Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSIONmercindia.org.in/pdf/Order 58 42/Order Case...

Order in Case No. 92 of 2012

MERC, Mumbai Page 1 of 57

Before the

MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

World Trade Centre, Centre No. 1, 13th

Floor, Cuffe Parade, Mumbai - 400 005

Email: [email protected]

Website: www.mercindia.org.in /www.merc.gov.in

Case No. 92 of 2012

IN THE MATTER OF

Suo-Motu Proceeding on the Policy Review in matters related to Wind Power in

Maharashtra

Smt. Chandra Iyengar, Chairperson

Shri. Vijay L. Sonavane, Member

Stakeholders:

1. The Government of Maharashtra

2. Maharashtra State Electricity Distribution Company Limited

Prakashgadh, Plot No. G – 9,

Bandra (East), Mumbai – 400051

3. M/s. Indian Wind Power Association (Maharashtra State Council) (IWPA)

Empire House, 214, Dr. D.N. Road,

Ent. A.K. Nayak Marg,

Fort, Mumbai – 400001

4. M/s. Tata Motors Ltd.(TML)

Bombay House

24, Homi Modi Street,

Fort, Mumbai – 400001

5. Wind World (India) Ltd. (Erstwhile Enercon (India) Ltd.)

Enercon Tower,

A – 9, Veera Industrial Estate,

Veera Desai Road,

Andheri (East), Mumbai – 400053



6. M/s. Ushdev International Ltd. & Others

i. Ushdev International Ltd.

Appejay House, 6th Floor,

130, Mumbai Samachar Marg,

Fort, Mumbai- 400001

ii. Canpex Chemicals Ltd.

123, Nana Peth,

Opposite - J.D. Transport, Pune – 02

iii. Sahyadri Industries Ltd.

Swastik House, 39/D

Gultekdi, J.N. Road,

Pune- 411037

iv. Subhash B. Mutha

123, Nana Peth,

Opp. J.D., Transport,

Pune- 411002

7. Maharashtra Energy Development Agency

MHADA Commercial Complex, II Floor,

Opp. Tridal Nagar,

Yerwada, Pune- 411 006

ORDER (SUO-MOTU)

Dated: 7 April, 2014

The Maharashtra Electricity Regulatory Commission (hereinafter referred to as the Commission

or MERC) determined Tariff for procurement of Wind Energy and wheeling for Third Party Sale

and Self Use in the State of Maharashtra vide its Order in Case No. 17(3), 3, 4 and 5 of 2002,

dated 24 November, 2003 (Wind Power Tariff Order, 2003). The said Order also classified Wind

Projects in to Group-I, Group-II and Group-III based on the date of commissioning of the

Project.

During the proceeding in Case Nos. 8, 18, 20 and 33 of 2012 in the matter of Open Access issues

related to Wind power in Maharashtra; M.D, MSEDCL vide letter dated 4 April, 2012 brought



out various facts that could be reviewed by the Commission. The Commission in matter of these

Cases, issued a Daily Order dated 27 April, 2012 and some of relevant extracts of the Daily

Order dated 27 April, 2012 in matter related to above mentioned Case Nos. 8, 18, 20 and 33 of

2012 are as under:

“...

The Commission opined that policy making is continuous process and with

evolving scenario the policy matters have to be reviewed/modified/altered, but at

the same time in the evolving scenario, in anticipation of policy review, there

cannot be a policy vacuum. The Commission after hearing all the parties ruled as

under:

1. All the matters pertaining to Case 8 of 2012, Case 18 of 2012, Case 20 of 2012

and Case 33 of 2012, prior to the letter sent and pleadings before the Commission

before or after the above mentioned letter was sent, pertaining to the above

mentioned Petitions shall be taken up, separately and issues emanating from the

letter sent by the MD (MSEDCL) shall be taken as a part of Policy review

exercise, separately.

.....

7. Illustrative issues that may be considered for Policy review are listed below:

a. The Petitioners need to submit the details of Capital Expenditure along with

effect of various concessions for Group I/Group II & Group III wind generation

plants. The data pertaining to the recovery of investment for Group II Plants after

expiry of their EPA tenure needs to be submitted in detail, in order to arrive at

proper policy decisions.

b. Are there any gaps in existing EPAs and are some important provisions

relating to the arrangement after the expiry of tenure of Agreement, etc, provided

in the existing EPAs.

c. What is the pace of obsolescence of wind Generation technology?



d. Objective of introducing REC mechanism, its intended beneficiaries and

whether discount on Cross Subsidy Surcharge available to Open Access

transactions from Renewable Energy generators is a preferential treatment and

whether generators getting this discount should qualify for REC benefits also.

e. Banking Charges, etc.

8. Views of State Government of Maharashtra on the letter sent by MD

(MSEDCL) will be sought.

9. Decision about Public consultation process (Public Hearing) on the policy

review will be taken by the Commission after studying the submissions by the

Petitioners & Respondents.”

Based on above mentioned decision, the Commission vide Notice dated 12 September, 2012

scheduled a Suo-motu Hearing on 19 October, 2012 and invited views/suggestion from various

Stakeholders, i.e., the Petitioners in Case Nos. 8, 18, 20 and 33 of 2012 and others who had made

submissions related to Part –II proceeding in these Cases.

Tata Motors Ltd. (TML), Indian Wind Power Association (IWPA), Wind World (India) Ltd.

(WWIL) and Arvind Cotsyn made their submissions on Affidavit in the matter on 15 October,

2012, 17 October, 2012, 19 October, 2012 and 15 October, 2012 respectively.

During the Hearing, MSEDCL made a detailed presentation regarding issues which are

pertaining to Policy Review in the matter related to Wind power in Maharashtra.

The representative from IWPA also made detailed submission during the Hearing. IWPA

submitted that the Policy Review is nothing but the complete review of various Orders.

The representative from TML submitted the details of capital cost of its Wind Projects and

confirmed that they availed concessions from Government of Maharashtra (GoM) such as Sales

Tax Benefit.

During the Hearing held on 11 January, 2013, the letter received from the GoM presenting its

view on the Policy Review matters was circulated to the parties. During the Hearing held on 31

January, 2013, all the Stakeholders in the matter were directed to file their replies on the

submission of Tata Power Company Limited on the Ancillary Services in Case No. 126 of 2012.



During the hearing held on 15 April, 2013, all the parties present, Utilities and the Wind Energy

Association were directed to study the subject of problems caused to the grid by injection of

Renewable Energy and solution for the same.

During the hearing held on 5 June, 2013, MSEDCL was directed to contact Indian

Meteorological Department (IMD), C-WET and CPRI to study the Wind forecasting in detail

and also approach the monsoon modelling expert, Mr. Vasant Gowarikar. Further, MEDA was

directed to study the cost analysis of the balance potential of Wind power in Maharashtra.

During the hearing held on 22 July, 2013, MSEDCL was directed to carry forward the dialogue

initiated with IMD regarding Wind forecasting by meeting Dr. S.D. Attri, Director,

Environmental Monitoring and Research Centre, IMD, New Delhi.

1. ANALYSIS AND COMMISSION’S RULING

1.1 Having heard the Parties and after considering the relevant materials placed on record, the

Commission has identified following matters for its consideration:

1. Option to Sell Power Post Expiry of Energy Purchase Agreement (EPA)

2. Tenure of EPA

3. Tariff for Sale of Power Post Expiry of EPA

4. Obsolesce of Technology and Repowering of Wind Turbines

5. Objectives of Renewable Energy Certificates (RECs)

6. Eligibility for RECs

7. Banking and Banking Charges

8. Sale at Average Pooled Power Cost (APPC) and Compliance to RPO

9. Incentives

10. Miscellaneous Considerations/Suggestions

Issue No. 1: Option to sell power post expiry of Energy Purchase Agreement (EPA)

MSEDCL

1.2 MSEDCL submitted that in the existing EPAs presently there is no obligatory provision for

renewal option. The renewal of the EPA can be done by any of the party (Wind Energy



Generators and Utility) after its expiry. The Parties to the EPA can renew the EPA by

mutual agreement on mutually agreed terms and conditions. There is no regulatory

obligation on either of the Parties to renew the EPA after the expiry of the tenure.

1.3 MSEDCL further submitted that under current Regulatory Environment, the competitive

market is available to the WEGs. However, currently, in the existing EPAs, there are no

provisions for arrangements for third party sales at what rate, cross subsidy surcharge or

any other charges as may be applicable in case the WEGs plan to sell the Wind Energy in

Open Access. Further, if the WEGs prefer to renew the EPA with MSEDCL only, there is

no provisions for the tariff at which the WEGs can sell. MSEDCL further submitted that, if

the tariff for period after expiry of the EPA is known, both parties can easily decide on

renewal of the EPAs.

1.4 MSEDCL further submitted that the provisions of refurbishment of old Wind Turbines are

also not present in the current EPAs. Many of the Wind Turbines are old and need more

O&M thereby increasing the operation cost. Breakdown of the critical components of the

Wind Turbines affects the machine availability and O&M cost for smaller capacity

Turbines. The provisions regarding timeframe for refurbishment and benefits (if any)

available to WEGs are absent in the existing EPAs.

1.5 MSEDCL submitted that following options are available with Wind Energy Generators

(WEGs) for sale of Wind energy post expiry of EPA:

(a). EPA with Distribution Licensee at Feed-in Tariff

MSEDCL submitted that WEGs have enjoyed all the benefits provided by the

State Government, the Commission and MSEDCL. Further, since the WEGs have

already recovered their entire investment with profit, the assets of these

Generators shall become the property of the State. Further, MSEDCL submitted

that post expiry of EPA, WEGs shall sell the Wind energy to MSEDCL at

discounted Tariff as may be decided by the Commission for balance life of the

Project and such purchase shall form part of Renewable Purchase Obligation

(RPO).

(b). Sale through Open Access



MSEDCL submitted that Open Access regime provides competitive market to all

participants and accordingly requested the Commission that no special

concessions shall be allowed for sale to third party under Open Access.

(c). Sale to Utility at Average Pooled Power Cost (APPC)

MSEDCL submitted that the WEGs may also sell Wind energy to the Distribution

Licensee at a price not exceeding APPC of such Utility as approved by the

Commission and is also eligible to claim Renewable Energy Certificate (REC)

benefits. However, MSEDCL requested the Commission to allow such purchase

under APPC for fulfilment of RPO as well.

IWPA

1.6 IWPA submitted that there are no gaps in the existing EPA and the EPAs that have expired.

After the due deliberations over a period of two years and consultations with all

stakeholders including Consumer Representatives, the Wind Power Tariff Order, 2003 was

issued and the tariff philosophy was stipulated in the said Order.

1.7 IWPA further submitted that in the Wind Power Tariff Order, 2003 the Commission in

paragraph 1.5.5 of the said Order had ruled that it would not revisit the old Projects (i.e.,

Group-I and Group-II) during the review that may be undertaken after 31 March, 2007.

1.8 IWPA referred Orders in Case No. 33 of 2007 dated 20 November, 2007, Case No. 89 of

2007 dated 7 October, 2008 and Case No. 39 of 2011 dated 29 April, 2011 which stipulates

freedom to WEGs either to supply to MSEDCL or to Open Access consumers in

accordance with the MERC (Distribution Open Access) Regulations, 2005 post expiry of 8

year EPA tenure for Group II Projects and 13 year EPA tenure for Group III Projects.

1.9 IWPA further submitted that said Orders having become final with the same not contested

by MSEDCL to any higher authorities, a review provisions post expiry of the EPAs do not

arise. Further there are no errors or mistakes apparent in the said Order and hence

conclusions made by the Commission cannot be a subject matter of review.

1.10 IWPA further submitted that Commission in Order dated 29 April, 2011 in Case No.39 of

2011 in Para 1.5 has ruled that for Group-II Projects whose EPA have expired has option



either to continue with the Commission’s preferential Tariff or opt for pricing under REC

mechanism.

1.11 IWPA further submitted that generation of power is a de-licensed activity and therefore

there cannot be any compulsion on the Generators to supply power at a specific tariff.

Further, there shall be no exclusivity to supply power to MSEDCL post expiry of the tenure

of EPA.

Tata Motors Limited

1.12 TML submitted that since the inception of the Project (except for a brief initial period) it

has been selling electricity to the third party or self consuming the electricity. TML further

referred the Commission’s Order dated 10 December, 2008 in Case No. 58 of 2008 in the

event, WEGs chose to supply to MSEDCL post expiry of EPA, the same shall be done at

the preferential tariff determined by the Commission (i.e., Rs. 2.52/kWh).

