BEFORETHEFLORIDAPUBLIC SERVICECOMMISSION

Inre: Petitionto determine needfor DOCKETNO. l10309-EI modernizationofPortEvergladesPlant, by ORDERNO. PSC-12-0187-FOF-EI**_F::...:I=-=o.:.:ri:.=d.::.a.::..P..:..o..:..:w..:..er:...&::.:....;L::.:i£h.::.t:...C=-o::.:m~a::.:n~.**____--ll ISSUED: April 9, 2012 The following Commissionersparticipated inthe dispositionofthis matter: RONALD A. BRISE, Chairman LISA POLAK EDGAR ARTGRAHAM EDUARDOE. BALBIS JULIE I. BROWN ORDER GRANTINGDETERMINATION OF NEED
BY THE COMMISSION: BACKGROUND On November 21, 2011, Florida Power & Light Company (FPL or Company) filed a Petition to Determine Need for Modernization of Port Everglades Plant (PEEC) pursuant to Sections 366.04 and 403.Sl9, Florida Statutes (F.S.), and Rules 2S-22.080, 2S-22.081, 2S-22.082 and 28-106.201, Florida Administrative Code (F.A.C.).! PEEC involves the construction ofa Combined Cycle power plant with a summer capacity rating ofabout 1,277 Megawatts (MW) and a commercial operation date ofJune 2016. PEEC will replace four dual-fuel fired steam generating units that entered service in the 1960s at FPL's Port Everglades site in Broward County, Florida. The modernized plant's primary fuel will be natural gas, and it will have the capability to bum a light fuel oil as a back-up fuel. On November 28, 2011, the Florida Public Service Commission (Commission) issued its Notice of Commencement of Proceedings for Determination ofNeed. On December 9, 2011, we issued Order No. PSC-II-OS6S-PCO-EI, establishing procedure in this docket. On January 13, 2012, the prehearing and hearing were noticed in the Florida Administrative Weekly. On January 17,2012, FPL and our staff(Staff) filed prehearing statements. A prehearing was heldonJanuary 31, 2012. OnFebruary 13,2012, we issued Prehearing Order No. PSC-12-0063-PHO-EI. On February 14, 2012, five days prior to the hearing and after the prehearing conference and the issuance ofthe Prehearing Order, the Florida Industrial Power Users Group (FIPUG) filed its Petition to Intervene. On February IS, 2012, FPL filed its Response in Opposition to FIPUG's Petition to Intervene. On February 16, 2012, FIPUG filed a Motion for Leave to file a Response to FPL's Motion in Opposition, FPL filed its Opposition to FIPUG's Motion for Leave to file a Response, and we issued Order No PSC-12-0070-PCO-EI, granting FIPUG's Petition to Intervene and denying FPL's Response in

Pursuantto Section 403.519, F.S., a hearing must be held within 90 days, and an ordergranting ordenying issued within 135 days, ofapetition for a determination. 

# o 2 I I 3 APR -9**~** FPSC-COMMISSIOI1 CLERK IORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 2 Opposition? On February 20, 2012, FIPUG filed aNotice ofPositions on Issues to be decided. Ahearingwasheld onFebruary 20, 2012. As reflected in the Prehearing Order, prior to the hearing, Staffwas recommending that the case be stipulated, all but one FPL witness had been excused from the proceeding, and testimony and exhibits, including all ofFPL'sresponses to Staffsdiscovery, wereto be inserted intothe record.3 The one unexcusedwitnesswas FPL witness Silvawho was availableto answer questions on all issues. At the hearing, the Chairmanclarified what "takingthe case as you find it" meant with respect to the FIPUG intervention. FIPUG argued for latitude while FPL argued that, based on the status ofthe case, FIPUG's participation should be limited to making an opening statement. "In an abundance ofcaution,"the Chairmanruled that,."we will allow for an opening statement, we will allow for cross-examination ofthe one witness, and participation as any otherpartywould participate atthisjuncturetoday." Briefs were due on March 2, 2012. On March I, 2012, FIPUG filed its Unopposed Motionfor Extension ofTimeto file its briefwhich was granted that day by OrderNo. PSC-12­ 0090-PCO-EI. OnMarch 5, 2012, FIPUG and FPL eachfiled apost-hearingbrief. In its post-hearing brief, FIPUG added an issue4 that was not included in the Prehearing Order. While the issue itself is not properly before US,5 FIPUG incorporated the argument associated with the issue by reference in its position on other issues. As such, the arguments have been considered in that context. The substance ofFIPUG's Proposed Conclusions ofLaw, numbered 1 through 3, are considered in our review of the issues. FIPUG's Proposed Conclusions ofLaw, numbered 4through 6, suggest procedural errors at hearing; these are more appropriately raised onreconsiderationorappeal. Pursuant to Section 403.519(3), F.S., this Commission is the sole forum for the determination ofneed for an electrical powerplant. In making our determination, we must take into consideration the need for electric system reliability and integrity, the need for adequate electricity at a reasonable cost, the need for fuel diversity and supply reliability, whether the proposed plant is the most cost-effective alternative available, and whether renewable energy sources and technologies, as well as conservation measures, are utilized to the extent reasonably available. Based on the plain meaning of the statute, a utility need not prevail on every consideration in order for us to determine that there is a need for a proposed electrical power plant. This Order will reference exhibits and testimony that are contested by FIPUG. However, we find that witness Silva's direct, summary, and extensive cross examination testimony, even when standing alone, provides an adequate basis for us to determine the need for PEEC. Our

2 The Order Granting Intervention provided that, "[P]ursuant to Rule 25-22.039, Florida Administrative Code, FJPUG takes the case as it finds it as set forth in OrderNo. PSC-12-0063-PHO-El, issued on February 13,2012." 3 OrderNo. PSC-12-0063-PHO-EJ, at Section VI, pp. 3-4. 4 FIPUG's Issue 6. 5See OrderNo. PSC-II-0565-PCO-EI at Section VII. C, p. 6.WaiverofIssues.

