Andhra Pradesh Electricity Regulatory Commission

11-4-660, 4th and 5th floors, Singareni Bhavan, Red hills, Hyderabad

 

O.P.No. 179 of 2003

Dated: 08-04-2003

Present:

Sri. G. P. Rao, Chairman

Sri. D. Lakshminarayana, Member

Sri. K. Sreerama Murthy, Member

 

 

Transmission Corporation of Andhra Pradesh Limited (APTRANSCO)

 

                                                                      …….. Applicant

As a sequel to the order of APERC in OP 506 / 2002 dated 29th July 2002, APTRANSCO filed a petition dated 28th January 2003 requesting the Commission’s approval for a new load forecast for the planning period FY 2002-2008 estimating the additional capacity requirement at 5251 MW citing certain additional factors responsible for the increase.

The Commission passed the following order on the petition after considering the material available on record.

ORDER

1)     Commission’s order dated July 29th 2002 on Load forecast

The Commission in the above-mentioned order directed APTRANSCO as follows:

(i)                 The system peak demand in the year FY 2006-07 shall be fixed at 10207 MW and energy requirement at 58776 MU after considering historical growth rates, system load factor of 70% and reserve margin of 14%.

(ii)               The cumulative capacity required to be added during the planning period FY 2002- 2007 shall be 3180 MW as against 4270 MW projected by APTRANSCO

(iii)             APTRANSCO shall revise the procurement plan to match the capacity of 3180 MW, as projected by the Commission

(iv)              APTRANSCO shall include 250 MW of NEDCAP projects, MPPS, CC-5, NTPC Talcher II and NTPC Ramagundam Extension project to cover the demand forecast drawing up a least cost generation plan

(v)                APTRANSCO and APGENCO shall consider the prospects of Srisailam Left Bank Project not contributing to the system peak and suggest equivalent capacity required, if any

2)                 APTRANSCO’s petition dated 28th January 2003

APTRANSCO has revised the capacity requirements to 5251 MW for the period 2002-2008, although no capacity was proposed to be added in FY 08, after adopting the growth rates and system load factor of 70% proposed by the Commission and taking the following additional factors into account:

(a)               24 hours rural supply which requires additional supply of power of about 1500 MU per year

(b)               The targeted Loss of Load Probability (LOLP) of 1% which is expressed in hours per year as 87.6 hours /year

(c)               Effect of Almatti which reduces the generation from Srisailam and Nagarjun Sagar by about 1000 MU per year due to lower inflows

(d)               Srisailam Left Bank Power House contribution to the firm energy in conventional mode is NIL.

(e)               To reduce the unserved energy to a level of 0.15% by the end of the planning period FY 2007.

3)                 The Licensee submitted a load forecast and a generation expansion plan along with the petition, which have been revised on 07-02-03 and again on 10-03-03. The licensee also submitted a business plan on 07-02-03, which was also subsequently revised on 10-03-03.

Commission analysis on the Demand of the AP System

4)                 Sales Projection for AP System

The Commission, in its order dated 29th July 2002, while following a historical method has approved a growth rate of 6.9% and energy requirement of 58,776 MU and capacity requirement of 11636 MW at the end of the plan period FY 07.

5)         In the letter dated 28th January 2003, the licensee has accepted the Commission’s growth rates and adopted the same for the planning period. However, it has incorporated the following changes:

(a)   Additional requirement of 1500 MU from FY 2005 is considered to extend continuous supply of power to rural areas. 85% of this additional requirement is attributed to Domestic category and the balance to Commercial category.

(b)   Reduction in loss levels to reflect the actual reductions vis-ŕ-vis earlier projections

(c)   Adopted ARR forecasts for the years FY 2003 and FY 2004 as submitted by the Licensees in December 2002 filings

6)         The Commission agrees with the licensee’s submissions of additional requirement of power due to provision of 24 hours rural supply, that being the policy of Government of Andhra Pradesh. However, the Commission is of the opinion that the costs related to such policy decisions need to be addressed in the Business plan.

7)         The Commission is also of the view that the earlier projections needed to be adjusted to the actuals as filed in the ARR. The detailed break-up of the sales forecast presented by APTRANSCO and accepted by the Commission is enclosed as Annex I.

