RAJASTHAN ELECTRICITY REGULATORY COMMISSON JAIPUR

Transcription

1 RAJASTHAN ELECTRICITY REGULATORY COMMISSON JAIPUR In the matter of Renewable Energy (RE) obligation in the area of distribution licensee Quorum Mr. K.L.Vyas, Member Commenters/Suggesters: - 1. Birla Corporation Limited (BCL) 2. DCM Shriram Consolidated Limited (DSCL) 3. JK Cement Works (JKCW) 4. The Rajasthan Textiles Mills Association (RTMA) 5. Shree Cement Limited (SCL) 6. Shri D.S.Agarwal, Rudrakash Energy 7. Indian Wind Energy Association (InWEA) 8. Rajasthan Cement Manufacturers Ass. (RCMA) 9. JK Laxmi Cement (JKLM) 10. Binani Cement Limited (BCL) 11. Hindustan Zinc Limited (HZL) 12. Aditya Cement 13. The Employers Association of Rajasthan Date of hearing: Present:- 1. Sh.D.S.Agarwal on behalf of RCCI & Rudraksh 2. Sh. P.N.Bhandari, on behalf of RTMA, HJKLC, BCL, HZL, Aditya Cement 3. Sh. Brajesh Bhargawa, Jt.V.P.(Admn.), DSCL 4. Sh. S.S. Khandelwal, RCMA 5. Sh. S.R.G.Sabal, Dy.CE(RPPC) 6. Sh. D.D.Joshi, XEN (Comml.),Jodhpur VVNL 7. Sh. Amarjeet Singh, Dy. Manager (Admn.), DSCL 8. Sh. Kamal Godha, HZL 9. Sh. V.K.Kapoor, SR.Manager, Birla Corporation Ltd. 10. Sh. Ajit Pandit, InWEA. Date of order: ORDER 1. In pursuant to Sec 86(1) (e) of the Act, the Commission is required to specify a percentage of the total consumption of electricity in the area of a distribution licensee to be purchased from renewable energy sources. In the process, the Commission has already specified through regulations such percentage requirement for the distribution licensee so that major part of the electricity consumption in the area of licensee is covered to begin with. There thus remain other areas located within the 1

2 area of distribution licensee where the electricity is consumed over which the distribution licensee has no control to fulfil this statutory obligation. Such areas as identified are electricity drawn from captive power plants (CPP) and the electricity drawn by the open access consumers from generators or traders. The Commission has thus approved the draft regulations alongwith a consultation paper for prior publication in the newspapers inviting comments from the public and other stakeholders. Public notice alongwith draft regulations was published in the following news papers on the dates indicated against each. 1. Rashtradoot Dainik Bhaskar The documents were also placed on the RERC website. 2. The Commission received twelve comments within the specified date and one comment thereafter from various stakeholders as listed above. All have indicated their willingness to be heard in person during the hearing also. 3. The Employer s Association of Rajasthan has represented that two vacancies have occurred in Rajasthan Electricity Regulatory Commission due to superannuation or ending of term of chairperson and one of the Members. Thus, the Commission is manned by only one Member. The Rajasthan Electricity Regulatory Commission while three Member Commission have published following draft Regulations and a paper for rationalization of Tariff calling stake holders to submit their comments. a) Rajasthan Electricity Regulatory Commission (Renewable energy and co-generation/obligation)regulation,2006 b) Rajasthan Electricity Regulatory Commission (Fixation of trading margin)regulations,2007 c) Draft Paper of Rationalisation of Tariff. The Association has cited Section 92(2) & (3) of the Act and regulation 16(1) of the RERC (Conduct of Business) Regulations 2000 and requested that the proceedings before appropriate commission must be conducted by more that one member. They have further quoted regulation 16(1) of the RERC (Conduct of Business) Regulations 2000 that the quorum of the proceedings before the Commission shall be two. The Commission while manned by single Member should avoid taking up such draft Regulations for finalization. The association has requested the Commission to defer the hearing on above mentioned draft regulation till Commission acquire full strength. 2

