Before the
13th Floor, Centre No.1, World Trade Centre, Cuffe Parade, Mumbai 400 005.
Tel. 22163964 / 22163965, Fax No. 22163976

CASE No. 16 of 2005

In the matter of
Approval of Rate of Power Purchase of peak power by M/s. Reliance Energy Limited and determination of transmission charges and losses for availing open access

Dr Pramod Deo, Chairman
Shri A. Velayutham, Member
Shri S B Kulkarni, Member

Dated: 12th January, 2006
  Reliance Energy Limited (REL) filed an Application on 6th June, 2005 in the matter of approval of rate of power purchase of peak power and application for determination of transmission charges for availing open access by Reliance Energy Limited on the transmission system/lines of the Maharashtra State Electricity Board (MSEB) and The Tata Power Company Limited (TPC) for transportation of power to its area of supply in Mumbai .The Petitioner made the following prayers in its Petition:
Approve the rate of power purchase for peak power;
Specify the transmission charges, losses and other terms and conditions for open access to REL on the MSEB and TPC transmission network and associated facilities upto REL's area of supply in Mumbai
Pending the hearing and final disposal of the present Application, specify the interim transmission charges, losses and other terms and conditions for such open access subject to adjustment of payment of such interim transmission charges with the transmission charges finally determined by this Hon'ble Commission;
Pass such other order/orders, as may be deemed fit and proper in the facts and circumstances of the case.
2. REL, in its Petition, mentioned that it had submitted two applications being Case No. 20 of 2003 and 21 of 2003 before the Commission on 27th August 2003 for a direction to TPC and MSEB to provide open access to REL on TPC and MSEB transmission and associated facilities upto REL system as deemed appropriate by the Commission and for determination of the transmission charges and other terms and conditions for such open access. Both the applications were disposed by the Commission by its common Order dated 4th February, 2005 in which the Commission at para 38 of the said Order mentioned that "In view of the above and the various considerations that have been brought out in the dispute regarding surplus capacity subsequently to the Commission's Order dated 23rd January 2004 under Section 35, the Commission is not in a position to allow open access on the MSEB system for transmitting 800 MW power (Padge to Boisar, Padge to Borivali, Padge to Trombay points) as sought by REL. However, if they so desire, REL may apply for a more limited open access in the context of the resolution of the dispute regarding the availability of surplus capacity, taking into account the exercise by MSEB and clearly indicating their source of supply and input and output points". In view of this, REL proposed to meet its incremental requirements during the evening peak by power sourced through open access and filed this application for approval of the rate of power purchase of such power and for determination of transmission charges and losses on the MSEB and TPC transmission network.
3. REL submitted that REL, BEST and TPC supply power to the majority of consumers in Mumbai and the maximum demand on the system is 2151 MW as of FY 2003-04 and the net generation capacity available to meet the power requirements of Mumbai is 2127 MW. Considering the maximum demand of 2151 MW as against the existing capacity of 2127 MW, the Mumbai system appears to be already facing a shortage during peak and further TPC's hydro plants may not always be available to meet the peak demand requirement of Mumbai. It further submitted that assuming a modest 3% growth and an additional 5% spinning reserve as specified under the National Electricity Policy, the overall demand on the Mumbai system will be 2402 MW in FY 2005-06 and 2704 MW in FY 2009-10. REL submitted that as an initial step towards addressing this capacity shortfall, it proposes to source power through open access on the MSEB and TPC transmission network to its area of supply in Mumbai.
4. REL submitted that it proposes to source 50 MW power during evening peak hours (17:00 - 23:00 hours) for a period of 3 months from July to September 2005 and this power is likely to be sourced from the Eastern/North region by Reliance Energy Trading Limited (RETL) and will be made available to REL at the boundary point of the Western Regional network and MSEB network. REL further submitted that RETL will sell this power to REL at a price of about Rs 3.49/kWh at the North eastern region boundary and considering the transmission charges, open access charges and losses applicable to this transaction on the ER, ER-WR and WR systems for transmission of power upto Maharashtra State Grid, this power will be available at Rs 3.95/kWh at the boundary point of the Western Regional network and MSEB network. REL submitted that this rate appears to be comparable to the estimated cost of peak power considering that REL pays demand charges towards power purchase on the basis of coincident maximum demand.
