Order
1. Leave granted. Heard the learned counsel for the parties.
2. The Madhya Pradesh Electricity Regulatory Commission (Mperc) by its order dated 30-11-2016 SMP No. 8 of 2013 determined tariff for procurement of power from biomass based power plants. The operative part of the order SMP No. 8 of 2013 is as follows:
“14. In compliance with the directions of the Hon'ble Aptel passed in its judgment dated 4-5-2016 2016 SCC OnLine APTEL 74, the Gross Calorific Value (GCV) at 3100 kCal/kg and Station Heat Rate (SHR) at 4200 kCal/kWh are considered. Accordingly, the Commission sets the yearwise tariff for generation of electricity from new biomass energy projects commissioned on or after 2-3-2012 as under:
(a) Commissioned on or after 2-3-2012 and during FY 2012-13
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
6.20
5.94
6.11
6.28
6.47
6.68
6.89
7.12
7.37
7.62
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
7.57
7.92
8.29
8.68
9.09
9.53
9.98
10.45
10.95
11.48
(b) Commissioned during FY 2013-14 and thereafter:
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
6.58
6.31
6.49
6.68
6.89
7.10
7.34
7.58
7.85
8.13
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
8.08
8.46
8.85
9.27
9.71
10.17
10.65
11.16
11.69
12.25
15. In view of the aforesaid judgment dated 4-5-2016 2016 SCC OnLine APTEL 74 passed by the Hon'ble Aptel and the applicable terms and conditions of the tariff order dated 2-3-2012, the tariff mentioned above in Para 14 of this order shall be subject to the following terms and conditions:
(a) This tariff shall be applicable till 31-3-2017 or the new tariff order is issued, whichever is earlier.
(b) The projects for more than 2 MW are subjected to the “scheduling” and “merit order dispatch principles” in terms of Para 8:10 of the tariff order dated 2-3-2012 since date of commissioning.
(c) This tariff order is applicable to the projects using rice husk, wheat husk, mulbury and coal (limited to 15% of the total fuel on annual basis) only as a fuel based on which GCV has been decided by the Hon'ble Aptel in its judgment dated 4-5-2016 2016 SCC OnLine APTEL 74.
(d) This tariff shall be applicable for the projects for which power purchase agreement has already been executed at the time of commissioning of the project.
(e) M.P Power Management Co. Ltd., Jabalpur shall submit, the draft of the power purchase agreement to be executed, if any, with the developer of biomass based power projects to be commissioned after the date of this order, for approval of the Commission.
(f) The developers shall have to submit monthly information, as required under Para 8.25 of the tariff order dated 2-3-2012, to M.P Power Management Co. Ltd., Jabalpur by 10th day of each month following the month of information failing which action as per the provisions of Para 8.26 of the tariff order dated 2-3-2012 must be ensured by M.P Power Management Co. Ltd.”
3. The above order was challenged by the respondents before the Appellate Tribunal for Electricity (Aptel). Aptel dealt with the question whether the concept of “Must Run” (MR) or “Merit Order Dispatch” (MOD) will apply. The MR would require payment for compulsory purchase of electricity irrespective of the requirement while MOD will require supply of electricity as per requirement so that the initial supply will be at lowest price and thereafter at higher price and so on.
4. The power purchase agreement (PPA) with respondent Orient dated 18-1-2016 provides as follows:
“Clause (c).—Mperc issued tariff order dated 2-3-2012 for sale of electricity to Discoms by biomass based power plants within the State of Madhya Pradesh, which was subsequently revised on 3-5-2013, in compliance with the judgment passed by the Hon'ble Appellate Tribunal for Electricity in Harvest Energy (P) Ltd. v. M.P ERC 2013 SCC OnLine APTEL 31, vide order dated 18-2-2013.
***
5.1 Biomass based power generation plants for more than 2 MW shall be subject to scheduling ‘merit order dispatch principles’.”
5. The Mperc tariff order dated 2-3-2012 provided as follows:
“8.10 Biomass based power generation plants for more than 2 MW shall be subject to the scheduling and merit order dispatch principles.”
6. Aptel held that notwithstanding Clause 8.10 in the tariff order, MR principle will apply in view of Regulation 9 of the Mperc Regulations, 2010. Aptel observed 2017 SCC OnLine APTEL 23: (SCC OnLine Aptel paras 93-96 & 123)
“93. Thus, we do not agree with the State Commission to keep the biomass power plants in scheduling as mentioned in Clause 8.10 of the tariff order dated 2-3-2012 but at the same time, Clause 9 of the Regulation supports the biomass plants under non-scheduling category and as per Clause 5.6 of the tariff order dated 2-3-2012, the biomass plants should be given “Must Run Status”. Further, this Tribunal in various judgments upheld that the State Commissions should follow their own condition of the Regulations while determining the tariff order.
