gillespie letter to general counsel ferrentino-seminole electric coop-jun-01-2016

8/16/2019 Gillespie Letter to General Counsel Ferrentino-Seminole Electric Coop-Jun-01-2016

1/38

VIA Email: [email protected] June 1, 2016

David D. FerrentinoGeneral CounselSeminole Electric Cooperative, Inc.

North Dale Mabry HighwayTampa, Florida 33618

Dear Mr. Ferrentino:

Several days ago I requested Seminole Electric Cooperative, Inc.'s federal tax returns for the last3 years, IRS Form 990 for tax-exempt organizations, or equivalent, from Ryan Hart, seeattached. Does your client plan to provide the tax returns, and if so, when?

On page 31 of Ms. Johnson’s testimony April 14, 2015 before the House Subcommittee onEnergy and Power, Ms. Johnson said Florida has a “lack of native energy production capacity”.

Given Florida is the “Sunshine State”, it appears Florida has an unlimited supply of free nativesolar energy production capacity. Did I read Ms. Johnson’s testimony correctly?

Kindly provide information about Seminole Electric Cooperative, Inc.’s use of Florida’sunlimited supply of free native solar energy production capacity. Thank you.

Sincerely,

Neil J. Gillespie8092 SW 115th LoopOcala, Florida 34481Tel. 352-854-7807Email: [email protected]

Enclosures: Ms. Johnson’s testimony, House Subcommittee on Energy and Power;Email to Mr. Hart requesting Seminole Electric Cooperative, Inc.'s federal tax returns

Cc.: Gina McCarthy, EPA Administrator Office of the Administrator, Mail Code 1101AEnvironmental Protection Agency1200 Pennsylvania Avenue, N.W.Washington, DC 20460Second Day Air UPS No. 1Z64589FNY90276059

Cc: Ryan Hart, email [email protected]


2/38

Neil Gillespie

From: "Neil Gillespie" To: Sent: Sunday, May 29, 2016 5:55 PMSubject: Request Seminole's IRS Return 990 for tax-exempt organizations

Page 1 of 1

5/31/2016

Mr. Hart,This is a request for Seminole Electric Cooperative, Inc.'s federal tax returns for the last 3 years, IRSForm 990 for tax-exempt organizations, or equivalent. Thank you.

Neil J. Gillespie


3/38

Neil Gillespie

From: "Ryan Hart" To: "Neil Gillespie" Sent: Sunday, May 29, 2016 6:17 PM

Attach: ATT00022.txtSubject: Read: Request Seminole's IRS Return 990 for tax-exempt organizations

Page 1 of 1

5/31/2016

Your message

To: Ryan HartSubject: Request Seminole's IRS Return 990 for tax-exempt organizationsSent: Sunday, May 29, 2016 5:55:49 PM (UTC-05:00) Eastern Time (US & Canada)

was read on Sunday, May 29, 2016 6:17:22 PM (UTC-05:00) Eastern Time (US & Canada).


4/38

1

TESTI MONY OF SEMI NOLE ELECTRI C COOPERATI VE, I NC.

PRESENTED BY LI SA D. J OHNSON

U. S. HOUSE OF REPRESENTATI VES

COMMI TTEE ON ENERGY AND COMMERCE

SUBCOMMI TTEE ON ENERGY AND POWER

HEARI NG ON THE “RATEPAYER PROTECTI ON ACT”

APRI L 14 TH, 2015


5/38

2

Table of Contents

1. EXECUTIVE SUMMARY OF WRITTEN TESTIMONY ..................... 3

2. SEMINOLE’S COOPERATIVE SYSTEM .............................. 8

a. I nt r oduct i on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

b. Semi nol e Gener at i ng St at i on ( SGS) . . . . . . . . . . . . . . . . . . . . . . . . 11

i . Si gni f i cant I nvest ment s i n Envi r onment al Cont r ol s . . . . . 13

i i . Out s t andi ng Debt Owed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

i i i . Remai ni ng Usef ul Li f e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

c. Mi dul l a Gener at i ng St at i on ( MGS) . . . . . . . . . . . . . . . . . . . . . . . . . 17

d. Power Pur chase Agr eement s / Renewabl e Ener gy Por t f ol i o . . . 18

e. Semi nol e’ s Tr ansmi ssi on Syst em. . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3. THE “RATEPAYER PROTECTION ACT” WOULD PROTECT OUR MEMBERS .. 22

a. The CPP may not sur vi ve l egal chal l enge . . . . . . . . . . . . . . . . . . 22

b. The CPP woul d have a si gni f i cant adver se ef f ect . . . . . . . . . . 24

i . The CPP woul d negat i vel y i mpact Semi nol e . . . . . . . . . . . . . . 24

i i . The CPP woul d negat i vel y i mpact Fl or i da by el i mi nat i ngf uel di ver si t y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

4. CONCLUSION ................................................ 35


6/38

3

1. EXECUTIVE SUMMARY OF WRITTEN TESTIMONY

Semi nol e El ect r i c Cooper at i ve ( “Semi nol e”) i s a not - f or -

pr of i t gener at i on and t r ansmi ssi on ( “G&T”) cooper at i ve, ser vi ng

appr oxi mat el y 1. 4 mi l l i on peopl e and busi nesses i n Fl or i da vi a

ni ne Member di st r i but i on el ect r i c cooper at i ves ( “Member s”) .

Semi nol e and i t s Member s provi de essent i al el ect r i c ser vi ce i n

pr i mar i l y r ur al ar eas of Fl or i da st r et chi ng f r om west of

Tal l ahassee t o sout h of Lake Okeechobee, t hr ough a combi nat i on

of coal - and gas- f i r ed gener at i on asset s and power pur chase

agr eement s. Semi nol e has s i gni f i cant concer ns about t he l egal

and t echni cal val i di t y of t he Envi r onment al Pr ot ect i on Agency’ s

( “EPA”) Exi st i ng- Sour ce Pr oposal , t er med t he Cl ean Power Pl an

( “CPP”) , and t he pr oposal ’ s subst ant i al i mpact s on Semi nol e, i t s

Member s, and t hei r consumer s, Fl or i da’ s el ect r i c syst em, and t he

ci t i zens of Fl or i da. We bel i eve t hat Chai r man Whi t f i el d’ s

“Rat epayer Pr ot ect i on Act ” wi l l pr ovi de bot h Semi nol e, and t he

St at e of Fl or i da, wi t h si gni f i cant pr ot ect i ons agai nst massi ve

r at e hi kes and damage t o t he r el i abi l i t y of Fl or i da’ s gr i d due

t o EPA’ s CPP.

