ARR/Tariff Proposals of APTRANSCO for FY2005-06

1
ARR/Tariff Proposals of APTRANSCO for FY2005-06

• Objections/Suggestions
• by
• Er. K.Raghu
• 28.02.2005

2
Consideration of Issues Raised During Public
Hearings

• Several important issues are raised during public
  hearings- in addition to those raised in the
  original petitions
• But most of these issues raised during public
  hearings are ignored by the Commission- do not
  find any mention in the tariff order
• Only issues raised in the Original Petitions are
  considered
• I request the Commission to consider all the
  issues raised during the public hearings also.

3

• This presentation consists of issues which have
  bearing on ARR of APTRANSCO

4
1.Separation of Trading From APTRANSCO
5
Separation of Trading from Transco

• Section 39 of Electricity Act,2003 provides for
  separation of Trading function from APTRANSCO (
  from 10th June2005)
• At present APTRANSCO is in the business of
  Trading, because of Power Purchase Agreements it
  entered with various Generating Companies.
• Separation of Trading means ?Separation of PPAs
  from APTransco
• Then who should Take the responsibility of these
  PPAs? This will have serious repercussions on the
  power sector future in the state.

6
Separation of Trading from Transco
OPTION-2
PPAs
Tradeco
OPTION-3
OPTION-1

• Transco

Genco
Discoms
It appears that the Government has already
decided to allocate PPAs to Discoms
(OPTION-1)ignoring other options
7
Separation of Trading from Transco

• Difficulties/Disadvantages in allocating PPAs to
  Discoms
• Difficulties in Allocation
• Factors affecting Allocation
• Power Requirement of Discoms Based on Historical
  or Future trends
• Evaluation of Generating Stations Availability
  or PLFs of Generating stations
• Availability of Fuel
• Additional Fuel Allocations
• Balance Life of Generating stations

8
Separation of Trading from Transco

• NPV or PV of Fixed Costs/Variable costs
• GVK, Spectrum,MP Plants Fixed Cost payments vary
  with time as they are based on capital cost
  recovery method.
• Other Gas Projects FC Payments are more or less
  uniform over project life, as it is based on unit
  cost of Electricity
• Impact of lifting APM

9
Separation of Trading from Transco

• Imbalances It would create imbalances among
  Discoms with respect to Power demand and
  availability.
• Burden of New institutions like Balancing and
  Settlement Committee (BSC)
• Impact of Open Access
• If surcharge from OA consumer does not fully
  compensate for the loss of cross subsidy ( as per
  draft guidelines of MOP/Report of Task force on
  Power sector investments and Reforms), then
  Discoms with better consumer mix would sufferas
  their present BST is kept high, taking existing
  favourable Consumer mix into consideration.

10
Separation of Trading from Transco

• Need For Uniform Retail Supply Tariff
• Uniform RST among discoms can not be done away
  with immediately
• Allocation of PPAs on Permanent basis among
  Discoms would create problems
• Against the spirit of Reforms
• Would not result in achieving Multi Buyer Model
  (MBM) in its true spirit
• Discoms will lose focus on revenue
  collections-results in creation of Mini
  Electricity Boards

11
Separation of Trading from Transco

• Legal Complications- advantage to IPPs and other
  Generators if PPAs are in multiple hands
• In view of the above I request the Commission to
  re-examine the whole issue of separation of
  Trading function from Transco.

12
Separation of Trading from Transco

• Alternative
• Allocation of PPAs to APGENCO would be a better
  option as it avoids all the above disadvantages
• Electricity Act,2003 does not prohibit generators
  from taking up Trading activity- so not against
  spirit of reforms
• SLDC can remain with APTRANSCO as trading is
  separated from Transco.
• Discoms can concentrate on Consumer service and
  Revenue collections
• Expertise on power trading is already available
  with APGENCO

13
Separation of Trading from Transco

1. Transition to Multi Buyer Model would be
   smooth- slowly Discoms can enter into new
   agreements with Generators for additional power
   requirements
2. No additional expenditure- only a trading license
   is required
3. Helps in developing rational Merit Order
   Procedure.
4. Eliminates unnecessary friction between
   Generators and Discoms
5. Allows Genco to effectively utilise its resources
   in the ABT regime.

