CASE NO. 23 of 1997

Present:
Shri S. C. Mahalik, Chairman
Shri A. R. Mohanty, Member
Shri D. K. Roy, Member

M/s. Grid Corporation of Orissa Ltd.,
Janpath, Bhubaneswar-751007. - Petitioner

1) M/s. Steel Authority of India Ltd.,
Rourkela Steel Plant, Rourkela. - Respondent No.1
2) M/s. Ferrochrme Plant,
Jajpur Road, Dist. Jajpur - Respondent No.2
3) M/s. Indian Aluminium Company Ltd.,
Hirakud. - Respondent No.3

For Petitioner:
Shri N.G. Nath, Chief Engineer(PP) Gridco.

For Affected Party:
Shri J.C. Patra, Ferro Chrome Plant
Shri B.N. Das, INDAL
Shri Rabindra Misra, INDAL
Shri A.K. Kar, INDAL

Date of argument: 09.04.1998

Date of Order : 15.05.1998

This proceeding relates to an application filed by M/s Grid Corporation of Ltd. (for short, GRIDCO) seeking approval of the Commission with regard to separate special agreements entered with three corporate consumers namely, M/s Rourkela Steel Plant (RSP), M/s Indian Aluminium Company Ltd. (INDAL) and M/s Ferro Chrome Plant (Ferro Chrome).

2. The application was heard on 04.11.97 and on 09.04.98. In the meanwhile, the Commission had sought for clarification on a number of points arising out of the application and replies were received from M/s Gridco.

3. M/s Gridco was represented by Shri N. G. Nath, Chief Engineer, (P&P), Shri B. P. Rekhani, General Manager, Shri T. S. Rama Rao, S.E. (Comm.), Shri M. K. Sircar, E.E.(E), and Shri M. N. Mohapatra, E.E.(Comm.). While no one appeared on behalf of M/s RSP, Rourkela, M/s INDAL was represented by Shri A. K. Kar, General Works Manager and Shri Rajesh Mishra, Works Manager and Mr. B. N. Das whereas M/s Ferro Chrome Plant was represented by Shri Jagadish Chandra Patra, Manager. The counters and rejoinders filed by M/s Gridco were considered and the representatives were heard.

4. All the three industrial consumers have their own Captive Power Plants. Major part of their requirement of power was met from their own power stations. However, they have taken connection from OSEB/Gridco to meet the gap between the demand and the capacity of their own CPP and to meet additional demand during planned maintenance/breakdown of their generating units. Instead of standard agreement as prescribed in Regulation 6, Gridco has entered into special agreements with these three consumers under the authority of Regulation 28 of the Orissa State Electricity Board (General Condition of Supply) Regulations, 1995 (for short GCS Regulations).

5. Essential facts of the case may be outlined at the outset. Aforesaid three consumers who have their own CPPs and have been consumers of Gridco to meet the gap between their need and the power generated by their CPPs and to meet demands during breakdown of CPPs as well as during plant shutdown for maintenance have been treated by Gridco as distinctive cases calling for special agreements regarding supply and tariff. M/s RSP is in the category of 'Heavy Industries' whereas M/s INDAL and M/s Ferro Chrome are in the category of 'Power Intensive Industries' . The special agreement with M/s INDAL was entered into on 20.03.95 effective from 01.08.94 till 31.07.95 for supply of maximum demand of 30,000 KVA and energy demand of 3 MU per month. The agreement with M/s Ferro Chrome was entered on 12.11.96 effective from 16.11.96 for one year. The contracted maximum demand is 7,000 KVA and energy demand is 9.07 lakh KWH per month. The agreement with M/s RSP was entered on 14.01.97 effective for a period of three years retrospectively from 16.09.96 for supply of maximum demand of 30,000 KVA and energy demand of 5 MU per month at 33 kV & 95000 KVA with 15 MU per month at 132 kV. While M/s RSP and M/s Ferro Chrome have only one connection each M/s INDAL has an additional connection for emergency power supply. The conditions of supply and the tariff prescribed in the special agreements are more or less similar in all the cases. Each of the three consumers have taken connection for a given contracted demand.

6. The nature of special agreements as outlined by Gridco is as under.

7. The implication of above is that the three industrial consumers covered under separate special agreements are to pay considerably lower amount than the other consumers in the category of Heavy Industries and Power Intensive Industries. Shorn of inessentials, Gridco's case is that each of these three consumers owning Captive Power Plants cannot be brought under any of the classes specified under Regulation 27 and hence there is justification for special agreement under authority of Regulation 28 of OSEB (General Conditions of Supply) Regulations, 1995.

