Approval of Final Capital Cost, True up FY and Multi Year Tariff of BEPL for FY 15-19

Transcription

1 THE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION LUCKNOW Petition Nos. 973 of 2014, 1036,1037,1038,1039 &1040 of , 1080, 1081, 1082 &1083 of 2016 FILED BY Bajaj Energy Private Ltd (BEPL) IN THE MATTER OF: Approval of final capital cost, True up for the period from the COD up to and Approval of MYT tariff for the period from FY to FY in respect of 2 X 45 MW thermal power plants of Bajaj Energy Pvt. Limited Barkhera Khambarkhera Kundarki Maqsoodapur Utraula Lucknow Dated: 24 th May, 2017

2 Table of Contents 1. FOREWORD 2. BACKGROUND 3. APPROVAL OF FINAL CAPITAL COST 4. APPROVAL OF PARAMETERS FOR DETERMINATION OF ARR 5. METHODOLOGY FOR TRUING UP 6. FINAL TRUE UP FOR FY , FY AND FY MULTI YEAR TARIFF PETITION FOR FY TOFY TARIFF DESIGN AND APPROACH FOR DETERMINATION OF MYT 9. APPROVED MULTI YEAR TARIFF AND ARR 10. OTHER PROVISIONS 11. COMMISION S DIRECTIVES 12. IMPLEMENTATION OF ORDER Page 2 of 114

3 Petition Nos.973 of 2014, 1036,1037,1038,1039 &1040 of , 1080, 1081, 1082 &1083 of 2016 BEFORE THE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION LUCKNOW Date of Public Hearing: , and Date of Order: PRESENT: 1. Hon ble Shri Desh Deepak Verma, Chairman 2. Hon ble Shri Suresh Kumar Agarwal, Member IN THE MATTEROF: Approval of final capital cost, True-up for the period from the COD up to and Approval of MYT tariff for the period from FY to FY in respect of 2 X 45 MW thermal power plants of Bajaj Energy Pvt. Ltd. BETWEEN M/s Bajaj Energy Pvt. Ltd, B-10 Sector 3, Bajaj Bhawan, Jamnalal Bajaj Marg, Noida (UP) Petitioner AND Uttar Pradesh Power Corporation Ltd. (UPPCL) Shakti Bhawan, 14-Ashok Marg, Lucknow &Others Respondent(s) Page 3 of 114

4 The following were present: 1. Shri Vinay Kumar Bonkuti, President, Bajaj Energy Pvt. Ltd. 2. Shri S. N. M. Tripathi, Director, Bajaj Energy Pvt. Ltd. 3. Shri Arun Garg, GM (F P&A), Bajaj Energy Pvt. Ltd. 4. Shri Anant Swaroop, VP, Bajaj Energy Pvt. Ltd. 5. Shri Amrendra, Sr. Manager, Bajaj Energy Pvt. Ltd. 6. Shri VKS, President (OM), Bajaj Energy Pvt. Ltd. 7. Shri Suth, Director, Bajaj Energy Pvt. Ltd. 8. Shri PradeepTandon, President, Bajaj Energy Pvt. Ltd. 9. Shri V. P. Srivastava, CE (PPA), UPPCL 10. Shri J. P. S. Gangwar, SE (PPA), UPPCL 11. Shri Nadeem Khan, EE, PPA, UPPCL 12. Shri VivekDikshit, EE, UPPCL 13. Shri Rajiv Srivastava, Advocate, UPPCL 14. CA Manish Garg, Consultant, UPPCL 15. Shri BhushanRastogi, Consultant, UPPCL 16. Shri Shafiullah, UPRVUP, Consumer Representative 17. Shri LaljiYadav, UPRVUP, Consumer Representative 18. Shri Rama Shankar Awasthi, Consumer Representative 19. Shri Avdhesh Kumar Verma, Chairman, UPRVUP, Consumer Representative Page 4 of 114

5 1. FOREWORD : Order 1.1 The Bajaj Energy Private Limited (BEPL) filed petitions for Approval of Capital Cost and for True up for Barkhera, Khambarkhera, Maqsoodapur, Kundarki and Utraula Thermal Power Stations for F.Y to on The petitions were admitted by the Commission vide order dated The Petitioner got the details published in newspapers on and The Petitioner was also directed to put the petitions along with the relevant documents on its website and to make available hard copies of the same for inspection by any person during office hours at its Registered Office. 1.2 Subsequently the Petitioner filed petitions vide affidavit dated for determination of Multi Year Tariff (MYT) for FY to FY The petition was admitted by the Commission vide order dated A Public Notice was given to the stakeholders and interested parties to give opportunity to submit comments/ objections/ suggestions to petitions in writing directly to the Commission s Office with an advance copy to the Petitioner, personally or by post. The Public Notice for hearing was published on and hearing in the matter was held in the office of the Commission on at 11:30 hrs. During the hearing, the representative of the Petitioner summarized the contents of the petitions, on which specific comments against the petitions were raised by Respondents. 1.4 UPPCL filed comments on the petition on to which the Petitioner filed a rejoinder on UPPCL raised an objection that the agreed capital cost of the Bajaj energy plants as on CoD was Rs Crores, on which the Petitioner has claimed a significant additional capitalization of Rs. 155 Crores after CoD. BEPL submitted that the additional capitalization of Rs Crores out of this Rs.155 Crores claimed in its Petitions has already been accepted as deferred liability in the Expert Committee Report on the approval of capital cost for its plants. 1.5 UPPCL also raised objection that plant wise audited annual accounts and plant wise audited details of deferred liabilities have not been submitted by the Petitioner to substantiate its claims of additional capitalization. 1.6 Since there was no representation from the public; on request of Shri Rama Shankar Awasthi, Consumer representative, the Commission allowed some additional time for filing of objections on the Petitions and fixed a date for second public hearing on at 11:30 Hrs. However, a Page 5 of 114

