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ULTRA MEGA POWER
PLANTS AND POLICY
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BACKGROUND With India being a country of chronic powerdeficits, the Government of India has planned to
provide "power for all" by the end of
the Eleventh Five-Year Plan (2007 2012).This would entail the creation of an additionalcapacity of at least 100,000 MW by 2012Ultra Mega Power projects, each with a capacityof 4000 MW or above, are being developed withthe aim of bridging this gapLaunched by Ministry of Power in 2005-06
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Central government has taken the initiativeunder tariff based competitive bidding routeusing super critical technology on BOO basisCentral Electricity Authority is the technical
partner & Power finance corporation is the nodalagencySeparate SPVs were provided for each project toundertake project development activities
including bid process managementIn addition to Ultra Mega thermal powerProjects, Ministry of Power is also taking stepsfor bringing up large Hydro Projects and largesize Transmission Projects on the fast track
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ROLE OF MINISTRY OFPOWER
Ministry of Power to be facilitator forcoordination with concerned Ministries/ agenciesand State Government for ensuring:
Coal block allotment for pithead projectsEnvironment/ forest clearancesFacilitate acquisition of land
Required support from State Govt. & itsagenciesTo facilitate proper payment securitymechanism with State Govt./ State utilities
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CONCEPTSetting up of large projects of 4000 MW at asingle location: ensuring economies of scaleAward of projects to developer through tariff
based competitive bidding : ensuring cheaper powerUtilization of super critical technology: ensuringhigher efficiency and lower CO 2 emissions
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The first UMPP, developed by TATA Power atMundra, Gujarat has been commissioned andcontributes 4,000 MW in power to the northern
grid.Total number of UMPPs viewed are 16 ,out ofwhich awarded are 4-
I. Sasan UMPP, Madhya PradeshII. Mundra UMPP, GujaratIII. Krishnapatnam UMPP, Andhra PradeshIV. Tilaiya UMPP, Jharkhand
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POLICIES FORDEVELOPMENT OF UMPPPROVISION OF ELECTRICITY ACT,2003 Provides that regulatory commissions shalladopt the tariff if it is determined throughtransparent process of bidding accordance withguidelines issued by central government
Aims at moving away from cost plus approachfor tariff determination & expected to encourage private sector investment
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O BJECTIVES OF THE P OLICY
Access to Electricity Available for all households innext five years.
Availability of Power Demand to be fully met by2012.Shortages to be overcome and spinning reserve tobe available. Per capita availability of electricity to be increasedto over 1000 units by 2012. Minimum lifeline consumption of 1 unit/household/day as a merit good by year 2012. Financial Turnaround and Commercial Viability ofElectricity Sector.
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ELECTRICITY TARIFF POLICY
Objective is to promote competition, efficiencyin operations & improvement in quality ofsupply
To ensure availability of electricity to consumersat reasonable and competitive ratesPolicy stipulates that all future requirement of
power needs to be procured competitively bydistribution licenses except in cases of expansionof existing projects
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BIDDING PROCESS WOULD START WITH THEREGULATOR APPROVING THE DEMAND
FORECAST FOR THE DISTRIBUTION COMPANIES
Demand forecast forshort / medium /
long term
Regulatoryapproval offorecast
Procurementprocess
Path 1
Using non-standardbid documents
Using standardbid documents
Path 2
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PROPOSED POWER PROCUREMENT BIDDING PROCESSIF STANDARD DOCUMENTS ARE USED
Key activities/Salient points
At each stage we mayspecify minimumnumber of bids to
proceed to next stage
Requirementdefinition
Initiate RFQ Shortlistbidders
RFP Bidding Evaluationof bids
Awardof bid(s)
Post bidnegotiations
Specificationof
Quantum Timing Duration of
contract
Publishnotice
Issue RFQ
Evaluateresponsesto RFQs
Shortlistbidders
For shorttermcontractsbidders maybe pre-qualified
Issue RFPto selectedbidders
Conductpre-bidconference
Short listedbiddersinvited tosubmit bids
Technicalcompliancemust for anybid to beconsidered
Determinationof winner onbases of pricebids
Use ofindependent
observer ifnecessary RFQ/RFP process may be combined into singlestep, especially for short term contracts
Regulator kept informed at all stages of theprocess
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PROPOSED POWER PROCUREMENT BIDDING PROCESS IN CASEOF DEVIATIONS FROM STANDARD BIDDING DOCUMENTS
