HARYANA ELECTRICITY REGULATORY COMMISSION

SCO 180, SECTOR 5, PANCHKULA - 134 109, HARYANA 

CASE NO. HERC/RA-1 of 2004 

Date of Order: 20 OCTOBER 2004

 1.         The Haryana Electricity Regulatory Commission (HERC), pursuant to the requirements of Section 62(1) of the Electricity Act 2003, issued a letter dated 18^th November 2003 directing Haryana Power Generation Corporation Limited (HPGCL) to file ‘tariff petition’ for determination of generation tariff for FY 2004-05. As the Commission was yet to finalize terms and conditions of generation tariff, HPGCL was directed to file their petition as per the HERC ARR & Tariff Regulations and Guidelines applicable to the Transmission & Bulk Supply and Distribution & Retail Supply licensee, suitably modified. On 16^th January 2004 HPGCL filed its tariff petition for approval of the Commission. The Commission observed a number of incongruities in the tariff computation and decided to seek the required information/data in light thereof. Consequently, on 3/2/2004 the Commission issued a deficiency letter directing HPGCL to file supplementary data / information. HPGCL filed supplementary information on 19^th February 2004.

 2.        After observing the due procedure as per the Electricity Act 2003 and Haryana Electricity Regulatory Commission (Conduct of Business) Regulations 1999, including public notice inviting objections, holding public hearing and consultation with the Commission Advisory Committee, the Commission, on 14^th May 2004, passed its Order on HPGCL’s generation tariffs for FY 2004-05 to be implemented w.e.f 1^st of June 2004.    

 3.      On 14/06/2004 HPGCL filed a review petition under section 10 (1)(h) of the Haryana Electricity Reforms Act, 1997, read with Regulation 109 of the Haryana Electricity Regulatory Commission (Conduct of Business) Regulations, 1999 seeking review and /or clarification of the Commission’s Order dated 14^th May 2004 in the case of determination of HPGCL’s Generation Tariff for FY 2004-05 (Case No. HERC/PRO-1 of 2004).

 4.        HPGCL sought review, reconsideration and modification with respect to the issues listed below: 

•         Auxiliary power consumption for FTPS (Units 1 to 3) & TDL TPS (Units 1 to 4).

•         Station Heat Rate allowed for FTPS Faridabad (Units 1 to 3).

•         Adjustment on account of variation in price or heat value of fuels.

•         Transit losses of coal.

•         Computational error.

•         Return on Equity (ROE) in the case of TDL TPS (Units 7&8).

 5.          Hearing on the aforesaid review petition filed by HPGCL (Case no.HERC/RA-1 of 2004) was held on Tuesday 7^th September 2004. The Commission directed HPGCL to file their oral submission made during the course of hearing on 7/9/2004 within seven days. HPGCL submitted the requisite filing on 24/9/2004 vide its Memo No. HPGC/Fin/Cost/170/3815.       

6.           The Commission, after considering the review petition, oral submissions of HPGCL during the hearing on the review petition and additional information provided thereto, passes the following Order in partial modification to its Order dated 14^th May 2004 in Case No. HERC/PRO-1 of 2004 in the matter of “Determination of HPGCL’s Generation Tariffs for FY 2004-05.

7.    Auxiliary Power Consumption for FTPS (Units 1 to 3) & TDL TPS (Units 1 to 4):

Having considered all facts and figures on record the Commission is of the view that in the case of HPGCL, the conditions being sub-optimal seems to have resulted in the plants operating for years much below the design tolerance level. This may have resulted in ageing on an accelerated basis. It is evident from the submissions made by HPGCL in its review petition that the quality of raw water, in the case of FTPS Faridabad, has been poor and the same further deteriorated during 15/04/2003 to 28/05/2004. Reportedly, the average value of Equivalent Mineral Acidity (EMA which indicates presence of salts like chlorides, sulphates & nitrates) goes up to 400 to 450 mg/litre as against designed value of 150/litre, KmnO⁴ value (indicating presence of organic effluents) varies up to 180 against the designed value of 40 thereby impacting the condenser vacuum which remains in the range of (-) 0.60 to 0.70 Kg/CM² against the designed value of (-) 0.90 Kg/CM². The frequent chocking of generator coolers, BFP oil coolers, BFP motor coolers raise the winding temperature resultantly the machine output declines pushing up the auxiliary consumption. The boiler efficiency also suffers because of low quality of coal in terms of useful heat value (UHV, determined on the basis of parameters such as percentage of ash, moisture & volatile matter in the coal) being used over a long period of time. This being the maiden generation tariff Order wherein all justifiable expenditure including O&M has been allowed to be recovered through tariff, the Commission expects that HPGCL would take the required corrective action. 

