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BEFORE THE HARYANA ELECTRICITY REGULATORY COMMISSION BAYS No. 33-36, SECTOR-4, PANCHKULA- 134112, HARYANA

Case No. HERC/PRO-45 of 2018

Date of Hearing : 18.12.2018

Date of Order : 03.01.2019

IN THE MATTER OF

Application under section 86(1) (b) of the Electricity Act, 2003 in HERC for source

approval and signing of PPA for procurement of 49.8 MW power from paddy straw

biomass based power projects through RFP floated and selected by HAREDA in districts

namely Krukshetra, Jind, Kaithal and Fatehabad.

Petitioner

Haryana Power Purchase Centre, Panchkula (HPPC)

Respondents

1. Director, HAREDA, Sector-17, Panchkula.

2. M/s Hind Samachar Ltd., Civil Lines, Jalandhar.

3. M/s Jind Bio-Energy LLP, Srikakulam, Andhra Pradesh.

4. M/s Sukhbir Agro Energy Ltd., Green Park Main, New Delhi.

5. M/s Fatehabad Bio-Energy, LLP, Srikakulam, Andhra Pradesh.

Present On behalf of the Petitioner

1. Shri Randeep Singh, SE, HPPC.

2. Shri Rajiv Mishra, Xen, HPPC.

3. Shri Randhir Singh, AEE, HPPC.

Present On behalf of the Respondent

1. Shri J.S. Kohli, T.E., HAREDA.

2. Shri P.K. Nautiyal, Scientific Engineer-A, HAREDA.

3. Shri Praveen Sharma, Advocate for M/s. Hind Samachar and M/s.

Sukhbir Agro Energy.

4. Shri S. Sanapala, Representative for M/s. Jind Bio-Energy and M/s.

Fatehabad Bio-Energy.

QUORUM Shri Jagjeet Singh, Chairman Shri Pravindra Singh Chauhan, Member

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ORDER

Brief Background of the Case 1. The petition has been filled by HPPC, vide memo no. Ch-78/CE/HPPC/SE/C&R-I/PPA-145

dated 04.10.2018. The petitioner has submitted as under:-

a) That the Petitioner, Haryana Power Purchase Centre (hereinafter referred to as ‘HPPC’)

represents the Distribution Licensees i.e. Uttar Haryana Bijli Vitran Nigam Limited and

Dakshin Haryana Bijli Vitran Nigam Limited (hereinafter collectively referred to as

‘Discoms’).

b) That Haryana Power Purchase Centre has been undertaking the instant power procurement

for fulfilling the non-solar RPO target set by the Commission for the Discoms.

c) That the nodal agency for promition of renewable energy in Haryana i.e. HAREDA forwarded

the draft RfP for procurement of 50 MW paddy straw based power projects and requested to

provide the draft model PPA. Accordingly, HPPC forwarded the draft model PPA with the

remarks that the said documents be got approved by the HERC before floating the same and

HPPC requested HAREDA to provide the financial assistance in view of high cost of power

procurement from such projects.

d) That on the matter of financial assistance, HAREDA on dated 03.07.201,7 intimated as under:

“the State Govt. has considered the proposal of the Department of New & Renewable Energy

Haryana to provide financial assistance to HPPC for purchase of power from Haryana based

power projects on the basis of difference between the present cost of Biomass Power and the

prevalent APPC + REC cost. The annual budget requirement for a capacity of about 50 MW

will be approximately Rs. 115 Crore for 25 years or for the plant life period”.

e) That HAREDA filed the petition in HERC for seeking approval of the Commission for inviting

bids for paddy straw based power projects in Haryana, in public interest, as per orders of

Hon’ble National Green Tribunal. The Commission considered as a special dispensation given

the fact that environmental issues arising from burning of paddy stubble is creating health

hazard in the State and NCR. Hence, the Commission approves the draft RfP document for

inviting bids for Paddy Straw based power projects in Haryana, with the benchmark tariff

being the generic tariff determined by CERC/HERC. Use of any other biomass/fossil fuel etc.

shall not be allowed.

f) That HAREDA floated the RfP for setting up paddy straw biomass based power projects on

build, own and operate (BOO) bases in the State of Haryana with the approval of Govt. of

Haryana and HERC. The bidders were asked to offer discount on the CERC tariff of Rs. 8.0 per