5. The Commission, vide its letter dated 20th July 2005 directed REL to submit clarifications in the context of present power purchase from TPC. REL, in its submission dated 25th July 2005, submitted the clarifications on various issues raised by the Commission. The issues raised by the Commission and clarifications submitted by REL are as follows:
  a) Justification for quantum of outside requirement during the relevant time-period
    REL submitted that the current Maximum Demand met by TPC and Dahanu Thermal Power Station (DTPS) combined together is about 2300 MVA, whereas the total projections for the Mumbai area of supply depict a load of about 2400 MVA. Thus, there is a gap of about 100 MVA in the system, which is part of the peak requirement.
  b) Basis of the procurement rate proposed, the tariff being pass-through to the Consumers
    REL submitted that in the recent past, there were two tenders floated by GRIDCO and MeSEB for sale of peak power, which form the basis of the procurement rate proposed. Also, MSEB has purchased its peaking power requirement in the month of July at a price slightly higher than the price proposed in the application.
  c) How the proposed purchase fulfills economic procurement criteria, considering Section 61(c) of the EA, 2003, rate at which REL presently sources power, and the price alternatives explored for the proposed purchase
    REL submitted that the proposed power purchase would meet the criteria under section 61(c) of EA, 2003 as granting such transmission open access will further enable competition in power sourcing for Mumbai area of supply, it will help in further improving the reliability of supply thereby increasing the efficiency and performance of the Distribution licensee, and utilization of surplus power in Eastern region of the country by Western region would enable economic use of resources thereby optimizing investments. REL further submitted that it has not explored price alternatives for the proposed purchase, as the quantity being sourced for short term peaking requirements was urgent and REL is convinced that the same is in line with current market rates due to shortage of peaking power in the country.
6.   The Commission heard the matter on 26th July 2005. During the hearing, Shri. Subodh Shah, Director, REL reiterated that the Application was basically for short-term power purchase from July to September, 2005. This is now not available since the month of July has already almost passed. Shri Shah clarified that the power is now required for the subsequent period, and particularly for October to December, 2005, when the requirement would increase as compared to the period July to September.
7. The Commission queried as to the probable frequency range and demand during these periods, since the profile during October to December 2005 is likely to be different than the profile during July to September 2003. Shri Shah submitted that they would provide the details. He pointed out that at present, REL is supplied by TPC and the details of TPC's outside purchases, and terms and quantum of purchases by TPC from erstwhile MSEB, etc., are not available with REL in full. The Commission observed that the point of supply, time duration, present availability, and present price would have to be taken into account and certain assumptions are required to be made for deriving benchmarks. Shri Shah suggested the possibility of fixing a ceiling rate for such short-term purchases, which is permissible under Section 62 of EA, 2003, as had been done in the Tariff Order in case of MSEB. The Commission observed that the MSEB circumstances at that time had been different and per unit average cost had been fixed for outside purchases. That has now run into difficulties because of prevailing sellers' market.
8. Shri Shah clarified that MSEB had purchased power from the same source at the same price in May-June, 2005. The present trading licensee is a sister concern of REL. REL had asked for more details and information, but the indications are that the October price situation would be worse. He therefore, urged that a ceiling rate be fixed indicating the time and period. REL would submit the additional peak requirement upto December, 2005 and requested the Commission to fix a month-to-month ceiling on purchase price.
