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CASE NO. 5 of 1997
ORDER No. 005 DATED 6th JUNE, 1996
Shri A. R. Mohanty, Member
Shri D. K. Roy, Member
In the matter of application of M/s Orissa Sponge Iron Limited (OSIL)
Work site at Palaspanga, District: Keonjhar, Regd. office 6, Saheed Nager, First Floor,
Bhuhaneswar.
M/s Sponge Iron Limited - Petitioner
For the Petitioner:
Shri G. Patra, Adviser
Shri S. Misra, Consultant, M.N. Dastur & Co.
For the affected party:
Shri L K. Misra, Chief Engineer (Commerce)
Shri B.P. Rekhani, S.E. (Commerce), GRIDCO.
This is a petition under Section 44 of the Electricity Supply Act. 144X
(hereinafter referred to as Supply Act) read with sub-section
(3) of Section 21 of Orissa Electricity Reform Act 1995 (for
short the Act) filed by M/s. OSIL.
2. The petitioner has set up two plants at their work
site at Palaspanga, District Keonjhar. One is M/s. OSIL and another is OSIL Steel Plant
(OSW) which is utilising a part of the Sponge Iron produce. The Sponge Iron Plant has
electrical furnace. The company has now planned to set up captive power plant by utilising
the chimney gas from sponge Iron plant presently being let out to atmosphere. The heat
contents of the gas will he used in a waste heat recovery boiler to produce steam which
will drive the turbine for producing electricity in a generator of about 10 MVA capacity.
3. At present, these two units are availing power
supply, from GRIDCO. The contract demand of power of the Sponge Iron unit is 2.5 MVA and
that of the OSIL Steel Plant. The petitioner has proposed that the power generated from
the proposed captive plant will be 10 MVA and the entire generation from the captive plant
will be utilised their own plants. After sharing a part of the load of the OSIL Steel
Plant and a part of the load of the Sponge Iron plant from the captive power plant, they
would still require balance power from GRIDCO. There would not be any substantial excess
overflow into the Grid System except inadvertent operational flow to the Grid.
4. In their detailed scheme, the petitioner has
submitted a feasibility report made by their consultant M.N. Dastur and Company and from
the feasibility report it is clear that the plant is an economical proposition in
retrieving energy from the waste heat and utilising for generation of electricity bringing
in economy in the operation of the plant. The project feasibility report has also
indicated the fixed and variable cost of generation from the proposed installation at
Appendix - 8.2 for over 15 years from the start of operation.
5. M/s. OSIL, the company promoted by IPICOL have been
operating direct reduction iron plant of 1 lakh tonne capacity per annum at Palaspanga,
District Keonjhar Orissa. The same company has also a separate unit of 50,000 tonnes per
annum for Mini Steel Plant OSIL Steel Works (OSW) and is located in the same complex for
making steel billets. The proposed CPP will be owned by M/s. OSIL as a separate division
under the common ownership and the energy produced through CPP will be utilised by both
OSIL and OSW.
6. The Commission decided to dispose the application
for grant of permission for setting up a CPP of 10 MVA capacity through a proceeding
registered as Case No. 5 of 1997. Notice was issued to the petitioner and M/s. GRIDCO
directing them to appear before the Commission in person or through their authorised
representative on 09.04.97. In response to the notice, the petitioner appeared on 09.04.97
and was represented by Sri M.A. Khan Additional General Manager of the Company. Sri S.
Misra, consultant M/s. M.N. Dastur & Co. and Sri G. Patra, Consultant to M/s. OSIL.
M/s. GRIDCO was represented by Sri B.P. Rekhani S.E.(Commerce) and Sri N.G. Nath,
S.E.(PP-I).
7. M/s. GRIDCO filed their counter on 5th April, 1997
with a copy to the applicant and the applicant has filed their counter on 24th April,
1997.
8. In the first hearing, on 09.04.97, Commission
ordered that M/s. OSIL shall make comprehensive submission to the Commission in the matter
of (a) ownership of their proposed captive power plant alongwith the existing two units to
which they propose to make supply (b) commercial terms relating to exchange of power with
the Grid, (c) reconciliation with GRIDCO in the matter of increase in fault level due to
addition of CPP and (d) undertaking to comply with the condition of Grid Code to be made
by GRIDCO in the matter of operational procedure of the CPP.
9. The petitioner submitted their comprehensive report
as called for by the Commission in its order above on 24.04.97. The next date of the
proceeding was fixed for 20th May, 1997 M/s. OSIL, the applicant was represented by Sri G.
Patra, Adviser and Sri S. consultant. M.N. Dastur and Company. M/s. GRIDCO was represented
by Sri L.K Misra, chief Engineer (Commerce) and Sri B.P. Rekhani, S.E. (Commerce). Heard
the representatives of M/s. OSIL and M/s. GRIDCO.