94. It is also to state that in the tariff order dated 2-3-2012, a two-part tariff was introduced and thereby the biomass power plants can survive with fixed charges to meet their capital cost, O&M expenses, etc. even if the plants are in scheduling so that the generators can pay back their commitments towards loan repayment to the nationalised banks and to financial institutions. In the subsequent tariff orders, the two part tariff was replaced by single part tariff. In the single part tariff, if the biomass generators are kept under scheduling and dispatch principles it is difficult for the generators to meet their expenditures like payment of loan, O&M expenses, etc. and thereby the biomass plants are forced to close down and thereby the principle of promotion of renewable energy sources will be defeated.
95. In view of the above, we feel that the biomass generating plants are to be kept under must run status so that the obligated entities can fulfil their RPO obligation and thereby the object of National Tariff Policy and promotion of co-generation and renewable energy generation can be fulfilled. Further, the biomass generation can survive in the State of M.P It is pertinent to mention that the appellant plants are supplying power from the date of commissioning without any scheduling by the State Load Dispatch Centres. In the light of the above, the very basis for providing for scheduling and merit order principles and not giving must run status contained in the tariff order dated 2-3-2012 ceased to apply. Further, in general we feel that merit order principle would apply when there is a two part tariff but in the case of single part tariff, there is no question of applying merit order dispatch principle.
96. Accordingly, we are not agreeing with the decision of the State Commission that the project for more than 2 MW are subject to scheduling and merit order principles in terms of Para 8.10 of the tariff order dated 2-3-2012 since date of commissioning.
***
123. We set aside Conditions (a), (b) and (d) specified in Para 15 of the impugned tariff order dated 30-11-2016 SMP No. 8 of 2013.”
7. We have heard the learned counsel for the parties on the correctness of the issue whether the principle of MR will apply or of MOD in relation to Respondents 2, 3 and 4 having regard to the agreement with the said parties.
8. We find that Aptel was in error in holding that MR principle will apply based on Regulation 9 of the Mperc Regulations, 2010. The fact remains that the said Regulation stands substituted by the Mperc Tariff Order, 2012 and thereafter in PPA it was agreed that Clause 8.10 of the tariff order as amended on 3-5-2013 will apply. The said tariff order has now become final between the parties to the agreement which provides for single part tariff. Thus, the findings of two part tariff cannot be sustained. We are unable to uphold the findings that Clause 8.10 of the tariff order dated 2-3-2012 will not apply in these circumstances.
9. Accordingly, we set aside the impugned orders 2017 SCC OnLine APTEL 23 2017 SCC OnLine APTEL 52 and restore the order of the Mperc dated 30-11-2016 SMP No. 8 of 2013 insofar as Condition (b) of Para 15 quoted above is concerned. The remaining conditions will remain unaffected.
10. The appeals are, accordingly, disposed of. Pending execution application(s) may now be decided in accordance with law.
Annexure I
madhya pradesh electricity regulatory commission, bhopal
Sub.: In the matter of compliance with judgment passed by the Hon'ble Appellate Tribunal for Electricity in Appeal No. 93 of 2012
Clubbed with SMP-08/2013
Order
(Date of hearing: 9-4-2013)
(Date of order: 3-5-2013)
1. The Commission had issued a tariff order for procurement of power from biomass based power plants on 2-3-2012. M/s Harvest Energy Pvt. Ltd. filed an appeal before the Hon'ble Aptel against the aforesaid tariff order. By order dated 18-2-2013 2013 SCC OnLine APTEL 31, the Hon'ble Aptel set aside the impugned tariff order and remanded back the matter to the Commission to decide the norms on capital cost, Gross Calorific Value, Station Heat Rate and price of biomass fuel based on the directions given in its judgment. Regarding ROE, the Hon'ble Aptel directed the Commission to allow not less than that allowed under its tariff regulations applicable to conventional generating stations. The Hon'ble Aptel also directed the Commission to redetermine the tariff and pass the consequential order.
2. Pursuant to the aforesaid directions of the Hon'ble Aptel, a public notice was issued on 1-3-2013 to obtain suggestions/comments on the above norms by 23-3-2013 and a public hearing was held on 9-4-2013. The following stakeholders filed their written submissions:
(i) M/s Pragya Energy Pvt. Ltd., Jabalpur
(ii) M.P Biomass Energy Development Association, Bhopal
(iii) M/s Orient Green Power Co. Ltd., New Delhi
(iv) Dy. Commissioner, New and Renewable Energy, Bhopal
3. During the public hearing on 9-4-2013, the following stakeholders participated and submitted their comments:
(i) M.P Biomass Energy Developers Association, Bhopal
(ii) M/s Orient Green Power Co. Ltd., New Delhi
(iii) M/s Arya Energy Ltd.
(iv) M/s ASN Industries
(v) New and Renewable Energy Department
4. The following submissions were made by various stakeholders on the normative parameters to be considered as per the order of the Hon'ble Aptel:
(i) Capital cost
(a) M/s Pragya Energy Pvt. Ltd. submitted that the Commission had taken the capital cost at Rs 4.25 crores per MW. The cost of equipment, etc. has increased substantially over the past 5 years and even applying the wholesale price index since 7-8-2007, the capital cost would have increased to beyond Rs 5.5 crores per MW. It also submitted that the actual capital cost of the power plant commissioned by them comes out to Rs 5.5 crores per MW and therefore the norm for capital cost needs to be revised.
(b) M.P Biomass Energy Development Association, Bhopal filed copies of certificates issued by chartered accountants in respect of capital cost of some plants. According to these, the capital cost ranges from Rs 5.54 crores per MW to Rs 7.30 crores per MW for water cooled condenser based generating stations. The average capital cost worked out to Rs 6.39 crores per MW including cost of evacuation. The Association submitted that the capital cost for air cooled condenser based generating stations may be enhanced by Rs 0.5 crores per MW. Also, an appropriate linkage of the base year capital cost to an escalation factor based on the indexation formula as approved by CERC may be allowed.
(c) M/s Orient Green Power Co. Ltd., New Delhi filed a copy of report on inputs to the Committee to undertake study on the performance/viability of biomass based plants operating in the country including the prevailing biomass prices along with its comments. In its written submissions, it mentioned that newer plants are facing continuous escalation on project cost and suggested that the capital cost be fixed at Rs 6-6.5 crores/MW even for the financial year 2012-13 with appropriate indexation for plants being commissioned in the financial year 2013-14.
(ii) Gross Calorific Value (GCV)
(a) M/s Pragya Energy Pvt. Ltd. submitted that in the biomass gasification technology of the petitioner's power plant, fossil fuel like coal cannot be used. So, while calculating GCV, the calorific value of 15% of fossil fuel should not be considered. GCV may be taken @ Rs 2500 kCal/kg.
(b) M.P Biomass Energy Development Association proposed average GCV of fuel at 2655 kCal/kg considering 2500 kCal/kg as the average GCV for 85% biomass used and average GCV of coal of 3600 kCal/kg for the 15% coal usage allowed.
(c) M/s Orient Green Power Company Limited, New Delhi submitted that in view of the various factors affecting the GCV of fuel like moisture, sand and ash content of the biomass used, the GCV may be taken at 2800 kCal/kg.
(iii) Station Heat Rate (SHR)
(a) M.P Biomass Energy Development Association submitted that based on CERC norms and the report of Expert Committee of CEA of September 2005, Station Heat Rate of 4200 kCal/kWh may be allowed for biomass power projects.
(b) M/s Orient Green Power Co. Ltd., New Delhi also proposed Station Heat Rate as 4200 kCal/kWh considering the specific fuel consumption with calorific value of 2800 kCal/kg on account of multiple fuels with different GCV.
(iv) Price of fuel
(a) M/s Pragya Energy Pvt. Ltd. submitted that considering the unregulated and unorganised biomass fuel market and the cost involved in processing, handling, transportation, wastage and storage of biomass, average cost of the biomass fuel works out to Rs 4500 per MT.
(b) M.P Biomass Energy Development Association submitted that a minimum price of Rs 3200 per tonne should be taken. This price would be escalated every year by a fuel price indexation or escalation factor as specified by CERC.
(c) M/s Oriental Green Power Company Limited, New Delhi proposed the fuel rate at Rs 3200 per MT.
(d) The Department of New and Renewable Energy, M.P submitted that they have carried out an exercise to work out the weighted average cost of biomass produce in respective districts. The average works out to Rs 3009.40 per MT.
(v) Return on equity (ROE)
(a) M/s Pragya Energy Pvt. Ltd. submitted that the return on equity for the biomass projects should be allowed at 20% pre-tax.
(b) M.P Biomass Energy Development Association submitted that ROE should not be less than that allowed to conventional energy sources projects. In its written submission, it proposed ROE as approved by CERC.
(c) M/s Oriental Green Power Company Limited, New Delhi proposed ROE at 20% in view of the fact that promotional tariff needs to be fixed for RE generators.
5. During the public hearing on 9-4-2013, the stakeholders also submitted comments/suggestions on other issues like plant load factor, scheduling, start-up power, auxiliary consumption, etc.
