RAJASTHAN ELECTRICITY REGULATORY COMMISSION
Suo-Motu
In the matter of Rajasthan Electricity Regulatory Commission (Terms and
Conditions for Determination of Tariff for Renewable Energy Sources – Biomass,
Biogas and Biomass Gasifier Energy) Regulations, 2015.
Coram:
Shri Vishwanath Hiremath, Chairman
Shri Vinod Pandya, Member
Shri Raghuvendra Singh, Member
Date of Order :
07.05.2015
Memo on Statement of objects & reasons and consideration
Comments/Suggestion, received from various stakeholders:
1.
of
The Commission issued Draft Rajasthan Electricity Regulatory Commission
(Terms and Conditions for Determination of Tariff for Renewable Energy
Sources – Biomass, Biogas and Biomass Gasifier Energy) Regulations, 2015
alongwith Explanatory Memorandum on 20.01.2015. These were placed
on the website of the Commission for the information of the persons likely
to be affected as required under the “Electricity (Procedure for Previous
Publication) Rules 2005. Public Notices for inviting comments/suggestions
from the Stakeholders were also issued in the following newspapers on
the date mentioned against each of them:
1. Dainik Bhaskar (All Rajasthan)
2. Dainik Navjyoti (All Rajasthan)
3. The Times of India (Jaipur Edition)
21.01.2015
21.01.2015
21.01.2015
The last date for receipt of comments was kept as 20.02.2015.
2.
The Commission has received 11 (Eleven) comments from stakeholders.
The names of the persons who have sent their suggestions/comments
alongwith suggestions/issues raised by them are placed at Annexure-I.
3.
The Commission has considered the issues raised by the stakeholders. The
broad issues raised and Commission’s findings thereon are as follows:
Eligibility Criteria (Proviso to sub regulation 1 of regulation 4) and extent of use
of fossil fuel:
4.
The stakeholders requested that use of fossil fuel may be allowed upto
31.03.2019 in place of 31.03.2017 as proposed in the draft Regulations.
Further, it is also requested that limit of use of fossil fuel may be revised
from proposed 15% to 25%.
5.
As regards allowing the use of fossil fuel, it is stated that the provision was
proposed in consideration of request of MNRE and second Amendment
proposed by CERC in their RE Tariff Regulations, 2012. Considering issues
highlighted by MNRE and suggestions made by the stakeholders, CERC
while finalizing its Second Amendment has allowed use of fossil fuel upto
15% in terms of calorific value as a one time dispensation till 31.03.2017,
i.e., end of the control period specified in their said Regulations.
Considering the above, Commission decides to retain the limit of 15% for
use of fossil fuel proposed in the draft Regulations with the provision that
use of fossil fuel to this extent shall be allowed till the end of the control
period envisaged in the draft Regulations, i.e., 31.03.2019.
Norms of SHR, GCV, Capital Cost and O&M Expenses for Biomass power
plants:
6.
Stakeholders have suggested that SHR of 4440 kCal/kWh specified for
AC Biomass power plants may be reduced. As regards GCV, one
suggestion is that GCV may be considered as 3100 kCal/kg as per CERC
Taskforce recommendations and another suggestion is to consider GCV
as 3050 kCal/kg as per recommendation of the study conducted in
2010-11 by a Consultant appointed by RREC. It is also requested to revise
O&M expenses norm as Rs. 44 Lakh/MW for Air cooled Biomass power
plants. Stakeholders have also requested to align the capital cost norm
of Biomass power plants with amended Regulations of CERC. One of the
stakeholders suggested to set up a Committee by the Commission to
study and verify the Capital costs, O&M costs, GCV and other norms
associated with working biomass power plants in Rajasthan for revision of
operating norms.
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7.
It is observed that the norms such as SHR and GCV were fixed in the
RERC Tariff Regulations, 2009. Since then, no new fact has been brought
on the records to warrant any change in the norms.
8.
As regards capital cost, it is observed that the capital cost for FY 2015-16
has been proposed on the same line based on which the capital cost for
FY 2014-15 has been arrived at by adopting the indexation formula of
CERC with capital cost of FY 2013-14 as reference base.
