The Punjab State Electricity Regulatory Commission (PSERC) has allowed the Punjab State Power Corporation (PSPCL) to install rooftop solar systems across 1,013 office buildings under the capital expenditure (CAPEX) model.

The Commission approved the capital expenditure of ₹1.23 billion (~$14.32 million), which includes the total value of work orders issued across seven packages, covering applicable taxes and duties.

However, PSERC rejected the inclusion of administrative charges of ₹326.4 million (~$3.8 million) in the capital cost, citing potential duplication. It noted that the charges are already accounted for in the annual revenue requirement (ARR) under operations and maintenance expenses.

Background

PSPCL sought approval for installing rooftop solar systems on all its office buildings across Punjab under the CAPEX model, as well as for the inclusion of an estimated expenditure of ₹1.6 billion (~$18.63 million) in the capital investment plan.

PSPCL justified the installation of rooftop solar systems as part of its statutory obligations to promote renewable energy and fulfill its renewable purchase obligations (RPO). It cited increasing electricity demand, particularly during the paddy season, and the need to enhance its internal solar generation capacity as primary motivations. The initiative also aligned with guidelines issued by the Ministry of New and Renewable Energy, which mandate the saturation of government buildings with rooftop solar power systems by December 2025.

A total of 1,013 buildings across various zones and power stations were identified as suitable for rooftop installations with a combined proposed capacity of 31.37 MW. PSPCL floated a tender in February 2024 to invite bids. The work was divided into seven packages, and letters of award were issued to the lowest (L1) bidders by August 2024. The total project cost, based on L1 rates, came to ₹1.23 billion (~$14.32 million).

PSPCL estimated that these installations would generate approximately 46.74 million units of energy annually. For the first 15 years, during which loans would be repaid, the cost of solar energy would be ₹3.26 (~$0.038)/kWh. Thereafter, for the remaining ten years of the 25-year project’s lifespan, electricity would be available at no cost.

The distribution company projected that this clean energy would offset reliance on external suppliers, stabilize power procurement costs, and contribute to meeting the escalating RPO targets, which are set to rise from 27% in the financial year (FY) 2024 to 43.33% in FY 2030. PSPCL also claimed that these measures would help avoid penalties for non-compliance and ultimately reduce tariffs for consumers.

Commission’s Analysis

PSERC observed that PSPCL initially pegged the capital requirement at ₹1.6 billion (~$18.63 million) but later revised this figure to ₹1.55 billion (~$18 million) after excluding administrative charges and computing project costs based on actual work order values and employee costs. PSPCL proposed to include administrative charges totaling ₹326.4 million (~$3.8 million) in the capital expenditure. The Commission rejected this component, noting that administrative and operational costs are already factored into the ARR. Allowing them again would amount to double-counting as capital costs.

It also noted that PSPCL had presented the cost of solar generation as ₹3.26 (~$0.038)/kWh during the loan tenure. However, since the capital expenditure is being approved and will be reflected in PSPCL’s gross fixed assets, all associated costs, including interest on loans, depreciation, and operation and maintenance expenses, will be factored into the ARR and recovered through tariffs. Therefore, PSPCL does not bear the direct burden of repayment. The Commission concluded that the full benefits of solar power generation, including cost savings, must be passed on to consumers.

To ensure transparency and accountability, the Commission directed PSPCL to measure solar generation at each site separately and present this data as part of its power purchase accounting in future ARR petitions. Any deviation, shortfall, or delay in installation timelines will solely be attributed to PSPCL and will not be considered for cost recovery.

While approving the revised capital cost of ₹1.23 billion (~$14.32 million), the Commission allowed only the actual interest during construction and incidental expenditure during construction to be considered during the true-up process. It warned against speculative or inflated projections.

The Commission emphasized the importance of timely execution. It mandated PSPCL to complete all rooftop solar installations within one year from the date of issuing work orders. Any delay resulting in a loss of generation would not be recoverable and would directly impact PSPCL’s compliance with RPO obligations.

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