1.

Introduction
This Tariff Order is the second on wind energy. This
order is a culmination of a consultative process spread over ten months
beginning in July 2008. Tamil Nadu being a pioneer in wind energy generation,
the Commission has analysed the connected issues in great depth before
finalising this comprehensive tariff order.

1.1 The importance of Renewable Energy Sources

Global concern over pollution and several related
issues caused by the increase in green house gas emission and consequent
changes in climate have resulted in a paradigm shift in the approach towards
development of the energy sector in many countries. The need for adoption of
clean technology, improving end use efficiency and diversifying energy bases
etc., have all been seriously considered by the Government of India since the
Sixth Five Year Plan and the country is poised for a considerable increase in the
use of renewable energy sources in its transition to a sustainable energy base.
Renewable energy sources such as wind, solar, hydro and biomass not only
augment energy generation but also contribute to improvement in the quality of
the environment, drought control, energy conservation, employment generation,
upgrading of health and hygiene, social welfare, security of drinking water,
increased agricultural yield and production of bio-fertilizers. The pace of
development has been accelerated by the Government through promotional
policies and fiscal and tax incentives.

1.2 Power Procurement from New and Renewable Energy Sources of

Energy Regulations 2008

Section 61 of the Electricity Act 2003 (Central Act 36

of 2003) stipulates that the State Electricity Regulatory Commission shall specify
the terms and conditions for the determination of tariff. In accordance with the
above stipulation, the Commission notified the “Power Procurement from New
and Renewable Sources of Energy Regulations 2008” on 8-2-2008. It has been

1
specified in the above Regulation that the tariff determined by the Commission
shall be applicable for a period of twenty years and the control period may
ordinarily be two years.

1.3 Order No.3 dated 15-5-2006

The Commission notified Order No. 3 on “Power

purchase and allied issues in respect of Non-Conventional Energy Sources
based Generating Plants and Non-Conventional Energy Sources based Co-
Generation Plants” on 15-5-2006. The said order stipulates tariff rates for power
procurement by the distribution licensee from Wind Energy Generators (WEGs),
biomass based generators and bagasse based co-generators. In the said order
the Commission adopted a control period of three years. The next tariff revision
would have been normally due on 15.5.2009.

1.4 Representation for tariff revision

For the past one year, the wind turbine

manufacturers, wind energy developers and wind energy generators have
repeatedly represented to the Commission that input costs such as capital cost,
interest rates, maintenance cost, etc. have considerably increased during the last
two years. They have been repeatedly requesting the Commission to revise the
tariff ahead of the control period of three years, taking into account the
escalation in input cost. During the last few years the capacity addition of wind
generation in Tamil Nadu has shown a declining trend, whereas States like
Gujarat have registered an increasing trend. Though there are many factors,
which have contributed for the decline in capacity addition, it has been widely
reported that the main factor for the decline in addition of wind energy capacity is
the unattractive tariff in Tamil Nadu.

2
1.5 Commission’s initiative on tariff revision for NCES based generation

In response to the repeated representations, the

Commission conducted a round table conference on 16-7-2008 to elicit the views
of wind energy experts, wind turbine manufacturers, wind energy developers and
other stake holders. Officials from the Ministry of New and Renewable Energy
Source (MNRE), Government of India, Indian Renewable Energy Development
Agency Limited (IREDA), Tamil Nadu Energy Development Agency (TEDA) and
Tamil Nadu Electricity Board (TNEB) participated in the conference. Based on
the views of the participants, the Commission decided to initiate the process of
tariff revision for power procurement from wind energy generators.

1.6 Commission’s order on relaxation of control period

The Commission in its order dated 19-09-2008, in

petitions M.P. Nos. 9, 14 & 23 of 2008 filed by Indian Wind Energy Association
(InWEA) and others decided that “the control period of three years as specified in
Order No. 3 dated 15.05.2006 is waived from the date of issue of this order”.

2.0 Provisions of the Electricity Act 2003, National Electricity Policy and
National Tariff Policy on NCES.

2.1. Preamble of the Electricity Act 2003 reads as

follows:
“An Act to consolidate the laws relating to generation,
transmission, distribution, trading and use of electricity and generally for taking
measures conducive to development of electricity industry, promoting
competition therein, protecting interest of consumers and supply of electricity to
all areas, rationalization of electricity tariff, ensuring transparent policies
regarding subsidies, promotion of efficient and environmentally benign policies
constitution of Central Electricity Authority, Regulatory Commissions and

3
establishment of Appellate Tribunal and for matters connected therewith or
incidental thereto.”

2.2. Section 86 (1) (e) of the Electricity Act 2003

states that the State Commission shall promote cogeneration and generation of
electricity from renewable sources of energy by providing suitable measures for
connectivity with the grid and sale of electricity to any person, and also specify,
for purchase of electricity from such sources, a percentage of the total
consumption of electricity in the area of a distribution licensee.

2.3. Section 61 (h) of the Electricity Act 2003 states

that the Appropriate Commission shall, subject to the provisions of this Act,
specify the terms and conditions for determination of tariff and in doing so shall
be guided by the following namely, (h) the promotion of cogeneration and
generation of electricity from renewable sources of energy, (i) the National
Electricity Policy and Tariff Policy.

2.4. Related provisions of the National Electricity

Policy are quoted below.
“5.2.20 Feasible potential of non-conventional energy
resources, mainly small hydro, wind and bio-mass would also need to be
exploited fully to create additional power generation capacity. With a view to
increase the overall share of non-conventional energy sources in the electricity
mix, efforts will be made to encourage private sector participation through
suitable promotional measures.”

“5.12.2 The Electricity Act 2003 provides that co-generation

and generation of electricity from non-conventional sources would be promoted
by the SERCs by providing suitable measures for connectivity with grid and sale
of electricity to any person and also by specifying, for purchase of electricity from
such sources, a percentage of the total consumption of electricity in the area of a

4
distribution licensee. Such percentage for purchase of power from non-
conventional sources should be made applicable for the tariffs to be determined
by the SERCs at the earliest. Progressively the share of electricity from non-
conventional sources would need to be increased as prescribed by State
Electricity Regulatory Commissions. Such purchase by distribution companies
shall be through competitive bidding process. Considering the fact that it will take
some time before non-conventional technologies compete, in terms of cost, with
conventional sources, the Commission may determine an appropriate differential
in prices to promote these technologies.”

2.5. Para 6.4 of the National Tariff Policy states as

below:

“(1) Pursuant to provisions of section 86(1)(e) of the Act, the

Appropriate Commission shall fix a minimum percentage for purchase of energy
from such sources taking into account availability of such resources in the region
and its impact on retail tariffs. Such percentage for purchase of energy should be
made applicable for the tariffs to be determined by the SERCs latest by April 1,
2006. It will take some time before non-conventional technologies can compete
with conventional sources in terms of cost of electricity. Therefore, procurement
by distribution companies shall be done at preferential tariffs determined by the
Appropriate Commission.

(2) Such procurement by Distribution Licensees for future

requirements shall be done, as far as possible, through competitive bidding
process under Section 63 of the Act within suppliers offering energy from same
type of non-conventional sources. In the long-term, these technologies would
need to compete with other sources in terms of full costs.

(3) The Central Commission should lay down guidelines

within three months for pricing non-firm power, especially from non–conventional
sources, to be followed in cases where such procurement is not through
competitive bidding.”

5
 2.6. A reading of the National Tariff Policy, National
Electricity Policy and the Electricity Act 2003 establishes the overwhelming
emphasis on environmental friendly renewable sources of energy such as wind,
hydel, solar and biomass. Tamil Nadu has been a pioneer in harnessing wind
power, which has enabled the State to capture 4136 MW, which accounts for
42.39 % of the capacity in the entire country as on 31-01-2009. This trend
witnessed reversal during 2007-08 owing to the perceived adverse factors such
as constraints on evacuation of wind energy, frequent load shedding and
unremunerative tariff.
2.7. We need to bear in mind that wind energy is
cheap and environment friendly. It came to the rescue of the State during the
difficult months of 2008. The Government of Tamil Nadu, the Commission and
the TNEB have all along adopted progressive and forward-looking policies in
regard to wind energy. It would be a tragedy to let the initiative slip out of Tamil
Nadu. Gujarat, Maharashtra and Karnataka are fast becoming destinations of
wind energy investment. Tamil Nadu should strive its best to retain the
leadership in this field.

2.8. Yet another factor, which is to be borne in mind

is that while thermal generation plants take three to four years to mature, wind
energy generators require just three to six months to install their capacity.
Considering the difficult times ahead during the next three years, it is essential
that the State adds capacity quickly, even discounting the fact that wind energy is
available only for six months in a year.

3.1 Wind Power Scenario

3.1.1. Total installed capacity of power generation in
the country is 1, 47,458 MW as on 31-1-2009. The contribution of NCES power
to the country’s installed capacity is around 13,242 MW out of which the
contribution of wind power is 9756 MW as on 31-1-2009. (Source: Central

6
Electricity Authority) The NCES power represents 9% and wind power 6.6% of
the total installed capacity. The installed capacity of wind power in different
States as on 30-11-2008 is furnished below:

State Potential Installed Percentage

( MW ) Capacity ( MW) to the total
Andhra Pradesh 8968 122.50 1.29
Gujarat 10645 1433.50 14.95
Karnataka 11531 1184.00 12.35
Kerala 1171 12.50 0.13
Madhya Pradesh 1019 187.70 1.96
Maharashtra 4584 1838.00 19.17
Rajasthan 4858 671.00 7.00
Tamil Nadu 5530 4133.00 43.11
Others 705 4.30 0.04
TOTAL 49011 9586.50 100.00
(Source: MNRE and www.windpowerindia.com)

3.1.2. Harnessing of wind energy is highest in

Tamil Nadu with an installed capacity of 4136 MW, contributing 42.39% of the
country’s total installed capacity of around 9756 MW as on 31-1-2009. The
following locations are endowed with favourable wind flow:-
Name of the Area
Passes/Districts
Palghat Coimbatore, Erode and Dindigul
Shencottah Tirunelveli and Tuticorin
Aralvoimozhi Kanyakumari, Radhapuram and Muppandal
Theni District Theni, Cumbum and Andipatty
Uvari, Tuticorin, Rameswaram, Poompuhar and
Sea coast
Ennore

7
 3.1.3. The year wise capacity addition in Tamil Nadu
over the past 10 years is furnished below:
Year Capacity addition (MW)
Up to1998-99 728
1999-00 46
2000-01 42
2001-02 45
2002-03 133
2003-04 371
2004-05 675
2005-06 858
2006-07 577
2007-08 381
2008-09 (up to 31-01-2009) 280
Total as on 31-1-2009 4136
(Source: TEDA & TNEB)

3.1.4. The steady increase in capacity addition of

wind power generation in Tamil Nadu is mainly attributed to the favourable
meteorological and topographical conditions and the pro-active policies of the
Government of Tamil Nadu.

3.2 Generation – Demand gap in Tamil Nadu

3.2.1. The generating capacity connected to TNEB’s
grid including the allocation from Central Generating Station is 10214.55 MW as
on 31.01.2009 comprising 2970 MW from TNEB’s four thermal stations, 516 MW
from four gas turbine stations, 2187 MW from 33 hydro stations, 17.55 MW from
TNEB’s wind farm, 1180 MW from private sector power projects, 214 MW as
contribution to Tamil Nadu grid by sale of electricity from captive generating
plants, 2825 MW as Tamil Nadu’s share from central generating stations and 305
MW from external assistance.

8
 3.2.2. Generating capacity from privately owned wind
farms is 4119 MW. The installed capacity of cogeneration in sugar mills is 466.10
MW and that of biomass project is 147.55 MW.

3.2.3. The average power availability during 2008-09

has been about 8000 MW, while the peak demand has been about 9500 MW,
which leaves a deficit of about 1500 MW. Since the infirm wind generation
contributes about 15% to 20% of the peak demand during wind season as TNEB
has no standby capacity to take care of this infirm power fully, in case of
unexpected meteorological changes, the deficit rises to 2000 MW. This deficit is
likely to increase in the next few years since the capacity addition is expected to
be less than the projected increase in demand. Therefore, any addition of wind
power generation will help the State to a great extent to tide over the shortage of
power.

4. Applicability of this Order

Order No.3 dated 15-5-2006 of the Commission lays
down a control period of three years for that order and therefore normally the
next order should have taken effect from 15-5-2009. The Commission in the
Common Order in M.P.Nos.9, 14 and 23 of 2008 dated 19-9-2008 has ruled that
the control period of three years specified in order No.3 dated 15-5-2006 is
waived from the date of issue of that order. The control period of three years,
thus, stands terminated on 19-9-2008. Therefore, the Commission holds that all
the wind energy generators commissioned on or after 19-9-2008 shall become
eligible for the benefits of the present order, subject to the condition that the
monetary benefits shall accrue from the date of this order. The existing
agreements between the wind energy generators and the distribution licensee
shall continue to be valid. The parties to the agreement are at liberty at any time
to renegotiate the existing agreement mutually in accordance with this order. The
agreements between the wind generators and the distribution licensee in relation

9
to all machines commissioned on or after 19-9-2008 shall be in conformity with
this order.

5. Tariff Determination Process

5.1. Clause 4 of the Power Procurement from New

and Renewable Sources of Energy Regulation, 2008 reads as follows:-
The Commission shall follow the process mentioned
below for the determination of tariff for the power from new and renewable
sources based generators, namely;-
a) initiating the process of fixing the tariff either suo motu or on an application
filed by the distribution licensee or by the generator.
b) inviting public response on the suo motu proceedings or on the application
filed by the distribution licensee or by the generator.
c) conducting public hearing on the above.
d) issuing general / specific tariff order for purchase of power from new and
renewable sources based generators.

5.2. The Commission in its order dated 19-09-2008,

in the petitions M.P. Nos. 9, 14 & 23 of 2008 filed by the Indian Wind Energy
Association (InWEA) and others, have ordered that “the prayer for revising the
tariff for the NCES generators would be considered by the Commission
separately”. In continuation of the above order, the Commission issues this order.

6. Tariff / Pricing Methodology

The Tariff / Pricing Methodology specified in Clause 4

of the Commission’s above said Regulation is reproduced below.
(2) While deciding the tariff for power purchase by distribution licensee from new
and renewable sources based generators, the Commission shall, as far as
possible, be guided by the principles and methodologies specified by:
(a) Central Electricity Regulatory Commission
10
(b) National Electricity Policy
(c) Tariff Policy issued by the Government of India
(d) Rural Electrification Policy
(e) Forum of Regulators (FOR)
(f) Central and State Governments

(3) The Commission shall, by a general or specific order,

determine the tariff for the purchase of power from each kind of new and
renewable sources based generators by the distribution licensee………..

Provided where the tariff has been determined by following

transparent process of bidding in accordance with the guidelines issued by the
Central Government, as provided under section 63 of the Act, the Commission
shall adopt such tariff.

(4) While determining the tariff, the Commission may, to the

extent possible consider to permit an allowance / disincentive based on
technology, fuel, market risk, environmental benefits and social impact etc., of
each type of new and renewable source.

(5) While determining the tariff, the Commission shall adopt

appropriate financial and operational parameters.

(6) While determining, the tariff the Commission may adopt

cost plus single part average tariff which can be reviewed later.

6.1 Preferential Tariff vs. Bidding

6.1.1. At this juncture it is relevant to discuss the

following stipulations of National Tariff Policy, which are reproduced below:
Section 6.4(1): Pursuant to provisions of section 86(1)(e) of
the Act, the appropriate Commission shall fix a minimum percentage for
purchase of energy from such sources taking into account availability of such

11
resources in the region and its impact on retail tariffs. Such percentage for
purchase of energy should be made applicable for the tariffs to be determined by
the SERCs latest by April 1, 2006. It will take some time before non-conventional
technologies can compete with conventional sources in terms of cost of
electricity. Therefore, procurement by distribution companies shall be done at
preferential tariffs determined by the appropriate Commission.

Section 6.4(2): Such procurement by distribution licensees

for future requirements shall be done, as far as possible, through competitive
bidding process under Section 63 of the Act within suppliers offering energy from
same type of non-conventional sources. In the long-term, these technologies
would need to compete with other sources in terms of full costs.

6.1.2. A view has been expressed by some

stakeholders that competitive bidding process should be adopted for
procurement of wind energy, although the dominant opinion was in favour of
continuing the present preferential tariff. The cost of generation of wind energy
generation is still higher than coal based generation. It will take quite some time
before wind energy technology can compete with the conventional energy
sources in terms of cost effectiveness. The Forum of Regulators, which is a
body consisting of Chairmen of all State Electricity Regulatory Commissions and
the Central Electricity Regulatory Commission considered this issue and has
recommended that cost based tariff on reasonable norms should be permitted for
renewable energy. The Commission endorses this recommendation of the
Forum of Regulators and decides to continue the present system of preferential
tariff.

6.2 Single Part Tariff vs. Two Part Tariff

Two-part tariff is generally adopted when the variable

component is significant. In the case of wind energy generation, wind being the

12
motive force, variable generation cost is nil. Reduction in capacity utilization and
variation in operation, maintenance and insurance cost could be taken care of by
adopting suitable parameters. Therefore, the Commission proposes to adopt
the single-part tariff for wind energy generation in accordance with Clause 4.6 of
Power Procurement from New and Renewable Energy Sources Regulations
2008.

6.3 Project Specific Tariff vs. Generalized Tariff

A generalized tariff mechanism would provide
incentive to the investors for use of most efficient equipment to maximize returns
and for selecting the most efficient site while a project-specific tariff would
provide each investor, irrespective of the machine type and the site selected, the
stipulated return on equity and it would shield the investor from the uncertainties
involved in capacity utilization due to machine choice and the site location. In
Tamil Nadu, so far, no wind farm developer has moved the Commission for
project specific generation tariff. Capacity of most of the generators is limited to a
few MWs. A view has been voiced by some stake holders pleading for project
specific tariff. Some others suggested that as and when such occasion arises
the Commission could take a view. The Commission decides that if a large
promoter seeks a project specific tariff, that application could be considered
separately subjecting it to the scrutiny of the Advisory Committee and the public
hearing. We think that any promoter installing new capacity exceeding 200 MW
within the same financial year may qualify for this dispensation.

6.4 Cost plus, single part, average tariff

The Commission’s order No. 3 dated 15-5-2006
adopted the “cost plus single part average tariff”. This tariff order was challenged
by Wind Power Producers Association before the Appellate Tribunal for
Electricity (ATE). The ATE in its order dated 18-12-2007 against the appeal No
205/2006 and 235/2006 have directed the Commission that “the tariff for the
wind power producers be re-determined within the next two months by

13
taking into consideration the time value of money”. The order of the ATE
has been challenged by the Commission and the TNEB before the Hon’ble
Supreme Court and the Hon’ble Supreme Court in its order dated:03-03-2008
(against appeal Nos: 1361-1362 0f 2008) have stayed the order of the ATE.
Therefore, the Commission decides to continue with the present methodology of
cost plus, single part, average tariff.

7.1 Components of tariff

The following are the components of tariff for wind
energy:-
1. Capital investment
2. Capacity utilization factor
3. Debt-equity ratio
4. Term of the loan
5. Interest rate
6. Return on equity
7. Life of plant and machinery
8. Depreciation of plant and machinery
9. Operation and maintenance expenditure
10. Insurance expenditure

7.2 Capital Investment

7.2.1. The estimates of capital investment show wide
variation. The Centre for Wind Energy Technology (CWET), Government of
India reported in their website at the time of preparation of the consultative paper
that the capital cost ranges from Rs.4.5 to Rs.5.5 crores per MW depending on
the site and the type of wind electric generator. This figure has been now scaled
up to Rs.4.5 to 6.85 crores per MW. The website of Tamil Nadu Energy
Development Agency (TEDA), entrusted with the task of promoting wind energy,
reports a capital cost of Rs.5 to 6 crores per MW in their website. The website of
Indian Wind Turbine Manufacturers Association mentions a figure of Rs.6.5

14
crores per MW. Indian Wind Power Association representing an installed
capacity of 1500 MW suggests that the capital cost is in the range of Rs.6 to 6.5
crores per MW. Tamil Nadu Spinning Mills Association which represents
installed capacity of 1200 MW suggests a capital cost of Rs.5.4 crores per MW.
Power Engineers Society of Tamil Nadu estimates that the cost cannot be more
than Rs.2 crores per MW. TNEB suggests a capital cost of Rs.4 to 4.5 crores
per MW. Thiru V. Sethuraman, Director, Neyveli Lignite Corporation opines that
the capital cost of Rs.5.35 crores per MW is not high. Thiru T.B. Chikkoba, an
expert on wind energy and a Member of the Advisory Committee opines that
Rs.5 crores per MW is reasonable.
7.2.2. The Ministry of New and Renewable Energy,
Government of India has recommended a capital cost of Rs.5.5 to 5.7 crores per
MW. This conforms to the views expressed by Thiru K.P. Sukumaran, Advisor,
MNRE, Government of India in the Expert Committee meeting held on 15-7-
2008. The Ministry of New and Renewable Energy Sources, Government of
India in their letter dated 8-12-2008 have stated that the average capital cost is
Rs.5.6 crores per MW. The Chairman and Managing Director of Indian
Renewable Energy Development Agency (a public sector undertaking of the
Government of India) has reported in his letter dated 2-12-2008 that the average
capital cost is Rs.5.61 crores based on 36 applications received between April
2007 and November 2008 aggregating to 442 MW. It is obvious that there are
wide variations in the capital cost estimates.
7.2.3. The Commission considers that the advice of
the IREDA and the Government of India based on the recent applications is a
reliable indicator of cost and therefore estimates that Rs.5.60 crores per MW is a
reasonable figure. The Commission in its Order dated 19-9-2008 in M.P. No. 27
of 2008 has ruled that in accordance with Sections 39 (2) (c), 40 and 42 (2) of the
Electricity Act 2003 the infrastructure development charges of Rs.25 lakhs per
MW should be borne by the distribution licensee and the State Transmission
Utility (STU). Therefore, it is logical that the capital cost of Rs.5.60 crores per
MW should be scaled down by Rs.25 lakhs per MW and fixed at Rs.5.35 crores

15
per MW. The Commission, therefore, determines a capital cost of Rs.5.35 crores
per MW. The Advisor, MNRE, Government of India has estimated that 85% of
the capital cost is attributable to machinery cost, 10% for civil works and 5% for
land cost. It is made clear that the distribution licensee and the State
Transmission Utility shall provide the necessary infrastructure.

7.3 Capacity utilization factor

The capacity utilization of a wind turbine is a function
of wind velocity, air density, power law index, mechanical efficiency of the
machine, age of the machine, height of the hub and length of the blade. The
Commission adopted a capacity utilization of 27.46% in order No.3 dated 15-5-
2006 for new machines based on performance of the machines installed
immediately before 15-5-2006. The capacity utilization figure has been
determined by the Commission as the weighted average of the assessed
generation of new machines in the Muppanthal, Shenkota, Palghat and Cumbum
passes. The assessment of capacity utilization has widely varied from figure of
21% suggested by Tamil Nadu Spinning Mills Association, 23% suggested by
Indian Wind Power Association, 26.5% suggested by Indian Wind Energy
Association and 27.15% recommended by TNEB. Mr.T.B. Chikkoba, an expert
and Member of the Advisory Committee opines that 27.15% is on the high side.
Having regard to the potential of four passes, the Commission estimates that
capacity utilization figure of 27.15% for new machines is reasonable.

7.4 Derating of machines

Derating of a wind turbine is necessitated by its
ageing. The Commission fixed the derating at 1% per annum after the first 10
years in Order No.3 dated 15-5-2006. The Commission has collected data from
the Tamil Nadu Electricity Board, Indian Wind Power Association and Tamil Nadu
Spinning Mills Association. Although the data shows declining performance of
the machines, behaviour of the data over the time period is erratic. The
Commission is unable to arrive at any definite conclusion based on the data and

16
therefore decides to retain the existing formula on derating, although some
stakeholders have pleaded for adoption of 1% derating after the first five years.
We decide that the derating shall be 1% per annum after the first ten years.

7.5 Debt : Equity Ratio

The Tariff Policy lays down a debt equity ratio of 70 :
30 for power projects. The Commission has adopted this ratio in the Tariff
Regulations 2005 as well as in Order No.3 dated 15-5-2006. The Commission
decides to retain the same ratio for this order.

7.6 Term of Loan

The Commission fixed the tenure of term loan as ten
years with moratorium of one year in Order No.3 dated 15-5-2006 on the
consideration that term loans sanctioned by IREDA stipulated this tenure. The
Commission proposes to retain the same tenure.

7.7 Rate of interest

The IREDA, which is a major financier of
renewable energy projects, has stated that interest rate of IREDA is in the range
of 11.75% to 12.9%. The Indian Wind Power Association submits that apart from
the IREDA, finances are secured from banks which charge interest rate of 13%
to 13.5%. The Tamil Nadu Spinning Mills Association demanded interest rate of
13.5% for loan from commercial banks. The Indian Wind Turbine Manufacturers
Association pitches for interest rate of 13%. The TNEB considers that a rate of
9% to 10% should be adequate on the ground that the public financial institutions
should offer concession for renewable energy generators. However, this has not
happened and there is no preferential rate of interest for renewable energy
generators. The Commission considers that interest rate of 12% is reasonable.

17
7.8 Return on equity
7.8.1. Order No.3 dated 15-5-2006 prescribed a
return on equity of 16% pre tax for wind energy projects, although the Tariff
Regulations 2005 of the Commission provides 14% post tax return for
conventional power projects (which works out to 17.63% pre tax on the
assumption that minimum alternate tax of 10.3 % is payable during the first ten
years and corporate tax of 30.9% is payable during the remaining ten years).
The treatment meted out to renewable energy projects is less favourable than
conventional power projects. Therefore the Commission proposed to offer 14%
post tax return for wind energy projects equivalent to 17.63% pre tax.
Subsequent to the preparation of the consultative paper the Central Electricity
Regulatory Commission has notified on 20th January 2009 a return of 15.5% post
tax effective from 1-4-2009. The equivalent of 15.5% post tax would be 19.85%
pre tax. The stakeholders have put forth demands for post tax return of 16% and
15.5%.
7.8.2. The TNEB is not in favour of converting the
post tax return to a pre tax return. Although there is limited validity in their plea, it
will be difficult in practice to assess the actual tax liability of about 8000 wind
generators. Therefore, it would be more practical to determine a pre tax return
on equity, particularly in the case of small renewable energy generators. The
concept of post tax return can be conveniently implemented in huge conventional
power projects. Therefore, the Commission decides that 17.63% pre tax return
on equity may be allowed upto 31-3-2009 and 19.85% pre-tax return on equity
may be allowed after 31-3-2009 for this order.

7.9 Life period

The Commission has considered a plant life of 20
years in the Order No.3 dated 15-5-2006. The Commission proposes to retain
the same life period for this order.

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7.10 Rate of Depreciation

It is proposed to depreciate the value of the plant and

machinery to 10% of the initial value during the life period of 20 years. This
translates to a rate of 4.5% per annum in the straight line method. The
Commission proposes to retain the rate of 4.5% per annum adopted in the Order
No.3 dated 15-5-2006 with the modification that depreciation shall be calculated
on 85% of the capital investment, which represents the cost of plant and
machinery.

7.11 Operation and Maintenance expenses

Presently operation and maintenance expenses is

charged as a percentage of the capital investment. The Commission would like
to modify this practice to lay down that 85% of the capital investment, being the
plant and machinery cost, may be reckoned as the basis for calculating O & M
expenses. The present rate of 1.1% per annum is retained. Escalation of 5%
may commence from the second year. With regard to maintenance of land and
civil works, which constitute 15% of the capital investment, 0.22% of the 15%
may be allowed every year.

7.12 Insurance
The Commission proposes to modify the existing
procedure of computing insurance charges. Insurance charges will be computed
with reference to 85% of the capital investment, which represents the cost of
plant and machinery. The Commission proposes an insurance rate of 0.75% of
the machinery cost for the first year to be reduced by half a percent of the
previous year’s insurance cost every year thereafter.

8.1 Related issues

The following are the issues related to wind energy
generation, transmission and wheeling and consumption:

19
 1. Banking
2. Transmission and wheeling charges
3. Cross subsidy surcharge
4. CDM benefits
5. Reactive power charges
6. Grid availability charges
7. Adjustment of energy generated
8. Scheduling and system operation charges
9. Application fees and Agreement fees
10. Billing and payments
11. Payment security and Security deposit
12. Power factor incentive / disincentive
13. Metering
14. Evacuation of wind energy
15. Energy purchase agreement
16. Energy wheeling agreement
17. Renewable energy purchase obligation
18. Control period

8.2 Banking
8.2.1. Banking as a concept was introduced by the
Tamil Nadu Electricity Board in 1986 to encourage generation of wind energy.
The banking charge was fixed at 2% in 1986 and raised to 5% in 2001. The
figure remained at 5% when the Commission issued order No.3 dated 15-5-2006.
The banking period was fixed at one month in March 2001 by the TNEB and
doubled in September 2001. It was further raised by TNEB to one year in March
2002 commencing from 1st April and ending on 31st March of the following year.

8.2.2. The banking charges shall be realized every

month for the quantum of units generated during the billing month less the

20
consumption of the captive users / third party sale. Slot-wise banking is
permitted to enable unit to unit adjustment for the respective slots towards rebate
/ extra charges. No carry over is allowed beyond the banking period. Unutilised
energy at the end of the financial year may be encashed at the rate of 75% of the
relevant purchase tariff. The Commission proposes to retain the same features
with some modifications based on the suggestions made by the stakeholders.
As and when the distribution licensee enforces restriction control measures for
restricting the consumption of wind energy generators, the Commission finds
justification in the plea that the unutilized energy at end of the financial year may
be encahsed at full value of the relevant tariff for sale to the licensee. The plea
of the TNEB to raise the banking charge from 5% to 15% and curtail the banking
period from one year to one month are too radical to be accepted by the
Commission.

8.2.3. Therefore, the Commission decides to retain

banking charges at 5%. Banking charges will be levied on the net energy saved
by the generator in a month after adjustment of the consumption during that
month. The banking period commences on 1st April and ends on 31st March of
the following year. The energy generated during April shall be adjusted against
consumption in April and the balance if any shall be reckoned as the banked
energy for April. The generation in May shall be first adjusted against the
consumption in May. If the consumption exceeds the generation during May, the
energy banked in April shall be drawn to the required extent. If the consumption
during May is less than the generation during May, the balance shall be reckoned
as the banked energy for May and banking charges for May will be leviable only
for this component. This procedure shall be repeated every month. The following
illustration would clarify the above formula.

21
 Illustration (8.2.3)
Case I
Month Generat Trans. & Net Consumption Banking Banking Withdrawal Net Cumulative
ion Wheeling available for the Charges from bank energy balance in
Charges for month @ 5% banked the bank
@ 5% captive for the
use month
(units) (units) (units) (units) (units) (units) (units) (units) (units)

April 110000 5500 104500 84500 20000 1000 0 19000 19000

May 84000 4200 79800 70000 9800 490 0 9310 28310

June 100000 5000 95000 115000 0 0 20000 0 8310

Case II
Month Generat Trans. & Net Consumption Banking Banking Withdrawal Net Cumulative
ion Wheeling available for the Charges from bank energy balance in
Charges for month @ 5% banked the bank
@ 5% captive for the
use month
(units) (units) (units) (units) (units) (units) (units) (units) (units)

April 110000 5500 104500 84500 20000 1000 0 19000 19000

May 84000 4200 79800 90800 0 0 11000 0 8000

June 100000 5000 95000 115000 0 0 8000 0 0

8.2.4 A view has been expressed that the facility of

banking permitted for the wind energy generator is not contemplated in the
Electricity Act 2003. We wish to deliberate on this proposition. Section 86(1)(e)
of the Electricity Act 2003 states that the State Commission shall promote
generation of electricity from renewable sources of energy. Section 61(h) of the
Act states that the Appropriate Commission shall specify the terms and
conditions for the determination of tariff and in doing so shall be guided by the
policy of promotion of generation of electricity from renewable sources of energy.
Clause 5.2.20 of the National Electricity Policy stipulates that feasible potential of
non conventional energy source mainly, small, hydro, wind and biomass would
also need to be exploited fully to create additional power generation capacity.

22
With a view to increase the over all share of non conventional energy source in
the electricity mix, efforts will be made to encourage private sector participation
through suitable promotional measures. Para 6.4(3) of the National Tariff Policy
states that the Central Commission should lay down guidelines within three
months for pricing non firm power, especially from non conventional sources, to
be followed in cases where such procurement is not through competitive bidding.
The National Electricity Policy and National Tariff Policy have the force of law in
terms of Section 3 of the Act. Section 181 of the Act empowers the Commission
to make regulations consistent with the Act and the rules to carry out provisions
of the Act. Banking would squarely be covered by this provision.

8.2.5. The above provisions of the Act are

supplemented by the Commission. Clause 4 of the Power Procurement from
new and renewable sources of energy Regulations 2008 of the Commission
empowers the Commission to devise appropriate banking mechanism for
generation of power from renewable sources of energy depending upon the
inherent characteristics.

8.2.6. Further, the guidelines of the Ministry of New

and Renewable Energy, Government of India on promotion of energy from non-
conventional sources recommend that the State Electricity Board provide for the
electricity generated to be banked for a period of one year.

8.3 Transmission and wheeling charges

The transmission and wheeling charges were initially

fixed by the TNEB at 2% in 1986 The charges were enhanced to 5% by the
TNEB in September 2001. They remained at that level till 2006. The
Commission adopted the same rate of 5% towards the transmission and
wheeling charges including line losses in order No.3 dated 15-5-2006. The
TNEB has now pleaded for stepping up the charges to 15% on the ground that
transmission and distribution losses have gone up in the recent years. The

23
transmission and distribution losses of the TNEB has remained static at 18%
since 2003 and therefore, the Commission does not see merit in the plea of the
TNEB to abruptly raise the charges to 15%. The Commission decides to retain
the wheeling and transmission charges including line losses at 5% uniformly for
captive use and third party sale of wind energy in the case of HT / EHT
consumption. However, the charges in regard to captive use and third party sale
in LT services are fixed at 7.5%..

8.4 Cross subsidy surcharge

At present order No.2 dated 15-5-2006 of the
Commission prescribes the rates of cross subsidy surcharge. The rate varies
from 97 paise to Rs.3.02 paise per unit depending on the category of the
consumer and the voltage level. The State Electricity Regulatory Commissions
of Maharashtra, Uttar Pradesh and Andhra Pradesh have done away with cross
subsidy surcharge altogether. Gujarat State Electricity Regulatory Commission
has proposed in their recent concept paper exemption of renewable energy
sources from cross subsidy surcharge. The TNEB has chosen to relinquish
temporarily, since November 2008, the cross subsidy surcharge leviable in terms
of Order No.2 of the Commission. The TNEB has opposed preferential treatment
for wind energy generators in the matter of cross subsidy surcharge. The
Commission believes that it is time for Tamil Nadu to make a beginning in this
respect and therefore, the Commission decides to levy 50% of the cross subsidy
surcharge for wind energy generators.

8.5 CDM benefits

Undoubtedly, a promoter of wind energy is required to
put in considerable efforts to secure the benefits of Clean Development
Mechanism and therefore, there is merit in the views of certain stakeholders that
the entire credit should accrue to the promoter as it obtains now. Some State
Commissions have permitted the distribution licensee to share 25% of the CDM
benefits. The Forum of Regulators has considered this issue and has

24
recommended that CDM benefits should be shared on gross basis starting from
100% to developers in the first year and thereafter reducing by 10% every year
till the sharing becomes equal (50:50) between the developer and the consumer
in the sixth year. Thereafter, the sharing of CDM benefits will remain equal till
such time the benefits accrue. The Commission accepts the formula
recommended by the Forum of Regulators.

8.6 Reactive power charges

Due to inherent characteristics, wind energy

generators are prone to draw reactive power from the grid, if adequate power
factor correction is not applied. During the wind season, wind energy generators
contribute about 20% of the grid demand and in such a situation grid stability will
be jeopardized, if the wind energy generators are allowed to draw reactive power
from the grid. Therefore, the Commission desides to retain the charges
proposed in Order No.3 dated 15-5-2006. Thus, 25 paise per kVARh will be
levied on wind energy generators, who draw reactive power upto 10% of the net
active energy generated. Anyone drawing in excess of 10% of the net active
energy generated will be liable to pay double the charge.

