Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION ... 58 42/Final Order- Case No 23 of... · MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade ... Recovery of generation

Order in Case No. 23 of 2013 & M.A. No.10 of 2013 in Case No. 23 of 2013 Page 1 of 35

Before the

MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai – 400 005

Email: [email protected]

Website: www.mercindia.org.in / www.merc.gov.in

Case No. 23 of 2013

IN THE MATTER OF

Petition filed by Abhijeet MADC Nagpur Energy Private Limited (AMNEPL) Nagpur for

Approval of Capital Expenditure and Determination of Tariff for Sale of Firm Power

generated from one Unit of 61.5 MW of the power plant of AMNEPL

AND

Miscellaneous Application No. 10 of 2013 in Case No 23 of 2013

Application of AMNEPL for Determination of Interim Tariff for sale of firm power

generated from one Unit of 61.5 MW of the power plant of AMNEPL

AND

Intervention Application submitted by Maharashtra Airport Development Company

Limited (MADC)

Abhijeet MADC Nagpur Energy Pvt. Ltd (AMNEPL)

39 Ambazari Layout, Nagpur – 440 010 .... Petitioner

Maharashtra Airport Development Company Limited (MADC)

8th

Floor, World Trade Centre, Cuffe Parade,

Mumbai – 400 005 .... Respondent

Mihan Industries Association (MIA)

SEZ Area, Plot No. 31, SEZ, Mihan,

Dist. Nagpur .... Intervener

Shri V. P. Raja, Chairman

Shri Vijay. L. Sonavane, Member

Smt. Chandra Iyengar, Member

http://www.mercindia.org.in/

http://www.mercindia.org.in/pdf/Order%2058%2042/Notice_23%20July%202013-MA%20No%2010%20of%202013.pdf

http://www.mercindia.org.in/pdf/Order%2058%2042/Notice_23%20July%202013-MA%20No%2010%20of%202013.pdf


Date: 23 August, 2013

ORDER

Abhijeet MADC Nagpur Energy Private Ltd. (AMNEPL), Nagpur submitted a Petition on 15

February, 2013 for approval of Capital Expenditure and Determination of Tariff for Sale of Firm

Power generated from one Unit of 61.5 MW of the Power plant of AMNEPL. AMNEPL in its

Petition submitted that the Commission has a duty cast upon it to determine the Tariff under

Sections 86 (1) and 62 of the Electricity Act, 2003 and the MERC MYT Regulations, 2011.

AMNEPL relied upon the following Sections/ Regulations for generation Tariff determination as

under:

a. Section 2(28) of EA2003

b. Section 61 & 62 of EA2003

c. Section 64 of EA2003

d. Section 86 (1) of EA2003

e. Regulations 16.1, 16.2, 27.1, 27.2, 27.4, 38.1, 38.2, 38.3, 38.5 of MERC MYT

Regulations, 2011.

2. The Prayers in the Petition in Case No. 23 of 2013 are as follows:

“14. In view of the above, the Petitioner respectfully prays that Hon'ble Commission

may:-

a. Admit the Petition for approval of capital cost and determination of Tariff for

Unit #1;

b. Approve the methodology proposed by the Petitioner for allocation /

apportionment / computation of Capital Cost for Unit #1;

c. Approve the Capital Expenditure of Rs. 575.65 Crs along with additional

capitalisation incurred by the Petitioner for 61.5 MW for the purpose of

computation of Tariff for the power generated from Unit #1;

d. Approve proposed benchmarks for performance parameters and O&M charges as

proposed in the Petition above;

e. Allow the Petitioner to recover the following as per contractual obligations

provided in the Concession Agreement:

i. Recovery of generation cost for DG set on actual basis;

ii. Recovery of O&M Cost for DG set as per proposed norms;

iii. Recovery of Revenue Sharing Expenses paid/ payable to MADC;


iv. Recovery of Additional Return on Equity for early commissioning of the

project

f. Approve recovery of fixed and variable charges as proposed in this Petition for

FY 2013-14 for sale of power from Unit #1;

g. Condone any inadvertent omissions / errors / short comings and permit the

applicant to add / change /modify / alter this filing and make further submissions

as may be required at later stages.

h. Pass such orders as Hon'ble Commission may deem fit and proper and necessary

in the facts and circumstances of the case, to grant relief to Petitioner.”

3. AMNEPL also submitted a Miscellaneous Application No. 10 of 2013 in Case No 23 of 2013 on

23 May, 2013 for determination of interim tariff for sale of firm power generated from one Unit

of 61.5 MW of the power plant of AMNEPL.

4. The Prayers in the Petition in Miscellaneous Application No. 10 of 2013 in Case No 23 of 2013

are as follows:

“9. In view of the above, the Petitioner respectfully prays that Hon'ble Commission may:-

a. Admit the Petition for determination of Interim Tariff for one Unit;

b. Approve the methodology proposed by the Petitioner for allocation/

apportionment I computation of Capital Cost for one Unit;

c. Approve the proposed benchmarks for performance parameters and O&M

charges as proposed.

d. Allow the Petitioner to recover the following:

i. Recovery of Fuel cost.

ii. Recovery of O&M expenses.

iii. Recovery of generation cost for DG set on actual basis;

iv. Recovery of Interest on working capital.

e. Approve recovery of fixed and variable charges on interim basis as proposed in

this Petition for FY 2013-14 for sale of power from Unit #1;

f. Take up the Petition for early hearing on urgent basis in view of the fact that

power supply to the consumers in the Mihan SEZ through the Distribution

licensee has already commenced and the Petitioner is unable to recover even the

bare minimum cost of generation.


g. Condone any inadvertent omissions/errors/short comings and permit the

applicant to add/change/modify/alter this filing and make further submissions as

may be required at later stages.

h. Pass such orders as Hon'ble Commission may deem fit and proper and necessary

in the facts and circumstances of the case, to grant relief to Petitioner.”

5. Subsequently, on 23 July, 2013, M/s Mihan Industries Association (MIA), SEZ Area, Plot No.

31 SEZ Mihan Dist, Nagpur filed an Application seeking permission to intervene in the present

matter.

6. The Prayers of M/s Mihan Industries Association in the Intervention Application in the present

matter are as follows:

“12. PRAYER:

i. Commission is requested to allow the applicant to intervene in the present matter.

ii. Commission is further requested to allow the applicant to submit further

submissions in the matter.

iii. Commission is requested to consider the submission of applicant for development

and protecting interest of consumers in MIHAN SEZ area.

iv. Commission is requested to conduct public hearing of the matter in MIHAN SEZ

area Nagpur.”

Submissions of AMNEPL

7. AMNEPL submitted that it was incorporated as a Special Purpose Vehicle for undertaking the

construction of the power plant on 'Build Operate Transfer' (BOT) basis. Originally, the Power

Plant was to be located in the Mihan SEZ area. However, later it was shifted outside the notified

Mihan SEZ to village Khairi Khurd, with the stipulation that the changed location of the power

plant would also be covered under the Mihan SEZ. AMNEPL submitted that it has developed the

thermal power project having following Units:

Table 1: Capacity and commissioning date of Units


8. AMNEPL submitted that the Power Plant was originally conceived as a Captive Power Plant

(CPP) and was constructed and commissioned as such. However, as the development of the

Industries in the Mihan SEZ area hardly took place, it became apparent that the captive character

of the Plant cannot be maintained. Therefore, the Plant was converted from CPP to an

Independent Power Producer (IPP) with the approval and recommendation of the Ministry of

Power and accepted by the Ministry of Coal on 27 February, 2012.

9. AMNEPL submitted that while changing the category of the Power Plant, the following

conditions were stipulated:

a. Surplus power after meeting the power requirement of Mihan area including the SEZ on

first priority basis, shall be supplied to the State DISCOMs through Tariff based

competitive bidding.

b. Such surplus power after meeting the power requirement of Mihan area including the

SEZ be tied up in 12 months for long term.

c. Till the finalization of long term PPA, the power generated be supplied to Maharashtra

Discoms as short-term measure so that there is no merchant sale of power from this plant

under any circumstance.

