ANDHRA PRADESH
ELECTRICITY REGULATORY COMMISSION
R.P.No. 11 / 2004
Between
1.Transmission Corporation of Andhra Pradesh Limited RP.No. 1/2004
2.
M. Venugopala Rao, Correspondent, Prajashakthi RP.No. 2/2004
3.
Peoples Monitoring Group on Electricity Regulation RP.No. 11/2004
….
Petitioners
AND
Non-Conventional Energy Developers’ of AP ….Respondent
1.
Andhra Pradesh Electricity Regulatory
Commission (hereinafter the Commission) initiated suo-motu
proceedings for determination of tariff applicable to Non-Conventional Energy
(NCE) projects of Andhra Pradesh to take effect from 01-04-2004 onwards.
2. The Commission passed the order dated 20-03-2004 in R.P.No.84 / 2003 in
O.P. No. 1075/2000, wherein the Commission determined the tariff, terms and
conditions for purchase of energy by Transmission Corporation of Andhra Pradesh
(hereinafter APTRANSCO) from the following categories of NCE based power projects :
i)
Biomass-based energy and Biomass-based co-generation plants
ii)
Bagasse-based Co-generation plants
iii)
Mini-Hydel power projects
iv)
Wind electricity generators
v)
Industrial Waste-based energy projects
vi)
Municipal Waste-based energy projects.
3. While
deciding the purchase price and other terms in respect of different categories
of NCE based projects, the Commission adopted a “Cost plus” approach and
allowed a fair amount of return instead of the adhoc
price earlier fixed in OP No 1075 / 2000 based on the guidelines of Ministry
of Non-Conventional Energy Sources
(MNES). The Commission computed the
tariffs based on realistic costs that NCE developers would incur from year to
year based on normative parameters, while APTRANSCO adopted levelised
tariff methodology to compute tariffs for NCE projects. The tariffs based on levelisation
proposed by APTRANSCO will not provide realistic tariff compensation. The Commission therefore adopted the “Cost
plus” approach.
Subsequent
to the issue of Commission’s order dated
a)
ROE to be at 14% instead of 16% allowed
by the Commission.
b)
PLF for bagasse-based
plants to be 62% against 55% adopted by the Commission.
c)
Correction to the provision of
depreciation allowance.
d)
Incentive payment to be based on annual
basis.
e)
Downward revision of incentive rate.
f)
Providing for certainty of continuation
of operation of the plants after their loans are
repaid.
Further to the review petition, APTRANSCO
sought Commission’s directions on the following:
g)
Adjudication of grievances by the
Commission.
h)
Non-allowance of incentive for generation
based on fossil fuels.
i)
Filing of annual reports and affidavits
on usage of coal in generation.
j)
Exemption from providing generation
terminal meters for biomass and hydel projects.
k)
Directions in respect of year of
operation.
4. Sri. M. Venugopala Rao, Correspondent, Prajashakthi,
and Peoples Monitoring Group on Electricity Regulation, have also filed review
petitions, (R.P No 2 and R.P No 11), seeking downward revision of the tariffs
on following grounds:
a)
The capital costs allowed are high and
should be determined after studying the market trends through an independent
agency. Peoples Monitoring Group has suggested that the capital cost be decided
based on the specific project instead of adopting benchmark capital cost.
b)
The Plant Load Factors (PLFs) adopted by the Commission are low and provide super
profits to the developers.
c)
The Return On
Equity (ROE) shall be only 14% and not 16%.
Peoples Monitoring Group have stated that the
Commission having recognised ROE of 12.5% in case of
Krishna Godavari Power Utilities, allowing 16% of ROE
is illogical.
d)
The fuel costs allowed, especially for
biomass, are high.
e)
The Municipal waste to energy and Wind
electricity generators must be allowed third party sales in view of the high
costs.
5. All these three petitioners have sought for downward revision of tariff
fixed by the Commission in its orders dated
6. The following developers of NCE projects, who are aggrieved by some of
the provisions of the Commission’s Order dated
i)
M/s. Biomass Energy Developers’
Association
ii)
M/s. Small Hydro Power Developers’
Association
iii)
M/s. Sree Rayalaseema Hi-Strength Hypo Ltd (Bio-mass Developer)
iv)
M/s. Vensa Biotek Limited
v)
M/s. Active Power Corporation
vi)
M/s.
vii)
M/s. Raus Power
Pvt. Ltd
viii)
M/s. Sai
Renewable Power Pvt. Ltd.