8.7 Grid availability charges

8.7.1. Start up power
Provision of start up power by the distribution licensee
and outage of wind energy generation are common and frequent in the wind
energy sector. The drawal of energy by the generator during the start up from
the distribution licensee shall be adjusted against the generated energy.
8.7.2 Stand by power
If adequate generation does not materialize or if
drawal by the captive / third party consumer exceeds generation, energy charges
and demand charges shall be regulated as follows:

25
8.7.3 Energy charges
When the generator is synchronized with the grid, the
captive / third party consumer shall be liable to pay to the distribution licensee for
the net energy consumed during the billing month at the applicable rate. The net
energy consumption shall be slot wise. That is, peak generation shall be
adjusted against peak consumption. Normal generation shall be adjusted
against normal consumption. Off peak generation shall be adjusted against off
peak consumption. Peak and normal generation may be adjusted against lower
slot consumption.
8.7.4 Demand charges
8.7.4.1. In the case of a wind energy generator, there
are two components of demand, namely, the demand supplied by the distribution
licensee and the demand supplied by the wind energy generator. In regard to
the former, the licensee is entitled to recover demand charges in terms of the
Tariff Order of the Commission dated 15-3-2003. The demand supplied by the
generator is estimated by the Commission in the following manner.
8.7.4.2. Assuming a capacity utilization figure of
27.15% and assuming that an average 65% of wind energy generated, (as per
the data available with the Commission) is used for captive / third party
consumption and assuming an average power factor of 0.9, the Commission
arrives at a figure of 19.61% as the demand contributed by the generator. The
energy supplied in each month by the wind energy generator shall be converted
to an appropriate demand in KVA and the demand charges at 80.39% of the
rates prescribed in the Tariff Order is payable by the wind energy generator in
regard to that converted demand.
8.7.4.3. The example below illustrates the case. The
demand charges payable by the consumer on open access will be calculated as
below:

26
Total generated units consumed by the consumer on open access A
divided by (30 x 24 x actual PF recorded during the billing month)
Recorded demand (or) 90% of sanctioned demand, whichever is higher B
The demand supplied by the Licensee (B – A) C
The demand charges payable by consumer on open access =
[A x (80.39%) of applicable demand charges + (C x applicable demand
charges)]
At current rate Demand Charges payable (Rs.)= [ (A x 0.8039 x 300) + (C x 300)]

8.7.4.4. The TNEB has suggested that deemed

demand concept may be abandoned since the demand charges are meant to
recover the fixed charges incurred by the Board for creating the required assets.
It needs to be clarified here that the cost of the asset created by the TNEB
including the transmission and distribution lines are fully recovered in terms of
the Tariff Order of the Commission. The shortfall in tariff revenue on account of
the demand contributed by wind energy generators can be factored into the
Annual Revenue Requirement of the TNEB and accounted for in the subsequent
tariff revision as prescribed in the Electricity Act 2003 and the Tariff Regulations
2005 of the Commission. On the other hand, the wind energy generators have
represented that the distribution licensee should recover demand charges only
for the net energy supplied by them. The Commission rejects this proposition
because the licensee is obliged at all times to supply the committed demand to
the consumer despite wide ranging fluctuations in the availability of wind energy.

8.8 Adjustment of generated energy

Section 9 (2) of the Electricity Act 2003 confers on the

captive generator the right to open access for the purpose of carrying electricity
from the captive plant to the destination of his use. Therefore, a wind energy
generator shall be entitled to adjust the generated energy for captive
consumption whether as a LT or a HT consumer. As regards sale to third
parties, Clause 11 of the Intra State Open Access Regulations 2005 of the

27
Commission, which prescribes a minimum limit of 1 MW, shall apply to wind
generators also.
Views have been expressed by some stakeholders
against adjustment of captive generation for LT services. Acceptance of such a
view would run counter to law and therefore, the Commission does not favour
that view.

8.9 Scheduling and system operation charges

The scheduling and system operation charges for
wind energy generators has been prescribed in Order No.2-5 dated 11-10-2008
at Rs.300/- per day per 1.65 MW for each service connection. If the generation
capacity of a service connection exceeds 1.65 MW, the same charge of Rs.300/-
per day would apply. If the generation capacity of a service connection is less
than 1.65 MW, the charges shall be proportionate. While arriving at the quantum
of this charge, the Commission took into account the fact that the capacity
utilization in wind energy generators is about 27% as against the average of 85%
in conventional power plants and that large size wind mills are generally available
in capacities of 1.65 MW.

8.10 Application fees and agreement fees

8.10.1. The Intra State Open Access Regulations

2005 of the Commission were amended in 2008 to provide for concessional
application fees and agreement fees for generators of non conventional and
renewable sources of energy. The application fees under the Energy Wheeling
Agreement was fixed at Rs.200 per MW subject to a maximum of Rs.5000 and
the agreement fees under Energy Wheeling Agreement was fixed at Rs.2000 per
MW subject to a maximum of Rs.50000 on the consideration that generators of
renewable sources of energy have small capacities compared to generators of
conventional energy. The agreement fees for Energy Purchase Agreement has
been fixed at Rs.2000 per MW or part thereof. As regards the Energy Purchase

28
Agreement, the TNERC – Fees and Fines Regulations 2004 prescribes Rs.2000
per MW or part thereof as the fees for approval of Power Purchase Agreement
by the Commission as against Rs.2500 per MW or part thereof leviable for
conventional power plants. This fee shall be collected by the licensee and
passed on to the Commission.
8.10.2. There is some validity in the plea of the TNEB
that frequent changes in the usage of the wind energy as well as the change of
drawal point necessitate extra clerical work. Therefore, the Commission decides
that every time a generator seeks such a change either through an amendment
to an existing agreement or through a fresh agreement, an additional charge
equivalent to the application fees and agreement fees shall be leviable by the
licensee on the generator.

8.11 Billing and payment

8.11.1. When a wind generator sells power to the
distribution licensee, the generator shall raise a bill every month for the net
energy sold after deducting the charges for start up power and reactive power.
The distribution licensee shall make payment to the generator within 30 days of
receipt of the bill. Any delayed payment beyond 30 days is liable for interest at
the rate of 1% per month.
8.11.2. If a wind energy generator utilizes the power
for captive use or if he sells it to a third party, the distribution licensee shall raise
the bill at the end of the month for the net energy supplied. The licensee should
record the generation and consumption simultaneously. While preparing the bill,
peak hour generation shall be adjusted against peak hour consumption. Off
peak generation shall be adjusted against off peak consumption. Normal
generation shall be adjusted against normal consumption. Peak hour generation
and normal hour generation can be adjusted against lower slot consumption.
Excess consumption will be charged at the tariff applicable to the consumer.
Transmission and wheeling charges, scheduling and system operation charges

29
and cross subsidy surcharge, wherever applicable, shall be recovered from the
bill. The net amount recoverable from the consumer shall be raised in the bill.

8.12 Payment security and security deposit

8.12.1. The National Tariff Policy calls for adequate

and bankable security arrangements to the generating companies. Order No.3
dated 15-5-2006 of the Commission stipulated a bankable security in favour of
generators. This mechanism has been found impractical, as there are a large
number of wind generators and the monolith distribution licensee is unable to
offer security for such a large number. Therefore, the Commission believes that
the penalty of 1% per month for delayed payment by the licensee would serve
the ends of justice.
8.12.2. As regards the security deposit of the
consumer, the Commission decides to retain the present arrangements. i.e., two
times the maximum net energy supplied by the distribution licensee in any month
in the preceding financial year shall be taken as the basis for the payment of
security deposit by the consumers.

8.13 Power Factor incentive / disincentive

As per Clause 7.17 of the Tariff Order dated 15-3-
2003 of the Commission, power factor incentive / disincentive is applicable to a
consumer as a percentage of current consumption charges. The average power
factor recorded by the meter shall be the reference for calculation of the incentive
/ disincentive. On the same analogy, captive consumers of wind energy shall be
eligible for incentive or liable for disincentive based on the gross energy
consumption and the applicable demand. This formula was adopted in Order
No.3 dated 15-5-2006 and the Commission retains the same formula.

30
8.14 Metering
8.14.1. The Commission decides that metering and
communication shall be in accordance with the following:
(1) Central Electricity Authority (Installation and
Operation of Meters) Regulations 2006

(2) Tamil Nadu Electricity Distribution Code 2004

(3) Tamil Nadu Grid Code 2004
(4) Tamil Nadu Electricity Intra State Open Access
Regulations 2005

8.14.2. Time of the day meter (ToD) / special energy

meters shall be provided both at the generator end and consumer end, if open
access is availed of. The consumers have been given the option to procure
meters as specified in the Central Electricity Authority (Installation and Operation
of meters) Regulations 2006.

8.15 Evacuation of Wind Energy

8.15.1. Section 39(2)(c) of the Act states that the
State Transmission Utility shall ensure development of an efficient, co-ordinated
and economical system of intra State transmission lines for smooth flow of
electricity from a generating station to the load centres. Section 40 of the Act
stipulates that it shall be the duty of the transmission licensee to build, maintain
and operate an efficient, co-ordinated and economical system of intra State
transmission and to provide non-discriminatory open access to its transmission
system for use by any licensee or generating company on payment of the
transmission charges or any consumer as and when such open access is
provided by the State Commission under section 42(2) on payment of the
transmission charges and a surcharge thereon, as may be specified by the State
Commission. Section 42 of the Act states that it shall be the duty of the
distribution licensee to develop and maintain an efficient, co-ordinated and
economical distribution system in his area of supply.

31
 8.15.2. The Forum of Regulators has recommended
that grid connectivity should be provided by the transmission licensee /
distribution licensees for renewable energy sources in an optimum manner,
through their capital expenditure plans to be submitted to the appropriate
Commissions for their approval. Clause 3 of the Power Procurement from New
and Renewable Sources of Energy Regulations,2008 states as follows:

“Provided that, in the case of sale of entire power to the

distribution licensee by any new and renewable source based generator, the cost
of interfacing lines up to the interconnection point shall have to be borne only by
the STU/ distribution licensee provided further that in case where the new and
renewable source based generator referred to in the first proviso who has
entered into an EPA with the distribution licensee referred to therein for the sale
of entire power to the said distribution licensee decides to use such power
agreed to be sold to the said distribution licensee, for his captive use or for sale
of such power to a third person or to a distribution licensee other than the
distribution licensee referred to above before the expiry of the period referred to
in such EPA, then he shall be bound to reimburse the entire cost of interfacing
lines to the distribution licensee with whom he has executed such EPA, before
the wheeling of power to his captive use or sale to third person or distribution
licensee other than the distribution licensee with whom the said EPA has been
executed by him”.
8.15.3. The TNEB submits that evacuation facility
could be provided by them on priority basis, if they are permitted to collect
infrastructural development charges. The Commission does not accept this plea
because the Electricity Act 2003 makes it clear that it shall be the responsibility of
the transmission utilities and the distribution licensee to create the appropriate
infrastructure. Therefore, the Commission prescribes the following procedure for
creation of evacuation facilities.

32
 (a) STU shall within 30 days of receipt of application from
WEGs, intimate whether or not the long term access can
be allowed without further system strengthening.
(b) If further system strengthening is essential, the results of
study conducted by the STU based on the request of
WEGs shall be intimated within ninety days of such request
of WEGs
(c) Feasibility based on system studies shall be established
within six months at the latest.
(d) Clearances, approvals, certificate, if any, required by
WEGs shall be issued within a month time.
(e) The distribution licensee is not liable to pay compensation
to the consumer on Open Access for deemed generation
benefits in case the distribution licensee is unable to
evacuate power due to failure of the Transmission and
Distribution facility
.
8.15.4. The Commission decides that the cost of
interfacing line upto the interconnection point shall have to be borne by the
STU/Distribution Licensee in case of sale of entire power to Distribution Licensee
by WEGs. For the captive use or sale of such power to third parties or to
Distribution Licensee other than the Distribution Licensee of that area, the entire
cost of inter facing line upto inter connection point shall have to be borne by the
WEGs and the work will be executed by the Distribution Licensee under Deposit
Contribution Work basis. The STU/ Distribution Licensee shall have to maintain
the standards as per CEA norms and Tamil Nadu Electricity Grid Code.

8.16 Energy purchase agreement (EPA)

The format of the Energy Purchase Agreement (EPA)

shall be evolved by the Commission after discussion with wind energy generators

33
and the distribution licensee within a month of this order. The agreement shall be
valid for a minimum period of 20 years. The distribution licensee shall execute
the Energy Purchase Agreement within a month of receipt of application from the
generator. The parties to the agreement may be given the option of exiting in
case of violation with three months notice to the other party.

8.17 Energy wheeling agreement (EWA)

The format of the Energy Wheeling Agreement (EWA)
shall be evolved by the Commission within a month of the order after consultation
with wind energy generators and the distribution licensee. The agreement shall
be valid for a minimum period of 5 years. The parties to the agreement shall be
given the option to exit for violation of the agreement after serving a notice of
three months on the other party. The plea of the TNEB for discontinuance of
wheeling in case of default is taken care of by the relevant provisions in the Intra
State Open Access Regulations 2005 of the Commission. The TNEB objects to
the frequent change in the usage of wind energy and the change of drawal point.
The Commission has dealt with this objection in para 8.10.2.

8.18 Renewable Energy Purchase Obligations (RPO)

8.18.1. Section 86(1)(e) enjoins upon the Commission
to specify, for purchase of electricity from renewable sources of energy, a
percentage of the total consumption of electricity in the area of a distribution
licensee. The above statutory provisions is supplemented by Clause 6.4 of the
National Tariff Policy which states that the Appropriate Commission shall fix a
minimum percentage for purchase of energy from renewable energy sources,
taking into account availability of such resources in the region and its impact on
retail tariff. The Forum of Regulators (FOR) has recommended that renewable
purchase obligation should be computed with reference to the energy input into
the system and not the energy consumed.

34
 8.18.2. As per the statistics furnished by the TNEB,
the energy injected into the grid by the TNEB was 65085 MU for 2007-08. The
Chief Electrical Inspector, Government of Tamil Nadu has reported that 2,570
MU were generated by standby generator sets during 2007-08. As it is not
possible to estimate the energy generated by unorganized standby generators, it
is sufficient to estimate the energy input on the basis of the above two figures, at
67,655 MU.
8.18.3. The energy injected by renewable sources of
energy into the TNEB grid during 2007-08 was 7,615 MU. The percentage of
energy injected by the renewable energy sources works out to 11.26% of the
total energy consumption in the area of the distribution licensee (7615 ÷ 67655).
Excluding the energy generated by the standby generators, the percentage
works out to 11.70 as against 11.26.
8.18.4. The Commission decides to fix the Renewable
Energy Purchase Obligation at minimum of 13% for 2009-10 and minimum of
14% for 2010-11.

8.19. Control period

The Order No.3 dated 15-5-2006 of the Commission
lays down a control period of three years. As the determinants of tariff
underwent radical changes during the control period, some of the stakeholders
represented for curtailing the control period. In pursuance of that effort the
Commission consulted experts on 16-7-2008 and delivered an Order on 19-9-
2008 in M.P. Nos. 9, 14 and 23 of 2008 scaling down the control period to two
years. Clause 6 of the Power Procurement from New and Renewable Sources of
Energy Regulations 2008 of the Commission promulgated on 8-2-2008 specifies
that the control period may be ordinarily two years. Taking into account the views
of the stakeholders, the Commission decides that the control period of this Order
shall extend upto 31-3-2011.

35
9. Wind energy tariff
9.1. Wind energy tariff is computed with reference to
the determinants listed in para (7) of this order. The tariff works out to Rs.3.24
per unit for the period upto 31-3-2009 and Rs.3.39 per unit after 1-4-2009. The
wind mills commissioned between 19-9-2008 and 19-3-2009 shall be eligible for
a tariff of Rs.2.90 per unit. These wind mills shall be eligible for Rs.3.24 per unit
from 20-3-2009 to 31-3-2009 and Rs.3.39 per unit from 1-4-2009. The wind mills
commissioned on or after 20-3-2009 shall be eligible for tariff of Rs.3.24 per unit
upto 31-3-2009 and the tariff of Rs.3.39 per unit from 1-4-2009.

9.2. The wind mills commissioned prior to 15-5-2006

shall be eligible for a tariff of Rs.2.75 per unit. The wind mills commissioned
between 15-5-2006 and 18-9-2008 shall be eligible for a tariff of Rs.2.90 per unit.

10. Acknowledgement
The Commission acknowledges with gratitude the
contribution of the officers and staff of the Commission, the valuable guidance
provided by experts, the active participation and advice of the Members of the
State Advisory Committee and the pains taken by the Members of the public in
offering their suggestions. The Commission particularly is indebted to the
valuable input of the Tamil Nadu Electricity Board, Tamil Nadu Energy
Development Agency, Indian Renewable Energy Development Agency and the
Ministry of New and Renewable Energy Sources, Government of India.

Sd……………… Sd…………………. Sd………….

(R. Rajupandi) (B. Jeyaraman) (S. Kabilan)
Member Member Chairman

(By order of the Commission)

R. Balasubramanian
Secretary

36
 Annexure – I

CONSULTATIVE PAPER ON POWER PROCUREMENT BY DISTRIBUTION

LICENSEES FROM WIND ENERGY GENERATORS AND ALLIED OPEN
ACCESS ISSUES

37
 Annexure – I

CONSULTATIVE PAPER ON “POWER PROCUREMENT BY DISTRIBUTION

LICENSEES FROM WIND ENERGY GENERATORS AND ALLIED OPEN
ACCESS ISSUES”

1.0 NEED FOR THE CONSULTATIVE PAPER

1.1 The importance of Renewable Energy Sources

Global concern over pollution and several related issues caused by the increase
in green house gas emission and consequent changes in climate have resulted in a
paradigm shift in the approach towards development of the energy sector in many
countries. The need for adoption of clean technology, improving end use efficiency and
diversifying energy bases etc., have all been seriously considered by the Government of
India since the Sixth Five Year Plan, and the country is poised for a considerable
increase in the use of renewable energy sources in its transition to a sustainable energy
base. Renewable energy sources such as wind, solar, hydro and bio mass not only
augment energy generation, but also contribute to improvement in the quality of the
environment, drought control, energy conservation, employment generation, upgrading
of health and hygiene, social welfare, security of drinking water, increased agricultural
yield and production of bio-fertilizers. The pace of development has been accelerated by
the Government through promotional policies and fiscal and tax incentives.

1.2 Commission’s Regulation on New and Renewable Energy Source of Energy

Section 61 of the Electricity Act 2003 (Central Act 36 of 2003) stipulates that the
State Electricity Regulatory Commission shall specify the terms and conditions for the
determination of tariff. In line with the above stipulation, the Commission issued and
notified the “Power Procurement from New and Renewable Sources of Energy
Regulations 2008” on 8.02.2008. In the above said Regulation it has been specified that
the tariff determined by the Commission in the tariff order shall be applicable for the
power purchase agreement period of twenty years and the control period may be two
years.

38
1.3 Commission’s order on Non Conventional Energy Sources (NCES) based
generation and allied Issues
The Commission notified Order No. 3 on “Power purchase and allied issues
in respect of Non-Conventional Energy Sources based Generating Plants and Non-
Conventional Energy Sources based Co-Generation Plants” on 15-5-2006. The said
order stipulates tariff rates for power procurement by the distribution licensee from Wind
Energy Generators (WEGs), biomass based generators and bagasse based co-
generators. In the said order the Commission decided to adopt a control period of three
years. The next tariff revision is due from 15.6.2009.

1.4 Commission’s order on relaxation of control period

The Commission in its order dated 19-09-2008, against the petitions M.P. Nos. 9,
14 & 23 of 2008 filed by Indian Wind Energy Association (InWEA) and others, has
decided that “the control period of three years as specified in Order No. 3 dated
15.05.2006 is waived from the date of issue of this order”.

1.5 Representation of WEGs, Wind Energy Developers and Wind Turbine

Manufacturers
For the past one year, the wind turbine manufacturers, wind energy
developers and wind energy generators have repeatedly represented that input costs
such as capital cost, interest rates, maintenance cost, etc. have considerably increased
in the last two years. They have been repeatedly requesting the Commission to revise
the tariff before the control period of three years, taking into account the above
escalation in input cost. In the last few years the capacity addition of wind generation in
Tamil Nadu shows a declining trend whereas States like Gujarat have registered an
increasing trend. Though there are many reasons which would have contributed for the
decline in the capacity addition, it has been widely reported that one of the reasons for
the decline in wind energy addition is unattractive tariff in Tamil Nadu.

1.6 Commission’s initiative on tariff revision for NCES based generation

In response to the above representation, the Commission conducted a round
table conference on 16.7.2008 to obtain the views of the wind energy policy makers,
wind energy experts, wind turbine manufacturers, wind energy developers, wind energy

39
generators and other stake holders. Officials from Ministry of New and Renewable
Energy Source (MNRE), Indian Renewable Energy Development Agency Limited
(IREDA), Tamil Nadu Energy Development Agency (TEDA) and Tamil Nadu Electricity
Board (TNEB) participated in the conference.

Based on the views of the participants, the Commission has decided to initiate
the process of tariff revision for power procurement from WEGs by distribution licensees
in the State.

2.0 EMPHATIC PROVISIONS OF THE ELECTRICITY ACT 2003, NATIONAL

ELECTRICITY POLICY AND NATIONAL TARIFF POLICY ON NCES.

Preamble of the Electricity Act 2003 reads as follows:

“An Act to consolidate the laws relating to generation, transmission, distribution,
trading and use of electricity and generally for taking measures conducive to
development of electricity industry, promoting competition therein, protecting
interest of consumers and supply of electricity to all areas, rationalization of
electricity tariff, ensuring transparent policies regarding subsidies, promotion of
efficient and environmentally benign policies constitution of Central Electricity
Authority, Regulatory Commissions and establishment of Appellate Tribunal
and for matters connected therewith or incidental thereto.”

Section 86 (1) (e) of the Electricity Act 2003 states that the State Commission shall
promote congenration and generation of electricity from renewable sources of energy
by providing suitable measures for connectivity with the grid and sale of electricity to
any person, and also specify, for purchase of electricity from such sources, a
percentage of the total consumption of electricity in the area of a distribution licensee.

Section 61 (h) of the Electricity Act 2003 states that the Appropriate Commission
shall, subject to the provisions of this Act, specify the terms and conditions for
determination of tariff and in doing so shall be guided by the following namely, (h)
the promotion of cogeneration and generation of electricity from renewable
sources of energy, (i) the National Electricity Policy and Tariff Policy.

Related provisions of the National Electricity Policy are quoted below.

“5.2.20 Feasible potential of non-conventional energy resources, mainly small
hydro, wind and bio-mass would also need to be exploited fully to create
additional power generation capacity. With a view to increase the overall share of
non-conventional energy sources in the electricity mix, efforts will be made to
encourage private sector participation through suitable promotional measures.”

40
“5.12.2 The Electricity Act 2003 provides that co-generation and generation of
electricity from non-conventional sources would be promoted by the SERCs by providing
suitable measures for connectivity with grid and sale of electricity to any person and also
by specifying, for purchase of electricity from such sources, a percentage of the total
consumption of electricity in the area of a distribution licensee. Such percentage for
purchase of power from non-conventional sources should be made applicable for the
tariffs to be determined by the SERCs at the earliest. Progressively the share of
electricity from non-conventional sources would need to be increased as prescribed by
State Electricity Regulatory Commissions. Such purchase by distribution companies shall
be through competitive bidding process. Considering the fact that it will take some time
before non-conventional technologies compete, in terms of cost, with conventional
sources, the Commission may determine an appropriate differential in prices to promote
these technologies.”
Para 6.4 of the National Tariff Policy states as below:

“(1) Pursuant to provisions of section 86(1)(e) of the Act, the Appropriate

Commission shall fix a minimum percentage for purchase of energy from such
sources taking into account availability of such resources in the region and its
impact on retail tariffs. Such percentage for purchase of energy should be made
applicable for the tariffs to be determined by the SERCs latest by April 1, 2006. It
will take some time before non-conventional technologies can compete with
conventional sources in terms of cost of electricity. Therefore, procurement by
distribution companies shall be done at preferential tariffs determined by the
Appropriate Commission.
(2) Such procurement by Distribution Licensees for future requirements shall be
done, as far as possible, through competitive bidding process under Section 63
of the Act within suppliers offering energy from same type of non-conventional
sources. In the long-term, these technologies would need to compete with other
sources in terms of full costs.
(3) The Central Commission should lay down guidelines within three months for
pricing non-firm power, especially from non–conventional sources, to be followed
in cases where such procurement is not through competitive bidding.”

A reading of the National Tariff Policy, National Electricity Policy and the
Electricity Act 2003 establish the overwhelming emphasis on environmental friendly
renewable sources of energy such as wind, hydel, solar and biomass. Tamil Nadu has
been a pioneer in harnessing wind power, which has enabled the State to capture 4100
MW, which accounts for 43 % of the capacity in the entire country as on date. But, this
trend witnessed reversal during 2007-08 owing to the perceived adverse factors such as
constraints on evacuation of wind energy and frequent load shedding of captive users of
wind energy.

41
 We need to bear in mind that wind energy is cheap and environment friendly. It
came to the rescue of the State during the difficult months of 2008. The Commission
has all along adopted progressive and forward-looking policies in regard to wind energy.
It would be a tragedy to let the initiative slip out of Tamil Nadu. Gujarat, Maharashtra and
Karnataka are fast becoming a destination of wind energy investments. Tamil Nadu
should strive its best to retain the leadership in this field.

Yet another factor, which is to be borne in mind, is that while thermal generation
plants take three to four years to mature, wind energy generators require just three to six
months to install their capacity. Considering the difficult times ahead for the next three
years, it is essential that the State adds capacity quickly, even discounting the fact that
wind energy is available only for six months in a year.

3.0 WIND POWER SCENARIO

Total installed capacity of power generation in the country is 1, 44,131 MW as on

31.3.2008. The contribution of NCES power to the country’s installed capacity is around
12,195 MW (Source: Central Electricity Authority) out of which the contribution of wind
power is around 8739 MW as on 31-3-2008. The NCES power represents 8.46% and
wind power 6.06% of the total installed capacity. The installed capacity of wind power in
different States as on 31-3-2008 are furnished below:
Name of State Potential Installed Percentage
in MW Capacity in to the Total
MW
Andhra Pradesh 8275 122.50 1.40
Gujarat 9675 1252.50 14.33
Karnataka 6620 1011.00 11.57
Kerala 875 10.50 0.12
Madhya Pradesh 5500 187.70 2.15
Maharashtra 3650 1756.00 20.09
Rajasthan 5400 539.00 6.17
Tamil Nadu 5500 3856.77 44.13
West Bengal 450 1.10 0.01
Others 1.60 0.02
TOTAL 45195 8738.67 100.00

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3.1 Wind Power Scenario - Tamil Nadu
The harnessing of wind energy is highest in Tamil Nadu with an installed capacity
of 3857 MW, contributing 44.14% of the country’s total installed capacity of around 8739
MW as on 31.3.2008. The following locations are endowed with favourable wind flow:-
Name of the Areas
Passes/Districts
Palghat Coimbatore, Erode and Dindigul
Shencottah Tirunelveli and Tuticorin
Aralvoimozhi Kanyakumari, Radhapuram and Muppandal
Theni District Theni, Cumbum and Andipatty
Sea coast Uvari, Tuticorin, Rameswaram, Poompuhar and Ennore

The year wise capacity addition in Tamil Nadu over the past 10 years is furnished below:

Tamil Nadu - Year wise capacity addition

Period Wind capacity

addition in MW
Up to 1992 22.31
1992-93 11.07
1993-94 50.47
1994-95 190.87
1995-96 281.68
1996-97 119.77
1997-98 31.14
1998-99 17.77
1999-00 45.68
2000-01 41.90
2001-02 44.90
2002-03 132.80
2003-04 371.30
2004-05 675.40
2005-06 857.60
2006-07 565.00
2007-08 397.11
Total as on 31.3.2008 3856.77

The steady increase in capacity addition of wind power generation in Tamil Nadu
is mainly attributed to the favourable meteorological and topographical conditions and
the policies of the State that encourage NCES.

43
3.2 Generation – Demand gap in Tamil Nadu
The generating capacity connected to TNEB’s grid including the allocation from
Central Generating Station is 10122.55 MW as on 31.03.2008 comprising 2970 MW
from TNEB’s four thermal stations, 424 MW from four gas turbine stations, 2187 MW
from 33 hydro stations, 17.55 MW from TNEB’s wind farm, 1180 MW from private sector
power projects, 214 MW as contribution to Tamil Nadu grid by sale of electricity from
captive generating plants, 2825 MW as Tamil Nadu’s share from central generating
stations and 305 MW as external assistance.
Generating capacity from privately owned wind farms is 3839 MW. The installed
capacity of cogeneration in sugar mills is 451.6 MW and biomass power project is
104.85 MW.
The average power availability during 2008-09 is around 8000 MW while the
peak demand is around 9500 MW which leaves a deficit of around 1500 MW. Since the
infirm wind generation contributes about 15% to 20% of the peak demand during wind
season and TNEB has no standby capacity to take care of this infirm power fully, in case
of unexpected meteorological changes, the deficit goes up to 2000 MW. This deficit is
likely to increase in the next few years since the capacity addition is expected to be less
than the projected increase in demand. Therefore, any addition of wind power
generation will help the State to a great extent to tide over the shortage of power
prevailing in the State.

4.0 APPLICABILITY OF PROPOSED ORDER

In line with the Commission’s order No: 3 dated 15-05-2006, the proposed order
shall come into force from the date of its issue. The tariff fixed in the proposed order
shall be applicable to all the WEGs commissioned on or after the date of this order. It
should be noted that the existing contracts and agreements between WEGs and the
distribution licensees signed prior to this order would continue to remain in force.
However, the WEGs and the distribution licensees shall have the option to mutually re-
negotiate the existing agreements / contracts in line with this order before the expiry of
the contracts / agreements. Any renewal of the said contracts / agreements, new
contracts / agreements shall be in conformity with this order. The tariff would be with
reference to the date of commission and the rate in force on that day.

44
5.0 Definitions.
(a) “Firm Power” means injecting of atleast 700 units into the grid by the generator per
hour per scheduled MW. [This calculation is based on a normative load factor of 70%
(i.e. 1000 kWh x 70% Load Factor = 700 units per hour)].
(b) “Infirm Power” means the energy supplied that is not firm power, which is
interruptible on a very short notice.

6.0 TARIFF DETERMINATION PROCESS

With regard to tariff determination process, the relevant portion of Regulation 4 of
the Power Procurement from New and Renewable Sources of Energy Regulation, 2008
are reproduced below:
The Commission shall follow the process mentioned below for the determination of tariff
for the power from new and renewable sources based generators, namely;-
e) initiating the process of fixing the tariff either suo motu or on an application filed
by the distribution licensee or by the generator.
f) inviting public response on the suo motu proceedings or on the application filed
by the distribution licensee or by the generator.
g) conducting public hearing on the above.
h) issuing general / specific tariff order for purchase of power from new and
renewable sources based generators.
The Commission in its order dated 19-09-2008, against the petitions M.P. Nos. 9, 14
& 23 of 2008 filed by Indian Wind Energy Association (InWEA) and others, have ordered
that “the prayer for revising the tariff for the NCES generators would be considered by
the Commission separately”. In accordance with the above order, the Commission has
prepared this consultative paper to elicit the views and suggestions of the stake holders.

7.0 TARIFF / PRICING METHODOLOGY

The relevant portion of Tariff / Pricing Methodology as specified in Regulation 4
of the Commission’s above said Regulation is reproduced below.
(2) While deciding the tariff for power purchase by distribution licensee from new and
renewable sources based generators, the Commission shall, as far as possible, be guided
by the principles and methodologies specified by:
(a) Central Electricity Regulatory Commission
(b) National Electricity Policy
(c) Tariff Policy issued by the Government of India
(d) Rural Electrification Policy
(e) Forum of Regulators (FOR)
(f) Central and State Governments

45
(3) The Commission shall, by a general or specific order, determine the tariff for the
purchase of power from each kind of new and renewable sources based generators by the
distribution licensee………..

Provided where the tariff has been determined by following transparent process of
bidding in accordance with the guidelines issued by the Central Government, as provided
under section 63 of the Act, the Commission shall adopt such tariff.

(4) While determining the tariff, the Commission may, to the extent possible consider to
permit an allowance / disincentive based on technology, fuel, market risk, environmental
benefits and social impact etc., of each type of new and renewable source.

(5) While determining the tariff, the Commission shall adopt appropriate financial and
operational parameters.

(6) While determining the tariff the Commission may adopt cost plus single part average
tariff which can be reviewed later.

7.1 Preferential tariff or by bidding process

At this juncture it is relevant to discuss the following stipulations of National Tariff
Policy which are reproduced below:
Section 6.4(1): Pursuant to provisions of section 86(1)(e) of the Act, the appropriate
Commission shall fix a minimum percentage for purchase of energy from such sources
taking into account availability of such resources in the region and its impact on retail
tariffs. Such percentage for purchase of energy should be made applicable for the tariffs
to be determined by the SERCs latest by April 1, 2006. It will take some time before non-
conventional technologies can compete with conventional sources in terms of cost of
electricity. Therefore, procurement by distribution companies shall be done at
preferential tariffs determined by the appropriate Commission.

Section 6.4(2): Such procurement by distribution licensees for future requirements shall
be done, as far as possible, through competitive bidding process under Section 63 of the
Act within suppliers offering energy from same type of non-conventional sources. In the
long-term, these technologies would need to compete with other sources in terms of full
costs.
It is a fact that wind energy is becoming a major alternate source of green power.
However, the capital cost and the cost of generation are still higher than coal based
generation. It is felt that it will take some more time before wind energy technology can
compete with conventional sources in terms of cost effectiveness. Therefore, the
Commission propose that wind energy procurement by distribution licensees shall be
done at preferential tariffs as determined by the Commission as per 6(4) (1) of the tariff
policy.

46
 However, the Rajasthan Electricity Regulatory Commission has specified vide its
order dated 9-3-2007 that, after 31-3-2009, the wind power tariff could be adopted based
on competitive bidding. Tamil Nadu has seven times more installed capacity of WEGs
than Rajasthan.
Suggestions are invited on the above issue.

7.2 Market Determined Pricing

In a free market, where there is perfect competition, market determines the price.
But there is a shortage of power in the State and this is likely to continue for a few more
years. There is good reason to believe that market driven pricing mechanism may be
difficult to apply in the case of wind power. Under market determined prices, the buyer of
power would opt for merit-order dispatch and purchase power from the cheapest source.
Wind power is infirm in nature and it cannot be precisely dispatched with present
technology. Wind power is mainly dependent on wind season and flow pattern. These
factors make market pricing of power purchase from WEGs difficult.

7.3 Project Specific or Generalized Tariff

A Generalized tariff mechanism would provide incentive to the investors for use
of most efficient equipment to maximize returns and for selecting the most efficient site
while a project-specific tariff would provide each investor, irrespective of the machine
type and the site selected, the stipulated return on equity which, in effect, would shield
the investor from the uncertainties involved in CUF due to machine type and the site
location. In Tamil Nadu, so far, no wind farm developer has moved the Commission for
project specific generation tariff. Capacity of most of the generators is limited to a few
MWs. It is not advisable to adopt project specific tariff in such a context. It is suggested
that the Commission may issue a generalized tariff order for WEG. It is proposed that
whenever there is a petition from large wind farms the Commission may consider project
specific tariff order.

7.4.0 Cost-Plus Tariff Determination

Cost-plus tariff determination is a more practical method. It can be easily
designed to provide adequate returns to the investor and a surety of returns will lead to
larger investment in wind power generation. It is also in line with Regulation 4(6) of
“Power Procurement from New and Renewable Sources of Energy Regulations 2008”.

47
7.4.1 Single Part vs. Two Part Tariff
Two part tariff is applied in order to recover fixed and variable costs through the
fixed and variable components of tariff. Since the question of fuel does not arise for
WEGs, all the costs of wind electric generators are considered to be fixed. There may be
some variation in CUF, O&M costs, Insurance cost etc. This will be appropriately
addressed by adopting suitable discount/escalation factors. Therefore, the “single part
tariff” is considered more suitable for wind power than a two part tariff. It is also in line
with Regulation 4(6) of “Power Procurement from New and Renewable Sources of
Energy Regulations 2008”.

7.4.2 Cost plus single part average tariff

In the Commission’s order No. 3 dated 15-5-2006, the Commission adopted the
“cost plus single part average tariff”. This tariff order was challenged by Wind Power
Producers Association before the Appellate Tribunal for Electricity (ATE). The ATE in its
order dated 18-12-2007 against the appeal No 205/2006 and 235/2006 have directed
the Commission that “the tariff for the wind power producers be re-determined
within the next two months by taking into consideration the time value of money”.
The order of the ATE was challenged by the Commission and the TNEB before the
Hon’ble Supreme Court and the Hon’ble Supreme Court in its order dated:03-03-2008
(against appeal Nos: 1361-1362 0f 2008) have stayed the order of the ATE. The
Commission’s contention is that in lieu of the time value of money, care has been taken
by providing de-rating of CUF @ 1% every year after 10 years, grouping of existing and
proposed WEGs in two categories and escalation of O&M charges @ 5% every year
after five years. Regulation 4(2) (6) of the Commission’s “Power Procurement from New
and Renewable Sources of Energy Regulation 2008” proposes “cost plus single part
average tariff”. It is proposed to adopt the same in the ensuing tariff order.
Other alternative is to arrive at a base tariff taking into account the existing financial
parameters and escalate it every year as done by the Maharashtra Electricity Regulatory
Commission. This may also resolve the control period issue.
Suggestions/comments are invited from the stake holders in this regard.

8.0 TARIFF COMPONENTS

The above said Regulation of the Commission specifies that while determining the
tariff, the Commission shall adopt appropriate financial and operational parameters. The

48
tariff, if determined in a cost-plus scenario, would depend significantly on the following
operating and financing parameters. The key drivers of cost are:
• Capacity Utilization Factor
• Capital investment
• Life of plant and salvage value
• Depreciation rate applicable
• Operation and maintenance expenses
• Insurance expenditure
• Debt-equity ratio
• Interest costs on debt (cost of loan / debt)
• Term of Loan
• Return on equity
• Control Period
• CDM Benefits
• Power Evacuation facilities
Each of the above parameters is discussed below in detail.

8.1 Capacity Utilization Factor (CUF)

The CUF depends on several factors such as wind velocity, air density, power
law Index, capacity and performance of the machines, age of the machines, height of the
hub, and length of the blade. The Commission has the location-wise, machines-wise
CUF data for the new machines commissioned up to 31-03-2006, collected for the last
tariff order. Location-wise, machines-wise CUF data has been collected from TNEB for
the new machines commissioned after 15-5-2006. Data on the potential development
areas and capacity were also obtained from TNEB. The average CUF for the proposed
WEGs expected to be installed in the potential area during the control period works out
to be 27.15 and the same is proposed to be considered for tariff calculation.

8.1.1 De-rating factor for WEGs

With regard to fixing of de-rating factor for wind machines, the following parameters
have to be considered.
1. Reduction in wind availability,
2. Ageing of wind machines.

49
 Commission in Order No.3 dated 15-05-2006 fixed the de-rating factor of 1% every
year after 10 years of operation. The Commission proposes to adopt the same for the
proposed tariff revision.
The Indian Wind Power Association (IWPA) has represented to the Commission that
most of the machines commissioned before 15.05.2006 are of smaller capacity having a
low hub height and the average PLF of these machines has come down to 17% in 2007-
08 from 21% in 1999-2000.
In this connection, the Commission has decided to collect exhaustive data from the Wind
Mills Association as well as TNEB and then take a view.

8.2 Capital Investment

In Order No.3 dated 15-5-2006, for the Group I WEGs commissioned before 15-
5-2006, a capital cost of Rs 4.50 Crores per MW was adopted by the Commission. For
the Group II Wind power projects commissioned after 15-5-2006, a capital cost of Rs
5.0 Crores per MW was adopted. In the round table meet, experts and developers have
suggested capital cost in the range from Rs. 5.5 Crores to Rs 6.2 Crores per MW for
which there is no authenticity or evidence of any bid evaluated documents. The capital
costs assumed by the other Commissions against the year of their orders are tabulated
below.
Name of Date of the order Capital cost in Rs
the ERC Crores per MW
GERC 11-8-2006 4.65 (including
evacuation)
KSERC 24-6-2006 and upheld in 27-2-2008 4.4
MPERC 21-11-2007 4.60
RERC Original order on 29-9-2006 and confirmed vide 4.22
order 09.03.2007
HERC 15-5-2007 4.3
KERC 18-1-2005 4.25
MERC 24-11-2003 upheld in 16-8-2006 and 6-5-2008 4
Among the above orders, the latest order was issued
on 21-11-2007 by the MPERC. They have considered a capital cost of Rs.4.60 Crores.
The previous order was issued by the HERC, which has considered a capital cost of
Rs.4.3 Crores. The Centre for Wind Energy Technology (C-WET), Government of India,
in their website, has reported that capital cost ranges between Rs.4.5 Crores to Rs.5.5
Crores per MW, depending on the site and the type of wind electric generator selected
for installation. The website of TEDA quotes a capital cost of Rs.5 Crores to Rs.6

50
Crores per MW. The website of Indian Wind Turbine Manufacturers Association
suggests a capital cost of Rs.6.5 Crores per MW. Mr.K.P.Sukumaran, Advisor, Ministry
of New and Renewable Energy Sources, Government of India, recommended a capital
cost in the region of Rs.5.5 – 5.75 Crores per MW at the round table conference held on
16-07-2008. The Chairman and Managing Director of Indian Renewable Energy
Development Agency, New Delhi in his letter dated 2-12-2008 and the Ministry of New
and Renewable Energy, Government of India in their letter dated 8-12-2008 have stated
that the average capital cost is Rs.5.60 Crores per MW. The Commission proposes to
adopt a figure of Rs.5.60 Crores per MW as the capital cost. The capital cost adopted
by the Commission in order No.3 dated 15-5-2006 included infrastructural development
charges of Rs.25 lakhs per MW. This charge of Rs.25 lakhs has been struck down by
the Commission on 19-09-2008 in M.P.No.27 of 2008 filed by the Indian Wind Energy
Association. Setting off Rs.25 lakhs against the capital cost of Rs.5.60 Crores, the
Commission arrives at a figure of Rs.5.35 Crores per MW as the capital cost.
8.3 Life of Plant
In Order No.3 dated 15-5-2006, the Commission considered the plant life as 20
years. Most of the Commissions have adopted a plant life of 20 years for tariff
determination purpose. The Commission considers it reasonable to retain the plant life of
20 years for the proposed tariff revision.
8.4 Depreciation Rate
For the purpose of tariff determination, it is prudent to assume depreciation by
the Straight Line Method (SLM) wherein the asset life is to be depreciated to a residual
value of 10% of its initial value over the entire asset life of 20 years. This translates to an
SLM depreciation rate of 4.50 % per annum. In Order No.3 dated 15-5-2006, the
Commission have considered the depreciation rate of 4.50 % per annum. The
Commission proposes to retain the same rate for the proposed tariff order.
Depreciation rates adopted by other Commissions are listed below.
Name of the Commission Rate of Depreciation adopted
4.5% (90% divided by 20
GERC years which is the expected life of the project
4.5% (90% divided by 20
KSERC years which is the expected life of the project
Depreciation @ 7% per annum for first 10 years and balance
20 % is to be depreciated @ 2% per annum in the next 10
MPERC years so that the asset is depreciated to a residual value of 10
% of its initial value
KERC 7% per annum under SLM

51
8.5 Operation and Maintenance Expenses
The Commission in Order No.3 dated 15-5-2006 has stipulated 1.10% of the
capital cost of the project as O&M expense for the first five years, which would be
increased thereafter with a simple escalation of 5% per year. In the round table meet
O&M expense of 1.8% to 1.9% have been suggested. One of the views expressed in the
round table conference is that the O&M cost is increasing with the increase in cost of
consumables hence it has to be reasonably escalated for the life span of the machine.
The O&M expense assumed by other Commissions are tabulated below.

Name of the ERC O&M Expenditure as Percentage of Capital Cost

GERC 1.5% with 5% escalation
KSERC 1.3% with 4% escalation
MPERC 1 % for the first 5years; thereafter simple escalation of 5%
RERC 1.25% with an escalation of 5% per annum
KERC 1.25% with an annual escalation of 5%.
MERC 1.5 % for 3 years; 2% for 4th year and 5% escalation there after

The O&M costs adopted by the other Commissions are slightly higher than the
O&M cost adopted by TNERC. But TNERC considers a separate insurance cost of
0.75% which is not considered by most of other Commissions. Taking into account the
insurance cost the O&M charges adopted in Commission’s order No:3 dated 15-05-2006
is quite reasonable. Since a higher capital cost has been considered for the next control
period resulting in higher allocation of money for the O&M expenses, the Commission
proposes to retain the procedure followed in the Commission’s tariff order dated
15-5-2006 towards allocation of O&M expenses.

8.6 Insurance charges

The Commission in Order No.3 dated 15-5-2006 adopted an insurance rate of
0.75% on the project cost for 5 years and reduction of 0.5% every year thereafter. Since
the insurance premium is charged in proportion to the net worth of the machine after
deducting the depreciation every year, the Commission proposes a insurance rate of
0.75% on the project cost for the first year and reduction of 0.5% every year thereafter.
Suggestions are invited.

52
8.7 Debt-equity ratio
As per the guide lines specified in the tariff policy for financing of future capital
cost of projects, a debt : equity ratio of 70:30 should be adopted. A debt-equity ratio of
70: 30 has been considered in the Commission’s Order No.3 dated 15-5-2006. This ratio
has been adopted by most of the Commissions. It is proposed to retain the same for the
proposed tariff revision.
8.8 Interest Costs on Debt
Interest on term loan was assumed as 9 % for all categories as per IREDA norms
for renewable energy projects in the last tariff order of the Commission. It was reported
in the round table conference that the interest rate of IREDA has risen to 12%. The other
experts and developers have reported an interest rate of 13% to 14%. Interest rates
adopted by the other commissions are tabulated below.
Name of the ERC Interest rate adopted
GERC 9%
KSERC 9%
MPERC 11%
RERC 10%
KERC 11%
MERC 12.5%
The Commission proposes an interest rate of 12% recommended by the IREDA. The
investor is free to avail a cheaper loan, if available.
8.9 Term of Loan
IREDA loans are available with the term structure of 10 years with a moratorium
of one year. In Order No.3 dated 15-5-2006, the Commission have considered the terms
of loan of 10 years with one year moratorium. The Commission proposes to retain the
same terms of loan for the next tariff order.
8.10 Return on Equity (RoE)
The Commission in Order No.3 dated 15-5-2006 stipulated the RoE of 16% pre-
tax. In the round table meet a RoE of 16% post tax (IRR of 12% to 14%) has been
suggested. ROE adopted by the other commissions are tabulated below.
Name of the ERC ROE adopted
GERC 14% post tax
KSERC 14% post tax with MAT at 10.1% on ROE
MPERC 16% pre tax
KERC 16% post tax with MAT at 7.5% on ROE
MERC 16% pre tax
HERC 16% pre tax

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The Tariff Regulations of the Commission stipulate 14% post tax RoE for conventional
fuel based generating stations. With the objective of promoting wind based power
generation, the Commission proposes to adopt the same rate of 14% post tax. The
corresponding pre tax RoE would be 17.63% at the current rate of corporate and income
tax.

8.11 Tariff Rate

The financial and operating parameters proposed in the paper and the projected
cost plus single part average tariff for 20 years for new wind energy projects are
tabulated below.
Values proposed in the paper for the financial and
Description of
operating parameters and the cost plus single part
financial and
average tariff worked out for 20 years for the new WEGs
operating parameters
to be Commissioned in the new control period
Capacity Utilization
27.15% and de-rating @1% for every year after ten years
Factor
Life of the machine 20 years
Project Capital cost Rs 5.35 Crores
Debt: Equity ratio 70:30
Interest on Loan 12.00%
Return on Equity 17.63% Pre-Tax
Loan Repayment
10 years with 1 year moratorium period
period
1.10% of capital cost with escalation of 5% per year after 5
O&M Charges
years.

Depreciation 4.5% Straight Line Method

Residual Value 10% of capital cost.
0.75% of capital cost in the first year with reduction of 0.5%
Insurance
every year thereafter
Cost plus single part
average tariff for 20 Rs.3.40 per kWh
years

As regards revision of rates for Group I and Group II WEGs, the Commission retains the
rates for the present and has decided to collect exhaustive data on decline of efficiencies
of old WEGs, de-rating the CUF of old WEGs etc. from the Wind Mills Association as
well as TNEB and then take a view.

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8.12 Tariff Review Period / Control Period
With regard to tariff Review Period / Control Period, the specific provisions of the
Regulations on “Power Procurement from New and Renewable Sources of Energy,
2008” are reproduced below:
6. Agreement and Control period
The tariff determined by the commission in the tariff order shall be
applicable for the power purchase agreement period of twenty years. The
control period may be three years. When the Commission revisits the
tariff and allied issues after the control period, the revision shall be
applicable only to the generator of new and renewable energy sources
commissioned after the date of such revised order.

In Order No.3 dated 15-5-2006, the Commission fixed a control period of three
years. The Commission in its order dated 19-09-2008, against the petitions M.P. Nos. 9,
14 & 23 of 2008 filed by Indian Wind Energy Association (InWEA) and others, have
decided that “the control period of three years as specified in Order No. 3 dated
15.05.2006 is waived from the date of issue of this order”. In the round table meet,
revised control period with escalation indexing mechanism was suggested. It has also
been recommended to reduce the control period to two years or one year considering
the vast increase in the input costs. Considering all the above, the commission proposes
to reduce the control period from three years to two years.
Other alternative is to arrive at a base tariff taking into account the existing
financial parameters and escalate it every year for ten years or 20 years as done by the
Maharashtra Electricity Regulatory Commission. This may resolve the control period
issue.
Suggestions/comments are invited from stake holders in this regard.

8.13 CDM Benefits

In the international market, one CER (Certified Emission Reduction) is being
traded around 25 US dollars (This may vary from time to time depending upon the
demand and supply of CERs). As per the base line emission data provided by the
Central Electricity Authority for the Indian Grid, WEGs may receive CDM benefit of
around one rupee per kWh. Regarding the sharing of this benefit, the guide lines
specified in the National Tariff Policy is reproduced below.

55
 5.0 GENERAL APPROACH TO TARIFF
(i) Benefits under CDM
Tariff fixation for all electricity projects (generation, transmission and
distribution) that result in lower Green House Gas (GHG) emissions than
the relevant base line should take into account the benefits obtained from
the Clean Development Mechanism (CDM) into consideration, in a
manner so as to provide adequate incentive to the project developers.

The formula adopted by the other Commissions to share CDM benefits is tabulated
below.
Name of ERC Share of CDM by WEG Share of CDM by
Distribution Licensee
GERC 75% 25%
RERC 75% 25%
KERC 100% 0%

The Commission proposes 50% share of CDM benefits to the generators in line with
the Tariff Policy. The balance 50% CDM benefit will be equally shared by the STU and
distribution licensee. STU and distribution licensee shall account for the CDM receipts in
the next ARR filing.

8.14 Minimum purchase requirements

With regard to fixing of minimum purchase requirement from NCES, the following
important factors have to be considered.
¾ Total quantum of energy required for the State
¾ Total potential for renewable energy generation in the State
¾ Quantum of renewable energy being generated
¾ Power purchase tariff for renewable energy
¾ Firm or infirm nature of the NCES power
¾ Quantum of penetration of NCES power and its impact on the grid
¾ Commercial impact on retail tariffs due to purchase of renewable power
In Order No.3 dated 15-5-2006, the Commission fixed 10% as the minimum
percentage of power each distribution licensee shall purchase from NCES sources out of
his total consumption in his area of supply as required by Section 86(1)(e) of the Act. As
per the data furnished by TNEB for 2007-08, energy available for sale by TNEB is 64430
MU out of which the contribution from NCES is 7507 MU. Assuming that TNEB buys

56
35% of the total wind energy generated, it constitutes only 4.08% of TNEB’s total
consumption. The Commission proposes to fix 7.5% as the minimum purchase
obligation by the distribution licensee in the next tariff order. There are few other related
points open to discussion in this issue. They are:

1. NCES power injected into the TNEB grid is 7507 MU. Had there been no wheeling of
NCES power to the HT services from NCES, TNEB have to purchase equivalent
quantum of power from other sources to supply to those HT services due to shortage of
power in the State. Therefore, there are suggestions that wheeling of power also could
be reckoned as purchase for consumption in the distribution licensee’s area. In that
case, the present NCES share of licensee’s consumption constitutes 11.65% instead of
4.08%. In such a case, the minimum purchase obligation needs to be enhanced to 15%.

2. Basically, wind power is an “infirm power”. Its penetration beyond certain limit may
affect the grid stability especially when there is no adequate spinning reserve in the
Southern Regional Grid. In the prevailing power shortage situation, when there is no
adequate spinning reserve, will it be appropriate to fix the minimum purchase obligation
based on the wind power penetration?

3. As per Section 86(1) (e), the Commission shall specify;

……for purchase of electricity from such (NCES) sources, a percentage of the

total consumption of electricity in the area of a distribution licensee.

The Act does not specify whether the percentage is minimum or maximum. Should we
fix a maximum or a minimum? Should we fix a total percentage for all the NCES power
put together or category wise percentage?
Suggestions are invited on the above points.

8.15 Reactive Power Charges

Due to its inherent characteristics, most of the WEGs are prone to draw reactive
power from the grid if adequate power factor correction is not provided. During the wind
season, the WEGs contribute around 15-20% of the grid demand and grid stability will
be at risk if we allow the WEGs to draw more reactive power from the grid. The
Commission in Order No.3 dated 15-5-2006 stipulated a charge of 25 paise / kVARh for

57
the WEGs who draw reactive power up to 10% of net active energy generated. In order
to curtail the WEGs who draw more than 10% of net active energy generated, as a
deterrent, the Commission in the said Order imposed a charge of 50 paise per kVARh
considering its negative impact on the grid. It is proposed to retain the same for the next
tariff order. Reactive energy charges adopted by the other Commissions are tabulated
below.
Name of the ERC Reactive energy charges
APERC 10 paise per kVArh upto 10% of active power supplied & 25
paise per kVArh above 10%
GERC 10 paise per kVArh up to 10% of active power supplied & 20
paise per KVArh above 10%
RERC 5 paise per year w.e.f. 01/04/2006 with escalation of 5% per year
MPERC 27 paise per kVArh
KERC Rs. 0.40 Per kVArh
MERC 25 paise per kVArh

8.16 Cross subsidy surcharges

The present order of the Commission stipulates the same cross subsidy
surcharge both for generation from conventional sources as well as renewable sources.
Gujarat Electricity Regulatory Commission has proposed to eliminate the cross subsidy
surcharges for generation from renewable sources. Certain Commissions such as
Maharashtra, Utter Pradesh and Andhra Pradesh have totally done away with cross
subsidy surcharges for generation from both conventional and renewable sources. The
following tabulation is illustrative:
Cross subsidy surcharge in Cross subsidy surcharge in
State rupees for generation from rupees for generation from
conventional sources renewable sources
Maharastra Nil Nil
Gujarat 1.00 1.00
0.37* (draft order issued) Nil * (draft order issued)
Utter Pradesh Nil Nil
Andhra Pradesh Nil Nil

TNEB has filed a petition with the Commission to temporarily relinquish cross
subsidy surcharge for third party purchase by the industrial and commercial consumers
in the State. In order to promote generation from renewable energy sources, the
Commission proposes to determine the cross subsidy surcharge at 50% of the level
prescribed for generation from conventional energy sources.

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8.17 Evacuation Facilities
With regard to evacuation facilities the guide lines specified in the Regulations on
“Power Procurement from New and Renewable Sources of Energy, 2008” are
reproduced below:
3(3) Evacuation facilities shall be provided by the State Transmission Utility (STU)
/Distribution licensee as per the Commission’s Intra State Open Access Regulations
2005, Central electricity Authority (Technical Standards for connectivity to the Grid)
Regulations, 2006 and Tamil Nadu Electricity Grid Code. The cost of interfacing lines,
switch gear, metering, protection arrangement and related other equipments up to the
interconnection point shall have to be borne by the generators, but the work shall be
executed by STU/distribution licensee. The developer may be permitted to execute the
works as per the terms and conditions of the STU/Licensee.

Provided that, in the case of sale of entire power to the distribution licensee by any new
and renewable source based generator, the cost of interfacing lines up to the
interconnection point shall have to be borne only by the STU/ distribution licensee.

Provided further that in case where the new and renewable source based generator
referred to in the first proviso who has entered into an EPA with the distribution licensee
referred to therein for the sale of entire power to the said distribution licensee decides to
use such power agreed to be sold to the said distribution licensee, for his captive use or
for sale of such power to a third person or to a distribution licensee other than the
distribution licensee referred to above before the expiry of the period referred to in such
EPA, then he shall be bound to reimburse the entire cost of interfacing lines to the
distribution licensee with whom he has executed such EPA, before the wheeling of power
to his captive use or sale to third person or distribution licensee other than the
distribution licensee with whom the said EPA has been executed by him”

In addition to the above stipulation, the Commission proposes the following procedure
for the next tariff order in line with the previous order.
a. STU shall within thirty days of receipt of application from WEGs, intimate whether
or not long term access can be allowed without further system strengthening.
b. If further system strengthening is essential, the results of the study conducted by
the STU based on the request of WEGs shall be intimated within ninety days of
such request of WEGs
c. Feasibility based on the system studies shall be established at the earliest possible
but not later than six months.
d. Clearances, approvals, certificate, if any, required by WEGs shall be issued within
a month’s time.

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e. The distribution licensee/STU shall provide the shortest but reliable transmission
facilities.
f. No compensation shall be provided to the WEGs by the distribution
licensee/STU for deemed generation benefits in case the transmission
facility of the distribution licensee/STU fails due to reasons beyond their
control.

8.18 Metering and Communication Arrangements

It is proposed to adopt the following procedure in the next tariff order.
(1) The metering and communication arrangements shall be provided in accordance with
the Commission’s Intra State Open Access Regulations 2005 and Central Electricity
Authority (Installation and Operation of Meters) Regulations, 2006 in consultation with
Distribution Licensee/STU. The periodicity of testing, checking, calibration etc., will be
governed by the Regulations issued by the Central Electricity Authority / Commission in
this regard.

(2) Main and Check Meters shall have facility to communicate its reading to State Load
Dispatch Centre on real time basis or otherwise as may be specified by the Commission.
Meter reading shall be taken as per the procedure devised by the TNEB/SLDC.

(3) The term ‘Meter’ shall include Current transformers, voltage/potential transformers,
wiring between them and meter box/panel etc.

8.19 Energy Purchase Agreement

Commission’s Regulation on “Power Procurement from New and Renewable
Sources of Energy, 2008” stipulates the following regarding the period of agreement.
Agreement and Control period
The tariff determined by the commission in the tariff order shall be applicable for
the power purchase agreement period of twenty years………………………
Since the agreement period is twenty years, the terms and conditions including the
purchase rate, as stipulated in the ensuing tariff order will continue to be applicable till
the end of the agreement period of twenty years. The NCES generator shall sign an
Energy Purchase Agreement (EPA) with the distribution licensee for a period of twenty
years for sale of power. The distribution licensees shall draft an EPA taking cognizance

60
of the tariff provisions and EPA related principles elaborated in this order and file a
model EPA for approval of the Commission. The parties to the agreement should
execute the agreement as per the Commission’s approved PPA. The distribution
licensee should sign the EPA within one month from the date of submission of the
application with all relevant details for such an agreement by the WEGs. The agreement
shall include a clause for penalty in case the developer winds up his operation before the
twenty year power purchase agreement period. The Distribution licensee shall pay the
required fee for each PPA executed as specified in the Commission’s Fees and Fines
Regulation. The application fee and registration fee are specified in the Commission’s
Open Access Regulation. The issues for discussion are:
1. What penalty should be imposed in case the developer winds up his operation
before the twenty year power purchase agreement period?
2. Should a clause in the PPA be included to break out of the PPA by either party
after giving three months notice?
3. If so, what should be the terms and conditions for termination?
Suggestions are invited.

8.20 Payment Security to the WEGs to be provided by distribution licensee

Clause 6.2 of the National Tariff Policy calls for adequate and bankable payment
security arrangements to the generating companies. On the same lines, the
Commission, in Order No.3 dated 15-5-2006 stipulated that a bankable security in favour
of the generator for an amount equivalent to the average monthly bill shall be opened by
the distribution licensee if required by the generator, in case an EPA is signed for power
purchase between distribution licensee and the generator. The Commission proposes to
retain the same procedure for the ensuing tariff order.

8.21 Billing and Payment to NCES generator by the Distribution Licensee

The Commission in Order No.3 dated 15-5-2006 stipulated that in case of NCES
generators selling power to distribution licensees, the generator will raise the bill every
month for the net energy supplied after deducting the charges for start up power,
reactive power charges, etc as per this Order. The distribution licensee shall make
payment to the generators within the same period prescribed for recovery of dues from
the HT industrial consumers. It has been proposed to adopt the same procedure in the
next tariff revision for WEGs. After the unbundling of TNEB, procedure for energy

61
accounting will be devised by the SLDC in accordance with Tamil Nadu Electricity Grid
Code (TNEGC) and submitted for approval of the Commission.
9.0 ISSUES RELATED TO CAPTIVE USE AND THIRD PARTY SALE

9.1 Grid Availability Charges

Outage of the generator and providing start up power by the Licensee is a routine
and frequent necessity for the WEGs. This shall be dealt with under unit to unit
adjustment basis.

9.2 Applicable Energy Charges

When the generator is synchronized with the grid, energy charges shall be
payable by the wind energy user, for the units supplied by the Distribution Licensee (i.e.
balance units arrived at after subtracting the units supplied by the generator from the
total consumption of the user during the billing month) at the applicable rate for that
category of user. The time of day consumption (ToD) shall be charged for the net
consumption only deducting the generated energy from the energy consumed during the
respective time slots.

9.3 Applicable Demand charges

In line with Order No.3 dated 15-5-2006, the applicable demand charges are
proposed as below:-
In addition to energy charges stipulated above, the wind energy user shall pay
applicable demand charges as specified below:
There are 2880 time blocks of 15 minutes interval in a billing month. It is not feasible
to segregate precisely the quantum of demand supplied in each time block in the billing
month to the wind energy user by the generator and by the licensee distinctly. This
segregation may be computed by matching the demand recorded in each time block at
the generator end (A) with the demand recorded in the corresponding time block at the
wind energy user’s end (B) then
Case 1: If (B) is lesser than (A), it means there is no supply of demand by the licensee to
the wind energy user.
Case 2: If (B) is greater than (A), it means that there is supply of demand by the licensee
in that respective time block.

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 As per the tariff order dated 15-3-2003, a demand charge in a billing month by
any HT consumer is 90% of sanctioned demand or recorded demand which ever is
higher. As the demand is recorded at every 15 minutes time block, the recorded
demand will show the maximum demand recorded in any of the 15 minutes time slot in
that billing period of one month.

The probability of occurrence of case 1 is zero and the probability of licensee

supplying the demand in any one of the time blocks in a billing month as in case 2 is
100 percent. In such a scenario, whether the licensee is entitled to receive the demand
charges in full, even though the generator is also injecting the demand into the grid
continuously, needs to be addressed. There is no doubt that, all the fluctuation in the
generator end and user end are met by the licensee. However, the percentage of the
demand, injected by generator is also to be taken for consideration and to that extent,
the demand charges receivable by the Licensee is to be restricted.

Till a mechanism is put in place to ascertain the relation between the demand
generated in each of the 2880 fifteen minutes time blocks and the demand recorded at
the consumer end in the related time blocks, a reasonable approximation has to be
followed to arrive at the demand supplied by the generator. The probability of meeting
the demand of the wind energy user by the WEG and distribution licensee varies from
0% to 100 % for both the parties. Therefore, it is considered prudent to convert the
energy supplied by the WEG into an equated demand with reasonable approximations
as the deemed demand supplied by the WEG to the wind energy user as detailed below:

Average CUF assumed for tariff calculation 27.15%

In Tamil Nadu, out of total wind energy generated, about 65% of energy is being
adjusted for own use and 35% is being sold to TNEB. Therefore the proportionate CUF
for adjustment of energy for own use is = 27.15X 0.65 = 17.65%
The demand supplied by the wind energy generator = 17.65/ 0.9 = 19.61%
0.9 being the power factor to be maintained by the user
The demand charges payable by wind energy user will be calculated as below:
Total generated units consumed by the user divided by (30 X 24 X Actual PF recorded
during the billing month ) _________________A
Recorded demand (or) 90% of sanctioned demand, whichever is higher ___ B
The demand supplied by the Licensee (B – A) _____ C

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The demand charges payable by wind energy user = (A X 80.39% of applicable demand
charges) + (C X applicable demand charges)
For the present tariff applicable to HT Industry = (A X 0.8039 X 300) + (C X 300)
In line with such an approximation, a deemed demand concept is proposed.
The total demand of a wind energy user shall be reckoned as the recorded demand or
90% of the sanctioned demand whichever is higher. A wind energy user draws power
from two sources, namely wind energy generator and the licensee. In regard to the
power drawn from the wind energy generator, he shall pay demand charges at the rate
of 80.39% of the demand supplied by the generator. In regard to the balance demand
supplied by the licensee, he will pay the full demand charges.

9.4 Banking
In Order No.3 dated 15-5-2006, the Commission permitted one year (from April
to March) banking period for the WEGs with 5% banking charges. The banking charges
shall be deducted in kind during the billing of every month for the quantum of units
generated during the billing month minus consumption by the captive user end and/or
third party end. Slot wise banking is permitted to enable unit to unit adjustments for the
respective slots towards rebate/ extra charges. No carry over is allowed beyond the
banking period. Such unutilized portion is eligible for encashment at the rate of 75 % of
normal purchase tariff. The Commission proposes the same procedure for the next tariff
order. The banking charges adopted by the other commissions are tabulated below.

Name of the ERC Banking Period Banking Charges

GERC Not allowed ---
RERC 6 months ---
MPERC Not allowed ---
KERC --- 2% of energy input
MERC 12 months ----

9.5 Transmission & Wheeling charges and line losses

As fixed in the previous tariff order, the Commission proposes transmission and
wheeling charges of 5% in kind for WEGs which include the line losses. The
transmission and wheeling charges fixed as above will get reduced, if the point of
injection and point of drawal are in higher Extra High Voltages. Such cases shall be
specifically brought to the Commission’s notice and approval obtained.

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The transmission and wheeling charges adopted by the other commissions are tabulated
below.

Name of the ERC Wheeling Charges

GERC 4% of energy
RERC Below 132 kV, 50% of normal charges applicable to 33 kV
declared by commission + Surcharge + Losses
MPERC 2% of energy + transmission charges as per ERC order
KERC 5% of energy + Rs.1.15/kWh as cross subsidy for 3rd party sale.
MERC 2% of Energy as wheeling + 5% as T&D loss
APERC At par with conventional Power
WBERC 7% of energy + open access charges

9.6 Reactive Power Charges

The reactive power charges as proposed in this Order would also apply to
captive use and third party sales.

9.7 Evacuation Facilities

The evacuation facilities as proposed in this Order are applicable.

9.8 Adjustment of Peak / off Peak power

Order No.3 dated 15-5-2006 specifies the following.
Since all the generators and tied up users shall be provided with ToD meters, the
adjustment of energy shall be done on slot to slot basis within the banking period as
follows.
i. Peak hour generation with peak hour consumption
ii. Off-peak hour generation with off-peak hour consumption and
iii. The normal hour generation with normal hour consumption.

Units generated during a higher tariff ToD-slot could be consumed in a lower

tariff ToD slot at the option of generators/users, but the reverse would not be allowed.
The peak hour extra charges and off peak hour rebate shall be on net energy
consumption after deducting generation during the respective peak hour block and off
peak hour block. It is proposed to adopt the same procedure in the next tariff order.

9.9 PF incentive / disincentive.

Order No.3 dated 15-5-2006 specifies the following on the above issue.

65
The pf incentive / disincentive is applicable to all users on the current consumption
charges bill based on the gross energy and applicable demand as per this order.
However, the average pf recorded by the meter will be the reference for calculation of pf
incentive / disincentive. The Commission proposes the same procedure for the next tariff
revision.

9.10 Energy Wheeling Agreement (EWA)

Order No.3 dated 15-5-2006 specifies the following on the above issue.

The WEGs / third party buyer of power and the concerned distribution licensee
shall sign an EWA for the purpose of wheeling of power from the WEGs to the CGP user
/ third party buyer. The distribution licensees shall draft an EWA taking cognizance of the
energy wheeling principles elaborated in this Order and submit the same for the
approval of the Commission. The parties to the agreement shall adopt the format
prescribed by the Commission. The distribution licensee should execute the EWA within
one month from the date of submission of application with all relevant details for such
agreement by the WEGs or the third party purchaser, as the case may be.

The Commission proposes the same for the next tariff order. The issues for
discussion are:
1. Whether the tenure of the EWA should be same as that of the EPA signed with the
CGP holder / third party buyer.
2. Whether any exit provision should be specified in the EWA

9.11 Payment of Security Deposit

As specified in Order No.3 dated 15-5-2006, the Commission proposes that two
times of the maximum net energy supplied by the distribution licensee in a month in the
previous banking period shall be taken as the basis for the payment of security deposit
by the user to the distribution licensee. Suggestions are invited on whether the period
should be changed to one calendar year as specified in the Tamil Nadu Distribution
Code instead of the banking period.

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9.12 Restrictions on service category for Captive use / third party sale

The Act does not impose any restrictions for captive use / third party sale of
energy by a generator in regard to service category and numbers. The generator is at
liberty to adjust
the energy on unit-to-unit basis for captive use / third party sale in any category and to
any numbers of HT services. There are requests by the generators to adjust the power
in their LT services also. It is felt that with the present energy accounting facilities
available with TNEB/SLDC, it is difficult for the SLDC /TNEB to extend energy
accounting and billing facilities to the LT consumers. Therefore, the Commission
suggests that the adjustment may be restricted to HT services only. Suggestions are
invited on extending captive use/third party sale facilities to LT services.

9.13 Billing and payment procedure

Order No.3 dated 15-5-2006 specifies the following on the above issue.

In case of captive use / third party purchase, the distribution licensee shall raise the bill
after accounting for the net energy supplied at the end of each monthly billing cycle.
Meter reading should be taken on the same day at WEG end and captive user / third
party purchaser end. The generation at generator end shall be communicated to all the
circles of the captive users / third party purchaser within two days so as to facilitate for
matching generation with consumption in the same billing month. Unit to unit adjustment
will be done on slot to slot basis as specified in this order. Excess drawal will be charged
under respective tariff applicable to the user. The distribution licensee shall raise the bill
to the user after accounting for generation and consumption at the end of each monthly
billing cycle subject to recovery of transmission and wheeling charges including the
losses in kind. After the unbundling of TNEB, the procedure for energy accounting will be
devised by the SLDC in accordance with TNEGC and submitted for the approval of the
Commission. Suggestions are invited.

9.14 Other Open Access Charges

Other open access charges such as scheduling charges etc as specified in the
Commission’s Open Access Regulation and subsequent amendments issued from time
to time would be applicable.

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 Annexure – II

COMMENTS OF THE STAKE HOLDERS ON THE CONSULTATIVE PAPER

ON “POWER PROCUREMENT BY DISTRIBUTION LICENSEES FROM WIND
ENERGY GENERATORS AND ALLIED OPEN ACCESS ISSUES”

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 Annexure – II

COMMENTS OF THE STAKE HOLDERS ON THE CONSULTATIVE PAPER

ON “POWER PROCUREMENT BY DISTRIBUTION LICENSEES FROM WIND
ENERGY GENERATORS AND ALLIED OPEN ACCESS ISSUES”

1. APPLICABILITY OF THE PROPOSED ORDER

Thiru G.Ramakrishnan, Retired Chief Engineer/TNEB:- New tariff order shall be
applicable to WEGs commissioned on or after this date irrespective of whether tie up
approval or agreements is executed between the WEGs and Distribution Licensees
before this date.

Tamil Nadu Electricity Board:- The group 1 and group 2 WEGs have not come forward
to execute the Energy Purchase Agreement and Energy Wheeling Agreement so far as
per the order dated 22-05-2008 of the Commission. Hence, these WEGs are not eligible
for the proposed revision of the tariff.

2. ADJUSTMENT OF PEAK/OFF PEAK HOURS

M/s.Indian Wind Power Association:- Terminology used under this could be peak
hour, night hour and other hour as in practice now rather than peak hour, off peak hour
and normal hour.

M/s.Acciona Wind Energy Pvt. Ltd., Bangalaore:- For adjustment of Peak/Off peak
power, the practice being followed in Maharashtra should be followed.

Tamil Nadu Electricity Board:- Unit to unit adjustment need not be considered.
Interchanging of slots is not accepted by the Commission in order No.3 and the same
was reiterated in the orders on MP No. 7 of 2007 and hence adjustment has to be made
against the generation slots only.

3. BANKING

M/s.Indian Wind Power Association:- A major boost to the growth of the wind sector in
the State has been the provision for banking facility for a period of one year with 5%

69
banking charges in kind. The provision for payment of the unconsumed banked units at
75% of the procurement cost would be fair under normal circumstances, but not during
R&C period. TNEB should be asked to pay at least 100% of the procurement tariff for
wind power prevailing on the date to the investors irrespective of whether or not they
have signed the new agreement.

M/s.Tamilnadu Spinning Mills Association:- WEGs are not allowed to consume the
whole of energy produced at the consumption end owing to Restriction and Control of
Power Supply. Besides, the entire energy banked is also not allowed to be encashed.
Draft of EWA needs to be revised incorporating necessary provisions for the TNEB’s
failure to allow the consumer in not consuming the energy at his consumption end for
any reason attributable to TNEB.

M/s.Sri Amaravathi Spinning Mills, Karur:- Due to power cut, the WEGs are not able
to consume all the generated units and therefore requested the Commission that the
banked units must be purchased by TNEB at Rs.2.70 per unit.

M/s.Acciona Wind Energy Pvt. Ltd:- Banking should be allowed for 12 months but with
nil charges

M/s.Winwind Power Energy Private Limited, Chennai:- Banking charges should be

made nil as in case of States like Maharashtra.

Power Engineers Society of Tamil Nadu:- Banking may be permitted for one month
alone and balance energy shall be waived.

Tamil Nadu Electricity Board:- This was the concession extended to promote wind
energy in the early years. Now the bankable capacity has grown up to a significant
extent and even poses a problem to grid management during the period of deficit
situation. The banking facility should be restricted to one month instead of allowing
yearlong banking and the banking charges should be increased to 15%.

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4. Billing and payment procedure
M/s.Indian Wind Power Association:- Current provision of making payment to the
generators may be retained. Commission should prescribe penal charges for non
payment to the generators on due date and this should be made automatic. Commission
could fix the penal charge at the same rate at which the distribution licensee has been
collecting penal charges from HT consumers for non payment of bills.

M/s.Tamilnadu Spinning Mills Association:- Delay of more than 2 months is occurring

in every payment by TNEB. Hence, this provision should be more specific with an action
plan.

Tamil Nadu Electricity Board:- NLC and NTPC are offering 30 days time to TNEB for
payment of their monthly energy bills. Commission may also consider the period of 30
days for the payment of the wind energy bills in view of the processing time required at
the circles, lead time required between the indent for funds and allotment of funds for
payment at the circles.

Indian Renewable Energy Development Agency Limited:- Present practice of raising

the bill after accounting for generation and consumption at the end of each monthly
billing cycle subject to recovery of transmission and wheeling charges may be continued.

5. CAPITAL INVESTMENT

M/s.Indian Wind Power Association:- The following are the rates of per MW capital
cost for different manufacturers after deduction of Infrastructure Development Charges:-
Vetsas - Rs. 6.30 crores
Sriram Leitwind - Rs. 6.33 crores
Suzlon - Rs. 6.00 crores
Enercon - Rs. 5.50 crores

A simple average price of Rs. 6.00 crores per MW may be followed by the Commission.

M/s.Tamilnadu Spinning Mills Association:- Capital cost has to be revised at least by

another Rs.10 lacs and it can be taken as Rs.5.45 crores per MW, considering various
transaction costs.

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M/s.Indian Wind Energy Association:- Indexing mechanism may be considered as
specified by the Hon’ble Rajasthan Electricity Regulatory Commission as it automatically
adjusts the cost with the change in underlying tariff parameters.

M/s.Thiru G.Ramakrishnan:- The cost of Infrastructure Development Charges (IDC) of

Rs.25 Lakhs may be added to the cost of WEGs and may be fixed as Rs.5.60 crores
since the TNEB will not be in a position to lay the line required for evacuating the WEG
generated energy in time due to its own procedure of procuring materials required and
executing the lines.

M/s.Acciona Wind Energy Pvt. Ltd.:- The cost of modern large wind turbines is more
than Rs.6.5 crores/MW.

