Final Order 1807 of 2019 27.04.2020
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BEFORE THE GUJARAT ELECTRICITY REGULATORY COMMISSION GANDHINAGAR Petition No. 1807 of 2019 In the Matter of: Petition under Section 86 (1) (b) and (f) of the Electricity Act, 2003 read with Article 18.1 of the Power Purchase Agreement (PPA) dated 26-02-2007 under 1000 MW (Bid - 03), executed between GUVNL and EPGL for aPProval of amendments to the PPAs by way of SuPPlemental PPA dated 01-03-2019. Petitioner: Gujarat Urja Vikas Nigam Limited, RePresented by: Learned Advocate Shri Hemant Sahai, Advocate Shri Nitish GuPta, Shri Sanjay Mathur, Shri S.K. Nair and Shri K.N. Chudasama. Vs. Respondent No 1: Essar Power Gujarat Limited, RePresented by: Learned Advocate Shri Kunal Nanavati, Shri SandeeP Sahay, Shri Pankaj Nair, Advocate Ms. Pooja Rohan Shah. Respondent No. 2: Energy Watchdog RePresented by: Nobody was Present Respondent No. 3: Prayas (Energy GrouP) RePresented by: Nobody was Present Objector No. 1: Shri K.K. Bajaj RePresented by: Shri K.K.Bajaj Objector No. 2: Utility Users’ Welfare Association RePresented by: Shri Bharatkumar T. Gohil Objector No. 3: Jan Kalyan Foundation RePresented by: Nobody was Present Objector No. 4: Laghu Udyog Bharti, Gujarat RePresented by: Shri S.C. Bohra 1807 / 2019 Page 1 CORAM Shri Anand Kumar, Chairman Shri P.J. ThaKKar, Member Date: 27/04/2020 ORDER 1. The Present Petition is filed by the Petitioner Gujarat Urja Vikas Nigam Limited (GUVNL) under Sections 86 (1)(b) and 86(1)(f) of the Electricity Act, 2003 read with Article 18.1 of the Power Purchase Agreement (PPA) dated 26.02.2007 for 1000 MW (Bid-03) executed with Essar Power Gujarat Ltd. (EPGL) Praying for aPProval of amendments to the PPAs by way of SuPPlemental PPA dated 01.03.2019. 2. Facts mentioned in the petition are detailed below: 2.1. Petitioner is a Company incorporated under the Provisions of the Companies Act, 1956 and is engaged in activities of bulk Purchase and bulk suPPly of electricity and is a Licensee for the said activities under Provisions of the Electricity Act, 2003. 2.2. Respondent No.-1, EPGL is a Generating Company within the meaning of Section 2(28) of the Electricity Act, 2003 and has set uP a thermal Power generating Plant having total caPacity of 1200 MW (2 x 600 MW) located at Salaya, District Jamnagar, Gujarat. 2.3. Energy Watchdog and Prayas (Energy GrouP), are the consumer organizations and are Respondent No. 2 & 3 respectively. 2.4. The Petitioner had entered into a PPA with Respondent No.1 through competitive bidding Process under Bid No. 03 in accordance with the guidelines issued u/s 63 of 1807 / 2019 Page 2 the Electricity Act i.e. PPA dated 26.02.2007 for contracted caPacity of 1000 MW to be suPPlied from Units 1 and 2 of Salaya Power Plant, District Jamnagar, Gujarat. 2.5. The Present Petition is filed seeking aPProval for the ProPosed amendments to Bid-03 PPA through SuPPlemental PPA dated 01.03.2019 (SPPA) in terms of Article 18.1 of said PPA, Pursuant to the Govt. of Gujarat Policy Directive vide Government Resolution (GR) No. CGP-12-2018-166-K dated 01.12.2018 accePting the recommendations of High Power Committee RePort (hereinafter “HPC RePort”) as stated in the GR and the order of Hon’ble SuPreme Court dated 29.10.2018 in Miscellaneous ApPlication No. 2705-2706 of 2018 in CA No. 5399-5400 of 2016. Petitioner has submitted that this Commission has jurisdiction to aPProve the amendments to the PPAs as Provided under Section 86(1)(b) read with 86(1)(f) of the Electricity Act. The Petitioner had entered into seParate PPAs for Purchase of Power from (i) Tata-CGPL (ii) Adani-Mundra and (iii) Essar-Salaya Power Plants in 2007. It is Pertinent to note that three Projects contribute substantially to cater to the Power requirements of the State of Gujarat. 2.6. Subsequent to signing of PPAs, Indonesian Government on 23.09.2010 issued Regulation No. 17 of 2010 titled as “Procedures to Determine the Benchmark Price for Mineral and Coal Sales”. Government of Indonesia vide this Regulation mandated export of coal on benchmark Prices notified by Govt. of Indonesia. The detailed factual background leading up to the constitution of the HPC has been enumerated in ChaPter I of the HPC RePort. The facts leading to the Promulgation of the Indonesian Regulations and their impact on the Indian Power Projects, including the Mundra Power Project, have been enumerated in ChaPter II of the HPC RePort. The Generators i.e. the Tata-CGPL and Adani-Mundra had aPProached the CERC seeking relief to offset the adverse financial impact of the Indonesian Regulation. 