ANDHRA
PRADESH ELECTRICITY REGULATORY COMMISSION
11-4-660, 4th
& 5th Floors, Singareni Bhavan, Red Hills,
Between
1. Small Hydro Power Developers Association – R.P 5/2004
2. M/s Active Power Corporation Pvt. Limited – R.P 12/2004 ….Petitioners
AND
Transmission Corporation of Andhra Pradesh …. Respondent
1) Andhra Pradesh Electricity Regulatory Commission (Commission)
initiated suo-motu proceedings for
determination of tariff in R.P. No. 84 /
2003 in O.P. No. 1075 / 2000
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, wherein the Commission
determined the tariff, terms and conditions for purchase of power by
Transmission Corporation of Andhra Pradesh (hereinafter APTRANSCO) from the
following categories of Non-Conventional Energy 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
on the purchase price and other terms in respect of different categories of
Non-Conventional Energy based projects, the Commission adopted a “Cost plus”
approach and allowed a fair amount of return compared to the adhoc price
earlier fixed based on the guidelines of Ministry of Non-Conventional Energy Sources (MNES)
issued in 1993. While rationalizing the tariffs and adopting the cost plus
approach, the tariff for some categories of NCE Developers underwent a revision
leading to reduction in the tariffs.
Aggrieved by some of the provisions of the said order, the following
developers of NCE projects filed writ petitions in the Hon’ble High Court of
Andhra Pradesh:
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 Bio-Tek Limited
v)
M/s. Active Power Corporation Pvt.
Limited
vi)
M/s.
vii)
M/s. Raus Power Pvt. Ltd
viii)
M/s. Sai Renewable Power Pvt. Ltd.
Out of the above, the present order deals
with non-conventional energy from Mini Hydel plants namely those listed at
serial numbers (ii) and (v) above. The Commission is passing separate orders on
the review petitions filed by other categories of non-conventional energy
developers.
4) The Hon’ble High Court by order dated
“The
Developers Association is permitted to file review petition against the
impugned orders dated 20-03-2004 before APERC as contemplated under section 94
(1) (f) of the Electricity Act, 2003 within a period of ten days from the date
of issue of the order and on such filing, the respondent. Regulatory Commission is directed to dispose
of the same within a period of eight weeks thereafter. Till passing of such order, as per the
interim orders passed by the Court on
5)
Pursuant to the directions of the Hon’ble High Court, the
petitioners filed petitions No. 5 / 2004 and 12 / 2004 before the Commission
for review of the order dated
Sri M.Venugopala Rao, Correspondent, Prajashakthi and Peoples Monitoring Group
on Electricity Regulation also filed petitions for review of the order dated
20.3.2004 passed by the Commission, for downward revision of the tariffs. The
other parties were given opportunities to file replies to the review petitions
by NCE developers or APTRANSCO, etc., as the case may be. The copies of the review petition of
APTRANSCO were also served on NCE Developers who had earlier participated in
the proceedings for determination of the tariffs, terms and conditions leading
to the passing of the Order dated
6)
Besides the issues on merits, the petitioners raised a
number of legal issues on the maintainability of the proceedings before the
Commission as well as the jurisdiction of the Commission to pass the impugned
order. The gist of the contentions raised by the petitioners is as under:
(a) The Commission on maintainability and
jurisdiction could not have lawfully initiated the proceedings under or in
pursuance of its earlier order dated 20-06-2001 in O.P. No. 1075 / 2000 when
that order had been suspended by the Hon’ble High court, even in case of non-conventional generating
companies who had agreed, or would agree, in the future to sell their entire
generation to APTRANSCO.
(b) From 10-06-2003, the functions of the
Commission are only those that are specifically provided for by the Electricity
Act, 2003 and the Commission cannot act in pursuance of anything other than
under the said Act, such as, any consensus or private reference or any contract
or agreement. The Electricity Act 2003 contemplates and provides only for the
determination of tariff by the Commission for generating companies for sales to
distribution licensees (as defined in section 2 (17) of the Electricity Act 2003)
and only in the manner provided in Part VII of the Electricity Act 2003. The Commission could not have exercised
jurisdiction under section 21 (4) of the Andhra Pradesh Electricity Reform Act
1998 and determine the price at which NCE developers shall sell electricity to
APTRANSCO.
(c) The Commission omitted to consider the
specific provisions of sections 62 and 64 of the Electricity Act, 2003 which
clearly provide for the manner in which the determination of tariff of
generating companies shall be carried out.
Section 62 (1) (a) of the Electricity Act, 2003 provides that the State
Commission shall determine the tariff in accordance with the provisions of the
Electricity Act, 2003 for the supply of electricity by a generating company to
a distribution licensee. Section 64 of
the Electricity Act, 2003 provides for the procedure for tariff order. Section 64 (1) provides that an application
for determination of tariff under section 62 shall be made by a generating
company in such manner and accompanied by such fee as may be determined by the
regulations. The function of
determination of tariff for generation within the State, referred to in Section
86 (1) (a), is to be performed only to the extent and in the manner expressly
provided by the said Act. The jurisdiction of the Commission to determine the
tariff in respect of the sales of electricity generated by a generating company
is only in respect of sales to distribution licensees. The Commission could not lawfully undertake proceedings for
determination of the tariff of generating companies in respect of sales to any
one other than distribution licensees, such as the APTRANSCO.
(d) Even if it is assumed that the provisions
of section 21 (4) of Andhra Pradesh
Electricity Reform Act would apply to
the respondent in respect of its purchases made during the transitional period,
the Commission exceeded its jurisdiction
and scope in making the order under review as the APTRANSCO is allowed to undertake trading only for a maximum period of one year from
the date of commencement of the
Electricity Act, 2003 and consequently could purchase electricity as a
bulk supply licensee under the Reform Act only till 09-06-2004. Effective from
(e)
Section
21 (4) of the Reform Act does not provide for the determination of tariff of a
generating company by the Commission. Section 21(4) contemplates only consent
to be given by the Commission to an agreement between the respondent and a
generating company for the purchase of electricity by the respondent. The scope
of the said section 21 (4) is only in respect of evaluating an agreement for
the purchase of electricity by a licensee and the scope of the said section
cannot be expanded to undertake determining the tariff binding on both the
generating company and the licensee; and neither the licensee can be compelled
to purchase at the price determined by the Commission nor the generating
company can be compelled to sell at the determined price.
(f)
The
Commission ought not to have considered the hypothetical possibility of the
so-called segregation of the respondent’s activities into transmission
activities and trading activities. The Commission ought to
have seen that the Electricity Act does not speak of such segregation. The
Electricity Act, 2003 prohibits the respondent, a State Transmission Utility,
from trading in electricity. The Commission could neither lawfully bind a yet
unborn and yet unconceived trading entity by its order, nor could it lawfully bind
a generating company to sell to a yet unborn and yet unconceived trading entity
at prices determined in the manner set out in the Commission’s order.
