TARIFF ORDER OF THE WEST BENGAL ELECTRICITY REGULATORY COMMISSION IN CASE NO: TP 31 / 07 08 IN RE THE TARIFF PETITION OF THE WEST BENGAL POWER DEVELOPMENT CORPORATION LIMITED FOR THE YEAR 2007 2008 UNDER SECTION 64(3)(a) READ WITH SECTION 62(1) OF THE ELECTRICITY ACT, 2003 DATE: 26.07.2007
Tariff Order of WBPDCL for the year 2007 2008 CHAPTER - 1 INTRODUCTION 1.1 The West Bengal Electricity Regulatory Commission (hereinafter referred to as the Commission) was constituted by the State Government of West Bengal u/s 17 of the Electricity Regulatory Commissions Act, 1998. The Electricity Regulatory Commissions Act, 1998 was subsequently repealed along with Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 by the Electricity Act 2003 and was enforced on and from 10 th June 2003. The Electricity Act, 2003 by Section 82(1) lays down that any State Electricity Regulatory Commission constituted by the State Government and functioning immediately before the appointed date shall be the State Commission for the purpose of the Electricity Act, 2003. Hence, the West Bengal Electricity Regulatory Commission, functioning as the State Electricity Regulatory Commission prior to the appointed date is the State Commission in West Bengal for the purpose of Electricity Act, 2003. 1.2 In accordance with the provisions of Section 86(1) of the Electricity Act, 2003, the State Commission shall discharge the following functions, namely - (a) Determine the Tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State. Besides, Section 62(1) ibid also lays down, inter alia, that the Appropriate Commission shall determine the tariff in accordance with the provisions of this Act for (a) supply of electricity by a generating company to a distribution licensee 1.3 The West Bengal Power Development Corporation Ltd (hereinafter called WBPDCL) constituted in 1985 under the Companies Act, 1956, is a generating company in terms of Section 2(28) of the Electricity Act, 2003 wholly owned by the State Government and is engaged in generation within the State of West West Bengal Electricity Regulatory Commission 2
Bengal. Hence, the generation tariff of WB PDCL shall be determined by the Commission. 1.4 In accordance with the provisions of the West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2007, which has come into force with effect from 09,.02.2007, tariff determination would follow the principles of multi year tariff and in terms of regulation 2.5.2 ibid every generating company, among others, shall file an application for approval of the Commission under the MYT framework. The first control period under the MYT in terms of regulation 2.5.3 ibid, shall be of duration of one year commencing from the financial year 2007-08 for all generating companies, among others, having conventional sources of generation of electricity. The second control period shall be of three years duration and thereafter each control period shall normally be of five years duration. Regulation 2.5.2 as also regulation 2.9.1 stipulate that the application for determination of tariff under Multi-Year Tariff (MYT) framework shall be filed 120 days prior to the date from which the tariff is desired to be made effective. It has further been stipulated in the above said Regulations that the first control period being the financial year 2007-08, the filing shall be made at least seven days before the date of commencement of the control period. 1.5 Accordingly, the West Bengal Power Development Corporation Ltd (i.e. WBPDCL in short), which is a generating company within the meaning of Section 2(28) of the Electricity Act, 2003, and business organization-wise, which is a Government company wholly owned by the State Government of West Bengal has submitted an application for station-wise revision of tariff for the financial year 2007-08 on 23 rd March 2007. The Commission after giving due consideration to the application, admitted the same, the admitted application bears Case No.TP-31/07-08. The Commission directed WBPDCL to publish a gist of the aforesaid application in an appropriate form in (a) either the Ananda Bazar Patrika or in the Bartaman, (b) also either in the Statesman or in the West Bengal Electricity Regulatory Commission 3
Telegraph, (c) also in one local daily in Hindi having readership predominantly in West Bengal as well as (d) in one English daily with all India readership predominantly (preferably in the Economic Times or in the Business Standard). The WBPDCL, accordingly, published the gist of the tariff revision application on 2 nd April 2007 in the Ananda Bazar Patrika, the Statesman, the Business Standard and the Sanmarg. 1.6 The gist contained the salient features of the tariff revision proposal and invited suggestions and objections, if any, from the interested parties, stake holders, members of the public and requested the respondents for submission of written objections or recommendations / comments on the tariff revision application of the generating company to the Commission directly so as to reach the Commission within 3 rd May 2007. The WBPDCL was further advised to allow all interested parties, stakeholders, members of the public to inspect the tariff revision application at their office for a period up to 30.04.2007. They were also informed that they might approach the Office of the Commission on all working days between 11.00 hrs and 16.00 hrs for inspection of the tariff revision application and for obtaining copies of the same or part thereof on payment of charges in terms of the stipulation in the Regulations of the Commission latest by 30 th April 2007 (inclusive of 30 th April, 2007). The suggestions and objections received within the specified time limit from the interested parties, stakeholders and members of the public have been recorded in a summarized form in Chapter 3 of the instant order. West Bengal Electricity Regulatory Commission 4
