CASE NO. 14 of 1998

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

For Petitioner:
Shri B.K. Patnaik, General Manager (Coordination) of M/s.. Indian Aluminium Company Ltd.

For Affected Party:
Shri B.P. Rekhani, General Manager
(Regulatory Affairs Unit), GRIDCO.

This is an application u/s 44 of the Electricity (Supply) Act, 1948 (hereafter, for short, the Act, 1948) read with section 21(3) of the Orissa Electricity Reform Act, 1995 (hereafter, for short, the Act, 1995) for grant of consent for setting up a 6X120 MW captive Power Plant at Rengali in the revenue District of sambalpur (Orissa). It is noted by the Commission that while disposing of case No.21 of 1997, the Commission handed over Order No.002 dated 4.11.97 giving the petitioner M/s INDAL liberty to file fresh application.

2. Indian Aluminium Company Itd. (INDAL), engaged in the field of production of aluminium metal as well as aluminium products, intends to set up a modern integrated Aluminium Complex in the State of Orissa. INDAL proposes to set up a green field aluminium smelter of 230,000 tons per year (TPY) alongwith a 6X120 MW Captive Power Plant to meet its power requirement.

2.1 It has been stated that since availability of large amount of uninterrupted and steady electrical energy at economic cost is the most important factor for the viability of' en aluminium smelter, a reliable power source at a competitive price to feed the smelter plant is considered essential.

3. So far as the unit cost of generation of electricity is concerned, it has been estimated that the capitalised project cost of the CPP will be Rs.33744.91 millions which comes to a cost of Rs.46.87 million per installed MW. Therefore, while the estimated cost of energy supply from CPP comes to Rs.2.23 per Kwh without duty on self-generation in the first year of operation, it is estimated that it will gradually go down alongwith the reduction in interest and depreciation burden and will finally levelise at Rs. 2.15 paisa per without duty on self-generation, for a period of 20 years.

4. It is averred that the basic requirements of the CPP such as land, fuel, consumptive water, power evacuation and other infrastructural facilities being abundantly available in the region in which it is proposed to be set up, necessary consent be accorded.

5. The Affected Party, M/s GRIDCO in its counter of 7th September'98 has averred that it was not possible to supply power to the petitioner at the rate at which it has estimated to generate power because the present tariff applicable to power intensive category of consumer is Rs.2.50 per unit plus Rs.200/- per KVA as demand charges. It is further averred that if the Commission decided to grant permission for installation of the CPP as applied for, the following conditions may be imposed:

1. the petitioner must ensure that the generation of power by the CPP is restricted to its own requirement and there should be no generation for the purpose of sale. No power should be injected into the GRIDCO's system unless there is a written contract for the same;

2. necessary technical evaluation with Transient Fault Study, System Study, Load Flow Study and Fault Level Study have to be conducted at the cost of the petitioner. The petitioner must provide required data accordingly to carry out those studies;

3. the applicant should bear the cost of upgradation of the equipment of the GRIDCO, if required due to increase in fault level by parallel operation of the applicants' generating station with the licensee's grid;

4. in case power has to be sold to GRIDCO at a future point of time, the same will have to be done on mutual written agreement subject to the approval of the Orissa Electricity Regulatory Commission (OERC);

5. the Captive Power Plant (CPP) shall comply with Grid Code and Operating procedure and instructions of all statutory and regulatory authorities as applicable for operation of CPP in Orissa which are connected with the State/Regional Grid from the point of safety and stability of the whole grid;

6. GRIDCO (Licensee) shall not be liable to pay for any supply of surplus power unless , it is contracted for nor shall it be liable to pay any compensation for loss of generation or damage to the equipment of the applicant due to operation/non-operation of the CPP running in parallel with the GRIDCO's transmission system; and

7. GRIDCO (Licensee) shall not be responsible directly or indirectly for any adverse effect, if any, on the Petitioner's generating station due to the change in the operating parameters of the GRIDCO's system.

6. The Tariff Division, in its analysis, has pointed out that even though the levelised tariff has been estimated by the petitioner at Rs.2.15 paisa per unit for a period of 20 years, yet it is estimated to be still less (Rs.1.81 paisa per unit). Further, while confirming that the rate of interest as shown in the DPR is reasonable, it is pointed out in the tariff analysis that the Return on Equity (ROE) taken at 21% by the petitioner as against 16 % is due to forex component and rate of exchange variations.

7. At the hearing, Mr. B.K. Pattnaik, General Manager (Coordination) presented the case on behalf of the petitioner. He submitted that as there is no objection to their setting up a 6X120 MW CPP to meet the power requirement for a green field aluminium smelter by the Affected party and they having raised no objection to the conditions raised by the Affected party in their counter of 7th September'98, the Commission may be pleased to grant necessary permission as required under the law.

8. Mr. B.P. Rekhani, General Manager (Regulatory Affairs Unit) of GRIDCO submitted that the Affected party has no objection to the granting of consent in this case provided its conditions are fully met and imposed on the petitioner.

9. In the fact and circumstances of this case, it thus appears that there is virtually no opposition to the prayer of the petitioner save and except that certain conditions indicated in the counter are sought to be met and fulfilled.

10. Electricity is a major input for aluminium production. Thus, the importance of cheap and assured power supply to aluminium smelter plant can hardly be over emphasised. In view of high quantum of electrical energy requirement, the availability of power at the cheapest possible cost is considered essential. Admittedly the generation of power from the proposed CPP is much cheaper than the rate at which it can be supplied by the Affected party.

11. Thus, in the facts and circumstances of the case, the Commission is of the opinion that the consent as prayed for may be granted in favour of the petitioner, particularly, in view of the position taken by the Affected party. However, while granting consent to M/s INDAL, 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. While setting up the proposed CPP, the petitioner shall do so keeping in view the technical, financial and other parameters as mentioned in the DPR. In case any deviation is considered necessary, prior approval of the Commission shall have to be taken.

2. The applicant must ensure that the generation of power is restricted to its own requirement and there should be no generation for sale purposes.

3. Necessary technical evaluation with System Study, Load Flow Study, Fault Study has to be conducted at the cost of the applicant.

4. The applicant shall bear the cost for any upgradation of the equipments of GRIDCO required due to higher fault MVA during parallel operation of 720 MW power station.

5. The applicant shall have no claim for sale of power to GRIDCO or to any other person. In case power has to be sold to GRIDCO at a future point of time, this has to be done only after approval from the OERC in a separate proceeding.

6. The licensee shall supply emergency power to applicant's CPP at rates approved by the Commission.

7. The CPP shall comply with the Grid Code and Operating Procedure and instructions of all statutory and regulatory authorities as applicable for operation of Captive Power Plant in Orissa connected with the State/Regional Grid.

8. GRIDCO shall not be liable to pay for any supply of surplus power to GRIDCO unless it is contracted for nor shall be liable to pay any compensation for loss of generation or damage to equipments of C.P.P. while operating in parallel due to disturbances of the Grid system.

12. 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 720 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.

13. Pronounced this day the 9th October, 1998. Copy to be given to the petitioner and to M/s. Grid Corporation of Orissa Limited, Bhubaneswar.

(D.K. ROY)
MEMBER

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