order for alaknanda- dated 29.3.2016 1 - :: uttar pradesh · pdf file ·...

Petition No. 1071 of 2015 and 881 of 2013, 952 of 2014, 1043 of 2015, 1092& 1093 of 2016

BEFORE

THE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION

LUCKNOW

PRESENT:

1. Hon’ble Sri. Desh Deepak Verma, Chairman

2. Hon’ble Sri. Indu Bhushan Pandey, Member

3. Hon’ble Sri. S. K. Agarwal, Member

IN THE MATTER OF

Permission to the applicant to participate in all the future hearings in respect of

Petition nos. 881/2013 & 952/2014 filed by the AHPCL before the Commission (1071

of 2015)

IN THE MATTER OF

Sri Bharat Jhunjhunwala, son of Sri Vishnu Dayal,

R/o- B-2106, Angel Mercury, Ahinsa Khand-2,

Indirapuram, Ghaziabad: 201014 (U.P.) ...Applicant

And Alaknanda Hydro Power Co. Limited Paigah House, 156-169, S. P. Road, Secunderabad: 500003, Andhra Pradesh

…Respondent

The following were present:

1. Dr. Bharat Jhunjhunwala, Consumer

2. Sri. T.V. Bhaskar, Head Legal, GVK Group, AHPCL

3. Sri. M. Sodakar, AGM-Law, AHPCL

4. Sri. Sriniwas Sisila, V.P., AHPCL

5. Sri. D. Niranjan Reddy, Vice President, AHPCL

6. Sri. P. V. Prasana Reddy, CEO, AHPCL

7. Sri. E. Chandan, DGM, AHPCL

8. Sri. DileepTripathi, Senior Liaison Officer, AHPCL

9. Sri. Gopal Sharma , Manager (Coordination), AHPCL

And

IN THE MATTER OF: Application under regulation 156 read with regulation 32 & 33 of

UPERC (Conduct of Business) Regulation, 2004 for approval of

additional term loans and revised means of finance in respect of

330 MW Srinagar HEPP.(Petition No. 881 of 2013)

Approval of provisional tariff for power to be generated at

Srinagar Hydro Electric Project (4 x 82.5 MW) under the Power

Purchase Agreement dated 28.6.2006. (Petition No. 952 of

2014)

Approval for extension of Commercial Operation Dates of 330

MW Srinagar HEPP. (Petition No. 1043 of 2015)

Application for urgent hearing in the matter of revised provisional

tariff and for revised provisional Capital Cost of 330 MW

Srinagar HEPP. (Petition No. 1092 of 2016)

Petition under Regulation 156 read with Regulation 32 & 33 of

UPERC CBR 2004 for revision of Provisional Tariff 330 MW

Srinagar HEPP. (Petition No. 1093 of 2016)

AND

IN THE MATTER OF

Alaknanda Hydro Power Company Limited

Paigah House, 156-169, S.P. Road,

Secunderabad – 500003 Andhra Pradesh Petitioner

AND

UP Power Corporation Limited

14- Ashok Marg, Shakti Bhawan,

Lucknow – 226001

Government of UP

(through Principal Secretary, Energy)

BapuBhawan,Lucknow Respondent

The following were present:

10. Sri. P. V. Prasana Reddy, CEO, AHPCL

11. Sri. D. Niranjan Reddy, Vice President, AHPCL

12. Sri. T.V. Bhaskar, Head Legal, GVK Group, AHPCL

13. Sri. Sriniwas Sisila, V.P., AHPCL

14. Sri. M. Sodakar, AGM-Law, AHPCL

15. Sri. E. Chandan, DGM, AHPCL

16. Sri. DileepTripathi, Senior Liaison Officer, AHPCL

17. Sri. Rajiv Srivastava, Advocate, UPPCL

18. Sri. V. P. Srivastava, CE, UPPCL

19. Sri. S. K. Sinha, SE, UPPCL

Order

(Date of Hearing: 16.03.2016)

First the Petition no. 1071/2015 was heard by the Commission which has been filed

by Sri Bharat Jhunjhunwala with the prayers as under:-

i) The applicant be allowed to participate in all future hearings in Petition

nos. 881/2013 & 952/2014;

ii) The notice of meetings be served on the applicant in advance;

iii) AHPCL and UPPCL may be directed to provide copies of all

submissions made by them before the Commission to the applicant in

advance and the applicant shall be entitled to file reply thereto and be

heard before disposal of the same;

iv) The issues, questions and points shown by the applicant be taken on

record and dealt with by the Commission in public interest; and

v) Pass such other or further orders as deemed fit, just and proper.

Sri Jhunjhunwala appeared in person and submitted that he may be permitted

by the Commission to participate in the proceedings. The counsel appearing on

behalf of AHPCL submitted that the Applicant has been given ample opportunity of

hearing and he has availed all of them and made his submissions which have been

replied by AHPCL appropriately so it is not required to allow him to participate in any

further hearing.

At the outset, it is relevant to mention that the Applicant had earlier filed a WP/PIL

2535 of 2014, before the Hon’ble High Court of Allahabad which had been declined

by order dated 31.03.2014 with the directions as under:-

“Thus, in view of the aforesaid discussions, we are not inclined to

entertain the instant writ petition. However, we may make it clear that in case

respondent no. 4 (AHPCL) makes any application before the Commission for

determination of Tariff, the Petitioner shall be provided an appropriate and

adequate opportunity of making his suggestions and raising objections in terms

of the provision contained in Sec. 64 (3) of the EA, 2003 and any other enabling

law.”

Section 64 of the Electricity Act, 2003 which deals with the ‘procedure for tariff order’

is reproduced as under:-

“64. Procedure for tariff order: (1) An application for determination of tariff

under section 62 shall be made by a generating company or licensee in

such manner and accompanied by such fee, as may be determined by

regulations.

(2) Every applicant shall publish the application, in such abridged form and

manner, as may be specified by the Appropriate Commission.

(3) The Appropriate Commission shall, within one hundred and twenty days

from receipt of application under sub-section (1) and after considering all

suggestions and objections received from the public,-

(a) issue a tariff order accepting the application with such modifications or

such conditions as may be specified in that order;

(b) reject the application for reasons to be recorded in writing if such

application is not in accordance with the provisions of this Act and the

rules and regulations made thereunder or the provisions of any other law

for the time being in force:

Provided that an applicant shall be given a reasonable opportunity of being

heard before rejecting his application.”

According to Section 64 (3) of the EA, 2003 the Commission has to consider the

suggestion and objections received from the public while considering the tariff

petition filed by the generating company or licensee. There is no requirement

specified in the said Act for granting an opportunity of personal hearing to the

objector(s) or individuals. The proviso of Section 64 (3), makes it crystal clear that

the applicant, (i.e., generating company or the licensee who has filed the petition for

determination of tariff), shall be given a reasonable opportunity of being heard in

case its application is being rejected. It can thus be seen that the manner of the

application of the principle of natural justice with respect to public is provided under

Section 64 (3) of the Act. The Act provides for calling of written

suggestions/objections/comments from the public.

The Hon’ble High Court of Rajsthan in Jetha Ram and others v/s State of Rajsthan

[1984 WLN 580] has held that providing an opportunity to the person whose rights

are likely to be affected to represent the case is necessary but the objector may not

necessarily be given an opportunity of making oral submission in such and every

matter. In some matters, an opportunity to file representation in writing and

consideration of the written representation may be sufficient compliance with the

principles of natural justice. The ‘addi alteram partem’ rule is a very flexible,

malleable and adaptable concept of natural justice.

Further the Hon’ble Supreme Court in Chairman, Board of Mining Excavation and

Chief Inspector of Mines and Another v/s Nanjee in (1977) 2 SCR 904 observed that

the natural justice can not be locked as a mere artifact nor we can fit natural justice

in a rigid mould. The concept of reasonable opportunity is that the authority taking

the final decision should not act mechanically and without applying its own mind, but

must give an opportunity to the person affected to have his say.

