17_Order_dt_10_04_2006_CN_01 of 200500008 by keralaguest



Technical Validation Session: Record of Proceedings
DATE OF HEARING: 10 th May, 2005

CASE NO.                 : 1 0f 2005

 MATTER                  : Procurement of power by MSEB from Bhandardara Hydro
                         electric Project (Phase II)

7.1     The list of participants in the public hearing were as follows:

Participants who attended the Technical Validation Session held on 10 th May, 2005 at Vista
Hall of World Trade Centre are as follows:

Sr No               Name                        Designation               Organisation

 1.     R K Shardul                      Manager                     Crisil
 2.     Deshpande K S                    Chairman                    Sne s Hydel Pvt Ltd
 3.     V M Kulkarni                     Dy Secretary                GoM
 4.     A A Inamdar                      Dy Engg                     Gom WRD
 5.     Anant D Sant                     Sect Engr                   Gom WRD
 6.     Raman N Lunawat                  Manager                     SHPL
 7.     S L Sahare                       CE (CP)                     MSEB
 8.     L N Ambekar                      EE (G)                      MSEB
 9.     S A Nikalje                      Sub Eng (G)                 MSEB
 10.    P N Holkar                       Sect Engr                   Gom WRD
 11.    Hari Natarajan                   Dy Manager                  REL
 12.    Rasike Gokhale                   Sr Officer                  REL
 13.    S P Nathan                                                   REDAM
 14.    Gaurav Joshi                     Counsel for MSEB            Little & Co
 15.    Alpana Dhake                     Advocate                    Little & Co
 16.    K S Jayaprakash                  Exe Eng                     MSEB
 17.    Prashant Pansikar                Comm Off                    DLHPPL
 18.    Shyam Vaidya                     MD                          DLHPPL
 19.    Prem Paunikar                    Director                    DLHPPL
 20.    Balraj Varma                     VP                          DLHPPL
 21.    Uday Samant                      Director                    DLHPPL
 22.    M N Ramachandra                  ED                          VHPL
 23.    Bhavin Sheth                     VP                          VHPL
 24.    M R Dharsakar                    Supdt                       BEST
 25.    Shantanu Dixit                                               Prayas
 26.    B K Bhojani                      Asst Eng                    Gom WRD

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Sr No                Name                         Designation              Organisation

 27.    P S Pandya                        Sr Consultant                REL
 28.    Subhash Gupta                     Dy EE                        MSEB
 29.    Anupam Ray                        Consultant                   PwC
 30.    Tushar Sud                        Consultant                   PwC
 31.    Sambit Basu                       Consultant                   PwC
 32.    Muddar                            Jt. Secretary                ID
 33.    Pathak                            SE                           ID
 34.    Datar                             EE                           ID
 35.    Vyas                              AE                           ID
 36.    J D Kulkarni                      AGM                          TPC
 37.    P K Anvekar                                                    TPC
 38.    A Gondhalekar                                                  TPC
 39.    Prashant Mehera                                                CMW
 40. Ramesh Pawar                         Chairman Energy              Committee

7.2     Number of issues was raised regarding the bidding process for this project and its
        consequence on the tariff. GOMID has allocated this project to M/S Dodson-
        Lindblom Hydro Power Pvt Ltd at a cost of Rs 60 crores upfront payment and annual
        payment as per the schedule provided in the bidding document. Initially the other
        respondents felt that this amount was taken by GOMID in order to construct the
        Nilwande dam, which essentially is an irrigation project. GOMID clarified that the
        amount stated as base charge was the depreciated cost of initial investment. The
        participants in the hearing requested GOMID to provide the details of initial cost
        calculations. GOMID agreed to provide the details.

7.3     GOMID also stated that the reserved price of the project has nothing to do with
        irrigation and is purely for power project. The project was offered to MSEB on lease
        rent but they refused. Thereafter it was put up on bid.

