ANDHRA
PRADESH ELECTRICITY REGULATORY COMMISSION
11-4-660, 4th & 5th Floors, Singareni Bhavan, Red Hills,
Sri. K. Sree
Rama Murthy, Acting Chairman
Sri. Surinder
Pal, Member
Between
The
AND
Transmission
Corporation of Andhra Pradesh … Respondent
Andhra Pradesh Electricity Regulatory Commission (Commission) initiated
suo-motu proceedings for determination of tariff
applicable to non-conventional energy (NCE) projects of Andhra Pradesh to take
effect from
2. The Commission having heard the Non-Conventional Power Project
Development Corporation of Andhra Pradesh Ltd (NEDCAP), Transmission
Corporation of Andhra Pradesh Ltd (APTRANSCO) and developers who appeared
before the Commission on 22-12-2003 and 23-12-2003 and the general public on
19-03-2004 and having considered the objections and the oral and written
submissions made by the parties passed the Order dated 20-03-2004 in R.P.No.84
/ 2003 in O.P.No. 1075 / 2000. In the said Order, the Commission notified
the tariff and other terms and conditions for purchase of power by 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 the tariff and other terms and conditions in respect of different
categories of NCE projects, the Commission adopted a “Cost plus” approach and
allowed a fair amount of return instead of the adhoc
price earlier fixed, which was uniform to all categories of NCE projects, based
on the guidelines of Ministry of Non-conventional Energy Sources (MNES) issued
in 1993. While thus rationalizing the
tariffs and adopting the cost plus approach, the tariff for some categories of
NCE Developers underwent a downward revision compared to the tariffs they were
enjoying earlier.
4. 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. Mini-Hydel
Developers Association.
iii)
M/s. Sree Rayalaseema Hi-Strength Hypo Ltd [Biomass Developer].
iv)
M/s. Vensa Bio-Tek Limited.
v)
M/s. Active Power Corporation Pvt. Ltd.
vi)
M/s. South India Sugar Mills Association.
vii)
M/s. Raus Power
Pvt. Ltd.
viii)
M/s. Sai
Renewable Power Pvt. Ltd.
The present order relates only to M/s.
South India Sugar Mills Association (bagasse-based
co-generation developers), listed at serial number (vi) above. The Commission
is passing separate orders on the other categories of developers such as
Biomass, Mini-hydro and Waste to energy.
5. The Hon’ble High Court, by order dated 27.4.2004 directed as
under:
“The Petitioner-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
01-04-2004 the existing tariffs shall continue in force”.
6. Following
the directions of the Hon’ble High Court, the South
India Sugar Mills Association (SISMA), the association of bagasse-based
co-generation power developers, filed this petition for review of the Order
dated 20.3.2004 for an upward revision of the tariff. The APTRANSCO, Sri M.Venugopal
Rao, Correspondent, Prajasakthi,
and Peoples Monitoring Group on Electricity Regulation also filed petitions for
review of the Order dated 20-03-2004 for downward revision of the tariff.
Opportunity was given to opposite parties in all these petitions to file the
replies. 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
20-03-2004 by the Commission. The Commission conducted a hearing on 11-06-2004
and invited Petitioner-Association, APTRANSCO, Sri M.Venugopal
Rao, Correspondent, Prajasakthi,
and Peoples Monitoring Group on Electricity Regulation 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.
7. The
issues raised by the Petitioner-Association for the review of the Order dated
20-03-2004 and the decision of the Commission are as under:
8. Capital cost:
According to the
Petitioner-Association, there has been a steep increase in costs, especially of
steel. Further, if the developer chooses air-cooled condenser, the increase
would be around Rs 0.4 Cr / MW. Hence, the Petitioner-Association, which
earlier proposed project cost of Rs.3.25 Crs per MW,
now claims a project cost of Rs.3.8 Crs per MW for
new projects in the review petition to compensate for the increase in the
prices.
APTRANSCO, responding to
the above, submitted that increase in steel prices over the past few months is
a cyclical phenomenon which cannot be used for benchmarking the Capital
cost. It has further submitted that
improved configuration of the plants gives rise to higher efficiency which pays
back for itself through the efficiency
gains. The objectors, Mr.Venugopala Rao, Correspondent, Prajashakthi,
and Mr. Thimma Reddy of Peoples Monitoring Group,
contended that the project cost is very high and the market trends for capital
cost need to be considered. According
to them, the developers had no basis for their claim of higher capital cost as
they have not submitted any invoices, etc. nor any indication that they had
adopted the competitive bidding process to justify the capital cost.