-------- .--- -------------­ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 3 decision in this case is consistent with the proposed stipulated language that was incorporated in the Prehearing Order.

ISSUES PRESENTED

A. Electric SystemReliability and Integrity We have been asked to determine whetherthere is a need for the proposed modernization ofFPL's Port Everglades plant, taking into account the need for electric system reliability and integrity, asthis criterionis used in Section403.519(3), F.S.

FPL asserts that adding PEEC in 2016 is the most cost-effective power source for customers and thatdelaying PEEC'sin-service date will result in increased costs for construction labor and equipment and the potential for substantial environmental cost increases. The Company argues that PEEC's location within the Company's most concentrated service area, Miami-Dade and Broward County, enhances reliability in terms of transmission load-togeneration balance and fuel supply. FPL contends that adding small capacity additions would ignore this Commission's precedent and fundamental principles of resource planning. The Company asserts that it has a steadily growing need that will reach 1,468 MW in 2021 and that this scenario is consistent with a prior Commission decision in which we approved the need for proposed generationin orderto meet forecasted growthbeyondthe in-service date. FIPUG FIPUG asserts that FPL failed to establish and carry its burden ofproofthat the Company needs an additional 1,277 MW project to maintain system reliability and integrity. FIPUG argues that, at best, FPL has identified only 284 MW ofneed in 2016, and questions the need for a 1,277 MW project to meet a 284 MW need. FIPUG contends that there are more cost-effective and efficient ways to meet this need, and that FPL failed to pursue such alternatives. FIPUG argues that the reliability need for PEEC is driven by the reduction ofpurchased power agreements and the increase in wholesale sales. FIPUG asserts that FPL did not explore whether it could avoid the need to build PEEC by simply operating for abriefperiodoftimebelowa 20 percentreserve margm. Review FPL evaluates the adequacy of its resources to meet the needs of its customers considering peak demand and a 20 percent reserve margin criterion. The 20 percent minimum reserve margin criterion is based on the reliability planning standard FPL stipulated to, and this Commission approved by Order No. PSC-99-2507-S-EU. FIPUG expressed concern that FPL

--- ..... -- ... -------­ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE4 did notexplore adeparture from its 20percentcriterion. However, the Chairman determined that reliance on the 20percentreserve margin criterion is "notone ofthe issues that'staken up in the Prehearing Order," and is thereforebeyond the scope ofthisproceeding. FPL's projected summer peak demand is based on assumptions developed by industry experts, is consistentwith historical experience, and relies on forecasting methods that havebeen previously reviewed and accepted by this Commission. FPL's load forecasts are reasonable for the purposes of this docket and include adjustments for wholesale loads. Although FIPUG questions the Company's decision to sell 200 MW ofpower to Seminole Electric beginning in 2014, the Chairman determined that the appropriateness of FPL's wholesale agreements was outsidethe scope ofthisproceeding. FPL's projected summer capacity includes its currently active generation fleet as well as future generation additions that we have already approved. FPL's projected summer capacity also considers the cost-effective removal of older generating units from active service which reduces FPL's summer capacity in 2016. Additionally, the expiration of existing purchased power agreements results in a loss of 1,306 MW of summer capacity by 2016. FPL has determined that renewing its agreements with Southern Company (totaling 931 MW), which expire at the end of2015, would no longer be economic for its customers. While its initial filing indicatedthat 375 MWofpurchasedcoal generation from JEA will no longerbe available dueto Internal Revenue Service regulations in 2016, the Company has since expressed that the purchase may extend beyond 2016. Upon review, we hereby require that FPL continue to report the status ofthe PEEC to us annually. Ifthe economics ofpurchasedpower change, to be more cost-effective,the Company must act accordingly. Based on current projections ofload growth and available firm capacity, FPL's summer reserve margin will fall below 20 percent starting in 2016. Table 1, below, summarizes FPL's projected capacity needs through 2021. The addition ofPEEC in 2016 will provide 1,277 MW ofcapacityto help satisfythe Company'scapacity needs through 2020. FIPUG contendsthatthe size ofPEEC is in excess ofthe projected need. However, while the addition ofsmaller units in 2016 would delay the in-service date of PEEC, the record reflects that this approach is not economic atthis time. Table 1: FPL'sReserve Margin Analysis

Total SummerCapacity Finn Peak Demand Reserve Margin MWNeed 2012 24.679 19,637 25,7% (1,115) 

### I 2013 25,294 19,822 27,6% (1,507) 

## I 2014 26,597 20,971 26,8% (1.432) 2015 27,553 21,382 28,9% (1,894) 2016 25.851 21,779 18,7% 284 2017 25.851 21.862 18,2% 384 2018 25,851 21.875 18,2% 400 2019 25,851 22.111 16,9% 683

