ANDHRA
PRADESH ELECTRICITY REGULATORY COMMISSION
Sri. K.Sreerama
Murthy, Member
Sri Surinder
Pal, Member
In re File No. E – 357 (D)
In the matter of Consent for proposed
amendments to Power Purchase Agreement
M/s
Transmission Corporation of A. P. Limited … First Party
and
M/s
GVK Industries Ltd,
Kohinoor,
Road No. 1, Banjara Hills,
The matter coming on for consideration of the Commission and the Commission on consideration passed the following
1. The former Andhra Pradesh State Electricity Board, the predecessor of the First Party (hereinafter APTRANSCO) after having agreed to purchase power from the Second Party (hereinafter, the Developer), developer of a combined cycle gas-based power project, entered into Power Purchase Agreement (PPA for short) in March 1997.
2. Subsequently,
after coming into existence in 1999 of this Commission, the APTRANSCO and the
Developer entered into an Amendment Agreement to amend the aforementioned PPA
and submitted the same to the Commission in December 2001 for its consent.
3. The Commission
critically examined various issues including the demand projections, generation
expansion plan of APTRANSCO, the technical and financial parameters in respect
of the projects, the fuel options and their usage. The Commission also conducted a public
hearing on
As regards the
fuel, it was defined in the Amendment Agreement as follows:
Fuel: means Natural Gas, that is intended to be used as primary fuel, by one or
more units of the Project to generate power from the Project or in case of
unavailability of primary fuel, Naphtha or Low Sulphur
Heavy Stock and the like as alternate fuel.
During the public hearing, the Commission staff suggested the following modifications to the Amendment Agreement / PPA, among other things:
a) Fixed charges to be limited to the availability of gas.
b) If the Developer is directed to run the plant on alternate fuel by APTRANSCO, the price of alternate fuel shall be limited to that of natural gas.
APTRANSCO responded as follows:
In
view of firm gas allocation from 80% to 100% PLF for these projects, fixed
charges will be paid as per PPA provisions
Earlier, APTRANSCO had stated that:
As per the indications given by GAIL, the
present projected availability by ONGC is about 8 to 9 MCMD of Natural Gas and
the current supply is about
7 MCMD. It is also
indicated that private agencies like CAIRN are expected to develop 3 to 4 MCMD
from 2004-05. Hence there is no difficulty to meet the requirement of gas for
this project.
Ministry of Petroleum, GOI issued gas linkage for the project on firm basis. GAIL, a Govt of India enterprise signed the Gas supply Agreement with the Company and it is therefore the responsibility of GOI and GAIL to supply gas to the project. However, generation with alternative fuel will be as decided by the Fuel Supply Committee and as per the merit order dispatch as approved by APERC
The response of the Developer on this issue, vide their letter dated 31-01-2003 was as follows:
“The projections of gas
availability given by Reliance as 40 MCMD for 15 years is based on one
finding in K.G. basin. They have got
five more blocks for exploration. In
addition, ONGC, CAIRN energy and
APTRANSCO also held discussions with the Developer and proposed the following amendment to the PPA on the usage of alternate fuel:
“Developer to run plant on
alternate fuel if required by AP Transco due to non availability of gas, the
price of alternate fuel used shall be limited to the price of Natural gas”.
The Developer’s response,
communicated by APTRANSCO to the Commission vide their letter dated
Government of AP in its letter No. 3504 / Pr.I.1/96
dated
“Regarding the
definition of ‘fuel’ in the PPA (article 1.27) in view of the reliable reports
of abundant availability of natural gas in Godavari-Krishna basin and off-shore
Kakinada, the relevant clause may be retained in the present form, with a
provision to use any of the fuels mentioned in article 1.27 as alternate fuel,
in case of unavailability of natural gas which is the permitted fuel for
the projects. The Government also desire that no restrictions on use of
alternate fuel be imposed in the PPA which may affect the attitude of lenders
with regard to financiability of the project”.
In
response to the communication from the Commission, APTRANSCO in its letter
dated
4. Finally, the Commission agreed to grant
its consent subject to certain modifications being incorporated in some of the
clauses, and accordingly the amended PPA was signed on
5. While the matter stood thus, the
APTRANSCO filed a petition, O.P.No. 22 / 2004, against the
Developer, seeking deletion of the provision for alternate fuel from the
definition of ‘Fuel’ in the PPA, as amended. The matter was posted for hearing on
6. While so, APTRANSCO on
(a)
At
present GAIL is unable to supply the allocated quantities of Natural Gas to the
already existing Gas based Projects in A.P. and it is noted that GAIL may not
be in a position to supply the allocated Natural Gas to the upcoming Gas based
Projects as per the GSAs entered.
