serc regulations

8/9/2019 SERC Regulations

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RAJASTHAN ELECTRICITY REGULATORY COMMISSION, JAIPUR

Suo-Motu

In the matter of determination of generic tariff for sale of electricity from wind

power plants in the state to Distribution Licensee for FY 2012-13.Coram:

1. Shri D.C. Samant, Chairman

2. Shri S.K.Mittal, Member

3. Shri S.Dhawan, Member

Date of hearing : 12.07.2012

Date of order : 07.09.2012

Order

1. As per RERC (Terms and Conditions for Determination of Tariff)

Regulations, 2009 (hereinafter referred as RERC Tariff Regulations, 2009),

Commission may initiate process for determination of generic tariff for

Renewable Energy (RE) generating stations on Suo-Motu basis or on the

basis of Petition filed by the Nodal Agency.

2.

The RERC Tariff Regulations, 2009 provide for terms and conditions fordetermination of generic tariff for wind power projects to be

commissioned during the Control Period of FY 2009-10 to FY 2013-14,

based on the parameters outlined in Part VII of these Regulations.

Commission had recently issued Fourth Amendment in RERC Tariff

Regulations, 2009 vide Notification dated.18.05.2012.

3. Commission, based on the performance parameters contained in the

RERC Tariff Regulations 2009 read with the said Fourth Amendment,

had worked out the draft order of generic tariff for the wind powerprojects getting commissioned during FY 2012-13 and the same was

issued for comments/suggestions from the stakeholders

4. Public notices were published in the following newspapers on the dates

mentioned against each inviting comments/suggestions from the

stakeholders on the Draft Order:

Rajasthan Patrika : 09.06.2012

Rashtradoot : 09.06.2012

The Times of India : 09.06.2012


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Public notices along with the draft order were also placed on

Commission’s website.

5. The last date for submission of comments/suggestions by the

stakeholders/public was 02.07.2012. Comments/suggestions from thestakeholders mentioned in Annexure-III were received.

6. Hearing on the Draft Order was held on 12.07.2012. The Stakeholders,

who participated in the hearing, are mentioned in Annexure-IV.

7. The present regulatory exercise is limited to determination of generic

tariff based on the parameters contained in RERC Tariff Regulations,

2009 read with Fourth Amendment. The comments of the stakeholders

on parameters such as Capital Cost, Depreciation, Interest Charges,

Auxiliary Consumption, De-ration etc. fall outside the scope of this

order, as they stand specified under the said Regulations and

therefore, they have not been considered. Similarly, other suggestions

of general nature such as providing expert help and arrangements for

recording of proceedings of hearing were also received. These

suggestions, though taken note of, have also not been discussed in this

Order on account of being outside the scope of this order.

8.

The comments/suggestions received from various stakeholders on

broad issues through written submissions and arguments during hearing

on the proposed Draft Order have been grouped and summarized as

under:

(1) Consideration of Surcharge, Changes in MAT,CDM Benefit,

Additional Depreciation and O&M Expenses;

(2) Subsidy or incentive by the Central Government;

(3) Procurement of Power at lower of the two tariff streams;

(4)

Procurement of wind power beyond RPO;

(5) Metering and CUF; and

(6) Some other comments.

9. The above issues and Commission’s analysis/decision thereon have

been dealt in the following paras.


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Consideration of Surcharge, Changes in MAT, CDM Benefit, additional

depreciation and O&M Expenses:

Stakeholder’s suggestions/comments:

10.

Main points raised by CLP Wind Power (India) Pvt. Ltd. (CLP India),Indian Wind Power Association (IWPA), Enercon (India) Limited (EIL),

Greenergy Renewables Pvt. Ltd. (GRPL), Torrent Power, Indian Wind

Turbine Manufacturers Association (IWTMA), Rajasthan Vidyut Vikas

Sansthan (RVVS), Ajmer Vidyut Vitran Nigam Ltd. (AVVNL) and others

on the above issue are briefly as under:

(1) Commission has not considered surcharge on income tax/MAT for

second and subsequent years, probably on the anticipation of

abolition of surcharge with the introduction of ‘Direct Tax Code’.

MAT/Income Tax (including surcharge, cess etc) is the Govt. tax

and does not constitute revenue to the generating company and

unless, Govt. of India through Finance Act alter/delete the

provisions of surcharge, not considering the same indirectly

reduces the admissible return on equity. Therefore, Commission

needs to consider surcharge on MAT as well as Income Tax for

entire project life. The illustration given at regulation 21(5) of the

RERC Tariff Regulations, 2009 considers MAT and income tax with

surcharge & cess.

(2) There can be drastic changes in taxation rates (including

surcharge, cess etc.) or methodology of levy of taxes, it will be

appropriate to specify that the tariff for wind power projects

getting commissioned during FY 12-13 at whatever MAT/Income

Tax rate it is determined, shall be subject to annual revision

reflecting the difference in applicable MAT and income tax

(including surcharge and cess).

(3) The Clean Development Mechanism (CDM) benefit has not been

taken into account in the tariff calculations, a suitable provision

needs to be made so that developers may pursue CDM benefit

seriously, which can generate about 20 paise/kWh.

