forecasted summer and winter peaks,
the number of customers, net energy for load and load factors,
which indicate a need for the proposed power plant required
by subsection (3) of the Rule. According to FPL, the
Petitioners’ statements of peninsular Florida’s conditions and
contingencies are insufficient because “peninsular Florida” is
merely a planning convention, not a utility. Third, FPL
opines that the Joint Petition “abysmally fails” to adequately
address the subsection (5) requirement of an analysis of
viable nongenerating alternatives. Finally, FPL asserts that
the Joint Petition fails to meet the subsection (7) requirements
of the Rule of an economic impact statement.

FPL’s arguments regarding rule requirements are disin-
genuous. First, the Joint Petition does identify “primarily
affected utilities”. They are the City and Duke New Smyma.
That the Joint Petition does not specifically. identify
secondarily affected utilities in peninsular Florida is a
function of the fact that the purchase of power from the
Project is voluntary. No retail utility can or will be required
to contract for the Project’s output.

Second, FF'.’s complaint that the Joint Petition does not
allege need but rather “attempts to finesse” the need
allegation by stating that the Project is “consistent with” the
need for electric system reliability and integrity is neither
s by the rule nor Commission precedent. The Rule _
states:

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. . . If a determination is sought on some basis in
addition to or in lieu of capacity needs, such as oil
backout, then detailed analysis and supporting
documentation of the costs and benefits is required.

Rule 25-22.081(3), Florida Administrative Code (emphasis
added)

Thus, the Rule specifically allows a need determination
proceeding to be brought on a basis other than megawatt
need. That is precisely what the Joint Petitioners have
proposed with respect to the Project’s merchant capacity, and
their Petition is supported by the rule as well as precedent.

We have previously approved need based on peninsular
Florida needs for peak demand. For example, in approving
Jacksonville Electric Authority and FPL’s petition for need
determination for the St. John’s River Power Park, we stated:

We construe the “need for power” issue to encompass
several aspects of need .... Should the Commission’s
FEECA goals governing the growth of seasonal kilowatt
demand be achieved, and we are of the opinion that they
can reasonably be achieved, additional generating
capacity for the purpose of insuring adequate supplies of
power and energy to peninsular Florida electric
consumers does not appear to be required until 1991.
Similarly, JEA and FPL do not appear to require
additional generating capacity for reliability purposes
until 1991 and 1989 respectively. . ..
In re: JEAIFPL’s Application Of Need For St. John’s River
Power Park Units 1 and 2 And Related Facilities, Order No.
10108, Docket No. 810045-EU, issued June 26, 1981. See
also In re: Petition For Certification Of Need For Orlando
Utilities Commission, Curtis H. Stanton Energy Center Unit
1, And Related Facilities, Order No. 10320, Docket No.
810180-EU, issued September 2, 1981.

f 45a

In short, we have a long history of approving need
determination petitions based on economic need rather than
strict and immediate capacity requirements.

FPL’s argument that the Joint Petition must be dismissed
because it fails to allege, among other things, the cost of
capital increases pursuant to subsection (7) of the Rule is
misplaced. By its terms, subsection (7) applies only to
investor-owned utilities which propose to contract with non-
utility generators. The Project is not the result of a purchased
power agreement of this type and thus the rule does not apply.
And, contrary to FPL’s allegations, it does not appear that
Duke New Smyrna is attempting to avoid this mandatory rule
requirement by omitting to enter into contracts with retail
utilities. The omission arises from the fact that retail utilities’
purchase of power from the Project is purely discretionary.

C. DUKE NEW SMYRNA/THE CITY ARE
PROPER APPLICANTS PURSUANT TO
DECISIONAL LAW

FPL dedicates a substantial portion of its legal arguments
for dismissal to its thesis that, pursuant to decisional law,
Joint Petitioners are not proper applicants as to the plant’s
merchant capacity—the 484 MW not committed to the City.
According to FPL, Duke New Smyma is not a proper appli-
cant because it has no obligation to serve and no contract with
a state regulated utility for its capacity. As authority for its
position, FPL cites Ark and Nassau, Nassau I and Nassau II.

FPL relies primarily on the Commission’s Ark and Nassau
decision. According to FPL, the decision stands for the
following three propositions. First, need determination
proceedings may only be initiated by “applicants” under
Section 403.519, Florida Statutes. Second, it is the need
arising from the obligation to serve customers that a need
determination proceeding is designed to examine. Third,
without a contract with the utility with an obligation to serve,

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the non-utility generators had no need of their own. The
requirement of a contract with a utility was intended to
recognize the utility’s planning process. According to FPL,
the Ark and Nassau decision is dispositive in the instant case
and Duke New Smyrna is not an applicant because it does not
have an obligation to serve customers or a contract with a
utility to sell its output. The Ark and Nassau decision was
appealed by Nassau and upheld by the Florida Supreme
Court. Nassau Power Corporation v. Deason, 641 So.2d 396
(Fla. 1994). FPL states that the Court’s “complete affirmation
of the Commission’s construction of the Siting Act in the Ark
and Nassau decision should leave no doubt as to the proper
disposition of this need determination petition.”