10. AMNEPL submitted that by virtue of the Notification dated 3 March, 2010, issued under the

SEZ Act 2005, the developer of an SEZ has been granted the status of a deemed distribution

licensee. and accordingly as the Developer of the Mihan SEZ, Maharashtra Airport Development

Company Limited (hereinafter referred to as MADC) applied to the Commission for taking on

record its status as 'Deemed Distribution Licensee' (Case No.16 of 2010).

11. AMNEPL submitted that the Commission by it Order dated 3 August, 2012, confirmed the status

of MADC as a Deemed Distribution Licensee. Further, a Petition for adoption of Tariff under


Section 63 of the Electricity Act, 2003 was submitted by MADC on 16 July, 2012 (Case No.65

of 2012). AMNEPL submitted that during the proceedings, the Commission found the

maintainability of the Petition questionable and gave the following options to MADC:

a. Either withdraw the Petition.

b. Submit detailed arguments on the maintainability of the Petition with specific prayers.

c. Submit an amended Petition.

12. AMNEPL submitted that MADC opted for the third option and had submitted an amended

Petition on 19 October, 2012. However, subsequently MADC opted for withdrawing the said

Petition and the Case was closed by the Commission stating "dismissed as withdrawn" by an

Order dated 5 December, 2012 (Case No. 65 of 2012).

13. In view of the above AMNEPL submitted that thus, the tariff for the consumers in the Mihan

SEZ has neither been adopted nor determined. Further, in the meantime, a number of consumers

from the Mihan SEZ area have applied to the MADC for supply of Power. The applicants

include those consumers whose demand is less than the threshold value of 1 MVA for open

access. AMNEPL submitted that these applications have been forwarded by MADC to

AMNEPL.

14. AMEPL submitted that in terms of its obligation to supply power to the consumers in the Mihan

SEZ, it agrees to supply power to these consumers through the Distribution Licensee but is

unable to do so in the absence of an approved tariff. AMNEPL further submitted that MADC in

its Petition in Case No. 65 of 2012 had stated that it will approach the Commission at an

appropriate time for determination of the distribution tariff.

15. AMNEPL submitted that pursuant to the Order in Case No. 65 of 2012 and the subsequent

developments, AMNEPL had approached the Hon'ble ATE (Appeal No. 13 of 2013). AMNEPL

submitted that on the advice of the learned Bench, the Petition was withdrawn with liberty to

approach the Commission for tariff determination. AMNEPL submitted that it has therefore,

approached the Commission to determine the Generation Tariff under Section 86 (1) of the EA

2003.

16. AMNEPL submitted that it is a "Generating Company" as defined under Section 2(28) of the

Electricity Act, 2003 as reproduced below:


"Section 2 (28) - generating company" means any company or body corporate or

association or body of individuals, whether incorporated or not, or artificial juridical

person, which owns or operates or maintains a generating station”

17. AMNEPL further, submitted that Section 62 of the Electricity Act, 2003 provides for

determination of Tariff by the Appropriate Commission for supply of electricity by a generating

company, as reproduced below:

"62. (Determination of Tariff):--- (1) The Appropriate Commission shall determine the

Tariff in accordance with the provisions of this Act for-

(a) supply of electricity by a generating company to a distribution licensee:

…

(2) The Appropriate Commission may require a licensee or a generating company to

furnish separate details, as may be specified in respect of generation, transmission and

distribution for determination of Tariff."

18. AMNEPL submitted that the Commission, under Section 86(1) (a) of the Electricity Act 2003, is

vested with the jurisdiction to regulate the Tariff of the Generating Companies within the State.

19. AMNEPL further submitted that the Commission has notified the MERC (Multi Year Tariff)

Regulations, 2011, which specifies the terms and conditions and methodology of tariff

determination under Section 62 and 86 of the Electricity Act, 2003. AMNEPL submitted that the

Multi Year Tariff framework shall apply to applications made for determination of Tariff for

Generating Companies, Transmission Licensee, Distribution Wires Business and Retail Supply

Business. AMNEPL also submitted that that operational benchmark/parameters defined in MYT

Regulations, 2011 are only for 200/210/250 MW sets and 500 MW and above sets and the

operational benchmark/parameters are yet to be determined for smaller size of plant such as 45/

50/ 60/ 61.5 MW. Thus, this Petition has been filed based on proposed benchmarks, giving due

justification for the same, wherever applicable.


20. AMNEPL submitted that the Petition for approval of Capital Cost of the generating plant and the

determination of provisional Tariff is filed under Regulations 16 and 38 of the MERC MYT

Regulations, 2011.

21. AMNEPL submitted that in line with the above mentioned Regulations, it is provided that the

Tariff can be determined stage-wise, Unit-wise or for the whole generating station. Also, for the

purpose of determination of Tariff, the capital cost of the generation project can be approved on

Unit-wise basis and in case the breakup of the capital cost of the Unit is not available, the

common facilities can be apportioned based on the proportion of the installed capacity of the

generating units. Therefore, this Petition is filed in line with the given Regulations for

determination of Tariff for one Unit of the generating station of 4 x 61.5 MW of the generation

project.

22. AMNEPL submitted that as regards the capital cost of the Unit, Regulation 27 of the MERC

MYT Regulations, 2011 specifies that a prudence check will be undertaken by the Commission

for the approval of the capital cost of the generating Unit. The approved capital cost will form

the basis for determination of the tariff. The scrutiny of the capital cost of the generating Unit

will be limited to the reasonableness of the capital cost, financing plan, interest during

construction, use of efficient technology, and such other matters for determination of Tariff.

23. AMNEPL, in its Petition submitted that the tariff proposed by it in the Petition is based on

principles specified in MERC MYT Regulations, 2011 to the extent applicable for the Unit size.

AMNEPL submitted that no benchmarks are yet provided by the Commission for 45 / 50/ 60/

61.5 MW size of plant. Thus, the Petition has been filed based on proposed benchmarks, giving

due justification for the same.

24. AMNEPL submitted that all the Units of the plant have achieved COD and the last Unit 4

achieved COD on 1 August, 2011. This application is filed for approval of capital cost and

determination of Tariff and covers the Capital expenditure incurred as under:

a. For all Units as on COD of last Unit (Unit-4)

b. As per Audited Balance Sheet as on 31 March, 2012 including additional capitalization.

25. AMNEPL submitted that the power generated from the date of synchronisation to the date of

commissioning has been sold as infirm power to M/s Reliance Infrastructure Ltd on agreed rates


under Power Purchase Agreement (PPA). The project cost has been suitably adjusted on this

account while computing final capital cost.

26. AMNEPL submitted that this Petition has been filed only for determination of final Tariff for

Unit 1 as the power is proposed to be sold from Unit 1 to MADC, which is the deemed

distribution licensee in the Mihan SEZ area. Project / capital cost for Unit 1 has been computed

by equally allocating the entire project cost of all 4 units, however, excluding the cost of DG set

required for SEZ area, Transmission Line required for SEZ area and other associated costs

incurred for SEZ area. These costs are further added to the apportioned capital cost of Unit 1 and

accordingly final capital/project cost of Unit 1 has been derived.

27. AMNEPL submitted that the Operation and Maintenance Expenses have been proposed

considering norms for similar sized Units, however, including the O&M expenses for DG set.

28. AMNEPL further submitted that the Financing Costs including Interest on Loan, Depreciation

and Return on Equity are computed as per MERC MYT Regulations, 2011 and considering

derived project cost.

29. AMNEPL submitted that the project cost for the power station as on the date of COD is Rs.

1,341.20 Crore. The COD of last Unit 4 was achieved on 1 August, 2011. The details of the same

are as shown in the Table below:

Table 2: Project cost for the power station as on the date of COD as submitted by

AMNEPL


30. AMNEPL submitted that post COD there has been additional capitalisation to the project cost of

the power station, which is to the extent of Rs. 279.91 Crore in FY 2011-12, Rs. 2.14 Crore from

April-Sep 2012 and proposed capitalisation of Rs. 10.80 Crore during latter half of FY 2012-13.

31. AMNEPL in support of the above also submitted the Audited Accounts of AMNEPL for FY

2011-12 and certified expenditure for Project Cost as on 31 March, 2012, with allocation of

common facilities from Unit 1 to Unit 4.