# ------------ ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGES

Total SummerCapacity Firm Peak Demand Reserve Margin MWNeed 2020 25,851 22,437 15.2% 1,074 2021 25,851 22,766 13.6% 1,468
In evaluating the results of the reserve margin criterion analysis, FPL has expressed concern that its reserves over time will become increasingly dependent upon DSM resources, as opposed to generation resources, Without new capacity in 2016, FPL's total reserves would be 4,072 MW ofwhich only 1,536 MW would come from generation resources, Therefore, DSM would provide most ofthe system reserves. FPL is conducting reliability studies to determine if the 20 percentreserve margin criterion shouldbe supplemented with a minimum reserve margin contribution from generation-only resources, FIPUG did not address potential concerns about greaterreliance on DSM. FPL has also expressed a concern regarding its growing reliance on transmission for importing power into Miami-Dade and Broward Counties (the most populated counties in FPL's territory with the highest concentration ofcustomer load). The two counties togetherrepresented more than 40 percent of FPL's total load in 2011, approximately 9,500 MW. The installed capacity in the area, in 2011, was approximately 5,000 MW. Therefore, FPL is largely reliant on power imported into the area which must overcome line losses and is more susceptible to interruptions from natural elements, such as lightning and storms. As such, placing generation near FPL's load centerin Miami-Dade and Broward Counties is desirable. Iftheaddition ofnew generation into Miami-Dade and Broward Counties were delayed beyond 2020, FPL would be forced to incur over $600 million in transmission upgrades to continue reliable service into southeastern Florida. FIPUG did notcontestthe benefits oflocating generation nearloadcenters. Section 403.519(3), F.S., requires that we consider the need for fuel diversity and supply reliability. PEEC will be capable ofburning light fuel oil in the event ofa natural gas supply disruption and has on-site storage to allow 72 hours ofcontinuous operation. Additionally, the Port Everglades site, because ofits coastal location, allows the receiptoflight oil backup fuel via waterborne transportation. The two delivery alternatives facilitate flexible re-supply oflight fuel oil to PEEC in emergency situations. FIPUG did not contest the benefits ofPEEC's dual fuel capability. Decision There is a need for Port Everglades Next Generation Energy Center, taking into account the need for electric system reliability and integrity. Based on the 20 percent reserve margin criterion adopted by FPL pursuant to a stipulation with this Commission, FPL projected in its filing that additional capacity to meet firm peak demand will be needed by the summer of2016. IfFPL did not construct PEEC until 2019, the Company's projected reserve margin would drop to 18.2 percent in 2017 and 2018 and wouldbe primarily made up ofDemand Side Management resources. After accounting for all projected DSM from cost-effective programs approved by this Commission, FPL's projections at the time ofthe filing indicate that by 2016, the Company will**-~-~~~~~~~~**ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 6 have a capacity need of284 MW in order to adhere to FPL's minimum reserve margin criterion of 20 percent. The timing of FPL's projected need was largely driven by the expiration of existingpurchasedpoweragreementstotaling 1,306 MW ofsummercapacity and the decisionto place certain units into inactivereserve mode. PEEC will provide 1,277 MW ofcapacityto help satisfythe Company'scapacity needsthrough 2020. PEEC will also enhance reliability in terms offuel supply because its coastal location facilitates the receipt of light oil backup fuel via both truck delivery and waterborne transportation. The two delivery alternatives will allow for flexible re-supply oflight fuel oil to PEEC in emergency situations. Such deliveries will augment the 72 hour on-site fuel supply. Additionally, PEEC is favorable from a transmission reliability perspective because it reduces the load-to-generation imbalance in the Miami-Dade and Broward County area and alsoprovides voltage support. B. Renewable Energyand Conservation We have been asked to determine whether there are any renewable energy sources and technologies or conservation measures taken by, or reasonably available to, FPL which might mitigatetheneed fortheproposed modernizationofthe Company'sPortEvergladesplant.

FPL asserts the following: its forecast accounts for all projectedDSM from Commissionapproved cost effective programs; it has identified no additional cost-effective DSM that might mitigate the benefits ofPEEC; additional cost-effective DSM cannot be counted on to contribute to system reliability; and, all anticipated cost-effective firm capacity that will be available from renewable resources and qualifying facilities through 2016 is already reflected in FPL's resource plan. FPL disputes FIPUG's assertion that the Company failed to pursue opportunities for renewable energy contracts with QFs in Miami-Dade andBrowardCounties. FIPUGFIPUG asserts thatFPL failed to adequately explore the availability ofrenewable energy resources that are available to meet FPL's need, ifany. FIPUG argues that witness Silva's firsthand knowledge about the availability offour resources was limited and that FPL has failed to carry its burden ofproofregarding renewable energy. Review

FPL's current DSM projections consider all programs that we have currently approved. Many of the approved DSM programs were based on projections through 2014 only. For purposes ofFPL's analyses, the Company assumed that it will continue to achieve its projected incremental level of DSM-based peak demand savings for the years 2015-2025. By 2016, incremental DSM and load management are projected to reduce FPL's peak demand by more than 2,500MW. FIPUGprovidedno evidencecontradictingFPL'sDSMprojections.ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 1l0309-EI PAGE7 Similarly, all anticipated cost-effective firm generating capacity, that will be available from renewable resources and qualifying facilities through 2016, is already reflected in FPL's resource plan. In additionto existing contracts, FPL anticipates that itwill secure approximately 110 MW ofadditional firm purchasedpower from renewable resources for atotal of740 MWby 2016. The Company has not received any offers through its standard offer contract that would defer the need for PEEC. FPL is currently in negotiations for additional firm purchased power from renewable resources potentially totaling up to 180 MW; however, it is unlikely that these negotiations will result in firm capacity anyearlierthan2019. At the hearing, FIPUG's counsel discussed multiple QFs located near FPL's load center; FPL presented the following testimony regarding these facilities: Florida Crystals' Kelantan facility is currently under contract with FPL, but only to sell as-available energy. Florida Crystals does not want to commit firm capacity to FPL; the two Broward County waste-toenergy facilities previously sold firm capacityto FPL, butthey rejected FPL's attempts to renew their contracts because they preferred to "play the market" by selling their powerto the highest bidder each day; and, the Monte nay waste-to-energy facility in Miami-Dade County has consistentlychosento sell its powerindependentlyratherthan sellingto FPL. FIPUG failed to present persuasive evidence that additional firm generation from renewable facilities will be available by 2016. Moreover, as we found in Order No. PSC-l1­ 0360-PAA-EI, it is unlikely that a respondent to a Request for Proposal (RFP) could provide similarbenefits tothoseprovidedbyPEEC.6
Decision FPL's forecast of resource needs takes into account all projected DSM from costeffective programs approved by this Commission. No additional cost-effective DSM has been identified in this proceeding which could mitigate the need for new generation. Similarly, all anticipated cost-effective firm generating capacity, that will be available from renewable resources and qualifying facilities through 2016, is already reflected in FPL's resource plan. In addition to existing contracts, FPL anticipates that it will secure approximately 110 MW of additional firm purchasedpowerfrom renewable resources for a total of740MWby 2016. FPL is currently in negotiations for firm purchased power from renewable resources potentially totaling up to 180 MW, however, it is unlikely that these negotiations would result in firm capacity any earlierthan 2019. C. AdequateElectricity at a Reasonable Cost