FPC also relies on the Nassau decisions as support for its
Motion To Dismiss. According to FPC the cases represent
the following three holdings: (1) need is utility and unit
specific and therefore cannot be determined on a statewide
basis; (2) only entities with an obligation to serve customers
can demonstrate need; (3) if an entity does not have a duty to
serve, it must have a contract with an entity that does have a
duty to serve. FPC declares that the Nassau decisions
conclusively determine that a need proceeding under Section

403.519 may only be brought by a retail utility.
_ We acknowledge that, divorced from the facts giving rise
to the litigation, the holdings in the Nassau cases could
appear to be persuasive in the instant docket. However those
decisions must be considered on their facts and the facts are
quite different. The differences are captive ratepayers and the
specter of a retail utility being required to purchase unneeded
electricity. The Nassau cases addressed need and standing of
QFs under the cogeneration regulations.
Under the cogeneration regulations, Florida utilities are
required to purchase cogenerated power based on the
utilities’ “avoided costs”—that is, the costs that the
utilities would incur to produce the same amount of

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electricity if they did not instead purchase the
cogenerated power from a qualifying facility.... Pre-
suming need under the Siting Act by way of the
cogeneration regulations, however, presented the
awkward possibility that individual utilities would be
required to purchase electricity that xeither they nor
their customers actually needed.

Nassau I, 601 So.2d at 1177. (emphasis added)

In Nassau I, the Supreme Court affirmed our decision in
Order No. 22341, Docket No. 890004-EU, issued Dec. 26,
1989. In that order, we reversed the practice of presuming
that a particular cogenerator’s power was needed. Instead of
presuming need, we held that when a QF, which by law was
seeking to require a utility to purchase its output, filed a need
determination, it must prove need based on the requirements
of the targeted purchasing utility.

That Nassau I is limited to the law of QF cogeneration
cannot seriously be disputed: “At issue is the relationship, if
any, between the requirements of the Siting Act and the
requirements of the PSC’s regulations governing small power
producers and cogenerators.” (footnotes omitted) 601 So.2d
at 1175. Nassau I does not apply to a non-utility generator
that does not seek to force any retail utility to purchase its
Capacity.

Likewise, Ark and Nassau is about cogenerators seeking to
force a retail utility to purchase power. The language of Ark
Energy’s Petition for need determination is telling. Ark
Energy petitioned the Commission to:

[R]eview and approve the attached firm capacity and
energy contract between Florida Power & Light
Company . . . and Pahokee Power Partners II, Limited
Partnership, . . . and find that this Contract is reasonable
and prudent and in the best interest of FPL’s customers;

48a

require FPL to enter into this contract with Pahokee
Power Partners II... .

(emphasis added)

In Re: Petition of Ark Energy, Inc. And CSW Development-I,
Inc. for Approval Of Contract For The Sale Of Capacity And
Energy To Florida Power & Light Company, Docket No.
920762-EQ, Document No. 08299-92, filed July 27, 1992 at

pg. |.

Neither Ark nor Nassau had a contract with FPL prior to
commencing the proceeding yet they sought to require FPL to
purchase their output and bind the retail ratepayers. We ruled
that if a utility has to buy the power, that utility’s needs must
first be evaluated. However, we expressly limited our
decision to its facts. “Jt is also our intent that this Order be
narrowly construed and limited to proceedings wherein non-
utility generators seek determinations of need based on a
utility’s need.” Order No. PSC-92-1210-FOF-EQ, Docket
No. 920783-EQ, issued October 26, 1992 at page 4
(Emphasis added).

Thus, the language quoted by FPL and FPC regarding non-
utility generators and utility-specific need is not applicable in
this docket. There are no captive ratepayers being required to
pay for the merchant portion of the Project because Duke
New Smyma is not seeking to require retail utilities to
purchase the proposed plant’s merchant output. On the con-
trary, if retail utilities purchase the merchant output of the
Project, those purchases will be strictly voluntary and they
will only be made if it is economic to do so. This is a case of
first impression arising on facts clearly distinguishable from
the cogeneration precedent. As such, we are not overruling

prior precedent with respect to need. determination
crocbediada iavebviag it

49a

C. DORMANT COMMERCE CLAUSE AND
FEDERAL PREEMPTION

Joint Petitioners and Amicus Curiae raise two con-
stitutional law arguments with respect to the issue of whether
a contract with a retail utility is required in order to invest
Duke New Smyma with standing to bring this need
determination as advocated by FPL and FPC. FPL raises a
threshold challenge to the constitutional analysis by stating
that we lack authority under the Separation of Powers
provision of Article II, Section 3 of the Florida Constitution
to undertake such an analysis. As authority for its position
FPL cites, inter alia, Palm Harbor Special Fire Control
District v. Kelly, 316 So.2d 249 (Fla. 1987).

We disagree with FPL’s conclusion regarding admin-
istrative adjudication of constitutional issues. This issue was
thoroughly addressed in the recent First District Court of
Appeals case Communications Workers of America, Local
3170 v. City of Gainesville, 697 So.2d 167 (1st DCA 1997).
The Communications Workers court recognized that
administrative agencies lack jurisdiction to invalidate statutes,
but that it is not uncommon for administrative agencies to be
called upon to construe the application of statutes they are
charged with enforcing and interpreting. “The notion that the
constitution stops at the boundary of an administrative
agency’s jurisdiction does not bear scrutiny.” Jd. at 170
citing Patsy v. Board of Regents of Florida, 457 U.S. 496
(1982). In the instant case, Duke New Smyrna is not
challenging the constitutional validity of Section 403.519,
Florida Statutes. Rather, it is challenging the constitutionality
of interpreting the statute to require an EWG to contract with
a retail utility as a condition precedent to applying for a need
determination. This decision clearly falls squarely within our
administrative expertise.

