Case No.139 of Smt. Chandra Iyengar, Chairperson Shri Azeez M. Khan, Member Shri Deepak Lad, Member

Transcription

1 Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai Tel /65/69 Fax Website: Case No.139 of 2014 In the matter of Petition of Adani Power Maharashtra Ltd. for netting off power for start-up activities of generating station against power supplied to MSEDCL, and with reference to Order in Case No. 51 of 2013 Smt. Chandra Iyengar, Chairperson Shri Azeez M. Khan, Member Shri Deepak Lad, Member Adani Power Maharashtra Ltd. Maharashtra State Electricity Distribution Co. Ltd. Appearance Petitioner Respondent For the Petitioner: For the Respondent: For Consumer Representative: ORDER Shri. Kandarp Patel Shri. Kiran Gandhi, (Advocate) Shri. Ashok Pendse (TBIA) Dated: 20 March, 2015 M/s Adani Power Maharashtra Ltd. (APML), Navrangpura, Ahmedabad (Gujarat) has filed a Petition on 22 July, 2014 for netting off power consumed for start-up activities of its generating station against the power supplied to the Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) under Power Purchase Agreements (PPAs), and with reference to Case No. 51 of 2013 regarding relief in respect of threat of disconnection of power supply, etc. The Petition cites Section 86 (1) (f) of the Electricity Act (EA), 2003 which deals with disputes between Licensees and generating companies. MERC Order Case No.139 of 2014 Page 1 of 12

2 2. APML s substantive prayer is as follows: a) to direct the Respondent to allow netting arrangement for the start-up power supplied to the Petitioner against the power supplied to the Respondent from the Petitioner s generating units by netting off the power In its Petition, APML has submitted that : 3.1. APML is a generating company setting up a 3300 MW (5 x 660 MW) Thermal Power Project at Tiroda in Maharashtra. It had executed a PPA dated 8 September, 2008 with MSEDCL for the supply of 1320 MW power For this power plant, MSEDCL had initially, vide letter dated , sanctioned startup power connection of 30 MVA at 132 kv level. Subsequently, after the commissioning of 400 kv switchyard, APML applied for start-up connection of 50 MVA at 400 kv level. This was sanctioned by MSEDCL with a condition of applying commercial tariff for the energy consumption. The start-up power connection was activated on A dispute arose between APML and MSEDCL with regard to billing of the consumption of the 2 x 80 MVA bus reactors as part of start-up power. These were installed as per directives of the State Load Despatch Centre (SLDC)/ Western Region Load Despatch Centre (WRLDC) to maintain grid voltage and to help stability of the grid, against the Contract Demand of 50 MVA and penalty for low power factor. APML received a disconnection notice dated from MSLDC for non-payment of outstanding amount. APML approached the Commission through Petition dated in Case No. 51 of 2013 seeking the following reliefs: a) Set aside the Respondent s letter dated threatening disconnection of startup power supply to the Petitioner; b) direct the respondent to adjust in kind the start-up power supplied to the Petitioner against the power supplied to the Respondent from the Petitioner s generating units; c) direct the Respondent to revise all the bills raised until the date of the petition accordance with the mechanism set out in its letter dated and apply tariff applicable to industrial category consumers and refund the excess amount which the MERC Order Case No.139 of 2014 Page 2 of 12

