BEFORE THE HARYANA ELECTRICITY REGULATORY … · 2017-10-25 · That the cost of Renewable Energy...

1 | P a g e

BEFORE THE HARYANA ELECTRICITY REGULATORY COMMISSION - PANCHKULA

Case No. HERC/PRO - 37 of 2016

Date of Hearing : 17. 07. 2017 Date of Order : 18 .10. 2017

In the Matter of

Petition / Application under section 86 (1) (b) of the Electricity Act, 2003 for approval of the

Commission for procuring short term non-solar RE power under RPO for the FY 2016-17

from Himachal Pradesh State Electricity Board (HPSEB) through Inter-State trading licensee

i.e. M/s Mittal Power Processor Pvt. Ltd. (MPPL).

Petitioner

Haryana Power Purchase Centre, Panchkula

Present On behalf of the Petitioner

1. Mr. U.K. Aggarwal, SE, HPPC 2. Mr. Neeraj Sharma, SE, HPPC 3. Mr. Rajiv Mishra, Xen, HPPC 4. Ms. Randhir Singh, AE, HPPC

Quorum

Shri Jagjeet Singh, Chairman

Shri M.S. Puri, Member

Shri Debashish Majumdar, Member

ORDER

Brief Background of the Case

1. HPPC has filed the present petition seeking approval for the procurement of Non-

solar RE Power from HPSEBL through MPPL to fulfill the non solar Renewable Purchase

Obligation (RPO) targets fixed by the Commission for the FY 2016-17. The submission of

the petitioner is set out in the paragraphs that follow.

2. That in order to fulfill the RPO target as per the HERC RE Regulations in vogue, the

Steering Committee for Power Planning (SCPP), in its 38th meeting approved purchase of

power from Himachal Pradesh Govt. through M/s Mittal Power Processor Ltd.

2 | P a g e

3. That the petitioner authorized MPPL vide Office memo no.Ch-

168/CE/HPPC/SE/C&R-II/RE-power dated 01.03.2016 to participate in the tender/NIT of

HPSEBL for purchase of RE (Non-Solar) power on short term basis during the period from

April 2016 to March 2017.

4. That LOI has already been issued to MPPL for purchase of RE-Power (Non-Solar)

vide office memo no. Ch-174/CE/HPPC/SE/C&R-II/RE-power dated 22.03.2016 on short

term basis from HPSEBL as under:-

Month Period Time slot

Quantum at Delivery point i.e. HP Periphery (in MW)

Rate at delivery point including trading margin of Rs. 0.04 per kwh

Apr,2016 1st to 30

th RTC 25-75 4.70

May,2016 1st to 15

th RTC 25-150 4.70

16th to 31

st RTC 50-150 4.70

Jun,2016 1st to 30

th RTC 200-325 4.70

Jul,2016 1st to 31

st RTC 200-325 4.70

Aug, 2016 1st ot 31

st RTC 200-325 4.70

Sep,2016 1st to 15

th RTC 150-250 4.70

16th to 30

th RTC 100-250 4.70

Oct,2016 1st to 31

st RTC 50-100 4.70

Nove,2016 1st to 30

th RTC 50-100 4.70

Dec,2016 1st to 31

st RTC 50-100 4.70

Jan,2017 1st to 31

st RTC 50-100 4.70

Feb, 2017 1st to 28

th RTC 50-100 4.70

Mar,2017 1st to 31

st RTC 50-100 4.70

5. That the cost of Renewable Energy Certificates (REC) is approximately Rs. 1.50/-

per Unit and the approximate landed cost of the power at Haryana periphery, in the present

case, is Rs.5.55/- per unit. Thus the effective cost of instant power is about Rs.4.05/- per

Unit.