Wehave been asked to determine whetherthere is a need for the proposed modernization of Florida Power & Light's Port Everglades plant, taking into account the need for adequate electricity ata reasonable cost, asthis criterionis used in Section 403.519(3), F.S.

6 This finding was unopposed by FIPUG orany otherentity.ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 8

FPL asserts that there is a need for PEEC taking into account the need for adequate electricity at a reasonable cost. FPL contends that PEEC's estimated installed cost is $1,185 million and that PEEC will take advantage ofan existing site, existing infrastructure and existing transmission system connectivity which represent a cost advantage. FPL argues that it has extensive experience building combined cycle power plants (CC) on time and on budget. The Company asks that our determination not be predicated on the use ofa particular combustion turbine (CT) design. Instead, the Company asks for flexibility through its analysis and negotiations to select the CT design that best meets customers' needs in terms ofreliability and cost-effectiveness. FPL agrees that ifit decides to use a CTdesign otherthanthe "J"technology, the Company will include in its annual report the comparative cost advantage ofthe alternative design chosen. FPL agrees to make such selection only ifthe projected costs to FPL'scustomers wouldbe lower as aresult ofthe alternate design.

By cross reference to arguments raised related to system reliability and whether FPL can serve its projected energy load without PEEC, FIPUG asserts that there is not a need for the proposed modernizationtaking into accountthe need for adequate electricityat areasonable cost. In this context, FIPUG disputes the need to construct PEEC and the proper comparisons to the PEEC resource plan. Review Forthis proceeding, FPL used projected costs and operating characteristics ofthe "J" CT technology. Although FPL has no direct experience with the operation of"J" CT technology, it has been supplied preliminary operating specifications for the technology. In order to quantify projected fuel/efficiency and other variable costs, FPL used the PMAREA production costing modeL The PMAREAmodel, which simulatesthe operation ofFPL's systemonanhourlybasis, has been usedbyFPL in fuel costrecoveryproceedings as well as in numerous needproceedings brought before this Commission. FPL's'analysis projects that PEEC will save customers $425 millionto $838 million cumulative presentvalue revenue requirements (CPVRR) as compared to the other available self-build alternatives, and at least $900 million CPVRR compared to third party-build alternatives. FPL is considering a number of advanced combustion turbine designs which could impact the overall cost ofthe PEEC project. For this proceeding, FPL used projected costs and operatingcharacteristics ofthe "J"combustionturbine technology, with which FPL has no direct experience. FinancialAssumptions In performingits analyses, FPLuses an incremental overall costofcapital of7.29 percent on an after-tax basis. This return is based on acapital structure of59 percentequity at acostrate of 10 percent and 41 percent debt at a cost rate of5.5 percent. The incremental cost ofcapital isORDERNO. PSC-12-0l87-FOF-EI DOCKETNO. l10309-EI PAGE 9 appropriate to use when evaluating new investment. FPL's other financial assumptions include an annual inflation rate of3.0 percent for capital expenditures and 2.5 percent for Operation and Maintenance (O&M) expenses. Upon review, we find that the financial assumptions used by FPL are reasonable and are consistent with the financial assumptions included in recent Commission-approved need determination filings. There is no evidence in the record which disputes the reasonableness ofFPL'sfinancial assumptions. Generation CostEstimatesandProjectedPerformance Specifications The installed cost ofPEEC is projected to be approximately $1,185 million. FPL's cost estimate includes benefits associated with utilizing the existing site and infrastructure. PEEC is projected to have a heat rate of 6,330 BtulkWh at full capacity and is expected to have an availability factor of 95.4 percent. The cost estimates, heat rate, and equivalent availability parameters for PEEC are comparable with similarprojects approvedby this Commission, Table 2, below, summarizes the PEEC project. FIPUG did not dispute the capital and operating assumptions associatedwith PEEC, Table 2: Summary ofPEEC

Installed Cost ($ Million) I Fixed O&M ($/kw-yr) 2016$

Variable O&M ($/MWh) 2016$ Heat Rate (BTU/kwh) 6,330 EquivalentAvailability (%) 95.4 Capacity Factor (%) 95 7.99 0.10

