The Appellate Tribunal for Electricity (APTEL) has passed an order asking the National Load Despatch Center (NLDC) to revoke and cancel erroneously issued renewable energy certificates (RECs) to the Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL).

Renewable energy certificates are financial instruments purchased by obligated entities like distribution companies, captive power project owners, and other power consumers to meet their renewable purchase obligation (RPO) targets. One REC certifies that the bearer owns 1 MWh of electricity generated from a renewable energy resource.

Background:

Techno Electric & Engineering Company Limited, a generating company with about 130 MW of wind projects in Tamil Nadu and Karnataka, filed an appeal with the tribunal contesting the APERC’s order on January 4, 2020.

It stated that in a previous order, the Commission had allowed the issue of RECs to APSPDCL for the financial year (FY) 2018-19, even though it had not fulfilled its RPO targets in the previous financial year.

The appellant said that APERC had given its recommendation to the NLDC to issue RECs to the AP DISCOM for FY 2017-18 despite a shortfall of 681.1 GWh in the distribution company’s RPO targets from solar-based sources.

Techno Electric said that despite being aware of the APSPDCL’s previous deficit, it recommended that the NLDC issues RECs worth ₹6.01 billion (~$81.1 million) at a floor price value for the following year as well (FY 2018-19).

Accordingly, the NLDC issued about four million non-solar RECs and 1.9 million solar RECs to APSPDCL in February 2020. Techno Electric maintained that this was a violation of the CERC’s REC regulations, which state that REC benefits should not be extended to DISCOMs with RPO deficits in the previous year.

Techno Electric noted that this erroneous issue of RECs has resulted in an increased supply of these certificates in the market and that this has altered the free market’s dynamics.

APERC’s Response:

In its response, the APERC contested the appellant’s claim for a remedy as to a “person aggrieved” or an “aggrieved party” as per CERC regulations. It said that this could not be maintained as the appellant was not within the area of jurisdiction of the APERC.

The APSPDCL also explained that RECs are issued to DISCOMs for procuring renewable energy above the RPO targets fixed for the previous financial year. It said that DISCOMs were entitled to claim RECs in the current year for their performance in the last financial year. Further, it also noted that the NLDC issued RECs to it for FY 2017-18 and furnished the supporting details only after ensuring the APSPDCL had satisfied its statutory requirements.

For FY 2018-19, however, it said that there was a shortfall in their solar targets in one of the past three years (FY 2017-18). It noted that this shortfall was on account of a government order in October 2019, which reallocated the procurement of renewable energy between APSDCL and APEDCL (Andhra Pradesh Eastern Power Distribution Company Limited) with retrospective effect.

The DISCOM stated that the APERC had taken this into account while issuing its recommendation and had deducted the excess RECs issued for FY 2017-18 for solar from the total entitlement for FY 2018-19. The Commission also adjusted the REC deficit in FY 2017-18 due to the revision with its RECs due in FY 2018-19.

APSPDCL explained that the NLDC issued RECs to it for FY 2019-20 (for its performance in the previous year) only after ensuring the statutory requirements were satisfied.

The respondents further argued that the appeal was not maintainable since the APERC only made a recommendation and not a decision or an order under the Electricity Act.

APTEL’s Analysis and Ruling:

The APTEL, upon analysis, said that the recommendation of the concerned Commission is crucial for issuing RECs as per central and state electricity regulatory commission.

It noted that state commissions could only accord their recommendation only if the DISCOM has complied with its obligations as per the regulations. The APTEL further explained the NLDC could not act as “a mere post office” to blindly proceed on the recommendation of the state Commission since it is responsible for verifying whether the obligated entity has satisfied all statutory requirements before issuing RECs.

It proceeded to point out that both the state Commission and the central agency (NLDC) made an error while calculating the RPO shortfall of the DISCOM by mixing up the “financial year” with the “performance year.” The tribunal said that it was evident that the APERC and the NLDC had not scrutinized the application properly despite a letter from the state load dispatch center (SLDC) showing the APSPDCL’s non-compliance of its RPO targets during FY 2017-18.

In light of this, it opined that the APERC should not have given its recommendation to the NLDC to issues the RECs to the state DISCOM.

The tribunal also said that according to the provisions of the Electricity Act, the word ‘order’ includes decisions. Citing this, it agreed with the appellant’s contention that the APERC’s recommendation can be considered an order.

It also agreed with the appellant that the erroneous issue of these RECs has had a direct adverse civil, financial, and legal injury to the appellant. It subsequently declared that the appellant was an “aggrieved party” and not just an “interested party” as purported by the respondents and that they could not have approached the central Commission challenging the issue of these certificates.

In its final order, it was underlined that the certificates the APSPDCL was given for the performance year 2018-19 but have already been sold need not be disturbed. However, it ordered the NLDC to start revoking and canceling the registration of the remaining disputed RECs that were issued and were unsold for the financial year 2018-19.

Recently, APTEL issued an order postponing the trading of renewable energy certificates scheduled for July 29 by four weeks. If the validity of any REC is set to expire during the four weeks, they will be extended by the concerned authority, the APTEL said in a recent order.

Previously, Mercom reported that the Central Electricity Regulatory Commission issued an order implementing revised forbearance and floor prices for solar and non-solar renewable energy certificates.