Petition No.2 of 2008
Date of hearing: 19.08.2008
Date of Order: 05-09-2008

1. Punjab State Electricity Board (PSEB) filed a petition before the Commission on 31.12.2007 seeking approval of the Request for Qualification (RFQ) bidding document for procurement of 1800 MW (± 10%) power under Case 1 as per the “Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensees”, issued by Ministry of Power, Govt. of India vide notification No.23/11/2004-R&R (Vol. II) dated 19.01.2005. The petitioner had prayed for approval both of the RFQ (Annexure-P4 to the petition) and the deviations (Annexure-P5 to the petition) from the aforementioned bidding guidelines and the standard bidding document (SBD) for Case 2. The petitioner filed additional submissions to be read with the original petition on 22.1.08 stating that data on the power supply scenario submitted earlier alongwith the petition was deficient and that additional information is required to be furnished.

2. The Commission heard the petition on 25.1.2008 and allowed the petitioner to file additional submissions reviewing the demand/supply projections taking into account the status of procurement of 1000 MW under Case 1 earlier indicated by the Board and provide justification for the deviations sought in the RFQ. In response, the petitioner filed the additional submissions on 12.2.2008 and was heard by the Commission on 19.2.08 when a request was made for filing further information, which was allowed by the Commission. This was duly filed on 31.3.2008 but on 13.5.2008, the next date of hearing, a request was made for an adjournment. The matter was then heard on 20.5.2008 when the petitioner again urged that they needed more time to draw up a revised RFQ. Accordingly, the matter was first adjourned to 22.7.2008 and subsequently to 19.8.2008.
   
   
3. The petitioner has now, in filing dated 18.8.2008, submitted that although this petition was initially submitted to seek approval of the RFQ in the proposed bidding process under Case1 of the Ministry of Power (MOP) guidelines, the RFQ had actually been based on the Case 2 SBD as MOP had not by then issued the final SBD for Case1. However, draft SBD documents under Case1 have since been circulated and the petitioner has drawn up bidding documents based on this draft and submitted the same for the approval of the Commission. A request has also been made that the petitioner may be allowed to again approach the Commission for approval to incorporate any significant changes effected when MOP finally approves these documents. In the light of the above, a prayer was made that procurement of 1800 MW (±10%) power be allowed on the basis of the draft RFP and PPA documents submitted to the Commission, keeping the revised demand projections and likely availability of power in view.
   
   
4. In the hearing on 19.8.2008, the petitioner pleaded that in the first instance, the Commission may consider allowing only the quantum of energy to be procured so that the process could be initiated. In the meanwhile, the MOP is likely to finalize the SBD for Case1 thereby obviating the need for the petitioner to come to the Commission for approval of any deviation as they plan to go ahead with the procurement process exactly in line with the SBD finalized by the MOP. In the event of the SBD not being finalized, by the time the petitioner is ready to initiate the procurement process, the petitioner will consider approaching the Commission for approval to the bidding document based on draft Case 1 SBD.
   
   
5. The Commission’s mandate requires it to decide:
   1. whether procurement of power is justified in terms of para 3.1 of the Guidelines and
   2. approve deviations from the SBD in the proposed bidding documents.
   These issues are discussed in the succeeding paras:
   
   
6. The petitioner has put forth its case for additional requirement of power based on a one time surge in demand to the extent of 2100 MW which is likely to manifest itself in the year 2011-12 thereby bringing annual demand projections to 13100 MW against 11000 MW as indicated in the Central Electricity Authority’s 17th EPS. The petitioner has urged that presently demand is being curtailed by imposition of power cuts and peak load restrictions but in line with the agenda of governance set by the State Govt., the petitioner proposes to provide 24 hours supply in rural areas, increase the duration of supply of agriculture power, release 3.5 lac pending tubewell connections, withdraw peak load restrictions for industrial consumers and ensure uninterrupted power supply to all sections of society as envisaged in the National Electricity Policy. For the period beyond 2011-12 upto 2016-17, the petitioner has worked out peak demand on the basis of CAGR of 5.59 % as envisaged in the 17th EPS. On this basis, the petitioner urges that sourcing of additional 1800 (± 10%) MW of power is amply justified.
   
   
7. The Commission has carefully considered the pleadings of the petitioner on the issue of increase in demand beyond the projections of the EPS but is not inclined to fully agree with the argument put forward. The EPS is an exhaustive document brought out by experts after careful consultation with the State Electricity Entities and it would be reasonable to assume that all relevant parameters effecting demand would surely have been factored in the recommendations of the survey. On the other hand, the contention of the petitioner that there is likely to be a surge in demand to the extent of 2100 MW in a single year seems to be based mainly upon assumptions of increased supply of power to different sections of consumers. In the circumstances, the Commission is not inclined to accept this contention of the petitioner, specially when the MOP guidelines clearly enjoin that demand forecast shall be based on the latest EPS available at the time of issue of the RFQ.
   
   
8. The guidelines provide that the approval of the Commission needs to be obtained if the quantum of power including that proposed to be sourced exceeds the demand projections based on the latest EPS for each of the 3 years after power to be procured becomes available. On this basis the Commission needs to look at the total energy available to the State for the years 2013-14, 2014-15 and 2015-16 and compare that with demand projections based on the 17th EPS. The Commission notes that at present, the installed capacity of the petitioner is 6201 MW as on 31.3.2007 which includes the petitioner’s own generation and the State’s share from central projects including the BBMB. In addition, another 10976 MW is further planned upto 2014-15 thereby increasing the total installed capacity to 17178 MW and the actual availability to 13790 MW. This includes power from the petitioner’s own thermal and hydro projects, NRSE sources as also the share from central sector projects and UMPPs. Some capacity addition on account of renovation, modernization and upgradation of existing projects is also included therein. The Commission notes that most of the additional power is proposed to be obtained from a vast array of nearly 44 projects which are slated for completion in the 11th and 12th Plan periods. The quantum of incremental power becoming available in each successive year as per projections of the petitioner is based on the assumption that all projects from which such power is proposed to be obtained will be commissioned as scheduled. This, however, does not appear to be realistic when it is seen that actual capacity addition in the 8th and 9th and 10th Five Year Plans was on an average only 49% of the target envisaged. Even otherwise, a cursory look at the power projects reveals that implementation of many of these has not even started which would add to the possibility of slippages in their commissioning. It is evident, therefore, that projections of additional capacity of 10976 MW upto 2014-15 appear to be extremely ambitious and are not likely to materialize to that extent. The Commission further notes that the petitioner had filed an application for withdrawal of Petition No.28 of 2007 for procurement of 1000 MW which was at the RFP stage and the petition has been dismissed as withdrawn by the Commission in its order of 5.8.2008. The Commission observes that there is a small surplus, not exceeding 840 MW, between peak availability and peak demand during the years 2013-14, 2014-15 and 2015-16 which will turn into a deficit if the 1000 MW procurement process which has been shelved by the petitioner is alone taken into account. With possible slippages in other projects, the deficit would only increase. Considering these aspects, the request of the petitioner for approval of 1800 MW (± 10%) capacity to meet the power requirement of the State appears to be justified even after taking the likely additions in existing capacity upto 2015-16 into account. The Commission, accordingly, grants approval for capacity addition to the extent of 1800 MW (± 10%) as requested by the petitioner.
   
   
9. As regards the other issue pertaining to the approval of the bidding documents, it is noted that the petitioner proposes to await finalization of Case 1 Standard Bidding Documents by the Ministry of Power. The Commission has, therefore, not taken up consideration of the matter at this stage. The petition is disposed of accordingly.