RAKESH NATH,J. - (1.) THIS appeal has been filed by M/s. Raj West Power Ltd. against the order dated 13.11.2009 passed by the Rajasthan Electricity Regulatory Commission ('State Commission') in the matter of determination of Page 2 of 81 Appeal No. 182 of 2010 provisional tariff for the first two generating units of 135 MW each at the power project being set up by the appellant.
(2.) THE appellant is a generating company which is in the process of establishing a lignite based thermal power project with 8 Units each of 135 MW capacity. The State Commission is the first respondent. The respondent nos. 2 to 4 are the distribution licensees of Rajasthan, who are the buyers of power from the appellant's power project. The respondent nos. 5 to 9 are the consumers/consumer associations of the distribution licensees.
(3.) THE brief facts of the case are as under: 3.1. The appellant is in the process of installing a power project with 8 Units of 135 MW each in District Barmer of Rajasthan. Out of the 8 Units, 2 Units have Page 3 of 81 Appeal No. 182 of 2010 been commissioned by the appellant. This Power Project has been established with a view to utilize the lignite resources at Kapurdi and Jalipa Mines in the State of Rajasthan. The technology adopted at the power plant for use of lignite available from the above mines with low calorific value, high moisture content and sulphur content is Circulating Fluidised Bed Combustion technology, hereinafter referred to as 'CFBC technology'. 3.2. On 28.7.2006 the appellant filed a petition before the State Commission for 'in -principle' determination of capital cost of its power project. The State Commission by its orders dated 19.10.2006 and 26.10.2006 approved in -principle capital cost and tariff of the generating project of the appellant and the transfer price of lignite from Kapurdi and Jalipa Mines to the power project. Page 4 of 81 Appeal No. 182 of 2010 3.3. On 23.1.2009, the State Commission notified its Tariff Regulations, 2009 providing for the norms for determination of tariff for generation and supply of electricity by the generating companies. 3.4. In February, 2009 the appellant filed a petition being petition no. 183 of 2009 for removal of difficulties on certain aspects of the norms and parameters as applicable to the appellant's generating project. 3.5. The lignite mines in Kapurdi and Jalipa were envisaged to be developed by a Joint Venture Company of the appellant and Rajasthan State Mines and Minerals Ltd., a State Government Undertaking. The Joint Venture Company, hereinafter referred to as 'JV Company' had to proceed with the implementation of the mining project after the land was secured, Page 5 of 81 Appeal No. 182 of 2010 transferred and vested in Rajasthan State Mines & Minerals Ltd., by the Government of Rajasthan. 3.6. While the appellant proceeded with the construction of the power project as per schedule, the mining project could not be commenced due to Rajasthan Government/Rajasthan State Mines & Mineral Ltd. not completing the land acquisition process. 3.7. Since the State was facing power shortage, the appellant offered to operate the generating station on alternate fuel viz; imported coal, till such time the local lignite mines were developed by the JV Company. The State Government and the respondent distribution licensees gave their consent for operating the power plant on alternate fuel in the interim period. Page 6 of 81 Appeal No. 182 of 2010 3.8. On 17.3.2009, the appellant filed a petition, being Petition no. 184 of 2009, before the State Commission for approval of provisional tariff for the first two units of 135 MW each with operation on the alternate fuel. 3.9. The State Commission heard the petition no. 183 regarding removal of difficulties in the Tariff Regulations and by an order dated 1.5.2009 held that the aspects raised in the said petition would be considered at the time of determination of the provisional tariff in petition no. 184 of 2009 which was pending before the State Commission. 3.10. In petition no. 184 of 2009, the State Commission, after a public hearing, passed an order dated 13.1.2009 determining the provisional tariff for the two units at the power station of the appellant on operation on imported coal. Page 7 of 81 Appeal No. 182 of 2010 3.11. Aggrieved by the order dated 13.11.2009 of the State Commission, the appellant has filed this appeal. The appellant has raised the following issues in the appeal: 4.1. Target Availability: The State Commission has incorrectly allowed the Target Availability for the generating station at 80% applicable to coal based station as per the 2009 Tariff Regulations ignoring the fact that the plant was set up as lignite based plant using CFBC technology. The State Commission ought to have adopted the target availability norms as applicable to the Lignite Fired Thermal Power Stations using CFBC technology. The 2009 Regulations provided for special dispensation for four years by way of relaxed