1.13 TML further submitted that prevailing law permits WEGs to enter into contract with any

Consumer and sell under Open Access and any Consumer can also select its supplier of

power. However, the Electricity Act, 2003 does not provided for regulating the sale of

power by the Generators to the Open Access Consumers.

1.14 Further, TML submitted that the Hon'ble Supreme Court in Tata Power Company Limited v

MERC & Others, 2009 ELR (SC) 246 has held that a Generator cannot be forced to enter

into an agreement to sell power from its Generating Unit to any person. Therefore, once the

term of the EPA is over, WEG is free to decide the sale of power option and therefore there

is no requirement of any Order or decision on the same in the present proceedings.

Wind World (India) Limited [Erstwhile Enercon (India) Limited]

1.15 WWIL submitted that the Hon’ble Supreme Court in the Tata Power Company Limited V/s

Reliance Energy Limited & Others (2009) 16 SCC 659 has held that a Generating

Company has freedom to sign a Power Purchase Agreement (PPA) with any person/Utility.

Further, WWIL submitted that Central Electricity Regulatory Commission’s (CERC) REC

Amendment Regulations, 2010 provides that after natural termination of PPA, WEG is

eligible for participating in the REC scheme.



1.16 WWIL submitted that the Group-II Projects are therefore entitled to opt any of the various

selling option in Maharashtra. WWIL further submitted that incentives once provided if

taken back would create a Regulatory uncertainty in the State and would impact investment

in Wind Power.

Bajaj Finserv

1.17 Bajaj Finserv submitted that many Investors invested in wind energy from the year 2000 to

2002 to meet long term CP / TP sale requirement, even though energy realization rate was

lesser than MSEDCL's tariff and MERC's promotional tariff as per GoM's Wind Power

Policy, 1998.

1.18 Further, Bajaj Finserv submitted that in the year 2004, one time change-over from

Captive/Third Party sale to sell wind energy to Discom at promotional tariff was permitted

by the Commission vide its Order in Case No. 59 of 2003 dated 10 September, 2004. In

spite of this, Captive/Third Party sale Projects like BFS did not opt promotional tariff to sell

their power to any DISCOM presuming long term security in continuation of Captive/Third

Party sale option for further period till now.

1.19 Bajaj Finserv submitted that to promote further investment in wind energy, functioning of

old Projects should not be disturbed during its remaining life, which will only be 30% post

2013.

Commission’s Rulings:

1.20 The Commission observed that it had deliberated on the issue of option of sale of power

post expiry of EPA under its Order dated 20 November, 2007 in Case No. 33 of 2007 in the

matter of Petition filed by MSEDCL. The relevant extract of the said Order reproduced as

under:

“While the Commission reiterates that wind energy generators have freedom to

sell to any party other than MSEDCL pursuant to expiry of the existing EPA, in

case wind energy developer wishes to sell to MSEDCL (or any other distribution

licensee), the licensees and such wind energy developers need to explore alternate

commercial arrangements pursuant to expiry of existing EPA sufficiently in



advance so that need for seeking approval for interim arrangement does not arise

at all.”

1.21 Further the Commission in its Order dated 7 October, 2008 in Case No. 89 of 2007 had

ruled as under:

“Group II projects whose EPAs expired shall be allowed to continue to inject power into

the Grid; unless such Group II project developer chooses to supply to any consumer

under open access regime subject to provisions under Section 42(2) of EA 2003 and

payment of applicable transmission charges, transmission loss, wheeling charges and

wheeling loss as determined by the Commission from time to time.”

1.22 The Commission in its Order dated 10 December, 2010 in Case No. 58 of 2008 in the

matter of Petition filed by M/s. Renewable Energy Developers Association of Maharashtra

regarding refusal of MSEDCL to make any payment to the wind farm developers of Group-

II category for the energy that is being fed to the MSEDCL Grid after the date of expiry of

the EPA’s said that:

“Wind developers were at liberty to supply to any other party other than

MSEDCL post expiry of EPA”

1.23 The Commission in its Order dated 29 April, 2011 in Case No. 39 of 2011 in the matter of

Determination of Generic Tariff for the second year of the first Control Period under

Regulation 8 of the Maharashtra Electricity Regulatory Commission (Terms and Conditions

for Determination of Renewable Energy Tariff) Regulations, 2010 had ruled as under:

“The tariff applicable to Group-II wind projects have been specified under section 3.12

of the Generic Tariff Order dated July 14, 2010, issued in Case No. 20 of 2010. Further,

beyond FY 2009-10, those Group-II wind power projects whose PPA has expired have

the option to either continue with the Commission specified preferential tariff or opt for

pricing under REC mechanism (Clause 16.1 of MERC Renewable Purchase Obligation,

its compliance and implementation of REC framework) Regulations, 2010 and in

accordance with second proviso to Regulation 3.1 of RE tariff Regulations, 2010.”



1.24 The Commission has deliberated on this issue for option of sale of power after expiry of the

EPA with Distribution Licensee as is evident from the extracts of various Orders (i.e., Case

No. 33 of 2007, Case No. 89 of 2007, Case No. 58 of 2008, and Case No. 39 of 2011).

Therefore, the Commission is of the view that provisions of supply of power to any party

other than MSEDCL post expiry of EPA have been reiterated by the Commission through

its various Orders mentioned above and the same needs to be continued.

Issue No. 2: Tenure of Energy Purchase Agreement (EPA)

MSEDCL

1.25 MSEDCL submitted that as against the life of Wind Projects of 20 years (now 25 years),

the Commission determined the Tariff for energy purchase for 8/13 years for Group-II and

Group-III Projects respectively. While doing so the Commission considered the interest of

the WEGs and has assured that recovery of investment is made in 8/13 years as the case

may be, with assured return of 16% (now 19%-24%) on equity. Thus in case of Group-II

Projects i.e., after 8 years in FY 2010, the EPAs with these WEGs ended and as decided by

the Commission investments made in Project has been recovered.

1.26 MSEDCL submitted that therefore on expiry of such EPA, investment cost of the investors

has already been recovered along with profit.

IWPA

1.27 IWPA submitted that the Commission in its earlier Orders had approved the tenure of EPA

after due stakeholder (including MSEDCL (erstwhile MSEB)) consultation process. IWPA

further submitted that MSEB had filed a Writ Petition before the Hon’ble Bombay High

Court which was withdrawn subsequently.

1.28 IWPA further submitted that subsequently MSEDCL (erstwhile MSEB) filed a Review

Petition on 5 March, 2004 against WPTO dated 24 November, 2003 which was not

considered by the Commission for the reasons given in Order of 12 March, 2004.



1.29 IWPA submitted that raising an issue related to tenure of EPA which has been fixed about 9

years back could impact the investment on Wind power Projects in the State of

Maharashtra.


1.30 WWIL submitted that one of the ways to increase the Tariff predictability and security for

both the WEGs and the State DISCOM is to increase the tenure of PPA to a minimum of 20

years. WWIL further submitted that the PPA tenure of 20-25 years is provided in all other

major Wind rich States and hence requested the Commission to accept the same.

Government of Maharashtra

1.31 The GoM submitted that as per the Wind Policy, 1998 the energy from Wind Power

Projects was to be purchased by erstwhile MSEB considering the rate of Rs. 2.25 /kWh for

the base year 1994-95 and escalated at the rate of 5% per annum for subsequent years. This

escalation was provided for first 10 years and 11th

year onwards the rate was kept constant

for 3 years and from 14th

year onwards again escalation of 5% per year for remaining 7

years was provided. It further submitted that GoM Policy also expected that the wind

energy produced by wind Projects would be supplied to MSEB for 20 years. However, the

Commission in its Wind Power Tariff Order, 2003 dated 24 November, 2003 decided the

period of EPA as 8 years for Group-II Projects (Commissioned from 27 December, 1999 to

31 March, 2003) and 13 years for Group-III Projects (commissioned after 1 April, 2003)

with different rates. This energy was purchased by erstwhile MSEB and supplied to the

common consumers at the rate decided by the Commission during the EPA period of 8/13

years (less than Project life of 20 years).

Commission’s Ruling:

1.32 The Commission notes that the EPA tenure had been fixed as 8 years for Group-II and 13

years for Group-III Projects considering the loan repayment obligations. The relevant

extract of the Wind Power Tariff Order, 2003 is reproduced as under:

“Based on the policies of the main lending institution such as IREDA, the loan repayment

period has been considered as 6 years for Group II Projects and 10 years for Group III

Projects.



In view of the possible slippage in loan repayment due to yearly variations in wind

resources within the loan repayment period considered, the tariff rate for purchase of

energy has been determined for 8 years (as against loan repayment period of 6 years) in

the case of Group II Projects from the date of commissioning, and 13 years (as against

loan repayment period of 10 years) from the date of commissioning of the Project for

Group III Projects.

The Commission also notes that the provisions of the Electricity Act (EA), 2003 that has

come in to force from 10th June 2003 are substantially different from the earlier Acts.

Specifically, the Commission notes that the new Act provides that the utilities shall have

to purchase a certain percentage of their total energy requirement from renewable

sources of energy. The Commission notes that it would take some time before the

procedures for such purchases are in place.

The Commission observes that in the light of the Act, it is essential that the duration of

the contract being entered be of minimum duration. On the other hand, it has to be kept

in mind that no Project would be financed if the duration of the agreement is shorter than

necessary for loan repayments. The Commission also notes that it is essential that some

contingency is required to be provided for in the duration of the agreement to take into

account uncertainty of wind, a natural resource, and also other commercial exigencies.

The Commission has, therefore, permitted 2 and 3 years period respectively for such

contingencies.

Therefore, the Energy Purchase Agreement Period has been determined as 8 years for

Group II Projects and 13 years for Group III Projects.

The Commission also takes a note at this point that the EA2003 has opened up a host of

opportunities for CPP and private sector generation. It also envisages the market-

oriented operation of the electricity sector. Therefore, the Commission took a conscious

decision, that, once the objective of market and technology stabilization is achieved, such

Projects must be allowed to compete in the market. This would enable the distribution

entities to source, based on competitive bidding with the benchmark of higher CUF and

consequent penalty for under-achievement, their energy requirements on commercial

basis rather than being saddled with a long-term (20 years as prescribed by MNES

policy) purchase agreement.”



1.33 The Commission further notes that Regulation 6.1 of the MERC (Terms and Conditions for

Determination of RE Tariff) Regulations, 2010 (hereinafter referred as MERC (RE Tariff)

Regulations, 2010) stipulates that tariff period for Wind Projects as 13 years. The relevant

extract of the said Regulations is reproduced as under:

“6.1 The Tariff Period for Renewable Energy power projects except in case of Small

hydro projects upto and including 5 MW, Mini/Micro Hydro projects, Solar PV, Solar

thermal power projects, Solar rooftop PV and other small Solar power projects shall be

thirteen (13) years.”

1.34 The Commission further notes that in the Order dated 19 December, 2013 in Case No. 65 of

2013 and Miscellaneous Application No. 13 of 2013 in Case No. 65 of 2013 in the matter of

Petition filed by MSEDCL for determination of tariff by bidding process for procurement of

wind energy for FY 2013-14 within Maharashtra on the issue of competitive bidding has ruled

as under:

“The subject of competitive procurement of renewable power is a matter

deserving greater scrutiny and thus is referred to the Committee to be constituted

as per the daily Order in the present case issued by the Commission, dated 1

October, 2013. The Committee is, directed to study, inter alia, the various issues

involved in introduction of competitive framework for procurement of renewable

energy by the distribution licensees in the State and incorporate its suggestions on

the same in its report. The report shall be circulated to all the stakeholders

involved in the matter.”

1.35 The Commission further notes that other State Electricity Regulatory Commissions have

also stipulated the EPA period linked to the life of the Project (i.e., EPA period has been

defined as 20/25 years). The summary of the EPA periods as considered by various wind

rich States are stipulated as under:

CERC/SERCs EPA Period

CERC 13 Years (CERC RE Tariff Regulations, 2009 & 2012)

MERC 8/13 Years (as per Order in 2003), 13 Years (as per MERC RE

Tariff Regulations 2010)

RERC 20 Years (RERC Term & conditions Regulations 2004 & 2009),

25 Year (RERC Amendment in 2012 to RERC Term & conditions



CERC/SERCs EPA Period

Regulations 2009)

MPERC 20 Years (Wind Order 2004, 2006 &2007), 25 years (Wind Order

2010)

GERC 20 Years (Wind Order 2006), 25 years (Wind Order 2010 &

2012)

TNERC 20 Years (Wind Order 2004, 2009 & 2012)

KERC 20 Years (Wind Order 2004 & 2009)

APERC 20 Years (As per wind Order 2009)

1.36 The Commission further notes that stakeholders have also supported for having a longer

tenure of EPA for wind Projects, however, the only concern has been raised to review the

existing EPA which has been signed long before.

1.37 The Commission further notes that after the issuance of Wind Power Tariff Order, 2003 and

notification of MERC (RE Tariff) Regulations, 2010 multiple options of sale of power are

now available for Wind Projects (i.e., third party sale, self consumption under captive route,

sale of power under REC schemes).

1.38 In view of the above, the Commission is of the view that there is a merit in

consideration of EPA period linked to life of the project for existing and new Projects.

Accordingly, the Commission rules that for Projects whose EPA have not expired may

be given an option to extend EPA to Project life. The Commission hereby further

clarifies that such extension is an option available to both Parties and is not a compulsion.

Issue No. 3: Tariff for Sale of Power after Expiry of EPA

MSEDCL

1.39 MSEDCL submitted that after expiry of EPA, the WEGs should sell the Wind energy to

MSEDCL at discounted Tariff as may be determined by the Commission for the balance

life of the Project and such purchase shall form part of Renewable Purchase Obligation

(RPO). MSEDCL, submitted that it pays only Rs. 1.65 to Rs. 2.0/kWh to Koyna Hydel

Station (set up in 1962), which is primarily to recover the lease rent and Operation &

Maintenance (O&M) expenses as the capital cost of the Dam has already been paid by the

consumers of Maharashtra. Similarly, for WEGs, the consumers of Maharashtra have paid



for the investment and now have exclusive right over the assets and its generation, at

reasonable O&M cost.

IWPA

1.40 IWPA submitted that the Commission has determined the interim preferential tariff in

Petition filed by M/s Renewable Energy Developers Association of Maharashtra for sale of

power post expiry of EPA in Case No. 58 of 2008 as Rs. 2.52/kWh based on simple

arithmetical basis on the offer of Rs. 1.29/kWh by MSEDCL and the proposal of Rs.

3.79/kWh i.e., the last tariff rate that was applicable to Group-II Projects at the time of

expiry of tenure of EPA.

1.41 The said interim tariff for Group II projects post expiry of EPA as determined in the Order

dated 10 December, 2008 in Case No. 58 of 2008, would be subject to final tariff that may

be determined through Regulatory process. Further it was ruled that no interest shall be paid

by MSEDCL for the period from expiry of the EPA and tariff determined in the said Order

since wind farm developers were at liberty to supply to any other party other than

MSEDCL post expiry of EPA.

1.42 It was further submitted that value of wind power cannot be simple cost of generation but

the intrinsic worth of wind power contributing to reduction in pollution levels in the

atmosphere, facilitating conserving the fossil fuel, effective tool in combating Global

Warming, etc., which are all qualitative aspects and cannot be measured in absolute

monetary terms in an accurate manner.

1.43 IWPA submitted that the Karnataka Electricity Regulatory Commission (KERC) permitted

the Tariff provided at the end of tenure of EPA of preferential Tariff to be continued post

expiry of the EPA and requested to adopt the same in Maharashtra, which would be an

encouraging proposition as it takes into account the opportunity cost as reasoned by the

KERC.

1.44 IWPA submitted that as far as sale to Open Access consumers are concerned post expiry of

EPA especially for Group II Projects, the Agreement for sale of power between two private

parties being confidential agreement and its members are hesitating to disclose the rate at

which each of them are selling power to their respective Open Access consumers. IWPA



submitted that as far as Group III Projects are concerned, since for most of them the EPA

tenure is for 13 years and would be expiring around 2016, there would be hardly any Group

III consumers opting for sale of power to Open Access consumers. Further, IWPA

submitted that the Commission had issued Regulations in the matter of implementation of

REC Framework which permits the WEGs and its Open Access consumers to opt for

bilateral agreement so that WEGs can avail RECs.

Tata Motors Limited

1.45 TML referred the Order dated 10 December, 2008 in Case No. 58 of 2008 which stipulates

for supply of power post expiry of the EPA to the Distribution Licensee at the preferential

Tariff of Rs. 2.52/kWh. TML further submitted that the Commission vide its Order dated

14 July, 2010 in Case No. 20 of 2010 in the matter of determining of generic Tariff of

Regulation 8 of The MERC (Terms and Conditions for Determination of Renewable

Energy Projects) Regulations, 2010 continued the Tariff of Rs. 2.52/kWh.

1.46 With regard to example quoted by MSEDCL of Koyna, TML submitted in the present case

there arises no occasion for a payback as Government has not funded the capital

expenditure incurred for setting up the Wind Projects.


1.47 WWIL submitted that cost plus approach has been adopted by CERC as well as all other

State Electricity Regulatory Commissions for determination of Tariff for Wind Energy

Projects.

1.48 WWIL further submitted the calculation on cost plus Tariff under two scenarios viz.,

“Scenario 1: All parameters taken as per Wind Tariff Order dated 24 November,

2003; CUF of 20% has been considered. The Tariff computed to Rs.

5.14/kWh.

Scenario 2: All parameters taken are as per Wind Tariff Order dated 24

November, 2003; MAT and Corporation Tax, Interest on Working

Capital taken as per Wind Tariff order of 2012; CUF of 20% has

been considered. The Tariff computed to Rs. 5.19/kWh.”



1.49 WWIL submitted that Wind Generators have earned return as determined by the

Commission and if the State enforces Group-II Power Plants to supply power solely to the

Distribution Licensee at a Tariff which is impossible to operate in, it would be much

against the spirit of the Electricity Act, 2003 besides interfering with the contracts which

have worked themselves out.

Shri S.K. Parikh’s Submission

1.50 The 1996 policy failed to bring-in the investments needed in the sector. After

considering/analysing the demography of the State, it was found that it is possible to

generate 400 MW of Wind Power in the State of Maharashtra. After studying other State

policies to encourage investment from private players Wind Policy 1998 was announced by

Maharashtra. Further main points under the Wind Power Policy, 1998 were submitted.

Shri Charbhuja Sales Corporation’s Submission dated 02 June, 2012

1.51 As per the Government of Maharashtra’s Wind Power Policy, 1998, MSEDCL should

purchase the electricity from Wind power Projects at the rate of Rs. 4.23/kWh. The

developers who would have done their computations at the rate decided in the Wind Power

Policy, 1998, would now be earning revenue at Rs. 1.72/kWh less than that originally

decided. Wind energy generation through the Project commissioned in 1998 is the same

today as was during that time and it cannot be increased.

Government of Maharashtra

1.52 The GoM submitted that MSEDCL/consumers of MSEDCL also has the share in the profit

of Wind Power Projects as they have supported these wind Projects to earn the profit (as

per the Commission’s determined rate of return) by consuming the wind energy from the

Wind Energy Projects. Further, the GoM submitted that the wind Project having availed

benefits from the Government and also from the view point of social responsibility, it is

expected that this profit should be distributed to the consumers also. Accordingly, GoM

supported the submission made by MSEDCL that the Wind Power Projects should supply

wind energy to consumers/MSEDCL at reasonable.



1.53 The GoM submitted that in light of the profit earned by the Wind Power Projects, various

concessions availed, responsibility of MSEDCL towards consumers and the GoM’s Wind

Power Policy, the submission of the MSEDCL may be accepted by the Commission.


1.54 The Commission notes that in the Order in Case No. 58 of 2008, the Commission has ruled

that the tariff on ad-interim basis for wind energy injection into the Grid by Wind Energy

developers under Group-II category post expiry of their respective EPAs, shall be Rs 2.52

per unit. For FY 2010-11 onwards, in case the Wind developer chooses to sell at

preferential Tariff, the Tariff of Rs 2.52/kWh shall be applicable.

1.55 Interim Tariff for Group-II Projects (MERC Order in Case No. 58 of 2008)

a. MSEDCL’s submission in Case No. 58 of 2008

i. Tariff proposed from Rs. 1.29/kWh to Rs. 1.96/kWh on different

assumptions of O&M expense, Profit Margin, CUF and

Contingency/Insurance/Taxes, etc.

b. REDAM’s Submission in Case No. 58 of 2008

i. Tariff at the rate of last financial of the eight year cycle determined by the

Commission under its order dated 24 November, 2003

c. Commission’s Ruling in Case No. 58 of 2008

i. Determined Tariff at Rs. 2.52 per unit, (i.e., arithmetic average of rates

proposed by both the Parties) [i.e., Rs 2.52 per unit = (Rs 1.29 per unit +

Rs 3.74 per unit)/2]

1.56 With respect to IWPA submission to refer the Karnataka Electricity Regulatory

Commission’s (KERC) Order dated 11 December, 2009 for fixation of tariff after the

expiry of EPA. The Commission has referred the relevant extract of the said Order which

stipulates as under:

“In view of the fact that, after completion of 10 years debt servicing will have

been fully met and the only increase (marginal) would be in respect of O&M

expenses, but at the same time the opportunity cost of the power has gone up, the

Commission decides to allow the rate equal to the rate at the end of the tenth

year, without escalation for the next ten years for all renewable projects. This



tariff is also applicable to such PPAs in which ten years period is already

completed but no tariff has been determined.”

1.57 The Commission notes that the in Karnataka, Wind Energy projects prior to its Tariff Order

of 2004 were governed by the Government of Karnataka’s Policy, which had prescribed

tariff on simple escalation basis on y-o-y (year on year) basis similar kind of principle

specified in Maharashtra for Group-I Wind Energy projects were governed by Government

of Maharashtra’s Policy. Hence, the Commission rules the submission of IWPA in this

regard cannot be accepted, since, such tariff as specified in the State’s Wind Policy was

only adopted and not determined.

1.58 However, subsequent to that the KERC in the Order dated 18 January, 2005 in the matter of

determination of tariff in respect of Renewable sources of Energy had determined the tariff

for projects and was made applicable for to all the Power Purchase Agreements filed before

the Commission on and after 10 June, 2004.

1.59 The Commission notes the different tariff streams as specified by it for Wind Projects in

Maharashtra and as determined by KERC shown in the Table below:

Rs./kWh

MERC KERC

Order,

2004 Tariff Year

Commissioning Year (Group-II Projects Commissioned

After 27 Dec, 1999 and Before 31 Mar, 2003)

FY 1999-00 FY 2000-01 FY 2001-02 FY 2002-03

FY 1999-00 2.80

FY 2000-01 2.91 2.91

FY 2001-02 3.02 3.02 3.02

FY 2002-03 3.13 3.13 3.13 3.13

FY 2003-04 3.24 3.24 3.24 3.24

FY 2004-05 3.35 3.35 3.35 3.35 3.95

FY 2005-06 3.46 3.46 3.46 3.46 3.82

FY 2006-07 3.57 3.57 3.57 3.57 3.69

FY 2007-08 3.68 3.68 3.68 3.56

FY 2008-09 3.79 3.79 3.43

FY 2009-10 3.9 3.3

FY 2010-11

MERC Tariff stream is in increasing trend; while KERCs

Tariff stream is in decreasing trend.

3.18

FY 2011-12 3.05

FY 2012-13 2.93

FY 2013-14 2.80



1.60 The Commission notes that KERC determined the tariff on cost-plus approach, accordingly

has reducing tariff at the end of 10th

year, while the Commission adopted cash flow method

and to minimise the impact of high initial tariff, front loading avoided and hence a simple

escalation on year on year was specified. Accordingly, the Commission rules that no

comparison with other States can specified to determine the tariff after expiry of the EPA.

1.61 Accordingly, the Commission rules that regulatory process for determination of tariff for

Group-II wind energy projects; upon expiry of validity of existing EPA, will have to be

undertaken in a transparent manner including participation of all key stake-holders similar

to any other tariff determination process. The Commission shall initiate such regulatory

process on suo-motu basis summarising key issues involved in tariff determination for

Group-II wind energy projects; upon expiry of validity of existing EPAs. The Commission

shall invite comments/objections/suggestions of all concerned before determining Tariff for

such projects.