M/s.Winwind Power Energy Private Limited, Chennai:- The present day capital
investment cost for WEG is Rs. 7 Crores per MW and no WEGs available at the price of
5.35 Crores per MW, at present.

M/s.Indian Wind Turbine Manufacturers Association:- Due to steep increase in the

prices of metals, cement and transportation, the cost of wind energy projects have also
increased. Hence the Commission should take project cost of Rs.6.05 Crores/MW.

Thiru Singhan Ragu, Ooty:- With the advent of economic recession world over and the
technological advancement in wind turbine, there exists every possibility that the capital
cost of wind generation may come down.

Power Engineers Society of Tamil Nadu:- If the cost plus principle is adopted, the
capital cost shall be capped to Rs.4 crores per MW.

Tamil Nadu Electricity Board:- Cost of Rs.4 to 4.5 crores / MW may be considered as
the capital investment and the Commission may also form the ‘Expert Committee’ for
determining the capital cost of the wind machine. The Commission should investigate
the correct and actual cost of installing 1 MW of WEG before proceeding to work out the
tariff.

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Ministry of New and Renewable Energy:- A capital cost of Rs.5.5 to 5.7 crores per
MW may be considered. The capital cost may be linked to indexing mechanism for
provision of automatic revision of tariff.

Indian Renewable Energy Development Agency Limited:- The average project cost
per MW is worked out to Rs.5.61 crores which is based on the 36 applications received
at IREDA from April, 2007 to November, 2008 aggregating to 442.13 MW.

6. CLEAN DEVELOPMENT MECHANISM (CDM)

M/s.Indian Wind Power Association:- For successful registration of the project one
has to prove that without CDM benefits the investments in wind power projects are not
viable at all. Under the above circumstances, if the investors are asked to share the
benefit from CDM with the STU and Distribution Licensee, it will only prove that the
investments in WEGs are otherwise profitable and that the benefit coming out of the
CDM is only additional to the normal profit that is being earned. This will send a wrong
signal to the Executive Board of UNFCCC and the probability of the Indian wind sector
projects getting registered will further reduce. Further, with the current recessionary
trend being faced globally, the prices of CERs have also come down significantly.
Commission may not include the discussion on sharing of CDM for the sake of growth of
wind industry in the State.

M/s.Tamilnadu Spinning Mills Association:- The rationality behind the sharing of

CDM revenue by the TNEB has not been mentioned in the consultative paper. The
question of sharing with others will arise, only when the other person is having a clear
stake on the project. Only when the WEG proves that without CDM revenue, the whole
project is not viable, it can be considered for CDM revenues. TNEB is not investing
anything on the WEG on its own and therefore, it cannot be a stake holder and hence,
the rationality to claim a share in the revenue alone is not a good ethical factor.

M/s.Indian Wind Energy Association:- The Hon’ble Commission should limit the CDM
sharing between the developer and the licensee on 75:25 basis as being followed in
Gujarath and Rajasthan.

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M/s.Sri Amaravathi Spinning Mills:- The sharing of CDM benefits at 50:50 ratio with
TNEB will dampen the spirit of the potential investors.

M/s.Rogini Mills:- TNEB is not helpful in any occasion to WEGs and demanding the
share of CDM benefits is not correct in any way.

M/s.Acciona Wind Energy Pvt. Ltd:- 50% sharing of the CDM benefits with the State
utility is not acceptable because WEGs are only taking risk in developing the projects.

M/s.Winwind Power Energy Private Limited:- The full benefit of CDM revenue should
be allowed to be retained by investor as being the case with most of the other States.

M/s.Indian Wind Turbine Manufacturers Association:- CDM benefit should only go to

the investors.

Tamil Nadu Electricity Board:- Commission proposal of sharing the CDM benefits in
the ratio of 50% by the WEGs and the balance 50% between the STU and the
Distribution Licensee is acceptable.

Ministry of New and Renewable Energy:- The principles adopted by the FOR working
group may be considered on the issue of sharing CDM benefits between the licensee
and the promoter.

7. CONTROL PERIOD

M/s.Indian Wind Energy Association:- Commission should specify control period of 2

years. Commission should also clarify that the new Control Period shall be effective from
September 20, 2008, the date of passing the Order for curtailing the control period
specified in the Order No. 3 dated 15-05-2006.

M/s.Acciona Wind Energy Pvt. Ltd.:- Regarding the control period, the approach taken
by Maharashtra ERC should be taken, which says that a review of the base tariff for

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wind energy should be done every year that considers prevailing conditions in the
market.

M/s.Winwind Power Energy Private Limited:- Base tariff should be arrived and should
be escalated every year for 20 years. This will ensure that all investors get reasonable
returns close to the ongoing rates, considering time value of money and inflation.

M/s.Super Wind Project Private Limited and M/s.Simran Wind Project Private
Limited:- Commission in its order dated 19-09-2008, against the petitions M.P. Nos. 9,
14 and 23 of 2008 filed by M/s. InWEA and others passed the order that the control
period of three years as specified in order no. 3 dated 15-05-2006 is waived from the
date of issue of the order. Hence, the new control period should be commenced from 19-
09-2008.

Tamil Nadu Electricity Board:- As per the section 10.2 of TNERC order No.3 dated 15-
05-2006, the revisions made by the Commission after the control period will be binding
on the new generators who have started generating after issue of revised order. TNEB
agrees with the proposal of revising the control period from 3 to 2 years. However, this
will increase the work load of the Commission and hence request the Commission to
revive the control period of 3 years.

Indian Renewable Energy Development Agency Limited:- Due to volatility in capital

costs, control period may be reduced from 3 years to 2 years.

Ministry of New and Renewable Energy:- Commission may specify the control period
of 2 years and Commission should clarify whether the new control period shall be
effective from 20-09-2008, the date of passing the order for curtailing the control period
specified in the order No.3 dated 15-05-2006. They welcomed the Commission’s
proposal of keeping the proposed tariff applicable for a period of 20 years, since this
provides much needed regulatory clarity and certainty for the development of wind
energy projects.

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8. CROSS SUBSIDY SURCHARGES

M/s.Indian Wind Power Association:- There should not be any cross subsidy charges
for generation from renewable energy sources.

M/s.Tamilnadu Spinning Mills Association:- The Cross subsidy charge at 50% of the
level prescribed for generation from conventional energy sources is too high, considering
the National Electricity Policy and also the related provisions of the Electricity Act, 2003,
particularly on the aspect of promotion of electricity generation through non-conventional
energy sources. The cross subsidy charges proposed may be dropped.

M/s.Indian Wind Energy Association:- Open access transactions involving renewable

power such as wind energy, should be exempted from levy of cross subsidy surcharge
and the open access consumers availing renewable power (wind energy) should not be
subjected to payment of surcharge.

M/s.Acciona Wind Energy Pvt. Ltd:- The cross subsidy surcharge should be made nil
as being considered in the State of Gujarat.

M/s.Winwind Power Energy Private Limited:- Third party sale should be provided with
all incentives and should not be burdened with any extra surcharges. Therefore, cross
subsidy charges should not be levied for third party sales for wind power generation.

M/s.Indian Wind Turbine Manufacturers Association:- As per the formula prescribed

by the National Electricity Policy, the cross subsidy surcharge is independent of
renewable energy sources. Therefore power from conventional sources is not
comparable even at marginal level. The other States like Maharashtra, Gujarath,
Karnataka, Rajasthan and Andhra Pradesh have exempted wind from cross subsidy
surcharge.

Power Engineers Society of Tamil Nadu:- Should be firm on cross subsidy surcharges
as this is a social commitment.

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Tamil Nadu Electricity Board:- Cross subsidy surcharge may be uniformly levied both
on the conventional and non conventional energy sources.

9. CAPACITY UTILISATION FACTOR (CUF)

M/s.Indian Wind Power Association:- The capacity utilization factor assumed by the
Commission at 27.15% for determining the tariff is on a higher side. The potentially good
windy sites have all been exhausted and the new windmills are getting installed in class
‘C’ sites. The ‘A’ and ‘B’ class sites in Tamil Nadu are also yielding less because of over
crowding and are comparable to the sites available elsewhere in the country. For
instance, the CUF assumed in Gujarat is 23%, Madhya Pradesh is 22.5%, Maharashtra
is 20%, Rajasthan is 21 and 20%. Only Karnataka has assumed a higher CUF of 26.5%.
Further, CUF has to be determined not only based on sites but also taking into account
the host of other factors like, the availability of evacuation infrastructure, demand for
electricity as well as the mix of various sources. When there is no adequate evacuation
infrastructure as in the case of Tamil Nadu, possible generation is lost. Similarly, when
the demand for electricity is low like during the monsoon period or during recessionary
period like the one that is being faced, the utility does not want to generate more
electricity as this would lead to higher frequency and some body else could draw this
free power. The easiest generation that could be shut down is the WEG and they
therefore suffer. Similarly, when a utility has a choice of different sources of energy, they
prefer to draw the power from sources other than wind, since wind power cannot be
scheduled. Therefore, the CUF could be considered at a lower level around 23% in
Tamil Nadu.

M/s.Tamilnadu Spinning Mills Association:- The main areas of consideration for

determination of CUF are:
(a) Wind availability
(b) Grid availability and
(c) Machine availability.

Further, the grid availability has not been taken into consideration while assessing the
CUF/PLF. TNEB for the past two years has started imposing announced and un-
announced power shedding and thereby, not permitting the WEGs owners to consume
their energy at their consumption end. This State of affairs is continuing for almost two

77
years. The recent order on Restriction and Control by the Commission has not been
complied with by the TNEB till to-day and even the Review Petition filed by TNEB was
dismissed by the Hon’ble Commission on 24.12.2008.

Hence, the aspect of CUF needs to be reworked by considering the factors of problems
in evacuation and also the problems of power crisis in the State. The proven statistics of
generation of units by each capacity wind turbine were analyzed and it gives an average
of 21% of PLF/CUF only. Hence, this needs to be revised from 27.15% to 21%.

Further, the ideal locations have already been occupied by the older machines and the
locations now available are not having the same rate of wind availability when compared
with the earlier locations. The Plant Load Factor/Capacity Utilization Factor may not go
beyond 20% for any reason whatsoever. Hence, on the aspect of wind availability also,
the CUF needs to be lowered down.

M/s.Indian Wind Energy Association:- In Tamil Nadu, the prominent wind sites have
already been exhausted, leaving the wind sites which have weaker wind regime and
requested the Hon’ble Commission to specify the Capacity Utilisation Factor after duly
considering the actual CUF achieved by the wind projects commissioned after the
issuance of May 15, 2006 Order.

M/s.Indian Wind Turbine Manufacturers Association:- New wind projects in Tamil

Nadu will be in the balance class – II sites with low wind power density and hence lesser
CUF shall be considered for tariff calculation.

Power Engineers Society of Tamil Nadu:- CUF should be arrived with the data
collected after 2002.

Tamil Nadu Electricity Board:- The proposed CUF of 27.15% is acceptable.

Ministry of New and Renewable Energy:- The CUF may not be as higher as was
analyzed by the Commission while issuing the earlier order. Requested the Commission
to specify the CUF after duly considering the actual CUF achieved by the wind projects
commissioned after the issuance of order No.3 dated 15-05-2006.

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10. DEEMED DEMAND CHARGES

M/s.Indian Wind Power Association:- The CUF should not be multiplied by 0.65 which
is a group / State phenomenon. The CUF should be taken as demand supplied by wind
energy generators. Commission should allow 100% generation and maximum demand
benefit to the consumers. Alternatively, the demand charges could be levied on net
energy supplied by the distribution licensee based on actual generation data for each
generator.

M/s.SP Spinning Mills Pvt. Ltd.:- CUF should be only applied when the deemed
demand is calculated on the installed capacity of the WEG. If the deemed demand is
arrived on the basis of actual energy, CUF should not be applied as energy is already
the result of applying the CUF on the capacity of the WEG.

Many captive consumers are using almost 100% of the energy for their own use only.
For such consumers the assumption of 65% adjustment for captive use and 35% sale to
TNEB will not hold true for these individual consumers. This assumption will put these
consumers at a heavy loss.

M/s.Acciona Wind Energy Pvt. Ltd.:- The demand charges payable by the wind
energy user should be directly proportional only to the balance of the energy needs they
are sourcing from the STU/Distribution Licensee.

Tamil Nadu Electricity Board:- At present 55% of energy generated is for generator’s
use and 45% of energy generated is purchased by TNEB and accordingly deemed
demand should be calculated.
However, the deemed demand concept should be deleted since the demand charges
are meant to recover the fixed charges incurred by the Board for creating required facility
towards capacity and meeting the demand of the consumer requiring power.
11. DEPRECIATION
M/s.Acciona Wind Energy Pvt. Ltd.:- A residual value higher than 2% of the capital
cost is not possible to be realized and the depreciation rate should be 4.9%.

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M/s.Winwind Power Energy Private Limited:- Considering the residual value of WEG
as zero at the end of 20 years and consequently, SLM depreciation rate of 5% should be
adopted.

Tamil Nadu Electricity Board:- The suggested depreciation rate of 4.5% is acceptable
to TNEB.

12. DE-RATING FACTOR

M/s.Indian Wind Power Association:- The experience in running Wind Energy

Generator has taught that the de-rating of the WEG be taken as 1/2 % (half percent) per
year after 2 years.

Thiru G.Ramakrishnan:- De-rating of CUF may be followed from 6th year onwards as
the generation is dependent upon the life of various critical components like gear box,
roughness of the blade, life of electrical components due to constant switching
operation, etc.

M/s.Winwind Power Energy Private Limited:- De-rating of CUF should not be

considered as an alternative to time value of money. Reduction in CUF and time value of
money operates in parallel and both need to be provided for. Further, de-rating of CUF
@1% does not even come close to sufficiently cover for the inflation as this de-rating
starts only from the 10th year.

M/s.Indian Wind Turbine Manufacturers Association:- De-rating factor should be

atleast 1% in every 5 year of project life.

Tamil Nadu Electricity Board:- De-rating factor is not allowed in case of thermal
stations and the electrical characteristic for all type generators is same. CUF is based on
wind velocity and may vary from year to year. As such average over a running period of
every 5 years may be considered for adoption.

13. ENERGY PURCHASE AGREEMENT

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M/s.Indian Wind Power Association:- The draft of the agreement should be discussed
with the investors, who is also a signatory to the agreement and the benefits intended to
be passed on to the investors should be available from the date of the order it self rather
than linking it to the date of entering into a new agreement. Further, there could be an
exit clause in the agreement after giving three months notice by either party and there
should not be any penalty associated with it.

M/s.Tamilnadu Spinning Mills Association:- The draft EPA as already proposed in

order no.3 dated 15.05.2006 of the Hon’ble Commission was not made available to the
comments of the stake holders and requested that more comments could be invited if
the exact text of the EPA is made available to the stake holders.

M/s.Acciona Wind Energy Pvt. Ltd.:- There need not be any penalty for terminating
the PPA with the STU and /or Distribution Licensee provided a 3 months notice period is
served by the WEGs. However, STU and/or the Distribution Licensee should not be
allowed to terminate the PPA under any circumstances since there would be a negative
outlook by the financial institutions providing the long term debt financing and thereby
financing the wind power projects would become difficult.

M/s.Winwind Power Energy Private Limited:- TNEB should not be allowed to break
out of the PPA. Developer should be penalized for breaking out of PPA, unless the
power generation is substantially reduced due to factors beyond control of developer.

M/s.Indian Wind Turbine Manufacturers Association:- In case of a wind project, most

of the cash outflows are there at the initial stages of project (Planning and construction).
The possibility of winding up such a capital incentive project that too with high debt value
does not arise except some extraordinary conditions. In view of the above, the clause for
penalty is not required.

Tamil Nadu Electricity Board:- If the WEGs winds up the operation before the expiry of
the agreement period, 25% of the then prevailing purchase price for the balance
agreement period based on the CUF adopted for working out the tariff may be imposed
as penalty. In case of sale to other party, then the WEGs have to apply for open access
and pay the associated charges.

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A clause in the PPA should be included to break out of the PPA by either party after
giving three months notice. The WEGs have to give 3 months notice well in advance and
the Board prepares for the settlement. If the generator resorts to payment of penalty, a
date may be fixed for disconnection of the WEGs. A disconnection certificate and no due
certificate will be given to the generator and the agreement may be terminated.

Similarly if the WEGs have not run for longer period, a time limit has to be set, so that
the WEGs operation has to be commenced within this time frame. The Superintending
Engineer concerned will issue the notice to this effect. If the WEGs has not started for
longer periods beyond the period indicated in the notice, penalty has to be imposed and
the 10% generation loss has to be paid.

Indian Renewable Energy Development Agency Limited:- The period of PPA should
cover at least the entire loan period.

14. EVACUATION FACILITIES

M/s.Indian Wind Power Association:- The wind sector in Tamil Nadu has suffered
during the previous years for want of adequate evacuation infrastructure. There has
been a loss of almost 30-40% of possible generation on this count alone. During the
year 2008, evacuation infrastructure of M/s Power Grid Corporation of India Ltd., was
used, which has been created to evacuate the power generated from the Koodankulam
Nuclear Power Station. Once the Koodankulam Station starts generating to its capacity,
this facility may not be available for evacuation of wind power. Commission may direct
TNEB to create its own evacuation facility so that the 100% wind power can be
evacuated in future. Further, creation of any additional infrastructure should take into
account the future growth envisaged in the sector rather than confining to then present
existing capacity.

M/s.Tamilnadu Spinning Mills Association:- TNEB has not yet complied the order
no.3 dated 15-05-2006 on the aspect of evacuation and requested each unit produced
by wind generators should be evacuated without any exception.

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M/s.Acciona Wind Energy Pvt. Ltd:- The STU/ Distribution Licensee should bear the
cost of interfacing line till the interfacing point for the wind power projects irrespective of
whether the wind farm investor sells the entire generated electricity to the distribution
licensee or to 3rd parties since the generator is contributing to reduce the huge energy
deficit in the State.

M/s.Indian Wind Turbine Manufacturers Association:- Commission may direct TNEB

for submitting every year a time bound plan for system augmentation and grid
strengthening based on the proposed wind sites. Further, the interconnection point is not
defined in NCES Regulation. In practice, an interconnection point can be a line (LILO
arrangement) or can be HV side (or LV side) of substation.

Tamil Nadu Electricity Board:- In the absence of collection of IDC, it may not be
possible for TNEB to provide the required evacuation on priority basis within the annual
plan. In case collection of IDC is permitted, then TNEB may consider allotment of power
transformer to the evacuation arrangement on priority basis from their general pool. The
evacuation / transmission capacities created for wind power will be utilized partially and
it may have to be examined as to whether such investments for such partial utilization
could be affordable.

15. ENERGY WHEELING AGREEMENT

M/s.Indian Wind Power Association:- The benefits intended to be passed on to the

investors should be available from the date of the order it self rather than linking it to the
date of entering into a new agreement. Further, there could be an exit clause in the
agreement after giving three months notice by either party and there should not be any
penalty associated with it.

M/s.Tamilnadu Spinning Mills Association:- The draft EWA should made available to
the comments of the stake holders and more comments could be invited if the exact text
of the EWA is made available to the stake holders.

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M/s.Winwind Power Energy Private Limited, Chennai – 6:- EWA should be signed for
5 year tenure with clause to extend the term with mutually agreed terms and the exit
clause should be allowed with mutually agreeable terms, with reasonable notice period.

Tamil Nadu Electricity Board:-

1. If the Captive generators have not complied the 26% ownership and 51%
consumption. The action to be taken has to be included in the agreement.
2. If the wheeling charges and scheduling & system operation charges are not paid
for 2 months, wheeling may be discontinued.
3. Agreement period may be 4 types 5, 10, 15 and 20 years.
4. If there is no option for the generator except for the own consumption they will
opt for longer period.
5. If the generators find option for additional stake holder/third party they will
terminate the short term agreement with compensation amount.
6. After the third party agreement period is over, then they will come and execute
the EWA as new entrant.
7. Exit provisions may be given with some compensation
8. Entire energy sale to Board, surplus sale to surplus banking and vice versa
change in utility of wind energy may be considered after one year of the
agreement executed.

16. INSURANCE CHARGES

M/s.Indian Wind Power Association:- Insurance premium needs to be worked out

taking into account the replacement value and not just the depreciated value. Insurance
charges could be fixed at a level of 0.75% of the replacement value in the first year and
with a possible increase of 5% every year thereafter.

M/s.Rogini Mills:- During the initial years no insurance company either nationalized or
private are having proper machinery breakdown policies as far as Wind Turbine
Generators are concerned. If generation stands stopped due to breakage, the credit
benefit goes down to that extent.

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Tamil Nadu Electricity Board:- The proposed rate of insurance charges is acceptable
to TNEB. However, the percentage to be applied for insurance calculation may be
changed to the cost of the machinery instead of the capital cost of the projects.

Indian Renewable Energy Development Agency Limited:- May be considered based

on the market practices.

17. INTEREST ON DEBT

M/s.Indian Wind Power Association:- It is not always possible to obtain financial

assistance from IREDA only. The present rate on term loan from the banking system for
WEGs is in the range of 13-14% and Commission could consider an interest rate of
13%.

M/s.Tamilnadu Spinning Mills Association:- In actual practice, IREDA is not able to

provide debts for all the WTG owners. All the WEG owners have to approach only
commercial banks for the purpose of loan. Hence, the interest cost on debts may be
raised and fixed as 14% on an average instead of 12%.

M/s.Indian Wind Energy Association:- The Hon’ble Commission can specify the
indexing mechanism by linking it with the long term Prime Lending Rate (PLR) of State
Bank of India. The Commission can specify the interest rate 200 basis point higher than
the SBI long term PLR due to higher risk perceived by the lenders.

M/s.Sri Amaravathi Spinning Mills:- The interest rate of 12% on non renewable energy
projects is not good enough to lure investors in such projects and this should be pegged
at 5% per annum. Further, there should be subsidy from the Government if the interest
rate exceeds 9% per annum.

M/s.Winwind Power Energy Private Limited:- The cost of debt incurred by an average
investor in majority of the cases should be taken and only a small proportion of investors
avail loan from IREDA and a major debt funding comes from various nationalized and
private sector banks. IREDA provides funding at a discounted rate, which is not the case
with other financing institutions.

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Therefore considering the PLRs of various banks and a premium of 50 basis points
should be applied on average PLR for wind power project funding which is worked out to
13.50%. Further the term of loan offered by IREDA is not the industry benchmark and
banks do not provide loans for such a higher term. Therefore term of loan should be
taken at 5 years, with one year moratorium.

M/s.Indian Wind Turbine Manufacturers Association:- The interest rate should be

minimum of 13% and the term of loan should be 7 years.

Tamil Nadu Electricity Board:- Reserve Bank of India has taken efforts to reduce the
interest rate charged by the financial institutions. The rate of interest rate offered to the
NCES sources should be less than the market rate prevailing from time to time. Hence,
the suggested rate of 12% is not acceptable and interest rate of 9% to 10% may be
considered. Further, increasing the loan tenure to 15 years can be considered.

Ministry of New and Renewable Energy:- Commission can specify the suitable
mechanism that could automatically address the issue of variation in interest rate in
future and requirement of review of tariff order should not arise.

18. INTRODUCING COMPETITIVE BIDDING

M/s.Indian Wind Power Association:- Time is not ripe enough for introducing
competitive bidding even from the same type of non-conventional source. There is a risk
of formation of a cartel and the price at which the generated power could be offered and
could be much higher than the cost plus method.

Thiru G.Ramakrishnan:- Most of the WEGs are erected by small and medium industrial
developers in small capacities and the competitive bidding will not help them or the
licensee to get competitive tariff.

M/s.Rogini Mills. :- NCES can not compete with conventional sources in terms of cost
of electricity and it may take some more time. Hence, wind energy procurement is to be
made at preferential tariff.

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M/s.Winwind Power Energy Private Limited:- In the present market scenario, buyer of
power would opt for the cheapest source and at present wind power will not be able to
compete in market with other conventional sources. Therefore, market determined
pricing should not be adopted for wind power projects.

M/s.Indian Wind Turbine Manufacturers Association:- International experience of

competitive bidding based procurement of renewable energy has not yielded favourable
results in the past. Further, the experience of competitive bidding based procurement is
not yet adequately established even in case of conventional technologies in the country
with many power projects awarded through competitive bidding yet to be commissioned.
In view of the above, power procurement through competitive bidding route may not be
an appropriate mechanism for promotion of renewable energy sources atleast at this
stage.

Power Engineers Society of Tamil Nadu:- Bidding is the better process. Cost plus
principle should be dropped.

Tamil Nadu Electricity Board:- Market determined pricing is not desirable now and
may lead to a sort of lopsidedness in approach. Hence the regulatory price should be
continued till the power position improves and a surplus situation prevails.

19. METERING AND COMMUNICATION

M/s.Tamilnadu Spinning Mills Association:- As per the regulation 8 (1) and (9) of the
Electricity Supply Code, 2004, it is the obligation of TNEB to provide a meter card at the
wind mill site, with the parallel one of the meter card maintained by TNEB, but in actual
practice, no such arrangement has been made available at the wind mill site.
Commission can order TNEB to provide meter card to the WEGs.

Tamil Nadu Electricity Board:- WEGs are also brought under the umbrella of
Availability Based Tariff mechanism and the Commission may examine this proposal
and order accordingly.

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20. MINIMUM PURCHASE REQUIREMENT

M/s.Indian Wind Power Association:- Commission could fix 15% as minimum

percentage of power to be procured from renewable sources of energy out of the total
consumption of electricity with the provision that the entire energy produced from
renewable sources should be accepted. There is no need for fixing source wise quota.

M/s.Tamilnadu Spinning Mills Association:- Minimum purchase requirement should

not include the captive consumption or third party sale of wind energy. Captive
consumption is for a separate purpose and therefore, it cannot fall under Section 86(1)
(e) of The Electricity Act, 2003, which specifically deals with the purchase alone and not
with the captive consumption. Barring the captive consumption percentage, the Hon’ble
Commission may retain or increase the 10% exclusively for sale/purchase category
alone and even by barring the third party sale if any.

M/s.Indian Wind Energy Association:- National Tariff Policy stipulates that the
appropriate Commission to specify ‘minimum percentage’ for power purchase from
renewable energy sources only. In view of the above, Hon’ble Commission to specify
only minimum percentage for power purchase from renewable energy sources.
Although wind energy is leading the front compared to other renewable energy sources
in the country, the others would also catch-up in the subsequent years (viz. biomass,
Bagasse-cogeneration & small-hydro has a PLF ranging from 35% to as high as 80%).
Therefore, no restrictions in terms of internal percentages amongst RE is desirable,
rather it is requested that the Hon’ble Commission should leave it to the market
conditions to decide so.

Hon’ble Commission should not make downward revision in minimum purchase

specification and the minimum purchase specification of 10% should be continued
during the next control period. Requested the Hon’ble Commission to extend the
applicability of ‘minimum percentage’ specification for renewable energy procurement to
‘open access consumers’ and ‘captive consumers’ apart from distribution licensees, to
the extent of the consumption outsourced from such sources.

Further, it may be worthwhile to look at an alternate approach of Renewable Purchase

Obligation (RPO) implementation through ‘Renewable Energy Certificate’ (RE

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Certificate) method for compliance, as against the currently operational ‘contract path
method’. The same method would also be very beneficial, should there emerge a unified
electricity market across the country in the coming years. Further, the RE certificate
system would have a component of ‘price discovery’ of RE based energy, and hence,
possible to move towards market determined pricing mechanism.

M/s.Acciona Wind Energy Pvt. Ltd.:- Minimum purchase requirement by the

Distribution Licensee should be 10% and the purchase should relate to the total of all
NCES power put together rather than being split category wise.

M/s.Winwind Power Energy Private Limited:- It is important to fix a minimum

purchase requirement for NCES, as well as for wind power to attain at a right energy mix
and at the same time, it is also true that penetration of wind power beyond a certain limit
may affect the grid stability.

Hence, both minimum and maximum limits should be prescribed for sourcing energy
from wind power. At present, wind power contributes approximately 10% of the total
electricity consumption of the State. In order to promote further investment, the minimum
purchase requirement for wind power should be at 12.50%.

M/s.Indian Wind Turbine Manufacturers Association:- 15% minimum purchase

obligation will solve the purpose and will boost the capacity addition sufficiently.

Tamil Nadu Electricity Board:- Minimum off take to be specified by the Hon’ble
Commission should be inclusive of the wheeled energy as also from other NCES
sources like Co-gen, Biomass, small hydro, solar, etc. Existing ceiling of 10% may be
retained for the current control period also and absorbing the excess energy above 10%
has to be left to the discretion of the TNEB. While minimum percentage is fixed on
quantum of wind energy maximum percentage (around 30%) on installed capacity is to
be fixed in order to facilitate grid management.

In any power supply management system, the penetration of infirm power cannot be
more than 10 to 12%. It may have to be examined as to how the additional wind energy

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generation is going to be helpful and to what extent. No distribution arrangements could
be established based on the 40% supply of an infirm and uncertain power.

Indian Renewable Energy Development Agency Limited:- Wind power should be

utilized to the maximum possible extent since it is based on the natural resources.

Ministry of New and Renewable Energy:- Principles adopted by the FOR working
group may be considered on the issue of maximum/minimum purchase specification.

21. OPERATION AND MAINTENANCE EXPENSES

M/s.Indian Wind Power Association:- O&M expenses considered by the Hon’ble

Commission during the previous order were based on the position obtained in the year
2006. However, more than two and a half years have since passed and these expenses
have almost doubled since then. Therefore, assuming the same level as fixed by the
Commission in May 2006 may not be appropriate, considering the escalation in prices of
almost all the parts. Hence, O&M expenses could be fixed at 1.8% of the capital cost for
the first five years and escalation of 5% every year thereafter.

M/s.Tamilnadu Spinning Mills Association:- For a machine of 1.25 MW, the capital
cost has come earlier to Rs.5.91 Crores. For such a machine of this capacity, the
manufacturer charges Rs.10 lacs as annual O & M charges. This comes close to
1.69% and therefore, considering the revised capital cost now enhanced, the O & M
charges should be fixed at the rate of 1.70% at least. Even though, the insurance
charges are fixed as 0.5%, the wind turbine owners are supposed to take additional
insurance policies besides break down policies, etc. Hence, this cannot be a criterion to
lower the O & M cost.

M/s.Indian Wind Energy Association:- There has been significant increase in

Consumer Price Index (CPI) and Wholesale Price Index (WPI) on year-on-year basis
and the CAGR corresponds to around 5%. Therefore, Hon’ble Commission may kindly
consider the O&M Cost for first year as 1.1% of the Project Cost with annual escalation
of 5% for tariff determination from second year onwards.

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M/s.Sri Amaravathi Spinning Mills:- O&M charges of 1.1% for the first 5 years should
be made applicable to the existing WEGs also.

Thiru G.Ramakrishnan:- Normally no O&M charge is collected in the first year when
the WEG is under warranty period. Hence, the O&M charge may be collected from
second year and the same may be increased at 5% from third year onwards as per
CERC norms applicable to thermal and hydro generating stations.

M/s.Acciona Wind Energy Pvt. Ltd:- The actual O&M cost is atleast 2% of the capital
cost with an escalation of 5% every year. Provision of 5% of the capital cost needs to be
made every 5 years towards replacement and / or repair of large components.

M/s.Winwind Power Energy Private Limited, Chennai – 6:- The prevailing rates
should be considered in working out the O&M expenses and suggested to adopt Rs.12
Lakhs per annum per MW towards O&M expenses. Further the escalation of 5% should
start from the second year itself.

M/s.Indian Wind Turbine Manufacturers Association:- There should be an escalation

of 5% every year on account of inflation.

Tamil Nadu Electricity Board:- The O&M charges of 1.1% of the capital cost exclusive
of insurance charges is acceptable. However, the percentage to be applied for O&M
calculation may be changed to the cost of the machinery instead of the capital cost of
the projects.

22. PAYMENT OF SECURITY DEPOSIT TO TNEB

M/s.Tamilnadu Spinning Mills Association:- Payment of Security Deposit may be in

accordance with the earlier order or it could be changed as the average of two times of
the net energy consumed after adjustment of wind energy.

M/s.Acciona Wind Energy Pvt. Ltd.:- Security deposit period norm should not be
changed to one calendar year.

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Tamil Nadu Electricity Board:- Security deposit at two times the net energy supplied
during the year by the distribution licensee may be considered.

23. PAYMENT OF SECURITY TO THE WEGS

M/s.Tamilnadu Spinning Mills Association:- Even though, the earlier Order No.3
dated 15.05.2006 specifically provides enough scope on this aspect, nothing was
materialized till to-day. However, the same can be reiterated with a specific time bound
action plan.

Tamil Nadu Electricity Board:- The bankable security in favour of the generator need
not be insisted and this may be deleted since in case of any encashment of the back up
LC by the WEGs, it will affect the image of the TNEB among the bankers.

24. PREFERENTIAL TARIFF DETERMINATION

M/s.Indian Wind Energy Association:- Power procurement through competitive

bidding route may not be appropriate mechanism for promotion of renewable energy
sources. Besides, unless Guidelines for Competitive Bidding for renewable sources are
notified by Central Government, the mechanism of ‘preferential tariff’ determination will
have to continue.

M/s.Winwind Power Energy Private Limited:- In view of the short term support
required by the industry and a strong energy support for the nation (as in Brazil), it will
go a long way to keep preferential tariff for wind power for coming few years.

M/s.Indian Wind Turbine Manufacturers Association:- Wind energy developers do

not get preferential tariff as in the case of thermal power stations where everything like
escalation in O&M, inflation, interest rates, etc. are being passed on to the consumers.
There is no mechanism till this date which saves investor from the risk of variation of
wind and hence the investor should be provided with guaranteed returns.

Tamil Nadu Electricity Board:- Tariff determination based on competitive bidding is

neither desirable nor justifiable since wind power is infirm power.

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Indian Renewable Energy Development Agency Limited:- Since the capital cost and
cost of generation for WEGs are not competitive with the conventional generation plants,
energy procurement should be done at preferential tariffs to encourage higher
generation of wind power.

Ministry of New and Renewable Energy:- Power procurement through competitive

bidding route may not be appropriate mechanism for promotion of renewable energy
sources at this stage. Besides, unless guidelines for competitive bidding for renewable
sources are notified by Central Government, the mechanism of preferential tariff
determination may be continued.

25. REACTIVE POWER CHARGES

M/s.Tamilnadu Spinning Mills Association:- Reactive power charges already fixed

are little high and may be reduced to 10 paise/20 paise from 25 paise/50 paise.

M/s.Sri Amaravathi Spinning Mills:- Reactive power charges can be reduced from 25
and 50 paise/KVARh to 10 and 25 paise/KVARh respectively.

M/s.Acciona Wind Energy Pvt. Ltd.:- Existing reactive energy charges should be
reduced in line with the other States.

M/s.Winwind Power Energy Private Limited:- Agreed with the reactive power charges
proposed in this Consultative Paper in the best interest of the industry.

Tamil Nadu Electricity Board:- Proposal indicated in the consultative paper should be
continued.

26. RESTRICTIONS ON SERVICE CATEGORY FOR CAPTIVE USE/THIRD PARTY

SALE

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M/s.Indian Wind Power Association:- Captive use of wind energy should be permitted
for LT consumers also. This has become more relevant in the current context of the
power crisis being faced in the State. As the gestation period for wind power project
being small when compared with conventional power projects, it would not only result in
increased capacity but would also ease the pressure on the TNEB to certain extent.

M/s.Tamilnadu Spinning Mills Association:- Captive user has to be preferentially

treated when compared with the third party seller and both can not be treated equally.

M/s.Acciona Wind Energy Pvt. Ltd:- WEGs should be allowed to adjust unit to unit for
captive uses / third party sale in LT services also along with HT services and the due
monitoring, accounting and billing system should be developed jointly by TNEB and
SLDC.

Tamil Nadu Electricity Board:- LTOA/third party sale to LT services should not be
allowed. Adjustment of any HT services may be accepted, but for the adjustment with
commercial services, the coincident compensation charges may be given.

Indian Renewable Energy Development Agency Limited:- The facilities on extending

captive use/third party sale to LT services should be considered after the present
accounting facilities available with TNEB/SLDC are enhanced to account for the same.

27. RETURN ON EQUITY (ROE)

M/s.Indian Wind Energy Association:- RoE of 14% on post-tax basis does not really
accord preferential treatment to renewable energy, enunciated in National Tariff Policy,
as the RoE for conventional generation projects also stands at 14% on post-tax basis.
Therefore InWEA requested the Hon’ble Commission to fix the Return on Equity of 16%
on post-tax basis for promoting the investments in wind sector.

M/s.Winwind Power Energy Private Limited:- In the present scenario, post tax returns
of 14% will not attract customers to enter into a non-conventional area. Investor should
get post tax returns at least 2% above the cost of funds. Considering average cost of
funds at 13.5%, the returns should be considered at 15.5% post tax. A benefit of tax

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waiver for 10 years is available under Section 80IA of Income Tax Act, pre tax returns
need not be calculated with current rate of income tax. Considering an average rate of
22.17% tax on profits, pre tax returns of 19.73% needs to be taken.

M/s.Indian Wind Turbine Manufacturers Association:- RoE should be 16% (Post-

Tax) for preferential tariff.

Tamil Nadu Electricity Board:- Allowing pre tax return to WEGs does not appear
correct since the WEGs are allowed to setoff losses in other industry towards
accelerated depreciation.

28. SCHEDULING AND SYSTEM OPERATION CHARGES

M/s.Indian Wind Power Association:- Hon’ble Commission may waive the scheduling
and system operation charges being levied on the power being generated from
renewable energy sources as a promotional measure. This will pave the way for larger
investments into the sector or make such charges zero for renewable energy.

29. TARIFF MECHANISM

M/s.Indian Wind Energy Association:- Commission may follow generalized approach

for tariff determination since Project Specific Tariff may give a scope for the utilities to
sign PPAs on priority basis with those Wind developers of larger project size who have
approved tariff on cost plus ‘Project Specific’ basis. Besides distorting the market, this
would lead to unnecessary confusion and risk among small potential investors.