3 Petitioner has already paid (which according to the Petitioner s calculations come to approximately Rs.28 crores) Vide Order dated 3 February, 2014, the Commission ruled as follows: The bus reactors which are part of intra-state transmission system and being operated as per instructions from SLDC for controlling the system voltages are assisting the STU / SLDC to maintain the grid voltage. Therefore the reactive energy drawn by such bus reactor for the purpose of controlling transmission system should not be charged on the Petitioner. Accordingly, the Commission directs MSEDCL to not to recover any charges for reactive energy drawn by the bus reactor for the purpose of controlling the transmission system voltages on the instructions of the SLDC. Hence, MSEDCL is directed to revise its energy bills issued to the Petitioner. Further the Commission directs both the parties to consult and finalise the arrangement so that the reactive energy drawn by the bus reactor for the purpose of controlling the transmission system parameters are not recorded in the energy meter used for the billing purpose. Till such time MSEDCL should not bill the energy drawn by the bus reactors for the purpose of controlling transmission system parameters. a. The power plant is an industrial premise wherein fuel and water are used as an input to generate electricity. Further, power plants are basic element of the electricity supply chain where electricity is generated. Thus, the start-up power consumption by such power plants which is used for starting of the power plant auxiliaries so that the electricity generation can be started should be treated as Industrial purpose only. Hence, in accordance with the Article 11.9 of the executed PPA, the Commission directs the MSEDCL to apply the tariff of Industrial category to the start-up power consumption of the Petitioner s generating plant and also revised the earlier energy bills to that effect and credit the excess collected amount in the upcoming bills of the Petitioner. b. CEA [Central Electricity Authority] in its letter dated 7 March, 2013 (copy attached hereto and marked as Annexure-P3), recommended for categorising the start-up power under Unscheduled Interchange (UI) mechanism. However, frequency based UI mechanism which is applicable at National level is not applicable in the State of Maharashtra. Maharashtra has adopted Balancing Settlement Mechanism wherein generators are not pool participant. Therefore, it is difficult to adopt the advice given by the CEA for the State of Maharashtra. Therefore, both the parties are required to once again approach the CEA on the issue of treatment of start-up power of the generating plant. Till such time, the start-up power consumption of the generating plant of the Petitioner should be billed as per the tariff applicable to industrial category as per Article 11.9 of executed PPA. 3.6 In respect of the prayer at (b), i.e. to adjust in kind the start-up power supplied to the Petitioner against the power supplied to the Respondent from the Petitioner s generating units, the Commission directed that: MERC Order Case No.139 of 2014 Page 3 of 12

4 Both the Petitioner and Respondent are required to once again approach the CEA on the issue of treatment of start-up power of the generating plant. Till such time, the startup power consumption of the generating plant of the Petitioner should be billed as per the tariff applicable to industrial category as per Article 11.9 of executed PPA. 3.7 Accordingly, APML approached CEA vide letter dated 14 March, 2014 with the following request: to issue necessary clarifications/recommendations to MERC on the issue of treatment of the start-up power consumed by our generation plant, keeping in view the fact that the frequency based Deviation Settlement Mechanism as notified by CERC[Central Electricity Regulatory Commission] is not applicable in the State of Maharashtra. 3.8 In its response dated 15 July, 2014, CEA has stated as follows: (i) The start-up power in State of Maharashtra where the Deviations Settlement Mechanism is not applicable may be categorized under the Balancing Settlement Mechanism i.e. netting up of power as also followed in cased of Generating Stations of MAHAGENCO and RGGPL (observed by the Commission in the order passed under case no. 37 of 2011). (ii) Wherein only one unit and part of units are requiring start-up power, the same may be drawn from the other operating units of the station. (iii) The Authority also suggested that the starting of the unit in case of grid disturbance be treated differently from normal start of units of the generating stations. The earlier advice given by the Authority shall continue to hold good for the States where the intra-state ABT (the Deviations Settlement Mechanism) is applicable. 3.9 MSEDCL has been allowing netting arrangement to the Maharashtra State Power Generation Co. Ltd. (MSPGCL) and the Ratnagiri Gas and Power Pvt. Ltd. (RGPPL) generating stations. It would discriminatory if CEA s advice is not applied to APML s generating station also. There is no legal justification for such discriminatory treatment between two sets of generating companies. The word "generating company" has been defined in Section 2 (28) of the EA, 2003, and it does not make any distinction between Government-owned generating stations and private generating companies. As in the case of RGPPL and MSPGCL, MSEDCL is the sole procurer from APML s generating station also. Therefore, there is no justification for not providing netting facility to APML. In fact, the Commission has already held such discriminatory treatment to be illegal and impermissible. In its Order dated 20 July, 2011 in Case No. 37 of 2011, the Commission has observed thus: MERC Order Case No.139 of 2014 Page 4 of 12

