Guidelines Short Term Power Procurement_13012012

7/31/2019 Guidelines Short Term Power Procurement_13012012

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Draft Guidelines for short-term (i.e. for a period less than one year) Procurement of power by Distribution Licensees through Tariff based bidding process

1. Preamble

Promotion of competition in the electricity industry in India is one of the key objectives of theElectricity Act, 2003 (the Act). Power purchase costs constitute the largest cost element forDistribution Licensees. Moreover, Power purchase costs for short-term procurement of Power isthe significant part of overall Power purchase costs for Distribution Licensees. Competitiveprocurement of short-term power requirement by the Distribution Licensees is expected toreduce the overall cost of procurement of power and will lead to significant benefits forconsumers.

The short-term power market presently comprises about 10 per cent of the total electricityprocured in India.

Section 61 & 62 of the Act provide for tariff regulation and determination of tariff of generation,transmission, wheeling and retail sale of electricity by the Appropriate Commission. Section 63 of the Act states that –

“Notwithstanding anything contained in section 62, the Appropriate Commission shall adopt thetariff if such tariff has been determined through transparent process of bidding in accordancewith the Guidelines issued by the Central Government.”

These Guidelines have been framed under the above provisions of section 63 of the Act. Thespecific objectives of these Guidelines are as follows:

i) Promote competitive procurement of electricity by Distribution Licensees for their shortterm demand (less than one year);

ii) Reduce the Power Purchase Bill of Discoms;

iii) Provide benefit to consumers;

iv) Facilitate transparency and fairness in procurement processes;

v) Facilitate reduction of information and approach asymmetries for various bidders;

vi) Harnessing of diverse sources of power such as co-generation, captive, wind power etc.

2. Scope of the Guidelines

These Guidelines are being issued under the provisions of Section 63 of the Electricity Act, 2003for procurement of power by Distribution Licensees (Procurer) for short-term i.e. for a period lessthan or equal to one year.

Explanation: For the purpose of these Guideline s, the term ‘ Procurer (s)’ shall mean, as thecontext may require, the Distribution Licensee(s), or the authorised representative of the



licensee(s) authorized by the Distribution Licensee(s) to perform all tasks for carrying out thebidding process in accordance with these Guidelines.

The Guidelines shall apply for procurement of short term power requirements throughcompetitive bidding.

Unless explicitly specified in these Guidelines, the provisions of these Guidelines shall be bindingon the Procurer(s).

Procurement by more than one Procurer through a combined bid process shall be permitted andin such a case the Procurers shall have the option to conduct the bid process through anauthorized representative who may be one of the Procurers. For such combined procurement,each Procurer shall provide the necessary information required as per these Guidelines. Toensure standardization in evaluation of bids, the payment security and other commercial termsoffered to the Bidders by the various Procurers shall not vary. The price offered by the Biddersshall be same for Procurers inviting the bid.

3.0 Preparation for inviting bids

3.1 The Procurer(s) shall procure short term power as per the plan approved by AppropriateCommission or appropriate body as may have been constituted for the purpose by theAppropriate Commission. In such case the Distribution Licensees will intimate about theinitiation of the procurement process to the Appropriate Commission.

3.2 In case procurement of short term power exceeds 10% of the approved annual short termprocurement plan, the Procurer(s) shall obtain approval from the Appropriate Commission orany appropriate body as may have been constituted for the purpose by the Appropriate

Commission.

4.0 Tariff Structure

4.1 The bidder shall quote the tariff at the delivery point upto three (3) decimals. Bid Capacityand tariff shall have to be constant for the entire contract period. The tariff will be quoted bythe bidder after considering the following in addition to the capacity and energy charge:

i. In case Generator is connected to STU Interface (Interconnection point), the transmissioncharges, if any, for transmitting power from the Interconnection Point to the Injection

Point(CTU Interface/Delivery Point) and transmission charges for such intra-statetransmission link.

ii. In case of Injection Point being a CTU Interface, applicable Injection/Drawl transmissioncharges as notified by CERC from time to time, from such CTU Interface up to the DeliveryPoint.

iii. The applicable open access charges as notified by CERC from time to time.



iv. The Transmission Losses as notified by RLDC/CERC from time to time, from theInterconnection Point upto delivery point.

v. The Bidder shall be responsible to obtain open access approval from the competentauthority from the Interconnection Point upto Delivery Point.

If the power is routed through alternate source/ Region, any additional charges and losses if any, due to cancellation of existing corridor and booking of new corridor etc., shall be to theaccount of Bidders.