(g)
Even
if the Government creates another entity in future for engaging in trading
activities, such an entity will have to obtain a trading licence under the
Electricity Act, 2003 and be bound by the terms of such licence and the
provisions of the Act. It is not
permissible for any trading licensee to be granted any kind of monopoly in the
purchase or sale of electricity. The
change from a Single Buyer Model to Multi Buyer Model is one of the essential
features of the Electricity Act, 2003. A
distribution licensee cannot be compelled to purchase electricity from only a
single specified trading licensee.
(h)
The
mandatory requirement of the section 86 (1) (e) of the Electricity
Act 2003 cannot be said to have been complied with by merely stating the total
quantum of purchase from NCE sources in the tariff order for the year 2004-05
issued separately issued by the Commission, as stated by the Commission in the
order dated 20.03.2004. It is not the
total quantum that is required to be specified by the Commission. The provision
requires the Commission to specify the percentage of the total consumption in
the area of a distribution licensee that shall be purchased from renewable
sources of energy.
(i)
Section
64 (1) of the Electricity Act, 2003 contemplates that the generating company
would make an application to the State Commission for the determination of the
tariff for sale to distribution licensees.
A plain reading of section 64 makes it abundantly clear that the
application is to be made by the generating company. The proceedings initiated by the Commission
and the Commission’s order under review have the effect of unlawfully
pre-empting and precluding an application to be made under section 64 (1) by a
generating company for sale to a distribution licensee.
(j)
The
order S.O. 672 (E) dated
(k)
Section
39(1) of the Electricity Act 2003 provides that the State Transmission Utility
shall not engage in the business of trading in electricity. The said provision was effective immediately
on the date of commencement of the Electricity Act 2003. This provision did not, by itself, provide
for any transitional relaxation. All
State Transmission Utilities were prohibited from engaging in trading in
electricity from the date of commencement of the Act, i.e.
(l)
The
transactions between generating companies and electricity traders are not to be
regulated by the Commission under the Electricity
Act 2003. Except for licensing under
section 14 and fixing of trading margins under section 86 (1) (j), there is no
regulatory function, power or jurisdiction of the Commission over the activities
of electricity traders, more particularly in respect of tariffs. There is no provision in the Electricity Act,
which provides for the determination of any tariff by the Commission of the
purchases by an electricity trader or for the determination of the tariff of
any generating company for sale to an electricity trader.
Commission’s
Analysis on the issue of maintainability of the proceedings initiated by the
Commission and the jurisdiction of the Commission:
7)
Before
dealing with the contentions of the petitioners, it will be necessary to set
out the developments in the electricity laws relevant to the present
proceedings. The Andhra Pradesh Electricity Reforms Act, 1998 (hereinafter for
brevity referred to as the Andhra Pradesh Act) came into force on 1.2.1999. The Andhra Pradesh Act was enacted by the
Legislature of the State of
8) Section
21 (4) and (5) of the Andhra Pradesh Act, amongst others, dealt with the
purchase of electricity by licensees from generating companies and it reads as
under:
“(4) A holder of a supply or transmission licence may, unless expressly, prohibited by the terms
of its licence, enter into arrangements for the purchase of electricity from,-
(a) the
holder of a supply licence which permits the holder of such licence to
supply energy to other licensees for distribution by them; and
(b)
any person or Generating Company with the consent of the Commission.
(5)
Any agreement relating to any transaction of the nature described in sub-sections (1), (2), (3) or (4) unless made with, or subject to such
consent as aforesaid, shall be void”.
9) The
Andhra Pradesh Act enabled the reorganization of the erstwhile Andhra Pradesh
State Electricity Board (APSEB). In exercise of the powers under the Andhra
Pradesh Act, the APSEB was reorganized with effect from 1.2.1999. Under the reorganization, APTRANSCO was
initially the licensee for transmission, bulk supply, distribution and retail
supply of electricity in the State.
Thereafter, effective 1.4.2001, the functions of distribution and retail
supply of electricity in the State were transferred from APTRANSCO and vested
in four distribution companies. The APTRANSCO continues to undertake the
transmission and bulk supply functions including the purchase of electricity
from generating companies in bulk and sale and supply of electricity in bulk to
the four distribution companies.
10) By
order dated 20.6.2001 passed in O.P. 1075 of 2000, the Commission directed the
NCE developers to sell the electricity generated in their projects to APTRANSCO
only and not to third parties. This order of the Commission was challenged by
some of the NCE developers in appeals filed before the Hon’ble High Court on
the ground that the Commission has no jurisdiction to compel the NCE developers
to sell the electricity to APTRANSCO. The Hon’ble High Court vide
order dated
11) The
Order dated 20-06-2001 specifically stated that the tariff, terms and
conditions for sale of electricity by the NCE developers to APTRANSCO shall be
subject to review and the reviewed tariff, terms and conditions shall be
effective from 01-04-2004. As mentioned above, while accepting to sell
electricity from their projects, the developers also agreed to the review of
the tariff terms and conditions by the Commission for sale of electricity by
them to APTRANSCO. The proceedings
leading to the order dated 20.3.2004 were pursuant to the above stipulation
contained in the order dated 20.6.2001 which were accepted by such of the NCE
developers who had agreed to sell electricity to APTRANSCO on the tariff and
other terms and conditions contained in the said order.
12) In
accordance with the above, the Commission initiated the proceedings for review
of the tariff, and other terms and conditions for sale of electricity by NCE
developers to APTRANSCO and has passed the order dated
O.P.No.1075/2000 had been suspended by the Hon’ble High Court and the
Commission therefore cannot initiate review proceedings as stipulated in the
order dated 20-06-2001 even for such developers who had voluntarily agreed to
sell electricity to APTRANSCO accepting the said order, is without any merit.