The negative or dormant Commerce Clause prohibits state
regulation that discriminates against, or unduly burdens

50a

interstate commerce thereby impeding free private trade in
the national marketplace. General Motors Corporation v.
Tracy, 519 U.S. 278 (1997) The crucial inquiry is
determining whether a protectionist measure can fairly be
viewed as protecting legitimate local concerns, with effects
on interstate commerce that are only incidental. But, “where
simple economic protectionism is effected by state
legislation, a virtually per se rule of invalidity has been
erected.” City of Philadelphia v. New Jersey, 437 U.S. 617,
624 (1978) The dormant Commerce Clause restriction on
state regulatory authority evolves from the Constitution and,
therefore, applies even in the absence of any federal statute
preempting a particular state regulation. Aflantic Coast
Demolition & Recycling, Inc. v. Board of Chosen Freeholders
of Atlantic County, 48 F.2d 701, 710 (3rd Cir. 1995)

The parties argue animatedly either for or against
application of the dormant Commerce Clause and federal
preemption on the issue of whether an EWG can be required
to enter into a contract with a retail utility before applying for
a need determination. A contract requirement, opine Joint
Petitioners, makes the regulated utilities the gatekeepers of
the wholesale power market in Florida. Joint Petitioners and
Amicus cite numerous United States Supreme Court cases in
support of their position that such an application of state
regulation is economic protectionism and per se invalid. FPL
and FPC counter with a series of United States Supreme
Court cases they allege validates their construction.

Having considered the well-reasoned arguments of counsel
and authority cited by them, we find that while it is
incumbent upon us to remain cognizant of Commerce Clause
analysis, is not appropriate for us to reach a decision on the
issue because there is insufficient evidence in the record to
fully adjudicate it. Likewise, to arrive at a decision on the
Motions To Dismiss, it is not necessary for us to reach a
definitive conclusion on federal preemption. The decision as

S5la

to whether Joint Petitioners are applicants for a need
determination in the absence of a contract with a retail utility
can be made by construing Florida’s existing statutory,
regulatory framework for retail and wholesale generation
being mindful of, but without resort to, a finding of federal

preemption.

In sum, we hold that FPL’s and FPC’s Motions To Dismiss
the Joint Petition For Determination Of Need are denied. The
Joint Petitioners have standing to bring this need
determination. In addition, the Joint Petition satisfies all of
the elements for a need determination proceedings pursuant to
. Florida Statutes and Florida Administrative Code. This
decision does not overrule, limit or alter the Nassau decisions
because this case must be distinguished on its facts.

FLORIDA WILDLIFE FEDERATION’S PETITION FOR
RECONSIDERATION

Florida Wildlife Federation (FWF) filed a Petition to
Intervene on November 13, 1998. No parties opposed FWF’s
petition. FWF’s petition was denied by the Prehearing
Officer in Order No. PSC-98-1598-PCO-EM, issued
December 1, 1998. FWF filed a Petition for Reconsideration
of Hearing Officer’s Order Denying Intervention on
December 11, 1998. FWF’s petition for reconsideration was
timely, and it met the pleading requirements of Chapter 120,
Florida Statutes, and Rules 25-22.0376 and 25-22.039,
Florida Administrative Code. We address FWF’s motion
below.

I. STANDARD FOR MOTIONS FOR RECONSID-
ERATION

It is well settled that an agency may reconsider its final
Order if the Order is found to-have been based on mistake,
inadvertence or a specific finding based on adequate proof of
changed conditions or other circumstances not present in the

52a

proceedings which led to the Order being modified. People’s
Gas System, Inc. v. Mason, 187 So.2d 335 (Fla. 1966). The
purpose of a reconsideration proceeding is to bring to the
attention of the agency some matter which-it overlooked or
faiied to consider when it rendered its Order. Diamond Cab
Co. v. King, 146 So.2d 889 (Fla. 1962). The mere fact that a
party disagrees with the Order is not a basis for rearguing the
case. Id. Nor is reweighing the evidence a sufficient basis for
reconsideration. State v. Green, 104 So.2d 817 (Fla. ist DCA
1958).

FWF has not demonstrated mistake of fact or law or
inadvertence. We believe that we properly applied the law of
standing to FWF in denying FWF intervention by Order No.
PSC-98-1598-PCO-EM, issued December 1, 1998.

A. FWF’S SUBSTANTIAL INTERESTS ARE
NOT WITHIN THE ZONE OF INTERESTS
TO BE PROTECTED BY SECTION 403.519,
FLORIDA STATUTES

FWF alleged in both its Petition to Intervene and its
Petition for Reconsideration of Hearing Officer’s Order
Denying Intervention that its substantial interests will be
affected by the Commission’s decision in this docket. FWF
alleges that its substantial interests are as follows:

FLORIDA WILDLIFE FEDERATION (FWF) is a non-
profit Florida corporation with over 13,000 members
who reside .vithin the state and whose main purpose is to
protect, manage and conserve Florida’s wildlife, for the
benefit of the people of the State of Florida, the wildlife,
FWF and its members. Numerous members of the
organization hunt, fish, observe, study and photograph
wildlife throughout the state. Approval of the Joint
Petition would result in injury or harm to Florida’s
wildlife population, causing them to decline and not be
available for the benefits of FWF and its members as

—_—

stated further below. FWF and its members are
substantially affected by the issues to be determined in
these proceedings. FWF Petition to Intervene at 2).