3 The Commission has gone through the various provisions of the Act and states that the provisions of the Act are above the Regulations. The Commission notes that section 93 of the act is relevant and is reproduced here under: Sec 93. Vacancies, etc; not to invalidate proceedings:- No act or proceeding of the Appropriate Commission shall be questioned or shall be invalidated merely on the ground of existence of any vacancy or defect in the constitution of the Appropriate Commission. As such the Commission can function and decide the cases and matters, which are placed before it. In past also there had been two vacancies in the Commission and one man commission had decided the matter places before the Commission. 4. Sh. Brijesh Bhargava appeared on behalf of DCM Shriram Consolidated Limited (DSCL) in its written submission has stated that the proposed regulations are arbitrary and not in consonance with the provisions of the Act. He raised following main objections and reiterated/ elaborated the same during the hearing also citing judicial pronouncements. Other CPP owned industries also referred to similar objections in their submissions. It is thus considered proper to deal the main issues of DSCL individually first as under: - i) It is far in excess of the powers and functions conferred U/S 86 and 181 of the Act. ii) iii) iv) Only the Distribution licensee is obliged and can be compelled to purchase R.E, hence the proposed regulations are misinterpretation of Sec 86(1)(e) of the Act. Proposed regulations are contrary to NEP, Tariff Policy, and policy of State Government which contemplate for purchase of RE by distribution Licensee. Proposed regulations are contrary to the provisions of the Act in relation to CPP and against the provisions of the Act to encourage setting up of CPPs. v) As non-conventional energy is non- firm power, it can be sold only to Distribution Licensee. Answers to all these issues shall be clear from the analysis as dealt in subsequent para. 5. On perusal of these objections, the Commission observe that the key issues involved are whether the Commission s functions include enforcing consumption of R.E. by captive consumers and Open 3

4 Access (OA) consumers and in the event of failure to comply such minimum specified obligation to purchase RE by such consumers whether any surcharge linked to energy consumption can be imposed upon them. Answer is to be found from the provisions of the Act and in this regard careful study of the relevant sec 86(1) (e) of the Act, reproduced below has to be done: - Functions of State Commission (1) The State Commission shall discharge the following functions; normally (e) promote cogeneration and generation of the electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee; 6. Under sec.86 (1) of the Act various functions have been assigned to the Commission of which one of the functions is as specified at sub section (e) above. There is no categorization of these functions e.g. basic function, primary function, or secondary functionaries. All functions of the Commission have been distinctly listed under this section. It is not proper to state that the function of the Commission is restricted to that specified u/s 86(1)(b) only describing it as a basic function. Hence the argument advanced by DSCL does not have any force. 7. The relevant part of the stipulation u/s 86(1) (e) is. renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person. The legislature has clearly understood the emphasis required for R.E. and therefore made the provision for connectivity with the grid such that RE so generated gets facilitatory mechanism specified by the Commission for access in the grid. It seems the legislature were aware that the R.E., may not compete with the conventional power and, therefore, to promote R.E. a statutory provision made in the Act under which the grid connectivity problem was resolved. The provision also states sale of electricity to any person such that R.E. so generated is allowed to be sold to any person. Here again the emphasis is on any person to be noted. The term person has very wide meaning as has been defined in the Act and includes any company or corporate body or association or body of individuals or artificial juridical person. As such with regulatory mechanism suitable measures are to be provided so that R.E. can be sold to any person and not to distribution licensee alone. The proposed regulation is thus one such measure for providing consumption/use of R.E. by any person i.e. captive/oa consumers, so that the specified 4

