Umpp(ultra mega power plant and international bidding )

slide2-background With India being a country of chronic power deficits, 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 additional capacity of at least 100,000 MW by 2012
Ultra Mega Power projects, each with a capacity of 4000 MW or above, are being developed with the aim of bridging this gap
Launched by Ministry of Power in 2005-06
slide3-Central government has taken the initiative under tariff based competitive bidding route using super critical technology on BOO basis
Central Electricity Authority is the technical partner & Power finance corporation is the nodal agency
Separate SPVs were provided for each project to undertake project development activities including bid process management
In addition to Ultra Mega thermal power Projects, Ministry of Power is also taking steps for bringing up large Hydro Projects and large size Transmission Projects on the fast track
slide4-role of ministry - Ministry of Power to be facilitator for coordination with concerned Ministries/ agencies and State Government for ensuring:
Coal block allotment for pithead projects
Environment/ forest clearances
Facilitate acquisition of land
Required support from State Govt. & its agencies
To facilitate proper payment security mechanism with State Govt./ State utilities
slide5-concept Setting up of large projects of 4000 MW at a single location: ensuring economies of scale
Award of projects to developer through tariff based competitive bidding : ensuring cheaper power
Utilization of super critical technology: ensuring higher efficiency and lower CO2 emissions
slide 7-PROVISION OF ELECTRICITY ACT, 2003
Provides that regulatory commissions shall adopt the tariff if it is determined through transparent process of bidding accordance with guidelines issued by central government
Aims at moving away from cost plus approach for tariff determination & expected to encourage private sector investment
slide8-national electricity policy-Aim of this policy is to supply reliable & quality power of specified standard in an efficient manner & at reasonable rates
Policy recognizes that competition will bring significant benefits to consumers
Policy stipulates that all efforts will need to bring the power industry as early as possible in the overall interest of consumers
slide9-Access to Electricity Available for all households in next five years.
Availability of Power Demand to be fully met by 2012.
Shortages to be overcome and spinning reserve to be available.
Per capita availability of electricity to be increased to 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 of Electricity Sector
slide 10-electric tariff policy
slide11-20 international bidding comparison with national bidding

1. ULTRA MEGA POWER PLANTS AND POLICY

2. BACKGROUND With India being a country of chronic power deficits, 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 additional capacity of at least 100,000 MW by 2012 Ultra Mega Power projects, each with a capacity of 4000 MW or above, are being developed with the aim of bridging this gap Launched by Ministry of Power in 2005-06

3. Central government has taken the initiative under tariff based competitive bidding route using super critical technology on BOO basis Central Electricity Authority is the technical partner & Power finance corporation is the nodal agency Separate SPVs were provided for each project to undertake project development activities including bid process management In addition to Ultra Mega thermal power Projects, Ministry of Power is also taking steps for bringing up large Hydro Projects and large size Transmission Projects on the fast track

4. ROLE OF MINISTRY OF POWER Ministry of Power to be facilitator for coordination with concerned Ministries/ agencies and State Government for ensuring: Coal block allotment for pithead projects Environment/ forest clearances Facilitate acquisition of land Required support from State Govt. & its agencies To facilitate proper payment security mechanism with State Govt./ State utilities

5. CONCEPT Setting up of large projects of 4000 MW at a single location: ensuring economies of scale Award of projects to developer through tariff based competitive bidding : ensuring cheaper power Utilization of super critical technology: ensuring higher efficiency and lower CO 2 emissions

6. The first UMPP, developed by  TATA Power at Mundra ,   Gujarat  has been commissioned and contributes 4,000 MW in power to the northern grid. Total number of UMPPs viewed are 16 ,out of which awarded are 4- Sasan UMPP, Madhya Pradesh Mundra UMPP, Gujarat Krishnapatnam UMPP, Andhra Pradesh Tilaiya UMPP, Jharkhand

