- (1.) Three Generators (Indiabulls Power Limited, Adani Power Limited and JSW Energy Limited) which had tied up power under the Case 1 route of the "Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensees" issued by Ministry of Power, Government of India (hereinafter referred to as "Competitive Bidding Guidelines" with Maharashtra State Electricity Distribution Company Limited (hereinafter referred to as "MSEDCL"), had approached the Commission for compensation/adjustment in Tariff due to shortage of domestic coal availability, increase of price of imported coal, etc. in Case No. 154, 189 and 118 of 2013. Considering the common issues involved in the matters, the Commission had heard the cases jointly and approved a framework for compensatory fuel charge in Order dated 15 July, 2014. The Commission had directed the three Petitioners in those cases to approach the Commission with detailed justification of their hardships to claim the compensatory fuel charge under the approved framework. Accordingly, Indiabulls Power Limited (hereinafter referred to as "IPL"), the Petitioner in Case No. 154 of 2013, has filed the present Petition for approval of compensatory fuel charge.
(2.) IPL has made the following prayers in the present Petition: - " a) condone the delay in filing the present petition; b) allow 100% transportation and transaction costs which would be incurred by the Petitioner post the CCEA notification dated 21 June, 2013 and the amendment of NCDP dated 26 July, 2013; c) Allow full pass through of incremental cost in procuring alternate coal for meeting the shortfall quantity by modifying the formula in para 33.1.2 of Order dated 15.07.2014 as below: change in Step - 1 by using the actual 'as received' GCV for calculation of Units i. generated from domestic coal instead of using Baseline GCV OR ii. revise the Step - 4 so that compensation calculated in Step - 3 is multiplied with Units generated by units from imported coal, calculated in Step ­ 2 OR iii. apportion the incremental cost of alternate coal over actual units delivered Hon'ble Commission may consider option (iii) above for the reasons enumerated in this Petition. d) the Hon'ble Commission may recognize the losses suffered by the Petitioner on account of lower generation resulting from supply of lower grade of coal vis -à -vis the grade assured by the LoAs compensate the Petitioner for the same; e) pass such other order or order(s) as this Hon'ble Commission deems fit in the facts and circumstances of the present case."
(3.) In its Petition, IPL submitted as follows: 3.1 IPL has executed two Power Purchase Agreements (hereinafter referred to as "PPA"), for supply of aggregate 1200 MWs (450 MWs and 750 MWs respectively) of power to the MSEDCL. There has been a substantial increase in the fuel cost due to non -supply of assured quantity of coal by the State owned coal supplier Coal India Limited and its subsidiaries (hereinafter referred to as "CIL"), and also failure to supply the assured grade of coal. On the said matter, the Petitioner had filed a Petition, which was numbered as Case No. 154 of 2013. The Commission had issued an Order on 15 July, 2014 in the said matter. In the aforesaid Order, the Commission has recognised hardships being faced by the Petitioner and has proposed a methodology for allowing Compensatory Fuel Charge on account of changes in the business environment related to coal demand -supply situation, prices of coal in the international market, etc. 3.2 IPL submitted that while accepting most of the findings of the Order in Case No. 154 of 2013, it is seeking clarification on the following issues in the present Petition: i. under recovery of entire cost of incremental Alternate coal; ii. recovery of only 60 % of the transportation and transaction cost; iii. Non recovery of entire cost of Alternate coal to be sourced due to slippage in assured quality of domestic coal. iv. Not adopting the principles of the Article 10.2.1 of the PPA which stipulates as follows: "while determining the consequences of Change in Law under this Article 10, the parties shall have due regards to the principle that the purpose of compensating the party affected by such Change in Law, is to restore through monthly tariff payment, to the extent contemplated in this Article 10, the affected party to the same economic position as if such Change in Law has not occurred." 