BEFORE HIMACHAL PRADAESH ELECTRICITY REGULATORY
Petition No.137/2011, MA No.71/2012
In the matter of:
Determination of Average Pooled Power Purchase Cost (APPC) for the financial year
2012-13 under REC mechanism.
1. This order pertains to determination of Average Pooled Power Purchase Cost
(APPC) for the financial year 2012-13. Regulation 5.1 of the CERC (Terms and
Conditions for recognition and issuance of Renewable Energy Certificate for
Renewable Energy Generation) Regulations,2010, specifies that :
A generating company engaged in generation of electricity from renewable
energy sources shall be eligible to apply for registration for issuance of and
dealing in Certificates if it fulfills inter alia the following conditions:
it sells the electricity generated either (i) to the distribution licensee of the
area in which the eligible entity is located, at a price not exceeding the
pooled cost of power purchase of such distribution licensee, or (ii) to any
other licensee or to an open access consumer at a mutually agreed price, or
through power exchange at market determined price.
Explanation.- for the purpose of these regulations ‘Pooled Cost of
Purchase’ means 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 energy suppliers long-
term and short-term, but excluding those based on renewable energy
sources, as the case may be.
2. The distribution licensee i.e. HPSEBL has filed petition No.137/2011, MA
No.71/2012 for approval of APPC for the financial year 2012-13 and revision of
methodology for determination of APPC rates for the current and ensuing years. The
licensee has given details of Power Purchase Cost for FY 11-12, the abstract of which is
Details MU Rs. Crore
BBMB Stations 332.36 18.01
NTPC Stations 1326.91 387.67
NHPC Stations 292.36 61.02
HPSEB Ltd. (own gen.) 1494.39 215.96
Free Power 732.10 216.70
Equity Power of SJVNL 296.07 127.74
Other Stations including market purchase 2441.81 532.94
Banking 549.41 -
UI Power 219.69 84.64
Total Power Purchase Cost (without State 6953.00 1427.98
Total Power Purchase Cost (with State 7685.1 1644.68
APPC(without State Govt. power) =205 Paise per unit
APPC(with State Govt. power) =214 Paise per unit
The HPSEBL pleaded in aforesaid petition to approve the APPC rate of 205 Paise per
unit for FY 2012-13, without taking into consideration the quantum of State
3. The HPERC issued a public notice in the newspapers namely- The Tribune on
17 April, 2012 and Amar Ujala on 17th April,2012 inviting objections/suggestions on
the aforesaid petition from the stakeholders. The last date for submission of
objections/suggestions was 7th May, 2012.Himachal Small Hydro Power Association
vide MA No.83/2012 requested to extend the time period for filing their
replies/documents and the HPERC extended the last date for filing
objections/suggestions upto 28th May,2012, for which a public notice for extension of
date had also been published in the newspapers- The Tribune on 21st May,2012 and
Amar Ujala on 20th May,2012 respectively.
4. The suggestions/objections received from Himachal Small Hydro Power
Association on 28.5.2012 vide MA 90/2012. There after a notice dated 29.05.2012 was
issued to distribution licensee to file rejoinder.
5. The Commission vide letter dated 23.6.2012 further sought for details of power
transactions under banking arrangements for the financial year 2011-12. The HPSEBL
submitted the additional information vide MA 103/2012 giving the details of power
6. The applicant licensee’s calculations of APPC are based on the following:-
1) The actual purchase (quantum and costs) for FY 2011-12 for 11 months
(April 11 to February 12) has been considered as details for March 12 is
not yet available.
2) The quantum and amount of Free Power from GoHP is not considered.
3) The arrears pertaining to past periods (paid in FY 2011-12) have been
excluded as these are not recurring in nature.
4) The PGCIL/Transmission charges/ULDC/Other charges have also not
been included as same will be levied additionally on the Generating
Stations which opt for the APPC rates and as such consideration of same
will result in double accounting.
5) The rates of own generating stations have been taken from the MYT
Order for 2nd Control Period dated 19th July,2011.
Regarding quantum of government power, petitioner’s plea is that:-
(1) Around 13% power is being procured from Free Power Share of GoHP,
wherein rate of sale of Free Power depends on APPC rates.
(2) The APPC Rate itself is in turn a function of Free Power Quantum and
(3) As a consequence,, any increase in either of the costs/rates inadvertently
results in increase of other costs/rate. Thus, while costs of hydro power
stations come down over a period of time cost computed with existing
methodology will always keep on increasing.