7. POLICIES FOR DEVELOPMENT OF UMPP PROVISION OF ELECTRICITY ACT, 2003 Provides that regulatory commissions shall adopt the tariff if it is determined through transparent process of bidding accordance with guidelines issued by central government Aims at moving away from cost plus approach for tariff determination & expected to encourage private sector investment

8. NATIONAL ELECTRICITY POLICY Aim of this policy is to supply reliable & quality power of specified standard in an efficient manner & at reasonable rates Policy recognizes that competition will bring significant benefits to consumers Policy stipulates that all efforts will need to bring the power industry as early as possible in the overall interest of consumers

9. Objectives of the Policy Access to Electricity Available for all households in next five years. Availability of Power Demand to be fully met by 2012. Shortages to be overcome and spinning reserve to be available. Per capita availability of electricity to be increased to 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 of Electricity Sector.

10. ELECTRICITY TARIFF POLICY Objective is to promote competition, efficiency in operations & improvement in quality of supply To ensure availability of electricity to consumers at reasonable and competitive rates Policy stipulates that all future requirement of power needs to be procured competitively by distribution licenses except in cases of expansion of existing projects

11. 11 GUIDING PRINCIPLES FOR COMPETITIVE BIDDING Competitive bidding process should ensure Free fair and effective competition Transparency Simplicity and cost effectiveness of process Minimal burden on regulator and other stakeholders Flexibility to adapt to varying needs of power procurement according to the structure of the sector The new guidelines should adequately build on GOI guidelines issued earlier by incorporating new inputs from EA 2003 and the Task Force report

12. 12 BIDDING PROCESS WOULD START WITH THE REGULATOR APPROVING THE DEMAND FORECAST FOR THE DISTRIBUTION COMPANIES Demand forecast for short / medium / long term Regulatory approval of forecast Procurement process Path 1 Using non-standard bid documents Using standard bid documents Path 2

13. 13 PROPOSED POWER PROCUREMENT BIDDING PROCESS IF STANDARD DOCUMENTS ARE USED Key activities/Salient points At each stage we may specify minimum number of bids to proceed to next stage Requirement definition Initiate RFQ Shortlist bidders RFP Bidding Evaluation of bids Award of bid(s) Post bid negotiations Specification of Quantum Timing Duration of contract Publish notice Issue RFQ Evaluate responses to RFQs Shortlist bidders For short term contracts bidders may be pre- qualified Issue RFP to selected bidders Conduct pre-bid conference Short listed bidders invited to submit bids Technical compliance must for any bid to be considered Determination of winner on bases of price bids Use of independent observer if necessary RFQ/RFP process may be combined into single step, especially for short term contracts Regulator kept informed at all stages of the process

14. 14 PROPOSED POWER PROCUREMENT BIDDING PROCESS IN CASE OF DEVIATIONS FROM STANDARD BIDDING DOCUMENTS Any modifications suggested by bidders, or due to any other reasons to be approved by regulator – possibly over several rounds of iterations Requirement definition Prepare bidding documents Initiate RFQ Shortlist bidders Seek regulatory approval Iterations on development of bid documents Regulatory clearance of forecast A RFP Bidding Evaluation of bids Awards of bid Post bid negotiations A Regulator’s comments on process and go ahead Even though active regulatory approval needed in only certain stages, but the regulator is always kept informed of all developments Regulatory approval if required

15. 15 IN THE RFQ STAGE, BIDDERS SHOULD BE SCREENED ON THE BASIS OF AN ARRAY OF METRICS Financial metrics Technical metrics Past record To ensure supply contracts, in case of default To minimise risk of delay/shortfall To prevent frivolous/mischievous bidders To ensure supply contracts, in case of default 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 transmission companies preferred Should be an organization of repute No default on previous contracts Net worth Credit worthiness Bank/other financial guarantees For long term contracts trader should show the capability/history to source 70-80% of contract amount Tie ups with generators and transmission companies are preferred Source of power has to be specified Trader of repute No default on past contracts Past litigation record No conflict of interest between other obligations and contract being bid Limits to vary by duration of contract and amount of load contracted To be suitably relaxed in initial stages for traders, as they would have no history of trading operations For generators For traders