14
Separation of Trading from Transco

• In view of the above I request the commission to
  advise the Government to entrust the Trading
  function to APGENCO, at least on a temporary
  basis, by allocating all the existing PPAs.
• If allocation of PPAs to Discoms proves
  successful elsewhere in the country, government
  may consider the same after evaluating those
  experiences.

15
2. Review of Power Purchase Agreements
16
Review of PPAs

• Commission in its Tariff Order for 2003-04
  stated that it would consider the review of the
  concluded PPAs after the detailed judgement of
  the Honble High Court at Mumbai was available.
• Maharashtra High court order was submitted to the
  Commission during 2004-05 Tariff Hearings.
• Commission in its Tariff Order for 2004-05 stated
  that At this stage, the Commission does not
  consider that any proceedings be initiated for
  the above purpose.
• However it directed APTRANSCO to renegotiate
  with the IPPs to reduce the cost of power
  purchase keeping in view the substantial
  reduction in interest cost and facility of
  swapping etc,.

17
Review of PPAs

• Commission in its order did not explain why it
  had not considered Mumbai High Courts order on
  review of PPAs.
• The PPA review taken up by the Government has
  many inherent limitations as the Government is
  not a party to the Power Purchase Agreement
• Its effectiveness depends purely on means out
  side legal framework.
• I request the Commission to immediately take up
  review of all the PPAs without leaving the matter
  entirely to the Government or APTRANSCO.

18
3. Excess Payments to IPPs in Violation of
PPAsi).Spectrumii).GVKiii).BSESiv).NCE
projects
19
Stop Excess Payments to IPPs- Violation of PPAs

• The following are a few instances where IPPs are
  paid in excess of what is due to them as per the
  PPAs.
• I request the Commission to immediately stop
  excess payments being made to IPPs in violation
  of the PPAs.
• This does not amount to review of PPAs.
• Excess payments to SPECTRUM
• Incentives
• Presently excess payments are being made to
  Spectrum Project (216 MW) at Kakinada towards
  incentives.
• As per the Govt. Of India notification no. S.O.
  251(E) Dt. 30/03/1992 published by MOP in Gazette
  of India Extrordinary under P-II sections 3-
  subsection (ii)?

20
Stop Excess Payments to IPPs- Violation of PPAs

• Full fixed charges shall be recoverable at
  generation level of 6000 hours/KW/year. For
  Generation above 6000 hours/kw/year, the
  additional incentive payable shall not exceed
  0.7 of ROE, for each percentage point increase
  of PLF above the normative level of 6000
  hours/kw/year.
• The above GOI notification is included as part of
  the PPA and the notification is signed by both
  the parties.

21
Stop Excess Payments to IPPs- Violation of PPAs

• In line with the above notification an incentive
  clause is included in the PPA which states that
• the Board ( ie APTRANSCO) shall pay for the
  actual generation and notional generation above
  the threshold level of a PLF of 68.49 an
  incentive in the nature of increased ROE in
  accordance with the following formula

22
Stop Excess Payments to IPPs- Violation of PPAs

• PLF Level of Incentive
• PLF lt 68.5 0.4 increase in ROE for every 1
  increase in PLF above 68.5
• 80.5 lt PLFlt 85.5 0.5 increase in ROE for every
  1 increase in PLF above 68.5
• PLFgt85.5 0.6 increase in ROE for every 1
  increase in PLF above 68.5
• It also states that the Notional generation above
  85 PLF shall not be considered for the purpose
  of payment of incentive
• Since generation above 85 will not be considered
  for notional generation, it would be better to
  restrict the purchases from IPP to 85PLF

23
Stop Excess Payments to IPPs- Violation of PPAs

• Incentive Payable at 85 PLF
• 0.5 increase in ROE for every 1 increase in
  PLF above 68.5
• ?(85-68.5) X 0.5/100 X ROE
• EQITY Rs 117.92 Crore ( As per ARR of
  APTRANSCO- Page 69)
• ROE allowable as per PPA 16 on Equity ROE
  (16/100) X 117.92 Rs 18.86 crores

24
Stop Excess Payments to IPPs- Violation of PPAs

• Therefore Incentive Payable to Spectrum at 85
  PLF
• 16.5 x (0.5/100)x 18.86 crore Rs 1.55 crore
• Whereas APTRANSCO has shown incentive payable to
  Spectrum as Rs 9.73 crore
• This is Rs 8.18 crore more ( 6.27 times) than
  what is required to be paid as per PPA.