13) The
Electricity Act, 2003 came into force on 10.6.2003. As mentioned above, the issue whether the NCE
developers can sell electricity to third parties or not during the period from
1.4.2001 till the coming into force of the Electricity Act, 2003 is pending for decision by
the
14) The
Electricity Act, 2003 makes certain transitional provisions. Section 14 and
proviso 1 to it read as under:
“The Appropriate Commission may, on
application made to it under section 15, grant a licence to any person –
(a)
to transmit
electricity as a transmission licensee;
or
(b)
to distribute
electricity as a distribution licensee;
or
(c)
to
undertake trading in electricity as an electricity trader, in
any area which may be specified in the
licence:
Provided that
any person engaged in the business of
transmission or supply of electricity under the provisions of the
repealed laws or any Act specified in the Schedule on or before the appointed date shall be deemed to be
a licensee under this Act for
such period as may be stipulated in
the licence, clearance or approval
granted to him under the repealed
laws or such Act specified in
the Schedule, and the provisions of the repealed laws or such Act specified
in the Schedule
in respect of such licence shall
apply for a period of one year from the
date of commencement of this Act or such earlier period as may be
specified, at the request of the licensee, by the Appropriate Commission
and thereafter the provisions of
this Act shall apply to such business”:
15)
Thus
in terms of the above provisions, the APTRANSCO as a licensee shall continue to
be governed by the provisions of the Andhra Pradesh Act and the applicable
provisions of the previous Central Laws for a period of one year in regard to
its licences. The licence of APTRANSCO shall be governed by the provisions of
the Electricity Act, 2003 after the period of said one year. Accordingly the restrictions contained in
sections 39 and 41 of the Electricity Act, 2003 prohibiting the State
Transmission utility and the Transmission Company from engaging in trading were
not to be applicable to APTRANSCO till 09-06-2004. When the order dated 20.3.2004 was passed by
the Commission, the prohibition contained in sections 39 and 41 of the
Electricity Act was not therefore applicable to APTRANSCO. There was then no
restriction on APTRANSCO purchasing the electricity from the generating
companies for resale to the distribution companies. The validity of the order passed by the
Commission needs to be judged based on the law applicable as on the date of the
order and not with reference any subsequent events. There is therefore no illegality or
invalidity in the order dated
16)
The
next issue arises as to whether the order dated 20-03-2004 which sanctions the
purchase of electricity by APTRANSCO from the NCE developers and its resale to
the distribution companies can be continued to be maintained even after
9.6.2004 when the transitional period of one year envisaged under the
Electricity Act, 2003 comes to an end and section 39 of the Electricity Act
prohibiting the State Transmission Utility from engaging in trading activity
should apply. In terms of section 39
read with sections 131, 132, 133 and 172 of the Electricity Act, 2003 what is
required to be implemented is the segregation of the trading functions of the
State Transmission Utilities and not the termination of the any agreement for
purchase and sale of the electricity as sought to be contended by the
petitioners. The Electricity Act allows APTRANSCO to transfer either the
trading activity or the transmission utility to another company to fulfill the
requirement of sections 39 and 41 of the Electricity Act. Such a transfer of
the function can be done through a transfer scheme notified under sections 131,
132, 133 etc. of the Electricity Act and also read with sections 23 and 24 of
the Andhra Pradesh Act.
17)
As
and when APTRANSCO transfers the above function of purchase of electricity to
the distribution companies and/or entities as per the requirement under the
Electricity Act, 2003, the rights and obligations under the existing agreements
including the purchase of electricity from the developers on the tariff terms
and conditions determined by the Commission under the impugned order shall
stand assigned and transferred to such transferee(s). The agreements with NCE developers will not
therefore come to an end because of the prohibition contained in section 39 of
the Electricity Act, 2003 on the State Transmission Utility from engaging in
trading. The NCE developers will be
bound to honour the agreements with the assignees or transferees under the
above statutory transfer scheme. In this
regard, the following specific provisions of the Electricity Act, 2003 and the
Andhra Pradesh Electricity Reform Act, 1998, are relevant:
ELECTRICITY
ACT, 2003:
“39. (1) The
State Government may notify the Board or a Government company as the State Transmission Utility:
Provided that
the State Transmission Utility shall not engage in the business of trading in
electricity:
Provided
further that the State Government may transfer, and vest any property, interest
in property, rights and liabilities connected with, and personnel involved in
transmission of electricity, of such State Transmission Utility, to a company
or companies to be incorporated under the Companies Act, 1956 (1 of 1956) to
function as transmission licensee through a transfer scheme to be effected in
the manner specified under Part XIII and such company or companies shall be
deemed to be transmission licensees under this Act.
131
(4) The State Government may,
after consulting the Government company or company or companies being State Transmission Utility or generating company or transmission licensee or
distribution licensee, referred to in
sub-section (2) (hereinafter referred to
as the transferor), require such transferor to draw up a transfer scheme to vest
in a transferee being any
other generating company or transmission licensee or
distribution licensee, the property, interest in property, rights and
liabilities which have been vested in the transferor under this section, and publish such scheme as statutory transfer scheme
under this Act.
131 (5) A transfer scheme
under this section
may-
(a)
provide for the formation of
subsidiaries, joint venture companies or other schemes of division,
amalgamation, merger, reconstruction or arrangements which shall promote the
profitability and viability of the resulting entity, ensure economic
efficiency, encourage competition and protect consumer interests;
(b) define the
property, interest in property, rights and liabilities to be allocated -
(i) by specifying or describing the property, rights and
liabilities in question; or
(ii) by
referring to all the property, interest in property, rights and liabilities
comprised in a described part of the transferor's undertaking; or
(iii) partly in one way and partly in the other;
(c) provide that
any rights or liabilities stipulated or described in the scheme shall be
enforceable by or against the transferor or the transferee;
(d) impose on the
transferor an obligation to enter into
such written agreements with or execute such other instruments in favour of any
other subsequent transferee as may be stipulated in the scheme;
(e)
mention the functions and duties of the transferee;
(f)
make such supplemental, incidental and consequential provisions as the
transferor considers appropriate including provision stipulating the order as
taking effect; and
(g) provide that
the transfer shall be provisional for a stipulated period.
131
(6) All debts and obligations
incurred, all contracts entered into and all matters and things engaged to be
done by the Board, with the Board or for the Board, or the State Transmission
Utility or generating company or transmission
licensee or distribution licensee, before a transfer scheme becomes effective
shall, to the extent specified in the relevant transfer scheme, be deemed to
have been incurred, entered into or done by the Board, with the Board or for
the State Government or the transferee and all suits or other legal proceedings
instituted by or against the Board or transferor, as the case may be, may be
continued or instituted by or against the State Government or concerned
transferee, as the case may be.
ANDHRA PRADESH ACT, 1998:
23 (5) The State Government may, after consulting the APTRANSCO (the "transferor licensee"), or generating company or
companies, as the case may be, require them to draw up a transfer scheme to vest in a further licensee (the
"transferee licensee") or any generating companies, any of the functions including distribution function, property, interest in property, rights and liabilities which have been vested in the transferor
licensee or generating companies, as the case may be under this section and
publish the same as Statutory Transfer Scheme under this Act.
The Transfer Scheme to be notified under this sub-section shall have the
same effect as the Transfer Scheme under sub-section(2).