32. AMNEPL in its Petition submitted the details of the funding of Project Cost along with the

detailed computation of the capital cost for Unit 1 as shown in the Table below:

Table 3: Capital cost for Unit 1 of AMNEPL’s power station as on 31 March, 2012

as submitted by AMNEPL


33. AMNEPL, in its Petition also submitted the proposed performance parameters along with the

detailed computation of the Tariff at the proposed capital cost for Unit 1.The Tariff proposed by

AMNEPL for FY 2013-14 in the Petition is shown in the Table below:

Table 4: Tariff of Unit 1 for FY 2013-14 as submitted by AMNEPL

S.

No. Particulars Units FY 2013-14

1 Depreciation Rs. Crore 29.24

2 Advance Against Depreciation Rs. Crore 0.00

3 Operation & Maintenance

expenses

Rs. Crore 15.50

4 Operation & Maintenance

expenses for DG Set of 25 MW

Rs. Crore 0.40

5 Interest on Long Term Loan Rs. Crore 55.40

6 Interest on Working Capital Rs. Crore 14.19

7 Return on Equity Capital Rs. Crore 26.84

8 Income Tax payable Rs. Crore 12.89

9 Less: Other Income Rs. Crore 0.00

10 Total Annual Fixed Charges Rs. Crore 154.47

11 Energy Charges Rs. Crore 156.03

12 Total Cost Rs. Crore 310.50

13 Net Generation from Unit 1 MU 403

14 Rate of Energy Charge Rs./kWh 3.87


S.

No. Particulars Units FY 2013-14

15 Total Tariff Rs./kWh 7.70

34. Maharashtra Airport Development Company Limited (MADC) submitted the Intervention

Application in the matter on April 8, 2013. MADC submitted that the present Intervention

Application is being filed pursuant to the Concession Agreement dated 7.11.2007 entered

between the MADC and Abhijeet MADC Nagpur Energy Pvt. Ltd. (AMNEPL) for developing

and operating a coal based Power plant of 100 MW (2 x 50 MW) expandable upto 200 MW with

Standby Unit, for supplying power to MIHAN Area. The relevant portion of Concession

Agreement is given below:

“ARTICLE 2

2. SCOPE OF THE AGREEMENT

2.1 Concession

Subject to the provisions of this Agreement, MADC hereby grants an exclusive

license (“License”) to the Project Company to do the following:

(i) develop, design, finance, construct, operate and maintain the Facility on a Build,

Operate & Transfer (BOT) basis for the Term;

(ii) operate and maintain the Transmission and Distribution Network in the MIHAN

Areas as set up and handed over by MADC to the Project Company for the Term;

(iii) supply electricity to the Consumers in the MIHAN SEZ Area on a priority basis;

(iv) sell electricity, over and above the requirement of MIHAN SEZ Area, at any point

of time during the Term;

(v) charge to the Consumers in the MIHAN Area (both SEZ as well as outside SEZ

area) a Tariff for purchase of electricity as per the terms and conditions

mentioned in this Agreement;

(vi) sell any excess electricity over and above the requirements of MIHAN Area (both

SEZ as well as outside SEZ area) to third parties at mutually agreeable terms.

For avoidance of doubt it may be noted that the order of priority of electricity

supply by Project Company to customers will be MIHAN SEZ Area followed by

MIHAN non SEZ area followed by any third party as per the Laws of India;


(vii) unless the Term is extended as per the provisions of Article 5, at the end of initial

Term, transfer the Facility to MADC.”

35. MADC further submitted that the various rounds of meetings were held between the MADC and

AMNEPL regarding the implementation of Concession Agreement. On June 4, 2010 , MADC

intimated AMNEPL regarding the decision arrived during the joint meeting held on May 15,

2010 with respect to Concession Agreement and their agreement stood amended.

36. MADC also submitted that AMNEPL passed a board resolution dated 30.10.2010 stated that

AMNEPL will abide by the terms and conditions of the Concession Agreement dated

07.11.2007, as amended from time to time, and supply the power at the tariff mentioned in the

Concession Agreement. The relevant portion of the above said resolution passed by AMNEPL is

given below:

“ 2. In case the tariff determined by Maharashtra Electricity Regulatory Commission (MERC) is

higher than the tariff mentioned in the Concession Agreement, the tariff applicable for supply of

power to the consumers in the MIHAN including SEZ are shall be the same as mentioned in the

Concession Agreement dated 7th November, 2007.

3. In case the tariff fixed by the MERC is lower than the rate under the Concession Agreement

the supplies to the MIHAN including SEZ be made at the tariff fixed by the MERC.”

37. MADC cited various Cases filed before the Commission such Case No. 16 of 2011 and Case No.

65 of 2012. MADC submitted that it has approached the Commission for adoption of tariff and

approval for modification in the Concession Agreement dated November 7, 2007, which was

dismissed as withdrawn on 5 December, 2012 in view of the statement that they would approach

the Commission at appropriate stage. MADC submitted that the impleadment of MADC herein is

necessary to determine all the relevant issues.

38. AMNEPL submitted its additional submissions in the matter on 9 April, 2013. In its additional

submissions, AMNEPL submitted that the Concession Agreement does not envisage or provide

for supply of power to any consumer in the MIHAN SEZ area through Open Access.

Concession Agreement is also not a bilateral agreement between the SEZ consumers and

AMNEPL, the generating company, as the SEZ consumers are not signatory to the Concession

Agreement. Some Units have constructed their premises in MIHAN SEZ and further as per


request of MADC, AMNEPL had agreed to supply power to the eligible consumers through

Open Access as an interim arrangement. ANMEPL informed MADC that supply of power

through the Open Access mechanism would be as per the provisions of MERC (Distribution

Open Access) Regulations, 2005. MADC informed that “consumers below 1 MVA can adopt

Open Access on the commercial principles. There is no bar for giving the power supply by

generator to the consumers below 1 MVA”. Meanwhile MADC started forwarding applications

of SEZ consumers for start of power supply without an approved tariff by the Commission. A

total of 23 such applications have been received so far, which are not fulfilling the requirement

of the EA 2003 and Rules and Regulations framed under.

39. AMNEPL also mentioned that as per the present policy of coal dispensation, a Generator should

have a long-term PPA with a DISCOM, and having an Agreement with Open Access consumers

does not qualify under long-term PPA, hence, FSA will never be signed by CIL.

40. AMNEPL submitted that it is facing a piquant situation as under:

a. The tariff for supply of power has neither been adopted nor determined by the

Commission;

b. MADC does not seem to agree for release of power supply through Open Access

mechanism as per the provisions of relevant Regulations as an interim arrangement

till the tariff is determined;

c. MADC is continuously pressuring AMNEPL to commence power supply to

MIHAN SEZ.

41. AMNEPL submitted that it has agreed to commence supply to the consumers in the MIHAN

SEZ subject to condition that they agree to pay the tariff including interim or provisional tariff if

any that the Commission may be pleased to approve.

42. AMNEPL in its additional submission also included an Additional Prayer as follows:

“Allow the Petitioner to continue the supply of electricity to the consumers in the MIHAN SEZ so

as not to cause any hardships to them;

Approve and permit the petitioner to collect a provisional tariff for the supply of electricity as the

Commission may deem fit, till the final determination of the retail tariff and issuance of the Tariff

Order.”


43. The Commission scheduled a hearing in the matter on 12 April, 2013. During the hearing held on

12 April, 2013, Shri A.K. Shrivastava appeared on behalf of AMNEPL and Shri Rahul Sinha,

Advocate appeared on behalf of MADC. After hearing AMNEPL and MADC, the Commission

impleaded MADC as a party in this Case and directed AMNEPL to serve the copy of the Petition

to MADC. The Commission directed MADC to submit their written submissions on the Petition

and directed AMNEPL to file its para-wise reply. The Commission also directed AMNEPL to

submit the copy of appeal filed by it before Hon’ble ATE to the Commission and other Parties

and to submit the details of lenders who are financing the project and project details required for

determination of Tariff under Section 62 of the Electricity Act, 2003 and Regulations made

thereunder.

44. AMNEPL submitted the information as directed by the Commission in the hearing held on 12

April, 2013 on 9 May, 2013.

45. The Commission sent detailed datagaps and additional information required to AMNEPL on 8

May, 2013 on its Petition for approval of Capital Expenditure and Determination of Tariff for

sale of Firm Power from one Unit of 61.5 MW of the Power Plant of AMNEPL.

