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RAJASTHAN ELECTRICITY REGULATORY COMMISSION Petition No. RERC/537/15

In the matter of determination of Capital Cost, Aggregate Revenue Requirement (ARR) & Provisional Tariff for Unit 4 (1x250 MW) of Chhabra Thermal Power Project (2x250 MW) for FY 2014-15 from COD of Unit 4 to 31.03.2015.

Coram: Sh. Vishvanath Hiremath, Chairman Sh.Vinod Pandya, Member Sh. Raghuvendra Singh, Member

Petitioner: M/s Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (RVUN) Respondents:

1. Jaipur Vidyut Vitran Nigam Ltd. (JVVNL) 2. Ajmer Vidyut Vitran Nigam Ltd. (AVVNL) 3. Jodhpur Vidyut Vitran Nigam Ltd. (JdVVNL)

Date of hearing 27.10.2015 Present:

1. Sh. D.K. Goyal, Superintendent Engineer, RVUN 2. Sh. Y. K. Upadhyay, CAO, RVUN 3. Sh. Ankit Sharma, Consultant, RVUN 4. Sh. S. T. Husain, Executive Engineer, JVVNL 5. Sh. G. L. Sharma

Date of Order: 01.01.2016

ORDER

1.1 Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (in short ‘RVUN’), a Generating Company under the provisions of the Electricity Act 2003, filed a Petition for determination of Capital Cost, Aggregate Revenue Requirement (ARR) & Provisional Tariff of CTPP Unit 4 (1x250 MW) for FY 2014-15 (91 days).

1.2 In exercise of the powers conferred under Sections 62, 64 and other provisions of the Electricity Act, 2003, read with RERC (Terms and Conditions for Determination of Tariff) Regulations, 2014, and other enabling Regulations, the Commission has carefully considered the submissions of the Petitioner and the suggestions/objections submitted by the various stakeholders. The Commission has passed the following Order.


1.3 This Order has been structured in 5 sections, as given under: (1) Section 1: General

(2) Section 2: Summary of filing of Capital Cost, Aggregate Revenue Requirement (ARR) & Provisional Tariff and Provisional Tariff determination process.

(3) Section 3: Summary of objections/ comments/ suggestions received from stakeholders on instant Petition and the RVUN’s response.

(4) Section 4: Determination of provisional Capital Cost of Chhabra Thermal Power Plant-Unit 4 (250 MW)

(5) Section 5: Determination of provisional ARR and Tariff for CTPP Unit 4(1x250 MW) for FY 2014-15 (91 days)

(6) Annexure-1 to Annexure-2


SECTION 2 Summary of Filing

2.1 In accordance with RERC (Terms & Conditions for Determination of Tariff) Regulations, 2014, hereinafter referred to as RERC Tariff Regulations, 2014, RVUN filed a Petition on 18.05.2015 for approval of Capital Cost, ARR and Provisional Tariff for FY 2014-15 from COD to 31.03.2015 (91 days) of Chhabra Thermal Power Station Unit 4 (1x250 MW).

2.2 RVUN vide its application dated 02.06.2015 requested to allow interim tariff for CTPP Unit 4 for FY 2014-15. The matter was heard on 23.06.2015. Sh. Ankit Sharma, Consultant appeared for the Petitioner and prayed for grant of interim tariff for CTPP Unit 4 for FY 2014-15 and FY 2015-16, as proposed in the application.

2.3 Accordingly, Commission vide its order dated 24.06.2015 allowed 90% of proposed tariff as an interim tariff for CTPP Unit 4 for FY 2014-15 (91 days) and FY 2015-16 till the provisional/final tariff is determined by the Commission.

2.4 As required under Section 64(2) of the Electricity Act, 2003, public notice with salient features of the petition inviting objections/ comments/ suggestions from any desirous person was published in the following newspapers on the dates mentioned against each:

Sr. No. Name of News Paper Date of publishing (i) Times of India 18.06.2015 (ii) Rajasthan Patrika 18.06.2015 (iii) Dainik Bhaskar 18.06.2015

2.5 The petition was also placed on RVUN and RERC Website. The objections/comments/ suggestions were received from following stakeholders:

• Sh. G. L. Sharma • Jaipur Vidyut Vitran Nigam Ltd. (JVVNL)

2.6 The Commission forwarded the objections/ comments/ suggestions of objectors to RVUN for its replies. The Petitioner replied to the objections/ comments /suggestions made by the objectors vide its letter dated 17.09.2015 and 02.11.2015.

2.7 The Public hearing in the matter was held on 27.10.2015.

2.8 To facilitate reference, the abbreviations used in this Order and an index of the issues and points dealt with are placed at Annexure-1 and Annexure-2, respectively.


SECTION 3 Summary of Objections/Comments/Suggestions and Petitioner’s Response on Petition filed by RVUN for Capital Cost, ARR and Provisional Tariff for Chhabra Thermal Power Station- Unit 4 (1x250 MW) for FY 2014-15 (91 days) COD and Delay

Stakeholder’s Comments/Suggestions: 3.1 Stakeholder submitted that in Para 2.1 of the Petition, it is mentioned that,

notice to DISCOMs for declaring COD was given on dated 25.11.2014. Copy of this notice is available in page 184 of the petition, which states that COD commences from 26.11.2014. The stakeholder pointed out that, exact time at which trial run commenced is not mentioned, for which it is assumed to be at 00:00 hours of 26.11.2014.

3.2 The COD on successful completion of trial run was declared w.e.f. 14:00 hours of 30.12.2014, which indicates trial run has been from 26.11.2014 to 30.12.2014, i.e., around 35 days as against 72 hours. RVUN to give proper justification for such long trial run period.

3.3 RVUN was further requested to provide the following information: • Total meter readings from 00:00 hours of 26.11.2014 to 31.12.2014 of each

half hourly block in respect of kWh, kVA, kVArh, average voltage and current, etc. as given at page 187 to 192 of the petition for the period 27.12.2014 to 30.12.2014.

• Copy of Order No. CE (RDPPC)/ SE(PP)/F.RVUNL/D.503 dated 03.07.2014 of Chief Engineer(RDPPC), Jaipur.

• The certificate of full load trial in page 186 of the petition states that the signatories witnessed the 72 hour full load trial run of CTPP Unit 4 (1x250 MW), commencing from 14:00 hours of dated 27.12.2014 and after verification of MRI and other relevant records, it was certified that Unit 4 has completed full load operation of 72 hours at 14:00 hours of dated 30.12.2014. • RVUN to clarify reason for two different dates of commencement of 72

hours trial run. • Further, RVUN to state issue of any fresh notice served by them to

Discoms for the same, and copy to be submitted. • RVUN to clarify whether in the above circumstance their declaration of

COD dated 31.12.2014 be considered as correct. • RVUN to clarify as to how and in what conditions the unit has been

running during the period 26.11.2014 to 31.12.2014, or whether it


remained shut till 27.12.2014.

3.4 The stakeholder submitted that, as per DPR the COD of Unit 4 was to be achieved in 33 months (Para 15.1 of DPR) from date of Letter of Intent (LOI), dated 20.08.2008. Hence, the Unit was to be commissioned on 19.05.2011, whereas it was commissioned on 31.12.2014. Thus, there is total delay by 3 years, 7 months and 12 days. Further, as per purchase order with BHEL dated 05.11.2008, the supplies were to be completed (for Unit 4) in 38 months from LOI, i.e., by 20.10.2011 (clause 9.1 of purchase order). Further, as per PPA dated 07.06.2007, executed by RVUN with DISCOMs, the unit was to be commissioned in December, 2010. Thus, there is total delay by 4 years. RVUN to submit detailed reasons and justification for the delay.

3.5 The stakeholder submitted that, in the notice dated 25.11.2014 (page 184 of the Petition), it is stated that, during commencement of trial run, many shortcomings and defects was noticed by BHEL. RVUN to submit: • List of shortcomings and defects noticed and reasons. • Duration period, i.e., period during which the defects and shortcomings

remain. • Costs associated • Amount of IDC of such period during which plant remained shut down.

RVUN’s reply

3.6 RVUN submitted that no specific period is mentioned in the Regulations for trial run period, however, demonstration of Maximum Continuous Rating (MCR) through a successful trial run period of 72 hours is a must for declaration of COD.

3.7 RVUN submitted that, as from past experiences, trial run is never completed in 72 hours. Due to new installation, several adjustments and settings were required. RVUN stated the reasons for trial run period from 26.11.2014 to 30.12.2014 as follows:

• During trial run, fault in AVR and high shaft & pedestal vibrations were observed. BHEL was advised to take corrective action for successful completion of trial run. Unit 4 was tripped and boxed up at 2:15 am dated 08.12.2014 due to AVR fault.

• During 26.11.2014 to 31.12.2014, Unit 4 was running intermittently. The Petitioner submitted the details at Annexure-A to replies.

• After rectification of AVR fault and high vibrations, there was stoppage of machine for more than 8 hours. Again trial run started on 15.12.2014 at 15:00 hours and completed at 15:00 hours on 30.12.2014.


