Case: In Re: Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2009 and Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) (First Amendment) Regulations, 2010 Vs. Central Electricity Regulatory Commission
| Judges | Pramod Deo, Chairperson, S. Jayaraman, V.S. Verma and Deena Dayalan, Members |
| Issue | Electricity Law |
| Judgement Date | April 26, 2010 |
| Court | Central Electricity Regulatory Commission |
Order:
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The Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2009, (hereinafter referred to as "the RE Regulations") provide for terms and conditions and the procedure for determination of tariff of the following categories of renewable energy generating stations:
(a) Wind Power Project;
(b) Small Hydro Projects;
(c) Biomass Power Projects;
(d) Non-fossil fuel-based co-generation Plants;
(e) Solar Photo voltaic (PV) and Solar Thermal Power Projects.
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The Regulations enjoins upon the Commission to determine the generic tariff on the basis of the suo motu petition, for the RE technologies for which norms have been provided in the regulations. Generic tariff is different from the project specific tariff for which a project developer has to file petition before the commission as per the format provided in the RE Regulations. Pertinently, project specific tariff has been envisaged for the new RE technologies and the technologies which are still at the nascent stage of development, and the Commission shall determine the project specific tariff for such technologies on a case to case basis.
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Clause (1) of Regulation 8 of the RE Regulations provides that "the Commission shall determine the generic tariff on suo motu basis at least six months in advance at the beginning of each year of the Control period for renewable energy technologies for which norms have been specified under the Regulations." The Commission had suo motu issued the generic tariff order, which was applicable for the renewable energy projects to be commissioned during first year of the control period (i.e. FY 2009-10). The Commission, in due discharge of the mandate under Regulation 8(1) of RE Regulations hereby determines the generic tariff of the RE projects for the second year of control period (i.e. FY 2010-11) through this order.
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The Commission has made the following provision in Regulation 8 through the CERC (Terms and Conditions for Tariff determination from Renewable Energy Sources)(First Amendment) Regulations, 2010, as under:
(2) Notwithstanding anything contained in these regulations,
a) the generic tariff determined for Solar PV projects based on the capital cost and other norms applicable for the year 2010-11 shall also apply for such projects during the year 2011-12; and
b) the generic tariff determined for Solar thermal projects based on the capital cost and other norms for the year 2010-11 shall also apply for such projects during the years 2011-12 and 2012-13,
provided that (i) the Power Purchase Agreements in respect of the Solar PV projects and Solar thermal projects as mentioned in this clause are signed on or before 31st March, 2011; and (ii) the entire capacity covered by the Power Purchase Agreements is commissioned on or before 31st March, 2012 in respect of Solar PV projects and on or before 31st March, 2013 in respect of Solar thermal projects.
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In pursuance of First Amendment to the RE Regulations, the Commission, by this order, based on the financial principles and technology specific parameters, determines the tariff for FY 2010-11 and FY 2011-12 in case of solar photovoltaic power projects and for FY 2010-11, FY 2011- 12 and FY 2012- 13 for solar thermal power projects, subject to the condition that power purchase agreement (PPA) for such Solar PV and Solar thermal power projects shall be signed before 31.3.2011 and entire capacity shall be commissioned on or before 31.3.2012 in case of solar PV projects and on or before 31.3.2013 in case of thermal projects.
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The Commission vide its public notice No. 1/3/2009-Reg.Affairs (RE Tariff - FY - 2010-11)(ii)/CERC dated 26th February, 2010 issued Order proposing the ''Determination of Generic Tariff for RE Technologies for the second year of the Control Period i.e. FY 2010-11'' and invited comments from the various stakeholders.
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A public hearing was held on 9th March, 2010. A statement indicating in brief the comments received from various stakeholders is enclosed in Attachment-1. The list of participants in the public hearing is enclosed in Attachment-2.
COMMENT/SUGGESTION RECEIVED AND COMMISSION''S DECISION THEREON
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Usage of fossil fuel in Solar Power Projects
Comments/Suggestions:
8.1. Stakeholders have submitted that for maintaining healthiness of the solar thermal power plant operations for longer run, a 5%~10% of fossil fuel firing shall be allowed in case of solar thermal power plant.
Analysis and Decision:
8.2. Regulation 7 provides for project specific tariff for determination in case of hybrid solar thermal power plants. Further, Clause 2(1)(j) of the RE Regulations, define ''Hybrid Solar Thermal Power Plant'' as the solar thermal power plant that uses other forms of energy input sources alongwith solar thermal energy for electricity generation, and wherein not less than 75% of electricity is generated from solar energy component.
