Honorable Central Electricity Regulatory Commission has determined floor and forbearance prices for REC (solar and non-solar)  which will be valid from April 1, 2017 onwards. The prices have reduced significantly and the solar prices are set to reduce from Rs 3,500 to Rs 1,000 and the non-solar REC prices are set to reduce from Rs 1,500 to Rs 1,000.


No Vintage Multiplier has been proposed for any technology and existing vintage multiplier for Solar generating technologies registered in REC mechanism prior to 1st January 2015 and shall expire after 31st March 2017.


The proposed floor and forbearance prices are given below:


The following is the REC price trend:


The impact of this price reduction on different aspects is as follows:

Impact on existing REC projects:

  • Reduction in floor price will aggravate the financial duress of RECs based projects: Already the newly established REC projects are under distress. Reduction in the floor price will only aggravate the situation as the number of unsold RECs will increase.

  • No Vintage Multiplier: The draft does not clearly state the position on multiplier to be provided on existing inventory of RECs.

Impact on obligated entities:

  • Perverse gain for defaulting Obligated Entity: Obligated entities which are non-compliant will benefit from reduction in prices since they will have an option to purchase RECs and fulfill their RPO compliance at a lower rate. This has never been addressed by the CERC or the state ERC’s,


  • Potential higher demand going forward: Most captive and open access based customers will find it easier to buy RECs than to buy green power. Therefore, the low prices may lead to an increase in the REC demand.


Impact on the market:

  • Low Demand in March 2017: Since the new prices will be applicable from 1st April, 2017, March will see minimum demand as the Obligated entities will have an option to comply with RPO compliance in the next FY.


  • Higher Inventory and therefore lower clearing ratios: If the appropriate multiplier is provided to the existing inventory, the inventory of unsold RECs will jump to 3.6 crore RECS as compared to 1.7 crore RECs as present. Even lower clearing ratios will be experienced at exchanges if the demand does not increase in proportion.

Other issues:

  • Calculation of floor price

  • Validity of RECs


The previous analysis of CERCs floor and forbearance for financial year 2012 to 2017 can be found here.


In an article in the Business Standard ,under the provisions of the Ujwal Discoms Assurance Yojna (UDAY) agreement, the state of Uttar Pradesh has issued bonds worth Rs 10,000 Cr. This is its second issuance against the debt of the discoms that it took over. The UP government had entered into a tripartite memorandum of understanding with the Ministry of Power and UPPCL to avail the benefits of UDAY which was aimed at helping the distressed power distribution companies with their finances.

Last year, UP was the first state to issue bonds having issued Rs 24,000 crore worth bonds by July.

REConnect performed a review of the UDAY scheme in one of it’s blogs. The link for the same can be found here

Review of UDAY Scheme on completion of one year

The UDAY scheme was launched an year ago, and was then touted as signature Discom reform scheme of the central government. In this article, we have analyzed the impact of UDAY scheme, responsiveness of the states, extent to which the Discom’s have got benefitted and also the reforms which they were supposed to undertake.

To briefly summaries, the UDAY scheme aimed at “financial turnaround of Power Distribution Compa-nies”.
Under the scheme, the state government was re-quired to take over 75% of the existing debt of the Discom and issue State Government bonds in re-turn.

The remaining 25% debt would be issued either as a bond by the Discom (guaranteed by the state gov-ernment) or the terms of the loan would be changed by the banks. In return, the Discom’s were required to undertake a series of reforms.

The key ones were:

  • Reduction of AT&C losses to 15% by 2018-19,
  • Quarterly tariff revision (to partly reduce the burden of large revisions once a year),
  • Reduce the gap between cost and revenue per unit to zero by 2018-19 and
  • Discom’s were to comply with RPO outstanding since April 2012 as per timelines suggested by MoP.

For a more detailed list of the requirements and for a detailed understanding of the scheme, refer our article here, or the scheme document here. After an year from launching, 17 states and UT’s have signed up for the UDAY scheme, while 15 have not. Notable states that have not signed up include Tamil Nadu, West Bengal, Kerala, Orissa, Assam and Telangana.
These states have relatively large Discoms and, espe-cially in the case of Tamil Nadu, significant accumulated losses and bank debt. Another way to look at this is the political affiliation of the state.
Most states that have signed up for UDAY scheme are associated or governed by BJP. Notable exceptions are Uttar Pradesh, Karnataka and Bihar. The only notable exception amongst the states that have not signed is Assam (governed by the BJP).