6. That the Commission, in various ARR Orders has pointed out the shortfall in meeting

RPO targets by the Discoms. It has been further submitted that the Commission vide its

Order dated 20.11.2013 in case no. HERC/RA-04 of 2012, HERC/RA-08 of 2012,

HERC/RA-11 of 2013 & HERC/PRO-30 of 2013 had allowed the Discoms to carry forward

the shortfall in the RPO compliance for the FY 2011-12, FY 2012-13 and FY 2013-14 on

actual basis, to the next financial year i.e. the shortfall should be met in the FY 2014-15 in

addition to the RPO for FY 2014-15. Thereafter in the ARR/Tariff Order of the FY 2015-16,

the Commission directed the Discoms to purchase renewable energy as per the RPO targets

for the FY 2015-16 and the shortfall carried forward, on actual basis, for previous years. In

case they can purchase the same at a tariff lower than determined by this Commission they

may do so, otherwise they must purchase all such power offered to them by the renewable

energy power producers at the tariff determined by the Commission.

3 | P a g e

7. That the Commission in its ARR Order dated 01.08.2016, had determined the RPO

targets for the FY 2016-17, as under:-

Energy Consumption for 2016-17 (MU)

%age of Non solar RPO of energy Consumption

Non solar RPO (MU)

Solar RPO as %age of energy sales

Solar RPO (MU)

Total renewable energy required to be purchased (MU)

46827.56 2.75% 1287.76 1% 468.28 1756.04

8. In view of the above, the Petitioner has prayed that the Commission may approve the

procurement of non-solar RE Power from HPSEBL through MPPL to fulfill the non solar RPO

targets fixed by the Commission for the FY 2016-17.

Proceedings in the Case

9. In order to take a reasoned view in the matter, the Commission, vide Memo No.

7414/HERC/ Tariff order 21.10.2016 , Memo. No. 8046-47/HERC/Tariff dated 24.11.2016

and Memo No. 8399-8400/HERC/Tariff dated 21.12.2016 and, sought certain additional

information from HPPC. The additional information sought by the Commission and HPPC’s

reply thereto is as under:-

i) Details of power procured through each trader (Month-wise quantity, Rate, Trading Margin

Paid source of power for FY 2013-14, 2014-15, 2015-16 & 2016-17 till date.

HPPC’s Reply:-

That the information of power procured from HPSEBL through MPPL has been

abstracted in the format as desired by HERC and tabulated as under:-

FY 2014-15 FY 2015-16 FY 2016-17

Month Qty

Supplied

(LU)

Rate/unit

including

MPPL’s trading

margin of Rs.

0.04/kWh

Qty

Supplied

(LU)

Rate/unit

including

MPPL’s trading

margin of Rs.

0.04/kWh

Qty Supplied

(LU)

Rate/unit

including MPPL’s

trading margin of

Rs. 0.04/kWh

April 0.000 0 0.000 0 299.832 4.70

May 0.000 0 0.000 0 749.940 4.70

June 0.000 0 623.129 4.70 2340.127 4.70

July 0.000 0 1117.174 4.70 2417.892 4.70

Aug 95.712 4.16 1116.300 4.70 2408.674 4.70

Sep 344.498 4.16 720.418 4.70 1799.851 4.70

Oct 0.000 0 372.180 4.70

Nov. 0.000 0 780.967 4.70

Dec 381.379 4.70 1117.524 4.70

Jan 534.602 4.70 974.100 4.70

Feb 503.635 4.70 320.012 4.70

Mar 557.635 4.70 185.724 4.70

Note: No power procured on short term basis from HPSEBL through MPPL for the FY 2013-14

4 | P a g e

ii) Whether power is procured on short term basis or long term basis?

HPPC’s Reply

That the power was procured on short term basis.

iii) Whether approval of the Commission is required or not?

HPPC’s Reply

That the above mentioned non-solar RE power for the FY 2014-15, FY15-16 & FY2016-17

have been procured on short term basis. There is no provision under which approval is

required for purchase of short term power as per RE Regulation-2010. Also, there are

various directives from the commission to fulfil the RPO targets. As, such the cases for

procurement of short term power for FY 2014-15, FY-15-16 were not sent to HERC for

approval. However, for procurement of non-solar RE power on short term basis for FY

2016-17, petition has been filed in HERC on 26.10.2016 for approval.

iv) Whether the power so procured qualified for RPO?

HPPC’s Reply

Power procured from HPSEBL through MPPL qualifies for the RPO requirement.

v. Himachal Pradesh State Electricity Board has issued LOI to M/s MPPL on 18.03.2016

stating “Rate at delivery point including Trading Margin of MPPL @ 2 Paise/kWh = Rs.