FWF’s statement of substantial interest alleges interests
which lie outside the purview of Section 403.519, Florida
Statutes. FWF’s substantial interests are asserted to be the
conservation of wildlife and wetlands for its members to
enjoy. These environmental concerns are beyond the scope
of Section 403.519, Florida Statutes, and outside the area of
our expertise.

1. STANDING

~ Following Florida standing law as it was expressed in
Agrico Chem. Co. v. Dept. of Envt’l. Regulation, 406 So. 2d
478 (Fla. 2d DCA 1981), petitioners to intervene in a docket
must have standing. In order to have standing, petitioners
must have a substantial interest in the outcome of the
proceeding. To have substantial interest in the outcome of
the proceeding, the petitioner must show:

1) that he will suffer injury in fact which is of sufficient
immediacy to entitle him to a section 120.57 hearing,
and 2) that his substantial injury is of a type or nature
which the proceeding is designed to protect. The first
aspect of the test deals with the degree of injury. The
second deals with the nature of the injury. (at 482)

Standing is further defined and clarified in Florida Soc. of
Ophthalmology v. State Bd. of Optometry, 532 So. 2d 1279
(Fla. Ist DCA 1988). In that case, the court elaborated on
both the reasons for and the history of standing:

The concept of standing is nothing more than a selective
method for restricting access to the adjudicative process,
whether it be administrative or purely judicial, by
limiting the proceeding to actual disputes between
persons whose rights and interests subject to protection

54a

by the statutes involved are immediately and
substantially affected. Thus it has been stated, the
‘purpose of the law of standing is to protect against
improper plaintiffs.’ citing 59 Am.Jur.2d, parties Sec. 30
(1987) (at 1284)

It is beyond dispute that the present petition presents rights
which will be determined through the power plant siting
process under Chapter 403, Florida Statutes. However, the
putative intervenor has not shown that its rights will be
determined under Section 403.519, Florida Statutes, which is
the authority under which we conduct the need determination
portion of the multiagency power plant siting process. FWF’s
interests may be determined during the proceedings before
the Department of Environmental Protection. The court in
Florida Soc. of Ophthalmology used a three part definition for
“party” to the litigation:

The basic definition of party in section 120.52(12)
includes three categories of persons. Reduced to a
simplistic statement, persons entitled to standing as a
party are those who (1) are denominated as such by the
constitution, a statute, or a rule (regulation); or, (2) have
a substantial interest that is directly affected by proposed
agency action; or, (3) in the exercise of the agency’s
discretion, are accorded the right to become a party by
intervention in an existing proceeding .... Although
one-need not have his rights determined to become a
party to a licensing proceeding, party status will be
accorded only to those persons who will suffer an injury
to their substantial interests in a manner sought to be
prevented by the statutory scheme. (at 1284)

In the Florida Soc. of Ophthalmology case, the court
approved a denial of-standing to challenge a licensing
procedure because the intervenors alleged economic injury
and that their interests would be adversely affected in a
manner different from the general public. As such, in that

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case, the intervenors did not satisfy the immediacy
requirement. The court further held that they did not show “a
zone of interest personal to them that would be invaded by
the certification process.” (Id. at 1285)

In the present petition, FWF has not alleged any injury to
itseif or its members that is any different from that which
could be suffered by the public generally. As the court in
Florida Soc. of Ophthalmology stated, the “petition contains
no allegations of any facts personal to any particular
applicant, petitioner, or patient that show that any certified
optometrist’s exercise of this new privilege would~—be_
medically deficient and cause anyone injury.” (at 1286)

FWF alleges a potential harm to the wildlife of Florida
arising from our decision in this docket. FWF alleges this
would, in turn, harm its members and the citizens of Florida
who would no longer be able to enjoy the wildlife for
recreational and educational purposes. Not only is this harm
one that is not peculiar to FWF or its members, this allegation
of harm is also so remote and speculative as to fail to meet
the immediacy requirement. FWF has produced no evidence
to support the claim that one 514 MW electric power plant on
approximately 30 acres of land would decimate the wildlife
population of the entire state. FWF’s arguments about the
“floodgate” effect of siting numerous merchant plants and the
negative impact they might have on the wildlife population of
Florida are also too remote and speculative to provide an
adequate basis for standing. 7

Il. STANDARD FOR ASSOCIATION STANDING

Florida Homebuilders Ass'n. v. Dept. of Labor and
Employment Security, 412 So. 2d 351 (Fla. 1982), held that
an association’s standing to bring a rule challenge under
Section 120.56(1), Florida Statutes, requires a person to show
that it was “substantially affected” by the challenged rule.
This test for association standing was extended in

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Farmworker Rights Org. v. Dept. of Health, 417 So. 2d 753
(Fla. Ist DCA 1982). The Farmworker case established that
there is no difference between 4 rule challenge and a Section
120.57, Florida Statutes, hearing for the purposes of
determining standing.