Tariff Order of WBPDCL for the year 2007 2008 CHAPTER - 2 PROPOSAL OF WBPDCL 2.1. It has been stated that the instant application seeking an upward revision of the current tariff has been submitted pursuant to regulation 2.9.1 of the West Bengal Electricity Regulatory Commission (Terms and conditions of Tariff) Regulations 2007, and is meant to cover the first control period, i.e. 2007-08 of a multi year tariff framework adopted by the aforesaid Regulations. The tariff application is in three volumes, each volume containing different parts of the total application. WBPDCL has confirmed that the instant application has been filed after its Board of Directors has approved the same. 2.2. The WBPDCL has submitted that it needs to realize the increased cost over the existing tariff determined by the Commission in its order dated 08.05.2006 for FY 2006-07. According to the WBPDCL, the average tariff of four existing power stations for FY 2007-08 should be 190.990 paise per unit which is less than 195.449 paise per unit which was proposed for FY 2006-07. 2.3. The WBPDCL has submitted that it is of vital importance to safeguard the sustainability of the generator s operation by providing revenue sufficiency to meet the cost and provide reasonable return matching with the risk of investment. The applicant apprehends that absence of sufficient revenue may affect its efficiency adversely and therefore prays that there may not be any adhoc deduction which would result in less recovery of the actual expenditure incurred thereby creating bottleneck in smooth plant operation. PROPOSAL FOR THE EXISTING POWER PLANTS/UNITS 2.4. The WBPDCL have projected its generating capacities for its existing as well as for new plants / extension units in the existing power stations, which are tabulated as below: West Bengal Electricity Regulatory Commission 5
Table 1 Capacity in MW Power Stations Existing Proposed Kolaghat Bakreswar Bandel Santaldih Sagardighi Bakreswar Phase-II 6x210 3x210 4x60+ 1x210 Santaldih Extension U#5 4x120 2x300 2x210 1x250 In this connection, the WBPDCL have stated that the Central Electricity Authority (CEA) vide memo No. CEA/PLG/DMLF/(DM)/513/2006/783-829 dated 28.12.2006 has allowed derating of the capacity of Unit Nos.1 to 4 Bandel Thermal Power Station from 80 to 60 MW. The applicant has enclosed the relevant copy in support of the above statement. 2.5. The WBPDCL has submitted that the information furnished in the prescribed formats for the period from FY 2002-03 to 2005-06 are based on plant-wise Audited Annual Statement of Accounts and those for FY 2006-07 and 2007-08 are done on reasonable estimation / projection based on the following assumptions. 2.5.1 The generation projections have been made based on the overall demand trend of WBSEB during 2006-07 as well as the target of generation fixed by the Commission. The projected generation, PLF, auxiliary consumptions for the existing plants, of WBPDCL for FY 2007-08, have been shown in the table below: Table 2 Name of the existing plant Projected generation for 2007-08 (MU) Plant Load Factor (%) Auxiliary Consumption (in MU and in %) Kolaghat 7533.000 68.25 799.000 (10.61) Bakreswar 4139.000 75.00 392.000 (9.50) Bandel 2225.000 56.44 245.000 (11.01) Santaldih 1303.000 30.99 169.000 (12.97) Total 15200.00 61.53 1605.000 (10.56) West Bengal Electricity Regulatory Commission 6
2.5.2 The projections for the auxiliary consumption is based on the actual for 2005-06 and 2006-07 (first half-yearly) and the declining trend of the earlier years. It has further been pointed out that in some cases, it has exceeded the norm due to wide fluctuation of the system demand. WBPDCL has also highlighted the submission that it is beyond its reach to exert control on load variation. 2.5.3 WBPDCL has intimated that on 22 nd May 2006 the Generator-Transformer of Unit No.5 at Bandel TPS (235 MVA 15.75/138 KV) tripped at 20.01 hrs and that resulted in non-availability of generation from that unit for the rest of the financial year. WBPDCL brought the incident to the notice of the Commission and the Commission advised WBPDCL to enhance the performance of other plants of WBPDCL by increasing the targeted PLF in order to make good the loss of generation as per tariff order for 2006-07 of the Commission. WBPDCL informs that, accordingly, it increased the generation at Kolaghat and Bakreswar beyond the benchmark by deferring the maintenance schedule of the above two plants. It has been proposed that it would carry out this deferred maintenance for the past period along with the routine maintenance programme for the current year in 2007-08. Details of this programme have been provided in the respective formats. WBPDCL has submitted that the generation schedule for 2007-08 has been prepared with due consideration of the deferred schedule. 2.5.4 WBPDCL has proposed that it should be allowed to recover its entire fixed cost from its only stake-holder WBSEDC Ltd (erstwhile WBSEB). 2.6. WBPDCL has stated that compared to the initial years since its inception, the Commission had improved upon the normative parameters which had resulted in reducing the accumulated huge loss in fuel cost. It has expressed its expectation that the Commission would consider the ground realities prior to fixing the performance parameters. WBPDCL has highlighted the following constraints in the operation of its plants. West Bengal Electricity Regulatory Commission 7
2.6.1 WBPDCL have no dedicated colliery. 2.6.2 Different grades of coal are being received from the coal suppliers. This creates difficulty in combustion control in boiler. 2.6.3 Coal supplied by MCL and BCCL is not in accordance with the design requirement of the boilers of Kolaghat and Santaldih plants. 2.6.4 Due to huge fluctuations in demand, sustained rated operation of the units becomes difficult. 2.6.5 WBPDCL has further stated that apart from the above reasons, the frequency of tripping of old units was high. 2.7 According to WBPDCL, because of the above mentioned factors, it is often unable to keep the Station Heat Rate and Auxiliary Consumption within the norms fixed by the Commission. WBPDCL has therefore projected the Station Heat Rate based on the first half-yearly trend in actual consumption for 2006-07 given in table 3 below: Power Station Station Heat Rate as per WBERC order for 2006-07 (K. cal/kwh) Station heat Rate as projected for 2007-08 (K. cal/kwh) 1. Kolaghat 2850 3153 2. Bakreswar 2650 2774 3. Bandel 3039 3284 4. Santaldih 3250 3587 Table - 3 Under the circumstances, WBPDCL has prayed to the Commission for consideration of the compelling circumstances under which it has to operate its plants. West Bengal Electricity Regulatory Commission 8