8.3. With regard to the usage of fossil fuel in the solar thermal power projects, the Commission is of the view that configuration of each Hybrid Solar thermal power project may be unique in terms of usage of support fuel, project sizing, configuration, technology and operational requirement. Accordingly the Commission has made specific provision in the regulations for providing project specific tariff determination for such hybrid solar thermal power plants so that tariff could be determined on case-to-case basis. 8.4. It is clarified that hybrid solar thermal projects which may use some percentage of fossil fuel are to approach the Commission for approval for project specific tariff determination as per Clause 7(1)(e) of the RE Regulations, 2009. We also clarify that the present petition pertains to the determination of generic tariff pursuant to Regulation 8 of the RE regulation and the first amendment to the RE Regulation and is not a review of the parameters relating to usage of fossil fuel in Solar Thermal power projects.
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Minimum Alternate Tax Rate (MAT)
Comments/Suggestions:
9.1. The Stakeholders have submitted that the minimum alternate tax have now been increased to 18%, CST to 7.5% and cess to 3%. Accordingly, MAT should be considered as 19.93% for all renewable energy tariff.
Analysis and Decision:
9.2. We are of the view that the RE Regulation provide for normative return on equity in pre-tax terms. Accordingly, we clarify that that the review of above parameters (Minimum Alternate Tax) is not the subject matter of present regulatory process.
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Capital Cost for Biomass Power Project
Comments/Suggestions:
10.1. The Stakeholders have submitted that taking into consideration the rise in the price of Steel, Cement and Labour, the Capital Cost has seen upward trend and accordingly, the capital cost for biomass power project of around Rs. 540 lakh /MW Rs. 580 lakh/MW may be specified and considered while determining the tariff.
Analysis and Decision:
10.2. With regard to Capital Cost for Biomass Power Projects for FY 2010-11, the Commission has specified the Capital Cost Indexation formulae under Regulation 35 of RE Regulations. It is noted that the key project cost determining factors such as Iron and Steel and Electrical and Machinery have followed a downward trend compared to the previous year. The detailed calculation of the capital cost applicable for the purpose of determination of generic tariff for biomass power project is explained in the Appendix - 3 and would apply.
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Auxiliary Consumption and Line Losses
Comments/Suggestions:
11.1. One of the Stakehodlers has submitted that the Lines losses as 3%~4% may be considered in the auxiliary power consumption.
Analysis and Decision:
11.2. Regulation 2(1)(l) of RE Regulations, defines the ''Inter-connection Point'' in relation to biomass power project as line isolator on outgoing feeder on HV side of generator transformer. Further, it is defined that the Inter-connection point shall mean interface point of RE generation facility with transmission system or distribution system, as the case may be. Thus, metering and accounting of energy by biomass power generating station will be at the Inter-connection point. Besides, the Clause 2(1)(b) of RE Regulations, defines the Auxiliary Power Consumption in relation to a period in case of generating station as "the quantum of energy consumed by auxiliary equipment of generating station, and transformer losses within the generating station, expressed as percentage of the sum of gross energy generated at generator terminals of all units of generating station". therefore we are of the view that the question of accounting line losses as part of auxiliary power consumption does not arise as it is not covered under the Regulations
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O&M Expenses for Biomass Power Projects
Comments/Suggestions:
12.1. Some of the Stakeholders have submitted that the O&M norm for biomass power project should be around Rs 35Lakh/MW instead of Rs 21.41 lakh/MW as proposed for FY 2010-11. One stakeholder has submitted that considering insurance and other charges, the O&M Expenses for biomass power projects shall be 7% of the capital cost.
Analysis and Decision:
12.2. With regard to the Operation and Maintenance Expenses for biomass power projects, Regulation 39 of RE Regulations provides for normative O&M expenses as Rs 20.25 lakh/MW for first year of control period (FY 2009-10) with escalation factor of 5.72% per annum. Accordingly, normative O&M expense of Rs 21.41lakh /MW has been considered while determining the generic tariff for the plants to be commissioned during FY 2010-11 and the same shall apply. Besides, the review of above parameters (normative O&M expense for biomass power projects) is not the subject matter of present regulatory process which has been initiated for determination of generic tariff.
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Transmission Line Cost for Solar PV power project(s)
Comments/Suggestions:
13.1. The cost of transmission line upto Utility''s grid substation may...
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