UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION LUCKNOW

Transcription

1 UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION LUCKNOW Sub: Suo-moto proceedings in the matter of Uttar Pradesh Electricity Regulatory Commission (Terms & Conditions of Generation Tariff) Regulations The following were present: 1. Sri B.S. Goel, Consultant, UPJVNL. 2. Sri S. Joshi, UPJVNL. 3. Sri U.S. Gupta, E.E., UPRVUNL. 4. Sri H. Aslam, Sr.A.E., UPRVUNL. 5. Sri A.K. Singhal, C.E. (Commercial), UPRVUNL. 6. Sri A.K. Agrawal, C.G.M., UPRVUNL. 7. Sri Bhushan Rastogi, Consultant, UPRVUNL. 8. Sri Mohit Goel 9. Sri Vaibhav Agrawal, Reliance Power Ltd. 10. Sri Sumit Notani, Reliance Power Ltd. 11. Sri S.P. Pandey, E.E., PPA, UPPCL. 12. Sri Awadhesh Kumar Verma, President, UP Rajya Vidyut Upbhokta Parishad. 13. Sri K.B. Singh, DGM, NTPC. 14. Sri Prashant Chaturvedi, NTPC. Order (Date of Public Hearing ) 1. In exercise of powers conferred under Section 181 read with Section-61 of the Electricity Act, 2003, and all other powers enabling in this behalf, the Commission made Uttar Pradesh Electricity Regulatory Commission (Terms & Conditions of Generation Tariff) Regulations, 2004 dt for a period of 3 years. The first amendment to these Regulations came in to force from 1 st April, 2008 which extended the said Regulations up to Clause 2 of Regulations-1, as amended, states that these Regulations shall remain into force up to In view of the said provision, the Commission prepared a draft Uttar Pradesh Electricity Regulatory Commission (Terms & Conditions of Generation Tariff) Regulations, 2009 (in short Draft Regulations 09) to come into effect from for a period of five years up to A discussion paper was also prepared which highlighted issues related to performance, energy audit, norms for operation, R&M of old plants, higher requirement of O&M, incentive for good performance and regular recovery of dues. Discussion paper and the Draft Regulations 09 was made available on our web site and a Public Notice dt was 1

2 published in Times of India (Lucknow Edition) and Rashtriya Sahara (Lucknow Edition) inviting comments, suggestions and objections from stakeholders and interested parties on the discussion paper and the Draft Regulations 09 by and the hearing in the matter was fixed on at 11:00 hrs. in the office of the Commission. Managing Directors of U.P. Power Transmission Company Ltd., U.P. Power Corporation Ltd., U.P. Rajya Vidyut Utpadam Nigam Ltd.(UPRVUNL), M/s Rosa Power Supply Company, U.P. Jal Vidyut Nigam Ltd.(UPJVNL), Madhyanchal Vidyut Vitaran Nigam Ltd., Poorvanchal Vidyut Vitaran Nigam Ltd., Paschimanchal Vidyut Vitaran Nigam Ltd., Dakshanchal Vidyut Vitaran Nigam Ltd., Kanpur Electric Supply Co. Ltd., M/s Jaiprakash Power Ventures Ltd., M/s Alaknanda Hydro Power Company Ltd. and Chief Executive Noida Power Company Ltd were also informed of the Public notice published in the newspapers vide UPERC letter dt UPRVUNL requested for time extension upto for submission of comments which was allowed. 2. The following have submitted comments before hearing: (i) Reliance Power Ltd., vide its letter dt (ii) Center for Societal Concerns, vide its letter dt (iii) UP Rajya Vidyut Utpadan Nigam Ltd., vide its letter no.119 dt (iv) UP Jal Vidyut Nigam Ltd., vide its letter no.354 dt (v) Associated Chambers of Commerce & Industry of UP, vide its letter no.3713 dt The submissions made during hearing on : (i) UP Power Corporation Ltd., vide its letter no.247 dt (ii) UP Rajya Upbhokta Parishad, vide its letter dt The Commission accepted the above submissions. The following made submissions after hearing on direction of the Commission: (i) UP Rajya Vidyut Utpadan Nigam Ltd., vide its letter no.150 dt and 146 dt (ii) UP Jal Vidyut Nigam Ltd., vide its letter no. 267, dt

