SCO 220-221 SECTOR-34-A
Petition No. 11 of 2003.
Date of Order: 21.06.2004
In the matter of: Petition for approval of tariff for export of power to PSEB from the Demonstration Co-generation Project No.846 of M/s. Rana Sugars Ltd. at Village Butter Seviyan, Tehsil Baba Bakala, District Amritsar, Punjab to PSEB Grid Station Sathiala u/s 64 of the Electricity Act, 2003 read with Regulation 2(3) and 3(1) and (2) of the Punjab State Electricity Regulatory Commission Tariff Regulations 2002.
AND
In the matter of: M/s. Rana Sugars Limited
Versus
PSEB and others.
Present: Shri R.S.Mann,Chairman.
Shri L.S.Deol, Member.
For the petitioner: Shri R.K. Millu, Vice President, Rana Sugars Ltd.
For the PSEB: Shri H.C.Sood, EIC/ Commercial,
Shri B.D.Bansal, Director/ Sales.
Shri V.K. Shanan, Dy. Director/ Sales.
For PEDA & Govt.: Shri S.S.Sekhon, Director.
Shri M.P.Singh, General Manager/ Projects.
ORDER:
1. This petition has been filed by M/s. Rana Sugars Limited praying for approval of tariff for sale of surplus power to the PSEB from the captive power generating system of the company in line with the previous policy and conforming to new NRSE Policy, 2001 for ‘old projects’ stipulating a tariff of Rs.3.01 per kwh for the base year 2000-01 and for 2001-02 @ Rs.3.1603 per kwh with 5% hike every year upto 2007-08 as per LOI dated May 14, 1997 and PPA dated June 6, 1999 or as specified in the NRSE Policy, 2001 as the Commission deems fit.
2. It
is stated in the petition that sugar factory of 2500 TCD of the petitioner
was initially commissioned in December,
1993 at Village Butter Seviyan, Tehsil
Baba Bakala, District Amritsar.
Later, capacity
of the factory was expanded to 5000 TCD.
The factory had its own power generating system of three STG sets of 11
MW capacity to meet its captive demand and had 4 MW
surplus power for export to the Board.
Besides, the petitioner decided to set up a
co-generation project for 10.2 MW capacity under the scheme of ‘National Programme
on Bagasse Based Cogeneration’ of Government of
India, Ministry of Non-conventional Energy Sources circulated on
3. The petitioner has further stated in his petition that the Government of Punjab brought out its NRSE Policy, 2001 on July 24, 2001 detailing incentives to be allowed to NRSE Projects. According to the petitioner, project of the petitioner is covered under ‘Old Projects’ of the NRSE Policy of Government of Punjab and is therefore entitled to the rate of Rs.3.01 per unit with base year 2000-01 and annual escalation of 5% upto 2004-05. The petitioner has given arguments to support the classification of the project under ‘Old Projects’ under NRSE Policy 2001 of Government of Punjab.
4. The petitioner has concluded that the cogeneration project of 10.2 MW should be treated as extension of the earlier 4 MW cogeneration project and as such should be classified as ‘Old Project’ for the purpose of granting benefit under NRSE Policy, 2001. In support of his argument, he has stated that the project was approved by the Project Approval Board of the Government of Punjab in June 2000 and Tripartite Financial Collaboration Agreement was signed in March 2000 with PEDA on behalf of the State Government for equity participation of Rs.255 lacs and that as these developments have taken place before promulgation of the NRSE Policy, 2001, the project is logically to be treated under ‘Old Projects’ and not ‘New Projects’.
5. It is further stated in the petition that the petitioner has accordingly been approaching the Board for entering into PPA for 10.2 MW cogeneration project providing for rates specified for ‘Old Projects’ and that the Board is however not willing to agree on this but insists on treating the project as New Project, thereby reducing the rate as well as annual escalation. The petitioner has further stated that the Board is not even honouring its PPA for 4 MW surplus power signed in June 1999 and is insisting on a fresh PPA for purchase of this power. The Board has not even made regular payment to the petitioner for power sold from 4 MW surplus power since February 2002. Resultantly the petitioner is suffering a great financial loss as he has invested a sum of Rs.32 crores in setting up the project. Delay in tariff rate determination is affecting financial viability of the project.