5 percentage of the total consumption of electricity by the Commission is achieved. As such any directions/order/regulations, under the provision of the Act, as may be issued by the Commission have a legal force. Any person who contravenes or there is noncompliance of any directions or orders of the Commission, the Commission is empowered with enforcement mechanism of imposing punishment as provided under section 142 & 146 of the Act, reproduced below; Sec 142:- Punishment for non-compliance of directions by Appropriate Commission:- In case any complaint is filed before the Appropriate Commission by any person or if that Commission is satisfied that any person has contravened any of the provisions of this Act or the rules or regulation made thereunder, or any direction issued by the Commission, the Appropriate Commission may after giving such persons an opportunity of being heard in the matter, by order in writing, direct that, without prejudice to any other penalty to which he may be liable under this Act, such person shall pay, by way of penalty, which shall not exceed one lakh rupees for each contravention and in case of a continuing failure with an additional penalty which may extend to six thousand rupee for every day during which the failure continues after contravention of the first such direction. Sec 146:- Punishment for non-compliance of orders or directions:- Whoever, fails to comply with any order or direction given under this Act, within such time as may be specified in the said order or direction or contravenes or attempts or abets the contravention of any of the provisions of this Act or any rules or regulation made thereunder, shall be punishable with imprisonment for a term which may extend to three months or with fine which may extend to one lakh rupees, or with both in respect of each offence and in the case of a continuing failure, with an additional fine which may extend to five thousand rupees for every day during which the failure continues after conviction of the first such offence. In view of the above it is held that the proposed regulations are well within the provisions of the Act and have legal force. 8. As regards purchase of RE only by the consumers of distribution licensee is concerned, it is stated that they are meeting this obligation by way of purchase from distribution licensee, who in turn is purchasing R.E. directly from the generating company. Here it is worth mentioning that this stipulation is to specify a percentage of total consumption in the area of distribution licensee. The spirit of the Act and the relevant provision is thus clear that such percentage has 5

6 to be specified on the total consumption of electricity and not the consumption as a consequence of sale by distribution licensee only. The word licensee assumes importance because the distribution licensee has been endowed with the responsibility of universal supply obligation in the area. Had this power been not arranged by the CPP or through open access then as per the supply obligation this power should have to be supplied by the licensee and in such a case the purchase of R.E. obligation is not disputed. With this analogy the word licensee area is important and attracts the provision of R.E. obligation and consumption of electricity. There can not be any discrimination amongst normal consumers & captive/o.a consumers, so far as the share of R.E. consumption is concerned. This leaves no doubt about the intent of the legislative of prescribing the clause total consumption in the area of licensee in the Act. 9. The Act does not prescribe any restriction on generation of electricity, as such no license or permission is required for electricity generation whether conventional or non-conventional or R.E. The generator can sell electricity to any person other than licensee directly under O.A. at mutually agreed rate but if sold to a licensee the rates shall be determined by the Commission. As a promotional measure, the O.A. mechanism for sale of R.E. as specified by the Commission is very liberal, under which the wheeling charges are 50% of normal charges, the loss levels for wheeling consideration are restricted to 33 kv level only and surcharge computation mechanism is such that it works out to be of insignificant value. As the Act provides for non- discriminatory O.A. it is therefore mandatory that the regular consumer of the distribution licensee as well as captive/o.a. consumers have to fulfill the R.E. obligation without discrimination. The intent of the legislature is clear that all consumption of electricity whether by normal consumer of distribution licensee or the captive/o.a. consumers cannot be allowed to pollute the environment beyond a certain limit without sharing the use of R.E. Only the regular consumers of distribution licensee can not be called upon to bear the RE obligation of the electricity in the area of their licensee as this burden is taken by their supplier i.e. his distribution licensee. The relevant excerpts from the order issued by Maharashtra Electricity Regulatory Commission in this regard are reproduced as below: :- Accordingly, the Commission rules that every Eligible Person will have to procure electricity generated from eligible renewable energy sources at the percentages specified below of its total consumption of electricity within the area of a distribution licensee. Eligible Persons or Entities covered under RPS have been discussed subsequently. 6

