CSERC’s order on non compliance of RPO by Discoms for the year 2011-12 & 2012-13

Chhattisgarh State Electricity Regulatory Commission (CSERC) passed an order on 15th October 2014 on non compliance of RPO by DISCOM’s of Chhattisgarh for the year 2011-12 and 2012-13.  In the order CSERC said that they will close this matter of non compliance of RPO by DISCOMs. The questions arises in the order is how, as CSERC has not mentioned about any action to be taken or any penalty to be imposed on the discoms for their non compliance. CSERC in its order have concluded that

“Our attention has been drawn towards the fact that in CSPDCL’s tariff determination, final true up for FY 2011-12 has been completed. Therefore, in our opinion, it would not be appropriate to force them for compliance of RPO for FY 2011-12 at this stage. We are also of the view, that penalizing the other respondents/DISCOM for non fulfillment of their RE obligation for year 2011-12 is unjustified”

Similar order was also given for FY 2012-13. The commission has only asked the Discoms to be more vigilant on fulfillment of RPO in the coming years.

The order can be accessed here ( FY 2011-12) and here ( FY 2012-13).


Chattisgarh APPC for FY 2012-13

On 14th December 2012, Hon’ble Chattisgarh State Electricity Regulatory Commission (CSERC) rolled out its pooled cost of power purchase for Chhattisgarh State Power Distribution Company Ltd. (CSPDCL), Bhilai Steel Plant (BSP-TEED) and Jindal Steel (JSPL). As per this order, APPC for FY13 is shown below

DISCOM FY 2010-11 FY 2011-12 FY 2012-13 CAGR
CSPDCL Rs. 1.62/kWh Rs. 1.67/kWh Rs. 2.11/kWh 9.21%
BSP-TEED Rs. 4.02/kWh Rs. 3.26/kWh Rs. 4.66/kWh 5.05%
JSPL Rs. 3.00/kWh Rs. 3.00/kWh Rs. 3.00/kWh 0.00%

As per relevant CSERC regulations – “Pooled Cost of Power Purchase? means the weighted average pooled price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the long-term and short-term energy suppliers, but excluding those based on renewable energy sources, as the case may be.” which is in line with that of CERC and followed by most states.

As per our analysis, the percentage increase in APPC for CSPDCL for FY11 – FY12 has been around 3.08% whereas for FY12 – FY13, a steep increase of 26.34% has been recorded. Likewise, APPC for BSP-TEED increased by a whopping 42.9 %. On the contrary, the APPC for JSPL has remained at Rs. 3.00/unit for all three years (APPC for FY11 & FY12). The increase in APPC for CSPDCL and BSP-TEED can mainly be attributed to the fact that power purchase from central generating stations (CGS) has increased from 4789 MUs in FY11 to 8062 MUs in FY13 and short-term power purchase has almost doubled from 1215 MUs in FY11 to 2083 MUs in FY13 (courtesy: CSERC MYT Order FY11-12).

RECs markets face uncertaininty due to lack of enforcement: Businessworld

We have highlighted the problem with enforcement regularly. A recent article in Businessworld brings the issue center-stage.

Jayant Deo, former MD and CEO of the Indian Energy Exchange (IEX) is quoted as saying:

” [obligated] entities are getting away with non-compliance because of poor enforcement of regulations and the lack of any penalties. With state discoms being allowed to renege on obligations, many expect private players to follow suit”

The recent demand-supply gap in the September 2012 trading session and the inventory that is building up is starting to worry project developers and potential investors in the renewable space. Vibhav Nuwal of REConnect Energy is also quoted in the article:

“70–80 per cent of the demand comes from the private discoms. The remaining come from captive and open-access consumers,” says Vibhav Nuwal, director at REConnect Energy, the largest trader in this market. Although, Nuwal says, the solar REC market, which began trading in May 2012, is too small and volatile to draw inferences from; he acknowledges the widening demand-supply gap in the non-solar segment.