While determining the Capital cost of the projects, the Commission in its Order dated 20.3.2004 at paragraph 33 discussed the views of developers, NEDCAP and APTRANSCO and held that the project cost shall be taken as Rs. 3.25 crs/MW for the bagasse-based projects. The paragraph 33 of the Commission’s Order dated 20.3.2004 reads as follows:
“M/s. NEDCAP indicated a project cost
of Rs. 2.5 Crs / MW
initially but subsequently revised it to Rs. 3 Crs / MW, for old projects and Rs.
3.5 Crs / MW for new projects, while APTRANSCO
considered a capital cost of Rs. 3 Crs / MW as reasonable for all projects. One of the Developers has quoted a figure of
Rs.2.5 Crs / MW to Rs.2.9 Crs
/ MW. The South Indian Sugar Mills Association Andhra Pradesh (SISMA-AP)
projected the capital cost as varying from Rs.3.25 Crs–Rs. 3.75 Crs / MW.
All these
numbers indicate that there is no convergence of views on capital cost of
projects. The Commission, in order to
arrive at the tariff was keen to estimate the project cost based on the details
available with some reliable organizations having maximum information on each
project. M/s. NEDCAP and APTRANSCO are
the two Government organisations which have the data
either from their own analysis or from Detailed Project Reports (DPRs) filed by the developers. The capital cost of each
project is varying depending on its size and technology.
During the
hearing with the developers, SISMA-AP quoted capital cost of Rs. 3.25 Crs/MW. As this cost is also falling in the range
quoted by NEDCAP, the Commission agrees to Rs. 3.25 Crs/MW as the project cost for Bagasse
based Co-generation projects without distinguishing between old and new
projects”.
Thus
the Commission adopted the benchmark capital cost after considering all the
relevant factors including the submission of SISMA which proposed the capital
cost of Rs.3.25 crs/MW in their letter dated
29.12.2003. It will neither be practical nor will be appropriate to determine the project cost on a
case-to-case basis. The project cost of Rs 3.25 crs/MW was fixed taking
into consideration the prices at the
level prevalent in some of the projects already set up the details of which
were available. The Commission cannot provide for continuous adjustment for
the prices in steel, copper or other
inputs. The Project Developers who are
setting up the projects now have the advantage of improved technology and
efficiency of the machines. While the Commission endeavours
to promote non-conventional energy development, the same cannot be open-ended
in the sense that the project cost becomes very high. In order for the
Commission to direct APTRANSCO to purchase the power generated from such
projects, it is necessary that the tariff is also reasonable and therefore the
project cost should be related to a benchmark capital cost. The Commission
cannot allow higher capital cost because of peculiarities of a few
projects. There is an optimum level
beyond which the project developers cannot expect the Commission to allow the
fixed cost. The direct impact of doing so will be unduly burdening the
consumers in general to pay higher tariff for the electricity. The Commission
has to strike a balance between the interest of promoting non-conventional
energy and the interest of the consumers to have an economical tariff for the
electricity. It was a conscious decision of the Commission to allow in its
Order dated 20.3.2004, Rs. 3.25 Crs/MW
as the project cost for bagasse-based co-generation
projects without distinguishing between old and new projects. There is no case in this petition for review
of the Order dated
9. Auxiliary consumption:
The petitioner has claimed
Auxiliary consumption of 10% as against 9% approved by the Commission, on the
plea that the power consumption in a bagasse-based boiler is higher than that of a coal-based
power station. APTRANSCO while responding to the review petition submitted that
the DPRs (detailed project reports) of various
projects including the project reports prepared by Avant-Garde
Engineers and Consultants Ltd., relied upon by SISMA, provide for auxiliary
consumption below 9%. The Commission in its Order dated 20.3.2004 has stated as
under in paragraph 34:
“According to
APTRANSCO, the DPRs indicate Auxiliary Consumption of
8% only but it has considered Auxiliary Consumption of 9% as reasonable. SISMA-AP and NEDCAP have indicated the
Auxiliary Consumption at 10%. The
Commission is of the view that compared to conventional power projects, the NCE
projects have less auxiliary system. These projects should be operated
efficiently to minimize losses and maximize production as provided in the
Energy Conservation Act. Hence the
Commission allows auxiliary consumption at 9% only”.