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unit for FY 2017-18. The selection of the bidders for procurement of power from the projects

under this bidding process will be on the basis of discount offered on the tariff

approved/notified for the same by HERC. The tariff after discount will be fixed for the term of

the PPA. HAREDA finalized the bidders in 4 districts namely Kurukshetra, Jind, Kaithal and

Fatehabad.

g) That HAREDA intimated that after evaluation, the complete matter was placed before the

High Powered Committee (HPC) headed by the Chief Secretary, Govt. of Haryana in

accordance with the State RE Policy 2005 in its meeting held on 11.01.2018. The High

Powered Committee decided allotment of the projects as per details given below:-

h) That all the four project developers have signed MOUs with HAREDA for implementation of

the projects.

i) That HAREDA issued the Letters of Intent (LOIs) to all the above firms after approval of DPRs

and forwarded the same to HPPC with the request to enter into PPA and intimated that:-

“The recommendations of the Standing Technical Committee (STC) and the Technical

Appraisal Committee (TAC) meeting were placed before the High Powered Committee (HPC)

headed by the Chief Secretary, Haryana in accordance with Clause No. 20.4 of the State RE

Policy 2005 in its meeting held on 11.01.2018. In the meeting of HPC, following decisions

were taken for allotment.

a. For district Kurukshetra project of 15 MW be allocated to M/s The Hind Samachar Ltd. at

a discount Rs. 0.73 per unit.

b. For district Jind, project of 9.9 MW be allocated to M/s Sri Jyoti Renewable Energy P. Ltd

at a discount of Rs. 0.71 per unit.

c. For district Kaithal, project of 15 MW be allocated to M/s Sukhbir Agro Energy Ltd. at a

discount of Rs. 0.71 per unit.

d. For district Fatehabad, project of 9.9 MW be allocated to Srinivas Snapla at a discount of

Rs. 0.71 per unit.

Thereafter, Letters of Intent (LoIs) were issued to the IPPs mentioned at Sr. No. a, b, c and d

above on 16.02.2018. Consequently, M/s Sri Jyoti Renewable Energy P. Ltd. requested for

implementation of the project at Jind through its SPV namely M/s Jind Bio-Energy LLP,

Srikakulam (A.P.) which was allowed by the competent authority as implementation of the

project through SPV was allowed if the SPV was formed before signing of MOU. Srinivas

Sanapla also requested for implementation of the project at Fatehabad through its SPV

District Company Name Proposed Capacity

Discount offered on CERC tariff of Rs. 8.0 per unit for 2017-18

(Rs./kwh)

Final Revised Discount Offered

(Rs./kwh)

Effective tariff after final discount

Rs./KwH

Kurukshetra M/s The Hind Samachar Ltd.

15.0 MW 0.66 0.73 7.27

Jind M/s Sri Jyoti Renewable Energy P. Ltd.

9.9 MW 0.30 0.71 7.29

Kaithal M/s Sukhbir Agro Energy Ltd.

15.0 MW 0.70 0.71 7.29

Fatehabad M/s Srinivas Snapla 9.9 MW 0.51 0.71 7.29

Total 49.8 MW

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namely M/s Fatehabad Bio-Energy LLP, Srikakulam (A.P.) which was also allowed. The

HPPC and the HERC were informed accordingly.”

j) That on the matter of providing financial assistance to HPPC, HPPC conveyed the decision of

44th SCPP meeting to HAREDA as under:-

“HPPC had conveyed that the Steering Committee for Power Planning (SCPP )in its 44th

meeting held on 02.02.2018 has taken up Policy decision that Discoms shall make the

payment for the subject cited projects at Average Power Purchase Price Cost (APPC) and the

differential cost. If any, shall be borne by the govt. of Haryana/HAREDA or the

Department/Agency concerned.”

k) That HAREDA has taken up this matter with Govt. of Haryana and conveyed the decision of

GOH to HPPC as under:

“The matter regarding meeting the expenditure involved in purchase of power from

biomass/bagasse/bio-waste based projects due to difference in Average Power Purchase

Price Cost (APPC) and the discovered tariff/ the tariff fixed by the HERC was submitted to

the State Govt. with the proposal the Power Utilities may be advised to include this amount

in their ARR and load the expenditure on the bills of the electricity consumers and in case the

HERC declines to include it in the ARR, the State Govt. may bear the burden in order to

encourage biomass/RE power projects in the State so that the decisions taken by the State

Govt./Hon’ble C.M./PPAs may be honored.