3.3 The Petitioner submitted that the Commission has laid down a methodology to recover Compensatory fuel charge in paragraph 32 of the said Order. IPL has worked out the actual recovery under the said methodology applying various formulae specified therein at Paragraph 32, 33, 33 and 34 of the said Order dated 15 July, 2014. Following are the underlying parameters: Table 1: Underlying parameters for computing Compensatory fuel charge Sr. No Parameter Unit Value Description/Remark 1 Baseline quantity MTPA 5.493 As per the Fuel Supply Agreement (hereinafter referred to as "FSA") executed with the South Eastern Coalfields Limited (hereinafter referred to as "SECL"), the Subsidiary Company of CIL 2 P Linkage INR/MT 2,298 As per the existing landed coal costs from SECL 3 Baseline GCV Kcal/kg 4,150 As per the FSA, G10, G11 and G12 grades of coal are allocated. However, currently, SECL is supplying G11 grade of coal and accordingly, the mid -point GCV of G11 grade of coal i.e. 4150 Kcal/kg is considered. Range of G11 grade coal is 4000 ­ 4300 Kcal/kg. 4 Shortfall quantity MTPA 1.648 Currently, the Petitioner is receiving ~ 70% of domestic coal of FSA quantity and hence the quantum of coal supply would be 3.845 (70% of baseline quantity i.e. 70% x 5.493) MTPA. Accordingly, the shortfall quantity to be Minimum of: (a) 5.493 ­ 3.845 = 1.648; and (b) 65% of 5.493 = 3.570 Kindly note that the coal supplies from SECL are commenced in phased manner, as and when each unit gets commissioned on pro -rata basis of commissioned capacity of 2 units (2x270MW). Realisation of ~70% of coal against FSA quantum is an approximate number which will be computed based on actual coal received during the period under consideration vis - a -vis entitlement of domestic coal under FSA. 5 (i) Revised GCV of kcal/kg 5000 Based on Argus (5000 Kcal/kg GAR) alternate source Index for Indonesian coal for the purpose of computation 5 (ii) Shortfall quantity MTPA 1.368 (Shortfall Quantity of domestic coal x of alternate coal Baseline GCV ) / Revised GCV of required alternate source i.e. (1.648 x 4150) / 5000 Sr. No Parameter Unit Value Description/Remark 6 Revised price of Rs/ton 4,814 Price based on Argus (ICI3, 5000 Kcal/kg alternate source GAR) indices for Indonesian coal. The break -up of coal price is given in the Table 2 7 Net SHR kcal/kWh 2692 Norms specified by CERC taken in to consideration Turbine Heat Rate - 1955 kcal/kWh Boiler Efficiency - 85% Multiplying factor - 1.065 Auxiliary consumption - 9% Net SHR = {(1955/85%) * 1.065}/(1 - 9%) 8 Units generated MUs 2541 Quantity of Alternate Coal in MTPA x from alternate coal 10^3 x Revised GCV of imported/alternate source (kCal/kg)/Net SHR (kCal/kWh) i.e. (1.368 x 10^3 x 5000 / 2692) 9 Units that can be MUs 5928 = Quantity supplied under FSA x baseline generated with GCV x 10^3 / net SHR domestic coal at = (5.493 x 70% x 4150 x 1000)/2692 baseline GCV 10 Actual units MUs 5142 = Quantity supplied under FSA x actual generated with GCV x 10^3 / net SHR domestic coal at = (5.493 x 70% x 3600 x 10^3)/2692 actual GCV of 3600 kcal/kg 11 Actual units that MUs 7683 5142 + 2541 will be delivered with available domestic coal at actual GCV and coal sourced from alternate source Table 2: Break -up of PAlternate as per approved methodology Component Price Recovery FOB Price ($/ton) 51.33 100% Sea Freight ($/ton) 8.50 $/ton 60% Insurance ($/ton) 1 $/ton 60% CIF Price ($/ton) 60.83 Rupee -$ rate 60.85 CIF Price (Rs/ton) 3,702 Port handling charges (Rs/ton) 500 60% Duties, cess and taxes on coal (Rs/ton) 305 100% Railway freight from Dahej to plant ­ distance ~740 KMs 969 60% (Rs/ton) Duties, cess and taxes on railway freight (Rs/ton) 244 60% Total coal cost (Rs/ton) 5,720 Transit loss (0.2%) 11 100% Actual Landed Coal Cost (Rs/ton) (P Alternate_ Actual) 5,731 Coal cost for recovery at 60% considered by Hon'ble 4,814 Commission (Rs/ton) (P Alternate) 3.4 Accordingly, the compensatory fuel charge is worked out as follows: Table 3: Computation of compensatory fuel charge Sr. No. Parameter Computation = (Shortfall in CIL Qty x Baseline GCV) /Alternate Coal I Quantity of Alternate coal GCV in MTPA = (1.648 x 4150) /5000 = 1.368 MTPA Compensatory Fuel Charge (i) Cost of Alternate Coal = (Q Alternate x P II Alternate(Actual)) (Rs/kWh) = (1.368 x 5731) = Rs. 784 Crores (ii) Cost of Alternate Coal with 60% restriction on transaction and transportation costs = (Q Alternate x P Alternate) = (1.368 x 4814) = Rs. 658 Crores (iii) Cost of Domestic Coal = (Q Shortfall x P Linkage) = (1.648 x 2298) = Rs. 379 Crores (iv) Actual incremental cost incurred on Alternate coal = Cost of Alternate Coal ­ Cost of Domestic coal = Rs 784 Crores ­ Rs 379 Crores = Rs 405 Crores (v) Hence, Actual Compensatory fuel charge at 100% recovery of entire cost of alternate coal = (Q Alternate x P Alternate Actual) - (Q Shortfall x P Linkage) Units generated from alternate coal = 784 Crores ­ 379 Crores (2541/10) = Rs 1.59/kWh (vi) As per the Order dated 15 July, 2014, passed in Case No. 154 of 2013 Compensatory fuel charge at 60% recovery of transportation and transaction costs of alternate coal will be: = 658 Crores ­ 379 Crores (2541/10) Sr. No. Parameter Computation = Rs 1.10/kWh Step 1: Units from domestic coal III Computation of total = (Baseline Quantity ­ Shortfall Quantity) x Baseline GCV/ amount of compensatory Net SHR charge = (5.493 ­ 1.648) x (4150 / 2692) = 5928 MUs Step 2: Actual units generated