| IN THE MATTER OF: |
Approval of Supplementary Power Purchase Agreement and project cost of 2X300 MW Rosa Power Project Stage II |
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| AND |
| IN THE MATTER OF: |
M/s Rosa Power Supply Company (Through Vibhav Agarwal) 519, Kasmanda Regent Apartment, 2, Park Road, Hazarat Ganj, Lucknow |
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: Petitioner |
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V/s |
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UP Power Corporation Ltd. Shakti Bahwan 14, Ashok Marg, Lucknow |
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: Respondent |
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The following were present:
1. Sri. S.K Agarwal, Director(F), UPPCL
2. Sri. G. Amudhan, M/s Rosa Power Supply Company
3. Sri. Vibhav Agarwal, M/s Rosa Power Supply Company
4. Sri. Sumeet Notani, M/s Rosa Power Supply Company
5. Sri.S.N Dubey, CE, UPPCL
6. Sri. S.P Pandey, EE (PPA), UPPCL |
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| 1 |
The Petitioner has filed this petition for approval of a Supplementary Power Purchase Agreement for sale of 300 MW power to the Respondent from unit IV of Rosa Power Project Stage II. The approval of cost of the said project, Rs.3098.6 Cr., has also been sought. |
| 2 |
Under section 86(1)(b) of the Electricity Act,03 and Regulation 126 of UPERC (Conduct of Business Rules)Regulations,2004, a licensee is required to seek approval of power purchase agreement including the price at which the electricity shall be procured and the procurement process. As the petition was filed by a generating company for approval of PPA and required fee had not been filed, the petition was fixed for hearing on admission. In the hearing, the petitioner informed that the fee had been filed. Sri. S.K Agarwal, Director (F) submitted on behalf of the Respondent that he had no objection if the petition was admitted. Since the Respondent had filed objections to the petition, the Commission decided to admit the petition and proceed to hear the issues involved in the matter. |
| 3 |
The Petitioner has revised Annexure 4 (Supplementary power purchase agreement), Annexure 8 (Basis of finalization of EPC contract) and Annexure 9 (Tariff) on the ground of inconsistencies discovered by it after filing the petition, vide submissions made on 22.5.09. A rejoinder, to the reply filed by UPPCL, has also been filed by the petitioner in the hearing attaching therewith again a revised Supplementary power purchase agreement (in short SPPA) as Annexure 1A vide affidavit dt.10.6.09. The agreement submitted with affidavit dt.10.6.09 shall be referred for the purpose of this proceeding. |
| 4 |
There is an agreement between the parties on supply of 300 MW power from Stage II project.
In reply to objections of the Respondent, the petitioner has accepted, in its rejoinder, to:
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supply 300 MW power comprising of 50% share of Respondent in both unit III & IV; |
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introduce a clause of liquidated damages if Commission decides to allocate 50% capacity from unit III & IV; and |
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pass benefit of mega power project in tariff. |
In light of above submissions, the objections of the Respondents in these
regards stand resolved. However, the following shall specifically be ensured in
SPPA that:
| I |
the Petitioner at no time shall deprive Stage I of the project of any shared or common facilities or resources and Stage I will have preference on common facilities or resources over Stage II ; |
| II |
the financial closure must be achieved as early as possible, however, the first unit (i.e. unit III) of stage II is scheduled for COD by 31.3.12 and that of second unit (i.e. unit IV) by 31.7.12; |
| III |
provision for liquidated damages shall be made similar to Stage I project; |
| IV |
any incentive consequent to grant of mega status to the project shall be pass through in tariff as the petitioner has made an application, as averred in the rejoinder, for grant of mega status. |
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| 5 |
Sri. Vibhav Agarwal submitted on behalf of the Petitioner that the 2X300 MW Stage II project was an expansion project within the meaning of clause 5.1 of Tariff Policy as such the parameters for tariff determination for entire capacity should be uniform. He prayed that the project cost might be approved and the issues related to tariff could be taken up separately. |
| Regarding cost, Sri.S.K Agarwal submitted on behalf of the Respondent that the Petitioner had entered into an EPC contract with SEC and UEEPL for Stage I project with base price applicable as on 6th March, 07 and with a provision that the petitioner could place an order for extension project at the same price.
However, the petitioner has agreed for higher price for Stage II project which was not acceptable to the Respondent. Sri. Vaibhav Agarwal replied that after signing contract with SEC and UEEPL, it was agreed between them that a notice to proceed for Stage I would be issued by the Petitioner by 30th April, 07, but due to delay in sanction of loan, notice to proceed was delayed and in the mean time on 27th May, 07, SEC informed the Petitioner that it could not maintain the price offered for Stage I due to appreciation in raw material prices & Chinese Yuan against US$ and withdrew the price offered for Stage II. The petitioner subsequently persuaded SEC who agreed to no change in price offered for Stage I whereas price for Stage II would be linked to variation in Chinese Yuan and US$. Similarly, the price offered for EPC contract for balance of plant of Stage II was also linked to variation in price on account of steel, labor and coal sale price and indices with Stage I price as base price as on 6th March,07. Sri. Vaibhav Agarwal submitted that the petitioner had negotiated the price with SEC and UEEPL in best interest of the consumers in the State and even saved Stage I project price from escalation as such the Stage II price was appropriate and Commission could approved the same. We appreciate that the price discovered by the petitioner for Stage I & II was through international competitive bidding, however, delay in issuance of ‘notice to proceed’ had adverse effect on the price offered for Stage I & II project and the petitioner succeeded in pursuing EPC contractors to agree to maintain price for Stage I project and with variation for Stage II. The objection of the Respondent is limited to escalation in the costs of Boiler-Turbine-Generator and balance of plant packages. The petitioner should endeavor to negotiate with SEC and UEEPL to bring down the escalation in price in overall interest of the consumers. The officers of the Respondent may also be involved in the negotiation. |
The Respondent raised the issue of additional cost involved with the extension of switchyard and objected to the additional cost of Rs.75 Cr. on that account. Sri. Vaibhav Agarwal clarified that balance of plant specification for Stage I was with 220 KV switchyard whereas for Stage II, 400 KV switchyard was envisaged . The additional cost on account of 400 KV switchyard as against 220 KV amounts to additional cost of Rs.75 Cr. and in view of that, the cost of balance of plant of Stage II could not be reduced as suggested by the Respondent. The petitioner was directed to identify the cost of 220 KV switchyard embedded in the project cost of Stage I and ascertain in consultation with the Respondent and U. P. Power Transmission Corporation Ltd, the additional cost involved in installation of a 400 KV switchyard. The additional cost thereafter agreed between the parties shall be considered for tariff purpose. |
Sri. S.K Agarwal objected to the prayer of the petitioner that the tariff of Stage II should be as determined under the regulations made by the Commission from time to time. Sri. Vaibhav Agarwal stated that as per regulation 2(5), UPERC (Terms & Conditions of Generation Tariff) Regulations,2009 (in short the Regulations) should also be applicable for determination of fixed charges in case of Stage I & II. The Respondent objected to the interpretation of Regulation 2(5) made on behalf of the petitioner. The parties must note that Regulation 2(5) operates only where any remedy is not available under power purchase agreement (PPA) signed between them but it is available in the said Regulation. In such event, any party to PPA could approach the Commission. Therefore, the terms & conditions of tariff approved by the Commission for Stage I project shall also apply to Stage II project. It is to clarify that UPERC (Terms & Conditions of Generation Tariff) Regulations,2009 as amended from time to time shall apply. On commissioning of stage II project, the capital cost of common facilities accounted for Stage I shall be shared by Stage I & II in equal proportion. |
| 6 |
Subject to observations made and directions issued above, SPPA and cost of Stage II project are approved. This approval of cost is for comfort to all stakeholders; however, it shall be subject to prudence check at the time of determination of tariff. A final supplementary agreement shall be drawn and a copy be sent to the Commission for information. The Petitioner shall submit compliance of directions issued in respect to cost of Stage II project on an affidavit within 2 months of this order. |
| 7 |
The petition is disposed of. |
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| (R.D. Gupta) |
(P.N. Pathak) |
(Rajesh Awasthi) |
| Member |
Member |
Chairman |
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| Lucknow; Dated: 15th June, 2009 |
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