(4) The adoption of CERC methodology in determining the benefit of

higher depreciation is right step .However, depreciation benefit is

to be considered vis-a-vis depreciation considered by the


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Commission, as such depreciation beyond 12 years must be as per

RERC Regulations, i.e. 2.024%.

(5) The capital cost of wind power plant includes Rs. 15 lacs/MW

towards the cost of wind energy evacuation upto and includingpooling station and Rs. 2 lacs/MW payable to RVPN as the

connectivity charges. Further, as per sub-regulation 6(iv) of

regulation 83, O&M expenses are to be levied at the rate of 1.25%

of capital cost for plants and 3% for transmission line. There are no

O&M expenses on the connectivity charges of Rs. 2 lacs/MW.

Therefore, connectivity charges should not be included in the

capital cost for working out the O&M Expenses.

(6)

The GERC model for solar tariff may be adopted and for initial

period, a low tariff may be given, which may be gradually

increased.

11. Commission’s Analysis and Decision:

(1) As regards the levy of surcharge, it is stated that the Commission

had determined levelised tariff based on the same methodology

for wind power plants commissioned during the FY 2009-10 i.e. first

year of the present control period. In order to maintain continuity

and consistency during the on going MYT control period, the

identical methodology has been followed in this order in

determination of generic tariff for FY 12-13. Further, this issue also

came up before Appellate Tribunal for Electricity (APTEL) in M/s

Enercon (India) Limited and Indian Wind Power Association

(Rajasthan State Council) v. Rajasthan Electricity Regulatory

Commission, Jaipur and Ors. reported in 2011 ELR (APTEL) 0987,

where it was decided by Hon’ble APTEL that the Commission

applied the correct rate of MAT including surcharge for the

purpose of grossing up the rate of return on equity. In view of the

said position no change is required as far as levy of surcharge is

concerned.

(2) As regards the suggestion of year-on-year adjustment of MAT

based on rate prescribed by GoI, it is stated that the tax rate

movements over the tariff period of 25 years could eventually

even out, as it may go up or down. Even otherwise, such year-on-

year changes cannot be captured, when levelised tariff for 25years is being determined. Commission, therefore, would like to


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continue with the past practice on account of the said reasons

and also for the sake of consistency.

(3) Regarding the issue of considering CDM benefit in the tariff

calculation methodology raised by one of the Discoms, it isclarified that RERC Tariff Regulations 2009 at regulation 42 provide

for sharing of CDM credit during the current control period wherein

project developer has been allowed 75% share of CDM benefits, if

this benefit is availed. Therefore, it would not be appropriate to

factor CDM benefit in the determination of tariff for wind projects.

The projects, which would avail CDM benefit, should share that as

envisaged in Regulations. Further, CERC is also not considering the

same in tariff computation, though CERC RE Tariff Regulations also

have such an enabling provision for sharing of CDM benefits.

(4) As regards the methodology of calculation of Higher Depreciation

benefit, it may be mentioned that IWPA and EIL, while welcoming

the adoption of CERC methodology suggested that depreciation

beyond 12 years be taken as 2.04%. On this issue, it may be

mentioned that the exercise is to arrive at the tax benefit of higher

depreciation a developer could avail. Therefore, the benefits of

option of higher depreciation available under Income Tax Act, i.e.

35% (=20%+15%) for the first year and 15% afterwards under written

down value method have to be compared with book

depreciation (i.e. 5.28% as per Straight Line Method) available

under Companies Act, 1956. CERC is also following the similar

methodology of arriving at the additional benefit with reference to

book depreciation available under Companies Act. It would,

therefore, be appropriate to retain the methodology for working

HD benefit as per the Draft Order. As all reasonable costs and

return on equity of 16% grossed up with normal tax rate is being

allowed, the additional tax benefit of higher depreciation needs

to be passed on to the consumers.

(5) As regards the suggestion of RVVS of not to consider Rs. 2 lacs/MW

for the purpose of working out O&M expenses, Commission would

like to clarify that RERC Tariff Regulations 2009 provide for O&M

expenses in terms of percentage of lump sum capital cost of a

power plant. The capital cost of a power plant comprises of hard

costs i.e. equipment costs, cabling etc as well as soft cost such asInterest During Construction (IDC), Erection & Commissioning, and


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Consulting Fee etc. As per prevailing practice of the power sector,

when Commercial operation Date (CoD) of a project is achieved,

these costs, hard as well as soft, are capitalised and become part

of a lump sum cost.

(6) As regards the suggestion of AVVNL for specifying different slabs

for preferential tariff with lower tariff for initial years, it is stated that

the RERC Tariff Regulations 2009 at note (ii) appearing below sub

regulation 6(b)(viii) of regulation 83 provides for determination of

levelised tariff for useful life of the wind projects i.e. 25 years.

Therefore, suggestion of Discoms for specifying different slabs of

the levelised tariff cannot be accepted and thus, levelised tariff for

25 years has been determined in accordance with the above

provision of RERC Tariff Regulations, 2009. It may be mentioned

that CERC also follows similar methodology.