7 Table: RPS Percentage Specification * Percentage RPS denotes Minimum Quantum of purchase from RE sources. Year Renewable Purchase Specification (RPS)* % % % % :- For the purpose of this RPS regime, for every Distribution Licensee, total consumption in its area of supply would mean energy purchased by the distribution licensee from all sources for the purpose of supply within its area of supply including quantum of energy supplied to open access and captive consumers. Similarly, for every OA consumer and Captive Consumer, above RPS percentage specification shall be applicable on that part of the consumption which is being generated from conventional generation or procured from any source other than the local distribution licensee in whose area of supply the consumer is located :- Eligible Persons: the minimum percentage as specified under clause of this order shall be applicable to all existing and future distribution licensee in Maharashtra as well as to open access users and captive consumers :- The Commission concurs with the suggestion made by Prayas that enforcement mechanism should be introduced gradually, especially when RPS framework is still evolving. Accordingly, the Commission rules that during the first year of RPS operating framework, i.e , there shall not be any charge towards enforcement. However, the eligible persons shall be liable to pay at the rate of Rs per unit of shortfall in , Rs.6.00 per unit of shortfall in , and Rs per unit of shortfall for Further, it is renewable energy procurement will not be allowed as pass through expenses in their Annual Revenue Requirement. 10. The Commission vide amendment in the RERC (Power Purchase and Procurement process of Distribution Licensee (First amendment) Regulations 2006 notified in official Gazette on has already specified minimum RE purchase during the year and maximum RE purchase percentages for which PPAs can be executed (not subject to penal provision) by the distribution licensee relevant extract is placed below:- (i) For wind energy:- 7

8 Year Minimum energy purchase percentage during the year Maximum energy purchase percentage for the Power Purchase Agreements by year end (not subject to penal provision) % 5.0% % 6.0% % 7.0% % 7.50% % 8.00% % 8.50% (ii) For Biomass energy:- Year Minimum energy purchase percentage during the year Maximum energy purchase percentage for the Power Purchase Agreements by year end (not subject to penal provision) % 1.0% % 1.75% % 2.50% % 2.95% % 3.25% % 3.50% (iii) For Non-Firm solar energy ( including PV System):- Specific minimum power purchase percentage shall be specified after commissioning of 50 MW capacity power plants in Rajasthan. (iv) For others:- Specific power purchase percentage shall be considered after commissioning of 25 MW capacity power plants in Rajasthan. Similar Purchase obligations are required for users of electricity from CPP and Open Access consumers for which the present attempt has been made. 11. Another issue is about the application of surcharge herewith to be called as R.E. Surcharge on captive/o.a. consumers. During hearing Sh. Brajesh Bhargava cited the following Supreme Court judgments and argued that no surcharge can be levied: A. Venkata Subharao V/s State of Andhra Pradesh B. Real food products Ltd & others V/s APSEB.(Civil appeal 3511=21 of 1993) C. Nagrik Upbhokta Manch V/s Union of India and others. (Civil Appeal 3242 of 2002) These citations are remotely related in the present context. The first one is the case of setting rate of procuring the food grain under a contract with the Government, whereas through Govt. order the excess profit due to increased rate was described as surcharge to be paid to Government, is thus totally not relevant here. 8