8)         Based on the above sales forecast, AP system requirement works out to be 61,017 MU at the end of the plan period FY 2007.

System Load factor:

9)         Though the present monthly system load factor ranges from 80 to 88% in the AP System, the Commission has proposed in its earlier order to adopt 70% as annual system load factor.

10)      The licensee has agreed with the Commission’s viewpoint and has taken 70% as annual system load factor for projecting system capacity requirement as against its earlier claim of 66%.

Reliability: Loss of load probability (LOLP) & Unserved Energy:

11)      APTRANSCO has adopted a target Loss of Load Probability (LOLP) of 1% i.e. 87.6 hours/year as the measure of reliability in estimating reserve capacity. This is to take care of the probability of failure of plants during the system peak demand. They have also proposed that the Energy Not Served (ENS) should be at a level of 0.15% of the energy requirement by the end of FY 2007.

12)      In the Order dated July 29th 2002, the Commission has adopted 14% reserve margin as earlier suggested by APTRANSCO to achieve targeted LOLP of 1% for the planning period FY 2002-2007. In the later submissions dated 28th January 2003, the licensee has worked out a reserve margin ranging from 13% in FY 2002 to 28% in FY 2007 to achieve the targeted 1% LOLP.

13)      The Commission accepts the target of 1% LOLP and 0.15% of ENS as proposed by APTRANSCO, being the norms adopted by CEA for planning the capacity additions. However, to ascertain the reserve margin required for a target of 1% LOLP, the Commission has requested the Central Electricity Authority, as a technical consultant, to advise on the technical aspect of assessing the reserve margin and generating capacity requirement to attain LOLP of 1% and less than 0.15% ENS in the AP system. Based upon the information made available by APERC and APTRANSCO, studies have been carried out by CEA, which vide their report dated 17th March 2003 made the following recommendations to AP Commission:

(a)   16th Energy Power Survey (EPS) forecast should be the minimum requirement for power planning as against APTRANSCO’s projections

(b)   Reserve margin of 30% in terms of rated capacity over peak demand or 29% of net capacity would give 1% LOLP and less than 0.15% ENS for the AP system.

(c)   Additional projects, besides 5251 MW, totalling to a capacity exceeding 1300 MW needs to be identified to meet the demand projections as per the 16th EPS.

(d)   Possibility of advancing the schedule of commissioning of projects due in 11th plan like Vijayawada VII unit (660 MW) may be seriously considered.

14)      The Commission notes that the actual demand and the load forecast by APTRANSCO is much lesser than CEA’s estimates of 16th EPS. Hence, the Commission didn’t consider the additional requirement of 1300 MW. Incidentally, the additional requirement would also involve substantial extra costs in the system, which has to be recovered by way of tariffs or subsidy.

15)      With regard to LOLP, the Commission agrees to adopt CEA’s recommendations on reserve margin of 29% of net capacity to give 1% LOLP and less than 0.15% ENS for the AP system, CEA being the highest technical authority.

16)      The Commission has further requested the CEA to suggest the required reserve margin in the following two situations:

(a)   If only 300 MW of Srisailam left bank is considered in the capacity addition

(b)   If no capacity of Srisailam left bank is considered in the planning period

CEA has responded that under APTRANSCO’s demand projection there would be a requirement of 32% reserve margin if only 300 MW is considered from SSLB project and 29% reserve margin if No MW is assumed from SSLB for the capacity addition.

17)      As SSLB has been excluded, for reasons stated in the supply section of this order, for determining the capacity requirement for the state of Andhra Pradesh, the Commission has considered 29% as reserve margin to achieve 1% LOLP and 0.15% of ENS in the AP system.

Capacity Requirement in the planning period:

18)      The sales figures of the Distribution Companies approved by the Commission are added to the captive and wheeling consumers’ consumption, and this provides the total AP system consumption. By applying system load factor of 70% and system reserve margin of 29% as suggested by CEA, Commission has arrived at the system installed capacity requirement for the plan period as at Annex II.

