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Petition No. 1051, 1054 & 1055 of 2015 BEFORE

THE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSIONLUCKNOW

Date of Order : 07.01.2016

PRESENT:

1. Hon’ble Sri Desh Deepak Verma, Chairman2. Hon’ble Sri Indu Bhushan Pandey, Member

IN THE MATTER OF: Extension of bid process timeline of Case­1 bidding process for a combined procurement of 6000 MW power.

Approval of deviation in SBD issued by MoP, GoI for conducting the process of long term procurement for 3800 MW power for meeting the requirement of Discoms.

(i) Procurement of Electricity of 2800 MW capacity under DBFOO basis from Power station using coal from concessional fuel from Coal India Ltd. or a subsidiary thereof.

(ii) Procurement of Electricity of 500 MW Capacity under DBFOO basis from Power station using coal from Imports.

(iii) Procurement of Electricity of 500 MW Capacity under DBFOO basis from Power station using coal from Captive Coal Blocks.

UP Power Corporation Limited(through its Chief Engineer (Planning)3rd Floor, Shakti Bhawan Extension14­ Ashok Marg, Lucknow.

­­­­­­­­­­­­­­­ Petitioner

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The following were presents:1. Shri Ather Hussain Khan C.E. (Planning), UPPCL

2. Shri Deepak Raizada. S.E., UPPCL

3. Ms. Niharika, A.E, UPPCL

4. Shri Amit Goenka, Consultant, UPPCL

5. Shri Rajeev Srivastava, Advocate, UPPCL

ORDER(Hearing Date 18.11.2015)

1. UPPCL has initiated the bidding process for procurement of 3800 MW Power

under the new bidding guidelines which has been notified by MoP, GoI vide

notification no. 23/09/2014 ­ R&R dated 5th May, 2015 and for which the

Standard Bidding Documents (Model RFQ, Model RFP and Model PSA) were

issued by MoP, GoI on 08th November 2013. UPPCL has informed that out of

their approved quantity of 6000 MW, approved by the Hon’ble Commission on

23rd July, 2012, they have tied up 2175 MW of power under earlier Case 1

bidding guidelines and therefore, initiated the fresh process on new bidding

guide lines for rest of 3800 MW capacity.

2. UPPCL has submitted that the sharing pattern of 3800 MW capacity amongst

the distribution utilities shall be as under:

Sl. No. Distribution Utility % share

1 PaschimanchalVidyutVitran Nigam Ltd. 35%

2 PurvanchalVidyutVitran Nigam Ltd. 21.67%

3 MadhyanchalVidyutVitran Nigam Ltd. 21.67%

4 DakshinanchalVidyutVitran Nigam Ltd. 21.67%

3. UPPCL has added that the Standard Bidding Documents allow them to conduct

separate bid process based on the choice of fuel source including the following:

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i. Procurement of power from power stations sourcing concessional fuel

from Coal India Limited or a subsidiary thereof (CIL)

ii. Procurement of power from power stations sourcing fuel sourced from

coal mine/blocks allocated through auction by Governmental

Instrumentality as per provisions of Applicable Laws

iii.Procurement of power from power stations sourcing fuel through

imports

iv. Procurement of power from power stations sourcing fuel through

imports from captive mines situated outside India, or from a long term

fuel supply contract

4. Through, these three petitions, UPPCL has submitted that it has envisaged to

procure

(i) 2800 MW capacity (out of total 3800 MW capacity requirement) based on

power stations sourcing concessional fuel from Coal India Limited or a

subsidiary thereof (CIL).

(ii) 500 MW power from stations using coal sourced through imports.

(iii) 500 MW power from power stations based on captive coal blocks

5. UPPCL has informed that for the procurement of 2800 MW, it has initiated the bid

process on 15th July 2015, for 500 MW power from imported coal on 11th

September 2015 and for 500 MW power from captive coal blocks on 15th July

2015. UPPCL has further informed that it has received fifteen (15) applications

with cumulative capacity of 6654.15 MW as against the requirement of 2800 MW,

eleven (11) applications with cumulative capacity of 3287 MW against the

requirement of 500 MW from imported coal and five (5) applications with

cumulative capacity of 2084 MW as against the requirement of 500 MW from

captive block. UPPCL has also submitted the list of bidders.

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6. UPPCL has submitted that albeit the model bid documents under DBFOO

framework (being used in the bid process by UPPCL) have undergone significant

amendments by MoP, GoI vide resolutions dated 16th April 2015 and 05th May

2015, certain provisions of the model DBFOO documents still continue to be

aligned with the documents issued under Design, Build, Finance, Operate &

Transfer (DBFOT) framework. The underlying principle under the DBFOO

framework is that the utility may select more than one (1) Bidder to meet required

capacity wherein the Bidders shall supply power from their respective stations

located across the country. In comparison, under the DBFOT framework, the utility

selects one bidder for setting up a power generating station at an identified site for

the required capacity through the bid process.

7. UPPCL has further submitted that the amendment to para at point 4 of the

Guidelines vide resolution dated 05th May 2015, provides that;

“Any deviation from the Standard Bidding Documents shall be made by

the Distribution Licensees with the prior approval of the Appropriate

Commission instead of Central Government…”

8. In view of above, UPPCL has requested for approval of the Commission on

certain deviations in RFP and PSA common to all the three processes. The

deviations are enlisted below:

Table 1

Sl. No.