Subsidy or incentive by the Central Government


12. Main points raised by CLP India, IWPA, EIL, REGEN, InWEA, EOXIS, INOX,

Green Infra, Torrent Power, GRPL, IWTMA, PEC and others are briefly as

under:

(1) The main objectives of GBI Scheme are:

(a) To broaden Investor Base by:

(i) Facilitating the entry of large Independent Power

Producers (IPPs)

(ii) Attracting FDI in the Wind Power Sector

(b) To provide level playing field between various classes of

investors.

(c)

To incentivize higher efficiencies.(d) To provide a framework for transition from an investment

based incentive to outcome based incentive.

(2) The Generation Based Incentive (GBI) was available for the wind

turbines commissioned after the issue of the scheme for

implementation of GBI for Grid interactive wind power projects

issued by Ministry of New & Renewable Energy (MNRE), GoI, vide

letter dated 17.12.2009 and before 31.03.2012.The duration of

scheme has not been extended so far. As per clause 4.6 of the


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scheme, this incentive is over and above the tariff that may be

approved by the State Electricity Regulatory Commission. In other

words, this incentive is sanctioned by the Union Government to

enhance the availability of power to the Grid and is not be taken

into account while fixing tariff by the State Regulators.

(3) Reducing GBI from the tariff would render the GBI scheme itself

meaningless. Further, if GBI is reduced from the tariff, none of the

investors would want to get into the effort and expenses towards

availing this incentive.

(4) As regards the treatment of GBI, Commission in its wind tariff order

for the FY 2009-10 has stipulated as under:

“Commission’s Ruling:

42. It may be mentioned that most of the investment in wind

energy in the state is taking place outside the incentive available

under GBI. However, the current tariff order is no way impinges on

the GBI scheme, which would be governed by the terms and

conditions of the scheme”.

(5) The new stand taken by the Commission that GBI should be

passed on to the distribution licensee is a radical change from the

earlier decision, this change in approach has never been

discussed through any consultation/public hearing.

(6) Similarly, other policy supports like tariff subsidy or CFA is provided

to the developers for attracting investment in the sector and the

same cannot be passed on to the Discoms where spirit and terms

& conditions of such policy support do not provide for the same.

In case such benefits are to be passed on to the Discoms, no

Generator would make efforts and incur expenditure towards

availing such benefits. Even in other cases, Commission may

specify that benefit shall be shared between Discom & Generator.

RERC Tariff Regulations, 2009 do not provide for reduction in the

tariff to the extent of GBI/Tariff subsidy/CFA/AD so availed by the

project developer. CERC and MERC are not adjusting GBI in tariff

calculation.

(7) If GBI is to be allowed as a pass through, then it should be on

sharing basis, as provided for CDM benefit, as expenses areinvolved in availing this benefit was other view point on the issue of


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GBI sharing. Yet another suggestion for GBI was that it should be

adjusted in tariff only in project specific tariff.

(8) GBI is not a capital subsidy and should not be treated similar to

Accelerated Depreciation.


(1) Most of the comments/suggestions as regards GBI are that it

should be over and above the preferential tariff determined by

this Commission. Commission has examined the issue. The GBI

Policy declared by Ministry of New and Renewable Energy (MNRE)

provided that GBI sanctioned by Union Government was to

enhance the availability of power to the grid. It has been

specifically mentioned in the Policy note that it shall be over and

above the tariff determined by the Commission. The scheme was

available to the wind turbines commissioned on or before

31.03.2012. Since then, neither the Policy has been extended nor

has any new Policy been issued by GoI.

(2) Considering the above position, the Commission is of the view that

GBI/Tariff Subsidy may not be factored if a notification (from

Central Government or State Government) specifically provides

for such GBI/ Tariff Subsidy to be over and above the preferential

tariff determined by the Commission. Even CERC methodology

doesn’t adjust GBI benefit in tariff calculation. It would, therefore,

be appropriate that at present, factoring of GBI/Tariff Subsidy

should continue to be governed by terms and conditions of such

scheme(s), as and when declared by the Central Government

and this view is in consonance with the decision taken by the

Commission in tariff order of FY 9-10, as quoted by one

stakeholder.

(3) The position as regards CDM and Higher Depreciation has been

dealt with in earlier part of this order and benefit of Accelerated

Depreciation stands withdrawn by the Govt. of India from the

current financial year as far as wind energy projects are

concerned.


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Procurement of Power at lower of the two tariff streams


14. Main points raised by IWPA,EIL, InWEA, ReNeW, REGEN, Green Infra,

INOX, EOXIS, Acciona Energy, TANOT POWER, Torrent Power, CLP India,

IWTMA,JVVNL , AVVNL and others on the above issue are briefly asunder:

(1) Unlike the present process where an investor is assured of a PPA

after the RREC grants approval, this process is likely to introduce

significant uncertainty from the investor’s perspective on matters

such as project certainty, applicable tariff, viability etc.