2.8 On the front of fuel prices, WBPDCL has stated that the projected average price of coal has been computed based on the latest notified coal price (inclusive of taxes & duties) and includes freight, estimated demurrage & transportation charges from the pit head to the point of loading. It has also been stated that till 2003-04, the Commission had not allowed coal transportation charges from pithead to the point of loading charged by the coal suppliers in their bills and that, according to WBPDCL, had resulted in non-recovery of a huge amount of coal cost, though the Commission, in its latest Tariff Regulation 2007 has given due consideration to the matter and has asked for data under the head Average Incidental Charges 2.8.1 The applicant has arrived at the current landed cost of LDO which includes unloading charges. 2.9 WBPDCL has stated that although its plant and machineries are age-old, it has projected the rate of increase in R & M within a reasonable limit based on cost of price index, and has furnished comparative statements in respect of enhancement of R & M charges and employees cost. These have been reproduced in a single table as below: Power Station Revised estimate for 2006-07 (Rs. In Lakh) Projection for 2007-08 (Rs. In Lakh) R & M Employee cost R & M Employee cost Kolaghat 9672 3296 11953 3485 Bakreswar 3243 1220 3405 1281 Bandel 3298 2296 3710 2370 Santaldih 2212 1736 2971 1792 Table - 4 West Bengal Electricity Regulatory Commission 9
2.10 WBPDCL has projected the number of employees employed during 2006-07 as below Table - 5 Power Station Directors Technical Non Technical Officers Others Officers Others Total Corporate Office 4 40 9 39 33 125 Kolaghat - 531 840 70 219 1660 Bakreswar - 196 216 25 55 492 Bandel - 362 433 43 130 968 Santaldih 243 420 42 96 801 Total 4 1372 1918 219 533 4046 2.11 WBPDCL has further submitted that depreciation has been calculated on the basis of the stipulations made in the WBERC (Terms & Conditions of Tariff) Regulations, 2007. 2.12 The tariff applicant has project the interest charges for 2007-08 as below : Table - 6 Power Station Interest charges (Rs. in Lakh) 1. Kolaghat (6 Units) 684.00 2. Bakreswar (3 Units) 4956.00 3. Bandel (5 Units) 0 4. Santaldih (4 Units) 0 Total 5640.00 West Bengal Electricity Regulatory Commission 10
WBPDCL has submitted that its total working capital loan received from the State Govt. has stood at Rs.1537.16 crores as on 31.03.2006. and further that it had claimed interest on the working capital loan in its tariff applications till 2006-07. But the Commission had disallowed the claims on the ground of default in repayment of the loan allegedly without considering the facts that there had been a huge sum of money receivable from the WBSEB which the latter had not been paying and such non payment on the part of the latter had forced the WBPDCL to resort to the default in repayment of the aforementioned loans. WBPDCL has also submitted that it has not claimed any interest on working capital loan taken from the State Govt. in the instant tariff application as it has learnt that at the time of financial restructuring of the WBPDCL and WBSEB, the State Govt. will cross settle the Govt. loans with receivables from the WBSEB by WBPDCL. However, if the same does not take place and WBPDCL has to bear a higher interest burden as a result of a different decision, then the same should, in the opinion of the WBPDCL, be allowed to be recovered through tariff of subsequent years. For the rest of the loan on working capital, WBPDCL submits that it has charged interest in accordance with the provisions of regulation 4.6.5 of the West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2007. 2.13 WBPDCL has stated that in the last Tariff Order, the Commission disallowed charges on water cess on the plea that the expense was not classified separately in the audited accounts and directed it to claim the actual expenditure on reimbursement basis. WBPDCL has therefore enclosed a few specimen copies of payment of the cess in Volume III of the application. 2.14 WBPDCL has stated that it had claimed centrally maintained expenses in the format prescribed by the Commission in the tariff application for 2006-07 and explained the reason for non-submission of the same in earlier years. It has stated that the Commission had disallowed such expenditure on the ground that West Bengal Electricity Regulatory Commission 11
no allocation of such expenses had been done in the earlier years. It has prayed to the Commission for entertaining the same. 2.15 WBPDCL has submitted other transportation charges excluding the Railway freight but including charges for carrying the coal from pit head to Railway siding, projected demurrage charges that are allegedly included in the average coal price. 2.16 WBPDCL have submitted plant-wise cash flow, summarized ARR and proposed tariff. The proposed ARR and Tariff for 2007-08 are reproduced below: Table 7 Power Station PLF % Saleable unit (MU) Fuel cost Fixed cost Total cost Rs. lac P/Unit Rs. lac P/Unit Rs. lac P/Unit Revised Estimate for 2006-07 Kolaghat 69.36 6769.105 91494.87 135.838 41076.87 60.683 133026.73 196.520 Bakreswar 88.89 4439.578 43540.14 98.073 31571.74 71.114 75111.89 169.187 Bandel 35.07 1354.375 21194.34 156.488 9068.43 66.957 30262.78 223.445 Santaldih 34.79 1235.298 19598.51 158.654 7271.83 58.867 26870.34 217.521 Overall 61.86 13798.356 175827.86 127.756 88988.87 64.492 265271.74 192.249 Proposal for 2007-08 Kolaghat 68.25 6734.000 90482.36 134.366 37629.21 55.879 128111.58 190.246 Bakreswar 75.00 3747.000 36737.05 98.044 31879.38 85.080 68616.43 183.124 Bandel 56.44 1980.000 30491.38 153.997 8310.76 41.974 38802.13 195.970 Santaldih 30.99 1134.000 17456.74 153.937 6664.97 58.774 24121.43 212.711 Overall 61.53 13595.000 175167.53 128.847 84484.32 62.144 259651.57 190.990 2.17 While WBPDCL has prayed for acceptance of the accompanying tariff proposals containing separate proposals for each of the Power Stations, to be made applicable from 01.04.2007, it has also prayed that WBPDCL should be allowed to adjust fuel purchase cost variations in future through Fuel Cost Adjustment West Bengal Electricity Regulatory Commission 12
