The National Electric Power Regulatory Authority (Nepra) has dismissed review motions filed by the Central Power Purchasing Agency Guarantee Ltd (CPPA-G) against the award of upfront tariff, 2013 to 12 baggasse cogeneration projects.
The Authority also considered the request made by the project developers that the date of COD should be reckoned from the date of decisions of instant review motions and observed that there has been no delay due to any act of the Authority. Therefore, the Authority has decided not to make any change with respect to the date of COD.
In pursuance of the CCI and ECC decisions, the Authority initiated suo motu proceedings under Nepra Upfront Tariff (Approval & Procedure) Regulations, 2011 for determination of upfront tariff for baggasse-based cogeneration power projects. The Authority after following due process of law and holding a public hearing issued an upfront tariff determination dated May 29, 2013 whereby upfront tariff along with the terms and conditions for power projects based on high pressure boilers (60 bars and above) was approved.
The Authority has considered submissions and arguments of all the parties and observed that as per regulation 3(2) of the NEPRA (Review Procedure) Regulations, 2009, a review motion may be filed against a decision of the Authority upon discovery of new or important matter of evidence or on account of some mistake or error apparent on the face of the record or from any other sufficient reasons. Thus the scope of the review proceedings is limited and the whole case cannot be opened without fulfilling the prerequisites as mentioned in the Review Procedure Regulations. Further, these review motions have been filed against the decisions of award of upfront tariff to 12 baggasse-based power projects and not against the original upfront tariff determination. Therefore, only matters which are related to the award of upfront tariff may be agitated by the petitioner and not the matters which are related to the original upfront tariff determination.
The petitioner contended in its written submissions as well as during the hearing that the National Economic Council (NEC) held some discussion regarding the purchasing of power on priority basis from renewable energy power projects and the decision of CPPA was pursuant to the said meeting of NEC. During the hearing, the Authority inquired from the petitioner about the sanctity of a decision of NEC and whether that decision would be equivalent to the policy of the federal government or upfront tariff of the Authority. The petitioner responded that a decision of NEC cannot be considered policy or regulatory framework. Further, CPPA-G requested that the submissions with respect to the NEC meeting may be discarded by the Authority. As CPPA-G itself has asked not to consider the meeting of NEC and no further submissions with respect to must dispatch commitments and demand-supply position were presented or substantiated through documents by CPPA-G, therefore, these submissions have not been considered while deciding the review motions.
It was contended by the petitioner that upfront tariff, 2013 had expired by the time the Authority issued the decisions of the 12 projects. The project developers in this regard submitted that acceptance was filed by each of them within the time prescribed in the upfront tariff, 2013. It has been observed by the Authority that the decision of the Authority of June 17, 2015 whereby the validity period of the upfront tariff was extended specifies that the option for accepting upfront tariff by cogeneration projects will be valid up to May 28, 2017.
The applicability period given in the decision of Nepra provides the time period for submitting the applications to Nepra along with all the requisite documents, meaning thereby that the projects which have submitted applications for opting the upfront tariff, 2013 along with requisite documents before May 28, 2017 have accepted that tariff and are qualified for it. It is not required in the upfront tariff regulations and the upfront tariff determination that the decision of the Authority has to be issued within that time period. The decision of the Authority may be issued after expiry of the applicability period of the upfront tariff. The Authority also observed that it has awarded tariffs to a number of power projects in other technologies post expiry of upfront tariff on the basis that those projects had filed the complete application within the validity period of the respective tariffs. In the instant cases also, the applications were filed by these 12 projects latest by May 26, 2017, ie before the expiry of the upfront tariff on May 28, 2017; therefore, there was no bar on the Authority to issue their decisions post expiry of upfront tariff, 2013. The petitioner submitted that prior to the expiry of the period for Upfront Tariff, 2013, the Authority had already undertaken and initiated the exercise of fresh determination of the Upfront Tariff, 2017 which is lower than the upfront tariff, 2013. Thus, during the pendency of such process, the impugned decisions are liable to be reviewed and set aside as the same are granting additional benefits to the project developers. The petitioner also requested the Authority to approve Upfront Tariff, 2017 for not only these 12 projects but also for other six projects with which EPAs have not been signed as the same shall lead to considerable savings over the life of these projects.
It has been observed by the Authority that the proceedings of issuing Upfront Tariff, 2017 were initiated to avoid the lag between the two upfront tariffs. Further, CPPA-G in its review motions itself has referred to Rule 18(2) of the Tariff Rules which provides that a tariff determined by the Authority shall not become effective until such time it is published in the official gazette.
The Nepra is of the view that it is abundantly clear from this rule that the initiation of the proceedings for new Upfront Tariff, 2017 cannot mean that the Upfront Tariff, 2013 has ceased to be applicable.
It is pertinent to mention here that the upfront tariff, 2013 was valid till May 28, 2017, therefore, the Authority is bound to entertain any application filed within the applicability period. Moreover, it was noted that the tariff schemes providing certain incentives are approved for a definite period of time. Upon expiry, new schemes are introduced with incentives relatively lower than allowed in the earlier decisions.