The
developers’ contention that the bagasse-based
projects require more auxiliary consumption is not correct. These projects in fact have less auxiliary
systems than the conventional projects which require more electricity in fuel
preparatory systems than the bagasse-based
co-generation projects. There is no basis for the petitioner to claim that the
auxiliary consumption in the case of a properly-run bagasse
projects shall be higher than 9%. As detailed in the Order dated 20-03-2004,
the projects should operate efficiently and minimize the losses. Hence the
Commission holds that no case is made out by the petitioner for review of the
Order dated 20.3.2004 in regard to auxiliary consumption.
10. Fuel consumption:
The Petitioner contended that
fuel consumption of 1.6 kg / kWh estimated by the Commission is incorrect.
According to the petitioner, the fuel consumption based on the expert committee
on biomass cannot be applied to bagasse-based power
plants. While accepting the station heat
rate of 3700 Kcal / kWh adopted by the Commission in its Order, the Petitioner
pleaded for considering the Net Calorific Value of bagasse
at 1790 Kcal / kg which translates into a fuel requirement of 2.07 Kg per kWh.
APTRANSCO
stated that the claim of the petitioner is not justified and the Commission has
determined the specific fuel consumption level correctly and it cannot be more
than 1.6 kg / kWh.
The Commission in paragraph 38 of
its Order dated 20-03-2004 has stated as under:
“The
fuel consumed in the Co-generation plant will cater to
-
Production of steam to process
plant.
-
Supply of power to the sugar
industry (Captive consumption) during crushing season.
-
Delivery of power to
APTRANSCO.
The consumption of fuel intended
for supply of power to APTRANSCO needs to be considered and costed.
The projections by different
agencies are widely varying. APTRANSCO assumed 2.08 kg / kWh, while NEDCAP
assumed 2 kg /
kWh. The expert committee constituted by
the GoAP for Biomass Power Projects has considered
allowable Station Heat Rate of
3650 Kcal / Kwh. However, there was no such
committee for Bagasse based projects. Considering the similarities between both
the categories, the Commission considers SHR at 3700 Kcal / Kwh
for Bagasse projects as reasonable and fair. Based on
this, the Commission considers 1.60 Kg / Kwh as the
rated average of specific fuel consumption during crushing and non-crushing
season”.
The
Commission’s study team, which visited projects such as M/s.Gaythri
Sugars Limited and Deccan Sugars Limited, observed
that the Gross Calorific Value of bagasse was around
2300 kcal/kg, based on the information made available at the site. Even SISMA
computed the bagasse price by taking Gross Calorific
Value of bagasse at 2300 kcal/kg in their letter
dated 29.12.2003. Further, the Specific Fuel Consumption allocated to power
generation is 1.14 kg / kWh during the crushing season based on the heat
balance diagram furnished by SISMA relating to the co-generation plant of M/s. Ganapathi Sugars Limited. The corresponding consumption
during non-crushing season is 1.789 kg / kWh. The weighted average of this
consumption levels works out to 1.42 kg / kWh, considering 130 days of crushing
season and 100 days of non-crushing season. From these, it is reasonable and appropriate to determine the fuel consumption of 1.60 kg/kwh as approved by the Commission in its Order dated
20.3.2004. The Order therefore does not
require any revision as claimed by the petitioner.
11. Cost of fuel:
The petitioner has submitted that
the cost of the bagasse, based on equivalent heat
value of ‘D’ grade coal, works out to Rs. 695 per MT
while the Commission worked it out on the basis of E / F grades coal which are generally allotted for power
generation. The petitioner has further
submitted that most of the sugar factories are selling bagasse
at their factories at prices ranging from Rs. 710 to
Rs.1150 per MT. Considering the
permitted usage of alternate fuel (coal) up to 25% and taking the transport
costs into consideration, the petitioner stated that weighted average cost of
fuel per MT would be Rs. 733 per MT and requested for
consideration of the price as above.
APTRANSCO stated that
the specific fuel consumption of Kothagudem Thermal
Station, Stage-V, is 0.7 kg / kWh with
the landed cost of coal at that station being about Rs.
1250 / MT. Based on the equivalent heat
value concept, the price of bagasse would be around Rs. 550 / MT while the Commission has considered a higher
price of Rs.
575 / MT.