(2) Commission has virtually directed Discoms to procure wind energy

at a generic tariff which is lower between the two tariff options

available to the investors i.e. with higher depreciation (HD) andwithout HD. A generator not in a position to avail higher

depreciation benefit may agree to lower tariff stream in the

anticipation of GBI/Tariff subsidy. But having contracted for lower

stream, he will have to pass on GBI/Tariff subsidy to Discoms. This is

grossly unjust to the investors who are willing to invest without

availing HD benefit. This is going to adversely affect the investment

in the state of Rajasthan, as investor profile has changed over the

years. At present, large international investors, who prefer

generation linked incentive over the tax incentives are investing in

the wind based generation in India.

(3) After withdrawal of Accelerated Depreciation, more IPPs would

be investing in wind generation and they would not be able to

avail benefit of higher depreciation.

(4) This, in a way, is removal of level playing field between the two

categories of the investors i.e. those who can avail the benefit of

higher depreciation and those who cannot.

(5) Creating classifications within the preferential tariff and preferring

one over other may create uncertainty for a large number of

projects already under various stages of construction in the state

(6) JVVNL and AVVNL stated that clarification for providing basis for

applying preference is required specifically through an example, if

there are two generators providing wind power, one based on

higher depreciation and another one without higher depreciation,

and if the RPO has not been met then in that case how should


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Discoms proceed. Any preference without a set of evaluation

matrix may get highlighted during audit.

Commission’s Analysis and Decision:

15.

In the light of the submissions made by the stakeholders as well asDiscoms, the Commission is of the view that the matter needs to be

re-considered. Commission has also taken note of the submission of

the stakeholder that after withdrawal of AD benefit, IPPs are expected

to invest more in wind generation, who would not be able to avail

benefit of higher depreciation. In order to address the concerns of

developers as well as Discoms, the Commission has reviewed the

matter and decided that both the tariff i.e. with or without availing

higher depreciation would be valid tariff for the purpose of signing of

Power Purchase Agreements (PPAs) by the Discoms.

Procurement of wind power beyond RPO


16. Main points raised by CLP India, IWPA,EIL, InWEA, Green Infra, PEC,

RVVS,REGEN, ReNeW, EOXIS, INOX, CVK Solar, JVVNL , AVVNL and

others on the above issue are briefly as under:

(1) It is to mention that, an investor/ generator needs to commit fund

deployment and even incur significant capex before reaching a

stage wherein PPA could be signed by the utilities. Thus, this clause

of restricting signing PPA would act as a major risk to developer

wherein there could be a situation where after putting in the initial

investment the developer gets to know that PPA cannot be signed

as RPO has been fulfilled. Therefore, the restriction may be

removed from the order at least for the FY13 and the situation may

be reviewed at the time of finalizing tariff for FY14.

(2) RERC in its Renewable Energy Obligation Regulations, 2007 has

mentioned that RPO is minimum. Thus, there should not be any

requirement of taking prior approval of the Commission.

(3) RPO was reduced in 2007 Regulations in view of actual energy

purchase of RE sources being far below than specified target. The

wind RPO target would be achieved based on the wind

capacities already commissioned or in the pipe line. Prescribing

the requirement of approval of the Commission for procurement

beyond RPO would, thus, seriously jeopardise the development of

new wind projects in the State.


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(4) Even the RERC (Renewable Energy Certificate and Renewable

Purchase Obligation Compliance Framework) Regulations, 2010,

acknowledge that excess power (RE based) over RPO can be

purchased by utilities.

Clause 7(1) of RERC (Renewable Energy Certificate and

Renewable Purchase Obligation Compliance Framework)

Regulations, 2010 mention that:

“..Credit for excess renewable power purchase/REC would be

adjusted in the ensuing year....”

Similarly, the National Action Plan on Climate Change (NAPCC)

mentions about supporting RE based power in the national power

system through specifying Dynamic Minimum Renewables

Purchase Standard (DMRPS).

(5) This will create uncertainty in procurement of power as the

achievement of RPO is only available on annual basis.

(6) There will be practical difficulties in implementing this. Wind power

generation is nature dependent and wind generation per MW of

capacity may vary annually. Next year generation cannot be

predicted with certainty. Prediction based on the next year may

result in shortfall in meeting RPO and based on average may lead

to overshooting of RPO.

(7) From wind plants installed during this financial year, energy

contribution will be very low as the high wind season i.e. April to

September is over and therefore, the capacity added during this

year will be useful for meeting RPO requirement for next FY. The

Commission should assess the energy purchase from wind

resources by various Discoms as per RPO for the FY 2011-12 and

thereafter the quantum of capacity to be added for the FY 2012-

13 be determined based on the RPO requirement for the year FY

13-14.

(8) While entering PPA with wind generator for RPO, Discoms may

consider normative generation by considering CUF 20% or 21% asthe case may be. It should also be clarified that distribution


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licensee shall not be held responsible for non compliance of

meeting RPO obligation, in case actual generation is lower or

higher than normative. Alternatively, the RPO of the Wind power

should be specified in terms of MW contracted and not the kWh.

(9) The calculation for capacity to be contracted for RPO fulfilment

may be specified, in absence of which, there could be a

possibility of usage of different calculation methodologies i.e. RPO

capacity based on energy consumption as per Multi Year Tariff

(MYT) Order or projected annual energy consumption based on

actuals by year end.

