Regulatory battle for renewable projects begins in Andhra Pradesh

A day after the Centre rapped states for cancelling renewable power projects, Andhra Pradesh’s power distribution companies (discoms) have filed three petitions in the Andhra Pradesh Electricity Regulatory Commission (APERC), seeking a reduction in tariff for solar and wind power projects totalling 7,500 MW.

The petitions pertain to projects with which the state signed power purchase agreements (PPAs) between 2012 and 2017. Along with tariff reduction, the discoms have also urged the regulator to reduce the PPA period to 5-6 years from the current 25 years.

The move is part of a high court order, dated September 24, asking the discoms to take the matter of tariff reduction of renewable energy projects to the APERC. 

Renewable power producers moved high court after the YSR Congress-led state government formed a committee to “review, negotiate and bring down” tariff of all renewable power projects that were awarded by the previous Telugu Desam Party government.

The petitions of the discoms in the APERC argue that terms of the PPA or the tariff specified in the PPAs was not the result of appropriate bargain made by the petitioners and also not inviolable according to the provisions of the Electricity Act.

Senior government officials told the paper that the state is contesting the projects awarded through illegal means. “There are certain projects which were competitively bid under Section 63 of the Electricity Act which means a singular tariff for the period of the project. But these projects are actually following Section 62 of the Act which allows escalation in tariff annually. Why does a renewable project which has no fuel cost need tariff escalation every year?” asked the official.

He said the award of these projects and their “flawed PPAs” were a regulatory overlook and the current government is trying to correct it.
In their petition, discoms have asked APERC to reduce the solar power tariff to Rs 2.44 per unit from the existing levels. In a separate petition against a group of 24 wind power producers, the Andhra discoms have asked for revised tariff of Rs 2.43 per unit.

The average wind power tariff in the state is Rs  4.8/unit and solar is Rs  4.5/unit.

The discoms have filed a third petition with regard to another group of 82 wind energy producers who have entered PPAs following another tariff regulation in 2015, seeking similar tariff revision orders from the regulator.

The discoms have stated that the power sector in the state has entered into a deep financial crisis as the high cost renewable energy purchases were adding Rs 2,500 crore to their losses every year. 

“We could not even pay monthly power purchase bills from August 2018, which have piled up to nearly Rs 20,000 crore,” the said the petition of the discoms.

At the same time, renewable power producers have alleged that the state is curtailing this power segment since the tussle began in July. 
Government officials claimed to this paper that the state never gave any orders of curtailment of renewables and it is governed by the Regional Load Despatch Centre. “There is no official record of state government ordering any curtailment,” said a senior official.

Meanwhile, the central government has been urging the state not to cancel any PPA or review the tariff. On Friday, at the State Power Ministers’ Conference being held in Gujarat, Union power minister R K Singh reiterated that states should honour the PPA they sign. Referring to Andhra, he said, “One state breached terms of power purchase agreement and five different ambassadors got in touch with me,” he said.

Sources said the energy department of Andhra Pradesh, which participated in the deliberations during the conference, did not reply or agree to the request of the Centre. State government officials said they were honouring the high court’s order to let the regulator take a decision in the matter.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel