All the above mentioned petitions pertain to the matter of signing of Power purchase agreements between Private Power Developers and the Punjab State Electricity board. Except for petition No 17 of 2002, all the petitions have been filed by Private power Developers. Petition No. 17 of 2002 has been filed by the PSEB in which prayer for review has been made for the rate and some of the terms & conditions in the PPAs already signed by the Board with some Private Power Developer. Since the matters involved in all these petitions are quite similar in nature, all the petitions were ordered by the Commission to be clubbed together and these are thus being disposed of by the single order. Considering the issues involved, the Commission ordered that in every case, Punjab Energy Development Agency (PEDA) and Government of Punjab be made parties in addition to the Punjab State Electricity Board (wherever these were not parties).

2. The substantive issue involved in these petitions is regarding the benefits and Incentives to be allowed to the Private Power Developers through these PPAs, as per the NRSE policy of the Government of Punjab notified in July. 2001. This policy was Formulated by the State Government for the promotion of energy generation through non- conventional sources of energy. This policy of the State Govt. was in fact based on a Similar policy approved by the Government of India, Ministry of Non-Conventional Energy Sources. The main objectives of the policy notified by the State Government are to enhance the contribution of renewable energy, to reduce environmental pollution caused by the fossil fuels, to create conditions conducive for the involvement of private investors in NRSE projects and to create direct and indirect and indirect employment opportunities.Under this policy, incentives are offered to the investors for the setting up of power projects. PEDA is to provide complete project support and facilitation services and for all practical purposes, PEDA is to act as the Nodal Agency for promoting such projects. In fact the policy reflects the commitment of the Govt, to promote environment friendly power generation in the larger public interest with the intention to attract private investment in the power sector and to create direct/indirect employment in the State.

3. While these petitions were pending before the Commission, the State Government sent a directive to the Commission u/s 39 of the ERC Act, vide Notification No.3/119/2002-STE(3)/Policy, dated 28th October, 2002 which is reproduced as under:-

"In exercise of the powers conferred by section 39 of the Electricity Regulatory Commission Act, 1998 (central Act No. 14 of 1998) and all other powers enabling him in this behalf, the Governor of Punjab is pleased to direct the Punjab State Electricity Regulatory Commission for compliance of the policy issued by the Government of Punjab, Department of Science, Technology, Environment and Non-Conventional Energy, Notification No. 10/85/2000-STE(3)/1476, dated the 24th July, 2001 published in the Government Gazette Part I, dated the 3rd August,2001(SRVN 12,1923 SAKA)."

All the parties were asked by the Commission to file their comments/objections on the directive received from the Government. The PSEB filed its objections wherein it was stated that rate of Rs.3.01 per unit for purchase of power allowed in the policy with annual escalation of 5% in the initial years is very high. However, the PSEB stated that it will have no objection to purchase power at this rate provided this is approved by the Commission and this rate of purchase of power is factored into the ARR (Annual Revenue Requirement of the Board. The PSEB also objected to some other terms & conditions of the proposed PPAs.

On February 18,2003, the Commission received another reference from the State Govt., which is reproduced below:-

"In continuation to this office DO No. PSIP/2003/74, dated 31.1.2003 and with reference to order of the Commission dated 3.2.2003 (copy enclosed) the matter regarding purchase of power from Mini Hydel Projects was reviewed in a meeting held on 11..2.2003. The following decisions taken in the meeting are re-produced below for reference of the Regulatory Commission. These decisions would be applicable to all projects set up under NRSE Policy-2001 through PEDA:-

1. 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 may be allowed to pass on full cost Of the power so purchased in the ARR and loaded to the consumers.
   
   
2. 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).
   
   
3. 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.
   
   
4. 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.
   
   
5. As per the policy guidelines of the State Government the developers may Be allowed to install suitable metering at their generation 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 above decisions of the Govt. may be considered by the Commission for tariff fixation. In view of the above decisions issuing of directions to PSEB under Section 78A of the ESA 1948 is not required."

On delebrations with all the parties and upon their unanimous consent, the Commission decided that the letter of February 18, 2003 from the State Government may be treated as an amendment of the earlier directive sent to the Commission by the State Government.

