17_Order_dt_10_04_2006_CN_01 of 200500006 by keralaguest



       (e)    Recovery of cost of electricity in a reasonable manner;

       (f)    Promotion of investment in electricity industry.

Approach & Methodology
Capacity (in MW) of the project

4.5    As submitted by GOMID, the height of Nilwande dam plays an important role on the
       generating capacity of the hydro power plant. The different phases of the Nilwande
       dam project are as follows:

       (a)    Phase I – This phase is the existing scenario i.e the dam does not exist.

       (b)    Phase II - In this phase the height of the dam will reach to 610m/613m.

       (c)    Phase III - In this phase the height of the dam will be raised to 648 m/650 m.

4.6    MSEB in its petition dated March 24, 2005 (on proposal for purchase of power from
       BHEP II) has stated that BHEP II is a 1 x 34 MW project. Also in the same petition
       MSEB has stated that at present the unit will have to be operated at 14 to 18 MW
       generating capacity.

4.7    GOMID has submitted in its letter dated 13th January, 2006 that at present Nilwande
       Dam is not constructed and with restricted discharge the power output in every month
       of the year would be 18781.44 kW.

4.8    Commission’s technical consultant in his report has stated that without Nilwande
       dam, BHEP II cannot be operated for peaking though pondage is available at Randha

4.9    GOMID has submitted that in Phase II the turbine output of BHEP II will be 37504
       kW in all the months of the year. The Commission’s technical consultant has stated
       that in this phase of development, with the re-regulation pondage available at
       Nilwande, it would be possible to operate BHEP II for peaking.

4.10   GOMID has submitted that the power output of BHEP II in phase III of the Nilwande
       Dam project would be varying between 26467 kW and 34580 kW in different months
       of the year. According to the Commission’s technical consultant, the peaking
       capability in this phase would reduce during periods of high tail water level when the
       water level in Nilwande is high and the head available for power generation falls
       below design head.

Energy generation at different heights of Nilwande Dam

4.11   The design energy at different phases is different as the increase in height of the dam
       will affect the storage level as well as the tail water level.

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4.12   GOMID has submitted that in phase I the design energy would be 33.35 MUs (the
       average of generation of past three years). In this phase the generation is the lowest.
       As per the analysis of the Commission’s technical consultant:


       Without Nilwande dam, BHEP II cannot be operated for peaking though Pondage is
       available at Randha weir. This constraint is in on account of the fact that there is no
       re-regulating pondage at the irrigation weir to even out pulsating peaking releases.
       Further, whenever releases available for power generation are less than 34 cum, the
       same cannot be utilized for power generation for BHEP II since this is the lower limit
       of turbine operation range. Accordingly in pre Nilwande phase, BHEP II will operate
       as run of the river project and the generation will depend on the irrigation discharges
       and there would be periods of power house closure on account the reasons beyond the
       control of the project operator.

       The annual energy potential of BHEP II in a 90% dependable could be taken as 34.1
       MU and the project would operate as ROR project with periods of shut down dictated
       by the irrigation requirements.


4.13   In phase II, the design energy proposed by GOMID is 49.65 MUs as against 43.4
       MUs as assessed by the Commission’s technical consultant. In this phase the
       generation is highest. As per the analysis of the Commission’s technical consultant:


       In this phase of development, with the re-regulation pondage available at Nilwande, it
       would be possible to operate BHEP II for peaking. The pre Nilwande constraint in
       operation of BHEP II during periods of flows lower than 34 cumec would no longer
       be applicable. Power generation would be possible even during the periods of release
       of less than 34 cumec, by utilizing the pondage available at Randha Weir. However,
       during the periods when no waters are to be released from Bhandardara, BHEP II
       would not be in a position to generate power. This situation is on account of the
       irrigation cycle and utilization of waters primarily for irrigation.

       The annual energy generation from BHEP II in post Nilwande (+613m) phase would
       be 43.4 MU. Peaking benefit to the extent of 34 MW would be available except
       during periods of no irrigation releases from Bhandaradara.


4.14   In phase III, the design energy proposed by GOMID is 42.04 MUs. The report of
       Commission’s technical consultant states the following


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       GOMWRD carried out integrated operation studies for Bhandaradara and Nilwande
       dams together and took into account the irrigation requirements downstream at
       Nilwande and Ozhar weir. These studies had considered the 90% dependable year
       inflows into Bhandardara reservoir as 292 MCM. The energy generation from BHEP
       II had been assessed taking into account the impact of higher tail water level on
       account of Nilwande. In these studies the power potential of BHEP II has been
       assessed as 40.78 MU for 90% dependable year (2000-01). In the studies, the initial
       water level in Bhandardara reservoir was taken as 714.3 m (42 MCM gross storage)
       and the final level at the end of the year was shown as 698 m (8 MCM gross storage).
       Thus there was an additional utilization of 34 MCM from the carry over storage. The
       energy assessments in the studies would need to be corrected for the additional
       utilization of carry over waters from previous year. The energy generation on account
       of this additional water is 4.52 MU (taking approx. 0.133 MU for 1 MCM of
       releases). If this correction is taken into account the 90% dependable potential for
       Bhandardara would be 36.26 MU.