Fuel Costs FPL represents thatits forecasts are based onrecognized, independent sources offorecast information. For natural gas, FPL used an escalation rate of 1.706 percent for the conversion forecast based on the average annual escalation beyond the year 2025 from the Energy Information Administration's (EIA) Annual Energy Outlook April 26, 2011, price forecast. FPL states that the "fuel price forecasts reflect the projected supply, demand and price for fuel oil, natural gas, and coal, as well as the transportation ofthese fuels to the existing and proposed sites." The fuel forecasts were originally prepared using the August 1, 2011, fuel price forecast. The oil price forecasts through 2013 are based on the forward curve for New York Harbor 1 percent sulfurheavy oil, U.S. GulfCoast 1percentsulfurheavy oil, and lightfuel oil commodity prices. The natural gas price forecast through 2013 is based on the forward curve for the Henry Hub natural gas commodity prices. For 2014 and 2015, FPL combined the forward curve and projections from PlRA Energy Group, giving each equal weight. For the period 2016 through 2025, FPL used the annual projections from PlRA Energy Group, For the period beyond 2025, FPL used the rate ofescalation from the EIA. Transportation costs are added to the commodity prices to obtain delivered prices. FPL asserts that the foregoing fuel forecast methodology is consistent with the approach used in previous filings, including the 2011 Ten-Year Site Plan.ORDERNO. PSC-12-0I87-FOF-EI DOCKETNO. II0309-EI PAGE 10 FIPUG did not dispute FPL's fuel forecast. Upon review, we find that FPL'sfuel price forecasts arereasonable for purposesofthis proceeding. Environmental Costs FPL has developedthree emission price forecast scenarios (ENV I, ENV II, and ENV III) based on forecasts developed by ICF International. These three emission price forecasts were used in FPL'sfeasibility analyses in DocketNo.**II0009~EI.** Forthe purposes ofthisproceeding, FPL relied on its ENV II forecast which represents the mid-range forecast. The compliance costs used were ICF International's 2011 4th quarter forecast for greenhouse gas legislation and the EPA'sCross StateAirPollution Rule. FIPUG questions the use ofcarbon costs based onFPL'sacknowledgementthat costs for carbon emissions are not currently imposed. However, FIPUG did not offer a witnessto support an alternate emissions price forecast. We observe that FPL's ENV II forecast does not reflect costs for carbon emissions until 2018. Upon review, we find that FPL's ENV II forecast is based on widely acceptedemissionprice forecasts and isreasonable for use inthis proceeding. Decision There is a need for PEEC, taking into account the need for adequate electricity at a reasonable cost. The estimated total installed cost for PEEC is $1,185 million, in 2016 dollars. PEEC will take advantage ofan existing site, existing infrastructure and existing connectivityto FPL's transmission system, thereby eliminating the costs for those components. Furthermore, FPL's analyses show that the resource plan that includes PEEC in 2016 is projected to save customers $425 million to $838 million CPVRR as compared to the other available**self~buiJd** alternatives, and at least $900 million CPVRR compared to third**party~build** alternatives. Accordingly, PEEC is projectedto provide needed electricity at areasonable cost. FPL is considering a number of advanced combustion turbine designs which could impact the overall cost ofthe PEEC project. For this proceeding, FPL used projected costs and operating characteristics ofthe "J"combustionturbine technology, with which FPL hasno direct experience. Therefore, FPL shall report annually to this Commission the budgeted and actual costs compared to the estimated total**in~service** costs ofthe proposed PEEC project relied upon in this proceeding. IfFPL decides to utilize a different combustion turbine design from the one presented in this proceeding, then FPL shall include in its annual report the comparative cost advantage ofthe alternative design chosen. Such a selection shall only be made ifthe projected costto FPL'scustomersis loweras aresult ofthe alternate design.

D. Fuel Diversity We have been asked to determine whetherthere is aneed for the proposed modernization ofFPL'sPort Everglades plant, taking into accountthe need for fuel diversity, as this criterion is used in Section403.519(3), F.S.

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FPL argues that there is a need for PEEC taking into account the need for fuel diversity. The Company argues that a large part ofits fuel diversity efforts consist ofimproving system efficiency. FPL asserts that PEEC will be fueled primarily by natural gas, can bum lightoil as a backup fuel, and is projected to improve the plant'sheat rate by 35 percent, thus reducing FPL's use ofnatural gas usage by about 90 million MMBtu and fuel oil by about 10.4 million barrels. FPL contends that PEEC's ability to bum light oil as a backup fuel further enhances FPL's reliability in the event ofdisruption in the supply or delivery ofnatural gas. Additionally, the Company argues that because PEEC's location is adjacent to a deep-water port that has significant oil storage, the light oil can be re-stocked rapidly allowing PEEC to continue running on light oil for much longer than would be the case at land-locked CC facilities where the light oil mustbe re-stockedby truckdeliveries. FIPUGFIPUG argues that the proposed Project does not provide fuel diversity and that, to the contrary, it increases FPL's reliance on natural gas. FIPUG asserts that, by ignoring the possibility of contracting with renewable facilities, FPL did not adequately consider fuel diversity. Thus, FIPUG contends that approval ofPEEC would further the Company's reliance onnatural gas. Review PEEC will be fueled by natural gas and, to enhancefuel supply reliability, itwill use light oil as a backup fuel. The construction ofPEEC will not substantially change FPL's generation fuel mix. However,the additionofnew coal ornucleargenerationby 2016 is not feasible and no cost-effective renewable generation has been identified that could defer the need for PEEC. While running oil generation ahead of gas generation could reduce natural gas use from 60 percent to 48 percent, such a choice is not economical. Upon review, we find that considering only the generation fuel mix is a misleading view of fuel diversity. We have previously recognized that the reduction offuel consumption as a step towards fuel diversity. We find that reducing the amount ofanyone fuel within a utility's portfolio provides the benefit oflessening that utility's exposureto potentialprice fluctuations associatedwiththat fueL When compared to returning the existing units at Port Everglades to service, adding PEEC will improve the plant's heat rate by 35 percent and will improve FPL's overall system heat rate by 1.3 percent. By increasing the efficiency ofits Port Everglades unit and its overall system, FPL will reduce the amount ofnatural gas and fuel oil needed to serve the same needs of its customers. FPL'seconomic analysis projects more than $1 billion in fuel savings when PEEC is compared to returning the existing Port Everglades units to service. Table 3, below, summarizes the projected fuel reductions associated with PEEC when compared to returning the existingPort Everglades units to service. Table 3: PEEC Fuel Reductions Comparedto ReturningUnitsto ServiceORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 12