9 The Second case is about the direction issued by the Government to APSEB in public interest under E(S) Act 1948 wherein the Government could issue policy directive only and not to specify tariff and hence is not relevant here. In this case the subject mater is to cast the responsibility to consume a certain percentage of renewable energy only. Third case is for the notification about rounding of the rates of essential commodities i.e. kerosene and creating this extra sum in new fund. This notification issued by the Govt. was without authority and not relevant in this case. 12. The Commission states that as per provision of the Act, it has facilitated the promotion of R.E. by way of providing connectivity with the grid with suitable measures. Such measures do require investment by the State Transmission Utility STU to meet this statutory requirement over and above the normal viability criteria to be followed for planning new system by the STU. The Commission is to allow its expenses in the annual revenue requirement of the STU, which is to be recovered in some form for whom such facility has been created. It is thus proper that such mode of recovery by STU from defaulting persons in the form, termed as R.E. surcharge, is nothing but a part of transmission tariff. Surcharge is already being levied from the consumer in one form or other as a part of tariff e.g. late payment surcharge, power factor surcharge, fuel surcharge etc. similarly there are various rebates e.g. voltage rebate, power factor rebate, PLF rebate etc are forming part of tariff mechanism. 13. In view of the above submissions, one can not say that only the cross-subsidy surcharge can be determined by the Commission. In this regard, the Supreme Court s decision in the case of Bisra Stone lime V/s OSED AIR 1976 SC 127 is relevant wherein it has been held that Surcharge stands for an additional or extra charge or payment (see Oxford English Dictionary). Surcharge is thus super added charge, a charge over and above the usual or current dues it is in substance an additional to the stipulated rates or tariff. The nomenclature, therefore, does not alter the position, enhancement of the rates by way of surcharge is well within powers of the Board to fix on review the rates of tariff under the provision of the Act. 14. In so far as determination of tariff is concerned, with the Electricity Act 2003 coming into effect, the powers are now vested with Electricity Regulatory Commission. The section 39(2) of the Act has 9

10 mandated the STU with the functions, to be carried out, which include among others as under: - (2) The functions of the State Transmission Utility shall be- (a) To undertake transmission of electricity through intra-state transmission system; (b) To discharge all functions of planning and co-ordination relating to intra-state transmission system with- (i) Central Transmission Utility; (ii) State Government; (iii) Generating companies; (iv) Regional Power Commission; (v) Authority; (vi) Licensees; (vii) Any other powers notified by the State Government in the behalf; (c) To ensure development of an efficient coordinated and economical system of intra-state transmission lines for smooth flow of electricity from a generating station to the load centers; (d) To provide non-discriminatory open access to its transmission system for use by- (i) any licensee or generating company on payment of the transmission charges, or (ii) any consumer as and when such open access is provided by the State Commission under sub-section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be specified by the State Commission. 15. The Commission has also directed the STU to undertake this responsibility as additional responsibility as brought out in paras 40 to 42 of the order dated in the matter of power purchase from nonconventional energy sources in Rajasthan. Thus the STU in carrying out its functions, and under the direction of the Commission, has not only to plan and create facility of transmission services within the State commensurate with the potential of RE in the State, which can be harnessed in phased manner but also as per development of RE in different parts of the State in coordination with RREC and percentage of total energy consumption specified by the Commission to be purchased from RE. The nodal agency for development of RE in the State i.e. RREC has thus been directed to be included in policy making committee i.e. State Power Committee to ensure proper and required transmission as planned for grid connectivity with RE based power plants is created and maintained by the STU, so that this statutory requirement U/s 86(1)(e) of the Act about providing suitable measures for connectivity with the grid is complied. 10

