CASE NO. 17 of 1998

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

For Petitioner:
Mr. J. Ramesh, Vice President along with Mr. D. Ashok, Executive Director.

For Affected Party:
Mr. B.K. Mohanty, Chief Engineer (Comm.),
Mr. M.K. Sircar, Executive Engineer (Elect.),
GRIDCO, Bhubaneswar.

Date of argument: 11.01.99

Date of Order : 29.01.99

The petitioner M/s Nava Bharat Ferro Alloys Ltd. (M/s NBFA Ltd.) in its application dt.26th October'98 has applied for permission under Section 21(3) of Orissa Electricity Reform Act, 1995 read with Section 44 of the Electricity (Supply) Act, 1948, for setting up of a 30 MW CPP at Khadgaprasad in Dhenkanal district, Orissa.

2. The petitioner has averred that M/s NBFA Ltd. has set up a ferro alloys plant to produce 50,000 tonnes of ferro chrome per year and has commenced operation since June, 1997.

3. Further, according to the petitioner, the manufacturing process used for producing ferro alloys is power intensive and, therefore, its financial viability is highly dependent upon cost of power.

4. According to the petitioner, due to high cost of power available from Gridco @ Rs.3.08 KWh, it could only utilise its capacity to the extent of 19.8% during the year 1997-98. As a result of that, the cost of their product in international competitive market has become unviable. Moreover, during the said period, only one furnace was switched on while the production in the second one could not commence though it was ready in all respects.

5. It is also averred that assured power supply at reasonable cost is highly necessary for the industry to survive in competitive international market. Therefore, it is essential for them to have a 30 MW Coal based Thermal Power Plant. Side by side, it is also contended that the cost per Kwh at the generator bus is estimated at Rs.1.88 which will decrease further with repayment of loan. With captive power available at such low cost as against Rs.3.08 charged by Gridco, the ferro alloys plant of NBFA Ltd. in Orissa can achieve a high utilisation capacity and earn valuable foreign exchange.

6. The petitioner has also averred that adequate land, water and coal deposit at Talcher which is close to their site, is available for setting up of the CPP.

7. The affected Party (Gridco), in its counter dt.10th December'98, while, inter alia, relying upon its letter No.120 dt.25.7.98 addressed to the Director (Engg.) has stated that it has no constraint in meeting the power requirement of the petitioner. It has further gone on record to assert that if the industry consumes more energy, the unit cost of power would be reduced to that of the cost of generation from the proposed CPP as estimated by the petitioner which has, in fact, been considerably cheaper from 01.12.98 with implementation of new tariff.

8. The affected party, in its letter No.120 dt.25.7.98, amongst other things, has raised the following points:-

1. To begin with M/s NBFA Ltd. had a contract demand of 34 MVA which has been reduced to 15 MVA from 22.3.98. Even though, the contract demand of the petitioner is now only 15 MVA, the justification for installation of a 30 MW CPP be taken into consideration.

2. The petitioner being an export oriented unit has been receiving power supply for 16 hours a day from NTPC (wheeled by Gridco) while the balance power requirement is met by Gridco at normal tariff rate applicable to power intensive industry. The normal tariff for energy for power intensive industries was Rs.2.50 per unit.

3. The cost of generation should have been calculated taking the depreciation at 7.84% instead of 5.06%. Further, if Return on Equity (ROE) @ 16% is included, the cost of generation per unit will be in the region of Rs. 2.41 per unit.

9. In the rejoinder filed on 23rd December'98, the petitioner has averred that the tariff effective from 1.12.98 for power intensive industries is Rs. 2.74 per unit and hence, it is no way cheaper compared to the unit cost of generation from the CPP.

10. In a pre-hearing conference on 28.8.98 attended by the petitioner & Director (Tariff) and Director (Engg.), it has been clarified that the Contract Demand with Gridco has been reduced to 15 MVA from that of 34 MVA because of the high cost of power and as a result of that only one of the furnace is operated with effect from 22.3.98 partly utilising NTPC power available at Rs.2.35/unit (including wheeling charges).

It is also clarified that the proposed 1X30 MW Steam Turbine Generator, though a self-sufficient unit and independent of power supply from Gridco, will, however, run parallel with Gridco's system having suitable protective devices. The petitioner further clarified that in addition to running parallel with Gridco's system, it will enter into a back up power supply agreement with Gridco for a Contract Demand of 5 MVA to meet the emergency load on account of failure of its proposed Captive Power Plant.

10.1 The petitioner, in its clarificatory letter dt.29.8.98 maintained that even if additional cost on account of Return on Equity (ROE) and cost of back-up power (5 MVA) from Gridco at Gridco's tariff rate is included to arrive at the unit cost for their total plant consumption, it will be less than the Gridco's tariff. The petitioner further maintained that the overall cost of power from the CPP will decrease from the second year onwards when loan is repaid year to year and consequently the interest burden is also reduced.