Natural Gas Oil (MMBtu) (Bbl) 90,000,000 10,484,000 Another benefit ofreduced fuel consumption is reduced emissions. PEEC is projectedto reduce greenhouse gas emissions by more than 22 million tons over the life ofthe project. Reducing emissions can be beneficial to FPL's customers because ofthe risk that the costs to comply with various environmental regulations in the future could be higher than projected. FPL'seconomic analysis projects more than $400 million in environmental savings when PEEC is compared to returning the existing Port Everglades units to service. Table 4, below, summarizes the projected emissions reductions associated with PEEC when compared to returningthe existingPortEverglades unitsto service.

Table 4: PEEC Emission Reductions Comparedto ReturningUnitsto Service

502 NO. CO2 (Tons) (Tons) (Tons) 40.661 32,635 22,232,000 FPL's utilization ofthe Port Everglades site will allow the use ofexisting natural gas infrastructure; thus, only additional compressioninfrastructure will be requiredto supply the site. FPL projects that itwill need additional natural gas supply and transportation to meet its overall system requirements by 2017, whether or not the Port Everglades Plant is modernized. FPL currently is preparing arequest for proposals to meet its future gas transportationneeds. Decision There is a need for PEEC, taking into account the need for fuel diversity. PEEC will be fueled bynatural gas, and to enhance fuel supply reliability, it will use light oil as a backup fuel. Compared to returning to service the existing units at Port Everglades, adding PEEC will improve the plant's heat rate by 35 percent and will improve FPL's overall system heat rate by 1.3 percent. The improved heat rate is projected to reduce FPL'suse ofnatural gas by about 90 million MMBtu and fuel oil by about 10.4 million barrels over a 30-year period. The PEEC project is also projected to reduce emissions of S02, NOx, and CO2 from FPL's system by approximately 40 thousand, 33 thousand, and 22 million tons, respectively, over the life ofthe project. With or without the modernization ofPort Everglades Plant, FPL projects that it will need additional natural gas supply and transportation to meet its overall system requirements by 2017. FPL is currently preparing a request for proposals to meet its future gas transportation needs. E. CostEffectiveness We have been asked to determine whether the proposed modernization of FPL's Port Everglades Plant will provide the mostcost-effective source ofpower, as this criterion is used in Section403.519(3), F.S.ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 13

FPL asserts that PEEC is the most cost-effective source ofpower and that the PEEC Resource Plan will provide savings to FPL's customers when compared to alternative plans based on similarreliability criteria. The Company argues that, comparedto returningthe existing Port Everglades unitsto service, adding a CC unit or adding a CT unit thatdefers PEEC to 2019, adding PEEC in 2016 will save customers $469, $838 million, and $425 million, respectively. The Company argues that PEEC will save at least $900 million compared to third party-build alternatives

FIPUGFIPUG argues that FPL has failed to carry its burden ofproofto establish that PEEC is the most cost-effective source ofpower. FIPUG contends that FPL has failed to explore other alternatives and that FPL proposes to meet a 284 MW need with a 1,277 MW project. FIPUG questions the use of carbon costs when evaluating PEEC and argues that a resource plan consideringareserve margin ofslightly lessthan 20 percentcould save ratepayers approximately $29 million. FIPUG argues that we should deny FPL's need determination because it is not the most cost-effective source ofpoweravailable. Review Our decision on a need determination petition must be based on the facts as they exist at the time ofthe filing with the underlying assumptionstested for reasonableness. Itis prudent for a utility to continue to evaluate whether it is in the best interests ofits ratepayers for a utility to participate in a proposed power plant before, during, and after construction ofa generating unit. If conditions change from what was presented at the need determination proceeding, then a prudent utility is expectedto respond appropriately. In addition, we have ongoing authority and an obligationto ensure fair,just,and reasonable rates for Florida'sutilities andratepayers. FPL evaluated multiple resource plans to meet its projected need. The resource plan at issue in this docket involves the construction of PEEC in 2016. FPL also evaluated the following: a resource plan which assumes a return to service of the existing Port Everglades units (Return to Service); a resource plan which assumes construction ofa combined cycle unit at a greenfield site in 2016 (GFCC); and, a resource plan which assumes the construction of two new combustion turbines at a greenfield site in 2016 and deferring PEEC to 2019 (GFCT). Each resource plan evaluated in FPL's petition satisfies its 20 percent reserve margin criterion overthe analysis horizon. FPL evaluated each resource plan over the projected 30-year useful life of a new combinedcycle powerplant. FPL'sanalyses also relied on the assumptions we reviewed in this Orderat Section C., above. While FIPUG asserts that the use ofcarbon costs is not appropriate for this proceeding, FIPUG did not present testimony to further its argument. Moreover, FPL's resource plans wereORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 1l0309-EI PAGE 14 evaluated considering varying natural gas prices, and assuming no costs associated with future carbon regulation. Upon review, we find that the assumptions used in FPL's base case are appropriate. FPL's analyses show that the resource plan that includes PEEC in 2016 is projected to save customers $425 millionto $838 million CPVRRwhen consideringthe assumptions filed by FPL (Base). Underthe least favorable evaluation, which considers no-carbon costs as argued by FIPUG, the PEEC resource plan remains the most cost-effective alternative that maintains a 20 percentreserve margin. The economic analysis ofPEECis summarizedinTable 5, below.