3 3. We have perused the written submissions and heard the parties. The issues raised before the Commission and the decisions thereof are as below: (a) Clean Development Mechanism & sharing of CDM benefits: Associated Chambers of Commerce and Industry of U.P. has suggested that all new projects and R & M schemes for existing projects should comply with Clean Development Mechanism. UPRVUNL states that the regulations must provide for sharing of net benefits instead of gross benefits. Regulation 2(4) in the Draft Regulations shall be replaced by the following: The generating company may adopt Clean Development Mechanism, for generating stations approved and commissioned on or after , and the proceeds of carbon credit from approved CDM project shall be shared in the following manner, namely- (a) 100% of the gross proceeds on account of CDM to be retained by the project developer in the first year after the date of commercial operation of the generating station ; (b) in the second year, the share of the beneficiaries shall be 10% which shall be progressively increased by 10% every year till it reaches 50%, whereafter the proceeds shall be shared in equal proportion, by the generating company and the beneficiaries. (b) Power Purchase Agreements where parties have agreed to terms & conditions of Tariff: Reliance Power has sought protection of operational norms under proposed Regulations 2(5). Regulation-2(5) is not in derogation to terms and conditions of determination of tariff agreed between the parties and approved by the Commission. As such, there is no material in the issue racked up by the Reliance power for protection of operational norms. However appropriate insertion to this effect shall be made in the regulations. 3

4 (c) Provisional tariff and adjustments on account of final tariff: UPPCL has further submitted that on determination of final tariff, under or over recovery of charges should be recovered from the beneficiary within six months. Associated Chambers of Commerce and Industry of UP has proposed yearly adjustment. The provision for adjustments within 6 months of determination of final tariff shall be made in regulation-5(3). (d) Income tax: Center for Societal Concerns states that in draft regulations ceiling on income tax is proposed as calculated on the return on equity which will result in under recovery of returns and dilute the ROE. UPRVUNL is pleading that income tax on revenues from incentives and UI should be paid by beneficiary. Incentives on higher plant load factor does not arise from core activity as the generating company has recovered full capacity charges before entering into this region as such income from incentive can not be considered for payment of income tax by the beneficiaries. Further UI charges arise from deviation from schedules and are compensatory in nature so can not be considered for the purpose of income tax. The regulation-7 (2) in the Draft Regulations shall be replaced by the following: (2) Notwithstanding anything contained in sub-regulation (1), total income tax payable to generating company, in any year, shall not be higher than the amount of : (a) Return on Equity allowed in that year X Minimum Alternative Tax, if company is paying such tax in any relevant year; or (b) Return on Equity allowed in that year X Corporate Tax, if company is paying such tax in any relevant year. However any income tax incidental due to payment of income tax in any preceding year shall be paid by the beneficiaries in subsequent year in addition to income tax at (a) & (b) above. 4

5 (e) Norms for operation: UPRVUNL has suggested to specify the norms for operation which are realistically achievable and to support its view has relied on the provision of the Tariff Policy which states where operations have been much below the norms for many previous years, the initial starting point in determining the revenue requirements and improvement trajectories should be recognised at relaxed level and not the desired levels. It is submitted that the operating levels have been much below the norms laid down by the Commission for many years and in such a situation the improvement trajectory should be determined in consideration of past performance and vintage of the plant. The target plant availability and target PLF for Obra A & B, Harduaganj and Parichha have been proposed lower than provided in draft regulations. Other norms, SHR, secondary fuel oil consumption and auxiliary consumption in respect to Obra A & B, Panki, Harduaganj and Parichha are sought much higher than proposed in the draft regulations. Sri Awadhesh Kumar Verma, President, UP Rajya Vidyut Upbhokta Parishad submitted that low PLF and high expenditure should not be allowed. The tariff policy provides that the initial starting point of improvement trajectories should be at relaxed level not the desired level. The commission had been specifying the operation norms for generating stations of UPRVUNL since vide para 2.2 of the discussion paper. Therefore, the present exercise can not be construed as initial starting by UPRVUNL. The actual performance data submitted by UPRVUNL suggest that the improvement in performance had been a non starter with the company since as also has been brought in the discussion paper. UPRVUNL has persistently pleading that the regular maintenance of the generating station has suffered due to non-payment of bills by the distribution licensees. In recognition of the fact of non payment, the Commission has relaxed some operation norms while 5

