APTEL Directs Madhya Pradesh DISCOM To Compensate Biomass Developers for Fixed Costs

In a judgment favoring biomass project developers, the Appellate Tribunal for Electricity (APTEL) has found that in the case of one part tariff, developers cannot be denied fixed cost component of the tariff if plant has been forced to shut down under Merit Order Dispatch (MOD) principle.

This judgment pertains to the appeals of two biomass project developers – Orient Green and Arya Energy (the appellants) each owning 12 MW and 10 MW of biomass projects in Madhya Pradesh. Both companies claim that they had wrongly been denied by the Madhya Pradesh Power Corporation Limited (MPPMCL) and Madhya Pradesh Electricity Regulatory Commission (MPERC), the option to claim fixed cost component of tariffs when Merit Order Dispatch is applied to them. MOD is used to optimize the cost of generation of power plants with multiple generating units, by ranking the units in order of their cost of production.

As per MOD, a list is prepared of the variable costs of all the generating sources. This is because the purchasing entity has to, in any case, pay the fixed costs of such generating sources. Once the fixed costs are paid, the purchasing entity can decide as to which sources of power to schedule.

According to the appeals of the biomass developers, MPPMCL was trying to wiggle out of its obligations to pay the fixed charges for the energy generated by the project developers. Based on the submission of the appellants, APTEL passed the following judgment:



“We hold that the generating plants of the Appellants shall be regulated by applying merit order dispatch as per Madhya Pradesh Balancing and Settlement Code, 2015 and the Appellants shall be entitled to receive fixed charges component from the date (17.01.2017) from which merit order dispatch has been applied and power not scheduled by MPPMCL.”

Further, APTEL also clarified that MPPMCL would have to compensate the appellants fixed cost component considering the base year 2013-14 (₹2.53 per unit and so on as per the year of operation) at the normative plant load factor (PLF) of 80% of contracted capacity, determined by the state commission in its tariff orders.

APTEL also directed the state electricity regulatory commission to verify the actual fixed cost component for which the appellants were entitled.

This judgment is expected to help renewable energy developers claim fixed cost when there is curtailment in the name of grid security and when power purchase agreements (PPAs) do not specify the compensation during such curtailment period.

Power curtailment has been affecting renewable energy projects across the country. Previously, the Amaravati High Court had ordered the state load despatch center (SLDC) and the state’s transmission company to stop the curtailment of power from solar and wind energy projects in Andhra Pradesh. Earlier, in a strongly-worded judgment, the Tamil Nadu Electricity Regulatory Commission had informed the SLDCs to stop curtailment of solar generation in the state. Solar power developers and associations representing them have been constantly bringing these issues of curtailment to the notice of the authorities responsible, but still the problem prevails.