and that WBPDCL should be allowed to pass through any tax liabilities that may arise during the period of the year. 2.18 WBPDCL has submitted certain reports indicating the status of the directives that were issued by the Commission in paragraphs 8.14, 8.15, 8.16 and 8.17 of the last tariff order dt.08.05.06 for the year 2006-07. 2.18.1 On the front of conservation of energy, WBPDCL has achieved the following in Kolaghat TPS : (a) better coal mill combination and coordinated planned maintenance schedule has reduced coal rate by 0.004 Kg / KWh, (b) better maintenance practice of coal mills and firing equipments has resulted in reduction of combustibles in fly ash ; (c) better O & M practices have resulted in reduction of consumption of DM water; (d) by utilizing fuel oil additives, nearly 55 KL of oil has been recovered from sludge ; (e) the turbine heat rate improved by 8.0 K cal/kwh after bullet cleaning of dirty condenser tube ; (f) APH outlet temperature improved by 2 0 C; (g) Eco inlet temperature rose by 5.7 0 C ; (h) recycling of plant and ash pond effluent has led to saving of 2050617 K L of water ; (i) auxiliary power consumption has been reduced by 0.165 MU because of introduction of dry fly ash handling system and reduction in running hours of various pumps. 2.18.2 In Bakreswar TPS, auxiliary consumption has been reduced by optimizing use of compressors so that the same amount of work gets done by running 5 compressors instead of running 6 of them, by running one CW pump for units no.1 and 3 during off peak period, and by switching off different lights (such as in compressor house, MCC room etc) during day time. 2.18.3 In Bandel TPS it has been possible to reduce consumption of DM water by 1.61% by recoursing to better O & M practices. West Bengal Electricity Regulatory Commission 13
2.18.4 In Santaldih TPS, non combustibles in fly ash and bottom ash are being reduced by application of Thermact additive to coal, use of CW pumps has been optimized resulting in less use of these pumps when the load is around 60-70 MW and vigorous actions have been taken to minimize steam leakages in the plant. 2.19 On the front of energy audit, the agency to undertake the audit in Kolaghat TPS has since been selected through limited tendering ; in Bakreswar TPS, the draft reports submitted by the energy auditors are under review ; in Bandel TPS, the final reports since submitted by the energy auditors on unit no.4, common service areas of units no.1-4 and associated common service areas of unit no.5 are under review, while in Santaldih TPS the concerned energy auditors are in the process of conducting the audit. 2.20 WBPDCL has reported that it is organizing various in-house seminars/workshops to familiarize all concerned with the provisions of the Act etc. 2.21 WBPDCL has been monitoring emission levels in all the Power Stations and taking steps to maintain appropriate permissible limits. It has also incorporated dry fly ash handling system in all the power stations. It is also observing the instructions of Govt. of India in the matter of utilization of ash. Similarly, WBPDCL is in the process of installing effluent treatment plants and waste water treatment plants in all its older Power Plants. WBPDCL has also joined a venture with a private agency to obtain improved quality of coal by washing the low grade coal from a washery near MCL. 2.22 In Chapter II of volume I of the instant tariff application, WBPDCL has submitted certain proposals pertaining to a few new Greenfield power projects / extension units of the existing Power Stations and has asked for determination of tariff for the power (both infirm and firm) to be generated by these new plants / extension West Bengal Electricity Regulatory Commission 14
units. This part of the tariff application presents the following overall status in respect of the latter:- PROPOSAL FOR THE NEW PLANTS / EXTENSION UNITS Name of Plant/extension units Capacity (MW) Proposed date of synchronization Table 8 Proposed date of commercial operation Santaldih U#5 250 June 2007 September 2007 Bakreswar U#4 210 June 2007 September,2007 Bakreswar U#5 210 August 2007 November 2007 Sagardighi U#1 300 June 2007 September 2007 Sagardighi U#2 300 September 2007 December 2007 WBPDCL has stated that due to delay in sequential supply of equipments as per the schedule of the main contractor, some of the projects might be delayed. It has also intimated that the above mentioned schedule is subject to unforeseen interruption in the progress of work. 2.23 WBPDCL has furnished clearances / certificates from the competent authority necessary for establishing new plant / extension of units in the existing plants. 2.24 WBPDCL in its tariff proposal has submitted that the following are the basis and assumptions made in preparing the proposal. 2.24.1 It has been projected that all their new plant (Sagardighi U#1&2) / extension units (Santaldih U#5 and Bakreswar U#4 and U#5) will operate during commercial operation at a PLF of 75%. 2.24.2 WBPDCL has stated that the fuel cost for in-firm power for all their new plant/extension units would be on actual basis and not on specified heat rate. West Bengal Electricity Regulatory Commission 15
The difference between the proposed cost and the actual cost would be adjusted through FCA. 2.24.3 WBPDCL has proposed fuel cost for firm power considering a uniform heat rate at 2500 K. cal/kwh for all their new plant/extension units. Based on the expected linkage, they have considered the grade mix to be as below. For Santaldih U#5, Grade D, E & F from ECL/BECML/BCCL. For Sagardighi U#1 & 2 Grade D & E from ECL. For Bakreswar U#4 & 5, Grade D, E & F from ECL/BECML 2.24.4 WBPDCL has stated that it has projected a nominal expenditure towards repairs and maintenance, employee cost and other overheads for all their new plant/extension units. 2.24.5 It has been further stated that the equity base has been considered on the basis of equity contribution received and expected to be received during the period 2007-08 that has been confirmed by the State Government. WBPDCL has calculated return @ 14% on that equity for the period during commercial operation for Santaldih U#5 and Sagardighi U#1&2. For Bakreswar U#4 & 5, it has been stated that the equity contribution of Rs.121.28 Cr was made by the State Government for construction of erstwhile Units I & II (now rechristened as Unit IV & V) during the period from January 1989 to June 1995. They have stated that return on above equity base had been calculated @ 14% for the period of commercial operation. 2.24.6 The projected interest on capital loan for the period during commercial operation of the new plant/extension units will be at the applicable rates of the lender. 2.25 WBPDCL has furnished the project cost for each project / extension unit as approved by an expert committee and has also delineated a financing pattern to West Bengal Electricity Regulatory Commission 16