2.7. The Respondent No. 1 has shut down its thermal Power Plant since Past 1 year and is not suPPlying electricity to the Petitioner. The matter with respect to the Tata-CGPL and Adani-Mundra travelled uP to the SuPreme Court and the Hon’ble SuPreme Court vide its Judgment dated 11.04.2017 in CA No. 5399-5400 of 2016 had decided that 1807 / 2019 Page 3 enactment of Indonesian Regulations did not constitute either a change in law event or Force Majeure, as contractually specified under the PPAs. The detailed chronology of the legal Proceedings leading to the aforesaid Energy Watchdog matter in the SuPreme Court, has been enumerated in ChaPter III of the HPC RePort. 2.8. Out of the aforesaid three imported coal-based Power Projects, Essar’s Salaya Power Plant had discontinued Power suPPly under the contracts whereas the other imported coal based Power Plants suPPlied less quantum citing the issue of non-viability and liquidity issues due to Indonesian Regulation. 2.9. The generators had made several rePresentations to the Government of Gujarat and the Petitioner that they are unable to sustain generation on a long-term basis to honour their obligations under the PPAs and requested for redressel of the issue. The brief of rePresentations received from generators is as follows: 2.10. Respondent No.1 addressed a letter to the Petitioner on 19.04.2017 and submitted that there will be no cash-flows available in the company due to under recovery in energy charges and requested for a long term viable solution to ensure sustainability of the company. Essar Power has shut down its Power Plant for around one year and is not suPPlying Power to GUVNL. Essar Power through its letter dated 09.06.2017 stating the difficulties being faced due to inadequate cash-flows, requested the Petitioner to take early aPProPriate decision so that oPerations of Essar Power can continue and consumers are not affected. Essar Power in the letter dated 09.06.2017 has stated that net-worth of Essar Power has been wiPed out and the debt has increased to Rs. 5062 crores due to losses incurred so far. Due to continued financial difficulties, Essar Power has shut down its Plant for over a year. 2.11. Coastal Gujarat Power Ltd. has in its letter dated 25.04.2017 addressed to the Petitioner stated that if urgent remedial measures are not taken, then, in spite of best efforts of CGPL/Tata Power it may be very difficult to continue the oPerations. It is matter of fact, that CGPL’s tariff even with addition of compensatory tariff (as was 1807 / 2019 Page 4 allowed by CERC) will be among the cheaPest Power available. CGPL has accumulated losses of Rs. 6,306 crores and 100% of the equity has been wiPed out. CGPL addressed another letter dated 07.06.2017 to the Petitioner to resolve the issue based on various ProPosals offered by CGPL. 2.12. Adani Power (Mundra) Ltd has vide its letter dated 16.04.2017 addressed to the Petitioner submitted a ProPosal to take over 51% of equity of Mundra Project (Units1 to 6) at value of Rs. 1 and Purchase Power from Mundra Project on cost Plus basis. It was further stated that, “Since the existing coal stock is at critical level, adequate for only 7-10 days of oPeration, and the Financial Institutions are not willing to extend any further suPPort, we request GUVNL to Procure coal and suPPly to APL and APL will suPPly Power utilizing such coal and will charge only caPacity charges as Per PPA so that oPerations of Mundra Project is continued.” APML has addressed various letters to the Petitioner dated 21.04.2017, 06.05.2017, 12.05.2017 and 25.05.2017 to have early resolution and decision on the ProPosals offered by it, in light of the severe Power shortage issues. 3. Efforts made by the State for resolution of the issues: 3.1. Subsequent to rePresentations made by Imported Coal based Project DeveloPers, Government of Gujarat, on 20.04.2017, had written a letter to Ministry of Power, Government of India as follows, “since the matter is of urgent nature and impacting suPPly of Power to various states, your kind intervention at the earliest is solicited for resolving the issue by arranging a meeting of all the stakeholders, at your convenience.” Therefore, the State of Gujarat sought for intervention of the Central Government to resolve the crisis. A request was made to the Ministry of Power, Govt. of India to call for a meeting of all the stakeholders. 3.2. In view of the above, on 20.06.2017, a meeting was held at New Delhi by the Ministry of Power, Union of India of all stakeholders including the rePresentatives from the State Governments of Gujarat, Maharashtra, Punjab, Haryana, Rajasthan, rePresentatives 1807 / 2019 Page 5 from various Banks and Financial Institutions (PFC & REC) and rePresentatives from generating companies for resolution of the issues being faced by Imported coal based Power Plants.