11 16. It is thus clear that the services are created and made available by the STU for use by the stakeholder. It is irrelevant whether such services so created by the STU are fully made use of by the Captive power plant users or of users for transmission or wheeling of energy or kept-spare by them as unused. In any case suitable compensation for creating/providing these services and also maintaining them in good condition have to be given to the STU. Such compensation does take into account its depreciation, O&M expenses and interest payment liability etc. to be serviced by the STU. Since, for providing of such services, the STU is to be suitably compensated by all for whom such services have been created which include the users of captive power and open access power also. If the users of captive power and OA power are not called upon to share their part of the compensation then this additional burden would fall on the general consumers who are already bearing their share of R.E. Obligation through their licensee. It is thus necessary for CPP/OA users to have their share of RE consumed and make use of the system provided for them else pay for the penal charges i.e. RE surcharge. 17. Another submission made by DSCL is about the sufficient captive capacity already available to meet their industries requirement fully and hence there is no shortfall or gap which they can make-up from R.E. The Commission has already considered this aspect and state that this situation may be equally applicable for self-sufficient distribution licensee also on whom specified R.E. obligation has been enforced. In complying such obligation by the CPP for their industrial units their consumption of electricity from the RE shall replace their conventional energy, and to that extent the consumption of conventional fuel shall also get reduced. This principle applies equally to all those who consume electricity without any distinction whether it is from licensee or CPP or IPP. The Act does not provide any relaxation or exemption on consumption of RE by any person consuming electricity from CPP or OA. Hypothetically, if it is assumed that the industries with CPP are not required to consume RE under obligation then the basic spirit of this Act shall be defeated and all industries may embark upon Captive Power Plant or through OA giving rise to dispersed emission pollution and depletion of conventional fuel faster, which goes not only against the promotional efforts made for growth and use of R.E., but against the spirit of the legislature also. The Commission states that adequate captive capacity with the CPP cannot be an excuse for any relaxation or exemption for RE purchase obligation. 18. The submission made by DSCL that the Non conventional energy being non-firm is incapable of being sold to any industry under an agreement and these can be sold to the Distribution licensee only is not tenable. 11

12 Under the provision of the Act the open access in transmission of electricity is allowed from day one, which can be exercised by any generating company, licensee or consumer. The Commission, with a view to promote the use of RE within the state, has already specified liberal and relaxed norms for wheeling of R.E. for captive use or third party sale. All RE is not non-firm in nature, however the wind/ solar power which are unpredictable being dependant upon nature have been considered non-firm and the Commission has already allowed/permitted facility of banking of energy for different form of R.E. The industry can set up its own captive RE power plant to meet RE obligation and avail the facilitatory provisions of banking. Alternatively the industries can purchase from RE producers or can request Discoms to assign their PPAs in their favour. Thus the argument made by DSCL that the use of RE is non-firm & difficult can not be accepted by any means. 19. The submissions made by DSCL that for wheeling of RE, there will be exorbitant charges towards cross-subsidy and wheeling charge also does not seem to be based on supporting documents. As already stated in earlier para, the Commission, with a view to promote consumption of RE in the State, have specified the wheeling charges for RE as 50% of those specified for wheeling of conventional energy and the cross-subsidy surcharge for industrial category of consumers may work out to be less than 15 P/kwh for wind energy and 2P/kwh for biomass energy as against 72 P/kwh for conventional energy during These are, thus mere apprehensions and cannot be agreed to. Attracting the doctrine of promissory- estoppels and equitable estoppels as submitted by DSCL is also not applicable as the DSCL has neither submitted any evidence or supporting document which state that they are exempted from the use of RE obligation under the provisions of the Act There is no distinction between a CPP connected to the grid & any other generating company from whom power is purchased by the distribution licensee in so far as regulating it s supply from the grid is concerned i.e. the states transmission system. Similarly consumption of electricity is no different whether it is from captive power plant or from any other generating company. Even the supply of electricity by a captive power plant to the distribution licensee attracts R.E. purchase obligation and there has to be no discrimination if it is consumed directly by the industrial unit. 20. On perusal of written submissions made by Aditya Cement, (Chittorgarh), The Rajasthan Textile Mills Association (Jaipur), Binani Cement Ltd., (Jaipur), Hindustan Zinc Ltd (Udaipur) and J.K. Laxmi Cement, it is observed that these submissions are identical in nature and represented through their common counsel Sh. P. N. Bhandari. 12