3.8 RVUN submitted the details of meter readings for the period 26.11.2014 to 31.12.2014. RVUN also provided a Copy of Order No. CE (RDPPC)/ SE(PP)/F.RVUNL/D.503 dated 03.07.2014 .

3.9 RVUN further stated that, a utility can start trial run on any given date/time, however, date/time for start of 72 hour trial run, will depend on the completion of 72 hours trial run at MCR (Maximum Continuous Rating). • Notice was given to the DISCOMs on 25.11.2014, which states that trial run

to begin from 26.11.2014. • Due to stoppage of machine for more than 8 hours during trial run, the trial

run was restarted on 15.12.2014 at 15:00 hours. • To achieve COD of a unit, RVUN has to demonstrate the Maximum

Continuous Rating (MCR) of Installed Capacity (IC) through a successful trial run of 72 hour and said 72 hours trial run was started from 14:00 hours dated 27.12.2014 and completed at 14:00 hours dated 30.12.2014.

3.10 RVUN submitted that no fresh notice was served to DISCOMs, but committee formed by CE (RDPCC) was informed telephonically. Actual COD was declared on 14:00 hours of 30.12.2014 rather than 31.12.2014.

3.11 As regards the reasons for delay, RVUN submitted that delay in commissioning was due to heavy rainfall at CTPP which delayed welding work of bunkers, resulting in delay in commissioning of coal mill area.

• Unit was synchronized and brought on full load on 30.06.2014, but due to power evacuation restriction of SOLD, RVPN, Jaipur, power generation at CTPP was to be kept upto 750 MW with the condition that Unit 1 should remain on 250 MW due to SPSS scheme.

• Further, a flash over occurred in 6.6 kV HT panel of station incomer 4C of unit 4 on dated 05.08.2014 resulting in failure of HT/LT supply. HT/LT supply was restored on 29.09.2014 and then testing, commissioning of coal mills and BHEL equipments was carried out.

• AVR fault occurred during trial run activity of unit 4, at 11.56 hours on 06.12.2014. After rectification of AVR trial run was restarted on 15.12.2014 at 11:00 hours and finally COD was achieved on 30.12.2014.

3.12 RVUN submitted that, AVR problem, high shaft and pedestal vibration were observed by BHEL. Duration from 26.11.2014 to 23.12.2014 was taken for successful trial run. RVUN also provided the details in this regard and submitted as follows:

• Shortcomings were rectified by BHEL, and no extra cost was incurred by RVUN


• Interest calculation is not possible or relevant. Capital Cost and Means of Finance

Stakeholder’s Comments/Suggestions: 3.13 Stakeholder submitted that the total Project Cost as per DPR including IDC is Rs

2200 Crore, which was later revised to Rs 2991 Crore. In the petition filed earlier, for Unit 3, the Capital Cost of Unit 4 is stated as Rs 3033.50 Crore and now in the present petition, the total capital cost is stated as Rs 3400.79 Crore (inclusive of common facilities, which also includes an amount of Rs 348.48 Crore yet to be incurred after the aforesaid COD. Thus, the cost actually incurred up to COD dated 31.12.2014 has been shown as Rs. 3052.31 Crore only. RVUN to submit certificate of statutory auditor of actual expenditure incurred.

3.14 Further from details of loan and IDC as given in page 44A and 44 B of the petition, the following wereobserved and certain clarifications wererequired from RVUN:

• Till COD, i.e., up to 31.12.2014, only sum of Rs 1426.50 Crore from PFC and sum of Rs 586.53 Crore from REC has been drawn, i.e., Rs 2013.03 Crore in total, as against total sanctioned amount of Rs 2426.90 Crore. RVUN to submit the reasons for lower drawl of loans.

• Further, RVUN to clarify the drawl of an amount of Rs 38.6 Crore from PFC and Rs 266.76 Crore after COD, i.e., 31.12.2014.

• From statements in page 44A and 44B, it is noted that total IDC up to 31.12.2014 works out as Rs 552.02 Crore only (Rs 363.60 Crore from PFC and Rs 188.42 Crore from REC), whereas in Table 2 it has been shown as Rs 689.83 Crore. RVUN to clarify the difference. Further, the stakeholder has pointed out that there should be no IDC after COD.

3.15 The stakeholder submitted that, in the annual accounts of RVUN, CA in their report at Annexure-1 Para 17, have been regularly mentioning about lack of clarity in utilisation of funds raised by RVUN on short term basis for long term investment and whether long term funds have been used to finance short term assets. Hence, proper utilisation of loans is not ascertained. The stakeholder further stated that, the non-maintenance of such accounts had resulted in delay in execution of projects. Petitioner has not drawn total loan sanctioned by PFC and REC, resulting in shortage of funds. Accordingly, RVUN should submit justification regarding the matter. The stakeholder requested the Hon’ble Commission to issue strict directions to RVUN, for maintenance of work wise, project wise accounts of loan.


3.16 The stakeholder submitted that RVUN has claimed an amount of Rs 42.5 Crore being 50% cost of state highway, which should not be admissible as it cannot form a part of generating station and the same should be excluded from capital cost of the project.

3.17 Representative for JVVNL submitted that the Petitioner should submit the reasons for revision in project cost to Rs. 3033.50 Crore as directed by the Commission vide its Order dated 22.05.2015.

RVUN’s reply

3.18 RVUN submitted that certificate of statutory auditor is enclosed as Annexure-C in the replies of the Petitioner.

3.19 RVUN submitted that, till COD of CTPP Unit 4, the drawl from PFC and REC was Rs 1465.14 Crore and Rs 881.01 Crore, as per statement in 44(A) and 44 (B), thus total drawl is Rs 2346.15 Crore. The drawl from financial institutes depended on the payment liability such as for example if bill is received but verification is pending, etc. So, drawl is lower than sanctioned amount. Remaining amount was drawn after COD.

3.20 RVUN submitted that in the statement at Page 44 (A) and 44 (B), total interest of PFC and REC are Rs 572.28 Crore and Rs 280.32 Crore respectively, i.e., Rs. 852.6 Crore. Up to COD, it is Rs. 804.85 Crore. Breakup of the amount Rs 804.85 Crore is as shown below:

Particular Amount (Rs Crore) Total Interest & IDC 804.85 IDC (Interest during Construction) Unit 3 312.02 IDC (Interest during Construction) Unit 4 377.81 Total IDC for Unit 3 &4 689.83 Regular Interest unit 3 (interest of unit 3, after date of COD of unit 3 and interest of the unit 4, after date of COD of unit 4)

115.02

Total Interest & IDC 804.85

3.21 RVUN submitted that detailed elaboration of capital expenditure is given in the Petition at page no. 13 and Annexure- C in replies of Petition.

3.22 RVUN submitted that books of account are maintained as per Company Law. Single central collection bank account for revenues as well as capital receipts is maintained as per instructions of Government treasury. Till COD of CTPP Unit 4, drawal from PFC was Rs 1465.14 Crore and Rs 881.01 Crore from REC. Drawal depends on payment liability, so capital expenditure can be outstanding on


COD date. Further, RVUN stated that loans are not sanctioned for individual package or item wise.

3.23 RVUN submitted that the construction of Kawai-Salpura- Dharnawada Road was essential for transportation of equipment of the generating plant. Further, the road was earlier damaged due to continuous transportation of fly ash bunkers. This damaged road was affecting construction of CTPP Unit 3 &4, and heavy equipments were stuck consequentially. So, PWD and RVUN agreed to share the cost of construction of the road equally. RVUN also submitted the copy of correspondence in this regard.

Compliance to Directions regarding Capital Cost

Stakeholder’s Comments/Suggestions: 3.24 The stakeholder submitted that, in Tariff Order dated 22.05.2015, Hon’ble

Commission had given following directions to RVUN : • The Commission directed RVUN in Para 4.12 at page 21of the Order to

submit the audited report for entire project, i.e., Unit 3 & 4 (CTPP- Stage 1, Phase-II) by statutory auditors as on COD of the unit 4 and submit the statutory auditor’s certificate for actual capital cost along with petition for determination of final capital cost and approval of final tariff for entire project.

• In Para 4.40 (page 29) of the said Order, the Commission has directed the Petitioner to submit detailed individual package wise reasons for increase in actual project cost as compared to original project cost estimates in its petition for determination of capital cost. Further, cost estimates not considered in original project estimates, but considered in revised cost, should be provided along with detailed reasons. Supporting documents to be provided wherever necessary.

• In Para 4.55 of the Order, Hon’ble Commission has given certain directives which are to be submitted by RVUN.

• In Para 4.63, of the Order, RVUN was directed to submit exact impact of taxes and duties on contract price along with computations of taxes and duties showing amount on which such tax and duty is levied, in the petition for determination of final capital cost.

• In Para 4.84, 4.91, 4.101 and 4.108 of the Order, Hon’ble Commission directed RVUN to submit details of construction of township along with other details required for final capital cost determination.