25
Stop Excess Payments to IPPs- Violation of PPAs

• APTRANSCO has stated that it has calculated
  incentive based on the formula Equity x
  (PLF-68.5)x0.005 .
• According to Transco this formula is provided in
  the PPA of Spectrum.
• But the above formula is not provided in the PPA
  of SPECTRUM
• APTRANSCO has assumed a formula similar to the
  one provided in the incentive clause in GVK PPA.
• SPECTRUM PPA on incentives only states that at
  85 PLF,
• Level of incentive 0.5 increase in ROE for
  every 1 increase in PLF above 68.5
• Where as formula assumed by the APTRANSCO takes
  increase of 0.5 on Equity and not ROE

26
Stop Excess Payments to IPPs- Violation of PPAs

• This has resulted in excess payment of incentive
  of Rs 8.18crore/Anum ( As per PPA provision it is
  only Rs 1.55 cr)
• NO SCOPE FOR ANY AMBIGUITY
• In fact there is no scope for ambiguity in the
  application of incentive provision as ROE is
  clearly defined in the PPA.
• Clause 2.5(e) of GOI notification dt 30/3/92
  incorporated in the PPA clearly states that
  Return On Equity shall be computed on
  the paid up and subscribed capital relatable to
  the generating unit, and shall be 16 of such
  capital.

27
Stop Excess Payments to IPPs- Violation of PPAs

• And thus ROE is a single unit, which is equal to
  16 of paid up and subscribed capital. In the
  present case ROE 16/100 X 117.92 Rs 18.86
  crores
• Therefore, 0.5 increase in ROE means
• incentive of 0.5/100 x 18.86
• and not 0.5/100 x 117.92
• I request the Commission to restrict the payment
  of incentive to Spectrum project to Rs1.55 crore
  

28
Stop Excess Payments to IPPs- Violation of PPAs

• Excess Payments to GVK Project
• Incentives
• Presently excess payments are being made to GVK
  Project (220 MW) at Jegurupadu towards
  incentives.
• As per the Govt. Of India notification no. S.O.
  251(E) Dt. 30/03/1992 published by MOP in Gazette
  of India Extrordinary under P-II sections 3-
  subsection (ii)

29
Stop Excess Payments to IPPs- Violation of PPAs

• Section 1.6 of above notification states that
  Full fixed charges shall be recoverable at
  generation level of 6000 hours/KW/year. For
  Generation above 6000 hours/kw/year, the
  additional incentive payable shall not exceed
  0.7 of ROE, for each percentage point increase
  of PLF above the normative level of 6000
  hours/kw/year.
• The above GOI notification is included as part of
  the PPA and the notification is signed by both
  the parties.

30
Stop Excess Payments to IPPs- Violation of PPAs

• However the same is not reflected in the
  Incentive clause incorporated in the Clause
  3.10.2 of the PPA.
• Clause 3.10.2 states that The Board shall pay for
  actual generation and notional generation above
  the target level of PLF of 68.49 on incentive
  payment according to the following formula
• Incentive paymentEquity x (PLF-68.5)x 0.00525
• In the above formula it is mistakenly stated as
  Equity which should have been ROE as per the GOI
  notification

31
Stop Excess Payments to IPPs- Violation of PPAs

• Implicaiton
• As per GOI notification incentive shall not
  exceed 0.7xROE 0.7 x16/100 x Equity
  0.00112X Equity
• Whereas the incentive clause provides for
  incentive of 0.00525x equity, which is 4.68 times
  the UPPER LIMIT fixed by the GOI

32
Stop Excess Payments to IPPs- Violation of PPAs

• There is a contradiction between two provisions
  within the same PPA (ie. incentive clause in
  GOI notification and clause 3.10.2 of PPA).
• APTRANSCO is paying incentives to GVK as per
  clause 3.10.2 which is resulting in higher
  payments to GVK. This is against the PPA and GOI
  notification
• APTRANSCO has shown an amount of Rs 21.21 crore
  towards incentive for the year 2005-06. It should
  have been Rs 3.39 crores. Thus an additional
  amount of Rs 17.82 crore is paid to GVK every
  year against the PPA provisions.