EPA’ s own model i ng pr oj ect s t hat mor e t han 90 per cent of

Fl or i da’ s coal - f i r ed gener at i on woul d be f or ced t o pr emat ur el y

r et i r e i n or der t o achi eve Fl or i da’ s goal , a 38 per cent

r educt i on i n gr eenhouse gases ( “GHG”) , speci f i cal l y car bon


7/38

4

di oxi de ( “CO 2”) . Thi s i ncl udes Semi nol e’ s 1, 300 megawat t ( “MW”)

coal - f i r ed f aci l i t y. Ser i ous f uel di ver s i t y, r el i abi l i t y, and

cost concer ns woul d r esul t i f , as EPA pr oj ect s, nat ur al gas-

f i r ed combi ned- cycl e ( “NGCC”) uni t s ar e r equi r ed t o pr oduce mor e

t han 85 per cent of Fl or i da’ s el ect r i ci t y i n 2025, and coal - f i r ed

uni t s l ess t han 2 per cent . The t r ut h i s t hat Fl or i da cannot

compl y wi t h EPA’ s pr oposal usi ng i t s exi st i ng ut i l i t y

i nvest ment s, and t he over al l ut i l i t y cost i mpact s woul d l i kel y

t ot al i n t he bi l l i ons – and per haps t ens of bi l l i ons - of

dol l ar s. Mor eover , Fl or i da i s di spr opor t i onat el y i mpact ed.

Fl or i da’ s goal i s mor e t han t wi ce t hat of sever al ot her st at es

and mor e t han 25 per cent above t he nat i onal aver age. EPA’ s goal s

al so penal i ze Fl or i da f or i t s al r eady- si gni f i cant per cent age of

gas- f i r ed gener at i on.

Semi nol e, i n par t i cul ar , woul d suf f er subst ant i al har m as a

r esul t of EPA’ s pr oposal , a r eal i t y t hat EPA has f ai l ed t o, but

must , addr ess. EPA pr oj ect s t hat Semi nol e woul d l ose at l east 20

year s of r emai ni ng usef ul l i f e of i t s coal - f i r ed uni t s , and

oper at e i t s gas- f i r ed f ac i l i t y at a subst ant i al l y r educed

capaci t y; t he cost of t hese l osses, i n addi t i on t o t he cost of

r epl acement gener at i on, woul d be bor ne by i t s Member s and t hei r

consumer s. EPA al so does not r ecogni ze Fl or i da’ s uni que

char act er i st i cs, such as i t s peni nsul ar geogr aphy and


8/38

5

accompanyi ng t r ansmi ssi on const r ai nt s, r el i abi l i t y concer ns f r om

over - r el i ance on a si ngl e f uel , l i mi t ed opt i ons f or r enewabl e

power , and i t s exi st i ng st at ut or y and r egul at or y f r amewor k. EPA

must t ake t hese i mpor t ant f act or s i nt o account and cor r ect t he

numer ous f l aws i n i t s pr oposal .

Regar di ng l egal f l aws, t her e i s ser i ous doubt i f EPA has

t he aut hor i t y t o i ssue ANY pr oposal r egul at i ng GHGs f r om

exi st i ng el ect r i ci t y gener at i ng uni t s ( “EGUs”) . Even assumi ng

such aut hor i t y, EPA’ s pr oposal cont ai ns numer ous ot her l egal

f l aws, such as EPA’ s l ack of aut hor i t y t o set nat i onal ener gy

pol i cy, i t s usur pat i on of s t a t e aut hor i t y, i t s r egul at i on of

ent i t i es out s i de- t he- f ence, i t s ar bi t r ar y deadl i nes , and i t s

f ai l ur e t o pr ovi de st at es wi t h a meani ngf ul oppor t uni t y t o

consi der an EGU’ s r emai ni ng usef ul l i f e.

EPA’ s pr oposal al so cont ai ns numer ous t echni cal f l aws, such

as t he r el i ance on i naccur at e dat a and f al se assumpt i ons i n i t s

Bui l di ng Bl ocks, goal cal cul at i ons, and compl i ance model i ng. For

exampl e, i n Bui l di ng Bl ock 1, EPA’ s 6 per cent heat - r at e

i mpr ovement assumpt i on i s cl ear l y er r oneous, especi al l y f or

uni t s l i ke Semi nol e’ s, whi ch have al r eady maxi mi zed heat r at e.

I n Bui l di ng Bl ock 2, EPA f ai l ed t o addr ess t he f easi bi l i t y of

i ncr easi ng NGCC capaci t y t o 70 per cent , i ncl udi ng whet her


9/38

6

suf f i c i ent nat ur al gas i s avai l abl e on a nat i onal , r egi onal ,

st at e or l ocal l evel , whet her t her e i s adequat e gas- pi pel i ne

i nf r ast r uct ur e, whet her t her e i s adequat e t r ansmi ssi on

i nf r ast r uct ur e, and what i mpact s such a shi f t wi l l have on f uel

di ver s i t y and r el i abi l i t y. I n Bui l di ng Bl ock 3, EPA

mi si nt er pr et ed and i nappr opr i at el y appl i ed t he r enewabl e

por t f ol i o st andar d of a si ngl e st at e t o t he ent i r e sout heast

r egi on, i ncl udi ng Fl or i da. Mor eover , i n Bui l di ng Bl ock 4, EPA

f ai l ed t o r ecogni ze t hat consumer behavi or det er mi nes how

demand- si de ener gy ef f i ci ency pr ogr ams wi l l be i mpl ement ed.

Accor di ngl y, Semi nol e has r equest ed t hat EPA wi t hdr aw i t s

pr oposal , r evi se i t s Bui l di ng Bl ocks as l egal l y and t echni cal l y

r equi r ed, and cor r ect i t s i naccur at e dat a and f al se assumpt i ons

bef or e i t t akes any f ur t her st eps t o pr omul gat e t hi s r ul e.

Shoul d t he EPA f ai l t o wi t hdr aw, or si gni f i cant l y r evi se,

i t s pr oposal , Semi nol e bel i eves t hat Chai r man Whi t f i el d’ s

“Rat epayer Pr ot ect i on Act ” woul d pr ot ect Semi nol e, our Member

cooper at i ves, and t he St at e of Fl or i da f r om suf f er i ng

i r r epar abl e har m economi cal l y and t o t he r el i abi l i t y of our

gr i d. Fi r st , t he Act woul d pr event Semi nol e f r om expendi ng

consi der abl e t i me, ef f or t , and capi t al on compl yi ng wi t h


10/38

7

r egul at i ons t hat may event ual l y be i nval i dat ed by t he cour t s.

Second, t he bi l l woul d pr ovi de t hat :

No State shall be required to adopt or submit a State plan,

and no State or entity within a State shall become subject

to a Federal plan . . . if the Governor of such State makes

a determination, and notifies the Administrator of the

Environmental Protection Agency, that implementation of the

State or Federal plan would . . .have a significant adverse

effect on the State’s residential, commercial, or

industrial ratepayers . . . or . . . have a significant

adverse effect on the reliability of the State’s

electricity system.

Semi nol e, t he Fl or i da El ect r i c Power Coor di nat i ng Gr oup ( a

gr oup consi s t i ng of Fl or i da i nves t or - owned el ec t r i c ut i l i t i es ,

r ur al el ect r i c cooper at i ves , and muni ci pal el ect r i c ut i l i t i es ) ,

Fl or i da’ s Publ i c Ser vi ce Commi ssi on, t he Fl or i da Of f i ce of

Publ i c Counsel , t he Fl or i da Depar t ment of Agr i cul t ur e, t he

Fl or i da Depar t ment of Envi r onment al Pr ot ect i on, and t he Fl or i da

El ect r i c Cooper at i ve Associ at i on have al l det er mi ned t hat t he

CPP as pr oposed woul d have si gni f i cant adver se ef f ect s on bot h

r at epayer s and t he r el i abi l i t y of Fl or i da’ s el ec t r i cal sys t em.