The Commission observes that FTPS (Units 1-3), with little residual life, is a fully depreciated plant, thus the original capital cost must have been completely recovered. Consequently, the plant including the auxiliaries may require extensive R&M measures including treatment of raw water. The Commission directs that HPGCL should assess the capital expenditure required for maintaining the performance of FTPS within acceptable technical parameters and submit the same along with its tariff petition for FY 2005-06. As far as the quality of coal available to FTPS (Units 1-3) is concerned, HPGCL should take up the issue with the Standing Linkage Committee (SLC Short Term) that accords coal linkage on a quarterly basis. The Commission, in future, will be reluctant to relax any norm on the basis of above-mentioned pleas viz. poor quality of raw water & coal. HPGCL should also realise that part load operation will become a regular feature under the Availability Based Tariff (ABT) regime impacting parameters such as station heat rate, auxiliary consumption etc.

We, as an exception and strictly confined to computation of FY 2004-05 tariff, allow auxiliary consumption of 11% in the case of TDL TPS (Units 1-4) and 13.00% in the case of FTPS (Units 1-3) as against 10.5% and 12.5% respectively, allowed in the Commission’s order dated 14^th May 2004, under review.

8.   Station Heat Rate at FTPS (Units 1 to 3):

HPGCL in its review petition has submitted that due to poor quality of raw water & coal together with obsolete design of the boilers adversely impacts the condenser vacuum and boiler efficiency, consequently Station Heat Rate (SHR) of 3970 Kcal / Kwh allowed by the Commission in the case of FTPS based on the levels achieved in FY 1999-2000, may not be achieved, and hence the same should be reviewed by the Commission. The Commission reckoned the fact of degradation over time and levels actually achieved while allowing SHR. It is a fact that even with regular annual maintenance the design efficiency level cannot be achieved. More so, use of low-grade coal over a long period of time also eats into the design margins thereby affecting heat rate. This being the first tariff approved by the Commission, wherein all justifiable expenditures have been allowed to be recovered through tariff, we expect that during the current year the SHR should be contained within the standard norms. The Commission directs HPGCL to assess the additional cost to be incurred for obtaining efficiency in the heat rate and submit along with its tariff application for FY 2005-06. Meanwhile, HPGCL should carry out all possible system improvements including condenser performance (deterioration), quality of makeup water consumption, heat loss during start up and shut down and any other instrument uncertainties that may be required to achieve a better heat rate. We, as an exception allow SHR of 4100 K.cal/Kwh solely for the purpose of working out the tariff for FY 2004-05 .

 9.    Adjustment on account of variation in price or heat value of fuels:

HPGCL sought review to allow ‘price adjustment’ on account of variation in price of coal & oil and in the heat value of fuels without filing quarterly petition in line with Central Electricity Regulatory Commission (CERC) Regulation No.22 (iii), Notification dated 26/3/2004.

The Commission has carefully considered this review prayer and is of the view that the provision of filing quarterly FSA petition is in line with the existing tariff filing Regulations of the Commission, and is not a subject matter of review at this stage. However, the Commission is in the process of framing terms and conditions of determination of generation tariff as mandated by Electricity Act 2003. HPGCL would be given sufficient opportunity to put forward their views on all aspects of generation tariff determination including FSA mechanism during the course of finalization of the above document.

Thus, the Commission finds no merit in this review prayer and rejects the same.

