The Central Electricity Regulatory Commission (CERC) recently approved tariffs of ₹2.99 (~$0.039)/kWh for 160 MW and ₹3 (~$0.040)/kWh for 810 MW of wind power projects (blended with solar) as agreed by the successful bidders.

It said that the selection of bidders by the Solar Energy Corporation of India (SECI) was done through a transparent bidding process per the guidelines issued by the Ministry of New and Renewable Energy (MNRE).

On the issue of trading margin, the Commission said that the distribution licensees had agreed to a trading margin of ₹0.07 (~$0.0009)/kWh. However, in case of failure by SECI to provide an escrow arrangement or irrevocable and revolving letter of credit to the solar generators, the trading margin will be limited to ₹0.02 (~$0.0003)/kWh.

The Central Commission added that the parties had agreed that the change in rates of safeguard duty, goods and services tax (GST), and basic customs duty (BCD) after July 28, 2020, would be treated as ‘Change in Law.’

It clarified that as per the provisions of ‘Change in Law Rules,’ the generator and the procurer should settle the claim mutually and approach the Commission only for the verification of the compensation amount.

SECI had filed a petition for the adoption of tariff for 970 MW of wind power projects (Tranche-IX) (with the option of blending solar power) and connected with the interstate transmission system (ISTS) discovered through a competitive bidding process.

Background

SECI had floated a tender to procure 2,000 MW of wind power from ISTS-connected wind power projects on March 20, 2020. However, to comply with the guidelines issued by MNRE, the RfS documents, draft power purchase agreement (PPA), and the power sale agreement (PSA) were amended, and the capacity was increased to 2,500 MW.

After the conclusion of the reverse auction, Vena Energy Vidyuth (160 MW) with a tariff of  ₹2.99 (~$0.039)/kWh and JSW Solar (1,000 MW) with a tariff of ₹3 (~$0.040)/kWh were selected. Vena Energy was awarded 160 MW and JSW Solar 810 MW.

SECI submitted that in the PSAs, the DISCOMs had agreed to pay SECI a trading margin of ₹0.07 (~$0.0009)/kWh.

SECI added that the change in safeguard duty, GST, and BCD rates after July 28, 2020, had been incorporated in the PPA as ‘Change in Law’ events and requested the Commission to recognize it as all the parties had agreed to it.

SECI had made certain deviations in the PPAs and PSAs from the provisions of the guidelines concerning ‘Change in Law’ provisions, and MNRE had approved the deviations. Therefore, the departure from the provisions specified in the guidelines did not amount to deviation.

Commission’s analysis

The Commission observed that the guidelines for the bidding process provided for the determination of quantum of compensation to offset the financial impact due to the occurrence of a ‘Change in Law’ event by the appropriate Commission.

However, SECI had provided for the pre-determined quantum of compensation for ‘Change in Law’ events, whereby for every increase or decrease of ₹100,000 (~$1,322)/MW in the project cost, there would be a corresponding increase or decrease in tariff equal to ₹0.0045 (~$0.00006)/kWh.

CERC noted that the modified ‘Change in Law’ provisions had been incorporated in the bidding documents. However, the competent authority had not approved the deviations.

Further, the Central Commission noted that though MNRE approved the changes on March 1, 2021, the conformity certificate furnished by the petitioner was dated February 18, 2021. This implied that on the date the conformity certificate was issued, there was no approval from the MNRE. This was a serious lapse on the part of SECI.

CERC stated that the parties had agreed that any change in the rates of safeguard duty, GST, and basic customs duty after July 28, 2020, would be treated as ‘Change in Law.’

In February this year, CERC adopted tariffs of ₹2.83 (~$0.038)/kWh for 250.8 MW and ₹2.84 (~$0.039)/kWh for 190 MW of wind power projects (Tranche-VIII) connected to ISTS.

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