5. Bidding Process - Single stage process

For procurement under these Guidelines, a single-stage process by inviting Request for Proposal(RfP) shall be adopted for the bid process. Procurer or authorized representative shall prepare biddocument in line with these Guidelines.

The Procurer shall publish a RfP notice in at least two national newspapers and company websitealso to accord it wide publicity. The bidding shall necessarily be by way of competitive bidding.

Procurer shall provide only written interpretation of the tender document to anybidder/participant and the same shall be made available to all other bidders. All parties shall relysolely on the written communication and acceptances from the bidders.

Standard documentation to be provided by the Procurer in the RFP shall include,

i) Definition of Procurer(s), requirements, including Quantum, time slot, duration for supplyof power and delivery point. Further, the Procurer may also provide the bidders theflexibility to bid for a part of the tendered quantity, subject to a given minimum quantity.

ii) the procedures and criteria to be used to evaluate bids and select the bidder for award of contract.

iii) Earnest Money deposit/Bank Guarantee

iv) Contract performance Guarantee

v) Validity period of offer of bidder;

vi) PPA proposed to be entered with the selected bidder. The PPA shall include necessarydetails on:

Risk allocation between parties;

Force majeure clauses as per industry standards;

Change in Law

Billing cycle

Default conditions and cure thereof, and penalties;

Payment term/Payment security to be made available by the Procurer



The RfP shall provide the maximum period within which the selected bidder must commencesupplies after the PPA becomes effective, subject to the obligations of the Procurer being met.

6. Bid submission and evaluation

To ensure competitiveness, the minimum number of bidders should be at least two other thanthe Genco(s) owned (51% or more) by State Government. If the number of bidders responding tothe RfP is less than two, and Procurer still wants to continue with the bidding process, the samemay be done with the consent of the Appropriate Commission.

The Procurer shall constitute a Standing Committee for evaluation of the bids with the oneexternal member, necessarily having expertise in financial / commercial field (Essentially havinghandled matters related to bid evaluation for procurement).

Bidders shall be required to submit separate non financial technical and financial bids. The nonfinancial bids shall contain the acceptance of General terms and conditions without any deviationand information about the sources from which the bidder shall supply the power. Bidders shallalso be required to furnish necessary EMD/Bank Guarantee along with the bids. The bids shall beopened in the presence of representatives of bidders who wish to be present.

The price bid shall be strictly as per the format prescribed in the RfP & shall be unconditional. Theconditional price bid shall be summarily rejected.

The Bidder who has quoted lowest tariff shall be declared as the Successful Bidder for thequantum of power (in MW) offered by such Bidder in its Financial Bid. The selection process of the Successful Bidder shall be repeated for all the remaining Financial Bids of the Bidders until theentire Requisitioned Capacity is met.

7. Deviation from process defined in the Guidelines

Any deviation from these Guidelines shall not be permitted.

8. Arbitration

Where any dispute arises claiming any change in or regarding determination of the tariff or anytariff related matters, or which partly or wholly could result in change in tariff, such dispute shall

be adjudicated by the Appropriate Commission.All other disputes shall be resolved by arbitration under the Indian Arbitration and ConciliationAct, 1996.



9. Time Table for Bid Process

The minimum period of 10 days shall be given for completion of bid process as per Annexure-I.

10. Contract award and conclusion

10.1 The PPA shall be signed with the selected bidder(s) consequent to the selection process inaccordance with the terms and conditions as finalized in the RfP bid documents.

10.2 After the conclusion of bid process, the Standing Committee constituted for evaluation of RfP bids shall provide appropriate certification on conformity of the bid process evaluationaccording to the provisions of the RfP document. The Procurer shall provide a certificate onthe conformity of the bid process to these Guidelines to the Appropriate Commission.

10.3 For the purpose of transparency, the Procurer shall make the bids public by indicating thetariff quoted by all the bidders, after signing of the PPA or PPA becoming effective,

whichever is later. While doing so, only the name of the successful bidder shall be madepublic and tariffs quoted by other bidders shall be made public anonymously.

10.4 The Procurer(s) shall submit a petition to the Appropriate Commission for adoption of tariff within 2 days from the date of signing of PPA. Appropriate Commission shouldcommunicate the decision within 7 days from the date of submission of petition.

However, if the quantum of power procurement and tariff determined are within theblanket approval granted by the appropriate commission in ARR of the respective year,then the same will be considered to have been adopted by the Commission.



Annexure - I

Time table for short term Procurement bid process

S. No. Event Elapsed time from Zero date

1. Publication of RfP Zero Date

2. Submission of RfP Bids 6 days

3. Evaluation of bids, issue of LoI and signing of PPA 10 days

Documents

Guidelines Short Term Power Procurement_13012012