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Before
the
MAHARASHTRA ELECTRICITY REGULATORY COMMISSION 13th Floor, Centre No.1, World Trade Centre, Cuffe Parade, Mumbai 400 005. Tel. 22163964 / 22163965, Fax No. 22163976 E-mail mercindia@mercindia.com Website: www.mercindia.com |
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CASE No. 22 of 2005
In the matter of Dr
Pramod Deo, Chairman, |
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ORDER
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Dated - 8th September, 2005
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| 1. | The Maharashtra State Electricity Distribution Company Limited. (MSEDCL) (in whom the distribution functions of the erstwhile Maharashtra State Electricity Board (MSEB) have been vested recently), vide letter dated 27th October, 2004, had forwarded to the Commission details of the projected demand in Maharashtra in the 10th and 11th Plan period, and requested the Commission to approve the bidding documents prepared by them for purchase of power on long term basis to mitigate expected power shortfall. The Commission, vide letter dated 19th November, 2004 responded that, under Section 63 of EA, 2003, guidelines were required to be issued by the Central Government for a transparent bidding process, and refrained from commenting on the draft bid documents forwarded by MSEB/ MSEDCL. | |||||||||
| 2. | Thereafter, under letter dated 15th July, 2005, MSEDCL have submitted their demand supply projections, MSEDCL's plan to bridge the future demand-supply gap arising from these projections, and the measures adopted or proposed to bridge the gap. Stating that they proposed to bridge the remaining gap through competitive procurement of power on long-term basis, MSEDCL have sought the Commission's review of the methodology adopted by them in arriving at the demand-supply gap, and approval to MSEDCL's forecast of power requirements during 2011-12. Thereafter, MSEDCL would submit the draft revised competitive bidding document to the Commission for approval as may be necessary according to the Central Govt. guidelines, which have now been notified. | |||||||||
| 3. | After circulation of the submissions to consumer representatives, the matter was heard on 9th August, 2005. MSEDCL made a presentation to the Commission on long term capacity planning in the context of the proposal for long term purchase of power through competitive bidding. A graphical representation of the long term capacity planning is attached at Annexure 'A'. Shri Seshan, Consultant to MSEDCL, drew attention to the overview of the demand supply position starting from the financial years 2000-2001 to 2004-2005. He submitted that the peaking deficit was 3045 MW in 2004-05. For the past 4 to 5 years, there was a registered CAGR of 5.04% of peak demand, and capacity installation CAGR of 2.7% in MSEB's generation. | |||||||||
| 4. | To the Commission's query as to the extent to which the increase in the CAGR from the last one year had been factored in, Shri Seshan submitted that it was a representation of the past trend, and in the future projections, they have deviated from it. | |||||||||
| 5. | Shri Seshan explained that, in order to highlight specific characteristics of the MSEB power load system, it had been categorized into 2 blocks, i.e. a) Non-monsoon period -October-May b) Monsoon period, from June to September. In the monsoon period, the demand curve can be categorized into two parts, viz. base demand and peak demand. In the non-monsoon period, apart from the base and peak demand, there is also an intermediate demand period between 0600 hrs to 2300 hrs. To a query from the Commission, he stated that this categorization does not consider cropping patterns and other such factors which were not factored it into the present exercise. | |||||||||
| 6. | Shri Seshan proceeded to the graphical representation of short term power purchase made by MSEB for the last two financial years 2003-2004 and 2004-2005, indicating the rate and range of purchases. He further submitted that, to meet the base load requirement, MSEB have been undertaking capacity planning. However, for intermediate load, which runs from 0600 hrs to 2300 hrs on consistent basis, there is no planning. He submitted that MSEB/ MSEDCL have tried to focus on projection of the intermediate load requirement, and whether there is any base load requirement apart from it. | |||||||||
| 7. | The Commission observed that figures contained in the 16th EPS are for the State as a whole, taking into account the Mumbai requirement. It is necessary to refer to a national plan and a State plan, although there may be differences in projections. Shri Seshan submitted that they had taken data from the 16th EPS for the MSEB system, excluding Mumbai. | |||||||||
| 8. | With regard to the demand-supply analysis, Shri Seshan submitted that capacity expansions at Uran, Talegaon and Khaparkheda have been taken into account. He pointed out that, in 2011-12, the availability is expected to be 15,165 MW. MSEDCL have modified the average load curve to that extent by shifting 700 MW demand from the peak to the off- peak hours in the afternoon. After doing so, it was found that there is an intermediate load requirement of 1324 MW. | |||||||||
| 9. | Shri Seshan explained the methodology of forecasting the demand for the year 2011-12. He submitted that the hourly pattern of the load curve in the non-monsoon period was maintained while projecting the daily demand curve. MSEDCL had targeted on the year 2011-2012 considering the period required for release of competitive bidding documents, finalisation of the documents and selection of parties. Another 4 years would be required for development and construction. With regard to the supply line, MSEDCL have not taken into account hydro generation as it was considered that it would be exclusively run for peak load. Even earlier, hydro power had not been taken into account for the computation of supply availability. He submitted that hydro power is sufficient for filling the gaps in actual load requirement. | |||||||||
