Renewable power stays grounded in Tamil Nadu…

 

High wind power potential, high solar insolation (the solar radiation energy it receives) and shortage of power make Tamil Nadu an ideal destination for investors in the renewable power sector.

The state has supported the harnessing of renewable energy, but policy, infrastructure and legal issues have hobbled the development of solar and wind power in the state. Energy from these sources could have helped the state tide through the power crisis.

The state even tried to promote domestic solar systems but the economics didn't work out. TN attracted interest when it announced its solar policy in October 2012, and investors planned to set up plants with a capacity of more than 800MW in TN, which would have increased the state's generation from non-conventional sources to 3,000 MW by 2015. However, legal problems have dogged large solar plants. For instance, the Appellate Tribunal for Electricity (Aptel) on Tuesday set aside a government order on Solar Purchase Obligation , which mandates that commercial consumers procure 6% of their power from solar plants. The Aptel judgment is likely to hamper solar power projects in the state. The only silver lining is that the Tamil Nadu Electricity Regulatory Commission, which had just one member for months, has got another member. "The appointment of a second member could mean that the order to sign power purchase agreements between Tangedco and solar power companies could be issued in February ," said D Arumugam, director of solar power infrastructure provider Marigold Steel & Power.

The use of solar pumps in agriculture could also help TN. "Around half a million farmers in TN are awaiting power connections. If they used solar pumps, the demand on the grid would reduce considerably," said Pashupathy Gopalan, president (Asia-Pacific ) of solar pump-maker SunEdison.

The state has stumbled with wind power too. TN had an installed wind power capacity of 7,145MW, but most of it is of no use because of a lack of infrastructure to evacuate the power.

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REC mechanism not being honoured by most States; Rays Power taps APTEL...

 

Most States are still not honouring the renewable energy certification (REC) mechanism available for solar photovoltaic power plants subjecting them to financial strain, according to Rays Power Experts.

A turnkey solutions provider for solar PV projects having set up three solar parks in Rajasthan, the company has knocked at APTEL (Appellate Tribunal for Electricity) seeking justice making various regulatory commissions respondents.

“If the REC mechanism is extended as per the National policy, the per unit purchase price works out to about Rs 9. In fact, we are now getting only Rs 2.75 per unit through third party sales as there is no power purchase agreement obligation,” Rahul Gupta, Director of Rays Power, told Business Line.

“Even though this is a policy announcement whose facility is available till 2017, it is not being currently honoured. This is making projects which have come up based on REC mechanism financially unviable. Therefore, we have approached APTEL seeking justice. The Central Electricity Regulatory Commission is also looking into the matter,” he said.

The company has set up three solar parks in Rajasthan near Bikaner with a total installed capacity of 60 mw and expects to take the capacity to up to 100 mw by March 31, 2014.

“Our clients include Rajasthan Patrika and food & beverage (namkeen) makers Haldiram and Bikaji among others for whom we have set up units,” he said.

A perfect business model of projects based on REC mechanism, which the Government had promised has been put to test as most State regulators are yet to implement the mechanism. The company has mentioned that a similar petition filed by the Indian wind power association.

Gupta said that there is immense potential in harnessing the potential of the solar power provided all the regulatory commissions meet and enforce renewable purchase obligation. This would provide much needed boost to the new and renewable energy sector in the country making it cost effective.

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Lanco says it got favourable APTEL ruling in Amarkantak issue...

 

Lanco Infratech's received a favourable verdict on its year-long dispute with Haryana Power Generation Corporation (HPGCL) over the second unit of its Amarkantak power plant.

“As per the Appellate Tribunal for Electricity’ (APTEL) order, Amarkantak Unit 2 shall be paid regulated tariff based on the actual capital cost of the project. This would result in sustainable and profitable operation of the project at full capacity,” said Lanco, in a press release today. The exact tariff for the power plant, is yet to be known as the order has not been made public.