9.
As regards O&M expenses, the norm of O&M expenses of Rs. 38
Lakh/MW for FY 2015-16 for Air cooled Biomass power plants has been
arrived at by escalating O&M expenses of FY 2014-15 by 5.85%, which
the Commission feels is rational.
10. In view of the above, Commission decide that no changes are required
in the norms.
Annual escalation in tariff of Biomass power plants commissioned under GoR
Policy 1999:
11. Stakeholders have raised the issue of deterioration of the financial health
of the Bio-mass power plants commissioned under GoR Policy 1999, as
most of them are incurring losses. In order to revive them, it has been
suggested that the proposed annual escalation of 5% in their tariff will be
inadequate and an annual escalation of 6% may be considered.
12. Stakeholders have submitted that the tariff of the plants operating under
GoR Policy, 1999 has a single part tariff. As these plants are also affected
by increase in Biomass fuel price, there is a need to provide increase in
variable cost in line with plants commissioned under the RERC Tariff
Regulations, 2009 and subsequent Regulations. With Biomass price of Rs.
2921.25 (approved by CERC), the variable tariff for FY 2015-16 for plants
set up under RERC Tariff Regulations, 2009 works out to be Rs. 4.15/kWh.
Considering this, there will be an increase of Rs. 2.34/kWh in their variable
tariff over FY 2010-11. However, taking into account the same increase of
Rs. 2.34/kWh in the variable tariff, the total tariff of plants commissioned
under GoR Policy, 1999, works out to Rs. 7.2786/kWh for FY 2015-16. Thus,
the proposed tariff of Rs. 6.3031/kWh in the draft Regulations for FY 201516 for plants commissioned in GoR Policy, 1999 is inadequate. It is
requested that the tariff of Biomass power plants set up under 1999
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Policy may be increased to the extent of increase in variable tariff of the
plants set up under RERC Tariff Regulations, 2009.
13. It is submitted that the rate of tariff proposed for Biomass power plants
under GoR Policy 1999 for 2015-16 is no more attractive and therefore,
increase in tariff for plants set up in 1999 Policy may also be
appropriately considered and enhanced suitably in percentage terms
as being increased for the State Discoms in their retail tariffs.
14. It is observed that tariff specified for Biomass power plants in 1999 policy
is a single part flat rate tariff having no separate fixed and variable
components. Therefore, it would not be rational to increase this single
part tariff by applying rate of increase in variable charges of plants
commissioned under RERC Tariff Regulations, 2009. It is further observed
that in case of two part tariff also, the fixed cost component of a
Biomass power plant typically goes down in the initial years of its
operation, as interest burden on loan decreases. However, it is only a
small O&M component of fixed cost, which is subjected to an annual
escalation. Considering the above, Commission is of the view that
escalation rate of 5% provided for this category of plants would be
adequate for the next control period as well.
Relocation of meter in case of Biomass power plants commissioned under
GoR Policy 1999:
15. The stakeholders have requested that relocation of meter may be
allowed for plants commissioned under GoR Policy, 1999, as per the
metering provisions of these draft Regulations thereby aligning the same
with the CEA Metering Regulations.
16. It is observed that CEA (Installation and Operation of Meters)
Amendment Regulations, 2014 dated 26.11.2014, specify metering
arrangement at the outgoing feeder from the Renewable Energy plant.
Keeping this in view, the draft Regulations also provide for the same
metering arrangement. Accordingly, the plants commissioned under
GoR Policy 1999 shall also be allowed to shift their meters to the location
at the generation facility subject to the technical feasibility and
acceptance by the Distribution Licensee. However, the cost of shifting
shall be borne by the concerned generator.
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Rebate for prompt payment:
17. It is submitted that financial conditions of Biomass power plants are
extremely poor and they need to have liquidity for purchasing fuel in
cash from farmers. The additional burden on account of reduction in
revenue due to a rebate of 2% in tariff would only make their condition
worse. Therefore, amendment in the provision of the Regulations be
made for not allowing rebate for payments made within seven days of
raising bills.
