The Nandipur power project, a 425MW most troublesome plant, is reportedly adding to the gigantic circular debt and heading towards bankruptcy as Nepra has not approved actual capital cost of the project which is around Rs 22 billion, well informed sources told Business Recorder.
"Nepra is not allowing tariff of the power plant on open cycle after CoD despite the fact it is a normal phenomenon as steam turbines at various plants do have to be shut for annual maintenance or under some faults. No open cycle tariff means that in such an eventuality whole plant complex will be shut down. Plant operation on open cycle is essential keeping in view the power crisis/ demand in the country from time to time," the sources added.
Nepra, as a regulator must know that plant machines are to go on an annual overhaul as contractual requirement and it was included in the contract that first inspection of machines will be the responsibility of the EPC contractor, sources stated. Giving the background, the sources said Northern Power Generation Company Limited (NPCGL) submitted a petition for determination of generation tariff for Combined Cycle Power Plant (CCPP), Nandipur to Nepra on May 20, 2014. Nepra determined the tariff and intimated the government for notification in the official gazette.
Aggrieved of the original determination, NPGCL submitted motion for leave to review under Rule 16(6) of the Nepra Tariff (standards and procedures) Rules, 1998 within 15 days of the intimation of original determination, the sources continued. The Registrar Nepra, on January 27, 2016 communicated the determination of Nepra Authority on the motion for leave to review filed by the NPGCL.
On March 21, 2016, the Ministry of Water and Power submitted reconsideration request under section 31(4) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (Nepra Act) with regard to determinations of Nepra. The public hearing on reconsideration request has been held in Nepra on May 24, 2016.
According to sources, the reasons for submission of tariff reconsideration request were as follows: (i) project cost- the project costs submitted in tariff petition are based on the revised PC-1 of the Nandipur power project approved by Executive Committee of the National Economic Council (ECNEC) in July 2013. However, Nepra has disallowed huge portion of such approved project costs; and (ii) Nepra has determined efficiency of the plant as 45 per cent on RFO and 49 per cent on gas. The claimed efficiency by company respectively was 44 per cent and 48 per cent.
"This approach of Nepra needs to be revised because the efficiency of the plant is affected by various reasons including the weather conditions, attitude, site and configuration etc. Another crucial factor is the recommended efficiency of EPC contractor which in this case is 44.3%," the sources said, adding that NPGCL has asked for determination of efficiency at 44% which is quite realistic.
The sources said, fixing of efficiency on a higher side creates a huge effect on the fuel cost. Under the 2 part tariff mechanism, the fuel cost is a pass through item. If the efficiency is fixed on the higher side, there shall be loss on operation of plant. Thereby, it is apprehended that at such efficiency (on higher side) the project will become "unviable". If the plant cannot operate due to less payment of fuel cost component, the large investment on the installation and other project cost will be wasted.
The sources further stated that Nepra did not allow the tariff of the power plant on high speed diesel (HSD). The 'startup' and 'stop' fuel of the Nandipur power plant is HSD. On every start/ stop and till synchronization and shifting of fuel from HSD to furnace oil, certain quantity of HSD is consumed. The operation of the plant on HSD may also be required in emergency situations and as such HSD tariff is essentially required.
Nepra has also not allowed the cost recovery of fuel during pre CoD operations. This again is a normal phenomenon that this cost is allowed to plants. Nandipur however has been treated differently and resultantly around Rs 4.5 billion have not been recovered. CPPA has time and again submitted tariff adjustment on this account but every time this has been disallowed, the sources maintained.
"Provision for open cycle operations in the tariff on requirement/ demand of system as well as HSD operations from time to time is a must along with other capital cost adjustments and re-fixation of efficiency," the sources agued. In the case of IPPs Nepra has even allowed lower efficiencies as compared to actual plant efficiencies. This gives the IPPs cushion to make huge profits. Water and Power Ministry maintains that the reference values for pre COD period may be reworked and actual cost borne by company should be allowed to be passed on.
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