REC TRADE RESULTS DECEMBER 2015

The demand response for REC’s saw very good momentum in the December’s trading session. Non Solar REC’s and Solar REC’s traded this month were 288% higher and 29.8% lower respectively, compared to trading session of November. The total transaction value of REC’s hit a sum total of Rs 156 crores, compared to Rs. 65 crores last month.

Analysis of Trading:

Non Solar – Clearing ratio in exchange were at 8.31% and 2.22% in IEX and PXIL respectively for Non Solar REC’s. A total of 898,439 RECs were traded in this trading session (in November 231,545 RECs were traded). Clearing ratio at IEX saw a huge jump, whereas the effect was opposite on PXIL.

Solar – Clearing ratio stood at 2.62% and 0.37% in IEX and PXIL respectively, compared to 2.07% and 4.97% last month. The total clearing fell by 26,165, as compared to last month, with PXIL recording very low clearance this time.

 

Trading volumes are expected to increase significantly going forward, as most obligated entities are now gearing up to fulfill their obligation considering that only 3 trading sessions are remaining in the current FY . Further, this year we have seen regulatory action in the form of compliance orders and/ or proceedings in several states like Orissa, Kerala, UP, MP and Maharashtra, to name a few. Overall the market showed clear signs of recovery, especially Non-Solar, and is expected to grow further in the closing months of the FY.

The November’s result can be accessed here.

 

MPERC waives off past Solar RPO

In a recent order, MPERC has waived off past solar RPO for its Discom’s.

 

This comes despite ApTel’s judgment specifically disallowing waive-offs, and CAG’s remark about states not meeting RPO regulations.

 

Even more telling is the fact that India is playing a lead role at the ongoing international climate talks in Paris, and has been promoting its solar capacity additions as the most ambitious in the world.

 

However, MPERC’s decision goes contrary to all of the above. In its order, MPERC has said the following:

 

“The Commission also noted that respondents could not fulfill the Solar Renewable Purchase Obligations during the FY 2014-15 also. The Commission is monitoring the progress through the Suo-Motu petition no. 43/2015 regularly. The Commission also gone through the progress achieved by the respondents during the FY 2015-16 based on which, the Commission feels that the respondents may purchase more than the Solar Renewable Purchase Obligations fixed for the FY 2015-16. This may mitigate the default on the part of the respondents in fulfilling the statutory Solar Renewable Purchase Obligations in previous financial years. Under the above circumstances, the Commission is of the view that it would not be appropriate to impose any penalty at present on the respondents.” (emphasis supplied)

 

And further -

 

“The Commission is not in agreement with the views of the petitioner that the Solar Renewable Purchase Obligations during the FY 2015-16 should be cumulative as this will generate bad practices to accumulate the shortfall and to carry forward the targets.”

 

It is worthwhile to note that in its judgment on the same issue, dated 20/11/2013, MPERC had said the following:

 

“….Commission is constrained to express serious concern on the lack of effort on the part of the utilities in fulfilling their respective RPOs. More than four months of the current financial year still remain and the respondents are directed to pursue renewable energy procurement to the maximum so that the shortfall against the RPO is minimised. Continuous failure on the part of utilities in this regard cannot be allowed to go unpunished” (emphasis supplied)

 

In response the potential bad precedent, the Commission has instead decided to not impose past year obligations, and instead hopes that excess purchase of solar power in 2015 “may mitigate the default” of prior years.

 

REConnect Analysis:

 

This order sets a very bad precedent. Not only has MPERC clearly gone against the order of ApTel, it also goes against the government’s ambitious plans of developing solar energy and all the commitments that India is making at the international stage.

 

CAG highlights gaps in RPO compliance of states; Penalties of Rs 4,234 crore not levied

In a recent audit report covering the functioning of MNRE, the Comptroller and Auditor General (CAG) has highlighted various issues on RPO compliance by states.

The main issues highlighted by the CAG are:

  • Setting RPO well below the NAPPC target

  • States have been lax in discharging their obligations under RPO regulations in every aspect. Many states have not prescribed any penalties (Rajasthan, Karnataka, UP are mentioned in the report), most do not collect data on compliance

  • Further, no states (except Uttarakhand, which has imposed a ‘token’ penalty) have imposed penalties. The CAG has estimated that a penalty of Rs 4,234.8 crore was leviable by states, but has not been done

  • CAG further mentions that “RPO was further diluted by frequent deferring of RPO targets as seen in the cases of Gujarat, Madhya Pradesh, Maharashtra and Uttarakhand”

 

REConnect Analysis:

It is good to see the CAG stepping into an area which has seen very little enforcement of rules by state regulators, despite the Supreme Court and ApTel giving clear judgements for enforcement.

It is also good to see the extent of penalties not collected being quantified for the first time. By any account, Rs 4,234 crore is a huge number. However, we believe that is is a significant understatement as the assessment by CAG covered Discom’s only – not CPPs and open access consumers who constitute a significant portion of obligated entities in the country.

 

News coverage of the CAG report can be accessed here.

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