6. After considering the comments/suggestions of various stakeholders and their written submissions, the Commission's views on various issues are as follows:
(i) Capital cost
In its written submissions, M.P Biomass Energy Development Association submitted copies of certificates issued by chartered accountants for capital costs of some of the biomass power projects which range from Rs 5.54 crores/MW to Rs 7.30 crores/MW. With such a variation, it would be difficult to determine the generic capital cost applicable to all such type of projects. In its Regulation 34, CERC has specified the normative capital cost for the biomass power projects based on Rankine cycle technology application using water cooled condenser as Rs 445 lakhs/MW for FY 2012-13, which shall be linked to the indexation mechanism specified under Regulation 35 of the RE Tariff Regulations. In accordance with the above referred Regulations, the normative capital cost of biomass power projects based on Rankine cycle technology application using water cooled condenser shall be Rs 463.336 lakhs/MW for FY 2013-14. In the absence of appropriate data of capital cost applicable for all projects, the Commission relies upon the CERC norms specified towards capital cost for the financial years 2012-13 and 2013-14 using indexation as above. Accordingly, the capital cost @ Rs 445 lakhs/MW and @ Rs 463.336 lakhs/MW shall be applicable to projects commissioned during FY 2012-13 and FY 2013-14 respectively.
(ii) Gross Calorific Value (GCV)
In the written submissions, various stakeholders suggested the Gross Calorific Value in the range of 2500 kCal/kg to 2800 kCal/kg. The Gross Calorific Value for determination of tariff depends upon the mix of biomass fuel available in any particular State. In absence of data for the quantum of crops in Madhya Pradesh and due to variation in the quantum of different fuels available in various parts of the State, it would be difficult to consider average GCV for the fuel mix throughout the State for determination of tariff applicable for all projects. The Commission is of the view that there is no established ground to determine the weighted average Gross Calorific Value of the fuel for Madhya Pradesh. The Commission, therefore, considers it appropriate to take Gross Calorific Value at 3600 kCal/kg for the purpose of determination of tariff.
(iii) Station Heat Rate (SHR)
The Station Heat Rate depends on several factors such as plant capacity, plant design and configuration, technology (type of boiler and pressure level, etc.), plant operation and maintenance practices, quality of fuel and operational performance over varying load conditions. In its written submissions, M.P Biomass Energy Development Association proposed the Station Heat Rate @ 4200 kCal/kWh based on the report of CEA of September 2005. Other stakeholders have also proposed the same Station Heat Rate. The Commission observes that the study was undertaken in the year 2005 and the latest CERC Regulations came in the year 2012 wherein Station Heat Rate @ 4000 kCal/kWh was considered. It may, therefore, be presumed that due to technological developments SHR may be brought down from 4000 kCal/kWh. The Commission is also of the view that any biomass power plant may not run on single fuel and a mix of fuels shall be used. The biomass power projects were already allowed to use fossil fuel @15%. Thus, the Commission does not find reason to enhance the existing Station Heat Rate of 3800 kCal/kWh for the purpose of tariff determination.
(iv) Price of fuel
In the written submissions, various stakeholders have proposed the price of fuel to be between Rs 3009.40 per MT to Rs 4500 per MT. The Commission observes that various constraints are being faced by the biomass power project developers in procuring biomass. The procurement of biomass fuel is in a highly unorganised sector and the prices are influenced by various local factors and therefore vary in wide range. There is no established mechanism to estimate the reasonable price of biomass. The Commission is of the view that the proposals of the stakeholders for higher price of fuel are not supported by valid reasons and cannot be accepted. In its Regulations of 2012, CERC had considered the price of fuel for FY 2012-13 at Rs 2476 per MT with the provision of escalation @ 5% p.a for other States including Madhya Pradesh. For FY 2013-14, an indexation mechanism is incorporated in the aforesaid Regulations. Keeping in view the aforesaid CERC Regulations, 2012, the Commission considers it appropriate to take into account the price of fuel as under:
(a) Rs 2476 per MT for the projects commissioned during FY 2012-13 with 5% escalation per annum.
(b) Rs 2653 per MT for the projects commissioned during FY 2013-14 with 5% escalation per annum.
(v) Return on equity (ROE)
In the written submissions, various stakeholders suggested return on equity from 20% pre-tax to 20-24% pre-tax as per the CERC Regulations, 2012. By order dated 18-2-2013 2013 SCC OnLine APTEL 31, the Hon'ble Appellate Tribunal directed the Commission to redetermine ROE at not less than that allowed to conventional power plants. The generating company is being allowed ROE @ 15.5% which is grossed up with the tax rate. Considering that the generating company is paying minimum alternate tax @ 20.01%, the return on equity would be less than 20%. The Commission, therefore, decides that the return on equity may be considered @ 20% pre-tax for tariff determination.