 10.    Transit loss of coal:

HPGCL sought review to allow 5.66% transit loss on the basis of last three years’ average as against 3% approved by the Commission in its order dated 14^th May 2004 They have contended that they have engaged Coal Agent w.e.f 1/9/2004. However, it could not bring down the transit losses of coal lesser than 3.79% at Panipat and 6.59% at Faridabad.  On an average, for HPGCL as a whole, it has been 4.19% for FY 2003-04.  The dispatch and transportation of coal call for an inter-agency coordination, namely Railway and Coal Companies etc.  HPGCL does not have much control in this configuration.  Railways do not own the responsibility for loss of coal in transit.  It has further been stated by HPGCL that the transit losses of coal in their power stations is comparable with the losses in power stations operating in the adjoining States. 

The Commission is not convinced with the arguments put forward by HPGCL.  PSERC has allowed a transit loss of 3% to the Thermal Power Station based in the neighboring State of Punjab where transportation of coal involves longer distances.

Thus, the Commission finds no merit in this review prayer of HPGCL and rejects the same.

 11. Computational Error:

HPGCL has pointed out an error in computing price of coal while considering its transit losses.  They have contended that the Commission has adopted the following formula while computing effective price of coal after allowing loss of coal in transit:-

Effective Price of Coal (EP) = Price of coal including railway freight (P)x(100 + loss of coal in transit % say X %).

They have contended that the following formula is required to be adopted for working out the effective price of coal: -

Effective Price of Coal (EP) = Price of coal including railway freight (P)x100/(100 – loss of coal in transit % say X %).

HPGCL has prayed for review and rectification of the arithmetical computation referred to above.

The Commission feels that the factor of coal transit loss is an estimated one and is actually going to be significantly higher.  It is a direct loss to HPGCL and a burden on to the electricity consumers of the State.  The Commission assumed an adjustment factor to account for this loss by enhancing the price of coal by 3%.  It need not be misunderstood as the actual loss of coal during transit.  However, HPGCL’s point of view has been well taken and is proposed to be suitably addressed while calculating the weight of coal (wherein the actual adjustment is required) rather than price of coal at the time of consideration/finalization of the document on terms and conditions of determination of generation tariff.

 12.     Return on Equity: 

HPGCL sought review of the Return on Equity (ROE) allowed by the Commission in the case of TDL TPS Units 7&8. It prayed for inclusion of Rs. 16.5 million as ROE on the amount of equity viz.1253.2 million to be received during FY 2004-05. 

The Commission allowed ROE in the case of TDL TPS Units 7&8 @5% (as proposed by HPGCL) on the paid up and subscribed equity capital as on 31^st March 2004. This was done as an exception. We shall like to examine the capital expenditure actually incurred as per the original scope of project as well as the actual equity deployed on the date of commercial operation of the above generating units. 

Thus, the tariffs approved for TDL TPS unit 7&8 be treated as provisional. 

HPGCL is hereby directed to approach the Commission with actual expenditure incurred up to the date of commercial operation of the said units along with other financial and technical details to determine their tariffs. The Commission further directs HPGCL to finalise the PPA for sale of power from these units without any delay. 

Date: 20^th October 2004
Place: Panchkula.

In regard to the paragraphs 7 & 8 above, I express difference of opinion as under:

1.     Auxiliary Power Consumption for FTPS (Unit 1 to 3) and TDL TPS (Unit 1 to 4):

HPGCL has argued as under in support of their contention for upward

revision of  Auxiliary Power Consumption for the  plants/ Generating Units in question as under:-

1(a)  FTPS (Unit 1 to 3):

The Auxiliary Consumption target fixed for FTPS Faridabad (12.5%) is not likely to be achieved on account of supply of poor quality of raw water to the plant, age and old technology of the machines.  During the three out of last five years, Auxiliary Power Consumption had remained more than 13% as per details given below:-

HPGCL have submitted:

(i)           that average value of Equivalent Mineral Acidity of raw water received went up to 400 mg/litre as against designed value of 150 mg/litre (Subsequently revised to 450 mg/litre as against designed value of 140 mg/litre in their filing dated 24.9.2004).