9. The Commission observed that the procurement price would have to be justified taking into account the local availability and the price from different sources at the inlet point. These would have to include intra and inter-State wheeling and transmission charges also. As far as local availability is concerned, Shri Shah submitted that TPC is their sole supplier at a price fixed by the Commission through its Tariff Order. Apart from the procurement price, the Commission may also fix transmission and wheeling charges, if necessary on an ad-hoc basis pending their final determination. The Commission observed that REL and other Mumbai licensees would have to undertake Demand Side Management (DSM) and energy conservation measures. This may not have immediate results, but would help in medium term shaping of the load curve.
10. Dr. S.L. Patil of Thane Belapur Industries Association (TBIA) submitted that all these matters are inter-dependent. If peak rates increase, the impact on industrial and other consumers would have to be considered. The cost economics in this regard have not been spelt out by REL. The period also now requires to be bifurcated because the requirement and costs are likely to differ.
11. Shri Shantanu Dixit of Prayas suggested that, considering the nature of the Application, TPC and MSEB also need to be brought in as parties. Further details are also required, such as the existing and expected demand supply scenario, monthly load curves, and the extent to which TPC are able to supply. A written submission should be made in this regard. Shri Dixit further submitted that the benchmark price needs to be determined through competitive bidding. It is not good enough merely to cite the rate at which MSEB have sourced power. As pointed out by Dr S.L. Patil, the impact on tariff also needs to be brought out.
12. Shri Dixit submitted that the revised Tariff Regulations are in the process of finalization. Therefore, any emergent dispensation with regard to REL's Application should be temporary and short-term and applicable only for the intervening period. Recalling the Commission's earlier Order dated 4th February, 2005 on REL's Application for Transmission Open Access under Sections 35 and 36 (which was issued prior to the notification of the Transmission Open Access Regulations), Shri Dixit stated that the Commission had envisaged some limited availability of transmission capacity for REL and asked them to apply after MSEB has submitted further details in this regard.
13. Shri Prakash Beria of REL set out the proposed rate details, elaborating on REL's written submission. He submitted that at the entry point, the rate is Rs 3.55/kWh and the landed cost at the Maharashtra boundary works out to be Rs 3.95/kWh (exclusive of intra-State charges to be fixed by the Commission). Shri Subodh Shah, REL, clarified that replacement of power from TPC was not envisaged in their proposal. REL have an average round the clock rate for purchase of power from TPC, and no separate peak rate. At the REL end, there is no methodology for fixing the peak power rate. Considering the expected supply position and the requirement of licensees in Mumbai, and the fact that some outside power is available now for sourcing, Shri Shah reiterated that a ceiling price be fixed along with interim transmission and wheeling charges. He submitted that, if this process takes much more time, difficulties may be faced in Mumbai in October, 2005. Very detailed assessment of the demand supply situation in a rigorous manner would take considerable time. It is now known that Mumbai has been drawing net power from MSEB. The details are available with the STU and would be brought out in connection with the Petition filed by MSEB in this regard. With regard to competitive bidding, Shri Shah submitted that Prayas' suggestion needs to be seen in the emergent context. REL's proposal was only for short-term power purchase for the peak requirement of Mumbai. Under the law, there is also no compulsion for competitive bidding, particularly under these circumstances. Moreover, the trading companies from whom purchases would be made, would also procure power through competitive bidding, and the rates are available in the public domain. The concerned trading company could be requested by REL to provide the details. The impact on tariff could also be assessed.
14. Shri Shah submitted that it would take REL a period of 1-1 ½ months after the Commission's approval to finalise the arrangements. Therefore, an early interim dispensation, laying down a ceiling price and period, may be provided by the Commission, following which the price movement could be further seen. The Commission observed that data on demand supply scenarios and anticipated load shapes would be required. It is possible that what may emerge is that even more power may be required, or TPC may agree to supply at a lower rate from Unit No. 4 as compared to outside purchases. Thus, different possibilities may emerge. As regards competitive bidding, reverse bidding could be resorted to, setting the rate offered by the trader as a ceiling.