Thiru S.Kittu, Goodwill apparels, Tiruppur:- Tariff of Rs.3.40 per unit should be given
to all existing WEGs also. Further, a special incentive should be provided for the existing
old machines due to their old technology and the productivity of the old machines can
not be compared with the new ones.

M/s.Winwind Power Energy Private Limited:- Generalized tariff should be fixed for
WEGs and project specific tariff orders can be considered for large wind farms. The

95
procedure to get specific tariff orders need to be looked into and may be modified to
make them faster and smoother.

M/s.Super Wind Project Private Limited and M/s.Simran Wind Project Private
Limited:- Commission may consider determining the generating Company specific order
with a minimum installed capacity of 200-250 MW.

Tamil Nadu Electricity Board:- Commission’s view of issuing a generalized tariff order
for WEGs is acceptable. Further TNEB welcomed the cost plus tariff determination.
However the capital cost employed should be checked with present cost of machines in
order to have reasonable tariff and to pass on the benefit to the end consumers. Tariff
for wind can only be single part. Suggestion of the Commission that levelised tariff be
worked out duly allowing de-rating of the capacity and escalation of O&M expenses is
acceptable. The tax benefits due to accelerated rate of depreciation in the initial years
may also be factored while determining the tariff. In a cost plus approach fixing a base
tariff and allowing escalation every year on this is not allowed. Hence base tariff with
escalation approach is not acceptable.

Indian Renewable Energy Development Agency Limited:- The operating cost is

increasing year by year and the performance of the WEGs also gets de-rated, thereby
resulting in lower realization of revenue and there should be annual escalation in tariff,
as has been done in Maharashtra and Rajasthan.

Ministry of New and Renewable Energy:- Commission may adopt a generalized

approach for tariff determination on cost plus basis.

30. TARIFF RATE

M/s.Indian Wind Power Association:- Thanked the commission for coming up to a

level of Rs.3.40. Commission may rework the tariff based on the above suggestions and
reiterated their earlier request during the round-table conference held at Chennai on July
16, 2008 for revising the tariff to Rs.3.90 per unit with 9 paise annual escalation for 20
years. The tariff proposed in the consultative paper will not even cover the interest cost
which works out to Rs.3.90 per unit.

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Commission may revise the tariff for group 1 and 2 WEGs in consonance with the tariff
now being proposed, as there is no difference in the quality of power being produced
from these and future WEGs. Thus, with the quality of power being the same, fixing
different tariff for different WEGs on the basis of date of commissioning is contrary to
and denying equality before law. Commission should fix the same tariff for all WEGs
from the date new rates come into force for WEGs to be installed.

M/s.Tamilnadu Spinning Mills Association:- The various parameters needs to be

revised wherever necessary, particularly on items like, CUF, Capital cost, interest on
loan, return on equity, O & M charges, etc. and accordingly all older machines
commissioned prior to 15.05.2006 and after 15.05.2006 should also be taken care on
the reworking of the purchase price. Further, the return on equity is a factor to be
determined only on the units generated, it needs to be reworked based on the actual
PLF/CUF based on the fact of grid availability, exhaust of ideal locations and also the
problem of power crisis. When the Koodangulam units start generation, the dedicated
lines provided for the transmission of energy, may not be available to the WTGs willing
to transmit their energy through the said line, to the destination of their use.

M/s.Rogini Mills:- The tariff rate shall be escalated every year for 20 years as has been
done in Maharshtra.

M/s.Acciona Wind Energy Pvt. Ltd.:- The tariff rate should be of Rs.3.40 /kWh with
annual escalation of 1.75% each year or Rs.4 / kWh fixed for 20 years.

M/s.Winwind Power Energy Private Limited, Chennai – 6:- Tariff rate shall be of
Rs.4.60 per kWh with 2.5% escalation every year.

M/s.Arvinth Hospital, Namakkal – 1:- The new rate of purchase should be uniform
irrespective of the date of commissioning of the WEGs particularly for those services
which supply power to TNEB.

M/s.Vairam Wind Power, Namakkal:- The new rate of purchase (Rs.3.40 per unit)
should be uniform irrespective of the date of commissioning of the WEGs.

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M/s.Indian Wind Turbine Manufacturers Association:- Base tariff may be arrived
taking into account the existing financial parameters and escalating it every year as
prescribed by the Maharashtra Electricity Regulatory Commission.

Power Engineers Society of Tamil Nadu:- The price of Rs.2.20 per unit being
equivalent to gas power station is reasonable as procurement price.

Tamil Nadu Electricity Board:- The policy directives of GoTN such as provisions of
power security to weaker sections and agricultural sectors shall also be kept in view in
tariff determination process. Further, the existing tariff for group 1 and group 2 WEGs is
hold good and for the new WEGs, a tariff rate of Rs.3 / unit will hold good duly freezing
the various parameters as suggested by TNEB. Levelised tariff is preferred than the
average tariff to avoid future litigation on this issue.

31. TIME VALUE OF MONEY

M/s.Indian Wind Power Association:- When tariff is being fixed for a period of twenty
long years, the purchasing power of rupee would have eroded substantially when the
inflation in our country has been in the range of 6 to 12%. Time value of money needs to
be factored in while arriving at the uniform tariff for a period of 20 years. Alternatively,
the Maharashtra model of an annual escalation in tariff could be announced with 9 paise
per year escalation which would take care of the erosion in the purchasing power.

M/s.Indian Wind Energy Association:- Hon’ble Commission should specify the tariff
after considering the time value of money and actual cash flow requirement of the
developer in initial years, either by way of specifying the front loaded declining tariff or
levellised tariff for 20 years of project life. Commission may differential tariffs for existing
projects and new projects, keeping in mind the benefits available to the two sets of
projects and the prevailing market conditions.

M/s.Winwind Power Energy Private Limited:- Tariff should be progressive reflecting

the growth in economy and corresponding prices and the concept of time value of

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money should be followed in the tariff determination. Rs. 3.74 per unit would be the right
metric.

32. WHEELING CHARGES

Tamil Nadu Electricity Board:- The transmission, wheeling charges and losses in kind
fixed by the Commission in order No.3 is very meager at 5% of the energy which will not
cover the losses approved by the Commission in the order No.2. The actual loss arisen
by stepping up the 11KV to 110 KV and step down from 110 KV to 11 KV is around 22%.
Hence, not withstanding the collection of the IDC amount, the transmission charges
have to be fixed separately in Rupees per MW per day basis and the wheeling charges
shall be enhanced from 5% to 15% separately.

Power Engineers Society of Tamil Nadu:- As the capital cost is heavy, the open
access charges shall be made same for all.

33. WORKING CAPITAL REQUIREMENT

M/s.Indian Wind Energy Association:- Commission has not considered the working
capital requirement but the wind project requires working capital in the form of operation
and maintenance expenses and receivables for running their routine business activities.
Further, Karnataka and Rajasthan ERCs have considered the working capital
requirement in wind tariff calculation. Therefore, Commission may consider the Interest
on Working Capital at the interest rate equivalent to State Bank of India, and the working
capital requirement equivalent to one month of O&M expenses and one and half months
receivables, for determination of tariff for wind energy projects.

34. OTHER ISSUES

M/s.Indian Wind Power Association:- Even though the Commission revised the Open
Access Regulations by reducing the open access application fee, open access
registration fee and the scheduling and system operation charges, TNEB is yet to
implement these changes. The investors who have invested in wind electric generators
for the purpose of selling the power generated to TNEB have not been receiving the

99
payments on time. These factors have affected the morale of the investors and they
have lost their confidence in investing in Tamil Nadu.

M/s.Sugavaneswara Spinning Mills Private Limited:- Tamil Nadu is now witnessing a

acute shortage of power and the same will be continued for few more years. Hence it is
necessary to encourage installation of more WEGs in this State and full support should
be provided to get maximum benefits.

M/s.Rogini Mills:- TNEB has frequently and orally asked the WEGs to shut down their
turbines for periods ranging from 9 hours to 20 hours a day during the season of six
months in a year. Because of the shutdown during the peak period, even though wind is
fully available the WEGs are not able to generate power.

There is no clause in the EPA for claiming compensation for shut down the turbines. Due
to the introduction of slot to slot adjustment, the WEGs are not able to fully utilize the
energy and lots of units are getting lapsed when the banking facility is closed. Even then
banking charges are unforgettably charged by the Board.

Thiru Singhan Ragu:- Possibility of providing huge capacity off shore wind farm may be
explored and encouraged to derive benefit by way of economy of scale, efficiency in
operation, reduction in capital and operational expenditure and to facilitate
implementation of competitive tariff bidding in the long run.

M/s.Acciona Wind Energy Pvt. Ltd:- Charges for Transmission, Wheeling and line
losses charges should be reduced to 4% in line with other States to promote NCES
generation.

Power Engineers Society of Tamil Nadu:- Tamil Nadu grid can not accommodate any
infirm generation. Promoting wind energy has lost its relevance in this State.

Tamil Nadu Electricity Board:- Commission has issued order no.3 dated 15-05-2006 in
suo motto without framing any regulation. One of the reasons for decline in capacity
addition in wind generators in Tamil Nadu is the increased cost of the wind mill. Further
the GOI has announced technological Upgradation funds to the textile mills and the

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funds were utilized in the wind sector. As these funds were stopped, the capacity
additions during 2006-07 have also been reduced.

Further, the reason for decline in capacity addition during 2007-08 is due to lack of
evacuation facilities and not because of the unattractive tariff. But the evacuation
problems have been sorted out now. The Commission had started encouraging the
NCES power at the cost of TNEB and is not acceptable. The Commission has to give
some compensation to the Central and State governments.

List of persons/organizations
1 Indian Renewable Energy Development Agency Limited:-
2 M/s.Acciona Wind Energy Pvt. Ltd., Bangalaore
3 M/s.Arvinth Hospital, Namakkal – 1:-
4 M/s.Indian Wind Energy Association:-
5 M/s.Indian Wind Power Association
6 M/s.Indian Wind Turbine Manufacturers Association:-
7 M/s.Rogini Mills:-
8 M/s.Simran Wind Project Private Limited
9 M/s.SP Spinning Mills Pvt. Ltd.:-
10 M/s.Sri Amaravathi Spinning Mills, Karur:-
11 M/s.Sugavaneswara Spinning Mills Private Limited:-
12 M/s.Super Wind Project Private Limited
13 M/s.Tamilnadu Spinning Mills Association:-
14 M/s.Vairam Wind Power, Namakkal:-
15 M/s.Winwind Power Energy Private Limited, Chennai:-
16 Ministry of New and Renewable Energy:-
17 Power Engineers Society of Tamil Nadu
18 Tamil Nadu Electricity Board
19 Thiru G.Ramakrishnan, Retired Chief Engineer/TNEB
20 Thiru S.Kittu, Goodwill apparels, Tiruppur:- T
21 Thiru Singhan Ragu, Ooty:-

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 Annexure – III

PROCEEDINGS OF THE EXPERT COMMITTEE MEETING ON NON-

CONVENTIONAL ENERGY SOURCES HELD ON 16-07-2008 (WIND
ENERGY)

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 Annexure – III

Proceedings of the Expert Committee meeting on Non-Conventional Energy

Sources held on 16-07-2008 (Wind energy)

Mr. Kasthuri Rangaiyan, VP, Indian Wind Power Association:

- The maintenance cost has increased by 25%, interest rate increased from 8% to
13% / 14% as pointed out by Indian Renewable Energy Development Agency
(IREDA).
- Even IREDA rate is 12%. Hence a revision on this is required. The time value of
money has to be taken, because the purchasing power of rupee is going down
drastically.
- Even in the competitive bidding by public sector and private sector entity reveals
that capital cost has increased beyond Rs. 5.5 Cr./MW to Rs. 6 or 6.2 Cr. / MW.
For the last year, it was Rs.5.75 Cr. / MW. Revised control period, with indexing
mechanism is suggested.
- The escalation is due to increase in steel price, cement price, etc. Indexing
through cement price index or steel price index or electricity load index or a
combination of these three.
- In the first year of 577 MW was added while in the 2nd year of control period less
than 250 MW only has been added which is clear reflection of the cost increase
during the control period. For the next year of control period, apart from revising
the cost we should have some escalation indexing mechanism. This can be
considered by the Commission for the coming period.
- National Tariff Policy & Commission order speaking about preferential tariff, the
Commission has given 16% return on pretax in the last control period. This
works out to around 14% post tax. When compared with conventional generation
having 14% post tax, this 16% pre tax for NCES is not a preferential tariff.
- The suggestion with preferential treatment would be around 16% post tax. We
request the Commission to consider capital cost, interest rate, indexing and
higher return.

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Mr. A.H. Pandit, Consultant, Indian Wind Energy Association:
- Average capital cost is around 5.57 Crs.
- Indexing mechanism for capital cost during the control period
- ROE of 16% pretax is less than 14% of post tax. Therefore ther is no preferential
treatment for NCES power.
- 16% of post tax ROE is recommended for NCES power.

Mr. K. Venkatachalam, Chief Advisor, Tamil Nadu Spinning Mills Association

- Firstly the generation tax of Rs.1000/- levied by GoTN has not been taken into
account in the working calculating Rs.2.75 or 2.90. This should be added.
- Secondly, the O & M cost assumption of 1% is less while the actuals is around
1.8% or 1.9%. The actual O & M cost should be taken into account.
- Because of the frequent power cuts, the wind mill generators are unable to
wheel their generated energy.
- We have invested so much of our energy, but we are not able to consume / use
our generated energy and our energy is being diverted to other industries by
TNEB.

Mr.P.Vetrivelan, M/s. Sri Shanmugavel Mills:

- Generated energy could not be utilized at user end due to load shedding of
TNEB.
- Due to inflation and raise in the lubricant cost O&M cost increased from 1.1% to
1.8%
- As against Rs. 3.50 we get an effective rate of Rs.2.50 only
- Spares are not available in the field for substation maintenance by TNEB.
- Due to poor frequency of grid 7% generation is lost

Mr.Jayachandran, M/s.Premier Mills, Coimbatore:

- The TNEB’s rate of Rs.3.81 is the effective rate.
- When it is lapsed we get only around Rs.2.00 per unit
- As of March 2007, we lost some units due to load shedding by TNEB.

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Mr.Ramesh Kymal, M/s.Vestas:
- All input costs have increased in the last 4 to 5 months.
- When you look at Tamil Nadu market, captive users are the maximum investors
in the last 4-5 years. But the real way forward is the Independent Power
Producers. That is how it is, the world over. Some how, investors shy off to
come to Tamil Nadu mainly because we are not able to give them expected ROI.
- At Rs. 2.90, the ROI is just 3%. If you can assure 12% to 14% IRR, I can assure
you billions of dollars can come to Tamil Nadu. It is the ideal location because
wind is steady, its a flat terrain, its ideal for wind power generation.
- We have worked out a basic tariff of Rs.3.40 (a basic minimum) with an
escalation also because every cash flow that we make, the variables are there.
Because if you want foreign investors or other big investors to come in, they are
looking for some kind of insulation for the inflation that will come in future.
- I have been corrected that at Rs. 3.90, IRR is 13.2% because interest rates have
gone up which can be substantiated.

Mr. Ramani, M/s. Indian Wind Turbine Manufacturers Association

- Capital cost has been increased and interest rates have gone up which is not
controllable.
- The tariff rate is Rs.3.40 in Karnataka and Rs.3.15 in Maharashtra.
- Last year Gujarat has grabbed around 650 MW whereas in Tamil Nadu it
continued to be around 300MW to 350 MW. With better tariff and better working
conditions we could do better.
- We talked about cost, inflation, interest rate, etc. for today. We have to factor
that also into tariff fixation. It has to be averaged for the coming 3 years.
- Another point is the waiver of the infrastructure development charges which may
increase productivity and optimisation of the industry itself.
- It is not that Tamil Nadu is bad but other states are more favourable.
- If operational charges, instead of reducing from Rs.1000 to Rs.350, if it is
reduced to zero, it will help the existing customers to come forward to make more
investment in Tamil Nadu.
- In the last 4 years, it has come down from 865MW to 350 MW. Every year it has
come down and not increased.

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 - The tariff/ PPA is only for 20 years. For this, the Commission can add a clause
that even after 20years, wherever the wind mills are in condition to continue
generation, the TNEB can continue the PPA since we do not know the fate of
wind farm after 20 years.
Mr.Rajendra V.Kharul, Head, Centre for Wind Power, WORLD INSTITUTE OF
SUSTAINABLE ENERGY(WISE), Pune:
- Steel and cement cost have increased by 20%
- Inflation at 12% and interest rates at 13% to 14%
- A tariff of Rs.3.80 is reasonable
- Cost of generation of conventional power have gone up by 27%
- The 5D x 7D array dimension for erection of wind mills is a killing one. We should
take a call and change the array dimensions.
- We should not control NCES power growth in any state. Maharshtra is ready to
purchase at the rate of Rs.7.00 to Rs.8.00 and there is a good demand for
power.
Mr.Sukumaran, Advisor, Cogen, Ministry of New and Renewable Energy Sources
- For NCES IPP growth in Tamil Nadu, the power purchase tariff shall be revised.
- A capital cost of Rs. 5.5 Cr. to 5.75 Cr. is recommended
- If WISE is coming out with some scientific study and proof, we can change the
array dimensions for erection of wind mills.
Mr.T.B. Chikkoba, Former Member, TNEB:
- With regard to OA scheduling charges, I am of the opinion that load despatch is
not doing any despatch job daily in wind mills. They do not collect data from all
the 5000 wind mills and tabulate them to arrive at the availability for the day. So
real despatching is not done.
- Wind is a infirm energy. There are methods to predict and make it a
despatchable energy for which you need extra equipments like SCADA, etc
which have not been installed in Tamil Nadu. Under such circumstances, I feel
that it is not fair or correct on the part of TNEB to levy scheduling charges for
wind mills. It does not come under merit order.
- The capital cost and the O&M cost have been increasing during the control
period of three years. But no clear data has been filed by the developer on
increase of O&M charges.

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 - Tariff setting every year is the best. In a stage when TNEB cannot stop load
shedding, carryover should be permitted except in Hydel season when it is
available in plenty. They should be allowed to make full use of energy generated.
- Reducing wheeling charges to 2% is not fair. Wind mills were located in scanty
far off areas earlier. It is not consumed in local area, power is being exported and
230 kV lines are overloaded. Therefore, the wheeling charge of 5% is justified.
- The increase in infrastructure cost should be analysed by a group. There should
be a match between wind projects and evacuation facility by TNEB.
- In best areas with old machines, intercropping may be done.
- Chairman, TNERC requested MNRE to give about Capital cost and WISE about
relocation, etc.

List of participants:

1. Mr. E.V.R. Sastry, Senior Advisor, Centre for Energy Technology, Osmania
University, Hyderabad
2. Mr.Debashish Majumdar, CMD, IREDA
3. Mr.T.C.Tripathi, Adviser, Solar, MNRE
4. Mr.C.R.Nagarajan, Tata BP Solar
5. M/s. Sri Power, Hyderabad
6. Mr. K.E. Raghunathan, M.D., SOLKAR Energy
7. Dr. M. Kumaravel, Professor, IIT, Chennai
8. Mr. Rajendra V.Kharul, Head, CWP, WISE, Pune
9. Mr. Mohan Varghese Chunkath, IAS, CMD, TEDA
10. Mr.C.S.Y.S. Rao, MD, Titan Energy Systems
11. Mr.R.Chellappan, M.D.,Numeric Power Systems
12. Mr. S. Kathiresan, Member(Accounts) /TNEB
13. Mr.T.K.Chikkoba, Former Member, TNEB & SAC Member, TNERC
14. Mr.K.Venkatesan, IAS (Retd), SAC Member
15. Mr.K.Raghunandan, MD, EID Parry India Ltd.
16. Mr.Ram V.Thiagarajan, CMD,M/s.Thiru Arooran Sugars Ltd.
17. Mr.R.Murugesan, VP, M/s.Bannari Amman Sugars
18. Mr.K. Raghu, MD, M/s.Ind Bharath
19. Mr.Santhosh Kamat, Co-founder, M/s.Auromira Energy
20. Mr.S. BalaSubramanian, Director, Avante Garde Engineers & Consultants (P)
Ltd.
21. Mr.S.C. Natu, Senior Vice President, MITCON, Pune
22. Mr.K.P. Sukumaran, Advisor, Cogen, MNRE
23. Mr. Kasthuri Rangaiyan, VP, Indian Wind Power Association
24. Mr. A.H. Pandit, Consultant, IWEA
25. Mr. K. Venkatachalam, Chief Advisor, TNSMA
26. Mr.P.Vetrivelan, M/s. Sri Shanmugavel Mills
27. Mr.Jayachandran, M/s.Premier Mills, Coimbatore
28. Mr.Ramesh Kymal, M/s.Vestas
29. Mr. Ramani, M/s. Indian Wind Turbine Manufacturers Association

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 Annexure – IV

PROCEEDINGS OF THE SIXTEENTH STATE ADVISORY COMMITTEE

MEETING HELD ON 16-02-2009

108
 Annexure – IV

PROCEEDINGS OF THE SIXTEENTH STATE ADVISORY COMMITTEE MEETING

HELD ON 16-02-2009.

Members Present:

1. Thiru. S.Kabilan Chairman / TNERC

2. Thiru. B. Jeyaraman Member / TNERC
3. Thiru. R.Rajupandi Member / TNERC
4. Thiru. S.Mohan Verghese Chunkath, I.A.S. Member / SAC
5. Thiru. C.P.Singh, I.A.S. Member / SAC
6. Thiru. K.Venkatesan, I.A.S. (Retd) Member / SAC
7. Thiru. T.B.Chikkoba Member / SAC
8. Dr. M.Abdullah Khan Member / SAC
9. Dr. U.Sankar Member / SAC
10. Thiru. N.L.Rajah Member / SAC
11. Thiru. S.Rathinasabapathy Member / SAC
12. Thiru. S.Pancharathinam Member / SAC
13. Thiru.S.V.Balasubramaniam Member / SAC
14. Thiru. A.Vellayan Member / SAC
15. Thiru. V.Sethuraman Member / SAC
16. Thiru. P.Gajapathy Member / SAC
17. Thiru K.P.Sukumaran Special Invitee
18. Thiru. Debashish Majumdar Special Invitee
19. Thiru. K.Kasthoorirangaian Special Invitee
20. Thiru. Santosh Kamat Special Invitee

The meeting commenced with welcome address by Chairman, TNERC. Chairman,

TNERC stated that Tamil Nadu has been ahead of all States in promoting wind power.
But last year Gujarath has overtaken Tamil Nadu by about 300 MW. Even Maharashtra
is ahead of Tamil Nadu in establishing wind power. The reasons could be
1) Exploitation of class A wind sites is over in Tamil Nadu.
2) Unattractive tariff in the State
3) Constraints in evacuation facilities
Chairman, TNERC also stressed the importance of encouraging wind energy as it is
environmentally a clean source of energy. Even though it is infirm in nature and available
only for 6 to 7 months in a year, it helped Tamil Nadu during power deficit situation to a
great extent. He also stated that the installed capacity of wind power in Tamil Nadu is
about 4,100 MW, which accounts for 44% of the installed capacity of wind power in
India. Nearly 15 to 20% of our peak demand is supported by wind power.

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Chairman, TNERC briefed the consultative paper on “Power procurement by distribution
licensee from wind energy generators and allied open access issues” and requested the
members to offer their views on important parameters. This was followed by a
presentation on concept paper by Director (Engineering). The views expressed by the
SAC members and special invitees are summarized below:

1. CAPITAL INVESTMENT

Chairman, Tamil Nadu Electricity Regulatory Commission(TNERC):- The proposed

capital cost of Rs.5.60 crores/MW is based on the average capital cost furnished by
IREDA and MNRE. A sum of Rs.25 Lakhs was discounted towards Infrastructure
Development Charges (IDC) from the proposed capital cost of Rs.5.60 crores as the
same was struck down by the Commission in its order dated 19-09-2008.

Thiru. C.P.Singh, I.A.S., Chairman, Tamil Nadu Electricity Board (TNEB): - As the
breakup for the capital cost of Rs.5.35 crores per MW is not furnished in the consultative
paper, TNEB is not in a position to offer remarks.

Chairman, TNERC:- This capital cost consists mainly civil works and machinery cost.
The land values vary from place to place.

Member – II, TNERC:- Even TNEB did not furnish the breakup in their suggestions of
Rs.4 to 4.5 crores in response to the concept paper.

Thiru. Debashish Majumdar, Chairman and Managing Director, Indian Renewable

Energy Development Agency (IREDA):- Price of the wind machine varies over time
and therefore Commission can consider indexing option for determining the cost of wind
machine. The cost of wind machine mainly depends upon the steel price in the market.

Member – II, TNERC:- The control period is only for two years, in that situation does it
require indexing for the second year?

Chairman, TNEB:- Indexing is a better option.

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Thiru. S.Pancharathinam, , President, Tamil Nadu Electricity Employees Central
Organisation:- Even TNEB’s thermal generation capital cost is around 4 – 5 crores per
MW and the proposed cost of wind machine is not digestible.

Thiru. S.Mohan Verghese Chunkath, I.A.S., Chairman and Managing Director,

Tamil Nadu Energy Development Agency (TEDA):- The data available on the cost of
wind machine in the market is little. Information available on financial data is not
accurate. The steel and cement price in the market is volatile. Indexing may be
incorporated in fixing the cost of wind machine.

Thiru K.P.Sukumaran, Advisor, Ministry of New and Renewable Energy Sources

(MNRE):- Precise data for break up is not available. The 5.6 crores per MW was based
on the average cost of 40 numbers of applications received recently. The break up
details of the capital cost may be worked out roughly as follows:
(i) Land – 5%
(ii) Plant and machinery – 85% and
(iii) Civil works – 10%.
The wind turbine cost may comedown in the forthcoming years.

Dr. U.Sankar, Honorary Professor, Madras School of Economics:- Base year is

important. Capital cost constitutes land, plant, machinery and civil works. Land cost is
location specific and it is to be separated from project cost and there should not be any
depreciation on land cost. The capital cost of thermal is comparatively low because of
the variable cost involved and it is increasing. Therefore wind capital cost is high.

Thiru. N.L.Rajah, Trustee/Consumer Action Group (CAG):- The proposed cost plus
tariff is not in line with the Act, National Electricity Policy and Tariff policy. This will not
promote competition. Section 63 of the Act and clause 6.4.2 of NEP stipulates such
procurement by competitive bidding. Rajasthan has decided to go for competitive
bidding from 31.03.2009. Section 62 of the Act specifies maximum and minimum price
under shortage condition. Hence, considering the installed capacity in Tamil Nadu, we
should go for competitive bidding with floor and ceiling rate of tariff.

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Thiru. V.Sethuraman, Director(Power), Neyveli Lignite Corporation Ltd (NLC).:- The
capital cost of thermal generation has gone upto 5 crores per MW for a capacity of 1000
MW station. Considering the smaller capacity of wind machine, the 5.35 crores per MW
is not high. Commission can fix a scale or benchmark for capital cost of wind machine.
Declining trend in wind capacity addition in Tamil Nadu is noticed in last couple of years.
Tariff on cost plus will bring the capacity addition in the State. Once the TNEB is in
comfortable position competitive bidding can be introduced. Till then, cost plus approach
can be adopted.

Thiru. T.B.Chikkoba, Former Member(Generation), TNEB:- The capital cost of the

wind machine depends upon the manufacturer/supplier. The cost of the wind machine is
determined by the market only and not determined by any other factor. The cost of wind
machine is raised due to increase in demand. Only class B sites are available in Tamil
Nadu. Manufacturers are not reducing the price even when steel and cement prices
have comedown. Commission does not have authentic data about the cost of wind
machines. As per the Electricity Act, 2003 Central Electricity Authority (CEA) has to get
all the data and the same has to be published in the form of a book. Commission can fix
the exact cost only if we have authentic data. Suppliers are not willing to share the cost
details. Commission can request the capital cost from the
suppliers/manufacturers/captive users and 5 crores per MW is reasonable.

Chairman, TNERC:- Market price can not be relied upon and therefore Commission has
gone by the figures of IREDA since they are financing the project. Control period is only
two years and indexing is a complicated issue in the present volatile condition.

Thiru. K.Kasthoorirangaian, Vice President, Indian Wind Power Association:- The

cost of wind machine is market driven. Steel and cement prices in the last 3 years have
increased considerably. The wind machines in Tamil Nadu are being erected on turnkey
basis and the capital cost ranges from 5.6 to 6.85 crores per MW. The input costs have
comedown, but the manufacturers have not brought it down. The capital cost never
comes down to 5.6 crores per MW and the proposed rate is on lower side. The
Infrastructure Development Cost (IDC) has been made nil only to those developers who
sells electricity to TNEB. But in Tamil Nadu 65% of the WEGs are captive users and the

112
Commission should take care of majority people. Rs.6.25 crores per MW may be
adopted towards capital cost. Only class C sites are available in Tamil Nadu.

Thiru. S.Pancharathinam:- WEGs are not giving energy to TNEB but consuming
themselves. The views of Chairman, TNEB should be taken into account. Government
can give subsidy/concession to the WEGs. The present tariff for wind energy itself is
high. The basis for the proposed capital cost of 5.35 crores per MW is to be given and it
is on the higher side. The WEGs have never helped TNEB and the government. The
cement and steel prices have come down recently. The Commission should take
appropriate steps to tie-up all the wind power produced to TNEB.

Dr. M.Abdullah Khan, Retired Professor, Anna University:- Preferential tariff can be
given to the WEGs as per NTP. There are problems in arriving at the tariff rate.
Competitive bidding among the respective suppliers should be introduced.

Chairman, TNERC:- In case of thermal, there are limited bidders participating in the
competitive bidding. There are about 8500 WEGs, 35% to 40% accounts for sale to
TNEB and the 65% accounts for captive use. There will be lot of difficulties in
competitive bidding due to more numbers of small WEGs in Tamil Nadu. There will be
variance of rate by different WEGs.

Dr. M.Abdullah Khan:- Step by step approach may be introduced for competitive
bidding. Market clearing price may be adopted even though more numbers of small
players exist.

Dr. U.Sankar:- Competitive bidding will be useful since the WEGs are reluctant to reveal
the true cost.

Thiru. T.B.Chikkoba:- Already agreement with TNEB is in force in respect of existing

plants. Small WEGs will not come for competitive bidding due to higher cost for lack of
economy of scale. Tamil Nadu do not have potential sites to put up more than 300 – 400
MW. WEGs can not come for competitive bidding since wind density varies from place to
place. Tamil Nadu is in shortage of power and we need to develop wind projects. Lots of

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problems will arise in competitive bidding and hence suggested to continue the present
policy.

Thiru K.P.Sukumaran:- The competitive bidding in the advanced countries like U.K. is
not successful. Preferential tariff is to be continued as recommended by the working
group of FOR.

Thiru. Debashish Majumdar:- The Electricity Act, 2003 stipulates competitive bidding in
procurement of power. The government has not notified the standard bidding documents
yet for procurement through competitive bidding for NCES power.

Thiru. S.Rathinasabapathy, General Secretary, Tamil Nadu Electricity Workers

Progressive Union:- Already, TNEB is purchasing energy at higher cost. The proposed
capital cost is high.

Chairman, TNEB:- Risk factor in procuring wind power has not been factored in the
consultative paper. Infirm power can not be more than 10 – 12%. Wind power is infirm in
nature and varied 0 to 900 MW during last two months.

Thiru. K.Venkatesan, I.A.S. (Retd):- Enquired whether TNEB wants maximum

percentage or ceiling on the procurement of wind power.

Thiru. S.Mohan Verghese Chunkath:- All NCES source of energy should be treated
equally. If the infirm power in the grid is more, it will bring difficulty in distribution. Special
incentive for wind development may be stopped.
Thiru. T.B.Chikkoba:- Eventhough wind is seasonal, in some countries like U.K.,
Denmark, etc. wind energy is scheduled and dispatched using advanced forecasting
method. Investment in SCADA will be helpful in scheduling and dispatch of wind power.

Chairman, TNEB:- The risk factor in buying wind energy should be addressed properly.
The wind power is seasonal and infirm in nature. TNEB transmission assets are idle
almost for 8 months in a year. TNEB could not take back its investment. We are
supplying power to the consumers at cheaper rate. Commission will have to take this
into consideration.

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Chairman, TNERC:- TNEB should buy certain quantity of wind power. It is mandated.
TNEB can recover its cost invested in generation, transmission and distribution by filing
ARR before the Commission. But TNEB has not filed any ARR. It is not the fault of the
Commission. All the cost of TNEB is passed to the consumer through tariff.

Thiru. T.B.Chikkoba:- Renewable energy is a clean source of energy and the same
should be encouraged both by TNEB and Commission. There should be a proper energy
mix to compensate the climate change. The price of thermal power will go up in future
since their fuel are depleting in nature. At the same time, the cost of renewable will come
down in future.

Thiru K.P.Sukumaran:- The subject matter of integrating wind energy in to the grid was
discussed in the GERC meeting held recently. It is a fear and not a fact particularly when
we are in shortage. Coordination should be there among the distribution licensee, SLDC,
STU and WEGs.

Dr. U.Sankar:- Power from Conventional source will be more than 60% of the actual
cost if we take into account the social cost. The cost of wind energy may come down in
the next 3 to 4 years. Ultimately consumers are paying for the preferential cost of wind
power and not the licensee.

Thiru. N.L.Rajah:- The role of Commission seems to be reduced to the level of cost
accountants in fixing only tariff. Whereas they have mandated with brighter role as per
section 86(2). Commission has to advise the government in framing the policies and
guidelines for bidding. The Commission should also write to TNEB to reduce T&D
losses.

Chairman, TNERC:- Clarified that as mandated in the Act, Commission is advising the
State government as and when required.

Thiru. S.Rathinasabapathy:- On what basis the capital cost of Rs.5.60 crores per MW
was arrived. TNEB is purchasing power at higher cost and selling at lower rates.

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Chairman, TNERC:- Clarified that the capital cost was arrived on the basis of data given
by IREDA and MNRE. Further, Chairman, TNERC clarified that TNEB is not able to
meet the cost of energy since they have not filed ARR for so many years. Even the
subsidy portion given by the Government is not sufficient to meet the gap.

2. CAPACITY UTILIZATION FACTOR (CUF)

Chairman, TNERC:- CUF is another important issue and the CUF of 27.15% was
arrived based on the generation data given by TNEB and the data already available in
the order no.3 dated 15.06.2006. De-rating of 1% per annum after ten years of operation
is also provided.

Thiru. T.B.Chikkoba:- The data from which the CUF was calculated were not given in
consultative paper. Last time CUF was calculated after getting data from C-WET. But
this time the old method was not adopted. The proposed CUF of 27.15% is high since
the wind potential areas were already utilized and only class C sites are available. De-
rating factor can not be linked with wind availability. 1% reduction of de-rating after five
years of operation is suggested.

Member-II, TNERC:- In next two years we expect a maximum of 2000 MW capacity

addition from wind source. WEGs have already purchased lands in class A, B and C
sites. The CUF of 27.15% is weighted average of all four regions. Viz. Muppandal,
Sengotta, Palghat and Cumbam pass. It was arrived at after getting actual data from
TNEB. The CUF is not calculated on ad-hoc basis.

Chairman, TNERC:- It is a voluminous data. However the CUF data will be sent to the
Members if required.

Thiru. K.Kasthoorirangaian:- The wind turbines have to be de-rated every year

continuously. In 2007-08, the CUF has comedown to 10.79% from 17.27% in respect of
99 wind mills in Muppandal area.

Member-I, TNERC:- Sample study on 99 machines can not be realistic representative to

all wind machines. De-rating of the wind machines also depends upon the maintenance.

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Thiru. K.Kasthoorirangaian:- Maintenance of wind machines is good by the private
promoters

Chairman, TNERC:- Further analysis will be made after getting data from TNEB and
developers.

3. RETURN ON EQUITY (ROE)

Chairman, TNERC:- RoE of 14% post-tax (17.63% pre-tax) has been proposed by the
Commission. CERC has proposed 15.5% post-tax which is equivalent to 19.85% pre-
tax.

Thiru. T.B.Chikkoba:- Why not follow the older system of 16% post-tax? He suggested
to pay tax separately in addition to tariff rate by each WEGs.

Chairman, TNERC:- It will be difficult to reimburse IT to each WEGs as they are large in
numbers.

Thiru. V.Sethuraman:- Suggested to adopt post-tax @ 15.5% as decided by CERC.

Member-II, TNERC:- Post-tax can be implemented for a project specific tariff and for a
generalized tariff, pre-tax is a better option.

Thiru. Debashish Majumdar:- RoE of 14% is not preferential treatment. Like

conventional project, RoE is not guaranteed in case of renewable project due to single
part tariff. Hence, RoE for renewable projects should be at least on par with conventional
projects.

4. INTEREST ON DEBT

Chairman, TNERC:- The interest rate of 12% was arrived as per the rate offered by
IREDA.

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Thiru. Debashish Majumdar:- State Bank of India’s (SBI) long term Prime Lending
Rate (PLR) with 2% additional interest rate may be adopted in future. Present SBI PLR
rate is 11.75%. The interest rate of IREDA varies from 11.75% to 12.9%.

Chairman, TNERC:- PLR also varies every quarter and will introduce uncertainties in
tariff. Therefore, we will go by IREDA rate.

Thiru. Debashish Majumdar:- In last 21 years IREDA rate was revised once in a year
only. But in the last six months, the interest rate was revised 4 times. But banks revised
interest rate only once in last year.

CMD, TEDA:- The loan quantity offered by IREDA is small. Therefore bank rate is good.

Chairman, TNERC:- Appropriate view will be taken

5. DEPRECIATION

Chairman, TNERC:- Depreciation rate of 4.5% under straight line method is proposed
by the Commission.

Thiru. V.Sethuraman:- Proposed rate of 4.5% is correct and acceptable.

