Petition No. MP/463/2014. Case: GMR Vemagiri Power Generation Ltd. Vs Andhra Pradesh Eastern Power Distribution Company Ltd. and Ors.. Central Electricity Regulatory Commission

Case NumberPetition No. MP/463/2014
CounselFor Appellant: Alok Shankar, Advocate
JudgesGireesh B. Pradhan, Chairperson, A.K. Singhal and A.S. Bakshi, Members
IssueElectricity Act, 2003 - Sections 79, 79(1), 79(1)(a), 79(1)(b), 79(1)(f), 86(1), 92
Judgement DateApril 27, 2015
CourtCentral Electricity Regulatory Commission


  1. The petitioner, GMR Vemagiri Power Generation Limited (GVPGL) has filed this petition claiming the following reliefs:--

    (a) To hold that the petitioner is entitled to compensation of ` 447 crore (on NPV basis as on COD) towards forgone Capacity Charges for the period upto 1.4.2009;

    (b) To direct the Respondents No. 1 to 4 to pay Additional Fixed Charges (AFC) of ` 0.439/kWh for the balance period of the PPA (to recover the loss on NPV basis based on the computation sheet at Annexure U) and for this purpose to effect necessary amendments to the PPA."


  2. The petitioner GVPGL had entered into a Power Purchase Agreement (PPA) with the erstwhile Andhra Pradesh State Electricity Board (APSEB) on 31.3.1997. As per PPA, the project cost was to be recovered through guaranteed operation of the plant at 80% PLF and energy charge was linked to the specified Station Heat Rate and the same was a pass through to the respondent discoms. The operation of the plant at 80% PLF was directly linked to the availability of fuel. The fuel for the generating station was "natural gas" and in the event of non-availability of natural gas, "Naphtha" was to be used. Based on the recommendations of the Govt. of AP (GoAP), the Ministry of Petroleum of Natural Gas (MoPNG) allocated 1.64 MMSCMD of natural gas to the petitioner on "firm" basis on 5.6.2000.

  3. Pursuant to the above, Gas Supply Agreement (GSA) was executed between the petitioner and M/s. Gas Authority of India Ltd. (GAIL) on 31.8.2001 for the period upto 2010. This GSA was further amended by GAIL extending the period of gas supply upto 31.3.2020. The PPA was amended on 18.6.2003 incorporating the installed capacity of 370 MW with natural gas as the primary fuel and in case of unavailability of primary fuel, other fuels such as Naphtha/LSHS as alternate fuel. Accordingly, Clause 1.127 of the PPA was amended and the Andhra Pradesh Electricity Regulatory Commission (APERC) granted consent to the said amendment.

  4. As the respondent discoms agreed to pay fixed cost to the petitioner on account of deemed generation irrespective of the fuel used in terms of the PPA, the respondents filed O.P No. 25/2004 before APERC seeking consent for deletion of the "alternate fuel clause" permanently from the PPAs in order to avoid payment on account of deemed generation. The anticipated liability of the respondents was to the tune of ` 1020 crore per year. At this point in time, M/s. GAIL supplied gas to its customers based on guidelines under which gas was distributed among various customers on pro rata basis. Keeping in view the guidelines of M/s. GAIL, the GoAP by letter dated 6.12.2004 recommended to the MoPNG to maintain pro rata supply of available gas to the four upcoming gas projects including that of the petitioner.

  5. Pursuant to the transfer scheme notified by the Govt. of AP on 7.6.2005, the PPA dated 31.3.1997, as amended from time to time, was transferred to the distribution licensees of the State of Andhra Pradesh namely, Andhra Pradesh Eastern Power Distribution Company Ltd. (APEPDCL), Andhra Pradesh Southern Power Distribution Company Ltd. (APSPDCL), Andhra Pradesh Central Power Distribution Company Ltd. (APCPDCL) and Andhra Pradesh Northern Power Distribution Company Ltd. (APNPDCL) (collectively referred to as the AP Discoms).

  6. The petitioner had declared the COD of the project on 16.9.2006. However, based on the decision taken by the GoAP and MoPNG to make available gas to upcoming gas projects only from new gas sources as and when the same became available, M/s. GAIL stopped supply of gas to the petitioner from 23.9.2006. As a result of this, the power plant of the petitioner was shut down completely for a period of two years from 23.9.2006 to 22.4.2009, except during the period from 17.2.2008 to 30.4.2008 and from 7.12.2008 to 22.4.2009 (when the gas was diverted from LANCO project to meet exigency of short fall in generation in the State).

  7. Meanwhile, after protracted discussions between the petitioner and the respondents, the petitioner agreed for deletion of the alternate fuel clause in the PPA, thus foregoing the right to claim full fixed charges in the event gas is not made available. In consideration of the petitioner's consent for deletion of the alternate fuel clause, the respondents agreed to extend the benefits to the petitioner to cover the losses like (a) extension of the PPA from 15 years to 23 years (b) FDSC recovery upto 12th and 13th year and (c) permission for sale of excess capacity of 17.625 MW over and above the PPA capacity to third parties. The entire package was acknowledged by the respondents and the GoAP and forwarded to APERC for consent. APERC while giving consent to the amendments in the PPA vide order dated 30.12.2006 considered the projected losses to the petitioner upto March, 2006. The basic premise for the said amendment was that the gas would be available to operate the plant in accordance with the projections and from April, 2008 onwards full gas would be available to operate the plant. (i.e. projected availability of fuel to the company by GAIL upto end of March 2008 and assuming availability of 1.64 MMSCMD of full gas from April, 2008 onwards).

  8. Thereafter, the petitioner had requested the respondents to amend the PPA for incorporation of a clause for sale of 20% of the plant capacity in open market to third parties to make good the foregone fixed cost...

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