The Commission conducted hearing on 8th,
10th and 11th of June 2004 and invited developers and
petitioners, to present their case on the review petitions filed before the
Commission. M/s NEDCAP had also been
directed to present their views in the hearing as intervenor.
After going through the submissions of
various parties, the Commission passed the following separate orders on the review
petitions filed by the developers :
|
RP Nos. |
Petitioners |
Date of Commission’s Order |
|
3 / 2004 4 / 2004 |
M/s Biomass
Energy Developers Association M/s Sree Rayalaseema Hi-Strength
Hypo Limited |
|
|
5 / 2004 12 /2004 |
M/s Small Hydro Power Developers Association M/s Active Power Corporation Pvt., Ltd. |
|
|
7/ 2004 9 / 2004 13/ 2004 |
M/s Sai Renewable Power Pvt., Ltd. M/s Vensa Biotek Pvt., Ltd. M/s Raus Power Private Limited |
|
|
8 /2004 |
M/s |
|
The issues raised
by the petitioners herein, in RP.No.1/2004, 2/2004 and 11/2004 for review of
the Order dated
7. Issue: Return on equity (ROE):
APTRANSCO submitted that it had proposed ROE of 14% and 11%
for the existing and the new projects respectively in its tariff proposal for
NCE projects due to declining rates of interest and market trends. The
Commission however, APTRANSCO submitted, had allowed ROE at 16% leading to
higher tariffs. APTRANSCO in its review
petition submitted the following:
a)
NCE generators are must-buy for APTRANSCO
as per the directions of the Commission.
b)
Payments are made regularly without delay
/ default.
c)
The Central Electricity Regulatory Commission
(hereinafter CERC) in its tariff regulations for Central generating stations
has fixed ROE at 14%.
d)
The task force (N.K Singh Committee) set up by
Ministry of Power Government of India (GOI) also proposed ROE of 14%.
e)
The Commission earlier approved ROE of
12.5% in case of M/s
Krishna Godavari Power Utilities’ coal-based power
plant.
f)
Karnataka Electricity Regulatory
Commission has fixed ROE of 12% for bagasse-based
plants and Mini Hydel power plants.
Considering the risk-free operations of
NCE projects, APTRANSCO submitted, the Commission may review this rate and
determine appropriate rate based on the submissions made above.
Sri. M. Venugopala Rao, one of the other petitioners submitted that 16% ROE
allowed by the Commission is high as 16% ROE was indicated by GOI in early
1990s when the rates of interest ranged between 16% and 20%. The task force headed by Sri. N.K Singh also
recommended 14% ROE. The petitioner,
further referring to the Krishna Godavari Power
Utilities’ coal-based project where the Commission allowed ROE at 12.5%,
pleaded that 16% ROE allowed by the Commission is too high and be
reviewed. He also submitted that ROE can
be fixed at 11%. M/s. Peoples Monitoring
Group expressing similar views, sought reduction in ROE.
Commission’s
Analysis:
The Commission in its Order dated
8. Issue: Plant Load Factor (PLF):
The petitioner, Sri. M. Venugopala Rao, submitted that the PLFs
adopted by the Commission in respect of mini-hydel
and bagasse-based co-generation plants
are very low. M/s Peoples Monitoring
Group on Electricity Regulation too submitted that the PLFs
adopted by the Commission are low and cast huge burden on the consumers. M/s NEDCAP requested for adoption of 50% PLF
in case of bagasse-based power projects and 35% in
case of mini-hydel power projects. APTRANSCO, while accepting the PLFs adopted by the Commission except in case of bagasse-based co-generation plants, submitted that 62% PLF
ought to be adopted in case of these plants taking into consideration the plant
operation for 150 days during crushing season and 100 days during non-crushing
season.
Commission’s
analysis:
The Commission has adopted the PLFs
based on the historical data furnished by APTRANSCO and NEDCAP. While considering the above the Commission
discarded the extremes where a plant in a particular category achieved very
high / very low PLF as consideration of such data tends to distort the process
of evaluation.