19)      Commission has worked out the existing system capacity after deducting the auxiliary consumption for each of the generating units. The captive and wheeling capacity has been matched on the supply side to cater to the exact demand from these units on to the system. The gross installed capacity so arrived is 9210 MW in FY 2002 as detailed in Annex III.

20)      The resultant demand-supply situation is provided in the Table 1 below:

Table 1

All figures in MW

FY 02

FY 03

FY 04

FY 05

FY 06

FY 07

Installed Capacity

11,519

11,623

11,846

12,525

12,946

13,639

Existing Capacity

9,210

9,220

9,235

8,646

8,457

8,457

Annual Additions required

2,309

94

207

1,269

610

693

Cumulative Capacity required

2,309

2,403

2,610

3,879

4,489

5,182

 

21)      It may be recalled that APTRANSCO had estimated requirement of 5251 MW in the supply expansion plan. Against this, Commission has come to the conclusion that the system requirement of additional capacity is 5182 MW during the plan period 2002-2008.

22)      The reason for increasing the capacity requirement to 5182 MW from         3180 MW is on account of 24 hours rural supply and increase in reserve margin from    14% to 29%.

23)      Hence, the Commission approves the following:

(a)   The System peak demand for the year FY 2006-07 is 13639 MW and the energy requirement is 61017 MU.

(b)   The cumulative capacity required to be added during the period 2001-02 till 2006-08 is 5182 MW.

(c)   The annual capacity addition required is as provided in the Table1 above.

Supply Expansion - Commission Analysis

24)      APTRANSCO has submitted a revised supply expansion plan along with the Business Plan on March 10th 2003. They presented the following supply expansion plan shown in Table 2:

Table 2

 

Projected Peak Demand

Capacity Retirement

Thermal Capacity Addition

Hydel Capacity Addition

Total Capacity Addition

Total Net Capacity

2001-02

8927

 

CC-1 (213.4) + Simhadri-I (460) + MPP (72) + NEDCAP (80.3)

298 Sri Sailam

1124

9999

2002-03

9061

 

Simhadri-Unit-II  (460) + New Captive 84.4 + NEDCAP (46.2)

298 Sri Sailam

889

10888

2003-04

9513

 

NEDCAP (45.5)+ 98 Talcher

298 Sri Sailam

442

11329

2004-05

9763

560 (400 Eastern region and 160 Captive)

CC-2 (432) + MPP (54) + 98 Talcher

 

584

11352

2005-06

10143

169 Captive

CC-3 (359) + CC-4 (450.1) + CC-5 (213) + Talcher (98) + Ramgundam (134)

 

1254

12438

2006-07

10575

 

385 RTPP + BPL (475.6) + 98 Talcher

 

959

13398

Total (MW)

 

728

4357

894

5251

 

(Source: APTRANSCO Submission January 2003 Table: Power Procurement Plan)

25)      It is important to note the following facts from the above submission:

i)               The supply expansion plan has been revised to 5251 MW in the petition dated 28th January 2003 to include 24 hours rural supply and increased reserve margin.

ii)             As directed by the Commission, APTRANSCO has considered NEDCAP and MPP’s capacity in meeting the peak requirement

iii)           Entire 894 MW of Srisailam plant is included as capacity addition

iv)           NTPC-Talcher-II and NTPC-Ramagundam-II are included in the capacity planning

v)             The Commissioning schedule of the new plants and year of captive repatriation are modified. Revised schedule of the new plants is shown in the table 3 below.

26)      APTRANSCO has agreed with the Commission’s viewpoint that due to hydraulic constraints in the riverbed, it will not be possible to start pumped mode operation from SSLB till 2007. They have also stated that it would take 6 years to eliminate these constraints.

27)      As the contribution from SSLB for the peaking purpose is negligible, Commission directs APTRANSCO to exclude 894 MW of SSLB from the proposed capacity addition. Therefore, as no MW will be considered from SSLB, the Commission has taken 29% as reserve margin to achieve 1% LOLP as recommended by CEA.

28)      APTRANSCO has forwarded the following PPAs to the Commission for their consent to the PPA as per Section 21 (4) of the Reform Act.