       DLH has assessed the potential for this phase as 34.8 MU. Correcting for the
       efficiency 83% to 84.6%, the power potential would work out 35.4 MU. The
       difference between the two energy assessments could be on account of the difference
       in assumptions made by DLH. The tail water level in GOMWRD studies would be
       appropriate as they take into account the integrated operation of the all the
       developments in the river basin and also consider irrigation releases at Nilwande and

       In this phase (post Nilwande +648m) of development, as per GOMWRD studies, the
       energy generation would be possible for 263 days i.e. 72% of the time.


Basis of Tariff and its period
4.15   The extant Petition of MSEDCL for procurement of power from BHEP-II on long
       term basis will be governed by Regulation 24 of MERC (Terms and Conditions of
       Tariff Regulations) 2005 notified on 23rd August 2005. The relevant extract of the
       said Regulations is as under:

              24.1 Every agreement or arrangement for long-term power procurement by a
              Distribution Licensee from a Generating Company or Licensee or from other
              source of supply entered into after the date of notification of these Regulations
              shall come into effect only with the prior approval of the Commission:

4.16   Further, the Commission will have to not only determine Tariff in accordance with
       Terms and Conditions for Generation Tariff as stipulated under Part E of the Tariff
       Regulations but also verify its conformity with the long term procurement plan of the
       Utility. The long term plan of the Utility should include base load and peak load
       demand forecast.

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4.17   In this context, the Commission notes that MSEDCL has neither furnished its long
       term power procurement plan nor provided details of ‘peak load’ demand requirement
       for which it proposes to procure power from said project (BHEP-II) on long term

4.18   Further, as elaborated under earlier paragraphs, the nature of project is intended to
       change over the period as the height of Nilawande Dam is raised upto 613M and with
       that ‘design energy’ of the project would also undergo change. The re-regulation
       pondage would offer flexibility to exploit the full potential of the project upto its
       installed plant capacity thereby offering ‘capacity benefit’ (or peaking benefit).
       However, until that is achieved, the project would be constrained to be operated as
       ‘run of the river’ small capacity hydel generation project (14 MW to 18 MW) limited
       by water releases for irrigation cycle requirements.

4.19   The Commission has not received any definite time frame regarding completion of
       construction of Nilwande dam to the heights of 613 meters or 648 meters. The design
       energy of the project varies with height of the Nilwande dam. The time frame for
       building of the dam is uncertain and thus the design energy for future years is
       uncertain. Therefore, Commission is of the view that determination of tariff in
       accordance with the Tariff Regulations for a period of thirty years will involve
       significant assumptions on the parameters that are related to time frame for
       completion of various phases of Nilwande dam like projected energy generation and
       power output.

4.20   In view of above complexities associated with evolutionary project scheme,
       determination of tariff for long term (for period of say 30 years), as per MERC (terms
       and Conditions for Tariff) Regulations 2005, at this stage will not be appropriate. At
       the same time, the Commission notes that this is a unique case, where the project has
       been operating for past six years and has been generating energy approx 33 MU to 35
       MU with capacity generation of around 14 to 18 MW, similar to any other small hydel
       generation project. Thus, it is certain that, until height of Nilwande dam reaches 613
       M, the project can continue to generate at capacity of 14 MW to 18 MW, even though
       installed capacity of the project is 34 MW and energy generation shall be constrained
       by water releases to meet irrigation cycle requirements and cannot be regulated as per
       power generation requirement.

4.21   Recently, the Commission has issued an order on tariff for small hydro project of
       capacity less than 25 MW, where the Commission had taken a stand that a case-by-
       case evaluation of similar project can be avoided and a common tariff can be
       awarded. The Commission is of the opinion that the above approach can be applied to
       BHEP II under the following grounds:

       (a)    The Commission cannot set tariffs to recover the cost at which asset is being
              sold by one owner to another. In a regulated business, the asset valuation
              should follow the investor expectation guided by the tariff and regulatory
              regime, but the tariff cannot follow the sale price to keep up the investor’s
              expectation. Indeed, the market valuation of various companies changes
              everyday, but those values are not considered by the Commission in

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