Summary of Petition No 27 of 2016 filed by M/s. Delhi MSW

Solutions Limited (DMSL)

Subject :- In the matter of determination of Tariff for sale of power to

Distribution Licensees in the State of Delhi in respect of the Municipal Solid

Waste to Energy (MSWtE) Project at Village Narela near Narela - Bawana

Road at Delhi.

1. The Petitioner is a generating company under sub section 28 of section

2 of the Electricity Act, 2003 (the “Act”), which is in the process of

commissioning a Waste to Energy Project at Bawana Industrial area,

New Delhi. The project comprises of two units of 600 tons per day of

boilers with a single stream turbine generator having a capacity of 24

MW. The project employs an air cooled condenser to conserve precious

resources like water and has sanction to utilize 1.0 MLD of treated

sewage from Delhi Jal Board (DJB).

2. The Petitioner has signed concessional agreement with the erstwhile

Municipal Corporation of Delhi (now North Delhi Municipal Corporation

– one of the three successor entities) for Door to Door collection,

Transfer, Transportation, developing an integrated Municipal Solid

Waste Processing Facility, which includes generation of power, and

Engineered Sanitary Landfill Facility as per MSW (Management &

Handling) Rules 2000 on long term Build, Own and Transfer (BOT)

basis on July 17, 2009.

3. The thermal processing of municipal waste results into ash as the sole

residue, apart from minor quantities of chemical residues emanating

from flue gas treatment. The sole and biggest advantage of thermal

processing of municipal waste, through generation of power, is its

ability to reduce the waste to the extent of 90% by volume and 75%

by weight. Thus the project set up by the Petitioner deploys multiple

processing technologies namely composting, RDF, thermal processing

(Waste to Energy) in tandem which will result in maximising the

recoverable from municipal waste such as compost and power, and to

minimize the residues so as to reduce the burden on sanitary landfill.

4. The land required for the project is provided on lease. The handing

over letter for the land of 100 acres at Bawana is dated December 31,

2009, which is issued by the erstwhile Municipal Corporation of Delhi

[(MCD) now North Delhi Municipal Corporation] for development of

Integrated MSW Processing Plant.

5. It is now pertinent of mention herein that the Central Government has

issued an amended National Tariff Policy dated 28.01.2016. The

relevant provision of the said policy is setout herein below:

“6.4 Renewable sources of energy generation

including Co-generation from renewable energy

sources:

…

(ii) Distribution Licensee(s) shall compulsorily procure 100% power

produced from all the Waste-to-Energyplants in the State, in the ratio

of their procurement of power from all sources including their own, at

the tariff determined by the Appropriate Commission under Section 62

of the Act.”

6. The Petitioner states that, in the meantime, certain proceedings

relating to waste-to-energy power plants were initiated before the

Hon’ble National Green Tribunal. The said proceedings were numbered

as Original Application No. 22(THC) of 2013, wherein the Petitioner

was also made a party. In the said proceedings, the Hon’ble National

Green Tribunal examined the status of the power plant of the

Petitioner, along with two other waste-to-energy plants situated at

Okhla and Ghazipur, Delhi.

In the above proceedings, the Hon’ble National Green Tribunal passed

an order dated 04.04.2016 wherein directions were issued to this

Hon’ble Commission to determine tariff of the Petitioner for the

purposes of sale to the Delhi Distribution licensees. The Petitioner was

also directed to file an appropriate petition before this Hon’ble

Commission for determination of its tariff. Accordingly, in the light of

the said directions, the Petitioner is filing the present petition.

It is further submitted that in the aforementioned order, the Hon’ble

National Green Tribunal also directed the Municipal Corporation, Delhi

to file a petition before this Hon’ble Commission in order to seek an

observation of this Hon’ble Commission regarding the revenue sharing

percentage between the Petitioner and the Municipal Corporation,

Delhi as per the Concession Agreement dated 17.07.2009.

