Andhra Commission Allows PPAs of Two Wind Projects to be Canceled

The Andhra Pradesh Electricity Regulatory Commission (APERC), in a recent order, ruled that the power purchase agreements (PPAs) signed between two wind developers and the Southern Power Distribution Company of Andhra Pradesh (APSPDCL) were not binding for the state distribution company (DISCOM).

The Commission asked the DISCOM to pay for the power received from the developers up to the date of disconnection at ₹2.93 (~$0.039)/kWh as compensation within two months from the date of the order.

Also, the Commission allowed the petitioners to sell their power in the market as per the provisions of the Electricity Act, 2003.

Vibrant Greentech India and Chaitanya Projects had filed petitions requesting the Commission to act upon the PPA entered with APSPDCL and direct the DISCOM to pay them for wind power supply from the commercial operation date (March 30, 2017) along with interest in terms of the PPA.


Background

Vibrant Greentech has a wind power project with a capacity of 4.25 MW in the Anantapur district of Andhra Pradesh. Chaitanya Projects also has a 0.8 MW wind project in Tamil Nadu.

The 4.25 MW project of Vibrant Greentech was commissioned on March 29, 2017, before the scheduled commissioning date of March 31, 2017. The wind developer entered into a PPA with APSPDCL at a tariff of ₹4.84 (~$0.065)/kWh for 25 years from the commissioning date on March 30, 2017.

Through its order dated March 26, 2016, the Commission had notified the levelized generic tariff for FY 2016-17 as ₹4.84 (~$0.065)/kWh without accelerated depreciation and ₹4.25 (~$0.057)/kWh with accelerated depreciation. The generation-based incentive was offered to the wind energy generator at ₹0.5 (~$0.007)/kWh of electricity fed into the grid for not less than four years and a maximum of up to ten years.

In December 2017, APERC had approved the PPAs for 41 wind projects aggregating 841.32 MW. The PPAs for the entire 841.32 MW had been signed at a tariff of ₹4.8 (~$0.075)/kWh.

APSPDCL, in its reply, said that the New and Renewable Energy Development Corporation of Andhra Pradesh (NREDCAP), through its letter dated October 13, 2016, had extended the timeline for the completion of the project up to March 31, 2017.

On February 27, 2017, the Principal Secretary, Energy had stated that NREDCAP had approved a large number of wind power projects and directed them to review the cancellation of all such projects that had not been commissioned within two years from the date of the singing of the memorandum of understanding and once the projects were canceled, the DISCOMs should cancel the PPAs.

The DISCOM further added that the petitioner’s claim that it was entitled to a tariff of ₹4.84 (~$0.065)/kWh for 25 years without the approval of the Commission was not tenable.

Later, the Government of Andhra Pradesh directed the DISCOMs not to enter into any PPA unless the tariff was less than ₹3 (~$0.040)/kWh.

The DISCOM clarified that considering the financial crisis of the DISCOMs and the fact that the price of power in the open market was ranging between ₹2 (~$0.027)/kWh and ₹3 (~$0.040)/kWh and also considering the larger interest of the consumers of the state, the respondent had rescinded the PPA.

Commission’s analysis

In the matter of approval of 41 PPAs on December 13, 2017, the Commission observed that it had directed the DISCOMs not to enter into fresh PPAs without its approval.

The Commission noted that the PPAs had no validity, and in the absence of approval by the Commission, such PPAs are not enforceable.

Further, APERC stated that after entering into the PPAs, it was noticed that the power generated from the projects was beyond the approved capacity of wind power as ordered by the Commission in the Retail Supply Tariff Order for FY 2016-17. Also, the PPAs were contrary to the directions issued by the Government of Andhra Pradesh to the effect that no further PPAs should be entered without the approval of the Commission and that no such prior approval was obtained from the Commission before signing the draft PPAs.

Also, the Commission noted that though the PPAs indicated a certain tariff, the respondents were not bound to pay the said tariff as the PPAs were not enforceable.

The Commission worked out a weighted average of the tariff discovered in 2017 through the bidding process for wind power projects in the country and arrived at a tariff of ₹2.93 (~$0.039)/kWh. Accordingly, the Commission directed the DISCOM to compensate the wind developers at ₹2.93 (~$0.039)/kWh for the power supplied by the petitioners and received by APSPDCL up to the time the project was disconnected.

In March this year, the Andhra Pradesh Energy Department clarified that the amendments made to the policies on the wind, solar, and wind-solar hybrid projects would apply to projects commissioned after November 18, 2019.

In December 2019, the Andhra Pradesh government had said that PPAs for which the tariffs had been set by the state electric regulatory commission and signed would not be revisited. The Ministry of New and Renewable Energy had clarified to the state government that the PPAs once signed were “sacrosanct and cannot be renegotiated unless there is a clause to do so in the agreement, or a case of corruption has been approved”.

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