| 10. | Shri Seshan submitted that the basic conclusion drawn from the exercise is that, in 2011-12, there will be an intermediate load requirement of 1324 MW running from 0600 hrs to 2300 hrs. Various options were considered by MSEDCL to bridge this demand-supply gap. Since the requirement is on a long term basis for a consistent period, power purchase on long term basis through competitive bidding had been considered as the best sustainable option to bridge the demand-supply difference. Thus, based on this methodology of estimation, MSEDCL were proposing purchase of 1324 MW power on long term basis between 0600 hrs to 2300 hrs for 8 months period, i.e. non-monsoon period requirement, and 700 MW during peak hours, i.e. from 0700 hrs to 1100 hrs and 1800 hrs to 2200 hrs, over and above 1324 MW. He pointed out that certain other measures had been initiated including single phasing, demand side management (DSM), separation of agriculture feeders, installation of capacitors, Akshay Prakash Yojana, etc to bridge the demand-supply gap. By these measures, MSEB have estimate shifting of 700 MW requirement. | |||||||||
| 11. | Concluding, Shri Seshan submitted that: | |||||||||
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i)
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The load pattern varies as between the monsoon and non-monsoon periods. In view of the significant surplus during the monsoon period, MSEDCL have focused on the non-monsoon period. | |||||||||
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ii)
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Considering the load requirement during the non-monsoon period, even after taking into account various planned additions, there would be an intermediate requirement of 1324 MW and peaking shortfall of 700 MW in the year 2011-12. Although MSEDCL would be taking up several measures for flattening of the load curve and adopting DSM measures, these would not bridge the entire demand-supply gap. | |||||||||
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iii)
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Considering these factors, MSEDCL are of the view that long time power purchase is the most viable and sustainable option to meet the projected requirement of 1324 MW. | |||||||||
| 12. | Shri Shantanu Dixit of Prayas submitted that there was no doubt that Maharashtra needs capacity addition. However, there were several crucial gaps in the demand projection methodology that MSEDCL have proposed. Based on the limited information made available to them on word file, excluding the forecast model (soft copy), and the presentation made at the hearing, Prayas pointed out the following deficiencies in MSEDCL's approach: | |||||||||
| (1) | The long-term demand forecast model of MSEDCL follows projections of the 16th EPS. However, it does not take into account the impact of the Electricity Act, 2003. With delicensing of captive generation and open access for all HT consumers above 1 MW, a significant quantum of the HT industrial load may leave MSEDCL's system. The proposal is silent on the likely impact of this on the demand on the MSEDCL system. | |||||||||
| (2) | With Government of India's scheme of `Power for all by 2012', there is likely to be a significant addition of household consumers, who have predominantly evening peak demand. MSEDCL's proposal is silent on this aspect. | |||||||||
| (3) | The Commission's draft revised Tariff Regulations give clear directions for forecasting the demand on long-term basis. The forecast has to be made for every tariff category, and should include power as well as energy projections for both peak and off-peak requirements. It is also necessary to clearly account for/ consider various options for energy conservation and DSM. | |||||||||
| (4) | The MSEDCL forecast is based on several important assumptions such as the effect of load shedding on the load curve, retention of the entire industrial load, monsoon and non-monsoon load shapes remaining the same for all ensuing years, etc. However, no sensitivity analysis to assess the impact of these and other assumptions on the final forecast has been presented. | |||||||||
| (5) | 2004 data has been considered as the base, but MSEDCL have not explained as to whether they have accounted for load shedding in that year and in what manner, i.e. whether the load-shedding plan is taken as it is and has been used for 2011-12 projection. This is critical considering that there was significant load-shedding in 2004-05. MSEDCL have admitted that, in case of load shedding, there is forced flattening of the load curve due to shifting of load from the peak to night hours when power is available. If that is used as a base for projection, it is likely that the 16th EPS figure will be applicable only for peak load, and energy content will be significantly higher than that assumed in the EPS. MSEDCL have not referred to energy content or demand in the off-peak period. | |||||||||
| (6) | 700 MW load shifting has been assumed because of single phasing and other measures. During the earlier discussions on single phasing, MSEDCL had stated that load shifting would be of the order of 1500 MW. It is not clear how these different figures can be reconciled. Would single phasing be undertaken to a more limited extent, or is it being admitted that single phasing would not lead to that order of load shifting? | |||||||||
| (7) | MSEDCL's forecast has considered capacity addition/ power procurement through several projects for which the Commission has yet to give approval. | |||||||||
| 13. | In conclusion, Prayas submitted that, inspite of these shortcomings in MSEDCL's demand forecast methodology, there is no doubt that capacity addition will be needed to meet demand. However, since MSEDCL have proposed to procure power through competitive bidding after submission of draft documents to the Commission for scrutiny and approval, MSEDCL could be allowed to proceed with procurement to the stated extent through competitive bidding, and to submit draft bidding documents, as an interim/ adhoc dispensation. At the same time, MSEDCL should submit a revised demand forecast taking into account the above factors. Pending such submission, no additional power procurement or capital expenditure on generation projects for sale to MSEDCL (other than for 1324 MW mentioned in the proposal) should be approved. The revised demand forecast should be put to the public and be technically validated. Prayas also set out their points in their subsequent written submission dated 12th August, 2005. | |||||||||