meet these costs. A summary of these quantifications proposed by WBPDCL is given in a tabular form hereunder. Table 9 Equity contribution by the Govt. of West Bengal Santaldih Extension Unit No. 5 Loan from PFC/Rural Electrification Corpn. Ltd/JBIC (Rs. Cr) Internal sources (Rs. Cr) Total (Rs. Cr) Approved amount (Rs. Cr) 429.00 955.53 (PFC) 45.57 1430.00 1430.00 Sagardighi Phase I Unit Nos.1 & 2 825.00 1925.00 (PFC) Nil 2750.00 2750.00 Bakreswar Phase II Unit Nos. 4 & 5 630.00 1470.00 (JBIC) Nil 2100.00 2100.00 WBPDCL informed that despite many constraints, it is trying to maintain the project cost within the limit recommended by the expert committee. 2.26 WBPDCL has furnished the major head-wise expenditure status for their new projects as given hereunder in a tabular form. Head of expenses Table 10 Approved by TEC (Rs-Cr) Expenses incurred till 28.02.07 (Rs Cr) Expenses to be incurred till completion (Rs Cr) STPS SgTPS BkTPS STPS SgTPS BkTPS STPS Sg.TPS BkTPs Main plant package Coal handling plant Capitalization of shared facilities of stage - 1 1100.00 2050.00 1720.00 447.00 1190.00 736.00 653.00 860.00 984.00 146.00 209.00 160.00 92.00 136.00 104.00 54.00 73.00 56.00 - - 210.00 - - 210.00 - - 0.00 West Bengal Electricity Regulatory Commission 17
Head of expenses Water intake & plant water system Extra coal transport cost Other civil works Diversion of road and road construction Temporary construction and enabling works Approved by TEC (Rs-Cr) Expenses incurred till 28.02.07 (Rs Cr) Expenses to be incurred till completion (Rs Cr) 112.00 88.00-77 49-35.00 39.00-11.50 50.00-6.00 30.00-5.50 20.00-9.50 - - 4.50 - - 5.00 - - - 5.00 - - 2.00 - - 3.00 - - 25.00 - - 15.00 - - 10.00 - Land - 60.00 - - 52.00 - - 8.00 - Township - 55.00 10.00-30.00 4.00-25.00 6.00 Transmission line 220 & 440 KV 51.00 208.00-25.00 85.00-26.00 123.00 - Total 1430.00 2750.00 2100.00 651.50 1589.00 1054.00 778.50 1161.00 1046.00 2.27 WBPDCL has proposed the following Tariff in their application. Power Station Infirm Power (Paise/kWh) Firm Power (Paise/kWh) Santaldih Unit 5 107.16 183.26 Sagardighi -Unit 1 & 2 113.69 179.06 Bakreswar- Unit 4 & 5 106.62 170.82 Table 11 2.28 In respect of these new plants / extension units, the prayers of WBPDCL are as follows : West Bengal Electricity Regulatory Commission 18
(a) (b) (c) to accept the accompanying project costs and tariff proposals for Santaldih Unit 5, Sagardighi Unit 1 & 2 and Bakreswar Unit 4 & 5 to pass final orders as the Commission might deem fit considering the facts and circumstances of the foregoing submissions of WBPDCL ; and to permit filing of additional documents / clarifications whenever required. West Bengal Electricity Regulatory Commission 19
Tariff Order of WBPDCL for the year 2007 2008 CHAPTER - 3 OBJECTIONS AND SUGGESTIONS Objections and suggestions on the Tariff Petition of West Bengal Power Development Corporation Limited (WBPDCL) 2007 2008 3.1 A gist of the tariff petition of WBPDCL for the year 2007-08 was published simultaneously on 02.04.2007 in 4 (four) leading dailies, viz. Ananda Bazar Patrika, The Statesman, The Business Standard and the Sanmarg. While highlighting the salient features of the tariff revision petition, the insertion invited objections to and suggestions on the said petition, in writing from all interested persons and stakeholders as also members of the public, if any one wished to do so, within 3 rd May, 2007. In response to the same 4 (four) objectors chose to submit their respective objections /suggestions to the Commission within the specified date. They are, respectively, Shri Tapas Kumar Bhattacharya, All Bengal Electricity Consumers Association (ABECA in short), The West Bengal State Electricity Distribution Company Ltd (the WBSEDCL in short), and the Government of West Bengal in the Department of Power & Non-Conventional Energy Sources. The objections / suggestions / comments of these persons are summarized in the paragraphs that follow. 3.2 Shri Tapas Kr Bhattacharya, who has described himself as the Secretariat Member of the Association for Protection of Democratic Rights, has made a critical observation to the effect that the claim of the WBPDCL in respect of auxiliary consumption, oil consumption and station heat rate seemed to be too high, while the generation level seemed to be low. He has given an example of his interpretation by comparing the gross station heat rate of the Power Stations of WBPDCL with the norm of Central Electricity Regulatory Commission (CERC in short). While the norm of station heat rate of CERC for 210 MW unit was 2500 Kcal/KWh, the same, as claimed by the WBPDCL was 2774 K Cal/KWh for Bakreswar and 3153 Kcal/KWh for Kolaghat. West Bengal Electricity Regulatory Commission 20