5 "The Commission has also noted that, MSEDCL is treating the Start-up Power requirement of Power Plant of Mahagenco and RGGPL differently than the other Power Plants in the State. This is due to the fact that, MSEDCL being sole procurer of Power generated from plants of Mahagenco and RGGPL, any charges levied by MSEDCL for Start-up Power requirement of these Power Plants will be ultimately recovered by them from MSEDCL only. Such discrimination amongst the same class of consumers can not be allowed under the Electricity Act However, decision in this matter can be taken after considering recommendations of CEA on the issue of treatment of Start-up Power requirement of Power Plant." 3.10 Netting arrangement is also being followed in other States. The Uttarakhand Electricity Regulatory Commission (UERC) s Order dated 16 March, 2012 in the matter of M/s. Sravanthi Energy regarding treatment of start-up power and commercial treatment of infirm power states as follows: In case of electricity generated from the plant is sold to the State Distribution Licensee, the electricity (in kwh) procured by the Generating Station from the State Distribution Licensee to meet its requirement of start-up power, will be adjusted from the electricity sold to the Distribution Licensee. The Distribution Licensee shall make the payment for net energy sold to it by the Generating Company, i.e. difference of the total energy supplied by the Generating Company to the Distribution Licensee and energy supplied by the Distribution Licensee to the Generating Company. 4. At the hearing on 25 November, 2014, APML reiterated its contentions. MSEDCL had charged it for start-up power at the Commercial tariff rate, whereas netting was allowed in the case of MSPGCL and RGPPL generation plants. In its Order dated 3 February, 2014, the Commission had directed revised billing for start-up power at the Industrial tariff, and also asked APML to obtain CEA s advice. Having obtained the CEA view, which is that netting should be allowed as in other cases, APML has approached the Commission again. Admittedly, Clause 11.9 of the PPA provides for application of Industrial tariff. To a query of the Commission, APML submitted that it had not cited the PPA while making its reference to CEA, but had attached a copy of the Commission s Order which quotes the relevant Clause of the PPA. MSEDCL submitted that the procurement from RGPPL and MSPGCL is not based on competitive bidding, and thus APML s case is not on par with theirs. As regards the CEA response, CEA is used to the UI mechanism and not the Balancing Scheme prevalent in Maharashtra. APML reiterated that the EA, 2003 does not allow MSEDCL to discriminate within the same category of consumers. The Commission directed both parties to furnish their further written submissions. It noted that MSEDCL had not submitted its Reply inspite of the MERC Order Case No.139 of 2014 Page 5 of 12

6 first hearing notice having been issued two months ago, and had asked for an adjournment instead. 5. In its Reply dated 28 November, 2014, MSEDCL submitted that: 5.1. In accordance with the Competitive Bidding Guidelines of the Ministry of Power (MoP), MSEDCL selected APML to supply 3085 MW capacity in aggregate on the terms and conditions contained in the Request for Proposal (RFP) documents. A PPA setting out the terms and conditions for the sale of the Contracted Capacity and supply of electricity by APML to MSEDCL was signed accordingly Article 11.9 of the Standard PPA as per the Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensee provides for the payment for start-up power as follows: 11.9 Payment for Start up Power The Seller shall be liable to pay, for the power and energy consumed for start-up of the Project and commissioning, to the distribution Licensee(s) in whose area the Project is located or such other entity from whom such power/energy is sourced, at the then prevalent rates payable by such industrial consumers APML was well aware of this condition and had bid accordingly. The PPA signed by MSEDCL and APML has the same provision. Vide its various Orders, the Commission has approved the bid documents to be used for procurement of power through competitive bidding process under Case 1 route being conducted by MSEDCL. Thus, the Commission has already approved the PPAs and adopted tariffs for power purchase between APML and MSEDCL. Seeking netting off for start up power amounts to amendment in the PPA, which is beyond the scope of the present proceedings. As per the Article 11.9 of the PPA, MSEDCL is entitled to charge APML for start-up power as per the tariff applicable to Industrial category With reference to the Commission s Order dated 20 July, 2011 in Case No. 37 of 2011 [quoted at para. 3.9 above], there is a basic difference in the PPA with MSPGCL and RGPPL and with APML. MSEDCL has been procuring power from MSPGCL and RGPPL through the Memorandum of Understanding (MoU) route whereas the PPA between APML MERC Order Case No.139 of 2014 Page 6 of 12