RVUN’s reply

3.25 RVUN with respect to the directions of Commission in Order dated 22.05.2015, submitted that:

• Copy of statutory auditor’s certificate is enclosed as Annexure- C. However, final petition for determination of capital cost of unit 3 &4 and statutory auditor’s certificate based on audited accounts shall be filed after accounts for FY 2014-15 are audited. Package wise increase in project cost is provided in page nos. 352-355 of the petition. Details of cost estimated included later in the project is Rs 85 Crore, and details are as follows:

Sl. No. Particular

As per BOD

(Rs. Crore)

Contract Order Value

(Rs. Crore)

Difference (Rs. Crore)

1 Water System 95.68 96.39 0.71 2 Colony & Residential Quarter 53.05 62.3 9.25 3 Pre fabricators room 5.29 5.29 4 C & I 33.24 33.97 0.73 5 Furniture & Fixtures 0.94 0.94 6 Initial Spares 68.38 68.38

Sub- Total 85.30 Less: Establishment & Contingencies & Others 0.42

Total 84.88

3.26 RVUN also submitted the copy of work orders. Detailed information regarding the other directions of Commission, as specified by stakeholder, shall be submitted in petition for determination of final capital cost of Unit 3 & 4.

Sale of Infirm Power

Stakeholder’s Comments/Suggestions: 3.27 As per Para 4.117, of Order dated 22.05.2015, RVUN was to furnish, details of

actual revenue realised from sale of infirm power, actual fuel cost incurred on generation of infirm power, treatment of expenses and revenue in books of accounts. Units generated month-wise during infirm power period for Units 3 & 4 was to be furnished separately.

RVUN’s reply

3.28 RVUN submitted information of infirm power of CTPP Unit 4 as follows:


Gross Generation

(MU)

Auxiliary Consumption

(MU)

Net Sent Out (MU)

Washed Coal

Amount (Rs.)

FO Amount

(Rs.)

LDO Amount

(Rs.)

Total Amount

(Rs.)

111.8107 13.427 98.731 464498540 169863641 30812034 665174215

Project Execution Stakeholder’s Comments/Suggestions: 3.29 The stakeholder submitted that clause 9.2 of the Order dated 05.11.2008

placed with BHEL states that contractor shall furnish detailed PERT network for completion of work as per commissioning schedule. It should indicate schedules for availability of civil works and foundations to be arranged by Purchaser along with schedules of supply of equipment of various activities. RVUN was to provide a copy of PERT Chart submitted by the Contractor and finalised after discussions between RVUN and BHEL.

RVUN’s reply

3.30 RVUN provided the copy of PERT chart. Norms of operation

Stakeholder’s Comments/Suggestions: 3.31 Representative for JVVNL requested the Commission to direct the Petitioner to

follow the norms of operation as specified in RERC Tariff Regulations. Further, the expenses should be allowed as per the RERC Tariff Regulations.

RVUN’s reply

3.32 RVUN submitted that the instant Petition has been filed as per RERC Tariff Regulations, 2014.

Depreciation

Stakeholder’s Comments/Suggestions: 3.33 The stakeholder submitted that depreciation depends upon the determination

of capital cost.

RVUN’s reply 3.34 RVUN submitted that the Commission should allow depreciation as per RERC

Tariff Regulations, 2014.


O & M Expenses Stakeholder’s Comments/Suggestions:

3.35 The stakeholder submitted that O&M expenses are to be allowed for period during which unit are considered to run from date of COD as per norms specified in Regulations.

RVUN’s reply

3.36 RVUN submitted that the Commission should allow O&M Expenses as per RERC Tariff Regulations, 2014.

Interest on Term Loans and Finance Charges

Stakeholder’s Comments/Suggestions: 3.37 The stakeholder submitted that Interest on Term Loans and Finance Charges

are dependent on determination of capital cost. Interest will be admissible on loan amount arrived at by deducting equity from Capital Cost.

RVUN’s reply

3.38 RVUN submitted that the Commission should allow Interest on term loans as per RERC Tariff Regulations, 2014.

Interest on Working Capital Stakeholder’s Comments/Suggestions:

3.39 The stakeholder submitted that interest on working capital should be arrived at as per norms specified in the Regulations.

RVUN’s reply

3.40 RVUN submitted that the Commission should allow Interest on working capital as per RERC Tariff Regulations, 2014.

Insurance Charges

Stakeholder’s Comments/Suggestions: 3.41 The stakeholder submitted that, in accordance with Regulation 25 of RERC

Tariff Regulation 2014, actual insurance expenses incurred by generating company should be allowed. Since RVUN has not submitted any documents, this should be inadmissible.

RVUN’s reply

3.42 RVUN submitted the copy of insurance policy and requested the Commission to allow insurance charges.


Variable Charges

Stakeholder’s Comments/Suggestions: 3.43 The stakeholder mentioned that, as per Regulation 45(3), Gross Station Heat

Rate (SHR) for new thermal generating station achieving COD on or after 01.04.2014 is as follows: Gross SHR= 1.045 x Design Heat Rate (kcal/kWh)

3.44 In petition, form G 2.1 at page 22 the guaranteed design heat rate (kcal/kWh) is shown as 1941.9. So, Gross SHR works out as 1.045x 1941.9= 2029.29 kcal/kWh, whereas in petition it is shown as 2312.31 kcal/kWh, which is on the higher side.

3.45 Further, the stakeholder submitted that, as per clause 5.1.2 of coal mining and delivery agreement dated 16.07.2008, the GCV of washed coal is 4500 kcal/kg (ADB) whereas in petition it is taken as 4332 kcal/kg.

3.46 RVUN to submit calculations of fuel cost of Rs 3475/ MT.

3.47 Representative for JVVNL submitted that the Petitioner has not submitted the documentary evidence for fuel cost and the basis of calculation of Variable Charges.

RVUN’s reply

3.48 RVUN submitted the SHR computation as follows:

Sl. No. Particular Figure

1 Guaranteed Turbine Design Heat Rate (kcal/kWh) A 1941.9

2 Boiler efficiency B 87.76% 3 Design Heat Rate (kcal/kWh) C=A/B 2212.74 4 Station Heat Rate Cx1.045 2312.31

3.49 RVUN submitted that, as per clause no. 5.1.2 of coal mining and delivery

arrangement (CMDA) dated 16.07.2008, GCV of washed coal is 4500 kcal/kg on ADB basis. The actual GCV of washed coal received from PKCL during FY 2014-15 is 4560 kcal/kg on ADB basis. Further, in accordance with RERC Tariff Regulations, 2014, GCV as received is to be taken and hence the GCV taken in the Petition as 4332 kcal/kg is average of available GCV for Apr 2014 to Sept 2014.

3.50 RVUN stated that Contract price is total delivered price per MT of coal at delivery point and comprises of Basic price and Reimbursable (Railway


Freight). In reference to clause 5.1.2 of CMDA, the Applicable Contract Price (excl. railway freight) applicable on 01.04.2014 comes to Rs 1236.20/ MT for washed coal of 4500kCal/kg. RVUN provided the copy of letter in this regard.

3.51 RVUN also submitted that, fuel cost of washed coal from PKCL taken as Rs 3475/MT (Form 5.1) was the average cost of the coal for the period April 2014 to September 2014. The Petitioner provided the detailed calculation of the coal cost. The Petitioner also provided the bifurcation of present cost of PKCL washed coal.

Commission’s views on issues raised by the Stakeholders: 3.52 The Commission has taken note of all the comments/suggestions /observations

of the Stakeholders raised in writing as well as during the course of hearing and RVUN’s responses to them. The Commission has attempted to capture all the comments/suggestions/observations. However, in case any comment/suggestion/observation is not specifically elaborated, it does not mean that the same has not been considered. The Commission has considered all the issues raised by the Stakeholders related to the instant petition and RVUN’s response on these issues while carrying out the detailed analysis in accordance with RERC Tariff Regulations,2014 as detailed in the next Sections of the Order.


SECTION 4

Determination of Provisional Capital Cost of Unit 4 (1x250MW) Chhabra Thermal Power Project as on COD, i.e., 30.12.2014

Petitioner’s Submission

4.1 RVUN submitted that CTPP Unit 4 was first synchronised on oil with Grid on 23.04.2014 and coal firing was started on 30.06.2014. RVUN further submitted that the Unit achieved full load on coal, i.e., 250 MW on 30.06.2014. Notice to Discoms for declaring COD was given on 25.11.2014. RVUN submitted that the Unit achieved COD on 30.12.2014 as per committee report dated 30.12.2014, and RVUN letter of declaration of COD dated 30.12.2014.

4.2 The proposal for setting up 2x250 MW Chhabra Unit 3 and Unit 4 was approved by the Board of Directors in its 116th meeting held on 12.12.2006. The State Government accorded “Administrative & Financial” approval vide its letter dated 31.01.2007 at an estimated project cost of Rs. 2200 Crore comprising of equity support of Rs.440 Crore from the State Govt. and debt portion (borrowings from PFC/Commercial Banks) of Rs. 1760 Crore.