RFP/ PSA

Existing Provision Proposed amendment/ modification

Rationale

1. RFP Clause 1.1.1: The [***Distribution Company] (the “Utility”) is/are engaged in the distribution of electricity and as part of this endeavour, the Utility has decided to procure electricity on a

Clause 1.1.1: The [***Distribution Company] (the “Utility”) is/are engaged in the distribution of electricity and as part of this endeavor, the Utility has decided to procure electricity on a long term basis from power station (s) set up on Design, Build, Finance, Own and Operate

Supply of power under DBFOO is expected from multiple generating sources and not from a single power station as envisaged in the SBD.

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long term basis from a power station (the “Project”) through Public Private Partnership (the “PPP”) on Design, Build, Finance, Own and Operate (the "DBFOO") basis, and has decided to carry out the Bidding Process for selection of a corporate entity

(the "DBFOO") basis and using …….[Insert fuel source] (“the Project”),

2. RFP Clause 1.1.1: Capacity required (in MW) ****

Clause 1.1.1: Capacity required (in MW) ****(In the event that the overall capacity is received more than the capacity requirement, the utility shall have the discretion to consider the additional capacity available to it under the bid process for procurement.)

UPPCL has received 6654.15 MW against a capacity requirement of 2800 MW envisaged to be procured from power stations using linkage based coal. In parallel, UPPCL is running another bid process for procurement of 1000 MW power from power stations using coal from allocated coal blocks and imported coal. Bid process under DBFOO framework allows UPPCL to negotiate with Bidders at L1 tariff. Considering the large capacity available in the market based on linkage based coal and in the event it being offered to UPPCL in the RFP stage, it is prudent that UPPCL avails the opportunity to exercise the right to procure the remaining 1000 MW, if available at a competitive rate.

3. RFP Clause 2.5.1: Bidders are encouraged to submit their respective Bids after familiarising themselves with the information and physical conditions relevant to the Project, including the transmission capacity,………..

Clause 2.5.1: Bidders are encouraged to submit their respective Bids after familiarising themselves with the information and physical conditions relevant to their generation project, including the transmission capacity,………..

Under DBFOO based framework, Bidders are required to quote from their respective generation sources. Project as envisaged under DBFOO is procurement of electricity on long term basis from power stations sourcing fuel as identified at the RFQ stage.

4. PSA Clause 18.4 : Open Capacity The Parties expressly acknowledge and agree that save and except as provided in Clause 18.4.2, 20% (twenty per cent) of the Contracted Capacity and the Committed Capacity,

Proposed to be deleted Open Capacity requirement of 20% envisages the following:i) The developer shall sell

such capacity in the open market to recover its associated costs. The quantum, time of sale and duration of sale of the open capacity is not certain and cannot be predicted by the bidder at the RFP stage.

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as the case may be, shall be available to the Supplier for production and supply of electricity to any person, in accordance with Applicable Laws and this Agreement (the “Open Capacity”) and the terms of such sale may, save and except as provided in this Agreement, be determined by the Supplier at its discretion……

Further, sale of power at such short notice may not be practically feasible to the Seller. It is quite likely that as a risk mitigation measure, the developer shall gross up its quoted fixed charge by such margin so as to recover losses arising out of such uncertainty thereby inflating the tariff for the utility. Hence it is proposed that the clause and related provisions to Open Capacity be removed from PSA.

5. PSA Provisions related to Open Capacity (Clause 18.5.1, Clause 22.4.3, 24.1.3, definitions of Open Capacity, revenue share)

Proposed to be deleted As the principle of Open Capacity is proposed to be deleted, related provisions may also be removed.

9. In addition to above deviations, in case of procurement of 500 MW power from

power stations based on captive coal blocks, UPPCL has submitted the

computation for determination of ceiling of fixed charges and requested to the

Commission to consider it for fixation of ceiling of capacity charges to be provided

in the RFP and PSA. UPPCL has submitted that as per the bidding guidelines, as

a condition of bidding, upper ceiling of Fixed Charges in terms of Rs/kWh towards

the Fixed/Capacity Charges is required to be indicated in advance to all the

prospective Bidders in consultation with the Hon’ble Commission. UPPCL has

demonstrated the range of capacity charges computed for the first year of

operations (i.e. 2016­17) for four approaches as summarized in the table below.

Table 2

Capital Cost Parameter Range of Capacity charge (Rs/kWh)

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CERC Benchmark Capital Cost 2.18­2.37

Capital Cost of CGS 1.89­2.79

Capital cost of thermal power stations in Uttar Pradesh

2.49­2.81

Capital Cost of thermal power stations of IPPs

1.64­2.99

Based on above, UPPCL has requested for approval of ceiling of capacity charge

of Rs. 2.99/kwh charges to be provided in the RFP and PSA procurement of 500

MW power from power stations based on captive coal blocks.

10. From above table, the Commission comes to the conclusion that the ceiling of

capacity charge of Rs. 2.81/Kwh would be reasonable enough. As far as

deviations mentioned in the Table 1 are concerned, the Commission allows the

same.

11. The petitions are disposed of.

(Indu Bhushan Pandey) (Desh Deepak Verma) Member Chairman

Place : LucknowDated: 07.01.2016