The comments of the Power Department on the said proposal were also obtained and after

considering the same, the Govt. has approved the proposal of the New & Renewable Energy

Department to include the amount required for purchase of RE power from

biomass/bagasse/bio-waste based projects in their ARR and load the expenditure on the

bills of the electricity consumers and in case the HERC declines to include it in the ARR, the

State Govt. may bear the burden in order to encourage biomass/RE power projects in the

State so that the decisions taken by the State Govt./Hon’ble C.M./PPAs may be honored.”

l) That the Additional Chief Secretary/ Power, GoH, has accorded the approval to file the

petition in HERC for source approval, and signing of PPA with developers.

m) That in view of the above the petitioner has prayed as under:-

a) For source approval and signing of PPA with the developers (M/s Hind Samachar Ltd.-15

MW, District Kurukshetra, M/s Jind Bio-Energy LLP- 9.9 MW, District Jind, M/s Sukhbir

Agro Energy Ltd – 15 MW, District Kaithal and M/s Fatehabad Bio-Energy (LLP), - 9.9

MW, District Fatehabad) for procurement of 49.8 MW power from paddy straw biomass

based power projects @ tariff finalized by the High Powered Committee of GoH for the

term of the PPA through RFP floated and selected by HAREDA.

b) Providing of financial assistance to DISCOMs as decided by Govt. of Haryana in its order

dated 03.07.2017

c) Pass such further order or order(s) as may be deemed necessary and fit in the

circumstances of the case.

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Proceedings in the Case

2. The case was heard on 18.12.2018, wherein HAREDA submitted its written submissions, vide

memo no. DNRE/HAREDA/2018/4002 dated 17.12.2018. HAREDA has submitted as under:-

a) That the Respondent No. 1 i.e. Director, Haryana Renewable Energy Development

Agency (hereinafter referred to as 'HAREDA'). having its registered office at Akshay

Urja Bhawan, Panchkula. Institutional Plot no. 1 Sector-17, Panckula-134109, is the

State Nodal Agency for coordinating all activities relating to Renewable Energy

Development including generation of power using non-conventional energy sources

as per the Haryana Govt. Policy for Promoting Generation of Electricity through

Renewable Energy Sources Notified vide no. 22/69/2005-5P dated 23.11.2005. It is

also responsible for laying down the procedure for inviting proposals from

independent power producers : DPR preparation, evaluation of project proposals,

project approvals and project progress monitoring etc.

b) That the Commission is aware of the environmental issues arising from the burning of

paddy straw/wheat stubble in fields. It is further submitted that Hon'ble NGT, in its

order pronounced on 10.12.2015 in the matter of Vikrant Kumar Tongad, V/s Union of

India and States (application no. 118 of 2013) has directed all the State Governments

to promote crop residue as a raw material for power generation as one of the options

at point no. 14 (b) of the judgment. The State Governments have also been directed to

evolve mechanism for collection of crop residue, its transportation and utilization for

appropriate purposes.

c) That the Haryana Government has decided to promote paddy straw based power projects

on pilot basis in the State, A decision in this regard was taken in a meeting held on 13

05.2016 under the Chairmanship of Hontle Chief Minister, Haryana.

Para wise reply of the Respondent No. 1 i.e. HAREDA to the application filed by the

petitioner i.e. Haryana Power Purchase Centre (HPPC) is as under:-

a) The contents of Para 1 to 9 are a matter of record and all necessary documents in this

regard have already been submitted to the Commission vide Ref. No. 786 dated

18.05.2018

b) The contents of Para 10 is a matter of record.

c) The contents of Para 11 is a matter of record and the decisions of the Government on

procurement of Renewable Energy (RE) Power from biomass/bagasse/bio waste based

projects was conveyed to the Petitioner i.e. HPPC vide Endst. No. 2430-35 dated

26.07.2018 which reads as under:-

”The matter regarding meeting the expenditure involved in purchase of power from

biomassibagasseibio-waste based projects due to difference in Average Power Purchase

Price Cost (APPC) and the discovered tariff/ the tariff fixed by the HERO, was submitted to

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the State Govt. with the proposal the Power Utilities may be advised to include this amount

in their ARR and load the expenditure on the bills of the electricity consumers and in case the

HERC declines to include it in the ARR. the State Govt. may bear the burden in order to

encourage biomass/RE power projects in the State so that the decisions taken by the State

Govt./Honlble C.M./PPAs may be honored.