The 300 megawatt second unit which was commissioned, could not start generating due to the dispute, can now start generation. The power generator's power purchase agreement with Power Trading Corporation (PTC) to supply to HPGCL, was terminated. This was over the non-compliance of certain PPA covenants.

The receivables from this unit have been pegged at Rs 195 crore, by the end of the second quarter. The first unit of coal-based Amarkantak power, which is located in Chhattisgarh, has been generating power and earning revenues, unlike the second unit. 

Lanco's Rs 7,700 crore debt recast was approved by its lenders, last month. Amongst other developments, Lanco said that it has two cases pending verdicts with APTEL and that they were expecting favourable judgments.

“Once tariff orders are passed, we will take around six months for payments to be cleared. We expect the payments to come over time and not immediately,” said Adi Babu, the chief financial officer of Lanco, told Business Standard in an interview after its debt recast was approved.

The release of payments from its power plants is one of the positive developments that the company had expected after its corporate debt restructuring (CDR) package was approved by the lenders. As its payments from Karnataka state utility as well as that of Haryana is cleared, the company expects its business to start turnaround by March.

Source: Business Standard

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CERC to hear Sasan commissioning case tomorrow...

 

Electricity regulator CERC, will tomorrow, hear Western Region Load Despatch Centre's petition challenging Reliance Power's claim of commissioning the first unit of its Sasan ultra mega power project, in Madhya Pradesh.

CERC (Central Electricity Regulatory Commission) will hear issues related to commercial operation of Sasan plant, according to information available on the regulator's website.

The Western Regional Load Despatch Centre (WRLDC), which operates the power grid in the region, had questioned the start date of commercial operations at the Sasan plant, where the first 660-MW unit was commissioned in March.

Based on a petition filed by the WRLDC, the CERC had set aside a certificate issued by the independent engineer for declaration of commercial operations at the Sasan plant.

Reliance Power filed an appeal with the Appellate Tribunal for Electricity (APTEL) on the grounds that CERC's order is violative of principles of natural justice and is not tenable in law.

APTEL set aside CERC's order on August 13 and directed it to decide afresh on the matter of commercial operation date.

While referring to the judgement of APTEL, WRLDC in its petition with the CERC said that since the issue of maintainability is linked with the main issue on merits, the commission can consider all issues and then come to a conclusion.

Sasan Power Ltd (SPL) is the wholly owned subsidiary of Reliance Power which is executing the 4,000 ultra mega power project. The first unit started producing power on March 30, Reliance Power said in a BSE filing on April 4.

The company is executing UMPPs in Sasan, Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand).

Source: Business Standard

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India Wind Power Association moves Tribunal challenging Tamil Nadu’s move to buy thermal power...

 

The India Wind Power Association (IWPA), a representative of wind energy producers, has launched a fresh challenge against the Tamil Nadu government's decision to buy thermal power, instead of using available wind power, to tide over shortages.

On Thursday, the association moved the Appellate Tribunal for Electricity, the appeals body, challenging an earlier ruling against it by the Tamil Nadu Electricity Regulatory Commission.

"Tangedco (the state-run power generation and distribution company) is buying from outside costly thermal power even during the windy months of May to September by backing down wind mills eight to 22 hours daily and refusing to give the 'must run' status to wind mills, calling it infirm power," K Kasthurirangaian, chairman of IWPA, told ET.

Infirm power is considered interruptible at a very short notice.

Wind energy producers feel hard-done by the absence of a 'must run' status, having lost an opportunity to sell their power. Already, they have been hit hard by long delayed dues that the utility owes them.

State government officials couldn't be reached for comments.

The tussle between wind energy producers and the state comes at a time when the latter is trying to address a huge problem in the electricity sector. Tamil Nadu faces a huge shortage of power and the state-run utility is neck-deep in debt.

The grouse of wind energy players, once the state's darlings, also manifests itself at a time when the Tamil Nadu is aggressively wooing solar developers, following a plan to add 3 gigawatt of solar power in three years.