Bonds issuance:
8 states have issued bonds, aggregating to Rs 149,000 crore. The coupon rate (interest rate) on these ranges from 8.12% to 8.55%. Of the total bonds issued more than 80% are contributed by just 3 states – Rajasthan, UP and Haryana. To understand the impact of the bond issuance, we analyzed the balance sheet of one Discom (the Jaipur Discom). The key points are:

*Coupon rates are as per latest issuance
Total debt of the Jaipur Discom has reduced by Rs 5,722 crore, or 22% of the total. However, this ag-gregate number includes a significantly higher amount of debt that was directly taken by the Discom from the banks. This debt is now replaced with debt owed to the state government. Thus, while the debt burden of the Discom has not changed much, its the banks that have benefited the most – they now own government bonds (which are a very good asset to own), compared to Discom loans. The performance on the actions that the Discom’s were supposed to take is analyzed below.

Note : Additional Bank debt taken over in June 2016 – Rs 7,228 crore.

Tariff increases:
Of the 8 largest Discom’s analyzed, not a single Discom undertook tariff revisions on a quarterly basis. Further, there was a wide difference between tariff increases of different Discoms. Discom’s of UP, Punjab, Bihar, Jharkhand & J&K did not increase tariff at all. While Ra-jasthan increased domestic tariff by 2%, Chhattis-garh increased the same by 21%. It is important to note that while Rajasthan issued bonds of 58,000 crores, Chhattisgarh only issued bonds for Rs 870 crores (the lowest amongst all states).

Haryana raised domestic tariff by a respectable 19%Industrial tariff increased also show a similar story – Rajasthan raised tariffs by 1.67%. ,Haryana by 0.98%, while Chhattisgarh by 18%. Other states did not raise tariffs.
Renewable Purchase Obligations:
An important requirement of the UDAY scheme was that Discom’s were to be fully complaint of RPO  from April 1, 2012 onwards. The scheme document says the following with regards to RPO -
“Clause 9 – DISCOM’s opting for the scheme will comply with the Renewable Purchase Obligation (RPO) outstanding since 1st April 2012, within a pe-riod to be decided in consultation with MoP”

However, the MoU entered between the Ministry of Power and the Discom’s is completely silent on the RPO requirement. Prima facie, it appears that this point has been dropped by the Ministry. The only exception is the MoU with UP Discom, which has the following provision.
“Clause 1.3 (f) – In compliance with the Renewable Purchase Obligation (RPO) outstanding since 1.4.2012 to 31.3.2015, Discoms of UP shall fulfill RPO obligation 3 years after the Discom reaches break-even i.e. the Financial year 2019-20”
This clause presents several legal and practical prob-lems that will impact the REC markets significantly. Firstly, it is in direct contravention to the Electricity Act 2003 which obligates RPO on all consumption.

There is no provision for waiver or roll forward of such obligations. In light of this, can the MoP and UP Discom circumvent an act of the parliament and mutually decide a timeline for compliance? Further, the MoU wordings itself leave ample scope for further delay/ waiver when it says – “...3 years after the Discom reaches break-even…”. If the Discom does not reach break-even does that mean it will get further time?
In short, the original intent of the UDAY scheme re-sulting in RPO compliance has been abandoned by the Ministry of Power itself.
Reduction in AT&C losses:
AT&C losses remain very high for most Discom’s in the country. This is due to several reasons – weak distribution infrastructure being one. However, this caption is also a proxy for un-checked theft of power and un-metered supply. Even without the UDAY scheme, AT&C losses have been declining. However, since this data becomes available only at the time of ARR filing by the Discom, it is not possi-ble to verify if the decline has accelerated after the adoption of UDAY.

*Source: Forum of Regulators (FoR) Report
The UDAY scheme has resulted in significant redrawing of the balance sheet of the Discoms. The beneficiaries of the scheme have been the banks, which were sitting on unsustainable levels of debt with loss making enti-ties. This debt has now been replaced with high quality government debt. However, in terms of real reforms and changes on the ground, whether relating to tariff increases or RPO compliance, there seems to be little that is changing. Unless the government follows through with actual op-erational changes, the story is likely to repeat itself over the next 5-10 years, where Discom’s will have again built up unsustainable debt and losses.

Our previous blog on Uday scheme can be accessed here.

Rajasthan Electricity Regulatory Commission exempts electricity duty for rooftop solar

The Rajasthan state government recently exempted the elctricity duty of 40p/unit for solar rooftop and captive units. It is expected that this electricity duty cut will have a positive impact on the new capacity lined up by the Rajasthan Electricity Regulatory Commission and also will help to close the 2300 MW rooftop solar capacity by 2022.

This step will create a lot of momentum in the rooftop segment and will encourage individuals and institutions to set up their own plants, thus contributing to the green energy while cutting down on their power costs.

Since Rajasthan has also announced net-metering policy (by which an individual can use the power they generate and the surplus can be fed into the grid), exemption of the electricity duty will be very beneficial to the consumers.

Recently, RERC also had issued a rate contract order for 25 MW & 5MW rooftop plants and empanelled companies to design supply and install these projects; under this the consumer will install a solar power plant and will not have to pay anything upfront.

The regulation can be accessed here.

Telangana Regulations for connectivity with the Grid and sale of electricity from the Rooftop Solar Photovoltaic

Telangana recently came up with its net metering regulation for connectivity with the Grid and sale of electricity from the Rooftop Solar Photovoltaic. This Regulation will be applicable to the distribution licensee, an eligible consumer and a third party owner of a Roof Top Solar PV System in the state of Telangana.


Following are some of the highlights of the regulations:


  • An eligible consumer shall install the grid connected Rooftop Solar PV System of the rated capacity as specified in this Regulation.
  • The tariff payable to an eligible consumer under the net-metering shall be the average power purchase cost of a Distribution Licensee.
  • The net metering facility, as far as possible, of an eligible consumer shall be in three phase service.
  • A single phase consumer is also eligible for net metering up to 3 KW.
  • The capacity of a Rooftop Solar PV System to be installed at the premises of an eligible consumer shall not be less than one Kilo Watt peak (1kWp) and a maximum of One (1) MWp.
  • The quantum of electricity consumed by an Eligible Consumer from the Rooftop Solar PV System under the Net Metering Arrangement shall qualify towards his compliance of Solar RPPO, if such Consumer is an Obligated Entity.
  • The quantum of electricity consumed by the Eligible Consumer from the Rooftop Solar PV System under the Net Metering arrangement shall, if such Consumer is not an Obligated Entity, qualify towards meeting the Solar RPPO of the Distribution Licensee.
  • The unadjusted surplus Units of the solar energy purchased by the Distribution Licensee under the provisions of sub-Para 10.3 shall qualify towards meeting its Solar RPPO.
  • The Rooftop Solar PV System under the net metering arrangement, whether self- owned or third party owned installed on the Eligible Consumer’s premises, shall be exempted from Transmission Charge, Transmission Loss, Wheeling Charge, Wheeling Loss, Cross Subsidy Surcharge and Additional Surcharge.
  • The Rooftop Solar PV System Developer shall retain the entire proceeds of CDM benefits in the first year after the date of commercial operation of the generating station.


The regulation can be accessed here.

TSERC Regulation for connectivity with the Grid and sale of electricity from Roof- top Solar Photovoltaic System

The Telangana electricity Regulatory Commission recently came up with its Net Metering Rooftop Solar PV Grid Interactive Systems) Regulation, 2016. Following are some of the highlights of the regulation:-

  • This Regulation will be applicable to:
    • Distribution licensee
    • An eligible consumer and
    • A third party owner of a Roof Top Solar PV System in the state of Telangana.


  • This Regulation does not preclude the right of a Distribution licensee or the State Government Department to undertake the Rooftop Solar PV projects above 1 MWp capacity through the alternative mechanisms.


  • The net metering facility, of an eligible consumer shall be in three phase service where a single phase consumer is also eligible for net metering up to 5 KW.  The capacity of a Rooftop Solar PV System to be installed at the premises of an eligible consumer shall not be less than 1kWp and a maximum of 1MWp peak.


  • The tariff payable to an eligible consumer under the net-metering arrangement will be the average power purchase cost of a Distribution Licensee.


  • The quantum of electricity consumed by an Eligible Consumer from the Rooftop Solar PV System under the Net Metering Arrangement shall qualify towards his compliance of RPPO, if such Consumer is an Obligated Entity.


  • The Rooftop Solar PV System under the net metering arrangement, whether self-owned or third party owned installed on the Eligible Consumer’s premises, will be exempted from
  • Transmission Charge,
  • Transmission Loss,
  • Wheeling Charge,
  • Wheeling Loss,
  • Cross Subsidy Surcharge
  • Additional Surcharge.

REConnect Energy : Awards & Accolades

We are very happy to announce that REConnect was awarded “REC Trader of the Year 2016” & “Forecasting Company of the Year 2016” in the Indian Wind Energy Forum. This is the third year in a row that we have won these awards. We would like to thank our clients for the faith that they bestow on us and the dedicated efforts of the REConnect team for this recognition.

The “REC Trader of the Year 2016” award is a recognition of our continuing REC market leadership (we are the largest REC trader in the country), faith of our clients in us and the flawless service the REConnect team provides every day.  The “Forecasting Company of the Year 2016” award is recognition of our knowledge-centric approach to forecasting and scheduling, and our market leadership in this domain.

We currently provide forecasting and scheduling services to over 12GW of wind and solar projects. We have successfully catered the GETCO state level wind forecasting project for a total capacity of 4086MW.