6. OPERATION AND MAINTENANCE

Chairman, TNERC:- The Commission has proposed 1.10% of the cost of the project for
first 5 years with escalation of 5% per year thereafter.

Chairman, TNEB:- O&M calculation may be charged on the cost of machinery instead
of the capital cost of the project.

Thiru. T.B.Chikkoba:- The capital cost for the wind energy project considered in
Maharashtra ERC is only 4 crores per MW and hence higher O&M is reasonable. But in
the proposed tariff the capital cost considered is more and hence the proposed rate of
O&M is reasonable.

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Thiru K.P.Sukumaran:- 85% of the capital cost can be considered for O&M calculation
since O&M is related to machinery only.

Thiru. S.Pancharathinam:- He supported TNEB’s suggestion of calculation of O&M on

the percentage of machinery instead of capital cost.

Chairman, TNERC:- Whether civil works required maintenance? As suggested by CMD

IREDA, we may consider 85% of the capital cost towards cost of machinery, 10%
towards civil and 5% towards land. O&M may be calculated based on the machinery
cost.

Thiru. T.B.Chikkoba:- The changes in O&M suggested by TNEB is very small amount
and suggested not to change. It is more reasonable to have a stable formula.

7. INSURANCE

Chairman, TNERC:- The proposed insurance charge is 0.75% on the project cost for
the first year and reduction of 0.5% every year thereafter.

Thiru. S.Pancharathinam and Thiru. S.Rathinasabapathy: - Suggested that only

machine cost shall be included for insurance calculation as proposed by TNEB.

Chairman, TNERC:- We can consider the insurance cost only on machinery as

considered for O&M

8. CONTROL PERIOD

Chairman, TNERC:- Control period was reduced from 3 years to 2 years and the
Commission proposed that the new tariff order will be effective from the date of tariff
order.

Thiru. S.Rathinasabapathy: - Is there any uniformity with other States who revise the
control period every year.

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CMD, TEDA:- For wind, the change in control period does not make much difference.
But in case of Bio-mass, it makes a difference since there is a variable cost in bio-mass.

9. APPLICABILITY OF THE ORDER

Chairman, TNERC:- The proposed order shall be applicable to all WEGs commissioned
on or after the date of this order. The point suggested by TNEB is not relevant.

10. TARIFF MECHANISM

Chairman, TNERC:- Generalized, cost plus single part tariff is proposed in the concept
paper. Project specific tariff may be determined for large projects.

Member-II, TNERC:- For a total of 200 MW or more by a single developer within the
control period, project specific tariff can be fixed.

CMD, TEDA:- The project specific tariff can be fixed if the tariff of specific project is
lesser than the generalized tariff.

Thiru. K.Venkatesan:- Location specific tariff may be adopted for larger capacity
projects.
CMD, IREDA:- We may look into the project specific tariff if there is any change in the
policy at central level. There will be change in tariff parameters in both the case. There
might be lower PLF and higher efficiency in project specific tariff.

Chairman, TNERC:- Pass wise tariff may be thought of. This is a greater issue and may
be discussed in separate meeting.

11. RENEWABLE PURCHASE OBLIGATION (RPO)

Chairman, TNERC:- Commission has proposed to fix 7.5% as the minimum purchase
obligation. Whether the minimum percentage shall include all the source of NCES or
wind alone. Whether only the energy purchased by the TNEB should be considered or
energy input to the system should be considered for deciding RPO.

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Thiru. K.Venkatesan:- In Tamil Nadu we are in deficit and for NCES there is no backing
down. Therfore, is it necessary to fix minimum percentage for RPO?

Chairman, TNEB:- NCES generation is seasonal, but RPO is given for per annum. It
shall be on pro-rata with reference to the number of seasonal months. He wants to know
the logic behind in fixing minimum percentage of purchase.

Thiru. V.Sethuraman:- Captive consumption shall not be taken into account for fixing
RPO.

Thiru. T.B.Chikkoba:- Captive consumption should be included in RPO to find out the
real consumption of NCES and to find out the energy mix. The RPO should be increased
to minimum of 15%.

Chairman, TNEB:- The RPO percentage should be fixed to minimum which shall
include captive consumption and all sources of NCES.

Member-II, TNERC:- Shall we take standby generation into account in calculating RPO?
If so, it shall be included in the denominator of the RPO formula.

Thiru. V.Sethuraman:- Standby generation should not be included in calculating RPO.

Thiru. N.L.Rajah:- Fix a minimum percentage of RPO at more than 10%.

Thiru. K.Kasthoorirangaian:- If we fix minimum percentage of RPO, there will not be

any incentive for growth. The Gujarath ERC has fixed RPO of 2%. If we fix a lower
percentage like this, distribution licensee will say that wind power will not be purchased
beyond that limit. Such case should not happen in Tamil Nadu. Hence, it should be at
least 15%.

Thiru. K.Venkatesan:- Suggested to fix minimum percentage, but it should be

reasonable.

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Chairman, TNERC:- The percentage of RPO shall be calculated from all consumption
including standby generation. The details of standby generation will be obtained from
electrical inspectorate. As per the new formula, the denominator will include standby
generation and that will bring down the present renewable consumption of 11.08%.
Hence, the RPO percentage may be fixed around 12%.

12. ENERGY PURCHASE AGREEMENT (EPA)

Chairman, TNERC:- It is suggested that distribution licensee shall draft an EPA taking
cognizance of the tariff provisions and EPA related principles elaborated in the order and
file a model EPA for approval of the Commission. At present there is no exit clause. But
it is proposed in the consultative paper. IREDA wants the period of PPA shall be tied up
to the entire loan period. TNEB wants to impose penalty if the WEGs wind up the
operation before the expiry of the agreement period as TNEB had established the
infrastructure facility. Even, if the transmission assets owned by TNEB are not utilized by
the WEGs, it is not a loss to TNEB since they can recover the cost for the stranded
assets through ARR.

Thiru. T.B.Chikkoba:- Why should the consumers bear the cost for stranded assets?

Member-II, TNERC:- There will not be any loss to TNEB even if the WEGs exit from
agreement, they will go for EWA and the transmission and wheeling charges can be
recovered by TNEB.

Chairman, TNERC:- We can presume that WEGs will continue in the business.

Thiru. K.Kasthoorirangaian:- The WEGs will not go out of business. It is a hypothetical

one.

CMD, IREDA:- As a financier, IREDA wants that the agreement should be continued
throughout the loan tenure.

Chairman, TNERC:- As a regulator, we have to look in to the matter legally and how this
should be addressed.

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Thiru. K.Venkatesan:- In that case, giving 3 months notice arises only after the loan
tenure.

Chairman, TNEB:- TNEB is willing to pay compensation if TNEB breaks the agreement.
What is the obligation to the WEGs, if they go out of business?

Thiru. K.Venkatesan:- It may not be good for WEGs if TNEB is given the exit option by
serving 3 months notice.

CMD, IREDA:- Supported Thiru. K.Venkatesan’s suggestion.

Thiru. S.Pancharathinam:- The WEGs should not be allowed to divert power to other
than TNEB. TNEB can exit, but generator should not be allowed to exit from the
agreement.

Chiarman, TNERC:- As per the Electricity Act, 2003 open access can not be denied.

Thiru.S.V.Balasubramaniam, CMD, Bannari Amman Sugars Limited:- Some

conditions may be specified for exit clause and penalty may be levied for exit from the
agreement.

Chairman, TNEB:- Our transmission system is always ready. There shall not be any
transmission constraint in wind power evacuation.

13. ENERGY WHEELING AGREEMENT (EWA)

Thiru. K.Kasthoorirangaian:- The Distribution Licensee and the WEGs should sit
together and frame agreement and the same may be got approved by the Commission.

Chairman, TNERC:- Commission can draft agreement and invite both TNEB and WEGs
for a meeting to finalize the model agreement.

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14. CLEAN DEVELOPMENT MECHANISM (CDM)
Member-II, TNERC:- Commission has proposed that 50% of the CDM benefits will go to
the WEGs and the balance 50% will be shared by the Distribution Licensee and the
STU.

Thiru. K.Kasthoorirangaian:- As per UNFCC guidelines, the CDM benefits will be

given only if the project is viable after getting financial additionality through CDM. If we
share the CDM benefits with others, we may not able to get CDM benefits. Hence, the
CDM benefits should not be shared with TNEB.

Thiru. T.B.Chikkoba:- Distribution licensee does not play role in getting CDM benefits.
The full benefits should go to only WEGs.

Member-II, TNERC:- TNEB only develops all the infrastructure for power evacuation
and therefore CDM benefits should be given to TNEB also.

Thiru K.P.Sukumaran:- The principles adopted by the FOR working group may be
considered on sharing the CDM benefits.

Chairman, TNEB:- Already RoE is assured to WEGs and therefore CDM benefits
should be shared by WEGs with TNEB.

Thiru.S.V.Balasubramaniam:- Getting CDM benefits is not a easy job and the

promoters have to engage experts for availing CDM benefits. Getting CDM benefits will
take 1 to 2 years. Further, all WEGs will not get CDM benefits and therefore the option of
sharing CDM benefits should be left to the WEGs.

Dr. U.Sankar:- If only 4% of the projects get CDM benefits, it seems something is wrong
in the approach in getting the CDM benefits.

Thiru. K.Kasthoorirangaian:- If Commission imposes sharing the CDM benefits with

TNEB, nobody will get the benefits of CDM in Tamil Nadu.

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Thiru K.P.Sukumaran:- Lot of efforts are required from promoter side to get the CDM
benefits. That is why FOR recommended higher percentage of CDM benefits to the
promoter in the initial 5 years.

Dr. M.Abdullah Khan:- The CDM benefits should be shared between the promoters
and the TNEB.
Chairman, TNERC:- Indicated the percentage of sharing of CDM benefits in various
other States and therefore sharing is necessary.

Chairman, TNEB:- Accepts the suggestion of Chairman, TNERC.

Thiru. K.Kasthoorirangaian:- If the CDM benefits are to be shared, the distribution

licensee should share the initial CDM expenses.

Thiru.S.V.Balasubramaniam:- If the CDM benefits are to be shared with TNEB, the

distribution licensee could blame the WEGs in later date for selling the CERs at lower
rate.

Chairman, TNERC:- Suggested to adopt FOR formula.

Thiru. K.Kasthoorirangaian:- Don’t shut door for CDM benefits in Tamil Nadu and
suggested not to share with TNEB.

CMD, IREDA:- Ownership of CERs is with the WEGs.

15. PAYMENT OF SECURITY TO THE WEGS

Chairman, TNERC:- Commission proposes bankable security in favour of the generator

for an amount equivalent to the average monthly bill.

Thiru. K.Kasthoorirangaian:- Even though this clause is incorporated in EPA, this is

not being followed by TNEB. TNEB takes 5 months for making the payment.

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Chairman, TNEB:- WEGs cannot give conformity for per day generation of power. It is
infirm in nature. TNEB do not have money for payment. Even, if we guarantee for one
month payment, what will happen to the next month payment?

Chairman, TNERC:- Suggested that payment has to be made to the WEGs within 30
days and any delay may attract an interest rate of 1% per month.

16. PAYMENT OF SECURITY DEPOSIT TO TNEB

Chairman, TNERC:- Commission suggests that the captive consumers should pay two
times of the maximum net energy supplied by the distribution licensee in a month in the
previous banking period.

Thiru. K.Kasthoorirangaian:- Agreed with the Commission

17. WHEELING CHARGES

Chairman, TNERC:- Commission has proposed wheeling charges of 5% of the energy

wheeled by the WEGs which also include the line losses.

Chairman, TNEB:- We have invested much in transmission sector for wind power
evacuation. Our transmission assets are idle for many months.

Chairman, TNERC:- TNEB can claim tariff for their assets through ARR. TNEB’s point
of keeping the transmission assets idle is not correct since in some part of the State
transmission facility is not adequate.

Dr. M.Abdullah Khan:- Methods for calculating the losses should be prescribed.

Thiru. T.B.Chikkoba:- In the earlier days, the generated wind energy might have been
consumed locally. But nowadays, due to higher capacity addition of WEGs, the
generated power has to be transferred from one place to another place. Hence loss will
be more than 5%. Preferential treatment has to be given to wind power and the present
system 5% wheeling charges may be continued.

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Member-II, TNERC:- The maximum average loss is 10% if wind power is stepped upto
230 kV from 11 kV and stepped down from 230 kV to 11 kV. The loss depends upon the
point of injection and point of drawal. The TNEB’s account of 22% loss is not correct.

CMD, TEDA:- Preferential tariff given at the beginning is acceptable. At present the
WEGs are well established, It is to be seen whether TNEB can bear the burden of
continuing the preferential treatment.

Thiru.S.V.Balasubramaniam:- Already the potential windy sites are occupied and only
the lesser windy sites are available. Therefore it is not reasonable to charge more than
5%. In addition to wheeling charges, transmission charges are also being collected.

Thiru. K.Kasthoorirangaian:- Initially TNEB assured only 2% of wheeling charges and

therefore more WEGs have been established. Subsequently the wheeling charges have
been increased to 5%. To encourage wind energy in our state, the present system
should be continued.
Thiru. K.Venkatesan:- Can we think of more than 5% wheeling charges? It is better to
adopt a reality figure.

Thiru.S.V.Balasubramaniam:- If we increase the wheeling charges, the investment in

the wind energy will come down.

Dr. M.Abdullah Khan:- We have to conduct a study on determining the losses.

Thiru. T.B.Chikkoba:- The tariff rate for industries is Rs.3.50 per kWh and 65% of the
wind energy is being used for captive purpose since captive use is advantageous for
WEGs. Increase in wheeling charge by 1% or 2% can only be on adhoc basis. It is
proved that there is no much loss due to wheeling of wind energy.

Member-I, TNERC:- Because of displacement of energy in the grid, there will not be
much loss.

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18. CROSS SUBSIDY SURCHARGES

Chairman, TNERC:- Commission has proposed 50% of the level prescribed for
conventional energy sources.

19. BANKING

Chairman, TNERC:- Banking charges of 5% is proposed.

Chairman, TNEB:- As Hon’ble High Court of Madras have stayed the matter relating to
adjustment of banked energy to the captive users, the matter is subjudice.

Member-II, TNERC:- The subject matter covered under the above stay is on a different
issue, therefore it is not subjudice.

Thiru. K.Kasthoorirangaian:- IWPA is also one of the party in the above matter and the
Hon’ble High Court do not have jurisdiction in this matter.

Chairman, TNERC:- Indicated the prevailing banking charges in different States.

Chairman, TNEB:- Each state has unique problem. Therefore, it is not appropriate to
compare the banking charges with other state.

Thiru. K.Kasthoorirangaian:- WEGs are not permitted to use their own power due to
imposition of R&C by TNEB.

CMD, TEDA:- Banking is necessary to protect the interest of the WEGs, but it is to be
limited to one year. To fulfill the obligation as prescribed in the Act/NEP/NTP, TNEB has
to purchase the balance power from renewable sources.

Chairman, TNERC:- R&C matter is not to be mixed with general order. If the wind
energy is not banked, TNEB should buy the wind power at higher rate.

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Thiru. K.Venkatesan:- Banking facility is a concession given to the generators. The
WEGs have to sell the surplus energy to distribution licensee or bank the energy.

Thiru. K.Kasthoorirangaian:- The WEGs can opt to sell other than the banked energy
to the distribution licensee at the rate prescribed by the Commission.

Thiru. T.B.Chikkoba:- If TNEB don’t bank the energy, they should purchase the wind
energy at the rate prescribed by the Commission. If there is a power cut, the WEGs have
to be allowed either to consume the energy or to sell to TNEB at the rate prescribed by
the Commission.

Member-II, TNERC:- IWPA suggestions can be included in the EPA.

CMD, TEDA:- Agreed with the IWPA suggestion.

20. EVACUATION FACILITIES

Chairman, TNERC:- Commission has proposed that in case of 100% sale to distribution
licensee, STU shall bear the cost of evacuation infrastructure. In case, if the WEGs opt
for wheeling, the cost of developing evacuation infrastructure is to be reimbursed.

Chairman, TNEB:- We don’t have sufficient money to invest in transmission

infrastructure development since we have already invested massively in thermal
projects. We will try to develop the transmission infrastructure as far as possible.

21. ADJUSTMENT OF PEAK/OFF PEAK HOURS

Chairman, TNERC:- Indicated the Commission’s proposal of adjustment of wind
generation.

Chairman, TNEB:- Since banking is provided, adjusting higher tariff TOD slot in a lower
tariff TOD slot need not be permitted.

Thiru. K.Venkatesan:- It is only beneficial to the TNEB, therefore TNEB can permit
such adjustments.

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22. TARIFF RATE
Chairman, TNERC:- Tariff rate arrived is a result of the parameters discussed so far.
Any change in the parameters will automatically reflect in the tariff rate.

Thiru. T.B.Chikkoba:- The matter of considering the time value of money for the wind
tariff is pending before the court of law. Hence it need not be considered now.

Thiru. K.Kasthoorirangaian:- Tariff rate for group 1 and group 2 WEGs have to be
revised due to increase in de-rating factor and O&M cost.

Thiru. K.Venkatesan:- Tariff for Group 1 and Group 2 should not be revised. Further, if
the capital cost is decreased whether the WEGs can accept downward revision of tariff?

Thiru. K.Kasthoorirangaian:- There should not be any discrimination among the WEGs
and hence tariff for Group 1 and Group 2 WEGs should also be revised.

Chairman, TNERC:- Tariff for WEGs is not based on the normative principles, it is
based on cost plus approach.

23. REACTIVE POWER CHARGES

Chairman, TNERC:- Indicated the Commission’s proposal of reactive power charges.

Thiru. T.B.Chikkoba:- The reactive power charges for WEGs are more when compared
to the charges in respect of bio-mass/co-generators.

Member-II, TNERC:- WEGs are mainly induction generators. Due to its inherent
characteristics to draw more reactive power from the grid, considering the stability of the
grid, as deterrent measure, more reactive power charges has been imposed on WEGs.

Chairman/TNERC, in his concluding remarks thanked all the members for their valuable
suggestions and informed that the remaining two items will be taken up at a next
meeting to be convened shortly.

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 Annexure – V

PROCEEDINGS OF THE PUBLIC HEARING HELD ON 5TH MARCH 2009

131
 Annexure – V

PROCEEDINGS OF THE PUBLIC HEARING HELD ON 5TH MARCH 2009

Secretary, TNERC welcomed all the participants gathered for public hearing and
requested to offer their views on the consultative papers for determination of tariff for
wind Energy, Bio-Mass and bagasse based Cogeneration power.

Thiru.V.Raghu, Secretary General, M/s.Indian Wind Power Association.

Requested the Commission to set the following parameters for determination of
wind tariff.
CUF 23 % ; Capital Cost – Rs.6.00 cr./MW ; O&M Expenses – 1.80% for 2 years with
5% escalation per annum ; Insurance - 0.75% on replacement value with 5% escalation
thereafter; Interest – 13% ; ROE – 15.5 % (post tax) as per CERC norms ; tariff rate of
Rs.3.90 per unit with annual escalation of 9 paise per unit. The tariff rate for group 1 and
group 2 WEGs should also be revised on the principles of equality before law. The
actual de-rating for the WEGs is around 7% in the last 3 – 4 years. The O&M charges
has increased to 21 paise per unit and requested to follow the Maharashtra model of
wind tariff determination.

If Commission imposes sharing of CDM benefits with the licensee, the promoter
will not get any CDM benefits. No cross subsidy surcharge for wheeling to third parties
be levied; RPO should be at 15% ; Rebate for payment made within 15 days shall be as
in Gujarat ; BPSC for payment made over 15 days shall be charged at SBI PLR ;
permission for outside State sale be given ; Demand charges may be calculated based
on the actual generation units only; adjustment of higher TOD slot units against lower
TOD be allowed ; no scheduling and system operation charges be levied ; Permission
for availing banked units during R & C period in addition to the TNEB quota shall be
given. The lapsed units shall be sold to TNEB or permission must be given to carry over
the lapsed units to the forthcoming years without any time restrictions. Prior discussion
with generators is required for finalizing model EPA/EWA .

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Thiru.K.Venkatachalam, Chief Adviser to Tamil Nadu Spinning Mills Association.
Requested the Commission to set the following parameters for determination of
wind tariff.
CUF – 22%; Capital Cost – Rs.5.45 cr./MW ; The actual O&M cost is around
1.89%. Commission may consider 1.69% of capital cost as O&M with the escalation
prevailing in the market. Loan tenure may be fixed at 7 years with one year moratorium
period. Interest on loan may be fixed at 13.5 %. The projects will get CDM benefits only
if there is any viability gap. Hence, there shall not be any sharing of CDM benefits and it
may be given to the Generators in full. The tariff for group1, group2 and proposed tariff
may be fixed at Rs.3/- , Rs.3.20/- and Rs.3.40 respectively.

Thiru.Ajit Pandit appeared for M/s.Indian Wind Energy Association, M/s.Simran

wind power and M/s Super wind Power.
The Control period of 2 year and the ROE of 17.63% specified in the
consultative paper is agreeable. For the RPO there is no maximum limit mentioned in
NTP, trajectory kind of target may be fixed. Regarding CUF, the wind potential sites are
already exploited and 26.5% may be considered. Regarding capital cost, indexation with
respect to steel and cement price movement may be introduced as introduced by
Rajasthan ERC in their MYT order. The project may be exposed for 10 years MAT and
10 years corporate tax. The interest on debt shall be based on PLR movement. Time
value of money may be considered. The Cross subsidy Surcharge should be made nil
since the cross subsidy surcharge formula introduced in the National Tariff Policy does
not include the NCES sources. Control period was waived on 19-09-2008, the new order
should have retrospective effect from that date otherwise there will be Regulatory
vacuum for the intermediate period.

Thiru V.Thiagarajan, CMD, Thiruarooran Sugars.

As PLF variability is there due to switching over of crops by farmers, availability
of bagasse, etc. The availability of bagasse for the year 2009-10 will be lower than the
availability in the year 2008-09. Commission may consider a block of 5 years for PLF
calculation. Any variation may be adjured in the next year PLF requirement. Due to lower
achievable PLF, the promoters could not take back their fixed cost. Generation over 55%
PLF, such sale is paid at ABT rates which may be less than even the variable cost ;
The actual calorific value of the bagasse is only 2272 Kcal/Kg due to higher moisture

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content and hence, the actual station heat rate comes to 4000 k.cal./kwh. Cross subsidy
surcharge may be waived. Capital cost shall be Rs.5.25 cr./MW. Payment to the
promoters shall be paid within 30 days and any delayed payment over 30 days, interest
at 18% per annum shall be paid to the promoter. Generator alone may avail the entire
CDM benefits. The matter of levying taxes on generation and consumption is under
litigation and the same may be accommodated in the tariff order. Commission may
permit to use coal in the off season so that the promoters can get the variable cost of
coal along with the fixed cost.

Thiru K.Raghunathan, MD, EID (P) ltd.

PLF must be bankable and adjustment may be done every year. An average of
55% PLF over a period of 5 years block may be considered by the Commission. Power
from higher PLF shall be given the same rate. For the units generated using bagasse,
even if the PLF is beyond 55 %, NCES tariff may be permitted instead of ABT rates.
Cane crushing data furnished to the Government may be verified for fuel quantity for
achieving 55% PLF. As various administrative expenses are involved in getting the CDM
benefits, it may be permitted to be held by the Generators.

Thiru N. Ramani, Indian Wind Turbine Manufacturers Association.

The 3 years control period should be reduced from the date it was announced.
The effective date for the new tariff should be either from 15th May, 2008 or 19th
September, 2008. 15.5% post tax should be considered for ROE as prescribed by
CERC. Incentives for better performing projects. Removal of cross subsidy payment for
wheeling to third parties, determination of project specific pricing for large projects;
allowing of 100% CDM benefits to generators atleast for 2 years; Payment by Letter of
Credit and exit clause should be introduced to attract international developers. IDC
should not be included in the project cost. If TNEB is charging evacuation charging, the
wind tariff should not be Rs.3.40 per unit. Wind potential is not same in all areas.

Thiru K.Venkatesh, M/s.Rajshree Sugars, Coimbatore

The proposed order may be applicable from 15-05-2008. The projects
commissioned prior to the proposed order and after the end of the control period should
be treated as new projects for the purpose of fixing new tariff order.

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Thiru S.Gandhi, President, Power Engineers Society of India.
Only 6 days are given for preparation of public hearing and the Tamil version of
the consultative paper have not been posted in the Commission’s website. Wind power
is infirm in nature and not facilitating TNEB, TNEB consolidate all kind of power and
distribute. Regarding capital cost, it is on higher side and no evidence for fixing the
capital cost is given. Cost of the WEG can not be more than 2 crores/ MW. WEGs are
getting central subsidy and corporate tax benefits and hence there is no reason to fix a
RoE of 17.63%. Electricity Act, 2003 does not permit banking and hence banking
arrangement should not be given to the WEGs. TNEB has not made any study on the
impact of TNEB grid due to 4200 MW WEGs because they are all inductive in nature. As
per Europian standards the fault level in each feeder can not be more than 5%. But due
to WEGs, the fault level is more. In the state of Kerala the tie feeders with the WEGs are
directly connected to the bus bar of the substation. But in Tamil Nadu it is not so. There
should be heavy penalty mechanism for VAR component injected into the grid. CUF
should be arrived based on the machines commissioned in the last 3 years. The actual
CUF in Theni area is around 37.5%. IDC should be charged with the promoters or the
promoters themselves can lay the transmission line. No justification in waiving the cross
subsidy and the poor people will get affected. Due to WEGs 36,000 acres of land is
barren and there is no agricultural production in these lands. Consultative paper reflects
the policy of privatizing the profits and socialize the losses.

Thiru Siva Subramanian, Sakthi Sugars:-

Very few plants came up after 15-05-2006. Two plants were commissioned in
2007 & 2008. Escalation of expenditures after 2006 is high. We achieved less than 55%
PLF in the past. For the existing projects capital cost may be revised to Rs.4.5
crores/MW and the tariff may be reworked accordingly. We have spent around Rs.5.5
crores for evacuation and this amount may be included in the capital cost. RoE of 15.5%
post tax may be given as prescribed by CERC. This should translate into 20.771% pre-
tax. TNEB is purchasing power at Rs.9 per unit and the co-generators are ready to
supply at less than Rs.9 per unit.

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Thiru R.Varadarajan, DGM, DCW Ltd.
The old projects should be included in the new tariff regime and the promoters
are not getting payment from TNEB in time.

Thiru A.Senthilkumar, M/s.TANFAC India Ltd.

We have captive power plant based on waste heat recovery from chemical
process. The tariff fixed by TNERC is only Rs.3.15 per unit. Since ours is a co-
generation plant, this should be treated on par with the bio-mass power plant. We are
not able to make agreement with TNEB for sale of electricity since our consumption is
less than 51%.

Thiru N.Nagarajan, DGM(O&M), M/s.Subashree Bio energies (P) Ltd.

We have biological biomass production and the plant is classified under biomass
group. The capital cost is around Rs.11 crores per MW and the generation cost is
Rs.10.50 per unit. The demand charges imposed should be waived. Charges may be
levied under Tariff – I instead of Traiff – III in the case of drawal from TNEB.

Dr.Rajapandian, Professor, Panimalar Engineering College.

If there is more demand for the wind machines, cost will come down. The WEGs
shall be allowed to realize the market price and should be allowed to sell any body.

Thiru K.Periasamy, Director (Technical), M/s.Precision Equipments (P) Ltd.

Bio-mass should not be encouraged as it affects the fertility of the top soil and
agriculture productivity. Pumped storage power plant may be categorized under NCES
as it reduces the peak load. Solar power plant can be encouraged only in the villages
where standalone system is required. NCES sources shall be encouraged only when it is
economically viable. Power Plants with de-salination shall also comes under NCES.

Thiru K.Nagaraju, M/s.Lakshmi Electrical Control System Ltd.,

Surplus units can be carry over to the next year to those people who have not
signed agreement with TNEB. Adjustment of peak hour units to other slots should be
allowed due to power cut.

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Thiru M.P.Vasanth.
The date of commissioning is not relevant since previously it was a single part
tariff, but the proposed tariff is two part tariff and therefore the applicability is to be
clearly spelt out. Agreement period is 20 years but the tariff is calculated based on the
12 years.

Thiru M.R.Krishnan, Consumrs Association of India.

The time given by the Commission for public hearing is not sufficient for
preparing the notes. Competitive bidding in procurement should be introduced.
Commission can review the performances of service providers. Most of the assumptions
in the consultative paper is based on the better parts of the other Commission reports.
Using of Coal should not be allowed in bagasse based generation.

Thiru V.Mageswaran, Unorganised workers federation

Consumer burden should be reduced. Solar and wind energy should be
promoted under public sector projects. Land is affected due to wind energy project.

Thiru K.Vijayarajan, Director, M/s.ABI Energy Consultancy Service (P) Ltd.

It is only after the year 2000, few projects have been registered for CDM benefits.
Only the projects which requires financial additionality have been considered for CDM
benefits. The transaction cost for getting CDM benefits is about 5 to 25% of the CERs.

Thiru S.V.Angappan, GS, TNEB Accounts & Executive staff union.

There is no evidence for the capital cost fixed by the Commission. TNEB does
not have the capacity to buy the costly power. Tariff should be revised so that TNEB will
have sufficient RoE. Banking shall be left to the decision between distribution licensee
and WEGs.

Thiru T.R.Krishnasamy, Director, Energreen Power Ltd.

The capital cost of biomass gasification plant is high which is about Rs.7.5 crores
/ MW. This should be bench marked . The cost of engine itself is more than Rs.3.5
crores/MW. Commission should provide some incentive to encourage technological
advancements. Evacuation shall be provided at 100 KW level in villages.

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Thiru Yuvaraj, Tamil Nadu Farmers Sangam, Kumbakonam,
Supply is not available even for 6 hours a day for agriculture purpose in last
month in Tanjore area. At least 8 hours supply should be given to the agriculture sector.
Farmers are not getting higher rate for bagasse. WEGs may be encouraged.

List of Persons/Organization

1. Thiru.V.Raghu, Secretary General, M/s.Indian Wind Power Association.

2. Thiru.K.Venkatachalam, Chief Adviser to Tamil Nadu Spinning Mills Association.
3. Thiru.Ajit Pandit appeared for M/s.Indian Wind Energy Association, M/s.Simran
wind power and M/s Super wind Power.
4. Thiru V.Thiagarajan, CMD, Thiruarooran Sugars.
5. Thiru K.Raghunathan, MD, EID (P) ltd.
6. Thiru N. Ramani, Indian Wind Turbine Manufacturers Association.
7. Thiru K.Venkatesh, M/s.Rajshree Sugars, Coimbatore
8. Thiru S.Gandhi, President, Power Engineers Society of India.
9. Thiru Siva Subramanian, Sakthi Sugars
10. Thiru R.Varadarajan, DGM, DCW Ltd.
11. Thiru A.Senthilkumar, M/s.TANFAC India Ltd.
12. Thiru N.Nagarajan, DGM(O&M), M/s.Subashree Bio energies (P) Ltd.
13. Dr.Rajapandian, Professor, Panimalar Engineering College.
14. Thiru K.Periasamy, Director (Technical), M/s.Precision Equipments (P) Ltd.
15. Thiru K.Nagaraju, M/s.Lakshmi Electrical Control System Ltd.
16. Thiru M.P.Vasanth.
17. Thiru M.R.Krishnan, Consumrs Association of India.
18. Thiru V.Mageswaran, Unorganised workers federation
19. Thiru K.Vijayarajan, Director, M/s.ABI Energy Consultancy Service (P) Ltd.
20. Thiru S.V.Angappan, GS, TNEB Accounts & Executive staff union.
21. Thiru T.R.Krishnasamy, Director, Energreen Power Ltd.
22. Thiru Yuvaraj, Tamil Nadu Farmers Sangam, Kumbakonam,

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 Annexure-VI

SUMMARY OF COMMENTS RECEIVED FROM THE STAKE HOLDERS,

ADVISORY COMMITTEE MEMBERS AND PUBLIC ON THE CONSULTATIVE
PAPER CIRCULATED BY THE COMMISSION.

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 Annexure-VI

SUMMARY OF COMMENTS RECEIVED FROM THE STAKE HOLDERS, ADVISORY

COMMITTEE MEMBERS AND PUBLIC ON THE CONSULTATIVE PAPER
CIRCULATED BY THE COMMISSION.

1. TARIFF MECHANISM

M/s Indian Wind Power Association: Time is not ripe enough for introducing
competitive bidding even from the same type of non-conventional source. There is a risk
of formation of a cartel and the price at which the generated power could be offered and
could be much higher than the cost plus method.

M/s Indian Wind Turbine Manufacturers Association: International experience of

competitive bidding based procurement of renewable energy has not yielded favourable
results. Experience of competitive bidding based procurement is not yet adequately
established even in case of conventional technologies in the country with many power
projects awarded through competitive bidding are yet to be commissioned. In view of the
above, power procurement through competitive bidding route may not be an appropriate
mechanism for promotion of renewable energy sources at this stage. Determination of
project specific pricing for large projects should be introduced.

M/s Indian Wind Energy Association: Power procurement through competitive bidding
route may not be appropriate mechanism for promotion of renewable energy sources.
Besides, unless guidelines for competitive bidding for renewable sources are notified by
Central Government, the mechanism of ‘preferential tariff’ determination will have to
continue. Commission may follow generalized approach for tariff determination since
project specific tariff may give a scope for the utilities to sign PPAs on priority basis with
those Wind developers of larger project size who have approved tariff on cost plus
“project specific” basis. Besides distorting the market, this would lead to unnecessary
confusion and risk among small potential investors.

M/s Winwind Power Energy Private Limited: In the present market scenario, buyer of
power would opt for the cheapest source and at present, wind power will not be able to

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compete in market with other conventional sources. Therefore, market determined
pricing should not be adopted for wind power projects. In view of the short term support
required by the industry and a strong energy support for the nation (as in Brazil), it will
go a long way to keep preferential tariff for wind power for coming few years.
Generalized tariff should be fixed for WEGs and project specific tariff orders can be
considered for large wind farms.

M/s.Super Wind Project Private Limited and M/s.Simran Wind Project Private
Limited: Commission may consider determining the generating company specific order
with a minimum installed capacity of 200-250 MW.

M/s Rogini Mills: NCES can not compete with conventional sources in terms of cost of
electricity and it may take some more time. Hence, wind energy procurement is to be
made at preferential tariff.

Thiru G Ramakrishnan: Most of the WEGs are erected by small and medium industrial
developers in small capacities and the competitive bidding will not help them or the
licensee to get competitive tariff.

Power Engineers Society of Tamil Nadu: Bidding is the better process. Cost plus
principle should be dropped. Tamil Nadu grid cannot accommodate anymore infirm
generation. Promoting wind energy has lost its relevance in this State

Thiru. K.Venkatesan, SAC Member: Location specific tariff may be adopted for larger
capacity projects.

Thiru. N.L.Rajah, SAC Member: The proposed cost plus tariff is not in line with the Act,
National Electricity Policy and Tariff policy. This will not promote competition. Section 63
of the Act and clause 6.4.2 of National Electricity Policy (NEP) stipulates such
procurement by competitive bidding. Rajasthan has decided to go for competitive
bidding from 31-03-2009. Section 62 of the Act specifies maximum and minimum price
under shortage condition. Hence, considering the installed capacity in Tamil Nadu, we
should go for competitive bidding with floor and ceiling rate of tariff.

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Thiru. V.Sethuraman, SAC Member: Tariff on cost plus will bring the capacity addition
in the State. Once the TNEB is in comfortable position, competitive bidding can be
introduced. Till then, cost plus approach can be adopted.

Dr. M.Abdullah Khan, SAC Member: Preferential tariff can be given to the WEGs as
per National Tariff Policy (NTP). There are problems in arriving at the tariff rate. Step by
step approach may be introduced for competitive bidding. Market clearing price may be
adopted even though more numbers of small players exist.

Dr. U.Sankar, SAC Member: Competitive bidding will be useful since the WEGs are
reluctant to reveal the true cost.

Thiru. T.B.Chikkoba, SAC Member: Small WEGs will not come for competitive bidding
due to higher cost for lack of economy of scale. Tamil Nadu does not have potential sites
to put up more than 300 – 400 MW. WEGs can not come for competitive bidding since
wind density varies from place to place. Tamil Nadu is in shortage of power and we need
to develop wind projects. Lots of problems will arise in competitive bidding and hence
suggested to continue the present policy.

Tamil Nadu Energy Development Agency: Preferential tariff given at the beginning is
acceptable. At present the WEGs are well established. It is to be seen whether TNEB
can bear the burden of continuing the preferential treatment. The project specific tariff
can be fixed if the tariff of specific project is lesser than the generalized tariff.

Indian Renewable Energy Development Agency Limited: The Electricity Act, 2003
stipulates competitive bidding in procurement of power. The government has not notified
the standard bidding documents yet for procurement through competitive bidding for
NCES power. Since the capital cost and cost of generation for WEGs are not
competitive with the conventional generation plants, energy procurement should be done
at preferential tariffs to encourage higher generation of wind power. We may look into
the project specific tariff if there is any change in the policy at central level.

Ministry of New and Renewable Energy: The competitive bidding in the advanced
countries like U.K. is not successful. Preferential tariff is to be continued as

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recommended by the working group of FOR. Besides, unless guidelines for competitive
bidding for renewable sources are notified by Central Government, the mechanism of
preferential tariff determination may be continued. Commission may adopt a generalized
approach for tariff determination on cost plus basis.

Tamil Nadu Electricity Board: Tariff determination based on competitive bidding is

neither desirable nor justifiable since wind power is infirm power. Market determined
pricing is not desirable now and may lead to a sort of lopsidedness in approach. Hence
the regulatory price should be continued till the power position improves and a surplus
situation prevails. Commission’s view of issuing a generalized tariff order for WEGs is
acceptable. Further TNEB welcomed the cost plus tariff determination. Tariff for wind
can only be single part. Base tariff with escalation approach is not acceptable.