23 (6) A transfer scheme may,-
(a)
provide for the formation of subsidiaries, joint venture companies or
other schemes of division, amalgamation, merger, reconstruction or
arrangements;
(b)
define the property, interest in property, rights and liabilities to be allocated:-
(i)
by specifying or describing the property, rights and liabilities in question;
(ii)
by referring to all the property, interest in property, rights and liabilities comprised in a specified part of the
transferor's undertaking; or
(iii)
partly in the one way and partly in the other;
(c)
provide that any rights or liabilities specified or described in the scheme shall be
enforceable by or against the transferor or the transferee;
(d)
impose on the licensee an obligation to enter into such written agreements with or
execute such other instruments in favour of, any other subsequent licensee as
may be specified in the scheme;
(e)
make such supplemental, incidental and consequential provisions as the
transferor licensee considers appropriate including provision
specifying the order in which any transfer or transaction is to be regarded as taking effect; and
(f)
provide that the transfer shall be provisional for a
specified period.
23 (7)
All debts and obligations incurred, all contracts entered into and all
matters and things engaged to be done by the Board, with the Board or for the
Board, or the APTRANSCO or generating company or companies before a
transfer scheme becomes effective shall, to the extent
specified in the relevant transfer scheme, be deemed to have been incurred,
entered into or done by the Board, with the Board or for the State Government or the transferee and all suits or other legal
proceedings instituted by or against the Board or transferor, as the case may
be, may be continued or instituted by or against the State Government or
concerned transferee, as the case may be.
23 (8) In the event that a licensee is required to vest any part of its
undertaking in another licensee pursuant to sub-section (5), the Commission shall amend the transferee’s license in
accordance with section 19 or revoke its licence in accordance with section 18.”
18) In
accordance with the above provisions, the rights, obligations, responsibilities
etc. assumed by APTRANSCO under the existing agreements and arrangements with
the generating companies including those with NCE developers in terms of the
stipulation contained in the Commission’s orders dated 20.6.2001 and 20.3.2004
shall vest in the successor entity and there shall be no vacuum in this regard.
The Commission is therefore entitled to proceed on the basis that there shall
be some entity / entities to succeed to the rights and interests as well as the
obligations of APTRANSCO to comply with the requirements of the Electricity
Act, 2003.
19) The
provisions of the Andhra Pradesh Act do not cease to apply after the coming into
force of the Electricity Act, 2003 on 10.6.2003 and even after the transition
period of one year specified in the said Act.
Section 185 (3) of the Electricity Act, 2003 read as under:
“185 (3) The
provisions of the enactments specified in the Schedule, not inconsistent with the
provisions of this Act, shall apply to the States in which such
enactments are applicable”.
The
Schedule to the Electricity Act lists the Andhra Pradesh Act as one of the
specified enactments. Accordingly,
except where a provision in the Andhra Pradesh Act is inconsistent with the
Electricity Act, 2003, the provisions of the Andhra Pradesh Act will continue
to apply. The Commission can therefore continue to exercise functions and
powers under the provisions of the Andhra Pradesh Act which are not
inconsistent with the Electricity
Act, 2003.
20) The
Electricity Act, 2003, does not prohibit the determination of the tariff terms
and conditions for purchase of electricity by a trading licensee from a
generating company.
Section 86 of the Electricity Act, 2003, inter alia, read as
under:
“86. (1) The State Commission shall discharge the following functions, namely: -
(a) determine the tariff
for generation, supply,
transmission and wheeling of
electricity, wholesale, bulk or retail, as the case may be, within the State:
Provided that where
open access has been permitted to
a category of consumers under section
42, the State Commission shall determine only the wheeling charges and surcharge thereon, if any, for the said category of consumers;
(b) regulate electricity purchase and procurement process
of distribution licensees including the
price at which electricity shall be procured
from the generating
companies or licensees or from
other sources through agreements for purchase of power for
distribution and supply within
the State”;
21) It can be seen from the above that
sub-clause (b) of clause (1) of section 86 of the Electricity Act, 2003 deals
specifically with the Commission’s function to regulate the purchase and
procurement process of electricity by the distribution companies from the
generating companies and also from others including from trading
licensees. Sub-clause (a) of clause (1)
section 86 of the Electricity Act is however wider and it deals with the
determination of generation tariff without any qualification or condition that
such determination of tariff can be restricted only to circumstances when the
generating companies sell electricity to a distribution licensee. Accordingly, the contention of the
petitioners that the Commission can determine the tariff only for the purchase
of electricity by the distribution companies from the generating companies and
not generally for the sale by the generating companies is without merit. There is also no inconsistency in the
provisions of the Andhra Pradesh Act and the Electricity Act 2003, in this
regard. Further, as mentioned above, the
order of the Commission was passed on
Section 14. Therefore, even assuming for
the sake of argument that there was any inconsistency between the Andhra
Pradesh Act and the Electricity Act 2003, it will have no bearing. Further, such tariff is being determined by
the Commission as envisaged in the order dated
22) The petitioners have urged that the
combined reading of sections 61, 62 and 86 of the Electricity Act, 2003, shows
that the Commission has no jurisdiction to compel a generating company to sell
electricity to a trading company and the Commission cannot determine the
tariff, terms and conditions of such sale. According to the petitioners,
section 86(1)(a) of the Electricity Act cannot be
interpreted in isolation. The petitioners have urged that the Commission
omitted to consider the specific provisions of sections 62 and 64 of the
Electricity Act, 2003 which clearly provide for the manner in which the
determination of tariff of generating companies shall be carried out. According
to the petitioners, in the absence of an application as per the provisions of
section 64, the Commission cannot proceed to determine or revise or review the
tariff suo-motu.
23) The above contentions of the petitioners
have no merits in the facts and circumstances of the present case. The
Commission has not and will not compel any NCE developers to enter into
agreements with either APTRANSCO or any other person including a distribution
company. Prior to the Electricity Act,
2003, the Commission exercised its functions under the Andhra Pradesh Act, and
refused the permission sought by NCE developers to sell electricity generated
by them to the consumers directly and provided that such NCE developers may
sell the electricity to APTRANSCO on the terms and conditions contained in the
order dated 20.6.2001. The order of the
Commission dated 20.6.2001 was suspended by the Hon’ble High Court on filing of
the writ petitions by some of the NCE developers in the context of the
Commission not permitting the sale of electricity to consumers and directing
such developers to sell electricity to APTRANSCO. However, some NCE developers voluntarily
accepted the order dated 20.6.2001 passed by the Commission and entered into
PPAs with APTRANSCO. In the proceedings leading to the order dated
a.
It relates to existing agreements between APTRANSCO and the
NCE developers at the time when APTRANSCO was the Bulk Supply Licensee and was
entitled to purchase and sell electricity in the State and as a licensee,
APTRANSCO has been under the regulatory control of the Commission including in
regard to tariff at which the electricity shall be purchased or procured;
b.
The order dated 20-06-2001 clearly provided for such review
of the tariff, terms and conditions by the Commission effective 01-04-2001 and
the concerned NCE developers have accepted the same and have been supplying
electricity generated by them to APTRANSCO based on the above.
c.