| 14. | Shri A.D. Palamwar of MSEDCL submitted that when they first approached the Commission with draft bid documents, etc. in October 2004, the required guidelines for transparent bidding were not in place. Now that these have been notified, MSEDCL have again approached the Commission, in the first instance with their demand-supply projections for approval. He submitted that, in the past, 700 MW were added every year to the grid, considering the earlier trend of demand rising by 500 MW every year. He submitted that open access will not affect the position significantly since, with surcharges, etc., MSEDCL would be supplying power at a cheaper rate. Moreover, even with open access, any surplus can be sold to others. | |||||||||
| 15. | Shri Palamwar further submitted that MSEDCL had to plan for outages, and if the process is halted at this stage, the State and consumers would suffer. He urged that MSEDCL be permitted to go ahead with the competitive bidding process, at least uptil the stage of inviting bids. As regards load shedding, he submitted that the data had been discussed ever since the Commission came into existence, and while dealing with the Dabhol case. At present, they are considering 70% of the quantum of load shedding reported from the field for evaluating actual demand. As regards energy, MSEDCL are taking the actual energy lost due to load shedding, which is a matter of record and could be verified. It is not energy data, but the demand of consumers that matters. The licensee has to meet demand, not energy, and, therefore, planning is done for meeting the demand. He queried as to what could be the base for estimation if EPS is not to be taken into account. Regarding the issue of Mumbai load, Shri Palamwar stated that they would be meeting with other utilities/ licensees to obtain their plans, in the context of the responsibility of the STU. | |||||||||
| 16. | Shri Palamwar submitted that it had not been anticipated
that the Dabhol Project would be shut down, which happened without alternative
arrangements being put in place. Returning to open access, he submitted
that it was difficult to estimate at this stage how many consumers would
shift. In case that happens, MSEDCL would plan accordingly. He clarified that load factor has been considered in respect of peak demand. As regards single phasing, he submitted that it is not being implemented to the extent originally envisaged. With respect to DSM, MSEDCL were finalizing a scheme for the Commission's approval. In the meantime, they should be allowed to go ahead with the initial bidding process. The revised forecasting exercise can be done separately. The preparation of demand projections as per the extensive guidelines in the revised draft Tariff Regulations might take another year. Shri Palamwar submitted that there was a general shortage and the only source available would be through additional capacity to meet demand. He stated that both monsoon and non-monsoon periods have been considered, so that demand can be met whenever it arises. Shri Palamwar concluded by pointing out that, currently, MSEDCL are facing 2000 MW shortfall, and it is necessary to plan and go ahead now,. pending a more scientific study. He submitted that MSEDCL have a responsibility to meet the demand irrespective of the fact of who is using energy and how. |
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| 17. | Shri Seshan submitted that standard bid documentation has yet to be prepared by Ministry of Power, Government of India. MSEDCL have been informed by the Ministry of Power that, until this is done, the State regulator would proceed according to its judgement, in accordance with the transparent bidding guidelines. The bid documents submitted earlier need to be revised in accordance with those guidelines. | |||||||||
| 18. | As it had observed at the hearing, and considering the various points made and the circumstances, the Commission has decided that it would be appropriate for two processes to proceed in parallel. Firstly, MSEDCL may initiate the process of competitive bidding to meet long term demand on the basis of its estimates, leaving some margin of flexibility. For this purpose, revised bidding documents may be submitted in accordance with Central Govt. guidelines, for the Commission's approval. Secondly, the demand forecast and methodology needs to be separately revised keeping in view the issues raised, the National Electricity Plan (by which the Commission is expected to be guided under Section 86(4) of EA, 2003) and other factors. The Commission also notes that its revised Tariff Regulations have also been recently notified on 23rd August, 2005, and are now in force. The other Licensees may also be involved by MSEDCL with this exercise. | |||||||||
| 19. | In sum, considering the present circumstances which justify an emergent dispensation, and in the light of the foregoing, the Commission directs that: | |||||||||
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(i)
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MSEDCL may initiate the competitive bidding process as above, and submit revised draft bidding documents for approval of the Commission. | |||||||||
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(ii)
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Separately, MSEDCL should submit a revised demand forecast as indicated at para 18, following a more robust methodology. | |||||||||
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Encl. Annexure 'A' - Presentation on Long Term Capacity Planning by MSEDCL |
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