1.62 However, for Group-IV Projects, i.e., the Projects for which tariff has been determined

under MERC (RE Tariff) Regulations, 2010, the Commission in Case No. 6 of 2013 has

ruled that in the matter of Determination of Generic Tariff for the fourth year of the first

Control Period under Regulation 8 of the Maharashtra Electricity Regulatory Commission

(Terms and Conditions for Determination of Renewable Energy Tariff) Regulations, 2010 on

the issue of tariff structure, PPA and useful life of Wind Power Plants had clarified as under:

“...The Commission also observes that while tariff period is specified as 13 years, the

levellisation is carried out over useful life which is 25 years and not just over 13 years,

thereby ensuring the cost recovery is spread over entire useful life which also results in

back-ending of the returns.”

1.63 Considering the fact that for Group-IV Projects, i.e., the Projects for which tariff has been

determined under MERC (RE Tariff) Regulations, 2010, the tariff is determined

considering the levellisation over the useful life of the Wind Projects, the Commission rules

that if such Projects opt to extend the EPA period from 13 years to 25 years, the tariff

determined for Wind Energy Projects for 13 years, considered from the date of commercial

operation of the Wind Project shall also be applicable from 14th

year to 25 years.



Issue No. 4: Obsolesce of Technology and Repowering of Wind Turbines

MSEDCL

1.64 MSEDCL submitted that refurbishment of old Turbines shall be allowed only if WEGs

agree to enter EPA with MSEDCL for whole plant life of 20 years. MSEDCL further

submitted that this is necessary as the Commission had determined the Tariff for entire

plant life of 20 years and the WEGs may have availed the benefit of accelerated

depreciation in the initial period of life of the Wind Power Plant.

1.65 MSEDCL further submitted that many of the Wind Turbines in the State are old and need

more O&M expense since, breakdown of critical components of the Wind Turbines affects

the machine availability.

1.66 Further, MSEDCL submitted that if any WEG is planning for refurbishment to sell power

under Open Access, it shall be subject to the provisions of the MERC (Distribution Open

Access) Regulations, 2005. Accordingly, reduction of contract demand, energy accounting

of 15 minutes time block, installation of Special Energy Meter at both the ends along with

scheduling of generation as well as consumption shall be made compulsory for WEGs who

are planning for refurbishment and opt to sell Wind Energy under Open Access route.

IWPA

1.67 IWPA submitted that from the experience of its members, fair changes in Wind energy

technology occur in 5 to 8 year period. IWPA submitted that small changes an ongoing

process but substantial development could be seen over a longer period of 5 years. IWPA

submitted that when Wind energy development began in India, market was flooded with

225 kW to 250 kW of Wind Turbines. However, the capacities of Wind Turbines have

increased to 1.5 MW to 2 MW and beyond.

1.68 Further, IWPA submitted that the tower hub height has also increased from 25 meters to 75

meters to harness more Wind energy. IWPA submitted that the Commission may deliberate

on evolving a Policy of repowering so that more and more high capacity Wind Turbines on

taller towers could replace the existing small capacity Wind Turbines so as to harness more

energy at the same location. IWPA submitted that marked changes in the blade design and

aerodynamic technology have also facilitated the increase in generation, although with a



higher capital cost. IWPA further highlighted the saturation of high potential land and

submitted that the potential land is available in the forest area for which the approvals from

the Forest and Environment Department requires considerable time.

1.69 IWPA submitted that few advancements over a period include uniquely designed wind

turbine blades from fiber glass with reinforced epoxy resin so as to support in terms of

optimal aerodynamics, introduction of permanent magnet generator i.e., system having

parts of conventional wind turbines and also moving parts. Conventionally people used to

increase the blade size to increase the turbine efficiency which soon turned out to be an

expensive option with limited availability of space. This resulted in the need for increase in

height of towers.

1.70 Introduction of laser system in wind mills overseas wherein the sensors monitor the wind

speed and direction in order to automatically adjust the position of turbine blades. In such a

manner the stress is reduced and more energy is generated. There are technologies of low

cost device that measures the speed and direction of the wind seconds before it hit the

turbine blades. The device is capable of receiving measurements up to 200 mts. of height.

This would also facilitate installing more turbines per acre of land. The new inventions

include Jet inspired Wind Turbines wherein the design provides for minimum wind losses.

Conventionally in a Wind Turbine half of the wind energy is spent on rotating the blades

while the other half in generating electricity. Some of these designs are yet to reach India.

Tata Motors Limited

1.71 TML submitted that refurbishment of old turbines is a welcome initiative, provided TML is

not called upon to give up any of its right available under the prevailing law. TML further

opposed to the conditional permissibility of refurbishment of old turbines i.e.,

refurbishment to be allowed only when Wind farm developers agree to enter into PPA with

MSEDCL for the whole of plant life i.e. 20 years. TML submitted that such conditions

would not be in accordance with the provisions of the Electricity Act, 2003 i.e.,

encouraging Open Access.




1.72 The summary of the installations of WTGs of various capacities over the years in the State

of Maharashtra is shown in the Table below:

*Source: Year-wise installation of WTGs data published by MEDA

1.73 It can be observed from the above Table that smaller capacities of Wind Turbine has also

been installed in FY 2011-12, therefore there appears to be no obsolescence of technology

rather there happens to be technology advancement over the period. In the later years,

installations of higher capacities have taken place.

1.74 It is noted that Re-powering deals with the replacement of first generation small capacity

Wind Turbines with modern Mega-watt and Multi-Megawatt Wind Turbines. Some of the

benefits of Re-powering is summarised as under:

(a). More efficient use of potential land, more capacity addition per unit of land area.

(b). More energy generation per unit of land area and per square meter of rotor area

with improved economics.

(c). Increase in the percentage share of wind-power in the power-generation mix

(d). Re-powering can be used as tool to achieve targets for RPO in Maharashtra

(e). More social and environmental benefits such as improved landscape, a lesser

number of turbines, a lesser footprint area utilization, use of new technology

Unit Capacity

(kW)

FY

1997-98

FY

1998-99

FY

1999-00

FY

2000-01

FY

2001-02

FY

2003-04

FY

2004-05

FY

2005-06

FY

2006-07

FY

2007-08

FY

2008-09

FY

2009-10

FY

2010-11

FY

2011-12

225 0.23 1.35 2.70 2.93 4.50 9.90 7.65 0.90

230 1.84 2.30 7.82 9.66 16.56

250 3.50 0.25 18.00 3.00 3.25 4.25

350 14.00 37.80 88.55 56.70

500 1.00 17.50

600 4.80 33.60 5.40 42.00 16.20 34.20 15.00 4.80 4.80

750 2.25 8.25 6.00 12.00 3.00

800 2.00 27.20 103.20 43.20 41.60 40.80 27.20 123.20

850 34.00

1000 53.00 2.00 48.75

1250 6.25 31.35 251.25 47.50 15.00 42.50 42.50 35.00

1500 40.50 120.00 50.08 25.50 46.50 178.50

1650 42.00 44.55 33.00 11.55 4.95 42.90

2000 2.00 32.00 10.00

2100 4.20 39.90 12.60

2500 5.00

Total (MW) 5.57 17.65 50.57 117.19 188.11 8.25 48.75 117.95 484.50 269.80 178.08 138.85 239.05 407.35



reducing noise-levels, reduced avian mortality resulting in better technology

acceptance by communities.

(f). Better power-grid integration

(g). Reduction in risks and uncertainties for wind-energy estimation, etc.

1.75 Though there are various benefits as indicated above, however, there are certain challenges

also envisaged in the Re-powering summarised as under:

(i). Turbine ownership: Repowering will reduce the number of turbines and there may

not be one-to-one replacement. Thus, the issue of ownership needs to be handled

carefully.

(ii). Land ownership: Multiple owners of wind farm land may create complications for

repowering projects.

(iii). Power Purchase Agreement: PPAs were signed with Distribution Licensees for 13

years and the respective Distribution Licensees may not be interested in

discontinuing or revising the PPA before its stipulated time.

(iv). Electricity evacuation facilities: The current grid facilities are designed to support

present generation capacities and may require augmentation and upgrading.

(v). Additional costs: The additional decommissioning costs for old turbines (such as

transport charges) need to be assessed.

(vi). Disposal of old turbines: There are various options such as scrapping, buy–back by

the Government or manufacturer, or export.

(vii). Incentives: In order to compensate for the additional cost of repowering, appropriate

incentives may be stipulated.

(viii). Policy package: A new policy package may be developed which may include a

repowering incentive (on the lines of the recently introduced generation-based

incentive scheme by (MNRE).



1.76 Hence, in exercise of the powers vested in it under Section 86 (2) of the Electricity Act,

2003, advises the Government of Maharashtra to formulate a Policy to encourage and

promote Re-powering of the existing small Wind Turbines within the State, which could

result in higher generation and also lead to better utilisation of existing wind sites, which

would help to encourage the investments in the State and also help to the meet the targets of

RPO. In these circumstances, considering the infirmity of Wind Power, the Government

may also consider to frame appropriate Policies for encouraging Pump-Storage Schemes

and Energy Storage Schemes.

Issue No. 5: Objective of Renewable Energy Certificate (REC)

MSEDCL

1.77 MSEDCL submitted that REC mechanism is a market based instrument to promote

Renewable Energy and facilitate compliance of Renewable Purchase Obligation (RPO).

MSEDCL submitted that the objective of REC is to address the mismatch between

availability of Renewable resources in the State and the requirement of the Obligated

Entities to meet the RPO. Through REC mechanism, it is expected that both Renewable

Energy Generators and Distribution Licensees/Consumers should get benefits and present a

win-win situation for both the Parties.

IWPA

1.78 IWPA submitted that the objective of introducing REC is that presently most States are

deficient in the availability of Renewable Energy and on account of nature of such

Renewable Energy sources, every State is endowed with only specific Renewable Energy

and at time the same is very much limited too. In the endeavor of the Central Government

and the State Governments and supported by Nodal Agencies and the Regulatory

Commissions to conserve the fossil fuel and to harness more and more Renewable Energy

and further making it mandatory for all Distribution Licensees, Captive Users and Open

Access consumers to compulsorily purchase power from Renewable Energy sources or in

its absence RECs. The respective State Electricity Regulatory Commissions have specified

only minimum qualificatory conditions on category of entities that can opt for Open Access

and avail REC benefits. IWPA further submitted that as the objective of REC is abundantly

clear, any Policy review in the matter of eligibility of REC is not called for.



1.79 IWPA submitted that as detailed in the CERC REC Regulations, 2010, MERC RPO

Regulations and implementation of REC Framework, 2010 and the Discussion Paper of the

Consultant appointed by the Commission has made it abundantly clear that the objective of

REC which principally aims at compliance with RPO by every Obligated Entity in order to

promote generation from Renewable Energy sources.


1.80 The Commission notes the following primary objectives identified for REC mechanism:

(i). Effective implementation of RPO mechanism in Maharashtra

(ii). Increased flexibility for participants to carry out RE transactions

(iii). Overcoming geographical constraints to harness available RE sources

(iv). Reduce transaction costs for RE transactions

(v). Create competition among different RE technologies

(vi). Development of all encompassing incentive mechanism

Issue No. 6: Eligibility for Renewable Energy Certificate (REC)

MSEDCL

1.81 MSEDCL submitted that a Captive Power Plant (CPP) based on Renewable Energy is not

eligible for REC, if it has availed or proposes to avail any benefit in the form of

concessional/promotional transmission or wheeling charges, banking facility benefit and

waiver of electricity duty. Even if the CPP forgoes the benefits of concessional

transmission and wheeling charges, banking facility benefit and waiver of electricity duty,

it shall become eligible for REC scheme only after a period of three years from the date of

foregoing such benefits.

1.82 MSEDCL submitted that the Commission in its Order dated 9 September, 2011 in Case No.

43 of 2010 in the matter of De-novo re-determination of Cross Subsidy Surcharge (CSS)

determined CSS as 25% of the applicable CSS for Open Access consumer purchasing

power from Renewable Energy Sources. MSEDCL submitted that such concession shall be

treated as preferential and such WEGs and Open Access consumers shall not be eligible for

benefit of REC scheme.



1.83 MSEDCL further submitted that through REC mechanism, Renewable Generators as well

as the Distribution Licensee should be benefited. MSEDCL submitted that WEGs availing

any form of concession from GoM/MERC shall not be eligible for participation in REC

scheme and shall not be allowed to earn windfall profits.

IWPA

1.84 Further, IWPA referred the eligibility condition for the Eligible Entities for receiving RECs

as per Central Electricity Regulatory Commission (Terms and Conditions for recognition

and issuance of Renewable Energy Certificate for Renewable Energy Generation)

Regulations, 2010 dated 14 January, 2010.