It is stated that the present petition concerns with the determination of

tariff of the Petitioner’s power plant and other related issues, while the

Municipal Corporation, Delhi shall institute separate proceedings qua

the issue of revenue sharing.

Determination of Capital Cost

7. The Capital Cost incurred for the project with detailed break up for

Land and Site development, Building and Civil Works, Plant and

Machinery Cost, Preliminary and Pre-operative expenses, Contingency

and Interest during construction (IDC) cost (but excluding Working

Capital Margin) works out as Rs.39,271 Lakhs. The detailed rationale

and analysis of each parameter for the Project cost is provided in

Schedule – 1 of the present petition. The above capital cost

computation is as per the certificate issued by the auditors of the

Petitioner.

8. The Petitioner states that it has infused a total Equity of Rs. 9,500

Lakhs in the Project. The balance of the Project Cost (till March 31,

2016) amounting to Rs. 29,771 Lakhs has been funded by lenders as

Debt. This gives a Debt – Equity Ratio of 75.81 : 24.19, which is well

within the normative Debt-Equity Ratio of 70:30in line with standard

regulatory norms considered for power generation projects.It is stated

that A part of the debt component required for the project was raised

from IndusInd Bank led consortium.

9. The power plant of the Petitioner is based on Municipal Solid Waste

(MSW) which comprises heterogeneous mixture of MSW, which causes

wear and tear of the Boiler and other equipments in the plant. In view

of this abrasive nature of feeding fuel and other cost components

involved, the Operation and Maintenance Cost estimated for the power

plant of this nature are high which have been elaborated in

subsequent chapters.

10. Petitioner has submitted that the Hon’ble Central Electricity Regulatory

Commission has notified Tariff Regulations outlining terms and

conditions for determination of renewable projects based on municipal

solid waste on 07.10.2015 through the CERC (Terms and Conditions

for Tariff determination from Renewable Energy Sources) (Fourth

Amendment) Regulation, 2015 (hereinafter referred to as “CERC MSW

Regulations”). Hence, for parameters such as O&M cost, O&M cost

escalation, Depreciation, Interest on Debt, working capital

requirement, Interest rate on Working Capital, rate of Interest for Debt

and Working Capital requirement, Return on Equity, etc., the Petitioner

has relied on the norms from the said regulations.

It is pertinent to mention herein that this Hon’ble Commission

does not have any regulations qua MSW power plants, and as such the

tariff of the Petitioner has to be determined as per the provisions of

Section 61 of the Electricity Act 2003, which includes taking guidance

from the CERC MSW Regulations.

11. The break-up of the capital cost of the Petitioner is provided in

Schedule – 1 of the petition, alongwith its justification. It is stated that

as per the said Schedule, the per MW capital cost of the project of the

Petitioner is around Rs.16.36 Crores. The Petitioner submits that as

per the CERC MSW Regulations, the normative capital cost for MSW

plants is Rs. 15 Crores, however, as per the provisions of Section

61(d) of the Electricity Act 2003, the Petitioner is entitled to the actual

project specific tariff as the Petitioner is entitled to recover the cost of

generation which includes the actual capital cost.

12. Summary of financial data (Tariff Design) submitted by the Petitioner

A. total works cost estimated

B. Summary of parameters for MSW Project

C. Auditors Certificate

D. Detailed working of the cost of generation

13. Prayers of the Petitioner

(a) direct the Respondent Licensees to execute Power Purchase

Agreement(s) with the Petitioner,

(b) determine the tariff payable by the concerned distribution

licensee for sale of electricity from the Petitioner’s power plant;

(c) In the interim, direct as follows:

1. direct SLDC and DTL to synchronize the power plant of the

Petitioner with the Delhi STU grid;

2. pass orders for provisional tariff to be payable by the

Respondent licensees, effective from the date of

synchronisation;

(d) pass such further and other orders, as the Hon’ble Commission

may deem fit and proper, keeping in view the facts and

circumstances of the case.

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