BEFORE THE CENTRAL ELECTRICITY REGULATORY COMMISSION
In the matter of
Petition filed by NTPC for approval of tariff for Kayamkulam Combined Cycle Power Project
And in the matter of
National Thermal Power Corporation Ltd., …………. Petitioner
Kerala State Electricity Board …………Respondent
The following were present:
1. Shri M.G. Ramachandran, Advocate, NTPC …..Petitioner
2. Shri Shyam Wadhera, GM, NTPC -do-
3. Shri P.T. Yohannan, CE, KSEB …..Respondent
4. Shri K.R. Unnithan, EE, KSEB -do-
The present petition has been filed by the petitioner, National Thermal Power Corporation Ltd. (NTPC), for approval of tariff in respect of Kayankulam Combined Cycle Power Station (Ky. CCPP).
2. Ky.CCPP has been set up by the petitioner dedicated to Kerala State. The Techno-Economic Clearance for this project with a capacity of 400 MW was accorded by the Central Electricity Authority (CEA) on 14-11-1994 at an estimated cost of Rs. 1271.63 crores including Interest During Construction (IDC) of Rs.76.10 crores. The cost of the project was revised to Rs.1310.58 crores, including Rs.76.10 crores on account of Interest During Construction (IDC) and Rs.38.95 crores on account of Working Capital Margin. The sanction was conveyed by Ministry of Power vide its letter dated 21-8-1995.
3. Meanwhile, the petitioner entered into a Power Purchase Agreement (PPA) with the respondent on 6-1-1995. The provisions of the PPA dated 6-1-1995 relevant for the purpose of deciding the controversies raised by the parties are extracted below:
"Whereas NTPC is a Generating Company wholly owned by the Government of India and will be executing Kayamkulam Combined Cycle Power Station in State of Kerala hereinafter referred to as "Kayamkulam PS’ and generally referred to as "Station" to be owned and operated by NTPC.
And whereas the Bulk Power Recipient is desirous of purchasing energy from NTPC’s Kayamkulam PS and NTPC is willing to sell energy from Kayamkulam PS to the Bulk Power Recipient from the date of commissioning of Unit-I of Kayamkulam PS on mutually agreed terms and conditions mentioned hereunder:
The installed capacity of Kayamkulam PS shall be 400 MW, subject to change after placement of orders for the main plant equipment.
The dates of commercial operation of Generating Units at Kayamkulam PS shall be as declared by NTPC from time to time.
The tariff and terms and conditions for the energy to be supplied by NTPC from Kayamkulam PS shall be as per the notification (s) to be issued by Government of India, Ministry of Power from time to time under section 43 A of the Electricity (Supply) Act 1948 (as amended). The following would specifically be taken into account while working out tariff for Kayamkulam PS:
11.0. EFFECTIVE DATE AND DURATION OF AGREEMENT
The Agreement shall come into force from the date of signing of this Agreement for all purposes and intent and shall remain opeartive upto completion of five years from the date of commercial operation of last unit of Kayakulam PS provided that this Agreement may be mutually extended, renewed or replaced by another Agreement on such terms and for such further period of time as the parties may mutually agree. In case Bulk Power Recipient continues to get power from Kayamkulam PS even after expiry of this Agreement without further renewal of formal extension thereof then all the provisions of this Agreement shall continue to operate till this Agreement is formally renewed, extended or replaced."
4. Ky.CCPP consists of two gas turbines and one steam turbine, with an ultimate capacity of 359.58 MW. The petitioner filed this petition for approval of tariff for two units of gas turbines of 116.6 MW each, stated to have been declared for commercial operation for open cycle w.e.f. 1-1-99 and 1-5-99. The tariff is stated to have been calculated by the petitioner based on the terms of the PPA dated 6-1-1995 and the norms notified by the Government of India vide notification dated 30-3-1992, except for heat rate which has been considered as approved by CEA vide letter dated 18-3-1996, for design of gas turbines similar to Ky.CCPP. According to the CEA’s letter dated 18-3-1996, the normative Heat Rates for the then existing gas projects of NTPC, namely Anta, Auraiya, Dadri, Kawas and Gandhar, are 2100 K Cal/KWhr for Combined Cycle Operation and 3150 K cal/KWhr on GCV basis for simple cycle operation. The petitioner has sought the Commission’s approval to the terms and conditions and tariff of power being supplied from the projects as detailed in Annexure "A" to the petition.
5. The petitioner filed an Interlocutory Application (No.27/99), stating that the respondent, Kerala State Electricity Board (KSEB), since the commencement of the commercial operation of Gas Turbines has been making payment at an ad hoc provisional rate of Rs.2.75/KWh. According to the petitioner, the payment made by the respondent was grossly inadequate in comparison with the two-part tariff payable under Government of India notification dated 30-3-1992, and agreed to between the petitioner and respondent in the meeting held on 21 and 22-6-1999, resulting in accumulation of huge amount of arrears. The petitioner has prayed for an interim order for payment of provisional tariff on two-part basis.
6. During pendency of the petition, the steam turbine of Ky.CCPP is stated to have been declared commercially operative w.e.f. 1.3.2000. Therefore, the petitioner filed an interlocutory Application (No.17/2000) for amendment of the petition and approval to the terms and conditions and tariff of power being supplied w.e.f. 1-3-2000 consequent to commercial declaration of steam turbine, as per the details contained in Annexure "A" to the amendment application. Another Interlocutory Application (No.18/2000) has been filed by the petitioner for interim order for payment of provisional tariff on two-part basis for the power being supplied for the Combined Cycle Operation w.e.f. 1-3-2000 pending finalisation of tariff by the Commission. The respondent is making provisional payment @ Rs.3.50/KWh consequent to commencement of Combined Cycle Operation.
