PUNJAB STATE ELECTRICITY REGULATORY COMMISSION

SCO 220-221 SECTOR-34-A CHANDIGARH

 

                                                                                                Petition No. 21 of 2002

Date of hearing:5.2.2004

Date of order:   May    6  , 2004.

 

IN THE MATTER OF:   Petition filed by M/S Chandigarh Distillers & Bottlers Ltd. for approval of Power Purchase Agreement (PPA) for 2.5 MW   co-generation Plant at existing distillery at Banur, Tehsil Rajpura Distt. Patiala.

     

                                                                        AND

 

IN THE MATTER OF:

 

M/s Chandigarh Distillers & Bottlers Ltd. Chandigarh.                            Petitioner

 

                                                                       

                                                                           VERSUS

 

Punjab State Electricity Board & others                                                   Respondent.

 

 

Present:                       Shri R.S. Mann,  Chairman.

                                                Shri L. S. Deol, Member.

           

For the petitioner:                   Sh. L.M.Suri, Senior Advocate,  

Sh. Vivek Bakshi, Company Secretary.

 

For the PEDA & Govt.:         Sh. A.K.Singla, Director/ PGL and

Sh. M.P.Singh Sr.Manager.

 

For the PSEB:                         Sh. B.D.Bansal, Director/Sales.

Sh. V.K.Shanan, Dy. Director/ Sales.

 

ORDER:

 

This petition has been filed by the petitioner for granting approval to the project and for fixing the tariff for sale of 2.5 MW energy by the petitioner to PSEB in accordance with NRSE Policy 2001 notified by the Government of Punjab.  Further it has been prayed that the Board be directed to provide the evacuation system for the purchase of energy from the generation site at its own cost and to extend all benefits and incentives as applicable under the NRSE Policy 2001. It is stated in the petition that the petitioner is already  operating one Turbine with capacity of 0.8 MW and that another Turbine of 3.1 MW capacity has been installed by the petitioner. It is further stated that out of total 3.9 MW energy, 1.4 MW is for captive use and 2.5 MW is surplus for sale to PSEB.  It is also stated that PSEB granted approval for captive use of energy for the said Turbine and in the approval it is stipulated that the petitioner would be required to obtain necessary approval from the Commission in order to sell the surplus power to the Board.

 

2.                     NRSE Policy was formulated by the State Government for development and promotion of new and renewable sources of energy based technologies and energy conservation measures.  Under this policy incentives are offered to the investors for the setting up of power projects based on new and renewable sources of energy.  PEDA is to provide complete project support and facilitation services and  is to act as nodal agency for promoting such projects.

 

3.                     The State Government had issued notification dated 28.10.2002 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.

 

4.                     The petition was admitted and notices were issued to the Respondents to file their replies.

 

5.                     Government and PEDA in their replies submitted that as the project has not been set up as per procedure prescribed under the NRSE Policy and PEDA was  also not  the facilitator in the Project, the petition may be dismissed. The Board, in reply,  stated that the petitioner was granted permission on  25.8.2000  as standby source of supply, that permission for installation of 3.1 MW Captive Power Plant (CPP) was accorded for its in-house consumption on 27.9.2002 and that there is no commitment on the part of the PSEB to import power from the petitioner. It was further submitted in the reply of the Board that the qualifying requirement of treating any project as NRSE based power project is that the proposal should have the approval of PEDA as it is the nodal agency for the implementation of the NRSE Policy of  the Punjab Government.  The Board prayed that the petitioner may be asked to furnish approval of its project by PEDA before reply on merits is submitted for consideration by the Commission.

 

6.                     The petitioner filed rejoinder in which it was stated that the petitioner did not accept the plea of the Respondents that the Project of the petitioner does not fall under the NRSE Policy 2001 merely because it has not been promoted or facilitated by PEDA.  It was further submitted in the rejoinder that the Company has approached the Government of Punjab in the matter and is confident of getting a favourable reply in the matter confirming that the project is covered under the NRSE Policy.

 

7.                     Vide order dated 10.1.2003, petitioner, PEDA and the Government were allowed to file additional affidavits.

 

8.                                On February 18, 2003, the Commission received another reference from the State 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.

 

i)               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 24.7.2001 and PSEB may be allowed to pass on full cost of the power so purchased in the ARR and load it to the consumers.

 

ii)             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).

 

iii)            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.

 

iv)            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.

 

v)             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 State Government may be treated as an amendment of the earlier directive sent by the State Government to the Commission.  The decision of the Commission is contained in Order dated 8.4.2003 passed in Petition Nos.  6 to 13, 14, 15, 17 and 24 of 2002.