7. Regarding other issues, the Commission decides that these may be taken up while determining tariff for the next control period since the Hon'ble Appellate Tribunal for Electricity had set aside the tariff order dated 2-3-2012 on limited issues and directed the Commission to redetermine the tariff as per the directions given in the judgment dated 18-2-2013 2013 SCC OnLine APTEL 31.
8. Based on the foregoing assessment, the Commission has decided to adopt the revised parameters for tariff determination in FY 2012-13 and FY 2013-14 as hereinafter stated. The terms and conditions stated in the Commission's tariff order dated 2-3-2012 shall continue to apply to the projects commissioned in these two financial years with the following amendments:
(i) In Para 5.1 of the tariff order dated 2-3-2012, the following shall be deleted:
“5.1 The tariff decided in this order are two part tariff viz. fixed tariff and variable tariff. The fixed tariff shall apply to all projects which are commissioned during the abovementioned control period and shall remain valid for the project life of 20 years. The variable tariff is determined for the period from the date of issue of this tariff order to 31-3-2013. The Commission shall declare the variable tariff for each year beyond 31-3-2013 in the month of March of its preceding financial year after considering the fuel cost afresh.”
(ii) In Para 6.26 of the tariff order dated 2-3-2012, the following shall be deleted:
“6.26 The Commission has also decided that the fuel cost for the subsequent period on year-to-year basis shall be determined in each year in the month of March preceding that financial year.
“Sl. No.
Parameters
Revised norms
FY 2012-13
FY 2013-14
1.
Capital cost including cost of power evacuation (Rs Lakhs/MW)
445
463.336
2.
Gross calorific value (kCal/kg)
3600
3.
Station heat rate (kCal/kWh)
3800
4.
Price of fuel (Rs/MT) with escalation @5% p.a
2476
2653
5.
Return on equity
20% pre-tax”
9. Considering the above revised parameters, the Commission sets the year-wise tariff for generation of electricity from new biomass energy projects as under:
(a) Commissioned on or after 2-3-2012 and during FY 2012-13
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
5.32
5.02
5.14
5.27
5.41
5.56
5.71
5.89
6.07
6.26
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
6.14
6.42
6.72
7.03
7.36
7.70
8.06
8.44
8.84
9.26
(b) Commissioned during FY 2013-14
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
5.64
5.32
5.45
5.59
5.74
5.90
6.08
6.26
6.46
6.67
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
6.55
6.85
7.16
7.50
7.84
8.21
8.60
9.00
9.43
9.88
10. Ordered accordingly.
Annexure II
madhya pradesh electricity regulatory commission, bhopal
SMP-08/2013
Sub.: In the matter of compliance to the judgment passed by the Hon'ble Appellate Tribunal for Electricity in Appeal No. 211 of 2015
Order
(Date of order: 30-11-2016)
1. The Commission had issued a tariff order for procurement of power from biomass based power plants on 2-3-2012 for the control period up to 31-3-2014. M/s Harvest Energy Private Ltd. filed an Appeal No. 93 of 2012 before the Hon'ble Appellate Tribunal for Electricity (Aptel) against the aforesaid tariff order dated 2-3-2012. By its order dated 18-2-2013 2013 SCC OnLine APTEL 31, the Hon'ble Aptel allowed the appeal and set aside the impugned tariff order and remanded back the matter to the Commission. The summary of the findings of the Hon'ble Aptel are as under: [Harvest Energy (P) Ltd. case 2013 SCC OnLine APTEL 31, SCC OnLine Aptel para 16]
“16. … (i) On capital cost, Gross Calorific Value, Station Heat Rate and price of biomass fuel, we find that the State Commission has not passed a reasoned order in deciding the normative values. We, therefore, remand the matter to the State Commission to decide these norms based on the directions given in this judgment. We want to make it clear that we are not giving any finding on values to be adopted for the above normative parameters.
(ii) Regarding return on equity, we find that the State Commission has allowed a higher ROE to the conventional power plants in its Tariff Regulations. Allowing a lower ROE to biomass based projects which are renewable source of energy is not in consonance with the provisions under Sections 61(h) and 86(1)(e) of the Act. We, therefore, direct the State Commission to allow ROE not less than that allowed under its Tariff Regulations as applicable to conventional generating stations.”
The Hon'ble Aptel also directed the Commission to redetermine the tariff and pass the consequential order.