4.66 per kWh”. However, M/s MPPL in its letter dated 21.03.2016 addressed to HPPC has

mentioned that “HPSEBL has issued LoI for sale for renewable power during the period

from April 2016 to March 2017 as per details given below…… Rate at delivery point

including Trading Margin (Paise/kWh) = Rs. 4.70 per kWh”. Please submit the reasons for

increase in such trading margin from 2 Paise in the original LoI of HPSEBL to 6 Paise in

the LoI letter from M/s MPPL.

HPPC’s Reply

CERC regulation dated 12.01.2010 regarding the new trading margin is reproduced

as under:-

5 | P a g e

“Trading margin shall not exceed 4 paise per unit if the sell price of electricity is less

than or equal to Rs. 3/unit. The ceiling of trading margin shall be 7 paise/unit in case

the sell price of electricity exceeds Rs. 3/unit.”

M/s MPPL is charging the trading margin @ 2 Paise/kWh from HPSEBL & @ 4

Paise/kWh from HPPC:-

i. The MPPL deposited earnest money of Rs. 2 crores in the form of demand

draft/bank guarantee to HPSEBL as Security Deposit (EMD) on behalf of HPPC.

ii. The MPPL deposited CPG within 10 days of issuance of LOI for an amount of Rs.

3 lacs/MW quantum of bid and the CPG was to be released after completion of

contract period on behalf of HPPC.

M/s MPPL is bearing the cost of earnest money & CPG etc. as such the trading

margin of 4 Paise/kWh from HPPC seems to be justified and is less than the ceiling limit of 7

paisa per unit.

vi. Clause no. 21.2 of HERC (conditions of License for Distribution and Retail Supply

Business) Regulations, 2004 specifies as under:-

“The Licensee shall not purchase electrical capacity and/or energy without

approval of the Commission under the terms of condition 21.1 except in case

of short term purchases for less than 6 months at a rate not more that the

bulk supply rate approved by the Commission.

In view of the above, HPPC may submit whether any such purchase was made prior to April,

2016 and if so, whether any approval of the Commission was obtained?

HPPC’s Reply

The instant power is RE power from small hydro which is governed by RE Regulation 2010.

As per RE Regulation-2010 there is no provision under which approval is required for

purchase of short term power. Also, there are various directives from the commission to fulfil

the RPO targets. It has been submitted that RE power was also procured prior to April 2016

for which details have already been submitted to the Commission vide this office memo no.

Ch-04/CE/HPPC/SE/C&R-I/loose dated 30.11.2016. Further, no approval was obtained from

Commission as there is no such provision of seeking approval for purchase of short term

6 | P a g e

power as per HERC RE Regulation-2010. In the FY 2014-15 purchases were made for 6

months and in FY 2015-16 for 10 months. The Commission’s order dated 18.06.2015 cited

by the Petitioner in support of its submission is reproduced as under:-

“HPPC, shall also make efforts to purchase additional small hydro power from

various available sources (including Himachal Pradesh). Besides, HPPC shall also

make efforts to purchase wind power from various available sources through bilateral

transactions or through power exchange”.

vii) HPPC was also asked to explain the reason for late filing the application for approval of

the Commission for procurement of short term power i.e. LoI dated 22.03.2016 is applied for

approval in October, 2016.

HPPC’s Reply

For procurement of short term power in FY-2014-15 & 2015-16 (in FY 2014-15 purchase

was made for 6 months and in FY 2015-16 for 10 months) from HPSEBL through MPPL, the

case was not forwarded to Commission for approval because there is no provision under

which approval is required for purchase of short term power as per RE Regulation-2010.

That the matter was referred to HERC vide this office Memo no. Ch-19/CE/ HPPC/ SEC&R-

I/WE dated 06.09.2016 requesting the Commission to define the period of procurement of

short term power in the 5th amendment to be issued by Haryana Electricity Regulatory

Commission (Terms and Conditions for determination of Tariff from Renewable Energy

Sources, Renewable Purchase Obligation and Renewable Energy Certificate) Regulation,

2010.