10. It is noted from the counter of GRIDCO that,
Orissa Sponge Iron Limited and OSIL Steel Works (OSW) are the consumers of Grid
Corporation of Orissa having contract demand of 2500 KVA and 7300 KVA under large
industries and Mini Steel Plant category respectively.
11. M/s. GRIDCO have objected to installation of the
proposed CPP on the ground that since M/s. OSIL is neither a licensee nor has it been
granted exemption under Section 16 of Orissa
Electricity Reform Act, 1995, it is not entitled to engage in business of sale of
electricity. M/s. GRIDCO further pointed out that such sale of electricity by the CPP to
the units will be harmful to the electricity industry and to the consumers due to the tact
that, present tariff structure applicable to the different categories of consumers has an
element of cross subsidy in it.
12. The applicant in his rejoinder has stated that the
transaction of power supply from CPP is only transfer of power from CPP to the two units
with common ownership as of CPP and as such no licence for sale is required. It was stated
that OSW and Orissa Sponge Iron Limited are two divisions of the same company. In support,
they have furnished an extract of decisions of Board of the company held on 10th March,
1997 stating intention of setting up of captive power plant by M/s. OSIL. The project cost
is about Rs.34 crores for which it was proposed to get finance from IFCL to the extent of
Rs.24 crores for meeting the cost of the equipments The cost of generation of electricity
from the captive plant proposed to be Rs.1.30 per unit in first year and Rs.0.5 per unit
from the 5th year onwards.
13. After careful consideration, we accept the
petitioner's contention that supply of electricity from the captive power plant to
industrial units under common ownership does not constitute a business in electricity and
therefore does not require a licence or an exemption. Having gone through the proposal of
the petitioner for the captive power plant showing clear economy in its operation, we may
not prevent the petitioner to go ahead with the project only because this adversely
affects the GRIDCO's revenue in a cross subsidised tariff structure. The malady of cross
subsidised tariff structure has to be removed gradually instead of preventing the
industrial units to go for co-generation in their existing plants.
14. M/s. GRIDCO has strongly objected for installation
of such captive power plants as they apprehend GRIDCO power flows from one unit of the
consumer to the other unit of the consumer through a common tie connection of the captive
generator. The concern expressed by M/s. GRIDCO was that the tariff rate for OSW Steel
Works (Mini Steel) is less then the tariff rate for the Sponge Iron Works (large
industries) and there is possibility of getting power supply from the lower tariff rate
unit to the higher tariff rate unit through common connection incurring loss to the
GRIDCO. The applicant has furnished detailed sequence diagram of their operation of the
captive power plant making parallel, first with GRIDCO power supply connected to OSIL and
then isolating the GRIDCO power supply to OSIL from the captive generation and make
parallel with GRIDCO's power supply to OSW latter on. Therefore, under no circumstances
the captive power plants is connected to troth the GRIDCO power supply to both the units.
In normal parallel operation, the captive power plant will be running in parallel with the
GRIDCO power supply to OSW, so that it takes up some load of OSW and some load of OSIL,
whereas OSIL will be continuing to get GRIDCO power supply totally isolated from the
captive generation. Therefore, we cannot agree with the contention of GRIDCO for
withholding consent on the ground of power supply to separate units may get interchanged
through the common link for captive power plant generation. Commission is of the view that
any misgivings on technical matter related to diversion of power supply from one unit to
another can be taken care of by way of metering arrangement and this should be ensured by
the applicant while complying to the GRIDCO's requirement.
15. Another factor arises from the applicant's
proposal in availing start-up power supply to CPP from Gridco's OSIL supply. There is
separate tariff rate for start up power for CPP and therefore, metering arrangement to the
satisfaction of Gridco should be made at the interconnecting tie between OSIL 6.6 KV Bus
and Generator Switch Board Bus to charge start-up supply at the appropriate rate.
16. M/s. GRIDCO has also opposed to the running of the
CPP in parallel with 33 K.V supply system of Grid Corporation of Orissa as it would bring
in operational difficulty in increasing the fault level in 33 KV, thereby jeopardising the
life of the equipments.
17. As per the statement-made in the rejoinder by the
applicant, they had referred this matter to their consultant, M/s. M.N. Dastur & Co.
Their consultant have opined that the fault level for interconnection of the CPP with
GRIDCO at 33 KV will increase from 288 MVA to 331 MVA. Normally, the designed fault level
for 33 KV equipment are of the order of the 750-1500 MVA. Thus, in their opinion the fault
level (331 MVA) unit in any way will not jeopardise the life of the existing equipments as
mentioned by GRIDCO. GRIDCO during hearing did not contest the fault level calculation
submitted by the applicant in their rejoinder, and therefore we can only observe that the
applicant should bear the cost of any eventual upgradation of the equipment in case the
system requires and it should be to the satisfaction of M/s. GRIDCO. M/s. GRIDCO should
not be burdened with extra investment on this account.