4.3 The project cost was revised to Rs. 2991 Crore in the 211th BOD meeting held on 29.08.2012. Out of total project cost of Rs. 2991 Crore for Phase II of CTPP, equity support from GoR was revised to Rs. 598.20 Crore and balance was to be arranged as loan from financial institutions.

4.4 The cost of the project was further revised to Rs. 3033.50 Crore due to reconstruction of Kawai-Salpura to Dharnawada section of State Highway-51, on which an amount of about Rs. 85 Crore was incurred. The cost is to be shared equally between PWD and Energy Department. Accordingly the share of Rs. 42.50 Crore (50% of Rs 85 Crore) for reconstruction of aforesaid 47.5 km road has been included in the project cost of Chhabra TPP Unit 3&4.

4.5 The Board of Directors approved the revised total capital cost of Rs. 3033.50 Crore for CTPP Phase II in its 216th meeting dated 07.11.2012. The Government of Rajasthan vide letter dated 28.03.2013 accorded approval of enhanced capital cost and equity support. Further, Power Finance Corporation (PFC) vide letters dated 02.07.2009 & 17.06.2013 (Loan No. 07301020) sanctioned a loan of Rs. 1465 Crore to RVUN for this Project and REC vide letters dated 02.07.2009 and 13.06.2013 sanctioned a loan of Rs. 962 Crore.

4.6 The cost of the project further increased from Rs. 3033.50 Crore to Rs. 3334 Crore mainly due to increase in interest during construction from Rs. 474 Crore


to Rs. 689 Crore and increase in order value of contracts placed with different contractors and vendors to the tune of Rs. 85 Crore.

4.7 Apart from the above capital cost of Rs. 3334 Crore, the sharing of common expenditure between Phase I (Units 1 & 2) and Phase II (Units 3 & 4) is Rs. 66.49 Crore as approved by the Commission in the order dated 06.06.2013. The said expenditure is towards railway siding amounting to Rs. 25 Crore, water conductor system amounting to Rs. 21.27 Crore and permanent township like boundary walls, roads and non-residential buildings amounting to Rs. 20.22 Crore. The common expenditure of Rs. 66.49 Crore has been further allocated to Unit 3 and Unit 4 to the tune of Rs. 37.79 Crore and Rs. 28.70 Crore respectively.

4.8 The cost of the project upto 30.12.2014 as on COD for Unit 4 was Rs. 3052.31Crore and Rs. 348.48 Crore is yet to be incurred.

4.9 The order for Main Equipment has been placed on BHEL and composite package for Balance of Plant has been ordered on M/s Indure Pvt. Ltd. The capital cost of CTPP Phase-II as submitted by the Petitioner is shown in theTable below:

Table 1: Capital Cost of CTPP Phase II as submitted by the Petitioner (Rs. Crore)

Particulars

Capital Cost as per BOD

dt. 07.11.2012

Contract Order value

Expenditure upto

31.12.2014

Capital Cost of Unit 3


Expenditure to be

incurred

Furniture& Fixtures and Office equipment (A) 0 0 0.94 0 0.94 0

Plant & Equipment Steam Generator Island

1256.66 1256.66 1223.37 695.24 528.13 33.29 Turbine Generator Island BoP Mechanical

930.01 930.01 879.34 499.73 379.61 50.67 BoP Electrical Control & Instrumentation 33.24 33.97 33.56 19.07 14.49 0.41 Total Plant & Equipment (B) 2219.91 2220.64 2136.27 1214.04 922.23 84.37 Civil Works 25.00 25.00 40.00 22.73 17.27 10.00 Water Supply System 95.68 96.39 79.16 44.98 34.18 38.51 Water reservoir 19.94 19.94 11.79 6.70 5.09 8.15 Colony

53.05 62.30 28.08 15.96 12.12 54.43 Residential Quarter Pre-Fabrication Rooms 5.29 5.29 3.01 2.28 0.00 Other 2.50 2.50 2.33 1.32 1.01 0.17 Construction Road 42.50 42.50 29.00 16.48 12.52 13.50 Total Civil Works (C) 238.67 253.92 195.65 111.19 84.46 124.76 Construction and pre-commissioning expenses

21.89 13.37 8.52 12.10 Development and pre-


Particulars

Capital Cost as per BOD

dt. 07.11.2012

Contract Order value

Expenditure upto

31.12.2014



Expenditure to be

incurred

operative including overheads Establishment/Administration expenses 25.00

Design Engineering Contingencies and consultancy charges 9.41 33.99

Total Development and pre-operative expenses (D) 34.41 33.99 21.89 13.37 8.52 12.10

Total Capital Cost excluding IDC and FC (E=A+B+C+D) 2492.99 2508.55 2354.75 1338.60 1016.15 221.23

IDC & FC (F) 473.74 689.83 312.02 377.81 Entry Tax & Labour Welfare Cess (G) 66.60 66.60 7.73 0 7.73 58.87

BHEL Spares (H) 68.38 68.38 Capital Cost as on COD (I=E+F+G+H) 3033.33 3052.31 1650.62 1401.69 348.48

Trial run expenditure Unit 4 (J) 66.51 Total Capital Cost (K=I+J) 1468.20

Commission’s Analysis

4.10 Regulation 42 of the RERC Tariff Regulations, 2014 specifies as under:

“42. Petition for determination of generation tariff …………………….. (4) A Generating Company may file a Petition for determination of provisional tariff in advance of the anticipated date of Commercial Operation of the Unit or Stage or Generating Station as a whole, as the case may be, based on the capital expenditure actually incurred up to the date of making the Petition or a date prior to making of the Petition, duly certified by the Statutory Auditors and the provisional tariff shall be charged from the date of commercial operation of such Unit or State or Generating Station, as the case may be. (5) A Generating Company shall file a fresh Petition in accordance with these Regulations, for determination of final tariff based on actual capital expenditure incurred up to the date of commercial operation of the Generating Station duly certified by the Statutory Auditors based on Audited Accounts, in accordance with the formats prescribed by the Commission from time to time. ……………………..”

4.11 The Phase II of CTPP comprises of two Units of 250 MW each and as on date of filing of the petition, both the Units had achieved COD. The sanctioned project cost is combined for both the Units. The orders placed by the Petitioner are combined for both the Units. The Commission vide its order dated 22.05.2015 in Petition No. 450/14 provisionally approved the Capital Cost of Unit 3. In the said order, the Commission directed the Petitioner to submit certain


information regarding the Capital Cost along with its Petition for final tariff for Unit 3 and Unit 4 based on the actual audited Capital Cost.

4.12 The Petitioner has filed the instant petition for determination of capital cost of Unit 4 based on allocation of actual capital expenditure as on COD of Unit 4, certified by the Chartered Accountant, among both the Units.The Petitioner, during the hearing, submitted that the Audited Accounts for FY 2014-15 were not finalised at the time of filing of the Petition. Regulation 16 of the RERC Tariff Regulations, 2014 specifies as under:

“16. Capital Cost and capital structure ……………………. (3) The capital cost shall be admitted by the Commission after prudence check and shall form the basis for determination of tariff. Provided that the actual capital expenditure as on COD for the original scope of work based on the audited accounts of the company may be considered subject to prudence check by the Commission……………………”

4.13 Therefore, as the Audited Accounts are not available to carry out the prudence check of the Capital Cost, the Commission has carried out the preliminary prudence check of Capital Cost of Unit 4.

Approval of Hard Cost 4.14 The Commission observes that initially the project cost was estimated as Rs.

2200 Crore which included IDC and financing charges of Rs. 151.45 Crore. The project cost was revised to Rs. 3033.50 Crore which included IDC and financing charges of Rs. 473.74 Crore. Accordingly, the hard cost of the project was originally estimated as Rs. 2048.55 Crore. The Petitioner has claimed the Capital Cost of Rs. 3052.31 Crore as on COD of Unit 4 which includes IDC and financing charges of Rs. 689.83 Crore. Accordingly, the hard cost of the project as on COD of Unit 4 is Rs. 2362.48 Crore.

4.15 The Commission is of the view that the revised estimated Capital Cost of Rs. 3033.50 Crore was on the basis of fairly actual data and has also factored the actual award of Main Plant Equipment contract price and therefore the Commission has considered the estimate of Rs. 3033.50 Crore as the base capital cost.

4.16 The Commission in its order dated 22.05.2015 had provisionally approved the hard cost of the project and provisionally allocated the total hard cost amongst Unit 3 and Unit 4. The Commission has also provisionally allowed the cost of common assets allocated to Phase II from Phase I. Further, the Commission in its Order dated 22.05.2015, has allowed the hard cost of Unit 3


as on its COD by considering the lower of actual hard cost incurred and the allocated hard cost to Unit 3.