15. Shri Beria of REL submitted that, once the ceiling or other rate for the small quantity presently envisaged are fixed, REL would apply to the STU. This would set the process of transmission open access in motion, and provide some indication of the issues and problems that might arise. He pointed out that, under Section 62(1)(a), a ceiling rate may be fixed by the Commission for a period of upto one year, in situations of shortage. In June 2005, power had been purchased by MSEB at Rs 3.75 from the same trader. If this is done now, it would save time and kick start the process and mitigate any eventuality that might be faced, particularly from October 2005 onwards.
16. The Commission concluded the hearing by asking REL to submit the information for an emergent dispensation taking into account the deliberations, within one week.
17. REL vide its letter dated 22nd August 2005, submitted the following information:
  a) The half-hourly month-wise maximum coincident demand of REL system for FY 2005-06
  b) The detailed break-up of power purchase rate at Maharashtra boundary (as proposed in the Petition)
  REL in its submission mentioned that the peaking power was available for a short period upto three months and since the supplier could not wait, power to be purchased by REL was already sold to some other party. REL requested the Commission to kindly approve a ceiling rate at Maharashtra boundary for the power purchase for the next twelve months period so that REL can source power to meet the shortfall, which may arise. REL submitted that in view of the shortage of peaking power in the State, the Commission is empowered to fix such a ceiling rate for one year under the provisions of Section 62(1)(a) of the Electricity Act, 2003.
18. REL also requested the Commission to fix the transmission charges including transmission losses as well as SLDC charges for bring such power in REL's area of supply for a period of next 12 months in the interim, pending the determination of such charges based on tariff determination process as per MERC (Terms and Conditions of Tariff) Regulations and other provisions of Electricity Act 2003 and rules and regulations thereunder.
19. The Commission convened a meeting of all Licensees in the State on August 24, 2005 to discuss the roadmap for power supply and demand management in the Mumbai system, the short/medium term arrangements to maintain uninterrupted supply in Mumbai during the ensuing peak season and related issues. During the meeting, some Licensees expressed concern that in the coming months, particularly from October 2005 onwards, the Mumbai area would be facing a difficult situation due to power shortage. The Commission asked TPC to elaborate on the steps planned by TPC to mitigate the supply deficit. The representative of TPC replied that in order to meet the anticipated growth in demand, TPC is exploring the possibility of sourcing 175 MW of power from the Southern region.
20. Subsequently, TPC filed an Application on September 13, 2005 for approval of purchase of 175 MW power by TPC for the month of September 2005 and for a period of twelve months from October 2005 onwards, from a source in the Southern Region as per Regulation 25 of MERC (Terms and Conditions of Tariff) Regulations, 2005 (Case 20 of 2005).
21. The Commission further heard REL's Petition for approval of short term power purchase alongwith TPC's application for approval of 175 MW power on short term basis on 14th and 20th September 2005.
22. During the hearing, Shri. Subodh Shah, the representative of REL, submitted that REL requires additional power mainly during the peak hours and REL has submitted an Application to the Commission for approval of ceiling rate at Maharashtra boundary for purchase of 50 MW of power during the peak hours for the next twelve months. Shri. Shah reiterated the submissions made in the Application and requested the Commission to approve the ceiling rate at Maharashtra boundary for purchase of power.
23. During the hearing, the Commission directed REL to submit its specific proposal for ceiling rate for power purchase at Maharashtra boundary alongwith assumptions and supporting documents.
24. The Commission issued an Order on 5th October 2005 on TPC's application for approval for purchase of 175 MW power from a source in Southern Region. The Commission, in its Order, has accorded in-principle approval to TPC for purchase of 175 MW 'round the clock' power for a period of three months from October to December 2005. Further the Commission in its Order also mentioned that in case the additional power is also required from January 2006 onwards, TPC can extend this arrangement of purchase of 175 MW of power on 'round the clock' basis for a further period of three months, i.e., from January to March 2006. The Commission, in its Order, has mentioned that this approval is on adhoc basis as an interim, short-term arrangement.