from Alternate coal = Quantity of Alternate Coal in MTPA x 'Revised GCV of imported/alternate source'/Net SHR = (1.368 x 5000 x 10^3)/2692 = 2541 MUs Step 3: The denominator for the formula for compensatory fuel charge per unit shall be computed using the Units from imported coal in Step 2 Step 4: Compensatory fuel charge payable shall be the compensatory fuel charge per unit payable in Step 3 multiplied by minimum of: (i) Actual units delivered at delivery point from the contracted capacity ­ Units from domestic coal as computed in Step 1 = (7683 ­ 5928) = 1755 MUs (ii) Units from imported coal computed in Step 2 = 2541 MUs Hence, the Compensatory fuel charge arrived at above i.e. Rs 1.10/kWh will be applied on 1755 MUs (minimum at step 4), and will work out to Rs 193 Crores i.e., (Rs 1.10/kWh x 1755 MUs/ 10) 3.5 Based on the above, the Petitioner has claimed that: The total compensation as per the adopted formula will be Rs 193 Crores, whereas the total incremental cost incurred by the Petitioner is Rs 405 Crores as computed at Sr. No. II (iv) in the Table 3 above leading to under recovery of 212 Crores, i.e., 52%. The actual units generated with domestic coal, i.e., 5142 MUs are significantly lower due to slippage in quality of coal. Using theoretical units generated from domestic coal of 5928 MUs in Step 4 (Sr. No. III in Table 3) above is leading to recovery of compensatory fuel charge on far lesser units than the actual units generated with imported coal. Reasons for under recovery of Alternate coal costs under the proposed methodology: 3.6 IPL submitted while the incremental cost for alternate coal is Rs. 405 Crores, it is being granted compensation of Rs. 193 Crores only. The primary reasons of this under recovery to the extent of 52% of actual costs are: Restriction imposed at Step 4 (Sr. No. III in Table 3) above on number of units allowed to claim Compensatory fuel charge (21% of the actual costs); and Only 60% recovery of transportation and transaction cost of Alternate coal (31% of the actual costs). 3.7 The following tables depict the impact of above two factors: Table 4: Impact of restriction on number of units on which compensatory fuel charge will be applicable Factor Rs Crores % of under recovery [Units generated with imported coal, i.e., 2541 MUs Rs 87 Crores 21% (786 MUs x Rs 1.10 kWh) minus Units for which compensation granted, i.e., 1755 MUs Hence, units for which Compensatory fuel charge of Rs 1.10/kWh not applied are (2541 ­ 1755) = 786 MUs Table 5: Impact of restriction imposed for 60% recovery of transportation and transaction cost of alternate coal Factor Rs Crores % of under recovery Revised Compensatory fuel charge based on 100% Rs 125 Crores 31% (1.59 ­ 1.10) transportation and transaction costs, i.e., Rs 1.59/kWh Rs/kWh x 2541 MU) minus Compensatory fuel charge at 60% cost recovery of transportation and transaction costs, i.e., Rs 1.10/kWh multiplied with total generation from alternate coal, i.e., 2541 MUs 3.8 The following tables summarises the total recovery and under -recovery of the cost incurred on alternate coal: Table 6: The total incremental cost of Rs 405 Crores incurred by the Petitioner is bifurcated as follows: Factor Rs Crores In % terms Cost recovered by the Petitioner as per 193 48% the formula Unrecovered cost due to restriction 87 21% imposed on units Unrecovered cost due to restriction 125 31% imposed on recovery of only 60% of transaction and transportation cost Total incremental cost on Alternate 405 100% Coal incurred by the Petitioner Changes that may be considered in the proposed methodology to address the under recovery in costs of Alternate coal 3.9 IPL submitted that the formula adopted by the Commission for calculating the Compensatory fuel charge for the under recovery of the cost of imported coal does not entail full recovery of incremental coal cost as enumerated above. IPL submitted that the formula applies Baseline GCV instead of using actual 'as received' GCV. Since 'as received' GCV is significantly lower than the Baseline GCV, the actual units generated from domestic coal (5142 MUs) are significantly lower than theoretical units calculated. IPL stated that as a result, the Compensatory fuel charge computed as per the approved methodology (Rs 1.10/kWh) is being multiplied with lower number of units (1755 MUs) than actual units generated from alternate coal over which it would need to be applied, i.e., 2541 MUs, so as to allow complete recovery of cost incurred in procuring alternate coal. IPL submitted that the under recovery is to the extent of 52% of cost incurred in procuring imported coal. 3.10 The Petitioner has proposed that to enable full recovery of cost of alternate coal, the Commission may make one of the changes in the Steps mentioned on Page 36 of the Order dated 15 July, 2014: Make change in Step - 1 by using the actual 'as received' GCV instead of baseline GCV for calculation of actual units delivered; OR Revise the Step - 4 so that compensation calculated in Step - 3 is multiplied with Units generated with Alternate coal, calculated in Step ­ 2; OR Apportion the incremental cost of alternate coal over actual units delivered. 