6. It is further stated in the petition that on representation made by the petitioner, PEDA has supported the petitioner’s contention regarding classification of the project under ‘Old Projects’ specified in the NRSE Policy of the Government of Punjab. The petitioner has further stated that his representation to the Board on the matter has been ignored by the latter inspite of the fact that the Board has already offered rate of ‘Old Projects’ in some other cases namely Jalkheri Project given on lease to a private party by the Board. The Board has agreed to interim rate of Rs.2.60 per unit on account of dire need of power but is insisting on approval of Commission on tariff. The petitioner has further stated that the average market price/cost of Bagasse and other Biomass has considerably escalated. The cost per unit has also gone up and the tariff provided in the existing PPA for 4 MW project should be applied to the new 10.2 MW cogeneration project as well. The petitioner having no alternate remedy, has approached the Commission. He has also referred to the directions of the State Government to the Commission under Section 39 of the E.R.C. Act 1998 to comply with the NRSE Policy, 2001.
7. In view of
all above, the petitioner has finally concluded that the project is covered
under the scheme ‘National Programme on Biomass Based
Cogeneration’ formulated by the Government of India. The guidelines issued by MNES were adopted by the Board and are
therefore binding on it. The term loan
was sanctioned by IREDA and MNES adopted the project as Demo project and
sanctioned CFA on the basis of Letter of Intent issued by the Board. Now, when the project is completed and
commissioned, it is not appropriate for the Board not to abide by the terms and
conditions of the
LOI and sign PPA accordingly. Principle
of promissory estoppel prohibits the Board from going
back on its assurance as the petitioner has already implemented the project
successfully on the basis of
LOI of the Board. Further,
the Board has already signed PPA with the petitioner to accept 4 MW power from its earlier
cogeneration plant. Tariff fixed as per
the MNES guidelines was adopted by the Board in toto
for this purpose. The petitioner has
been exporting surplus power and the Board has been paying for the same on
monthly basis continuously upto February 2002. The
rate for the year 2001-02 as per this PPA was Rs.3.16 per unit. The same principles for determination of
rate and other terms and conditions should apply for the new cogeneration plant
as well. The Board has itself granted
permission for installation of 12 MW TG Set which has since been commissioned
in March 2002. However, the case for
amendment of PPA was moved by the petitioner with the Board in March 2001 which
still remains to be decided. NRSE
Policy, 2001 is clear on the matter. The
petitioner fulfills requisite qualification and the State Nodal Agency namely
PEDA has already recommended the petitioner’s case to the Board for treating
the project under the category ‘Old Projects’ and as such there should be no
doubt or reason for delay in the matter.
MNES guidelines have been issued after due deliberations, experts opinion and Technology Consultancy. The Model PPA is circulated by MNES for
successful implementation of the programme which has
been adopted by the Board and as such, it is not justifiable for the Board to
go back from its commitment at this belated stage. The Board should also honour
the LOI of May 1997 and the tenure of PPA for 10 years provided therein. The Board, when it was short of power in
May/June 2002 , requested the petitioner for supply of
power. The petitioner having procured
raw material at exorbitant cost has supplied the power to the Board in public
interest. However the Board is making
payment only at the interim rate of Rs.2.60 per unit as the final payment is
still pending signing of PPA. The
Commission has already decided similar five petitions filed by Private Power
Developers for signing of
Power Purchase Agreement
with the Board. This decision of the
Commission is applicable to the petitioner as well, as he is similarly placed.
8. Notice of motion to the respondents namely the Board and PEDA was issued on August 4, 2003. The Board filed its reply on August 27, 2003. PEDA sent request for extension of time upto September 22, 2003 for filing reply. The petition was taken up for hearing on August 27, 2003 and extension of time upto September 15, 2003 was allowed to PEDA. During oral discussions, it was noted by the Commission that some material points were missing in the reply filed by the Board. The Board’s representative agreed to file amended reply by September 15, 2003. The petitioner was allowed to file rejoinder, if any, by September 22, 2003.
9. The PEDA submitted its reply on September 16, 2003. The Board also filed amended reply on September 23, 2003 and the petitioner filed rejoinder on September 30, 2003.
10. The petition was taken up for hearing on September 30, 2003. On the request of the petitioner, Secretary to Government of Punjab, Department of Science and Technology, Environment and Non-conventional Energy Sources was allowed to be impleaded as respondent in the petition. The Board was directed to file detailed reply in respect of points raised during the hearing upto October 31, 2003. Secretary Science and Technology was allowed to file reply by the same date. The petitioner was directed to file his rejoinder, if any, by November 14, 2003.