Setting aside the earlier awarded tariffs due to reduction in incentives through subsequent tariff schemes to 18 projects merely on the basis of differential impact between two tariffs is not worth considering. Such action shall not be correct and lawful as well as it will be in contravention of basic regulatory principles of certainty and predictability. The petitioner put much thrust on the argument that as these projects had accepted the conditional consent of CPPA-G, and attained the benefit of the cut-off date, hence, they could not resile there from and they have to abide by the conditions mentioned in the consent letters. It was noted by the Authority that the conditional consent letters were considered by the Authority at the time of issuance of the impugned decisions; however, it was decided to issue the decisions in the standard form. Further, it was also observed that attaching conditions with the power purchaser's consent was not in consonance with the upfront tariff, 2013 as well as the upfront tariff regulations, 2013.
The Authority observed that under the Nepra Act and rules and regulations, it is prerogative of the Authority to determine the tariff and its terms and conditions. The power purchaser does not have the authority to amend the tariff and its terms and conditions. Further, the framework 2013 and Renewable Energy Policy, 2006 also do not empower the power purchaser to impose such conditions in the consent letter.
The Authority noted if a condition is related to the commercial terms which are part of the EPAs and are not covered in the tariff determination then such matter is between the parties and does not have any bearing on the decision of Nepra. However, if the condition is such which is related to the tariff determination and restricts the benefits granted by the tariff determination, then such condition shall be void as CPPA does not have the power to modify the tariff determination issued by Nepra and notified by the federal government.
It was also noted by the Authority that the award of upfront tariff to a power project has to be on the same terms and conditions which are mentioned in the original tariff determination. At the time of awarding of the upfront tariff, new terms and conditions cannot be imposed and introduced in the decision of award of upfront tariff. Therefore, the contentions of the petitioner that the conditions introduced by it in the letter of consent should have been part of the decisions of Nepra are devoid of merit and unfounded. The petitioner also referred to the letter of Nepra of October 07, 2016 sent to Ministry of Water and Power requesting certain changes to be made in the Cogeneration Policy, 2008 and Framework, 2013. The Authority noted that Upfront Tariff, 2013 provides for priority dispatch of energy from baggasse cogeneration power projects, ie to run these plants on priority while balancing the demand and supply position. It does not provide the payment arrangement ie whether to pay without the dispatch of energy or otherwise. In the referred letter, the point which was highlighted primarily was related to the payment arrangement decided in the approved Energy Purchase Agreements (EPAs). The Authority in the advisory communicated that arrangement of payments decided in the EPA was made in light of deemed dispatch provisions given in the Framework, 2013 and, therefore, proposed changes in that policy document. No mention was made in the advisory that these plants be given dispatch only to certain limit of APCF. In response to that Advisory, the MoW&P in its letter submitted that recommendations of Nepra are being deliberated at the federal government level; however till such time a policy amendment is made, the Nepra is bound to work within the given framework.
The Nepra construed from the response of MoW&P that it agreed the payment mechanism decided in light of Framework, 2013 and stated that recommendations of Nepra shall be considered. Moreover, the MOW&P asked Nepra to continue implementing the Framework, 2013 till changes are made therein. As no amendments have been made in the Framework, 2013; therefore, referring advisory sent by Nepra for the sake of these proceedings does not add any substance to this case and is irrelevant.
During the hearing, the petitioner submitted that units of electricity only to the extent of 45% annual plant factor have been attributed priority to ensure mandatory purchase by the power purchaser in the Framework, 2013 and the Authority's Upfront Tariff, 2013. In this respect it has been noted by the Authority that the Framework, 2013 does not specify any number for annual plant factor. Further, the upfront tariff determination has specified a minimum annual plant factor of 45% after considering all the relevant factors. The plant factor is a minimum benchmark and the dispatch of energy on priority basis has not been linked anywhere in the Framework, 2013 and the upfront tariff determination with the minimum or maximum annual plant factor. Even the matter of linkage of 45% annual plant factor with the priory dispatch was not a condition of the letter of consent issued by CPPA-G.
According to Nepra, these review motions are against the issuance of decisions of award of upfront tariff to 12 baggasse-based cogeneration power projects wherein the main grievance of CPPA-G is that the conditions of the consent letter were not made part of the decisions of Nepra. These proceedings are not meant for review of the original upfront tariff determination and its terms and conditions. Therefore, raising of issues which are related to the terms and conditions of the original tariff determination is not permissible under these proceedings. Further, the matter of maximum annual plant factor and its linkage with the priority dispatch seem to be an afterthought of the petitioner, which is not supported from the contents of the Framework, 2013 and the upfront tariff, 2013.
The Nepra has concluded it is of the considered view that these review motions are devoid of merit and therefore, all the review motions are hereby dismissed. It is pertinent to mention here that the Authority also considered the request made by the project developers that the date of COD should be reckoned from the date of decisions of instant review motions. It has been observed that there has been no delay due to any act of the Authority. Therefore, the Authority has decided not to make any change with respect to the date of COD.
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