Petition No. 13 of 2003
Date of hearing: November 23, 2005
Date of order: December 14, 2005
In the original petition filed before the Commission it was submitted that the Government of Punjab and PSEB desired to establish rice/wheat straw based power projects at different locations in Punjab and for this purpose PSEB invited bids to build, own and operate such projects. It was further submitted that on the basis of competitive bids, the petitioner was selected for rice/wheat straw (Biomass fuel) based power projects each having an installed capacity of approximately 10 MW in Punjab. The tariff quoted by the petitioner varied from year to year for the entire term of PPA with first year tariff of 266 P plus 150 P = 416 P per kwh. Power Purchase Agreement having 20 years term was initialed by the petitioner and PSEB wherein it was agreed that the petitioner would approach this Commission for finalizing tariff and other related commercial terms & conditions for sale of power from these projects to PSEB. The petitioner filed the petition for approval of Tariff and o! ther commercial terms and conditions for sale of power from these projects to PSEB on the basis of selection as a result of the competitive bids.
Vide order dated October 20, 2003 passed by the Commission notice of motion was ordered to be issued to the Respondents. PSEB filed reply on December 29, 2003 stating that the Government in a meeting held on January 4, 2002 had decided that PSEB and not PEDA should invite tenders for setting up small biomass based power plants. The representative of PEDA, during the hearing on January 8, 2004 stated that as per NRSE Policy PEDA is the Nodal Agency in respect of NRSE Projects and that the Government in the meeting held on June 5, 2002 had decided that business of promotion and development of NRSE projects shall be carried out by PEDA. As there was confusion and conflict in the approach of the two agencies of the Government namely PEDA and PSEB and the decision of the Government was quoted by both of them to support their assertions, reference was made to the Chief Secretary to Government of Punjab requesting to clarify the position regarding the Nodal Agency for the project! s of this type.
The petition was ordered to be taken up for hearing after receipt of clarification from the Government on this issue. D.O. letter dated January 13, 2005 was received from the Chief Secretary to the Government of Punjab in which it was intimated that twelve 10 MW rice straw based Biomass power projects for which process had already been initiated by PSEB and private developers had submitted applications before PSERC for determination of tariff would continue to be developed by PSEB and all other Biomass based power projects shall be developed by PEDA. After the receipt of reply from the Government the petition was admitted vide order dated March 9, 2005.
Reply was filed by PSEB on May 23, 2005. It was stated in the reply that the tariff offered by the petitioner is on the higher side, that it is not in line with the PPA initialed with the petitioner, that it is not comparable with the tariff of other sources of supply of power and that it is not acceptable to PSEB. PSEB prayed in the reply that the developers be directed to offer a tariff which is competitive with the tariff of other long term sources of supply of power and the petitioner be asked to submit detailed cost analysis of tariff in terms of the project cost and other salient features of the project. In view of the reply of PSEB, the petitioner made a request that the petitioner may be allowed to amend the petition and the request of the petitioner was allowed by the Commission vide order dated August 1, 2005. The petition was ordered to be taken up for hearing after the amended petition was filed.
The petitioner filed submissions on September 26, 2005, amending the petition. The petitioner submitted that the company was agreeable to sign P.P.A. with PSEB containing the terms & conditions as contained in the P.P.A. as already signed by PSEB with the parties clubbed in Petition No.14 of 2002 and that in such an event they may be allowed tariff as per NRSE Policy i.e. tariff of Rs.3.01 Paise per unit, base year 2001-02 with an escalation of 3% per annum for a period of five years i.e. Rs.3.50 paise per unit for the year 2006-07. It was further stated that a direction should be issued that a provision be made in the P.PA. that in the event of revision of NRSE Policy of the Government of Punjab, in future to consider escalation in the cost of fuel, the petitioner should also be allowed an opportunity to come back to the Commission for reconsideration with regard to escalation in the cost of fuel.