6 corrigendum was issued later that the public hearing shall be held on instead of Shri Awasthi also brought to the notice his written submissions filed during the Public Hearing on Petition No. 852, 853, 854, 855, 856 & 869 of These include the following points: 1. The Commission should take up review of operating norms based on performance test report (PG report) submitted by supplier and actual performance report since CoD. 2. The Commission should prepare benchmark study report for operating parameter for 45 MW thermal generating station before reviewing the operating parameters 3. The Commission should not amend or add this stabilization period for generating plant of 45 MW based on CFBC technology 4. CFBC technology is newer and an improved technology. Therefore in any case operating parameter should not be more than operating parameter as decided by MPERC in M/s BLA Power Pvt. Ltd. passed on Order dated The objections raised by the Consumer representatives in second public hearing have been detailed in the following sections: A. Shri Avadhesh Kumar Verma, Chairman, U.P Rajya Vidyut Upbhokta Parishad raised objection that BEPL has uploaded the petitions and other related documents on instead of Bajaj Energy Pvt. Ltd. website. He further raised objection that UPPCL had not uploaded their expert committee report on the agreed capital cost of BEPL on the website and that BEPL had not provided the report on the subletting of the contract by BIDCO (EPC Contractor) to other contractors. B. During the public hearing Shri Verma also brought to the notice his written submissions filed during the Public Hearing on Petition No. 852, 853, 854, 855, 856 & 869 of He had submitted that the Consumer s interest must be taken care of by the Hon ble Commission and that private power producers in the State are already getting very high tariff which is evident from the annual revenue requirements as submitted by UPPCL. The issue of such high tariff is required to be examined thoroughly so that the reasons for difference in tariff in comparison to State or Central sector generating plants may be ascertained. He further propounded that the Hon ble Commission may form a high level committee to probe the issue of higher cost power as supplied through the MoU route by the power producers in the state of Uttar Pradesh (UP). He added that a competent expert committee should be formed by the Hon ble Commission to review the actual performance of the petitioner plants and only on the basis of the report any decision may be taken. Shri Verma, stressing again upon the already higher tariff as being paid to the Page 6 of 114

7 company, vehemently opposed any further allowance which may impact increase in tariff and which would ultimately further burden the consumer of the State. C. Shri Verma also submitted a letter of objections along with the findings of CAG report which states the following points: 1. Faulty planning of Generation plants 2. Faulty installation of Power plant by BEPL 3. Default in informing Commission about the criteria of DPR 4. Discrepancies in Petition filed by BEPL related to power purchase 5. Consideration of wrong value of Debt and Equity 6. Consideration on increased IDC during construction period 7. Permission granted for increased rate on equity 8. Non-Monitoring of activities by GoUP D. Shri Shafiullah, another Consumer representative, raised objection that M/s Bajaj Hindustan Ltd. (BHL) had signed EPC contract for all the 5 projects with M/s Bajaj Infrastructure Development Company (BIDCO) on , much before the date of MoU signed between BHL and GoUP on and the finalization of EPC contract by BHL prior to signing of MoU and PPA. This implies that BHL has taken up the 5 thermal Power Projects (2X45 MW) at Barkhera, Khambarkhera, Maqsoodapur, Kundarki and Utraula on their own which were subsequently brought under MoU route by signing of MoU with the BHL on He further submitted that the existing 5 projects of (2X45 MW) thermal Power Project at Barkhera, Khambarkhera, Maqsoodapur, Kundarki and Utraula are said to have been installed under UP Government Co- Generation policy, declaring these units as Co-Generation Plants installed by the Co-Generator, BHL. Further, the Consumer representative raised objection that as per Regulation 11 of UPERC Generation Tariff Regulations 2009, BHL was required to submit the Detailed Project Report (DPR) of the Projects and scheduled Commercial Operation Date (CoD) etc. in respect of the proposed Projects to the Commission. However, the Commission was not even aware of the fact that BHL was in advance stage of the project by the time the approval for PPA was sought by UPPCL. E. Shri Shafiullah raised objection that while approving the PPA, the Commission had not considered the issue of procedures for selection of BHL as developer and also the following facts: 1. The guidelines issued by GoI for Case-2 bidding in selection of BHL as developer 2. Specifications for the establishment of the Plant were not approved from the Commission and Standard Bidding Documents (SBDs) framed by the Government of India (GoI) were not followed. He added that higher O&M charges, fixed charges and variable charges had Page 7 of 114