4. During further hearings before the Commission, all the Petitioners and Respondents expressed their clear and full agreement to the rate and terms & conditions to be incorporated in the PPA’s as reiterated through the two directives of the State Government sent to the Commission. In its written concurrence, the PSEB stated that the entire policy as amended by the directives of the Government should be applied as a complete package. Though this reference itself, PSEB sought to raise some additional objections on points which are not strictly covered by the NRSE policy. Upon being pressed by the Commission to state categorically whether the PSEB was a party in the celiberations at the State Government level after which the directives were issued to the Commission of February 18, 2003, the representatives of the PSEB replied in the affirmative. The representatives of the PSEB also conceded that the Board was bound by the latest directives of the State Government.

As all parties in these petitions have unreservedly agreed to draw up and sign the PPA’s as per the NRSE policy of July, 2001 as modified by the two directives received by the Commission from the Governments, the only points which remain to be examined by the Commission are whether the directives of the State Government are in order and are binding on the Commission as per Section 39 of the ERC Act, 1998 and and whether the rates allowed for power purchase as per this policy are fit to be passed on to the ARR.

That the two directives of the State Government are in conformity with Section 39 of the ERC Act, 1998 is clear from the facts that the directives have been sent in writing and they pertain to a matter of policy involving public interest viz. the implementation of the NRSE policy framed by the State Govt.

In sub-para (i) of its letter of February 18,2003, the Government of Punjab has directed that the Commission may permit PSEB to buy power from the Developers at the rates provided in the NRSE policy and the full cost of the power so purchased may be passed on to the consumers through the ARR. For the reasons given in para 6 below, the Commission decides that costs on this account could be passed on to the ARR for the relevant year.

As per sub-para (ii) of the Government letter dated February 18, 2003, the Government has directed that except for PPAs already signed with PEDA, the cost for transmission lines/works required to be laid for avacuating this power to the nearest PSEB Grid Sub Station should be borne by the Developers. Since the private Developers before the Commission have no objection to this stipulation, the Commission endorses the same.

As per sub-para (v) of the Govt. letter dated February 18, 2003, the Government have 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 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. None of the parties before us have objection to the contents of this para. However, the Commission feels that it is not desirable for the Government to lay down a definite figure for transmission losses to be passed on to the consumers. Transmission losses which the consumers should be required to bear are only the actual transmission losses as claimed by the PSEB and finally determined by the Commission. For a particular year, transmission losses may be above or below the figure of 5%. The Commission accordingly determines that 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 safe guarded and none of the parties in these petitions stand to lose.

6. Many of the Private Developers have taken effective steps including commitment of funds, towards the implementation of these projects. In some cases, even PPAs were signed between these parties and the PSEB. It will thus be not fair or appropriate to change the rate of purchase of power on any ground more so when the rate of sale of electricity was prefixed in the tenders invited by Govt. as per provisions of NRSE policy. The Commission has, however, noted that the PPAs are for 20 years extendable for another 10 years through mutual agreement. The rate of purchase of power in respect of old Projects is 301 paise/unit with base year 200-01 to be increased by 5% every year up to 2004-05. The rate of purchase of power in respect of new Projects is 301 paise/unit with base year 2001-02 to be increased by 3% on yearly basis up to 5 years. Thereafter the rate is to remain fixed for the balance years of the contract. The Commission, therefore, is of the opinion that the rates of purchase of power which may appear to be high in the initial years may prove competitive and highly beneficial in the later years of the duration of the PPAs, keeping in view the incremental cost of power involved in subsequent years of requirement. Thus by allowing these rates, the interests of the consumers will be well served. Moreover, the PSEB is already purchasing power from other co-generation producers and other such sources at the same rates.

7. The Commission accordingly decides that PPAs in all cases be approved 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 period PPAs are valid, the private parties will produce power using only non-conventional sources for which the projects have been approved. Also in order to protect the interests of the PSEB and consumers in general, PEDA and Govt. may take suitable steps to ensure that the developers continue to supply powe5r at prescribed rates during the entire period of contract and NRSE policy is implements. The PSEB will also ensure that there is uniformity in respect of all clauses of PPA for all parties falling under same categories under NRSE policy of the Government.

Place : Chandigarh
Dated : April 8, 2003