46. The second hearing in the matter was held on 13 May, 2013. During this hearing, Shri Suhas

Tuljapurkar, Advocate appeared on behalf of AMNEPL and Shri Ravi Prakash, Advocate

appeared on behalf of MADC. The Commission directed AMNEPL to file its replies to datagaps

within two weeks time. During the hearing, AMNEPL submitted that it is supplying power to 13

consumers in SEZ area and around 14 lakh units have been supplied to these consumers since

January, 2013. AMNEPL requested the Commission to approve interim tariff for supply of

power to these consumers. During the hearing, the Commission opined that AMNEPL may file a

Petition for an interim Tariff and the Commission will take a view on the matter after hearing all

concerned.

47. AMNEPL filed a Miscellaneous Application No. 10 of 2013 in Case No 23 of 2013 on 24 May,

2013. AMNEPL in its Miscellaneous Application submitted the computation of the interim

Tariff considering recovery of partial fixed charges and full energy charges. AMNEPL in its

Application submitted that Interest on Loan Capital, Depreciation, Return on Equity Capital,

Revenue share of MADC and Income Tax have been not considered for the computation of

interim Tariff. The interim Tariff proposed by AMNEPL for FY 2013-14 is as shown in the

Table below:


Table 5: Computation of Interim Tariff as submitted by AMNEPL

Sl. No. Particulars Units FY 2013-14

A Installed capacity MW 61.5

B Number of days of operation prior to COD No. 46

C Number of days of operation projected for FY 2013-14 No. 328

D Annual Fixed charges

1 Depreciation Rs. Crore 0.00

2 Advanced Against Depreciation Rs. Crore 0.00

3 Operation and Maintenance Expenses Rs. Crore 15.50

4

Operation and Maintenance Expenses for DG set of 25

MW Rs. Crore 0.40

5 Interest on Long Term loan Rs. Crore 0.00

6 Interest on Working capital Rs. Crore 9.09

7 Return on Equity Rs. Crore 0.00

8 Income Tax Paid Rs. Crore 0.00

9 Income Tax Payable Rs. Crore 0.00

10 Less: Other Income Rs. Crore 0.00

11 Total Annual Fixed charges Rs. Crore 24.99

E Annual Energy charges (projected) Rs. Crore 155.64

F Total Annual cost (Fixed + Energy charges) Rs. Crore 180.63

G Net Generation for Unit 1 at 33 kV Bus MU 399.00

H Projected Tariff for Energy Charges Rs./kWh 3.90

I Capacity charges Rs./kWh 0.63

J Total Tariff (Fixed + Energy) Rs./kWh 4.53

48. AMENPL further submitted that against the above, the total cost per kWh for three months

period (Jan- Mar, 2013) works out as under

Energy charges: Rs. 3.98 /kWh

Capacity charges: Rs. 0.62 /kWh

Total cost per kWh: Rs. 4.60 /kWh


49. In view of the above, AMNEPL submitted that the interim Tariff is proposed at Rs. 4.50 /kWh

and requested the Commission to approve the same.

50. MADC filed its submissions on AMNEPL’s Petition for Approval of Capital Expenditure and

Determination of Tariff for Sale of Firm Power generated from one Unit of 61.5 MW of the

power plant of AMNEPL on 17 June, 2013.

Submissions of MADC dated 17 June, 2013

51. MADC challenged the maintainability of the Petition (Case No. 23 of 2013) filed by the

AMNEPL for determination of Tariff for sale of Firm Power generated from one Unit of 61.5

MW of the power plant of AMNEPL. MADC submitted that the Electricity Act, 2003 provides

for two alternative routes to the distribution licensee for procurement of power, viz.:

a. Through bilateral/negotiated Power Purchase Agreements (hereinafter referred to as

“PPA”), where the agreement is subject to prudence check and regulatory approval of

Tariff under Section 62 and procurement under Section 86 (1) (b). This is commonly

known as the ‘MoU Route’

b. Through transparent process of competitive bidding conducted in accordance with

Central Government's Bidding Guidelines, where the Appropriate Commission is obliged

to adopt the Tariff discovered under Section 63. This is commonly known as the ‘Bidding

Route’.

52. MADC submitted that Section 63 starts with non-obstante clause and excludes the Tariff

determination powers of the State Commission under Section 62 of the Act. The entire focus of

the competitive bidding process under Section 63 is to discover the competitive Tariff in

accordance with the market conditions. On the other hand, under Section 62 of the Act, the

Commission is required to collect various relevant data and carryout prudence check on the data

furnished by the generating company for the purpose of fixing the Tariff. Hence, determination

of Tariff under Section 62 is totally different from determination of Tariff through competitive

bidding process under Section 63.

53. MADC submitted that the present case involves the following sequence of events:


54. MADC as developer for MIHAN SEZ has to provide the infrastructure including power to the

industrial Units in MIHAN area. MADC, therefore, decided to go for a Captive Power Plant

(CPP), and dedicated Transmission and Distribution Network to supply quality, uninterrupted

power to MIHAN area. Accordingly, International Competitive Bidding was done during FY

2006-07. The Request for Proposal (RFP) documents were circulated to the participant bidders

and during the pre-bid meeting it was clarified to all bidders that the power plant is to be

considered as captive and power supply is to be provided to MIHAN SEZ consumers. All

regulatory risks are with the bidder/developers of the power project and the same are evaluated

with full consideration at the time of bidding for the project. MADC submitted that a competitive

bidding process was adopted to identify the lowest bidder, further, the tariff process in the

present case has been transparent and there is no ambiguity involved in the same. MADC

submitted that the bidding process has been conducted in a procedural and step-wise manner. An

RFP was duly issued and bids were invited from the interested bidders.

55. Further, tariff proposal was sought from the bidders and the tariff calculation method/ formula

was prescribed. The technical requirements and price specifications were determined by means

of set formulae and the Tariff proposed by various bidders were examined to determine the

lowest bidder who meets the technical requirements.

56. MADC submitted that after the evaluation of Technical and Commercial bids, M/s. Abhijeet

Infrastructure Ltd. Nagpur were selected as the lowest bid and the Letter of Intent (LOI) was

issued on 28 August, 2007, in which it is clearly stated that the power project shall be a 2 x 50

MW coal based captive power plant (CPP) with a provision to enhance up to 200 MW (4 x 50

MW) and also has to operate and maintain the 33 kV substations and Distribution Network

developed by MADC for a concession period of 33 years including construction period on BOT

basis and this has been accepted by AMNEPL with Reference Tariff of Rs. 2.97/kWh from the

COD and subsequent escalation as per the RFP document. Out of the total Reference Tariff of

Rs. 2.97/kWh, the Capacity Charge is Rs. 1.17/ kWh and the Energy Charge is Rs. 1.80/ kWh.

57. Pursuant to the above, a Special Purpose Vehicle Company / Joint Venture named Abhijeet

MADC Nagpur Energy Private Limited (AMNEPL) was formed on 20 July, 2007 and a

Concession Agreement has been signed between MADC and AMNEPL on 7 November, 2007

for developing and operating a coal based power plant of 100 MW (2 x 50 MW) expandable up

to 200 MW with standby unit for supplying power to MIHAN area.


58. MADC submitted that the competitive bidding process under Section 63 of the EA 2003 is

designed to promote competitive procurement of electricity by distribution licensees with

transparency, fairness and level playing field. The procedure envisaged under Section 63 of the

Act read along with the Central Government’s Competitive Bidding Guidelines and the

procedure followed in the present case reveals that the situation at hand is akin to Section 63 of

the Act. MADC submitted that it is pertinent to note that the competitive bidding process

undertaken by MADC is also more or less in lines with the Central Government’s Competitive

Bidding Guidelines framed under Section 63 of the Electricity Act, 2003.