11. From the pleadings of the parties on record, it appears that there is no dispute or controversy on the following points:-

1. that the petitioner company is an export oriented unit and that it is a power intensive industry; and

2. that assured power supply is needed at reasonable cost to survive in the highly competitive international market.

12. It appears from the pleadings of the petitioner that the unit cost of generation of power from the proposed CPP of the petitioner company will be 222.79 paise taking return on equity into account and hence it is comparatively cheaper than the tariff realisable by Gridco from such type of industries. This is evident from para 5 of the letter from petitioner dated 29.08.98.

13. In course of the hearing, Mr. J. Ramesh, Vice-President of the petitioner company submitted that setting up of a C.P.P. will be economical and technically fool-proof for assured power supply and will also be eco-friendly and therefore, they be granted permission as applied for.

14. On the other hand, Mr. B.K. Mohanty, Chief Engineer (Commerce) of the Gridco. contended that if an industry like Nava Bharat Ferro Alloys Ltd. is taken out of the net work of the Gridco. it is bound to upset its revenue.

15. Mr. B.K. Sahoo, Director (Engg.), with the permission of the Commission, sought for a technical clarification from Mr. D. Ashok regarding required variation in the specification of the generator for operation in the present occurrence of high frequency in the eastern grid for a larger part of the day and necessity of the two transformers of 37.5 MVA capacity referred to in the Project Report prepared in May, 1998.

15.1 Mr. D. Ashok, in reply assured that the Project Report on 30 MW CPP prepared in May, 1998, will be suitably revised to incorporate the suggestion of the Orissa Electricity Regulatory Commission in a Detailed Project Report (DPR) to be prepared freshly and submitted to the Commission at the earliest.

15.2 Accordingly, the petitioner filed a DPR with a forwarding letter on January, 19, 1999 taking note of the objection (vide page 13 of the DPR) raised by the Director (Engg). In the revised DPR, the petitioner has indicated that the CPP will be operated in isolated mode in the event of grid frequency exceeding the limits of frequency variation for which the generator is designed.

It also explained that out of the two 37.5 MVA transformers considered in the DPR, one will be used for stepping down power received from Gridco at 132/11.5 KV for feeding the furnace load which will be retained even after installation of the CPP and also availing emergency/start-up power, while the second will be required for stepping up the power generated by the CPP at 11 KV to 132 KV for parallel operation with the grid.

16. In the facts and circumstances of the case, the Commission is of the opinion that the consent as prayed for may be granted particularly in view of the fact that Gridco's supply of power is unable to match the reliability and the cost of power of the CPP proposed by the petitioner. However, while granting consent to M/s. NBFA Ltd., Commission has to take note of the fact that the power procurement planning and financial viability of the licensee of the area is not adversely affected. Accordingly certain stipulations as below have to be incorporated in the consent:

1. The generation of power from the CPP should be restricted to the requirements of applicant as outlined in the application.

2. Commissioning of the CPP in all respect shall be completed within 5 years from the date of this order, failing which fresh consent of the Commission has to be sought.

3. The petitioner shall make adequate arrangements to prevent the flow of power to Gridco's system and in case, it flows inadvertently when in parallel, no charges/fees/ duties will be payable by the concerned transmission licensee.

4. Any sale of power to Gridco or third party shall need prior approval of this Commission through separate filing.

5. Gridco shall not be liable for incur any financial liability whatsoever due to loss of load or generation or damage to the plant on account of system disturbance and system conditions while running in parallel with integrated Gridco's system;

6. The cost of any upgradation of equipments on Gridco's system due to increase in fault level arising out of such parallel operation of the CPP shall be borne by the petitioner. Petitioner shall conduct a system study taking into account their proposed parallel operation of CPP and appraise the same to Gridco regarding its compatibility with Gridco system;

7. The petitioner shall follow the Grid Code disciplines while running in parallel with Gridco system;

8. Petitioner shall furnish the full technical details of its equipments of the CPP to Gridco before procurement and obtain Gridco's "no objection" to ensure safety of the Grid;

9. Other statutory clearances from concerned authorities required for establishment of such coal based thermal power station shall be obtained by the applicant before proceeding with the procurement of plant;

10. Clearance from the Electrical Inspector, Orissa is mandatory before commissioning of the plant.

17. Subject to above said directions and observations, the Commission has no objection to grant of consent to the petitioner for setting up a CPP of 30 MW to be operated in parallel with GRIDCO System. But before the final consent is granted in writing, we order that the case is referred to CEA for consultation in accordance with provisions of sub-section (2-A) of Section 44 of the Electricity (Supply) Act, 1948.

18. Pronounced this day the 29th January, 1999. Copy to be given to the petitioner and to M/s. Grid Corporation of Orissa Limited, Bhubaneswar.

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