APTRANSCO as on the date of the passing of the order
dated
d.
Section 86 (1) (f) of the Electricity Act, 2003, empowers
the Commission to adjudicate on the issues related to the agreement between the
generation company and the licensees.
e.
Section 86(1)(a) of the Electricity Act, 2003, empowers the
Commission to determine tariff in the case of generating companies which have
entered into agreements for sale of electricity generated by them;
f.
Whatever has been decided by the Commission in the orders
dated 20.6.2001 and 20.3.2004 on the sale and purchase of electricity between
the NCE developers and APTRANSCO will enure to the benefit of the company which
will succeed to the trading functions presently being undertaken by APTRANSCO.
The agreements will not become void or voidable merely because the Electricity
Act requires that as the State Transmission Utility APTRANSCO should not carry
on trading in electricity after the transition period.
24) The
next contention of the petitioners is that the Commission should not have
proceeded to determine tariff terms and conditions for the sale of electricity
beyond the transition period of one year. The petitioners have contended that
the Commission has been aware that with the coming into force of the
Electricity Act, 2003, APTRANSCO has to cease to undertake trading function
after the transition period and there is therefore no question of deciding on
the tariff for the post-transition period on the sale of electricity by the NCE
developers. As mentioned above, the Electricity
Act, 2003, does not render void the existing agreements between the APTRANSCO
and NCE developers after the transition period.
The Act only requires the segregation of the transmission and trading
functions. On such segregation, the entity which will succeed to the trading
function will assume all the rights and obligations of APTRANSCO for the
remaining period of the PPAs. The
Commission has the power to determine tariff of the generating companies (NCE
developers) and has also the function to regulate the trading licensee. There is therefore no merit in the contention
of the petitioners on the lack of jurisdiction of the Commission to determine
tariff for the NCE Developers for the period beyond the transition period.
25) The
Government of
26) The
petitioners contended that the Commission has to fix a percentage of the total
consumption in the areas of distribution licensees that shall be purchased from
renewable sources of energy. This is an
independent issue and is not relevant for the present case. By the order dated
ON
MERITS OF THE ORDER
The issues on merits raised by
the petitioners and the Commission’s analysis are as under:
27) Study team Report:
The petitioners have contended
that the report of the study team appointed by the Commission to visit some of
NCE projects is not made available to the petitioners. In this connection, it is stated that the
report of the study team is in respect of biomass and bagasse-based projects
and not related to Mini-Hydel
Plants.
28) Tariff determination procedure:
The Petitioner-Association contend
that the law contemplates the determination of tariff upon an application from
the generating company. The Commission’s
conclusion that a two-part tariff will be difficult to implement in view of
large number of projects of small capacity is unreasoned. According to the Petitioner-Association, in
the computer era and age of information technology, such reasoning is not
understandable. The respondent stated that the Order dated
The
Commission has already discussed the rationale for not adopting the
conventional two-part tariff at paragraph (30) of the Commission’s order which
reads as under:
“The Commission recognises the fact that two part tariff
will be difficult to implement in view of the large number of the plants of low
capacity. But at the same time, the
Commission considers that beyond the threshold level of generation, the developers
should get only variable cost (if any) and incentives and not the fixed
charges. The Commission would also like
to determine the tariff for all the projects of one category based on the year
of commissioning of each project”.
The two-tier tariff contemplated by the Commission based on the benchmark performance level (Plant Load Factor, or PLF) would distinguish those plants, which are operating at varying operating conditions. This would virtually mean a two-part tariff, modified to suit the non-conventional projects. This methodology is based on scientific principles and applied in respect of tariff for the power plants across the country. In view of the above, the contention of the petitioners seeking the adoption of a two-part tariff as in case of conventional projects is not warranted and merits no consideration.
29) Two-tier tariff:
The other Petitioner, M/s. Active Power Corporation Private Ltd., contends that the two-tier tariff fixed by the Commission with 35% threshold PLF would result in closure of NCE projects, in particular in case of the Petitioner’s own project. As per the petitioner, it has to pay term loan of Rs. 30 lakhs (inclusive of interest) every quarter apart from meeting operational costs. The Petitioner contends that full cost recovery up to 100% PLF must be allowed to meet O & M expenses.
APTRANSCO submitted that the contention of the petitioner
neither reflects the correct position with regard to petitioner’s profitability
in the past nor does it take into account any normative parameters for the
future operations. Hence the case does
not warrant specific consideration.
30) Capital Cost:
The Petitioner-Association submitted that the Commission has arbitrarily taken the project cost as Rs. 4.5 Crs. per MW.
It has further stated that the Commission, having agreed that the cost of smaller projects is more than that of the larger projects due to economies of scale, should have given effect to the reality.
It has also stated that as per the information submitted by the Petitioner-Association, the actual project cost lies between Rs. 4.18 Crs., and Rs. 7.14 Crs / MW for various projects with capacity ranging from 7.5 MW to 0.75 MW. Considering the above, the petitioner stated that adoption of Rs. 4.5 Crs. per MW merely on the basis of undetailed indications given by APTRANSCO and NEDCAP is not proper.
The Petitioner-Association
has also contended that this Commission has stated that the MNES,
has been providing more capital subsidy for new smaller projects and less for
bigger projects and that the said consideration is not correct and, in any
case, is not relevant for the facts of the case. The MNES has categorically confirmed in letter
dated
The other Petitioner, M/s.
Active Power Corporation Private Limited, has also contended that the
Commission should have considered actual project costs of individual projects,
and submitted that its project cost was
Rs. 7.91 Crs for a capacity of 1.4 MW.
APTRANSCO stated that the MNES guidelines for the interest subsidy, which were existing prior to the capital subsidy regime, had stipulated maximum eligibility ceilings of capital cost at Rs.4 Crs. (for capacity of above 1 MW) and Rs.5 Crs. (for capacity of less than 1 MW). It contended that these ceilings are a sort of benchmark for capital cost. Also that, going forward for the capital subsidy regime, though MNES has not stipulated the capital cost, it relied on the benchmarks already established for providing capital subsidy. Therefore, once a norm (indicated through the subsidy regime) is in place, any higher cost of project for any capacity cannot become a specific case for consideration.