6 S.n o determining tariff for Therefore, no norm of operation inferior to norms considered for tariff would be allowed. So far as PLF and target availability are concerned, the Commission decides to provide one more opportunity to UPRVUNL to haul its efficiency by adopting prudent maintenance practices and reduce partial outages and plan R&M of its generating stations. The relaxation in target availability and target PLF shall be for initial years however the ultimate target for shall remain as provided in the draft Regulations. In consideration of above decisions, the norms of operation shall be as below and the relevant regulations in the draft regulations shall be replaced accordingly: (i) Target availability for recovery of full capacity charges: Power Station i) Obra-A ii) Obra-B iii) Panki TPS iv) Harduaganj TPS v) Parichha S.n o (ii) Target PLF for incentive: Power Station i) Obra-A ii) Obra-B iii) Panki TPS iv) Harduaganj TPS v) Parichha (iii) Gross Station Heat Rate: S.No. Power Station Design i) Obra-A ii) Obra-B iii) Panki TPS iv) Harduaganj TPS v) Parichha

7 (iv) Auxiliary energy consumption: S.No. Power Station 11 i) Obra-A ii) Obra-B iii) Panki TPS iv) Harduaganj TPS v) Parichha (f) Capital cost of hydro and thermal generation stations: UPPCL has pointed out that in case of Hydro Plants a ceiling on capital expenditure has been provided whereas for thermal plants, if the actual capital expenditure exceeds the ceiling limit, the increase/decrease shall be considered by the Commission. UPPCL has suggested making provision for hydro plants similar to thermal. 1 st Proviso to Regulation 33 of the draft Regulation shall be replaced by the following: Provided that where the Power Purchase Agreement entered into between the generating company and the beneficiaries provides a ceiling on capital expenditure and the actual capital expenditure exceeds such ceiling, such increase/escalations shall be decided by the Commission on case to case basis on an application filed by the generating company. (g) Renovation & Modernisation: UPRVUNL has submitted in the hearing that it would be difficult to stick to yearly R&M as provided in the draft. Regulation 18(4)(ii) and 34(4)(ii) of Draft Regulations shall be replaced by the following: The provisions of sub regulation (i) shall apply provided the generating company shall ensure to plan R&M of at least one unit of each generating station every year for life extension and improvement in performance, wherever due, after due techno economic studies and approval from the Commission to facilitate R&M or phase out. 7

8 (h) ROE during construction period: UPRVUNL has sought ROE during construction period similar to interest on loan during construction period (IDC). This issue shall be examined in due course of time. (i) Depreciation: UPRVUNL is seeking depreciation upto 95% as provided under Companies Act. The rate of depreciation for the electricity industry had been regulated by the Central Government under the repealed laws and now by the CERC as such no change in depreciation is allowed on the ground that other laws provide different rate of depreciation. (j) Variable rate of interest: UPRVUNL suggests that sharing of benefits due to be financing under Reg.21 (1) (i) (c) should be shared between the beneficiaries and the generator in 2:1 ratio. Regulation 21(1) (i) (e) and Regulation 38(i)(e) shall be replaced by the following: The generating company shall make every effort to swap the loan as long as it results in net benefit to the beneficiaries. The costs associated with such swapping shall be borne by the beneficiaries and the net savings shall be shared between the beneficiaries and the generating company in the ratio of 2:1. Further the Regulation 2 nd proviso to 21(1)(i) (j) and Regulation 38(i)(j) shall be inserted as below: Provided if the generating company does not have actual loan or have swapped/refinanced the loan resulting in nospecific loan attributable to the generating station then the weighted average rate of interest of the generating company as a whole shall be considered. The existing 2 nd proviso to 21(1)(i) (j) and 38(i)(j) shall be the 3 rd provisos to these Regulations. 8