 

9.                     PEDA and the Government filed additional replies in which it was stated that the case had been taken up by the Empowered Committee constituted under NRSE Policy 2001 for granting approval/clearance for the Project, that the Committee on 22.4.2003 decided that all such projects which had come up after notification of NRSE Policy and whose financial closure was after the declaration of the Policy 2001, could be taken into consideration for extending the benefits of NRSE Policy 2001 and that as the financial closure of this project was on 9.3.2002, the Empowered Committee had granted  approval for covering the project under the NRSE Policy.

 

10.                   The case was taken up by the Commission on 19.5.2003 when the Board requested for time to file counter  reply to the reply filed by PEDA and Government. This was allowed.  The Board filed counter reply to the reply filed by PEDA and Government on 12.5.2003 wherein it was requested that the petitioner may be asked to sign Implementation Agreement and that the Government may be directed to review/ recast NRSE Policy for future project to enable the Commission to determine the actual cost of generation payable by PSEB under NRSE Policy. The petitioner filed counter reply to the reply filed by the Board on 8.7.2003 in which it was stated that the Implementation Agreement has been signed on 18.6.2002 with PEDA, that approval of PSEB had been obtained for the Commissioning of 3.1 MW co-generation plant vide letter dated 27.9.2002, that the petitioner has already taken effective steps to implement the project, that the Turbine has been commissioned in October, 2002, that the power produced is being used for in-house consumption and that in view of all this, the project cannot be treated as ‘future project’ as mentioned in the Government letter dated 18.2.2003. The Government and PEDA also filed their submissions similar to those of the petitioner.

 

11.                   A question arose regarding the Government direction dated February 18, 2003 referred to in Para 8 above. The Commission was of the view that there was some contradiction in the stand of the Government  with regard to review/ recast of NRSE Policy 2001 and applicability of NRSE Policy for ‘future projects’. While the Government vide its letter dated 18.2.2003 had committed to review/ recast the NRSE Policy, 2001, no such review has been undertaken by the Government.  Also while for ‘future projects’, the reviewed NRSE Policy was to be applied, the Government had cleared this particular project to be covered under the un-revised NRSE Policy 2001 on the ground that its financial closure was after declaration of NRSE Policy 2001. It was felt by the Commission that if financial closure being after the declaration of NRSE Policy 2001 was to be the sole criteria for deciding the projects to be covered under the existing NRSE Policy 2001, all projects to come up now or even years later will satisfy the criteria and would be eligible for benefits under NRSE Policy 2001.  As per this interpretation, it would appear that the Government did not intend to review/ recast  NRSE Policy 2001 as  undertaken earlier by the Government.  In view of the contradiction, it was ordered by the Commission that a clarification be obtained from the Government on the issue.  A reference was made by the Secretary, PSERC to the Chief Secretary to Government of Punjab on 26.8.2003 requesting him to intimate the decision of the Government on review/ recast of NRSE Policy 2001 and the interpretation of ‘future projects’ for enabling the Commission to settle the pending petitions.  In response to the letter dated 26.8.2003, Principal Secretary to Govt. of Punjab, Department of Science & Technology conveyed the views of the Government to the Commission on 6.1.2004 stating that the cut off date for extending the benefit of NRSE Policy 2001 to the projects is fixed as 30.11.2003  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 other consumers.

           

12.                   On receipt of Govt. response dated 6.1.2004, parties were directed to file their submissions with regard to the said reference. The Board filed its submissions on 20.1.2004 which are reproduced below :-

“Notwithstanding the objections of PSEB about the higher per unit rate recommended by Punjab Government to be paid to the Developers of NRSE based projects in the State as per policy & guidelines of the Punjab Govt. and the power of the Hon’ble State Electricity Regulatory Commission to regulate electricity purchase as per Section 22(1) (c ) of ERC Act, 1998 & Section 86 (1) (b ) of EA, 2003; PSEB shall have no objection  to purchase this power and make payment to the power developers at the rate provided in the NRSE Policy, provided the same are approved and allowed as expenditure in the annual Revenue Requirement of the Board by the Commission”.

 

This stand of the PSEB is apparently quite different from the position taken by it through its reply dated August 29, 2003 filed before the Commission.  In that reply, PSEB had stated that this project was a new/ future project which was developed without conforming to the procedure laid down in the NRSE Policy 2001 and that tariff for power to be supplied from this project should not be determined under the NRSE Policy 2001 but on commercial principles which require that the  Commission should first determine the true cost per unit of electricity to be supplied.

 

13.                   Vide order dated 29.1.2004, petitioner was directed to file additional affidavit to explain as to why the project should be covered under NRSE Policy and allowed NRSE rates. To this purpose, the petitioner was to explain as to how it can be inferred that the project has been set up in view of and under NRSE Policy and if so, as to why the procedure laid down for NRSE project has not been followed by the petitioner from the beginning.  The petitioner was further directed to explain as to why ABT principle of tariff determination should not be followed while determining the price of power in this case.

