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KARNATAKA POWER TRANSMISSION CORPORATION LIMITED
No: KPTCL: B-36: 6580: F: 2002-03: Corporate Office,
Encl: proposal in six sets Regulatory Affairs
along with Annexures 1st Floor, Kaveri Bhavan
Bangalore-560 009
Dated: 07-08-2003
The Secretary,
Karnataka Electricity Regulatory Commission,
6th, 7th Floor, Mahalaxmi Chambers,
M.G. Road, Bangalore-560001.
Sir,
Sub: Approval for enhancement of BST and retail supply Tariff consequent on allowing USD $ 0.04 towards fixed charges payable to Tannir Bhavi Power Company –reg.
I am submitting in six sets the proposal for enhancing the bulk supply and retail supply Tariff of FY-04, consequent to allowing the fixed charges at USD $ 0.04 payable to Tannir Bhavi power Company as per Arbitral Award, for kind consideration and approval of Hon’ble Commission.
Yours faithfully
Superintending Engineer Electrical
Regulatory Affairs & Computers
BEFORE THE KARNATAKA ELECTRICITY REGULATORY COMMISSION,
AT BANGALORE
IN THE MATTER OF TARIFF ORDER 2003
KARNATAKA POWER TRANSMISSION
CORPORATION LIMITED
Kaveri Bhavan, Bangalore – 9. ………APPLICANT
AFFDIVIT
APPLICATION FOR MODIFICATION OF TARIFF ORDER-2003 DATED 10.3.2003 UNDER SECTION 27 OF KARNATAKA ELECTRICITY REFORM ACT
1. I, B.S. Ramesh, S/o Late M.R. Somashekhara Rao, aged 56 years, residing at No.42, 1st Cross, GKW Layout, Vijay Nagar, Bangalore – 560 040, do solemnly affirm and say as follows:
2. I am the Superintending Engineer Electrical, Regulatory Affairs and Computers, KPTCL, Bangalore, duly authorised to make this Affidavit.
3. The statements made in paragraph 1 to 11 herein now shown to me and marked with the letter ‘A’ are true to my knowledge and the statements made in paragraph 1 to 11 are based on information I believe them to be true.
4. Solemnly affirmed at Bangalore on this day 07.08.2003 that the contents of the above Affidavit are true to my knowledge, no part of it is false and nothing material has been concealed therefrom.
B.S. Ramesh
Superintending Engineer Electrical
Regulatory Affairs & Computers,
KPTCL, Kaveri Bhavan,
Bangalore.
‘ A ‘
BEFORE KARNATAKA ELECTRICITY REGULATORY COMMISSION
AT BANGALORE
IN THE MATTER OF TARIFF ORDER 2003
KARNATAKA POWER TRANSMISSION
CORPORATION LIMITED
Kaveri Bhavan,
Bangalore – 9 ……….APPLICANT
APPLICATION FOR MODIFICATION OF TARIFF ORDER-2003 DATED 10.3.2003 UNDER SECTION 27 OF KARNATAKA ELECTRICITY REFORM ACT
Applicant above named states as follows:
1. M/s Tanir Bavi Power Company Private Limited (TBPCL) has entered into a Power Purchase Agreement on 16th July 1997 providing for payment of Fixed Charges and also Variable Charges for the electricity supplied. This was amended by two supplemental agreements dated 29th May 1999 and 30th September 1999.
2. A dispute arose between KPTCL and TBPCL regarding rate at which the fixed charges shall be paid. As per TBPCL, the fixed charges payable as per clause 7.3 of PPA is US $ 0.04 per Kwhr where as KPTCL differed from it.
3. The dispute came to be referred to the Government of Karnataka. The Government of Karnataka, after consulting the Advocate General, vide its letter dated 1st December 2001 directed KPTCL to pay the fixed charges at the rate of US $ 0.04 per Kwhr.
4. Consequent to the above letter, KPTCL filed a revised Expected Revenue From Charges for FY- 02 and FY- 03 and claimed the additional fixed charges payable to TBPCL to the tune of Rs. 121-79 Cr and Rs. 163-81 Cr for the FY-02 and FY-03 respectively.
5. The Hon’ble Commission held a hearing on 18th February 2002 only on the issue of rate of fixed charges payable to TBPCL. After hearing, the Commission (at page 123 of the tariff order 2002) passed the following order:
i) The additional fixed charges payable to TBPCL of Rs. 121.79 Crore in FY- 02 and Rs.163.81 Crore in FY-03 are disallowed for inclusion in the ERC for the respective years:
ii) KPTCL is directed not to take any further action on the claims of TBPCL without following the dispute resolution mechanisms included in the PPA.
6. As per the above order, KPTCL started admitting the bills of TBPCL excluding the disputed amount. Consequent to it, the Generating Company invoked the Escrow instrument and started realising the electricity charges inter-alia, the fixed charges at US $ 0.04 per Kwhr.