On October 4, 2005, PSEB filed reply to the submissions dated September 26, 2005 made by the petitioner. In the reply PSEB submitted that the petition may be covered under NRSE Policy. It was further submitted in the reply that plant developers may not be allowed any escalation beyond 2005-06 as notified in the NRSE Policy which states that annual escalations shall be payable @ 3% on yearly basis upto 5 years. It was further submitted that the plant developers may be ordered to bear the cost of transmission line for evacuation of power up to the grid substation and that interfacing along with cost of bay and equipment shall be the responsibility of the developer and PSEB shall provide jumpers only at the receiving end. It was also submitted that duration of the agreement should be allowed up to 20 years extendable for another 10 years, that plant developers should be directed to obtain N.O.Cs from various departments as envisaged under NRSE Policy and that plant develope! rs should be directed to deposit the processing fee at the rate of 1% of the total project cost for the techno-financial examination of the project. It was further submitted that developers may be covered under NRSE Policy and may be asked to use fuel as per NRSE Policy. Thus the petitioner, vide submissions dated September 26, 2005 has prayed that the project may be covered under NRSE Policy.
NRSE Policy was formulated by the Government of Punjab for development and promotion of New and Renewable Sources of Energy based technologies and energy conservation measures. The policy was issued by the Government of Punjab on July 24, 2001. Under this policy, incentives are offered to the investors for the setting up of power projects based on New and Renewable Sources of Energy. The Government of Punjab issued notification dated October 28, 2002 under Section 39 of the Electricity Regulatory Commissions Act, 1998 directing the Commission to comply with the NRSE Policy issued by the Government on July 24, 2001. Provision analogous to that of Section 39 of the Electricity Regulatory Commissions Act, 1998 also appears in Section 108 of the Electricity Act, 2003.
On February 18, 2003, the Commission received another reference from the Government conveying the following decisions. These decisions were to be applicable to all projects set up under NRSE Policy 2001 through PEDA. It was also stated that these decisions of the Government be considered by the Commission for tariff fixation.
"The Commission may permit PSEB to buy power from the Developers at the rates provided in the NRSE Policy of State Government, circulated vide notification dated July 24, 2001 and PSEB may be allowed to pass on full cost of the power so purchased in the ARR and load it to the consumers.
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).
All other terms & conditions/incentives for the Private projects developed through PEDA shall be same as envisaged in the NRSE Policy – 2001 of the State Government.
In the changed scenario in which per unit cost of generation is to be determined by the State Regulatory Commission, for future projects the NRSE Policy circulated by the State Government needs to be reviewed/recast for which Secretary, Science & Technology, shall bring suitable proposal for consideration of CMM.
As per the policy guidelines of the State Government the developers may be allowed to install suitable metering at their generating end to record the generation made for sale to PSEB and billing done on the basis of readings recorded by the meter installed at the generator end. The power available for sale to PSEB to be included in the ARR shall be units so generated and recorded minus 5% transmission losses.”
The matter was considered by the Commission and it was decided that the letter of February 18, 2003 from the Government may be treated as an amendment of the earlier directive sent by the Government to the Commission. The decision of the Commission is contained in the Order dated April 8, 2003 passed in Petition Nos.6 to 13, 14, 15, 17 and 24 of 2002.
Another letter dated January 6, 2004 was received from the Government in which it was stated that review/recast of NRSE Policy-2001, was under consideration and decision was to be taken shortly.
On August 12, 2004, the Commission received another reference from the Principal Secretary to Government of Punjab, Department of Science & Technology conveying the following decision of the Government with regard to review and recast of NRSE Policy.
“The present NRSE Policy-2001 notified vide No.10/85/2000-STE(3)/1476 dated July 24, 2001 will continue for providing financial & fiscal incentives to the eligible producers. However, the cost of transmission lines shall be borne by the private developers. The full cost of purchase of electricity from these projects may be allowed to be passed in the Annual Revenue Requirement to PSEB and loaded to the consumers”.
In view of the above letter, NRSE Policy continues for providing financial and fiscal incentives to the eligible producers.
In another similar petition a clarification was sought by the Commission from the Principal Secretary to Government of Punjab, Department of Science & Technology vide letter dated August 30, 2005 with regard to escalations to be allowed to the developers i.e. as to whether escalations are allowable upto the year 2006-07 or only upto the year 2005-06. The Principal Secretary to Government of Punjab, Department of Science & Technology clarified vide letter dated August 30, 2005 that annual escalation in respect of the new NRSE projects shall be payable @ 3% upto the year 2006-07 in line with NRSE Policy.
Arguments advanced by the parties have been heard. The representatives of the parties have agreed that all the terms and conditions provided in the PPAs signed by PSEB with other Developers of NRSE Policy are acceptable to them. The representative of the petitioner has further prayed that the Commission may issue a direction for making provision in the P.P.A. that in the event of revision in the NRSE Policy of the Government in future regarding the escalation in the cost of fuel, the petitioner has a right to approach the Commission for reconsideration with regard to admissibility for escalation of the cost of fuel. In view of clarifications made by the Principal Secretary to Government of Punjab, Department of Science & Technology, the matter regarding escalations to be allowed to the developers stands settled. The representative of the petitioner also agreed to PSEB’s proposal for signing PPA for a term of 20 years.
Once the project is covered under the NRSE Policy, it is entitled to all incentives as contained in NRSE Policy 2001 of the Government subject to amendment carried out by the Government in its letter dated February 18, 2003 as already approved by the Commission. As per sub-para (v) of the Govt. letter dated February 18, 2003, the Government 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 generator end. Further, the power available for sale to PSEB to be included in the ARR shall be units so generated and recorded, less 5% on account of transmission losses. The Commission is of the view that it is not appropriate to lay down a definite figure of transmission losses to be passed on to the consumers. The consumers should be required to bear only the actual transmission l! osses. For a particular year, actual transmission losses may be above or below the figure of 5%. The Commission accordingly holds that actual transmission losses would be allowed at the time of truing up for the relevant year. However till figures of actual losses are available transmission losses shall be assessed as 5%. The Commission considers 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 accordingly decides that P.P.A. in this case be executed as per NRSE Policy 2001 and as per the PPAs already signed by PSEB with the developers under NRSE Policy in accordance with the direction of the Government as per its letter dated 28th October, 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 transmission losses shall be allowed to PSEB initially @ 5% subject to adjustment in true up based on actuals. The PPA shall have twenty years term. The rates applicable will be as applicable to the new projects under NRSE policy i.e. at Rs.3.01 per unit for the base year 2001-02. Five escalations shall be allowed @ 3% per annum upto the year 2006-07. Thereafter, there shall be no further escalation and the tariff for sale of energy as applicable for 2006-07 shall remain in force for the remaining term of PPA. PEDA and PSEB shall also ensure tha! t during the period PPA is valid, the petitioner will produce power using only non conventional energy sources. Also, in order to protect the interests of PSEB and the consumers in general, Government and PSEB must adopt suitable safeguards to ensure that the developers continue to supply power at the prescribed rates during the entire period of agreement under the NRSE Policy for which suitable provisions shall be incorporated in the PPA. The Commission further decides that in the event of revision in the NRSE Policy of the Government in future regarding escalation in the cost of fuel, the petitioner’s right to approach the Commission for suitable orders will not be curtailed in any manner. The Commission further decides that the issue regarding deposit of processing fee shall be settled mutually by PSEB and the petitioner.
The petitioner is a company registered under the laws of UAR. The representative of the petitioner undertook that the company will get itself registered in India. In view of this P.S.E.B. may ensure that before signing the PPA the company gets itself registered in India so that it is amenable to the jurisdiction of Indian Courts and the Indian laws will be applicable to the company.
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