The Hon’ble APTEL has in Appeal no. 106/2008, vide order dated 26.02.2009 has

observed that the structuring of tariff is a prerogative of the Commission for which no

notice is required to be issued to stakeholders and the Appropriate Commission has

power to design the tariff as per its wisdom.

It is also reasonable to mention here that the Applicant had also filed a Petition no.

974/2014 with similar prayers in this Commission , which was disposed of, vide order

dated 17.11.2014. The relevant portions of this order are quoted below:-

“4. At the outset, the Commission enquired that when Sri Jhunjhunwala has

been given adequate opportunity to be present during the presentation of

report and also been provided the copies of report then what is the

necessity of this petition?

5. Sri Jhunjhunwala replied that to pursue appropriate and adequate

opportunity for making his suggestion at an early date, the petition has

been filed.

6. The Commission opined that in view of above present petition may be

considered as disposed of as Sri Jhunjhunwala has already been given

opportunity for being present during the presentation of the report and

provided copies of the report. Sri Jhunjhunwala did not object but

requested to consider his plea at the time of hearing of Petition no. 881 of

2013 & 952 of 2014 filed by Alaknanda Hydro Power Co. ltd. In the

matters of additional loan and provisional tariff. This opportunity in any

case is available to him at the time of Public hearing.

7. The petition is disposed of accordingly.”

As far as the applicable law, rules and regulations with respect to procedure for

publication inviting suggestion/objections/comments in a transparent manner is

concerned, the provisions of Section 86 (3) of the EA, 2003 and Clause 54 of the

UPERC (Conduct of Business) Regulations, 2004 are relevant so as to be taken into

consideration by the Commission.

In view of above, to ensure transparency while exercising its powers and discharging

its functions by applying the mandates as provided under Section 64 (3) of the EA,

2003 and Clause 54 of the CBR, 2004, the Commission allowed the Applicant to

attend the presentation made by Expert Committee before the Commission and also

to attend the Public Hearing. Standard procedure in such hearings is that objections

are invited from general public through a public notice. Objectors who may be in any

number file their objection in writing or orally and the Commission hears them.

Subsequently, Commission considers these objections, calls for the information from

the generator or the licensee and then objections of each application are dealt with

on merit. There is no provision of making objectors party to the petition who are

allowed to attend every proceedings of the case. It may be mentioned here that in

cases where there are hundreds of objectors, it may not be even practically possible.

In the instant case, Shri Jhunjhunwala has been given an opportunity during public

hearing. He was also allowed to make his written submissions. The following facts

establish that Sri Jhunjhunwala has been present during Public Hearing/Presentation

and has availed of the opportunities to submit his

submissions/comments/suggestions in response to invitation/notice given by the

Commission:-

(a) Sri Jhunjhunwala was allowed to be present during the presentation of the

report on Capital Cost by the Expert Committee on dated 21.04.2014.

(b) The copy of the report of the Expert Committee, as submitted to the

Commission was furnished to Sri Jhunjhunwala.

(c) Sri Jhunjhunwala was present during the hearing of his petition no. 974 of

2014 on 11.11.2014 which was disposed by the Commission as above.

(d) Accordingly, in the matters of petition nos. 881 of 2013 and 952 of 2014,

an intimation dated 25.11.2014 for Public Hearing on 16.12.2014 was sent

to Shri Jhunjhunwala.

(e) The Public Hearing on 16.12.2014 was attended by the advocate of Shri

Jhunjhunwala, Shri Sri P. S. Sharda who had also made the written

submission dated 8.12.2014.

(f) Shri Jhunjhunwala made written submissions on 8.12.2014 and rejoinder

on 01.06.2015 which have been replied by AHPCL

In view of the above, we are of the considered opinion that a reasonable

opportunity has been given to the Applicant to submit his comments, suggestions

and objections with respect to Petition no. 881/2013 and 952/2014 filed by AHPCL

and the same has also been availed of by the Applicant and there is no necessity to

extend any further opportunity of oral hearing or making him a party to the

proceedings. We also make it clear that the comments, objections and suggestions

given by the Applicant shall be considered by the Commission.

With the above directions the petition was disposed of.

The Commission, however, allowed the Applicant to send his written

suggestions/comments/objections, if any, which would be considered by the

Commission at the time of deciding provisional/final tariff.

Subsequently, petitions nos. 881 of 2013, 952 of 2014, 1043 of 2015, 1092& 1093 of

2016 filed by AHPCL were heard.

Background:

UPPCL sought approval of Power Purchase Agreement (PPA) with Alaknanda Hydro

Power Company Ltd. formerly known as Duncan North Hydro Power Company Ltd.

in Petition No. 337 of 2006 for purchase of power from 330 MW Srinagar

Hydroelectric Project. The Commission vide its Order dated June 7, 2006 read with

Order dated May 8, 2006 approved the amended and restated PPA as per

provisions of Electricity Act, 2003 and UPERC (Term & Conditions of Generation

Tariff) Regulations, 2004.

The Commission in its Order dated October 16, 2007 approved financing of Rs.

1977.87 Crore with debt equity ratio of 80:20. The Commission approved the

increase in capital cost by Rs. 325.31 Crore subject to prudence check, vide its

Order dated June 23, 2008, due to increased cost of civil works, hydro mechanical

work and interest and financing cost.

The Commission vide its Order dated December 10, 2008 approved additional

capital cost on account of revised earthquake parameters approved by National

Committee on Seismic Design Parameters. The revised cost estimate of Rs. 2697.70

Crore was approved subject to prudence check.

Further in Petition No. 710 of 2010, vide its Order dated May 26, 2010, the

Commission considered revised estimated capital cost of Rs. 3675.16 Crore and

accepted the same on record subject to prudence check at an appropriate time.

For prudence check and verification of Capital Cost of the Project, based on GoUP

letter no. 747 dated 19.10.2011 and UPPCL letter no. 786 dated 16.09.2011, an

Expert Committee, comprising of Sri R.D.Gupta, Ex. Member, UPERC, Sri

G.K.Pharlia, Ex. Member (Hydro), CEA & Sri Ajesh Tuli, Chartered Accountant, was

constituted on 12.01.2012 by the Commission for verifying the capital cost of Rs.

3675.16 Crore. The Committee submitted its report in February, 2014 in which the

capital cost has been recommended as Rs. 4218.80 Cr. The Committee made a

presentation of report before the Hon’ble Commission on 21.04.2014. The letter to

attend the presentation was sent to AHPCL, UPPCL, GoUP and Sri Bharat

Jhunjhunwala. The presentation was attended by AHPCL, UPPCL and Sri Bharat

Jhunjunwala. On 28.4.2014, copy of the report was forwarded to UPPCL and GoUP

for necessary comments. The copy of report was also provided to Sri Jhunjunwala

through RTI.

Subsequently, as decided during the presentation, since the project cost had

increased, a letter was sent to Secretary CEA enquiring that in view of capital cost

provided in Techno Economic Clearance (TEC), whether any approval of CEA was

required in case of cost escalation due to geological surprises and geological

variations in such hydro projects? It was also enquired that whether intimation to

CEA by AHPCL was mandatory in case of geological surprises and whether such an

intimation was given by the developer? CEA vide their letter dated 30.06.2014,

informed that no intimation was sent by developer to CEA. It has also been stated

that as per para 3(ix) of TEC, CEA need to be made a member of the committee on

geological surprises. It was further stated by CEA that the Expert Committee needs

to examine and recommend the enhanced cost, however, examination and approval

of cost by CEA is not mandatory. Copy of CEA letter was forwarded to AHPCL,

GoUP and UPPCL on 25.11.2014 for their comments.

