Petition No. 125/MP/2011. Case: Association of Power Producers Vs NTPC Ltd. and Ors.. Central Electricity Regulatory Commission
| Case Number | Petition No. 125/MP/2011 |
| Counsel | For Appellant: Shri Amit Kapur, Advocate, APP, Shri A. Jain, Advocate, APP and Shri S.K. Sharma, APP and For Respondents: Shri M.G. Ramachandran, Advocate, NTPC, Shri C.K. Mondal, NTPC, Shri A. Dua, NTPC, Shri A. Basu Roy, NTPC, Shri Rohit Chabra, NTPC, Shri R.B. Sharma, Advocate, BSEB and Shri K.K. Agrawal, MPPMCL |
| Judges | Pramod Deo, Chairperson, S. Jayaraman, Member, V.S. Verma, Member and M. Deena Dayalan, Member |
| Issue | Competition Act, 2002 - Section 21; Electricity Act, 2003 - Sections 10(2), 3, 38, 39, 40, 42, 60, 61, 62, 63, 66, 7, 79; Indian Contract Act, 1872 - Section 27 |
| Judgement Date | April 26, 2013 |
| Court | Central Electricity Regulatory Commission |
Order:
1. The petitioner, Association of Power Producers, has filed the present petition under Sections 60 and 66 of the Electricity Act, 2003 alleging abuse of dominant position by NTPC Ltd. for having signed Power Purchase Agreements (PPAs) for supply of 37000 MW of electricity during the period from 1.10.2010 to 5.1.2011. The reliefs claimed by the petitioner are as under:
i) Invoke its authority under sections 60 and 66 of EA03 and direct NTPC not to execute/implement the contracts;
ii) Declare PPAs entered into/executed by NTPC between 01.10.2010 until 05.01.2011 as being null and void;
iii) Direct NTPC to discontinue such abuse of dominant position and not to enter in anti-competitive agreements in future;
iv) Refer to the Competition Commission of India for its opinion on NTPC enjoying dominant position.
v) Pass such other order/directions as this Hon'ble Commission deems fit and appropriate under the circumstances of the case and in the interest of justice.
The petitioner claims to be the representative body of private power developers who together are engaged in developing and/or operating power projects with an aggregate installed capacity of 1,20,000 MW. The petitioner claims to have been formed "with the objective of becoming a neutral platform for the private power developers to discuss and seek resolution of significant barriers and discriminatory conditions faced by them due to prevalent policy and regulatory environment, which directly impact the sector and frustrate the legislative objectives underlying the Electricity Act, 2003".
Background Facts
2. Section 3 of the Electricity Act, 2003 provides that the Central Government shall, from time to time, prepare the National Electricity Policy and Tariff Policy, in consultation with the State Governments and the Central Electricity Authority for development of the power system based on the optimal utilization of resources such as coal, natural gas, nuclear substances or minerals, hydro and renewable sources of energy. In furtherance of the said mandate, the Central Government notified the National Electricity Policy vide Notification dated 12.2.2005. One of the objectives of the National electricity Policy is to make available reliable and quality power at competitive rates while safeguarding the interest of consumers. The Central Government in exercise of its powers under Section 3 of the Act notified the Tariff Policy on 6.1.2006. The Tariff Policy through its various provisions seeks to promote competition in the electricity industry, to ensure financial viability of the sector and attract investment in the electricity sector. The Tariff Policy made provisions for competitive bidding for sale of power by the generating companies to the distribution licensees. The relevant part of the Tariff Policy notified vide Notification dated 6.1.2006 is extracted hereunder:
5.1 Introducing competition in different segments of the electricity industry is one of the key features of the Electricity Act, 2003. Competition will lead to significant benefits to consumers through reduction in capital costs and also efficiency of operations. It will also facilitate the price to be determined competitively. The Central Government has already issued detailed guidelines for tariff based bidding process for procurement of electricity by distribution licensees for medium or long-term period vide gazette notification dated 19th January, 2005.
All future requirement of power should be procured competitively by distribution licensees except in cases of expansion of existing projects or where there is a State controlled/owned company as an identified developer and where regulators will need to resort to tariff determination based on norms provided that expansion of generating capacity by private developers for this purpose would be restricted to one time addition of not more than 50% of the existing capacity.
Even for the Public Sector projects, tariff of all new generation and transmission projects should be decided on the basis of competitive bidding after a period of five years or when the Regulatory Commission is satisfied that the situation is ripe to introduce such competition.