7.4     It was stated that the project has been built as a peaking station for life but at present it
        is being operated as a base load station. The Chairman enquired about the total time
        period expected, for it to be operated as a peaking station. It was replied that in a
        year’s time the project would be operated a peaking station.

7.5     The Chairman enquired MSEB on their preference about choice of front loaded or
        back loaded tariff. Mr Sahare (CE CP) of MSEB did not opt for any option and
        submitted that the Commission may take a view on the matter.

7.6     Member MERC stated that today’s environment calls for clear demarcation of
        expenses between irrigation and power.

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7.7    One of the objectors stated that it is unfair to expect that the entire cost purchase of
       the project shall be a pass through. The objector questioned that whether the entire
       cost would be a pass through even if this project would have been sold at a very high
       cost say Rs 500 Crores instead of Rs 92 Crores. Representative of M/S Dodson
       Lindblom stated that a threshold level was fixed in the bidding so that no one
       undercuts this value. The representative of GOMID informed that the two options of
       price in the Bid Document was set taking into account the depreciated value of the
       assets and also stated that the amount quoted by the winning bidder is not very high
       from the minimum price set in the Bid Document. Thus the bidding process in this
       case is not adding much to the final feed in tariff.

7.8    It was noted in the meeting that the tariff petition on Bhandardara Hydro Electric
       project was submitted by MSEB against a general convention of submission of such
       petitions by the generators itself. The Chairman also stated that the MSEB proposal is

7.9    M/S Dodson-Lindblom Hydro Power Pvt Ltd explained that at present the generating
       station is being run as a base load station. However as soon as the height of the
       Nilwande dam reaches 610/ 613 meters it will be in a position to operate as a peaking
       station. The developers also stated that after the height of the dam is increased further
       to 648 meters, at times due to backwater, the generating station will not be in a
       position to generate electricity and therefore the total energy generation will reduce.
       GOMID officials, although agreed to the issue of backwater, did not agree to the point
       of view of the developer that the energy generated will reduce when the height of the
       dam reaches 648 meters.

7.10   Crisil Infrastructure Advisory had submitted on behalf of MSEB that the capital cost
       of the project was Rs 322.70 Crore over a period of 30 years and additional Rs 16.8
       crore was to be incurred for completion of project. The per MW cost worked out to be
       Rs 9.96 crore/MW, which was on higher side. The participants did not agree to the
       basis of computation of capital cost on aggregate basis and argued that the net present
       value of the investment be considered for the capital cost.

7.11   MSEB opined that the possibility of pegging the cost of power at avoided cost may be
       explored. The Commission advised the licensee to provide their views on
       methodology of calculating avoided cost.

7.12   One of the objectors also expressed its doubt on the irrigation department’s
       methodology of allocation of expenses between activities related to irrigation and
       those related to power. CEA’s methodology of apportionment was referred to in this
       case. Representative of Prayas stated that this high cost of project actually a
       revaluation of the project cost which is similar to that of revaluation of the assets in
       Orissa. Chairman pointed out that this can not be considered as revaluation of assets
       and is rather a value addition.

7.13   Mr Kulkarni sought explanation from M/S Dodson-Lindblom Hydro Power Pvt Ltd
       regarding the necessity of spending Rs 10 Crores on the project as repair and
       upgradation cost.

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7.14   Prayas also requested for the feasibility report on Bhandardara project as prepared by
       GOMID. They also stated that if avoided cost method is proposed to be used for
       determination of tariff then a discussion paper on the subject should be circulated.

7.15   PwC enquired whether the bid document is available for study. They also enquired the
       basis of arriving at the renovation expenses of Rs 50 lakhs and 100 lakhs for 11th and
       21 st year respectively.

7.16   It was stated that the following documents are required to be submitted

       (a)    Copy of the bidding document,

       (b)    Working of the tariff,

       (c)    Basis of arriving at the value of Rs 92 Crores and

       (d)    Details of the depreciated cost as worked out by GOMID.

7.17   The Chairman enquired about time period by which the documents can be submitted.
       It was agreed upon that the documents would be submitted within a period of one

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