33
Stop Excess Payments to IPPs- Violation of PPAs

• Since, GVK has also agreed to abide by the GOI
  notification, which clearly limits the incentives
  to 0.7 of ROE, the incentive payment to GVK
  shall be limited to the same
• I request the Commission to restrict the payment
  of incentive to GVK project to Rs 3.39 crore,
  instead of Rs21.21 crore as shown by APTRANSCO.

34
Stop Excess Payments to IPPs- Violation of PPAs

• Excess payments towards ROE
• At present APTRANSCO is making payments to both
  GVK and Spectrum projects towards ROE
• which is equal to 16 of Equity, paid in twelve
  monthly installments
• Monthly installments paid to these projects is
  1/12 of (16 of ROE)
• This is resulting in ROE of over 17.2 of equity
  per anum considering the interest benefits to the
  IPPs.
• But section 1.5 of the GOI notification dated
  30/3/1992 incorporated in the PPA and signed by
  Private parties clearly states that the above
  amount of 16 of ROE shall be for the entire
  year.

35
Stop Excess Payments to IPPs- Violation of PPAs

• The notification also states that, if payments
  are made on monthly basis, necessary adjustments
  shall be made on actuals at the end of the year.
• It can be seen that APTRANSCO is not making any
  adjustments towards the end of the year, leading
  to excessive payments to IPPs, in violation of
  the PPAs.
• Total Equity of GVK and Spectrum projects is
  244.8117.92 Rs 364.72 crore
• Thus additional payment made to these projects
  1.2/100 x 364.72 Rs 4.37 crore/Anum
• This is clear violation of the PPA provisions
• Hence I request the Commission to direct the
  Transco to make necessary adjustments towards the
  end of the Year to adjust the excess ROE paid to
  these IPPs.

36
Stop Excess Payments to IPPs- Violation of PPAs

• Recover the Excess payments made to GVK and
  Spectrum Projects
• Huge amounts are already paid to GVK and Spectrum
  projects towards incentives and ROE in violation
  of the provisions of the PPA
• Excess payments already made every year
• Towards incentive17.82(GVK)8.49(Spectrum)Rs26.3
  1 cr
• Towards ROE
  Rs 4.37 cr
• Total excess payments Rs30.38 cr
• Total amount to be recovered from these two
  projects
• 30.38 x 8 years of operation Rs 243.04 crore
• Interest also must be recovered
• Hence, I request the Commission to direct
  APTRANSCO to recover the amounts from GVK and
  Spectrum, which are paid in violation of the
  provisions of the Agreements

37
Stop Excess Payments to IPPs- Violation of PPAs

• COMMISSION TO IDENTIFY ALL SUCH VIOLATIONS
• The above excess payments made to the IPPs is due
  to violation of PPA provisions and reduction of
  these costs can not be treated as review of PPAs
• There is every likelihood of many more such
  violations, whose elimination would reduce the
  cost on APTRANSCO and eventually on the consumer.

38
Stop Excess Payments to IPPs- Violation of PPAs

• For ex
• Failure on the part of IPPs to achieve ramp up
  rate of 4 MW/Minute would allow APTRANSCO to
  impose penalty of double the shortfall of such
  shortfall in energy.
• As per GOI notification incorporated in the PPAs,
  all Components of Fixed Cost ( not just ROE )
  shall be calculated on annual basis and may be
  recovered in monthly installments and due
  adjustments shall be made towards the end of the
  year
• I request the Commission to identify all such
  violations immediately and reduce the payments to
  IPPs and pass on the benefits to the Consumers.

