In another interesting turn of events in Andhra Pradesh’s renewable energy space, the Appellate Tribunal for Electricity (APTEL) has directed the state distribution companies (DISCOMs) to pay a tariff of ₹2.72 (~$0.04)/kWh along with a trading margin of ₹0.07 (~$0.001)/kWh to Sprng Energy, Ayana Renewable Power, and SB Energy, the winners in the auction conducted by the National Thermal Corporation of India (NTPC) for 750 MW of solar projects in Ananthapuramu solar park.

A petition was filed by solar power project developers Sprng Agnitra Private Limited, Ayana Kadapa Renewable Power Private Limited, SB Energy Solar Private Limited, and Sprng Soura Kiran Vidyut Private Limited, against the petition filed by AP DISCOMs before the Andhra Pradesh Electricity Regulatory Commission (APERC).

Andhra Pradesh DISCOMs, namely, Southern Power Distribution Company of Andhra Pradesh and Eastern Power Distribution Company of Andhra Pradesh, had earlier filed a petition to reduce the tariff for the solar power. The case has so far been tossed from one bench to another, awaiting resolution.

Context

The Andhra Pradesh distribution companies at various stages had approached the state Commission stating that the tariff must be reduced to ₹2.44 (~$0.034)/kWh since there is going to be a delay in commissioning of the project. They had also sought for the reduction of a trading margin of ₹0.07 (~$0.001)/kWh to ₹0.02 (~$0.0002)/ kWh.

The state DISCOMs argued that the tariff for procurement of solar power across the country had been reduced to ₹2.44 (~$0.03)/ kWh, so the tariff that would be applicable will be the one that’s prevalent when the project starts supplying power.

AP DISCOMs further argued that there is no regulation under the Andhra Pradesh Electricity Regulatory Commission, where it specifies that ₹0.07 (~$0.001)/ kWh is payable as trading margin. The DISCOMs stated that the APERC needs to examine this issue since the trading margin of ₹0.07 (~$0.001)/ kWh would be an “unjustified burden” to the end consumers.

The state DISCOMs also added that the solar developers (appellants) have failed to achieve progress in developing the project within the period stipulated in the power purchase agreement (PPA) and power sale agreements (PSA). The distribution companies argued that the developers might face the consequences of paying liquidated damages if the projects aren’t commissioned on time.

Contradicting this, the solar developers stated that the delay caused is only due to AP DISCOMs not meeting their obligations on time. They alleged that the state distribution companies are trying to mislead the tribunal by stating that the tariff payable for power from the solar projects will be the tariff set for that period when the project is ready to supply power. However, in this case, the tariff was discovered under the competitive bidding process, and the claim of the DISCOMs should be denied.

Meanwhile, the intermediary procurer, National Thermal Power Corporation (NTPC) filed a submission arguing that if the competitive bidding process was held as per the guidelines issued by the Ministry of Power (MoP), then it does not require the approval of the state regulatory commission to approve the tariff. The approval from the Commission is required only if the case deviates from the guidelines.

The NTPC stated that this is contrary to what has already been agreed between the parties during the time of signing the document.

“Now, AP DISCOMs cannot unilaterally seek a reduction in the applicable tariff which is contrary to the bid documents, PPA, and PSA,” the NTPC added.

Objecting to the objections made by AP DISCOMs, the NTPC further argued that the state distribution companies categorically accepted the trading margin payable at ₹0.07 (~$0.001)/ KWh, now they cannot make a U-turn.

It was further argued that the AP DISCOMs voluntarily agreed to pay the tariff of ₹2.72 (~$0.04)/kWh and the trading margin, which is essentially the income for NTPC and SECI.

In the order, it was noted that since PSA and PPA are back to back agreements which form part of one transaction, the state Commission should not have passed a conditional order subjecting the approval of procurement of power and adoption of tariff to amendments or modifications suggested by two objectors, since the laid down procedure under Section 63 does not contemplate public hearing calling for objections.  The procedure to be adopted is only to see whether the guidelines providing for competitive bidding process was followed or not.  “The very entertainment of public hearing is quite contrary to the spirit of Section 63 of the Act,” the order noted.

In December 2019, the Andhra Pradesh high court had put a stay order on the notice issued by the APERC for public hearings to revise solar tariffs.

The APERC was expected to hold this hearing on December 7, 2019. The state government had earlier constituted a high-level negotiation committee to review, negotiate, and bring down these prices.

The high court ordered the stay after Waaneep Solar Private Limited filed a petition, a special purpose vehicle (SPV) promoted through a public-private partnership between Waaree Energies and North Eastern Electric Power Corporation Limited (NEEPCO). The petition noted that these tariffs were discovered through a transparent, competitive bidding process under Section 63 of the Electricity Act 2003. According to the petition of Waaneep Solar, these tariffs cannot be revised.

The ongoing dispute in Andhra Pradesh over the revision of solar and wind tariffs has set a bad precedent for the industry at large, besides making the developers apprehensive and hurting the investor sentiment.

In September 2019, the high court ordered that the terms of the contract have to be honored, and the state has no say in the prices as it is to be determined by law.  The court ordered that until it is determined that the price is indeed high, power cannot be curtailed. It ordered DISCOMs to honor the bills of wind and solar purchasers and to pay all pending and future bills at the interim rates of ₹2.44 (~$0,03404)/kWh for solar power and ₹2.43 (~$0.0339)/kWh for wind power. A timeframe of six months was also suggested to the APERC for the other batch of writ petitions to dispose of the cases.

However, despite the high court’s orders, renewable energy generators have not been paid, and the state government has filed a writ appeal against the high court’s order.