8 been provided to the petitioner as compared to those already declared vide Schedule-1 in UPERC Tariff Regulations dated and requested the Commission for recovery of excess payment from the Petitioner. F. Further he raised an objection on BEPL regarding setting up of plants without Railway siding and requested the Commission to institute enquiry through an appropriate agency to examine the circumstances of deciding 45 MW units with CFBC boilers as an IPP utility and locating the same at forlorn places of Bajaj Sugar Factories without any Railway siding. G. Shri Shafiullah submitted that the Expert Committees had practically not carried out any check of the Capital Cost and did not verify the details related to IDC. He further submitted that the Expert Committee appointed by the Commission did not examine the detailed cost structures and relied on the figures indicated by UPPCL, thereby reducing the cost by Rs Crore. H. Shri Shafiullah requested the Commission to determine the correct capital cost of the 5 projects of BEPL through some other outside agency. I. Shri Avdhesh Kumar Verma, requested the Commission to hold another Public hearing in this matter. J. On the above submissions made by the Consumer representatives, Shri S.N.M.Tripathi, Director, BEPL submitted that the softcopies of the petition and other documents were easily available on their group company s website. However, if the Commission thinks that it should be on their generating company s website, then they have no problem in uploading the documents on that website. Further he submitted that the projects were conceived under GoUP Energy Policy on coal based power generation to meet the gap in demand. The projects have undisputed status of IPP and have started operations in record time. He requested the Commission to approve their final tariff. K. Subsequent to the public hearing, BEPL vide letter dated submitted their response to the observations made by Consumer representative Shri Shafiullah. The submissions are given in the following: 1. The Petitioner submitted that the observations by Consumer representative pertaining to recommendations of the operating parameters of Bajaj Thermal Power Plant are not the subject matter of the petition of BEPL in the current instance. 2. The Petitioner submitted that in the Petition, the observations/ submissions are made against UPPCL and Expert Committee appointed by Hon ble Commission and BEPL is not the respondent intended. Page 8 of 114

9 3. The Petitioner further submitted that the determination of operating parameters for 45MW IPP units was disposed of by the Hon ble Commission vide order dated after due diligence and based on submission and deliberations of all stakeholders in public hearing. The Consumer representative had opportunity to file objection during that time. To raise objection now after five years seems to harass the associated parties and the Hon ble Commission. 4. The Petitioner further submitted that the Hon ble Commission had decided to fix parameters of 45MW separately by an order and by necessary amendments in the regulations as the same were not described in UPERC (Terms and Conditions of Generation tariff, 2009). 5. The Petitioner submitted that the Hon ble Commission had followed the due procedure and had invited comments from all stakeholders on its discussion papers after uploading it on its website on and also copies of the same were forwarded to CEA, CERC and other regulatory commissions and other stakeholders. 6. The Petitioner also submitted that prior to passing the order dated , Hon ble Commission had reviewed all aspects in details including available benchmarks, precedence by that time, contention related to category of plant (viz. CPP or IPP or Cogen) SHR, O&M, APC etc. and had also sought clarifications and details from CEA, CERC and also held public hearing before final determination of operating parameters. 7. The Petitioner further submitted that the Hon ble Commission had also appointed an Expert Committee to review operating parameters after one year of continuous successful operation. The Committee after review of data and on ground verification had recommended the operating parameters. L. The Petitioner vide letter dated informed the Commission that the petitions and other related documents had been uploaded on the website of Bajaj Energy Private Limited. M. The issues raised by Consumer representatives can be broadly classified in three categories namely increase in quantum in PPA from 90% to 100% of the power, operating parameters and capital cost. Regarding the increase in quantum, the Commission vide its Order on Petition Nos. 662, 663, 664, 665, 666, 689 and 701 of 2010 dated read with Order on Petition Nos. 662, 663, 664, 665, 666, 689 and 701 of 2010 dated approved the purchase of 90 % of the power from each of the aforementioned power stations. Subsequently the Commission in its Order on Petition Nos. 830, 833, 838, 839, 840, 842, 845, 859 of 2012 and 897 of 2013 dated approved the revised quantity of 100% power in case of the power stations of BEPL after due diligence, considerations and public hearings. Page 9 of 114

10 N. In the matter of determination of operating parameters for 45MW IPP units, the Commission has taken a view vide order dated after due diligence and based on submission and deliberations of all stakeholders in public hearing. The Commission notified the UPERC (Terms and Conditions of Generation Tariff Regulations) (First Amendment Regulations) 2012 which firmed up the operating parameters for thermal power plants with installed capacity up to 50 MW. The Commission had issued an order dated on the petition filed by BEPL on review of parameters determined for 45 MW capacity coal based generating plant based on CFBC technology. In line with the directions in the aforesaid Order an expert Committee comprising of Shri N. B. Mathur, Retired General Manager (Engg.), BHEL and Shri Rajiv Goyal, Retired Chief Engineer, UPRVUNL was constituted for verifying the operational data of the IPP plants of the Petitioner and propose the normative values for operating parameters like-station Heat Rate and Auxiliary Power Consumption. The matter of operational parameters considered for the true up period FY to FY has been dealt with in detail in Section 4 of this Order. Further operating parameters for the MYT Control Period FY and FY have been considered as per the norms specified in the UPERC (Terms and Conditions of Generation Tariff Regulations) O. As per directions of the Commission, UPPCL had appointed a Committee for verification of the actual incurred capital costs of the thermal power plants. The Committee after due audit and verification process had recommended a capital cost of Rs Crore to UPPCL in its report dated as against an incurred cost of Rs Crore submitted by BEPL. UPPCL and BEPL after further deliberation had submitted a mutually agreed cost of Rs Crore before the Commission vide letter dated P. For verification and prudence check of capital cost, an Expert Committee comprising Shri V. K. Garg, Ex-Chairman, JERC and Shri P.K. Agarwal, Ex Director (Technical) UPRVUNL was constituted by the Commission. The Committee submitted its report on in which it has verified the Capital Cost of Rs Crore. The matter of capital expenditure additional capital expenditure has been dealt with in detail in Section 3 of this Order. Q. The Commission conducted the third hearing on the subject petition on R. Vide order dated , the Commission had directed UPPCL, Shri A.K. Verma and Shri R.S. Awasthi to provide written objections/ comments to the petitioner within fifteen days of the hearing which was conducted on and the Petitioner was directed to submit responses to these objections/ comments within the next 10 days. Page 10 of 114