Regarding Capital Cost, in its written submission dated 15.12.2014, UPPCL on

affidavit has stated as follows:

That as far as capital cost claimed by firm (Rs. 4573.53 Cr as on

31.3.2014) for the purpose of tariff determination as per their petition

no. 952/14 is concerned we have to point out as follows:-

(a) Despite time extension upto May 13 approved by UPERC, none

of the units could achieve Commissioning resulting that interest

during under construction (IDC) alongwith other escalations are

still going on.

(b) Presently there is impact of IDC to the tune of Rs. 995.01 Cr

(23%) and it will go further until the completion of project. In past

we had categorically opposed for non admissibility of IDC

because of prolonged delay in execution (emphasis para 8 of

UPERC order dated 02.7.2012) and we still reiterated the same.

The IDC included upto the approved COD should only be

allowed due to the reason that for delay beyond this date, the

procurer is not responsible.

(c) Presently claimed capital cost amounts to around Rs 13.85 Cr.

per MW which is exorbitant as compared to the other Hydro

Projects ranging between Rs. 8.27 Cr to Rs 8.73 Cr on per MW

basis. However the Commission is requested to take a view and

fixed the project cost for the purpose of provisional tariff.

(d) Consequent to exorbitant completed cost of project, the procurer

may not be willing to buy costly power. The Commission may

therefore like to direct developer to explore third party sale in

order to offset tariff burden.

Regarding provisional tariff, UPPCL submitted that :

the Petitioner has calculated Annual fixed charge component on

the basis of (a) actual expenditure incurred of Rs 4573.53 Cr as

on 31-03-14 (b) Commissioning of unit -I&III in July 14,

Commissioning of unit-Ill in Aug. 14 and last unit in Oct. 14 (c)

Design energy of 676.4 MU in remaining financial year after

COD and (d) ROE @14% as well as O&M @1.5 % as per

Regulation 2004. Accordingly the amount towards AFC comes to

Rs 18.35 Cr per month per unit as per Form 1 of Petition. In this

regard we have to point out as follows:-

(a) The above stated Commissioning schedule could not be

adhered. Further even if the units now Commissioned in this

financial year, the design energy would be extremely lesser due

to winter season. Hence the data mentioned in present Petition

becomes in fructuous.

(b) UPERC have so far approved and extended COD upto 31-05-13

only. As per SI no 2 in Form 5 A of Petition the expenditure upto

this date is Rs 4192 Cr. Expenditure beyond this date should not

be considered for the purpose of tariff determination unless the

revised COD is approved.

(c) The Petitioner should be directed to provisionally calculate AFC

on per month per unit basis corresponding to expenditure upto

31-05-13 and based on this UPERC may like to consider 60%

provisional payment subsequent to Commissioning of each unit

one by one.

(d) We do not have any objection on proposed primary energy rate

which is Rs O.798 per unit

Further, vide letter dated 15.12.2014, UPPCL made submissions regarding

Prudence Check Committee Report and the CEA letter dated 30.6.2014.

In the matter related to subject noted above , we have gone through with

Expert Committee Report (Jan. 14), intervening representations of Sri

Bharat Jhunjhunwala RIO B-2106 Angel Mercurry, Ahinsa Khand-II Indira

Puram Gaziabad as well as CEA's letter dated 30-06-14 enclosed with

UPERC letter dated 25- 11-14 and we have to point out on the important

issues as follows:-

1- PPA was executed and signed on 12-11-06 on the basis of approval

accorded by UPERC vide its order dated 07-06-06.In this order,

UPERC stated that while TEC was granted by CEA on 14- 06-2000 for

the completion of Project at Rs 1700 Cr on the premise of

Commissioning of lst unit by June 05, but the work could not even

started due to reorganization of erstwhile UP and various other reasons

beyond the control of concerned parties. Further even though CEA

revalidated TEC upto 14-06-06, the Project cost remained at Rs 1700

Cr despite steep increase in input costs. The Commission therefore

deliberated that it would not be appropriate to assume that cost

approved by CEA in TEC still holds good for the plant to be

Commissioned in 2010 and accordingly approved the then proposed

completion cost of Rs1977.87 Cr subject to prudence check by

Commission of actual expenditure incurred on completion of Project. It

is therefore evident that originally approved Project cost at the time of

PPA itself had gone beyond TEC cost and the question to adhere with

TEC cost attracts no merit at this stage.

2- UPERC vide its order dated 26-05-11 in the matter of revision in Project

cost accepted the revised estimated capital cost of Rs 3675.16 Cr. on

record and directed to continue the project works as per the revised

estimate in order to make necessary financing arrangements as

required for the timely completion of the project.

3- Since the aforesaid revised estimate of Rs 3675.16 Cr includes the

increase on account additional items of work due to geological surprise,

the Expert Committee was under obligation to analysis and evaluate

the cost impact due to geological surprises faced during Project

execution. The report does not elucidate this aspect. Therefore the

committee should be asked to elucidate the geological surprises and

justification of cost.

4- Regarding increase in cost due to damages incurred after the flood of

June 2013 the prudence check committee's report presently do not

cover the same. However the procurer should not be responsible for

loss due to floods and other accidents and this should be claimed by

developer from Insurance.

5- Regarding CEA's letter dated 30-06-14 related to the procedure to be

followed for geological surprise, it may be mentioned that Mls AHPCL

did not request GoUP to constitute an Expert Committee pursuant to

Para 3(IX) of TEC dated 14-06-2000. However they will be in a position

to explain as to whether a systematic record of geological surprises

was maintained by them or not. The prudence check Expert

Committee, who visited the project site may simultaneously be

requested to enlighten the factual position in this regard.

Vide public notice dated 25.11.2014, the Petitioner, AHPCL, was directed by the

Commission to place the softcopies of their petitions and supporting documents on

their website within one week from the date of publication of notice with an intimation

to the Commission. Through the Public Notice, opportunity was given to the

stakeholders and interested parties to submit comments in the above matters in

writing directly to the Commission. The notice was sent to Principal Secretary

(Energy), GoUP, Chairman, UPPCL, AHPCL & Sri Bharat Jhunjhunwala.

The Public Hearing was conducted on 16.12.2014.

Vide letter dated 8.12.2014, Sri Jhunjhnwala informed that the soft copies of the

petitions were not posted on the petitioner’s website whereas, AHPCL vide letter

dated 5.12.2014 informed that the soft copies were posted on website. During the

hearing, Sri D. Niranjan Reddy, Vice President, AHPCL stated that for uploading of

soft copies on their website they had to make certain technical arrangements which

took some time and so they could upload the soft copies on 5.12.2014 by afternoon.

Advocate of Sri Jhunjhunwala accepted that the soft copies were available on

website from then onwards.

Sri P. S. Sharda, Advocate for Sri Bharat Jhunjhunwala deliberated the issues

filed in his written submission dated 8.12.2014. AHPCL requested for copy of Sri

Jhunjhunwala’s written submission so that they may properly respond to them. The

Commission directed to provide a copy of written submission to AHPCL for their

reply. It was observed that the GoUP was not represented and no comments were

received from them even though the notices were sent and the comments were

sought both from GoUP and UPPCL.

In the written reply submitted by UPPCL in the matter of capital cost and

prudence check report, the Commission found that there was no clarity in the stand

taken by UPPCL who are the procurer for supply of power for the consumers of the

State. On one hand, they have submitted that the project cost of Rs. 13.85 Cr per

MW was exhorbitant as compared to the other Hydro Projects (which is set to be

ranging between Rs. 8.27 Cr to Rs 8.73 Cr per MW) and have expressed

unwillingness to buy costly power and even requested to direct developer to explore

third party sale; on the other hand, they requested to fix the project cost without

stating any objection to the proposed primary energy rate. It was also not clear as to

how does it harmonize with their plea regarding the IDC component of Rs. 995.01

Crs due to prolonged delay in Commissioning and data on design energy provided

by the developer in the petition. Such an ambiguous stand taken by UPPCL on the

capital cost and on the report submitted by the Expert Committee formed by the

Commission on their request from the panel suggested by them only made it

impossible to take a decision in the matter. The Commission expressed its strong

displeasure on this and desired UPPCL to take a clear stand in this matter.