8. Before indicating the issues that emerge from the case it is necessary to refer to relevant provisions of law.

9. In this background of legal provisions, M/s.GRIDCO has entered into special agreement with the aforesaid three corporate consumers on the ground that these cases do not come under any of the clauses specified under Regulation 27 and has charged tariff on a different basis than the one provided in Commission's Tariff Order No.009 dt. 12.03.97. From the facts of the case the issues that have emerged are as below:

1. Whether the three industrial consumers could be covered under any of the classes specified under Regulation 27?

2. Whether having regard to the nature of supply and purpose for which the power is required, there is justification for invoking provisions for Regulation 28 and for entering into special agreements stipulating special tariff and conditions of supply in these cases?

3. Whether the tariff charged by GRIDCO as per the special agreement were in conformity with the tariff prescribed by the OERC?

4. Whether the special agreements submitted to the Commission are liable to be approved and if so, from which dates?

10. Reasons stated by GRIDCO for the justification of special agreement in case of INDAL and Ferro Chrome are that the use factor for these two industries have fallen below 80% due to installation of Captive Power Plant. Definition of P.I. industries as per GCS Regulation is "the industries where power is substantially utilised as raw material electro-chemical and/or electro-metallurgical processes with a contract demand of and above 2000 KVA having a monthly use factor of 80%". Gridco's representative explained the use factor" as the ratio of average energy drawn (M.U.) by the consumer from Gridco to the total energy (M.U.) consumed by the Industry. Since the aforesaid ratio after captive installation has come down to less than 80%, these two do not fall under 'Power Intensive Industries' and as such a special agreement is called for as contemplated in Regulation 28 of GCS Regulation. According to Gridco the drawal of P.l. industries from Gridco after installation of Captive Power Plant has become more demand oriented than energy based as their energy component is quite low compared to their demand. The salient departure of the special agreement from the approved tariff order is the change of load factor for estimating minimum charges. Present approved tariff provide 40% load factor to be used for estimating minimum charges for P.l. and Heavy Industries whereas the special agreement provides for charging at 20% while enhancing demand charges to be levied at 100% of M.D. or C.D. whichever is higher instead of 80% used in the approved tariff order keeping in mind the pattern of drawal of the consumer.

11. Further it is claimed that, by GRIDCO and its predecessor OSEB have been guided by Govt. of Orissa Policy Resolution to grant incentives to the industries having CPPs. In this connection, GRIDCO has quoted the Dept. of Energy Resolution No.20396-E dt.09. 11.92 and the recommendation of the Sunderrajan Committee. In order to combat power shortage and to attract private investment in power generation Govt. of Orissa encouraged the industries state to put up their own CPPs. This has been made to enable the industries to be self-reliant and to depend upon the State Electricity Board only for emergency assistance, or operational power during plant breakdown or during capital maintenance and for backup power. According to GRIDCO the backup power agreement was entered into with M/s.lNDAL and subsequently with others only in pursuance of Govt. Policy. This argument was elaborated by GRIDCO as below:

1. The high demand component and the low energy component for these type of consumers equipped with its own CPPs call for execution of special agreement as this is not covered under tariff prescribed for different categories of consumers by OERC in Order No.009 dt. 12.03.97.

2. In case of M/s.lNDAL the agreement was for supplementing backup power drawn from the state grid in conjunction with its own CPPs as a result of which the energy requirement for operational power is very much less and hence, M/s. lNDAL do not fit into appropriate clause of consumers define in Regulation 27.

3. There is no supply of power to such consumers at lower rate as the only relaxation for these three industries were with regard to load factor.

12. Shri B. N. Das, authorised representative of M/s INDAL augmented the arguments of M/s Gridco. He stated that Gridco derived a lot of advantages and benefit from its commercial contract with the three industrial units having the CPPs. Consequent on availability of surplus power from these CPPs the unit power cost of electricity is reduced for Gridco. Further, the CPPs have helped Gridco to meet demand of other consumers. It was argued that industries having CPPs requiring power during maintenance/breakdown could not be fitted in any of the categories specified in the Regulations 27 and therefore, they could not be final into any of the categories covered in the tariff regulation. The tariff notifications dt.20.03.97 had prescribed rate for emergency power supply to CPPs with regard to supplying - startup, essential, auxiliary and survival power in the event of failure of CPPs. This rate could not be made applicable for supply of operational power in case of maintenance low generation CPPs. Basically argument was that tariff should be different for operational power for industries having CPPs and for emergency power supply to CPPs. Mr. Das also referred to the average cost of energy for backup and for emergency power supply and supported the justifications for special agreements in pursuance of the Govt. policy for encouragement to the industries for setting up CPPs.

