Petition No. 66/GT/2012. Case: Damodar Valley Corporation Vs Delhi Transco Limited and Ors.. Central Electricity Regulatory Commission
| Case Number | Petition No. 66/GT/2012 |
| Counsel | For Appellant: Avinash Menon, Advocate and For Respondents: R.B. Sharma, Advocate |
| Judges | Gireesh B. Pradhan, Chairperson, A.K. Singhal and A.S. Bakshi, Members |
| Issue | Damodar Valley Corporation Act,1948 - Sections 38, 40; Income Tax Act, 1961 - Section 61(d) |
| Judgement Date | April 20, 2015 |
| Court | Central Electricity Regulatory Commission |
Order:
-
This petition has been filed by the petitioner, DVC, for approval of tariff for Durgapur Steel Thermal Power Station, Unit-I and Unit-II (2 × 500 MW) ("the generating station") from their respective dates of commercial operation (COD) till 31.3.2014 in accordance with the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009 (hereinafter referred to as "the 2009 Tariff Regulations").
-
The project comprises of two units of 500 MW each. The petitioner has entered into Power Purchase Agreements (PPAs) with the respondents Delhi Transco Ltd., PSEB, and MP Power Trading Company Ltd. on 24.8.2006, 7.11.2006 and 14.5.2007 respectively. As per order of DERC dated 31.3.2007, the PPA with DTL dated 24.8.2006 has been assigned to three Distribution Companies of Delhi namely, BSES-BPL, BSES-BYPL and TPDDL with effect from 1.4.2007. The petitioner vide affidavit dated 24.5.2012 has submitted that Units I and II of the generating station achieved commercial operation on 15.5.2012 and 5.3.2013 respectively. Pursuant thereto, the petitioner vide affidavit dated 24.7.2013 has revised the tariff petition based on the actual capital cost as on respective CODs.
-
The Capital Cost (including IDC and FC) claimed by the petitioner vide affidavit dated 24.7.2013 is as under:
-
Based on the above, the annual fixed charges claimed by the petitioner for the period from 15.5.2012 to 31.3.2014 are as under:
-
Reply to the petition has been filed by the respondent, BRPL and the petitioner has filed rejoinder to the said reply.
Commissioning Schedule
-
The petitioner has submitted that the time schedule for completion of the project as per CERC time line is 44 months for First unit and 50 months for Second unit from the date of investment approval of 16.6.2008. Accordingly, the details of the actual date of commercial operation (COD) of the project as against its scheduled date of commercial operation, submitted by the petitioner are as under:
-
According to the petitioner, there is a delay of 3 months in case of Unit-I and 7 months in case of Unit-II of the generating station. In response to the directions of the Commission vide ROP dated 27.8.2013, the petitioner vide its affidavit dated 13.9.2013 has submitted its justification for the computation of scheduled COD as per CERC time line and has pointed out that the Commission while passing the provisional tariff order dated 10.10.2012 in respect of Chandrapura TPS Units 7 & 8 (another project of the petitioner) had considered the delay in the commissioning of the project with respect to the date of investment approval as per Appendix-II of Regulation-15 of the 2009 Tariff Regulations. Accordingly, the petitioner has argued that the time overrun of 3 months for Unit-I and 7 months for Unit-II is as per the timeline specified by the Commission.
-
We have examined the matter. The project was envisaged to supply power to the respondent, Delhi Transco Ltd. as per petitioner Corporation resolution No. 7567 dated 30.4.2007. Also, the Central Government had cleared the project subject to the condition that the units shall be commissioned before the Commonwealth Games in 2010. Thus, the generating station was contemplated to be under commercial operation before October, 2010. We are not inclined to accept the submissions of the petitioner regarding computation of scheduled COD as per time line specified in Appendix-II to the 2009 Tariff Regulations. It could be observed from para-12 of the Commission's order dated 10.10.2012, that the schedule CoD as per timeline specified by the Commission is considered to examine whether the units of the generating station are entitled for additional Return on Equity (RoE) of 0.5% for timely commissioning of plant in terms of 2009 Tariff Regulations, and not for assessing the time overrun. The question of time overrun was left to be decided before the determination of final tariff after hearing of all the parties on merits. It is clarified that the timeline specified by the Commission in Regulation 15 of the 2009 Tariff Regulations is for considering whether any project/unit is entitled for an additional Return on Equity (ROE) of 0.5% on account of timely commissioning of unit/project and shall not be taken as a benchmark norm to assess the actual time over run in the commissioning of different units. In this connection, the observations of the Appellate Tribunal for Electricity (The Tribunal) in its judgment dated 12.1.2012 in Appeal No. 104/2011 is extracted as under:
13. Perusal of Regulation 15 along with Appendix II and Para 13.12.1 of SoR would amply reveal that these deal with Return on Equity and completion time frame provided therein refers only to additional Return on Equity of 0.5%. It does to limit the time frame for calculation of IDC.