7 and MSEDCL is based on the Competitive Bidding Guidelines and the terms and conditions of the PPA are binding on both the parties. The PPA with MSPGCL is on a cost plus basis (escalable charges) and approved by the Commission. The netting off for units in case of RGPPL is not in existence from October, Any deviation in the PPA from the Standard Bidding Documents needs to be approved by the Commission. Thus, MSEDCL is only following the provisions of the PPA and there is no discrimination or different treatment to different generators as alleged. As such, both APML and MSEDCL have to adhere to the terms and conditions of the PPA. Therefore, APML is liable to pay for the power and energy consumed for start-up of the Project and commissioning at the rates payable by Industrial category consumers The advice given by CEA regarding start up power may not be applicable to the contractual obligations mandated by the PPA, which prevail over all the other similar precedents. Moreover, the CEA letter dated 15 July, 2014 addressed to the Commission is merely an advice and suggestion and does not constitute Regulations or Rules. The provisions of the PPA relied upon by APML stating that the said letter amounts to a regulation and is applicable to the PPA is misconceived and untenable in law Frequency-based UI Mechanism is not applicable in the State of Maharashtra, where the Balancing Settlement Mechanism is applicable. There is no provision for netting of units under the Balancing Settlement Mechanism The UERC case cited by APML pertains to Uttarakhand State. As such, the issue involved in that matter has been dealt with has been dealt with by UERC as per the rules framed by it. Thus that case is not relevant to the present matter MSEDCL may be allowed to charge APML for start-up power as per the tariff rate applicable to Industrial category and maintain the sanctity of the PPA approved by the Commission. 6. In its Rejoinder dated 2 December, 2014, APML reiterated the contentions in its Petition and cited the Commission s earlier Order and CEA s response, and submitted further as follows: MERC Order Case No.139 of 2014 Page 7 of 12

8 6.1. In view of the decision of the CEA, APML has approached the Commission to allow the netting arrangement in line with the arrangement allowed by MSEDCL to the MSPGCL and RGPPL generation stations All the objections raised by MSEDCL in its Reply were raised by it during the proceedings in Case No. 51 of 2013 and were dealt with by the Commission in its Order dated 3 February, MSEDCL never challenged the Commission s direction to approach CEA for the treatment to start-up power. It is clear that, while pronouncing the Order, the Commission duly considered the provisions of the PPAs and directed MSEDCL to apply the tariff of Industrial category to the start-up power consumption of APML s generating plant as per Article Significantly, at para 33 of the Order, the Commission has expressly held that the Industrial tariff as per article 11.9 of the PPA shall be applied until CEA issues its recommendation While it duly considered Article 11.9, the Commission, having regard to the prevailing mechanism for treatment of start-up power in the State as well as at the national level and also to eliminate anomalies in this regard, directed parties to approach CEA. The decision to seek CEA s recommendation is in accordance with the EA, Section 73 (n) pertaining to CEA reads as follows: 73. Functions and duties of Authority - The Authority shall perform such functions and duties as the Central Government may prescribe or direct, and in particular to -.. (n) advise the Appropriate Government and the Appropriate Commission on all technical matters relating to generation, transmission and distribution of electricity; 6.4. MSEDCL has rightly contended that the PPA between APML and MSEDCL has been approved by the Commission, and netting off for start-up power would tantamount to amendment of the PPA and would, therefore, need the Commission s approval. Therefore, implementation of the CEA decision, which would require amending the terms of the PPA, would require approval of the Commission. Even MSEDCL is agreeing with the settled position that the Commission is empowered to amend/alter the provisions of the PPA. MERC Order Case No.139 of 2014 Page 8 of 12

