Corporates Win Three RPO Compliance Delay Cases in Karnataka

In three separate cases related to the delay in compliance of renewable purchase obligation (RPO)by corporates, the Karnataka Electricity Regulatory Commission (KERC) has provided relief to the obligated entities.

Case 1

KERC had initiated proceedings against JK Cements Works Limited, Muddapur in the matter of RPO non-compliance by the firm for the financial year (FY) 2017.

Per information provided by state load dispatch center (SLDC), JK Cements had not complied with the solar RPO to an extent of 80.53 MWh nor with the non-solar RPO to an extent of 590.59 MWh. Per regulations, the company had to meet the solar RPO of 88.58 MWh (110 percent of shortage) and the non-solar RPO of 649.65 MWh (110 percent of shortage) through the purchase of renewable energy certificates (RECs).

After being asked by KERC, the company submitted that the solar REC sale was on hold due to a Supreme Court order, and that it had purchased 1,491 non-solar RECs for non-solar RPO compliance on June 26, 2017, and 104 non-solar RECs on June 29, 2017.

Later, on May 30, 2018, the firm purchased 4,631 solar RECs to meet solar RPO of FY 2017. In its order, KERC stated that considering the Supreme Court’s stay on the sale of solar RECs, the commission approved the late purchase of RECs by the firm. Per KERC, the firm has now fulfilled its RPO for FY 2017, and the proceedings against it have also been halted.

Case 2

KERC also initiated the proceedings against Honda Motorcycles and Scooters India Pvt. Ltd. in the matter of RPO non-compliance by the firm for FY 2017.

Per information provided by SLDC, Honda Motorcycles and Scooters India Pvt. Ltd. had not complied with its non-solar RPO to an extent of 750.04 MWh. Per regulations the company had to meet a non-solar RPO of 825.04 (110 percent of shortage) through purchase of non-solar RECs.

After being asked to show cause by KERC, the firm stated that it has complied with the non-solar RPO. After examining the firm’s reply, KERC noted that the firm had not complied with non-solar RPO to an extent of 8.80 MWh even after purchasing 742 RECs in July 2017.

KERC issued a notice to for the firm to appear before the commission to provide facts and figures. The company stated that it had purchased excess solar power to the tune of 400 MWh through open access to meet non-solar RPO shortfall. When asked by KERC to verify the purchase of solar energy by the company, the SLDC replied that non-solar RPO of 825.04 MWh had been met by purchase of 742 RECs and by purchase of wind energy to an extent of 600 MWh.

The KERC decided to offset 8.80 MWh of non-solar RPO shortfall considering the company’s purchase of 400 MWh of solar energy. Keeping in mind the stay order on REC trade by Supreme Court, the commission condoned the delay in purchase of RECs by the company. Per KERC the firm has now fulfilled its RPO for FY 2017, and the proceedings against it are closed.

Case 3

KERC had also initiated proceedings against Khayathi Steel Industries Pvt. Ltd. for non-compliance of solar the RPO to an extent of 533.70 MWh and the non-solar RPO to an extent of 3,913.77 MWh. Per regulations, the company had to meet solar its RPO to an extent of 587.07 MWh (110 percent of shortage) and its non-solar RPO to an extent of 4,305.15 MWh (110 percent of shortage).

The company submitted a reply on November 14, 2017, stating that it had complied with the RPO. After examining the reply, KERC noted that the energy considered by the firm was 73,844 MWh which was different from that furnished by SLDC.

The SLDC in its submission dated July 5, 2018, confirmed that the company had purchased 73,844 MWh of energy. KERC on July 31, 2018, noted that SLDC confirmed compliance of solar RPO through purchase of 558 RECs and non-solar RPO of 4,061.44 MWh by purchase of 17,700 MWh of wind energy.

KERC in its ruling stated that the company had complied with RPO and proceeding against it are closed.

Why did Supreme Court Put a Stay on REC Trade?

In March 2017, CERC had issued new forbearance and floor prices for RECs, for both solar, and non-solar. According to the CERC order of 2017, the new forbearance price of solar RECs is ₹2,500 (~$37.41)/MWh and the floor price is ₹1,000 (~$14.962)/MWh. The forbearance price for non-solar RECs is ₹2,900 (~$43.39)/MWh and the corresponding floor price is ₹1,000 (~$14.962)/MWh.

Before the CERC order of 2017, solar RECs came with forbearance price of ₹5,800 (~$86.78)/MWh and the floor price was ₹3,500 (~$52.37)/MWh. For non-solar RECs, the forbearance price was fixed at ₹3,300 (~$49.38)/MWh while the floor price was ₹1,500 (~$22.44)/MWh.

After the issuance of new forbearance and floor prices for REC trading, many REC generators filed petitions citing losses due to the exclusion of vintage multiplier in the new prices. The petitioners first approached the APTEL to suggest a way to clear the existing REC stock.

However, at the time, APTEL refused to put a stay on the REC trading, which led the petitioners to approach the Supreme Court. Upon hearing the petition, the Supreme Court put a stay on REC trading and the new prices introduced by the CERC.

Then, after due deliberation, the Supreme Court asked the respondents to ensure that any obligated entity purchasing RECs at the new floor price determined by CERC must deposit the difference between the earlier floor price and the present floor price.

Later, in July 2017, the Supreme Court of India issued an order that enabled the trading of non-solar RECs, with obligated entities required to pay the old REC rate of ₹1,500 (~$23.5)/REC. Back then, the Supreme Court had instituted a stay until further judiciary action took place.

 

Saumy Prateek Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.