(b)
APTRANSCO
will have to pay full Fixed Charges once these upcoming Gas
based Projects are commissioned and are declared available even though GAIL
does not supply the required Gas as per linkage. The total commitment towards payment of Fixed
Charges without availing energy works out to about Rs.1020 crs.
per annum (in respect of four projects in all, including this project
and similar projects of M/s. Vemagiri Power
Generation Ltd., Bangalore, M/s. Konaseema EPS Oakwell Power Ltd., Hyderabad and M/s. Gautami
Power Pvt. Ltd., Secunderabad – Added by Commission for clarity).
(c)
The
above issue has been brought to the notice of Government of A.P. and Government
of
(d)
GoAP further informed
that:
(i) A
meeting was convened by the Principal Secretary to Prime Minister on
(ii)
After detailed
discussions it was agreed that MoP & NG along
with ONGC would, working backwards from June 2006, prepare list of actions to
be taken to ensure availability of extra gas to IPPs
in AP from middle of 2006. Action plan
and Quarterly progress in this regard would be furnished to PMO.
(iii)
MoP & NG would provide infrastructure support and take
other necessary steps to facilitate the early availability of gas from
discovered fields of Reliance to AP.
(iv)
MoP & NG and GAIL would examine the issue regarding
invoicing of full fixed charges for transmitting lower quantity of gas to IPPs in AP and would revert to the State Government with
alternative suggestions.
(v)
Reliance have already entered into MOU with NTPC to supply gas in
first quarter of 2007 for the
The Government of A.P. informed that in view
of the concerns about unavailability of Natural Gas for the upcoming four Gas
based Power Projects, GoAP held negotiations with the
developers of four Gas based Power Projects for necessary amendments to the
Power Purchase Agreements to mitigate the “Fixed Cost” payment risk arising out
of Gas unavailability situation and the following agreement has been arrived.
(i)
Use of
alternate fuel will not be permitted before January 1, 2007.
(ii)
The
Project will be implemented in line with Scheduled Date of Completion (SDoC) as per PPA.
(iii) The SDoC shall be extended day-to-day for any delay resulting from non-availability of Natural Gas before January 1, 2007.
7. APTRANSCO followed it up by submitting
on
a)
Use of alternate fuel will not be permitted before
b)
The scheduled date of completion shall be extended day for
day for any delay arising from (i) non-availability
of Natural gas for commercial operation up to
c)
The developer would be obliged to supply committed incentive
energy up to
d)
The Company shall not be liable for any penalty under clause
3.6 “Disincentives” due to lower PLFs arising out of
non-availability of Natural gas for any period up to
e)
A new clause to be introduced as 5.2 (e) stipulating that
“in case of non-supply or partial supply of Natural gas up to 31-12-2006, the
monthly capacity charge shall be paid as per the Availability Declarations
based on Natural gas only”.
f)
Interest on the actual cost of interconnection facilities to
be payable to AP Transco in case the project is not synchronised
in terms of Clause 7.1 (g) will not be applicable prior to 1st
January 2007, in case of non-availability of Natural gas.
g)
The occurrence and continuation of event stated in clause
9.2 (f) will not be treated as Company’s default up to 31-12-2006 if the said
failure is on account of unavailability of natural gas for a PLF of 60%.
8. The amendments were scrutinized. The
Commission noticed that the proposed amendments are an improvement over the
existing PPA in as much as these will reduce the liability of payment of fixed
charges by APTRANSCO because of non-availability of gas till
9. The Commission in order to reduce the burden on the consumers at large who have to eventually shoulder the burden of the fixed costs is inclined to give consent to the proposed amendments, and grants the consent as sought for.
10. Before parting with the matter, the Commission also makes the following observations:
(i) The Commission would like APTRANSCO to keep the Commission apprised on a quarterly basis, of the progress in regard to commissioning of the project; and
(ii) Having given assurances about adequate
supply of natural gas during the entire duration of the PPA, the Commission
expects that the Developer shall make all reasonable efforts to ensure that
uninterrupted supply of natural gas is available at least from
This order is corrected and signed this 14th day of December, 2004.
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SURINDER PAL |
K. SREERAMA MURTHY |
K. SWAMINATHAN |
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Member |
Member |
Chairman |
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