Andhra Offers 5% Annual Escalation On Base Price of Bagasse-Based Renewable Projects

The Andhra Pradesh Electricity Regulatory Commission (APERC) has determined the fuel price for biomass and industrial waste-based projects at ₹3,176.72 (~$45)/metric ton for the financial year (FY) 2019-20. The fuel cost for bagasse-based projects has been set at ₹1,788.43 (~$25)/MT for FY 2019-20.

These rates will be increased at 5% every year up to FY 2023-24 as per the Central Electricity Regulatory Commission (CERC) Regulation, 2017. By adopting the fuel price at ₹1,788.43 (~$25)/MT for bagasse for FY 2019-20, the unit price of power will be ₹3.14 (~$0.04)/kWh.

APERC-Tariff Payable to Biomass Based Projects

Background

The APERC had earlier determined the variable cost for biomass, industrial waste, and bagasse projects for FY 2014-15 to FY 20-18-19, with indicative fuel price escalation of 6%. The Commission needs to notify the actual fuel price escalation before the beginning of each financial year starting from FY 2015-16.


As reported by Mercom last year, the state previously issued a draft order setting the variable cost of power generated from biomass, industrial waste, and bagasse-based power projects for the 5 years between April 1, 2019, and March 31, 2024. The APERC has kept the variable cost of power from the sources mentioned above unchanged as there was no information available based on which the commission could have changed the variable cost. The variable cost for biomass-based power projects is set at ₹4.81 (~$0.070)/kWh, for bagasse-based power projects, at ₹3.07 (~$0.045)/kWh and for industrial waste-based power projects at ₹4.81 (~$0.070)/kWh.

Responding to the proposed draft, various stakeholders, including the existing biomass and bagasse-based projects, filed their submissions and objections. In a letter dated April 13, 2019, biomass developers and generators expressed their objections stating that the proposal to continue the variable cost of the financial year 2018-19 for the next four years is against the fact that the prices of biomass fuel, cost of labor, and transportation cost increase almost every year.

Considering this, they proposed that the Commission should provide 6% escalation over the base price of FY 2018-19; an escalation of 5% every year for fuel cost, determine the biomass fuel prices prevalent in the state for 2019-20 and consider it as the base fuel price for computation of variable cost for FY2020-21 to FY2023-24. Else, they advised that the Commission, while making the final draft of the order, should follow the option included by the CERC under which biomass fuel price must be decided annually by the appropriate regulatory commission.

Similarly, the South Indian Sugar Mills Association suggested that the Commission must consider the real market value of bagasse or at least to consider 11.2% of fuel price escalation on the 2018-19 bagasse rate and revise the same every year from FY 2019-20.

In its order, the state commission drew from the CERC order that had previously analyzed the objections and suggestions. Bagasse, being a by-product generally used by the cogeneration plants, is available within the premises of sugar mills. Therefore, there is no transportation cost incurred in its procurement.  The CERC had also considered the data on the cost of bagasse for FY 2019-20 and found that bagasse cost and data for one month do not substantiate that the fuel price is valid for the full year. It was mentioned that there are suggestions from others that extending support for the reduction of the price as bagasse is a by-product in cane processing, and its associated cost is already included in the cost of sugar. So, CERC did not accept the claim for upward revision of bagasse price.

Considering this, the Commission stated that it accepted the price determined by the CERC at ₹1,788.43 ($25)/ MT for FY 2019-20, and it can be adopted as the fuel cost for the same financial year. The state body has also agreed to escalate the amount by 5% every year up to FY 2023-24.

Previously, CERC issued an order providing relief to Nirani Sugars Limited in a case concerning the payment of dues amounting to ₹110.9 million (~$1.59 million) for a bagasse-based project.