“The generic tariff fixed by the commission in cases where competitive bidding is also permissible should act as the ceiling tariff for guiding the competitive bidding process,” said the Maharashtra Electricity Regulatory Commission (MERC) in its recent order.
It was responding to a review petition filed by Tata Power Renewable Energy Limited (TPREL). In the review petition, it highlighted two issues for the commission to consider – commissioning timelines of 13 months for generic Renewable Energy (RE) tariffs and the tariff period of 25 years for generic RE tariffs.
Tata Power has argued that the commission in its “Generic Tariff Order” dated August 18, 2018, has considered two approaches for the determination of the generic RE tariff. First, if the commission has not adopted a tariff for eligible RE technology by way of competitive bidding, then the generic tariff will be calculated as per the financial principles and technology-specific parameters defined in RE Tariff Regulations, 2015. Secondly, if the tariff is discovered through competitive bidding process and is lower than the tariff calculated by way of financial principles and technology-specific parameters as defined in RE tariff regulations, 2015, then tariff discovered through competitive bidding will be taken as the generic tariff.
The commission has considered a tariff of ₹2.72/kWh (~$0.039/kWh) as discovered through a competitive bidding process carried out by Maharashtra State Electricity Distribution Company Limited (MSEDCL) for solar projects as the generic tariff for projects commissioned in FY 2018-19.
In the petition, Tata Power has contended that the commission had stipulated that this tariff will be valid for projects commissioned from August 1, 2018 to March 31, 2019. This reduces the duration for commissioning of projects to 8 months, whereas the Requests for Selection (RfS) and Power Purchase Agreements (PPAs) prescribe the commissioning schedule as 13 months from the date of signing of the PPA.
TPREL said –
The Commission has adopted the tariff of ₹2.72/kWh (~$0.039/kWh) but has not considered the commensurate commissioning period of 13 months (now amended to 24 months). Moreover, the period of 8 months allowed in the generic tariff period is extremely small for any renewable project. TPREL has therefore, requested the commission to consider a commissioning period of 13 months (after signing of the PPA).
The commission in its earlier final RE tariff order had said that 13 months is the maximum construction period available for the developers and there have been cases where solar PV projects have been commissioned in much lesser period than thirteen months. It has also rejected TPREL’s reasoning that some selected bidders are yet to sign the PPAs by saying that delay in signing of PPA by some bidders cannot be ground for blanket extension of commissioning deadline.
In the present order, the MERC has clarified its earlier order by stating that RE Tariff Regulations, 2015 determines fixed tariff for the projects commissioned during that particular financial year only and does not specify any commissioning period.
Therefore, TPREL’s request for determining tariff of ₹2.72/kWh (~$0.039/kWh) applicable to all those projects whose PPAs are signed during the current year and commissioned within 13 months from signing of PPA does not fall under the law.
In the matters related to duration of tariff period, the regulation 7 of the RE Tariff Regulations, 2015 states that the tariff period for wind power, solar PV, solar rooftop PV and non-fossil fuel-based co-generation projects will be 13 years. This contrasts with the competitive bidding guidelines which provide for a tariff period of at least 25 years. TPREL has argued that tariff period is extremely relevant for recovery of investment as in lower tariff periods, the investor would have to recover his investment in a shorter time period, and that may include charging a higher tariff. For example –
“Based on the RE tariff regulations, considering a PPA period of 13 years, the tariff worked out for solar project was ₹3.02/kWh (~$0.043) and not ₹2.72/kWh (~$0.039/kWh) as has been made applicable in the final tariff order.”
In the order, the MERC has accepted the issue raised by the TPREL regarding the tariff period of solar PV projects but argued that only three months are left in the current RE tariff order and any modifications at this time will not be advisable. It further said that the commission is in the process of determining generic tariff for renewable energy for the next financial year (RE tariff order 2019-20) and will suitably address these issues in the RE tariff order 2019-20.
Recently, Mercom reported that MERC approved PPAs for grid-connected solar projects totaling 235 MW.