(10) Representative of CVK Solar Enterprises stated in the hearing that

energy available from wind plants getting commissioned during

the course of a year is around 30% of the annual CUF, as most of

the plants get commissioned in the later part of financial year and

monthly generation from April to July is much higher than average

monthly generation of later part of the financial year. It was

further argued that approval of capacity beyond RPO need not

be insisted upon.


(1)

It may be observed that under S. 86(1)(b), electricity purchases

are required to be regulated by the Commission. This relates to

regulating both quantum as well as price of electricity purchases.

As far as purchases of renewable energy upto RPO limit are

concerned, Commission’s approval is implied as in such cases the

tariff as well as the quantum of power purchase are as determined

or specified by the Commission.

(2) However, once purchases in excess of RPO are to be made even

at the tariff determined by the Commission, the capacity to be

contracted over and above RPO level would require Commission’s

approval. As regards suggestion of a stakeholder that RPO be

specified in capacity terms on account of the uncertainty in

working out energy availability from wind plants and total annual

energy requirement, it may be mentioned that S. 86(1)(e) of the

Electricity Act envisages RPO in relation to consumption of

electricity in the area of distribution licensee, and, therefore, has to

be in energy terms.


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(3) However, Commission realises that exact assessment of capacity

in relation to RPO target, which is in energy terms, may not be

possible in very precise terms on account of the fact that wind

generation from plants may vary from year to year depending

upon wind intensity and other factors. Similarly, the energyconsumption in particular year may vary from the assessed

requirement. On account of the said uncertainty the capacity

required for meeting RPO in the particular year cannot be

correctly assessed during the course of the year in which PPA

would need to be finalised. However, a broad assessment for a

capacity to be contracted can be made based on past trend of

energy availability from wind power plants.

(4)

The past trend of energy availability could be worked out based

on the actual availability of energy from plants in past 3 years as

most of the capacity addition in the State has been during this

period. The total energy availability in a financial year from the

accumulated capacity of plants injecting power to grid as on 1 st

April of the Financial Year could be considered for working out the

average CUF for that Financial Year. The annual average CUF thus

worked out of the past 3 years i.e. FY 9-10, FY 10-11 and FY 11-12

could then give average CUF of past three years by taking simple

average of CUF of these three years. This average CUF then could

be used for assessing the energy availability from the plants which

were supplying power to Discoms as on 1st April, 2012. Considering

uncertainty in the availability of energy from wind plants due to

year to year variation in energy output on account of changes in

wind intensity and other factors, the Discoms may take CUF lower

by 7% than the average CUF of past 3 years. This is so because

even the CUF on year to year basis may vary significantly.

(5) As regards availability of energy from plants to be commissioned in

the current year, it can be assumed that energy availability would

be on the average for six month. Further since energy availability

in the second half of the financial year is much lower than first half

i.e. April to September, the energy availability in first half of the

year and second half of the year could be assumed to be in the

ratio of 70:30 i.e. 70% in first half year and 30% in the second half

year.


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(6) As regards total energy requirement of Discoms, the energy as

approved in the ARR and the tariff order could be taken into

consideration and margin of 5% may be added on this to account

for variation, if any, in energy requirement from what has been

approved.

(7) This is to further clarify that by taking recourse to above

methodology, in case RPO target gets exceeded, that could be

adjusted in RPO of ensuing year and shortfall, if any, could be met

by additional purchases in coming years.

(8) However, this is not to say that wind energy beyond RPO target

cannot or need not be purchased even if purchase beyond RPO

level is justified. However, if capacity in excess of assessment

based on methodology discussed above is to be purchased, the

approval of Commission along with justification be obtained.

Metering and CUF


18.

Main comments given by RVVS in respect of metering and CUF are as

under:

(1) The Commission in their order dated 16.7.2009, in the matter of

determination of tariff for Wind power plants, had clarified at para

29 that the tariff is determined on the ex-bus basis at Generator

premises which is the interface metering point as defined in the

CEA Metering Regulations. It was further clarified in the same para,

that interface metering point could be at the licensee premises

subject to mutual agreement, and, in that case 1% loss for 33 kV

systems and 3% loss (sic.) for 132 kV systems shall be applicable.

The provision of mutual agreement for deciding the location is not

in confirmation with Central Electricity Authority Regulation which

have been made by the CEA in exercise of the powers conferred

by sub section-1 of section-55 and clause (e) of section-73 read

with sub section(2) of section-177 of Electricity Act. Therefore, the

Commission may take a view and direct, that metering shall be

done strictly as per CEA Metering Regulations which are binding

as per Electricity Act.


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(2) Provisions for proper checking, maintaining & testing of the

interface meters as per CEA Regulations should be necessarily

complied. This will facilitate avoidance of dispute in bills. It is,

therefore, suggested that Commission may reiterate that thepayment of bills raised to the Distribution licensee should be

released only after receipt of these meter testing reports

periodically.

(3) The Wind Power plants in Rajasthan are operating at around 10 to

12% CUF as against 20-21% CUF which is minimum in the entire

country. This CUF has been considered by the Commission for the

purpose of estimating the generated units. The reasons for

significantly low generation from Wind power plants need to be

investigated. The possible reasons could be either installation of

poor/ de-rated plants by the Developers in the beginning itself, or

a very poor site selection where Wind velocity is too low to qualify

for site approval.

