The Appellate Tribunal for Electricity (APTEL) has provided a huge relief to renewable energy generators in the state of Andhra Pradesh. Amid the squabble between the newly-formed state government and renewable developers regarding the tariff of wind and solar projects, the tribunal has directed the commission to not allow the state DISCOMs to withdraw the proceedings pending for approval/adoption of tariff pertaining to the competitive bidding process. It has also restrained the state’s electricity regulatory commission (APERC) from conducting a public hearing on the tariff adoption process as the tariff had been discovered through a competitive bidding process.

In the order, APTEL states, “We fail to understand how public hearing is initiated in the adoption of the tariff, which is an outcome of the competitive bidding process.  At this stage, we are of the opinion if the PSA read with PPA are pending for consideration before the respondent-commission in terms of Section 86(1) (b), the proceedings have to be taken up by the respondent-commission in accordance with the act and the regulations with reference to the settled law pertaining to competitive bidding process under Section 63 of the Act. The respondent-commission shall not permit the respondent-DISCOMs to withdraw the said petition at this stage.  We also direct the respondent commission not to hold public hearing since the proceedings pertaining to the adoption of tariff in a competitive bidding process.”

“This order will have a far-reaching effect, and it will send a positive message to developers that there cannot be a public hearing in the competitive bidding process. Post the completion of the competitive bidding process that’s in compliance with the guidelines, the tariff adoption is a ministerial act,” commented Aditya K Singh from HSA Advocates.

The next date of hearing is scheduled to be held on September 16, 2019.

Background

As reported previously by Mercom, Ayana Renewable Power, SB Energy, and Sprng Energy had filed petitions before the APTEL against the APERC.

Through a competitive bidding  process,  the  three  petitioners; Ayana Renewable Power, SB Energy, and Sprng Energy  were  the  successful  bidders of an auction conducted by NTPC and SECI for 750 MW each and  have  paid  more  than  ₹1 billion (~$13 million) each  to  Andhra Pradesh Solar Power  Corporation  to develop projects  in  the  solar  parks. All the projects are under development and some close to commissioning.

According to the three companies, the investment was made after NTPC and SECI had assured them that the tariff approval would be obtained by the state commission and is only a matter formality. However, after the Andhra Pradesh South Power Distribution Company Limited (APSPDCL) filed a memo to the APERC to cancel the 21 wind PPAs despite the court’s stay order, the three companies fearing a similar course of action against their solar projects went ahead and filed a petition.

Responding to the petition by the three solar companies, the APTEL had issued a direction against the DISCOM and the state regulatory commission to not initiate any precipitative or coercive action against the petitioner until the state commission issued an order about the adoption of the tariff, trading margin, and approval of procurement of contracted capacity.

Mercom had earlier reported the APERC contemplating whether to approve or suggest a few deviations in the power sale agreements (PSAs) for a total of 1,750 MW of grid-connected solar photovoltaic (PV) projects.

The approval of tariffs discovered through competitive bidding which was earlier a matter of formality has now become a matter of contention with regulatory commissions directing the DISCOMs to renegotiate tariffs. Recently in Maharashtra, the Maharashtra Electricity Regulatory Commission (MERC) has ordered Maharashtra State Electricity Distribution Company Limited (MSEDCL) to renegotiate tariffs with solar developers for projects allocated to them. The tariffs discovered for the 1,170 MW ranged between ₹2.8 (~$0.039/kWh) and ₹3.29 (~$0.046/kWh), and the commission noted that the tariffs discovered through another 1,000 MW tender ranged between ₹2.74 to ₹2.75/kWh (~$0.039). Therefore, the commission ruled that MSEDCL would need to renegotiate tariffs for this tender to match the tariffs in recent bids.

The trend of the regulatory commissions directing the DISCOMs to renegotiate tariffs discovered through competitive bidding process citing lower tariffs in earlier auctions and taking a long time to approve is seriously hindering project financial closures and commissioning. Not to mention the unnecessary stress caused to the investors and developers.

“It is never a good thing for the industry when the judiciary has to step in and protect the sanctity of contracts from regulators. The best outcome that could come out of this unfortunate episode will be a ruling that sets a precedent for future cases and makes it impossible for government agencies to cancel or renegotiate signed contracts,” said Raj Prabhu, CEO of Mercom Capital Group.

Image credit: Greenko Group