4.17 The Commission has followed the same approach in approval of provisional hard cost of Unit 4. The Commission has considered the allocated hard cost of Unit 4 out of the total hard cost as approved in the order dated 22.05.2015. Further, the Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. The Commission has also considered the cost of common assets allocated to Phase II from Phase I. The Commission shall once again examine the issue of allocation of costs amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost on COD of Unit 4 and final tariff for Unit 3 and Unit 4.

BTG Package 4.18 The cost of BTG package as per the revised cost approval dated 07.11.2012 is

Rs. 1256.66 Crore. As against the same, the actual cost of BTG package claimed by the Petitioner is Rs. 1223.37 Crore as on COD of Unit 4. Out of this total cost, the Petitioner has allocated Rs. 528.13 Crore to Unit 4. The Commission in its order dated 22.05.2015 had provisionally approved Rs. 1256.66 Crore towards BTG package and has allocated Rs. 542.50 Crore to Unit 4. The Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. Accordingly, the Commission has provisionally approved Rs. 528.13 Crore towards cost of BTG package for Unit 4 as on COD of Unit 4. The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

BoP Package 4.19 The cost of BoP package as per the revised cost approval dated 07.11.2012 is

Rs. 930.01 Crore. As against the same, the actual cost of BoP package claimed by the Petitioner is Rs. 879.34 Crore as on COD of Unit 4. Out of this total cost, the Petitioner has allocated Rs. 379.61 Crore to Unit 4. The Commission in its order dated 22.05.2015 had provisionally approved Rs. 930.01 Crore towards BoP package and has allocated Rs. 401.49 Crore to Unit 4. The Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. Accordingly, the Commission has provisionally approved Rs. 379.61 Crore towards cost of BoP package for Unit 4 as on COD of Unit 4. The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of


approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Control and Instrumentation (C&I) 4.20 The cost of control and instrumentation as per the revised cost approval dated

07.11.2012 is Rs. 33.24 Crore. As against the same, the actual cost of control and instrumentation claimed by the Petitioner is Rs. 33.56 Crore as on COD of Unit 4. Out of this total cost, the Petitioner has allocated Rs. 14.49 Crore to Unit 4. The Commission in its order dated 22.05.2015 had provisionally approved Rs. 33.24 Crore towards control and instrumentation and has allocated Rs. 14.35 Crore to Unit 4. The Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. Accordingly, the Commission has provisionally approved Rs. 14.35 Crore towards cost of control and instrumentation for Unit 4 as on COD of Unit 4.The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Railway System 4.21 The cost of railway system as per the revised cost approval dated 07.11.2012 is

Rs. 25 Crore. As against the same, the actual cost of railway system claimed by the Petitioner is Rs. 40 Crore as on COD of Unit 4. Out of this total cost, the Petitioner has allocated Rs. 17.27 Crore to Unit 4. The Commission in its order dated 22.05.2015 has provisionally approved Rs. 20 Crore towards railway system and has allocated Rs. 8.63 Crore to Unit 4. Further, the Commission has also considered Rs. 10.79 Crore out of Rs. 25 Crore towards the cost of common assets allocated to Phase II from Phase I. Hence, the total cost of railway system of Unit 4 provisionally allocated by the Commission is Rs. 19.42 Crore. The Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. Accordingly, the Commission has provisionally approved Rs. 17.27 Crore towards railway system for Unit 4 as on COD of Unit 4. The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Water supply system 4.22 The cost of water supply system as per the revised cost approval dated

07.11.2012 is Rs. 95.68 Crore. As against the same, the actual cost of water supply system claimed by the Petitioner is Rs. 79.16 Crore as on COD of Unit 4.


Out if this total cost, the Petitioner has allocated Rs. 34.18 Crore to Unit 4. The Commission in its order dated 22.05.2015 has provisionally approved Rs. 76.54 Crore towards water supply system and has allocated Rs. 33.04 Crore to Unit 4. Further, the Commission has also considered Rs. 9.18 Crore out of Rs. 21.27 Crore towards the cost of common assets allocated to Phase II from Phase 1. Hence, the total cost of water supply system of Unit 4 provisionally allocated by the Commission is Rs. 42.22 Crore. The Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. Accordingly, the Commission has provisionally approved Rs. 34.18 Crore towards water supply system for Unit 4 as on COD of Unit 4. The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Water reservoir 4.23 The cost of water reservoir as per the revised cost approval dated 07.11.2012 is

Rs. 19.94 Crore. As against the same, the actual cost of water reservoir claimed by the Petitioner is Rs. 11.79 Crore as on COD of Unit 4. Out of this total cost, the Petitioner has allocated Rs. 5.09 Crore to Unit 4. The Commission in its order dated 22.05.2015 has provisionally approved Rs. 15.95 Crore towards water reservoir and has allocated Rs. 6.89 Crore to Unit 4. The Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. Accordingly, the Commission has provisionally approved Rs. 5.09 Crore towards water reservoir for Unit 4 as on COD of Unit 4. The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Residential quarters 4.24 The cost of residential quarters as per the revised cost approval dated

07.11.2012 is Rs. 53.05 Crore. As against the same, the actual cost of residential quarter claimed by the Petitioner is Rs. 28.08 Crore as on COD of Unit 4. Out of this total cost, the Petitioner has allocated Rs. 12.12 Crore to Unit 4. The Commission in its order dated 22.05.2015 has provisionally approved Rs. 42.44 Crore towards residential quarter and has allocated Rs. 18.32 Crore to Unit 4. Further, the Commission has also considered Rs. 8.73 Crore out of Rs. 20.22 Crore towards the cost of common assets allocated to Phase II from Phase 1. Hence, the total cost of residential quarter of Unit 4 provisionally allocated by the Commission is Rs. 27.05 Crore. The Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated


hard cost. Accordingly, the Commission has provisionally approved Rs. 12.12 Crore towards residential quarter for Unit 4 as on COD of Unit 4. The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Pre fabrication rooms 4.25 The cost on this account was not envisaged in the revised cost approval

dated 07.11.2012. The Petitioner has claimed Rs. 5.29 Crore towards pre fabrication rooms as on COD of Unit 4. The Petitioner has not submitted any justification for claiming this cost. The Commission in its order dated 22.05.2015 has not approved any cost on this account. As the Commission is approving the provisional capital cost of Unit 4 based on the provisional hard cost approved in its order dated 22.05.2015, the Commission in this order has not approved any cost on this account. The Commission shall carry out the prudence check of the justification and cost under pre fabrication rooms in the approval of final Capital Cost.

Other Cost 4.26 The other cost as per the revised cost approval dated 07.11.2012 is Rs. 2.50

Crore. As against the same, the Petitioner has claimed Rs. 2.33 Crore as on COD of Unit 4. The Petitioner has allocated Rs. 1.01 Crore to Unit 4. The Commission in its order dated 22.05.2015 has provisionally approved Rs. 2.00 Crore towards other cost and has allocated Rs. 0.86 Crore to Unit 4. The Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. Accordingly, the Commission has provisionally approved Rs. 0.86 Crore towards other cost for Unit 4 as on COD of Unit 4. The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Construction roads 4.27 The cost of construction roads as per the revised cost approval dated

07.11.2012 is Rs. 42.50 Crore. As against the same, the Petitioner has claimed Rs. 29 Crore towards construction roads as on COD of Unit 4. The Commission in its order dated 22.05.2015 has not approved any cost on this account. In the said order, the Commission directed the Petitioner to claim these expenses separately with proper justification along with petition for determination of final Capital Cost. As the Commission is approving the provisional capital cost of


Unit 4 based on the provisional hard cost approved in its order dated 22.05.2015, the Commission in this order has not approved any cost on this account. The Commission will once again examine this issue at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Entry Tax & Labour welfare cess 4.28 The cost of entry tax & labour welfare cess as per the revised cost approval

dated 07.11.2012 is Rs. 66.60 Crore. As against the same, the Petitioner has claimed Rs. 7.73 Crore towards entry tax & labour welfare cess as on COD of Unit 4. The Commission in its order dated 22.05.2015 has not approved any cost on this account. In the said order, the Commission directed the Petitioner to submit the exact taxes and duties paid along with computations along with the petition for determination of final Capital Cost. As the Commission is approving the provisional capital cost of Unit 4 based on the provisional hard cost approved in its order dated 22.05.2015, the Commission in this order has not approved any cost on this account. The Commission will once again examine this issue at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Furniture & fixtures and office equipment 4.29 The cost on this account was not envisaged in the revised cost approval

dated 07.11.2012. The Petitioner has claimed Rs. 0.94 Crore towards Furniture & fixtures and office equipment as on COD of Unit 4. The Petitioner has not submitted any justification for claiming this cost. The Commission in its order dated 22.05.2015 has not approved any cost on this account. As the Commission is approving the provisional capital cost of Unit 4 based on the provisional hard cost approved in its order dated 22.05.2015, the Commission in this order has not approved any cost on this account. The Commission shall carry out the prudence check of the justification and cost under Furniture & fixtures and office equipment in the approval of final Capital Cost.