59. MADC further submitted that the present case does not warrant interference by the Commission

under Section 62 of the Act for determination of tariff for the following reasons:

a. The sanctity and integrity of a competitive bidding process (and particularly international

competitive bidding process), needs to be maintained.

b. Awarding of contract in the present case has been in public interest to the lowest bidder

and the same has been done in a fair and transparent manner.

c. The scope of judicial review of administrative actions (like conducting a competitive

bidding in the present case) is very limited.

d. The award of contract, whether it is by a private party or by a public body or the State, is

essentially a commercial transaction. In arriving at a commercial decision, commercial

considerations are paramount. Each State can choose its own method to arrive at a

decision. It can fix its own terms of invitation to tender and that is not open to judicial

scrutiny.

e. When a party accepts the benefit of a contract, it must adopt the whole contents of that

instrument and conform to all of its provisions. It cannot choose to adhere to and abide by

some of the terms of the contract, which are advantageous to him and repudiate the other

terms of the same contract, which might be disadvantageous to him.

f. There is a necessity to provide “level playing field” to all the bidders.

g. The “price” named in the RFP, LOI and Concession agreement is an essential condition

of eligibility and non-adherence to the same may lead to discrimination against the other

bidders.

60. The third hearing in the matter was held on 27 June, 2013. Ms Sonal Kulkarni, Advocate

appeared on the behalf of the Petitioner and Shri Ravi Prakash, Advocate appeared on behalf of

MADC. In the hearing, AMNEPL requested the Commission for additional time to file the


rejoinder on the submission of MADC dated 17 June, 2013. The Commission directed AMNEPL

to file rejoinder within three weeks time. The Commission also directed that MD, MADC be

present in the next hearing.

61. AMNEPL filed its rejoinder on 22 June, 2013 in reply to the submission of MADC dated 17

June, 2013.

AMNEPL’s reply submitted on 22 July, 2013 on the submissions made by MADC

62. AMNEPL submitted that it has set up a Captive generating station, and subsequently converted it

into an IPP comprising of 4 x 61.5 MW with 25 MW standby DG set and a dedicated

transmission line from the power plant to the Mihan SEZ substation, after incurring a capital cost

of Rs.1623.24 Crore up to 30 September, 2012. AMNEPL submitted that of the 246 MW

installed capacity, only one Unit of 61.5 MW is being operated for MADC (2 MW), and 55 MW

is being supplied to Reliance Infra and balance capacity of 184.5 MW is lying idle.

63. AMNEPL submitted that unless urgent reliefs are granted it will be forced to cease its operations.

AMNEPL submitted that it has filed the Miscellaneous Application dated 23 May, 2013

numbered as Miscellaneous Application No. 10 of 2013 for the determination of interim Tariff in

furtherance of its Petition dated 29 January, 2013 filed for approval of capital cost and

determination of Tariff for sale of firm power from one 61.5MW Unit of AMNEPL.

64. AMNEPL submitted that this is a case where MADC, to begin with, conceived the idea of setting

up a captive power plant (CPP). At the time when such CPP was conceptualized by MADC,

MADC had not contemplated any regulatory intervention. Hence, it is pertinent to note, that the

bidding process carried out by MADC inviting bids for setting up of the CPP did not envisage

any tariff determination by the Commission. The said bidding process was hence, not in

accordance with the guidelines issued by the Central Government as mandated by Section 63 of

the Electricity Act, 2003. In fact, irrespective of whether MADC was to follow either the bidding

route or the MoU route, it never intended to approach the Commission for

determination/approval/regulation of Tariff at all because for the Applicant’s generating facility

was to remain a CPP for the entire term of 33 years.

65. AMNEPL submitted that it is on this basis that MADC even today is contending that the

Commission does not have jurisdiction to entertain the Petition filed by the Applicant for


determination of Tariff and is thus attempting to avoid any interference by the Commission in

the matter of Tariff. AMNEPL submitted that MADC’s attempts to avoid the Commission are

based on incorrect legal advice.

66. AMNEPL submitted that pursuant to the execution of the Concession Agreement, there was

subsequently a major change in the circumstances not envisaged by MADC when the

Government of India, Ministry of Commerce and Industry on 3 March, 2010, issued a

notification notifying that the provisions of clause 14 (b) of the Electricity Act, 2003 would

apply to all SEZs notified under subsection 1 of the SEZ Act, 2005 and that the developer of

such notified SEZ shall be deemed to be distribution licensee for the purpose of such an SEZ.

Owing to the overriding effect of the SEZ Act, the aforesaid notification of the Government had

to be adhered to and the power plant set up by the Applicant under the Concession Agreement

with MADC came under the full purview of the Electricity Act, 2003 and under the regulatory

purview of the Commission. MADC also admitted it, as immediately thereafter on 2 February,

2011, MADC filed a Petition in Case No. 16 of 2011, whereby MADC requested the

Commission to take on record its status as a deemed distribution licensee in view of the

notification issued by the Government of India, Ministry of Commerce. The Commission vide its

order dated 3 August, 2012 took on record the status of MADC as a deemed distribution

licensee.

67. AMNEPL submitted that the Commission has exclusive jurisdiction to determine the Tariff

between the Applicant as the generating company and MADC as the distribution licensee.

AMNEPL submitted that MADC has accepted the jurisdiction of the Commission and filed the

Case No. 16 of 2011 before this Commission to take on record its status as a deemed distribution

licensee. Thereafter, MADC filled another Petition in Case No. 65 of 2012 with a prayer to adopt

the Tariff given under the Concession Agreement and to approve the modification proposed to be

made to the Concession Agreement.

68. AMNEPL submitted that by filing these Applications, MADC has accepted and submitted to the

jurisdiction of the Commission. Further, the Electricity Act, 2003 is an enactment passed to

consolidate the laws relating to the generation, transmission, distribution, trading and use of

electricity and as such all matters relating to rationalization of Tariff fall under the purview of the

Commission established under the Act. AMNEPL thus, submitted that any challenge to the

jurisdiction of the Commission by MADC on the subject of determination of tariff is baseless

and devoid of any substance and merit.


69. AMNEPL submitted that the conduct of MADC before the Commission has always been evasive

and inconsistent in as much as MADC has time and again changed its stand before the

Commission on the issue of Tariff. This may be elaborated in light of the events that transpired

during the course of the proceedings in Case No. 65 of 2012. As aforesaid, the Case No. 65 of

2012 was filed by MADC before the Commission with a prayer to adopt the Tariff given under

the Concession Agreement and to approve the modification proposed to be made to the

Concession Agreement.

70. AMNEPL submitted a brief background of the same as follows:

a. The MADC filed an application in Case No. 65 of 2012 on 13 July, 2012, before the

Commission, inter alia for adoption of Tariff as provided in the Concession Agreement

under Section 63 of the Electricity Act, 2003 read with Regulation 17.5 of MERC (Multi

Year Tariff) Regulations, 2011.

b. In Case No. 65 of 2012, MADC contended that the Tariff under the Concession

Agreement had been arrived at after following an international bidding process and

hence, such Tariff must be adopted by the Commission under Section 63 of the Act.

71. AMNEPL submitted that in the first hearing in Case No. 65 of 2012 conducted on 17 August,

2012, the Commission questioned the maintainability of the Application under Section 63 of the

Act as filed by the MADC. It is pertinent to note that the possible reasons as to why the

Commission questioned the maintainability of the Case No. 65 of 2012 may be summed up as

follows:

a. The bidding guidelines authorized by the Central Government were not followed.

b. The Tariff under the Concession Agreement was fixed directly at the consumer end.

There is no mention of the Generation Tariff in the Concession Agreement.

c. Under the Act, only a Distribution Licensee is competent to conduct bidding for power

purchase. However, in respect of the bidding carried out by MADC, it is most significant

to note that MADC was never a Distribution Licensee at the time when it invited bids for

setting up of a CPP to supply power to MIHAN.

72. AMNEPL submitted that it was clear from the above observations of the Commission that the

MADC had approached the Commission by invoking the incorrect provisions of the Electricity


Act, 20013. Adoption of Tariff under the Concession Agreement by the Commission was not

possible, as had also been indicated earlier by the Commission. Further, on 19 October, 2012,

MADC submitted an Additional Affidavit to the Commission wherein it completely changed its

stand taken in the main application in Case No. 65 of 2012. AMNEPL submitted that MADC has

by changing its stand time and again attempted to mislead this Commission and further

attempted to prevent the Commission from intervening in the matter of determination of Tariff.

73. AMNEPL further submitted that at the hearing on 22 October, 2012, MADC withdrew its

Petition filed in Case No. 65 of 2012. The Commission was pleased to pass the final Order in the

matter on 5 December, 2012 dismissing the Petition as withdrawn.