Regarding the CEA clarifications, UPPCL submitted that the Expert Committee

did not evaluate the Cost impact due to geological surprises and also not covered

the increase in cost after the floods of June, 2013. UPPCL further mentioned that

the developer did not request GoUP to constitute an Expert Committee pursuant to

para 3(ix) of TEC dated 14.6.2000.

Vide its order dated 19.01.2015, the Commission specifically enquired whether

price at which electricity would be supplied to UPPCL from this project is viable?

Whether diligent examination of costs has been done by UPPCL? Further, whether

the costs of exit from the existing PPA and its consequences have been calculated?

In view of above, the Commission directed UPPCL to go for detailed

examination, based on analysis of costs and benefits in consultation with GoUP and

then file their detailed reply with specific recommendations. The reply must also

contain consent or dissent on the capital cost submitted by the Expert Committee

made by the Commission on their request. If there was any disagreement then they

should give their specific recommendation as to what extent the capital cost was, in

their view, admissible or inadmissible.

The GoUP was also required to file its stand on above mentioned CEA letter and

on the report of Expert Committee formed by the Commission on their request.

AHPCL was directed to file reply on the submissions made by Sri Jhunjhunwala and

on the comments made by UPPCL as above. GoUP, being a party in MoU and

UPPCL, being a party in PPA both need to submit the agreed capital cost after

proper examination of report submitted by the Committee and after getting all the

clearances from the concerned authorities.

In the meanwhile, AHPCL filed petition no. 799 of 2012 for approval of revised

dates of Commissioning. The Commission vide its Order dated July 2, 2012 granted

the extension of COD as given below,

Unit-1: March 31, 2013

Unit-2: March 31, 2013

Unit-3: May 31, 2013

Unit-4: May 31, 2013

Mr. Bharat Jhunjhunwala submitted his objection before the Commission

dated December 8, 2014 seeking constitution of fresh Prudence Check Committee.

Further Mr. Jhunjhunwala submitted that the project has exceeded the expenditure

beyond TEC and so the Commission should consider only the expenditure permitted

in TEC. Mr. Jhunjhunwala has stated that the Force majeure event is unacceptable

due to non disclosure and Cost escalation due to change in design and it is to be

born by AHPCL. Increase in cost due to flood are wholly due to the errors on part of

AHPCL and these cannot be loaded on the legitimate capital cost of the project. Mr.

Jhunjhunwala further submitted that standards of prudent check should have been

fixed by the Commission and the Prudence Check Committee should have called for

public hearing.

AHPCL filed its reply on April 23, 2015, to the submission made by Mr.

Jhunjhunwala. AHPCL submitted that the information available on CEA website has

shown that the cost escalation do occur over the appraised cost in TEC on account

of various reasons which are beyond the control of project developer and cost

escalation are not communicated to CEA as they are not in the purview of the CEA.

AHPCL further stated that the issues of Geological and surprises/ variation and

Force Majeure events were reported to UPPCL through periodic progress reports

and through various Petitions before the Commission and also to CEA, for their

record and as mentioned in TEC no any unreasonable cost has been accounted by

them. AHPCL further submitted that the power house is constructed as per the

approved CEA parameters and there were no errors made by AHPCL in power

house construction and the Prudent Check Committee has examined all aspects in

detail.

Mr. Bharat Jhunjhunwala in its rejoinder dated June 1, 2015 to its earlier

submission on December 8, 2014, submitted that AHPCL has failed to answer many

of his allegation related to public hearing in determination of Capital Cost, Prudence

Check Committee went into overdrive after complaint was made by him to PNB and

approval of excess capital cost beyond the cost approved by CEA. Further Mr.

Jhunjhunwala submitted that CEA allows variation in cost on some accounts but not

on accounts claimed in the present case and the liability for not understanding model

studies rests on Duncans renamed as AHPCL.

Mr. Bharat Jhunjhunwala reiterated that cost escalation and wilful failure on

the part of AHPCL should not be passed on to the public by faking surprise. AHPCL

has not informed CEA of the geological surprises and Design cannot be changed

without the consent of CEA on any ground and therefore the cost escalation due to

design change should not be allowed. Further Mr. Bharat Jhunjhunwala submitted

that the Prudence Check Committee report is liable to be rejected as it is not based

on any standards and not in public interest.

Further in addition to above, Mr. Bharat Jhunjhunwala submitted that AHPCL

is misleading the Commission by saying that the Supreme Court has not found any

violation of the environmental laws and the cost of this violation should be borne by

AHPCL. Expert body appointed by MoEF has clearly indicted AHPCL for the

damages that have occurred during the floods.

AHPCL made an additional submission on April 23, 2015, in which it

submitted that although the Commission had approved COD of May 31, 2013, but

the project has delayed due to force majeure events and therefore the contention of

UPPCL that provisional Tariff to be calculated up to approved COD has no bearing.

Further AHPCL submitted that the restoration cost being recovered from the insurer

has not been added in the project cost.

Further AHPCL submitted that in case project cost as on May 31, 2013 is

considered for determination of provisional tariff as per UPPCL suggestion then that

will lead to incorrect picture and will be inadequate to meet even the debt service

obligation and the operational cost for delivering power. AHPCL added that as

provided in regulation, provisional tariff up to 95% could be allowed until the

determination of final tariff. Based on above concept, AHPCL submitted the

reworked tariff proposal form.

AHPCL further submitted that for computation of provisional tariff they have

considered 1397 MU as design energy ascertained and approved by CEA and

adopted in PPA. AHPCL further added that there has been improvement in the

hydrology of the river from recent data for the period from 1998 to 2013 as a result of

which the design energy may be increased and AHPCL would approach the

Commission with latest hydrology after Commissioning of the project for

determination of Design Energy.

AHPCL Prayed the Commission to approve provisional tariff and provisional

energy charges as submitted in tariff proposal and to allow to raise bills on the

respondent for payment of provisional capacity charges on per unit per month basis

for the period from the date of Commissioning of Unit 1 on the basis of design

energy of 1397 MU till revised hydrological data is received on monthly basis. In

addition to this AHPCL prayed the to raise bills for the incentive for plant availability

as per the terms and condition of PPA and for levies, taxes, duties, cess other

payments/ claims including reimbursement of Income Tax from UPPCL under the

provision of PPA.

The Commission vide its order dated June 5, 2015, observed as follows:

“UPPCL was directed to file their reply as per the directions of the

Commission vide order dated 19.01.2015 positively before 30.06.2015.

The reply should also cover the response on additional submission of

AHPCL dated 23.04.2015 and specific replies on capital cost / provisional

tariff. They should also comment as to whether any part of time overrun is

attributable to developer?

AHPCL was directed to file detailed reply on the year wise cost increase

due to geological changes and/or surprises and due to court cases.

AHPCL was further directed to submit the details of year wise increase in

IDC due to controllable / uncontrollable factors.”

In reply to queries raised by the Commission vide its order dated January 19,

2015 and additional submission made by AHPCL on April 23, 2015, UPPCL made its

submission on June 29, 2015. UPPCL submitted that the price at which electricity

would be supplied to UPPCL after prudence check has been assessed to be viable.