As s uch, we wel come t he pr ot ect i ons of t he “Rat epayer Pr ot ect i on

Act ” and l ook f or war d t o i t s swi f t passage.


11/38

8

2. SEMINOLE’S COOPERATIVE SYSTEM

a. Introduction

Semi nol e i s one of t he l ar gest , not - f or - pr of i t , gener at i on

and t r ansmi ss i on cooper at i ves i n t he count r y. Semi nol e was

f ounded i n 1948, under t he Rur al El ect r i c Admi ni st r at i on’ s

El ect r i c Cooper at i ve Cor por at i on Act , and became f ul l y

oper at i onal as a G&T i n 1976. Semi nol e st r i ves t o pr ovi de

r el i abl e, compet i t i vel y pr i ced, whol esal e el ect r i c power t o i t s

ni ne Member di st r i but i on el ect r i c cooper at i ves. Semi nol e’ s

Member s i ncl ude:

• Cent r al Fl or i da El ect r i c Cooper at i ve

• Cl ay El ect r i c Cooper at i ve

• Gl ades El ect r i c Cooper at i ve

• Peace Ri ver El ect r i c Cooper at i ve

• Sumt er El ect r i c Cooper at i ve

• Suwannee Val l ey El ect r i c Cooper at i ve

• Tal qui n El ect r i c Cooper at i ve

• Tr i - Count y El ect r i c Cooper at i ve

• Wi t hl acoochee Ri ver El ect r i c Cooper at i ve


12/38

9


13/38

10

Col l ect i vel y, Semi nol e’ s Member s s er ve an aver age of 14

consumer s per mi l e of l i ne – al t hough t hi s number var i es

consi der abl y acr oss t he st at e dependi ng on gr owt h and l ocat i on.

For compar i son pur poses, i n Fl or i da, i nvest or - owned ut i l i t i es

t ypi cal l y ser ve an aver age of 57 consumer s per mi l e. Nat i onal l y,

t he aver age i s 34 consumer s per mi l e f or i nvest or - owned

ut i l i t i es and 48 f or muni ci pal i t i es . Thi s i s s i gni f i cant , as

el ect r i c cooper at i ves must mai nt ai n t he same ut i l i t y

i nf r ast r uct ur e as i nvest or - owned ut i l i t i es and muni ci pal s wi t h

f ewer consumer s t o shar e t he associ at ed cost s, and i n ar eas

wher e f or - pr of i t ut i l i t i es wer e unwi l l i ng or unabl e t o ext end

ser vi ce.

Semi nol e i s al so gr eat l y concer ned about t he economi c

i mpact t he r ul e wi l l have on i t s Member s’ consumer s, a f act or

t hat EPA must t ake i nt o consi der at i on. Based on a 2011 sur vey,

t he r esi dent i al cust omer s Semi nol e’ s Member s ser ve ar e

pr edomi nant l y r ur al , appr oxi mat el y one- t hi r d of whi ch have

househol d i ncomes bel ow t he pover t y l evel . Mor e t han 75 per cent

have househol d i ncomes l ess t han $75, 000. Lower - i ncome

househol ds spend a subst ant i al l y hi gher per cent age of t hei r

i ncome on el ect r i ci t y usage. Accor di ngl y, any change i n r at es as

a r esul t of EPA’ s pr oposal wi l l i mpact t hem di spr opor t i onal l y.


14/38

11

Semi nol e’ s pr i mar y gener at i on r esour ces i ncl ude t he

Semi nol e Gener at i ng St at i on ( “SGS”) i n nor t heast Fl or i da, and

t he Ri char d J . Mi dul l a Gener at i ng St at i on ( “MGS”) i n sout h

cent r al Fl or i da. Semi nol e al so mai nt ai ns a sui t e of pur chase

power agr eement s t o meet demand.

b. Seminole Generating Station (SGS)

I n 1978, Congr ess enact ed t he Power pl ant and I ndust r i al

Fuel Use Act , whi ch r est r i ct ed new power pl ant s f r om usi ng oi l

or nat ur al gas f or power gener at i on and encour aged t he use of

coal . Thi s was t he same t i me t hat Semi nol e was devel opi ng pl ans

t o bui l d a gener at i ng f aci l i t y t o meet i t s Member s’ demand.

Semi nol e deci ded t o bui l d a coal - f i r ed pl ant because i t di d not

have anot her vi abl e opt i on. EPA i ssued Semi nol e a pr event i on of

si gni f i cant det er i or at i on ( “PSD”) per mi t i n 1979 t o const r uct

and oper at e SGS i n Put nam Count y, near t he St . J ohn’ s Ri ver ,

sout h of J acksonvi l l e, and i t began commer ci al oper at i on i n

1984.

SGS consi st s of t wo, 650- MW coal - f i r ed gener at i ng uni t s. I n

2014, Semi nol e gener at ed mor e t han 50 per cent of t he ener gy i t s

Member s needed f r om t hese coal - f i r ed uni t s. I n past year s, t he

por t i on of ener gy pr ovi ded t o t he Member s f r om SGS has been even

hi gher . Thr oughout t he past 17 year s, SGS has had an aver age


15/38

12

capaci t y f ac tor of 80 per cent . I n shor t , t hi s ef f i c i ent , c l ean,

coal - f i r ed power pl ant has been and cont i nues t o be t he pr i mar y

wor k- hor se i n Semi nol e’ s syst em, and i t i s capabl e of cont i nui ng

t o ser ve i n t hi s capaci t y f or many year s t o come.

SGS empl oys appr oxi mat el y 300 har d- wor ki ng Fl or i di ans i n

r ur al Put nam Count y. By compar i son, MGS empl oys appr oxi mat el y

30. Shoul d t he EPA’ s CPP be f i nal i zed, Semi nol e’ s coal - f i r ed

power pl ant wi l l be f or ced t o cl ose – l eavi ng t hose 300 ski l l ed

empl oyees wi t hout a j ob. Addi t i onal l y, SGS r el i es on hundr eds of

ski l l ed cont r act or s t o assi st dur i ng mai nt enance out ages and

capi t al pr oj ect i mpl ement at i on. For exampl e, i n 2012 SGS had

mor e t han 650 cont r act or per sonnel onsi t e at one t i me t o assi st

dur i ng a mai nt enance out age. For 2013, cont r act or per sonnel

exceeded 550, and dur i ng t he 2014 spr i ng out age, SGS had mor e

t han 400 cont r act or per sonnel onsi t e. On Mar ch 11 t h of t hi s year ,

SGS had 732 cont r act or s on si t e. Al l of t hese cont r act or

per sonnel j obs wi l l no l onger be needed shoul d t he pl ant cl ose

ear l y. SGS al so has a l ong- st andi ng wor ki ng r el at i onshi p wi t h an

adj acent wal l boar d f aci l i t y, Cont i nent al Bui l di ng Pr oduct s

( “Cont i nent al ”) , whi ch conver t s t he bypr oduct f r om an SGS

envi r onment al cont r ol syst em i nt o wal l boar d. Cont i nent al empl oys

appr oxi mat el y 100 empl oyees and depends on t he coal - based

bypr oduct f or wal l boar d pr oduct i on. Wi t hout coal and access t o


16/38

13

t hi s bypr oduct , j obs at Cont i nent al wi l l al so be l os t i n t hi s

r ur al communi t y.