1.85 IWPA submitted that both, this Commission as well as the CERC stipulate that REC

Mechanism has two components viz., electricity component and Renewable Energy

component. The ineligibility for REC is linked to preferential Tariff for sale of power to

Distribution Licensee or Tariff for sale of power to Distribution Licensee not to exceed

their APPC i.e., the reference of preferential benefit is only with respect to the electricity

component and not to the Renewable Energy component or REC which represent

environmental attributes of Renewable Energy generation.

1.86 Hence both the Regulations do not bar Renewable Energy Generator from availing REC

benefits merely because the Regulatory Commission has provided for “discounted” CSS

payable on account of the fact that the power being purchased by open access consumers is

from renewable energy sources.

1.87 Further, IWPA referred statement of objects and reasons issued by the CERC on 27

September, 2010 in the matter of CERC (Terms and Conditions for Recognition and

Issuance of Renewable Energy Certificates for Renewable Energy Generation) (First

Amendment) Regulations, 2010 stipulates that jurisdiction regarding eligibility conditions

to avail REC benefits lies with CERC only.

1.88 IWPA submitted that discount on CSS available to Open Access transactions from

Renewable Energy Generators cannot be interlinked with qualification for REC benefits.

IWPA submitted that neither RPO nor REC Framework have been linked with levy of CSS.



1.89 IWPA submitted that the Commission in view of the infirm nature of Wind has stipulated a

lower CSS for Open Access Consumer and the same cannot be termed as a discount. IWPA

submitted that CSS is the charge or penalty on Open Access consumers who are in the high

end category and who migrate away from Distribution Licensee by purchasing power from

Parties (including Renewable Energy Generators) other than Distribution Licensee. Since

many a state controlled Distribution Licensees have certain obligations to different sector of

economy like agriculture, certain element of CSS is required to be stipulated.

1.90 IWPA further submitted that the Commission in order to encourage setting up of more

Renewable Energy Projects like wind power as sale of power from Renewable Energy

sources has provided the “discounted” CSS to Open Access.

1.91 IWPA further submitted that without prejudice to submission made as above it further

submitted that merely because certain power like Wind and Solar are infirm, CSS may not

be restricted to a preferential discount as compared to normal CSS rate. IWPA submitted

that ultimately the CSS is computed on power consumed by Open Access consumers from

sources other than the Distribution Licensee. Such levy is on the actual power consumed by

the consumer irrespective whether it is Wind power or any other Renewable power or

conventional power. Therefore, CSS has no relevance to the infirm nature of the power.

IWPA submitted that whenever any charges are linked to capacity of the plant, same scale

for conventional and non-conventional power especially infirm power like Wind Power

cannot be applied. However when charges are based on units consumed the nature or source

of power has little effect. On the basis of above reasoning, IWPA submitted that CSS is

required to be charged at the normal rate on Open Access consumers and other entities as

per Regulation at the normal rate of CSS determined by the Commission without granting

any discount and accordingly requested the Commission to take a final decision in the

matter of CSS.

Tata Motors Limited

1.92 TML submitted that, the CERC Regulations on REC framework dated 14 January, 2010 is

elaborate and clear and requires no comments as far as eligibility for REC mechanism is

concerned. TML submitted that CSS levied by the Commission is based keeping in view



the infirm nature of the Wind energy and the same cannot be termed as a preferential

treatment.

1.93 TML submitted that presently CSS discount is available only for self use and not for third

party Wind power sale. In order to get adequate return on investment, REC mechanism

should be continued to be made available for all old & new Wind Projects for third party

sale. TML submitted that CSS levied by this Commission is based keeping in view the

infirm nature of the Wind energy and the same cannot be termed as preferential treatment.


1.94 WWIL submitted that consumers procuring power from Renewable Energy Generating

Stations must be exempted from CSS as Renewable Generators need such exemptions in

order to compete with other generation sources in the market. WWIL submitted that CSS

on Open Access consumers is applied so that these subsidizing categories of consumers

when procure power from outside, the Tariff burden should not fall upon the subsidized

consumers. But, in case of Renewable Energy, the Open Access consumers are already

fulfilling their social obligation and supporting the promotion of Renewable Energy and

hence should not be further burdened with CSS. Further, WWIL submitted that CERC in its

REC amendment Regulations, 2010 has not stipulated discount on CSS as a concessional

benefit for non-eligibility of REC.


1.95 The Commission notes the CERC in its Second Amendment to CERC (Terms and

Conditions for recognition and issuance of Renewable Energy Certificate for Renewable

Energy Generation) Regulations, 2010 (hereinafter CERC REC Regulations, 2010) has

specified the following concessional benefits for Projects which a Project has to forego in

order to avail REC benefits.

(i). Concessional/promotional transmission charges

(ii). Concessional/promotional wheeling charges

(iii). Banking facility benefit. The expression ‘banking facility benefit’ shall mean only

such banking facility whereby the CGP or any other renewable energy generator



gets the benefit of utilizing the banked energy at any time (including peak hours)

even when it has injected into grid during off‐peak hours.

1.96 The Commission noted that CERC by way if Second Amendment to CERC REC

Regulations, 2010 had withdrawn the criteria of waiver of Electricity Duty as one of the

concessional benefits.

1.97 As regards the submissions of the stakeholders the Commission has fixed the CSS as 25%

of the applicable CSS for Open Access consumer purchasing power from for Wind Power

Projects considering infirm nature of wind generation, the Commission clarifies no such

criteria was considered. The Commission has fixed concessional CSS in order to promote

the Renewable Energy sector in the State of Maharashtra. The relevant extract of Order

dated 9 September, 2011 in Case No. 43 of 2010 is reproduced as under:

“The Commission views that increase in generation from renewable sources is also

environmentally beneficial policy and it is also the mandate of the EA 2003 as per the

provisions of Section 86 (1) (e) thereof read with Para 5.2.20 of the NEP. However,

considering the submissions of the distribution licensees and the parties representing the RE

Sector, the Commission is of the view that some CSS must be levied on OA transactions by

RE Sector instead of continuing with the exemption. Therefore, the Commission decides to fix

CSS as 25% of the applicable CSS for open access consumer purchasing power from

renewable sources of energy.. This would compensate the distribution licensees and yet not

demote promotion of RE Sector.”

1.98 As regards the submissions of the stakeholders that the CERC in its REC Regulations, 2010

and Amendment thereof has not stipulated discount on CSS as a concessional benefit for

non-eligibility of REC, the Commission has taken a note of the same. However, the

Commission is fully aware of the powers conferred to it under the Electricity Act, 2003 and

among other powers, it only has the jurisdiction to determine the CSS.

1.99 The Commission notes that with the implementation of REC mechanism, the WEGs

receives another source of income by way of selling of RECs on Power Exchanges.

However, under such schemes, a WEG would be selling only the electricity component to

the third party consumer and not the Renewable Energy. The Renewable Energy

Component is being sold on Power Exchanges in form of RECs.



1.100 However, the Commission directs the Secretariat of the Commission to evaluate the need

of concessional benefit on CSS for open access transactions from Renewable Energy and

present it to the Commission within next 6 months of issuance of this Order.

Issue No. 7: Banking and Banking Charges

MSEDCL

1.101 MSEDCL submitted that due to infirm nature of Wind, it is very difficult to predict the

generation from Wind for a particular period. MSEDCL submitted that around 70% of the

Wind energy is generated during the period of June to September, i.e., just 4 months and

only 30% of the Wind energy is generated during the balance period. Also, most of the

Wind generation is during night i.e., off peak period and low in peak period i.e., morning.

MSEDCL submitted that this mechanism allows WEGs to inject power into the grid during

off peak low Tariff hours and consume high Tariff power during peak hours.

1.102 MSEDCL submitted that Wind Power Tariff Order, 2003 has provided that Wind Energy

generated at any given Time of Day (ToD) slot would be allowed to adjust against the

consumption at that particular ToD slot on any given day during the same financial year

and that Banking is applicable to those Wind Generators who consume power for self-use

or selling power to a third party. MSEDCL submitted that Tariffs can change not only

during the day but also during different seasons and therefore a careful examination must

be done of banking system. MSEDCL submitted that two major issues need to be examined

whether Banking system can be continued with adjustments in Tariff for the period in

which energy is injected and the period in which energy is drawn to take care of price

fluctuations over the seasons or whether it should be totally given up or not.

1.103 MSEDCL submitted that with Final Balancing and Settlement Mechanism (FBSM) in

place, it is very difficult to match drawl and schedule with provision of Banking. Therefore,

requested the Commission to not allow Banking as it would make energy accounting

complicated.

IWPA

1.104 IWPA submitted that Banking of energy is a mandatory requirement with respect to

infirm power like Wind. IWPA referred the Hon'ble Appellate Tribunal for Electricity



(APTEL’s) Judgment dated 7 September, 2006 in Appeal 20 of 2006 in the case between

Chhattisgarh Biomass Energy 14 of 53 Appeal No. 74 of 2007 Developers Association &

Ors. Vs. CSERC.

1.105 Further, IWPA submitted that the Hon’ble APTEL had reiterated the concept of Banking

in their Order dated 21 September, 2011 in Appeal nos. 53, 94 and 95 of 2010 in Case of

Tamil Nadu Electricity Board (TNEB).

1.106 IWPA submitted that the Commission in its Wind Power Tariff Order, 2003 permitted

Banking for a period of 12 months with no specific Banking charges. IWPA further

submitted that Banking, as in Wind Power Tariff Order, 2003 be allowed to continue as it is

definitely one of the encouraging attributes for continued development of Wind Energy in

the State.

1.107 IWPA submitted that as presented by MSEDCL, only 275 MW Wind power developers

have opted for third party sale. The said 275 MW roughly translates to a mere 377 MU

which is only 0.34% of the total power in MU handled by MSEDCL. Further, the entire

quantum of 0.34% may not contribute in a mismatch of generation and consumption.

Therefore such mismatch quantum from Wind Power Open Access would be a miniscule

vis-à-vis the quantum of power handled by MSEDCL. Further, IWPA submitted that the

contention sought to be raised by MSEDCL cannot be implemented as the same is contrary

to the prevailing law in which Open Access as well as incidental Banking is required to be

encouraged.

1.108 IWPA submitted that as far as Banking is concerned, as per the Regulations in the State

such adjustments are made for the same time zone as per ToD meter. IWPA submitted that

even CERC in its Order dated 27 September, 2010 has held that since such adjustment is

based on the respective time zones, the availability of Banking cannot be considered as a

concession. MSEDCL do not raise any issue when wind farm developers sell power to

MSEDCL. Questions are raised when wind farm developers opt for Open Access.

MSEDCL had raised no issues with respect to matching generation with drawl of wind

power when wind power is sold to MSEDCL. Also 75% of the total power distributed is in

the domestic segment and another 16% is in the agricultural sector as per Statistics

provided by MSEDCL and obviously MSEDCL takes care of estimated drawls by such a



huge segments constituting 91% (in terms of numbers and 42% in terms of MU) of the

power distribution.

Tata Motors Limited

1.109 TML submitted that banking facility is available to them till date without any charges.

TML submitted that Banking of Wind energy for at-least one year from the date of injection

should be provided as per the Commission’s Wind Power Tariff Order, 2003. TML

submitted that considering the infirm nature of Wind, GoM’s Wind Power Policy dated 12

March, 1998 read with various Orders passed by the Commission/APTEL have provided

for Banking facility.

1.110 TML presented the following to show the impact of Banking facility on the ARR of

MSEDCL:

“…

I. Let total installed capacity = 2500 MW @ 15% CUF

II. Let 1000 wind developers have installed capacity = 2000 MW @ 2MW

each (in reality it may be more)

III. Captive (Self Use) and Third Party sale to Open Access consumer

installed capacity = a-b = 500 MW approx.

IV. Let A Slot TOD Generation @30% = 197.1 MUs (Ref =

cx0.15x24x365x0.30)

V. MSEDCL have said A zone rainy season Market rate = Rs 1.50 per KWh.

VI. However MSEDCL rainy season A zone Tariff rate for HT Consumer like

TML was = Rs 5.69 (excluding Tax & duties, MD charges, etc.)

VII. Can we say that MSEDCL have earned a profit of Rs 4.19 for every unit

billed to diligent consumer like us.

VIII. MSEDCL have projected KWh requirement = 90000 MUs (for year 2010-

11)

IX. Assuming 10% increase for Year 2011-12 and power requirement =

100000 MUs approx.

X. Contribution of Wind power generation in A slot from Captive & Third

Party vis-à-vis Total Power = 0.197%



XI. If we assumed 100% banked unit, the impact is = less than 1 paise per

unit on ARR

XII. But in reality only about 10% banking is required per year. There is no

significant impact on the ARR.