After the hearing dated 08.09.2016, HPPC filed the petition in the HERC for approving the

procurement of Non-solar RE Power from HPSEBL through MPPL to fulfill the non solar

RPO targets fixed by commission for FY 2016-17.

viii) Government of India (GoI), Ministry of Power had issued guidelines dated 30.03.2016 for

short term procurement of power by Distribution Licensees through tariff based competitive

bidding. The commission had forwarded the same to HPPC and the Discoms vide Memo No.

4741-43/HERC/Tariff dated 18.05.2016. Please explain the reasons for procurement of

power from a trader rather than procuring the same through competitive bidding as per GoI

guidelines.

7 | P a g e

HPPC’s Reply

That the HPSEBL had floated tender no. IS 02/2016 for sale of RE power on short term

basis for the FY 2016-17. On the basis of said tender M/s MPPL offered for sale of RE

power from HPSEBL to HPPC.

That the HPPC authorized MPPL to participate in the tender/NIT of HPSEBL for purchase of

RE (Non-Solar) power on short term during the period from April 2016 to March 2017. HPPC

authorized MPPL to participate in HPSEBL tender vide Ch-168/CE/HPPC/SE/C&R-II/RE-

power dated 01.03.2016. The power was allotted to HPPC in the tender by HPSEBL.

Accordingly, HPPC issued LOI to MPPL for purchase of RE-Power vide office memo no.

Ch-174/CE/ HPPC/SE/ C&R-II/RE-power dated 22.03.2016 for purchase of renewable non-

solar power on short term basis from HPSEBL. Simultaneously HPPC had intimated the

same to HERC vide this office memo no. Ch-175/CE/HPPC/SE/C&R-II/RE-power dated

22.03.2016 that in order to fulfill the RPO targets fixed by HERC for Renewable (Non-Solar)

Power.

This process for procurement of non solar RE power on short term basis for the FY 2016-

17 was already finalized whereas GoI, Ministry of Power had issued guidelines on dated

30.03.2016 for short term procurement of power by Distribution Licensees through tariff

based competitive bidding and the Commission had forwarded the same to HPPC and

DISCOMs vide memo no. 4741-43/HERC/Tariff dated 18.05.2016.

ix) Reasons for participating in the tender floated by HPSEBL through M/s Mittal Processor

Pvt. Ltd. instead of applying directly. Further, the basis of selection of M/s Mittal Processor

Pvt. Ltd. as trader may also be furnished.

HPPC’s Reply

As per NIT/Tender document No. IS-02/2016 , HPSEBL issued the NIT for sale of renewable

power on short term basis & invited tenders from inter-state trading licensees and utilities on

firm basis for the period commencing from 1st April 2016 to 31st March 2017.

That the HPPC did not directly participate in the tender due to the following reasons:-

i. The HPPC had to deposit earnest money of Rs. 2 crores in the form of

demand draft/bank guarantee to HPSEBL as Security Deposit (EMD).

8 | P a g e

ii. The HPPC had to deposit CPG, within 10 days of issuance of LOI for an

amount of Rs. 3 lacs/MW quantum of bid, and the CPG was to be released

after completion of contract period.

Moreover, M/s MPPL in its capacity as trader was having the experience of trading

and provides other relevant information regarding supply of short term power.

x) Provide a copy of the proposal submitted to the 38th SCPP meeting for procurement of

power under this proposal.

HPPC’s Reply

Agenda for purchase of hydro power renewable energy from HPSEBL was put up in the

SCPP meeting held on 02.06.2016 and the decision of SCPP is reproduced as under:-

“The committee was apprised of the power purchased from Himachal Pradesh Govt.

tender through M/s Mittal Power Processor Ltd. trader to meet the Non-Solar RPO

Targets. The committee approved the same.”

Copy of the proposal & approval accorded by the SCPP was enclosed.

xi) Whether the purchase of power was made to meet the gap in the demand and supply or

just to fulfil RPO? Further, the details of sale of surplus power (quantum and amount)

through exchange/UI during the period from April-16 to till date may also be provided.