Subsequently, the First District Court of Appeal recognized
that, in the context of standing, there can be a difference
between the concepts of “substantially affected” persons and
persons whose “substantial interests” are affected by an
agency’s action. The court suggested that Farmworker is not
applicable to every case in which an association seeks to
institute a Section 120.57 proceeding. Florida Soc. of
Ophthalmology supra. Florida Soc. of Ophthalmology
appears aimed at the first prong of the Florida Homebuilders
Ass’n. test which provides that an association must
demonstrate that a substantial number of its inembers are
substantially affected by the agency’s action. The Court does
not address the applicability of the second and third prongs of
Florida Homebuilders, relating to the requirement that the
subject matter of the proceeding be within the association’s
general scope of interest and activity; and, that the relief
requested is of the type appropriate for an association to
receive on behalf of its members.

Florida Homebuilders Ass’n. and Florida Soc. of
Ophthalmology, when read together, suggest that the
appropriate test for association standing in this case is
whether the FWF’s petition, has demonstrated: (1) that a
substantial number of its members have substantial interests
which are affected by the present action; (2) that the subject
matter of the proceeding is within the association’s general
scope of interest and activity; and (3) that the relief requested
is of the type appropriate for an association to receive on
behalf of its members.

Under the first prong of the Florida Homebuilders Ass'n.
test associations must meet the Agrico test outlined above.

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When the FWF’s petition is read under Agrico, the Florida
Homebuilders Ass'n. and Florida Soc. of Ophthalmology
cases, it fails to meet the tests of Agrico, the Florida
Homebuilders Ass'n. and Florida Soc. of Ophthalmology
because the petitioners have not shown: (1) “a zone of interest
personal to them that would be invaded” by this proceeding
under Section 403.519, Florida Statutes, which would rise to
the substantial interest test; and (2) that the need
determination to be decided under Section 403.519, Florida
Statutes, is within the association’s general scope of interest
and activity. The third prong of the Florida Homebuilders
Ass'n. and Florida Soc. of Ophthalmology test for association
standing, determining that the relief requested is of the type
appropriate for an association to receive on behalf of its
members, could arguably be met here if all other prongs had
been met. This determination is not dispositive of the
question of whether FWF is entitled to intervene in this
instance however, because the association does not meet the
first two prongs of the test for association standing.

A. FWF ASSERTS THAT ITS SUBSTANTIAL
INTERESTS ARE CONSISTENT WITH
LEAF’S

FWF asserts that its “statement of substantial interest was
consistent with that contained in LEAF’s petition and,
therefore, that the Prehearing Officer’s decision to grant
LEAF intervention and deny FWF intervention was arbitrary
and capricious. The decision of the Prehearing Officer to
allow LEAF to intervene and deny FWF intervention is not
“arbitrary and capricious” as alleged by FWF. LEAF’s state-

ment of substantial interests alleged that:
LEAF has a substantial interest in the Commission’s

determination of need and in securing the environmental
and health benefits of increased efficiency in the

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delivery of energy services and increased use of cleaner
energy resources to meet energy service needs.

(Petition at 1)

We find that there is no “consistency” between LEAF’s
statement of substantial interests affected and that provided
by FWF which reads as follows:

FLORIDA WILDLIFE FEDERATION (FWF) is a non-
profit Florida corporation with over 13,000 members
who reside within the state and whose main purpose is to
protect, manage and conserve Florida’s wildlife, for the
benefit of the people of the State of Florida, the wildlife,
FWF and its members. Numerous members of the
organization hunt, fish, observe, study and photograph
wildlife throughout the state. Approval of the Joint
Petition would result in injury or harm to Florida’s
wildlife population, causing them to decline and not be
available for the benefits of FWF and its members as
stated further below. FWF and its members are
substantially affected by the issues to be determined in
these proceedings.

(Petition at 2)

LEAF asserted that its interest in how energy is generated and
delivered in Florida would be determined by this proceeding.
LEAF’s members asserted that they had a substantial interest
not only in how electric power is provided and what energy
resources are relied upon, but specifically in the possibility of
renewable energy. LEAF’s concerns are within the purview
of Section 403.519, Florida Statutes.

Counsel for FWF asserted in the petition for re-
consideration that the mention of conservation measures in
Section 403.519, Florida Statutes, requires us to determine
whether or not siting a power plant would have a deleterious
effect upon wildlife and wetlands. Not only would the

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exercise of such authority be outside of our jurisdiction and
expertise, it misconstrues th€ statute. Contrary to FWF’s
arguments, this section has nothing to do with protecting
wildlife or wetlands. The conservation discussed in Section
403.519, Florida Statutes, is meant to encourage utility
“avoided units,” or units which may not have to be built by a
utility because that utility implemented demand side
management (DSM) or other programs to reward consumers
for installing energy-saving equipment or using ‘oad
management to reduce the consumption of electricity.

Il. CONCLUSION

In sum, FWF has not shown that we based our decision to
deny FWF intervenor status on a mistake of law or fact or
upon inadvertence. FWF has not shown any changed
circumstances which would require a reconsideration of the
Order Denying Intervention. FFWF has not shown that it
meets the test for standing to be allowed to intervene in this
proceeding. It has alleged an interest that is remote and
speculative. It has not demonstrated that it or its members
will suffer immediate injury in fact sufficient to entitle it to a
Section 120.57, Florida Statutes, hearing. Further, it has not
shown that the injury it alleges that it will suffer is of the
nature or type which these proceedings are designed to
protect. As an association, FWF has not shown that its
members have a zone of interest personal to them that would
be invaded and rise to the substantial interest test, or that the
need determination decided in this case is within the
association’s general scope of activities.