11 S. Shri Shafiullah filed objections before the Hon ble Commission as rejoinder on , which are given in the following sections and has prayed before the Commission for appropriate action 1. Shri Shafiullah raised objection that M/s Bajaj Hindustan had started construction of the 5 nos. of 2x45 MW Plants in the year 2009 as Captive Power Plants and had already placed the orders for Supply, Erection, Testing Commissioning and Operation of BTG for one year on and finalized all the contracts through BIDCO during the year The objector alleged that these Plants have not been designed and constructed under the MoU dated and accordingly are deemed to be Captive Plants for which the Hon ble Commission has issued MYT Regulations in 2010 and in The Plants of BEPL fall in the category of Captive Plant and hence the exercise for sanction of exclusive tariff for these Plants is unlawful. 2. Shri Shafiullah mentioned that State Bank of India (SBI) while arranging the loan for the Projects had prepared a DPR and had also determined the Capital Cost, Energy Cost and the Tariff for 10 years for the recovery period of loan. As per the report of SBI, the total tariff was Rs.2.93/kWh and with this the Bank had projected a return of 16% RoE and some surplus amount besides the recovery of loan with interest, IWC cost of consumables and the liability of taxes. He mentioned that the quoted DPR is available in public domain in internet and has requested the Hon ble Commission to take reference of the same before sanction of exorbitantly higher tariff of Rs 6.82/kWh excluding Taxes. 3. Shri Shafiullah raised objection that BIDCO was appointed by BHL as Project Management Company and not as EPC contractor through any bidding process as mentioned by BEPL in their Petitions and therefore there has been absolutely no financial control over pricing of the Project. 4. He further mentioned that the BTG suppliers have given guaranteed GSHR and Auxiliary Consumptions with stringent Liquidated Clauses and accordingly the Operating Parameters approved in favour of BEPL need to be modified in line with the terms and conditions of the BTG contracts. 5. He submitted that from the available coal dispatch record of Coal India Limited, BEPL had received 90.3% of their FSA quantity against their PLF of 69.8% and hence the claim that coal was procured from the open market is not true as submitted by the Petitioner. He requested the Hon ble Commission to restrain UPPCL from approving such energy charges. 6. He mentioned that the revised GoUP Power Policy had authorized only for increase in capacity of Co-generation/ Captive Plants up to 100 MW and had allowed use of Coal/Gas as Fuel and Ground Water and for IPP it had been permitted upto units of 250 MW and above. Therefore all actions taken to declare these 2x45 MW Plants as IPP are unlawful. Page 11 of 114

12 7. Shri Shafiullah objected that the RoE admissible for these Plants as per CERC regulations is 15.5% and therefore the considerations of 0.5% incentive for these plants is unlawful. 8. Shri Shafiullah mentioned that GoUP Power Policy has authorized UPERC to determine the tariff for these Plants, which cannot be extrapolated as power for declaring these plants as IPP. The UPERC has already determined the tariff for such plants and the same ought to be applicable to these plants of BEPL also. 9. Shri Shafiullah mentioned that the fee submitted by the Petitioner along with the Petition is not as per latest revised fee regulations notified vide notification no. 429/24 dated He requested that the Petition should not be accepted for hearing without the submission of requisite fee by the Petitioner. 10. Shri Shafiullah mentioned that the amount of additional capital cost of Rs Cr mentioned in Petition No to 1083 by the Petitioner has not been detailed either in Petition or in Annexures and hence are arbitrarily assumed figures and hence should not be admissible. 11. Shri Shafiullah also submitted that the start date of project given in Form 5E is not correct as application for coal linkage, orders for supply of boilers, contract for civil works were placed before the date mentioned in Form 5E. He requested that the earliest possible date should be considered as the date for start of project. 12. Shri Shafiullah mentioned that the amount of equity shown in Form-6 of Petition no to 1083 is not correct as in the report prepared by SBI, the equity is given as 25%. 13. Also, he mentioned that the amount of Capital shown in Form-5D of the Petition no to 1083 are arbitrary and different from that submitted by UPPCL and as claimed by BEPL. 14. He mentioned that the Petitions submitted by the Petitioner neither contain the Common Loan Agreement (CLA) nor the amount and dates of drawdown and BEPL has calculated the interest at SBI PL rates which is normally higher than the CLA rates. Hence neither the IDC nor interest on long term loan can be ascertained. 15. Further, Shri Shafiullah mentioned that as per the report prepared by SBI, the cost of the project was Rs Cr and the RoI on the loan is 11.5% as against 14% and 13.83% claimed by BEPL. 16. Shri Shafiullah claimed that the capital cost figures mentioned in the SBI report are based on actual work order values and include head wise scope of work. He objected that both UPPCL and the Expert Committee appointed by the Hon ble Commission for prudence check did not take reference of the SBI report nor the costs were analyzed from value of work orders. He mentioned that the Committee followed Reductio ad Absurdum technique of reducing some amounts from the cost data of BEPL. 17. He further mentioned that the cost of Boilers and Generators mentioned in SBI report taken from work orders is Rs Crore as against the amount of Rs Crore assumed Page 12 of 114