The Commission, in paragraph 36 of its Order dated 20.3.2004 has stated as under:
“The power is basically generated out of the Bagasse produced by crushing of sugar cane in the
manufacture of sugar. APTRANSCO has
considered Bagasse price as Rs.
600 / MT for new projects and Rs. 533 / MT for existing projects (base year 2000-01)
whereas NEDCAP has indicated it as Rs. 600 / MT,
while developers have sought price of Bagasse as Rs. 650 / MT. The Commission recognises
that the price of Bagasse is the key parameter
influencing the project economics and determination of tariff. The fuel for the Co-generation plant during
crushing season is virtually free.
However, if Co-generation plant
does not exist the Bagasse will fetch some
price. As such the issues like calorific
value of Bagasse, Station Heat Rate (SHR) and its
linkage to sugar cane prices need to be addressed adequately. As Co-generation is an efficient process
where the cycle efficiency is high, it needs to be encouraged.
In the DPRs,
the Gross Calorific Value of the Bagasse is around
2270 Kcal / Kg, whereas APTRANSCO has considered the Gross Calorific
Value of Bagasse
as 2300 Kcal / Kg and the same is also
projected by the Developers. NEDCAP
during revised submissions indicated Gross Calorific Value as 2000 Kcal /
Kg. The Commission considers Gross
Calorific Value of 2300 Kcal / Kg as proposed by APTRANSCO reasonable for price
determination of Bagasse.
The Commission feels that there
cannot be any relationship between price of sugar cane that is being fixed by
Govt., and the price of Bagasse. One of the objectors
has pointed out that Bagasse is a wasteful residue
and must be available free of cost.
However the Bagasse is also in demand by other
industries like paper, cattle feed etc., and accordingly market forces
determine the price of Bagasse.
For determination of Bagasse price, Commission has adopted equivalent heat value
of coal. The Commission has considered
the pit head cost and calorific value of coal to arrive at the fuel price
linked to heat content. The fuel price
in terms of Rupee / tonne equivalent to gross
calorific value of 2300 kcal / kg works out to around Rs.562 / MT. NEDCAP has also submitted that the average
cost of Bagasse, based on heat equivalent of coal
works out to Rs.575 / MT. The Commission
therefore considers Rs.575 / MT as a reasonable and fair price for Bagasse”.
From
the above, it will be seen that the Commission fixed the price of fuel
considering equivalent heat value of 2300 kcal/kg. As it is a co-generation
project and there is accordingly no element of transportation of fuel, the pit
head price of coal was adopted by the Commission. The tariff for the co-generation projects is computed
based on bagasse for operation of the plant for 130
days during crushing season and 100 days during non-crushing season with the
saved bagasse. The fact that the projects are allowed to use coal as alternate fuel up to 25% is
itself a benefit given to the project developers for extending the number of
days of operation of the plants. The
extra cost, if any, including transportation cost involved in generation of
power during the extended period cannot be allowed as this will only burden the
consumers unduly especially when the full fixed costs are covered by generation
at 55% PLF achievable otherwise also.
The Commission did not therefore allow
the transportation charges for
generation of electricity with coal as an alternate fuel. Accordingly, the
Commission does not find any reason to review its Order dated 20.3.2004 on the
costs of the fuel as requested by the petitioner. As mentioned above, while the Commission endeavours to promote non-conventional energy development
the same cannot be open- ended in the sense that the project cost becomes very high. In order for the Commission to
direct APTRANSCO to purchase the power generated from such projects, it is
necessary that the tariff is also affordable.
There is an optimum level beyond which the project developers cannot
expect the Commission to allow higher tariff to promote non-conventional energy
development as the direct impact of higher tariff will be unduly burdening the
consumers in general to pay higher tariff for the electricity.
12. O & M expenditure:
The petitioner has submitted that
the O & M expenditure of 3% provided by the Commission is very low and
sought 5.5% of the capital cost towards O&M expenses. A statement of O & M expenditure stated
to have been incurred by GMR Technologies and Industries, M/s Kakatiya Cement and Sugar Industries and M/s.Gayathri Sugar
Industries has also been filed in the review proceedings.
APTRANSCO referred to the guidelines of the Central Electricity
Regulatory Commission (hereinafter CERC) stipulating 2.5% of capital cost
towards O & M, and stated that 3% O
& M provided by the Commission is adequate.