target availability norms for power plants Page 8 of 81 Appeal No. 182 of 2010 using CFBC technology and designed for use of lignite. CFBC technology is not in extensive use in India and for this purpose the special dispensation was provided for four years for stabilization of the plant to attain optimum performance. The relaxation in plant availability is not for use of the fuel but on account of the use of the CFBC technology. The State Commission also did not consider that the Boiler designed with CFBC technology for lignite with low calorific value and high moisture content can use coal, indigenous or imported with characteristic similar or close to lignite namely low calorific value and high moisture content and not any other type of coal. 4.2. Operation & maintenance expenses: As in the case of plant availability, the State Commission has wrongly applied the O&M expenses applicable to coal based stations on the ground that coal is actually Page 9 of 81 Appeal No. 182 of 2010 being used instead of lignite. The O&M expenses as applicable to lignite fired station ought to have been allowed by the State Commission. The plant and machinery installed at the power plant was designed for use of lignite as fuel. The coal to be used should also be of a characteristic similar to that of lignite, namely, high moisture content and low calorific value. Merely because coal was being used as a fuel, the routine maintenance of the plant, employees cost and administrative and general expenses would not get reduced. The O&M expenditure norms provided in the Regulations are based on nature of the plant and not the type of fuel used from time to time. 4.3. Station Heat Rate: The State Commission has not correctly applied the provisions of the 2009 Tariff Regulations in regard to the Station Heat Rate for the generation station. The State Commission has not Page 10 of 81 Appeal No. 182 of 2010 given effect to the proviso regarding computation of unit design heat rate for plant where unit heat rate is not guaranteed but turbine cycle heat rate and boiler efficiency are guaranteed separately and for plants based on CFBC technology, as applicable to the appellant's power plant. Further, the correction in Station Heat Rate for high moisture content in coal has also not been allowed. 4.4. Depreciation: The State Commission has not calculated the depreciation correctly in terms of the Regulations. The State Commission has erred in calculating depreciation on 90% of the total capital cost and not on 100% of the capital cost. 4.5. Capital cost allocation: The State Commission has allowed one fourth of the total capital cost of the generating station towards the first two units on the Page 11 of 81 Appeal No. 182 of 2010 ground that the capital cost has to be proportionately allocated. Some of the common assets, though to be used for all the units of the generating station, were required for commissioning and operation of the first two units. Accordingly, the appellant had claimed allocation of 30% of the total capital cost to be allocated to the first two units according to the 2009 Tariff Regulations which was not allowed. Postponing the recovery of capital expenditure till the commissioning of the entire generating station is not in the interest of either the appellant or the Respondent distribution licensees and the consumers as the same would be recovered at a later stage with Interest During Construction (IDC). 4.6. Gross Calorific value of imported coal: The State Commission has wrongly disallowed the claim of the appellant for calculation of gross calorific value for the Page 12 of 81 Appeal No. 182 of 2010 purpose of variable charges only on the ground that the coal analysis at the loading port had not been furnished. At no point of time during the proceedings before the State Commission, the appellant was ever asked to produce the coal analysis data at the loading port. The appellant filed the data for loading port along with the review petition filed before the State Commission but the State Commission did not deal with the issue in the review order. 4.7. Insurance charges: The State Commission has not allowed the insurance charges at the rate of 0.5% of the capital cost on the ground that no actual insurance premium was paid by the appellant whereas the Regulations permit insurance charges or provision for contingency reserve upto 0.5% of the capital cost. Page 13 of 81 Appeal No. 182 of 2010 4.8. Variable cost of fuel: The appellant had prayed before the State Commission for not limiting the variable cost and norms only for imported coal but to also include the indigenous coal and lignite available for other sources. The State Commission in the review order has held that this was a new issue and could be addressed separately on filing of a separate petition. Accordingly, the appellant has craved leave to approach the State Commission by way of separate petition and not press the adjudication on this issue in the present appeal.;