9 (k) O&M expense: UPJVNL finds escalation rate of 5 % provided for arriving at base O&M as inadequate and suggests that O & M expenses approved by the Commission for financial year be escalated at 10% for base year It is seeking 8% escalation rate from onward excluding abnormal O&M expenses after prudence check by the Commission. UPRVUNL states that expenses like cost of water, chemicals, lubricants, consumable stores and station supplies are at present part of O&M which should be considered as part of variable charges on the plea that some SERC s have allowed such treatments. The treatment to chemicals, lubricants, consumable stores and station supplies shall continue as per present practice. Cost of water shall be allowed at actuals. Regulation 21(1)(iv)(b) shall be replaced by the following: Obra A, Obra B, Panki, Parichha and Harduaganj Power Stations. (Rs.in lakh/mw) Year Obra-A Obra-B Panki Harduaganj Parichha Provided that Obra A, Obra B, Panki, Parichha and Harduaganj may approach the Commission for adjustment in O&M expenses only on account of establishment expenses, insurance charges and repair and maintenance based on annual audited financial statements and prudence check. And Regulation 21(1)(iv)(d) shall be replaced by the following: 9

10 The expenses on regulatory fee, payment to pollution control board, fringe benefit tax, impact of pay revision, cost of water and water cess shall be paid additionally at actuals. In case of hydro generating plants, Regulation 38(iv) shall be replaced as below: (a) The normative values of operation and maintenance expenses including insurance, for the existing generating stations for the base year , shall be derived from values approved by the Commission for FY 08-09, under tariff orders, escalated by 10%. (b) The rate of escalation of operation & maintenance expenses from year onwards shall be 5.72% p.a., excluding abnormal operation and maintenance expenses, if any, after prudence check by the Commission. Provided further that generating company may approach the Commission for adjustment in O&M expenses only on account of establishment expenses, insurance charges and repair and maintenance based on annual audited financial statements and prudence check. (c) In case of the hydro electric generating stations declared under commercial operation on or after the date of commencement of this regulation, the base operation and maintenance expenses shall be fixed at 2.0% of the actual capital cost as admitted by the Commission, after prudence check by the Commission, in the year of commissioning and shall be 5.72% per annum for the subsequent years excluding abnormal operation and maintenance expenses, if any. 10

11 Provided also that the Commission may consider revising the percentage, subject to ceiling of 2.5% of capital cost, for tracing the O & M expense from the capital cost of the project on case to case basis. (d) The expenses on regulatory fee, payment to pollution control board, fringe benefit tax, impact of pay revision, cost of water and water cess shall be paid additionally at actuals. (l) Interest on working capital: Center for Societal Concerns suggests that 15% of O&M expenses as cost of spares against earlier provision of 1% of capital cost will result in lower recovery. UPRVUNL, UPJVNL, Reliance Power Ltd. & UPPCL have no objection to above provision as such no change is contemplated particularly in view of high increase in O&M expense. (m) Proration of capacity charges: UPRVUNL has proposed to delete the provision of proration of capacity charges if the availability is less than target availability. The beneficiaries ensure the generating company for reimbursement of full expenses and costs at target availability and the generating company has duty to ensure to maintain such availability and in case availability falls short of the target, beneficiary can not be asked to pay for the service which has not been availed. Therefore no change is to be made in the regulation. (n) Normative coal transit and handling losses: UPRVUNL suggests retaining transit losses for pit head station at 0.3%. The Commission may think of stringent norms for transit losses in future and no change is being considered at present. 11

12 (o) Incentive for early commissioning: UPPCL has objected to provision made under proposed Regulations- 21(iii) on additional 0.5% for advanced commissioning of the plants for which PPA has been signed before and suggested to provide incentive on advance commissioning with reference to specified time lines agreed under PPA. 1 st proviso of Regulation 21(1)(iii) and Regulation 38(iii) shall be replaced by the following: Provided that in case of projects commissioned on or after 1st April, 2009, if such projects are completed within the timeline specified in Appendix-IV, or for projects approved by the Commission before 1st April, 2009 in absence of any provision made in PPA, an additional return of 0.5%, shall be allowed; Reliance power has suggested that in Reg.23(2), the provision be made that generating company shall be eligible for incentive of an amount equivalent to reduction of interest during construction and has objected to phrase prorata used in Draft Regulations which may lead to different interpretations. Regulation 23(3) and Regulation 40(5) shall be replaced by the following: In case of commissioning of a thermal power station or part there of ahead of schedule, as setout in the approval of Commission, the generating stations shall be eligible for incentive of an amount equivalent to reduction of interest during construction. However actual interest during construction shall be considered for calculation of final and completed project cost for tariff determination. The incentive shall be recovered through tariff in twelve equal monthly instalments during first year of operation of generating station. In case of delay in commissioning, as set out by the Commission, interest during construction for the period of delay shall not be allowed to be capitalized for determination of tariff, unless it is shown that the delay is on account of force meajure conditions. (p) Late payment surcharge: 12

