The Kerala State Electricity Regulatory Commission (KSERC) recently allowed the Kerala State Electricity Board (KSEB) to procure 300 MW of solar power from the Solar Energy Corporation of India (SECI) at a tariff of ₹2.44 (~$0.032)/kWh.

The Commission also approved the power sale agreement (PSA) signed between SECI and KSEB with certain modifications suggested by the distribution company (DISCOM).

KSEB had filed a petition seeking approval for procuring 300 MW of power from interstate transmission system (ISTS)-connected solar power projects on a long-term basis.

Background

SECI had offered KSEB 200 MW of solar power under Tranche-I of the 6,200 MW of ISTS-connected projects linked with manufacturing projects.

In its submission, SECI had said that out of the 6,200 MW, 3,000 MW was from solar manufacturing projects (solar projects installed by solar module manufacturers) and 3,200 MW from other ISTS-connected solar projects. The tariff quoted in Tranche-I ranged from ₹2.36 (~$0.031)/kWh to ₹2.92 (~$0.039)/kWh. If the total capacity of 6,200 MW did not materialize, the final tariff could vary between ₹2.36 (~$0.031)/kWh and ₹2.92 (~$0.039)/kWh.

In December last year, the Commission directed KSEB and SECI to proceed with the procurement of 200 MW at the pooled tariff of ₹2.66 (~$0.036)/kWh.

Later, SECI gave a revised offer to KSEB for 500 MW of ISTS-connected solar power under Tranche-IX at a tariff of ₹2.44 (~$0.032)/kWh, including the trading margin of ₹0.07 (~$0.0009)/kWh. KSEB confirmed that it was interested in buying 300 MW of solar power at ₹2.44 (~$0.032)/kWh instead of the 200 MW offered earlier.

Then in April, KSERC directed SECI to finalize the draft PSA for 300 MW and forward it to KSEB by May 4, 2021.

In September, the Commission directed KSEB to file the amended petition along with the PSA before the Commission.

In the next hearing in October, KSEB modified the clause proposed by SECI for liquidated damages in the PSA. According to the modified clause, any damages recovered by the buyer by encashing the performance bank guarantee, following a default of the solar developer, should be passed on by the buyer to the payment security fund maintained by the buying utility subject to the clarifications by the Ministry of Power or the Ministry of New and Renewable Energy. Until any clarification is issued, the amount of liquidated damages would be dealt with per the guidelines.

Commission’s analysis

The Commission observed that the issue under consideration was not the power purchase agreement (PPA) but the PSA signed between the SECI and KSEB.

It noted that it had the jurisdiction to approve the power purchase and tariff and regulate the PSA signed between the SECI and KSEB.

The state regulator approved the purchase of 300 MW of solar power from ISTS-connected solar projects at a tariff of ₹2.44 (~$0.032)/kWh including trading margin, subject to the adoption of the tariff by the Central Electricity Regulatory Commission.

It also approved the PSA signed on September 20, 2021, with the modifications suggested by KSEB.

In June this year, KSERC approved the PPA signed between KSEB and Tata Power Company for procuring 110 MW of solar power at the rate of ₹2.97 (~$0.041)/kWh. The Commission also granted permission to KSEB to sign a PPA with TP Saurya, a wholly-owned subsidiary of Tata Power Company.

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