(ii)          that the presence of organic effluents went as high as 245 mg/litre as against the designed value of 40 mg/litre during the period 15.4.2003 to 28.5.2004 at the time of closure of Agra Canal by UP Irrigation Department and practically sewer water was received at FTPS (Subsequently the parameter has been stated to be 250 mg/litre in their filing dated 24.9.2004).

(iii)         that Generating units run at partial load due to constraints of poor quality of raw water and coal, inadequate capacity of ID Fans and Refractory boiler design.

(iv)        that addition of station auxiliary under renovation scheme.

(v)         that machines run at partial load due to poor condenser vacuum in the range of (-)0.60 to 0.70 Kg/cm² against the designed value of (-)0.90 Kg/cm² due to poor water quality (Subsequently in their filing dated 24.9.2004, the poor condenser vacuum has been attributed to high circulating water inlet temperature).

(vi)         that more cooling tower fans run even during shut down of the units due to high cooling water inlet temperature.

(vii)        that more loading of coal mill, FD fans, ID fans and PA fans thereby resulting in increase in auxiliary consumption.

(viii)       that backing down of units/partial restriction of load add to additional auxiliary consumption.

(ix)         that the average auxiliary consumption for 55/60 MW generating units in other parts of the country is as under:-

                  (Figures in %)

1(b)      TDL TPS (unit 1 to 4)

The auxiliary consumption target fixed for TDL TPS unit 1 to 4 (10.5%) is not likely to be achieved on account of the following reasons:-

    i.   that the forced outages due to backing down of 4 x 110 MW generating units are the major contributory factor  for increase in auxiliary consumption.

    ii.  that partial backing down of the generating units is frequent for controlling the frequency of the system.  Auxiliaries continue to run even on the reduced load which in turn increase the auxiliary consumption.

   iii. that the overhauling of the units is not allowed as per Schedule, which results into running of additional ID fans and coal mills thereby leading to increase in auxiliary consumption.  Non-allowing of shut down leads to deterioration in performance of generating units thereby causing generation loss and consequential increase in auxiliary consumption.

   iv.  that coal received at the Plant is normally of ‘E’ & ‘F’ grade as against the requirements of ‘D’ grade coal.  Poor quality of coal leads to more load on coal mills & PA fans/ ID fans which leads to more auxiliary consumption.

   v.  that auxiliary power consumption in respect of few 110 MW units operating in other parts of the country is as under:-

(Figures in %)

I observe as under:-

  i.         that there has been inconsistency of data in regard to the observed values of Equivalent Mineral Acidity & percentage of organic effluents including the design value of Equivalent Mineral Acidity submitted by HPGCL in their filing to corroborate their contention of poor quality of raw water for FTPS.

  ii.        that the poor condenser vacuum of FTPS units has been attributed to poor water quality as per filing dated 14.6.2004 whereas the filing dated 24.9.2004 ascribes it to high circulating water inlet temperature.

  iii.       that it will be more appropriate (for HPGCL) to improve upon the quality of raw water at FTPS by appropriate methodology & technology rather than to seek higher auxiliary power consumption which has a cascading  effect on the generation tariff.

  iv.      that the review petition dated 14.6.2004 seeks an auxiliary power consumption of 15.05% as against 13% in the original filing dated 16.1.2004 for FTPS unit 1 to 3.  It is basically wrong.

  v.      that all the generating units at FTPS are similar to 2x60 MW units at UP’s Hardua Ganj Thermal Power Station and 1x60 MW unit at Delhi’s I.P. Thermal Station.  The units are of the same vintage.

  vi.      that UPERC’s bench mark for auxiliary power consumption for Hardua Ganj Power Station has been 12% (each for 2002-03 and 2003-04) and UPPCL’s proposal for 2004-05 envisaged an auxiliary consumption of 12% for the said Thermal Power Station.

  vii.    that DERC has approved an auxiliary power consumption of 11.64% for 2004-05 for Delhi’s IP Thermal Station as against the actual auxiliary power consumption of 13.04% for the said station for 2003-04.