As such the Free Power Rate is not the true indicator/factor for computation of
actual average pooled power purchase cost (as APPC is already factored in Free
Power Rate) and hence the Free Power quantum and amount needs to be
excluded from the computation of APPC rates for FY 2012-13.
7. Himachal Small Hydro Power Association in their reply have raised the following
(i) That the free power of GoHP is not available to local DISCOM i.e. HPSEBL
free of cost. It is available at a price determined by this Commission on a
methodology approved by the Commission and accepted by HPSEBL.The
delinking of free power from Average Power Purchase Cost will not be true
reflection of Average Power Purchase Cost and will not be in consonance
with the definition of Average Power Purchase Cost as defined by Central
Electricity Regulatory Commission.
ii) That in the calculation of Average Power Purchase Cost, the Petitioner Board
has taken the 549.41 Million units against banking at zero cost. This is
absolutely erroneous as no power can be procured at zero cost. Banked
power is nothing but a deferred use. In summers when HPSEBL is in excess
of power, it banks it with neighboring States and in winters it takes that
back. It had given the power in summer out of the available kitty and adding
the banked power again at zero cost mean double accounting in the
denominator leading to misrepresentation of Average Power Purchase Cost.
Had the HPSEBL sold the surplus power in summer and bought the deficit
power in winter the Average Power Purchase Cost would have been
different and higher. Therefore, to remove this anomaly either the cost of
banking power has to be added or the units reflected under banking have to
be removed. If we go by the premise of Petitioner Board, the Board can
show the whole power banked to Punjab and the whole power received on
the basis of banking can be priced at zero cost. In that case the Average
Power Purchase Cost of all the power will be zero. Therefore, the contention
of HPSEBL to include the banked power at zero cost is totally wrong and
iii) The PGCIL/Transmission Charges/ULDC/Other charges should not levied
additionally on Generating Station which opts for Average Power Purchase
8. HPSEBL in their rejoinder reiterated that quantum and cost of government
power should not be considered.
As regards banking quantum at zero cost, HPSEBL has submitted that since the
Commission considers the availability of power from banking at zero cost while
approving the Power Purchase Cost, the HPSEB Limited has also considered the
banking power at zero cost for determination of APPC as banking cost is not a pass
through in approved power purchase cost. However, the quantum of banking needs to
be included as it is one of the sources of power. Petitioner has given an illustration
also to substantiate its plea.
Regarding PGCIL/ Transmission Charges etc., Petitioner has clarified that
Transmission/Wheeling/Other charges will be levied additionally, if applicable, if the
generator opting for APPC considers for sale of power to users within/outside State
other than HPSEBL.
9. Petitioner in its rejoinder/additional submission has also pleaded that the power
purchased from Unscheduled Interchange (UI) needs to be excluded from the
determination of APPC because, U.I. is the per force transactions of energy which are
attributable to the prevailing system conditions and the Utility have no control over it.
Further, amount paid for the energy drawl under U.I. is basically the penalty paid for
the deviation from the schedule and hence cannot be termed as Power Purchase from
the sources and as such cannot be included in the determination of APPC.
10. Commission after careful analysis of pleadings, objections thereupon and the
rejoinder has considered each issue accordingly keeping in view the CERC Regulations.
As per the CERC Regulations 2010, the average pooled cost of purchase of power has
three components relevant to the present context i.e. it has to be weighted average
pooled price of power purchased, and it has to be for the previous year and further that
it has to be from energy suppliers long term and short term. The claim of the petitioner
that power purchased from the State Govt. from its share of free power from the
generating stations within the State should not be counted, does not have any merit
because the State Govt., although is not a generator, yet is a source of supply for which
price is determined by the Commission and the quantum and period of purchase/sale is
mutually agreed between the State Govt. and the petitioner. Therefore, the Commission
holds that the quantum and rate of power purchased from the State Govt. out of its free
power share shall be taken into account for pooled cost of purchase.
11. The contention of the Small Hydro Power Association that quantum of power
banked cannot be counted at zero cost and therefore, either quantum of incoming and
outgoing power should not be counted or cost of banked power has to be added,
otherwise it amounts to double counting of cost of power has a merit.
12. The details of power purchase under banking arrangement during the year
2011-12 furnished by the petitioner is as under:-
Banking Purchase FY 2011-12
Grand Total 739.43 MU
13. Total power purchased is disposed off/utilized by way of sale, within and
outside State and by way of banking. Power purchase only is relevant for APPC and
disposal/utilization of power is not relevant to the context of determination of APPC.