18. M/s. GRIDCO have objected to the surplus power
flow from the captive power plant to the GRIDCO system as it is not despatchable, because
such surplus power depends upon the workings condition of OSW. In case furnace of OSW
breaks down, there is a loss of load and therefore there could be surplus of power. In
parallel condition marginal inadvertent power flow cannot be avoided, but as objected by
M/s. GRIDCO the applicant may install the reverse power flow relay to prevent the power
flow from their captive plant into (GRIDCO system while they are in parallel.
Interconnected operation has to be on mutual operational convenience. Applicant shall not
be entitled to raise any claim on GRIDCO for loss of generation of his captive plant or
damage to his plant and equipment due to interconnection with the Grid.
19. M/s. GRIDCO has also objected to the commercial
term of purchase of surplus power on net exchange basis. We admit the objection of GRIDCO
and confirm that the rate of surplus power from the captive plant, if delivered should not
be kept in par with the rate of GRIDCO power and therefore, net exchange basis is not
acceptable. In this regard, the applicant must make mutually agreed commercial terms with
GRIDCO. The petitioner in their rejoinder dtd.23.04.97 had intimated that the rated
capacity of the proposed captive power plant shall be 10 MW/12.5 MVA as per their
technical feasibility report submitted. It is noted that the petitioner has earlier
indicated their rated capacity of the proposed captive power plant as 10 MVA.
20. In consideration to the above, permission is
hereby granted to the petitioner under Section 44 of the Supply Act, 1948 read with sub-section (3) of Section 21 of the Reform
Act, 1995 for installation of a captive power plant of 10 MW/12.5 MVA capacity. The
permission shall be prospective in nature and shall be effective from the date of issue by
the Commission and shall be valid for a period of two years.
21. It is also ordered that a copy of this order
should be sent to the Chief Electrical Inspector, Govt. of Orissa, who shall inspect the
metering, and safety aspect of the installation and send a copy of the inspection report
to the Commission.
22. Subject to the above observations, the petition is
allowed.
23. Pronounced this day the 6th June, 1997 in the open
Court. Copy to be given to the petitioner and to M/s. Grid Corporation of Orissa Limited.
-Sd/
(D.K. ROY)
(MEMBER)
-Sd/
(A.R. MOHANTY)
(MEMBER)
ORISSA ELECTRICITY REGULATORY COMMISSION
ORISSA, BHUBANESWAR
CASE NO. 5 OF 1997
CP-001/97
Order No.001 dated 9th April, 1997
09.04.97 M/s. Orissa Sponge Iron Limited
(OSIL), the applicant is represented by Sri M.A. Khan, Addl. General Manager of the
Company, Sri S. Mishra, Consultant and Sri G. Patra, Consultant to M/s. OSIL. Gridco the
affected party represented by Sri B.P. Rekhani, S.E. (Commerce) and Sri N.G. Nath, S.E.
(PP-I). Heard the representatives of M/s. OSIL and M/s. GRIDCO.
Ordered that M/s. OSIL shall make comprehensive submission to the
Commission in the matter of (a) ownership of their proposed Captive Power Plant and the
existing two industrial units to which they proposed to make supply, (b) commercial terms
related to exchange of power with the Grid, (c) reconciliation with Gridco in the matter
of increase in fault level due to addition of CPP and (d) undertaking to comply with the
conditions of Grid Code to be made by Gridco in the matter of operational procedure of the
CPP. A copy of such submission to the Commission shall be served on Gridco by the
applicant by 25th April, 1997.
Next date of hearing will be notified to the applicant on receipt of
their submission.
(A.R.MOHANTY)
MEMBER
(D. K. ROY)
MEMBER
Order No.002 dated 2nd May, 1997
02.05.97 Next date of hearing fixed on
20.05.97.
(A.R.MOHANTY)
MEMBER
(D.K.ROY)
MEMBER
Order No.003 dated 20th May, 1997
20.05.97 M/s. Orissa Sponge Iron Limited
(OSIL), the applicant is represented by Sri G. Patra, Advisor and Sri S. Mishra, Advisor,
M.N. Dastur & Co. M/s. GRIDCO, the affected party represented by Sri L.K. Mishra,
C.E.(Commerce) and Sri B. P. Rekhani, S. E. (Commerce). Heard the representatives of M/s.
OSIL and M/s. GRIDCO.
Hearing in the matter is concluded and it is reserved for orders.
(A.R.MOHANTY)
MEMBER
(D.K.ROY)
MEMBER
Order No.004 dated 6th June, 1997
06.06.97 M/s. OSIL, the applicant is
represented by Sri G. Patra, Adviser and Sri S. Mishra, Adviser, M/s. M.N. Dastur &
Co. M/s. GRIDCO, the affected party is represented by Sri B.P. Rekhani, S.E. (Commerce).
Order delivered in separate sheets. Copies of the order be given to the applicant and the
affected party.
(A.R.MOHANTY)
MEMBER
(D K.ROY )
MEMBER
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