Table 3

Projects Under Scrutiny

Capacity (MW)

Commissioning Date

BPL

520

FY 2007

RTPP-II

420

FY 2007

BSES

220

FY 2002

Konaseema

445

FY 2004

Vemagiri

370

FY 2006

Gautami

464

FY 2006

GVK Industries

220

FY 2006

 

29)      The following new projects, as submitted by APTRANSCO, that will come up during the planning period contribute about 4272 MW as against the additional installed capacity requirement to meet the peak demand of 5182 MW, leaving a gap of 910 MW in the plan period FY 2002-2007.

New Generating Stations
Capacity in MW

BSES

213

Simhadri

920

MPP's

126

NEDCAP

172

GVK Extension

213

Talcher

392

Ramagundam Extension

134

Konaseema

432

Vemagiri

359

Gowthami

450

BPL Ramagundam

476

RTPP

385

Total Capacity

4272

 


Analysis of the Business Plan

30)      Before approving the load forecast and procurement plan, the Commission has also analysed the Business Plan, especially with regard to the Power Purchase Cost. The significant observations made from the business plan include:

(i)                 The Business plan has considered 5251 MW of capacity addition including SSLB for the plan period FY 2002-07. The Business plan proposes to meet the total expenditure by way of Tariff increases, Government Subsidy, Efficiency measures and Other income viz. revenue from wheeling charges, sales of surplus power etc.

(ii)               From the capacity addition considered, it is evident that the Business                   plan has also considered 29% reserve margin to provide reliable supply throughout the year for the state of Andhra Pradesh. It also includes 24 hours supply to rural domestic and commercial consumers.

(iii)             The Business plan assumes that the gas projects will have supply of gas at the base price of Rs 2850 / 1000 SCM. This works out to about Rs 4000 / 1000 SCM inclusive of taxes and transportation. The Commission after discussions with the GAIL authorities had an apprehension that with the dismantling of Administrative Price Mechanism (APM) the gas prices might go up in future to Rs 5600 / 1000 SCM, the market determined rate now fixed for Ravva Satellite gas. At this rate the cost of gas works out to about Rs 7400 inclusive of taxes and transportation. In this context, the Commission expressed the following concerns to APTRANSCO vide its Lr.No.APERC/Secy/F:/ D.NO.874/03 dated 24-03-2003:

(iv)              With the increase in gas prices, the power purchase cost of APTRANSCO in the plan period will be increased by Rs 1896 crores vis-ŕ-vis the business plan projections (FY 2005-07) which needs to be addressed by the licensee

(v)                The increase in gas prices will also be applicable to the existing stations viz. Lanco Kondapalli, GVK, Spectrum, APGPCL etc. Hence, the variable cost of these stations will also increase and make them expensive in the merit order operations when compared to new gas plants and coal fired plants viz. APGENCO, CGS etc. In view of the dispatch rights provided to these IPP’s, other generating stations with lower variable costs might have to be backed down in the merit order.

(vi)              The business plan projected seasonal surplus and assumes to sell about 2000 MU in FY 2006 and 4600 MU in FY 2007 to generate a revenue of Rs 1300 Crores. With regard to surplus power, the Commission is of the view that even after selling 4600 MU, there would be about 8000 MU surplus energy available for the state of Andhra Pradesh.

31)      APTRANSCO responded to the above as follows vide their letter number  CE/Trg.Plg./F.Load Forecast/D.NO 174 / 2003 dated 29-03-2003

(i)                 APTRANSCO is of the view that no firm decision is reached yet and in the event of any gas price increase especially from Ravva II satellite field, the increase will be spread over the entire allocation of gas there by impacting only to the extent of Rs 360 / 1000 SCM. APTRANSCO stated that this impact tantamount to Rs 300 Crores which will be recovered through the Fuel Surcharge Adjustment.

(ii)               With regard to backing down of existing stations, APTRANSCO has responded that the AP Power Sector will become surplus only in the FY 2006, that too for short periods of time during the year, provided all the capacity additions materialise as scheduled. And hence, the situation of backing down the gas-based units to the extent of rendering them idle in a shortage scenario will not arise.

(iii)             In response to the surplus energy, APTRANSCO pointed out that the surplus availability estimated by the Commission is only seasonal and there will be no surplus of 8000 MU’s left. They have also stated that the success rate of power projects in achieving financial closure is unimpressive in AP as well as in the entire country.