In respect of bagasse-based
co-generation plants, the Commission considered the operation of co-generation
plants for 130 days during crushing season based on 10 years’ average as
submitted by South India Sugar Mills Association and 100 days during
non-crushing season. The PLF of 55%
adopted by the Commission is therefore based on valid data and needs no
consideration for review. There are
therefore, no grounds for review of the order in respect of the above.
9. Issue: Capital cost:
The petitioner, Sri. M. Venugopala Rao, contended that the capital
costs allowed for NCE projects are high and need to be determined based on the
study of market trends through an independent agency. M/s Peoples Monitoring Group submitted that
the capital cost be fixed for each project instead of adopting normative
benchmark parameters.
Commission’s
Analysis:
The Commission adopted benchmark parameters for the capital
cost, as determination of capital cost for NCE projects on a case-to-case basis
would be impractical in the absence of a bidding process. Moreover, these projects have been commissioned
at different points of time under difference market situations. While arriving at the costs for different NCE
projects, the Commission placed reliance on the Detailed Project Reports, and
the data provided by APTRANSCO and NEDCAP, to arrive at the benchmark capital
cost. The Commission therefore is of
the opinion that there is no error apparent on the face of it and the
contentions of the petitioners have no grounds.
However, where it was brought to the
notice of the Commission in respect of mini-hydel
plants that the capital subsidy adopted by the Commission was at variance to
the subsidy actually provided by MNES, the Commission has reviewed and revised
the capital cost accordingly. This has
been provided in paragraph 30 of the Order dated
10. Issue: Rate of Incentive:
APTRANSCO in its review petition submitted two alternate
methodologies for fixing the incentives as detailed below:
a)
Incentive equivalent to savings in
transmission costs on account of “localised supply”.
b)
Incentive equivalent to 50% of O & M
cost per unit.
Based on the above methodology, APTRANSCO
proposed incentive of 10 paise per unit.
The petitioner, Sri. M.Venugopala Rao,
submitted that the incentive shall be as per CERC guidelines.
Commission’s
Analysis:
The Commission in its Order dated
11. Issue: Incentive to be on annual
basis:
APTRANSCO as well as other developers requested that the
PLF should be worked on annual basis and incentive be allowed accordingly,
construing that the Commission had indicated in its Order dated 20-03-2004 that
PLF shall be computed on the basis of billing month.
Commission’s
Analysis:
It was not the intention of the Commission that PLF and
incentives should be worked on a monthly basis.
The Commission, therefore, while issuing orders on the review petitions
filed by the NCE developers clarified that the PLF shall be computed on annual
basis, and re-iterates that clarification herein too.
12. Issue: Continuation of the operation
of the plants after loans are repaid:
APTRANSCO in its review petition submitted that the
Commission may issue necessary regulations so that the plants continue to
operate and supply electricity to APTRANSCO even after the loans are repaid.
Commission’s
Analysis:
The Power Purchase Agreements (PPAs)
provide that the duration of the PPA is 20 years from the date of commercial
operation. Even when the power purchase
price is subject to revision by the Commission on completion of 10 years after
date of commissioning, the developers would still receive O & M charges,
variable charges and residual depreciation representing 20% of the capital cost
besides ROE. Therefore, the apprehension
of the APTRANSCO that the developers will not operate the plants after the
loans are repaid is misplaced and no direction is required to that effect, nor
can it be effective, if given.
13. Issue :
Correction to the provision of depreciation:
APTRANSCO submitted that the Commission in its Order has
stated that APTRANSCO has assumed a depreciation rate of 7.84% for biomass and Bagasse-based plants and of 6.7% for Mini-Hydel plants,
whereas it (APTRANSCO) had instead considered a depreciation rate of 7% p.a.
for providing repayment of loan over a 10-year period. It requested the Commission to consider the
depreciation rate of 7% as adopted in its tariff proposals.
Commission’s
Analysis:
The Commission did not fix
the rate of depreciation on the basis of APTRANSCO’s submissions alone and
observed in its Order dated
“The depreciation rate of 7.84% is as per the rates approved
for Independent Power Producers (IPPs) so that this
amount can be used for repayment of loans.