3.2.1 He has also observed that the WBPDCL s prayer for upward tariff revision, excluding fuel cost, for the existing generating units at Kolaghat, Bandel and Santaldih indicated an abnormally high increase. He has also stated that the tariff petitioner s claim has no adequate and proper foundation. 3.2.2 He has submitted that any further delay in starting the commercial operation of the new units of the WBPDCL which was initially due to take place in March 2007, but later postponed till June / July 2007 would cause immense suffering to public life and to the economic activities of the people. His suggestion to the Commission on this score is for issue of a directive towards starting timely commercial operation of all these new units. 3.3 All Bengal Electricity Consumers Association (i.e. ABECA in short) has pointed out that the PLF of all the generating stations of WBPDCL is very low and the lowest PLF in one generating station under ownership and management of WBPDCL is 30.99% only. According to ABECA, the minimum norm of PLF should be 86%. Such a low PLF signifies reduction in generation of power. 3.3.1 ABECA has not found the argument given by WBPDCL in respect of auxiliary consumption, acceptable. The latter has stated that it has made its projections in respect of auxiliary consumption on the basis of a reducing trend and that only in some cases it has gone beyond the norm, which has happened because of wide fluctuations in system demand. However, in the opinion of ABECA, such arguments are incorrect, as load shedding from 3 to 5 hours every day still persists. 3.3.2 Referring to the contents of paragraph 1.3 of the tariff petition (Volume I Chapter I) in which the WBPDCL has tried to clarify the impediments for operating its power stations as per normative parameters, ABECA has held that such explanations do not hold good. In the opinion of ABECA, the higher return amounting to 14% on equity which is much higher than what the company West Bengal Electricity Regulatory Commission 21
would have got under the dispensations of the 1948 Act should have had its effect by way of an appropriately high PLF and similarly a suitably lowered auxiliary consumption. But that has not happened and ABECA does not support this state of affairs. 3.3.3 Citing the recommendation of K P Rao Committee in respect of station heat rate, ABECA has opposed the station heat rates projected by the tariff petitioner in the tariff petition. According to ABECA, the aforesaid committee recommended a station heat of 2500 K Cal / KWh with a special allowance of only 100 Kcal/KWh, whereas WBPDCL has projected a station heat rate of 3153 K Cal/KWh for Kolaghat and 3587 K Cal / KWh for Santaldih in 2007-08. In the opinion of ABECA, it is because of high station heat rates that the cost of generation is high and the quantum of generation is low. These are some of the glaring examples of inefficiency in the WBPDCL and ABECA has prayed that no indulgence should be given in these matters, for to accept WBPDCL s pleas will go against the interest of the consumers. 3.3.4 ABECA has gone on to calculate that at a lower projected PLF of 68.25% (instead of 86%) at Kolaghat, there would result less generation of 9492 MU of power. Similarly because of a lower (projected) PLF at Bakreswar, generation would be lower by 607 MU, at Bandel generation would fall by 1165 MU; and at Santaldih also generation would be of a lower order lower by 1303 MU because of some factor of a reduced projected PLF. ABECA has argued that costs should not be allowed merely because of its projected incurrence. On the other hand, only such costs should be allowed that are based on norms that follow the Act and the Regulations and are also in consonance with the concerned directions of the Commission. 3.3.5 ABECA s additional argument is that going by the normative heat rate of 2500 K Cal / KWh, which was recommended by K P Rao Committee, WBPDCL has already received some extra allowance on this score through the tariff order West Bengal Electricity Regulatory Commission 22
issued by the Commission for 2006-07. For Kolaghat such extra allowance was to the tune of 350 K Cal / KWh, for Bakreswar, the extra allowance was of the order of 150 K Cal / KWh, for Bandel such extra allowance amounted to 539 K Cal/KWh, while for Santaldih, the same was 750 K Cal / KWh. Further allowances sought for by WBPDCL for 2007-08 are to the tune of 653 K Cal / KWh for Kolaghat, 274 K Cal / KWh for Bakreswar, 704 K Cal / KWh for Bandel and 1087 K Cal / KWh for Santaldih. All these signify high consumption of coal, high cost and high uneconomic use of resources and therefore should not be allowed. 3.3.6 ABECA has argued that WBPDCL s statement that the projected auxiliary consumptions are based on their reducing trend in the past years, itself shows that the quanta of auxiliary consumption are high and that these can be reduced. Further, according to ABECA, the projected auxiliary consumptions varying between 9.5% and 12.97% among the four generating stations and the projected generation that is based on significantly lower PLF are logically inconsistent yielding an absurd result. In the opinion of ABECA, auxiliary consumption should not be allowed at a rate higher than 5% of the production at 90% PLF. 3.3.7 ABECA has objected to the proposed hike in O & M cost on the ground that increase in such costs is not matched by any increase in generation. ABECA is particularly critical of the projected increase of O & M cost at Kolaghat which is to increase from Rs.96.72 lakh in 2006-07 (revised estimate) to Rs.119.53 lakh in 2007-08 (projected) and does not find any justification for the projected increase. 3.3.8 On the issue of interest and interest on working capital, ABECA has objected to the proposal of allowing a sum of Rs.5640 lakh as total interest charges in 2007-08 and has suggested that one should try to find out whether it will be possible to swap high cost loans with low cost ones. West Bengal Electricity Regulatory Commission 23
3.3.9 ABECA is of the view that the decision of the Commission to disallow the interest charges claimed by WBPDCL in its tariff petition for 2006-07 on the ground of default in repayment of the Govt. loans was a correct decision. ABECA is also of the view that the burden of interest due to restructuring of the WBSEB and consequential higher interest burden on WBPDCL is not acceptable, for this will be a burden to the consumers. ABECA has expressed its total disagreement to whatever has been proposed by WBPDCL by way of interest on working capital in 2007-08. 3.4 The West Bengal State electricity Distribution Company Ltd (WBSEDCL in short) has expressed its disagreement with the claim of WBPDCL to the effect that the generation projected by the latter for 2007-08 is based on the overall trend of demand of the WBSEB (i.e. WBSEDCL). It has stated that the WBSEB had repeatedly agreed in the past to absorb the entire generation of WBPDCL irrespective of its demand. WBSEDCL, the successor DISCOM of WBSEB also maintains the same stand. In its opinion there is no reason for operating the generating stations of WBPDCL at reduced PLF on the plea that the latter can generate power only as per demand from the WBSEB (i.e. WBSEDCL). 3.4.1 WBSEDCL is critical of the idea of projecting a lower PLF of any unit solely because of its scheduled maintenance programme, or even because of resuming of its deferred overhauling that could not be taken up last year on account of the necessity to continue its operation in order to compensate the shortfall in PLF caused by long outage of some unit of another Generating Station. 3.4.2 According to WBSEDCL, the target PLF of different Power Stations is fixed after taking into account the real time operational aspects and also the all India norms. Therefore, the fixed cost should be allowed to be recovered by WBPDCL only if the target PLF is achieved. West Bengal Electricity Regulatory Commission 24