…….”


1.111 WWIL submitted that the Commission in its Wind Power Tariff Order, 2003 permitted

ToD Banking. Further, WWIL submitted that the provisions of Banking as in WPTO are as

per the terms of Section 61 (h), 86 (1) of Electricity Act, 2003 and the provisions of Tariff

Policy and National Electricity Policy.

1.112 WWIL submitted that the Wind Industry cannot survive without the provision of

Banking. WWIL submitted that if Banking is discontinued in the State, the infirm nature of

the Wind would be an operational constraint in the balancing and settlement of Wind

energy. WWIL submitted that the Commission has to give due regard to the operational

constraints while determining wheeling charges for Open Access consumers as per

Electricity Act, 2003.

1.113 WWIL submitted that the Commission should provide Banking provision in the Open

Access Regulation itself. WWIL further referred to the Judgments of the Hon’ble APTEL

viz. Judgment in Appeal No. 98 of 2010 and Judgment in Appeal No. 53 of 2010 regarding

the Banking facility.

1.114 WWIL submitted that even Indian Electricity Grid Code (IEGC) Regulations, 2010

issued by the CERC where Wind Generators had to forecast for 15 minute time block on a

day-ahead basis have not been implemented as there are many constraints which need to be

addressed. WWIL submitted that therefore, the Commission may continue with the existing

Banking mechanism.

Arvind Cotsyn

1.115 Arvind Cotsyn submitted that the Banking facility on yearly basis must be continued.



Shri R. B. Goenka

1.116 Shri Goenka submitted that Projects whose EPA has expired and now availing third party

sale and self-use should be charged separate banking charges apart from transmission

losses, distribution losses and cross subsidy surcharge. These banking charges may be in

form of kind i.e., some percentage of energy wheeled may be debited in the banking facility

users account. He further submitted that said energy in form of charges to be allowed to

fulfill the RPO obligation of the licensee so that the commercial interest of the licensee

shall be covered and general consumers shall also benefited.

Commission’s Analysis

1.117 The Commission notes that existing banking facility as specified in the Wind Power

Tariff Order, 2003 stipulates as under:

“In view of these considerations, the Commission has taken the following decisions:

i) Banking of energy will be permitted at any time of the day and night

ii) Balance at the end of the financial year will not be carried over to the next

year

iii) Surplus energy at the end of the financial year, limited to 10% of the energy

(kWh) fed into the grid during the financial year, will be purchased by the

utility at the lowest TOD slab rate for HT energy tariff applicable on 31st

March of the financial year in which the energy was banked.

iv) Surplus energy in excess of 10% of the energy fed into the grid during the

year due to force majeure conditions shall be purchased by the utility at a

rate equivalent to the weighted average fuel cost as determined by the

Commission in the tariff order and in force from time to time.

v) The payment for surplus energy should be made to the developer/ owner and

not to the consumer in case of third party sale.”



1.118 The Commission has taken a note of the submissions of MSEDCL that when the banked

energy is redrawn by the Wind Generators, power has to be procured from the market at

higher rates and therefore the impacting financially to the licensee.

1.119 The Commission notes that in the Order dated 3 January, 2013 in Case No. 8 of 2012,

Case No. 18 of 2012, Case No. 20 of 2012 and Case No. 33 of 2012 considering the

submission of MSEDCL regarding commercial and financial implication of providing

banking facility to wind projects, had directed MSEDCL to carry out a detailed study based

on the historical actual generation, actual power purchase cost, incremental power purchase

cost, banking, any other relevant parameters, banking provisions provided in other States,

etc.

1.120 Accordingly, the Commission directs MSEDCL to submit the said Report and based on

such findings may file a separate Petition to review the existing provision of banking. The

Commission further rules that existing banking mechanism as stipulated in the Wind Power

Tariff Order, 2003 shall be continued.

1.121 The Commission further notes that stakeholders have opposed for levy of any banking

charges for banking facility, however, such stakeholders in other States had supported for

retaining the banking facility however with some charges.

1.122 The Commission further rules that in ad-interim basis banking charges in kind shall be

levied @5% on the energy banked at the end of every month and the same shall be reduced

from the energy banked at the end of the month. The Commission shall review the same

based on the Petition filed by MSEDCL in this regard.

Issue No. 8: Sale at Average Pooled Power Cost (APPC) and Compliance to RPO

MSEDCL

1.123 MSEDCL submitted that one of the options available with WEGs is to sell Wind energy

to Distribution Licensee at a price not exceeding the APPC of such Distribution Licensee.

MSEDCL submitted that APPC is the weighted average pooled price at which the

Distribution Licensee has purchased the electricity including cost of self generation, if any,



in the previous year from all the long-term and short-term energy suppliers, but excluding

those based on Renewable Energy sources, as the case may be.

1.124 The energy sale at APPC as approved by the Commission from time to time is eligible to

claim the REC benefit.

1.125 MSEDCL further submitted that such energy purchase is not considered for fulfilment of

RPO and request the Commission to consider the same for RPO fulfilment.

IWPA

1.126 IWPA submitted that issue raised regarding purchase at APPC is in the domain of CERC

and if the CERC relaxes this aspect there would be savings both to State Utilities as APPC

rate is much less than the preferential tariff rate in many States and further facilitating

development of REC to make good the shortfall in availability of renewal power in

different parts of the country in the matter of obligated entities meeting the RPO

requirements. IWPA submitted that however if more entities opt for REC, it could

adversely impact the REC market and the same needs to be addressed to by the Hon’ble

CERC.

1.127 IWPA submitted that many States have given option for purchase of power at APPC and

the utilities are also entering into EPA to purchase power at APPC rate and the developer

being eligible for REC. IWPA submitted that this may work out to be more economical to

MSEDCL, and the Wind farm developers may also be inclined to sell power at APPC rate

to MSEDCL post expiry of their EPAs and further avail REC.


1.128 WWIL submitted that under REC mechanism the electrical component of Renewable

power has to be sold by the Renewable Energy Generator at APPC of previous year.

Enercon submitted that the Commission should declare APPC of previous financial year

timely so that there is no ambiguity in the determination of cost of power under REC

mechanism.



Tata Motors Limited

1.129 TML submitted that RPO needs to be fulfilled by MSEDCL by purchase of power at

preferential Tariff fixed by the Commission and that such purchase at APPC cannot amount

to an RPO purchase.


1.130 The Commission notes that the CERC REC Regulations, 2010 stipulated that sale to host

Distribution Licensee at APPC by the Renewable Energy Project shall be considered as

eligible to participate under REC mechanism. Under the existing REC mechanism

approved by the CERC, Projects selling power at APPC to Distribution Licensee would be

selling only the electricity component and not Renewable Energy component. Hence, the

said purchase at APPC shall not be considered to meet the RPO targets under the existing

CERC REC Regulations, 2010 and amendment thereof.

1.131 As regards the submission of WWIL that APPC may be declared every year, the

Commission has taken a note of same and hereby directs all the Distribution Licensees in

the State of Maharashtra to file the details of actual Power Purchase expenses of previous

year within one month after the end of previous financial year in order to determine the

average pooled cost of power purchase.

Issue No. 9: Incentives

MSEDCL

1.132 MSEDCL submitted that the State Government provides various facilities to WEGs such

as exemption in electricity duty, infrastructure facilities like approach road, power

evacuation and equity grant. Such facilities shall be treated as concessional benefits and

hence WEGs availing any form of concession from GoM/MERC shall not be held eligible

for participation in REC scheme.

1.133 MSEDCL submitted that GoM Policy is providing many incentives to the Wind energy

developers which are not considered while computing Tariff. MSEDCL listed such benefits

as under:



(a). Electricity Duty: exempted for captive as well as third party sale for first 10 years

(b). Octroi Tax / Entry Tax: 100% refund of Octroi Tax / Entry Tax for equipments

(c). Refund of 50% of expenses on the Evacuation Arrangement from Green Energy

Fund

(d). Refund of 100% expenditure on Approach Road as subsidy from Green Energy

Fund.

IWPA

1.134 On the issue of substantial profit being made by Wind power developers, as referred to by

MSEDCL, IWPA submitted that even if the Wind farm developers have made such profits,

such profits cannot be a matter of deliberation in respect of illustrative issues listed for

policy review. IWPA submitted that policy review or the policy formation could be

deliberated at the highest for new Projects. However, all the existing Projects for which all

the functioning is as per law cannot be questioned and cannot be the subject matter for

discussion.

1.135 On the issue of ‘concessions on certain Open Access charges’, as referred by MSEDCL,

IWPA submitted that there are no concessions enjoyed by Open Access consumers as they

are required to pay the wheeling charges, transmission charges, wheeling loss, transmission

loss as mandated by the relevant Orders of the Commission. The Open Access consumers

of Wind farm developers also pay CSS as determined by the Commission.

1.136 IWPA submitted that wind power has a number of inherent benefits which are difficult to

be quantified but the availability of benefits have been accepted world over and further

India and the State of Maharashtra stands committed for developing more and more

Renewable Energy sources. The Electricity Act, 2003, the Tariff Policy, the Nodal

Agencies in different States, the Central Electricity Regulatory Commission and State

Electricity Regulatory Commissions are all committed for generating more and more power

from Renewable Energy. IWPA further submitted that some of the incentives detailed by

MSEDCL like 50% of the expenses being refunded from Green Energy Fund or Refund of

100% expenditure on approach road, Refund of Octroi and Entry Tax, etc. would have been

considered by the Commission while determining the tariff as ultimately the net cost to the

developer is taken under capital cost.




1.137 WWIL submitted that almost all other States in the country except Maharashtra provide

promotional Open Access charges to Renewable Energy Generators. WWIL submitted that

the Transmission charges in Maharashtra for Renewable Generators are equivalent to short-

term Open Access transaction but in other States concessional Transmission charges have

been provided. WWIL requested the Commission to consider the promotional status given

to Renewable Energy under Section 61 (h) and 86 (1) (e) of the Electricity Act, 2003,

National Electricity Policy and Tariff Policy and provide promotional Open Access charges

to Wind Generators.

1.138 WWIL submitted that infrastructure charges provided by MSEDCL to the developers are

mostly delayed leading to loss of working capital. WWIL requested the Commission to see

that the developers are repaid the infrastructure charges on time and if not, some penalty

clause should be inserted which would deter the Distribution Licensees to delay these

payments.

Tata Motors Limited

1.139 TML submitted that being a Group II developer, following concessions were given to

them:

“Sales Tax Benefit - 1/6th

of total investment in wind power Project (excluding land cost)

was available per year to the TML as sale tax benefit for a period of 6 years. TML availed

Rs.18.25 cr per year for six years from 2001-02 to 2006-07.

Capital Subsidy – TML is eligible and entitled to claim Rs.20,00,000/- as capital subsidy.

Earlier MEDA, Respondent No.2 paid Rs. 20,00,000/- to TML towards Capital Subsidy.

However, subsequently MSEDCL, Respondent No.1 arbitrarily, without any authority and

contrary to the law has in November 2008 deducted 50% of this amount i.e.Rs.10 lacs, from

the amount payable to TML by MSEDCL on some other account. I state that TML is

entitled to receive Rs. 10,00,000/- towards Capital Subsidy as per the Order dated April 23,

2010 in Case 70 of 2009 passed by this Hon’ble Commission and the request for payment

is pending with MSEDCL.”



1.140 TML submitted that incentives should be available for the survival of old Wind Projects.

TML submitted that the Wind Projects set-up by them are now old and to upkeep the

installations TML has to incur huge Operation and Maintenance expenses to the tune of

over Rs.20 lacs per month. TML submitted that presently Cross-subsidy surcharge discount

is available only for self use and not for third party wind power sale. Further, TML

submitted that REC mechanism should be continued to me made available for all Old &

New Wind Projects for third party Wind power sale.

Arvind Cotsyn

1.141 Arvind Cotsyn submitted that the ground reality on the allegation of undue enrichment

against Wind power generators is far different. Arvind Cotsyn submitted that the PLF of

20%, as considered for Group III Projects is on a higher side and that the Wind energy is

purchased at a rate lower than that given in the Government of Maharashtra Policy.

1.142 On the incentive of sales tax concession, Arvind Cotsyn submitted that many generators

could not avail the same as their PLF was below 12%. Arvind Cotsyn submitted that

initially, sales tax benefit was given in proportion of PLF, thereafter, the PLF, if more than

12%, was rounded off to 12% for calculating the benefit.