18. It is observed that Regulations provide both, for levy of surcharge in case
of late payment and allow rebate for making prompt payment. Thus,
when late payment surcharge is levied for late payments, it is but logical
that rebate has to be provided for prompt payment. Further, prompt
payment would also result in savings for Biomass power plants in terms of
non-incurring of interest on working capital requirement. Further, similar
rebate mechanism for prompt payment is specified for other RE
generation such as solar and wind power. In view of the above,
Commission considers it appropriate that the provision of rebate for the
prompt payment shall be continued for next control period.
Incentive mechanism:
19. A suggestion has been received that as a promotional measure,
incentive slabs for achievement of certain PLF percentage (say starting
from 50%) may be specified for the Biomass power plants commissioned
under the RERC Tariff Regulations, 2009 to recover their losses. A similar
suggestion of providing incentive for better PLF than specified by the
Commission has also been made. In this respect, example of UPERC
Regulations is also cited by the stakeholders.
20. In order to encourage the generation above a threshold/target PLF, an
incentive is in vogue for conventional power plants where the fixed
charge component of the tariff is capped for generation above a
normative availability/PLF and incentive is allowed in variable charge
component for each unit generated above a threshold/target PLF.
However, in
contrast
to
conventional
power plants,
Biomass/Biogas/Biomass gasifier plants are allowed full tariff (Fixed charge +
Variable charge) for each electricity unit generated over the threshold
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PLF. Allowing incentive over and above the full tariff would not be
justified. The Commission, therefore, does not accept the suggestion.
Consideration of repayment of loan equal to the depreciation and specifying
separate tariff streams with and without AD benefit:
21. A suggestion for implementing the principle of taking repayment of loan
equal to depreciation for plants commissioned before 2013-14 has been
received. Further, request for allowing separate tariff streams with and
without availing AD benefit for plants commissioned in 2009 Regulations
is also received.
22. This request has to be rejected as the relevant tariff orders wherein similar
issue has been raised and rejected have attained finality.
Transmission and wheeling charges:
23. A clarification is also requested by one of the stakeholders whether the
provisions of the draft Regulations relating to transmission and wheeling
charges is also applicable to the Bio-mass power plants commissioned
before 1.04.2014.
24. As regards the applicability of provisions relating to transmission and
wheeling charges proposed in the draft Regulations, it is clarified that
these provision shall also be applicable to Biomass power plants
commissioned before 1.04.2014 .
Separate norms for Juliflora based power plants:
25. Stakeholders citing the GoR Policy, have requested for specifying
separate norms such as Capital Cost, GCV, fuel cost and tariff for
Juliflora based Bio-mass power plants. It is also requested by the
stakeholders that Commission may issue directive to reduce the 60%
royalty component of Julifora fuel to 5%.
26. It is observed that the same type of Biomass is not evenly available
across the State and any shortfall in fuel requirement has to be met
through other Biomass fuels such as jeera husk, straws of castor, etc. Thus,
different fuels/ fuel mix may have to be used for running the same
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Biomass power plant. In view of this, the suggestion of specifying
separate norms for Juliflora based power plants is not acceptable. As
regards change of royalty component for Juliflora fuel from 60% to 5%, it
has to be stated that the same does not fall within the purview of this
Commission. The generators have to approach the GoR as it relates to a
State Policy.
Storage losses:
27. Stakeholders have requested that considering substantial losses in
Biomass fuel while stacking, handling, feeding boiler and exposure to
wind, rain and fire, storage losses of atleast 8% may be considered
against the proposed 2%.
28. In absence of reliable data, the suggestion cannot be accepted.
Change in definition and eligibility criteria of Biogas and Biomass gasification
power plants:
29. One of the stakeholders has requested for a change in the definition of
Biogas proposed in the draft Regulations to include “agro/bio industrial
effluents from agro and bio-industries” to widen the coverage of
definition of Biogas power plant. Similarly, suggestion of including high
efficiency “producer gas turbines” has also been made in eligibility
criteria of Biogas and Biomass Gasifier based power plant.
