Five More States to Kick Start Power Sector Reforms

In addition to Meghalaya, Goa and Uttarakhand, five more states would be signing a joint statement of reforms with the Central Government in order to enable 24×7 power supplies to consumers. The states Rajasthan, Andhra Pradesh, Jharkhand, Chhattisgarh and Assam are set to take up the government’s “Power for All” programme. Maharashtra is also trying to achieve the impetus to take up the programme. As the Center is pursuing states to cut their losses and by hiking tariff and raising funds from the market, the states would be hiking their tariffs as follows:-

Among these big states only Andhra Pradesh doesn’t require any raise in the tariff, as it is not burdened with any financial losses unlike the rest of the states. The following graph depicts the financial losses incurred and the funds required by the states to cover up their losses, with Rajasthan being the state with highest financial losses and Assam being the least.

The above update has been taken from Business Standard’s article published on 19th October, 2015 which can be accessed here.

Our previous blog on power sector reforms can be accessed here.

Analysis of changes in CSS and its impact on Open Access market

Cross-subsidy regime used as a tool to influence the open access market

In this financial year (FY 2015-16), Andhra Pradesh, Telangana and MP suddenly raised cross-subsidy surcharge (CSS) applicable on industrial units significantly. In the case of AP and Telangana last years’ cross-subsidy was nil, but this year its Rs 2.23 and Rs 1.42 respectively. In the case of MP, the cross subsidy increased from Rs 0.48 to Rs 2.16 (an increase of 350%).

An analysis of several states suggests that cross-subsidy is often increased suddenly and substantially. In each of the above cases, the immediate impact will be that third-party transitions will come to a halt, as they will no longer be viable. For example, in MP the revised CSS is 46% (vs 12% last year) of the applicable tariff. In AP and Telangana, its 40% and 25% respectively.

These three states accounted for approximately 20% of the volume on power exchanges as per the market monitoring report from CERC for February (the most recent available). This volume is likely to dip to insignificance thanks to the steep rise in CSS.

Another good example is the case of Haryana. In FY 2013-14, the applicable CSS was Rs 0.53. Next year it was raised to Rs 2.02 (a four-fold increase). As a result, the traded volume between February 2014 and February 2015 has fallen by half (160 MUs and 86 MUs respectively). One must keep in mind that the above volume includes purchase from Discom’s, if any, on which CSS is not applicable. Thus, the actual fall in volume from open access consumer is must larger.

Changes on the horizon

It is clear from the above examples that cross-subsidy is varied by states to influence the open access market.

However, some fundamental changes are on the horizon. The first one pertains to applicability of CSS on renewable energy. One of the amendments proposed to the Electricity Act, 2003 seeks to remove CSS applicability from renewable energy transactions. This will have a significant impact as it will make RE transactions very attractive. One hopes that states will adopt this in its true spirit.

The second change pertains to the way CSS is calculated by the States. The existing National Tariff Policy (NTP) suggests that CSS be calculated as the difference between the top 5% of the incremental power procured by the Discom (this is often proxy for the most expensive power procured) and the applicable tariff. However, this is a very opaque measure – for example, between 2013-14 and 2015-15, the cost of top 5% of the power in MP fell from Rs 5.47 to Rs 4.59 (a fall of 20%), despite increase in overall costs and tariffs.

The amendments to NTP will require the calculations to be done by taking the overall costs (including the cost of regulatory assets, ie losses incurred by the Discom).



Further, the proposed NTP seeks to limit the CSS to 15% of the applicable tariff in the category. It is noteworthy that till now, NTP has been more recommendatory in nature. For example, it requires that CSS should be brought down progressively to bring it to 20% of the opening level by 2010-11. However, the significant changes done recently clearly indicate that this objective of the policy has not been achieved.

Team REConnect Energy


APERC New Cross Subsidy Surcharge Applicable for All OA consumers In AP

The Andhra Pradesh Electricity Regulatory Commission (APERC) has come with an order stating that, the Cross Subsidy Surcharge will be levied on the consumers who opt for Open Access for the Financial Year 2015-16.

The Table below summarizes the new cross subsidy surcharge applicable during FY15-16:

As per previous years there was no CSS charges applicable in the state of Andhra Pradesh. This is a considerable setback for the consumers who are availing OA and purchasing power from exchanges. The Average charges through exchange is close to Rs 4.60 for the OA consumers. With implementing CSS it would be close to Rs 6.60 to 9.20 depending on consumer category for Industrial and Commercial, which is very high compared to DISCOM Tariff.

With the current scenario we can rule out OA in  Andhra Pradesh through exchanges. The only option of purchasing power through open access is 3rdparty power through Solar, as the CSS is waved off for Solar generators under Solar policy of the state. But CSS is applicable for purchasing power through other renewable source.

As Andhra Pradesh being a power surplus  state, this would be great revenue for the DISCOMs as all the consumers have to buy the power through DISCOM and option of availing power though exchange is completely ruled out. With this Excess consumption of units and revenue, the DISOCM may recover the losses from previous years.