1.143 Arvind Cotsyn submitted that the subsidy on capital investment was disbursed to them

after a period of 5 to 7 years and MSEDCL deducted 50% of it. This shows that the

discounted value of the subsidy on receiving it was negligible. Arvind Cotsyn submitted

that the Government of Maharashtra Policy of 2004 had a clause for ‘Infrastructure

Development and Green Power Fund’. Arvind Cotsyn submitted that neither MEDA nor

MSEDCL has reimbursed any money as per this policy.

Bajaj Finserv

1.144 Bajaj Finserv submitted that WEGs earned less returns than the estimation after the

WEGs were installed during the period 2000-2002, because of non-availability of

MSEDCL's infrastructure to evacuate entire estimated wind energy. Due to this, the GoM

had given relief in eligible production of electricity for tax benefits vide GR dated 7

January, 2002 & letter dated 15 February, 2007. However, investors lost benefits of

electricity generation during that period permanently. Bajaj Finserv submitted that the same



situation continues till today. Presently, at Vankuswade Satara site, the installed capacity of

substation is 250MVA. However, only 150 MVA is working against 185 MW generator's

load and 100 MVA is idle for want of repairs since last 2 years and loss of 35 MW of WEG

continues. Same situation exists at other major site Dhule.


1.145 As regards the submission of MSEDCL regarding incentives and facilities provided by

the State Government to WEGs to be treated as concessional benefits and hence such

WEGs shall not be held eligible for participation in REC scheme, the Commission notes

that the CERC REC Regulations, 2010 does not stipulates any such concessional benefits.


Conditions for recognition and issuance of Renewable Energy Certificate for Renewable

Energy Generation) Regulations, 2010 (hereinafter CERC REC Regulations, 2010) has

specified only following concessional benefits for Projects which a Project has to forego in

order to avail REC benefits.



(iii). Banking facility benefit. The expression ‘banking facility benefit’ shall mean only

such banking facility whereby the CGP or any other renewable energy generator

gets the benefit of utilizing the banked energy at any time (including peak hours)

even when it has injected into grid during off‐peak hours.

1.147 As regards the submission of MSEDCL regarding factoring of such incentives/facilities

provided by the State Government while deciding the tariff, the Commission notes that

such clarification has already been issued in the Order dated 22 March, 2013 in Case No. 6

of 2013. The relevant extract of the said Order is reproduced as under:

“As stipulated in Regulation 22.1 of MERC RE Tariff Regulations, 2010, the

Commission observes that it shall take into consideration the incentive or subsidy

offered by the Central or State Government while determining the Tariff. The

Commission is of the view that in the absence of specific information as regards

nature of subsidy, its purpose, eligibility, applicability, concerned parties etc., the



Commission is not inclined to pass generic ruling in the matter in the present

proceedings. The issue of sharing of such subsidies can be taken up based on

application filed by the concerned party.”

Issue No. 11: Miscellaneous Considerations/Suggestions

i. Details of Capital Expenditure as sought by the Commission

MSEDCL Submissions

1.148 MSEDCL submitted that the stakeholders have not provided any data related to capital

expenditure along with effect of various concessions for Group I/Group II Wind generating

plants as sought by the Commission. MSEDCL further submitted that it has received some

information from the WEGs and requested the Commission to give more time to study the

submissions made on capital expenditure to submit the comments/observations on the

submission made by the WEGs.

IWPA Submissions

1.149 IWPA submitted its difficulty in collating the past records as the Projects were

capitalized prior to 31 March, 2003. IWPA submitted that another Wind Power Association

viz., Renewable Energy Development Association of Maharashtra (REDAM) had already

provided the capital expenditure data to the Commission on 20 February, 2003 on an

Affidavit at the time of the Commission determining the Wind Power Tariff as part of

proceeding of the Wind Power Tariff Order, 2003.

1.150 IWPA submitted that in the Wind Power Tariff Order, 2003, the Commission had

recognised the average Project cost per MW for about 177 completed Projects at Rs.5.36

Crore/MW as filed by REDAM and Indian Wind Energy Association (InWEA). However,

the Commission considered the Project cost of Rs. 5 Crore/MW for determining the Tariff.

Tata Motors Limited Submissions

1.151 TML submitted that Wind Projects were set by the erstwhile Tata Finance Limited in the

year 2000. The Capital Expenditure made was Rs. 112.02 Crore for a total of 21.95 MW,

translating into Rs. 5.1 Crore/MW



MEDA Submissions

1.152 MEDA submitted that according to market sources, old technology WEGs is available at

around Rs. 5 to 5.5 Crore/MW, while the Class III WEGs which have higher hub height and

bigger blade diameter are costing around Rs. 5.5 to 6 Crore/MW. These Class III WEGs

have higher efficiency than old technology WEGs. Further, there may be variation of 5 to

10% in Project cost due to site conditions.


1.153 The Commission extracted the data submitted by REDAM and InWEA on 20 February,

2003 and 17 February, 2003, respectively, from its records. An analysis of the data shows

that average Capex/MW of the data submitted by REDAM was Rs. 5.86 Crore/MW and

that for InWEA was Rs. 5.12 Crore/MW. Following table shows the sale option wise

capacity and capex as provided in the mentioned data.

Capex Data Submitted by REDAM on 20.02.2003

Particulars Capacity (MW) Capex

(Rs. Crore/MW) % of Total

Self Use 24.00 5.72 18%

Third Party Sale 52.18 5.92 40%

Sale to MSEDCL 53.74 5.88 41%

Total 129.92 5.86 100%

Capex Data Submitted by IWEA on 17.02.2003

Particulars Capacity (MW) Capex

(Rs. Crore/MW) % of Total

Self Use 95.56 4.63 46%

Third Party Sale 77.83 5.71 37%

Sale to MSEDCL 35.42 5.16 17%

Total 208.80 5.12 100%

1.154 The Commission directs the Secretariat of the Commission to consider the above

mentioned issue as a separate exercise and present it to the Commission.



ii. Pre-Commissioning PPA Signing


1.155 WWIL submitted that currently MSEDCL signs the EPA post commissioning of the

Project. WWIL requested the Commission to give directions to MSEDCL to sign pre-

commissioning PPA which would help in the financial closure.


1.156 The Commission has taken a note of the suggestion made regarding signing of EPA

before commissioning of the Plant and also notes that in the past various issues related to

EPA have been submitted by various parties including Distribution Licensees. The

Commission directs MSEDCL to file a separate Petition regarding various modifications in

the EPA.

iii. Group Captive Model


1.157 WWIL submitted that Tamil Nadu has come up with its Group Captive model which has

been appreciated by the Distribution Licensee as well as the developers. WWIL requested

the Commission to evolve such Group Captive model in Maharashtra so that both

developers as well as the Utility benefits by attracting various Group Captive players in the

State.


1.158 The Commission has taken a note of the suggestion made Group Captive model in the

State of Maharashtra and clarifies that Group Captive Model already exists in the State of

Maharashtra and no restrictions have been imposed in adopting the same. The Commission

clarifies that WEGs are free to choose the Group Captive Model subject to the provisions of

the Electricity Act, 2003 and the Electricity Rules, 2005 made thereunder.



iv. Wind Zoning and Single Tariff across the State

MSEDCL

1.159 MSEDCL submitted that there is a need for change in procedure for classification of

Wind power Projects in Wind zone class by MEDA, as Ministry of New and Renewable

Energy (MNRE) has withdrawn the qualifying criteria of minimum Wind power density of

200 W/m2 at 50 m above ground level for establishment of Wind power Project at any site

in India. MSEDCL submitted that ascertaining the Wind zone class is a cumbersome and

tedious task considering the practical difficulties of time and labour involved. MSEDCL

submitted that considering the previous measurements and self declaration of Wind energy

generators, most of the WTGs lies in Zone I and II which are eligible for higher Tariffs.

1.160 MSEDCL submitted that there is a need of more scientific and logical approach to

establish correct Wind zone till such time Wind zone 2/3 Tariffs shall be made applicable.

Based on the above reasoning, MSEDCL requested the Commission to reconsider the zone

wise Tariff for Wind Projects in the State and determine a single Tariff for all zones.

Further, MSEDCL submitted that the Commission may incorporate the combination of

machine efficiency and the Wind velocity to decide Tariff in respect of Wind Projects.

MSEDCL submitted that most of the Wind energy potential States have only single Tariff.

IWPA

1.161 IWPA submitted that wind zones have been determined after due study by the Nodal

Agency, MEDA with assistance from Central Government Agency C-WET and also after

due discussions and deliberations with Distribution Licensees, wind farm developers and

the said approach has been approved and agreed to by MSEDCL. The classification of

zones based on available CUF has been recently concluded by MEDA by taking the views

of all the stakeholders including MSEDCL. Therefore the classification determined to be in

force for a reasonable period of 5 to 8 years before revisiting the same for any

modifications thereof.

MEDA

1.162 MEDA in its submission dated 12 April, 2013 submitted that Wind power potential of the

State is declared at central level through C-WET, which is an authority for assessment of



wind power potential for the entire country. The bigger sized WEGs and removal of 200

watt/square meter WPD criteria will also add up to the wind potential of the State. Further,

in its submission data 17 July, 2013 MEDA submitted that MNRE / C-WET have declared

44 sites in Maharashtra which have WPD more than 200 watt per sq. meter. On these

potential windy sites, C-WET has declared potential of 5961 MW of wind power Projects

and that the installed capacity till 30 June 2013 was 3277.56 MW in the State. Further,

Wind potential of the State is estimated by the C-WET on the basis of assumption that only

2% land is available for development of wind power Project on each site. But on many

sites, land is available more than 2% and removal of 200 watt per sq. meter criteria will

increase land availability. Therefore, estimated potential of State will increase accordingly.

1.163 MEDA submitted that Wind zones have been introduced to give appropriate returns for

different wind density sites. With the introduction of wind zones, the lower Wind Power

Density (WPD) sites may also get explored. Further, MEDA submitted that the Wind Zone

classification procedure is prepared in consultation with C-WET, wind developers and all

distribution licensees. WPD of a windy site is determined on the actual wind data collection

at the site for 1-2 years and analysis of data and certification of WPD by C-WET. Project is

awarded the wind zone as per the procedure formulated by all the stakeholders. If the

Project does not fit into the parameters set in the procedure, then the Project is referred to

C-WET for Project specific WPD. Majority of the windy sites as per MEDA in the State are

low wind power density sites. Generation of electricity from any WEG is completely

dependent on availability of wind and also there is theoretical limit for conversion of wind

into electricity. New WEGs with higher hub height and higher blade diameter are designed

to convert maximum possible wind energy into electricity. Wind energy may be infirm, but

it cannot be termed inefficient.

Commission’s Rulings:

1.164 As regards the submission of MSEDCL regarding change in the procedure for wind

zoning, the Commission directs the Secretariat of the Commission to deliberate on this

issue and put up for Renewable Energy Tariff Order for FY 2014-15, considering the

submissions of MSEDCL.



v. Renewable Purchase Obligation Target

MSEDCL

1.165 MSEDCL submitted that RPO Target should be linked with the actual potential of the

State. MSEDCL submitted that the State has Wind Energy Potential of 5439 MW of which

only 2954 MW has been achieved. Further, the actual wind generation based on installed

capacity for FY 2012 stood at around 3% of the overall energy demand as compared to the

recommended RPO of 6.75%.

IWPA

1.166 IWPA submitted that it agrees with MSEDCL that it should be linked with actual

potential of the State. Having admitted that it is only a miniscule of 3% of the overall

energy demand, MSEDCL has failed to proactively and wholeheartedly support wind

power and make efforts to control the costs emanating from the rest of the 97% of the

overall energy demand being met by conventional power. Though stipulation of RPO is

required to be realistic and probably the Commission after due deliberation has fixed the

RPO levels, the achievement of RPO levels have been further facilitated by the Hon'ble

CERC by introducing Renewable Energy Certificates and the same has been adopted at

State levels by Hon'ble MERC by stipulating that REC could be a component in bridging

the gaps, if any, in achieving the RPO obligations. IWPA further submitted that the fact of

REC in FY 2012-13 is that there are more RECs available and less takers even at the

minimum price of Rs. 1,500/- per REC. If MSEDCL is finding difficult to bridge the gap on

RPO they could very well purchase the RECs from the market. Therefore avenues do exist

in meeting the RPO obligations.