(4) To oversee the issues relating to lower generation and metering, a

committee be constituted, whose report in respect of site

clearance & commissioning and compliance of CEA Metering

Regulations, may be made essential prerequisite before signing of

the PPA by a Distribution licensee.


(1) As regards the metering issue raised by the stakeholder, it would

be pertinent to have a look at the evacuation needs of wind

energy projects. Wind turbines with capacities ranging from 225

kW to 2.1 MW are distributed in a geographical area. A low

capacity wind turbine usually generates energy at a low threephase voltage output rated at 440-690V. A pad mounted

transformer at the turbine steps up the voltage to a medium

voltage, usually 33 kV. Several such turbines are connected to

form cluster/group, which in turn are connected to the large

substation termed as ‘a pooling station’ where the substation

transformer steps up the voltage to the desired transmission level

(e.g. 132 kV – 220 kV). This pooling station is further connected to

nearest Utility Substation.


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(2) In view of the requirement of ‘pooling station’ to facilitate

evacuation of wind energy, particularly for a group of low

capacity turbine; special provision has been incorporated in

Regulations for metering as given in regulation 83 of Tariff

Regulations 2009. Even CERC and some other RegulatoryCommissions have made special provisions in respect of wind

energy. It may be mentioned that CERC’s RE Regulations define

interconnection point in relation to wind energy projects as line

isolator on outgoing feeder on HV side of the pooling sub-station.

MERC RE Regulations also define the interconnection point in the

similar way. GERC’s recent Order defines interconnection at the

nearest GETCO substation and stipulates metering point as 66 kV

pooling substation located at the wind farm site.

(3) However, since the issue raised by the stakeholder relates to the

provisions specified in Regulations, the same would be examined

separately for taking an appropriate view.

(4) As regards the suggestion relating to checking, maintaining &

testing of interface meters, the STU or Discoms, as the case may

be, would need to see that applicable regulations in this regard

are complied with.

(5)

As regards low CUF, it may be mentioned that it may vary based

on quality of plants and machinery, its efficiency and also on

location and wind regime. The Commission has adopted capital

cost of Rs. 530 lac/MW considering CUF of 20% or 21%, as the case

may be, as the norm for tariff determination. Low efficient, de-

rated plants may have lower cost and lower CUF.

(6) However, Commission agrees with stakeholder that there is need

to encourage efficient plants for optimal utilization of wind

potential in the State. The Nodal Agency (RREC) should take

suitable steps to discourage low efficiency/de-rated plants while

giving clearance to a project.

20. Other Suggestions:

(1) RVVS suggested that it may be advisable to prescribe a standard

Format which should be annually furnished by the Developers to

the Distribution licensee ensuring the disclosure of any policy/

capital finance assistance or higher depreciation benefit etc. The


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Page 17

submission of Format should be made essential pre-requisite for

payment of bills of the Developers by the Distribution licensees.

(2) Shri P.N. Mandola during hearing said that Commission should not

fix any tariff for supply of power by wind power plants todistribution licensee and Companies should be asked to reveal

their cost structure. It is further suggested that long term

agreements may not be executed and tariff should be

determined on yearly basis for a plant.

(3) M/s Torrent Power suggested that in case a project developer,

who intends to opt for REC Mechanism, approaches the Discoms

for entering into a PPA for sale of electricity component at an

Average Power Purchase Cost (APPC) determined by the

Commission under REC mechanism, then in such a case, the

Discoms should be obliged to procure the power from such

developer at APPC.

(4) Samata Power observed that reason of increasing tariff period of

wind power plants from 20 years to 25 years need to be

elaborated.

21.

Commission’s Analysis and Decision: (1) As regards the suggestion of prescribing standard formats for

disclosure of information annually, Distribution licensees need to

obtain annual certificate, as mentioned later in this order.

(2) On the comment that annual tariff be determined based on cost

of projects, Commission would like to mention that since project

specific tariff is not being determined and instead a generic tariff

valid for 25 years as per applicable Regulations is being

determined through this order, the said suggestion cannot be

agreed to.

(3) As regards suggestion to make it obligatory for Discoms to

purchase electricity component at APPC under REC mechanism,

the Commission would like to clarify that as per existing

Regulations, such purchases are not obligatory and this matter is

outside the scope of this order.

(4) In respect of the point raised by the stakeholder for increasing

tariff period of wind power plants from 20 to 25 years, it may be

mentioned that the same is being done in pursuance of recentamendment in Regulations.


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The levelised generic tariff for wind power projects for FY 2012-13.

22. The levelised generic tariff for wind power plants, getting commissioned

during FY 2012-13, has been worked out based on operational and

performance parameters as specified under Regulation 83(6) of RERC

Tariff Regulations, 2009 and the Financial Principles as stipulated underPart III of RERC Tariff Regulations, 2009, read with Fourth Amendment

finalised vide Notification dated 18.05.2012. The parameters adopted

in this order have been discussed in the following sub-paras.

Debt-Equity Ratio

(1) The Debt-Equity ratio of 70:30 as envisaged at regulation 17 of RERC

Tariff Regulations 2009 has been taken for working out the debt and

equity components of normative capital cost for determination of

levelised generic tariff.