74. AMNEPL submitted that MADC in spite of having categorically accepted before the

Commission in Case No. 65 of 2012 that it had approached the Commission on a wrong legal

basis and that it ought to have approached the Commission under Section 62 of the Act, MADC

in its submissions in this Case is yet again changing its stand by contending that the Commission

does not have the jurisdiction to hear and decide the Petition filed by the Applicant under Section

62 of the Electricity Act, 2003 which Petition was filed by AMNEPL on account of the failure of

MADC to file a Petition for determination of Tariff in spite of an express undertaking to that

effect given in its Additional Affidavit dated October 19, 2012 in Case No. 65 of 2012.

75. As regards maintainability of the Petition and the Application filed therein, AMNEPL submitted

that the Petition filed is maintainable on facts as well as on the law on the following grounds:

a. It had approached the Hon'ble ATE vide an Appeal No. 13 of 2013 against the Order

dated 5 December, 2012. The Hon'ble ATE, vide its Judgment dated 22 January, 2013,

permitted it to withdraw the Appeal with a liberty to approach the Commission for

appropriate relief. AMNEPL submitted that the Petition filed by MADC under Section 63

of the Act was already questioned on the grounds of maintainability due to which the

same had to be withdrawn by MADC. Hence, in view of the APTEL Judgment dated 22

January, 2013 passed in the Appeal No. 13 of 2013 and the Order dated 5 December,

2012 passed by the Commission in Case No. 65 of 2012, there is no choice but to

approach the Commission with a Petition under Section 62 of the Act. AMNEPL thus,

submitted that the Petition filed by it under Section 62 of the Act is maintainable.

b. MADC became a Distribution Licensee only on 3 August, 2012 after the Commission

took on record its status as a “deemed distribution licensee” pursuant to the notification

issued by the Government of India, Ministry of Commerce and Industry on 3 March,


2010, notifying that the provisions of Section 14 (b) of the Electricity Act, 2003 would

apply to all SEZs notified under subsection 1 of the SEZ Act, 2005 and that the developer

of such notified SEZ shall be deemed to be distribution licensee for the purpose of such

an SEZ. The aforesaid notification of the Government brought MADC under full purview

of the Act and consequently under the purview of the Commission, which necessitated

MADC to seek validation from the Commission and take on record its status as a deemed

distribution licensee vide its Petition in Case No. 16 of 2011. AMNEPL submitted that

under the Act and more particularly under Section 62 thereof, it is a positive obligation

cast on the Commission to determine the Tariff between a generating company and a

distribution licensee.

76. AMNEPL further, submitted that it has been pointed out by the Commission in the proceedings

in Case No. 16 of 2011 that AMNEPL and MADC will have to approach the Commission for

determination of Tariff as this cannot be a matter of mutual decision between the AMNEPL and

MADC. AMNEPL submitted that a clear and categorical observation to this effect can be found

in the record of proceedings of the hearing dated 31 October, 2011, which records as follows:

“The MADC is a deemed distribution licensee. The Commission observed that the

clauses of the Concession Agreement dated 7th November, 2007 entered with between

MADC and Abhijeet MADC will be ultravires the EA, 2003, so far as they are

inconsistent or contravene the provisions of the EA, 2003. Thus once the MADC has been

granted deemed distribution licensee status, it will have to approach the Commission for

fixation of Tariff and all other related matters as these cannot be decided between

MADC and Abhijeet. The Commission suggested that both MADC and Abhijeet MADC

need to amend the agreement to take into account the present realities.”

77. AMNEPL thus, submitted that the Commission by its own record had directed the Parties to

approach the Commission for fixation of Tariff and other related matters. The Commission has

expressly observed that the issue of Tariff cannot be decided between MADC and the AMNEPL.

AMNEPL hence, submitted that the Petition filed by the Applicant under Section 62 of the Act is

maintainable.

78. AMNEPL further submitted that MADC in its submissions has tried to mislead the Commission

by attempting to portray that a valid Tariff has already been arrived at between the AMNEPL

and MADC via the bidding route as envisaged under the scheme and framework of the Act.


However, in reality, the bidding process that has been followed is not to arrive at a Tariff for

which power would be supplied by a generating company to a distribution licensee. In fact the

bidding process has been followed in this case for setting up of a captive power plant (CPP). The

AMNEPL submitted that it is pertinent to note that:

a. As on date when the bids were invited for setting up of the CPP, MADC was not a

deemed distribution licensee and AMNEPL had not even come into existence. Hence,

there is no question of the bidding process being followed for arriving at a tariff for

supply of electricity from a generating company to a distribution licensee as at the time of

the bidding, both, the distribution licensee and the generating company had not come into

existence;

b. The bidding process was conducted in accordance with international bidding process and

not the guidelines approved by the Central Government. Therefore, in order to entertain a

Petition under Section 63 of the Act, the Parties must have necessarily arrived at the

Tariff pursuant to a bidding process duly conducted under the guidelines framed by the

Central Government, which has not been done in the present case. Hence, there is no

question of the Petition falling under the purview of Section 63 of the Act as the most

fundamental requirements of the Section 63 of the Act are not fulfilled in this case.

79. AMNEPL further submitted that the comparison shown by MADC between the competitive

bidding process undertaken by MADC and the Bidding Guidelines issued by the Central

Government is baseless, irrelevant, devoid of any substance and merit, and grossly misleading.

80. AMNEPL submitted that MADC’s contention of preserving the sanctity of international

competitive bidding is devoid of any merit whatsoever as one cannot by any stretch of

imagination contend that the sanctity of the so called international bidding process followed by

MADC should be upheld or given precedence over the statutory mandate laid down under

Section 63 of the Electricity Act, 20013 to follow the bidding guidelines laid down by the

Central Government.

81. AMNEPL submitted that MADC has cited certain cases that deal with the issue of contractual

estoppels and/or estoppels arising purely out of conduct of the parties. AMNEPL submitted that

none of these contentions are applicable to this case, which falls within the purview of the Act.

The Act and more particularly Section 62 thereof envisage a strong regulatory control by the

Commission. Section 62 of the Act also provides for the contracts/understandings (PPAs) to be

put up before the Commission for formal approval thereof, which has not been done in this case.


82. AMNEPL further submitted that the power plant has been subsequently converted to an IPP

(Independent Power Producer) with the approval of the Government on 27 February, 2012. In

light of this change in the status of the power plant from CPP to IPP, the commercial decisions

and parameters decided at the time when the same power plant was originally conceived as a

CPP are now redundant and deserve to be worked out afresh taking into consideration the

changed circumstances. Thus, on this ground as well, the Petition filed needs to be entertained by

the Commission and the Generation Tariff as well as the interim Generation Tariff needs to be

determined by the Commission.

83. The fourth hearing in this Case was held on 23 July, 2013. During the hearing, Shri Suhas

Tuljapurkar, Advocate appeared on behalf of AMNEPL and Shri U P S Madan, Managing

Director of MADC and Shri Samir Malik, Advocate, appeared on behalf of MADC. Shri R B

Goenka, on behalf of MIHAN Industries Association requested the Commission to admit his

Intervention Application in the Case. The Commission admitted the Intervention Application

filed by Shri R B Goenka on behalf of MIHAN Industries Association.

84. During the hearing, AMNEPL submitted that it was a Special Purpose Vehicle established

pursuant to the bidding process conducted by MADC for the award of setting up of a Captive

Power Plant on BOT basis and a consortium led by Abhijeet Infrastructure won the bid.

AMNEPL submitted that the draft Concession Agreement was a part of the bidding documents

notified by MADC. AMNEPL submitted that a load of 94 MW was estimated to be materialised

in stages by the year 2012, however, the current load materialised is less than 2 MW. AMNEPL

submitted that the status of Power Plant was converted to IPP on 27 February, 2012 after

following a due process.

85. AMNEPL further submitted that as the Commission had ruled out the adoption of Tariff given in

Concession Agreement under Section 63 of the Act, vide its Order dated 5 December, 2012 in

Case No. 65 of 2012, the Commission is required to consider its Petition under Section 62 of the

Act, which is the only other provision empowering the Commission to determine tariff.

AMNEPL submitted that the Concession Agreement was only a private agreement between two

Companies and does not in any manner impede the regulatory powers and duties of the

Commission under Section 62 of the Act. AMNEPL submitted that the Concession Agreement

was executed prior to MADC becoming a Distribution Licensee and hence, is not binding on the

Commission.