13 UPPCL, referring CERC Regulations, has requested that the late payment surcharge payable by the beneficiary for delayed payment should be charged after 60 days (2 months). In Regulation 26 (a) & 44(a), period of 1 month in second line shall be replaced period of 2 months. (q) Obligation for promotion of Renewable Energy Sources: UPPCL has objected proposed regulation 2(10) casting obligations on generating companies by Central/State Government regarding promotion of Renewables. The generating company shall abide by the policy directions given by the Central/State Government as considered necessary for promotion of renewable sources of energy. (r) Billing & payment: UPJVNL has requested to allow recovery of full capacity charge even in case of short fall in generation in comparison to design energy due to poor hydrology. The present provision does not call for any change. The generating company must schedule its generation. (s) Revenue side true up: UPRVUNL is seeking revenue side true up to compensate the uncontrollable costs as only capital side true up has been provided under the draft regulations on the ground that some SERC s have allowed the same. No revenue side true up is allowed except in case of O&M expenses limited to provision made under in 21(1)(iv)(b) & 38(iv). (t) Incentive above Target PLF: UPRVUNL seeks 25 paisa/kwh for energy generated above target PLF instead of staggered incentive as proposed in the Regulations. UPRVUNL must improve its performance to reach the level of incentive after which the Commission may consider its prayer for higher incentive. 13

14 (u) Cost on implementation of ABT: UPRVUNL suggests that expenditure on implementation of ABT should be allowed in tariff. Cost on implementation of ABT shall be pass through as additional capital expenditure. Regulation 18 (6) and 34 (6) shall be inserted as below: Cost on implementation of ABT shall be allowed as additional capital expenditure in tariff. 4. Besides the decision taken in para 3 above, the Commission considers it appropriate to effect following changes in the Draft Regulations also: (i) The power under Regulation 13 shall be exercised by an order and the Regulation 13 of the Draft Regulations shall be replaced by the following: The Commission, for reasons to be recorded in writing, may vary any of the provisions of these regulations on its own motion or on an application made before it by an interested person by an order. (ii) Regulation 16 of the Draft Regulations, after heading but before 16(i), shall be replaced by the following: The norms of operation as given hereunder shall apply. However, in case of generating stations where PPA has already been executed on or before , the norms of operation under the PPA shall be applicable for the purpose of this Regulation. (iii) Gross station heat rate under Regulation 16(iii) and auxiliary energy consumption under Regulation 16(v) for 300 MW units shall be same as that for 200 MW series. The Draft Regulations shall be modified accordingly. (iv) Regulation 21(1), before Regulation 21(1) (i), shall be replaced by the following: The capacity charges shall be computed on the following basis and their recovery shall be related to target availability in case of all existing as well as new generating stations. Regulation 38, before 38(i) shall be replaced by the following: 14

15 The annual fixed charges shall be computed, in case of all existing as well as new generating stations, on the following basis: 5. Based on decisions taken in Para 3 and 4 of this Order, Draft Regulations shall be modified. Any correction or modification incidental to above decisions shall also be carried out in the draft regulations including the minor correction in language, if any. Final Uttar Pradesh Electricity Regulatory Commission (Terms and Conditions of Generation Tariff) Regulations, 2009, so made, shall be put up for approval of the Commission. These Regulations shall come in to force from 1 st April, The Secretary to the Commission shall get these Regulations notified in the official gazette with Hindi Translation. Pending Gazette Notification, the Regulations approved by the Commission shall be made public by posting it on the Website of the Commission and informing all persons by a Public Notice in the newspapers. 6. The matter is disposed of. (R. D Gupta) Member (P.N Pathak) Member (Rajesh Awasthi) Chairman Lucknow; Dated: 30 th March,