Banking has three components i.e. (i) certain quantum of energy out of total purchases
is banked during the year and the same quantum is received back during the same year
is called contra banking; (ii) certain quantum of energy is borrowed from other
Discoms during the year which is to be returned in the subsequent year is known as
forward banking under purchase category and (iii) quantum sold during the year under
forward banking will be received back in the next financial year is called return banking
under purchase category.
Where the outward banking (banking sale) is from out of power purchased
during the year from energy supplier (long term and short term), its cost is already paid.
Therefore, if the same quantum is received as inward banking (contra banking
purchase), such quantum and price should not be included over and above the quantum
or price already taken into account, out of which such power has been banked. The
above figures indicate that out of the total inward banking (banking purchase) of 739.43
MU, only 570.76 MU is contra banking for 2011-12. It is true that Commission had
taken cost of banking power, whether purchase or sale, as zero because in the absence
of firm cost of such power any notional cost leads to distorted results in profit/loss in
the balance sheet. It is also true that banking arrangement as a practice in the State is
rolling arrangement involving contra, forward and return banking which is with various
Discoms in the region. For the purpose of APCC only the weighted pooled price of
previous year is required to be taken into account, therefore, the Commission is of the
view that against the total banking purchase of 739.43 MU, only 570.76 MU is contra
and this quantum shall not be counted in the total power purchase quantum during the
year. However, 168.67 MU has been received as inward banking during the year over
and above quantum taken into account as purchased from the energy supplier, therefore,
this is an additional power purchase. Since there is no criteria for determination of rate
and as a prudent practice the Commission had taken such banking sale and purchase at
zero cost, this quantum of energy shall be treated as additional purchase at zero cost.
14. The petitioner has pleaded that power purchase through unscheduled interchange
(U.I.) should not be included in the power purchase cost. U.I. as a system mechanism is
not a platform for power purchase or sale but is transaction/system of over-drawl or
under-drawl against the power scheduled from the source. The under-drawl is a
situation where the purchaser has paid price of power scheduled to him to the suppliers
but he has not drawn from the system and if someone-else over-draws, charges will be
reimbursed as per the pricing mechanism under U.I. Similarly, the over-drawl is from
the system beyond the power purchased from the supplier and so scheduled and
therefore, it does not amount to purchase of power on long term or short term basis
from energy supplier. It can be argued that quantum of under-drawl should be reduced
from the total power purchase which can further lead to issues of pricing of under-
drawls as to whether such price should be on the principles of costly power at the
margin in the merit order purchase. Therefore, U.I. over-drawls cannot be treated as
power purchase for the purpose of pooled cost of purchase.
15. As has been clarified also by the licensee in its rejoinder, PGCIL/transmission/
ULDC charges etc. are not applicable when power is being supplied to local Discom at
16. Based on the above discussions, the Commission comes to the conclusion that the
power purchases from State Govt., against its share of free power from generating
stations will be considered for pooled cost of purchase, that over-drawl/transactions
under U.I. cannot be treated as power purchase from energy supplier and further that
only the quantum of inward forward banking (banking purchase) in access of quantum
of contra-banking, , in 2011-12 will be taken as additional power purchase at zero cost.
17. Accordingly, the Commission has considered the relevant power purchase
expenses of 2011-12 eligible for calculation of weighted average pooled price for FY
2012-13 submitted in the Petition by the Distribution License and accordingly the
Commission has determined the rate of APPC for FY 2012-13 as given below:-
Eligible Power Purchase Expenses of FY 2011-12 for APPC 2012-13
Details MU Rs. crore
BBMB Stations 332.36 18.01
NTPC Stations 1326.91 387.67
NHPC Stations 292.36 61.02
HPSEB Ltd. (own gen) 1494.39 215.96
Govt. Free and Equity power 1028.17 344.44
Other Stations including 2441.81 532.94
Forward banking 168.67 -
Total 7084.67 1560.04
Based on the above, the average pooled purchase cost (APPC) for FY 2012-13 works
out to Rs. 2.20 per unit and is so approved by the Commission. These prices are firm
and final and will not be trued up.
18. This order shall be applicable for FY 2012-13 and shall continue for further period
with such variation or modification as may be ordered by the Commission for next
Commission orders accordingly.
Dated: 16th July, 2012. (Subhash C Negi),