11. Shri S.S.Sekhon, Director PEDA filed reply on behalf of Secretary, Science and Technology on November 3, 2003 and the Board filed reply on November 11, 2003. The petitioner filed rejoinder on November 17, 2003. The petition was heard on December 1, 2003 and it was noted by the Commission that reference already stood made by the Commission to the Government seeking clarification about the decision of the Government on review/recast of NRSE Policy, 2001 and the intention of the Government about the applicability of the guidelines dated February 18, 2003 for ‘future projects’ and interpretation of the term ‘future projects’. As the response of the Government was still awaited and the same was considered necessary by the Commission before taking a decision in the petition, the petition was adjourned to January 14, 2004. Meanwhile the petitioner was directed to file cost analysis relevant for tariff fixation as desired by the Board.
12. The petitioner filed cost analysis as desired by the Commission on December 12, 2003. Government sent its response on January 6, 2004 to the reference made by the Secretary, PSERC to the Chief Secretary to Govt. of Punjab dated August 26, 2003 seeking clarification of the Govt. on review/ recast of NRSE policy and intention of the Govt. about applicability of the guidelines dated February 18, 2003 for future projects and interpretation of the term ‘future projects’. In that response, it was stated that cut off date for extending the benefit of NRSE Policy, 2001 to the projects is fixed as November 30, 2003 and that the Commission may permit PSEB to buy power from the private developers whose petitions were filed with the Commission before this cut off date at the rates provided under the NRSE Policy, 2001 and full cost of power so purchased may be allowed to be passed on in the ARR of the Board and loaded to the consumers.
13. Arguments were heard partly on January 21, 2004 and the petitioner was directed to explain as to why ABT principle of tariff determination should not be followed in view of the implementation of the same at all India level with effect from December 1, 2002.
14. The petitioner made further submissions on January 30, 2004 and February 19, 2004 regarding points raised by the Board on the cost analysis submitted by the petitioner and the applicability of ABT tariff on power purchase from NRSE projects.
15. The petition was heard on February 11, 2004. The arguments put forward by the petitioner, PEDA and the Board were heard. It was contended on behalf of the petitioner that his project of 12 MW is covered under NRSE Policy as the same was only an extension of his already existing project of 4 MW. It was further contended by the petitioner that MOU and Implementation Agreement for the project was signed well before March 2001 and as such the project was covered under ‘Old Projects’ and not ‘New Projects’ for the purpose of determination of benefit including rates for purchase of power to be applied for this project under the NRSE Policy. PEDA confirmed entering into MOU and Implementation Agreement with the petitioner prior to the issue of the revised NRSE Policy, 2001. As such, PEDA contended that the petitioner was entitled to the benefit allowable to ‘Old Projects’ under NRSE Policy, 2001. The Board on its part contradicted the stand taken by the petitioner that the project of 12 MW was an extension of the earlier 4 MW project. According to the Board, earlier project was cogeneration project while later 12 MW project was an IPP. It was contended on behalf of the Board that the question therefore remains restricted only to 12 MW project which is to be treated independently and not as an extension of earlier 4 MW project. Regarding 12 MW project, the Board further stated that it is not aware either of the fact of MOU or Implementation Agreement having been entered into by the petitioner with PEDA. The Board desired copies of these documents to enable it to frame its comments thereon. The petitioner was accordingly directed by the Commission to file copies of MOU and Implementation Agreement stated to have been entered into between PEDA and the petitioner. Copies of the same were also to be supplied to the Board within three days. The Board was to file its comments thereon within a week thereafter.
16. The petitioner accordingly filed copies of
Tripartite Collaboration Agreement dated
17. The Board in its amended reply filed on
18. Finally, it
is stated that the Board has no commitment for importing any additional power
beyond 4 MW. The payments
against energy supply upto February 2002 as per PPA
for 4 MW has already been cleared. The supplies from additional capacity
are merged with the supplies from 4 MW plant and as such, payment for supplies
after February, 2002 at the rate of Rs.2.60 per unit is being made on adhoc basis subject to final adjustment. MNES guidelines are not
existing in the changed scenario and the rate and terms and conditions
to be made applicable to purchase of power from NRSE Projects are subject to
scrutiny by the Commission. In view of applicability of ABT and consumers
interest, burden of high cost power import from IPPs
needs critical cost analysis by the Commission.
The Board has no commitment to purchase high end power ignoring the
interest of the consumers. According to
the Board, the petitioner has misinterpreted letter dated
19. The Board has accordingly prayed that as the consumer is utilizing
its Bagasse being generated at its own sugar plant against 6 MW generation, the second 12 MW plant needs to be treated as
IPP and the generation should be metered separately and rate decided by the
Commission after critical cost analysis.