Put nam Count y has been desi gnat ed as bot h a St at e Rur al

Ent er pr i se Zone and a Rur al Ar ea of Cr i t i cal Economi c Concer n.

Por t i ons of Put nam Count y ar e wi t hi n a Feder al Hi st or i cal l y

Under ut i l i zed Busi ness Zone. As such, t hi s i s not an ar ea i n

r ur al Fl or i da t hat can af f or d t o l ose near l y 400 j obs di r ect l y,

and hundr eds mor e i ndi r ect l y, as a r esul t of EPA’ s r egul at i on.

To pl ace even gr eat er emphasi s on t hi s i ssue, Semi nol e i s al so

t he l ar gest t axpayer i n Put nam Count y. Semi nol e pai d mor e t han

$5 mi l l i on i n pr oper t y t axes i n bot h 2013 and 2014. Put nam

Count y cannot af f or d t o l ose Semi nol e’ s coal - f i r ed power pl ant

or any of t he j obs associ at ed wi t h t he f aci l i t y.

i. Significant Investments in Environmental Controls

When const r uct ed and br ought onl i ne i n 1984, SGS was

out f i t t ed wi t h advanced envi r onment al cont r ol s - - el ect r ost at i c

pr eci pi t at or s and wet l i mest one f l ue gas desul f ur i zat i on

( “FGD”) . Semi nol e has i nvest ed mor e t han $530 mi l l i on i n st at e-

of - t hear t envi r onment al cont r ol t echnol ogy at SGS. I n 2005, as

a r esul t of EPA’ s Cl ean Ai r I nt er st at e Rul e ( “CAI R”) , Semi nol e

began eval uat i ng addi t i onal st r at egi es t o reduce emi ssi ons of

sul f ur di oxi de ( “SO2”) and ni t r ogen oxi de ( “NOx”) t o t he l evel s


17/38

14

r equi r ed under t he new r ul e by 2009. Var i ous s yst em

modi f i cat i ons and al l owance pur chasi ng st r at egi es wer e eval uat ed

f or compl i ance. Begi nni ng i n 2006, Semi nol e spent $177. 2 mi l l i on

t o i nst al l sel ect i ve cat al yt i c r educt i on ( “SCR”) syst ems on bot h

Uni t s 1 and 2 at SGS. These addi t i ons i ncl uded new st r uct ur al

st eel , duct wor k, cat al yst r eact or s, new i nduced dr af t f ans and

mot or s, new auxi l i ar y t r ansf or mer s, and t he i nst al l at i on of

st eam coi l ai r heat er s. I n 2011, Semi nol e spent an addi t i onal

$4. 6 mi l l i on t o i ns tal l t he t hi r d l ayer of i t s SCR cat al ys t . I n

2014, Semi nol e cont i nued t o i nvest i n t he excel l ent per f or mance

of t he SCR syst em by r epl aci ng t he mi ddl e l ayer of cat al yst i n

Uni t 2 at a cost of $2 mi l l i on. A si mi l ar pr oj ect wi t h si mi l ar

cost i s pl anned f or Uni t 1 i n t he Spr i ng of 2015.

I n or der t o cont r ol a secondar y r eact i on of t he SCR syst em,

Semi nol e al so i nst al l ed a $9. 9 mi l l i on sul f ur t r i oxi de ( “SO3”)

r emoval syst em. Thi s syst em i nj ect s hydr at ed l i me i nt o t he f l ue

gas i n or der t o pr event t he f or mat i on of sul f ur i c aci d. Semi nol e

has pl ans t o f ur t her i nvest i n upgr adi ng t hi s syst em i n 2015.

I n or der t o f ur t her r educe SO2 emi ssi ons, Semi nol e upgr aded i t s

FGD syst em at a cost of $68. 7 mi l l i on. Semi nol e has al so

i nst al l ed l ow- NOx bur ner s t o mi ni mi ze excess ai r f i r i ng. I n

t ot al , Semi nol e has i nvest ed mor e t han $262. 4 mi l l i on si nce 2006

i nst al l i ng emi ssi ons cont r ol equi pment t o compl y wi t h EPA


18/38

15

r equi r ement s ( pr i mar i l y CAI R) , and mor e t han $530 mi l l i on on

emi ssi ons cont r ol equi pment si nce SGS was pl aced i n- ser vi ce. I n

summar y, Semi nol e has i nvest ed and cont i nues t o i nvest i n

mai nt ai ni ng excel l ent envi r onment al qual i t y cont r ol syst ems at

SGS.

These i nvest ment s, whi l e necess ar y t o compl y wi t h

r egul at i ons, have caused el ect r i ci t y r at es t o r i se. As st at ed

above, Semi nol e i s a not - f or - pr of i t cooper at i ve, and i t s cost s

ar e di r ec t l y r ef l ec ted i n i t s rat es . Fur t her , i nt er es t on debt ,

gr eat er oper at i on and mai nt enance expenses, and par asi t i c l oads

al l cont r i but e t o hi gher cost s t o t he Member s’ consumer s. I f SGS

wer e t o be decommi ssi oned pr i or t o t he end of i t s usef ul l i f e,

t he net book val ue wi l l have t o be r et i r ed, wr i t t en of f , and

col l ect ed f r om our Member s, al ong wi t h t he i nt er est expense on

debt t hat was bor r owed t o mat ch t he expect ed usef ul l i f e.

ii. Outstanding Debt Owed

Semi nol e, as a r ur al gener at i on and t r ansmi ssi on

cooper at i ve, has pr i mar i l y rel i ed on capi t al bor r owed f r om t he

Feder al Fi nanci ng Bank and l oan guar ant ees f r om t he Rur al

Ut i l i t i es Ser vi ce ( “RUS”) f or t he const r uct i on of i t s gener at i on

f l eet and capi t al i mpr ovement s t o i t s f ac i l i t i es , pr i mar i l y

i nvol vi ng envi r onment al cont r ol s. Cur r ent l y, l oans r el at ed t o


19/38

16

SGS account f or mor e t han 75 per cent of Semi nol e’ s t ot al

out st andi ng debt . These l oans ar e secur ed by Semi nol e’ s Tr ust

I ndent ur e. I f SGS wer e t o be r et i r ed pr i or t o t he end of i t s

usef ul l i f e i n or der t o compl y wi t h EPA’ s CPP, t he debt ser vi ce

r el at ed t o t hese l oans woul d cont i nue t o i mpact t he el ect r i ci t y

r at es pai d by our Member s. Most of Semi nol e’ s l oans al so cont ai n

si gni f i cant pr epayment i nt er est penal t i es, so a st r at egy t o

pr epay t he debt woul d onl y f ur t her i ncr ease t he cost pai d by our

Member s.

iii. Remaining Useful Life

EPA decl ar es t hat st at es ar e f r ee t o consi der t he r emai ni ng

usef ul l i f e of a uni t i n es t abl i shi ng t he s t at e s t andar ds . Of

cour se, t he Cl ean Ai r Act ( “CAA”) expr essl y al l ows f or such

consi der at i on. But EPA’ s appr oach of i mposi ng ver y st r i ct st at e

goal s negat es a st at e’ s abi l i t y t o consi der meani ngf ul l y t he

r emai ni ng usef ul l i f e of a par t i cul ar uni t ; EPA pr ovi des onl y

f aux f l exi bi l i t y. As not ed bel ow, EPA’ s I nt egr at ed Pl anni ng

Model ( “I PM”) pr oj ect s t hat 91 per cent of Fl or i da’ s coal - f i r ed

capaci t y wi l l r et i r e by 2025, i ncl udi ng SGS Uni t s 1 and 2. Thi s

i s f ar shor t of SGS’ r emai ni ng usef ul l i f e. I n 2004 and 2005,

Semi nol e commi ss i oned Bur ns and McDonnel l t o pr epar e l i f e

appr ai sal r epor t s f or SGS Uni t 1, SGS Uni t 2, and common

f aci l i t i es.


20/38

17

I n t he r epor t s, Bur ns and McDonnel l i ndi cat ed t hat based on

t hei r r evi ew and Semi nol e’ s cont i nued posi t i ve oper at i onal and

mai nt enance pr act i ces, SGS shoul d r eal i ze a r emai ni ng usef ul

l i f e of 40 year s, t hr ough 2045. Thi s dat e cor r esponds t o t he end

of t he Semi nol e’ s Whol esal e Power Cont r act s wi t h i t s Member s,

and al so cover s t he l ast l oan r el at ed t o emi ssi on cont r ol

equi pment at SGS, whi ch mat ur es i n 2042.

I f SGS wer e r et i r ed pr i or t o t he end of i t s usef ul l i f e,

t he r emai ni ng net book val ue ( st r anded asset ) woul d be r equi r ed

t o be wr i t t en of f and t he expense woul d be pai d by our Member s.

The Member s woul d cont i nue t o pay t he f i xed cos t s r el at ed t o SGS

wi t hout r ecei vi ng any ener gy or capaci t y f r om i t s oper at i on.

Semi nol e wi l l st i l l have t o ser ve t he f ul l r equi r ement s of our

Member s, and t he r epl acement capaci t y r el at ed t o t he ear l y

r et i r ement of SGS wi l l ei t her have t o be const r uct ed or

pur chased. Thi s wi l l cause our Member s t o pay f or bot h t he

st r anded asset and t he r epl acement capaci t y at t he same t i me.

c. Midulla Generating Station (MGS)

MGS i s an 810- MW f aci l i t y l ocat ed i n Har dee Count y t hat

uses nat ur al gas as i t s pr i mar y f uel . The f aci l i t y consi st s of a

500- MW combi ned- cycl e uni t , whi ch began commer ci al oper at i on i n


21/38

18

2002, and 310 MW of peaki ng capaci t y, whi ch Semi nol e added i n

2006. The combi ned- cycl e uni t has hi st or i cal l y oper at ed at a

capaci t y f act or bet ween 50- 70 per cent . The peaki ng uni t s consi st

of f i ve, Pr at t & Whi t ney aer oder i vat i ve FT- 8 Twi n- Pacs, and have

hi st or i cal l y been ut i l i zed at a capaci t y f act or of l ess t han 11

per cent . Each Twi n- Pac, i n f act , i s l i mi t ed t o 2, 500 hour s of

oper at i on per year – 2, 000 hour s on nat ur al gas and 500 on oi l –

by expr ess condi t i on of i t s Ti t l e V per mi t . Accor di ngl y, t hese

peaki ng uni t s ar e not subj ect t o EPA’ s pr oposal .

d. Power Purchase Agreements / Renewable Energy Portfolio

Semi nol e wor ks t o mai nt ai n a bal anced and di ver si f i ed

gener at i on por t f ol i o t hat i ncl udes SGS and MGS, as wel l as

capaci t y and ener gy pr ovi ded t hr ough shor t - , medi um- , and l ong-

t er m pur chased power agr eement s ( “PPAs”) wi t h ot her ut i l i t i es,

i ndependent power pr oducer s, and gover nment ent i t i es. These

r esour ces r ef l ect a mi x of t echnol ogi es and f uel t ypes,

i ncl udi ng one of t he st at e’ s l ar gest r enewabl e ener gy

por t f ol i os, al t hough Semi nol e sel l s a por t i on of t he r enewabl e

ener gy cr edi t s ( “RECs”) associ at ed wi t h i t s r enewabl e gener at i on

t o t hi r d par t i es, whi ch can use t he RECs t o meet mandat or y or

vol unt ar y r enewabl e r equi r ement s. The speci f i c amount of

gener at i on Semi nol e pur chases f r om PPAs var i es year t o year , but

on aver age, PPAs account f or ar ound 25 per cent of our t ot al


22/38

19

r esour ces. The bal ance and di ver si t y i n Semi nol e’ s gener at i on

and PPA mi x r educes exposur e t o changi ng mar ket condi t i ons,

hel pi ng keep r at es compet i t i ve. Fuel di ver si t y i s al so of

par amount i mpor t ance f or Semi nol e and Fl or i da due t o i t s uni que

geogr aphi c l ocat i on and al r eady- heavy rel i ance on out - of - st at e

nat ur al gas suppl i es.

Semi nol e has had a speci f i c pol i cy i n pl ace f or year s t o

acqui r e addi t i onal r enewabl e r esour ces, ei t her t hr ough owner shi p

or PPAs. Speci f i cal l y, Semi nol e’ s Boar d Pol i cy No. 308 expr esses

i t s commi t ment t o devel op and ut i l i ze r enewabl e ener gy

r esour ces, par t i cul ar l y wher e cost - ef f ect i ve. Thi s has r esul t ed

i n Semi nol e ent er i ng i nt o numer ous PPAs f or r enewabl e

gener at i on. Accor di ngl y, t he r easonabl y avai l abl e and cost -

ef f ect i ve r enewabl e opt i ons i n Fl or i da ar e al r eady bei ng

ut i l i zed, and EPA’ s assumpt i on t hat Fl or i da can do subst ant i al l y

mor e i s er r oneous.

e. Seminole’s Transmission System

Semi nol e owns mor e t han 350 ci r cui t mi l es of t r ansmi ss i on

t hat i nt er connect Semi nol e’ s el ect r i c gener at i ng pl ant s wi t h

Fl or i da’ s t r ansmi ssi on gr i d. Semi nol e al so r el i es on t hi r d par t y

t r ansmi ss i on pr ovi der s t o r el i abl y del i ver el ec t r i c i t y t o our

Member s. Gr i d r el i abi l i t y, as a r esul t of r e- di spat chi ng


23/38

20

exi st i ng NGCC f aci l i t i es t o mai nt ai n an aver age 70 per cent

capaci t y f act or , as ant i ci pat ed i n EPA’ s Bui l di ng Bl ock 2, i s of

gr eat concer n t o Semi nol e. I n 2014, 58 per cent of Semi nol e’ s

ener gy r equi r ement was ser ved vi a our owned coal - f i r ed

f aci l i t i es and gener at or t i e l i nes t o t he Fl or i da gr i d. Semi nol e

does not have suf f i ci ent owned or cont r act ed NGCC f aci l i t i es or

t r ansmi ssi on f aci l i t i es t o adequat el y ser ve l oad wi t hout our

coal - f i r ed uni t s . Fl or i da’ s t r ansmi ss i on gr i d i s congest ed, as

descr i bed f ur t her bel ow, and i t i s unl i kel y t hat Semi nol e woul d

be abl e t o obt ai n PPAs or const r uct new NGCC f aci l i t i es wi t hout

creat i ng addi t i onal t r ansmi ssi on const r ai nt s .

Regi onal st udi es per f or med t o eval uat e t he di spat ch of

nat ur al gas- f i r ed pl ant s ver sus coal i n an uneconomi c f ashi on

r esul t ed i n sever e t r ansmi ssi on congest i on t hr oughout t he

Fl or i da Regi on. The bul k t r ansmi ssi on syst em was desi gned ar ound

basel oad coal gener at i on. Di spat chi ng out of economi cs ( such as

maki ng t oday’ s i nt er medi at e- cl ass uni t s r un at basel oad) woul d

cause power swi ngs t o f l ow acr oss t r ansmi ssi on l i nes/ cor r i dor s

t hat wer e not desi gned t o t r anspor t basel oad gener at i on. I n

addi t i on, Semi nol e’ s exper i ence i n t r yi ng t o cont r act wi t h t hi r d

par t i es vi a pur chase power t r ansact i ons f r om exi st i ng gener at i ng

f aci l i t i es has shown on mul t i pl e occasi ons t hat t he exi st i ng


24/38

21

t r ansmi ssi on syst em i nt er connect ed t o t hese respect i ve

f aci l i t i es i s congest ed, and i t i s not economi cal l y f eas i bl e.

Wi t h t he except i on of a l i mi t ed amount of el ect r i ci t y t hat

can be t r anspor t ed i nt o t he st at e ( 2, 800 MW f i r m) , Fl or i da i s

essent i al l y an i sl and t hat r el i es on gener at i ng uni t s wi t hi n t he

st at e t o ser ve appr oxi mat el y 52, 000 MW of l oad. I f t he pr oposed

r ul e wer e t o t ake ef f ect pr i or t o suf f i ci ent gener at i on or

t r ansmi ssi on i nf r ast r uct ur e bei ng const r uct ed, si gni f i cant

r eact i ve def i ci enci es may al so occur t hr oughout t he st at e

r esul t i ng i n t he possi bi l i t y of depr essed syst em vol t ages and

vol t age st abi l i t y concer ns dur i ng nor mal ( st eady- st at e)

condi t i ons and cont i ngency event s.

EPA has f ai l ed t o assess t r ansmi ssi on r el i abi l i t y i mpact s

i n Fl or i da, i ncl udi ng t he t ot al r eact i ve power def i ci ency.

Fl or i da must have suf f i ci ent t i me t o eval uat e and model t he

r el i abi l i t y i mpact s due t o t he l oss of gener at i ng capaci t y,

whi ch i ncl udes a r evi ew of t he i mpact on compl yi ng wi t h Nor t h

Amer i can El ect r i c Rel i abi l i t y Cor por at i on ( “NERC”) Rel i abi l i t y

St andar ds.


25/38

22

3. THE “RATEPAYER PROTECTION ACT” WOULD PROTECT OUR MEMBERS

Sub- Commi t t ee Chai r man Whi t f i el d’ s “ Rat epayer Pr ot ect i on

Act ” woul d pr ot ect Semi nol e’ s Member s by ensur i ng t hat we do not

have t o expend consi der abl e t i me, ef f or t , and capi t al on

compl yi ng wi t h r egul at i ons t hat may event ual l y be i nval i dat ed by

t he cour t s. Second, t he bi l l woul d pr ovi de t hat no st at e shal l

be r equi r ed t o i mpl ement a st at e or f eder al pl an t hat t he

st at e’ s gover nor , i n consul t at i on wi t h ot her r el evant st at e

of f i ci al s, det er mi nes woul d have a si gni f i cant adver se ef f ect on

( i ) r et ai l , commer ci al , or i ndus t r i al r at epayer s ; or ( i i ) t he

r el i abi l i t y of t he s t at e’ s el ect r i ci t y s ys t em.

a. The CPP may not survive legal challenge

EPA’ s pr oposal cont ai ns f undament al l egal pr obl ems. I n sum,

t her e i s ser i ous doubt whet her EPA has t he aut hor i t y t o i ssue

ANY pr oposal r egul at i ng GHGs f r om exi st i ng EGUs. Br i ef i ng i s

al r eady under way i n t he D. C. Ci r cui t Cour t , and or al ar gument s

ar e schedul ed f or Apr i l 16 t h , r egar di ng t he pl ai n l anguage of CAA

Sect i on 111( d) , whi ch pr ecl udes EPA f r om pr omul gat i ng rul es f or

exi st i ng EGUs under Sect i on 111( d) when EPA has al r eady i ss ued a

r egul at i on cover i ng EGUs under Sect i on 112. I f t hi s i s not a

suf f i ci ent pr ohi bi t i on, t he CAA f ur t her pr ecl udes EPA f r om

i ssui ng a r ul e f or exi st i ng sour ces under 111( d) unt i l i t has

i ssued a val i d r ul e f or new sour ces. Ther e ar e ser i ous l egal


26/38

23

quest i ons r egar di ng t he val i di t y of such r ul es, i f EPA f i nal i zes

t he r ul e i n i t s cur r ent f or m. Fur t her mor e, EPA i t sel f has st at ed

t hat 111( d) r ul es ar e onl y appr opr i at e f or speci al i zed t ypes of

uni t s t hat emi t di scr et e t ypes of pol l ut ant s; t hey ar e NOT

appr opr i at e f or pol l ut ant emi ssi ons f r om di ver se and numer ous

sour ces, such as GHGs, and CO 2 speci f i cal l y. See 40 Fed. Reg.

53340 ( Nov. 17, 1975) . The r egul at or y web t he CPP weaves i s on

quest i onabl e l egal gr ound.


27/38

24

b. The CPP would have a significant adverse effect

I n Fl or i da, t he CPP as pr oposed, woul d have a “si gni f i cant

adver se ef f ect on bot h r et ai l , commer ci al , or i ndust r i al

r at epayer s ; and t he r el i abi l i t y of t he s t at e’ s el ect r i ci t y

syst em. ” I n wr i t t en t est i mony pr ovi ded t o t hi s commi t t ee f or a

Mar ch 17 hear i ng, Ar t Gr aham, t he Chai r man of t he Fl or i da Publ i c

Ser vi ce Commi ssi on, st at ed, “Consequent l y, r epr esent at i on of

pot ent i al i ncreases of 25- 50% i n some r et ai l el ect r i c rates i s a

cr edi bl e est i mat e of t he l evel of Fl or i da’ s Cl ean Power Pl an

cost s. ” Taki ng i nt o account t hese si gni f i cant r at e i ncreases,

and concer ns wi t h r el i abi l i t y, t he “Rat epayer Pr ot ect i on Act ”

woul d al l ow t he Gover nor of Fl or i da t o del ay t he i mpl ement at i on

of t he pl an t o t he benef i t of Fl or i da consumer s.

i. The CPP would negatively impact Seminole

EPA’ s I PM compl i ance model pr edi ct s t hat Semi nol e’ s coal -

f i r ed power pl ant , SGS, woul d be f or ced t o shut down under EPA’ s

pr oposal . These t wo coal uni t s wer e const r uct ed i n t he ear l y

1980’ s i n r esponse t o f eder al l aws t hat pr ohi bi t ed t he use of

nat ur al gas t o gener at e el ect r i ci t y. The uni t s wer e al so

const r ucted t o f ul f i l l t he l egal obl i gat i on of Semi nol e and i t s

Member s t o pr ovi de el ect r i ci t y t o t hei r Member consumer s i n

Fl or i da. El ect r i ci t y f r om SGS i s used by Semi nol e’ s Member s t o

f ul f i l l t hei r l egal obl i gat i on t o ser ve Member consumer s wi t hi n


28/38

25

t he di s t r i but i on cooper at i ve’ s es t abl i shed ser vi ce t er r i t or i es .

SGS i s a si gni f i cant asset t hat i s r el i ed upon by Semi nol e and

i t s Member s t o f ul f i l l t hat obl i gat i on, and SGS has si gni f i cant

economi c val ue remai ni ng. I f , as predi ct ed, EPA’ s pr oposal

f or ces SGS t o compl et el y shut down bef or e i t s usef ul l i f e has

r un, Semi nol e’ s enor mous, undepr eci at ed i nvest ment i n SGS wi l l

be r ender ed wor t hl ess. That r esul t wi l l l eave Semi nol e and i t s

Member s wi t h a “st r anded asset ”, wi t h si gni f i cant r emai ni ng

economi c val ue and debt . Semi nol e and i t s Member s ar guabl y wi l l

be l egal l y ent i t l ed t o r ecover t he cost s i ncur r ed under t hi s

pr oposed gover nment r egul at i on. Fur t her , EPA’ s I PM model i ng and

i t s economi c i mpact anal ysi s f ai l t o account f or t he r eal cost s

of “st r anded asset s” such as SGS t hat wi l l di r ect l y r esul t f r om

EPA’ s pr oposal or t o consi der t he i mpact of t hose “st r anded

asset s” on t he el ect r i ci t y gener at i ng i ndust r y i n gener al ,

el ec t r i cal t r ansmi ss i on r el i abi l i t y, and on t he f ut ur e cos t of

el ect r i ci t y.

EPA’ s pr oposal woul d have a devast at i ng economi c i mpact on

Semi nol e. As not ed i n Sect i on 3, f or ci ng SGS t o compl et el y shut

down, as EPA pr edi ct s wi l l happen under i t s anal ysi s of i t s

pr oposal , woul d el i mi nat e al l economi cal l y vi abl e use of

Semi nol e’ s asset s at SGS. Whi l e t he l and upon whi ch SGS was

bui l t may r et ai n a nomi nal val ue, t he hundr eds of mi l l i ons of


29/38

26

dol l ar s Semi nol e i nvest ed i nt o SGS, and has not yet r ecover ed,

woul d be compl et el y l ost ; a r esul t t hat undoubt edl y const i t ut es

a sever e economi c i mpact t o Semi nol e and i t s Member s.

I n addi t i on t o st r i ppi ng Semi nol e of al l economi cal l y-

vi abl e use of i t s SGS pr oper t y, t he pr oposal al so appear s t o

compl et el y el i mi nat e Semi nol e’ s di st i nct i nvest ment - backed

expect at i ons i n SGS. As pr evi ousl y di scussed, Semi nol e bui l t SGS

i n 1984, pur suant t o t he r equi r ement s of t he f eder al Power pl ant

and I ndust r i al Fuel Use Act of 1978, whi ch r est r i ct ed new power

pl ant s f r om usi ng oi l or nat ur al gas and encour aged t he use of

coal . SGS was bui l t as a coal - f i r ed power pl ant because t he

f eder al r egul at or y envi r onment of 1984 l ef t Semi nol e wi t h no

ot her vi abl e f uel opt i ons t o meet i t s l egal obl i gat i on t o ser ve

i t s cust omer s. At a t i me when t he gover nment encour aged t he use

of coal , and pr ohi bi t ed t he use of oi l and nat ur al gas, Semi nol e

r easonabl y expect ed t hat i t s coal - f i r ed power gener at i on at SGS

woul d not be r egul at ed out of t he mar ket ( by t he ver y gover nment

t hat r equi r ed i t t o bui l d a coal - f i r ed pl ant ) dur i ng i t s usef ul

l i f e. Based on t he r egul at or y envi r onment of 1984, EPA’ s 2014

CPP was compl et el y unf or eseeabl e. Semi nol e r el i ed on t he f eder al

gover nment ’ s di r ect i ve t o const r uct coal uni t s, and spent

hundr eds of mi l l i ons of dol l ar s si nce t hen compl yi ng wi t h

subsequent envi r onment al r ul es.


30/38

27

ii. The CPP would negatively impact Florida by

eliminating fuel diversity

The f ol l owi ng pages cont ai n t wo maps. The f i r st shows t he

l ocat i on of t he 30 coal - f i r ed gener at i ng uni t s i n Fl or i da t oday,

and t he second shows t he onl y t hr ee uni t s t hat woul d r emai n i f

t he CPP wer e adopt ed as pr oposed. EPA’ s pr oposal assumes

adequat e nat ur al gas suppl y i s avai l abl e t o r epl ace t hese

r et i r i ng coal uni t s wi t h gas- f i r ed el ec t r i c gener at i on. Thi s

assumpt i on does not account f or f uel suppl y r i sks associ at ed

wi t h t he pr oduct i on, pr ocessi ng, st or age and t r anspor t at i on of

nat ur al gas suppl y t o power pl ant s i n peni nsul ar Fl or i da.

Unl i ke sol i d f uel ( coal ) and l i qui d f uel ( oi l ) , nat ur al gas

i s not eas i l y s t or ed due t o i t s physi cal char acter i s t i cs that

r equi r e si gni f i cant l y mor e vol ume per uni t of ener gy st or ed.

Nat ur al gas st or age f aci l i t i es must al so possess speci f i c

char act er i st i cs t o saf el y and economi cal l y st or e a mat er i al

amount of f uel f or use dur i ng per i ods of suppl y di sr upt i on.

