The Maharashtra Electricity Regulatory Commission (MERC), in its recent order, allowed captive power producers to fulfill their renewable purchase obligation (RPO) backlog for the financial years (FY) starting 2015 to 2020, by March 31, 2022.

Background

Captive Power Producers Association (CPPA) has filed a petition seeking permission to allow an option to meet the RPO targets by March 31, 2022, as per the order dated October 6, 2020.

In its order dated October 6, 2020, MERC stated that the composite RPO targets for captive power projects commissioned before April 1, 2016, would be set at 9% for the operating period of the regulations. It added that for projects commissioned after this date, the composite target would be the target for the year in which the project was commissioned.

The Captive Power Producers Association informed the Commission that many of its members’ projects in Maharashtra were forced to shut to due to the national lockdown enforced by the government to control the spread of the Covid-19.

The Association also approached the Maharashtra Energy Development Authority (MEDA) to comply with the order dated October 6, 2020.

Reliance Industries, Deepak Fertilizers, BILT Graphics Paper Products, and Tata Steel are the members of the association who have complied with the order issued in October.

In its response, MEDA said the members of the association must deposit the average price (₹0.5 (~$0.0067)/kWh) of renewable energy certificates (REC) forbearance and floor price, as per the Commission’s order dated October 6, 2020.

The Association also said that members face difficulties meeting fixed expenses like providing salaries to employees, payments to small contractors, lease rentals, fixed cost of power, taxes, and duties, among others due to prolonged lockdown in the state. In addition, power producers do not have any source of income because of the closure of all industrial activities and markets across the globe. This would force captive power producers to face cash liquidity issues for the time to come.

MEDA’s response

MEDA informed the Commission that it had corresponded with 41 captive power producers. Of this, only five deposited the RPO shortfall amount before March 31, 2021, and two of them (ONGC and Laxmi Organic Industries) deposited the amount later.

MEDA also requested the association to provide a list with contact details of captive power producers that filed a petition before the High Court. However, the association provided a copy of the petition but without contact details.

In its response, MEDA requested the guidance of the Commission to implement its orders amidst the difficulties. It also requested the Commission to clarify whether delayed payment charges in case of RPO shortfalls must be levied or not on captive power producers.

MEDA also asked the Commission to direct captive power producers who refused to submit RPO compliance reports to do so through the RPO web portal or hardcopy.

Commission’s analysis

The Commission noted that in its previous order, it had allowed captive power producers to meet their RPO targets for the financial year (FY) 2016-17, FY 2017-18, and FY 2018-19 to FY 2019-20 by March 2020.

However, the Captive Power Producers Association filed a petition on July 16, 2020, seeking another extension up to March 2021 to meet their cumulative RPO targets. In its order, the Commission stated that fossil fuel-based captive power producers that want to exercise the option must deposit an amount equivalent to the floor price of the renewable energy certificates with MEDA.

The Commission also noted that some of the association members complied with its order dated October 6, 2020, and deposited the stipulated amount with MEDA.

In its analysis, the Commission acknowledged challenges faced by captive power producers due to the prevalent pandemic situation. It also opined that economic activities are returning on track, and captive power producers required some time to get back to normalcy.

Therefore, the Commission allowed the captive power producers an extension to meet their RPO targets by March 2022. In addition, the Commission directed captive power producers of Maharashtra to submit their RPO compliance report to MEDA within two months and to provide contact details sought by MEDA within 15 days.

In June 2020, MERC rejected the plea of BILT Graphic Paper Products to offset RPO for its Bhigwan unit from the energy generated from its biomass project located at Ballarpur.

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