7. KPTCL approached the Karnataka Electricity Regulatory Commission to restrain the generating company from realising the disputed fixed charges till the dispute is decided by arbitration. The Hon’ble Commission, however, held that it has no powers to grant an injunction against the Company and its Escrow Agent. TBPCL thus kept realising its dues according to its own interpretation of the PPA relating to the fixed charges.
8. Pursuant to the directions of the Commission to follow the dispute resolution mechanism provided in the PPA, both KPTCL and TBPCL referred the dispute to an Arbitral Tribunal consisting of the Hon’ble Mr. Justice Y.V. Chandrachud, (Former Chief Justice of India), Hon’ble Mr. Justice S. Mohan, (Former Judge of the Supreme Court) and Hon’ble Mr. Justice G.N. Ray, (Former Judge of the Supreme Court). The Tribunal has passed the following Award on 19th May 2003.
- 3 -
i) The claimant is entitled to the fixed charge at the rate of US $ 0.04 per Kwh, for the electricity supplied by it to the respondent as per the terms of the Power Purchase Agreement dated 16.7.1997 and the subsequent amendments.
ii) The claimant is further entitled to the amount of Fixed Charges at Rs. 191.31 Crores together with interest at the rate of 24% per annum from the date of default to the date of payment.
iii] Each party shall bear its own costs of these Arbitral proceedings.
A copy of the Award is placed at Annexure-A
9. KPTCL is therefore, bound to pay fixed charges @ US $ 0.04 per Kwhr. Consequently, the additional burden on KPTCL for FY- 02 and FY- 03 is Rs. 113-50 Crore and 158-10 Crore respectively. For FY-04, the anticipated additional burden on KPTCL will be Rs. 147-34 Crore. The detailed calculation is placed at Annexure-B.
Annexure-C indicates the interest liability of Rs. 34.10 Cr.
10. This Hon’ble Commission has not allowed the above amounts to be included in the respective ERCs during the pendency of the arbitration proceedings. In the light of the Arbitral Award, the Commission may have to take note of its impact on KPTCL and consequently revise the tariff. The additional outgo on account of Power Purchase Cost is a pass through expenditure for KPTCL and should be recovered from the consumers.
11. The claims of KPTCL made in this application are without prejudice to its rights and contentions in the MFA No. 3456/2003 pending before the Hon’ble High Court of Karnataka against the Tariff order-2003.
Prayer
It is respectfully prayed that the Hon’ble Commission may be pleased to take note of the additional payment of Rs. 271.60 Cr received through Escrow by TBPCL for the Power supplied for the years FY-02 & FY-03 and projected additional expenditure of Rs. 147.34 Cr for FY-04 and an interest burden of Rs. 34.10 Cr totalling to Rs. 453.04 Cr and to enhance the bulk supply tariff and consequential retail tariff of FY-04 suitably in the interest of justice.
FOR KARNATAKA POWER TRANSMISSION
CORPORATION LIMITED
Superintending Engineer Electrical
Regulatory Affairs & Computers
ANNEXURE-A
BEFORE THE ARBITRAL TRIBUNAL
PRESENT
JUSTICE Y.V. CHANDRACHUD
(FORMER CHIEF JUSTICE OF INDIA)
JUSTICE S. MOHAN JUSTICE. G.N. RAY
(Former Judge supreme Court) (Former Judge supreme Court)
IN THE MATTER OF
Dispute relating to Fixed Charge
Between
Tanir Bavi Power Company Pvt Ltd (TBP)……………….. Claimant
And:
Karnataka Power Transmission
Corporation Ltd (KPTCL) ….…….. Respondent
AWARD
Per. G. Mohan J.
Pleadings:
1. M/s Tanir Bavi Power Company Pvt Limited, the claimant herein, is a company incorporated under the provisions of Companies Act, 1956 with the object of setting up Power Plants. (This Company will be referred to in our Award as “The Claimant”)
2. M/s Karnataka Power Transmission Corporation Limited is the Respondent, a Company incorporated under the companies Act of 1956. It is the successor of the Karnataka Electricity Board in terms of the provisions of Karnataka Electricity Reforms Act 1999. It is wholly owned and controlled by the State of Karnataka. Its responsibility is to generate, transmit and distribute electrical energy to the consumers of Karnataka. (it will be referred to as KPTCL).
3. In view of the acute power shortage faced by the State of Karnataka, a Notification was issued by Government of Karnataka on 8-12-1995 inviting Global Tenders / Bids for setting up Barge Mounted Power Plants of 150 MWs near Mangalore and one unit of 100 MWs at Kurta (This unit to be set up @ Kurta does not form part of the present controversy) which have short gestation period. Pursuant to the said notification, several bids were submitted. M/s. Smith Cogeneration International and Chicago Power Inc., submitted
a Joint Bid/Proposal for setting up two Barge Mounted Power Plants at Mangalore.
4 In the said notification it was stipulated that the electricity generated by the Power Plants shall be Purchased by the Karnataka Electricity Board, the predecessor-in-interest of the Respondent. The tender documents required the bidders to specify the tariff in two parts comprising of:
(i) Total Fixed Charge, and
(ii) Variable Charge.