Any modificationssuggested by bidders, ordue to any other reasons tobe approved by regulator possibly over severalrounds of iterations
Requirementdefinition
Preparebiddingdocuments
Initiate RFQ Shortlistbidders
Seek regulatoryapproval
Iterations ondevelopment ofbid documents
Regulatoryclearance offorecast
A
RFP Bidding Evaluationof bids
Awards ofbid
Post bidnegotiations
ARegulators commentson process and goahead
Even though activeregulatory approval
needed in only certainstages, but the regulator is
always kept informed ofall developments
Regulatoryapproval if
required
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IN THE RFQ STAGE, BIDDERS SHOULD BE SCREENED ON THEBASIS OF AN ARRAY OF METRICS
Financial metricsTechnical metrics Past record
To ensure supplycontracts, in case ofdefault
To minimise risk ofdelay/shortfall
To preventfrivolous/mischievousbidders
To ensure supplycontracts, in case ofdefault Net worth
Credit worthiness Bank/other financial
guarantees
For new plants Past infrastructure
project execution Resource raising
For existing plants Reliability Performance in the past
Tie ups with transmissioncompanies preferred
Should be an organizationof repute
No default on previouscontracts
Net worth Credit worthiness Bank/other financial
guarantees For long term contracts
trader should show thecapability/history to source
70-80% of contractamount
Tie ups with generatorsand transmissioncompanies are preferred
Source of power has to bespecified
Trader of repute No default on past
contracts Past litigation record No conflict of interest
between other obligationsand contract being bid
Limits to vary by duration ofcontract and amount of loadcontracted
To be suitably relaxed in initial stages fortraders, as they would have no history oftrading operations
Forgenerators
For traders
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FOR MEDIUM/LONG TERM CONTRACTS, AT RFP STAGE, BIDSSHOULD BE SCREENED BASED ON NON PRICE EVALUATION PRIORTO PRICE COMPARISONSElement forevaluation Details
Financial guarantee covering supply default
Different bidders could be capable of delivering power atdifferent points in grid
Most reliable/least bottlenecked point most preferable
Relevant for time of day contracts, or for parts of long termcontract
Best fit to demand should get preference
Bidder asking for least financial guarantee from buyer would bepreferred
Risk sharing mechanism in case of forced outages/unforeseencircumstances
Suppliersguarantee
Delivery point
Deliverydates/period
Buyersguarantee
Force majeure /risk sharing
All these aspectsneed to besufficiently
detailed in the
standard biddocuments andprocesses, to
enable bids to beefficiently andtransparently
evaluated/ rejectedon technical merits
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BUYER SHOULD SPECIFY THE BID STRUCTURE IN DETAIL
Whether partbidding is allowed?
What is being bidfor?
What is the tariffstructure used?
No part bidding Part bidding allowed Part bidding allowed in multiples
of some pre-specified minimumbid unit (preferred option)
Energy Capacity Percentage of load (varying)
Single part tariff Two part tariff with suitable
indexation (preferred)
Elementsof a bid
Illustrative
examples
Element
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INTERNATIONAL PRECEDENTS OFFER SEVERAL USEFUL TIPS FORFORMULATING THE COMPETITIVE GUIDELINES
Aspect International examplesReference documentIssue date/number
Bidding for part of thecontract
RFP for Central Maine Power Company allowsbidders to bid in multiples of 20% of total contractamount
November 18, 2003;issued by Maine PUC
Use of Independent
observer
Independent observer was used for overseeingthe process of RFPs for Portland GeneralElectric Company
January 20, 2004; Interimreport of independentobserver
Use of discounting/NPV calculations forevaluation
Public service commission of Maryland approveduse of single discounted average term price
(DATP) for evaluation of bids in the phase IIsettlement proceedings Order no. 78710 Case no.8908; Phase II September2003
Pre-qualification ofbidders to form apanel
Rules of the Florida Public Service Commissionon general purchasing procedures allow theprequalification of bidders to form a panel
Ch.25-25 Sup no.194
Financial guaranteesfrom bidders
RFP for Central Maine Power Company requiredbidders to provide financial guarantees upto US$1.21 million/month and 1.50 million/month whilebidding for service to 2 classes of consumers
November 18, 2003;issued by Maine PUC
Bidding for percentageof load
Rather than a fixed load (in MW/ MWh) the bidmay be asked for the percentage of the utilitysload, so as to offload some risk to the suppliers
EPSA guidebook for designimplementation andmonitoring of competitivepower supply solicitations
Bidding for partialduration
EPSA guidelines mention use of annuity basedcalculations while comparing bids for unequal(part) duration and choosing a lower overall bidportfolio
EPSA guidebook for designimplementation andmonitoring of competitivepower supply solicitations
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