The Himachal Pradesh Electricity Regulatory Commission (HPERC) has approved the pass-through of a tariff-based royalty of ₹0.05 (~$0.00057)/kWh on all solar power projects above 1 MW.

The royalty will be recovered by the Himachal Pradesh State Electricity Board (HPSEBL) from the power generated by these projects and paid to the state government over and above the approved tariff.

The Commission has ruled that this amount will be eligible for pass-through, which means it can be included in the cost structure of the power supplied and consequently reflected in consumer tariffs.

The decision corrects earlier omissions in several power purchase approval orders where the royalty clause had not been incorporated.

Background

The case originated after the Himachal Pradesh Government issued a notification on levying a tariff-based royalty of ₹0.05 (~$0.00057)/kWh on all solar projects exceeding 1 MW capacity. The royalty was to be paid to the state government after commissioning, with the objective of generating revenue for welfare activities, area development, public services, and environmental restoration.

Following the notification, HPERC began including this royalty clause in power purchase approvals for solar projects. However, in several cases, the provision was inadvertently omitted due to clerical oversight.

To address this inconsistency and ensure uniform application, the Commission initiated a series of suo motu petitions.

In response to the notice, a consumer representative filed replies opposing the levy of royalty. He argued that the additional charge would burden consumers since no solar developer in Himachal Pradesh sells power in the open access market, and all generated electricity is supplied to the state grid.

He further contended that the royalty lacked justification and that the Commission was not bound by the Government’s policy directives.

According to the representative, the tariff set by the Commission for solar projects is already higher than the national average and should be reduced to protect consumer interests.

HPSEBL, on the other hand, supported the inclusion of the royalty clause. It submitted that in several earlier power purchase agreements (PPAs) approved by HPERC, the provision to recover the royalty had been left out inadvertently, and therefore, it should be permitted to recover the amount from the project generation and remit it to the Government.

HPSEBL requested that the royalty amount be considered eligible for pass-through in tariff determination since it was a statutory levy arising from the state government’s notification.

Commission Analysis

The Commission noted that the state government’s notification of September 2023 clearly mandated the collection of royalty at ₹0.05 (~$0.00057)/kWh from all solar projects above 1 MW.

It also observed that while several PPAs issued after the notification had already included the clause, certain orders had omitted it due to clerical oversight.

The Commission also referred to its own earlier order, which determined the generic levelized tariff for solar projects for the financial year 2026. In that order, HPERC had already provided for the royalty to be recovered over and above the approved tariff and allowed it to be passed through to consumers.

HPERC acknowledged the concerns of the consumer representative regarding the potential burden on consumers but reasoned that the amount involved was minimal and that the royalty served a broader public interest.

The Commission stated that the royalty would contribute to funding welfare programs, protecting low-income consumers, and supporting environmental restoration and public infrastructure.

It also emphasized that the royalty did not affect project developers since it was to be collected over and above the tariff already approved for them.

Based on these findings, HPERC concluded that it was necessary and appropriate to formally incorporate the royalty clause in all the affected power purchase approvals.

The Commission directed the HPSEBL to compute the royalty at ₹0.05 (~$0.00057)/kWh from the generation of all specified solar projects, including those of MVD Solar Power Project, Shree Rudra Green Solar Power Project, Samurja Shakti, Camson Industries Solar Power Project, Evaz Solar Power Project, Rockwell Industries Solar Power Project, Bhubaneswari-II Solar Power Project, Himachal Renewables, SS Energy, and KK Kashyap Green Solar Energy Power Producer-II.

The royalty will be paid to the Himachal Pradesh government and will remain eligible for pass-through in consumer tariffs.

In April this year, HPERC approved a levelized tariff of ₹3.45 (~$0.04)/kWh for solar projects up to 1 MW and ₹3.38 (~$0.039)/kWh for projects between 1 MW and 3 MW for the financial year 2025-26.

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