32)      Conclusions of the Commission

(i)                 The Commission agrees that as of today the increase proposed in gas prices to the existing consumers is Rs 360 / 1000 SCM. However, APTRANSCO should be prepared for higher prices with the dismantling of APM and consequent higher power purchase costs. The Commission also acknowledges that with the existing level of gas prices, the Business plan has tied up the entire expenditure by way of Subsidy, Tariff Revenue and Non-Tariff income.

(ii)               As per the Commission’s workings it is evident that even after selling 4600 MU of surplus power during FY 07, there will be surplus availability of about 8000 MU for which there might not be any requirement. There will be substantial surpluses if all the projects go through as scheduled and if the export plans do not materialise. The surplus availability indicates that few stations have to be kept on standby paying only the fixed charges. APTRANSCO and GoAP should be prepared for this situation and should have a contingency plan to meet the eventualities. This situation arises primarily on account of the provision of considerable reserve margin of 29% to achieve the level of reliability at the accepted targets of 1% LOLP and 0.15% ENS. The Commission emphasises that, while it is desirable to have a reserve margin of 29% as sought by the Licensee and as confirmed by CEA, to ensure reliable supply, it should be realised that it has a cost as most of the time some capacity be standing by.

(iii)             CEA has also corroborated in its report that few stations are not expected to operate at 85% system load factor and would operate at below 1% load factor. However, CEA has also indicated that the achievement of capacity addition under private sector is highly unsatisfactory and keeping this uncertainty in view, it would be prudent and pragmatic to plan for higher capacity addition.

(iv)              Commission agrees with the CEA’s statement and acknowledges that if some of the projects do not achieve financial closure, to that extent the reserve margin will come down. This correspondingly reduces the financial burden although it will have an adverse effect on the reliability of supply.

(v)                The Commission also notes that with the increase of gas prices to      Rs7400, the variable cost of the new gas stations will be increased from about 80 ps/kwh to about 150 ps/Kwh. In spite of this increase, the average cost from these plants will be about Rs 2.50/kwh which will be more or less on par with the coal plants like BPL, RTPP etc and it will increase the average cost of power purchase of APTRANSCO by 11 ps/kwh. To the extent exports take place, the burden of power purchase cost will go down.

ORDER

33)      In the facts and circumstances mentioned above, the Commission directs as under: 

(a)   In terms of Section 11 (1) (g) of the Reform Act, the System peak demand in the year FY 2006-07 shall be fixed at 10575 MW and the energy requirement at 61017 MU.

(b)   For meeting the peak load and energy requirement, the installed capacity at the end of the planning period will be 13639 MW.

(c)   The annual capacity addition required shall be as provided in the Table1 above. The cumulative capacity required to be added during the period 2001-02 till 2006-07 shall be 5182 MW.

(d)   Based on the capacity requirement of 5182 MW, Commission approves the power procurement plan of APTRANSCO as detailed in Table 2 excluding SSLB from the capacity addition to meet the peak requirement.

(e)   APTRANSCO may exclude the cost of SSLB project from the Business Plan till the capacity can be recognised for meeting the peak requirement.

(f)     Inclusion of new plants proposed in the approved power procurement plan doesn’t construe approval of the Power Purchase Agreements for these new plants by the Commission. Approval of PPA by the Commission depends on the merits of the agreement and is not part of this order.

(g)   As per the paragraph 2.2 of the power procurement guidelines the licensee shall submit its load forecast to the Commission in the month of April of each year.