APTRANSCO further submitted the project cost of the mini-hydel stations installed by APGENCO as follows :
|
S.No. |
Name of the Station |
Capacity |
Project Cost |
|
1. |
D-83 9th Mile |
2 x 500 KW |
249 lakhs |
|
2. |
10th Mile |
3 x 220 KW |
140 lakhs |
|
3. |
14th Mile |
2 x 500 KW |
307.38 lakhs |
|
4. |
16th Mile |
2 x 500 KW |
276.22 lakhs |
|
5. |
18th Mile |
3 x 220 KW |
150 lakhs |
|
6. |
19th Mile |
3 x 230 KW |
165 lakhs |
|
7. |
Palair |
2 x 1000 KW |
375 lakhs |
|
8. |
Chettipeta |
2 x 500 KW |
388.17 lakhs |
It also highlighted that as per the Indian Renewable Energy Development Agency (hereinafter IREDA) norms for financing of the mini-hydro schemes, the projects should satisfy three conditions, namely (a) technical soundness, (b) least cost design, and (c) should have a financial return of 12%. The guidelines clearly stress for minimization of project cost, thereby calling for efficiencies in project planning and execution.
In this background, keeping the norms of MNES as well as requirement of IREDA (being one of the financiers to the sector) in view, there is no justification for considering any higher ‘actual’ costs of the projects for tariff determination.
With regard to categorisation of projects below 1 MW capacity and projects above 1 MW capacity, APTRANSCO stated that there are only 4 projects operating below 1 MW (totaling up to 2.5 MW) out of the entire capacity of 84 MW set up by 25 developers. Given this scenario, the installed capacity is more skewed towards developers with more than 1 MW. The Commission has considered base cost of Rs.4.5 Crs./ MW for hydro projects, which favours majority of the capacity installed in the State.
APTRANSCO
also contended that the structure of the subsidy scheme, either on account of
interest subsidy or on account of capital subsidy tends to factor in economies
of scale. For example, during the interest subsidy regime, there was a maximum
support ceiling, which was progressively decreasing for larger projects. In case of the capital subsidy, similar
subsidies are provided for first MW and reduced subsidies for subsequent
MWs. The phenomena of economies of scale
are also observed from the actual projects provided by the
Petitioner-Association (though not to be considered as benchmarks for tariff
determination). Given the above, the Commission’s benchmarking of the project
cost, after accounting for subsidy, is therefore appropriate for tariff
determination.
APTRANSCO, while responding to M/s. Active Power Corporation Ltd., submitted that the Petitioner’s contention of higher capital cost (Rs. 5.65 Crs/ MW) is without any basis and reasoning and as such does not make any ground for revising the benchmarks. The Petitioner has already earned Rs.13.58 Crores i.e., twice the estimated project cost and 1.7 times the project completion cost as submitted by the petitioner during the last 4 years of the project operation.
The objectors, Sri. M.Venugopala Rao and Peoples Monitoring Group on Electricity Regulation, pleaded that higher cost should not be considered. Peoples Monitoring Group also submitted that some of the projects had already recovered their full capital cost or near-full cost, so the payments already made for such projects be also considered while fixing the tariff.
The Commission notes that
the project costs of APGENCO’s
mini-hydel projects – none exceeding 1 MW capacity – as tabulated above range
from Rs.1.80 crs. to Rs.3.88 crs. / MW. The Commission,
however, adopted the project cost of Rs. 4.5 Crs / MW for the reasons already
stated in its Order dated
2000-SHP dated:
“The Commission therefore considers that a uniform capital cost of Rs. 3.75 Crs/MW (Rs. 4.5 crs less capital subsidy of Rs. 0.75 crs) would be reasonable for mini-hydel projects, whether small or large”.
Similarly,
the Table in para 76
of the order is also revised as follows:
Year of operation(nth
year) |
Tariff Rs
/ Unit |
|
1st |
2.69 |
|
2nd |
2.60 |
|
3rd |
2.52 |
|
4th |
2.43 |
|
5th |
2.34 |
|
6th |
2.26 |
|
7th |
2.17 |
|
8th |
2.09 |
|
9th |
2.00 |
|
10th |
1.92 |
31) Plant Load Factor:
The
Petitioner-Association contends that the Commission ought not to have
determined a PLF of 35% without considering compensation for those years in
which actually realized PLF is less than 35%.
The detailed information from which the proposed averages have been
computed has not been made available to the Petitioner-Association. Mere arithmetical average is non-conclusive
of anything. Further, the Commission is to be concerned with the future; the
trends of change are more relevant than the changes themselves. The Commission ought to have made projections
for the future taking into consideration the relevant circumstances. It has further stated that the statement of
Chief Engineer / Nagarjuna Sagar is so general and bereft of any supporting
information or details that it cannot be considered anything more than an
unreasoned ipse dixit. It is neither
evidence nor relevant to the facts of the case.
The Petitioner contends that the declining and alarming positions of the
years 2001-2004 are known and not disputed and the Commission ignored this
aspect and fixed the benchmark at 35%.
APTRANSCO submitted that while determining the PLF for a long term, long-term trends hold relevance rather than the short-term trends. It further submitted that the average PLF for these plants for the period prior to FY 2000 is above 40% for which the data has already been submitted to the Commission. Most of the capacity additions in the State had taken place by the year 2000 when the total capacity of Mini-Hydel Plants had reached more than 50% of the present capacity. The average PLF during FY 2000 and FY 2001 was more than 40%. The PLFs considered are, therefore, achievable. The generation was affected during 2003 primarily due to reduced monsoon in Karnataka. The projects are based on long term hydrology studies conducted before determining capacities. The contention of the Petitioner-Association is therefore baseless.
One of the objectors, Sri. M. Venugopala Rao, opined that the benchmark parameter of 35% PLF is too low and would cast huge burden on the consumers. He suggested that inefficient projects that are unable to achieve even this level of performance, should not be encouraged.
The Commission discussed in detail the views of the developers, NEDCAP, APTRANSCO, Irrigation department and the average PLF of the seven years from 1996 in paragraph 66 of its Order dated:20.03.2004 and determined the threshold PLF as 35%. In addition to the above, the Commission observes the following:
a)
The
project planning and capacity determination in respect of hydel projects has
necessarily to be based on long term study of hydrological data and possible
future scenario.
b)
When
the projects were conceived in and around the year 2000, the issues that could
possibly arise out of construction and completion of the projects in the upper
riparian States (including Alamatti) against the background of “Krishna River
Water Tribunal Award” were too well known and must have been taken into
consideration.
c)
If
the planning is to be based on short term data, large-sized hydel projects
could not have been conceived and constructed.
d)
The
sites for the projects have been selected by the developers themselves on their
own as submitted by Chief Engineer / Nagarjuna Sagar at the time of hearing leading to the
issue of Commission’s order dated 20-03-2004 (paragraph 66), and if the sites
selected are such that they support very low PLF, the APTRANSCO or the
consumers at large cannot be expected to shoulder the consequential undue extra
burden.
e)
The
Commission does not find any reason to dismiss the submission of a responsible
officer like Chief Engineer/ Nagarjuna Sagar, made during the course of open
hearing in the presence of Petitioner-Association that bad monsoons is not a
permanent feature and is cyclic in nature.
