The Maharashtra Electricity Regulatory Commission (MERC) has approved a tariff of ₹3.10 (~$0.037)/kWh for the procurement of 117.5 MW of solar power on a long-term basis.

The Commission directed the parties to sign the power purchase agreement (PPA) within 30 days of the order.

It added that the power procured from these projects would be eligible for fulfilling the solar renewable purchase obligation (RPO) targets of the Maharashtra State Electricity Distribution Company (MSEDCL).

MSEDCL had filed a petition seeking approval of tariff for the procurement of 117.5 MW of solar power under Component C of the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) program.

Background 

Earlier, MSEDCL had floated a tender for long-term procurement of 500 MW of solar power with a ceiling of ₹2.30 (~$0.028)/kWh under the KUSUM program. However, despite extending the bid submission deadline five times, no response was received. Later, on June 22, 2022, MSEDCL floated another tender without a ceiling tariff under Component C of the PM-KUSUM program.

Financial bids were opened on September 26, 2022, and the quoted rates by the bidders were higher for the final qualified capacity of 117.5 MW. Hence, bidders were called for discussion to negotiate the tariff.

The higher rates quoted incorporated the combined cost of the solar project, remote monitoring system, and metering system.

The bidders later offered revised tariffs which were in the range of ₹3.15 (~$0.038)/kWh to ₹3.92 (~$0.047)/kWh. The revised rates offered still appeared on the higher side. Therefore, another round of deliberation was carried out with successful bidders on December 15, 2022, in which a tariff of ₹3.10 (~$0.037)/kWh was proposed.

Commission’s analysis

The state regulator noted that projects being set up under the PM KUSUM program were identical to solar projects being set up under Mukhyamantri Saur Krishi Vahini Yojana, for which the Commission had adopted the tariff of ₹3.30 (~$0.039)/kWh recently.

MERC stated that under the KUSUM program, the project developer would be eligible for central financial assistance (CFA) of ₹10.5 million (~$126,931)/MW, which as per MSEDCL’s submission, translated to ₹0.52 (~$0.006)/kWh. Thus, the tariff for the project developer worked out to be ₹3.62/kWh.

As against the tariff of ₹3.62 (~$0.044)/kWh, including the CFA component, it can be assumed that the successful bidders passed on ₹0.20 (~$0.002)/kWh, the difference between ₹3.30 (~$0.039)/kWh and ₹3.10 (~$0.037)/kWh to MSEDCL. Thus, the effective tariff to the developer worked out to ₹3.42 (~$0.041)/kWh, of which the cost to MSEDCL was ₹3.10 (~$0.037)/kWh.

Additionally, the Commission stated that MSEDCL modified the scope after bid submission and negotiated with all qualified bidders based on this revised scope. Usually, such changes in scope after the bidding process would not be permitted.

However, MSEDCL extended the bidding period multiple times and provided all qualified bidders with a fair opportunity to submit revised quotes.

As an exceptional circumstance, the Commission accepted the proposed tariff.

Furthermore, since the tariff discovered under this program was lower than the tariff set by the Mukhyamantri Saur Krishi Vahini Yojana, MSEDCL was directed to give priority to the tendering process under the PM KUSUM program as it will optimize the cost of power purchase to that extent.

The Commission said it was crucial to initiate the work in parallel to ensure that the associated monitoring systems are ready along with the projects.

Regarding metering, the Commission recommended the OPEX model and instructed MSEDCL to conduct a cost-benefit analysis.

Recently, MERC approved MSEDCL’s proposal to procure 150 MW of solar power at ₹3.3 (~$0.040)/kWh from projects under the Mukhyamantri Saur Krishi Vahini Yojana.

Earlier, MERC had allowed MSEDCL to procure 132.75 MW of solar power on a long-term basis at ₹3.10 (~$0.037)/kWh tariff.

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