The comments of the Power Department on the said proposal were also obtained and after

considering the same, the Govt. has approved the proposal of the New & Renewable Energy

Department to include the amount required for purchase of RE power from

biomassibagasseibio-waste based projects in their ARR and load the expenditure on the bills

of the electricity consumers and in case the HERO declines to include it in the ARR, the State

Govt. may bear the burden in order to encourage biomass/RE power projects in the State so

that the decisions taken by the State Govt./Hon'ble C.M./PPAs may be honored."

d) That as the time allowed for the completion of project is 18 months from the date of

signing of PPA as per Clause No. 8 of the Memorandum of Understanding (MoU) signed

with the project developers, signing of PPAs at the earliest is of vital importance for early

commissioning of the projects.

e) Further, keeping in view the fact that the issue of paddy straw burning is being regularly

monitored by the Hon'ble NGT due to incessant pollution in the NCR region due to straw

burning, there is a need to address this issue on priority to facilitate commissioning of the

paddy straw based projects at the earliest possible.

f) In view of the above, it is prayed as under:-

i) Hon’ble Commission may accord source approval and signing of PPAs with the project

developers at the tariff finalized by the High Powered Committee of Govt. of Haryana

for the term of the PPA through RfP floated and selected by HAREDA.

ii) In line with the decisions of the State Govt. as conveyed vide Endst. No. 2430-35 dated

26.07.2018, the additional amount required to meet the difference in Average Power

Purchase Cost (APPC) and the discovered tariff/the tariff fixed by the HERC may be

allowed to be included in the Annual Revenue Requirement (ARR) of the licensees.

Scientifict for Director, HAREDA, Panchkula.

3. The petitioner i.e. HPPC mainly reiterated the contents of its petition, which for the sake of

brevity, is not being reproduced here.

4. Shri Praveen Sharma, Ld. Advocate, for Respondent No. 2 & 4, argued that the tariff may be

re-fixed taking into consideration the Regulations on Renewable Energy (Haryana Electricity

Regulatory Commission (Terms and Conditions for determination of Tariff from Renewable

Energy Sources, Renewable Purchase Obligation and Renewable Energy Certificate)

Regulations, 2017), framed by the Commission, subsequent to the bidding. The Ld. Advocate

vehemently argued that although the ibid Regulations provide must run status to the

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Biomass projects below 10 MW capacity, but, as a special dispensation given the fact that

environmental issues arising from burning of paddy stubble is creating health hazard in the

State and NCR, the project may be granted “must-run” status for the financial viability of the

project. It has been submitted that if such plants are subjected to backing down on merit

order then not only the viability of such project shall be in jeopardy but will also defeat the

basic objective of utilization of paddy straw being burnt by the farmers leading to

environmental issues.

5. Shri S. Sanapala, Representative for Respondent No. 3 & 5, submitted that the Commission

may take a fair view in the matter as deemed appropriate by the Hon’ble Commission so that

the projects take off and meets the objectives and concerns of the National Green Tribunal

and the Haryana Government.

6. While controverting the aforesaid submissions raised on behalf of the generators/private

respondents, the representative of the petitioner urged that the prayer made on behalf of the

respondents cannot be acknowledged by this Hon’ble Commission since no such petition has

been filed by any party. Moreover, the tariff has been agreed between the parties and an

enforceable agreement has come into being upon issuance of Letter of Intent (LoI) and

acceptance thereof by the generators. The said acceptance having created a binding

enforceable obligations interse between the parties, there can be no change in the agreed

contractual terms at the unilateral asking of a singular party. The tariff is an essential term

of the contract and a contractual agreement can be novated only by consensus of the

signatory parties of the contract. The petitioner not agreeing to any novation in the essential

terms of the contract, the Hon’ble Commission cannot elect to substitute the consensual acts

of the contracting parties by will of its own, more so, when any such substitution has a far

reaching financial implications and increased financial burden on the consumers.