In reply to second query of the Commission, UPPCL submitted that they are

agreeable to the projected capital cost calculated by the expert committee up to

September 30, 2013 at Rs. 4218.80 Crore minus sales proceeds of the scrap of

capital equipment for the determination of provisional tariff. In reply to the third query

of the Commission, UPPCL submitted that the same has ceased to be relevant as

they have already started receiving supply from the project from the month of May,

2015. In this submission UPPCL did not explain that why they accepted receiving

supply when the decision on third party sale was pending before the Commission as

per their request and why they changed their stand?

In reply to the additional submission by AHPCL on April 23, 2015, UPPCL

submitted that in the absence of a proper explanation by AHPCL as stated in the

petition dated April 23, 2015 regarding delay of about two years in achieving COD,

the time overrun is entirely attributable to the developer.

Further UPPCL submitted that AHPCL was obliged to approach the

Commission for extension of COD beyond May 31, 2013 on the ground of ban

imposed by MoEF. In addition to this, UPPCL stated that force majeure event

occurred in the month of June, 2013, and letter dated June 19, 2013 and June 28,

2013 were not applications filed before the Commission for extension of COD

beyond May 31, 2013.

UPPCL submitted that they have shown willingness to accept the estimated

cost of Rs 4218.80 Crore arrived at by the expert committee and the higher capital

cost claimed by AHPCL over and above may be referred to the same expert

committee. UPPCL further added that till the expert committee gives its view on the

increased capital cost, the Commission may allow provisional tariff in favour of

AHPCL at the capital cost estimated by the expert committee.

UPPCL further added that AHPCL has not explained in the petition, the

reasons for delay of two years in achieving COD of the project. Further UPPCL

made following submission,

(a) UPPCL is agreeable to 75% of the annual fixed charges claimed by

the petitioner subject to the direction of this Hon’ble Commission.

The agreed Capital Cost, which is emanating from the cost referred

by Expert Committee is roughly 82% of the Capital cost claimed by

the petitioner in the petition under reply for the purpose of computing

AFC.

(b) UPPCL is agreeable to pay provisional capacity charge as approved

by the Commission based on per unit per month.

(c) UPPCL has no objection to the AHPCL raising bills based on design

energy of 1397 MU till new design energy is approved by the

competent authority.

(d) UPPCL is agreeable to consider primary energy charges and has no

objection to the AHPCL raising bills for payment of secondary energy

charge at the rate of primary energy charge.

(e) UPPCL has no objection to pay for the incentive of plant availability,

all taxes and for supply of power as per the provisions of PPA.

Subsequent to hearing dated June 30, 2015, the Commission vide its Order

dated July 14, 2015 observed as follows:

“UPPCL filed a reply on 29.6.2015 wherein it has replied to the queries

raised in the orders dated 19.1.2015 and 5.6.2015. AHPCL also submitted

its replies on the Commission’s order dated 5.6.2015.

UPPCL informed that they have started provisionally paying AHPCL at the

rate of Rs. 4.00 per kwh for the supplied electricity though the logic of

arriving at this decision could not be explained by them. UPPCL also

submitted that they are exploring the options of reasonable tariff under the

existing provisions and for the purpose working on a rationalization plan

through which impact of higher capital cost of this plant could be

minimized on end consumer. However, in their written submission dated

29.6.2015, they have propounded that for the purpose of provisional tariff

they are agreeable to the capital cost as submitted by the Expert

Committee i.e. Rs. 4218.80 Cr. minus sale proceed of scrap of the capital

equipment. Based on this, UPPCL has agreed to 75% of the annual fixed

charges claimed by the petitioner, considering the agreed capital cost as

roughly 82% of the capital cost as claimed by the petitioner in the petition.

The petitioner has claimed the capital cost of Rs. 5088.77 Cr. as on

31.3.2015. The view of UPPCL is at variance from its earlier submission

dated 15.12.2014 wherein it has agreed to 60% of the annual fixed charge

calculated on the basis of Rs. 4192 Cr. AHPCL also requested that the

provisional tariff may be determined by the Commission on the basis of

capital cost submitted by the Expert Committee.”

Commission vide its Order dated July 14, 2015 directed the respondent to

come up with specific and categorical view on Capital Cost and the Tariff and also

Tariff rationalization plan to which respondent came with six (6) models of Tariff

rationalization plan on August 13, 2015, but then the Commission in its Order dated

September 2, 2015, directed UPPCL to come up with a firm proposal so that the tariff

to the consumers may be rationalized. But till date UPPCL has not made any such

submission.

Further, vide order dated 2.9.15, the Commission has taken following view:

“The Commission recalled the directions given to UPPCL in the earlier

orders seeking their categorical views on the Capital Cost, tariff and tariff

rationalisation plan as discussed by them. The UPPCL has submitted 6

different models for determination of tariff. The Commission feels that it

was not proper and would not serve the purpose. UPPCL needs to give its

definite recommendations or atleast give its order of preference among

the six models. The Commission, therefore, directs UPPCL to come up

with a firm proposal so that the tariff to the consumers may be

rationalised. Although UPPCL has submitted its comments on increase in

capital cost due to change in capital cost, geological changes, geological

surprises and IDC but the Commission finds the comments on geological

changes and geological surprises are not given specifically and

separately. Therefore, the Commission decides that expenditure on

geological changes & surprises would be sent to CEA for verification.”

Subsequently, a letter was sent to CEA by UPERC for verification of the

expenditure on geological changes and surprises faced by AHPCL.

AHPCL filed its reply on October 9, 2015 to rejoinder filed by Mr. Bharat

Jhunjhunwala on June 1, 2015. AHPCL submitted that they are denying to all the

allegation, contention and averments of Mr. Jhunjhunwala. Also AHPCL has cited

the judgment of Hon’ble Supreme Court in which it has been categorically held that

the role of the Central Electricity Authority (CEA) established under the Section 70 of

the electricity Act, 2003 (Act) was limited to matters enumerated under Section 73 of

the Act and that the approval of the scheme for generating companies or the capital

expenditure for the completion of such projects or capitalization of the additional

expenditure not being one such function. It was also categorically held that

“Insistence on a reference, to the CEA for such approval, despite the sea change in

the legal framework would have been both unnecessary as well as opposed to the

spirit of new law that reduced the role of CEA to what was specified in Section 73 of

the Act”.

AHPCL submitted that Prudent Check Committee has brought out reasons for

the delay in project in its report apart from technical reasons and it is in the purview

of the Commission to see whether the delay in commercial operation is attributable

to AHPCL or not. AHPCL further submitted that they have intimated UPPCL and

CEA of the geological factors and stipulation under TEC is applicable to the

Geological Surprises when they occur in Underground Works and not for other

geological factor. AHPCL also reiterated that the condition imposed by CEA under

the TEC are only based on the reports submitted on the initial technical evaluation of

the project site and the project parameter may differ from the initial approved by the

TEC depending upon the site conditions, which will come into light only when the

project is carried out.

AHPCL reiterated that the Supreme Court did not find any violation of law on

part of AHPCL and allowed the project to be operational. Further AHPCL, submitted

that the report referred by Mr. Jhunjhunwala has been rebutted by another technical

committee consisting of experts from the Central Electricity Authority (CEA), Central

Water Commission (CWC) and along with a report from consortium of seven Indian

Institute of Technology (IIT’s) formed by MoEF, which had not come to any

conclusion about the contribution of alleged ill effects of the hydroelectric projects in

Ganga basin.

CEA vide its reply dated December 15, 2015, CEA has submitted that UPERC

may take appropriate action for the determination of the capital cost or tariff, if

required , taking cognizance of the report of the Expert committee constituted by

UPERC for increase in capital cost on account of geological changes/ surprises and

other contributing factors.