The Commission while approving uniform rate of depreciation both for
existing as well as new projects, allows depreciation at the rate of 7.84% per
annum from the date of commissioning till the depreciation allowed accumulates
to 70% of the project cost. The balance depreciation of 20% of the project cost
will be allowed every year equally for the balance period of the PPA so that
the total depreciation allowed for the project does not exceed 90% of the
project cost”.
Hence there are no grounds to review this component
14. Issue :
Year of Operation:
APTRANSCO sought for a direction from the Commission
regarding year of operation. Some of the developers stated that the year of
operation shall be reckoned from commercial operation date and not on the basis
of financial year.
Commission’s
Analysis:
The Commission hereby clarifies that the year of operation
shall be reckoned from the date of commercial operation to arrive at the
appropriate fixed charges for each year.
The variable charge shall however be as indicated in the Order based on
the corresponding financial year.
15. Issue : Exemption from installation of generator
terminal meters for biomass and hydel projects:
APTRANSCO sought exemption from installing meters at the
generator terminals in respect of biomass and hydel
projects.
Commission’s
Analysis:
The Commission in its Order dated 20-03-2004 (paragraph 81)
directed that where the developers are having captive consumption and supply
energy to APTRANSCO after meeting their internal consumption, APTRANSCO should
make arrangements for meter reading at generator terminals for proper
implementation of the two-tier tariff.
In this connection, the Commission hereby
clarifies that where there is no captive consumption the energy recorded at the
interface point may be grossed up by adopting normative auxiliary consumption
to arrive at the PLF at generator terminals.
However, where captive consumption is involved, metering at generator
terminals shall be provided, to ascertain the actual PLF at the generator
terminals. With this clarification, no further review of the Commission’s Order
is called for.
16. Issue : Fuel Cost
The petitioner, M/s. Peoples Monitoring Group, has
submitted that the fuel cost allowed, especially for biomass projects
is on the high side.
Commission’s
Analysis:
The Commission deputed a team of its officers to some
biomass and bagasse-based projects to ascertain the
type of fuels used and the mix and to ascertain the price obtaining for the
fuels. The rates of fuel for biomass and bagasse have
been fixed by the Commission, based on the report by the study team and various
other facts and data, as detailed in paragraph 54 of the Commission Order dated
17. Issue : Non-allowance of incentive for generation
based on fossil fuels
APTRANSCO submitted that no incentive should be allowed for
generation based on fossil fuels as it defeats the very purpose of generation
of power from non-conventional energy sources.
Commission’s
Analysis:
The Commission is of the view that when MNES has permitted
usage of up to 30% conventional fuels, the developers cannot be barred from the
use of fossil fuels to the extent permitted.
Hence, no grounds for review.
18. Issue :
Developers to submit annual reports and affidavits for usage coal
APTRANSCO submitted that the Commission may issue
directions that the developers should submit annual reports and affidavits about
the usage of coal.
Commission’s
Analysis:
The Commission is of the view that if APTRANSCO considers
it necessary, it may itself seek such reports / data from the developers. No such directions are required from the
Commission. If the developers refuse or
fail to give the reports, APTRANSCO may then file an application. The Commission will consider the application
on merits and pass appropriate orders.
19. Issue :
Adjudication of grievances by the Commission
The Commission in its Order dated
Commission’s
Analysis:
The issue involves a lot of technical data, required to be
verified initially with records available with the Licensee before the
Commission takes up matter for adjudication.
APTRANSCO itself admitted that the issues involved are technical and do
not permit easy and simple adjudication. The suggestion of APTRANSCO and
apprehensions of other petitioners are therefore not appropriate.
20. Issue: Third-party sales:
Sri. M. Venugopala
Rao submitted that the developers of Wind energy and Municipal waste to energy
must be allowed to sell power to third parties in view of the high cost.
Commission’s
Analysis:
The developers have entered into long-term agreements (20
years) with APTRANSCO.
In view of the Commission’s analysis above,
on the various submissions made by the petitioners, there are no grounds to
review the Order of the Commission dated
The petitions are accordingly dismissed.
This order is signed by Andhra Pradesh Electricity
Regulatory Commission on
(MEMBER) (MEMBER)