3.11 IPL submitted that instead of measurement of power generation from different coal sources which is impracticable technically and consequent computation of Tariff which would be highly theoretical, the cost of blended coal should be considered and the consequent Compensatory fuel charge should be based on the total generation. In the case of MSPGCL power plants using blended coal, the practice followed is Tariff computation considering cost of blended coal and total generation rather than computation of Tariff separately for different sources of coal. 3.12 IPL submitted that sourcing of coal from alternative sources entails significantly increased transportation and transaction costs which were not part of the bid assumptions, and is a recurring expenditure which needs to be compensated in terms of the provisions relating to Change in Law. The principle of granting a compensatory fuel charge in the present case has to be in line with the principle laid down under the Change in Law provisions of the PPA, and as such the Commission may allow recovery of 100% of such costs to the Petitioner in entirety. Hence, the allowance of only 60% of the transportation and transaction costs is an anomaly. Further, by allowing only 60% of the transportation and transaction cost, the Commission has also gone against the principles laid down under Section 61(d) of the Electricity Act, 2003, which are relevant for granting Compensatory fuel charge. 3.13 IPL submitted the under -recovery on various costs of transportation and transaction costs as follows: Table 7: Indicates various components of Transportation and Transaction costs which are proposed to be recovered to the extent of 40% by the Commission Indicative Components of Transportation (Rs/ton) Under recovery (40%) and Transaction cost Rs/ton Ocean Freight - Sea Freight (8.5$ x Rs 60.85/$) 517 207 500 200 Port Handling Charges Inland Transportation - Railway freight from Dahej to plant ­ 969 388 distance ~740 KMs - Duties, cess and taxes on railway 244 98 freight Transaction Cost - Insurance (1$ x Rs 60.85/$) 61 24 Total Transportation and transaction cost 2291 917 3.14 Based on the above break -up, against the landed cost of Rs. 5731 per ton, the Petitioner would be allowed only Rs, 4814 considering the approach of allowing 60% of transportation and transaction costs. Quantity shortfall due to low GCV coal supplied by CIL 3.15 IPL submitted that the Commission accepted that the generator/ developer needs to be compensated for any additional changes resulting from the changes in New Coal Distribution Policy, 2007 (hereinafter referred to as "NCDP, 2007"). The following may be noted in this respect: As per NCDP 2007, power utilities including Independent Power Producers (IPPs) have to be provided with 100% of coal required for operating the plant at Normative Availability. Letter of Assurances ("LOAs") for certain quantity of particular grade (quality) are issued to fulfill such requirement of the IPPs to operate the plant at Normative Availability as per the NCDP, 2007. The quantity for which LOAs are issued are always driven by the grade (quality) of coal ­ higher quantity for low grade coal and vice versa; In case the GCV supplied is less, then the quantity has to be adjusted accordingly so that plant can operate at Normative Availability, which is not the case in the present matter. 3.16 IPL submitted that with the available quality and quantity, it is barely in position to run the power plant at ~ 50% Plant load factor ("PLF"). Running the power plant at lower PLF as compared to the Normative Availability as envisaged at the time of bidding makes the Tariff offered at the time of bidding untenable and causes severe hardships to the Petitioner due to inability to completely recover all costs. The Commission has recognised the quantity shortfall in supplies from CIL and passed an Order to address the same. However, the loss in generation on account of grade slippages in supplies from CIL has not been addressed. This grade slippage has caused additional shortfall which needs to be addressed by the Commission. This shortfall is further resulting into lower PLF as compared to the PLF assumed at the time of bidding. IPL submitted that it is incurring huge losses on a regular basis on account of such hardships. Therefore, in case this situation continues, it will result the power plant of the Petitioner becoming a Non Performing Asset and ultimately the operations of the power plant may have to be stopped. The same will deprive the State of Maharashtra, the advantage of having access to cheaper power from a power plant located within the State of Maharashtra. ;