86. During the hearing, MADC reiterated its written submissions and requested the Commission to

not entertain the Petition filed by AMNEPL under Section 62 of the Electricity Act, 2003.

87. During the hearing, the Commission enquired about the relevant Clauses on Tariff in the

Concession Agreement and the resolution mechanism agreed upon by the Parties in the

Concession Agreement in case of any dispute. In reply to the Commission’s query about the

exercising of dispute resolution mechanism in Concession Agreement, MADC submitted that it

has not never been exercised. AMNEPL submitted that no dispute has arisen and hence, the

dispute resolution mechanism has not been exercised.

Submissions of M/s Mihan Industries Association (MIA) in its Intervention Application

submitted on 23 July, 2013

88. MIA submitted that AMNEPL has filed the Petition for fixation of interim Tariff for sale of firm

power generated from one Unit of 61.5 MW of its power plant to MADC, being a distribution

licensee in SEZ Mihan area and approval of capital expenditure of the generator. MIA submitted

that MADC has entered into a Concession Agreement with AMNEPL for developing and

operating a coal based power plant of 100 MW (2x50 MW), expandable to 200 MW (4x50 MW)

with standby DG Unit of 25 MW, for supplying power to the MIHAN area. This Concession

Agreement was signed after a bidding process.

89. Further, as per the Concession Agreement, AMNEPL is supposed to recover a capacity charge of

Rs. 1.17 per unit and energy charge of Rs. 1.80 per unit for the first contract year. The charge

shall subsequently escalate on an annual basis (capacity charge at 10% of WPI and energy

charge at 100% of WPI). Escalation provisions as per the Concession Agreement may be made

applicable one year after completion of commercial declaration of the facility (COD).

90. MIA submitted that as per the Concession Agreement, over and above the Tariff that can be

levied by AMNEPL to consumers, AMNEPL shall also be entitled to recover up to 1% of the

Tariff amount towards collection fee, i.e., as franchisee it shall get 1% as service charges. MIA

submitted that considering the above agreement between the Parties, the Commission should fix

the Tariff as per the rate in Concession Agreement since it is being considered as long-term

Power Purchase Agreement and AMNEPL has filed this Petition considering the Concession

Agreement as PPA.


91. Further, MIA submitted that AMNEPL has considered the coal purchase from WCL and open

market in e-auction and the rates are very high and the Commission should consider the coal

rates based on the linkage granted by Standing Linkage Committee and LOA issued by WCL.

92. MIA submitted that the projected tariff of Rs. 4.60 /kWh by AMNEPL is very high even

compared to today's market scenario, where power is available at Rs. 3.25/- to Rs. 3.50/- per

unit.

93. MIA further suggested that the Commission should consider the rates fixed in the Concession

Agreement with price escalation clause since it is arrived at by bidding process and is being

considered as long term PPA for 33 years. Further, as regards the O&M Expenses for 25 MW

DG set and energy charges, MIA submitted that these expenses and energy charges should not be

separately decided since it was included in the rate of energy in the bidding process and the

Agreement has already been executed.

94. MIA further submitted that in the Concession Agreement it was agreed that AMNEPL shall be

the franchisee in the area and shall be paid 1% of Tariff as service provider. Hence, the

Commission should permit AMNEPL as franchisee in MIHAN SEZ area by adding 1% to the

Tariff of consumers and there is no need of fixing the consumers’ Tariff separately.

95. MIA submitted that the Industries are reluctant to come to MIHAN area since the promises of

uninterrupted supply at low tariff rates has not been kept by the agencies involved in the

development of the project. The existing consumers in SEZ area are paying very high electricity

charges to MADC to the tune of Rs. 11 to Rs. 16 per kWh.

96. MIA submitted that in the absence of assured power some industries are operating on their own

DG sets since last few years. MIA submitted that MADC was issuing energy bills to the

consumers in Mihan SEZ area illegally without having any trading licence or without the

Commission’s approval for consumers’ Tariff. MSEDCL is raising energy bills to MADC at

single point and charging commercial Tariff and MADC has fixed sub-meters to the consumers

and issued bills to consumers charging commercial Tariff though all the consumers are industrial

consumers and software industries for whom industrial Tariff at much lower rate than

commercial Tariff is applicable. MIA requested the Commission to enquire into the matter and

direct MSEDCL and MADC to charge Tariff as per Commission approved and applicable Tariff.


97. Shri R B Goenka also made submissions identical to those made by MIA (excluding the prayers),

in his capacity as an authorised Consumer Representative.

98. Subsequent to the hearing held on 23 July, 2013, AMNEPL submitted a brief Note on the

arguments made during the hearing on 24 July, 2013. AMNEPL, in its Note, submitted that the

consumers including MADC have given undertakings to abide by the tariff which would be fixed

by the Commission and hence, it is incumbent on the Commission to determine tariff. In view of

these undertakings, any prior undertakings between the Parties gets overruled. AMNEPL

submitted that as MADC is a deemed distribution licensee, the Commission would have the

jurisdiction in related disputes if any, as laid down by the Hon’ble Supreme Court of India in

2008 ELR SC 0001- Gujarat Urja Vikas Nigam Limited versus Essar Power Limited. AMNEPL

further submitted that there is no prerequisite of a Power Purchase Agreement (PPA) envisaged

in Section 62 of the Electricity Act, 2003 and the application and the undertakings given by the

consumers and MADC to the Applicant constitute a contract and the same are sufficient for the

requirements of Section 62 of EA, 2003.

99. The factual matrix of the present case including list of events is tabulated below:

Table 6: Factual Matrix

Approval by Government of India to MADC to set

up SEZ at MIHAN, Nagpur, Maharashtra 6 November, 2006

Issuance of RFP by MADC for Selection of

Developer Captive Power Plant at MIHAN SEZ on

Build, Operate and Transfer Basis

MADC/MIHA/044/2006 – 07/02

Incorporation of AMNEPL July, 2007

Execution of Concession Agreement between

MADC and AMNEPL 7 November, 2007

Notification by Government of India regarding

changed status of SEZ Developers as Deemed

Licensee

3 March, 2010

Conversion of status of the Project from Captive

Power Plant to IPP 27 February, 2012

MERC Order on Petition of MADC for taking on 3 August, 2012


record its Distribution Licensee Status for SEZ at

MIHAN

Petition filed by AMNEPL for determination of

Generation Tariff as Generating Company for

supply of Power to MADC (Distribution Licensee)

15 February, 2013

100. Having heard the Petitioner, MADC and MIA, and after going through all the

submissions made in this regard, the Commission is of the view that though several arguments

and contentions have been advanced by the parties in the present case, the issue that needs to be

addressed can be gauged in a narrow compass, i.e., whether the present petition is maintainable

under Section 62 or Section 63 of the Electricity Act, 2003 or none. Before this issue is

answered, the following principles are to be kept in view :-

(1) Section 62 provides for determination of tariff inter alia for supply by a generating company

to a distribution licensee.

(2) Section 62 does not provide for determination of tariff for supply by a generating company to

consumers.

(3) Section 63 provides inter alia for adoption of tariffs so long as the same has been arrived at

pursuant to the conduct of bidding process by the distribution licensees in accordance with the

Guidelines notified by the central Govt.

(4) Section 63 does not provide for adoption of tariffs if the same has been arrived at pursuant to

the conduct of bidding process by an entity other than distribution licensee. The moment bidding

process is conducted by an entity other than distribution licensee such a bidding process cannot

be in accordance with the Guidelines notified by the central Govt.

In view of the above principles, and in view of the factual matrix in the present case, the

Commission is of the view as follows:-

101. The Commission in its Order in Case No. 65 of 2012 has already raised the question on

maintainability of the Petition filed by MADC for adoption of Tariff under Section 63 of the

Electricity Act, 2003. It may be noted that during the proceedings of Case No. 65 of 2013,

MADC itself agreed that it had wrongly proceeded on the legal basis in its original Petition dated

13 July, 2012 and approached the Commission for adoption of Tariff for MIHAN SEZ under


Section 63 of the Electricity Act, 2003 and thus, subsequently filed an amended Petition in which

it submitted as follows:

“..MADC is not seeking any Order in regard to Distribution network and distribution

tariff to which MADC is entitled to in regard to the use of the distribution network by the

consumers in the MIHAN SEZ Area. Similarly, MADC is not praying for any Orders in regard to

the electricity outside MIHAN SEZ Area namely in the MIHAN Area which are not covered by

the notification of SEZ issued by the Government of India. MADC will be filing an appropriate

separate application in regard to the same at the appropriate stage.”