Table 5: Results ofEconomicAnalyses Relative to PEEC (millions. CPVRR. 20\\$) Sensitivity {Positivevalues indicate netcostswhen compared to PEEC} I Resource LowNG No Carbon High NG Base Plan I Return to 469 440 102 533 Service GFCC 841 834 816 838 276 425 456 410 GFCT
While it is highly unlikely that a third party could build a new generating unit at a site in Miami-Dade or Broward Counties by 2016, FPL estimated the potential cost ofsuch a project. When compared to PEEC, which will require no cost for new land, no cost for water access, no cost for a new gas pipelineto deliverfuel, and no cost for newtransmission lines to connect, any third party proposal is projected to require additional costs of at least $900 million and may exceed $1.1 billion. FIPUG argues that FPL did not explore a departure from its 20 percent criterion andthat a resource plan considering a reserve margin of slightly less than 20 percent could save ratepayers approximately $29 million. However, based on the informationreferencedbyFIPUG inits brief, we are unable to determine the genesis ofFIPUG'sclaim. The record reflects that ifFPL did not construct PEEC until 2019 (thus dropping below the 20 percent criterion) or ifthe Company entered into a purchased power agreement that deferred construction of PEEC to 2019 (thUS maintaining the Company's 20 percent reserve margin in the nearterm) thecosts would be as reflected in Table 6, below.ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 15 Table 6: Results ofEconomic AnalysesRelativeto PEEC (millions, CPVRR, 2011$) Sensitivity (Positivevalues indicate netcostswhen compared to PEEC) Resource

Plan Base High NG LowNG I No Carbon Delayw/PPA 30 60 16 

### I -119 Delay -18 12 -32 I -167 I Although these resource plans demonstrate potential savings when compared to the PEEC resource plan, they do not consider equal levels ofsystem reliability and may notprovide a meaningful economic comparison. Without new capacity in 2016, FPL'stotal reserves would be 4,072 MW of which only 1,536 MW would corne from generation resources. Therefore, DSM would provide most of the system reserves. This could lead to excessive use of load control andpotential defections from theprogram. Only the "Delay" resource plan shows savings when compared to PEEC under the base case and an increase to the price ofnatural gas could eliminate those savings. Moreover, FPL expressed concernthat delaying PEEC could lead to relatively significantcost escalations. FPL's analyses which consider construction ofPEEC beyond 2016 assume a standard escalation rate of 3 percent. National economic recovery could cause greater competition for labor, materials, and equipment, thus raising the cost of the unit more than the assumed 3 percent increase. Additionally, potential environmental regulation combined with low gas prices could result in utilities shutting down coal generation and adding new gas generation. Finally, an increase in demand for equipment for combined-cycle units throughout the country could raise the cost of projectslike PEEC. Decision PEEC is the most cost-effective alternative available, as this criterion is used in Section 403.519, F.S. FPL's economic analyses demonstrate that adding PEEC in 2016 is projected to result in customer savings of: $469 million CPVRR when compared to returning to service the existing Port Everglades units; $838 million CPVRR when compared to adding a combined cycle unit at a greenfield site; and, $425 million CPVRR when compared to adding a combustion turbine unit at a greenfield site in 2016 and deferring PEEC to 2019. In addition, when compared to third party-build alternatives, customer savings are projected to amount to at least$900 million and may exceed$1.1 billion. If FPL did not construct PEEC until 2019, the Company's projected reserve margin would drop to 18.2 percent in 2017 and 2018 and would be primarily made up of DSM resources. Such a scenario was also projected to produce near-term savings as well as overall long-term savings. However, since this scenario does not consider equal levels of system reliability, this scenario may not provide a meaningful economic comparison. FPL's analyses indicate that a short-term purchased power agreement for the years 2016 through 2019, which is**-~--** .... -_. 

### -----------­ORDERNO.**PSC~12-0187-FOF-EI** DOCKETNO. 110309-El PAGE 16 projected to maintain the Company's 20 percent reserve margin criterion, could result in nearterm savings, but would have net costs over the analysis period ending in 2047. These analyses reflect only a standard assumed escalationrate of3percent and do not take into account factors specific to the current PEEC project that could substantially increase PEEC's costs if it is deferred. F. DeterminationofNeed We have been asked whether, based on the resolution ofthe foregoing issues, we should grant Florida Power & Light Company's petition to determine the need for the proposed modernization ofFloridaPower & Light's PortEverglades plant.