HPPC’S Reply

The short term power from HPSEBL through MPPL was purchased in-view to achieve the

RPO targets. The detail of sale of power through exchange was enclosed at Annexure-G.

xii) Whether any comparison was made with respect to the procurement of RE power vis-à-

vis purchase of REC? Please provide such comparison power would have resulted in either

backing down/surrender of Long Term Power or sale of power through exchange.

9 | P a g e

HPPC’S Reply

Justification to purchase Non-solar RE Power Purchase of Non-solar RE Power is beneficial

as compared to RECs as can be seen from the table below:-

Purchase of REC Purchase of Non-solar RE power

Total no. of units supplied 100 Total no. of units supplied 100

No. of Units at Average Power

Purchase Cost (APPC)

100 No. of Units at APPC Price 98

REC’s Price for FY 2016-17 in

Rs./kwh

1.50 APPC Price for FY 2016-17 in Rs./kwh 3.77

Let’s say 2 units of Non-solar RE

power unit has to be purchased

as REC to fulfill RPO

2 Let’s say 2 units out of 100 units served

through non solar

2

Cost of REC in FY 2016-17. 1.50 Cost of Non-solar RE power from

HPSEBL through MPPL unit/kWh

4.70

APPC rate after adding REC cost

in Rs./kwh

(100x3.77+2x1.50)

/100=3.80

New APPC rate is Rs./kwh (98x3.77+2x4.70

/ 100 = 3.79

*Rs 3.77/- is the average power purchase cost (APPC) Rs/kWh for FY 2016-17 allowed by

the Commission in the order dated 01st August 2016. Also it has been discussed in detail

(35th SCPP meeting ) and ACS (Power) desired that instead of purchasing REC, HPPC

should explore means to purchase renewable power at reasonable rate.

The case was heard on 17.07.2017. After hearing the case, the Commission passed an

Interim Order dated 19.07.2017 directing HPPC to submit certain information. The reply was

filed by HPPC vide memo no. Ch-248/CE/HPPC/SE/C&R-I/Re-power dated 18.08.2017. The

information sought by the Commission vide the ibid order and HPPC’s reply thereto is as

under:-

a) Copy of the Audit Para and its reply submitted by HPPC.

HPPC’s Reply:-

The copy of the Audit Para and reply was enclosed as Annexure I & II.

b) Basis/Process of selection of M/s. Mittal Power Processor Pvt. Ltd., as trader for

purchasing this power.

HPPC’s Reply

The selection of bidder was done on first come & merit basis. M/s APPCPL (sic.) requested

HPPC to authorize the firm to participate in the tender to be floated by HPSEBL for sale of

RE (non-solar) power @ Rs. 4.70/-Per kWh inclusive of trading margin of Rs.0.04 per kWh

for the period April 2016 to March 2017 vide letter no. APPCPL/HPPC/2015- 16/GGN/453

10 | P a g e

dated 14.01.16. The firm was authorized to participate in the tender vide memo no. Ch-

5/CE/HPPC/SE C&R-II/T-43 dated 01.02.2016 @ Rs. 4.70/-Per kWh inclusive of the trading

margin of Rs.0.04 per kWh.

It has been submitted that M/s MPPL also requested HPPC to authorize the firm to

participate in the tender to be floated by HPSEBL for sale of RE (non-solar) power @ Rs.

4.70/-Per kh (including trading margin of Rs.0.04 per Kwh) for the period April 2016 to March

2017 vide letter no. MPPL/PT/DEL/HPPC/26309 dated 29.2.16. He was also authorized to

participate in the tender vide memo no. Ch¬168/CE/HPPC/SE/C&R-II/RE power dated

01.03.2016 @ Rs. 4.70/-Per kWh (including trading margin of Rs.0.04 per kWh) with the

approval of the Managing Director of the Uttar Haryana Bijli Vitran Nigam.

That the HPSEBL floated the tender no IS-02/2016 dated 01.03 2016 (CP-226) for sale of

RE non solar power at Himachal Pradesh periphery for the period from 1st April 2016 to 31st

March 2017. The last date for submission of bid was 11.03.2016 and further extended the

last date up to 17.03.16 for submission of bid by issuing corrigendum dated 10.03.16.