3.4.3 In the opinion of WBSEDCL, the current dispensation of allowing adjustment of the amount of shortfall in achieving the target PLF of one plant having low generation, with enhanced generation achieved by some other plant for the purpose of recovery of fixed cost is not appropriate. Each plant should be allowed to operate and perform independently, for tariff of each plant is different from that of the others and also because their operating parameters also differ from each other. If the existing arrangement continues and if the plants of WBPDCL are allowed to enjoy lower targets of PLF, they will enjoy a double benefit which, in the opinion of the WBSEDCL, is not due to them. 3.4.4 WBSEDCL has challenged the claim of WBPDCL to the effect that due to major variations in the WBSEB demand, the auxiliary consumption in the different plants of WBPDCL has gone up. The erstwhile WBSEB, it is claimed by WBSEDCL, has always absorbed all that could be generated by WBPDCL during off peak period, barring a few exceptional cases arising out of severe load crash. That apart, the projected auxiliary consumption at Bandel and Kolaghat are too much on the high side and further it would have an important bearing on the issue to find out what actions have been taken by WBPDCL on the recommendations of the energy auditor. 3.4.5 WBSEDCL has also challenged the plea made by WBPDCL towards bench marking of fuel consumption on the basis of operational ground realities. WBSEDCL does not see any justification for WBPDCL s objection to station heat rate at normative level. If bench marking is at all to be done, the same should be considered keeping the all India perspective in view, otherwise, according to WBSEDCL, WBPDCL may secure some incentives not commensurate with its performance in respect of consumption of fuel. 3.4.6 WBSEDCL has also argued against the claim of WBPDCL that any adverse variation in system demand badly affects the sustained rated operation of the units of WBPDCL now that they are all tied up with Power Transmission Grid. West Bengal Electricity Regulatory Commission 25
WBSEDCL points out that with the synchronization of Northern Grid with Central Grid, the frequency band has been narrowed down and most of the time the frequency is within the permissible band. In the opinion of WBSEDCL, the system has already stabilized. A generator is therefore now much better off than when it had to operate within a small grid. 3.4.7 Pointing out that the O & M charges projected by WBPDCL for 2007-08 are much higher than what they have been given in 2006-07, WBSEDCL submits that this is so because of inordinately high charges projected on consumption of stores and spares and on repair and maintenance of plants and machineries. But there is no indication of higher availability of WBPDCL s units inspite of high expenditures on the items mentioned above and inspite of better maintenance which these expenditures should secure. 3.4.8 In the opinion of WBSEDCL, the unit wise projected Plant Availability in 2007-08 of the plants of WBPDCL is extremely low (i.e. 75% for Kolaghat and 81% for Bakreswar), and unless the Plant Availability Factor is appreciably higher than the percentage of PLF indicated in the tariff petition, the target PLFs will not be achieved. 3.4.9 To WBSEDCL, it is not clear why in the case of Bakreswar, the projected availability in 2007-08 should be as low as 81% when the actual estimated availability for 2006-07 was 92%. WBSEDCL has considered 85% PLF for Bakreswar in its own power purchase planning for 2007-08. Similarly, Plant Availability of 62% for the 5 th unit of Bandel, indicated by WBPDCL, appears to be unacceptably low, because once this unit is commissioned, it should run at the highest level of generation for the rest of the year. 3.4.10 WBSEDCL has drawn attention to its contention that WBPDCL has not submitted any detailed statement in respect of capital expenditure in form no.1.19, and West Bengal Electricity Regulatory Commission 26
similarly has not given the details in respect of capital work in progress in form no.1.18(a). 3.4.11 WBSEDCL also points out that the amount of adjustment, as stated in paragraph 1.72 at page 15 volume I of the tariff petition, does not tally with the outstanding balance (i.e. Rs.1838 crores approx) as shown in the books of accounts of the WBSEB as on 31.03.2006. 3.4.12 WBSEDCL has also to make a few critical remarks on the costing of new power projects / extension projects. According to the objector, the project costs of the 5 th unit of Santaldih (250 MW), and of the 4 th and 5 th units of Bakreswar Phase II (2 X 210 MW) work out to Rs.5.72 crores per MW and Rs.5 crores per MW respectively. Observing that these are extension projects of already running power stations and therefore all the necessary infrastructure facilities that would otherwise have to be provided afresh had these been new units, are already available in site, WBSEDCL comments that the per MW costs of these extension projects are inordinately high. Even the project cost of the two units of Sagardighi Phase I (2 x 300 MW), which comes to Rs.4.58 crores per MW is very much on the high side, according to WBSEDCL, since Sagardighi has been selected as the site for this project mainly due to easy availability of crucial inputs like land, water and coal besides being a load centre. Thus, inspite of being a new project, the per MW cost of Rs.4.58 crores at Sagardighi, in the opinion of WBSEDCL, is also high. 3.4.13 WBSEDCL has objected to inclusion of a sum of Rs.210 crores in project cost of Bakreswar extension project as capitalization of shared facility billed along with Stage I on the ground that all the three units of stage I of Bakreswar TPS have been commissioned quite a few years ago and even the tariff for those stage I units have been fixed by the Commission. West Bengal Electricity Regulatory Commission 27