Agreeing to any such demand would compromise larger public interest in order to secure

windfall gain for the generators who had voluntarily, consciously and willingly agreed to a

particular tariff as the ceiling limit.

Commission’s Analysis and Order

7. The Commission heard the arguments of both the parties as well as perused the

petition/reply filed in the matter. The Commission finds merit in the submissions of the

parties that addressing the environmental menace created by burning of paddy stubble is of

paramount importance. Considering this, the Commission had approved the draft RfP

document for inviting bids for Paddy Straw based power projects in Haryana, with the

benchmark tariff being the generic tariff determined by CERC/HERC, vide its letter no.

1338/HERC/Tariff dated 20.07.2017. Bidders were not allowed the use of any other

biomass/fossil fuel etc.

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8. The Commission observes that RfP was floated by HAREDA, as per the bid documents

approved by the Commission and successful bidders were selected on the basis of

discussions in the meeting of High Powered Committee (HPC) held on 11.01.2018 under the

Chairmanship of Sh. D.S. Dhesi, Chief Secretary, Haryana for allotment of Paddy Straw based

biomass power projects in Haryana, wherein it was decided as under:-

“PSNRE further informed the Committee that in this bidding process, the bidders were asked

to offer maximum discount on the annual generic tariff of HERC/CERC of the year 2017-18

which shall be considered as ceiling tariff to arrive at the lowest tariff. In case, the

generic tariff for paddy straw based projects is not issued by HERC seven days prior to the

last date of submission of bids then the generic tariff notified by the CERC for paddy straw

based power projects for Haryana State shall be taken as the ceiling tariff and the discount

is to be offered on this tariff only. As the CERC has also fixed two type of tariffs for paddy

straw based power projects depending upon the boilder; the firms were asked to offer the

discount on the lowest applicable tariff of Rs. 8.00 per unit. The matter of discount offered by

the bidders was discussed by the Committee in detail and the committee was apprised that

the issue of factoring the discount in the applicable tariff will be decided by the HERC

for which a petition will be filed for fixation of tariff.” (emphasis added)

9. In accordance with the discussions in the meeting of High Powered Committee (HPC) held on

11.01.2018, the Letter of Intent (LoI) were issued to the successful bidders.

10. In view of the approval already accorded to the bid documents the Commission, under

Section 86(1)(b) of the Electricity Act, 2003, approves the proposed sources from which

power shall be procured by the HPPC / Discoms through power purchase agreement(s)

approved by the Commission. Tariff shall be decided on the separate petition to be filed by

Generators under section 62 of the Electricity Act, 2003, wherein the ceiling tariff shall be

annual generic tariff of HERC of the year 2017-18 with appropriate factoring of the discount

negotiated with the bidders. The tariff petition shall include DPR approved by HAREDA and

all other relevant documents to arrive at the reasonable capital cost and all other tariff

components.

11. Having approved the source of power procurement the Commission has perused the draft

PPA(s) submitted by the petitioner as well as submissions made by the parties in the hearing

held on 18.12.2018 in the matter. The Commission observes as under:-

i) The Ld. Advocate appearing for M/s. Hind Samachar and M/s. Sukhbir Agro Energy

argued at length that such projects ought to be accorded ‘must run status’ by relaxing

any regulations in vogue to the contrary. The Commission has considered the

submissions of the Ld. Counsel on this issue and observes that the RE Regulations in

vogue provides for ‘must run status’ to RE Power Plants below 10 MW only. However,

given the fact that neither intra-state ABT has been introduced in Haryana nor any

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Regulations including the Haryana Grid Code in vogue provides for deviation / energy

settlement for intra-state RE Power Plants with single part tariff, moreover, the RE

Projects, including paddy straw based, are being encouraged in the State in fulfillment of

RPO of the Discoms as well as to encourage green power due to environmental concerns,

the Commission, in exercise of power vested in it under regulation 65 of the Haryana

Electricity Regulatory Commission (Terms and Conditions for determination of Tariff

from Renewable Energy Sources, Renewable Purchase Obligation and Renewable Energy

Certificate) Regulations, 2017 and in public interest relaxes the provisions of regulation

10 of the ibid regulations. Hence, all such power projects shall have ‘must run status’. It

is added that for accounting purposes the SLDC shall maintain the requisite records of

actual energy generated and injected by the RE Power projects into the Grid.

ii) The Commission has perused the draft PPAs for four paddy straw based power projects

submitted for its approval. The Commission has noticed a few aberrations in the same as

under:-

a) The definition of Tariff needs to be changed to read that the tariff payable to the IPP shall

be the year to year tariff determined by the Commission w.r.t. CoD of the project and the

discount offered by the IPPs as part of the RFP shall be deducted from the year to year

tariff determined by the Commission.