Al l of t he nat ur al gas consumed by EGUs i n Fl or i da i s

pr oduced out si de t he st at e and i mpor t ed vi a one of t he

i nt er s t at e gas pi pel i nes . Hi s t or i cal l y, t he vas t maj or i t y of t he

gas suppl y t r anspor t ed i nt o Fl or i da was pr oduced al ong t he gul f


31/38

28

coast ( Al abama, Mi ssi ssi ppi , Loui si ana, Texas) f r om shal l ow and

deep- wat er of f shor e pl at f or ms. Of f shor e nat ur al gas pr oduct i on

has decl i ned i n r ecent year s and onshor e, unconvent i onal gas

pr oduct i on i s maki ng up an i ncr easi ngl y l ar ge per cent age of t he

suppl y t r anspor t ed i nt o Fl or i da. Thi s suppl y or i gi nat es f r om

pr oduct i on r egi ons even f ur t her away f r om t he st at e ( Okl ahoma,

Ar kansas, nor t h Loui si ana, and sout h Texas) and i s dependent on

mul t i pl e i nt er st at e pi pel i nes i n or der t o r each Fl or i da.

Fl or i da’ s i ncr eased r el i ance on t he ‘ upst r eam’ pi pel i ne net wor k

cr eat es a new f or m of r i sk f or t he st at e t hat i s not addr essed

by EPA’ s pr oposal and one t hat woul d be exacer bat ed wi t h t he

r emoval of coal and oi l - f i r ed gener at i on and t he associ at ed

st or abl e nat ur e of t hei r r espect i ve f uel s wi t hi n t he st at e.

Cur r ent l y, Semi nol e hol ds enough f i r m gas t r anspor t at i on

capaci t y t o di spat ch i t s exi st i ng owned and t ol l ed ( pur chased

power ) NGCC f aci l i t i es at a 70 per cent capaci t y f act or , however ;

t hi s wi l l r educe Semi nol e’ s avai l abl e gas t r anspor t at i on

capaci t y f or use i n si mpl e cycl e gas f aci l i t i es dur i ng per i ods

of peak demand. Shoul d Semi nol e be r esponsi bl e f or const r uct i ng

NGCC gener at i on capaci t y t o r epl ace i t s coal - f i r ed f aci l i t i es

and oper at e t hose at a 70 per cent capaci t y f act or , Semi nol e wi l l

need a mi ni mum of 150, 000 decat her ms per day ( “Dt hs/ day”) of

i ncr ement al f i r m gas t r anspor t at i on capaci t y t o meet t hi s need.


32/38


33/38

30

be t he opt i mal deci si ons f or consumer s i n t he l ong- t er m. Gas

t r anspor t at i on commi t ment s wi l l l i kel y have a 20- year mi ni mum

t i me hor i zon meani ng t hat t he next gener at i on wi l l cont i nue t o

pay f or t he cost of hast y deci si ons.

Fuel di ver si t y i n Fl or i da and nat i onal l y cannot be st r essed

enough, and i t s i mpor t ance i s gr eat enough t o war r ant pr i or

r egul at i on at t he f eder al l evel ( see di scussi on above r egar di ng

t he Fuel Use Act ) . Fuel di ver si t y has served t he Uni t ed St at es

wel l t hr ough f r equent per i ods of f uel suppl y l i mi t at i ons, many

of t hem r el at ed t o nat ur al gas di sr upt i ons ( e. g. , hur r i canes

Kat r i na and Ri t a) r esul t i ng i n l i t t l e i mpact t o el ec t r i c gr i d

r el i abi l i t y.

The ext r eme col d of J anuar y and Febr uar y 2014, par t i cul ar l y

i n t he Mi d- At l ant i c and Nor t heast st at es, pr ovi ded a peek i nt o

t he pot ent i al consequences of r educi ng f uel di ver si t y and over -

concent r at i ng EGU demand i nt o nat ur al gas. Wi t h many EGUs

el i mi nat i ng t hei r abi l i t y t o ut i l i ze f uel oi l i n or der t o compl y

wi t h envi r onment al r egul at i ons, t hese uni t s i nst ead r el i ed

sol el y on nat ur al gas, whose spot pr i ces r eached r ecor d l evel s

exceedi ng $100/ MMBt u i n ar eas wi t hout adequat e suppl y. For

exampl e, i n t he Nor t heast , t he dai l y pr i ce of nat ur al gas maxed

out at $123. 81/ MMBt u i n J anuar y of 2014. Si mul t aneousl y, at t he


34/38

31

Henr y Hub, wher e suppl y was not i mpact ed by i nf r ast r uct ur e

const r ai nt s, t he pr i ce was onl y $4. 59/ MMBt u. Thi s pat t er n

r epeat ed i t sel f i n Febr uar y 2015 when t he pr i ce of gas i n t he

Nor t heast r eached $46. 00/ MMBt u at t he same t i me t hat t he Henr y

Hub pr i ce was onl y $2. 93/ MMBt u. The r api d pr i ce i ncr eases and

ext r eme vol at i l i t y of t he 2014 and 2015 gas mar ket s, associ at ed

wi t h suppl y const r ai nt s, l i kel y f or eshadows what woul d happen i n

Fl or i da i f t he CPP wer e t o t ake ef f ect wi t hout t he needed gas

i nf r ast r uct ur e. As EPA’ s pr oposal r esul t s i n addi t i onal

mi gr at i on f r om coal t o gas as a f uel choi ce, cost wi l l become a

secondar y pr obl em when EGUs ar e f aced wi t h gas suppl y shor t ages

and r el i abi l i t y i s j eopar di zed.

Thi s f uel di ver si t y need i s especi al l y cr i t i cal f or Fl or i da

gi ven i t s geogr aphi c l ocat i on, l ack of nat i ve ener gy pr oduct i on

capaci t y and l i mi t ed el ect r i c t r ansmi ssi on i mpor t capabi l i t y.

Wi t h t he except i on of a l i mi t ed amount of el ect r i ci t y t hat can

be t r anspor t ed i nt o t he st at e, Fl or i da i s essent i al l y an i sl and

t hat r el i es on gener at i ng uni t s wi t hi n t he st at e and t he

necessar y f uel suppl y f or t hose uni t s . Fl or i da’ s cur r ent

el ect r i c rel i abi l i t y i s dependent on EGUs’ abi l i t y t o i mpor t

f uel suppl y f or ei t her i mmedi at e consumpt i on, or t o st or e i t f or

consumpt i on l at er . Coal i s a st or abl e f uel sour ce i n Fl or i da

whi l e nat ur al gas i s not . Fl or i da does not have t he geol ogi cal


35/38

32

f or mat i ons t o economi cal l y st or e a mat er i al amount of nat ur al

gas under gr ound. EPA’ s pr oposal must al l ow f or a subst ant i al

amount of coal - f i r ed el ect r i c gener at i on t o r emai n i n Fl or i da t o

ensur e some l evel of f uel di ver si t y and t he r esul t i ng

r el i abi l i t y benef i t s. To r emove mor e t han 90 per cent of coal

capaci t y f r om Fl or i da as pr oposed by EPA woul d obl i gat e Fl or i da

t o r el y sol el y on ‘ j us t i n t i me’ i nvent or y f or near l y al l of i t s

f uel suppl y, wi t h r el i abi l i t y consequences f or any di sr upt i ons

i n t he suppl y chai n.


36/38

33


37/38

34


38/38

gillespie letter to general counsel ferrentino-seminole electric coop-jun-01-2016

Documents