The order can be accessed here.

Contributed by Vignesh Kumar Adiraju

APERC Finalizes Tariff for FY 15-16

The Andhra Pradesh Electricity Regulatory Commission (APERC) has finalized the tariff for the electricity consumer of the state. The tariff will be applicable during FY 15-16.

The graph below gives comparison between the new tariff determined for FY 15-16 and the tariff of FY 14-15 and the % increase in tariff for different categories.

Wheeling charges: The tariff order did not include the wheeling charges and wheeling losses. Below is the wheeling charges and wheeling losses given by the commission in its multiyear tariff order (Order dated 09.04.2014) , which was given before the bifurcation of the state.

Wheeling loss: 

The order given by the commission has not given any clarity on the determination of cross subsidy surcharge and any other charges besides the above.

The tariff order can be accessed here.


Andhra Pradesh Wind Power Policy 2015

Andhra Pradesh government has released its new wind power policy, the new policy will be known as Andhra Pradesh Wind Power Policy 2015. It will replace the previous policy in the state. The policy has been revised to attract new investment in the state. NREDCAP will act as a Nodal Agency under this policy.

The new policy targets of achieving 4000 MW capacity addition through wind power in next five years. The main objectives of the state government is to encourage & develop the wind energy generation in the state, to attract private investment and establish large wind projects. The policy will remain applicable for next 5 years or till amended or replaced by new policy. Wind power projects commissioned under the policy will be eligible for the incentives declared under this policy, for a period of ten (10) years.

All registered companies, Joint Venture Companies, Central and State power generation/ distribution companies and public / private sector wind power developers will be eligible for setting up of wind power projects. The more details of the policy are as in the table below:

The category of projects to be developed is given in the table below:

The power generated from wind projects under category-I will be for sale within the State only. The projects under category-II and category-III will not have any cap on capacity and both of these projects will be eligible for REC mechanism.

Apart from this the policy also talks about repowering i.e. for projects where lower capacity and lower hub height WEGs were installed and which have completed more than 15 years of life, proposals will be considered for replacing older turbines with higher capacity WEGs. In such cases, existing PPAs with the state will undergo amendment with extension of time period for another 25 years. This is subject to the condition that the energy generated from additional capacity available due to repowering, will be paid at the rate of tariff determined by APERC from time to time.

The Wind policy can be found here.

Andhra Pradesh Solar Power Policy 2015

The Andhra Pradesh Government has released its new policy for the development of solar energy projects in the state. The new policy will replace the previous policy being announced in 2012 by state government.  The policy was also presented during the RE-Invest summit. The main highlights of the policy are listed in the table below:

Apart from the features listed in the tables, the policy also gives directions about migrating projects from solar policy 2012 i.e. projects commissioned after 30th June 2014, to the new policy.

The policy has given a good scope to those who wish to avail OA due to exemption from all major charges and losses, besides providing deemed scheduling and banking facility. Single clearance will further encourage new project proponents. Overall it is a welcome step to promote Solar power in the state.

The policy can be accessed here.

MNRE Releases Draft Guidelines for 3000 MW Solar Under JNNSM

Ministry of New and Renewable Energy (MNRE) has recently released the draft guidelines for selection of 3000 MW grid connected Solar PV Power Projects under Phase-II, Batch-II & tranche-I of JNNSM.

Under Part-I of Tranche-I, 1000 MW Solar PV Projects would come up in the Solar Park to be developed by the Joint Venture company of SECI, NEDCAP & APGENCO at Kurnool district in Andhra Pradesh.

The key points proposed in the draft are as below:

  1. The Scheme will be implemented by NVVN.
  2. The selection of Grid Connected Solar PV Projects of 1000 MW will be carried out by NVVN through a transparent tariff based bidding process.
  3. The generated power from developer will be purchased by NVVN and sold to AP distribution companies.
  4. To connect the projects to the transmission utility substations at 132kV and above, the Project capacity should be 50 MW.
  5. The maximum capacity to be allocated to a company or its group companies should be limited to a total of 250 MW.
  6. Out of total 1000 MW Under this scheme a capacity of 250 MW will come under Domestic Content Requirement (DCR).
  7. Keeping the slow-moving REC market in mind, it has been proposed that the NVVN will purchase 1 (One) Non- Solar REC (or proportionate Solar REC so as to match expenditure on non-Solar REC) for every 40,000 Units of bundled power purchased. The power sold to DISCOMs will cost them an extra Rs. 0.05/Unit, which is quite insignificant.
  8. The 1000 MW purchased by NVVN, will be bundled with 500 MW thermal power from NTPC.

 Time Schedule for Solar PV Projects:  Selection of Solar PV Projects shall be carried out according to the timeline given below:

The total bundled power of 1500 MW purchased, will result in injection of approximately 2250-2300 million units. As a result, NVVN will buy 56000-57500 REC per annum, which is insignificant compared to current inventory of 10.5 million RECs.