13. The first issue to be decided is whether the three corporate consumers fall in any of the categories specified under Regulations 27. M/s RSP falls under the category of, Heavy Industries as its contract demand is 100 MVA at 132 kV. Electricity is utilised substantially as a motive force and hence, it clearly falls within the category of Heavy industries. Gridco has not given any reason as to how and why RSP cannot be categorised as 'Heavy Industries'. RSP has neither recorded its presence nor has responded in any manner to the notices given to it as an affected party. On the facts before us, we do not find any reasons for treating RSP on a different footing than any other 'Heavy Industries' and hence there is no justification for a special agreement under Regulation 28.

Both M/s INDAL and M/s Ferro Chrome substantially use power as raw material for their electric metallurgical process. The contract demand of M/s INDAL and M/s Ferro Chrome Plant are 30 and 7 MVA. Even the special agreements stipulate that the demand charges and energy charges shall be payable at the rate applicable to Power Intensive Industries category. Hence, it is clear that these two consumers fall under a specified category under Regulation 27 and Gridco itself had no doubt about it. Hence, there can be no justification for attracting the provisions Regulation 28. However, before putting this at rest, it may be relevant to examine one aspect, namely, the "Operational use factor" which has been laboured for too much and to find out whether on this ground these two Power Intensive Industries defy classification under Regulation 27.

14. It has been argued at length that in case of INDAL and Ferro Chrome, monthly operational use factor have fallen below 80% and therefore, they do not come under the category of "Power Intensive Industries" and have to be treated as special cases. Gridco and INDAL have tried to differentiate between the load factor and operational use factor. On a careful reading of the definition of load factor as at Regulation 3 (XVII) and classification of power intensive industries as at Regulation 27 (XIII), we find that load factor and operational use factor are one and the same thing. Load factor refers to the ratio of the total number of units consumed vis-a-vis maximum contract demand/maximum demand and similarly, operational use factor refers to use of Gridco's power for operational purposes vis-a-vis contracted demand. Whether the industrial unit depends on Gridco for less than 80% of its total power requirement is extraneous to calculation of load factor/operational use factor. The regulation is with regard to commercial relationship between the Gridco and the consumer and hence, it is not concerned with the total demand of industrial unit from all sources. The regulation is concerned with the quantum of consumption vis-a-vis the quantum of contracted demand. Calculation of operational use factor with reference to total demand of the consumer company seems to be an ingenious argument devoid of merit. It has not been proved before us that the power drawn from Gridco for operational use was less than 80% of the contract demand/maximum demand. Thus, the reasoning given by Gridco and supported by Mr. B. N. Das falls to ground. Hence, we hold that INDAL and Ferro Chrome are liable to be categorised as power intensive industries under XIII of the Regulation 27. No case has been made out with regard to RSP and by any consideration it has to be categorised as Heavy Industries as at XIV of Regulation 27.

15. We would like to briefly deal with some of the other arguments with the observation that these are not relevant for the issues before us in the light of the position in law. During the annual tariff hearing in February-March'97 neither Gridco nor any other affected party had put forth a case for special tariff treatment to the industrial consumers having CPPs on the ground of operational use factor. Such special agreements virtually creating a special category is not tenable. Secondly, we have noted that during tariff proceeding Gridco had asked for special rate for CPPs who have contracted only for emergency supply whereas no case was made out for separate classification for industries who had contracts with Gridco for operational power. Thirdly, issues such as implementation of Govt. Policy for incentive to industries, discrimination D, hardship and rationalization on tariff etc. raised by Gridco and by the authorised representative of INDAL Shri B. N. Das are issues which can be settled only in a general tariff proceeding. The present proceeding on a limited issue with regard to specific case cannot provide a scope and forum to settle general tariff issues. It is not open for Gridco to enter into special agreement or to take any other decision on the ground of Govt.'s policy regarding incentives to industries or for setting of CPPs.

16. Special Agreements stipulating different basis for calculating demand charge and energy charge has the effect of reducing the financial impact on the consumers and adversely affecting the revenue potential of Gridco. In any case Gridco was not authorised to go ahead with any agreement which had the effect of modifying or diluting the tariff order No.009 dated 12th March'97 and Gridco's own notification dated 19.03.1997. The impugned special agreements were obviously not in conformity with the tariff order.

17. Having given our findings, we have to finally observe and order as follows. The Special Agreements are irregular and Gridco should not have entered into any such agreement without prior approval of the Commission. However, taking note of various factors we would allow the subsisting special agreements to run their course and to order that in cases where the special agreements have already lapsed the tariff has to be charged and basis of charge has to be calculated as in case of any other consumer of appropriate category effective from 1st July 1998. Appropriate steps for cancellation of agreement/intimation to consumer and for levying tariff and charges in consonance with the tariff order dated 12th March, 1997 have to be taken by Gridco and an action taken report sent to Commission by 30.06.98.

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