Further, the
proposed addition of power generation is not cogeneration as it is not linked
to the process of production of sugar which is required to go
hand-in-hand. Additional generation from
twelve MW plant by the petitioner by purchasing primary fuel from
open market renders it the status of IPP under non-conventional sources of
energy and critical cost analysis needs to be made before the rates of supply
of power from the same are finally approved by the Commission. To this purpose, petitioner needs to be asked
to place cost analysis on record and PSEB afforded suitable opportunity to file
its comments on merits in line with the National Tariff Policy. The developer, as such, cannot claim to be
covered under NRSE Policy for his capacity addition. Regarding the claim of the petitioner that
the letter of the Board dated May 14, 1997 be treated as LOI to cover its
second project by the terms and conditions of PPA dated June 11, 1999, the petitioner may
be asked to accept firm rate of power at the rate of Rs.2.25 per kwh on the total energy export to PSEB Grid. The project should be treated as new/future
project taking into consideration the view point of the State Government as
conveyed vide its letter dated
20. PEDA vide
its reply filed on
21. The petitioner filed
rejoinder on
22. During the
hearing held on
23. Reply to the petition was filed by the State Government on October 31, 2003 in which it was requested that petition of the petitioner may be allowed in line with order dated April 8, 2003 passed by the Commission.
24. The petitioner filed counter reply to the reply filed by the State
Government. A reference was made in the
reply to the letter of the Govt. dated
25. The petitioner also submitted counter reply to the clarifications
made by the Board on
26. The
Commission has considered the facts given in the petition, replies of the
respondents, the rejoinders of the petitioner and other relevant facts connected
with the case. The arguments of the
parties have been fully heard.
27. The
Commission notes that the two references issued by the State Government on
October 28, 2002 and February 18, 2003 directing the Commission for compliance
of NRSE Policy, 2001 of the Govt. of Punjab are in conformity with Section 39
of the ERC Act, 1998 as these have been issued in writing and they pertain to
matter of policy involving public interest.
They are also in line with similar policy being followed by the Govt. of
India and many other states in the country.
Accordingly, the Commission has already accepted these references of the
Government as directions under Section 39 and has also followed these in other
similar petitions. Further vide letter
dated
28. The main question before the Commission is whether the project is covered under the NRSE Policy and if so, whether the same is to be considered as an ‘Old Project’ or as ‘New Project’. To this effect one associated question getting linked to the question of whether the project is covered under the NRSE Policy, is whether the same is an extension of the petitioner’s earlier project of 4 MW or not. There is clear dispute on this latter issue. While the petitioner claims his 10.2 MW project as an extension of the earlier 4MW project, the Board has disputed the claim. The relevance of the question is on account of the fact that earlier 4 MW project of the petitioner has already been accepted as an NRSE project by the Board and power generated from this project is being imported to the grid of the Board under the agreement signed between the petitioner and the Board and was being paid at NRSE rates. The situation slightly changed after the commissioning of the new project as the petitioner did not meter the power inputs of the new projects separately while the Board insisted on the same and refused to make payment of the combined input from both the projects at the old project rates. Lately, the Board has been making payment for the combined input at an adhoc rate of Rs.2.60 per kwh subject to final adjustment after passing of orders by the Commission.
29. In this connection, the Commission notes that in view of the detailed facts given in Para 2, which are not contradicted, and the sanctions and financial support received from the Central and the State Governments for the co-generation project of 10.2 MW capacity of the petitioner, there is no doubt that the project was sanctioned under the ‘National Programme on Bagasse Based Co-generation’ scheme of the Government of India, Ministry of Non-Conventional Energy Sources (MNES) . It is also noted that the petitioner’s statement that the nomenclature of the scheme was changed by the MNES, was perhaps as a result of misconception as the reference of the Government of India quoted by the petitioner is only a sanction for a particular year and does not involve any change of nomenclature. In any case, this fact is immaterial as the same does not affect the nature and purpose of the project. This also did not affect release of the financial support from the Government of India, Government of Punjab and other financial institutions which came later on. The Commission also notes that the 10.2 MW project was completed and commissioned in March, 2002.