In paragraph
39 of the Commission’s Order dated 20.3.2004, the Commission discussed the
claims of all the stakeholders and determined the O & M expenditure as
follows:
“APTRANSCO has
stated that the O & M expenditure of 2.5% of capital cost has been
considered as per DPRs made available by some of the
developers.
The developers
have contended that the O & M expenditure of 2.5% of capital cost assumed
by APTRANSCO is too low. NEDCAP has
considered 3% initially and subsequently raised it to 5% (including insurance).
SISMA-AP claimed 5.5% for O & M expenditure including insurance whereas one
developer (M/s.Sudalagunta Sugars) claimed 3.8% based
on actual expenditure.
For thermal projects, the O & M
expenditure allowed as per CEA guidelines is 2.5% per annum. But Bagasse based
co-generation projects are very small in capacity and are of evolving
technologies. These cannot therefore be
compared to bigger projects of advanced technologies. At the same time it is a
fact that the O & M of the steam generator cannot be totally apportioned to
power generation as part of the steam generated is utilised
for the industry. The Commission considers O& M expenditure of 3% per annum
(including insurance) as reasonable”.
M/s. Sudalagunta Sugars subsequently pointed out that they had also claimed insurance @ 1%, in addition to the O&M expenditure of 3.8%, though shown separately. This, however, has no bearing on the final conclusion of the Commission on O&M expenditure, as the amount claimed (3.8% + 1.0%) was lower than the 5% claimed by the Petitioner-Association.
The
wear and tear of some of the auxiliary systems in coal-fired thermal stations
is much more intensive requiring increased maintenance, calling for higher
O&M expenditure. However,
considering that 2.5% of the capital cost is provided for large coal-fired
power stations as per the guidelines of CERC, the Commission considers it reasonable
to provide 3% of capital cost towards O&M expenditure for bagasse-based co-generation plants of smaller capacities.
As
the developer has not raised any new points or produced any additional
information, the Commission does not find any reason to review this component
for increase.
13. Interest on term loan:
The petitioner contends that
swapping of loans is not possible as the existing co-generation units are
committed and logged in at higher interest rates. According to the petitioner, the swapping of
loans with new lenders is difficult especially when bagasse-based
co-generation units are established by sugar industry which is not performing
well financially. The petitioner requested for fixing up interest rate at 13% p.a instead of 10% p.a and in a
subsequent communication dated 17-06-2004 requested for at least 12% for the
existing projects adding that 10% is acceptable for the new projects.
APTRANSCO submitted that
the interest rate provided by the Commission is in line with the interest rate
proposed by NEDCAP for existing and new projects in view of the interest
subsidy provided by MNES.
The Commission in paragraph 43 of its Order dated 20-03-2004
has stated as under:
“APTRANSCO has
considered the interest on term loan at 13% for the existing and 10% for the
new projects, whereas NEDCAP has considered Interest on Loan as 11% for the
existing projects and 10% for the new projects after interest subsidy. The developers however sought 13% on
existing projects and 10% to the new projects.
All the stakeholders have uniformly quoted 10% as interest rate for new
projects. This must be on account of
falling interest rates. But the impact
of falling interest rate is not being reflected in the interest rates of old
projects. Some of the Developers are
reported to have swapped their loans for lesser interest rates. The Commission is of the view that this has
to be followed by other developers too so that benefit of falling interest
rates can be passed on to consumers.
In view of the above, the Commission
considers 10% rate of interest on Term Loans as reasonable for existing as well
as new Projects”.
From
the above, it can be seen that all the stakeholders have uniformly quoted 10%
as interest rates for new projects. The Commission considers that the
developers of existing projects also should mitigate the cost of the project by
adjusting to falling interest rates as was done by some of the developers by
swapping their costly loans with cheaper ones.
In a cost plus system, there is a duty on the part of the developers to
mitigate and reduce the interest burden significantly. It will not be correct
on the part of the developers to ignore the above, merely because the interest
charges are a pass-through in the tariff.
The Commission reiterates that interest at 10% is adequate and appropriate
for the loans taken for the projects and the petitioner project developers have
an obligation to reduce the interest burden.
Therefore, the Order dated 20-03-2004 does not require any review on
this component.
14. Annual escalation:
The petitioner has submitted that
the developer has to meet the actual expenses and the escalations therein which
will always be higher than the normative escalation. The petitioner has stated that the developers
have to incur additional expenditure every year for smooth running of the
plants.