REC Trading Report – June 2012

REC trading for June was conducted today (June 27, 2012). Compared to last month, there were a few surprises:

  • Supply exceeded demand for Non-Solar RECs for the first time since start of trading
  • Demand for Solar RECs grew significantly

Detailed analysis of Non-solar REC trading:

Price on IEX remained the same as in May (Rs 2,402), while on PXIL it increased from Rs 2,150 to Rs 2,460 (increase of 14%). Aggregate demand reduced to 349,000 RECs from 365,000 last month (-4%). At the same time, supply of RECs increased from 275,000 to 361,000 (increase of 31%). Of these, 236,000 RECs were sold.

As mentioned above, this was the very first time that supply of RECs exceeded demand. Given the mismatch, it was good to see prices hold/ increase slightly. However, if the situation persists, the peak pricing has probably been reached until stronger enforcement signals emerge from the regulators.

Detailed analysis of Solar REC trading:

June was the second month when solar RECs were traded. Demand has grown significantly since last month (from 1,642 to 9,619; approximately a 6X growth). Available RECs increased to 563 from 249 last month (2.2X). Pricing fell marginally from the high of Rs 13,000 last month to Rs 12,750 on IEX and Rs 12, 506 on PXIL. 342 Solar RECs were sold, up from 10 RECs last month.

Total market value exceeded Rs 57 crore, of which Rs 44 lakhs were from Solar RECs.

The Hindu quoted Vishal Pandya of REConnect which covered the June trading news:
“The overall market growth in both solar as well non-solar space seems good. However, with the first quarter of the financial year getting almost over, it would be highly desirable now to see state regulators and nodal agencies acting strictly on the RPO compliance,” says Mr Vishal Pandya, Director, REConnect.

Other links which covered the trading news :

Tariff increases offer a ray of hope for Discom’s

Two recent articles highlight the changes taking place in Discom’s. The article in Business Standard mentioned that last year, some Disocm’s were able to raise tariffs to an extent that was not seen in the past.


Tariff increase for FY11
States Tariff increase in %


HP, MP, Punjab, Karnataka


Mizoram, Manipur, Chattisgarh, Maharashtra


AP, Orissa, Bihar, Jharkhand, J&K


Nagaland, Delhi, Rajasthan


Source: CRISIL report


This is very encouraging for many reasons – a healthy Discom will be able to work towards providing adequate and quality power – a simple change that we believe will have a knock-on effect on the economy of the state. This is also very good news for the REC markets – we have always said that the key stumbling block in enforcing RPO regulations will be the financially troubled Discoms. If that situation were to be remedied, it will be very good for the renewable energy sector in general and REC markets in particular.

The article also provides some interesting data:

According to data from the power ministry, the average cost of supply (ACS) for all power companies has clearly far exceeded the average revenue realised on a subsidy basis. In 2008-09, the average costs stood at Rs 3.41/kwh versus revenues of Rs 2.91/kwh; in 2007-8, costs were Rs 2.93/kwh versus revenues of Rs 2.65/kwh; and in 2006-07, costs were Rs 2.75/kwh compared to revenues of Rs 2.49/kwh

A note of caution is needed here – these increases are just a beginning and it’s a long way before Discoms turn back into the black. This has been mentioned by CERC in the past, and also by the Business Standard in the article:

However, it’s not as if the struggle for financial viability is over just yet. These kinds of tariff increases need to happen for the next two-three years continuously in order to make a substantial improvement in the financial position of the discoms, REC’s director of finance, H D Khunteta, tells Business Standard.


On account of the cost increases, the tariff would be required to increase at a CAGR of six per cent over the next five years, according to a report by CRISIL.

The second article ran in the Times of India. It mentions a recent restructuring of the loan to Discom’s. The center has approved a scheme of restructuring that will require the state governments to take on the entire burden of Rs 1.5 lakh crore. According to the article:

Instead, the finance ministry is insisting that states, which are responsible for the mess, do their bit by infusing equity and taking over the liabilities. In addition, they have to agree to reducing losses due to theft and raise tariffs to reflect the real cost of electricity. For states, this is a second lifeline in less than a decade as they had earlier issued bonds to power generation companies and promised reforms. Given their track record, the Centre is not keen that banks be forced to take a haircut.