2. Pursuant to the aforesaid directions of the Hon'ble Aptel, the Commission had reviewed the norms and issued an order on 3-5-2013. The M.P Biomass Energy Developers Association filed Appeal No. 144 of 2013 before the Hon'ble Aptel against the aforesaid order dated 3-5-2013. By its order dated 29-5-2014 2014 SCC OnLine APTEL 80, the Hon'ble Aptel partially allowed the appeal and with regard to the issues of GCV and SHR remanded back the matter to the Commission. The relevant paras 30, 31 and 37 of the judgment dated 29-5-2014 2014 SCC OnLine APTEL 80 are as follows: (M.P Biomass Energy Developers Assn. case 2014 SCC OnLine APTEL 80, SCC OnLine Aptel)
“30. We agree that the normative value of GCV has to be decided based on the types of biomass fuels used in the State. However, the State Commission has indicated that there is no established ground to determine the weighted average GCV. We find that neither the appellants have furnished proper data giving the proportion of different biomass fuels used by them nor the State Commission took assistance of the State agencies concerned to obtain the data on availability of different types of biomass fuels in the State. The State Commission could take assistance from the State Renewable Energy Agency, Agriculture Department to ascertain the availability of types of biomass fuels prominently in the State and assess the proportion of different biomass fuels. Data of GCV of different biomass fuels being available, it may be possible to determine the weighted average GCV of biomass fuel. Considering 15% use of coal and GCV of coal available in the State, the normative GCV may be determined. The appellants are also directed to furnish data regarding actual use of different types of biomass fuel with the supporting documents to the State Commission for consideration.
31. Accordingly, we direct the State Commission to redetermine the GCV of fuel.
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37. We find that the State Commission without any detailed analysis of the use of new technology in the biomass based generation has decided 5% reduction in heat rate over the norm specified by the Central Commission in its Regulations. The Regulations of the State Commission are also beginning from FY 2012-13 and cover the period of 2012-14. We find that the State Commission has reduced SHR by 5% arbitrarily without any analysis. We therefore have to again remand the matter to the State Commission. We also direct the appellants to furnish information regarding design heat rate, as certified by the manufacturer, factors affecting SHR due to practical consideration and any other data that is relevant to decide the SHR to the State Commission and the State Commission shall consider the same. The State Commission shall consider the design heat rate for the technology used, variation to be allowed due to practical considerations, data submitted by the appellants and any other relevant data. The State Commission is an expert body and we expect it determine the norms based on some scientific basis. Data can also be obtained from renewed manufacturers of equipment for biomass based generating plant. Accordingly, we again remand the matter to the State Commission with directions to redetermine SHR based on scientific analysis.”
(emphasis supplied)
3. Pursuant to the aforesaid directions contained in the order dated 29-5-2014 2014 SCC OnLine APTEL 80 passed by the Hon'ble Aptel, a public notice was issued to the appellants, respondents and the Department of New and Renewable Energy, Government of Madhya Pradesh (hereinafter referred as NRED) and the hearing was held on 3-7-2014. However, the appellants have not furnished any data for the consideration of the Commission. The Department of New and Renewable Energy of the Government of Madhya Pradesh was directed to furnish a report on the aforementioned issues. NRED vide its letter dated 10-7-2015 had submitted the test results of GCV of samples collected from six districts of Madhya Pradesh as under:
Sample
Gross Calorific Value (kCal/kg)
Rice husk
From 2780 to 2934
Wheat husk
From 3149 to 3368
Soyabean husk
From 3210 to 3349
However, the weighted average GCVs were not submitted. The Commission was of the view that in absence of the weighted average GCVs, it would be difficult to arrive at the reasonable GCV for the purpose of determination of tariff for the State. Under the above circumstances, it was decided that the GCV for the period under consideration may be continued at 3600 kCal/kg as fixed in the impugned order till a detailed study is carried out by an independent agency or the Department of New and Renewable Energy, Madhya Pradesh. The Commission was also of the view that the biomass power plants may not run on single fuel and a mix of fuels are used. The biomass power projects were already allowed in its tariff order dated 2-3-2012 to use fossil fuel up to 15% of the total requirement of fuel. Regarding SHR, NRED had submitted that SHR for the biomass plants works out in the range of 4229 to 4586 kCal/kWh based on the specific fuel consumption at 1.5-1.8 kg/kWh accepted by CERC and the above worked out GCV. Since GCVs worked out by NRED was not the weighted average GCV and SHR of the plants actually functioning in the State was not furnished, therefore, SHR based on above calculated GCVs could not be considered in the impugned order for the purpose of tariff determination till a detailed study is carried out by some independent agency or the Department of New and Renewable Energy, Madhya Pradesh. Accordingly, the order was passed by the Commission on 13-8-2015 retaining the previous norms for GCV and SHR.
4. M.P Biomass Energy Developers Association filed Appeal No. 211 of 2015 against the aforesaid order dated 13-8-2015 before the Hon'ble Aptel. Considering the appeal, the Hon'ble Aptel passed the order on 4-5-2016 2016 SCC OnLine APTEL 74. Para 9.18 of the order dated 4-5-2016 2016 SCC OnLine APTEL 74 states as under: (M.P Biomass Energy Developers Assn. case 2016 SCC OnLine APTEL 74, SCC OnLine Aptel)
“9.18. It is to conclude after going through the study reports of various agencies such as National Productive Council, Central Electricity Authority, MNRE, etc. and we found that the test results submitted by the Deputy Commissioner, NRED, Bhopal is almost nearer to the value suggested by the agencies specified above.”