In Petition No. 1043 of 2015, AHPCL has sought the approval of extension of

COD from the dates mentioned in Order dated July 2, 2012 to the date mentioned

below,

Unit COD as per

agreed PPA

dated

28.6.2006

Extension of COD

approved by the

Commission vide

order dated 12.5.2009

Revised

COD as per

Order dated

2.07.2012

COD

actually

achieved

I 10.07.2010 31.12.2011 31.03.2013 23.04.2015

II 10.08.2010 31.01.2012 31.03.2013 21.06.2015

III 10.09.2010 28.02.2012 31.05.2013 02.05.2015

IV 10.10.2010 31.03.2012 31.05.2013 21.06.2015

Also, it has prayed the Commission to declare that the reason behind the

delay caused in achieving the COD as per dates mentioned in Order dated July

2,2012 were due to Force majeure event and were beyond the control of the

Petitioner. Also Petitioner seek permission for coming to the Commission for

approval of project cost including cost incurred on account of force majeure event at

an appropriate time in due course.

UPPCL filed a counter affidavit on February 23, 2016, wherein it has

submitted that AHPCL in violation of Article 8.3 of the PPA never kept UPPCL

informed about the progress of the construction of the project from time to time so

that UPPCL would be in a position to further correlate with its own program of works

with regards to transmission and utilization of energy from the project. UPPCL has

also submitted that no notice of the scheduled synchronization date of each Unit was

given to it by AHPCL. As per Article 8.3 of the PPA, AHPCL was required to give 30

days advance notice for the same.

UPPCL further mentioned that apart from those force majeure events which

were considered by the Commission in granting extension of COD vide Order dated

July 2, 2012, the only new force majeure ground taken in the petition under reply is

the unprecedented flash floods occurred in the state of Uttarakhand, in the month of

June, 2013. After discounting the force majeure events which were considered by

the Commission in granting extension of COD by order dated July 2, 2012, there is

no explanation in the petition under reply as to why the COD in respect of all the four

units could not be achieved by the dates granted by the Commission, the last date

being May 31, 2013.

In view of the above, UPPCL has requested not to grant any extension of

COD beyond the dates as allowed by the Commission in its Order dated July 2,

2012, (as mentioned above) for working out capital cost of the project.

AHPCL filed a rejoinder on March 24, 2016 to Petition No. 1043 in reply to

counter Affidavit filed by UPPCL in which it submitted that it is not true to say that

AHPCL has sought extension of COD more or less on the same force majeure

events. AHPCL stated that the part of 17 months delay due to stay by MoEF, the

Commission has approved 13 months delay in COD in Order dated July 2, 2012 and

balance is yet to be cured by the Commission.

AHPCL submitted that delay due to flash floods, protest by villagers and due

to non availability of Associated Transmission System and Inter Connection Facility

were not sought in earlier petitions. Further AHPCL submitted that they have

complied with Article 8.3 of PPA by giving notice to UPPCL about schedule

synchronization of the units and UPPCL has not complied with the Article 8.2, by

which UPPCL was obliged to keep AHPCL informed about the transmission facility

by giving 30 days notice to them.

Further AHPCL in Petition No. 1092 of 2016 filed on February 5, 2016 has

prayed before the Commission to consider the financial hardship faced by the

Petitioner as it has been alerted by its lenders for actions under the loan

agreements.

AHPCL has started generation and sale of power to UPPCL from the actual

COD (as mentioned above) and so far has supplied about 1,200 MUs of power.

UPPCL is paying AHPCL only on an ad-hoc basis at the rate of Rs. 4 per unit which

AHPCL is claiming to be insufficient to meet its debt service obligation. AHPCL has

submitted that they have proposed four (4) alternative options to UPPCL vide their

letter dated December 19, 2015 and has submitted to have offered to sacrifice a part

of their entitlement to ROE and to explore refinancing of the project debt.

UPPCL has filed an affidavit dated February 23, 2016 in the matter of Petition

No. 881 of 2013 and 952 of 2014, in compliance to the Commission’s Order passed

on September 2, 2015. UPPCL has mentioned that acting on the Commission’s

direction in Order dated September 2, 2015, it had considered two models out of four

model proposed by AHPCL. It further submitted that, when both of them agreed on

one model, AHPCL proposed four new model for consideration. UPPCL was about

to finalize the model for being placed before the Energy Task Force (ETF) for

approval so that UPPCL may place definite recommendations in order of its

preference with justifications. However, the shift in stand by AHPCL has undone all

the exercise performed by them.

AHPCL had previously proposed to file a joint Petition for determination of

Tariff, but now it has filed a fresh petition/application on February 5, 2016. In the said

Petition, AHPCL has made five prayers and as per UPPCL, these prayers are in

nature of upsetting the work done in compliance of Order dated September 2, 2016.

UPPCL has further submitted that since the decision taken by the Board of

Directors of UPPCL on January 18, 2016 with regard to tariff model approved for

consideration of ETF was taken at the highest level of the management of UPPCL,

response to the Petition filed by AHPCL on February 5, 2016 from UPPCL may be

filed only after a decision is taken by the top management of UPPCL.

In this counter affidavit, UPPCL has sought for some reasonable time to

submit its response after which the Commission may take a comprehensive view

upon considering the entire material with regard to the fixation of capital cost and

tariff determination, including provisional tariff in respect to AHPCL.

AHPCL filed the rejoinder on February 24, 2016, in reply to the counter

Affidavit filed by the UPPCL, in which it submitted that out of four model submitted by

them, UPPCL had consent on 2nd and 3rd model. AHPCL submitted that they did not

agree on any single model out of 2nd and 3rd model with UPPCL and neither they

have proposed any new models to UPPCL. Further AHPCL submitted that it is not

true to state that AHPCL has shifted its stand that resulted in undoing the exercise

by the respondent to submit a concrete model for fixation of tariff before the

Commission.

AHPCL in petition No. 1093 of 2016, filed on February 5, 2016 has requested

to approve revised provisional Capital cost of Rs. 5088.77 Crore and consider the

same for determination of provisional Tariff until the capital cost is finalized by the

Commission. It has also sought permission to file a Petition for determination of

actual capital cost and for determination of the final Tariff based on such capital cost

of the project for the power supplied with a direction to UPPCL to consider Rs.

5,088.77 Crore as provisional capital cost for determination of provisional tariff to be

paid for the second control period FY 2016-17.

In hearing dated February 24, 2016, in Petition No. 881 of 2013, 952 of 2014,

1043 of 2015, 1092 & 1093 of 2016, UPPCL reiterated its request to grant some

more time to submit a firm proposal, as they are in the final stage of arriving at

decision on the issue. The Commission granted time to UPPCL to submit a detailed

reply with firm recommendations before the next date of hearing which was

scheduled on March 16, 2016 at 11.30 Hrs.

UPPCL has submitted on March 14, 2016, that their matter on finalization of

model is pending with Energy Task Force (ETF) and they have sought for one month

time for the submission of the firm proposal, as was asked by the Commission in the

last Hearing. The salient points of the submissions are as follows:

“3. That this Hon’ble Commission, in the course of hearing held on

24.02.2016 directed UPPCL to go ahead with the submission of its

firm proposal for adopting a model of tariff before ETF and come

back before this Hon’ble Commission with the firm proposal of tariff

model for consideration and determination by this Hon’ble

Commission.

4. That as per the decision taken by the Board of Directors of UPPCL

on January 18, 2016 two models of tariff, namely models no. 2 and

3, out of four models proposed by AHPCL based on the capital cost

of Rs. 4218.80 crore worked out by the Expert Committee were

placed before ETF on 2nd March, 2016 for approval.

5. That ETF, on 2nd March, 2016, while considering the

recommendation of UPPCL for making a firm proposal with regard to

the tariff for AHPCL before this Hon’ble Commission, was pleased to

refer the matter to the subcommittee of ETF to examine the proposal

submitted by UPPCL.