Development and pre-operative expenses 4.30 The cost of development and pre-operative expenses as per the revised cost

approval dated 07.11.2012 is Rs. 34.41 Crore. As against the same, the Petitioner has claimed Rs. 21.89 Crore towards development and pre-operative expenses as on COD of Unit 4. Out of this total cost, the Petitioner has allocated Rs. 8.52 Crore to Unit 4. The Commission in its order dated 22.05.2015 has provisionally approved Rs. 29.41 Crore towards development and pre-operative expenses and has allocated Rs. 12.70 Crore to Unit 4. The


Commission has provisionally approved the lower of the actual hard cost of Unit 4 as on COD of Unit 4 and allocated hard cost. Accordingly, the Commission has provisionally approved Rs. 8.52 Crore towards development and pre-operative expenses for Unit 4 as on COD of Unit 4. The Commission will once again examine the issue of allocation of cost amongst Unit 3 and Unit 4 at the time of approval of final completed Capital Cost as on COD of respective units and final tariff for Unit 3 and Unit 4.

Total Hard Cost 4.31 Based on the above discussion the Commission provisionally approves the

hard cost of Unit 4 as on COD as shown in the Table below.

Table 2: Hard Cost of CTPP Project and Unit 4 as on COD of Unit 4 (Rs. Crore)

Particulars

Total Hard Cost

Provisionally approved by

the Commission

Unit 3 Hard Cost

(Allocated Cost)

Unit 4 Hard Cost

(Allocated Cost)

Total Hard Cost as on

COD of Unit 4 claimed by

RVUN

Hard Cost claimed for Unit 4

Provisionally Approved

Hard Cost for Unit 4

A B C D E Min (C,E) Furniture & Fixtures and office equipment 0.00 0.00 0.00 0.94 0.94 0.00

Steam Generator Island 1256.66 714.16 542.50 1223.37 528.13 528.13

Turbine Generation Island BoP Mechanical 930.01 528.52 401.49 879.34 379.61 379.61 BoP Electrical Control and Instrumentation 33.24 18.89 14.35 33.56 14.49 14.35 Total Plant and Equipment 2219.91 1261.57 958.34 2136.27 922.23 922.09 Railway System 20.00 25.58* 19.42* 40.00 17.27 17.27 Water Supply System 76.54 55.59* 42.22* 79.16 34.18 34.18 Water Reservoir 15.95 9.06 6.89 11.79 5.09 5.09 Residential Quarter 42.44 35.61* 27.05* 28.08 12.12 12.12 Pre Fabricator Rooms 0.00 0.00 0.00 5.29 2.28 0.00 Other 2.00 1.14 0.86 2.33 1.01 0.86 Construction road 0.00 0.00 0.00 29.00 12.52 0.00 Total Civil Works 156.93 126.97 96.45 195.65 84.46 69.52 Entry Tax and Labour Welfare Cess 0.00 0.00 0.00 7.73 7.73 0.00

Establishment/Administrative Exp. 29.41 16.71 12.70 21.89 8.52 8.52 Contingencies and Consultancy charges Total Development and Pre-Operative Exp. 29.41 16.71 12.70 21.89 8.52 8.52

Hard Cost 2406.25 1405.26 1067.48 2362.48 1023.88 1000.13 *Including Cost allocated from Unit 1 and Unit 2

Scheduled Completion Period: 4.32 The Commission observes that as per the EPC contract, the Unit 3 and 4 were

to be commissioned within 36 months and 38 months respectively from the


Letter of Award issued to the EPC Contractor. Accordingly, as per the schedule, Unit 3 was supposed to be commissioned by 05.11.2011 and Unit 4 was supposed to be commissioned by 05.01.2012. However, Unit 3 achieved COD on 19.12.2013 and Unit 4 achieved COD on 30.12.2014.

Date of Commercial Operation 4.33 One Stakeholder has objected on the procedure followed by RVUN for

declaring COD of Unit4. The Commission has gone through the submission of RVUN, including the certificate declaring successful trail run for Unit 4. The Petitioner vide its letter dated 25.11.2014 issued a notice to the Discoms regarding commencement of trial run to demonstrate installed capacity of CTPP Unit 4. Further, vide the letter dated 30.12.2014, the Petitioner has notified the declaration of COD of CTPP Unit 4. The main contention of the stakeholder was that RERC Tariff Regulations, 2014 specify the trial run duration of 72 hours after notice to the distribution licensees whereas the COD was declared after 35 days of issue of notice to the distribution licensees. The Petitioner in its replies to the stakeholder has submitted that the notice was issued for commencement of trial run w.e.f. 26.11.2014 but due to several adjustments and settings required and intermittent operation, the trial run was started w.e.f. 15.12.2014 and COD declared on 30.12.2014 after 72 hours of successful trial run. This issue also came up during the Hearing on 27.10.2014 during which the stakeholder made a detailed representation.

4.34 The Commission acknowledges that the COD was declared on 30.12.2014 after demonstrating successful trial run for 72 hours. The Commission has accordingly considered the actual COD of Unit 4 as 30.12.2014.

Delay in commissioning of the Unit: 4.35 Unit 4 of Chhabra Thermal Power Project achieved COD on 30.12.2014. Thus,

there is delay of around 34 months in commissioning of the Unit4. The Petitioner vide its replies to the stakeholder submitted that the delay in commissioning of Unit 4 was on account of heavy rainfall resulting in delay in commissioning of coal mill area, power evacuation restriction imposed by RVPN and tripping of Unit 4 on AVR failure. The Petitioner has not submitted any supporting documents for substantiating the claims.

4.36 The Commission observes that the Unit was synchronised and brought to full load on 30.6.2014 while the COD was declared on 30.12.2014. There has been a time gap of 6 months between attainment of full load and declaration of COD. It is observed that some technical failures also occurred during this


period. The Commission acknowledges that the reasons for delay in commissioning have to be examined in detail while approving the final capital cost of Unit 3 and Unit 4.

4.37 The Commission in its Order dated 22.05.2015 directed the Petitioner to submit detailed information in this regard. The Commission shall examine the information submitted by the Petitioner and shall take final view regarding the incremental cost on account of delay in commissioning of CTPP Unit 3 and Unit 4 in the approval of final Capital Cost.

IDC and Financing Charges 4.38 The IDC and financing charges as per the revised cost approval dated

07.11.2012 is Rs. 473.74 Crore. As against the same, the Petitioner has claimed Rs. 689.83 Crore towards IDC and finance charges as on COD of Unit 4. The Commission in its order dated 22.05.2015 has provisionally approved Rs. 342.35 Crore towards IDC and financing charges. Out of this total cost, the Petitioner has allocated Rs. 377.81 Crore to Unit 4. As the Commission is approving the provisional capital cost of Unit 4 based on the provisional hard cost approved in its order dated 22.05.2015, the Commission in this order has not recomputed the IDC and financing charges. The Commission has provisionally considered the total IDC and financing charges of Rs. 342.35 Crore as approved in the order dated 22.05.2015. In the said order, The Commission has allocated Rs. 179.94 Crore towards IDC and financing charges of Unit 3. The balance amount of Rs. 162.41 Crore has been considered as IDC and financing charges of Unit 4. The Commission shall take a final view regarding the IDC and financing charges in the approval of final Capital Cost.

4.39 During the Hearing held on 27.10.2015, one stakeholder raised concern regarding the repayments of REC Loan before the COD of Unit 4. Although the Petitioner submitted in the hearing that the reply to the same would be submitted, it has not replied so far. The Commission directs the Petitioner to submit the details in this regard alongwith its Petition for approval of final Capital Cost and Tariff.

4.40 The Capital Cost provisionally approved by the Commission for Unit 4 as on COD of Unit 4 is as shown in the Table below:


Table 3: Provisionally approved Capital Cost for the Project and for Unit 4 as on COD (Rs. Crore)

Particulars

Total project cost as

submitted by RVUN

Cost of Unit 4 claimed by RVUN

Total project cost provisionally

approved by the Commission

Provisionally approved cost of Unit 4 as on

COD

Hard Cost 2362.48 1023.89 2406.25 1000.13 IDC and financing

charges 689.83 377.81 342.35 162.41

Total Cost 3052.31 1401.69 2748.60 1162.54 4.41 The Petitioner submitted that the trial run expenditure of Rs. 66.51 Crore has not

been capitalised as the same shall be reimbursed through billing of trial run energy. However if the same has not been reimbursed fully, the same shall be capitalised in the Capital Cost of Unit 4. As the Petitioner has not claimed any cost on this account, the Commission has not considered the same. Further, it is to be observed that in accordance with RERC Tariff Regulations, 2014, the fuel cost pertaining to infirm power has to be recovered from the Discoms.