We do not believe that FWF has shown that its substantial
interests are consistent with LEAF’s. As discussed herein,
we find that it was not arbitrary and capricious for us to deny
intervention to FWF and to grant it to LEAF when LEAF
specifically alleged that both it and its members had a
substantial interest in how energy is generated, and delivered

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and whether renewable energy sources are advocated. FWF
alleged no interest in the generation of electric energy, only
an interest in protecting wildlife for the benefit of its
members and Florida’s citizens. This interest is not
determined in this docket, but before DEP in a further
proceeding on the need determination.

Therefore, Florida Wildlife Federation’s Petition for
Reconsideration of Hearing Officer’s Order Denying
Intervention is hereby denied.

MOTION TO STRIKE ADDITIONAL AUTHORITY

On February 5, 1999, Florida Power & Light Company
filed a Motion To Strike “Additional Authority” Letter and
Attachments filed by Joint Petitioners in this docket. As
grounds for its motion, FPL stated that the letter, which was
filed in response to staff counsel’s question posed at oral
argument in this docket on January 28, 1999, is an improper
rebuttal or reply brief not authorized by the procedural rules
or the procedural orders of this case. As authority, FPL cites
Rule 28-106.215, Florida Administrative Code. FPL also
states that the letter and attachments are improper ex parte
communication to the staff that is not cured by providing
notice and a copy of it to the parties.

On February 12, 1999, the Joint Petitioners filed a
Response In Opposition To FPL’s Motion to Strike. Pursuant
to Rule 1.140(f), Florida Rules of Civil Procedure, the Joint
Petitioners alleged that the motion was inappropriate and that
it was not an improper ex parte communication.

Upon consideration, FPL’s Motion To Strike Additional
Authority is granted. Rule 1.140(f), Florida Rules of Civil
Procedure is not applicable in this instance. The Order
Establishing Procedure, Order No. 98-1183-PCO-EM, issued
September 4, 1998, as amended ore tenus during a
continuance of the proceeding, governs the posthearing

6la

procedures and posthearing filing dates. | The Order is
controlled by Rule 28-106.215, Florida Administrative Code
and does not provide for filings out of time. The deadline for
filing posthearing submissions was January 19, 1999. Thus,
the additional authority letter and attachments are untimely
and shall be stricken from the record of this proceeding.

NEED FOR THE PROPOSED POWER PLANT is
I. INTRODUCTION

Section 403.519, Florida Statutes, enacted in 1980 as part
of FEECA, established this Commission as the exclusive
forum for determining the need for an electrical power plant
subject to the PPSA. The statute requires us to take into
account the following criteria in making a determination of
need as part of the plant siting process:

1) The need for electric system reliability and
integrity;

2) The need for adequate electricity at
reasonable cost;

3) Whether the proposed plant is the most cost-
effective alternative available;

4) Conservation measures taken by or
reasonably available to the applicant or its
members which might mitigate the need for
the proposed plant; and

5) Other matters within its jurisdiction which it
deems relevant.

In evaluating a need determination petition, we must take
into account all of the above listed criteria. We may base our
determination of need for an electrical power plant on a single
criterion or any combination of the above criteria. As set
forth in Section VI, A below, many times in the past, we have

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approved need determination petitions on bases other than
Strict reliability need.

Our underlying policy in deciding need determination
petitions is to protect electric utility ratepayers from
unnecessary expenditures and ensure a safe reliable grid. In
approving the proposed plant, we are effectuating our
longstanding policy. Duke New Smyrma, as proposed, would
be a wholesale provider of electricity. Retail utilities, with
the obligation to serve, may purchase from Duke New
Smyrna, if it is economic to do so. The Project provides a
choice to retail utilities in meeting the needs of their
customers. If a retail utility purchases from Duke New
Smyrna, those retail customers would realize economic
benefits due to the existence of the Duke New Smyma
project.

Furthermore, there is sufficient record evidence before us
to determine that the statutory criteria required “y Section
403.519, Florida Statutes, have been met. This Project is the
most cost-effective alternative available to meet both Duke
New Smyra’s and the City’s need. We find that we have
sufficient information to assess the need for the proposed
power plant under the criteria set forth in Section 403.519,
Florida Statutes. We address each of the five statutory
criteria.

Il. THE NEED FOR ELECTRIC SYSTEM RELI-
ABILITY AND INTEGRITY

Both the City and Duke New Smyma presented extensive
testimony pertaining to the need for electric system reliability
and integrity as required by the statute.

A. THE CITY
The City’s 1998 summer peak demand was 78 MWs. By
the year 2008, the City’s peak summer demand is expected to
grow to 98 MWs. The City’s generating resources currently

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consist of 31.5 MWs of City owned generating capacity (19
MWs diesel, 7.1 MWs of St. Lucie #2 nuclear, and 5.4 MWs
of Crystal River Unit 3 nuclear), and 83 MWs of purchase
power for a total of 114.5 MWs. The City’s 83 MWs of
purchased power is obtained through contracts with FPC,
TECO, and Enron. These contracts are to expire between
September 1999 and 2004. Without these contracts, the
City’s resources (31.5 MWs) are less than half of its current
retail demand (78 MWs).

