The Tamil Nadu Electricity Regulatory Commission (TNERC) has fixed the pooled cost of power purchases for Tamil Nadu Generation and Distribution Corporation (TANGEDCO) at ₹3.70 (~$0.056)/kWh for the financial year (FY) 2017-18. The cost applies to all purchases made from April 1, 2017.

In a letter addressing the announcement, TNERC clarified that the pooled cost of power is ₹3.70 (~$0.056)/kWh or 75 percent of the preferential tariff fixed by the commission for that category or sub-category of NCES generators, whichever is less. The preferential tariff is the tariff of choice for state PPAs and can be much lower than the generic tariff.

For FY 2016-17, TNERC had set ₹3.96 (~$0.060)/kWh or 75 percent of the preferential tariff fixed by the commission for that category as the pooled cost of power purchases payable by TANGEDCO. The current cost is ₹0.26 (~$0.004)/kWh, about 7 percent less than in the previous year.

The pooled cost of power payable by TANGEDCO has fluctuated over the past three fiscal years. In FY 2015-16 it was ₹3.35 (~$0.051)/kWh, rising to ₹3.96 (~$0.060)/kWh in FY 2016-17, then falling to ₹3.70 (~$0.056)/kWh this fiscal year.

When asked about the rise and fall of the pooled power cost, a TNERC official said, “The average pooled power cost depends on the sources of power purchased (high cost versus low cost) and demand. If the distribution company (DISCOM) purchases more low-cost power over a period of time, then the pooled power cost for the next year will go down. The commission analyzes real-time data to arrive at the pooled power purchase cost.”

“As has been happening in the past two years, the DISCOM is buying more of low-cost power (from solar wind farms and other sources) and entering into long-term power purchase agreements (PPAs), thereby reducing cost and at the same time demand has not increased much. In such a scenario, it’s easy for them to purchase low-cost power as there is no immediate requirement forcing them to buy high-cost power to supply an increasing number of customers,” added the TNERC official.

TANGEDCO recently signed PPAs for 1,500 MW of solar projects at ₹3.47 (~$0.0537)/kWh, contributing to the lower pooled cost of power purchases. Tamil Nadu is expected to auction solar projects with ₹3 (~$0.0457)/kWh as the benchmark tariff in the near future.

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