According to data available with the Centre for Wind Energy Technology, Tamil Nadu is still the leader in wind power installed capacity. It accounts for 40% of the country's total installed capacity of over 18 gigawatt.

The tussle started in September when Tangedco sought the nod from the state electricity regulator to buy over 2 gigawatt of thermal power for 15 years starting 2013. This was over and above the 1 gigawatt or so approved end of last year.

The state's plan was this: buy roughly half from outside the state from the players such as Balco and GMR and the rest from private players inside like OPG and ILF&S.

IWPA protested, saying there was enough surplus wind power available. It was also joined by Tamil Nadu Spinning Mills Association in the case. Tamil Nadu Spinning Mills is also fighting a case against Tamil Nadu over the mandatory solar purchase obligation.

The electricity regulator upheld Tangedco's stand, ruling that the IWPA position lacked merit. Tangedco, citing a Central Electricity Authority estimate, had pegged the total available capacity for 2013-14 at just under 11 gigawatt, much lower than demand (at 15.7 gigawatt). Further, it had argued, that the utility can't plan for the future relying on infirm power such as wind.

The appellate tribunal has posted the case for hearing on Dec. 21

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Lanco Infratech has got the Lender's approval for the CDR for the Rs. 4,400 Crores debt...

 

Power generator Lanco Infratech got a Rs 7,700 crore breather from its bankers as they approved a proposal to restructure its debt, today. The corporate debt restructuring (CDR) will allow the company a two-year interest holiday.

The lenders will restructure debt of Rs 4,400 crore and non-fund based exposure like bank guarantees and letters of credit worth Rs 3,300 crore.

It will also get additional funds of Rs 2.500 crore from the bankers. Of this, Rs 1,060 crore will be non-fund based. “We will use the additional funding vendors, suppliers and other service providers,&" said Adi Babu, chief financial officer of Lanco Infratech. The company has outstanding payments of around Rs 1,500 crore. It will also spend yet another Rs 1,000 crore to pay for impending work.

The promoters of the company, which includes the chairman Lagadapati Rajgopal, will have to bring in Rs 153 crore as their contribution. The payment will have to made before the signing of master restructuring agreement, which is expected to be signed by the end of the month.

As per the agreement, lenders will also reduce the interest rates by 2.5% for the first 3-4 years. This shall be compensated in the subsequent years as it will increase by 4.5%.

“The moratorium will ease the liquidity and will help us ease existing activity. This will help us make a comeback in engineering, procurement and construction (EPC) business. We will go ahead with our EPC business aggressively,&" Babu told Business Standard. He also expects business to normalise by March.

In the last 10 months, activity on the company's EPC business was stalled. In addition to slowdown in EPC business, Lanco's troubles which took it to CDR include frozen payments from state electricity boards (SEBs), leading it into a huge funding gap. The power generator is yet to receive as much as Rs 2,000 crore from power distribution companies in Karnataka as well as Haryana.

“There are two tariff orders pending with Central Electricity Regulatory Authority and Appellate Tribunal for Electricity (APTEL). Once these orders and judgements are passed, we will take around six months for payments to be cleared. We expect the payments to come over time and not immediately,&" said Babu.

Lanco has a power generating capacity of as much as 4,732 megawatts. The power business, like many other assets in the country, was affected by issues other than delayed payments like lack of fuel supply to both its coal and gas-based power plants. Earlier, the company had said that prevailing macro-economic conditions have affected it.

The company maintains that a complete turnaround in the power sector would happen only if the government provides fuel, especially for those projects which are completed. The state electricity boards should also increase tariffs to consumers and should be in a better position to buy more power as opposed to going for power cuts.

“Once these corrective measures are taken by the government, it will help the sector make a turnaround. But for the company, we expect many issues to be resolved by March expect for fuel for our gas-based power plants,&" said Babu.

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Upon Petitions of R-Infra's Delhi Discoms, APTEL directs DERC to effectively implement Fuel & Power Purchase Adjustment mechanism...

 

Reliance Infrastructure's Delhi Distribution Companies BSES Rajdhani Power Limited (BRPL) and BSES Yamuna Power Limited BYPL) have filed and petition to the Appellate Tribunal of Electricity  for some fundamental issues relating to the functioning of the Delhi Electricity Regulatory Commission as well as certain aspects of the tariff determination for the Discoms. APTEL has issued a judgment in favor BRPL and BYPL and directed DERC to effectively implement the Fuel & Power Purchase Adjustment Mechanisms while arriving at tariff for the Discoms.

 

Major points as filed by the Discoms are:

• Adverse impact on the cash flow and financial crisis due to the acts and omissions by the Delhi Commission by failing, refusing and neglecting to perform the statutory functions.
• Ineffective implementation of an efficacious Fuel Price Adjustment.
• In spite of lapse of nearly 9 years since the enactment of the Act, 2003, there has been no effective implementation of an efficacious Fuel Price Adjustment.
• The first effective order allowing Fuel Price Adjustment was passed on 1.2.2012 giving an ad-hoc allowance of 5% and an unjustified disallowance of 5.75% from the claim of 10.75% increase as per the prescribed formula.
• The second order was passed on 1.5.2012 by the State Commission, which again gave only an ad-hoc allowance of 6% as against the claim of 7.27% increase without dealing with the backlog of the previous quarter.
• Lace of effective Power Purchase Cost Adjustment Mechanism for the tariff calculations.
• Continuous failure to determine the cost of the reflective tariff in a timely manner in terms of Part VII of the Act, 2003 resulted in an ever increasing accumulation of a Regulatory gap.
• The Delhi Commission refused to provide any recovery mechanism and amortization schedule along with carrying cost for the admitted revenue gap of nearly Rs.3658 Crores accumulated over the years.
• The Delhi Commission refused to follow the directions and findings of this Tribunal in three direct judgments related to Delhi Commission since 2009 on the basis that the Delhi Commission has already proposed to file Appeals in these cases before Hon’ble Supreme Court.

APTEL after hearing to the pleas of both the parties have given the following judgments:

• The Petitions filed by the Discoms under Section 121 of the Electricity Act, 2003 are maintainable.
• The refusal by the DERC to implement the judgments of this Tribunal would amount to judicial indiscipline and is against the settled position of law. Mere filing of the Appeal or proposal to file the Appeal would not amount to the effect of automatic stay of the Tribunal’s judgment.
• However, in view of the affidavit filed by Delhi Commission in Appeal No.14 of 2012 and submissions made in these petitions, any penal actions against the DERC are not proposed except to advise it to correct its mistakes committed earlier and follow the directions issued by APTEL in future.
• As regards recovery/amortization schedule of the admitted regulatory assets and effective implementation of Fuel & Power Purchase Adjustment mechanism, DERC is directed to take immediate action in pursuance to the directions given in OP No.1 of 2011 dated 11.11.2011.

The full judgment as issued by APTEL can be downloaded from here.

Source: ATPEL

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APTEL issues notices to Gujarat Solar Park Develoers...

 

The Appellate Tribunal for Electricity (Aptel) has issued notices to 80 Gujarat-based solar project developers on an appeal filed by Gujarat Urja Vikas Nigam (GUVNL), the state government-run utility. GUVNL is seeking a cut in the rate of power it will buy from the solar players on the grounds that the actual cost incurred by developers of these projects was 40 per cent less than initially assumed.

The utility is seeking a proportionate cut in the rate to Rs 9 a unit from the Rs 12.54 agreed under the power purchase agreements (PPAs). GUVNL has signed PPAs with 80 players, including the solar arms of Tata, GMR Essar and Welspun.

The dispute has put solar energy projects in Gujarat of Rs 14,000 crore under a cloud.

The tribunal admitted the appeal, with a rider on its maintainability. "Since the maintainability of the appeal as well as the petition filed before the state commission is questioned, we deem it fit to admit this appeal, subject to maintainability," Aptel said in its order on Monday.

The hearing is set for December 11.

In August, Gujarat Electricity Regulatory Commission (GERC), the state regulator, had dismissed a review petition. A reason was the petition had been made after three years, while the time allowed for such petitions was 60 days from the original order.

In 2009-10, GERC had determined the rate through a consultative process. "The Commission decides to adopt Rs 16.50 crore per Mw (Megawatt) as capital cost for Solar Photovoltaic (PV) Power Project and Rs 13 crore per Mw for Solar Thermal Power Project," it had said.

Based on these rates, GUVNL signed 88 PPAs for 971.5 Mw aggregate capacity, in two phases. 857 Mw of solar capacity has been established, according to GUVNL.

At the originally agreed cost of Rs 16.5 crore per MW, the cost of these projects work out to Rs 14,140 crore.

But, GUVNL argues that several developers it had checked had incurred between Rs 10 crore to 13 crore per MW. "The weighted average woks out to around Rs 12 crore per MW."

At this rate, the total project cost comes to Rs 10,284 crore or Rs 3,856 crore less.

This difference of Rs 3,856 crore is a windfall for the developers and will result in additional burden for consumers, the utility argued.

"The increased tariff of Rs 3.54 per unit is a direct burden on the consumers of the state and is an unwanted, unjustified and windfall gain to the project developers," the petition said.

Besides challenging the petition on its maintainability and other technical grounds, developers say that a fall in cost of solar equipment and other costs was taken into account even at the time of fixing the tariff and it was one of the factors that had attracted investment in the renewable energy sector.

Changing terms of the PPA long after it was finalised, will affect future investments in the sector, they argue.

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Tata Power's low-end consumers to soar 7.92 lakh in Mumbai...

 

The ongoing tussle between Tata Power and Reliance Infrastructure (R-Infra) to lure consumers in Mumbai is expected to become even more embittered.

The Maharashtra Electricity Regulatory Commission (MERC) has ordered the transfer of R-Infra’s 7.92 lakh low-end residential consumers with a monthly power consumption of 0-300 units to Tata Power's distribution arm from November 1. MERC has asked Tata Power to supply electricity to these new low-end consumers from the R-Infra distribution network. Tata Power will pay wheeling, regulatory asset charges and other costs to R-Infra.

However, R-Infra had approached the Appellate Tribunal for Electricity (ATE) challenging MERC's order. ATE has not stayed Merc's order, but will hear R-Infra’s petition on December 17. In the meantime, according to ATE’s order, R-Infra has again approached

MERC for extending the timeline for transfer of its consumers to Tata Power. The hearing is slated for November 8 at Merc.

A Tata Power spokesman said, “'Tata Power is studying the order.” On the other hand, an R-Infra spokesman stated, “R-Infra approached ATE, as the time-span given to implement Merc directives was too short and inadequate.”

Currently, of the 4.25 lakh consumers, Tata Power is supplying power to 2.50 lakh low-end residential consumers. However, R-Infra's low-end consumer base will fall to 1.1 million from the present 1.9 million. R-Infra is currently supplying power to a total of 2.8 million in Mumbai.

The current tariff charged by R-Infra from low end residential consumers for the 0-100 slab is Rs 3.93 per unit while Tata Power's tariff is Rs 2.13 per unit. For the 101-300 slab, R-Infra charges Rs 6.84 per unit against Tata Power's Rs 3.62 per unit. This excludes fixed charge.

These consumers are from the 11 clusters in Mumbai identified by Merc to introduce competition in the distribution business and thereby protect the interest of the common man, specifically low-end consumers by option of cheaper electricity to be sourced from TPC-D. Industry players believe that the transfer will  bring parity in the number of low-end residential consumers serviced by both the utilities. Further, R-Infra's subsidy burden is expected to come down.

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CERC issues approach paper to determine tariff regulations for the control period 2014 - 19...

 

Central Electricity Regulatory Commission has issued an approach paper for studying and determining various terms and conditions for the tariff regulations for the control period of 2014 to 2019.

CERC will also appoint and engage a consultant to better understand the current scenario and to determine the trends in the Indian power sector.

The study, to frame 'Tariff Regulations for control period 2014-19', comes against the backdrop of multiple woes in the power sector especially rising dependence on imported coal which would push the electricity prices higher.

Factors including return on investment made by power producers, fuel issues, operational norms and various orders passed by authorities including CERC and Appellate Tribunal for Electricity (APTEL) would be taken into consideration.

As per the draft paper uploaded by CERC on its website...

"Considering the developments in the sector during the current tariff period, current and perceived challenges in the power sector and need for market development, it has been felt to give a fresh look into the basis and assumptions to be considered while framing the fresh terms and conditions of tariff for control period 2014-19,"

In recent times, many power producers have faced hurdles related to increasing tariffs, especially in the case of projects utilizing costlier imported coal.

Meanwhile, the consultant to be appointed by the CERC, would have the mandate to undertake comparative studies, collate information collected from the stakeholders and providing assistance in framing the new tariff regulations.

Among others, the consultant would carry out an analysis of "fuel stock being maintained by existing generating stations to take a view - in regard to benchmarking of fuel stock for the purpose of working capital", according to a CERC document.

Also, an analysis of the debt market would be done for the purpose of deciding approach for return on investment taking into consideration domestic market.

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Additional Reading...

• http://www.cercind.gov.in/2013/draft_reg/FO_AP_2013.pdf
• http://www.cercind.gov.in/2013/tender/TOR19.pdf
• http://economictimes.indiatimes.com/news/news-by-industry/energy/power/cerc-to-start-work-soon-on-framing-new-power-tariff-norms/articleshow/21308263.cms

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GMR moved to Supreme Court for non-payment of Rs. 600 Crs by Tamil Nadu Electricity Board…

Power India found that GMR Power Corporation Private Ltd has filed a case against Tamil Nadu Electricity Board (TNEB) for non-payment of tariff invoices amounting to around Rs. 600 Crs from the 200 MW Diesel Based Power Project at Basin Bridge.

 

GMR had entered into a power purchase agreement (PPA) with TNEB in September 1996 for setting up a 200 MW Diesel Power Plant at Basin Bridge of Chennai.

 

The infrastructure company had also entered into a fuel supply agreement with HPCL in December 1996 for purchase of low sulphur heavy stock fuel for its diesel engine based power plant and onward sale of power to the electricity board.

 

GMR had a dispute with the state electricity board with respect to PPA, land lease rentals among others.

 

GMR had earlier filed a petition against non payment of invoices by TNEB to Tamil Nadu Electricity Regulatory Commission in the year 2008.

• Tamil Nadu Electricity Regulatory Commission by its order dated April 16, 2010 had allowed the claims of GME and directed TNEB to pay approximately Rs 480 crore with interest in six equal monthly instalments to the former.

 

However, thereafter TNEB has approached the Appellate Tribunal for Electricity.

• The Aptel wide its order dated February 28, 2012  had ruled in favour of GPC.
• Aptel ruled that reimbursements received by GMR from Hindustan Petroleum Corporation Ltd (HPCL) by way of fuel credits should be paid or set-off against dues payable by the Tamil Nadu Electricity Board (TNEB).

 

Recently, GMR has challenged the above petition into the Supreme Court.

• A bench headed by Chief Justice S H Kapadia has sought reply from HPCL as to whether such credit has been given by it gratuitously to GMR as claimed by the latter.
• However, it asked the parties to maintain “status-quo as far as inter-se adjustment is concerned.”

 

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More Literature on this topic:

http://courtnic.nic.in/supremecourt/temp/ac%203201-320212p.txt

http://aptel.gov.in/judgements/Appeal%20No.%20177%20of%202010.pdf

http://tnerc.tn.nic.in/orders/commn%20order/2010/DRP%20No.10%20of%202008.pdf

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