In its bid, M/s. Smith Cogeneration International and Chicago PowerInc., quoted the following tariff per KWh at 85% load factor.
(i) Variable Charge Rs. 1.05
(ii) Dollar denominated US $ 0.04 (4 Cents) (Equivalent to
fixed charge Rs. 1.40 at the then prevailing rate
of 1 US$=Rs.35/- )
(iii) Other fixed charges Rs.0.175.
5. Bids were evaluated by a High Power Committee which recommended the award in favour of M/s. Smith Cogeneration International and Chicago Power Inc., Accepting the recommendation of the High Power Committee the Cabinet of Government of Karnataka accorded its approval in favour of
M/s. Smith Cogeneration International and Chicago Power Inc., to set up two Barge Mounted Power Plants at Mangalore. Thereafter, by Government Order dated 5th March, 1996 the said Company was called upon to set out the Barge Mounted Power Plants and enter into a Power Purchase Agreement (PPA) with Karnataka Electricity Board.
6. A Meeting of Karnataka Electricity Board was held on 15th September 1997. In the agenda prepared for the Board Meeting the tariff payable to M/s. Smith Cogeneration International and Chicago Power Inc., was stated as Rs.2.625 per KWhr comprising of the following components:-
(i) Variable charge : Rs.1.05
(ii) Dollar denominated : US $ 0.04 (4 cents)
fixed charge (equivalent to rs.1.40 at the then prevailing rate of 1 US $=Rs.35/-
(iii) Other fixed charges ; Rs.0.175
7. On 16.7 1997 the Power Purchase Agreement was approved and the same was signed between Karnataka electricity Board and the Claimant Company. By the same Government Order, the capacity of the Project was enhanced to 170 MW, and again the capacity of the Project was enhanced to 200 MW by order dated
10.11.1997. In view of the said enhancement, Karnataka electricity Board was directed by the Government to hold talks afresh on tariff negotiation with the Claimant Company. Subsequently, by Government Order dated 10.03.99 the capacity of the Project was enhanced to 220 MW. Consequent to this, there were negotiations concerning the tariff. The other fixed charges came to be reduced from Rs. 0.175 to Rs.0.145 per Kwh, in view of the enhancement in capacity to 220 MW. Thereupon to incorporate the same, on 15.12.1997 a Power Purchase Agreement was entered into between Karnataka Electricity Board and the Claimant setting out in detail the terms and conditions including the tariff payable.
8. As was required by the Power purchase Agreement, the Government of Karnataka Government Guarantee Undertaking to discharge the obligations and liabilities in the event of default on the part of the Karnataka Electricity Board.
Article 7 of power Purchase Agreement (PPA) dated 15.12.1997 provides for tariff payments.
Subsequent to the execution of Power Purchase Agreement, two Supplemental Agreements were entered into between the parties on 29th May, 1999 and 30th September, 1999 amending certain
Paragraphs of PPA. The Amended Articles 7.3 and 7.4 of the PPA run as follows:-
Article 7.3 (As amended)
Tariff: In consideration for the Electricity supplied by the company to the Board and Deemed Generation pursuant to section 7.6, the Board shall pay the company the Tariff payment. The monthly Tariff Payment shall equal the sum of the Monthly Total Fixed Charge Payment; Monthly variable Charge Payment and payments pursuant to supplemental invoices. The basis of Monthly Fixed Charges Payment and Monthly variable charge payment will be the individual tariff components as given in the following table.
Tariff Period / 1 / 2 / 3 / 4 / 5 / 6 / 7Variable Charge / In accordance with provisions of Section 6.5, 6.6 and 7.5 of this Agreement with a Tariff heat Rate of 2075 kcal./Kwh.
Total Fixed Charge / At 85% plant Load Factor
1. Fixed Charge (USD/Kwh)-Fc / .04 / .04 / .04 / .04 / .04 / .04 / .04
2. Other Fixed Charge (Rupee/Kwh)-Fo / 0.145, 0.145 plus escalation in accordance with Section 7.4
Article 7.4
Total Fixed Charge:
Total Fixed Charge for a Tariff Period is fixed price per Kwh of Electricity delivered and Deemed Generation, upto 85% PLF for the applicable Tariff Period, as set forth in tariff table of Section 7.3
The total Fixed Charge shall comprise of Dollar denominated Fixed Charge component expressed in USD per Kwh and a Rupee denominated other Fixed Charge component expressed in Rupee per Kwh. The dollar denominated fixed charges shall provide exchange rate protection.
(a) upto 16% Return on foreign Equity component and
(b) foreign debt service charges
The total equity component shall not exceed 30% of the project Cost. The Company shall be required to demonstrate that the Return on Equity and Debt Service component of the Dollar denominated Equity or dollar denominated Debt are paid to service the dollar denominated debt or dollar denominated equity invested in the project. The Fixed Charge shall be determined at the time of Financial closing and shall be subject to a ceiling of $ 0.04 per Kwh.
In case there is any balance in the Fixed Charge after meeting (a) and (b) above, the balance will be paid in Rupees for which there will be no foreign exchange protection.