It needs to be noted that the tariff payable has to be necessarily be the tariff determined

by the Commission under section 62 or adopted by the Commission under section 63 of

the Electricity Act, 2003. Hence, the issue of financial assistance by HAREDA / State

Govtt. , if any, between the year to year tariff determined by the Commission and Average

Power Purchase Cost (APPC) is an issue between HPPC / Discoms and HAREDA / State

Govtt. and no intervention of this Commission is required. However, if any such financial

assistance is received by the HPPC / Discoms the same shall be reckoned with while

arriving / claiming power purchase cost of such projects in the ARR(s) of the Discoms.

b) Given the fact that the fuel i.e. paddy straw is available only for a few months and thereby

requiring the IPPs to lock in working capital upfront, the due date for payment in respect

of tariff invoice raised by the paddy straw based power project developers shall be the

30th day from the next day of the receipt of tariff invoice by the HPPC / Discoms. In such

cases the 1% rebate shall be admissible to the Discoms / HPPC and 2% rebate shall be

applicable in case the energy bills of the seller are made on presentation.

c) Clause 6.10 regarding payment for infirm power needs to be deleted as the tariff payable

shall be the year to year generic tariff, hence, the concept of infirm power less fuel cost to

be reckoned for reduction of capital cost is not applicable in such cases. Hence, entire

energy injected after synchronization of the power plant and injected into the Grid has to

be paid for at the applicable tariff.

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d) Clause 10.6 regarding penalty for delay in CoD needs to be qualified that the delay caused

is attributable to the project developer and not beyond its reasonable control or

attributable to force majeure events.

e) Clause 18.17 (Renewable Energy Certificate) needs to be reworded as – The renewable

energy certificate (REC) as defined in the CERC / HERC Regulations shall not accrue to

and/or claimed by the paddy straw based power project developer, under these

agreement, for the power generated and supplied to HPPC / Discoms and the same shall

be counted towards RPO of the Discoms.

f) The Commission has taken note of the fact that the successful bidders in the present case

is required to deposit, with HAREDA, Rs 5 lakh / MW including Rs. 4 lakh / MW in the

shape of Bank Guarantee (BG), the Commission considers it appropriate that the BG again

sought by HPPC @ Rs. 30 lakh / MW is onerous, hence, the same shall be reduced to Rs.

10 lakh / MW.

12. Having considered the contention with respect to refixation of the tariff as per the

Regulations of 2017 framed by this Commission, the Commission finds merit in the

submissions made on behalf of the petitioner. Any change in the accepted tariff, without

adhering to the ceiling limit of tariff already decided would reopen the entire contractual

arrangement and would dilute the genesis of the contractual agreement/arrangement. Apart

there from it would amount to re-writing the fundamental terms of the agreed contract.

There is no valid basis furnished before the Commission by the respondents as to why a

voluntarily agreed tariff consented to by the generators should be revisited and be increased

at this stage notwithstanding that the same would have huge financial ramifications. The

Commission being a watchdog of the interest of the consumers and also being the harbinger

of benign and transparent policies, cannot be seen as bestowing undue and unwarranted

favour by redetermination of higher tariff by disregarding the ceiling limit of tariff already

determined.

13. Subject to the above, the Commission approves the PPAs to be signed by HPPC and paddy

straw based power project developers’ i.e. M/s. Hind Samachar and M/s. Sukhbir Agro

Energy, M/s Jind Bio-Energy LLP and M/s Fatehabad Bio-Energy, LLP.

14. The petition is accordingly disposed of. HPPC / Discoms shall submit a signed copy of the

PPAs for the record of the Commission within two weeks from the date of this order.

This order is signed, dated and issued by the Haryana Electricity Regulatory Commission on

03.01.2019.

Date: 03.01.2019 (Pravindra Singh Chauhan) (Jagjeet Singh) Place: Panchkula Member Chairman