3. Thus the Tariff Policy exempted the public sector projects from competitive bidding for a period of five years, that is, up to 5.1.2011 or when the appropriate Regulatory Commission is satisfied that the situation is ripe to introduce such competition. Before expiry of the period of exemption, Ministry of Power, Government of India on a proposal by NTPC for amendment in Tariff Policy to permit cost-plus tariff structure for public sector undertakings beyond 5.1.2011 made a reference to this Commission for its advice under sub-section (2) of Section 79 of the Act. This Commission on receipt of the reference from the Ministry of Power carried out an internal study for comparing the tariffs obtained through competitive bidding route with those allowed under cost-plus tariff structure. The result of the analysis indicated that the levelised tariffs obtained through competitive bidding were lower than the levelised tariff under the cost-plus regime. This Commission through statutory advices dated 1.6.2010 and 16.9.2010 advised the Ministry of Power, Government of India that "the deadline of January 2011 for completing the transition to procurement of power through tariff based competitive bidding even from State/Government owned entities should not be extended any further....". On 9.12.2010, Ministry of Power, Government of India issued clarification regarding clause 5.1 and 7.1 of the Tariff Policy which stated that in view of the decision taken in the meeting of the Group of Ministers on Power Sector held on 29.10.2010, generation (excluding hydro) projects of PSUs/CPSUs for which PPAs have been signed on or before 5.1.2011 are exempted from the tariff based competitive bidding route.
4. As submitted by NTPC in its affidavit dated 2.6.2011, it has signed PPAs in respect of 21 projects with 37 beneficiaries during the period 1.10.2010 till 5.1.2011. Being aggrieved by the action of NTPC for entering into such large number of PPAs with the distribution companies and State Electricity Boards within a period of little over three months, the petitioner association has filed the present petition under section 60 and 66 of the Act.
Case of the Petitioner
5. The petitioner has alleged that NTPC undertook a massive exercise of signing Power Purchase Agreements with the State distribution companies and State Electricity Boards with a clear intention of bypassing the impending competitive bidding requirements during the period from 1.10.2010 to 5.1.2011 and signed the PPAs for supply of more than 37000 MW of power. The petitioner has submitted that NTPC had already signed PPAs for supply of 9000 MW of electricity between 1.4.2010 and 30.9.2010, thus making the PPAs signed during 2010-11(upto 5.1.2011) for supply of about 47000 MW of power which is in sharp contrast to its signing of PPAs during 2008-09 and 2009-10 which were only for 5820 MW and 8442 MW respectively.
6. The petitioner has submitted that the reason for the signing spree on the part of NTPC is its constant failures in the competitive biddings. In this connection, the petitioner has compared the levelised tariff quoted by NTPC for Sasan UMPP and Tilaiya UMPP with that of the L-1 bidders in those projects and has submitted that had these projects been awarded to NTPC based on its bids, the consumers would have been made to pay thousands of crores of rupees extra in tariff. It has been submitted that for Sasan UMPP, NTPC as the L-8 bidder had quoted the levelised tariff of Rs. 2.12/kWh as against the L-1 bidder's quotation of Rs. 1.19/kWh. By working out the difference between the levelised tariff of Rs. 2.12/kWh and Rs. 1.19/kWh over a period of 25 years, the petitioner has submitted that NTPC would have charged excess tariff of Rs. 544,773 crore over 25 years, had the project been awarded to NTPC. In case of Tilaiya UMPP, it has been submitted that NTPC as the L-2 bidder had quoted a levelised tariff of Rs. 2.39/kWh as against the quote of Rs. 1.77/kWh by the L-1 bidder. Again, by working out the difference between the levelised tariff of Rs. 2.39/kWh and Rs. 1.77/kWh, the petitioner has submitted that had the project been awarded to NTPC, the consumers would have been made to pay an excess amount of Rs. 414,097 crore over a period of 25 years. Based on the above comparative analysis, the petitioner has contended that cost-plus tariff which shall be charged by NTPC for supply of power from the projects proposed to be executed on the basis of the PPAs entered between 1.10.2010 to 5.1.2011 would be prejudicial to the interest of the consumers.
7. The petitioner has further alleged that NTPC has a history of poor project implementation which has resulted in its failure to meet its targets and long delays in completion of the projects. In that connection, the petitioner has cited certain data pertaining to the project implementation by NTPC during the 11th Plan in respect of 20 projects of NTPC. The petitioner has submitted that in case of Case 1 bidding, the bidder is required to submit alongwith its bid documents the proof of having undertaken specific actions for the project...
To continue reading
Request your trial