39
Recovery of Excess Fixed Costs Paid to BSES
before Commercial Operation Date

• BSES is one of the Short Gestation Project
  approved by the GoAP, accordingly PPA was signed
  on 31.3.1997 with APTRANSCO
• Amendment Agreement submitted to the Commission
  in December 2001 for its consent.
• Construction of 220MW BSES project at Samarlakota
  was completed before the approval of Commission
  for the Amended PPA.

40
Recovery of Excess Fixed Costs Paid to BSES
before Commercial Operation Date

• Since the project was ready to produce energy,
  commission has allowed the plant generate energy
  and directed APTRANSCO to purchase energy from
  BSES at 169 ps/unit, pending approval of Amended
  PPA by the Commission
• The above approved tariff is substantially higher
  than the variable cost of energy ( About Rs
  1.00)? this difference between the Total cost (
  169 ps) and the variable cost ( about 69 ps) can
  be treated as advance amount paid towards
  repayment of fixed cost.

41
Recovery of Excess Fixed Costs Paid to BSES
before Commercial Operation Date

• Subsequently, the commission has consented to the
  amended PPA of BSES project, and presently energy
  from this project is being purchased as per the
  terms of the amended PPA.
• Thus the entire Fixed cost of the BSES project
  would be recovered from the tariff as per the
  terms and conditions laid down in the amended PPA
  from the CoD ie 24/12/2002.
• This means that the fixed cost paid to this
  project before COD is in addition to the total
  fixed cost commitment of APTRANSCO to the BSES as
  per the PPA.

42
Recovery of Excess Fixed Costs Paid to BSES
before Commercial Operation Date

• Thus this entire Fixed Cost amount paid to the
  BSES prior to the COD has to be recovered now,
  including the interest component- otherwise it
  amounts to excess fixed cost payments to BSES in
  violation of the PPA.
• APTRANSCO had purchased energy from this project
• from 21/02/2002 to 24.12.2002 _at_ 169 ps/unit.
• Total quantum of energy purchased from this plant
  was about 650 MU.

43
Recovery of Excess Fixed Costs Paid to BSES
before Commercial Operation Date

• Assuming the variable cost component to be
  69ps/unit ( variable cost based on natural gas as
  per the supply price of GAIL has to be
  considered )
• fixed cost to be recovered is 100 ps/unit.
• Total amount to be recovered from BSES excluding
  interest (650/10)x1Rs65Cr. Interest component
  has to be added to this amount.
• Hence, we request the Commission to recover the
  entire excessive amount of Rs 65 cr paid to BSES
  prior to the COD.
• An amount of Rs 22.8 cr is shown as other
  charges paid to BSES during 2003-04. This amount
  is not shown in others during FY 2005 and FY
  2006.
• The same may please be clarified.

44
Excess Payments to Non-conventional Energy
Projects

• Restrict payments to contracted capacity only
• Presently payments to NCE projects are being made
  based on average monthly PLFs
• This is resulting in higher payments to NCE
  projects, because NCE projects are at times
  generating energy above their contracted
  capacities with APTRANSCO.
• If NCE projects produce energy above their
  contracted capacities, the same shall not be
  allowed.
• We request the commission to direct APTRANSCO to
  install meters capable of taking readings in
  15min. block periods, and make payments to NCE
  projects accordingly, limiting the payments to
  contracted capacities.
• We also request the Commission to recover the
  excess payments already made

45
Excess Payments to Non-conventional Energy
Projects

• New NCE Projects/capacities
• It is reported in the press that the Commission
  is directing APTRANSCO to purchase energy from
  new NCE projects/capacities
• Already NCE projects are imposing unbearable
  burden on APTRANSCO and consumers of the state.
• Also energy from these projects is not firm and
  not reliable
• Section 86(e) of the Electricity Act, 2003
  enjoins the commission to promote cogeneration
  and generation of electricity from renewable
  sources of energy and also specify , for purchase
  of electricity from such sources , a percentage
  of the total consumption of electricity in the
  area of a distribution licensee

46
Excess Payments to Non-conventional Energy
Projects

• But, it can seen that the purchases from NCE
  projects to the total purchases by APTRANSCO in
  AP is higher compared to majority of the states
  in India and there is no need to allow new
  purchases from NCE projects any further.
• EA, 2003 also allows third party sales and as
  such there is no need for APTRANSCO to buy this
  expensive energy
• Also, there is no reason why only direct
  consumers of Discoms should bear the burden of
  these NCE projects.
• No where in the EA, 2003 it is stated that only
  direct consumers of the utility shall bear entire
  burden due to NCE projects.

47
Excess Payments to Non-conventional Energy
Projects

• In fact, Section 86(e) of EA,2003 enjoins upon
  the Commission to specify, for purchase of
  electricity from such sources, a percentage of
  the total consumption of electricity in the area
  of a distribution licensee.
• Thus while specifying the percentage of
  purchases from NCE projects it shall consider the
  total consumption in the area of a distribution
  licensee.

48
Excess Payments to Non-conventional Energy
Projects

• This implies that the burden due to these NCE
  projects shall be borne by all the consumers in
  the area of Distribution licensee.
• It means that even the Open Access consumers
  shall bear the additional burden due to these NCE
  projects.
• I request the Commission to distribute the burden
  due to NCE projects uniformly on all the
  consumers including Open Access consumers.

49
4. Closure of Nellore Thermal Station
50
Closure of Nellore Thermal Station(NTS)

• It is learnt that APGENCO has decided to close
  down the NTS
• The decision is irrational
• Closure is due to irrational merit order
  procedure which takes only the variable cost in
  to consideration for dispatch of energy from
  generating stations
• NTS is located at load centre- reduces TD losses
  and also improves voltages in the region. If all
  these factors are considered, cost of power from
  NTS would be lower than average RST of Discoms

51
Closure of Nellore Thermal Station(NTS)

• Also considering the objections from public
  during 2004 public hearings, Commission had
  directed APTRANSCO to examine the benefits
  likely to accrue, by identifying the linkages
  between generating stations and the load centers,
  duly factoring the transmission losses in to the
  variable cost and submit a report to the
  Commission by 1st june 2004.
• APTRANSCO in its ARR stated that Revised
  proposals will be submitted to APERC by
  15.12.2004

52
Closure of Nellore Thermal Station(NTS)

• Transmission losses and Distribution losses are
  not uniform across the entire state.
• Transmission system is spread across the entire
  state and Transmission losses also vary from
  discom to discom.
• Also Distribution losses are different in
  different distribution companies
• Thus the merit order would not be identical for
  all the discoms

53
Closure of Nellore Thermal Station(NTS)

• It can be seen that Commission is considering
  these variations for calculating cost-to-serve
  for various consumer categories and also in
  allocation of government subsidies among Discoms.
• Hence it would be logical to consider these
  variations apart from other factors such as
  impact of load centre etc,. and revise the merit
  order for individual discoms accordingly.

54
Closure of Nellore Thermal Station(NTS)

• In the wake of EA2003, it is not wise to close
  down NTS. As per the Electricity Act2003, the
  Commission is contemplating introduction of Open
  Access in distribution starting from Sept2005.
• It may be logical for APTRANSCO not to buy energy
  from NTS as it may not fall in its Merit Order,
  but it will be beneficial for APGENCO to find
  Consumers of its own or sell energy to traders
  like PTC etc,.instead of closing down the
  station.
• It appears that the decision to close down the
  NTS is taken without carrying out proper Residual
  Life Assessment(RLA) studies

55
Closure of Nellore Thermal Station(NTS)

• Whatever may be the criteria stated for the
  Closure of NTS, it would highlight the defects in
  the load forecast approved by the Commission.
• If all the projects approved by the Commission
  and CGS which are under various stages of
  construction start their commercial production,
  it is no surprise that all the projects of Genco
  will have to be backed down.
• In view of the above I request the Commission to
• advise the Government not to close down the NTS
  station
• revise the merit order procedure and
• advise APGENCO to explore the possibility of
  trading energy from NTS.

56
5. Collection of LD from Gas Projects
57
Collection of Liquidated Damages from Gas Projects

• Non-Collection of Liquidated Damages
• None of the Short Gestation projects approved by
  the Government during 1997 achieved completion as
  per the CoD of PPAs.
• As per PPAs Transco shall collect Liquidated
  damages to the tune of over Rs 400 cr from these
  projects for the failure to complete as per the
  schedule
• This issue was brought to the notice of the
  Commission
• Commission agreed with the petitioners view, but
  instead of directing APTRANSCO to collect these
  charges, allowed APTRANSCO to decide on the
  matter.
• Till now APTRANSCO has not collected these
  charges from Gas Projects.
• Commission should direct APTRANSCO to collect
  these LDs from gas projects

58
6. Review of PPAs of Gas Projects
59
Review of PPAs of Gas Projects

• Issues involved in the recent order
• Commission on 14/12/04 has passed an order on 4
  Gas Projects allowing
• a)The scheduled date of completion to be extended
  day for day for any delay arising from (i)
  non-availability of Natural gas for commercial
  operation up to 31-12-2006 and (ii) the time
  required for commissioning as per the
  construction schedule due to non-availability of
  Natural gas.

60
Review of PPAs of Gas Projects

• Commission in its order has not made it clear if
  it is convinced about the gas availability after
  31.12.2006, so that the consumer is not burdened
  with huge fixed costs.
• GAIL and IPPs have gone back on their earlier
  assurances on availability of natural gas to
  these projects.
• This is the basic premise on which Commission has
  earlier gave consent to these projects
• Hence Commission should review all these PPAs
  afresh through public process.

61
Review of PPAs of Gas Projects

• There are many more issues- not just availability
  of natural gas- which were raised by the public
  during the hearings of these gas projects, which
  still have relevance.
• For Ex
• APTRANSCO has stated that the burden of fixed
  costs due to these projects is Rs 1020 cr. While
  projecting this figure Transco made two
  assumptions
• The APM regime would continue in future
• It can sell entire energy purchased from these
  projects
• But chances of above assumptions going wrong are
  very high, as
• GoI had already announced that it would soon lift
  the APM on natural gas and other petroleum
  products
• Transco may not be able to buy/sell the entire
  energy from these projects due to several
  factors such as

62
Review of PPAs of Gas Projects

• various provisions of EA,2003 viz Open Access,
  Parallel Licensing, Stand Alone systems etc,.
  which will considerably reduce the demand
• Efficiency measures introduced by the Government
  in Agriculture sector would substantially bring
  down consumption
• Other new initiatives to reduce TD losses
• If the above factors are taken in to
  consideration, because of Take-or-pay
  provisions in the Gas Supply Agreements, Fixed
  cost burden due to these 4 gas projects would be
  about Rs2650 cr
• In view of the serious implications of these
  projects on the consumers of this state, we
  request the Commission to review these PPAs
  through public process.

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Collection of Liquidated Damages from Gas Projects

• Also if there is any LD clause for the delay in
  the execution of the Gas Projects in the
  construction contracts (EPC) entered by the IPPs,
  the said amount must be passed on to the
  consumers

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7. Two Part Tariff
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Purpose of Two Part Tariff

• It is not clear why APTRANSCO is proposing two
  part tariff
• two part tariff would discourage energy savings
  by Discoms as it would commit Discoms for minimum
  purchases from Transco.
• This results in higher burden on consumer due to
  expensive power purchases
• It can recover the entire fixed costs based on
  the total purchases of discoms at the end of the
  year
• Necessary adjustment mechanism can be introduced
• Hence I request the Commission to reexamine the
  two part tariff proposal by APTRANSCO

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Prayer to the Commission

1. To consider issues raised during public hearings
   also
2. Advise Govt to entrust Trading function to
   APGENCO
3. Review all PPAs in the light of Mumbai High Court
   order
4. Stop/Recover excess payments being made to IPPs
   in violation of PPAs(GVK,Specturm,BSES and NCE
   projects)
5. To transfer the burden of NCE projects on OA
   consumers also
6. Advise Govt not to close down NTS.
7. Collect liquidated damages from gas projects
8. Review of PPAs of all the gas projects in view of
   non-availability of Gas
9. Transfer LD paid by EPC contractors to IPPs, if
   any
10. To review Two-Part Tariff proposal of APTRANSCO.

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• Thank you