f)
Even
the large plants at Nagarjuna Sagar and Srisailam (Right & Left) Power
Houses are built on long term forecasts ranging from 25-50 years.
g)
A
point raised by the Petitioner-Association in regard to the normative PLF is
that the inclusion of the unusually high PLF of a single developer (M/s.Active
Power Corporation Pvt. Ltd.,) had unrealistically raised the average PLF. It suggested that such unusual level of PLF
as well as the projects with zero PLF should be excluded before computing the
average PLF. An exercise has been
carried out in the Commission on this basis and it is observed that the results
are not much different. It is
particularly seen that in respect of the
(calendar) years 1998, 1999 and 2000, the three normal monsoon years in the
recent past and the period when the number of small hydro projects in operation
was substantial (10 to 27), the average PLF works out to 35.06%.
h)
Further,
the normative PLF of 35% has been adopted based on the recommendations of
NEDCAP, as they have details of performance of the NCE projects, and are the
nodal agency for promotion thereof.
i)
The
Commission therefore is of the opinion that the benchmark parameters of 35% PLF
is reasonable and achievable.
Hence
the Commission does not find any justification to review this component.
The other
petitioner, M/s. Active Power Corporation Private Ltd., raised the issue of
reduction in inflows and power generation due to construction of cooling towers
at Vijayawada Thermal Power Station.
The
Petitioner contends that due to proposed construction of cooling towers for
three generating units at Vijayawada Thermal Power Station (VTPS), drawal of
water by Irrigation Department from Budameru diversion canal and completion of
Basavaramatarakam lift irrigation scheme at Vijayawada in 2004-05, the water
availability would get reduced substantially and power generation would come
down from 12.5 MU to 4 MU. Regular
annual maintenance of bund and electrical machinery may cause further reduction
in power generation. The Commission
passed its order dated
APTRANSCO
submitted that the allegations of the Petitioner are baseless. It further submitted that the Petitioner’s
Mini Hydel Power Project was commissioned in April 2000, and from April 2000 to
March 2004, the Petitioner’s Mini Hydel Project has delivered 42.69 MU (at
about 90% PLF) to the grid for sale to APTRANSCO for which APTRANSCO paid Rs. 13.58 Crores to
the Petitioner towards cost of power. It
further stated that the Petitioner’s Mini Hydel Project delivered 0.96 MU in
March 2004 at a PLF of above 100%. Even
if the assumption that generation comes down due to the factors stated above,
the project would safely generate power above the threshold PLF of 35%
considered by the Commission.
Notwithstanding
what is stated by APTRANSCO, the Commission opines that there would indeed be
reduction in power generation when the proposed cooling towers are constructed
for three of the six generating units of
32) Incentive:
The
Petitioner-Association contends that the fixation of incentive at a low level
of 21.5 paise per unit for generation above the PLF of 35% is not rational and
reasonable. The criteria
for fixing 21.5 paise per unit is not indicated in the Commission’s
order. The Commission did not even
consider allowing shortfall to be recouped in the subsequent year when the PLF
is above 35% by allowing full-cost tariff for such additional energy in such
subsequent year.
The
reasons for introducing incentive beyond threshold level are explained at
paragraph (76) of the Commission’s order which reads as under:
“As observed earlier, fixation of uniform tariff across all
mini hydel power plants with varying operating conditions would lead to unequal
tariffs. The Commission therefore
proposes a two tier tariff for the mini hydel power plants distinguishing those
operating up to 35% PLF and other operating above 35% PLF. The Tariff indicated above will be applicable
for the Power Plants up to PLF of 35% and where PLF during a settlement period
exceeds 35%, only an amount of 21.5 paise per unit as has been allowed to other
categories of NCE developers (in place of the tariff indicated above) shall be
paid for every unit delivered in excess of 35% PLF at generator terminals i.e.
including captive and auxiliary consumption”.
The
incentive scheme has been introduced by the Commission in such a way that while
allowing adequate return to the developer and providing necessary motivation to
generate beyond the threshold PLF, the consumer is not unduly burdened. This is based on the provisions made by
Central Electricity Regulatory Commission (hereinafter CERC) in respect of
conventional projects. Any business is
fraught with risks. It is, however, not
fair to pass on all risks to the consumers.
Therefore, the philosophy of payment of full tariff during surplusing
years to compensate for shortfall in other years is not rational and cannot be
accepted.
Subsequent to the issue of
Order dated
33) Auxiliary consumption:
The
Petitioner-Association pleaded that fixation of Auxiliary Consumption at 1%
based on CERC guidelines is not correct as the Mini-Hydel plants are small in
capacity. It pleads for additional
allowance for transformation losses.
APTRANSCO
submitted that the detailed project reports made available by some of the Small
Hydro Developers show Auxiliary Consumption as 1% and it is reasonable.
The
Commission does not consider that there can be any substantial difference in
transformation loss for Mini-Hydel projects in comparison to other hydel
projects. Hence the Commission does not
find any reason to review the Auxiliary Consumption fixed at 1% in its Order
dated
34) O & M expenditure:
The
Petitioner-Association contends that allowing for operation and maintenance
(O&M) expenditure at 1.5% of capital cost following the Central Electricity
Authority (hereinafter CEA) guidelines is an error. It has submitted that CEA
guidelines are not applicable to small hydro plants and that the actual
expenditure is as high as 4.7%, depending on individual circumstances and
location, size, etc. of the projects.
The
other petitioner, M/s. Active Power Corporation Private Ltd., contends that it
has to incur Rs.90 lakhs every year towards O&M expenditure and 1.5% of
Capital cost fixed by the Commission is unreasonable.
APTRANSCO
submitted that the O&M expenditure during the first 4-5 years is almost
negligible and 1.5% as provided by APERC is reasonable.
APTRANSCO
also submitted that Rs.90 lakhs projected for O&M cost corresponds to 11% which
is most unrealistic and not justifiable.
The
Commission cannot consider an individual case, especially that of a developer
which is reported to have earned revenue
of twice its estimated project cost and
1.7 times the project completion cost in the preceding four years of the
operation of the project as referred to in paragraph 30 of this Order, as the
basis for laying down a benchmark. As to the contention of the petitioners that
CEA guidelines are not applicable to small hydro plants, the Commission
observes that allowing the O&M expenditure as a percentage of a capital
cost is justifiable and equitable, considering the fact that the capital cost
of a project is linked with the capacity of the plant and the economies of
scale accrue to bigger projects. Hence
there are no grounds for review of the component of O&M expenditure fixed
as per CEA guidelines.
35) Rate of interest:
M/s.
Active Power Corporation Pvt. Ltd., contends that
adoption of 12% rate of interest on term loan is incorrect stating that it is
paying interest at 14%.