FPL argues that we should grant its petition and asserts the following: Bringing PEEC into service in 2016 is the most cost effective source ofpower for customers, and delaying PEEC results in cost penalties; PEEC enhances system reliability, reduces dependency on natural gas and further improves FPL's already low air emissions profile; PEEC is the best option available for FPL'scustomers taking into account the need for electric system reliability and integrity, the need for adequate electricity at a reasonable cost, the need for fuel diversity and supply reliability, cost-effectiveness, and the availability of renewable or conservation alternatives; PEEC will optimize the use of an existing site and is thus consistent with the Commission's direction that before a utility constructs a new generating unit at a greenfield site, it must considerthe feasibility ofmodernizationofexisting units. FIPUG FIPUG asserts that we should deny FPL's Petition the for the reasons and proposed findings of fact setinits in its arguments regarding each issue inthisdocket. Review Our decisions at Sections A through E, above support construction ofPEEC in 2016. Moreover, upon review, we find that, in the absence ofsignificant contravening evidence, the testimony ofwitness Silva, when taken alone, supports the determination ofneed for PEEC in 2016. PEEC will increase FPL's system generation to maintain system reliability and, because PEEC can receive backup fuel delivered via waterborne transport, it will contribute to system reliability in the event of a disruption in gas delivery. No cost-effective DSM, not already reflected in FPL'sresource plan, hasbeenidentifiedto deferthe need for PEEC. Similarly, there are no known additional cost-effective renewable resources that could provide any significant amount of firm generating capacity prior to 2019. Because PEEC is needed to meet FPL's reliability criteria, and it is the most cost-effective alternative available, it is expected to provide adequate electricity at a reasonable cost to FPL's customers. PEEC will enable FPL to reduce fossil fuel use thus contributing to fuel diversity. Analyses indicate that PEEC is the most costeffective alternative compared to returning to service olderunits now in inactive reserve, adding a new combined cycle unit at a greenfield site, or delaying PEEC by adding CTs. Additionally,ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 17 the record reflects that PEEC will provide numerous benefits, including the addition ofbaseload generation near FPL's load center, the optimization ofan existing site, and the improvement of the efficiencyofFPL'sgenerationfleet. Decision The addition ofPEEC in 2016 will optimize the use ofan existing site and is consistent with the Commission'sbeliefthat before a utility constructs anewgeneratingunit at a greenfield site, itmustconsiderthe feasibility ofmodernization ofexistingunits. G. ClosingDocket We havebeen askedto determine whetherthisdocket shouldbe closed.

FPL asserts that, upon issuance ofan order granting its petitionto determine the need for PEEC, we should close this docket. FPL does not object to our including in a final need order the commitmentsthe Companymade inthe Proposed Stipulation. FIPUGFIPUG assertsthatthe Docket shouldbe closed. Decision Upon issuance ofan order granting FPL's petition to determine the need for PEEC, this docket shall be closed. Pursuant to Section 403.519, F.S., this Commission is the sole forum for the determination ofneed for**m~or** new power plants. In making our determination, we must take into account the need for electric system reliability and integrity, the need for adequate electricity at a reasonable cost, the need for fuel diversity and supplyreliability, and whether the proposed plant is the most cost-effective alternative available. We must also expressly consider whether renewable generation or conservation measures taken by or reasonably available to the utility might mitigate the need for the proposed plant. Our decision on a need determination petition must be based on the facts as they exist at the time ofthe filing with the underlying assumptions tested for reasonableness. It is prudent for a utility to continue to evaluate whether it is in the best interests ofits ratepayers for a utility to participate in a proposed power plant before, during, and after construction of a generating unit. If conditions change from those presented at the need determination proceeding, then a prudent utility would be expected to respond appropriately. In addition, we have an ongoing authority and obligation to ensure fair, just, and reasonable rates for Florida's utilities and ratepayers. FPL shall continue to report the status ofthe PEEC to this Commission inthe annual reportrequiredby ourdecision at Section C. ofthis Order.ORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 18 Basedonthe foregoing, itis ORDERED by the Florida Public Service Commission that the Florida Power & Light Company's November 21, 2011, Petition to Determine Need for Modernization of Port Everglades Plantis hereby granted as setforth inthe body ofthis Order. Itis further ORDERED that, Florida Power & Light Company anuaUy shall file with this Commissionthe informationrequired in the bodyofthis Order. ByORDERofthe Florida Public Service Commissionthis 9thdayofApril, 2012.

ANN COLE CommissionClerk Florida Public Service Commission 2540 Shumard OakBoulevard Tallahassee, Florida 32399 (850) 413-6770 www.floridapsc.com Copies furnished: A copy of this document is provided to the parties of record at the time of issuance and, ifapplicable, interestedpersons.

CWM

NOTICE OF FURTHERPROCEEDINGS ORJUDICIAL REVIEW The Florida Public Service Commission is required by Section 120.569(1), Florida Statutes, to notify parties ofany administrative hearing orjudicial review ofCommission orders that is available under Sections 120.57 or 120.68, Florida Statutes, as well as the procedures and time limits that apply. This notice should not be construed to mean all requests for an administrative hearingorjudicialreviewwillbe granted orresult inthe reliefsought. Any party adversely affected by the Commission's final action inthis mattermay request: 1) reconsideration of the decision by filing a motion for reconsideration with the Office of Commission Clerk, 2540 Shumard Oak Boulevard, Tallahassee, Florida 32399-0850, withinORDERNO. PSC-12-0187-FOF-EI DOCKETNO. 110309-EI PAGE 19 fifteen (15) days ofthe issuance ofthis order in the form prescribed by Rule 25-22.060, Florida Administrative Code; or 2) judicial review by the Florida Supreme Court in the case of an electric, gas ortelephone utility orthe FirstDistrict CourtofAppeal in the case ofa water and/or wastewater utility by filing a notice ofappeal with the Office ofCommission Clerk, and filing a copy ofthe notice ofappeal and the filing fee with the appropriate court. This filing must be completedwithin thirty (30) days afterthe issuance ofthis order, pursuantto Rule 9.110, Florida Rules of Appellate Procedure. The notice of appeal must be in the form specified in Rule 9.900(a), FloridaRules ofAppellate Procedure.