13 by BEPL and certified by UPPCL which is arbitrary and inflated. Similarly, the total cost of overhead charges, margin money, cost of BOP (Mechanical and Electrical) switchyard etc. as claimed by Petitioner are inflated from that considered by SBI in its report. 18. Shri Shafiullah requested the Hon ble Commission to ensure that the Generator does not get undue opportunity to recover more tariff by way of manipulating the fuel price and GCV. 19. Shri Shafiullah further mentioned that there are error in the fixed cost calculations in Hon ble Commission s order dated which resulted in passing of higher tariff. He further objected that higher tariff was calculated by wrongful consideration of Equity and Return of Equity. 20. Shri Shafiullah requested the Commission to examine the tariff as the determined tariff has been calculated even with reduction in capital cost in petition no to He specifically highlighted the amounts considered for AAD in Maqsoodapur, Increase in Interest of Working Capital etc. He also alleged that BEPL has not provided any data of coal prices and GCV in any of the Petition which amounts to irregularity. 21. He further mentioned that, as per ARR of UPPCL, the average power purchase rate from NTPC plants is around Rs. 3.47/kWh and as per SBI report it is Rs. 3.25/kwh. Therefore the tariff calculated for BEPL is fallacious. 22. Shri Shafiullah objected that there has been an unusual trend of prices of Coal and SFO as mentioned in the petition which needs scrutiny. He has supported his objection by providing comparable prices from other plants and based on rates taken in SBI report. 23. Shri Shafiullah mentioned that operating norms for all type/ sizes were already available in GoI notification of 1999 but reference of the same was not included by the Commission in their discussion paper. For finalization of operating norms for 45MW units. 24. Shri Shafiullah also requested the Commission for amending the GSHR and Auxiliary consumption of the plant 25. Shri Shafiullah also requested the Commission for consideration of O&M charges at 2.5% of the capital cost which was initially proposed in the discussion paper and as per GoI notification of Shri Shafiullah mentioned that the Hon ble Commission in its order dated had declared the plants of BEPL as increasing capacity of captive plants being established in accordance with revised GoUP Power Policy dated Since the Commission has already declared tariff for all captive power plants vide Schedule 1 of its CNCE Regulations dated , the same should also be applicable to BEPL and no separate tariff calculation should be carried out. He further mentioned that the Hon ble Commission has further revised the CNCE regulations on and has declared for the MYT period to and same should be applicable for BEPL plants also. Page 13 of 114

14 27. Shri Shafiullah also mentioned that the declaration of the BEPL plants as IPP is also fallacious as the revised Power Policy of GoUP permits IPP only with units of 250 MW and above and for plants operated by coal for capacity up to 100MW as increase in capacity of captive plant. Hence the 5 nos. of BEPL plants with 2x45MW capacity should be considered under increase in capacity of captive plants and CNCE Tariff should be applicable. 28. Shri Shafiullah requested the Commission to use power provided under Electricity Act 2003 regarding enforcing Commercial Principles, Economy, and Efficient and Optimum use of resources to reduce the burden on the consumers and take action against profiteering. T. On , Shri R.S. Awasthi filed an application requesting copies of (i) enclosures of Shri V.K. Garg, Committee (ii) enclosures of Shri Rajeev Goyal and Shri N.B. Mathur Committee (iii) Unit wise financial statement. The copies of the enclosures were handed over to Shri R. S. Awasthi on except unit wise financial statement which was not available with the Commission. U. Shri A.K. Verma vide letter dated filed written objections before the Commission which are given below 1. He mentioned that due to incorrect consideration of auxiliary consumption, higher tariff has been determined. Upto March 2013, Bajaj got a benefit of Rs. 115 Crore and in the next 24 years, the benefit accrued will be Rs Crore. 2. The submitted capital cost of Rs along with Rs. 155 of Additional Capitalisation submitted by Bajaj is not correct. CAG in its report has highlighted many irregularities which the expert committee appointed by the Commission should look into. 3. He requested the Commission to investigate the type of works awarded to BIDCO by BEPL as BIDCO is a concern company of the Bajaj group. He objected that BIDCO was offered works at higher rates by BEPL which subsequently were awarded by BIDCO to other companies for execution. 4. He highlighted that the tariff of Rs. 6.82/kWh determined for Bajaj Energy is very high which is increasing the electricity bills of the consumer wherein cheaper power is available in power agencies. 5. He requested that his interim objection may be sent to BEPL and UPPCL for their reply. The Commission vide letter UPERC/Secy/D(G)/ dated September 2016 had forwarded the same to BEPL and UPPCL for their replies. V. Shri. R. S. Awasthi filed written objections vide letter dated which are given as under Page 14 of 114