The City has a well-defined need for energy and capacity
to serve its native retail load. The City must acquire
additional resources in order to provide adequate service to its
retail customers. The record reflects the 30 MW entitlement
_is necessary for the City to continue to serve its native retail
load in an efficient and cost-effective manner. We find that
the participation agreement is a legally binding agreement
between Duke New Smyrna and the City which identifies a
megawatt entitlement of the proposed plant, and a price per
megawatt-hour at which the City will pay for the energy from
the proposed plant. Even with the 30 MW entitlement from
Duke New Smyma, however, the City must continue to plan
for additional capacity on its system.

The Participation Agreement with Duke New Smyma
entitles the City to 30 MWs of capacity to replace part of the
City’s need for capacity beginning in November 2001. The
Participation Agreement is the result of a business
arrangement between Duke New Smyma and the City.
Pursuant to the contract, the City agreed to:

1) Furnish the site to Duke New Smyrna;

2) Furnish an interconnection point for the
Project to the City’s Smyma substation; and

3) Provide reuse water from its wastewater
treatment plant, and other water
requirements.

64a
For these considerations, Duke New Smyma agreed to:

1) Finance, design, construct, own and operate
the Project; fl

2) Grant a 30 MW entitlement of the Project’s
capacity to the City; and

3) Price energy to the City from its 30 MW
entitlement at $18.50/MWH.

B. DUKE NEW SMYRNA AND PENINSULAR
FLORIDA

The FRCC approved a 15 percent reserve margin as
suitable for Peninsular Florida reliability. We are currently
reviewing this level of reserve margin in Docket No. 981890-
EU. The utility intervenors argued that because Peninsular
Florida reserve margins are forecasted to be at or above the
FRCC’s threshold, the Project is not needed for peninsula
reliability. Based on the testimony of Witness L’Engle,
however, past peninsula reserve margins of between 20 and
25 percent did not prevent the loss of firm load. In Order No.
22708, issued March 20, 1990, in Docket No. 900071-EG, we
determined that during the Christmas freeze of 1989,
sustained low temperatures combined with unit outages,
resulted in the loss of firm load in certain areas of the State.
Witness L’Engle characterized the currently planned reserves
of Peninsular Florida as being “on the edge” and suggested
that additional capacity would be beneficial to Florida, but
that existing utilities are unwilling to make the investment
due to cost and competitive pressures.

The Project will provide benefits to Peninsular Florida’s
operating reliability. Joint Petitioners’ Witnesses Vaden,
Green and Nesbitt addressed projected peninsular reserve
margins, and the opportunity for wholesale sales in Florida.
Currently, Florida utilities must maintain, on an hour-by-hour
basis, reserves to replace the state’s largest unit,

65a

approximately 900 MW. The addition of the Project is likely
to improve the state’s ability to meet its operating reserves.
The capacity should be considered for hourly and short term
Operating reserves, but not for long term planning reserve
margins, unless contracted for. Duke New Smyrma and its
shareholders will finance and own the Project, as well as
carry the risk of that investment. Duke New Smyma will,
therefore, have an economic incentive to be available as much
as necessary in order to remain economically viable. This
economic incentive is greater during peak periods or times of
emergency because utility incremental fuel costs tend to be
higher during these periods.

Utility intervenors argued that there are no assurances that
Duke New Smyrma would not sell all or a portion of its
merchant capacity out-of-state. Joint Petitioners’ Witness
Green did acknowledge that under certain circumstances,
power sales to the north could occur. Record evidence
establishes, however, that a significant amount of the power
from the Project will be sold to Peninsular Florida utilities.
Generation costs are lower in the Southern Company region
compared to Florida. As such, the probability of sales to
Georgia is reduced. As a long term business strategy, we
believe that it makes no sense for Duke New Smyrna to sell
power out-of-state because those sales would have to
overcome the costs of natural gas transportation to the site
and wheeling costs for transmission out-of-state.

Whether Duke New Smyma makes in-state or out-of-state
sales, those sales would be at market based rates. A Florida
retail IOU, on the other hand, would have to charge cost
based rates for in-state sales. We plan to address this
disparity whereby some utilities are allowed to charge
wholesale market prices while other utilities cannot in an
upcoming workshop, as discussed in the last section of this
Order.

66a

Based on the record, we believe that the capacity from the
Project is needed by the City to continue to serve its retail
customer loads._ Without the entitlement, we believe that the
City would either have to purchase or build capacity at a
much greater cost to its ratepayers, or seriously compromise
its reliability. Further, the entitlement promotes the integrity
of the City’s system by allowing for adequate electricity to
meet retail demand at a reasonable cost. We believe that the
Participation Agreement as well as the testimony and exhibits
of Witness Vaden sufficiently demonstrate the need for the 30
MW entitlement. We are persuaded that the entire 514 MWs
are what make the 30 MWs entitlement cost-effective, and the
entire project is, therefore needed for New Smyrma Beach’s
system reliability.

Il. THE NEED FOR ADEQUATE ELECTRICITY
AT A REASONABLE COST

The reliability and integrity of the City’s system will be
greatly enhanced by the proposed Project. The Project will,
by providing needed reliability, also give the City adequate
electricity at a reasonable cost. The 514 MWs are what
makes the 30 MWs cost effective. In other words, the low-
cost power provided to the City is contingent upon the entire
Project being constructed. As such, if the Project is not
constructed, the City will have to construct or contract for
higher cost capacity and energy.