Thiru M.R.Krishnan, Consumrs Association of India.

Competitive bidding in procurement may be introduced.

Dr.Rajapandian, Professor, Panimalar Engineering College.

The WEGs shall be allowed to realize the market price and should be allowed to sell any
body.

2. CAPITAL INVESTMENT

M/s Indian Wind Power Association (IWPA): Recommended a simple average price of
Rs. 6.00 crores per MW in their written comments and 6.25 crores in the SAC meeting.

M/s Tamilnadu Spinning Mills Association (TASMA): Suggested a Capital cost of

Rs.5.45 crores per MW.

M/s Indian Wind Energy Association (InWEA): Indexing mechanism may be

considered as specified by the Rajasthan Electricity Regulatory Commission as it
automatically adjusts the cost with the change in underlying tariff parameters.

Thiru G.Ramakrishnan, Chief Engineer (Rtd): The cost of Infrastructure Development

Charges (IDC) of Rs.25 Lakhs may be added to the cost of WEGs and may be fixed as
Rs.5.60 crores since the TNEB will not be in a position to lay the line required for
evacuating energy generated by the WEG in time.

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M/s Acciona Wind Energy Pvt. Ltd: Cost of modern large wind turbines is more than
Rs.6.5 crores per MW.

M/s Winwind Power Energy Private Limited: Present day capital investment cost for
WEG is Rs. 7 Crores per MW

M/s Indian Wind Turbine Manufacturers Association (IWTMA): A capital cost of

Rs.6.05 Crores per MW is recommended. IDC should not be included in the project cost.
If TNEB is charging evacuation charging, the wind tariff should not be Rs.3.40 per unit.

Thiru Singhan Ragu: The advent of economic recession world over and the
technological advancement in wind turbine, there exists every possibility that the capital
cost of wind generation may come down.

Power Engineers Society of Tamil Nadu (PESOT): If the cost plus principle is
adopted, the capital cost shall be capped at Rs.4 crores per MW. During the public
hearing, the president of the society stated that the capital cost is on the higher side and
no evidence for fixing the capital cost is given. Cost of the WEG can not be more than 2
crores per MW.

Tamil Nadu Electricity Board (TNEB): Suggested a capital Cost of Rs.4 to 4.5 crores
per MW and favoured indexing mechanism. TNEB requested break up details of the
proposed capital cost and forming of an “Expert Committee” for determining the capital
cost of the wind machine.

Ministry of New and Renewable Energy (MNRE): A capital cost of Rs.5.5 to 5.7 crores
per MW may be considered. The capital cost may be linked to indexing mechanism for
provision of automatic revision of tariff. The break up details of the capital cost may be
worked out as (i) land is 5%, plant and machinery is 85% and Civil works is 10%.

Indian Renewable Energy Development Agency Limited (IREDA): The average

project cost per MW is worked out to Rs.5.61 crores based on the 36 applications
received at IREDA from April, 2007 to November, 2008 aggregating to 442.13 MW. Price

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of the wind machine varies over time and therefore Commission can consider indexing
option for determining the cost of wind machine. The cost of wind machine mainly
depends upon the steel price in the market.

Thiru. S.Mohan Verghese Chunkath, CMD, TEDA and SAC member: Indexing may
be incorporated in fixing the cost of wind machine.

Dr. U.Sankar, SAC member: Capital cost constitutes land, plant, machinery and civil
works. Land cost is location specific and it is to be separated from project cost and there
should not be any depreciation on land cost. The capital cost of thermal is comparatively
low because of the variable cost involved and it is increasing. Therefore wind capital cost
is high.

Thiru. V.Sethuraman SAC member: The capital cost of thermal generation has gone
up to 5 crores per MW for a capacity of 1000 MW station. Considering the smaller
capacity of wind machine, the 5.35 crores per MW is not high. Commission can fix a
scale or benchmark for capital cost of wind machine.

Thiru. T.B.Chikkoba, SAC Member: The capital cost of the wind machine depends
upon the manufacturer/supplier. The cost of the wind machine is determined by the
market only and not determined by any other factor. The cost of wind machine is raised
due to increase in demand. Only class B sites are available in Tamil Nadu.
Manufacturers are not reducing the price even when steel and cement prices have
comedown. Commission does not have authentic data about the cost of wind machines.
As per the Electricity Act, 2003 Central Electricity Authority (CEA) has to get all the data
and the same has to be published in the form of a book. Commission can fix the exact
cost only if we have authentic data. Suppliers are not willing to share the cost details.
Commission can request the capital cost from the suppliers/manufacturers/captive users
and 5 crores per MW is reasonable.

Thiru. S.Pancharathinam, SAC member: The basis for the proposed capital cost of
5.35 crores per MW is to be given and it is on the higher side. The cement and steel
prices have come down recently. Even TNEB’s thermal generation capital cost is around
4 to 5 crores per MW and the proposed cost of wind machine is not acceptable.

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Thiru. S.Rathinasabapathy, SAC member: The proposed capital cost is high. The basis
for the proposed capital cost of Rs.5.60 crores may be furnished.

Dr.Rajapandian, Professor, Panimalar Engineering College.

If there is more demand for the wind machines, cost will come down. The WEGs shall be
allowed to realize the market price and should be allowed to sell any body.

Thiru S.V.Angappan, General Secretary, TNEB Accounts & Executive staff union.
There is no evidence for the capital cost fixed by the Commission.

3. CAPACITY UTILISATION FACTOR (CUF)

M/s Indian Wind Power Association: The wind turbines have to be de-rated every year
continuously. In 2007-08, the CUF has comedown to 10.79% from 17.27% in respect of
99 wind mills in Muppandal area. The capacity utilization factor assumed by the
Commission at 27.15% for determining the tariff is on a higher side. The potentially good
windy sites have all been exhausted and the new windmills are getting installed in class
‘C’ sites. The ‘A’ and ‘B’ class sites in Tamil Nadu are also yielding less because of over
crowding and are comparable to the sites available elsewhere in the country. For
instance, the CUF assumed in Gujarat is 23%, Madhya Pradesh is 22.5%, Maharashtra
is 20%, and Rajasthan is 21 and 20%. Only Karnataka has assumed a higher CUF of
26.5%. Further, CUF has to be determined not only based on sites but also taking into
account the host of other factors like, the availability of evacuation infrastructure,
demand for electricity as well as the mix of various sources. Therefore, the CUF could
be considered at a lower level around 23% in Tamil Nadu. The Association
recommended a CUF of 23 % and reported a de-rating of 7% in the last 3 – 4 years.

M/s.Tamilnadu Spinning Mills Association: The main areas of consideration for

determination of CUF are: (a) Wind availability (b) Grid availability and (c) Machine
availability. Further, the grid availability has not been taken into consideration while
assessing the CUF/PLF. The proven statistics of generation of units by each capacity
wind turbine were analyzed and it gives an average of 21% of PLF/CUF only. Hence,

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this needs to be revised from 27.15% to 21%. The Association recommended 22% CUF
during the public hearing.

M/s.Indian Wind Energy Association: In Tamil Nadu, the prominent wind sites have
already been exhausted, leaving the wind sites which have weaker wind regime and
requested the Hon’ble Commission to specify the Capacity Utilisation Factor after duly
considering the actual CUF achieved by the wind projects commissioned after the
issuance of May 15, 2006 Order. The Association recommended 26.5% CUF during the
public hearing.

M/s.Indian Wind Turbine Manufacturers Association: New wind projects in Tamil

Nadu will be in the balance class – II sites with low wind power density and hence lesser
CUF shall be considered for tariff calculation.

Thiru. T.B.Chikkoba, SAC Member: The data from which the CUF was calculated were
not given in consultative paper. Last time CUF was calculated after getting data from C-
WET. But this time the old method was not adopted. The proposed CUF of 27.15% is
high since the wind potential areas were already utilized and only class C sites are
available. De-rating factor can not be linked with wind availability. 1% reduction of de-
rating after five years of operation is suggested.

Power Engineers Society of Tamil Nadu: CUF should be arrived with the data
collected after 2002. The society suggested during the public hearing that the CUF
should be arrived based on the machines commissioned in the last 3 years and actual
CUF in Theni area is around 37.5%.

Ministry of New and Renewable Energy: The CUF may not be as higher as was
analyzed by the Commission while issuing the earlier order. Requested the Commission
to specify the CUF after duly considering the actual CUF achieved by the wind projects
commissioned after the issuance of order No.3 dated 15-05-2006.

Tamil Nadu Electricity Board: The proposed CUF of 27.15% is acceptable.

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4. DE-RATING FACTOR

M/s.Indian Wind Power Association: The experience in running Wind Energy

Generator has taught that the de-rating of the WEG be taken as 1/2 % (half percent) per
year after 2 years.

M/s.Indian Wind Turbine Manufacturers Association: De-rating factor should be

atleast 1% in every 5 year of project life.

M/s.Winwind Power Energy Private Limited: De-rating of CUF should not be

considered as an alternative to time value of money. Reduction in CUF and time value of
money operates in parallel and both need to be provided for. Further, de-rating of CUF
@1% does not even come close to sufficiently cover for the inflation as this de-rating
starts only from the 10th year.

Thiru G.Ramakrishnan: De-rating of CUF may be followed from 6th year onwards as
the generation is dependent upon the life of various critical components like gear box,
roughness of the blade, life of electrical components due to constant switching
operation, etc.

Tamil Nadu Electricity Board: De-rating factor is not allowed in case of thermal
stations and the electrical characteristic for all type generators is same. CUF is based on
wind velocity and may vary from year to year. As such average over a running period of
every 5 years may be considered for adoption.

5. RETURN ON EQUITY (ROE)

M/s.Indian Wind Energy Association: RoE of 14% on post-tax basis does not really
accord preferential treatment to renewable energy as enunciated in National Tariff
Policy, as the RoE for conventional generation projects also stands at 14% on post-tax
basis. Therefore a RoE of 16% on post-tax may be fixed. During the public hearing the
association stated that 17.63% specified in the consultative paper is agreeable and the
project may be exposed to 10 years MAT and 10 years corporate Tax.

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M/s.Indian Wind Turbine Manufacturers Association: RoE should be 16% (Post-Tax)
for preferential tariff. During the public hearing the association stated 15.5% post tax
should be considered for ROE as prescribed by CERC.

M/s.Winwind Power Energy Private Limited: In the present scenario, post tax returns
of 14% will not attract customers to enter into a non-conventional area. Investor should
get post tax returns at least 2% above the cost of funds. Considering average cost of
funds at 13.5%, the returns should be considered at 15.5% post tax. A benefit of tax
waiver for 10 years is available under Section 80IA of Income Tax Act, pre tax returns
need not be calculated with current rate of income tax. Considering an average rate of
22.17% tax on profits, pre tax returns of 19.73% needs to be taken.

Thiru. T.B.Chikkoba, SAC Member: Older system of 16% post-tax may be followed.
He suggested paying tax separately in addition to tariff rate by each WEGs.

Thiru. V.Sethuraman, SAC Member: Suggested to adopt post-tax @ 15.5% as decided

by CERC.

Indian Renewable Energy Development Agency Limited: RoE of 14% is not

preferential treatment. Like conventional project, RoE is not guaranteed in case of
renewable project due to single part tariff. Hence, RoE for renewable projects should be
at least on par with conventional projects.

Tamil Nadu Electricity Board: Allowing pre tax return to WEGs does not appear
correct since the WEGs are allowed to setoff losses in other industry towards
accelerated depreciation.
Power Engineers Society of Tamil Nadu: WEGs are getting central subsidy and
corporate tax benefits and hence there is no reason to fix a RoE of 17.63%.

6. INTEREST ON DEBT

M/s Indian Wind Power Association: It is not always possible to obtain financial
assistance from IREDA only. The present rate on term loan from the banking system for

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WEGs is in the range of 13-14% and Commission could consider an interest rate of
13%. During the public hearing the association requested an Interest of 13% .

M/s.Tamilnadu Spinning Mills Association: In actual practice, IREDA is not able to

provide debts for all the WTG owners. All the WEG owners have to approach only
commercial banks for the purpose of loan. Hence, the interest cost on debts may be
raised and fixed as 14% on an average instead of 12%. During the public hearing the
association stated that loan tenure may be fixed at 7 years with one year moratorium
period and interest on loan may be fixed at 13.5 %.

M/s.Indian Wind Energy Association: The Hon’ble Commission can specify the
indexing mechanism by linking it with the long term Prime Lending Rate (PLR) of State
Bank of India. The Commission can specify the interest rate 200 basis point higher than
the SBI long term PLR due to higher risk perceived by the lenders.

M/s.Indian Wind Turbine Manufacturers Association: The interest rate should be

minimum of 13% and the term of loan should be 7 years.

M/s.Winwind Power Energy Private Limited: Only a small proportion of investors avail
loan from IREDA and a major debt funding comes from various nationalized and private
sector banks. IREDA provides funding at a discounted rate, which is not the case with
other financing institutions. Therefore considering the PLRs of various banks and a
premium of 50 basis points should be applied on average PLR for wind power project
funding which is worked out to 13.50%. Further the term of loan offered by IREDA is not
the industry benchmark and banks do not provide loans for such a higher term.
Therefore term of loan should be taken at 5 years, with one year moratorium.

M/s.Sri Amaravathi Spinning Mills: The interest rate of 12% on non renewable energy
projects is not good enough to lure investors in such projects and this should be pegged
at 5% per annum. Further, there should be subsidy from the Government if the interest
rate exceeds 9% per annum.

Indian Renewable Energy Development Agency Limited: State Bank of India’s (SBI)
long term Prime Lending Rate (PLR) with 2% additional interest rate may be adopted in

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future. Present SBI PLR rate is 11.75%. The interest rate of IREDA varies from 11.75%
to 12.9%. In last 21 years IREDA rate was revised once in a year only. But in the last six
months, the interest rate was revised 4 times. But banks revised interest rate only once
in last year.

Ministry of New and Renewable Energy: Commission can specify the suitable
mechanism that could automatically address the issue of variation in interest rate in
future and requirement of review of tariff order should not arise.

Tamil Nadu Electricity Board: Reserve Bank of India has taken efforts to reduce the
interest rate charged by the financial institutions. The rate of interest rate offered to the
NCES sources should be less than the market rate prevailing from time to time. Hence,
the suggested rate of 12% is not acceptable and interest rate of 9% to 10% may be
considered. Further, increasing the loan tenure to 15 years can be considered.

CMD, TEDA, SAC Member: The loan quantity offered by IREDA is small. Therefore
bank rate is good.

7. OPERATION AND MAINTENANCE EXPENSES

M/s.Indian Wind Power Association: O&M expenses considered by the Hon’ble

Commission during the previous order were based on the position obtained in the year
2006. However, more than two and a half years have since passed and these expenses
have almost doubled since then. Therefore, assuming the same level as fixed by the
Commission in May 2006 may not be appropriate, considering the escalation in prices of
almost all the parts. Hence, O&M expenses could be fixed at 1.8% of the capital cost for
the first five years and escalation of 5% every year thereafter. During the public hearing
the association requested an O&M expenses of 1.80% for 2 years with 5% escalation
per annum. The O&M charges has increased to 21 paise per unit and requested to
follow the Maharashtra model of wind tariff determination.

M/s.Tamilnadu Spinning Mills Association: For a machine of 1.25 MW, the capital
cost has come earlier to Rs.5.91 Crores. For such a machine of this capacity, the
manufacturer charges Rs.10 lacs as annual O & M charges. This comes close to

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1.69% and therefore, considering the revised capital cost now enhanced, the O & M
charges should be fixed at the rate of 1.70% at least. Even though, the insurance
charges are fixed as 0.5%, the wind turbine owners are supposed to take additional
insurance policies besides break down policies, etc. Hence, this cannot be a criterion to
lower the O & M cost. During the public hearing the association the association stated
that the actual O&M cost is around 1.89%. Commission may consider 1.69% of capital
cost as O&M with the escalation prevailing in the market.

M/s.Indian Wind Energy Association: There has been significant increase in

Consumer Price Index (CPI) and Wholesale Price Index (WPI) on year-on-year basis
and the CAGR correspond to around 5%. Therefore, Hon’ble Commission may kindly
consider the O&M Cost for first year as 1.1% of the project cost with annual escalation of
5% for tariff determination from second year onwards.

M/s.Indian Wind Turbine Manufacturers Association: There should be an escalation

of 5% every year on account of inflation.

M/s.Acciona Wind Energy Pvt. Ltd.: The actual O&M cost is atleast 2% of the capital
cost with an escalation of 5% every year. Provision of 5% of the capital cost needs to be
made every 5 years towards replacement and / or repair of large components.

M/s.Winwind Power Energy Private Limited:- Rs.12 Lakhs per annum per MW
towards O&M expenses is suggested. The escalation of 5% should start from the
second year itself.

M/s.Sri Amaravathi Spinning Mills: O&M charges of 1.1% for the first 5 years should
be made applicable to the existing WEGs also.

Thiru. T.B.Chikkoba, SAC Member: The capital cost for the wind energy project
considered in Maharashtra ERC is only 4 crores per MW and hence higher O&M is
reasonable. But in the proposed tariff the capital cost considered is more and hence the
proposed rate of O&M is reasonable. The changes in O&M suggested by TNEB are very
small amount and it is suggested not to change. It is more reasonable to have a stable
formula.

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Thiru G.Ramakrishnan: Normally no O&M charge is collected in the first year when the
WEG is under warranty period. Hence, the O&M charge may be collected from second
year and the same may be increased at 5% from third year onwards as per CERC
norms applicable to thermal and hydro generating stations.

Thiru. S.Pancharathinam, SAC Member: TNEB’s suggestion of calculation of O&M on

the percentage of machinery instead of capital cost may be adopted.

Ministry of New and Renewable Energy: 85% of the capital cost can be considered for
O&M calculation since O&M is related to machinery only.

Tamil Nadu Electricity Board: O&M calculation may be charged on the cost of
machinery instead of the capital cost of the project. The O&M charges of 1.1% of the
capital cost exclusive of insurance charges are acceptable. However, the percentage to
be applied for O&M calculation may be charged to the cost of the machinery instead of
the capital cost of the projects.

8. DEPRECIATION

M/s.Acciona Wind Energy Pvt. Ltd.: A residual value higher than 2% of the capital cost
is not possible to be realized and the depreciation rate should be 4.9%.

M/s.Winwind Power Energy Private Limited: Considering the residual value of WEG
as zero at the end of 20 years, SLM depreciation rate of 5% should be adopted.

Thiru. V.Sethuraman, SAC Member: Proposed rate of 4.5% is correct and acceptable.

Tamil Nadu Electricity Board: The suggested depreciation rate of 4.5% is acceptable.

9. INSURANCE CHARGES

M/s.Indian Wind Power Association: Insurance premium needs to be worked out

taking into account the replacement value and not just the depreciated value. Insurance

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charges could be fixed at a level of 0.75% of the replacement value in the first year and
with a possible increase of 5% every year thereafter. Similar views expressed by the
association in the public hearing.

M/s.Rogini Mills: During the initial years no insurance company either nationalized or
private are having proper machinery breakdown policies as far as Wind Turbine
Generators are concerned.

Thiru. S.Rathinasabapathy and Thiru. S.Pancharathinam, SAC Members: Only

machine cost shall be included for insurance calculation as suggested by TNEB.

Indian Renewable Energy Development Agency Limited: May be considered based

on the market practices.

Tamil Nadu Electricity Board: The proposed rate of insurance charges is acceptable to
TNEB. However, the percentage to be applied for insurance calculation may be charged
to the cost of the machinery instead of the capital cost of the projects.

10. TIME VALUE OF MONEY

M/s.Indian Wind Power Association: When tariff is being fixed for a period of twenty
years, the purchasing power of rupee would have eroded substantially when the inflation
in our country has been in the range of 6 to 12%. Time value of money needs to be
factored in while arriving at the uniform tariff for a period of 20 years. Alternatively, the
Maharashtra model of an annual escalation in tariff could be announced with 9 paise per
year escalation which would take care of the erosion in the purchasing power.

M/s.Indian Wind Energy Association: Hon’ble Commission should specify the tariff
after considering the time value of money and actual cash flow requirement of the
developer in initial years, either by way of specifying the front loaded declining tariff or
levellised tariff for 20 years of project life.

M/s.Winwind Power Energy Private Limited: Tariff should be progressive, reflecting

the growth in economy and corresponding prices and the concept of time value of

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money should be followed in the tariff determination. Rs. 3.74 per unit would be the right
metric.

11. WORKING CAPITAL REQUIREMENT

M/s.Indian Wind Energy Association: Commission has not considered the working
capital requirement but the wind project requires working capital in the form of operation
and maintenance expenses and receivables for running their routine business activities.
Further, Karnataka and Rajasthan ERCs have considered the working capital
requirement in wind tariff calculation. Therefore, Commission may consider the Interest
on working capital at the interest rate equivalent to State Bank of India, and the working
capital requirement equivalent to one month of O&M expenses and one and half months
receivables, for determination of tariff for wind energy projects.

12. TARIFF RATE

M/s.Indian Wind Power Association: Tariff rate for group 1 and group 2 WEGs have to
be revised due to increase in de-rating factor and O&M cost. Thanked the commission
for coming up to a level of Rs.3.40 per unit but requested revising the tariff to Rs.3.90
per unit with 9 paise annual escalation for 20 years. The tariff proposed in the
consultative paper will not even cover the interest cost which works out to Rs.3.90 per
unit. With the quality of power being the same, fixing different tariff for different WEGs on
the basis of date of commissioning is contrary to and denying equality before law.
Similar views are expressed in the public hearing.

M/s.Tamilnadu Spinning Mills Association: All older machines commissioned prior to

15.05.2006 and after 15.05.2006 should also be taken care on the reworking of the
purchase price. During the public hearing the association requested that the tariff for
group1, group2 and proposed WEGs may be fixed at Rs.3/- , Rs.3.20/- and Rs.3.40
respectively.

M/s.Indian Wind Turbine Manufacturers Association: Base tariff may be arrived

taking into account the existing financial parameters and escalating it every year as
prescribed by the Maharashtra Electricity Regulatory Commission.

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M/s.Acciona Wind Energy Pvt. Ltd.: The tariff rate should be of Rs.3.40 per kWh with
annual escalation of 1.75% each year or Rs.4 per kWh fixed for 20 years.

M/s.Winwind Power Energy Private Limited: Tariff rate shall be of Rs.4.60 per kWh
with 2.5% escalation every year.

M/s.Arvinth Hospital: The new rate of purchase should be uniform irrespective of the
date of commissioning of the WEGs

Thiru S.Kittu, Tiruppur: Tariff of Rs.3.40 per unit should be given to all existing WEGs
also. Further, a special incentive should be provided for the existing old machines due to
their old technology.

M/s.Vairam Wind Power: The new rate of purchase should be uniform irrespective of
the date of commissioning of the WEGs.

M/s.Rogini Mills: The tariff rate shall be escalated every year for 20 years as has been
done in Maharashtra.

Thiru. K.Venkatesan, SAC Member: Tariff for Group 1 and Group 2 should not be
revised. Further, if the capital cost is decreased whether the WEGs can accept
downward revision of tariff?

Thiru. T.B.Chikkoba, SAC Member: The matter of considering the time value of money
for the wind tariff is pending before the court of law. Hence it need not be considered
now.

Power Engineers Society of Tamil Nadu: The price of Rs.2.20 per unit being
equivalent to gas power station is reasonable as procurement price.

Tamil Nadu Electricity Board: The policy directives of Government of Tamil Nadu
(GoTN) such as provisions of power security to weaker sections and agricultural sectors
shall also be kept in view in tariff determination process. Further, the existing tariff for

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group 1 and group 2 WEGs is hold good and for the new WEGs, a tariff rate of Rs.3.00
per unit will hold good duly freezing the various parameters as suggested by TNEB.
Levelised tariff is preferred than the average tariff to avoid future litigation on this issue.

13. APPLICABILITY OF THE PROPOSED ORDER

Thiru G.Ramakrishnan: New tariff order shall be applicable to WEGs commissioned on

or after this date irrespective of whether tie up approval or agreement is executed
between the WEGs and Distribution Licensees before this date.

14. CONTROL PERIOD

M/s.Indian Wind Power Association: Commission could specify control period of 2

years. Commission may clarify that the new Control Period shall be effective from
September 20, 2008, the date of passing the order for curtailing the control period
specified in the Order No. 3 dated 15-05-2006.

M/s.Acciona Wind Energy Pvt. Ltd.: Regarding the control period, the approach taken
by Maharashtra ERC may be taken, which says that a review of the base tariff for wind
energy should be done every year that considers prevailing conditions in the market.

M/s.Winwind Power Energy Private Limited: Base tariff should be arrived and should
be escalated every year for 20 years. This will ensure that all investors get reasonable
returns close to the ongoing rates, considering time value of money and inflation.

M/s.Super Wind Project Private Limited and M/s.Simran Wind Project Private
Limited: Commission in its order dated 19-09-2008, against the petitions M.P. Nos. 9,
14 and 23 of 2008 filed by M/s. InWEA and others passed the order that the control
period of three years as specified in order no. 3 dated 15-05-2006 is waived from the
date of issue of the order. Hence, the new control period should be commenced from 19-
09-2008.

Indian Renewable Energy Development Agency Limited: Due to volatility in capital

costs, control period may be reduced from 3 years to 2 years.

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Ministry of New and Renewable Energy: Commission may specify the control period
of 2 years and Commission may clarify whether the new control period shall be effective
from 20-09-2008, the date of passing the order for curtailing the control period specified
in the order No.3 dated 15-05-2006.

Tamil Nadu Electricity Board: As per the section 10.2 of TNERC order No.3 dated 15-
05-2006, the revisions made by the Commission after the control period will be binding
on the new generators who have started generating after issue of revised order. TNEB
agrees with the proposal of revising the control period from 3 to 2 years but request the
Commission to revive the control period of 3 years.

Thiru. S.Mohan Verghese Chunkath, CMD, TEDA and SAC member: For wind, the
change in control period does not make much difference.

Thiru.Ajit Pandit, IWEA

The Control period of 2 year specified in the consultative paper is agreeable. Control
period was waived on 19-09-2008, the new order should have retrospective effect from
that date otherwise there will be Regulatory vacuum for the intermediate period.

IWTMA:The 3 years control period should be reduced from the date it was announced.
The effective date for the new tariff should be either from 15th May, 2008 or 19th
September, 2008.

Thiru R.Varadarajan, DGM, DCW Ltd.

The old projects should be included in the new tariff regime and the promoters are not
getting payment from TNEB in time.

15. MINIMUM PURCHASE REQUIREMENT

M/s.Indian Wind Power Association: If we fix minimum percentage of Renewable

Purchase Obligation (RPO), there will not be any incentive for growth. The Gujarath
ERC has fixed RPO of 2%. If we fix a lower percentage like this, distribution licensee will
say that wind power will not be purchased beyond that limit. Such case should not

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happen in Tamil Nadu. Hence, it should be at least 15%. Commission could fix 15% as
minimum percentage of power to be procured from renewable sources of energy out of
the total consumption of electricity with the provision that the entire energy produced
from renewable sources should be accepted. There is no need for fixing source wise
quota.
M/s.Tamilnadu Spinning Mills Association: Minimum purchase requirement should
not include the captive consumption or third party sale of wind energy. Captive
consumption is for a separate purpose and therefore, it cannot fall under Section 86(1)
(e) of The Electricity Act, 2003, which specifically deals with the purchase alone and not
with the captive consumption. Barring the captive consumption percentage, the Hon’ble
Commission may retain or increase the 10% exclusively for sale/purchase category
alone and even by barring the third party sale if any.

M/s.Indian Wind Energy Association: National Tariff Policy stipulates that the
appropriate Commission to specify ‘minimum percentage’ for power purchase from
renewable energy sources only. In view of the above, Hon’ble Commission to specify
only minimum percentage for power purchase from renewable energy sources. No
restrictions in terms of internal percentages amongst RE is desirable. The minimum
purchase specification of 10% should be continued during the next control period.
Hon’ble Commission may extend the applicability of ‘minimum percentage’ specification
for renewable energy procurement to ‘open access consumers’ and ‘captive consumers’
apart from distribution licensees, to the extent of the consumption outsourced from such
sources. Further, it may be worthwhile to look at an alternate approach of RPO through
‘Renewable Energy Certificate’ (RE Certificate) method for compliance, as against the
currently operational ‘contract path method’. The same method would also be very
beneficial, should there emerge a unified electricity market across the country in the
coming years. Further, the RE certificate system would have a component of ‘price
discovery’ of RE based energy, and hence, possible to move towards market determined
pricing mechanism. The association stated in the public hearing that for the RPO there is
no maximum limit mentioned in NTP, trajectory kind of target may be fixed.

M/s.Indian Wind Turbine Manufacturers Association: 15% minimum purchase

obligation will solve the purpose and will boost the capacity addition sufficiently.

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M/s.Acciona Wind Energy Pvt. Ltd.: Minimum purchase requirement by the distribution
licensee should be 10% and the purchase should relate to the total of all NCES power
put together rather than being split category wise.

M/s.Winwind Power Energy Private Limited: It is important to fix a minimum purchase

requirement for NCES, as well as for wind power to attain at a right energy mix and at
the same time, it is also true that penetration of wind power beyond a certain limit may
affect the grid stability. Hence, both minimum and maximum limits should be prescribed
for sourcing energy from wind power. At present, wind power contributes approximately
10% of the total electricity consumption of the State. In order to promote further
investment, the minimum purchase requirement for wind power should be at 12.50%.

Thiru. K.Venkatesan, SAC Member: In Tamil Nadu we are in deficit and for NCES
there is no backing down. Therefore, is it necessary to fix minimum percentage for
RPO? Minimum percentage may be fixed but it should be reasonable.

Thiru. T.B.Chikkoba, SAC Member: Captive consumption should be included in RPO

to find out the real consumption of NCES and to find out the energy mix. The RPO
should be increased to minimum of 15%.

Thiru. N.L.Rajah, SAC Member: Fix a minimum percentage of RPO at more than 10%.

Thiru. V.Sethuraman, SAC Member: Captive consumption shall not be taken into
account for fixing RPO. Standby generation should not be included in calculating RPO.

Indian Renewable Energy Development Agency Limited: Wind power should be

utilized to the maximum possible extent since it is based on the natural resources.

Ministry of New and Renewable Energy: Principles adopted by the FOR working
group may be considered on the issue of maximum/minimum purchase specification.

Tamil Nadu Electricity Board: Minimum off take to be specified by the Hon’ble
Commission could be inclusive of the wheeled energy and inclusive of all NCES
sources. Existing ceiling of 10% may be retained for the current control period also and

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absorbing the excess energy above 10% has to be left to the discretion of the TNEB.
While minimum percentage is fixed on quantum of wind energy, maximum percentage
(around 30%) on installed capacity is to be fixed in order to facilitate grid management.
In any power supply management system, the penetration of infirm power cannot be
more than 10 to 12%. No distribution arrangements could be established based on the
40% supply of infirm and uncertain power.

16. EVACUATION FACILITIES

M/s.Indian Wind Power Association: The wind sector in Tamil Nadu has suffered
during the previous years for want of adequate evacuation infrastructure. There has
been a loss of almost 30-40% of possible generation on this count alone. During the
year 2008, evacuation infrastructure of M/s Power Grid Corporation of India Ltd., was
used, which has been created to evacuate the power generated from the Koodankulam
Nuclear Power Station. Once the Koodankulam Station starts generating to its capacity,
this facility may not be available for evacuation of wind power. Commission may direct
TNEB to create its own evacuation facility so that the 100% wind power can be
evacuated in future. Further, creation of any additional infrastructure should take into
account the future growth envisaged in the sector rather than confining to then present
existing capacity.

M/s.Tamilnadu Spinning Mills Association:TNEB has not yet complied the order no.3
dated 15-05-2006 on the aspect of evacuation and requested each unit produced by
wind generators should be evacuated without any exception.

M/s.Indian Wind Turbine Manufacturers Association: Commission may direct TNEB

for submitting every year a time bound plan for system augmentation and grid
strengthening based on the proposed wind sites. Further, the interconnection point is not
defined in NCES Regulation. In practice, an interconnection point can be a line (LILO
arrangement) or can be HV side (or LV side) of substation.

M/s.Acciona Wind Energy Pvt. Ltd.: The STU/ Distribution Licensee should bear the
cost of interfacing line till the interfacing point for the wind power projects irrespective of
whether the wind farm investor sells the entire generated electricity to the distribution

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licensee or to 3rd parties since the generator is contributing to reduce the huge energy
deficit in the State.

Power Engineers society of Tamil Nadu: IDC should be charged with the promoters
or the promoters themselves can lay the transmission line.

Tamil Nadu Electricity Board: In the absence of collection of IDC, it may not be
possible for TNEB to provide the required evacuation on priority basis within the annual
plan. In case collection of IDC is permitted, then TNEB may consider allotment of power
transformer to the evacuation arrangement on priority basis from their general pool. The
evacuation / transmission capacities created for wind power will be utilized partially and
it may have to be examined as to whether such investments for such partial utilization
could be affordable.

17. METERING AND COMMUNICATION

M/s.Tamilnadu Spinning Mills Association: As per the regulation 8 (1) and (9) of the
Electricity Supply Code, 2004, it is the obligation of TNEB to provide a meter card at the
wind mill site like one maintained by TNEB. But in actual practice, no such arrangement
has been made available at the wind mill site. Commission can order TNEB to provide
meter card to the WEGs.

Tamil Nadu Electricity Board: WEGs are also may be brought under the umbrella of
Availability Based Tariff mechanism and the Commission may examine and order
accordingly.

18. PAYMENT OF SECURITY TO THE WEGS

M/s.Indian Wind Power Association: Even though this clause is incorporated in EPA,
this is not being followed by TNEB. TNEB takes 5 months for making the payment.

M/s.Tamilnadu Spinning Mills Association: Even though, the earlier Order No.3 dated
15.05.2006 specifically provides enough scope on this aspect, nothing was materialized
till to-day. However, the same can be reiterated with a specific time bound action plan.

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Tamil Nadu Electricity Board: The bankable security in favour of the generator need
not be insisted and this may be deleted

19 BILLING AND PAYMENT PROCEDURE

M/s.Indian Wind Power Association: Current provision of making payment to the

generators may be retained. Commission should prescribe penal charges for non
payment to the generators on due date and this should be made automatic. Commission
could fix the penal charge at the same rate at which the distribution licensee has been
collecting penal charges from HT consumers for non payment of bills. TNEB takes 5
months for making the payment. Rebate for payment made within 15 days shall be
as in Gujarath ; BPSC for payment made over 15 days shall be charged at SBI
PLR.

M/s.Tamilnadu Spinning Mills Association: Delay of more than 2 months is occurring

in every payment by TNEB. Hence, this provision should be more specific with an action
plan.

Tamil Nadu Electricity Board: NLC and NTPC are offering 30 days time to TNEB for
payment of their monthly energy bills. Commission may also consider the period of 30
days for the payment of the wind energy bills in view of the processing time required at
the circle offices for payment to WEGs.

Indian Renewable Energy Development Agency: Present practice of raising the bill
after accounting for generation and consumption at the end of each monthly billing cycle
subject to recovery of transmission and wheeling charges may be continued.

M/s Indian Wind Turbine Manufactures Association: Payment by Letter of Credit and
exit clause should be introduced to attract international developers.

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20. CLEAN DEVELOPMENT MECHANISM (CDM)

M/s Indian Wind Power Association: For successful registration of the project one has
to prove that without CDM benefits the investments in wind power projects are not viable
at all. Under the above circumstances, if the investors are asked to share the benefit
from CDM with the STU and Distribution Licensee, it will only prove that the investments
in WEGs are otherwise profitable and that the benefit coming out of the CDM is only
additional to the normal profit that is being earned. This will send a wrong signal to the
Executive Board of UNFCCC and the probability of the Indian wind sector projects
getting registered will further reduce. Further, with the current recessionary trend being
faced globally, the prices of CERs have also come down significantly. Sharing the CDM
benefits with TNEB would shut the door for CDM benefits in Tamil Nadu. If Commission
imposes sharing of CDM benefits with the licensee, the promoter will not get any CDM
benefits.

M/s Tamilnadu Spinning Mills Association: The question of sharing with others will
arise, only when the other person is having a clear stake on the project. Only when the
WEG proves that without CDM revenue, the whole project is not viable, it can be
considered for CDM revenues. TNEB is not investing anything on the WEG on its own
and therefore, it cannot be a stake holder and hence, the rationality to claim a share in
the revenue alone is not a good ethical factor. The projects will get CDM benefits only if
there is any viability gap. Hence, there shall not be any sharing of CDM benefits and it
may be given to the Generators in full.

M/s Indian Wind Energy Association: The Hon’ble Commission should limit the CDM
sharing between the developer and the licensee on 75:25 basis as being followed in
Gujarath and Rajasthan.

M/s Indian Wind Turbine Manufacturers Association: CDM benefit should only go to
the investors. Allowing of 100% CDM benefits to generators atleast for 2 years may be
considered.

M/s Acciona Wind Energy Pvt. Ltd.: 50% sharing of the CDM benefits with the State
utility is not acceptable because WEGs are only taking risk in developing the projects.

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M/s Winwind Power Energy Private Limited: The full benefit of CDM revenue should
be allowed to be retained by investor as being the case with most of the other States.

M/s Rogini Mills: Demanding the share of CDM benefits by TNEB is not correct.

M/s Sri Amaravathi Spinning Mills: The sharing of CDM benefits at 50:50 ratio with
TNEB will dampen the spirit of the potential investors.

Thiru. T.B.Chikkoba, SAC member: Distribution licensee does not play role in getting
CDM benefits. The full benefits should go to WEGs only.

Dr. U.Sankar, SAC member: If only 4% of the projects get CDM benefits, it seems
something is wrong in the approach in getting the CDM benefits.