15 1. Shri Awasthi mentioned that BEPL has not provided required documents to the Committee for prudence check of operational parameters and capital cost and requested the Commission to not accept the Committee recommendations. He requested the Commission to disallow an amount of Rs Crore as BEPL has not submitted requisite documents before the expert Committee. 2. He submitted that there is large scale irregularity and deviations from standard bidding procedure in awarding contract to group concern BIDCO as EPC contractor. He requested the Commission to constitute a high power committee/ independent agency for verification of actual capital cost, enquiry on bidding process and to determine amounts routed to group concern. 3. He objected that payment terms were changed in LOA to favor BIDCO and thereby BHL/BEPL paid excess amount as initial advance. He requested the Commission to not allow IDC on the excess initial advance. 4. Shri Awasthi requested the Commission to direct BEPL to clarify whether BIDCO was appointed as EPC or PMC contractor. 5. Shri Awasthi requested the Commission to examine the actual COD date of each unit from test certificates as prescribed in article of PPA as there are irregularities in the dates mentioned in various committee reports. 6. Shri Awasthi requested the Commission to issue specific directions to all the Committees for submitting detailed expenditure of around Rs. 438 Crore with supporting documents before the Commission and also to clarify in which year the expenditure has been incurred and whether BEPL has capitalized that amount in its books or not. He mentioned that the Commission should not allow the expenditure until details are clarified. 7. He objected that the claim of Rs Crore towards land claimed by BEPL should be disallowed 8. He requested the Commission to verify the cost of spares amounting to Rs Cr claimed by BEPL in capital cost whereas the same should have been included under O&M head in case purchased before the cutoff date. Also Commission should verify if the spares were part of the total cost of OEM supplier as the original list was not available for review. 9. Shri Awasthi mentioned that the available 132 KV transmission line is inadequate to evacuate power from the plant when running in full load due to capacity constraints and hence has requested the Commission to look into the issue. 10. Shri Awasthi requested the Commission to verify the amounts deducted by BEPL under Liquidated Damages from BTG/BOP suppliers/ contractors through sister concern due to delay of supply or non-completion of work on time. He mentioned that such deductions should not be considered in the amount claimed by BEPL. Page 15 of 114

16 11. He requested the Commission to verify the pre-operative expenses amount of Rs Crore which has been claimed by BEPL 12. He mentioned that as per details available and shareholding pattern, both the companies BEPL and BIDCO are related parties and requested the Commission to investigate the accounts of BIDCO and pending enquiry, to restrict tariff to 80% of approved capital cost. 13. He requested the Commission to direct UPPCL and BEPL to submit details of energy scheduled, coal procurement/ consumption records, secondary oil consumption and inhouse energy consumption. 14. He requested the Commission to disallow higher GSHR, Auxiliary consumption and Secondary Fuel Oil Consumption and fix the norms as per actuals. 15. He requested the Commission to not accept the recommendation of the Committee for additional SHR of 100 kcal/kwh during the stabilization period. 16. He mentioned that BEPL has failed to submit technical specifications of BTG as supplied by OEM and performance test reports to the Committee due to which the Committee had to rely on whatever information was available. He requested the Commission that till submission of all documents, the parameters should not be approved. 17. Shri Awasthi also requested the Commission to stop payment for both the Committees due to nonperformance of their duties. 18. The Commission vide letter UPERC/Secy/D(G)/ dated had forwarded the copy of interim objection letter of Shri R. S. Awasthi to BEPL and UPPCL for their reply. W. UPPCL vide affidavit dated has submitted their replies on the comments/ observations of the Consumer representatives. UPPCL submitted the following 1. That the mandate of section 64 (3) of the Electricity Act, 2003 is restricted to considering all suggestions and objections received from the public Inputs from Consumer representatives do not confer upon them the right to get their views made a part and parcel of the tariff determination process. 2. That the Consumer representatives may not be allowed to arrogate to themselves and at best can point out a specific violation of Section 61 of the Act, in a tariff determination exercise undertaken by a Commission. UPPCL objected that the Consumer representatives have not spared the sanctity attached with the functioning of the Commission by being critical about the decisions taken by the Commission on various aspects. 3. UPPCL further mentioned that from the comments of the Consumer representatives, it appears that they are seeking to get the entire process reversed. Page 16 of 114

17 4. UPPCL strongly denies any wrong doing on its part as alleged in the comments of the Consumer representatives and mentioned that it has always complied with all directions and orders of the Commission. 5. UPPCL further stated that the role assigned to them as licensee under provisions of Section 61 of the Electricity Act, 2003 is of much higher order than the claims made by the Consumer representatives and therefore is not willing to cede to the observations made by the Consumer representatives. X. In reply to the suggestions/ comments of the Shri R. S. Awasthi, BEPL filed their responses before the Commission vide affidavit dated BEPL submitted the following: 1. BEPL submitted that the expert committee report related with determination of Operating Parameters was already disposed of by Hon ble commission earlier. Also the information memorandum was prepared for the limited purpose of fund raising only and the same should also be referred only where relevant. 2. BEPL in their submission also mentioned that many of the objections raised by the Consumer representative has already been settled by the Hon ble Commission. 3. BEPL mentioned that it had provided all relevant documents as sought by the referred Committee for Prudence check of Capital Cost. Further, the report(s) were submitted by Expert committee to the Hon ble Commission directly and hence BEPL is not in a position to comment regarding the sufficiency of documents referred by Expert Committee based on which report was prepared. 4. BEPL further mentioned that the bidding procedure adopted was already reviewed and thoroughly scrutinized by Expert committee appointed for the purposes. Subsequently such observations were submitted before Hon ble Commission. BEPL reiterated that it had strictly followed standard commercial procedures for bidding and applied reasonable prudence considering magnitude and size of project and in optimum interest of time and cost involved. Regarding the contention related with steel consumption, Expert Committee had already reviewed thoroughly all aspects related with design, engineering, BOQ, consumption etc. and has found it satisfactory. So any contention of public representative based on his presumptive approach was baseless and is not tenable. 5. BEPL had invited prospective bidders and gave full opportunity to reach at minimum competitive price. After various round of negotiations, BIDCO emerged as lowest bidder. Further, to reduce contract price, payment terms were re-casted further. Such justifications were also appraised by Expert Committees and were found satisfactory in line with industrial practice. 6. BEPL mentioned that it does not want to comment on the concerns raised by learned Consumer representative pertaining to the functioning, procedure adopted and prudence of Page 17 of 114