14. The period of 36 months is the actual construction period allowed. Regulation 7(1) does not provide for the construction period to commence from the date of the Investment Approval. In fact, such construction period cannot be construed to be commenced immediately from the date of Investment Approval. After the Investment Approval is given, the Appellant has to initiate the process of awarding the contract, select the contractor and then issue the Letter of Award. Thus, the construction can start only after the award of contract and not before.
-
Accordingly, the time line for the purpose of time overrun shall be reckoned on the basis of the timeline indicated in the Investment approval.
Time Overrun
-
The scheduled date of commercial operation of units of the generating station as per the agenda Note of the 573rd meeting of the Petitioner Corporation is 36 months for Unit-I and 38 months for Unit-II from the date of Letter of Award (LOA). The date of LOA for Main Plant package has been mentioned as 27.7.2007 in Form-5D of the revised tariff filing forms filed vide affidavit dated 24.7.2013, the scheduled COD (from date of LOA), the actual COD and delay in actual COD are indicated as under:
-
The petitioner vide ROP dated 11.9.2014 was directed to furnish certain information/clarification on the following issues:
(i) Detailed justification of time overrun of 22 months for Unit-1 and 29 months for Unit-2 from the scheduled COD with reference to Board Resolution.
(ii) Reasons for delay in acquiring land giving details of total land required for the project i.e. land required for main plant, land required for ash pond, land required for railway siding, land required coal handling plant etc. and whether the land was in the possession of DVC as on the date of Letter of Award (LOA)
(iii) Cost over-run due to time over-run of 22 months and 29 months from the date of scheduled COD to actual COD as per the investment approval and to be quantified with detailed computations giving break-up of increase due to (i) escalation in prices in different contract packages, (ii) increase in IDC & FC with detailed computation giving the actual phasing of expenditure & considering the phasing of expenditure as per the investment approval, (iii) increase in IEDC and (iv) increase/decrease due to change in scope, if any.
-
In response to the above directions, the petitioner vide affidavit dated 24.9.2014 has submitted additional information/clarifications on the above issues. The petitioner has computed the time overrun as 14 months in case of Unit-I and 16 months in case of Unit-II by considering the scheduled COD as 42 months for Unit-I and 48 months for Unit-II from the date of start of work (zero date) on 3.8.2008.
-
The submissions have been examined. We do not find any merit in the computation of time overrun by the petitioner as the scheduled COD of the units of the generating station is required to be considered as per time line indicated in the Investment Approval as per Resolution of the petitioner Corporation. The scheduled COD of the Units I and II shall be considered as 36 months for Unit-I and 38 months for Unit-II from the date of LOA, as these dates of commercial operation does coincide with the date of Commonwealth Games during October, 2010. Considering this, we conclude that there is time overrun of 22 months in respect of Unit-I and 29 months for Unit-II of the generating station.
Reasons for Time overrun
-
The petitioner vide affidavit dated 13.9.2013 has furnished additional information indicating the reasons for time overrun in the commissioning of the units as summarized in the table given below:
-
The respondent, BRPL has submitted that the reasons furnished by the petitioner as regards the delay in the completion of units of the generating station is attributable to the delay in providing inputs like making land available to the contractor and slackness in project management etc. are problems narrated by the petitioner only an excuse for the delay, and the same is entirely attributable to the petitioner. The learned counsel has also submitted that prudence check for Time and Cost overrun may be considered in terms of the principle laid down in the judgment of the Appellate Tribunal for Electricity (the Tribunal) dated 27.4.2011 in Appeal No. 72 of 2010 (MSPGCL v. MERC & Ors).
-
The petitioner was directed to furnish the reasons for time overrun of 22 months for Unit-I and 29 months for Unit-II along with the PERT chart, and the petitioner has failed to furnish complete information in the required forms. On a specific query by the Commission during the hearing on 11.11.2014 as regards the submission of additional details regarding time and cost overrun along with PERT chart, the learned counsel for the petitioner clarified that all information has been submitted and no further details are available for submission in the matter.
-
The Tribunal in its judgment dated 27.4.2011 in Appeal No. 72 of 2010 has laid down the principle for prudence check of time over run and cost overrun of a project as under:
7.4. The delay in execution of a...
To continue reading
Request your trial