Capital Cost

(2) Capital cost of Rs 530 Lacs/MW, including connectivity charges (of Rs.

2 Lacs/MW) and cost of evacuation network (Rs 15 Lacs/MW) as per

sub-regulation 6(b)(i) of RERC Tariff Regulations 2009, has been taken

for FY 2012-13.

Capacity Utilisation Factor (CUF) & de-ration in CUF

(3)

Regulation 83(6)(b)(ii) of RERC Tariff Regulations 2009 provides for CUF

of 21% for Jaisalmer, Jodhpur and Barmer districts and 20% for other

districts. Further, regulation 83(6)(b)(iii) also stipulates a de-ration of

1.25% from 6th ,10th, 14th & 18th year in the above CUFs. Accordingly,

CUFs along with de-ration have been taken.

Operation & Maintenance Expenses

(4) O&M expenses have been taken as 1.25% of capital cost for power

plant and 3% of cost of transmission line in accordance with

Regulation 83 (6)(b)(iv) of RERC Tariff Regulations,2009.

Depreciation

(5) In accordance with regulation 83(6)(b)(vi) of RERC Tariff Regulations

2009, the rate of the depreciation has been considered as 5.28% of

the total project cost for the first 12 years and remaining depreciable

value has been spread over the balance useful life of the power

project and transmission system.


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Interest rate on long term and Interest on working capital requirement

(6) In line with Regulations 83(6)(b)(viii) of RERC Tariff Regulations 2009,

the interest rate on long term loans has been taken as 300 basis points

higher than the average SBI base rate prevalent during first six months

of FY 11-12 . The average SBI base rate for first six months during FY2011-12 works out to be 9.30%. Accordingly, the interest rate of 12.30%

(= 9.30% + 3.00%) has been taken for long term loans.

(7) The repayment of loan has been taken equal to the depreciation

allowed for that year as stipulated at regulation 22(3) of RERC Tariff

Regulations, 2009.

(8) For the purpose of working capital requirement, the composition of

working capital has been taken as per regulation 83(6)(b)(vii).

(9) The interest on working capital for wind power plants has been taken

as 250 basis points higher than the average SBI base rate prevalent

during first six months of FY 11-12, which works out to be 11.80%

(=9.30%+2.50%). Accordingly, interest rate of 11.80% has been taken

for working capital requirements.

Return on Equity

(10) Regulation 21 of RERC Tariff Regulations 2009 provides for 16% Return

on Equity base of 30% determined in accordance with regulation 17.

As per regulation 21, return on equity has been computed by grossing

up the base rate of 16% with tax rate equivalent to Minimum

alternate Tax (MAT) for first 10 years from COD and normal tax rate for

remaining years of the project life. The MAT rate of 20.01% (= 18.50%

MAT rate+5% surcharge + 3% education cess) has been considered

for first year and a MAT rate of 19.06% (= 18.5% MAT rate + 3%

education cess) has been considered for remaining 9 years of the first

10 years. For remaining 15 years of project life (also equal to useful

life), the normal tax rate of 30.90% (= 30% tax rate + 3% education

cess) has been applied for grossing up of Return on Equity.

Subsidy or incentive by the Central Government

23. As discussed earlier, the Generation Based Incentive/Tariff Subsidy, if

allowed by the Central Govt. would be governed by the terms and

conditions of such scheme.


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Page 20

24. Earlier, the benefit of accelerated depreciation of 80% was being

extended to wind power plants under Income Tax Act. However,

recently, vide GoI Notification No. 15/2012 (F. No. 149/21/2010-SO (TPL)]

S.O.694 (E), dated 30.03.2012, this depreciation has been restricted to

15% for wind power plants installed after 31.03.2012. However, Inaddition to this, an additional depreciation of 20% has been allowed to

the wind power projects during the first year in a recent amendment in

the Finance Act, 2012. Both these rates have been considered in

computing income tax benefit as given at Annexures-1and 2. In this

computation, the methodology of taking capitalisation during the

second half of the year, as has been followed by CERC for working out

the benefit of accelerated depreciation, has been applied. The

energy available in the second half of the year has been taken as 30%

of annual generation. The levelised generic tariff has been worked out

considering both the situations viz. if higher depreciation benefit is

availed and if not availed.

Tariff period and Levelised Tariff

25. The levelised tariff has been determined for the useful life of the wind

power projects i.e. for 25 years as per note (ii) of regulation 83(6)(b)(viii)

of RERC Tariff Regulations 2009. Earlier levelised tariff of 20 years was

being determined and PPAs were to be entered into for the same

period. However, since levelised tariff of 25 years has now been

determined, PPA should also be for 25 years.

26. In light of the above position, the levelised generic tariff applicable for

wind power plant for FY 2012-13 has been determined as under:

S.

No.Particulars

Tariff (Rs/kWh)

if higher

depreciationbenefit is not

availed

Tariff (Rs/kWh) if

higher

depreciationbenefit is

availed

1 2 3 4

1 Wind Power Plants located

in Jaisalmer, Jodhpur &

Barmer districts

5.18 4.89

2 Wind Power Plants located

in districts other than

Jaisalmer, Jodhpur &

Barmer districts.