(emphasis supplied)
5. In addition to above, Table I: Gross Calorific Value and Table II: Test Results of Station Heat Rate of the order dated 4-5-2016 2016 SCC OnLine APTEL 74 indicates SHR under five scenarios as furnished by NRED on the basis of test conducted on the samples of fuel viz. rice husk, wheat husk, mulbury and coal only.
6. Further, in Para 10 of the order dated 4-5-2016 2016 SCC OnLine APTEL 74, the Hon'ble Aptel has mentioned that: (M.P Biomass Energy Developers Assn. case 2016 SCC OnLine APTEL 74, SCC OnLine Aptel)
“10. We, after careful and serious analysis and survey of the aforesaid reports given by various agencies, decide the Gross Calorific Value (GCV) in question as 3100 kCal/kg and Station Heat Rate (SHR) at 4200 kCal/kWh. In these circumstances, the State Commission is bound to redetermine the tariff considering GCV and SHR determined by us in this judgment. Both these issues are hereby decided in favour of the appellants and thus, the appeal is liable to be allowed.”
7. Moreover, the operative part of the order dated 4-5-2016 2016 SCC OnLine APTEL 74 is reproduced below: (M.P Biomass Energy Developers Assn. case 2016 SCC OnLine APTEL 74, SCC OnLine Aptel para 11)
“11. The instant appeal being Appeal No. 211 of 2015 is hereby allowed and the impugned order dated 13-8-2015 passed by the State Commission is hereby set aside. The State Commission is directed to redetermine the tariff adopting the Gross Calorific Value (GCV) and Station Heat Rate (SHR) determined by us above within two months from today positively under intimation to this Appellate Tribunal for our perusal. The State Commission is expected to comply with this judgment in letter and spirit without seeking any excuse of any kind whatsoever. No costs.”
8. The Commission has observed that the appellants have failed to comply with the following directions issued in paras 30 and 37 of the judgment passed on 29-5-2014 2014 SCC OnLine APTEL 80 by the Hon'ble Aptel, abstract of which is reproduced below: (M.P Biomass Energy Developers Assn. case 2014 SCC OnLine APTEL 80, SCC OnLine Aptel)
“30. … The appellants are also directed to furnish data regarding actual use of different types of biomass fuel with the supporting documents to the State Commission for consideration.
***
37. … We also direct the appellants to furnish information regarding design heat rate, as certified by the manufacturer, factors affecting SHR due to practical consideration and any other data that is relevant to decide SHR to the State Commission and the State Commission shall consider the same.”
(emphasis supplied)
9. The Hon'ble Aptel has not taken into cognizance of this fact and passed the order dated 4-5-2016 2016 SCC OnLine APTEL 74 wherein specific numbers have been provided for GCV and SHR, which could only have been arrived at by the Commission scientifically based upon the data to be furnished by the appellant.
10. The Commission, therefore, filed Review Petition No. 21 of 2016 before the Hon'ble Aptel. In the review petition, it was specifically mentioned that neither M.P Biomass Energy Developers Association and other appellants of Appeal No. 144 of 2013 nor NRED furnished the required data to the Commission as per the directions of the Hon'ble Aptel dated 29-5-2014 2014 SCC OnLine APTEL 80 and hence, GCV and SHR could not be determined scientifically.
11. The case was heard on 3-10-2016 and was not admitted and dismissed. The operative part of the order is reproduced below:
“This review petition has been filed by the review petitioner seeking review of the order dated 4-5-2016 2016 SCC OnLine APTEL 74 passed in Appeal No. 211 of 2015. Admittedly from order dated 4-5-2016 2016 SCC OnLine APTEL 74 an appeal was carried to the Supreme Court by M.P Power Management Co. Ltd. and on 25-7-2017 the Supreme Court dismissed the said appeal by passing the following order Civil Appeal No. 6547 of 2016:
Upon hearing the counsel, the Court made the following
Order
Exemption from filing certified copy of the impugned judgment is granted.
We find no substantial question of law arising for an order of formal adjudication of the appeal. The appeal is accordingly dismissed. Consequently, IA No. 2 for stay is also dismissed.
In view of the above, this review petition cannot be entertained. Review petition is dismissed accordingly.”
