The Central Electricity Regulatory Commission (CERC), in a recent order, adopted the ceiling usage charge of ₹3.50 (~$0.046)/kWh for 1,692 MW of solar power projects (Tranche I & II) under the second phase of the Central Public Sector Undertaking (CPSU) Program.

The Commission said that the agreed usage charges between NTPC Limited and the Telangana distribution companies (DISCOMs) of ₹2.86 (~$0.037)/kWh for 1,323 MW capacity and ₹2.69 (~$0.035)/kWh for 369 MW capacity were within the ceiling of ₹3.50 (~$0.046)/kWh as specified in the CPSU Program, Phase-II.

NTPC had filed a petition for the adoption of usage charge for 1,692 MW of solar projects (Tranche I&II) connected to the interstate transmission system (ISTS) and selected through competitive bidding under the CPSU Program, Phase-II with viability gap funding (VGF) support by the government.

Background

Phase-II of the CPSU program to set up 12,000 MW of grid-connected solar projects for self-use or use by government entities was approved by the President of India in March 2019.

Under the CPSU program, the Solar Energy Corporation of India (SECI) issued a tender to set up 2,000 MW of grid-connected solar power projects (Tranche-I) on March 15, 2019. Later, SECI issued another tender for setting up 1,500 MW of solar projects (Tranche-II) under the CPSU program Phase-II.

NTPC was allocated 769 MW out of the 2,000 MW. It was allocated another 923 MW out of the 1,500 MW under Tranche-II. NTPC was required to set 1,692 MW of solar projects under both tranches. It entered into power usage agreements (PUAs) with the Telangana distribution companies (DISCOMs) to supply power from its solar projects.

Subsequently, NTPC requested SECI to approach CERC for the adoption of bids. However, SECI refused to take action. The projects have been established in Rajasthan, Tamil Nadu, and Telangana and supply power to Telangana.

NTPC, in its submission on October 12, 2021, said that it had entered into PUAs with Telangana DISCOMs at the usage charge of ₹2.86 (~$0.037)/kWh for 1,323 MW capacity and ₹2.69 (~$0.035)/kWh for 369 MW capacity, both within the ceiling of ₹3.50 (~$0.046)/kWh.

NTPC clarified that the competitive bidding process had been carried with VGF as the bid parameter specified in the CPSU program, Phase-II. The petitioner and the DISCOMs agreed to the usage charge.

SECI, in its response, said that the usage charge was to be paid by the government entities for the power supplied to them by the government-owned power generator within a ceiling of ₹3.50 (~$0.046)/kWh. The usage charge was to be mutually agreed upon between the two government entities.

In a subsequent hearing, the nodal agency added that the program permits a mutually agreed usage charge between the government power generator and consumers, i.e., the government entities, either directly or through DISCOMs, subject to the ceiling.

Commission’s analysis

The Commission observed that only government-owned power generators were eligible for availing VGF under the CPSU Program, Phase-II. Setting up solar power projects under the program was solely for self-use or use by government entities, either directly or through DISCOMs.

The bidding process based on VGF as the bid parameter was not exactly as per the bidding guidelines. Instead of a pre-determined tariff, the CPSU Program, Phase-II, only provides for a pre-determined ceiling usage charge. Further, the CPSU program recognizes that the parties may mutually agree on the usage charge.

The Commission adopted the ceiling usage charge of ₹3.50 (~$0.046)/kWh under Section 63 of the Electricity Act for 1,692 MW capacity under Tranche-I and II.

The Commission said that the usage charge arrived at between NTPC and the Telangana DISCOMs under various PUAs was within the ceiling of ₹3.50 (~$0.046)/kWh as specified in the CPSU Program, Phase-II.

In June this year, the Ministry of New and Renewable Energy extended the commissioning for solar projects under Tranche-III of the CPSU Program, Phase-II to 30 months from 24 months.

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