9 6.5. In Appeal No. 166 of 2010 (Chhattisgarh State Power Transmission Co. Ltd. Vs. RR Energy Ltd. & Ors.), the Appellate Tribunal for Electricity (ATE) has held that a generating company drawing start-up power from a Distribution Licensee cannot be treated as a consumer since consumption of start-up power is temporary and intermittent in nature, and is supplied for benefit of the Distribution Licensee only. This decision is squarely applicable to the present case. The Commission has already held in its Order in Case No. 37 of 2011 that allowing netting off arrangement to MSPGCL and RGPPL and denying it to APML and other private sector generating stations would amount to discrimination and cannot be allowed. MSEDCL s contention that the PPA with APML is pursuant to competitive bidding and that of MSPGCL and RGPPL were on a cost plus basis is of no consequence. The ultimate beneficiary in both cases is MSEDCL and, therefore, they form the same class of generating stations receiving start up power from MSEDCL and making payment to it This is also clear from the Judgment cited earlier [para above], where the UERC, relying on Regulation 58 of its Tariff Regulations, 2011 held that, in case electricity generated from a plant is sold to the Distribution Licensee, the electricity procured by the generating station from that Licensee to meet its requirement of startup power will be adjusted from the electricity sold to it. MSEDCL is well aware that netting off arrangement is applicable to generating stations having PPA executed based on Competitive Bidding Guidelines such as CGPL. Commission s Analysis and Ruling 7. This matter arises from the Commission s Order on APML s earlier Petition in Case No. 51 of 2013 seeking adjustment of start-up power given to its generating Units by MSEDCL against the power supplied by APML under PPAs, the application of Industrial tariff to such power, and related reliefs. The relevant part of the Order dated 3 February, 2014 reads as follows: 24. Regarding the issues at (B) i.e. tariff applicable for the start-up power consumption of the generation plant, the Petitioner has submitted that as per Article 11.9 of the executed PPA, the MSEDCL is required to provide start-up power at the rate of tariff applicable to the Industrial category. However, the Respondent, MSEDCL is levying Commercial tariff for them. On this issue MSEDCL has submitted that the said Article 11.9 of the PPA does not provide for billing of start-up power as per industrial tariff. The tariff is applicable as per the actual usage of Industrial consumer. It is further MERC Order Case No.139 of 2014 Page 9 of 12

10 submitted that as the contention of the Petitioner is purely commercial, the only category within which the Petitioner could be classified is HT-II Commercial. 25. The above said Article 11.9 of the executed PPA regarding start-up power is reproduced below: 11.9 Payment for Start up Power - The Seller shall be liable to pay, for the power and energy consumed for start-up of the project and commissioning, to the distribution Licensee(s) in whose area the Project is located or such other entity from whom such power/energy is sourced, at the then prevalent rates payable by such industrial consumers. The above clause of the executed PPA which has been approved by this Commission has very clear provision regarding payment of the start-up power consumption at the rate of tariff payable by industrial consumers. 26. Regarding, MSEDCL submission of commercial nature of the power plant, the Commission observed that the power plant is an industrial premises where in fuel and water are used as an input to generate the electricity. Further, power plants are basic element of the electricity supply chain where electricity is generated. Thus, the start-up power consumption by such power plants which is used for starting of the power plant auxiliaries so that the electricity generation can be started should be treated as Industrial purpose only. Hence, in consonance with the Article 11.9 of the executed PPA, the Commission directs the MSEDCL to apply the tariff of Industrial category to the start-up power consumption of the Petitioner s generating plant and also revise the earlier energy bills to that effect and credits the excess collected amount in the upcoming bills of the Petitioner. 27. The Petitioner has further requested for netting arrangement for start-up power consumption. The Petitioner has also mentioned about the Hon ble ATE Judgment in Appeal No. 166 of 2010 wherein it is ruled that power plants consuming the start-up power for generating the electricity cannot be termed as the consumer in the Electricity Act, The Hon ble ATE in its above Judgment [in Appeal No. 166 of 2010] ruled that a generator taking start-up power from distribution licensee and supplying power to same licensee on startup, cannot be termed as a consumer. However, Hon ble ATE does not specify the methodology for accounting such startup power consumption of the generators CEA in its letter dated 7 March, 2013 recommended for categorising the start-up power under Unscheduled Interchange (UI) mechanism. However, frequency based UI mechanism which is applicable at National level is not applicable in the State of MERC Order Case No.139 of 2014 Page 10 of 12

11 Maharashtra. Maharashtra has adopted Balancing Settlement Mechanism wherein generators are not pool participant. Therefore, it is difficult to adopt the advice given by the CEA for the State of Maharashtra. Therefore, both the parties are required to once again approach the CEA on the issue of treatment of start-up power of the generating plant. Till such time, the start-up power consumption of the generating plant of the Petitioner should be billed as per the tariff applicable to industrial category as per Article 11.9 of executed PPA. 8. Accordingly, APML approached the CEA, and has now reverted to the Commission with CEA s response dated 15 July, 2014, which is as follows: (i) The start-up power in State of Maharashtra where the Deviations Settlement Mechanism is not applicable may be categorized under the Balancing Settlement Mechanism i.e. netting up of power as also followed in cased of Generating Stations of MAHAGENCO and RGGPL (observed by the Commission in the order passed under case no. 37 of 2011). (ii) Wherein only one unit and part of units are requiring start-up power, the same may be drawn from the other operating units of the station. (iii) The Authority also suggested that the starting of the unit in case of grid disturbance be treated differently from normal start of units of the generating stations. The earlier advice given by the Authority shall continue to hold good for the States where the intra-state ABT (the Deviations Settlement Mechanism) is applicable. 9. The Commission had directed that CEA be approached regarding the treatment of start-up power for the generating plant since it is an apex technical body with a national perspective and, as such, would be the appropriate entity to set the guiding principles for the purpose. The context in which the reference was to be made was one in which the generator (APML in this case) and the Distribution Licensee (MSEDCL) providing start up power were bound through PPAs based on the MoP s Competitive Bidding Guidelines and which specifically provided a dispensation for the treatment and tariff for start up power. The Commission notes that the reference made to CEA by APML on 13 March, 2014 did not explicitly set out Article 11.9 of the PPA (although it did mention that long-term PPAs had been entered into under the Case-1 competitive bidding process, and a copy of the Commission s Order in Case No. 51 of 2013 was enclosed). The CEA advice is general in nature and does not address that context. 10. Article 11.9 of the PPA between APML and MSEDCL is in accordance with the provision for start up power in the Model PPA drawn up by MoP along with the Competitive Bidding Guidelines and Standard Bid Documents in terms of Section 63 of the EA, It may be MERC Order Case No.139 of 2014 Page 11 of 12

12 mentioned that, in its Order dated 24 January, 2008 in Case No. 38 of 2007 and subsequent Orders, the Commission had dealt with the Revised Bid Documents presented by MSEDCL for Case 1 competitive bidding and certain deviations proposed, and that M/s Adani Power Ltd. (APML s predecessor entity) had also participated in those proceedings. The Petitioner had an opportunity to raise the issue of netting off startup power during that proceeding. However, APML did not contest this issue during that hearing and even at the time of signing the PPA with MSEDCL. As a result, both parties have agreed to Article 11.9 and entire PPA. Article 11.9 of the PPA is binding on both APML and MSEDCL, both parties having expressed their consent by entering into and executing it. 11. APML has cited an Order of UERC dated 16 March, 2012 to support its contention that netting should be followed. However, in that matter the UERC relied on Clause 58 of its own Tariff Regulations, 2011 which provided for the treatment of start up power. Moreover, it did not involve any PPA based on competitive bidding. On the other hand, this Commission s Regulations and Tariff Order do not have any such provision. APML has also pointed out the dispensation for providing start up power by MSEDCL to RGPPL and MSPGCL, and the Commission s statement in its Order dated 20 July, 2011 in Case No. 37 of 2011 that discrimination between the two was not permissible. However, APML is not on the same footing as RGGPL and MSPGCL since power procurement from the latter was not based on competitive bidding under S. 63. At paras. 27 to 29 of its Order in Case No. 51 of 2013, the Commission has already dealt earlier with the ATE judgment in Appeal No. 166 of 2010 referred to by APML. Moreover, that judgment is not applicable to the facts of the present Case, where the parties have agreed to a particular Clause in relation to a PPA under Section In view of the foregoing, start up power shall be treated as per Article 11.9 of the PPA between MSEDCL and APML, as set out at paras. 26 and 33 of the Commission s earlier Order dated 3 February, 2014 in Case No. 51 of 2013 and in line with the Competitive Bidding Guidelines, the Standard Bid Documents and the Model PPA, without netting off power. The Petition of M/s Adani Power Maharashtra Ltd. in Case No. 139 of 2014 stands disposed of accordingly. Sd/- Sd/- Sd/- (Deepak Lad) (Azeez M. Khan) (Chandra Iyengar) Member Member Chairperson MERC Order Case No.139 of 2014 Page 12 of 12