(This Order is signed by the Andhra Pradesh Electricity Regulatory Commission on  8 April 2003)

Sd/-

Sd/-

Sd/-

(K Sreerama Murthy)

(D Lakshminarayana)

(G P Rao)

Member

Member

Chairman

                          

CERTIFIED COPY

 


Annex I: Commission Approved Sales Forecast

In Million Units

 

FY 01

FY 02

FY 03

FY 04

FY 05

FY 06

FY 07

CAGR

Domestic

    6,117    6,117

6,698

      7,583  7,583

8,206

10,552

11,775

13,147

13.60%

Commercial

1,273

1,397

1,628

1,814

2,177

2,430

2,713

13.44%

LT Industry

1,680

1,756

2,037

2,241

2,557

2,910

3,313

11.98%

Cottage Industry

31            31

28

            31

            34

            39

            44

            50

8.29%

Irrigation and Agriculture

11,071

12,181

11,237

10,998

10,888

10,778

10,670

-0.61%

Public Lighting

407

520

653

 697          697

872           872

973

1,085

17.75%

General purpose

122

80

            91

109

122

136

152

3.73%

Temporary

2              2

7

            11

            13

            14

            16

            18

44.22%

TOTAL LT

      20,703

22,667

      23,271

      24,112

      27,221

      29,062

      31,148

7.04%

 

 

 

 

 

 

 

 

 

Industrial Segregated

3,646

3,746

4,764

5,417

5,849

6,318

6,824

11.01%

Industrial Non-Segregated

602

616

736

818

906

1,001

1,109

10.72%

Irrigation and Agricultural

39

44

79

175

183

192

202

31.54%

Railway Traction

922

963

1,094

1,155

1,244

1,342

1,446

7.79%

Colony lighting

128

180

178

195

206

215

225

9.86%

RESCO's

1,147

1,123

1,152

1,166

1,247

1,335

1,426

3.70%

HT TOTAL

3,646

3,746

4,764

5,417

5,849

6,318

6,824

11.01%

Overall Demand

27,187      27,187

29,339

31,274

33,038

36,856

39,465

42,380

7.68%


 

Annex II: Capacity and Energy requirement for AP Power System

 

 

 

FY 02

FY 03

FY 04

FY 05

FY 06

FY 07

DISCOMS Sales (LT+HT)

MU

29,339

31,274

33,038

36,856

39,465

42,380

APTRANSCO Purchases

MU

42,214

42,870

43,904

47,251

49,331

52,646

Wheeling Energy Requirement

MU

3,650

3,296

3,322

3,205

3,125

3,106

Captive Repatriation energy requirement

MU

-

-

-

786

1,533

1,523

Outstanding Captive

MU

4,921

5,026

5,026

4,384

3,742

3,742

System Energy Requirement

MU

50,786

51,193

52,253

55,627

57,731

61,017

 

 

 

 

 

 

 

 

System Load Factor

 

70.00%

70.00%

70.00%

70.00%

70.00%

70.00%

 

 

 

 

 

 

 

 

APTRANSCO Capacity Requirement

MW

6,884

6,991

7,160

7,706

8,045

8,585

Capacity Requirement for wheeling

MW

595

538

542

523

510

506

Captive Repatriation

MW

-

-

-

189

378

378

Outstanding Captive

MW

1,450

1,481

1,481

1,292

1,103

1,103

System Peak Demand Requirement

 

8,930

9,010

9,183

9,709

10,035

10,573

System margin for 1 % LOLP

29%

2,590

2,613

2,663

2,816

2,910

3,066

System Installed Capacity Requirement

 

11,519

11,623

11,846

12,525

12,946

13,639

 

Annex III: Capacity of Existing units

Generating Units

Installed Capacity

Auxiliary Consumption

Capacity Available

 

 

 

 

APGENCO

 

 

 

   -  Thermal units

2,953

10%

2,657

   -  Hydel units

2,672

1%

2,645

 

 

 

 

Central Sector

1,000

 

 

   -  NTPC

580

8.43%

531

   -  NEYVELI

277

8.43%

254

   -  MAPP

28

8.43%

26

   -  Kaiga

115

8.43%

105

 

 

 

 

Vijjeswaram

 

 

 

    -  VGTS-I

100

3%

97

    -  VGTS-II

172

3%

167

 

 

 

 

Independent Power Producers (IPPs)

 

 

 

   -  GVK

216

3%

210

   -  Spectrum

208

3%

202

   -  Kondapalli

355

3%

344

 

 

 

 

GRIDCO / Eastern Region

 

 

400

 

 

 

 

Captive and Other Wheeling Consumers

 

 

1483

 

 

 

 

Non Conventional Projects

 

 

90

 

 

 

 

TOTAL

 

 

9210