30. Commission finds the suggestion of modifying the definition of Biogas
and eligibility criteria of Biomass gasifier acceptable and accordingly,
the definitions of Biogas and eligibility criteria of Biogas and Biomass
gasifier based power plants have been modified.
Norms for Biomass gasification power plants:
31. The issue of considering higher capital cost (Rs 700+ Lakh/MW), with the
same PLF as specified for rankine cycle based power plants, higher
auxiliary consumption (12% against proposed 10%) and higher O&M
expenses (Rs 120 Lakh/MW) for Biomass gasification plants have been
raised by stakeholders.
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32. In view of limited availability of operational information in connection
with Biomass Gasifier plants, Commission has adopted the norms
specified by CERC in their RE Tariff Regulations, 2012. In view of the
above, no change is required in norms such as O&M Expenses, PLF and
auxiliary consumption. However, a calculation error has been noticed in
the capital cost proposed for Biomass Gasifier based power plants in the
draft Regulations. Accordingly, the normative capital cost for Biomass
Gasifier based power plants has been corrected from proposed
Rs. 631.26 Lakh/MW in draft Regulations to Rs. 607.24 Lakh/MW for FY
2015-16. The net capital cost after considering capital subsidy of Rs. 150
Lakh/MW has also been corrected from Rs. 481.26 Lakh/MW to Rs. 457.24
Lakh/MW in the final Regulations.
Separate tariff and capital cost for biogas/Biomass gasifier plants not availing
GBI/tariff/capital subsidy:
33. The issue of specifying a provision for separate capital cost and tariff for
Biogas/Biomass
Gasifier
based
power
plants
not
availing
GBI/tariff/capital subsidy in the Regulations and making the consequent
amendments in regulation 21, 33 and 41 of the draft Regulations has also
been raised by stakeholders.
34. GBI/tariff/capital subsidies are promotional instrumentalities adopted by
the Appropriate Govt., for encouraging the technologies where the cost
of generation is on higher side. The acceptance of suggestion would
eventually result in an increase in the cost of generation of electricity
from these technologies which are still in the infancy stage. In view of the
above, Commission has arrived at the conclusion that no change is
required in the Regulations.
Fuel cost for working capital requirement:
35. One of the stakeholders has raised the issue to increase the fuel cost
from four months to six months for working capital requirement.
36. It is observed that the provision of working capital has been retained
from the earlier RERC Tariff Regulations 2009. CERC also specify the same
for the fuel cost of four months in their RE Tariff Regulations, 2012. In view
of the above, Commission has arrived at conclusion that no change is
required.
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Fuel price for Biomass power plants:
37. Stakeholders have raised various issues on biomass fuel price:
i.
Fuel price is lower than that specified by the neighbouring Punjab
and Haryana ERCs.
ii.
Fuel price of Rs 2870/MT plus Rs 450/MT towards handling cost may
be considered.
iii.
Total fuel cost for biomass power plants as Rs. 3155/MT may be
considered.
iv. In absence of recommendations of the Committee, Biomass price of
Rs. 2921.5/MT as per CERC’s Order dated 03.03.2015 for Rajasthan,
may be considered.
38. Hon’ble APTEL in their judgment dated 23.03.2015 in the matter of OP No.
3 of 2012 has directed to the State Commissions among other things that
variable charges may be determined periodically on the basis of
prevailing biomass fuel price which may be fixed after carrying out a
State specific study. The fuel price may be determined annually through
an independent study. Alternatively, fuel price may be determined for
the first year of the Control Period of say 2 to 3 years with percentage
annual escalation linked to appropriate indices for the subsequent years
of the Control period. At the end of the Control Period, the fuel price
may be re-determined for the first year of the next Control Period.
39. Commission has gone through the said APTEL’s judgment and provisions
relating to determination of fuel price in the draft Regulations and
suggestions received. Commission has come to the conclusion that an
alternative mechanism, contained in the directions of the Hon’ble APTEL
be incorporated, where the biomass fuel price for the first year shall be
based on fuel study and escalation in fuel cost, linked to indices, as
specified by CERC in their RE Tariff Regulations, 2012, shall be applicable
for the subsequent years of the control period.