5.44 5.13


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Page 21

27. Distribution licensees may procure wind energy at the applicable tariff.

However, if capacity in excess of RPO after assessment as discussed in

para 17 of this order, is to be contracted, approval of the Commission

alongwith justification be obtained.

28. A generator claiming the higher tariff worked out as above for projects

not availing higher depreciation benefit would have to furnish an

undertaking in advance to the buyer regarding higher depreciation

benefit not being availed and this would have to be followed for each

financial year. Similarly, annual undertaking would need to be

furnished if CDM benefit is not availed. However, if CDM benefit is

availed, it would have to be shared with distribution licensee as

envisaged in applicable Regulations.

29.

A project developer, to the extent of capacity contracted withdistribution licensee by signing PPA for supply of power as per

applicable tariff determined under this order, would not be availing

benefit of REC in respect of such contracted capacity and such an

undertaking would also be incorporated in the PPA.

30. The detailed calculations for determination of tariff are annexed as

under:

(1) Tariff determination of Wind Energy Power Plants - Annexure-I

located in Jaisalmer, Jodhpur & Barmer districts.(2) Tariff determination of Wind Energy Power Plants - Annexure-II

located in districts other than Jaisalmer,

Jodhpur & Barmer districts.

(S. Dhawan)

Member

(S.K. Mittal)

Member

(D.C. Samant)

Chairman


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Annexure-III

List of Stakeholders who submitted their comments

1 M/s CLP Wind Farms (India) Private Limited (‘CLP India’), Mumbai

2 M/s Indian Wind Power Association(‘IWPA’), Jaipur

3 M/s ReGen Powertech Pvt. Ltd.(‘REGEN’), Chennai4 Shri Bal Mukund Sandhya, Director, Samta Power, Jaipur

5 M/s Acciona Energy India Pvt. Ltd.(‘Acciona Energy’), Bangalore

6 M/s Enercon (India) Limited(‘EIL’), Jaipur

7 Shri P. N. Mandola, Committee for Protection of Public Properties,

Jaipur

8 M/s Indian Wind Energy Association(‘InWEA’), New Delhi

9 M/s Eoxis Renewable Energy India Private Limited(‘EOXIS’),

Mumbai

10 M/s South Asia Energy Policy, Bangalore

11 M/s Power & Energy Consultants(‘PEC’), Delhi12 M/s INOX Renewables Limited, Noida

13 M/s ReNew Power Ventures Pvt. Ltd.(‘ReNeW’), Gurgaon

14 M/s Green Infra Limited(‘Green Infra’), New Delhi

15 M/s Tanot Wind Power Ventures private Limited(‘TANOT POWER’),

Hyderabad

16 M/s Greenergy Renewables Pvt. Ltd., Mumbai

17 M/s Torrent Power Limited(‘Torrent Power’), Ahmedabad

18 Superintending Engineer (‘RDPPC’), Ajmer Discom

19 M/s Rajasthan Vidhyut Vikas Sansthan(‘RVVS’), Jaipur

20 M/s Indian Wind Turbine Manufacturers Association(‘IWTMA’),Chennai

21 M/s CVK Solar Enterprises(‘CVK Solar’), Jaipur

22 Jaipur Vidyut Vitran Nigam Limited, Jaipur


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Annexure-IV

List of Stakeholders present during the hearing

1. Sh. B. K. Makhija, Director(T), RREC

2.

Sh. B. M. Bhamu, SE (RDPPC), AVVNL3. Sh. S. C. Sharma, SE(C), JVVNL

4. Sh.Ajeet Saxena, XEn(RA&R),JVVNL

5. Sh. L. N. Soni, XEN(RA), Jd VVNL

6. Sh. Anand K. Ganeshan, Advocate, IWPA & EIL

7. Sh. Vikalp Vats, Assistant Manager, InWEA

8. Sh. Santosh Singh, Senior Manager, Greenergy Renewables Pvt. Ltd.

9. Sh. Brajesh Kumar, Manager, CLP India

10. Sh. B. M. Sanadhya, Director, Samta Power

11. Sh. Sunil Kumar, Coordinator, IWPA-RSC

12.

Sh. R. Vyas, Corporate Advisor, EIL13. Sh. Vinod, State Head, Suzlon

14. Ms. Shruti Bhatia, GM-Pol. & Govt. PoliciRelations, Vestas India

15. Sh. Vikas Kumar, Head-Regulatory Affairs, ReNew Power

16. Sh. Prabhat K. Mishra, GM-Power Sales & Regulatory, Green Infra Ltd.

17. Sh. Vikram Paliwal, GM-PD, ReGen Powertech

18. Sh. Amit Jangid, Sr. Executive, Suzlon

19. Sh. Inder Bhambra, Executive Director, EOXIS

20. Sh. R. G. Gupta, CEO, RVVS

21. Sh. M. M. Vijayvergia, CMD, CVK Solar Enterprises

22.

Sh.P.N.Mandola, Secretary, Committee for Protection of PublicProperties

23. Sh. Sandeep Sharma

serc regulations

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