30. As pointed out by the petitioner, the project is covered under the ‘National Programme on Bagasse Based Co-generation’ scheme formulated by the Government of India. The guidelines issued by MNES were adopted by the Board. The term loan was sanctioned by IREDA and MNES adopted the project as a demo project and Central Financial Assistance was also sanctioned and released on the basis of Letter of Intent (LOI) issued by the Board. In view of all the above facts, there seems to be no doubt that the project was conceived and started only on the basis of incentives provided to the projects under MNES guidelines of the Government of India. The Punjab State Electricity Board itself has adopted the same vide their circular letter dated October 26, 1998 which clearly goes on to state, “In order to widen the scope of generation and encourage setting up of non-conventional based power plants, matter has further been considerd and it has been decided that MNES guidelines be mainly followed for the purchase of power from all IPPs/ Co-generation units including sugar mills who are interested to develop other non-conventional sources of energy for production of power.” The Policy also included purchase of power @ Rs.2.25 per kwh as the base rate for the year 1994-95 with annual escalation of 5% for the first ten years from the date of signing of PPA as per the guidelines issued by the MNES. The Policy further goes on to state that “ rate for purchase of power from all non-conventional energy sources based power plants/ mini hydel plants/ co-generation plants including sugar mills shall be Rs.2.73 per kwh for the year 1998-99. This rate shall be uniform throughout the day for the entire year. The Board would not be liable to pay any additional amount on any account”. In view of above, it is clear that the Board had itself adopted the policy of making power purchases from all non-conventional energy sources based plants at the rate worked out with reference to the rate of Rs.2.25 per Kwh as the base rate for the year 1994-95 with 5% escalation every year.
31. The Board has given detailed reply dated
32. If the project is an NRSE project, it should automatically be
entitled to the same rates and other terms & conditions as applicable to
other similarly placed NRSE projects. In
that case, the fact of incorporation of the condition to the effect of power
from this plant being treated as dumped power in the Letter of the Board dated
33. The Board has contradicted the petitioner’s version that the project
should be treated as an old project under the NRSE Policy, 2001. However, the PEDA and the Government have strongly
supported the contention of the
petitioner. The Commission notes that
under the NRSE Policy, 2001,
those projects are to be covered as old projects only if MoU / Implementation Agreement have been signed before the
date of issue of the Policy i.e. before
34. In view of all above, the Commission has come to the conclusion that the project of the petitioner is clearly of the nature so as to justify it as an NRSE project. Accordingly, the same is covered under NRSE Policy 2001 of the Government of Punjab. Further, in view of the facts discussed above, the project is to be covered as an ‘old project’ and is entitled to the rates for purchase of power accordingly.
35. The Govt. of
“Since the transmission lines works required to be laid for evacuating this power to the nearest PSEB Grid Sub Station could not be included in the ARR (being capital expenditure), this cost should be borne by the Developers (except for PPAs already signed with PEDA)”
In some of the petitions decided separately
by the Commission pertaining to the NRSE Policy, 2001, The Commission took the
view that even though the Government had formulated the NRSE Policy, 2001 and
had subsequently issued a directive to the Commission to implement the policy,
the Commission was within its rights to test the contents of this policy against the
provisions of the Act. However, for the
sake of expediency and for the reasons recorded in the orders deciding those
petitions, and briefly mentioned in para
27 above, the Commission decided to adopt NRSE Policy, 2001 as
clarified/modified by the Govt. of
Punjab’s letter dated
36. As per sub clause (v) of Government letter dated February 18, 2003, the Govt. has stipulated that the developers may be allowed to install suitable metering at their generating end to record the generation made for sale to PSEB and billing be done on the basis of readings recorded by the meter installed at the generating end and the power available for sale to PSEB to be included in the ARR, shall be units so generated and recorded less 5% for transmission losses. The Commission feels that it is not desirable for the Govt. to lay down a definite figure for transmission losses to be passed on to the consumers. Transmission losses which the consumers may be required to bear, should be only the actual transmission losses as determined by the Commission. For a particular year, transmission losses may be above or below the figure of 5%. The Commission accordingly determines that the transmission losses to be allowed would be as per the actual losses for each year. The Commission feels that by this modification, the interests of the consumers will be safeguarded and none of the parties in this petition, stands to lose. The Commission has followed the same principles for other similar petitions.
37. In view of the above, it is decided that PPA in this case be approved at the rates as applicable to the old projects as per the NRSE Policy, 2001 and as per the directions of the Government dated October 28, 2002 as amended vide their reference dated February 18, 2003 except that the clause pertaining to 5% losses be amended to state that each year only assessed transmission losses be allowed to the PSEB subject to adjustment based on actuals. PEDA & PSEB may also ensure that during the total period PPA is valid, the petitioner will produce power using only non-conventional source for which the project has been approved. Also, in order to protect the interests of the PSEB and consumers in general, PEDA and State Govt. may take suitable steps to ensure that the petitioner continues to supply agreed quantum of power to the Board at prescribed rates during the entire period of contract under the NRSE Policy, 2001.
Sd/- Sd/-
(L.S. DEOL) (R.S.MANN)
Member. Chairman.
Place:
Dated: