DISCOM Asked to Pay the Differential Amount for a Bagasse-Based Generation Project

The Uttar Pradesh Electricity Regulatory Commission (UPERC) has directed the state distribution company (DISCOM) to pay the differential amount between November 2017 to June 2018 to Gobind Sugar Mills as per the power purchase agreement (PPA).

Background

Gobind Sugar Mills commissioned a 30 MW generating plant using bagasse as fuel at Khamaria Pandit in Lakhimpur Khiri, Uttar Pradesh, in November 2015.

The company signed a PPA with the Uttar Pradesh Power Corporation Limited (UPPCL) to export 22 MW of surplus power from its 30 MW plant as per tariff regulated by the Commission. In its petition, the company said it has been raising bills per the PPA for exporting power as per the prevailing tariff to UPPCL. The same was paid in full.


However, UPPCL arbitrarily modified bills between November 2017 and June 2018. The state DISCOM reduced the tariff to ₹5.56/kWh (~$0.075) as against ₹5.95 (~$0.080)/kWh and ₹6.07 (~$0.081) for the period between April 2018 and June 2018.

The UPPCL informed the Uttar Pradesh State Load Dispatch Center (UPSLDC) that it has decided to procure electricity from bagasse- and biomass-based energy sources with a tariff of up to ₹5.56 (~$0.075)/kWh.

UPSLDC informed the company to schedule its export to zero as its tariff for the aforesaid period exceeded ₹5.56 (~$0.075)/kWh. The UPPCL forced the company to agree to export power at the reduced tariff of ₹5.56 (~$0.075)/kWh, as per the petition filed by the company.

The company said it yielded to the advice of UPPCL and gave an undertaking to supply power at a reduced tariff of ₹5.56 (~$0.075)/kWh.

However, the company raised bills by applying a tariff of ₹5.95(~$0.080)/kWh from November 2017 to March 2018 and a tariff of ₹6.07 (~$0.081)/kWh from April 2018 to June 2018.

The company said the payment of bills from November 2017 to June 2018 at a reduced tariff of ₹5.56 (~$0.075)/kWh violated the PPA and resulted in the financial loss of ₹45.94 million (~$615,846).

UPPCL did not sign any supplementary PPA with the company to date. Therefore, the reduction in tariff in the absence of a supplementary PPA approved by the Commission is not allowed per the original PPA.

The company requested the Commission direct UPPCL to pay the differential amount of ₹45.94 million (~$615,846) and interest.

UPPCL’s response

UPPCL said it requested the company to sign a supplementary PPA. However, the company expressed its inability to negotiate the tariff rate and enter a supplementary PPA from the backdate, reducing the tariff.

It said the company’s offer to supply power at a reduced tariff was not by force. The company volunteered. UPPCL accepted the offer of a reduced tariff made by the company and informed UPSLDC accordingly.

Commission’s analysis

 After examining submissions made by both parties, the Commission observed that the company is seeking full payment of ₹45.94 million (~$615,846) as a differential amount to be paid for the period between November 2017 to June 2018.

The state regulator noted that the company agreed with UPPCL to supply power at the reduced rate of ₹5.56 (~$0.075)/kWh under the protest, reserving its right to claim the differential amount. However, the company has not executed a supplementary PPA with UPPCL for the reduced tariff of ₹5.56 (~$0.075)/kWh.

The Commission said the company raised bills by applying tariffs as per the PPA for supplying power from November 2017 to June 2018 in the absence of a supplementary PPA. Therefore, the company is entitled to differential payment based on the tariff as per the PPA.

Earlier this month, the Maharashtra Electricity Regulatory Commission ruled that sugar factories having bagasse-based cogeneration projects can install rooftop solar systems in their premises. There is no restriction on the solar project capacity.

Mercom had earlier reported that the Haryana Electricity Regulatory Commission exempted a bagasse-based cogeneration project owner for paying cross-subsidy surcharge and additional surcharge.