We also take immense pleasure in announcing that our work was also recognized by SMART CEO as Top 50 venture in The Ssmart CEO-Startup50 India 2016 program and also in BERLIN where REConnect Energy was awarded as the best Indian start up.

MERC Determination of Generic Tariff for Renewable Energy for FY 2016-17

The Maharashtra Electricity Regulatory Commission came up with its Draft order on the MERC (Terms and Conditions for Determination of Renewable Energy (RE) Tariff) Regulations, 2015, (“the RE Tariff Regulations”) on 1st April, 2016.The RE Tariff Regulations specify the Terms and Conditions and the Procedure for determination of Generic Tariff by the Commission. The graph below gives a comparison of the RE tariff determined in year 2014-15, 2015-16 to 2016-17 for wind and mini & micro hydro generating stations.

In the Draft Generic Tariff Order for FY 2016-17, the normative Capital Cost for the Solar PV power projects for FY 2016-17 was not declared by CERC and accordingly, the Commission proposed to consider the same Capital Cost of Rs. 605.85 lakh/MW for the Solar PV Projects to be commissioned in the period from 1 April, 2016 to 31 March, 2017.

The graph below gives comparison of Generic Tariffs for Solar Projects in the period from 2016– 21017 to the previous year. The tariff has been determined with AD benefits depending on the type of solar project as follows.:


The Generic Tariffs for Wind Energy Projects in the period from 1 April, 2016 to 31 March, 2017 have been determined as follows.  The discount factor for levelisation of Tariff for Wind Energy Projects works out to 10.54%.

The Commission has invited Comments, suggestions and objections from the public and stake-holders, including RE Developers, Distribution Licensees, MEDA, electricity consumers, etc. are on this draft Suo Moto Order.

The Order can be accessed here.


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.

Wind & Solar Forecasting & Scheduling Regulations 2015

To overcome the difficulties related with managing the infirm wind and solar power, the Central Electricity Regulatory Commission introduced the provisions for wind/solar power forecasting under the Indian Electricity Grid Code in May 2010. The mechanism was promoted as the Renewable Regulatory Fund (RRF) mechanism. The mechanism was originally intended to be implemented by January 2011, which got four extensions (Jan’12, Jul’12, Feb’13, July’13) before it could get even started.

The mechanism finally got implemented from 15th July, 2013 and subsequently got caught under the litigations as the Wind Associations challenged the decision of CERC to implement such regulations for wind power plants connected under the intra-state networks. Finally, the commercial settlement related with the mechanism finally went to temporary suspension mode in Feb’14.

The mechanism also attracted lot of resistance from various stakeholders due to the reasons represented in the block diagram below.

CERC Forecasting and Scheduling Regulations 2015

The CERC, on 05th April 2015 proposed new framework for the Forecasting, Scheduling and imbalance handling of Wind and Solar Energy generating projects at inter-state level, and finalized the same through notification on 7th August, 2015, to make major amendments to the Deviation Settlement Regulations (DSM) Regulation 2014 and the IEGC Regulation 2010. The highlights of the same are given below:

Error calculation methodology:

The error calculation methodology used earlier and the proposed one are compared below:

The penalty mechanism as per the new regulation is as follows:

  • For single PPA agreements, the fixed rate shall be the PPA rate between the generator and buyer, and in case of multiple PPA’s, the weighted average shall be taken.
  • For Open Access transactions for RE, where consumer is not claiming RPO, or in case of captive power, the fixed rate shall be the APPC rate at the national level.

The existing wind capacity of 23.7 GW[1], most of which comes under the control area of the state, whereas in case of solar, approximately 200 MW odd capacity out of 4 GW[2] comes under the control area of RLDCs. With the central government thrust on large additions year-on-year, in future, large inter-state projects will come under purview of the new inter-state forecasting regulation. However, the regulation for accommodating the capacity connected with the state control area can be expected to be announced soon as the CERC in its closing remarks of the final regulation has expressed the desire for the same.

We are expecting the Intra-state regulation to come soon, along with the implication of the commercial settlement. With the implementation of the Inter-state regulation becoming applicable from 1st November 2015, and possibly, the soon to come Intra-state regulation, it is a huge task at hand for all stakeholders, especially for those generators for whom forecasting and scheduling will be something new to oblige to, when the new regulations are implemented. It also calls for more efficient approach in terms of huge data management schema, automation of operations, forecasting techniques and error handling & response.

As an experienced Co-ordinating agency we have geared up to the new regulations in all way possible, and would like to deliver our value oriented in-house services as per expectations of stakeholders, and even beyond.

The IEGC Amendment can be accessed here.

The DSM Regulation can be read here.

The Statement of Reasons from CERC can be understood here.

[1] As per MNRE data on 30.06.2015

[2] As per MNRE data on 30.06.2015

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