 

14.                      In compliance with the order dated 29.1.2004 passed by the Commission, the petitioner stated that immediately after the notification of NRSE Policy by the Government in July 2001, the Board of Directors of the petitioner company met on 24.8.2001 and approved setting up of 3.1 MW co-generation plant. In this connection, the petitioner has produced a certified copy of an extract from the  minutes of the meeting of the Board of Directors of the Company wherein it is clearly stated that surplus power will be sold to the PSEB under the NRSE Policy 2001 which will improve the financial health and resources of the Company.  The petitioner has stated that immediately thereafter, the PSEB was also approached for permission to install 3.1 MW co-generation plant and in this application, it was clearly stated that the surplus power from the co-generation project will be sold to PSEB.  It is further stated by the petitioner that the PSEB while granting the necessary permission through its letter dated 27.9.2002 interalia advised the petitioner that the rate of sale of power will have to be got approved from the PSERC.  The petitioner has further stated that the Government of Punjab has also approved the project and has clearly stated that the petitioner’s case is covered by the NRSE  Policy 2001.  With regard to the ABT principles, the petitioner emphasized that these do not apply as the NRSE Policy 2001 makes no mention of these.

 

15.                                   The Commission noted that it has already approved certain projects including some micro hydel and biomass projects under the NRSE Policy of the Government as amended vide its letter dated February 18, 2003 (with slight changes).  For these projects, the Commission has already allowed rates for purchase of power by the Board according to the rates contained in the NRSE Policy.  Thus, ordinarily, there is no reason for the Commission to differentiate between the projects approved under NRSE Policy 2001 earlier and those being approved now.  As long as a project is covered under NRSE Policy 2001, it is entitled for all  benefits thereunder.  In view of this, the only question before the Commission is whether a project is covered under NRSE Policy 2001 or not.

 

16.                                The Commission further noted that the Government has already committed that application of NRSE Policy in its present form shall remain restricted to only those projects for which the petitions have been filed with the Commission till November 30, 2003.  All projects where petitions will be filed  with the Commission thereafter are to be covered under the revised NRSE Policy  to be framed by the Government.  The Commission noted that in fact only three petitions involving_about 15 MWs of capacity are now  pending before the Commission which were all filed before November 30, 2003.  Thus extension of NRSE Policy in its present form is restricted to a very limited number of projects. In view of this, the Commission accepts the view of the Government conveyed vide its letter dated January 6, 2004 and allows extension of NRSE Policy to projects where petitions were filed before the Commission before November 30, 2003.

 

17.                                 The Commission further considered the question whether the petitioner’s case is covered under NRSE Policy 2001 or  not.  The Commission noted that the petitioner has produced an extract from the minutes of the meeting of the Board of the Company which clearly shows that it was  immediately after the pronouncement of the NRSE Policy by the Government in July 2001 and well before the commissioning of the project, that it was envisaged  by the promoters that the project was to be set up for taking advantage of the NRSE Policy 2001.  Reference to  the Board for granting permission for installation of 3.1 MW T.G. set was also made soon thereafter. Further, in the approval of the Board, it was stated that the Company may move the Commission for getting the rate of sale of power approved from the Commission.    Thus it is clear that the intent of the petitioner was to sell electricity to the Board and the Board was also  willing to go by such an arrangement. The Commission also notes that PEDA has categorically stated that this project is fully covered under NRSE Policy 2001. The Commission further notes that even the Government in its reference to the Commission has clearly stated that this project is covered under the NRSE Policy 2001 of the Government as amended vide its letter of February 18, 2003.  It is noted that even though initially procedure laid down under the NRSE Policy 2001 was not followed, but the same has been complied with later on and all the procedural requirements as obligated under the NRSE Policy 2001 of the Government have been complied with.  The Board in its later reply has also not contradicted this view  In view of all these facts, it is decided that the project is covered under the NRSE Policy 2001.

 

18.                          Once the project is covered under the NRSE Policy, it is entitled to all the 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 has already been approved by the Commission. As regards applicability of ABT rates, the Commission decides that the same having not been provided for in the NRSE  Policy of the Government or its amendments, it will not be appropriate to provide for the same now for this project.

              

19.                               The Commission accordingly decides that PPA in this case is approved and the rates allowed are as applicable to the new projects of the NRSE Policy 2001 and 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 only assessed transmission losses be allowed to the PSEB subject to adjustment based on actuals.  The PEDA and PSEB may also ensure that during the period  PPA  is valid,  the petitioner will  produce power using only non conventional energy source for which the Project has been approved.  Also, in order to protect the interests of the PSEB and the consumers in general, PEDA and State Government 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.

 

 

 

                                ( L.S. Deol)                                             ( R.S.Mann)

                                    Member                                                Chairman.

 

 

Chandigarh

Dated: May 6, 2004