The Appellate Tribunal of Electricity (APTEL) has set aside an order of the Tamil Nadu State Electricity Regulatory Commission (TNERC) regarding the banking of energy, terming it unjust. The Tribunal reiterated that energy banking for renewable energy projects will continue and the state commissions should not tamper with the provision.
TNERC had in an order in 2018 increased the banking charges from 12% to 14% and ordered the withdrawal of banking facility from captive wind generating stations installed or commissioned after March 31, 2018.
The state regulator had ordered the withdrawal of the banking facility from all wind energy projects selling power to a third party. It had also announced a 10% increase in wheeling charges and cross-subsidy surcharge and set the feed-in-tariff for sale of power to the utility at ₹2.86 (~$0.039)/kWh without accelerated depreciation and at ₹2.80 (~$0.038)/kWh with accelerated depreciation.
In its ruling, APTEL directed TNERC to restore the status quo that prevailed before the impugned order. It said that it would not like TNERC to bring about changes in energy banking rules and called for a study on their financial impact on stakeholders.
The Tamil Nadu Spinning Mills Association, Indian Wind Power Association, and Watsun Infrabuild had filed separate applications with the APTEL against the order passed by TNERC in 2018.
Coming down heavily on TNERC, the appellate Tribunal said that the state regulator had not considered the wind generators’ case and had based the order only on the pleas of the state distribution companies (DISCOMs).
The Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) had in a petition before TNERC said that the banking facility had proved financially detrimental to its interest and deserved to be done away with. It had also requested APTEL to increase the cross-subsidy surcharge from 50% to 100%.
Heeding the plea, TNERC withdrew the banking facility from all wind energy projects selling power to third parties and increased banking charges.
In their applications before APTEL, the Tamil Nadu Spinning Mills Association, Indian Wind Power Association, and Watsun Infrabuild insisted on the banking facility’s continuance, particularly for wind generators. They said that the impugned order was retrograde and violated the spirit of the law.
TANGEDCO had been opposed to the facility of energy banking for a long time. The state DISCOM had asked for its for all the wind generators irrespective of commissioning date.
The state DISCOM had said that the cost that the distribution licensee incurs in providing banking facility includes drawl charges, the penalty paid based on a grid disturbance, purchase of high-cost power for supply to the third-party or captive consumers during non-wind seasons, and loss of energy charges. All such costs incurred on account of providing banking facility are ultimately passed on to consumers through tariff fixed by TNERC. It had contended that the banking facility, thus, compromises the consumer’s interest.
On the other hand, the wind generators argued that there was no justification for abolishing power banking. They pointed out that the productivity of the processes and technology used by wind projects was not consistent. It was dependent on uncontrollable factors such as wind speed, velocity, direction, and climate. Therefore, the lean periods have to be taken into account.
After considering all the parties’ views, APTEL observed that there were many reasons for the banking facility to continue, even if the distribution licensee’s concerns cannot be brushed aside.
“We find the claims of TANGEDCO for permanent discontinuance of the banking facilities to be radically extreme and, patently contrary to the contemporary letter and spirit of the prevalent law particularly concerning wind energy resources,” APTEL said.
APTEL noted that TNERC had chosen to maintain the banking facility for the existing wind generators for twelve months but had reduced the banking facility to one month and disallowed banking when the generated electricity is sold to third parties. The regulatory body did not find any reason for such stipulation.
Wind power generation is seasonal due to which banking facility must be provided to wind projects for the whole year, APTEL said.
It also pointed out that TNERC had rejected the request for a reduction in the banking period for the last several control periods and said that there was no reason why the request of TANGEDCO had to be accepted.
“Several State Commissions have been struggling to find fair and equitable solutions to the vexed issues arising from power banking. But we feel the ad hoc approach is more to blame for such state of affairs,” APTEL said.
Commenting on the significance of the order, attorney Aditya K Singhal said, “APTEL has given a landmark decision, dismissing the arguments put forth by DISCOMs and Commissions consistently while dealing with banking provisions. DISCOMs have been submitting that banking charges do not have the statutory force. But APTEL clarified that banking finds its strength from the National Tariff Policy and the Electricity Act.”
“TANGEDCO in the instant appeal and every DISCOMs in all public hearings submit that banking is causing losses to the DISCOMs. APTEL, in clear terms, observed that if consumer interest and financial health of distribution licensee are important, then the provisions concerning third-party sale, open access, and renewable energy sources are of equal significance. The Tribunal has recognized that banking is not a sole commercial transaction but is physical support to renewable energy generation which is periodic in nature,” he said.
In October last year, TNERC issued an order with detailed guidelines for wind power procurement. The order provided details on the mode of power procurement, energy banking, transmission, wheeling, scheduling, and system operation charges. The order came into effect from October 07, 2020, and the control period was to be in force until March 31, 2022.
In another order, TNERC had asked TANGEDCO to pay Arulmozhi Spinning Mills Private Limited ₹814,213 (~$11,122) for 280,763 unutilized banked units as of March 31, 2012, along with a monthly interest rate of 1% from the due date.
Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.
Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). More articles from Rakesh Ranjan.