The National Electric Power Regulatory Authority (Nepra) has fixed upfront tariff of Rs 12.2 per unit for RFO-fired Captive Power Plants (CPPs) to be delivered to power purchaser on take and pay basis applicable till December 31, 2018. According to determination a proposal for upfront tariff for captive power plants on RFO on take and pay basis was made public in leading national news papers on April 29, 2017. The purpose of upfront tariff fixations is aimed at short-term utilization of available generation capacity.
The proposed upfront tariff comprises of fuel cost component and fixed cost component. The fuel cost component was calculated on net LHV thermal efficiency of 38.43%, HHV calorific value of 40,486 Btu/ Kg, LHV-HHV factor of 1.05 and reference RFO price of Rs 45,116 per ton including freight charges of Rs 4,780 per ton. The fuel cost component was also proposed to be adjusted for variation in RFO price and variation in actual calorific value.
The upfront tariff on RFO proposed for captive power plants was Rs 11.9229 per unit which includes fuel cost component of Rs 10.3929 per unit and fixed cost Rs 1.5300 per unit. Hearing in the matter was scheduled on 11th May 2017. The hearing was held as per schedule and was participated by Faisalabad Chamber of Commerce & Industries, K-Electric, Gadoon Textile Mills, Sitara Energy Limited, Nishat Power, PPDB, CPPA, NPCC, AQLAAL and BOI.
Nepra's team considered the proposed fuel cost component which was based on net LHV thermal efficiency of 38.43%. SEL in its intervention request submitted that the proposed efficiency is unreasonably high and is not attainable by existing SPPs and CPPs with old and used equipment. SEL further submitted that the overall RFO consumption of a well maintained plant is approximately 245 grams/kWh and above (corresponding to 36.15% efficiency). SEL also submitted that the specific fuel consumption is around 230 grams/kWh, the impact of auxiliary is 4%-5%, cost of diesel used for startup 2-3 grams, sludge/water drainage 1% of fuel consumed and power house/line losses of around 1.5 percent. None of the other interveners objected to the proposed efficiency.
The Authority has considered the submissions made by the stakeholders. The proposed thermal efficiency was based on the approved net LHV thermal efficiency of 38.43% in case of Sitara Energy Limited in the matter of approval of PAR of FESCO. The referred efficiency was approved after considering all the factors affecting thermal efficiency. The Authority has, therefore, decided to maintain the net LHV thermal efficiency of 38.43% for calculation of fuel cost component for CPPs generating electricity on RFO for sale of surplus power to the system.
Accordingly on the basis of net LHV thermal efficiency of 38.43%, HHV calorific value of 18,364 BTUs/lb., LHV-HHV factor of 1.05 and reference Ex-GST HHV price of Rs 45,116/ton, the fuel cost component works out Rs 10.3916/kWh and the same is being approved. The fixed cost component of Rs 1.53/kWh was proposed for RFO based CPPs. The proposed fixed cost component was based on the fixed cost component approved in the case of Sitara Energy Limited in the matter of approval of PAR of FESCO.
According to the draft power purchase agreement between FESCO and SEL, Fixed Cost Component has been defined as "The tariff component payable per kWh delivered by the company which includes but not limited to O&M cost, tax on income of the company, insurance cost, return on investment, duties etc.: The agreed fixed cost component between FESCO and SEL was not subject to any indexation/adjustment as per the draft PPA'.
SEL in its intervention request submitted that the fixed cost component is unreasonably low. SE requested that the fixed cost component should allow financially viable capital investments required for upgrading and maintaining existing plants of CPPs and SPPs for generating surplus energy. SEL suggested fixed cost component of Rs 3.27/kWh after incorporating indexation factor of 214% on the Pepco approved rate of Rs 1.53/kWh from January 1, 2009. Gadoon Textile in its intervention request submitted that the startup cost on Diesel that ranges, generally, about Rs 1/kWh is apparently not considered in the upfront tariff proposal. None of the other stakeholders commented on the fixed cost component.
The Authority considered the comments of the stakeholders and decided to reestablish the fixed cost component. The variable and fixed O&M cost allowed to RFO based reciprocating engines of IPPs is Rs 0.9564/kWh and Rs 0.4079/kWh respectively. The fixed O&M cost component has been worked out on the basis of 75% plant factor. The Authority considers that similar cost should also be allowed to RFO based captive power plants. Accordingly, the Authority decided to approve Rs 1.3643/kWh on account of fixed and variable O&M cost. For insurance and ROE components, the Authority has decided to adopt the cost allowed to gas based captive power plants which is Rs 0.3871/kWh and Rs 0.1067/kWh respectively. The total fixed cost component works out at Rs 1.8581 and the same is being approved for RFO based captive power plants.
Regarding the issues raised by Gadoon Textile Mills, it is appropriate to mention that RFO has been included in the Upfront Tariff Regulations as designated fuel through amendment. Regarding the determination of tariff for CPPs, the Authority considers that any captive power plant can sell surplus power and the rate shall be determined by the Authority. Regarding the issues raised by Anwar Kamal Law Associates, power plants are utilized on the basis of demand and availability and the demand is not constant throughout 24 hours. Similarly if the plant is under outages allowance, it cannot be dispatched. If the plant is not available beyond the agreed outages period, no capacity charges shall be paid and LDs shall also be imposed by the power purchaser. The dispatch instructions to CPPs are issued by Discos in co-ordination with NPCC in accordance with the distribution code and grid code.
Short term utilization means the utilization of the available generation capacity with CPPs to mitigate the impact of current load shedding. The proposed efficiency has been worked out on the basis of technical analysis after considering all the factors eg size, degradation etc. It is to be noted that Discos shall purchase the power offered under the instant upfront tariff from CPPs under bilateral agreements and payment settlement shall be in accordance with the commercial code.
After taking into account the viewpoints of stakeholders, Nepra has fixed upfront tariff of Rs 12.2497 per unit, of which Rs 10.3916 will be reference fuel cost component and fixed cost component of Rs 1.8581 per unit. The term of the power purchase agreement under the upfront shall be for calendar year 2017 and 2018. Any CPP/SPP can opt the upfront tariff for sale of surplus to the system.