 viii.       that non-adherence to preventive maintenance schedules for the generating units at FTPS & TDL TPS is a conscious management decision unworthy of consideration from regulatory point of view.

  ix.     that backing down of units/partial restriction of load both at FTPS & TDL  TPS will be a reality to be reckoned with by HPGCL under ABT regime.

   x.     that the review petition dated 14.6.2004 seeks an auxiliary power consumption of 11.7% as against 11.4% in the original filing dated 16.1.2004 for TDL TPS (unit 1 to 4).  It is basically wrong.

   xi.    that the energy consumed by the workshop and part of the offices at TDL TPS has been accounted for in the auxiliary power consumption of these units in the past data submitted by HPGCL.

   xii.   that R&M of generating  unit- 2  at TDL TPS should lead to an improvement in the auxiliary power consumption of these machines for FY 2004-05.

  xiii. that the auxiliary power consumption for 110 MW unit 1 to 4 at GNDTP, Bathinda has been in the range of 9.32% to 9.78% in the last five years.  These units were commissioned from September 1974 to January 1979 as against November, 79 to January, 87 in case of TDL TPS (unit 1 to 4).

  xiv  that the Commission was well aware of the above facts while passing the order dated 14.5.2004 and had suitably accounted for them by allowing a higher value i.e. 12.5% for FTPS and 10.5% for TDL TPS ( Unit 1 to 4) as against the usual value up to 10%.

Keeping in view the above position, I find no merit in this review prayer and reject the same.

2.      Station Heat Rate at FTPS (unit 1 to 3):

HPGCL has argued for upward revision of Station Heat Rate (3970 K.Cal/Kwh approved by the Commission in its order dated 14.5.2004) on the average of past three years i.e. 2001-02, 2002-03 and 2003-04 which works out to be 4233 K.Cal/Kwh due to  the following  reasons:-

i.                Poor quality of raw water causes frequent clogging of condenser tubes.

ii.              Frequent chocking of generator coolers, BFP oil coolers, BFP motor coolers causing rise of winding temperature thereby restricting the load on the machines.

iii.             Average calorific value of coal received is 4600 K.Cal/Kg  against designed value of 5500 K.Cal/Kg and ash content of 30% against designed value of 22%.

iv.            Old and obsolete design of refractory design boilers restrict the sealing of furnace causing reduction in draft, fuel gas leakage, reduction in load and heat loss.

Keeping in view the above position, I observe as under:-

i.               that it will be more appropriate to improve upon the quality of raw water by appropriate methodology and technology rather than to seek higher Station Heat Rate at FTPS which has a direct impact on the generation tariff.

ii.     that the UPERC’s bench mark for Station Heat Rate for Hardua Ganj Power Station has been 3480 K.Cal/Kwh (each for 2002-03 and 2003-04) and UPPCL’s proposal for 2004-05 too envisaged a Station Heat Rate equal to 3480 K.Cal/Kwh.  These generating units are of same vintage.

iii.     that DERC has approved Station Heat Rate of 3235 K.Cal/Kwh for Delhi’s IP Thermal Station both for 2003-04 and 2004-05.

iv.     that HPGCL may take up the issue of poor quality of coal with the Standing Linkage Committee of the Ministry of Coal, GOI.

v.     that the Commission directed time-bound consideration of RLA & LE study report of FTPS languishing with HPGCL for long as the performance parameters of the units operating there are undesirably high.

Keeping in view the above position, I find no merit in this review prayer and reject the same as the consumers of Haryana ought not be burdened for the delay in decisions by HPGCL.

(T.R. Dhaka)
    Member

 ORDER

1.            In terms of Section 92 (3&4) of the Electricity Act 2003 (Act 36 of 2003), the majority view of Lt.Col (retd) Raghbir Singh, Chairman & CEO and Shri. Subhash Katyal, Member, will be the order of the Commission.

 2.          The reworked tariff schedule in the light of Sr.No. 1 above is attached at Annexure - I

 3.          This order is signed dated and issued by the Haryana Electricity Regulatory Commission on 20^th October 2004.

Place: Panchkula
Date: 20/10/2004

                                                                                                                    Annexure- I