3.4.14 WBSEDCL has drawn the attention of the Commission to the fact that the proposed new units have been envisaged to be commissioned in course of 2007-08, but depreciation for any of these units in 2007-08 has not been considered in the computation of the revenue requirements. 3.4.15 It should be noted, WBSEDCL submits, that the revenue earned from sale of infirm power has to be deducted from the capital cost of the project in accordance with regulation 4.1 of the WBERC (Terms and Conditions of Tariff) Regulations, 2007. 3.4.16 While comparing the costs under some of the important heads projected for Santaldih 5 th unit, Bakreswar 4 th and 5 th units and Sagardighi 1 st and 2 nd units, WBSEDCL has observed that the costs of employees and other administrative and general charges assumed for Santaldih and Bakreswar, inspite of being extension projects, are higher than those assumed for Sagardighi which is a new project. According to the objector, the cost implication for such items should be higher in a new project than these in extension projects. 3.5 The State Government of West Bengal in the Department of Power and Non- Conventional Energy Sources has the following to state in respect of the tariff petition of WBPDCL for 2007-08. 3.5.1 As per the latest review of progress in implementation of the projects of WBPDCL, held by the State Govt. the 5 th unit of Santaldih which is expected to start commercial operation in November,2007, will generate 145 MU of infirm power and 610 MU of firm power during 2007-08. Similarly the 4 th and the 5 th units of Bakreswar, which are expected to generate power on a commercial footing from November 2007 and February 2008 respectively, are together projected to generate 225 MU of infirm and 725 MU of firm power in course of 2007-08. The two units of Sagardighi will also have the same time schedule for West Bengal Electricity Regulatory Commission 28
the purpose of commercial generation, and taken together are to generate 325 MU of infirm and 1035 MU of firm power over the year. 3.5.2 The State Govt. has also submitted its own calculation of depreciation of the new assets being added by WBPDCL during 2007-08. These calculations show that the 5 th Unit of Santaldih should have a depreciation amounting to Rs.22 crores; the 4 th unit of Bakreswar should have a depreciation of Rs.16 crores; the monetary value of depreciation of the new assets of the 5 th unit of Bakreswar should be Rs. 6 crore; the same for the 1 st unit of Sagardighi should come to Rs.20 crore; the same for the 2 nd unit of Sagardighi should amount to Rs. 8 crore. 3.5.3 The State Govt. has commented that the employees cost and other administrative expenses for the units under consideration and submitted by WBPDCL in its tariff petition have been projected on the basis of Man / MW ratio as prevailing in the existing units at Bakreswar and are adequate to cover the period of commercial generation in these units during 2007-08. 3.5.4 Finally, the State Government has noted that WBPDCL has not provided for any income / expenditure for items like coal / ash handling, water cess, interest on working capital, but the State Government is of the view that the expenditures on such items during the period of commercial generation over 2007-08 will be very small and they will have practically no impact on tariff. 3.6 The Commission has taken careful note of the objections and suggestions made by the objectors on the contents of the tariff application under consideration, and has given due attention to them. The views of the Commission in this regards will be reflected in the concerned part of the tariff order hereinafter. West Bengal Electricity Regulatory Commission 29
Tariff Order of WBPDCL for the year 2007 2008 CHAPTER 4 LAW POINTS ON HEARING 4.1 The question of affording an opportunity of hearing to the consumers in the process of determination of tariff has come up on different occasions in various manners. It is, therefore, necessary to give the matter our consideration and clarify the position taken by the Commission in this behalf. 4.2 Before we deal with this point we clarify that in the instant determination of tariff for WBPDCL no hearing has been given either to WBPDCL or to any of the consumers or public. However, the Commission has considered all the suggestions and objections received from the consumers and / or public while passing the instant tariff order. 4.3 Commission is of the considered opinion that under the Act, the legislators have deliberately excluded any scope of hearing while determining the tariff under section 62 read with section 64 of the Act. Section 64 of the Act contains the procedure for determination of tariff. A bare reading of section 64 of the Act and its sub-sections clearly show that while issuing a tariff order under section 64(3) of the Act, Commission is required to consider all suggestions and objections received from the public. However, if the application under section 64(1) of the Act is found to be not in accordance with the provisions of the Act and rules and regulations made thereunder or the provisions of any other law for the time being in force, Commission is empowered to reject the application of a generating company or a licensee after giving a reasonable opportunity of being heard to such licensee or generating company. Therefore, section 64(3)(b) of the Act limits the scope of hearing only in case of outright rejection of the application of a generating company or a licensee made under section 64(1) of the Act. This may be mentioned that under the Act the Commission has been entrusted with different kinds of functions. Determination of tariff under section 62 read with section 64 of the Act is only one of such functions. In respect of some functions, the statute has clearly mandated the Commission to provide West Bengal Electricity Regulatory Commission 30