APTRANSCO
submitted that the nodal agency NEDCAP has proposed interest rate of 8.5% while
the Commission has allowed 12%. The
Petitioner may swap the loan if really paying 14% interest rate. It has further submitted that the contention
of the Petitioner that the Commission has ignored the objections raised by the
Petitioner and proposals submitted by NEDCAP is incorrect. Recommendations of NEDCAP have been
considered by the Commission on merits.
The
Commission in its order dated
“APTRANSCO has
considered the interest on term loans at 13% for the existing and 10% for the
new projects.
The developers of mini hydel projects during hearing stated that
prevailing interest rates are higher as no interest subsidy is available from
MNES. They requested for a provision of
14%.
NEDCAP
indicated an interest rate of 8.5% for the existing (after interest subsidy)
and 11.75% for the new projects.
While determining the project cost, the Commission has adopted
same price for both existing and new projects. The capital subsidy or interest
subsidy more or less nullifies the higher interest rate for one category
vis-à-vis the other one. As the Commission considered the capital cost after
adjusting for capital subsidy, interest rate is considered without adjusting
for the interest rate subsidy. Hence
Commission considers the interest rate of 12% for both existing and new
projects”.
As
observed in the Order of the Commission dated
36) Annual escalation:
The
Petitioner-Association stated that while determining the annual escalation for
operation and maintenance, the Commission has fixed it at 4%, ignoring the
IREDA norm of 5% and expressed reservations on relevance of WPI & CPI.
APTRANSCO
submitted that as per CEA guidelines, O&M costs are required to be
escalated by assigning weightage to both WPI & CPI. CEA has fixed similar norms for diesel sets
having smaller capacities.
The
Commission observes that determination of escalation based on WPI & CPI is
an accepted practice across the country and the escalation as provided in the
Order dated
37) Payment of Royalty charges:
The Petitioner-Association stated that the Commission has directed that water royalty charges shall be paid directly by APTRANSCO and the DISCOMs to the Government. It questioned as to how the DISCOMs have come into the picture. It is further submitted that it does not appear that the Commission has jurisdiction to make such a stipulation as royalty charges, if any, are to be paid by the developer to the Government and the recovery of the same too is enforceable only against the developers.
APTRANSCO submitted that the Petitioner has completely misunderstood the proposition. The reference to DISCOMs is made with a futuristic view of the emerging sector structure with regard to payment of royalty. APTRANSCO / DISCOMs are contemplating to evolve certain structure and would propose measures for payment of royalty.
The
Commission observes that as long as a suitable mechanism / procedure is
evolved for payment of royalty to the State Government, it is immaterial which
agency discharges the obligation.
Accordingly, the Commission finds no grounds justifying a review of its
impugned Order in regard to this component.
38) Debt-equity ratio :
The
Petitioner-Association
submitted that while the debt-equity ratio of 70: 30 is relevant
in the ordinary circumstances considering the norms of financial institutions,
the extraordinary circumstances of the small hydro power developers at present
have not been taken into account. The
developers incurred losses over the past three years due to inadequate power
generation by reason of extremely poor inflows.
Consequently, the debts had been restructured with interest amounts
being converted into term loans to the extent of 45% over and above the
original debt. Under the conditions, the
debt service costs have gone up. The
Petitioner stated that these extraordinary circumstances have not been taken
into consideration by the Commission.
APTRANSCO
submitted that neither APTRANSCO nor the consumers in the State are responsible
for such debt restructuring and skewed debt equity. It further stated that though there are PPAs
in the country which have skewed debt-equity structure yet the tariff is based
on normative parameters; therefore such a consideration is not justifiable.
The debt-equity ratio is a
norm, which is followed uniformly by the lenders for project financing. The Commission has adopted the same in its
Order dated
39) Income-tax :
The
Petitioner-Association submitted that the Commission has not appreciated the
true position with regard to Minimum Alternate Tax (MAT) and provisions with
regard to income-tax. Further, the tax
holiday period in case of some developers is coming to an end and they have to
pay income-tax at 35% plus 10% surcharge which should have been allowed as a
pass-through.
APTRANSCO
submitted that the Commission has considered a 16% return which provides
necessary margin for meeting MAT obligation.
It has further stated that in case the tax holiday is coming to an end,
these projects might be at the threshold of completing 10 years of operation. As such, as per the Order of the Commission
dated
The
Commission has provided return on equity at 16% to all non-conventional projects
including the small-hydro power projects, taking into account the MAT
obligation also. Further, these projects
enjoy a 10-year tax holiday. As per the
Commission’s Order, there will be a review of tariff for individual projects on
completion of 10 years. The Commission,
while reviewing the tariffs applicable to individual projects on completion of
10 years will take into consideration this aspect also. Presently, therefore, there is no case for a
review.
40) Settlement period:
The
Petitioner-Association submitted that in case of seasonal operation, such as
that of Small Hydro Power Projects, the settlement period of one month for the
application of the benchmark 35% PLF is erroneous. The settlement period for such projects
cannot be less than a whole year.
APTRANSCO
also submitted that the PLF computation should be on annual basis for payment
of incentive.
The
Commission hereby clarifies that PLF computation and payment of incentive
beyond threshold PLF shall be on annual basis only.
41) Year of Operation:
It
is submitted by the Petitioner-Association, without seeking any specific relief, that the Commission
erred in determining the tariff for 10 years and determining that the existing
and the new projects shall be entitled to tariff, based on the year of
operation in the schedule provided in paragraph 76 of the Commission’s order
dated 20-03-2004, and the same is without any rationale.
The
Commission however, clarifies that the year of operation for the purpose of
payment of fixed charges shall be reckoned from the date of commercial
operation. The variable charge shall however be related to the financial year
as indicated in its Order dated
42) Access to records:
The
Petitioner-Association alleged that the data / records sought from the
Commission were not made available. The
allegation is factually wrong. The Petitioner's representative, Sri. D.G.N.Kumar,
was provided access to all the related records on
43) Conclusion:
The
petitions filed by the Petitioners for review of the Order dated 20.3.2004 do
not indicate any error apparent on the face of the record or non-consideration of any relevant
material or document or otherwise sufficient reason for review of the
Order dated 20-03-2004 passed by the Commission except for additional
information furnished on capital subsidy by MNES leading to re-determination of
the capital cost. The Commission in the order dated
Except
for the clarifications provided above on the settlement period and the year of
operation, re-determination of capital cost due to additional information on
capital subsidy by MNES now being made available, and revision of incentive
beyond threshold PLF, the Commission hereby rejects the petitions filed by the
petitioners.
This
order is signed by Andhra Pradesh Electricity Regulatory Commission on 7th
day of July, 2004.
Sd/- Sd/-
SURINDER
PAL K.SREERAMA MURTHY
(MEMBER) (ACTING
CHAIRMAN)