The Punjab State Electricity Regulatory Commission (PSERC) has rejected the Punjab State Power Corporation’s (PSPCL) proposal to set a generic levelized tariff of ₹3.10 (~$0.036)/kWh for procuring 1,000 MW solar power from 1 MW to 5 MW projects.

Instead, the Commission directed PSPCL to procure the capacity through a transparent reverse auction process, with ₹3.10 (~$ 0.036)/kWh serving as the ceiling tariff.

Background

On November 23, 2016, PSERC allowed tariff determination with bidders offering discounts on a Commission-determined generic tariff. However, the Commission, through orders on October 31, 2017, and January 19, 2023, discontinued the determination of generic levelized tariffs for solar projects, shifting to competitive bidding for tariff discovery. It cited market maturity and lower tariffs achieved through reverse bidding as the basis for its decision.

Additionally, a Ministry of Power notification dated November 23, 2021, provided a waiver of interstate transmission system (ISTS) charges for renewable energy projects until June 30, 2025, with a gradual increase thereafter. A subsequent Ministry notification on October 20, 2023, introduced the distributed renewable energy (DRE) category for projects under 10 MW, with penalty provisions for non-compliance.

The petitioner, PSPCL, approached the Commission in April 2025 to procure 1,000 MW of solar power during FY 2026 from projects with capacities ranging from 1 MW to 5 MW. It cited steep increases in its renewable purchase obligation (RPO) targets, projected RPO shortfalls of over 42,000 MU by 2029–30, and the threat of a ₹3.72 (~$0.043)/kWh penalty for non-compliance with the DRE targets.

PSPCL argued that procuring power from small, local projects would reduce transmission losses, avoid escalating ISTS charges, and boost the local economy.

It proposed a fixed generic levelized tariff of ₹3.10 (~$0.036)/kWh, contending that this was comparable to the landed cost of solar projects after including ISTS charges and losses ranging from ₹3.01 (~$0.035) to ₹3.22 (~$0.037)/kWh.

The petitioner later clarified that while the cumulative capacity could exceed 5 MW, individual project sizes must remain within 5 MW and proposed a first-come, first-served (FCFS) allocation through a web portal.

Commission’s Analysis

PSERC acknowledged the petitioner’s necessity to meet its RPO targets and recognized that distributed solar generation aligns with state and central renewable energy policies.

However, it rejected the petitioner’s request for a fixed tariff, affirming its prior decision to discontinue generic tariff determination from FY 2018 onwards, as market-discovered tariffs are deemed more competitive.

The Commission directed the petitioner to adopt a competitive bidding mechanism to ensure fairness, efficiency, and compliance with regulations, cautioning against the FCFS method due to its susceptibility to manipulation.

It provisionally accepted the ceiling tariff of ₹3.10 (~$0.036)/kWh for bidding reference and mandated the petitioner to invite bids and subsequently submit a tariff adoption petition for the final discovered price.

Recently, PSERC accepted PSPCL’s request to approve an additional surcharge of ₹1.22 (~$0.014)/kWh for full open access consumers and ₹0.83 (~$0.009)/kWh for partial open access power consumers.

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