18 Expert Committees. It further mentioned that the Consumer representative by requesting for constitution of another high power Committee is trying to create unnecessary hindrance and delay in the instant tariff petition. 7. With respect to the concern for IDC, the Expert Committee appointed by UPPCL, has already addressed this issue in its report and recommended for disallow the part of IDC pertaining to initial advance payment to BIDCO. Hence, the request of Consumer Representative in this regard is not relevant is already settled. 8. BEPL submitted that it had appointed M/s BIDCO as EPC Contractor and scope of same also included services as Project Coordination and Management consultancy services apart from Supplies, Civil Construction, Erection etc. This aspect was also duly addressed in detailed reviewed by Expert Committees. 9. With regards to determination of COD, BEPL submitted that the Article of the Power Purchase Agreement (PPA) duly prescribed the method and procedure to determine COD. Accordingly, COD was determined and considered based on Certificate of Independent Engineer duly appointed by UPPCL. The issued certificate was duly endorsed and communicated as COD to BEPL by UPPCL. Such declared COD was put on record as COD for respective station for all purposes and question of any doubt in this regard is baseless and not tenable. 10. BEPL submitted that M/s BHL had entered into a MoU with GoUP to implement 450 MW TPP which was later with due permission of GoUP, assigned in favor of the SPV M/s BEPL. BHL, being promoter, initially incurred the expenditure and which was subsequently transferred on assignment and accordingly, the same was considered as a part of capital cost. This was appraised in detail by Expert Committees and found to be in order. The Expert Committees had also reviewed and scrutinized all related supporting documents, financial statements in detail. Hence, the request of the Consumer representative to form another Committee appears as intent of causing hurdle and delay in the tariff determination. 11. BEPL submitted that the Capital Cost of Rs Crore is mutually agreed and the Cost of Land is not included as part of agreed capital cost. The concern of the representative in this regard is already settled in the agreed cost and hence is not tenable. 12. BEPL submitted that the mandatory spares supplied by OEM with the main equipment were fast consuming items required for plant stabilization during the warranty period of two years and cannot be considered distinctly as initial spares as provisioned in the Regulation. These spares are different from the critical spares which are required as backup for usage in the medium and long term. The Regulation 17 of UPERC Regulations 2009 and 2014, after taking an overall view on the aforesaid and having considered the requirement of medium and long term delivery provides to procure initial spares subject to ceiling of 2.5% Page 18 of 114

19 of capital cost and accordingly the initial spares of Rs crore have been considered. BEPL has claimed initial spares within ambit of the Regulations and the Expert Committees have found it in order after reviewing it in detail. 13. BEPL further submitted that the concern raised by the consumer representative regarding viability of evacuation of BEPL TPP in conjunction with Cogen Power Plants through existing 132 KV substations was baseless, misconceived and irrelevant. Since almost the last five years, power is being evacuated uninterruptedly and in full capacity through the existing 132 KV Transmission System. 14. BEPL stated that there was no delay in the supply/ commissioning by OEMs or EPC contractor, hence the question of LD does not arise. All the guaranteed operating parameters were also duly demonstrated in Performance Guarantee (PG) Test to the satisfaction of all concerned. Hence, the concern raised are baseless and not tenable. 15. With regards to the concern raised for pre-operative expenditure, the Expert Committee had reviewed the same and found satisfactory. Further, UPPCL has also disallowed the part of miscellaneous fixed assets cost which was consented by BEPL. Hence the concern of the representative is denied. 16. BEPL further submitted that the contentions of the Consumer representative pertaining to relation between the BEPL and the EPC contractor are baseless. Both the organizations operate under distinct professional management and all transactions were carried out at arm s length basis and based on merits. Transparent bidding procedure was adopted while awarding the EPC Contract. Such concerns although settled has now been raised by the representative only to cause unnecessary hindrance and delay in determination of tariff. 17. BEPL stated that the IPP s were established under UP Government Energy Policy 2009 and 100% of its saleable energy is to be procured by the State nominated agency. Hence concerned of the representative regarding fixed cost issue is misconceived and baseless. Also, regarding the concern on competitiveness of variable cost and submission of documents, BEPL clarified that the energy supplied is being scheduled by SLDC as per competitive variable charges within the ambit of merit order and the relevant records with regard to energy scheduled, coal procurement, coal consumption, auxiliary consumption, secondary oil etc. are being regularly submitted to UPPCL with monthly billing for their due verification. 18. With regards to the concern of the Consumer representative on the Committee s findings and recommendations in absence of design data from the manufacturers, BEPL reiterated that the manufacturers design data is mentioned in the joint PG Test report of boilers and turbines and were made available to the Committee. 19. BEPL further reiterated that the current petition is for determination of Capital cost and Tariff and not for determination/ review of Operating Parameters. The Technical Committee Page 19 of 114