25. In response to the Commission's query on specific proposal, REL, vide its letter dated 30th November 2005, submitted that Reliance Energy Trading Limited (RETL) has identified source of power in North Eastern region (Meghalaya State Electricity Board) from where peak power to the extent of 50 MW was available and the rate offered at Maharashtra boundary was Rs 4.15 paise/kWh upto June 2005 and Rs 3.95/kWh from July to September 2005. REL attached a copy of the offer made by RETL to REL as supporting document and as per the offer, the rate offered at delivery point was Rs 3.70/kWh for June 2005 and Rs 3.52/kWh from July to September 2005. REL submitted that they have considered following assumptions for working out the rate at Maharashtra boundary:
  a) Short term transmission charges as prescribed by PGCIL for Short Term Open Access customers
  b) RLDC charges as prescribed by PGCIL in its 'Procedure for Reservation of Transmission Capacity to Short-Term Open Access Customers' (as per CERC Letter dated 22nd March 2005)
  c) Loss data was taken as per the 52-week average loss data published by respective Regional Load Despatch Centres
  d) It was assumed that the NER-ER-WR corridor shall be available for flow of power.
26. REL further submitted that as per the current market scenario, the price of electricity in the short term trading market has increased substantially in last few quarter. The price which emerged from the competitive bidding process initiated by Grid Corporation of Orissa (GRIDCO) for sale of peak power during the period January to March 2006 is Rs 3.98/kWh at GRIDCO periphery and the landed price of this power at the point of entry into MSEB system would work out to around Rs 4.45/kWh. REL requested the Commission to give due consideration to the present market scenario and the other assumptions for fixing the ceiling price for peak power sourcing along with the transmission and wheeling charges.
27. REL's original application was for the approval of rate for sourcing 50 MW power during peak hours (17:00 - 23:00 hours) for the three month period from July to September 2005. Subsequently, REL requested the Commission to fix a ceiling rate for purchase of power at Maharashtra boundary for one year under the provisions of Section 62 (1) (a) of Electricity Act, 2003.
28. The Commission is of the opinion that the additional 175 MW power being sourced by TPC from southern region on 'round the clock' basis will also be able to meet REL's peak requirement till March 2006 and REL may not have to source additional power to meet its requirement till March 2006.

Further, in response to Commission's query on specific proposal for approval of ceiling rate, REL has submitted the details of the bid submitted by RETL for the period upto September 2005. REL in it submission has not proposed any ceiling rate for approval alongwith the supporting details and has requested the Commission to give due consideration to the present market scenario for fixing the ceiling price for peak power.

  • Considering that the Commission's in-principle approval to TPC for sourcing 175 MW additional power till March 2006 will also be able to meet REL's peak requirement, the Commission feels there is no reason at this point to go into the aspects of rate for peak power. Further, in the absence of specific proposal about the proposed ceiling rate along with the supporting document (such as identified source alongwith quantum and rate of purchase of peak power in the prevalent market scenario), the Commission cannot be expected to approve or decide the ceiling rate for purchase of power by REL on short term basis.
30. As regards transmission and wheeling charges, the Commission, in its Order dated 5th October 2005, on TPC's application for approval for purchase of 175 MW power from a source in Southern Region mentioned that "The Commission will separately determine the transmission and wheeling charges for open access and other transactions for transmission of power on the State network. However, the transmission charges and transmission losses payable by TPC to MSTCL for this arrangement will be based on the Western Region rates for short-term open access as per the Transmission Open Access Regulations of the CERC".
31. With this Order, the Commission disposes the Application of Reliance Energy Limited pending before it.

(S.B. Kulkarni)
(A. Velayutham)
(Dr Pramod Deo)
Chairman, MERC
(Mrs. Malini Shankar),
Secretary, MERC