4.42 The Commission has further allocated the total cost of Unit 4 as provisionally approved to class wise assets for the purpose of computing depreciation in the proportion of asset class wise cost as percentage of total cost submitted by the Petitioner. Accordingly, the asset class wise Capital Cost provisionally considered by the Commission is given in Table below: Table 4: Asset class wise break-up of Capital Cost of Unit 4 as on COD (Rs. Crore)

Particulars RVUN Approved

Land & Land rights 0.00 0.00 Hydraulic works 95.33 79.07 Building & Civil works of Power Plant 123.73 102.62

Plant & Machinery 1161.33 963.21 Communication equipment 20.00 16.59 Vehicles 0.00 0.00 Furniture & fixtures 1.28 1.06 Office equipment 0.00 0.00 Capital spares 0.00 0.00 IT equipment 0.00 0.00

Total 1401.69 1162.54


SECTION 5

Determination of ARR and Tariff for FY 2014-15

5.1 The Annual Fixed Charges comprise of the following elements: i. Depreciation ii. Interest on Term Loan iii. Interest on Working Capital iv. Operation and Maintenance (O&M) Expenses v. Return on Equity vi. Less: Non-tariff Income

5.2 Each of these elements has been dealt with in the following paragraphs.

Additional Capitalisation 5.3 The Petitioner has submitted the expenditure to be incurred as Rs. 348.48 Crore.

The Commission shall carry out the prudence check of the same based on the submissions of the Petitioner in the relevant proceedings.

Depreciation

Petitioner’s Submission 5.4 RVUN submitted that the depreciation for FY 2014-15 (91 days) has been

computed on the basis of norms prescribed under Clause 22 of RERC Tariff Regulations, 2014.

5.5 RVUN has computed depreciation of Rs. 17.86 Crore on the basis of the Capital Cost as on COD, i.e. on 30.12.2014.

Commission’s Analysis

5.6 The Commission has computed depreciation on the basis of approved capital cost as on COD of Unit 4 in accordance with RERC Tariff Regulations, 2014.

5.7 The total depreciation for FY 2014-15 is as shown in the table below: Table 5: Depreciation approved for FY 2014-15(Rs. Crore)

Particular As claimed in Petition Approved by the Commission

Depreciation 17.86 14.81


Interest on Term Loan Petitioner’s Submission

5.8 RVUN in its petition for ARR and Tariff for FY 2014-15(91 days) has estimated interest on term loan as Rs. 36.05 Crore. Commission’s Analysis:

5.9 The Commission while approving the interest charges has considered the approved capital cost as on COD of Unit 4.

5.10 The Petitioner has submitted that the interest rate applicable for the project was 13.00%. The Commission in accordance with RERC Tariff Regulations, 2014 has considered the interest rate of 13.00%.

5.11 The interest charges on term loan allowed by the Commission for FY 2014-15 (91days) is as shown in the Table below.

Table 6: Interest on loan approved by the Commission for FY 2014-15 (Rs. Crore)

Particulars RVUN Approved Opening Loan 1121.35 930.03 Receipt during the year 0.00 0.00 Repayment 17.86 14.81 Closing Loan 1103.49 915.22 Average Loan 1112.42 922.63 Interest Rate 13.00% 13.00% Interest 36.05 29.90

Operation and Maintenance Expenses

Petitioner’s Submission 5.12 RVUN submitted that the Operation & Maintenance Expenses for FY 2014-15

have been computed on the basis of norms prescribed under RERC Tariff Regulations, 2014.

5.13 Accordingly, RVUN has claimed the O&M Expenses of Rs. 10.03 Crore for FY 2014-15 (91 days).

Commission’s Analysis 5.14 The Commission has verified RVUN’s computations of O&M expenses and

found it to be in order and accordingly, same has been approved.

5.15 The O&M expenses as approved by the Commission for FY 2014-15 have been provided in the Table below:


Table 7: O&M Expenses Approved for FY 2014-15 (Rs. Crore)

Particular As claimed in Petition

Approved by the Commission

Operation & Maintenance Expenses 10.03 10.03

Recovery of ARR & Tariff Petition Fees Petitioner’s Submission

5.16 The Commission vide Order dated 10.03. 2008 had allowed to pass through the fees levied for filing of ARR & Tariff Petition, as expenses in the ARR. Accordingly, RVUN has claimed the fee of Rs. 0.125 Crore for FY 2014-15 (91 days).

Commission’s Analysis: 5.17 The Commission has approved the recovery of ARR and Tariff Petition fees as

claimed by RVUN for FY 2014-15 as shown in Table below: Table 8: Recovery of ARR & Tariff Petition Fees approved for FY 2014-15 (Rs. Crore)

Particulars As claimed in Petition

Provisionally approved by the

Commission Recovery of ARR & Tariff Petition Fees 0.125 0.125

Insurance Charges

Petitioner’s Submission 5.18 RVUN has claimed insurance charges as per norms defined under Regulation

25 of RERC Tariff Regulations, 2014 which allows actual insurance charges incurred by the generating company subject to a ceiling of 0.2% of average of Net Fixed Assets for the year. Accordingly, RVUN has claimed the insurance charges of Rs. 0.37 Crore for FY 2014-15 (91 days) for CTPP Unit 4. Commission’s Analysis

5.19 The Commission in view of Regulation 25 of RERC Tariff Regulations, 2014 has approved insurance charges of Rs. 0.37 Crore as claimed by the Petitioner.

5.20 The insurance expenses as approved by the Commission for FY 2014-15 have been provided in the Table below:

Table 9: Insurance Expenses approved for FY 2014-15 (Rs. Crore)

Particulars As claimed in Petition Provisionally approved by the Commission

Insurance Expenses 0.37 0.37


Interest on Working Capital Petitioner’s Submission

5.21 RVUN submitted that the requirement for working capital loan has been computed as per norms defined under Regulation 27of RERC Tariff Regulations, 2014 and the rate of interest on Working Capital Loan has been taken as 250 basis points higher than the average Base Rate of State Bank of India prevalent during first six months of the year previous to the relevant year. Accordingly, the Petitioner has claimed Rs. 3.98 Crore towards Interest on Working Capital for FY 2014-15 (91 days). Commission’s Analysis

5.22 Regulation 27 of the RERC Tariff Regulations, 2014 states that the interest rate for computing interest on working capital shall be considered at a rate of 250 basis points higher than the average base rate of SBI prevalent during the first six months of the previous year. The Commission has accordingly considered interest rate of 12.21% for computing interest on working capital.

5.23 Further, the Commission has worked out the working capital requirement in accordance with Regulation 27 of the RERC Tariff Regulations, 2014. The interest on working capital as approved by the Commission for FY 2014-15 (91 days) has been provided in the Table below.

Table 10: Interest on Working Capital approved for FY 2014-15 (91 days)

Particulars RVUN Allowable Cost of Coal 10.48 41.47 Cost of secondary fuel oil 0.18 0.73 O&M expenses 0.84 3.31 Maintenance spares 2.01 2.01 Receivables 19.11 70.85 WC 32.62 118.37 Rate of IWC 12.21% 12.21% IWC 3.98 3.60

Return on Equity 5.24 RVUN in its Petition has not claimed return on equity. The Commission has

therefore not considered the same.


Non-Tariff Income Petitioner’s submission

5.25 RVUN submitted that the main heads of accounts of Non-tariff income are sale of scrap, interest on FD/Staff loans and miscellaneous receipts (rebates), etc. Accordingly, RVUN has estimated the non-tariff income of Rs. 0.53 Crore for FY 2014-15(91days). Commission’s Analysis

5.26 The Commission has examined RVUN’s submission and has considered non-tariff income of Rs. 0.53 Crore as submitted by the Petitioner:

Table 11: Non-Tariff Income approved for FY 2014-15(Rs. Crore)

Particular As claimed in Petition Provisionally approved by the Commission

Non-Tariff Income 0.53 0.53

Annual Fixed Charges for FY 2014-15 5.27 Based on the above analysis, the approved Fixed Charges of the Chhabra

Thermal Power Station-Unit 4 (250 MW) allowed for FY 2014-15 (91 days) are as under:

Table 12: Annual Fixed Charges approved for FY 2014-15 (91 days) (Rs. Crore)

Particulars RVUN Approved Depreciation 17.86 14.81 Interest on Loans 36.05 29.90 IWC 3.98 3.60 O&M expenses 10.03 10.03 Recovery of ARR & Tariff Petition fee 0.13 0.13 Insurance expenses 0.37 0.37 Gross Fixed Charges 68.42 58.84 Less: NTI 0.53 0.53 Net Fixed Charges 67.88 58.31 Fixed Charges (Rs./kWh sent out) 1.646 1.414

Determination of Variable Charges for FY 2014-15

Petitioner’s submission 5.28 RVUN has considered SHR of Unit 4 as 2312.31 kcal/kWh. The PLF and Auxiliary

consumption have been considered as 83% and 9.00% respectively. RVUN further submitted that the coal for Unit 4 is being procured from Parsa East and Kente Basan coal blocks allocated under Government Company dispensation route. Further, RVUN had signed coal mining and delivery agreement on


16.07.2008 and amendment dated 22.09.2010 with Parsa Kente Colleries Limited.

5.29 RVUN submitted that CTPP Unit 4 is a new Unit and only domestic coal is being used in this Unit. The GCV of coal has been taken as the 4332 kcal/kg which is the average of actual GCV for the months of April, 2014 to September, 2014. The cost of coal has been taken as Rs. 3475/MT which is the average of actual coal price for the months of April, 2014 to September, 2014.