After issuing of above tender, M/s PTC vide their reference no. PTC/MTFG/HPPC/17975

dated 03.03 16, submitted the conditional request for participation in the tender on behalf of

HPPC that PTC shall submit the earnest money deposit on behalf of HPPC and HPPC shall

deposit the equivalent amount with PTC. In case HPPC defaults in off-take of power to PTC

after issuance of LOI by HPSEBL and HPSEBL forfeits the EMD on account of such default,

PTC reserves the right to claim the requisite amount of EMD from HPPC along with other

associated implication upon placement of LOI. After placement of LOI, HPPC shall provide:

the performance guarantee as per the tender document of HPSEBL. The conditional request

of PTC was not considered.

M/s Knowledge infrastructure Systems Pvt. Ltd. vide their reference no. KISPL/HPPC/16-

17/08032016 dated 08.03.16 (received on dt.16.03.016) submitted the request for

authorization which was also not considered.

c) Process/Methodology adopted by HPPC in arriving at a tariff of Rs. 4.70 (Rs.

4.66/kwh+0.4 paisa trading margin) at which said trader was allowed to procure the

power.

11 | P a g e

HPPC’s Reply

That the RE Power was procured from HPSEBL in the previous years at the offered

rates against the various tender floated by HPSEBL as under:-

SN Tender No Reserve Price/kwh Rate per kwh Tender Remarks

1 HPSEBL/CE/SO&P/IS-60A/2014-845-49 dated 20.08.2014

4.00 4.16 M/s. MPPL

50 MW RE Power received


4.45 4.45 -do- No Power received

3 HPSEBL/CE/SO&P/IS-60A/2014-15 40-50 dated 29.11.2014

5.50 4.70 -do- Power received


5.23 4.20 & 4.70 -do- No Power received


5.23 4.70 -do- Power received

6 IS-02/2016 dated 01.03.2016

- 4.70 M/s. MPPL

No Power received

Commission’s Analysis & Order

10. The Commission has examined the petition filed by the HPPC as well as their

replies/written submission and additional information provided from time to time. Upon

perusing the submissions and arguments of the Petitioner, the Commission has framed the

following issues for its consideration and order:-

Issue No. 1:- Whether, seeking approval of the Commission for procurement of RE

Power on a short term basis is a pre-requisite.

The Commission has examined the aforesaid issue at length. At the onset the Commission

notes that some issue regarding purchase of short term power was also raised by Principal

Accountant General (PAG). In its report dated 29.12.2014 it was observed by the PAG that

the Discoms in their ARR filed for the FY 2013-14 had not proposed any short term power

purchase. Hence, the Commission had not considered any power from short term

arrangement for the FY 2013-14. Thus, irregular purchase of short term power amounting to

Rs. 126 crore has been made. In reply to this, HPPC submitted that the power purchase was

approved by SCPP in its 29th meeting dated 03.09.2013. However, it will be ensured that in

future, if purchasing of short term power exceeds the approved annual short term power

purchased by the Commission, then prior approval shall be obtained from HERC. The PAG,

12 | P a g e

again pointed out in its Report dated 19.10.2016, while conducting the Internal Audit for the

FY 2014-15 and FY 2015-16 that HPPC has purchased substantial quantum of power in

short term from M/s. Mittal Traders without prior approval of HERC. In reply to this HPPC

submitted that the procurement was done to fulfill with the RPO obligations and comply with

the direction of the Commission given in Order dated 18.06.2015 (Case No. PRO-3 of 2015)

that HPPC shall also make efforts to purchase renewable power from various available

sources (including Himachal Pradesh). Further, case was put up before SCPP in 35th

meeting for approval to purchase REC in lieu of Solar and non solar power. PAG concluded

that the HPPC has failed to take corrective action. Para stand.