1.167 As regards the submission of MSEDCL regarding RPO, the Commission has given its

ruling in its Order dated 12 March, 2014 in Case No. 180 of 2013 on a similar issue

reproduced as under:

“The Commission is of the view that for realistic planning of contracting Renewable

Energy for meeting RPO, realistic CUF plays vital role. In case there is large

variation in CUF calculated by the MEDA and actual CUF achieved by Renewable



Energy generators then it certainly affects the planning of Distribution Licensees.

Hence the Commission directs MEDA to undertake a detailed study to re-assess the

realistic Capacity Utilisation Factor (CUF) for Wind power projects in the State with

the help of reputed technical institutes within six months from the date of this Order.”

vi. Restriction on Number of WTG

MSEDCL

1.168 MSEDCL submitted that there is a need for restriction on number of WEGs per consumer

considering the consumer Contract Demand. There should be some kind of limit on how

much capacity of Wind energy generation (MW) should cater to how much contract

demand of a consumer. e.g., TML having contract demand of 55 MVA is sourcing Wind

power from 90 MW of WTGs and therefore occupying large capacity.

1.169 MSEDCL submitted that there shall be a limit of Wind power capacity say 20% more

than the contract demand or as may be determined by the Commission.

IWPA

1.170 IWPA submitted that MSEDCL has given an illustration of Tata Motors and Essar Steel

and primarily emanates from difficulties in administration. IWPA submitted that

considering the wind farm developers are small entities with few MW each, restricting their

supply of power to Open Access consumers would be a retrograde step. It is already

stipulated that only developers having 1 MW and above installation can opt for Open

Access and the same has already restricted the entry of small developers. IWPA submitted

that handling a handful of wind farm developers supplying to a single Open Access

consumer should not be an issue with the modern software system available which can

make any computations in the shortest possible time.

Tata Motors Ltd.

1.171 TML submitted that MSEDCL’s entire presentation is based on the various deterrent

clauses of their earlier Commercial Circulars 147 and 155. There is no more fresh point as

of today.




1.172 As regards the submission of MSEDCL regarding restriction on number of WTGs, the

Commission directs the secretariat of the Commission to analyse the above mentioned

issue and present it to the Commission.

Summary of Rulings:

Issue No. 1: Option to sell power post expiry of Energy Purchase Agreement (EPA)

1.173 The Commission has deliberated on this issue for option of sale of power after

expiry of the EPA with Distribution Licensee as is evident from the extracts of various

Orders (i.e., Case No. 33 of 2007, Case No. 89 of 2007, Case No. 58 of 2008, and Case

No. 39 of 2011). Therefore, the Commission is of the view that provisions of supply of

power to any party other than MSEDCL post expiry of EPA have been reiterated by

the Commission through its various Orders mentioned above and the same needs to be

continued.

Issue No. 2: Tenure of Energy Purchase Agreement (EPA)

1.174 The Commission notes that other State Electricity Regulatory Commissions have

also stipulated the EPA period linked to the life of the Project (i.e., EPA period has

been defined as 20/25 years).

1.175 The Commission further notes that stakeholders have also supported for having a

longer tenure of EPA for wind Projects, however, the only concern has been raised to

review the existing EPA which has been signed long before.

1.176 The Commission further notes that after the issuance of Wind Power Tariff Order,

2003 and notification of MERC (RE Tariff) Regulations, 2010 multiple options of sale

of power are now available for Wind Projects (i.e., third party sale, self consumption

under captive route, sale of power under REC schemes).

1.177 In view of the above, the Commission is of the view that there is a merit in

consideration of EPA period linked to life of the project for existing and new Projects.

Accordingly, the Commission rules that for Projects whose EPA have not expired may



be given an option to extend EPA to Project life. The Commission hereby further

clarifies that such extension is an option available to both Parties and is not a

compulsion.

Issue No. 3: Tariff for Sale of Power after Expiry of EPA

1.178 The Commission rules that regulatory process for determination of tariff for

Group-II wind energy projects; upon expiry of validity of existing EPA, will have to

be undertaken in a transparent manner including participation of all key stake-

holders similar to any other tariff determination process. The Commission shall

initiate such regulatory process on suo-motu basis summarising key issues involved in

tariff determination for Group-II wind energy projects; upon expiry of validity of

existing EPAs. The Commission shall invite comments/objections/suggestions of all

concerned before determining Tariff for such projects.

1.179 However, for Group-IV Projects, i.e., the Projects for which tariff has been

determined under MERC (RE Tariff) Regulations, 2010, the Commission in Case No.

6 of 2013 has ruled that in the matter of Determination of Generic Tariff for the

fourth year of the first Control Period under Regulation 8 of the Maharashtra

Electricity Regulatory Commission (Terms and Conditions for Determination of

Renewable Energy Tariff) Regulations, 2010 on the issue of tariff structure, PPA and

useful life of Wind Power Plants had clarified that while tariff period is specified as 13

years, the levellisation is carried out over useful life which is 25 years and not just over

13 years, thereby ensuring the cost recovery is spread over entire useful life which also

results in back-ending of the returns

1.180 Considering the fact that for Group-IV Projects, i.e., the Projects for which tariff

has been determined under MERC (RE Tariff) Regulations, 2010, the tariff is

determined considering the levellisation over the useful life of the Wind Projects, the

Commission rules that if such Projects opt to extend the EPA period from 13 years to

25 years, the tariff determined for Wind Energy Projects for 13 years, considered

from the date of commercial operation of the Wind Project shall also be applicable

from 14th

year to 25 years.



Issue No. 4: Obsolesce of Technology and Repowering of Wind Turbines

1.181 In exercise of the powers vested in it under Section 86 (2) of the Electricity Act,

2003, advises the Government of Maharashtra to formulate a Policy to encourage and

promote Re-powering of the existing small Wind Turbines within the State, which

could result higher generation and also lead to better utilisation of existing wind sites,

which would help to encourage the investments in the State and also help to the meet

the targets of RPO. In these circumstances, considering the infirmity of Wind Power,

the Government may also consider to frame appropriate Policies for encouraging

Pump-Storage Schemes and Energy Storage Schemes.

Issue No. 5: Objective of Renewable Energy Certificate (REC)

1.182 The Commission notes the following primary objectives identified for REC

mechanism:

(i). Effective implementation of RPO mechanism in Maharashtra

(ii). Increased flexibility for participants to carry out RE transactions

(iii). Overcoming geographical constraints to harness available RE sources

(iv). Reduce transaction costs for RE transactions

(v). Create competition among different RE technologies

(vi). Development of all encompassing incentive mechanism

Issue No. 6: Eligibility for Renewable Energy Certificate (REC)


Conditions for recognition and issuance of Renewable Energy Certificate for

Renewable Energy Generation) Regulations, 2010 (hereinafter CERC REC

Regulations, 2010) has specified the following concessional benefits for Projects which

a Project has to forego in order to avail REC benefits.



(iii). Banking facility benefit. The expression ‘banking facility benefit’ shall mean

only such banking facility whereby the CGP or any other renewable energy



generator gets the benefit of utilizing the banked energy at any time (including

peak hours) even when it has injected into grid during off‐peak hours.

1.184 The Commission noted that CERC by way if Second Amendment to CERC REC

Regulations, 2010 had withdrawn the criteria of waiver of Electricity Duty as one of

the concessional benefits.

1.185 The Commission notes that with the implementation of REC mechanism, the WEGs

receives another source of income by way of selling of RECs on Power Exchanges.

However, under such schemes, a WEG would be selling only the electricity component

to the third party consumer and not the Renewable Energy. The Renewable Energy

Component is being sold on Power Exchanges in form of RECs.

1.186 However, the Commission directs the secretariat of the Commission to evaluate the

need of concessional benefit on CSS for open access transactions from Renewable

Energy and present it to the Commission, within next 6 months of issuance of this

Order.

Issue No. 7: Banking and Banking Charges

1.187 The Commission notes that in the Order dated 3 January, 2013 in Case No. 8 of

2012, Case No. 18 of 2012, Case No. 20 of 2012 and Case No. 33 of 2012, considering

the submission of MSEDCL regarding commercial and financial implication of

providing banking facility to wind projects, had directed MSEDCL to carry out a

detailed study based on the historical actual generation, actual power purchase cost,

incremental power purchase cost, banking, any other relevant parameters, banking

provisions provided in other States, etc.

1.188 Accordingly, the Commission directs MSEDCL to submit the said Report and based

on such findings may file a separate Petition to review the existing provision of

banking. The Commission further rules that existing banking mechanism as stipulated

in the Wind Power Tariff Order, 2003 shall be continued.



1.189 The Commission further notes that stakeholders have opposed for levy of any

banking charges for banking facility, however, such stakeholders in other States had

supported for retaining the banking facility however with some charges.

1.190 The Commission further rules that in ad-interim basis banking charges in kind shall

be levied @ 5% on the energy banked at the end of every month and the same shall be

reduced from the energy banked at the end of the month. The Commission shall

review the same based on the Petition filed by MSEDCL in this regard.

Issue No. 8: Sale at Average Pooled Power Cost (APPC) and Compliance to RPO

1.191 The Commission notes that the CERC REC Regulations, 2010 stipulated that sale to

host Distribution Licensee at APPC by the Renewable Energy Project shall be

considered as eligible to participate under REC mechanism. Under the existing REC

mechanism approved by the CERC, Projects selling power at APPC to Distribution

Licensee would be selling only the electricity component and not Renewable Energy

component. Hence, the said purchase at APPC shall not be considered to meet the

RPO targets under the existing CERC REC Regulations, 2010 and amendment

thereof.

1.192 As regards the submission of WWIL that APPC may be declared every year, the

Commission has taken a note of same and hereby directs all the Distribution Licensees

in the State of Maharashtra to file the details of actual Power Purchase expenses of

previous year within one month after the end of previous financial year in order to

determine the average pooled cost of power purchase.

Issue No. 9: Incentives and Promotional Open Access Charges

1.193 As regards the submission of MSEDCL regarding incentives and facilities provided

by the State Government to WEGs to be treated as concessional benefits and hence

such WEGs shall not be held eligible for participation in REC scheme, the

Commission notes that the CERC REC Regulations, 2010 does not stipulates any such

concessional benefits.



1.194 As regards the submission of MSEDCL regarding factoring of such

incentives/facilities provided by the State Government while deciding the tariff, the

Commission notes that such clarification has already been issued in the Order dated

22 March, 2013 in Case No. 6 of 2013 that in the absence of specific information as

regards nature of subsidy, its purpose, eligibility, applicability, concerned parties etc.,

the Commission is not inclined to pass generic ruling in the matter in the present

proceedings. The issue of sharing of such subsidies can be taken up based on

application filed by the concerned party.

Issue No. 11: Miscellaneous Considerations/Suggestions

(i) Details of Capital Expenditure as sought by the Commission

1.195 The Commission directs the Secretariat of the Commission to consider the above

mentioned issue as a separate exercise and present it to the Commission.

(ii) Pre-Commissioning PPA Signing

1.196 The Commission has taken a note of the suggestion made regarding signing of EPA

before commissioning of the Plant and also notes that in the past various issues related

to EPA have been submitted by various parties including Distribution Licensees. The

Commission directs MSEDCL to file a separate Petition regarding various

modifications in the EPA.

(iii) Group Captive Model

1.197 The Commission has taken a note of the suggestion made Group Captive model in

the State of Maharashtra and clarifies that Group Captive Model already exists in the

State of Maharashtra and no restrictions have been imposed in adopting the same.

The Commission clarifies that WEGs are free to choose the Group Captive Model

subject to the provisions of the Electricity Act, 2003 and the Electricity Rules, 2005

made thereunder.

(iv) Wind Zoning and Single Tariff across the State



1.198 As regards the submission of MSEDCL regarding change in the procedure for wind

zoning, the Commission directs the Secretariat of the Commission to deliberate on this

issue and put up for Renewable Energy Tariff Order for FY 2014-15 considering the

submissions of MSEDCL.

(v) Renewable Purchase Obligation Target

1.199 As regards the submission of MSEDCL regarding RPO, the Commission has given

its ruling in its Order dated 12 March, 2014 in Case No. 180 of 2013 on a similar issue

and has directed MEDA to undertake a detailed study to re-assess the realistic

Capacity Utilisation Factor (CUF) for Wind power projects in the State with the help

of reputed technical institutes within six months from the date of said Order.

1.200 Accordingly, with the above rulings, the Suo-Motu Petition in Case No. 92 of 2012

stands disposed of.

Sd/- Sd/-

(Vijay L. Sonavane) (Chandra Iyengar)

Member Chairperson

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