13 Most of the issues raised therein are similar to those raised by DSCL as have been discussed in preceding para. A reference of tariff policy provision clause 6.4 was cited that the role of the Commission about specifying minimum percentage of R.E. keeping in view it s availability and impact on retail tariff only. The required percentage has been specified by the Commission, keeping in view the total potential of R.E. available in the State and development that has taken place by way of various promotional measures adopted and concessions given by State through a notified nodal agency i.e. RREC. The industries who are meeting their requirement of power partly or wholly from CPP or from any other generator through open access the tariff for supply of electricity is not required to be determined by the Commission, are free to meet their obligatory requirement of R.E from their captive power plant of RE source or may purchase RE from any generating company without getting the tariff determined from the Commission. In both the cases, the transmission charges shall be payable as determined by the Commission. The tariff policy laid emphasis on impact on retail tariff for meeting R.E. obligation is thus based on the fact that the Commission s function is to determine tariff for supply to distribution licensee or for retail supply. Since a generator can supply directly to any consumer at mutually agreed tariff/rate the Commission is not required to interfere in such cases & hence the tariff policy do not interfere the transactions between the generator and consumer. It is assumed that with a specified purchase obligation of R.E. the implication on retail tariff shall be no different for the electricity consumed by the industrial unit from its CPP as such parity shall be maintained amongst all whosoever consumes electricity. 21. Various argument about the status of CPP was highlighted by Sh. Bhandari and submitted that one who buys power should only be called upon to bear this obligation and stand alone CPP should not be forced to get connected with the grid. The position in this regard is clear from the Act which relates to the consumption of electricity. It is immaterial if it is CPP or any other generator. The Commission states that connectivity of CPP with this grid is not necessary to fulfill RE obligation. RE can also be generated off grid by the user of electricity from CPP and can be used along with it. 22. Sh. Bhandari has further submitted that by meeting the R.E. obligation they have to reduce their generation from C.P.P. over and above the reduction on account of meeting minimum consumption requirement. It is stated that this aspect, however, has already been dealt in earlier para on the apprehension raised by DSCL. 13

14 23. Birla corporation Ltd., in its submission stated that they are partly consuming electricity from Ajmer VVNL and party from their CPP of 27 MW capacity and, therefore, should not be called upon for RE purchase obligation as this is against the policy and this would discourage setting up of captive power plant. The Commission has noted that it has not been stated whether the partly consumption from distribution licensee is intended to cause exemption on the other consumption of electricity supplied from CPP. The Commission states that a meagre quantity of electricity consumption from distribution licensee should not be a cause for exemption to purchase RE as this would lead to evasion tactics and discourage RE development and clarify that this RE purchase obligation is for the electricity supplied by CPP/ OA only. Birla Corporation Ltd. may consider adopting cogeneration in their industrial unit to meet its RE obligation or may setup their other captive power plants for generating RE instead of their captive power depending wholly on conventional fuel. 24. J.K. Cement works and Shree Cement Ltd. (SCL) also made their submission on the plea that many entrepreneurs set up their industrial unit close to raw material sources where connectivity with the grid is not available and hence the R.E, obligation is not justified. Another submission is for promoting waste heat recovery based power project. The Commission has observed that they could not substantiate their submission by quoting name of any such industry where transmission system is not available or cannot be provided such as Ras. The Commission states that to provide grid connectivity is the prime responsibility of STU under the provisions of the Act and there seems no difficulty in extending grid network to Ras. Another submission is for promoting waste heat recovery based power project and prayed it to be classified as RE power project. The Commission states that waste heat recovery from the industrial plant has already been classified as cogeneration project and thus falls under the category of RE power projects. Any consumption of electricity from such cogeneration qualify to be of R.E. as part of obligation. 25. Shri D.S. Agarwal of Rudraksh Trade Links, Jaipur submitted during the hearing that the proposed regulation on purchase obligation of RE is a welcome step whatever may be the percentage prescribed depending upon the potential of RE within the State. He suggested that the default payment mechanism should be through distribution licensee for ease in transaction. Sh. Rajiv Swarup on behalf of RREC and State Govt. stated that any action to promote RE development in the State should be encouraged in any form. Sh. Agarwal in his written comments submitted that the proposed surcharge implication on failure to meet RE purchase obligation work out to be 20P/kwh to be 14

15 deposited to STU may discourage availing open access and suggested for some practical and simple procedure such that open access consumer can take specified percentage of RE from generator, at the rate on which distribution company is purchasing. The Commission states that the implication of default or non-compliance of this obligation should not be considered as a regular course. In case of default the penal provisions have to be higher otherwise everybody would go for default defeating the promotional measures. The Maharashtra Electricity Regulatory Commission have specified Rs.5, Rs. 6. & Rs. 7 per unit for , , respectively. 26. Rajasthan Cement Manufacturers Association made their submission stating that since CPP is not a consumer as defined in the Act hence SERC is not empowered to cast such obligation and requested that the generation of electricity by waste heat recovery/cogeneration should qualify as RE. Similar submission was made by Birla Corporation Ltd. The Commission has held that as dealt in earlier para and further clarifies that the electricity generation of waste heat recovery/cogeneration has been considered and categorized as RE. The Industries may exploit this potential to meet their obligatory requirement in part or full. 27. Shri Ajit Pandit from InWEA argued that the definition of consumer is very wide in the act and the impact by the use of it may be positive or negative. The total consumption of electricity referred to in the Act is for within the area of licensee irrespective of who supplies this power. He further submitted that MERC and APERC have already specified such purchase obligation on use of CPP/OA power. Maharashtra ERC have specified penal provision also for those who fail to comply with the requirement and requested that there should be some enforcement mechanism for strict compliance of this obligation. He further stated that on the order of MERC a legal opinion was sought from Justice G. B. Patnaik on: a. Whether obligation to purchase renewable energy be applied to open access and captive consumers in addition to distribution companies? b. Whether the order of Maharashtra Electricity Regulatory Commission in case No. 6 of 2006 dated is in accordance with law and has properly interpreted Section 86 (1) (e) of the Act? The concluding opinion is reproduced as under: In this view of the matter an analysis of the different provisions of the Act and bearing in mind the Tariff Policy as well as the Electricity policy, I am of the opinion that Section 86 (1) (e) should not be construed narrowly by way of excluding the open access users and the captive users, but should be construed beneficial and allowing the provision to have its full play by taking into account the captive users as well as open access users within the area of a distribution licensee along with the users from 15

16 the said licensee for determining a percentage of total consumption of electricity in the area. So far as the 2 nd query is concerned, on going through the order of the Maharashtra regulatory Commission and for the reasons indicated in answering the query No. 1 I am firmly of the view that the said order is in accordance with law and the Commission has reached the right conclusion on indepth analysis of provisions of the Act as well as bearing in mind the true legislative intent. 28. The Commission decides that the draft regulations published for inviting public comments is approved with changes in regulation 4 & 5 as under: 4.Renewable Energy Obligation (RE Obligation) (1) The RE Obligation shall be applicable on the electricity drawn from the CPP and through Open Access. (2) RE Obligation for the minimum purchase of RE shall be as under: S.No. Year Obligation expressed as % age of total energy drawn other than from distribution licensee % % % % % (3) The RE Obligation for a distribution licensee including deemed licensee shall be governed by the Rajasthan Electricity Regulatory Commission (Power purchase & procurement process of distribution licensee) Regulations, Payment of Renewable Energy surcharge for Short fall in Obligation (1) Any short fall to meet the RE obligation shall be subject to payment of RE surcharge by the distribution licensee, open access consumer and Captive Power Plant. The payment of renewable energy surcharge shall be made to State Transmission Utility (STU). (2) The surcharge collected by STU will be credited to a fund to be utilized for creation of transmission system infrastructure of Renewable Energy power plants. (3) RE surcharge shall be as notified by the Commission from time to time. For the year the RE surcharge shall be Rs. 3.59/ kwh and shall continue until revised 29. The Commission directs that the copies of the order be sent to objectors and Government of Rajasthan. 16 (K. L. Vyas) Member

17 17