The Commission has perused various ARR / Tariff Orders passed by it in the past and is of

the view that purchase of RE Power (both solar as well as non-solar) are on an altogether

different footing vis-à-vis purchase of power other than from renewable sources. The

Electricity Act, 2003 and the policies notified thereunder also places RE Power on a higher

pedestal given its direct / indirect benefits. It is to be noted that in the past when Haryana

was a power deficit State the trade off was either to procure power from whatever source

was available for onwards supply to the electricity consumers of the State or manage

demand through power cuts at the cost of the State GDP which has much larger cascading

effect. Thus, to bridge the demand-supply gap the Discoms, at times, proposed short term

purchases and the Commission approved the same in the ARR order. Further, day to day

exigencies were met by the Discoms by resorting to drawl under the Unscheduled

Interchanges (UI) as well. However, as the power supply position improved in Haryana there

was no need for the Discoms to project / propose drawl of power on short term basis, hence,

there was approval of the Commission as such. Given the dynamics of power supply and

demand the fact cannot be denied that short term purchase / sale of power as well as UI

mechanism shall remain an integral part to manage day to day or seasonal variations in

demand and supply of power. Consequently, the short term purchase of conventional power

was envisaged and also built into the terms of license issued to the Discoms as well as the

HERC MYT Regulations in vogue.

Clause no. 21.2 of HERC(Conditions of Licence for Distribution and Retail Supply Business)

Regulations, 2004 which provides as under:-

“The Licensee shall not purchase electrical capacity and/or energy without

approval of the Commission under the terms of condition 21.1 except in case

of short term purchases for less than 6 months at a rate not more that the

bulk supply rate approved by the Commission.”

13 | P a g e

Further, Clause 60 of HERC(Terms and Conditions for Determination of Tariff for

Generation, Transmission, Wheeling and Distribution & Retail Supply under Multi Year Tariff

Framework) Regulations, 2012 specifies the procedure to be followed by the Licensee for

procurement of short term power, as under:-

“60.1 The distribution licensee shall submit a rolling quarterly forecast of the quantum

of short-term power to be purchased for the year for the Commission’s approval. The

forecast shall be based on monthly sales forecast, the power available from

approved long-term sources of power, merit order dispatch of available sources,

banking with other distribution utilities, load curtailment, time of its requirement,

availability of short-term power and the expected price. The distribution licensee shall

provide the basis for forecast of short-term power procurement price including the

criteria for evaluation of alternative options;

60.2 The Commission shall indicate the ceiling of short-term power purchase price

and volume for the ensuing quarter based on the availability of power, past

requirement, approved quantum of short-term power in ARR, approval granted for

past quarter and past market performance. The Commission may ask for additional

information and data as it may deem necessary for reviewing the forecast for the

ensuing quarter and the distribution licensee shall furnish such information within 2

weeks from being asked to do so;

60.3 If there is a short term requirement of power by the distribution licensee over

and above the quantum as approved by the Commission and such requirement is on

account of any factor beyond the control of the distribution licensee (shortage/non-

availability of fuel, snow capping of hydro resources inhibiting power generation in

sources stipulated in the plan, unplanned/forced outages of power generating units or

acts of God), then the cost shall be directly passed on to the consumers through FSA

mechanism.

Provided that the cost of the additional power shall be allowed at the ceiling price for

short term power determined by the Commission in accordance with regulation 60.2.

Provided further that in such a case, the distribution licensee shall inform the

Commission about the purchase of power over and above approved quantum with all

of the supporting documents. Unless the Commission is satisfied that the additional

power is within the ceiling price of short term power determined by the Commission,

it may disallow the quantum and cost of this short term power procurement in the

True-Up order.

60.4 The variation in actual quantum and price of short-term power vis-a-vis the

quantum and price of short-term power approved by the Commission shall be

subjected to prudence check by the Commission and shall be adjusted on yearly

basis along with the annual performance review based on the price and quantum cap

determined by the Commission for each quarter as mentioned in the above

regulation. “

14 | P a g e

The aforesaid stipulations were made keeping in mind purchase of conventional

power. Further, purchase of RE Power, as also submitted by the HPPC / Discoms is

governed by a different set of Regulations i.e. HERC RE Regulations and the RPO specified

there under. The RPO, as per the said RE Regulations, again can be met either by

purchasing RE Energy or by purchasing RECs. Resultantly, the quantum and cost of the

known source of RE Power are included in the Commission’s order and the balance,

including the shortfall of previous years allowed by the Commission to be carried over vis-à-

vis the RPO were to be met from other RE Power sources available or by way of alternative

mechanism of REC given the trade-off between purchase of RE Power and REC so as to

minimize the cost of RPO on the electricity consumers of the State. Further, given the overall

quantum of power approved by the Commission in the ARR order, any additional RE Power

purchased by the Discoms for meeting its RPO will only go towards substituting the

conventional power so that the energy balance is maintained.