The relevant order can be accessed here.

Our previous Blog on MNRE JNNSM Phase-2 Batch-2 Scheme can be read here.

Contributed by Dheeraj Babariya.

APERC: Tariff for the Wind & Industrial Waste Power projects

Andhra Pradesh Electricity regulatory Commission (APERC) in its order dated 6th September 2014 has given tariffs for the wind energy generators who have completed 10 years of their commercial operation. The tariff will be applicable to the wind generators of both the states i.e. Andhra Pradesh and Telangana.

The project developers through their submissions requested commission to fix a reasonable tariff as they incurred higher losses due to lower PLF’s achieved. They also requested that in the initial years they paid higher wheeling charges while tariffs were low.

The commission in its order said that as the petitioners were the first movers for the wind generation in the then state of Andhra Pradesh. The PLF’s achieved by petitioners have varied between a range of 6% to 15% against the projected 20% such lowered efficiency has affected the performance of the wind mill generators.

After hearing all the respondent and taking all submissions into consideration the commission fixed single part tariff of Rs.3.37 per unit and said that the tariff should be continued for all these projects till the expiry of the respective PPAs.

In another hearing for fixing the tariff for industrial waste based power projects from 11th year to 20th year of operation, the commission in its order dated 1st September 2014 concluded that the tariff fixed for Biomass based power projects would also be applicable to the Industrial waste based power projects.

The commission in its order dated 19th July 2014 has fixed the fixed cost component for the Biomass based projects in its orderdt.19.07.2014. The details of the tariff are in the table below:

The relevant order can be accessed here.

The order for the Industrial waste based projects can be accessed here.

Our Previous blog post on APERC biomass tariff can be read here.

Contributed by Dheeraj Babariya. 

APERC Proposes Draft Amendment for RPO Regulation

Andhra Pradesh Electricity Regulatory Commission (APERC), joint commission for the Andhra Pradesh and Telangana, has proposed separate drafts for the amendment in its Renewable Purchase Obligation (RPO) Regulation 2012, for Andhra Pradesh and Telangana.

The summary of the proposed amendments for the both the states is as below:

  1. According to the proposed draft, the commission proposed to remove the .25% solar purchase obligation for distribution licensee & captive generating plants out of the total of 5% RPO, and has proposed that RPO shall be fulfilled by purchase of any renewable source of energy.
  2. The commission has proposed that the Lapsed Banked Energy (Renewable) as according to Open Access regulation 2006 shall be considered towards the RPO of the distribution licensee.
  3. Consumption from captive co-generation power plant, is exempted for levy of RPO.

The commission has also proposed changes in eligibility of and registration for REC’s, which are highlighted below –

  1. The power generating plant shall be of 1 MW and above capacity for obtaining accreditation from the state agency.
  2. A roof top or ground mounted solar power plant of 100 kW and above, shall be eligible for obtaining RECs for the entire generation from such plant.
  3. The entire electricity generated from Captive Power Plant & Co-Generation Plants based on Renewable Sources of Energy, including self-consumption shall be eligible for issue of REC’s.
  4. In case of pre-mature termination of the power purchase agreement (PPA) with a consumer or DISCOM, a generator will not be eligible for REC’s for three years, starting from the date of termination of the agreement.

The proposed draft will directly affect the solar power generators as the Solar RPO has been merged with Non-solar RPO in the state. In our opinion, since the floor price of solar REC’s are much higher, the obligated entities will not purchase solar REC at all.

In contrast to Tamil Nadu, which has moved to Supreme Court, with a clear objective of implementing Solar Purchase Obligation (SPO) of 6% in the state, APERC does not seem to be in favour of incentivising solar power by having separate RPO status for solar in the two states. In addition to this, the cap of 1 MW on Non-Solar and 100 KW on Solar projects, will only deter smaller projects from coming up in future.

The commission through separate Public notices for Telangana and Andhra Pradesh, has invited the comments and suggestions by 08th September 2014.

The Draft Proposed for Andhra Pradesh can be accessed here

The Draft Proposed for Telangana can be accessed here

Contributed by Dheeraj Babariya


APERC approves Fixed Cost Component for Baggase based plants

The Andhra Pradesh Electricity Regulatory Commission (APERC), through an order on 5th July 2014, has approved the fixed cost for the Baggase based power plant, which have completed 10 years of their operation.

 The order came in response of various petitions filed by project developers. The details of the approved fixed cost component is as below:

 The Commission has determined the PLF (Plant Load Factor) at 55%, the commission in its order also said that in order to promote Baggase Project Developers an incentive of Rs. 0.50/Unit shall be paid for all generation above 55% generation by the concerned DISCOM.

The commission order can be accessed here.

Our previous blog post on APERC Biomass tariff here.

Contributed by Dheeraj Babariya.

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