KERC Directs State Distribution Companies to Submit Wind PPAs for Approval

The Karnataka Electricity Regulatory Commission (KERC) has directed the state distribution companies (DISCOMs), BESCOM (Bengaluru Electricity Supply Company), and HESCOM (Hubli Electricity Supply Company) to submit power purchase agreements (PPAs) for wind projects totaling 242.50 MW for approval.

In a letter addressed to the Additional Chief Secretary, Government of Karnataka, the KERC stated, “The additional capacity of 242.50 MW from wind projects that have been commissioned up to March 31, 2017, is not substantial and will not cause considerable grid disruption. The KERC therefore decides to approve the PPAs signed by BESCOM and HESCOM, subject to the project developers opting for a tariff of ₹3.74 (~$0.058)/kWh.” In September, the KERC fixed ₹3.74 (~$0.058)/kWh as the generic tariff for wind projects in Karnataka.

When contacted, a BESCOM official said the PPAs are for projects totaling 200 MW for BESCOM and the remaining 42.50 MW capacity is for HESCOM. The BESCOM official added, “Now the government will provide us with guidance regarding these PPAs according to KERC recommendations.”

The letter was a routine reply by the state government, said a KERC official. “The state government wanted clarification regarding progress of the wind projects,” added the KERC official.

The official further added that in 2017 the KERC had issued an advisory asking state DISCOMs to withhold from entering into new PPAs with wind developers until further review by KERC.

The KERC found that increasing procurement from wind power projects in the state is not good for the financial health of state DISCOMs and wind PPAs already signed will be sufficient to meet the state renewable purchase obligation (RPO) for the current financial year as well as another couple of years.

The KERC also acknowledged that DISCOMs in the state recently signed PPAs with wind power projects tendered by the government. Power from these projects can be sold only to DISCOMs in Karnataka per government regulations. Procurement of power from such sources will lead to violation of long-term PPAs with thermal power projects, resulting in payments of fixed charges to thermal power projects, and increased costs of power for consumers. The commission also found that DISCOMs in the state were defaulting on payments to renewable energy generating units due to cash flow constraints.

At that time, a KERC official had told Mercom, “The new PPAs, if signed, will aggravate the problem as DISCOMs will have to pay two parties and they are already struggling with debt. If the government thinks it is feasible and developers want to, they can go ahead and sign PPAs.”