In view of the above discussions the Commission answers the issue no. 1 in

negative i.e. for purchasing RE Power only that too within the RPO including backlog,

if any, carried forward with approval of the Commission, no specific approval of the

Commission is required.

Issue No. 2: Whether proper and transparent process was adopted for selection of MPPL.

The Commission, from the reply submitted by HPPC, on this issue notes that the Discoms

had four parties who has submitted request for being authorized i.e. APPCPL, MPPL,

PTC India and Knowledge Infrastructure Systems Pvt. Ltd. on a first come and merit basis.

Since the process followed had the approval of SCPP, at this stage on ex-post facto basis it

would not serve any useful purpose to examine other options that could have been adopted.

The Commission further notes that given the fact that offer from PTC India was conditional

including some additional financial liability on HPPC while that from M/s Knowledge

Infrastructure Systems Pvt. Ltd. was received late vis-à-vis the last date of submission of

bids. Resultantly, M/s APCPL and MPPL was authorized to participate in the tender floated

by HPSEBL dated 01.03.2016. Hence, the issue is answered in affirmative.

Issue No 3: Whether the price at which non-solar RE Power was procured in the

present case reasonable and done with adequate due diligence.

On the economics of the present purchase, HPPC has attempted to justify the same by

comparing purchase of REC vis-à-vis purchase of non-solar RE Power from HPSEB through

15 | P a g e

M/s MPPL that has already been re-reproduced at para 10(c) of HPPC’s reply. The

calculations are entirely hinging on the fact that APPC rate of Rs. 3.77/kWh has been

considered. The correlation, in the present case, appears to be spurious given the fact that

Haryana is Energy Surplus. Hence, the RE Power so purchased would only displace other

conventional power mostly tied up under long term Power Purchase Agreement wherein

liability for paying fixed cost remains. Hence, what is saved by purchasing RE Power is the

fuel cost. Resultantly, an appropriate equation would have been to consider cost of REC

(1.50/kWh) + Average Fuel Cost of 1% most expensive power in the FY 2016-17 as per

ARR order (Rs. 2.40/kWh). Thus, the total effective cost per unit for fulfilling RPO through

REC route would have been about Rs. 3.90 / kWh as against cost of RE Power, in the

present case, of Rs. 4.70/kWh at Haryana periphery and cost o transmission is to be added.

In view of the above discussions, the issue no. 3 is answered in negative i.e. it was

not reasonable for HPPC to purchase RE Power in the present case.

Issue No. 4: Whether the cost of such power can be allowed in the ARR and recovered

from the electricity consumers of Haryana.

In view of the discussions at issue no. 3 above the Commission is of the considered

view that proper due diligence was not done while preferring RE Power over REC. Hence,

the issue no. 4 is answered in negative i.e. entire cost incurred cannot be a pass

through in the ARR and Tariff.

11. The DISCOMs are directed that while claiming true up of Power Purchase cost for

the FY 2016-17, the cost incurred on such power shall be shown separately and the same,

to the extent of the excess cost incurred by purchasing RE Power instead of REC, shall not

be eligible for true up.

12. The Petition is accordingly disposed of.

This Order is signed, dated and issued by the Haryana Electricity Regulatory

Commission on 18th October, 2017.

Date: 18.10.2017 (Debashish Majumdar) (M.S. Puri) (Jagjeet Singh)

Place: Panchkula Member Member Chairman

BEFORE THE HARYANA ELECTRICITY REGULATORY … · 2017-10-25 · That the cost of Renewable Energy...

Documents

Transcript of BEFORE THE HARYANA ELECTRICITY REGULATORY … · 2017-10-25 · That the cost of Renewable Energy...