The Commission in its Order has provided escalation
for O &M and fuel price as these two components attract increase in price
and escalation for these components is allowed in conventional projects
also. Escalation of 4% is provided in
line with the rate of inflation as explained in the Commission’s Order dated
20-03-2004. In paragraph 40 of the Order
dated 20-03-2004, the Commission has held as under:
“The
developers stated that escalation on O & M is to be considered between
4%-8%.
M/s. NEDCAP indicated the
escalation at 2% initially but later revised it to 5%.
APTRANSCO submitted that the O & M
escalation was provided at 4% based on the trend of inflation after considering
the variation of Wholesale Price Index & Consumer Price Index (WPI &
CPI) during the past few years.
The Commission considers the escalation of
4% on O & M expenditure as provided by APTRANSCO as reasonable as it is
falling in line with the rate of inflation”.
The petitioner has not shown any ground as to how the above decision of the Commission is wrong and calls for a review.
15. Depreciation:
The Petitioner-Association first submitted that the depreciation should be applied on the total capital less residual value of 10% and not restricted to 70% of the capital cost during the first 10 years of operation. It has also requested the Commission to fix depreciation at 8.25% instead of 7.84% based on the repayment commitment.
Subsequent to the hearing on
Hence, no review is called for.
16. Single-part tariff:
The
Petitioner submitted that since co-generation plants operate for a maximum of
only 250 days in a year, single-part tariff only should be applied for the bagasse-based co-generation plants, stating that APTRANSCO itself observed that two-part
tariff cannot be applied to NCE projects in view of the requirement of large
administrative machinery for monitoring and settlement. The Petitioner has further requested the
Commission to take note of the fact that other States have considered only
single-part tariff for NCE projects. The
petitioner also sought for removal of cap over threshold PLF and payments for
100% capacity factor.
APTRANSCO has responded
by stating that though it originally proposed single-part tariff based on levelized tariff, it finds that the two -part tariff
considered by the Commission is reasonable.
At paragraph 30 of the Order dated 20-03-2004,
the Commission discussed the methodology in determination tariff as under:
“The key issue
involved in determination of tariff in case of projects is whether to consider
single part tariff or two part tariff.
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”.
Most
of the projects cover their fixed cost at different threshold levels and the
Commission is particular in not burdening the consumers for any generation
beyond threshold levels covering the fixed costs in full. At the same time, the Commission is
interested in balancing the interests of the developers also by providing them
incentives. Further, the Commission observes that the two-tier tariff proposed
is in consonance with the tariff fixation for most of the power projects in the
Country. Hence the Order dated
20-03-2004 does not require to be reviewed on this ground.
17. Higher tariff:
The Petitioner-Association sought
that tariff provided to wind electricity generators should be provided to bagasse-based co-generation plants also with 5% simple
escalation. It further contends that the rate allowed for bagasse-based
co-generation plants is insufficient to repay the loans and earn the return.
APTRANSCO has replied that the plants under wind energy and bagasse
have different characteristics and hence the parameters used for tariff
fixation cannot be the same.
The Commission is in agreement with APTRANSCO that the two categories of generation cannot be on the same platform. This was explained in paragraph 29 of the Order dated 20.3. 2004 as under:
“Some of the objectors have criticised
the current practice of maintaining the same tariff for all categories of NCE
sources. The Commission is also of the
same view as the project cost and the fuel are different for each category and
allowing the same tariff across the categories is neither appropriate nor in
the interests of the consumers. The
Commission has decided to fix the tariff on cost-plus approach so that each
element of fixed and variable cost is properly addressed and not to follow any
other adhoc basis for fixing the prices at which the
different categories of NCE developers sell electricity to APTRANSCO”.
Hence
no grounds are shown warranting review of the Order dated 20-03-2004.
18. Incentive:
The petitioner pleaded for
adoption of a single-part tariff, and in case the two-part tariff was inevitable, the
petitioner argued that the rate of incentive should be enhanced to 25 paise / unit as per CERC notification dated
APTRANSCO contends that
incentive needs to be provided to the generator only for additional energy
supplied to APTRANSCO and not for captive consumption beyond the normative
levels and the incentive should not be provided if these plants use coal. It has further submitted that the incentive
should be payable on annual basis and the Commission needs to mandate these
generating companies to submit their annual balance sheets and file affidavits
providing the details of the coal used by them in their stations. APTRANSCO also submitted that as per the
direction of this Commission, these projects have to be treated as “must run”
plants. These generating stations
therefore enjoy prime advantage of 100% dispatch. While contending that the rate of incentive
allowed by the Commission is high, it suggested two alternate methodologies for
incentive payment for consideration by the Commission, according to which, the
incentive payment works out to 10 paise/ kWh.
The Commission in its Order dated 20-03-2004 at paragraph 47 has stated as under:
“One of the objectors has pointed out that
only incentive should be paid beyond the threshold level of PLF. The Commission
has noticed that some of the Bagasse based
co-generation projects are generating beyond the threshold level of 55% also.
The Commission is inclined to encourage this non-conventional generation. But at the same time, the consumers should
not be burdened with the same tariff beyond threshold PLF as the developers
would have recovered the entire fixed cost at the threshold level of PLF
itself. In order to encourage the
developers and without unduly burdening the consumers, the Commission deems it
fit to provide an incentive of 21.5
paise per unit as fixed by Central Electricity
Regulatory Commission (CERC) in its tariff notification dated 20th
December, 2000 for conventional generation projects. This incentive will be for
actual generation beyond the threshold PLF of 55% at generator terminals i.e.
including captive and auxiliary consumption.”
From the above, it can be
seen that the incentive allowed is to encourage the developers to generate
beyond threshold limits also and the rate of incentive was as per CERC’s contemporary guidelines for conventional power
projects.
Subsequent
to the issue of the Commission’s Order, however, CERC in its notification dated
26-03-2004 revised the incentive rate to 25 paise per
unit for ex-bus energy beyond the target PLF.
The Commission taking note of the above allows revision of incentive
from 21.5 paise per unit to 25 paise
per unit for energy delivered at inter-connection point attributable to
generation beyond the threshold PLF of 55% at generator terminals i.e.
including captive and auxiliary consumption.
This will however be effective from 01-04-2004.
In view of the preceding discussion, Petitioner-Association has failed to make any case for any other review of this component.
19. Additional incentive:
The petitioner contends that
considering the fact that the bagasse-based co-generation
plants are eco-friendly and facilitate substantial reduction in Transmission
& Distribution Losses, additional incentive of 28 paise
be provided based on the quantification and assessment stated to have been made
by advisor of MNES.
The
Commission has recognised the advantages of NCE
projects and provided various benefits like higher return on equity and
“must-run” status. Hence the Commission does not consider that any further
additional incentive is required to be paid to the bagasse-based
co-generation power developers.
20. Settlement period:
The Petitioner contended that in
case two-part tariff is adopted in case of bagasse-based
co-generation plants having seasonal nature of operations, the threshold PLF
should be calculated on annualized basis and not on settlement period (billing
month) basis and APTRANSCO be directed to pay both fixed cost and variable
charges till such time the aggregate units in a financial year reach the
threshold PLF.
APTRANSCO also proposed that
incentives should be payable on annual basis.
The
Commission clarifies that the incentive shall be based on computation of PLF on
annual basis.
21. Year of operation:
The Commission in its Order dated
20-03-2004 directed that the existing and new projects shall be entitled to a
tariff with the component of fixed charge based on the year of operation and
variable charge corresponding to the financial year of the operation. The Petitioner-Association submitted that the
year of operation should be reckoned from the date of commercial operation date
of the projects instead of treating all the projects commissioned during a
financial year alike.
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 charges shall however
be as indicated in the Order dated 20-03-2004 based on the corresponding
financial year.
22. The APTRANSCO
has also raised a number of issues in the petition filed by it for the review
of the Order dated 20-03-2004 and has claimed downward revision of tariff on
various aspects. The Objectors also claimed downward revision of tariff on
different aspects contending that the tariff allowed to the developers is
excessive. Some of the issues raised by APTRANSCO and the two objectors have
been discussed above while dealing with the issues raised by the
Petitioner-Association. The Commission
is passing separate orders on the issues raised by APTRANSCO and the Objectors
seeking downward revision in the tariff.
23. Conclusion:
The petition filed by the
Petitioner-Association for review of the Order dated
Except
for the clarifications provided above on the settlement period and the year of
operation and the revision of incentive beyond threshold PLF, the Commission
hereby dismisses the petition.
This order is signed by Andhra Pradesh Electricity
Regulatory Commission on 10th July, 2004.
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CERTIFIED COPY