7. The prayer for amendment of the main petition contained in IA 17/200 has already been allowed. We propose to deal with IA 27/1999 and IA 18/2000 through this order.
For Open Cycle 2900 K cal/KWh
For Combined Cycle 2000 K cal/KWh
9. In view of the contentions raised by the parties, the following preliminary issues arise for our determination:
Commencement of Commercial Operation
10. According to the respondent, the Fixed Charge is paid by the respondent for the capacity and hence it is imperative that the capacity details of the turbines shoualdl be demonstrated by the petitioner. Further, for commercial and economical operation of the grid, the capacity of each generating unit is to be established for merit order despatch and planned operations. Since the capacity has not been demonstrated by the petitioner, the plant cannot be deemed to have been commercially in operation. The petitioner has stated that in terms of clause 2.2 of the PPA, the declaration of commercial operation of the generating units is within its exclusive domain and after such a declaration, the PPA fastens it with an obligation to supply electricity. According to the petitioner, Performance Guarantee tests, etc. are the matters between it and the equipment supplier..
11. We have given our anxious consideration to the issue raised by the respondent. On careful consideration of the matter, we are of the opinion that the PPA between the parties does not provide for Performance Guarantee tests or the capacity demonstration by the petitioner. These cannot be considered to be pre-requisite for commencement of commercial operation, after which the petitioner has an obligation to supply power as per the terms of the agreement. However the generator should be able to supply to the extent demanded by the beneficiary with reference to the capacity for which fuel charges are payable. There is no whisper mention in the reply filed by the respondent that the petitioner has in many manner defaulted in the supply of power since declaration of commercial operation by it. Therefore, we accept the contention of the petitioner that the commercial operations of the station commenced w.e.f. 1-1-1999 in respect of Gas Turbine Unit I, 1-5-1999 in respect of Gas Turbine Unit II and 1-3-2000 in respect of Steam Turbine Unit. As stated by the petitioner as per clause 2.2. of PPA the requirement is a declaration by the petitioner which has been done. It has also been established that the petitioner never defaulted in supply for want of capacity declaration. The respondent has been paying for the power drawn @ Rs.2.75/KWh since 1-1-1999 and @ Rs.3.50/ Kwh for Combined Cycle Operation. Therefore, the respondent through its own conduct has accepted the commencement of commercial operations of the plant. Nevertheless, for the satisfaction of the respondent, the petitioner should have no qualms on the issue of capacity demonstration.
Liability of the respondent to pay for the Fixed Charges during open cycle operation
12. According to the respondent, it has no liability to pay for the fixed charges before commencement of the Combined Cycle Operations. Relying upon certain clauses of the PPA, it has been contended on behalf of the respondent that its contractual obligations under the PPA are for the Combined Cycle Power Plant and the date of commercial operation of the Steam Turbine Unit becomes the date of commercial operation of the Combined Cycle. Clause 5 (vii) of the PPA stipulates that before commissioning of the Combined Cycle, the Variable Charge would be based on the norms of Heat Rate and Auxiliary consumption for Open Cycle. In the light of this provision, it has been argued by the respondent that the PPA does not provide for payment of Fixed Charges during Open Cycle Operation, but provides for payment of the Variable Charges only. The reliance has also been placed by the respondent on Government of India’s notification dated 30-3-1992, as amended from time to time, according to which the actual capital expenditure incurred on completion of project shall be the criteria for fixation of tariff and in case of multi-unit project, the percentage of capital cost as specified by the CEA in its Techno-Economic Clearance shall be considered for fixation of tariff on commercial operation of the progressive units. In the light of these provisions of the Government of India’s notification dated 30-3-1992, it has been contended that the petitioner should have got the fixed charge apportioned unit-wise and intimated to the respondent before claiming Fixed Charges during the Open Cycle Operation. It has been argued that in the absence of such an apportionment after obtaining the CEA’s approval, the respondent has no liability to pay for Fixed Charges during the Open Cycle Operation.
Applicaiton of Station Heat Rate
15. The Variable Charge has been calculated by the petitioner by taking into account the Station Heat Rate of 2100 K cal/KWh for Combined Cycle Operation and of 3150 k cal/KWh for simple or Open Cycle Operation, based on CEA’s letter dated 18-3-1996, wherein CEA had intimated Station Heat Rate for five projects, including Kawas Power station. According to the petitioner, the equipment purchased for Ky.CCPP was similar to the equipment ordered for Kawas Gas Power Station and, therefore, its claim was justified. The respondent has questioned the claim of the petitioner and has averred that Station Heat Rate as prescribed under Government of India’s notification dated 30-3-1992 and amended vide notification dated 6-11-1995 should apply. According to the respondent, since Ky.CCPP had not started operationsperforming on the date of issue of CEA’s letter dated 18-3-1996, Station Heat Rate mentioned therein does not apply to the project in question. On the other hand, the petitioner argued that the notification dated 6-11-1995 is prospective in operation and cannot be extended to Ky.CCPP, the Techno-Economic Clearance for which was accorded by CEA on 14-11-1994.
20. We make it clear that the above directions relate to payment of provisional tariff and are only interim in nature. The final tariff shall be determined in the light of the norms and terms and conditions to be notified by the Commission.
22. Before parting with the case, we place on record our appreciation for the assistance rendered by the CEA in arriving at just and fair decision on the rival contentions raised in this case.
(A.R. Ramanathan) (G.S. Rajamani) (D.P. Sinha) (S.L. Rao)
Member Member Member Chairman
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