Dr. M.Abdullah Khan, SAC member: The CDM benefits should be shared between the
promoters and the TNEB.

Thiru.S.V.Balasubramaniam, SAC member: Getting CDM benefits is not an easy job

and the promoters have to engage experts for availing CDM benefits. Getting CDM
benefits will take 1 to 2 years. Further, all WEGs will not get CDM benefits and therefore
the option of sharing CDM benefits should be left to the WEGs. If the CDM benefits are
shared with TNEB, the distribution licensee could blame the WEGs in a later date for
selling the CERs at lower rate.

Ministry of New and Renewable Energy: Lot of efforts are required from promoter side
to get the CDM benefits. That is why FOR recommended higher percentage of CDM
benefits to the promoter in the initial 5 years. The principles adopted by the FOR working
group may be considered on the issue of sharing CDM benefits between the licensee
and the promoter.

Tamil Nadu Electricity Board: Already RoE is assured to WEGs and therefore CDM
benefits should be shared by WEGs with TNEB.

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Thiru K.Vijayarajan, Director, M/s.ABI Energy Consultancy Service (P) Ltd.
It is only after the year 2000, few projects have been registered for CDM benefits. Only
the projects which requires financial additionality have been considered for CDM
benefits. The transaction cost for getting CDM benefits is about 5 to 25% of the CERs.

21. REACTIVE POWER CHARGES

M/s.Tamilnadu Spinning Mills Association: Reactive power charges already fixed are
little high and may be reduced to 10 paise and 20 paise from 25 paise and 50 paise
respectively.

M/s.Acciona Wind Energy Pvt. Ltd.: Existing reactive energy charges should be
reduced in line with the other States.

M/s.Winwind Power Energy Private Limited: Agreed with the reactive power charges
proposed in this Consultative Paper in the best interest of the industry.

M/s.Sri Amaravathi Spinning Mills: Reactive power charges can be reduced from 25
and 50 paise per kVARh to 10 and 25 paise per kVARh respectively.

Thiru. T.B.Chikkoba, SAC Member: The reactive power charges for WEGs are more
when compared to the charges in respect of bio-mass/cogenerations.

Tamil Nadu Electricity Board: Proposal indicated in the consultative paper may be
continued.
Thiru S.Gandhi, Power Engineers Society of Tamil Nadu: There should be heavy
penalty mechanism for VAR component injected into the grid.

22. ENERGY PURCHASE AGREEMENT

M/s.Indian Wind Power Association: The WEGs will not go out of business and hence
the TNEB transmission assets will not be idle. The draft of the agreement should be
discussed with the investors, who is also a signatory to the agreement and the benefits
intended to be passed on to the investors should be available from the date of the order
itself rather than linking it to the date of entering into a new agreement. Further, there

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could be an exit clause in the agreement after giving three months notice by either party
and there should not be any penalty associated with it.

M/s.Tamilnadu Spinning Mills Association: The draft EPA as already proposed in

order no.3 dated 15.05.2006 of the Hon’ble Commission was not made available to the
comments of the stake holders and requested that more comments could be invited if
the exact text of the EPA is made available to the stake holders.

M/s.Indian Wind Turbine Manufacturers Association: In case of a wind project, most

of the cash outflows are there at the initial stages of project (Planning and construction).
The possibility of winding up a capital intensive project with high debt value does not
arise except in some extraordinary conditions. In view of the above, the clause for
penalty is not required.

M/s.Acciona Wind Energy Pvt. Ltd.: There need not be any penalty for terminating the
PPA with the STU and /or Distribution Licensee provided a 3 months notice period is
served by the WEGs. However, STU and/or the Distribution Licensee should not be
allowed to terminate the PPA under any circumstances since there would be a negative
outlook by the financial institutions providing the long term debt financing and thereby
financing the wind power projects would become difficult.

M/s.Winwind Power Energy Private Limited: TNEB should not be allowed to break out
of the PPA. Developer should be penalized for breaking out of PPA, unless the power
generation is substantially reduced due to factors beyond control of developer.

Thiru. K.Venkatesan, SAC Member: Giving 3 months notice may arise only after the
loan tenure. It may not be good for WEGs if TNEB is given the exit option by serving 3
months notice.

Thiru.S.V.Balasubramaniam, SAC Member: Some conditions may be specified for exit

clause and penalty may be levied for exit from the agreement.

Thiru. S.Pancharathinam, SAC Member: TNEB can exit, but generator should not be
allowed to exit from the agreement.

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Indian Renewable Energy Development Agency Limited: As a financier, IREDA
wants that the agreement should be continued throughout the loan tenure. It may not be
good for WEGs if TNEB is given the exit option by serving 3 months notice. The period
of PPA should cover at least the entire loan period.

Tamil Nadu Electricity Board: If the WEGs winds up the operation before the expiry of
the agreement period, 25% of the then prevailing purchase price for the balance
agreement period based on the CUF adopted for working out the tariff may be imposed
as penalty. A clause in the PPA should be included to break out of the PPA by either
party after giving three months notice. Similarly if the WEGs are not operating the
generator for a longer period, a time limit has to be set and penalty @ 10% generation
loss has to be paid.

23. ENERGY WHEELING AGREEMENT (EWA)

M/s.Indian Wind Power Association: The Distribution Licensee and the WEGs should
sit together and frame agreement and the same may be got approved by the
Commission. Prior discussion with generators is required for finalizing model EPA/EWA .
The benefits intended to be passed on to the investors should be available from the date
of the order itself rather than linking it to the date of entering into a new agreement.
Further, there could be an exit clause in the agreement after giving three months notice
by either party and there should not be any penalty associated with it.

M/s.Tamilnadu Spinning Mills Association: The draft EWA should be made available
for the comments of the stakeholders.

M/s.Winwind Power Energy Private Limited: EWA should be signed for five years
tenure with a clause to extend the term on mutually agreed terms. There shall be an exit
clause with reasonable notice period on mutually agreeable terms.

Tamil Nadu Electricity Board: If the Captive generators have not complied with the
26% ownership and 51% consumption, the action to be taken has to be included in the
agreement. If the wheeling charges and scheduling & system operation charges are not

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paid for 2 months, wheeling may be discontinued. Agreement period may be for 5, 10,
15 and 20 years period. Exit provisions may be given with some compensation. Entire
energy sale to Board, surplus sale to surplus banking and vice versa change in utility of
wind energy may be considered after one year of the agreement executed.

24. PAYMENT OF SECURITY DEPOSIT TO TNEB

M/s.Indian Wind Power Association: Agreed with the Commission’s suggestion of

payment of two times of the maximum net energy supplied by the distribution licensee in
a month in the previous banking period.

M/s.Tamilnadu Spinning Mills Association: Payment of security deposit may be in

accordance with the earlier order.

M/s.Acciona Wind Energy Pvt. Ltd.: Security deposit period norms should not be
changed to one calendar year.

Tamil Nadu Electricity Board: Security deposit at two times the net energy supplied
during the year by the distribution licensee may be considered.

25 ADJUSTMENT OF PEAK/OFF PEAK HOURS

IWPA: Terminology used under this could be peak hour, night hour and other hour as in
practice now rather than peak hour, off peak hour and normal hour. Adjustment of
higher TOD slot units against lower TOD be allowed.

Acciona Wind Energy Pvt. Ltd: For adjustment of peak/off peak power, the practice
being followed in Maharashtra should be followed.

TNEB: Unit to unit adjustment need not be considered. Interchanging of slots is not
accepted by the Commission in order No.3 and the same was reiterated in the orders on
MP No. 7 of 2007 and hence adjustment has to be made against the generation slots

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only. Since banking is provided, adjusting higher tariff TOD slot in a lower tariff TOD slot
need not be permitted.

Thiru. K.Venkatesan, SAC member: Permitting the WEGs to adjust the energy
generated in the higher ToD slot during the lower ToD slot is only beneficial to the
TNEB. Therefore, TNEB can permit such adjustments.

Thiru K.Nagaraju, M/s.Lakshmi Electrical Control System Ltd.,

Adjustment of peak hour units to other slots should be allowed due to power cut.

26. RESTRICTIONS ON SERVICE CATEGORY FOR CAPTIVE USE/THIRD PARTY

SALE

M/s.Indian Wind Power Association: Captive use of wind energy should be permitted
for LT consumers also. This has become more relevant in the current context of the
power crisis being faced in the State. As the gestation period for wind power project
being small when compared with conventional power projects, it would not only result in
increased capacity but would also ease the pressure on the TNEB to certain extent.

M/s.Tamilnadu Spinning Mills Association: Captive user has to be preferentially

treated when compared with the third party seller and both can not be treated equally.

M/s.Acciona Wind Energy Pvt. Ltd.: WEGs should be allowed to adjust unit to unit for
captive uses / third party sale in LT services also along with HT services and the due
monitoring, accounting and billing system should be developed jointly by TNEB and
SLDC.

Indian Renewable Energy Development Agency Limited: The facilities on extending

captive use/third party sale to LT services should be considered after the present
accounting facilities available with TNEB/SLDC are enhanced to account for the same.

Tamil Nadu Electricity Board: LT open access /third party sale to LT services should
not be allowed. Adjustment of any HT services may be accepted, but for the adjustment
with commercial services, the coincident compensation charges may be given.

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27. DEEMED DEMAND CHARGES

M/s.Indian Wind Power Association: The CUF should not be multiplied by 0.65 which
is a group / State phenomenon. The CUF should be taken as demand supplied by wind
energy generators. Commission should allow 100% generation and maximum demand
benefit to the consumers. Alternatively, the demand charges could be levied on net
energy supplied by the distribution licensee based on actual generation data for each
generator.

M/s.SP Spinning Mills Pvt. Ltd: CUF should be only applied when the deemed
demand is calculated on the installed capacity of the WEG. If the deemed demand is
arrived on the basis of actual energy, CUF should not be applied as energy is already
the result of applying the CUF on the capacity of the WEG. Many captive consumers are
using almost 100% of the energy for their own use only. For such consumers the
assumption of 65% adjustment for captive use and 35% sale to TNEB will not hold true
for these individual consumers. This assumption will put these consumers at a heavy
loss.

M/s Acciona Wind Energy Pvt. Ltd: The demand charges payable by the wind energy
user should be directly proportional only to the balance of the energy needs they are
sourcing from the STU/Distribution Licensee.

Tamil Nadu Electricity Board: At present 55% of energy generated is for generator’s
use and 45% of energy generated is purchased by TNEB and accordingly deemed
demand should be calculated. However, the deemed demand concept may be deleted
since the demand charges are meant to recover the fixed charges incurred by the Board
for creating required facility towards capacity and meeting the demand of the consumer
requiring power.

28. SCHEDULING AND SYSTEM OPERATION CHARGES

M/s.Indian Wind Power Association: Hon’ble Commission may waive the scheduling
and system operation charges being levied on the power being generated from

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renewable energy sources as a promotional measure. This will pave the way for larger
investments into the sector.

29. BANKING PROVISION AND CHARGES

M/s.Indian Wind Power Association: A major boost to the growth of the wind sector in
the State has been the provision for banking facility for a period of one year with 5%
banking charges in kind. The provision for payment of the unconsumed banked units at
75% of the procurement cost would be fair under normal circumstances, but not during
restriction and control (R&C) period. WEGs are not permitted to use their own power due
to imposition of R&C by TNEB. TNEB should be asked to pay at least 100% of the
procurement tariff for wind power prevailing on the date to the investors irrespective of
whether or not they have signed the new agreement. The WEGs can opt to sell other
than the banked energy to the distribution licensee at the rate prescribed by the
Commission. During the public hearing they stated that permission for availing banked
units during R & C period in addition to the TNEB quota shall be given. The lapsed units
shall be sold to TNEB or permission must be given to carry over the lapsed units to the
forthcoming years without any time restrictions.

M/s.Tamilnadu Spinning Mills Association: WEGs are not allowed to consume the
whole of energy produced at the consumption end owing to restriction and control of
power supply. Besides, the entire energy banked is also not allowed to be en-cashed.
Draft of EWA needs to be revised incorporating necessary provisions for the TNEB’s
failure to allow the consumer in not consuming the energy at his consumption end for
any reason attributable to TNEB.

M/s.Sri Amaravathi Spinning Mills: Due to power cut, the WEGs are not able to
consume all the generated units and therefore requested the Commission that the
banked units must be purchased by TNEB at Rs.2.70 per unit.

M/s.Rogini Mills: TNEB has frequently and orally asked the WEGs to shut down their
turbines for periods ranging from 9 hours to 20 hours a day during the season of six
months in a year. Because of the shutdown during the peak period, even though wind is
fully available the WEGs are not able to generate power. There is no clause in the EPA

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for claiming compensation from TNEB for shutting down the turbines. Due to the
introduction of slot to slot adjustment, the WEGs are not able to fully utilize the energy
and lots of units are getting lapsed when the banking facility is closed. Even then
banking charges are strictly charged by the Board.

M/s.Acciona Wind Energy Pvt. Ltd: Banking should be allowed for 12 months but with
nil charges

M/s.Winwind Power Energy Private Limited: Banking charges should be made nil as
in case of States like Maharashtra.

Power Engineers society of Tamil Nadu: Banking may be permitted for one month
alone and balance energy shall be waived. During the public hearing the society’s
president stated that Electricity Act 2003 does not permit banking and hence banking
arrangement should not be given to the WEGs.

TNEB: This was the concession extended to promote wind energy in the early years.
Now the bankable capacity has grown up to a significant extent and even poses a
problem to grid management during the period of deficit situation. The banking facility
should be restricted to one month instead of allowing yearlong banking and the banking
charges should be increased to 15%. As Hon’ble High Court of Madras have stayed the
matter relating to adjustment of banked energy to the captive users, the matter is
subjudice.

Thiru. S.Mohan Verghese Chunkath, CMD, TEDA and SAC member: Banking is
necessary to protect the interest of the WEGs, but it is to be limited to one year. To fulfill
the obligation as prescribed in the Act/NEP/NTP, TNEB has to purchase the balance
power from renewable sources.

Thiru. K.Venkatesan, SAC member: Banking facility is a concession given to the

generators. The WEGs have to sell the surplus energy to distribution licensee or bank
the energy.

173
Thiru. T.B.Chikkoba, SAC member: If TNEB don’t bank the energy, they should
purchase the wind energy at the rate prescribed by the Commission. If there is a power
cut, the WEGs have to be allowed either to consume the energy or to sell to TNEB at the
rate prescribed by the Commission.

Thiru K.Nagaraju, M/s.Lakshmi Electrical Control System Ltd.,

Surplus units can be carry over to the next year to those people who have not signed
agreement with TNEB.
Thiru S.V.Angappan, GS, TNEB Accounts & Executive staff union.
Banking shall be left to the decision between distribution licensee and WEGs.

30. CROSS SUBSIDY SURCHARGES

M/s.Indian Wind Power Association: There should not be any cross subsidy charges
for generation from renewable energy sources.

M/s.Tamilnadu Spinning Mills Association: The Cross subsidy charge at 50% of the
level prescribed for generation from non-conventional energy sources is too high,
considering the National Electricity Policy and also the related provisions of the
Electricity Act, 2003, particularly on the aspect of promotion of electricity generation
through non-conventional energy sources. The cross subsidy charges proposed may be
dropped.

M/s.Indian Wind Energy Association: Open access transactions involving renewable

power such as wind energy, should be exempted from levy of cross subsidy surcharge
and the open access consumers availing renewable power should not be subjected to
payment of surcharge since the cross subsidy surcharge formula introduced in the
National Tariff Policy does not include the NCES sources.

M/s.Indian Wind Turbine Manufacturers Association: As per the formula prescribed

by the National Electricity Policy, the cross subsidy surcharge is independent of
renewable energy sources. Therefore power from conventional sources is not
comparable even at marginal level. The other States like Maharashtra, Gujarath,

174
Karnataka, Rajasthan and Andhra Pradesh have exempted wind from cross subsidy
surcharge. Removal of cross subsidy payment for wheeling to third parties is suggested.

M/s.Acciona Wind Energy Pvt. Ltd: The cross subsidy surcharge should be made nil
as being considered in the State of Gujarat.

M/s.Winwind Power Energy Private Limited: Third party sale should be provided with
all incentives and should not be burdened with any extra surcharges. Therefore, cross
subsidy charges should not be levied for third party sales for wind power generation.

Power Engineers Society of Tamil Nadu: Commission may be firm on cross subsidy
surcharges as this is a social commitment. No justification in waiving the cross subsidy
and the poor people will get affected

Tamil Nadu Electricity Board: Cross subsidy surcharge may be uniformly levied both
on the conventional and non conventional energy sources.

31. TRANSMISSION AND WHEELING CHARGES

M/s.Indian Wind Power Association: Initially TNEB assured only 2% of wheeling

charges and therefore more WEGs have been established. Subsequently the wheeling
charges have been increased to 5%. To encourage wind energy in our state, the present
system should be continued.

M/s.Acciona Wind Energy Pvt. Ltd: Charges for Transmission, Wheeling and line
losses charges should be reduced to 4% in line with other States to promote NCES
generation.

Thiru.S.V.Balasubramaniam, SAC Member: Already the potential windy sites are

occupied and only the lesser windy sites are available. Therefore it is not reasonable to
charge more than 5%. If we increase the wheeling charges, the investment in the wind
energy will come down.

175
Dr. M.Abdullah Khan, SAC Member: We have to conduct a study on determining the
losses. Methods for calculating the losses should be prescribed.

Thiru. K.Venkatesan, SAC Member: It is better to adopt a reality figure of wheeling

charges.

Thiru. T.B.Chikkoba, SAC Member: The tariff rate for industries is Rs.3.50 per kWh
and 65% of the wind energy is being used for captive purpose since captive use is
advantageous for WEGs. Increase in wheeling charge by 1% or 2% can only be on
ad-hoc basis. In the earlier days, the generated wind energy might have been consumed
locally. But nowadays, due to higher capacity addition of WEGs, the generated power
has to be transferred from one place to another place. Hence loss will be more than 5%.
Preferential treatment has to be given to wind power and the present system of 5%
wheeling charges may be continued.

Power Engineers Society of Tamil Nadu: As the capital cost is heavy, the open
access charges shall be made same for all. IDC should be charged with the promoters
or the promoters themselves can lay the transmission line.

Tamil Nadu Electricity Board: We have invested much in transmission sector for wind
power evacuation. Our transmission assets are idle for many months. The transmission,
wheeling charges and losses in kind fixed by the Commission in order No.3 is very
meager at 5% of the energy which will not cover the losses approved by the Commission
in the order No.2. Not withstanding the collection of the IDC amount, the transmission
charges have to be fixed separately in rupees per MW per day basis and the wheeling
charges shall be enhanced from 5% to 15% separately.

32. OTHER ISSUES

M/s.Indian Wind Power Association: Even though the Commission revised the Open
Access Regulations by reducing the open access application fee, open access
registration fee and the scheduling and system operation charges, TNEB is yet to
implement these changes. The investors who have invested in wind electric generators
for the purpose of selling the power generated to TNEB have not been receiving the

176
payments on time. These factors have affected the morale of the investors and they
have lost their confidence in investing in Tamil Nadu. No scheduling and system
operation charges be levied.

M/s.Sugavaneswara Spinning Mills Private Limited: Tamil Nadu is now witnessing an

acute shortage of power and the same status may continue for few more years. Hence it
is necessary to encourage installation of more WEGs in this State and full support
should be provided to get maximum benefits.

Thiru Singhan Ragu: Possibility of providing huge capacity off shore wind farm may be
explored and encouraged to derive benefit by way of economy of scale, efficiency in
operation, reduction in capital and operational expenditure and to facilitate
implementation of competitive tariff bidding in the long run.

Thiru S.Gandhi : Power Engineers Society of Tamil Nadu

Only 6 days are given for preparation of public hearing and the Tamil version of the
consultative paper have not been posted in the Commission’s website. Wind power is
infirm in nature and not facilitating TNEB, TNEB consolidate all kind of power and
distribute. TNEB has not made any study on the impact of TNEB grid due to 4200 MW
WEGs because they are all inductive in nature. As per Europian standards the fault level
in each feeder can not be more than 5%. But due to WEGs, the fault level is more. In the
state of Kerala the tie feeders with the WEGs are directly connected to the bus bar of the
substation. But in Tamil Nadu it is not so. Due to WEGs 36,000 acres of land is barren
and there is no agricultural production in these lands. Consultative paper reflects the
policy of privatizing the profits and socializes the losses.

Thiru K.Periasamy, Director (Technical), M/s.Precision Equipments (P) Ltd.

Pumped storage power plant may be categorized under NCES as it reduces the peak
load. Solar power plant can be encouraged only in the villages where standalone system
is required. NCES sources shall be encouraged only when it is economically viable.
Power Plants with de-salination shall also comes under NCES.

Thiru M.R.Krishnan, Consumer Association of India

177
The time given by the Commission for public hearing is not sufficient for preparing the
notes. Commission can review the performances of service providers. Most of the
assumptions in the consultative paper is based on the better parts of the other
Commission reports.

Thiru V Mageswaran, Unorganised workers federation

Consumer burden should be reduced. Solar and wind energy should be promoted under
public sector projects. Land is affected due to wind energy project.

Thiru S.V.Angappan, General Secretary, TNEB Accounts & Executive Staff Union
TNEB does not have the capacity to buy the costly power. Tariff should be revised so
that TNEB will have sufficient RoE.

Thiru Yuvaraj, Tamil Nadu Farmers Sangam, Kumbakonam,

Supply is not available even for 6 hours a day for agriculture purpose in last month in
Tanjore area. At least 8 hours supply should be given to the agriculture sector. Farmers
are not getting higher rate for baggase. WEGs may be encouraged.

178
 Annexure -VII

GUIDELINES OF THE GOVERNMENT OF INDIA ON POWER GENERATION

FROM NON-CONVENTIONAL ENERGY SOURCES

179
 Annexure -VII

GUIDELINES FOR PROMOTIONAL AND FISCAL INCENTVIES BY STATE

GOVERNMENTS FOR POWER GENERATION FROM NON-CONVENTIONAL
ENERGY SOURCES

1. OPERATIVE PERIOD

The scheme of promotional and fiscal incentives will come into operation
with immediate effect and will remain in force for a period of five years.

ELIGIBLE PRODUCERS

Those generating electricity and feeding in full or part to the State Grid
from Non-Conventional Energy Sources such as wind electric generators, small
hydro plants, biomass combustion and co-generation, etc., there will be no
restriction on generation capacity or supply of electricity to the grid. Consortia or
co-operatives will also be eligible.

2. GRID INTERFACING

i) Interfacing, including transformers, panels, kiosk, protection, metering,

H.T. lines from the points of generation to the Board’s nearest HT lines, etc., as
well as maintenance, will be undertaken by the producer as per the
specifications and requirements by the producer as per the specifications and
requirements of the Board, for which he will bear the entire cost. Alternatively,
these works and their maintenance could be undertaken by the Board, at
charges to be decided by the board.

ii) Depending upon the generation capacity, if the sub-station capacity at

33/11 KV or higher levels is required to be augmented or 66 KV or higher
capacity transmission lines are to be provided, this will be undertaken by the
Board, at their cost.

iii) Two separate meters one for the export of power to the grid, and another
for import from the grid, will be installed on the HT side by the producer. The
meters and metering boxes will be sealed by the Board.

iv) Necessary current limiting devices such as thyristors will be installed in the
generating equipment of the producer. Capacitors of sufficient rating will also be
provided in the equipment to ensure that the power factor is always maintained
above 0.80

180
3. FACILITY BY SEB

i) Wheeling

The State Electricity Board will undertake to transmit on its grid the power
generated, and make it available to the producer for captive use or to a Third
Party within the State, at a uniform wheeling charge of 2 % of the energy fed to
the Grid, irrespective of the distance from the generating station. The Third
Party must be a H.T. Consumer of the Board, unless this stipulation is relaxed
specifically by the SEB.

ii) Banking

The State Electricity Board will permit the electricity generated to be

banked for a period upto to one year..

iii) Sale of Power

The State Electricity Board will purchase electricity offered by the

producer at a minimum rate of Rs.2.25 /unit, with no restriction on time or
quantum of electricity supplied for sale. This rate will be reviewed every year,
and will be linked to standard criteria such as wholesale price index. The
producer will also have the option to sell the electricity generated by him to a
Third Party within the State (as defined 3 (i) above), at a rate to be mutually
settled between them.

iv) All transactions between the Board and the producer involving
wheeling, banking or sale of power will be settled on a monthly basis.

v) Exemption from duty

Consumption of electricity generated by the producer will be exempted

from electricity duty.

vi) Exemption from demand cut

The exemption from demand cut to the extent of 30% of the installed
capacity of the producer will be given by the Board.

4. OTHER INCENTIVES

i) Sales Tax benefits will be available to the producer, who owns the
project (Resolution of the Govt., off Gujarat dated 27th January, 1993 is
enclosed for guidance)

181
ii) The producer will be allowed to use the water for power generation.
Royalty on the water used for small hydro projects will be charged at a rate not
exceeding 10% of the prevailing electricity tariff for HT consumers.

iii) Power generation from non-conventional energy sources will be treated

like any other industry, and incentives normally available to new industrial units
can be availed.

iv) Concessions given to industrial units in backward areas will be provided,

such as exemption from taxes and duties, capital subsidies, etc.,

v) Infrastructural facilities such as approach roads, water supply, crane,

power during construction period, etc., will be provided on the lines of
industrial estates.

5. APPLICATION AND CLEARANCES

i) Producers should submit their application for setting up the project and
for grid interface in the Proforma to the State Nodal Agency / State Electricity
Board (simple composite application form should be devised which include all
statutory approvals such as Chief Electrical Inspector, etc., )

ii) Clearance will be provided within a period of two months from the date of
application.

iii) An agreement will be entered into with the producer within a period of
one month from the date the clearance is provided.

iv) If the applicant does not take effective steps (i.e., at least 10 % of the
total project cost should be incurred ) to implement the project within six
months from the date of obtaining possession of land, the Agreement could be
terminated and the site allotted to another applicant. If, on the other hand, land
is not provided within three months from the date of Agreement, the applicant will
have the option to terminate the Agreement.

182
GUIDELINES FOR FIXATION OF PURCHASE PRICE FOR POWER
PRODUCED FROM NON-CONVENTIONAL ENERGY

1. The State Electricity Board will announce a base purchase price every
year for the electrical energy purchased by it from non-conventional energy
based power projects. These rates shall be valid from 1st April to 31st March of
the following year.

The base electrical energy purchase price valid for 1994-95 shall be a
minimum of Rs. 2.25 / kWh.

The base price shall be escalated at a minimum rate of 5% every year.

Announcement of revised base prices shall be made by the SEB on 1st April
every year.

The base prices shall be applicable to all non-conventional energy

based power projects based on solar, wind, hydro, biomass, etc., for which
Power Purchase Agreements are signed during a year.

2. A promoter / developer shall be entitled to receive the base price set out
in PPA for all electrical energy delivered from his project to the State grid for the
duration of the Power Purchase Agreement. The rate shall be equal to the base
price in the year of signing of PPA, escalated at a rate of 5% per year for a
period of 10 years, from the date of signing of the Power Purchase Agreement.
From the end of the 10th year, and for the remaining duration of the Power
Purchase Agreement, the new purchase price shall be equal to the purchase
price at the end of the 10th year, or the High Tension (HT) tariff prevalent in the
State at that time, whichever is higher.

3. A monthly invoice shall be submitted by the promoter / developer to the

State Electricity Board, at its designated offices, for the net electricity supplied by
him to the Board. The Board shall make payment of amounts due, calculated at
the purchase price for that particular year, within a period of 30 days.

The Board shall also provide facilities of an escrow amount or an

irrevocable, transferable, divisible and confirmed standby letter of credit issued
by State Bank of India, or another nationalized bank, acceptable to the promoter /
developer. The amount of the letter of credit shall be equal to the expected total
of two years payment by the Board.

The ensure prompt realization of the dues, and in order to provide a

security cover, the Board shall issue ‘Electricity Credit Notes’ to the promoter /
developer equivalent to the amount of electricity received by the Board,
whenever it is unable to pay in cash within the stipulated period. The Electricity
Credit Notes shall be transferable to one or more High Tension consumers of
the Board, who will be allowed to adjust the amount for which the Credit Notes

183
have been issued, from their electricity bills due to the Board. The validity of
Credit Notes shall be six months.

4. The duration of the Power Purchase Agreement shall be a minimum of 20

years, which could be extended by another 10 year, through mutual agreement.

184
 Annexure – VIII

Components of wind energy tariff

(upto 31-03-2009)

Sl.No Parameters Values

1 CUF 27.15%
2 De-rating factor 1% for every year after ten years
3 Life of the plant 20 Years
4 Capital investment Rs. 5.35 Crores
5 Debt : Equity ratio 70:30
6 Interest on loan 12.00%
7 Loan repayment period 10 years with 1 year moratorium period
8 Return on equity 17.63% Pre-Tax
9 O&M charges for machinery on 85% of capital investment 1.10% with escalation of 5% from 2nd year
10 O&M Charges for civil works on 15% of capital investment 0.22% with escalation of 5% from 2nd year
11 Insurance charges on 85% of capital Investment 0.75% with reduction of 0.50% after 1 year
12 Depreciation on 85% of capital investment 4.5% SLM
13 Residual value 10%

185
 Annexure – IX
Components of wind energy tariff
(01-04-2009 to 31-03-2011)

S.No Parameters Values

1 CUF 27.15%
2 De-rating factor 1% for every year after ten years
3 Life of the plant 20 years
4 Capital investment Rs. 5.35 Crores
5 Debt : Equity ratio 70:30
6 Interest on loan 12.00%
7 Loan repayment period 10 years with 1 year moratorium period
8 Return on equity 19.85% Pre-Tax
9 O&M charges for machinery on 85% of capital investment 1.10% with escalation of 5% from 2nd year
10 O&M Charges for civil works on 15% of capital investment 0.22% with escalation of 5% from 2nd year
11 Insurance charges on 85% of capital Investment 0.75% with reduction of 0.50% after 1 year
12 Depreciation on 85% of capital investment 4.5% SLM
13 Residual value 10%

186
 Annexure – X
Working sheet of tariff computation (upto 31-03-2009)
O & M charges at 1.10% for Insurance at Interest on Depreciation at Return on Total Cost Units
Cost
machinery on 85% of capital 0.75% and loan @ 4.5% on equity generated for
per unit
investment and at 0.22% for civil reduction of 12.00% 85% of capital @17.63% 1 MW (de-
works on 15% of capital 0.5% every investment Pre-Tax rating @1%
Years
investment with 5% escalation year after one for every year
every year from 2nd year year after ten
years)
(Rs)
(Rs) (Rs) (Rs) (Rs) (Rs) (Rs) (Rs)
1 517880 341063 4494000 2046375 2829615 10228933 2378340 4.301
2 543774 339357 4494000 2046375 2829615 10253121 2378340 4.311
3 570963 337660 4044600 2046375 2829615 9829213 2378340 4.133
4 599511 335972 3595200 2046375 2829615 9406673 2378340 3.955
5 629486 334292 3145800 2046375 2829615 8985569 2378340 3.778
6 660961 332621 2696400 2046375 2829615 8565971 2378340 3.602
7 694009 330958 2247000 2046375 2829615 8147956 2378340 3.426
8 728709 329303 1797600 2046375 2829615 7731602 2378340 3.251
9 765145 327656 1348200 2046375 2829615 7316991 2378340 3.077
10 803402 326018 898800 2046375 2829615 6904210 2378340 2.903
11 843572 324388 449400 2046375 2829615 6493350 2354557 2.758
12 885751 322766 2046375 2829615 6084507 2331011 2.610
13 930038 321152 2046375 2829615 6127180 2307701 2.655
14 976540 319546 2046375 2829615 6172076 2284624 2.702
15 1025367 317949 2046375 2829615 6219306 2261778 2.750
16 1076635 316359 2046375 2829615 6268984 2239160 2.800
17 1130467 314777 2046375 2829615 6321234 2216768 2.852
18 1186990 313203 2046375 2829615 6376184 2194601 2.905
19 1246340 311637 2046375 2829615 6433967 2172655 2.961
20 1308657 310079 2046375 2829615 6494726 2150928 3.019
Average tariff for 20 years 3.24

187
 Annexure – XI
Working sheet of tariff computation (01-04-2009 to 31-03-2011)
O & M charges at 1.10% for Insurance at Interest on Depreciation at Return on Units
Total Cost Cost
machinery on 85% of capital 0.75% and loan @ 4.5% on equity generated for
per unit
investment and at 0.22% for civil reduction of 12.00% 85% of capital @19.85% 1 MW (de-
Years works on 15% of capital 0.5% every investment Pre-Tax rating @1%
investment with 5% escalation year after one for every year
every year from 2nd year year after ten
years)
(Rs) (Rs)
(Rs) (Rs) (Rs) (Rs) (Rs) (Rs)

1 517880 341063 4494000 2046375 3185925 10585243 2378340 4.451

2 543774 339357 4494000 2046375 3185925 10609431 2378340 4.461
3 570963 337660 4044600 2046375 3185925 10185523 2378340 4.283
4 599511 335972 3595200 2046375 3185925 9762983 2378340 4.105
5 629486 334292 3145800 2046375 3185925 9341879 2378340 3.928
6 660961 332621 2696400 2046375 3185925 8922281 2378340 3.751
7 694009 330958 2247000 2046375 3185925 8504266 2378340 3.576
8 728709 329303 1797600 2046375 3185925 8087912 2378340 3.401
9 765145 327656 1348200 2046375 3185925 7673301 2378340 3.226
10 803402 326018 898800 2046375 3185925 7260520 2378340 3.053
11 843572 324388 449400 2046375 3185925 6849660 2354557 2.909
12 885751 322766 2046375 3185925 6440817 2331011 2.763
13 930038 321152 2046375 3185925 6483490 2307701 2.810
14 976540 319546 2046375 3185925 6528386 2284624 2.858
15 1025367 317949 2046375 3185925 6575616 2261778 2.907
16 1076635 316359 2046375 3185925 6625294 2239160 2.959
17 1130467 314777 2046375 3185925 6677544 2216768 3.012
18 1186990 313203 2046375 3185925 6732494 2194601 3.068
19 1246340 311637 2046375 3185925 6790277 2172655 3.125
20 1308657 310079 2046375 3185925 6851036 2150928 3.185
Average tariff for 20 years 3.39

188
 Annexure – XII
Determination of Capacity Utilization Factor

GE
MANUFACTURE SUZLON NEPC NEG NEG ENERCON ENERCON VESTAS PIONEER SUZLON VESTAS
WIND
R (KW) (KW) (KW) (KW) (KW) (KW) (KW) (KW) (KW) (KW)
(KW)
Location 1250 225 750 1650 330 800 1500 500 850 600 1650
Muppandal Pass
Sankaneri (kWh) 3451177 566542 1765938 5268364 975489 2479825 4047019 1518963 2428292 --- ---
Average (kWh) 3451177 566542 1765938 5268364 975489 2479825 4047019 1518963 2428292 --- ---
Per MW 2760942 2517964 2354584 3192948 2956027 3099781 2698013 3037926 2856814 --- ---
Average for 1 MW for this Pass (kWh) 2830555
CUF in % for Muppandal Pass 32.31
Shencottah Pass
Nettur area
2883763 477916 1539787 4082584 803514 1927777 3413688 1222158 1871506 --- ---
(kWh)
Azhagia
pandipuram area 3191647 500438 1705083 4576922 842849 2111923 3774362 1278716 2098925 --- ---
(kWh)
Mangalapuram
3291703 524250 1740286 4763848 885449 2142199 3875167 1360406 2216306 --- ---
area (kWh)
Average (kWh) 3122371 500868 1661718 4474451 843937 2060633 3687739 1287093 2062246 --- ---
Per MW 2497897 2226080 2215625 2711789 2557386 2575791 2458493 2574187 2426171 --- ---
Average for 1 MW for this Pass (kWh) 2471491
CUF in % for Shencottah Pass 28.21
Palaghat Pass
Poolavadi (kWh) 3229658 499718 1704126 4694174 850155 2137694 3814840 1294612 2147500 --- ---
Edayarpalayam
3101280 483064 1612606 4564045 829404 2031763 3628343 1270972 2116766 --- ---
(kWh)
Myvadi (kWh) 2820648 438877 1482499 4087443 747757 1868172 3314212 1142472 1886054 --- ---
Pushpathur
--- --- --- --- --- 1401600 --- --- --- 1204150 ---
(kWh)

189
 Poosaripatti
2406758 384795 1199719 3848077 681581 1744199 2786040 1069373 1794121 --- ---
(kWh)
Arasampalayam
2680715 410859 1353577 4169738 720571 1782634 3114481 1127645 1974238 --- ---
(kWh)
Mettukadai (kWh) 2318485 353181 1188819 3493407 618246 1549612 2713844 947782 1615268 --- ---
Pongalur (kWh) 2522864 388530 1305183 3747482 671445 1674493 3582486 1028132 1728169 --- ---
Average (kWh) 2725773 422718 1406647 4086338 731308 1773771 3279178 1125855 1894588 1204150 ---
Per MW 2180618 1878745 1875529 2476568 2216086 2217214 2186119 2251711 2228927 2006917 ---
Average for 1 MW for this Pass (kWh) 2151843
CUF in % for Palaghat Pass 24.56
Cumbum Pass
Andipatti (kWh) --- --- --- --- --- --- --- --- --- --- 4399798
Average (kWh) --- --- --- --- --- --- --- --- --- --- 4399798
Per MW --- --- --- --- --- --- --- --- --- --- 2666544
Average for 1 MW for this Pass (kWh) 2666544
CUF in % for Cumbum Pass 30.44

Abstract

Name of the Pass Exploitable Capacity (MW) CUF in %

Muppandal Pass 75 32.31
Shencottah Pass 650 28.21
Palaghat Pass 668 24.56
Cumbum Pass 200 30.44
1593 27.15

Total exploitable capacity = 1593 MW

Weighted average CUF = 27.15%

190