Kerala Commission Asks DISCOM to Modify PSA for 100 MW of Wind Power with SECI

The Kerala State Electricity Regulatory Commission (KSERC) has ordered the Kerala State Electricity Board Limited (KSEB) to file a petition incorporating all the recommended changes for the approval of the power sale agreement (PSA). The PSA is for the procurement of 100 MW of wind power from Solar Energy Corporation India Limited (SECI).

The Commission directed KSEB to submit a copy of the power purchase agreement (PPA) signed between the distribution company (DISCOM) and SECI. KSEB has also been asked to sign a Letter of Intent (LoI) with SECI indicating the quantity, rate, and the date of commencement for the supply of power for 25 years.

Regarding the trading margin of ₹0.07 (~$0.0009)/kWh, the Commission has directed the KSEB to negotiate with SECI and submit the decided rate before the Commission.

Background


In November 2019, the Kerala State Electricity Board had filed a petition before the Commission for the approval of PSA for 100 MW of wind power on a long-term basis of 25 years to meet its renewable purchase obligation (RPO) targets for the year 2021-2022.

As per the estimated electricity demand and the RPO targets, KSEB has to meet 850 MW from non-solar renewable sources by the year 2021-2022. However, the existing non-solar capacity achieved was only about 292 MW.

In May 2019, SECI concluded its tranche-VII bidding where 480 MW wind capacity was auctioned. Of this, 100 MW was allotted to KSEB.

SECI requested KSEB to confirm its requirement at an average tariff of ₹2.83 (~$0.04)/kWh, including a trading margin of ₹0.07 (~$0.0009)/kWh until the commissioning of the cumulative capacity. After the commissioning of the cumulative awarded capacity, the tariff payable by the buying entity will be ₹2.80 (0.04)/kWh, along with the trading margin, it noted.

The Commission noted that almost all the important articles of the PSA signed with the SECI and KSEB had reference to the PPA that was to be signed with the SECI and wind developers, which were yet to be executed. So, without evaluating the provisions in the PPA, the Commission added that it could not approve the PSA.

Further, the Commission proposed both parties incorporate several changes in the PSA.

  • The Commission noted that the PSA appears to impose unequal rights and obligations. While the DISCOMs “should be bound to fulfill the obligation on a back to back basis towards SECI,” the rights of DISCOMs to claim against SECI should depend on SECI enforcing such rights against the wind developer.
  • Since the payment security fund is not obligatory as per the bidding guidelines, the Commission directed that KSEB should take up with SECI to have only two securities for payment security instead of all three as proposed.
  • Though the minimum and maximum capacity utilization factor (CUF) were not specified in the PSA, the maximum energy purchase limit, and the minimum limit of energy for avoiding penalty is mentioned in the PSA. KSEB is required to verify the CUF limit specified in the PSA and the PPA.

KSEB was also asked to modify a clause incorporating the exemption of inter-state transmission charges and losses

  • Only the Buyer SECI and the buying entity KSEB are included as affected parties under the force majeure conditions. The Commission asked to consider including the wind power generator as an affected party as well.
  • The PSA says that if SECI fails to supply power to the delivery point for a continuous period of one year, it should be constituted as SECI’s event of default. To classify as default, there has to be a continuous period of one year of non-supply. Even if SECI supplies power for a few days in a year or intermittently, it cannot be held responsible for the event of default. The Commission commented that this has to be adequately addressed to cover a situation where SECI provides intermittent supply for a few days or a few months in a year. KSEB should include adequate provisions in the PSA to address such issues, the Commission noted.

Considering these shortcomings, the Commission cannot ascertain the financial and other consequences on KSEB Ltd and its consumers. Citing this, the approval of the PSA has been put on hold for now.

Recently, Kerala State Electricity Regulatory Commission approved a tariff of ₹2.83 (~$0.04)/kWh to procure 200 MW of wind power. While the tariff of ₹2.83 (~$0.04)/kWh would be applicable from the scheduled commissioning to the commissioning of the cumulative capacity, a pooled tariff of ₹2.82 (~$0.04)/kWh will be applicable from the full commissioning to the term of the agreement.

In March 2020, Mercom reported that the Central Electricity Regulatory Commission approved tariffs ranging between ₹2.79 (~$0.038)/kWh and ₹2.83 (~$0.039)/kWh for 480 MW of wind power projects (Tranche -VII) connected to the inter-state transmission system.