5.30 The GCV of oil (HFO/LDO) has been taken as 10504kcal/litre for HFO and 12000

kcal/litre for LDO based on the actual GCV during the previous months. The prices of oil has been taken as Rs. 46940/kL for HFO and Rs. 66572/kL for LDO based on the actual prices for the preceding months.

5.31 RVUN further submitted that any variation in the cost of generation due to

change of Qty. /quality of coal will be adjusted in fuel price adjustment prescribed by the Commission. In case of any variation in price before the finalization of tariff order, RVUN has requested the Commission to consider the change in tariff accordingly. Commission’s Analysis

5.32 The Commission has approved Variable Charges for the FY 2014-15 on the basis of following.

(a) The Commission has considered PLF of 83% as per the RERC Tariff Regulations, 2014.

(b) The Petitioner in its replies to Stakeholder submitted the computations of Station Heat Rate claimed in the Petition. The guaranteed Turbine Cycle Heat Rate is 1941.9 kcal/kWh. The guaranteed boiler efficiency is 87.76%. The Commission has accordingly worked out the design heat rate of Unit 4 as 2212.74 kcal/kWh. The Commission has considered the design heat rate as approved above and in accordance with RERC Tariff Regulations, 2014, has considered 4.50% margin over and above design heat rate. Based on this the station heat rate works out to be 2312.31 kcal/kWh. The Commission, for the purpose of this order, has considered the station heat rate of 2312.31 kcal/kWh as computed above. The Commission shall take final view regarding the allowable station heat rate in the approval of final tariff.

(c) With regards to auxiliary consumption, the Petitioner has submitted auxiliary consumption of 9% which is in accordance with the RERC Tariff Regulations,


2014. Further the Petitioner has claimed secondary fuel oil consumption as 0.50ml/kWh which is also in accordance with the Regulations.

(d) As regards the coal price, the Commission in its Order dated 22.05.2015 on approval of Provisional Tariff for Unit 3, observed as follows: “(k) The Commission has gone through the submission of RVUN and various correspondences in this regard including the Coal Mining and Delivery Agreement and is of the view that the price of coal in the said case has been determined through competitive bidding in accordance with government approved mechanism and the mechanism of coal price has been approved by the Government. The Commission is therefore of the view that the coal price as per the provisions of Coal Mining and Delivery Agreement can be considered as price determined through Government approved mechanism and there is no need for the Petitioner to file a separate Petition with the Commission for the transfer price of coal. The Commission has accordingly considered the coal price as per the provisions of Coal Mining and Delivery Agreement. (l) RVUN was further asked to submit the basis of the cost submitted along with the computation as per the Coal Mining and Delivery Agreement. The Petitioner in its response dated 19.02.2015 submitted the cost of coal on the basis of the coal received in the month of May and June 2014 as Rs. 2881.75/MT with GCV as 4040 kCal/kg. The Petitioner, however, in its reply dated 27.04.2015 revised the cost of coal to Rs. 3385.41/MT. (m) The Commission at this stage has provisionally considered the cost of coal as submitted by the Petitioner which works out to be Rs. 3385.41/MT. The Commission directs the Petitioner to submit the actual coal price in accordance with the provisions of Coal Mining and Delivery Agreement at the time of truing up along with the detailed justification of the component wise actual coal price claimed vis-à-vis the provisions of the CMDA. The Commission shall carry out the final prudence check of the individual component wise coal cost while determining the final tariff of CTPP Unit # 3 and Unit # 4.”

(e) Continuing with the same approach adopted while approving the provisional tariff for CTPP Unit 3, the Commission at this stage has provisionally considered the cost of coal as submitted by the Petitioner which works out to be Rs. 3475/MT. The Commission directs the Petitioner to submit the actual coal price in accordance with the provisions of Coal Mining and Delivery Agreement at the time of truing up along with the detailed justification of the component wise actual coal price claimed vis-à-vis the provisions of the CMDA. The Commission shall carry out the final prudence check of the individual component wise coal cost while determining the final tariff of CTPP Unit 3 and Unit 4.


(f) As regards GCV, the Commission has provisionally considered the GCV as

submitted by RVUN in its Petition.

Table 13: Provisionally approved Variable Charge for FY 2014-15 (91 days)

Particulars Units RVUN Approved Total capacity MW 250 250 Availability % 83% 83% PLF % 83% 83% Gross generation MU 453.18 453.18 Aux cons % 9% 9% Aux cons MU 40.79 40.79 Net generation MU 412.39 412.39 SHR kcal/kwh 2312.31 2312.31 Fuel Parameters Calorific value for difft fuels Fuel 1 (Indigenous coal) kcal/kg 4332 4332 Fuel 2 (HFO) kcal/ltr. 10504 10504 Fuel 3 (LDO) kcal/ltr. 12000 12000 Landed Fuel price for difft fuels

Fuel 1 (Indigenous coal) Rs/MT 3475 3475 Fuel 2 (HFO) Rs/kL 46940 46940 Fuel 3 (LDO) Rs/kL 66572 66572 Specific fuel consumption Fuel 1 (Indigenous coal) kg/kwh 0.53 0.53 Fuel 2 (HFO) ml/kWh 0.45 0.45 Fuel 3 (LDO) ml/kwh 0.05 0.05 Total Fuel consumption Fuel 1 (Indigenous coal) MT 241339 241339 Fuel 2 (HFO) kL 204 204 Fuel 3 (LDO) kL 23 23 Total fuel cost Fuel 1 (Indigenous coal) Rs Cr 83.87 83.87 Fuel 2 (HFO) Rs Cr 0.96 0.96 Fuel 3 (LDO) Rs Cr 0.15 0.15 Total Fuel cost Rs Cr 84.97 84.97 Cost of generation per unit Rs./kWh 1.875 1.875 Energy charges per unit (sent out) Rs./kWh 2.060 2.060

5.33 Accordingly, the Commission provisionally approves the tariff for FY 2014-15 for

Unit 4 as follows.


Table 14: Tariff for FY 2014-15 (Rs. Crore)

Particulars As claimed by the Petitioner

Provisionally Approved

Fixed Charges (for 91 days) – Rs. Crore 67.89 58.31 Fixed Charge – Rs/kWh (Energy Sent out) 1.646 1.414 Variable Charge – Rs/kWh (Energy Sent out) 2.060 2.060 Total Tariff – Rs/kWh (Energy Sent Out) 3.707 3.474

5.34 The copy of this Order may be sent to the Petitioner, Respondents, Objectors,

CEA and Government of Rajasthan.

(Raghuvendra Singh) (Vinod Pandya) (Vishvanath Hiremath) Member Member Chairman


Annexure-1 ABBREVIATIONS

Act Electricity Act, 2003 ARR Aggregate Revenue Requirement BHEL Bharat Heavy Electricals Ltd. BoD Board of Directors BoP Balance of Plant BTG Boiler, Turbine & Generator CEA Central Electricity Authority CHP Coal Handling Plant CMDA Coal Mining and Development Agreement COD Commercial Operation Date CTPP Chhabra Thermal Power Station Discoms Distribution Companies DPR Detailed Project Report EPC Engineering Procurement and Construction ETC Erection Testing & Commissioning FY Financial Year GCV Gross Calorific Value GFA Gross Fixed Assets GoR Government of Rajasthan HFO High Furnace Oil IDC Interest during Construction JVVNL Jaipur Vidyut Vitran Nigam Limited kcal kilo calorie kL kilo Litre kW kilo Watt kWh kilo Watt hour LDO Light Diesel Oil LOA Letter of Award MOM Minutes of Meeting MT Metric Ton MU Million Units MW Mega Watt MYT Multi Year Tariff O&M Operation & Maintenance PLF Plant Load Factor PPA Power Purchase Agreement PV Price Variation RERC Rajasthan Electricity Regulatory Commission ROE Return on Equity SBI State Bank of India SHR Station Heat Rate TPS Thermal Power Station


Annexure-2

Index

Section/ Para/ Annexure Particulars Page

No.

Section 1 General 1

Section 2 Summary of filing of Aggregate Revenue Requirement (ARR) & Provisional Tariff and Tariff determination process.

3

Section 3 Summary of objections/ comments/ suggestions received from stakeholders on the instant Petition and RVUN’s response.

5

Section 4 Determination of provisional Capital Cost of Chhabra Thermal Power Plant Unit 4(250 MW) 16

Section 5 Determination of ARR and provisional Tariff for CTPP Unit 4 (1x250 MW) for FY 2014-15 (91 days)

30

Annexure 1 Abbreviations 39 Annexure 2 Index 40

Documents

RAJASTHAN ELECTRICITY REGULATORY COMMISSION Petition No ... · PDF fileRAJASTHAN ELECTRICITY REGULATORY COMMISSION Petition No. RERC/537/15 ... half hourly block in respect of kWh,