16. 16 FOR MEDIUM/LONG TERM CONTRACTS, AT RFP STAGE, BIDS SHOULD BE SCREENED BASED ON NON PRICE EVALUATION PRIOR TO PRICE COMPARISONS Element for evaluation Details Financial guarantee covering supply default Different bidders could be capable of delivering power at different points in grid Most reliable/least bottlenecked point most preferable Relevant for time of day contracts, or for parts of long term contract Best fit to demand should get preference Bidder asking for least financial guarantee from buyer would be preferred Risk sharing mechanism in case of forced outages/unforeseen circumstances Supplier’s guarantee Delivery point Delivery dates/period Buyer’s guarantee Force majeure /risk sharing All these aspects need to be sufficiently detailed in the standard bid documents and processes, to enable bids to be efficiently and transparently evaluated/ rejected on technical merits

17. 17 BUYER SHOULD SPECIFY THE BID STRUCTURE IN DETAIL Whether part bidding is allowed? What is being bid for? What is the tariff structure used? No part bidding Part bidding allowed Part bidding allowed in multiples of some pre-specified minimum bid unit (preferred option) Energy Capacity Percentage of load (varying) Single part tariff Two part tariff with suitable indexation (preferred) Elements of a bid Illustrative examples Element

18. 18 INTERNATIONAL PRECEDENTS OFFER SEVERAL USEFUL TIPS FOR FORMULATING THE COMPETITIVE GUIDELINES Aspect International examples Reference document Issue date/number Bidding for part of the contract RFP for Central Maine Power Company allows bidders to bid in multiples of 20% of total contract amount November 18, 2003; issued by Maine PUC Use of Independent observer Independent observer was used for overseeing the process of RFP’s for Portland General Electric Company January 20, 2004; Interim report of independent observer Use of discounting/ NPV calculations for evaluation Public service commission of Maryland approved use of single discounted average term price (DATP) for evaluation of bids in the phase II settlement proceedings Order no. 78710 Case no. 8908; Phase II September 2003 Pre-qualification of bidders to form a panel Rules of the Florida Public Service Commission on general purchasing procedures allow the prequalification of bidders to form a panel Ch.25-25 Sup no.194 Financial guarantees from bidders RFP for Central Maine Power Company required bidders to provide financial guarantees upto US$ 1.21 million/month and 1.50 million/month while bidding for service to 2 classes of consumers November 18, 2003; issued by Maine PUC Bidding for percentage of load Rather than a fixed load (in MW/ MWh) the bid may be asked for the percentage of the utility’s load, so as to offload some risk to the suppliers EPSA guidebook for design implementation and monitoring of competitive power supply solicitations Bidding for partial duration EPSA guidelines mention use of annuity based calculations while comparing bids for unequal (part) duration and choosing a lower overall bid portfolio EPSA guidebook for design implementation and monitoring of competitive power supply solicitations

19. 19 INTERNATIONAL BIDDING PROCESS - EXAMPLE US long term bid process Posting of information publicly Request for Expressions of Interest ( EoI ) FERC qualification Credit application and financial information received Pre-bid conference Eligible bidders qualified and issued certification Request for detailed proposals from eligible bidders Price proposals received Bids evaluated Award of bids More rounds if previous rounds fail to meet objectives Iteration continues till satisfactory solution reached Retail prices published 6 months before start of contract Receiving proposals Process start Receiving EOIs Regulatory Validation Bidder selection Round 1 Revision/Round 2 Contract start Steps Timeline Details 3½ months 15 days 15 days 15 days 2 months 9 months Source: Allegheny power RFPs and RFQs