12. Meanwhile, M.P Biomass Developers Association had filed Execution Petition No. EP-7 of 2016 before the Hon'ble Aptel against the Commission towards non-execution of order of the Hon'ble Aptel passed on 4-5-2016 2016 SCC OnLine APTEL 74 in Appeal No. 211 of 2015. The case was heard on 3-10-2016 and Execution Petition No. EP-7 of 2016 was disposed EP No. 7 of 2016 in Appeal No. 211 of 2015 of with the direction that the order dated 4-5-2016 2016 SCC OnLine APTEL 74 is to be implemented within a period of 8 weeks from 3-10-2016.
13. It is pertinent to mention here that:
(a) Para 8.10 of the tariff order dated 2-3-2012 provides as under:
“Scheduling
8.10 Biomass based power generation plants for more than 2 MW shall be subject to the ‘scheduling’ and ‘merit order dispatch principles’.”
(b) Para 8.6 of the tariff order dated 2-3-2012 provides as under:
“Power purchase agreement
8.6 The State Government … financial year. Accordingly, the power purchase agreements will be signed between the developer and M.P Power Trading Co. Ltd., Jabalpur. M.P Power Trading Co. Ltd., Jabalpur in turn will have back to back power supply agreement with Discoms. The agreements will be for exclusive sale/purchase of electricity for a period of 20 years from the date of commissioning of plant.”
(c) Paras 8.25 and 8.26 of the tariff order dated 2-3-2012 provide as follows:
“Monitoring mechanism for use of fossil fuel
8.25 The project developer shall furnish a monthly fuel procurement and fuel usage statement duly certified by Chartered Accountant, to the appropriate agency designated by the Commission for the purpose of monitoring the fossil and non-fossil fuel consumptions. However, the compliance of the condition of fossil fuel usage shall be monitored on annual basis….
… power plant site.
8.26 Non-compliance with the condition of fossil fuel usage by the project developer, during any financial year, shall render power generated by such biomass power project ineligible as a generation from renewable source during such financial year. However, such defaulting Biomass Power Project shall continue to sell power to distribution licensee concerned even during the period of default at a rate lower by Re 1.00.kWh below the applicable variable tariff determined as per this tariff order.”
(d) Section 86(1)(b) of the Electricity Act, 2003 provides as under:
“86. (1)(b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State;”
(emphasis supplied)
14. In compliance to the directions of the Hon'ble Aptel passed in its judgment dated 4-5-2016 2016 SCC OnLine APTEL 74, the Gross Calorific Value (GCV) at 3100 kCal/kg and Station Heat Rate (SHR) at 4200 kCal/kWh are considered. Accordingly, the Commission sets the year-wise tariff for generation of electricity from new biomass energy projects commissioned on or after 2-3-2012 as under:
(a) Commissioned on or after 2-3-2012 and during FY 2012-13
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
6.20
5.94
6.11
6.28
6.47
6.68
6.89
7.12
7.37
7.62
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
7.57
7.92
8.29
8.68
9.09
9.53
9.98
10.45
10.95
11.48
(b) Commissioned during FY 2013-14 and thereafter:
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
6.58
6.31
6.49
6.68
6.89
7.10
7.34
7.58
7.85
8.13
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Year 17
Year 18
Year 19
Year 20
8.08
8.46
8.85
9.27
9.71
10.17
10.65
11.16
11.69
12.25
15. In view of the aforesaid judgment dated 4-5-2016 2016 SCC OnLine APTEL 74 passed by the Hon'ble Aptel and the applicable terms and conditions of the tariff order dated 2-3-2012, the tariff mentioned above in Para 14 of this order shall be subject to the following terms and conditions:
(a) This tariff shall be applicable till 31-3-2017 or the new tariff order is issued, whichever is earlier.
(b) The projects for more than 2 MW are subjected to the ‘scheduling’ and ‘merit order dispatch principles’ in terms of Para 8.10 of the tariff order dated 2-3-2012 since date of commissioning.
(c) This tariff order is applicable to the projects using rice husk, wheat husk, mulbury and coal (limited to 15% of the total fuel on annual basis) only as a fuel based on which GCV has been decided by the Hon'ble Aptel in its judgment dated 4-5-2016 2016 SCC OnLine APTEL 74.
(d) This tariff shall be applicable for the projects for which Power Purchase Agreement has already been executed at the time of commissioning of the project.
(e) The M.P Power Management Co. Ltd., Jabalpur shall submit, the draft of the Power Purchase Agreement to be executed, if any, with the developer of biomass based power projects to be commissioned after the date of this order, for approval of the Commission.
(f) The developers shall have to submit monthly information, as required under Para 8.25 of the tariff order dated 2-3-2012, to the M.P Power Management Co. Ltd., Jabalpur by 10th day of each month following the month of information failing which action as per the provisions of Para 8.26 of the tariff order dated 2-3-2012 must be ensured by the M.P Power Management Company Limited.
16. Ordered accordingly.