102. Section 63 of the Electricity Act, 2003 states as follows:

“Section 63. (Determination of Tariff by bidding process):

Notwithstanding anything contained in section 62, the Appropriate Commission

shall adopt the Tariff if such Tariff has been determined through transparent process of

bidding in accordance with the guidelines issued by the Central Government.”

103. As regards the same, the Commission is of the view as under:

a. Considering the fact that MADC while undertaking the competitive bidding was not

given the status of distribution licensee and thus it would not be appropriate to consider

the competitive bidding process conducted by MADC in accordance with the competitive

bidding guidelines issues by the Central Government. Further, there is nothing on record

to show that MADC while under taking the bidding process had followed the competitive

bidding guidelines issues by the Central Government. It could not have in any case

because it was not a deemed distribution licensee then.

The Request for Proposal issued by MADC was for selection of Developer for Captive

Power Plant at Mihan SEZ Area, Nagpur on Build, Operate and Transfer basis. Thus, the

original and the only bidding process carried out by MADC was for setting up of the

Captive Power Plant and was never intended for the procurement of power by

Distribution Licensee under Section 63 of the Electricity Act, 2003.

b. The Tariff under the Concession Agreement was fixed directly at the consumer end and

there is no mention of the tariff for supply of power by AMNEPL to MADC, Distribution


Licensee in the Concession Agreement. The term Tariff is defined in the Concession

Agreement as under:

““Tariff” means the price of electricity charged by the Project Company to Consumers

in MIHAN Area in accordance with Article 14 and Schedule 5.”

104. The Commission considering the above facts is of the view that the adoption of the Tariff

based on the bidding undertaken by MADC cannot be construed as falling under Section

63 of the Electricity Act, 2003.

105. As regards the prayer of AMNEPL for determination of tariff for sale of firm power

generated from one Unit of 61.5 MW of AMNEPL’s Power Station to MADC under

Section 62 of the Electricity Act, 2003, the Regulation 17.2 and Regulation 25 of MERC

(Multi Year Tariff) Regulations, 2011 stipulate as follows:

“17.2 New Generating Stations

17.2.1 The tariff for the supply of electricity by a Generating Company to a Distribution

Licensee from a new generating Unit/Station shall be in accordance with tariff as per

power purchase agreement approved by the Commission, except if such power purchase

agreement has been exempted from requiring such approval in accordance with Part D

of these Regulations.”

“25 Approval of power purchase agreement/arrangement

25.1 Every agreement or arrangement for power procurement by a Distribution

Licensee from a Generating Company or Licensee or from other source of supply

entered into after the date of effectiveness of these Regulations shall come into effect

only with the prior approval of the Commission:

Provided that the prior approval of the Commission shall be required in accordance with

this Regulation 25 in respect of any agreement or arrangement for power procurement by

the Distribution Licensee from a Generating Company or Licensee or from any other

source of supply on a standby basis:

Provided further that the prior approval of the Commission shall also be required in

accordance with this Regulation 25 for any change to an existing arrangement or

agreement for power procurement”.(emphasis added)


106. As per the provisions of MERC (Multi Year Tariff) Regulations, 2011, prior approval of

the Power Purchase Agreement/Arrangement is required for the procurement of power by

the Distribution Licensee. AMNEPL has also admitted in its submissions that Section 62

of the Act also provides for the contracts/understandings (PPAs) to be put up before the

Commission for formal approval thereof, which has not been done in this case. However,

till date, MADC as Distribution Licensee has not submitted any Application to the

Commission for obtaining approval of Power Purchase Agreement/Arrangement for

procuring power from AMNEPL. Further, in the entire process of bidding and signing of

Concession Agreement, no prior approval from the Commission was obtained.

107. In this regard, as submitted by AMNEPL, the Commission recognising the fact that the

Concession Agreement had been originally signed considering the power supply from a

Captive Power Plant and directly to the consumers and was never meant to be for supply

of power to a Distribution Licensee, observed as follows during the hearing held on 31

October, 2011 in Case No. 16 of 2011:

“The MADC is a deemed distribution licensee. The Commission observed that the

clauses of the Concession Agreement dated 7th November, 2007 entered with between

MADC and Abhijeet MADC will be ultravires the EA, 2003, so far as they are

inconsistent or contravene the provisions of the EA, 2003. Thus once the MADC has been

granted deemed distribution licensee status, it will have to approach the Commission for

fixation of Tariff and all other related matters as these cannot be decided between

MADC and Abhijeet. The Commission suggested that both MADC and Abhijeet MADC

need to amend the agreement to take into account the present realities.”(emphasis

added)

108. Thus, the Concession Agreement executed between MADC and AMNEPL for supply of

power to consumers in the MIHAN SEZ area cannot be construed as a Power Purchase

Agreement between AMNEPL as Generating Company and MADC as Distribution

Licensee, and the Commission has already communicated to the Parties that there is a

need to amend the agreement to take into account the present realities.

109. In view of the above observations and the prevailing circumstances, the Commission is of

the view that the present Case clearly does not fall under Section 62 of the Electricity


Act, 2003 for determination of tariff to be supplied by AMNEPL as Generating Company

to MADC as Distribution Licensee.

110. In light of the above, the Commission is of the view that the present Case clearly does not

fall either under Section 62 or Section 63 of the Electricity Act, 2003 which are the only

enabling provisions of the Electricity Act, 2003 under which the Commission can

approve or adopt the tariff for supply of power by a Generating Company to a

Distribution Licensee. Thus, the Petition for determination of Tariff filed by AMNEPL

deserves to be rejected as not maintainable.

111. In view of the above, the prayers made by AMNEPL in the Petition filed by AMNEPL

for Approval of Capital Expenditure and Determination of Tariff for Sale of Firm Power

generated from the first Unit of 61.5 MW of the power plant of AMNEPL and the

Miscellaneous Application filed by AMENPL for Approval of Interim Tariff are rejected

and the Petitions are accordingly dismissed as not maintainable.

112. Summary of our findings:

i) The Competitive Bidding Guidelines notified by the Central Government are

for procurement of power by a distribution licensee.

ii) MADC while undertaking the competitive bidding was not given the status of

distribution licensee and thus it would not be appropriate to consider the

competitive bidding process conducted by MADC in accordance with the

competitive bidding guidelines issues by the Central Government. Further,

there is nothing on record to show that MADC while under taking the bidding

process had followed the competitive bidding guidelines issues by the Central

Government. It could not have in any case because it was not a deemed

distribution licensee then.

iii) The Tariff under the Concession Agreement was fixed directly at the consumer

end and there is no mention of the tariff for supply of power by AMNEPL to

MADC, Distribution Licensee in the Concession Agreement.


iv) As per the provisions of MERC (Multi Year Tariff) Regulations, 2011, prior

approval of the Power Purchase Agreement/Arrangement is required for the

procurement of power by the Distribution Licensee. MADC as Distribution

Licensee has not submitted any Application to the Commission for obtaining

approval of Power Purchase Agreement/Arrangement for procuring power

from AMNEPL. Further, in the entire process of bidding and signing of

Concession Agreement, no prior approval from the Commission was obtained.

v) The Concession Agreement executed between MADC and AMNEPL for supply

of power to consumers in the MIHAN SEZ area cannot be construed as a Power

Purchase Agreement between AMNEPL as Generating Company and MADC as

Distribution Licensee.

vi) The present Case clearly does not fall either under Section 62 or Section 63 of

the Electricity Act, 2003 which are the only enabling provisions of the

Electricity Act, 2003 under which the Commission can approve or adopt the

tariff for supply of power by a Generating Company to a Distribution Licensee.

Thus, the Petition for determination of Tariff filed by AMNEPL deserves to be

rejected as not maintainable

Sd/- Sd/- Sd/-

(Chandra Iyengar) (Vijay L. Sonavane) (V.P. Raja)

Member Member Chairman

Documents

Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION ... 58 42/Final Order- Case No 23 of... · MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade ... Recovery of generation