6. That it is humbly submitted, that UPPCL, considering the time being

taken by ETF in taking a decision on the recommendation of

UPPCL, they may not be in a position to submit a firm proposal with

regard to the determination of tariff for AHPCL on the date of hearing

fixed on 16th March, 2016 as per the order dated 03.03.2016 of this

Hon’ble Commission.

7. That since, UPPCL will have to wait for the decision of ETF on its

recommendation with regard to the firm tariff model in respect of

AHPCL for being placed before the Hon’ble Commission, it is humbly

submitted that this Hon’ble Commission may kindly be pleased to

grant a further time of one month from the date of this affidavit for

submitting a firm proposal for consideration of this Hon’ble

Commission for adoption of tariff in respect of AHPCL.”

As allowed by the Commission in petition no. 1071 of 2015, Sri Bharat

Jhunjhunwala made additional submission on March 16, 2016 in wirtting. In this

submission Sri Jhunjhunwala raised objection as mentioned below:

Total approved cost by CEA in 2000 was 1626 crores. The COD was

extended and increased cost up to Rs. 3675 crores was taken on record by the

Commission subject to prudence check. This extension only allows AHPCL to incur

expenditure beyond the initial COD and do not imply acceptance of increase in cost

due to inflation or other reasons. Whether these are admissible in capital cost will

depend upon prudence check. In addition to above Mr. Jhunjhunwala has submitted

that the increase in capital cost due to COD Extension can be calculated on

Wholesale Price Index.

Sri Jhunjhunwala submitted that as Prudent Check Committee has detailed

the change in design, the question arises that whether these changes were

approved by the CEA, as it may endanger the safety and security of the people and

project. Also he added that any increase in cost due to geological surprises be

disallowed, as AHPCL has not informed GoUP about its occurrence. Sri

Jhunjhunwala has suggested that the cost increase may be calculated by

determining the increase in cost due to change in design and due to alleged

geological surprises separately. He has also suggested determining the weight of

steel and cement in approved cost viz-a-viz actually used.

Sri Jhunjhunwala has raised objection in relation to increase in cost due to

MoEF stop work order and consequent delays. He submitted that there was no stop

work order and raised objection that whether the increase in cost due to dereliction

of AHPCL be allowed. Sri Jhunjhunwala has suggested that to quantify this, the

Commission may consider damages paid by AHPCL to contractors and price

escalation based on wholesale price index.

Sri Jhunjhunwala, has submitted that the level of flood water at Rudra Prayag

upstream of Srinagar in June 2013 was less than in 1974 and this means flood was

not exceptional. He further has raised question about the sanctity of flood to be a

force majeure event. He further added about the suggestion to quantify the increase

in cost if allowed. Sri Jhunjhunwala has suggested that to quantify the damages, the

Commission may consider damages paid by AHPCL to contractors and price

escalation based on wholesale price index deducting the amounts claimed by

AHPCL from insurance.

In addition to above he submitted objection in relation to delay due to leakage

in sedimentation tank. He further submitted that there was no geological event at that

time. Design was changed and size increased from 494 cum to 759 cum. He further

raised question that whether leakage was due to change in design or it was due to

poor quality of execution?

In hearing dated March 16, 2016, AHPCL submitted that they are facing

financial hardship as they are able to pay only 50% of their loan obligation at the

present tariff of Rs. 4 per unit paid by UPPCL. Further AHPCL submitted the letters

received from bank as proof that they are facing financial hardship and prayed the

Commission to approve interim tariff considering provisional capital cost of 5088

Crore. Further AHPCL also submitted that any ambiguity subject to under or over

recovery can be resolved in trueup.

During the hearing on 16.03.2016, Shri V.P. Srivastava, CE (PPA) UPPCL

reiterated their submission made on March 14, 2016 that they need time of one more

month for submission of the Tariff proposal. He, however, further submitted that they

will have no objection if a provisional tariff on the basis of Capital Cost of Rs. 4218

Crore as recommended by the Expert Committee will be allowed by the Commission.

Commission’s Obervations:

The Commission clubbed all five petitions on the issues arising from the PPA

between UPPCL and AHPCL. Through Petition no. 1092 of 2016, urgent hearing

has been requested by AHPCL referring its precarious position of financial hardship

as they were being paid only Rs. 4/Unit by UPPCL arbitrarily. Petition No. 881 of

2013 was filed for approval of additional term loan and revised means of finance,

petition no. 952 of 2014 for approval of provisional tariff, petition no. 1043 of 2015 for

approval of revised CoDs and petition no. 1093 of 2016 for revised provisional tariff.

From the details it is evident that although there are five petitions but at this point of

time all converge to one issue determination of provisional tariff which is the main

concern of AHPCL.

As far as the submissions made by Sri Jhunjhunwala, on 16.03.2016 and

earlier, are concerned, the Commission considers that they are not necessarily be

heeded at this point in time when the provisional tariff is being decided for the project

which has started supplying power. However, it is also considered that the relevant

issues would be considered in detail at the time of final tariff.

Now let us take decision in the above petitions one by one.

Petition No. 881 of 2013

AHPCL has achieved CoDs for all the units. The process for determination of

provisional tariff has been initiated and so, the issue of approval of additional term

loan and revised means of finance is irrelevant at this stage. Therefore, the

Commission considers this petition as disposed of.

Petition no. 952 of 2014

This petition was filed for approval of provisional tariff. Subsequently revised

petition no. 1093 of 2016 has been filed on same issue. Therefore, the Commission

decides to deal with issues raised in this petition along with the petition no. 1093 of

2016 as the provisional tariff would, in any case, is to be determined.


This petition has been filed for approval of revised CoDs. UPPCL has

categorically opposed any further extension of CoDs. Since at this moment the

issue of determination of provisional tariff seems to be critical, the Commission

keeps this issue in abeyance with the view that it would be finalized with the final

tariff. AHPCL would require to file application for revised CoDs at the time of final

tariff. With this, the Commission disposes of this petition.


AHPCL has requested urgent hearing for provisional tariff through this petition

referring its precarious position of financial hardship as they were being paid only Rs.

4/Unit by UPPCL arbitrarily. The issue has been taken up by the Commission

considering their request. Hence disposed of.


In the background mentioned herein before, the Commission has to determine

the provisional tariff of the project as all the four units of the project have been

Commissioned and AHPCL has started supplying power to UPPCL. The provisional

tariff for two years is to be decided in view of the fact that FY 2015-16 is ending. The

Commission has promulgated the Generation Tariff Regulations for the period from

1.4.14 to 31.3.2019 and clause 2(4) of the Regulations provides that for Generation

Tariff for the control period 2014-15 to 2018-19 will be decided as per the provisions

of the Regulations. In this particular project the cost estimated at the start of the

project has increased manifold and UPPCL has not yet submitted its firm view.

Although UPPCL has accepted for allowing the provisional tariff based on Capital

Cost of Rs. 4218 Crore as recommended by the Expert Committee but it has also

raised objections on increased cost due to geological surprises and floods of June

2013. UPPCL has also opposed extension of CoDs beyond May 31, 2013 and sale

proceeds of scrap.

AHPCL, during the hearing has submitted that in many hydro power projects in

the country, the capital cost envisaged at the time of start of the project increased

and the concerned Regulatory Commission has devised the tariff in such a way that

consumers are not put to extraordinary burden due to very high capital cost. AHPCL,

has further submitted that to avoid the additional burden on the consumer, they

would be considering to sacrifice some part of RoE, to elongate the loan repayment

period and to increase term of PPA. The AHPCL submitted that they have made

their submission in this regard to the procurers, on the basis of which the procurer

had earlier submitted six options with different tariff structures.