20 appointed for the purposes had reviewed all aspects related with the consumption of Secondary Fuel Oil on materiality basis and found the same to be satisfactory and within ambit of allowed Normative Parameters. 20. With regards to the relaxation provided in SHR during stabilization, the Hon ble Commission had considered the same after due diligence by a Technical Committee and based on Committee s recommendations. Hence the concern is already settled. 21. With regards to the concerns of the Consumer representative on the reports of two Expert Committees, one for verification of capital cost and another for prudence check of operating parameters appointed by Hon ble Commission, BEPL does not wish to comment on the same. 22. BEPL reiterated that the objections/ observations of the learned representative are baseless, misconceived, misleading, not tenable and irrelevant to the petition under consideration before the Hon ble commission and liable to be rejected. Y. In reply to the suggestions/ comments of Shri Avdhesh Kumar Verma, BEPL filed their responses before the Commission vide affidavit dated BEPL submitted the following: 1. BEPL mentioned that the learned Consumer representative had referred to the CAG report submitted before the UP Government and filed objections based on it. BEPL submitted that current petition is for determination of capital cost and for determination of tariff and the Hon ble Commission has exercised its prudence procedurally as defined in the Regulations. Hence the concerns raised at this stage by referring to the CAG report are not relevant to the Petition. 2. BEPL submitted that the contention of the Consumer representative with regards to mutually agreed capital cost and additional capitalization is misconceived. The agreed capital cost has been arrived after due scrutiny of the relevant documents by the Expert Committee nominated by UPPCL. The Expert Committee appointed by the Hon ble Commission had also submitted their findings before the Hon ble Commission. BEPL further submitted that the additional capitalization of Rs. 155 Cr for expenditure incurred up to the cutoff date has been claimed as per the ambit of the Regulations. 3. BEPL further submitted that the concern of the Consumer representative alleging irregularities in awarding EPC contract to BIDCO is denied. BEPL reiterated that all transactions were carried out in strict compliance of standard industrial practices and in transparent manner. The Entire bidding process was also scrutinized in detail by various Expert Committee and no irregularities were observed in bidding and award pricing. The allegations are baseless and denied. Page 20 of 114

21 4. With regards to the allegation of high energy charges, BEPL has not submitted any comment on the same. Z. Summary and Conclusion by the Commission The Commission has provided ample opportunities to all the stakeholders to file their comments and responses regarding the subject Petition. The Commission has considered and reviewed the submissions/ comments and recommendations of all the stakeholders and hereby summarizes its views in the following sections 1. Status as an IPP The Commission has already dealt upon this matter in the order dated and thereby doesn t find it necessary to again clarify on the matter in the current Petition. The status of the power plant as IPP has been considered as per the prevalent policies. 2. Detailed Project Report The Petitioner has not submitted the detailed project reports even after directions from the Commission. However, the Commission does not see it as a deterrent in the process of finalizing the tariff as per the Regulations. 3. Capital cost While approving the final capital cost of the project, the Commission has exercised due prudence and has considered recommendations of the Expert Committees and the agreed capital cost of the Petitioner and the Respondent. The Commission has dealt with the approval of capital cost of the project in a detailed manner in Section 3 of this order. 4. Operating norms The Commission has dealt with topic of operating norms in the order dated Also the norms for determination of tariff have been approved as per the relevant UPERC Generation Tariff Regulations. The Commission has also considered the recommendations of the nominated Expert Committee for approval of GSHR and Auxiliary norms for 45 MW thermal power plant of the Petitioner. However, the norms have been dealt in detail in Section 4 of this order. 5. Additional RoE The Commission has approved additional RoE of 0.5% in line with its order dated and the applicable Regulations. Page 21 of 114

22 6. Fixed Cost The Commission has determined the fixed cost for the period under True-up and MYT as per the provisions of the relevant Generation Tariff Regulations and after due prudence check of the submissions of the Petitioner. During the scrutiny of the Petition, the Commission had directed the Petitioner to submit additional information in support of their claims. The Commission has proceeded with the tariff determination of the thermal power project only after thorough review of the submission of the Petitioner. 7. Variable cost The variable cost shall be considered as per the norms provided in the Generation Tariff Regulations. 8. EPC Contract The Committees nominated by the Commission and by UPPCL for verification and prudence check of the Capital cost had dealt with the subject topic. The Expert Committee nominated by UPPCL under section 5 of its report had mentioned its key observations after evaluating the EPC vendor selection process. The Committee concluded by mentioning the following 11) Considering the aforementioned documents and findings highlighted above in Para 1 to 10 above, we have come to the conclusion that the EPC Vendor Selection Process was not consistent with the standard bidding practices and scope for bias/ errors may have existed in the process. 12) In the background, we are of the opinion that Company could have adopted a more detailed exercise in selection of the EPC Contactor. The Expert Committee nominated by the Commission in its report had mentioned that while during verification of the capital cost, the Committee had reviewed various project related agreements and also mentioned the reasons for increase in value of the EPC contract The Committee also reviewed various Project Contractual Arrangements comprising of Contract for Engineering services and Project Management awarded to SIJCON, Contract for Design Engineering services awarded to Powertech Engineering Pvt. Ltd. Page 22 of 114