A. THE CITY

Witness Vaden testified that Duke New Smyrna’s price of
$18.50 per MWH is much lower than other purchase power
contracts. For example, the City’s existing contract for base
load capacity with TECO isat $25 per MWH. The City’s
cost-benefit analysis provided by Witness Vaden showed a
savings of approximately $3.1 million per year net present
value for the first ten years, and approximately $7.75 million
net present value for the following ten years, for a total

67a

estimated savings of approximately $39 million net present
value.

The record supports the conclusion that the purchase of
energy from the Project will be the most cost-effective
alternative for the City to meet its needs for energy and
capacity. The 30 MW entitlement to the City is contingent
upon the entire 514 MW Project being constructed. Thus, the
Joint Petitioners have shown a need based upon economics.
As such, if the Project is not constructed, the City will have to
construct or contract for higher cost capacity and energy at a
greater cost to its retail ratepayers. No party to this
proceeding challenged the validity of this evidence.

B. DUKE NEW SMYRNA AND PENINSULAR
FLORIDA

Duke New Smyrna, which is an EWG and not a QF, does
not have the legal right to require utilities to purchase its plant
output. No utilities and no ratepayers will be obligated to
purchase from the Project. No purchase power agreement for
long-term firm sales, therefore, is necessary for us to consider
in order to approve Duke New Smyma’s Project. The
“bidding rule,” Rule 25-22.082, Florida Administrative Code,
requires that an investor-owned utility evaluate supply-side
alternatives in order to determine that a proposed unit, subject
to the PPSA, is the most cost-effective alternative available.
If Duke New Smyrna were to construct the Project, it could
propose to meet a utility’s need pursuant to the bidding rule,
but the IOU would have the final decision on how it would
meet its needs. An IOU, or any other utility in Florida should
prudently seek out the most cost-effective means of meeting
its needs. The Duke New Smyrna project simply presents
another generation supply alternative for existing retail
utilities. Florida ratepayers will not be at risk for the costs of
the facility, unless it is proven to be the lowest cost
alternative at the time a contract is entered. Retail ratepayers

68a

will only be obligated for the term of any contract, and not
the full economic life of the facility.

Duke New Smyrna, as an EWG, can contract with utilities
on a long term basis (equal to or greater than one year), or on
a short term or on an hourly, as-available basis. All IOU
purchases will be subject to our approval in our ongoing
purchased power cost recovery docket. If Duke New Smyrna
were to sign an as-available contract, the utility would be
expected to pay no more than its avoided energy cost. In
other words, Duke New Smyrna will be compensated no
more than the utility’s cost of producing the next increment of
electricity, essentially fuel and variable operating and
maintenance costs. The utility’s ratepayers would be
indifferent to a transaction which was priced at incremental
cost because it would be cost neutral and, therefore, there
would be no adverse consequences to the utility’s retail
customers. Retail customers would realize benefits if the
negotiated price was less than the utility’s incremental cost.
This analysis also applies if Duke New Smyrma were not
proposing to commit any of the Project’s capacity to a utility.

We approve the Project because Duke New Smyma has
shown an economic need for the Project. Retail customers
are not at risk, and we do not have to determine and assess the
avoided costs of a proposed unit over several decades where
changes in the world economy, changes in generation
efficiencies, and changes in the cost of fuel can render
decisions uneconomic in the future which were projected to
be economic when made. In this case, the market will
determine whether or not Duke New Smyma’s decision to
use natural gas continues to be economic over the next
several decades with all of the risk borne by Duke New
Smyrna and its shareholders. We find this Project to be a
benefit to the ratepayers of this state.

Duke New Smyrna, as proposed, would be a wholesale
provider of electricity. Retail utilities, with the obligation to

- 69a

serve, may purchase from Duke New Smyrna, if it is
economic to do so. The Project provides a choice to retail
utilities in meeting the needs of their customers. If a retail
utility purchases from Duke New Smyrna, those retail
customers would realize economic benefits due to the
existence of the Duke New Smyrna project. Ratepayers will
continue to be protected against uneconomic utility decisions
by our ongoing audits and review of purchased power
contracts of retail-serving investor-owned Florida utilities.
The fact that the proposed plant is completely financed by
Duke New Smyma at no cost to retail ratepayers, leads us to
believe that the Project is good for the City’s retail ratepayers
and that it is also economically good for the state as a whole.

Duke has demonstrated that its plant may lower wholesale
electric prices paid by retail-serving utilities. This does not
mean that subsequent merchant plants will be able to
demonsirate that they will do the same. Merchant plant
applicants do not have a right to build merchant plants in
Florida. Each applicant must demonstrate that its project
conveys a benefit to Florida ratepayers, given the existence of
‘he prior power plant additions. We recognize that there may
be certain applications in the future, which may fail to
demonstrate an economic need, despite the fact that the retail
ratepayers are not at risk. This demonstration may involve
the inability of the applicant to demonstrate that it will
dispatch within the Florida grid. We also recognize that there
may be certain times when a proposed plant could adversely
effect the reliability of the Florida grid. This could involve a
plant, by its proposed location within the Flo

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1575%3A2. Public record. Not legal advice.