40. The Biomass fuel cost for FY 2015-16 has been arrived notionally as per
the CERC’s indexation formula with Rs 1830/MT as reference base. This is
the only Biomass fuel price available, which was finalized by the
Commission in the year 2011 based on the fuel study. In any case, the
fuel cost would be finalized as per the fuel study and recommendations
thereon by the State Level Committee envisaged in the Regulations. In
view of the above, Commission has arrived at conclusion that no
change is required in Biomass fuel cost specified in the Regulations.
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Use of extra land:
41. One of the stakeholders suggested that Bio-mass power plants having
extra land may be allowed to set up solar power plants without
participating in the reverse bidding.
42. It is observed that as per GOR Policy, the land allocation is done by the
SLEC formed by the State Government. Therefore, the jurisdiction of
allowing setting up solar power plant on such lands would lie with the
State Government alone.
Scheduling Requirement:
43. A suggestion that in view of uncertainty in availability of Biomass in the
State and hardly 50% RPO is achieved, all Biomass power plants may be
treated as must run plants and requirement of scheduling may not be
made applicable to them.
44. The scheduling requirement proposed on the basis of CERC RE Tariff
Regulations, 2012, is in All India context. However, considering the
difficulties of the Biomass power plants in the State, the request of the
stakeholders deserves consideration and accordingly, Biomass power
plants supplying electricity to the Discoms, shall not be subject to
scheduling requirement irrespective of the capacity.
Separate Connection:
45. One of the stakeholders has requested that their Biomass based power
plant situated at Sirohi having capacity of 20 MW could not be run as
expected due to Biomass availability problem. As for lighting and
auxiliary requirement, they require app. 800 units where as we are
loosing 2000 units of power on account of transformer losses which can
be reduced to 1400 units by providing a separate connection of 135 kVA
on 11 kV line(Main transformer installed capacity is 25 MVA, which is
being used as a connectivity between plant & 132 Kv GSS premises for
export as well as import of power.)Commission may consider to provide
a separate connection to the power generator unit so that power plant
equipment can be maintained on daily basis and as and when the
situation improve, they would switch to main 132 kV connectivity. Their
power plant is non-operative since May-2012.
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46. Since the above problem does not relate to Regulations, it has to be
dealt separately.
General Suggestions:
47. Some general suggestions have also been received from the
stakeholders such as there should also be financial and social incentive
for Biomass fuel producers. The basic difference between Biomass,
Biogas and Biomass gasifier may be explained. The difference between
water cooled and air cooled condenser may also be brought out.
48. It is observed that the concerns of the stakeholders have already been
addressed in the Explanatory Memorandum issued alongwith draft
Regulations. Commission is of the view that no change is required in
Regulations on the above account.
49. In addition to above, it is observed that while determining the fixed cost
component for the tariff period, receivables of one and half month of
fixed and variable charges have to be considered over the tariff period.
However, considering the uncertainty in fuel price over the tariff period,
an escalation of 5% in fuel/feed stock price, as the case may be, shall be
considered. Accordingly, the provision of Tariff Design has been
appropriately modified.
50. With above consideration the Commission has finalized Rajasthan
Electricity Regulatory Commission (Terms and Conditions for
Determination of Tariff for Renewable Energy Sources – Biomass, Biogas
and Biomass Gasifier Energy) Regulations, 2015. The same are placed in
the file for issue and publication in the Official Gazette.
(Raghuvendra Singh)
Member
(Vinod Pandya)
Member
(Vishvanath Hiremath)
Chairman
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Annexure – I
List of Stakeholders, who offered the comments/suggestions:
1.
M/s Rudraksh Energy
2.
Rajasthan Biomass Power Developers Association, Jaipur
3.
M/s Suryaa Chamball Power Ltd., Kota
4.
Indian Biomass Power Association
5.
M/s Sathyam Green Power Pvt. Ltd.
6.
Rajasthan Renewable Energy Corporation
7.
M/s Samta Power
8.
Sh. S.K. Bhatnagar
9.
M/s Kalpataru Power Transmission Ltd.
10.
M/s Sambhav Energy Ltd.
11.
M/s Tata Power Company Ltd.
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