The Commission considers that during the process, it has tried its best that both

procurer and the developer reach to a mutually agreed solution and make a filing of

agreed tariff structure before the Commission but both the parties have not been

able to reach any conclusion and in the hearing dated 16 March 2016, the procurer

once again have sought time of one month for making their submission. It is

necessary to mention that the Commission directed UPPCL to file firm proposal vide

order dated 2.9.2015. As no reply of UPPCL was received, a new date of hearing

was fixed on 24.02.2016. In this hearing, UPPCL requested further time which was

allowed to them with the direction to file detailed reply with firm recommendations

before the next date of hearing which was fixed on 16.3.2016. On 14.3.2016,

UPPCL again sought one month’s time. From above it is clear that even after a laps

of about six months, UPPCL has not been able to file its firm reply, however it has

started accepting the power at a mutually agreed tariff of Rs 4.00/kwh.

The developer M/s AHPCL has made the submission before the Commission on

16.3.2016 that due to inadequate tariff of Rs.4.00/KWh which has been allowed to

them on an ad-hoc basis, it has become difficult for them to meet even their debt

obligations and they are on the verge of defaulting to the lenders in their repayment

obligations. The developer M/s AHPCL has submitted the copies of letters of various

banks and financial institutions asking them to make the overdue payments. M/s

Alaknanda Hydro Power Co. Ltd. has submitted during the hearing that in order to

reduce the tariff of the project, they have proposed elongation of repayment period to

25 years from the present 11.5 years under 5/25 scheme of Reserve Bank of India.

AHPCL has added that for applying under this scheme, they have to keep their bank

accounts regular by making the repayment of loan as per the present loan

agreement.

In such a situation, the Commission is of the view that the issue of fixation of

provisional tariff can not be postponed for another one month. Since the developer

has asked for the provisional tariff which is adjustable in the final tariff, the

Commission decides that the provisional tariff should be allowed for two years for

this project taking into account some parameters as agreed in PPA even if it requires

deviation from the Regulations (2014-19) so as to avoid any undue burden on

ultimate consumer. The Commission has considered to allow above provisional tariff

only in view of the fact that supply of power has been accepted by UPPCL. The

power is being supplied at a mutually agreed tariff of Rs. 4/kwh and that too when

this tariff has never been brought to the Commission for approval. The developer has

subsequently approached to the Commission with the plea that this tariff is

insufficient for them even to meet their loan liabilities and hence requested the

Commission to allow them revised provisional tariff. The Commission, considering

the letters from the banks mentioning default by AHPCL in loan repayments, has

decided to allow provisional tariff believing that fulfilling the defined liabilities are

necessary for existence of the project. The Commission also considers that issues

flagged by UPPCL and by Shri Jhunjhunwala would be considered in detail while

finalizing the final tariff of the project as in view of above mentioned facts, immediate

intervention for provisional tariff has become imperative.

For deciding the provisional tariff, guiding principles in respect of various items

shall be as mentioned herein below:

1. Capital Cost

On request of GoUP / UPPCL, the Commission had earlier appointed a

Prudence Check Committee to determine the project cost up to 30th Sep

2013. The Committee had recommended the capital cost as Rs. 4218 crores.

This cost has also been agreed by UPPCL/GoUP for allowing the provisional

tariff although with certain objections mentioned in earlier paragraphs.

Therefore, the Commission decides to consider 95% of this cost i.e. Rs. 4007

Crore for determination of provisional tariff.

2. Interest on Loan

Interest on loan is allowed on the average of opening and closing balance of

loan. The opening balance of the loan is also considered at 78% of the cost

allowed for computation of provisional tariff.

3. Depreciation

The Appendix – III of the Regulations 2014 specifies the rate of depreciation

admissible on different items of fixed assets the weighted average of which

comes to 3.80% for first 12 years and 2.47 for the remaining life of the asset,

but the depreciation shall not exceed to 90% of the cost which will be

approved by the Commission at a later date. After adoption of 5/25

refinancing Scheme of RBI, the rate of depreciation can further be rationalized

if it provides some comfort in over all tariff. For the first two years the

depreciation is allowed @3.80%.

4. Return on Equity

The PPA executed between the developer and the procurer provides RoE

@14%. However the Regulations 2014-19 allows the return on equity

@15.5%. But the cost of this project has increased manifold and the

developer has shown their inclination to reduce the tariff even by further

sacrificing some part of RoE. Therefore, the Commission presently allows

RoE @14% as provided in the PPA, for the purpose of provisional tariff.

5. O&M Charges

As per the PPA, O&M charges are admissible @1.5% of the capital cost after

reducing the R&R expenses from the capital cost considered for

determination of tariff. Though the Regulations (2014-19) provide for O&M

charges @ 2.5% on the capital cost considered for determination of tariff but

in this case since project cost has not yet been decided and the developer

has shown their inclination to claim the O&M charges as per the PPA,

therefore to keep the tariff to an acceptable level the O&M charges are

allowed @ 1.5% of the cost considered for determination of provisional tariff.

The Regulations provide for escalation of O&M charges after the first

year of operation. The escalation rate provided in the PPA is 4% but in the

Regulations the escalation rate is permissible @6.43%. Here again to keep

the tariff at reasonable level the escalation is allowed @ 4% as provided in the

PPA.

6. Interest on Working Capital loan

Interest on working capital loan shall be allowed on the basis of the

Regulations subject to the capital cost considered for determination of

provisional tariff and the receivables worked out on the basis of provisional

tariff.

7. Design Energy

The design energy of this project was determined at 1397 MU on the basis of

95% of 90% dependable year computed on the basis of hydrological data

available at the time of start of the project. But now the developer has

indicated during the hearing that the hydrology of the project has undergone

significant change so it may be revised to 1550 MU per year. Relying on the

submissions made by the developer, the design energy is taken at 1550 MU

subject to its finalization at the time of determination of final tariff on the basis

of revised hydrological data which will be provided by the developer. The

Commission believes that the design energy of this project has increased

which is beneficial for the consumers and hence directs the developer to get

the design energy of 1550 MU/year finalized through due process before the

approaching the Commission for final tariff. Till then for all purposes the

design energy would be considered as 1550 MU/year.

8. Free Power

As per the Government of India policy and the revised implementation

agreement, 12% free power is to be provided to the state of Uttrakhand.

UPPCL has vehemently opposed paying for this power. Therefore, the

Commission decides that the issue would be finally decided with the final

tariff.

On the basis of above, the annual fixed charges for the first year of the

operation FY i.e. 2015-16 is computed at Rs. 538 Crores which is considered for

determination of capacity charge and energy charge. As per the Regulations 50% of

the annual fixed charge is admissible as capacity charge and remaining 50% is

allowed as energy charge. On the basis of Regulations, considering the design

energy at 1550MU, the first year energy charge works out to Rs. 2.59 per KwH and

capacity charge works out to Rs. 269.08 Crores. For second year the annual fixed

charge will be Rs. 329.36 Crores and the energy charges will be Rs. 2.44 per KwH.

The Commission has also worked out the levelised tariff for 30 years on the

basis of provisional cost considered at present. The levelised tariff for 30 years

works out to Rs. 3.86 per KWh which is well below the cost allowed by the procurers

under the Case- I bidding procurement carried out recently. The remaining cost

claimed by the developer will be subject the prudence check and also subject to the

comments and the facts provided by the procurers to the Commission in due course

of time.

The Commission directs AHPCL and UPPCL to device a tariff structure to

avoid the additional burden on the consumer by considering to sacrifice some part of

RoE by AHPCL, by elongating the loan repayment period and by increasing the term

of PPA.

With above, the petitions are disposed of.

(S. K. Agarwal) (Indu Bhushan Pandey) (Desh Deepak Verma) Member Member Chairman

Place: Lucknow Date: March 29, 2016

order for alaknanda- dated 29.3.2016 1 - :: uttar pradesh · pdf file ·...

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