The restructuring was necessitated as discoms were under financial strain and unable to pay their dues to the lenders. State governments have not been permitting an increase in electricity tariffs, while cost has gone up, resulting in stagnant revenues and losses.

We hope that it works. As the article in the Business Standard points out, this approach has been tried in the past with only limited success:

This bleak situation existed even as far back as a decade ago. So much so that in 2001-02, a committee headed by Montek Singh Ahluwalia had to bail out utilities by issuing long-term bonds to be discharged by the state governments. Some experts believe that if the government does not take action on a continuous basis to improve the financial health of discoms, the situation that arose in 2001-02 may recur.

Power trading prices shoot up 20-25%

In this scorching heat as the power demand across the country keeps on increasing the power trading prices have also gone up . In an article of the Business Standard the cause of rising trading prices was highlighted. Short-term power prices have seen an increase of 20-25 %. The highest price at which the power was traded rose to Rs 5 per unit.

In an article of the Business Standard , Rajesh Mendiratta, Indian Energy Exchange’s Senior VP for Business Development said that “Due to mismatch in demand and supply, the prices are expected to increase further but it will not reach too high a level,” . The average for power trading was Rs 3.5-4 per unit where last year the average rates were 2.9 per unit in the same period.

Due to inadequate coal supply the power industry is unable to meet the rising need of power in the country.Demand for coal in India has grown at an annual rate exceeding 8.4 per cent over the past five years.

With the increasing demand of power and shortage of coal supply it seems that the our electricity bills will keep going up. Lets hope that the monsoon comes soon which will bring some relief to our regular power cuts.

Contributed by Rahul Tyagi

Punjab roll-forwards RPO to next year

PSPCL recently petitioned the Punjab Electricity Regulatory Commission to amend its RPO from 2.4% (including 0.03% solar) to 1.65%. This is inline with the extent of RPO achieved in the state (1.67% non-solar and 0.0075% solar). The reasoning behind the request for reduction was that PSPCL suffered due to reduced RE generation (delays and closures of RE facilities), and its efforts to procure RE power from the market did not bear fruit. PEDA supported PSPCL’s petition.

The commission rejected the request [DOC file]. Instead, it allowed PSPCL to carry forward the RPO to next year. PSPCL will now have to meet the shortfall this year in addition to the current year RPO (2.9%).

In our analysis, a few things stand out in the petition:

  • PSPCL did not mention efforts to procure RECs from the market as a step it took to try and meet its RPO
  • The commission did mention it as one of the steps it can consider to meet its RPO in the current year. The order states: ” This carry forward shortfall in RPO compliance during 2011-12 to 2012-13 shall be in addition to the RPO specified in the RPO Regulations for that year, to be made good separately for non-solar and solar power as specified by the Commission, through purchase/generation of electricity from RE Projects on best efforts or in case of non-availability of such electricity, through purchase of RECs from the Power Exchange(s)”
  • It is unclear whether the waiver will also apply to open access and captive consumers. The order is specific to PSPCL, but this may open a way for a carry-forward for open access and captive consumers also

Overall, the order from the commission is in the right direction. Given the nascent stage that REC markets are in, it will be difficult to enforce full penalties due to non-compliance. However, waiver or retrospective change in RPO % would send a wrong signal to the market and obligated entities.


Open Access Faces Hurdles from Discoms in Rajasthan

Recently, all the Discom’s in Rajasthan simultaneously came out with circulars with changes to the open access mechanism. The pretext of making these changes was the recent letter from the Law Ministry on Open Access. As an example, the key changes made by the circular of the Ajmer Discom (See Comml. AJ-484) are mentioned below:

  • Those consumers that draw power from the Discom’s only in an emergency will be levied temporary tariff (50% higher than the normal applicable tariff)
  • They will have to inform the Discom’s 48 hours in advance of the intent to draw such power
  • The Discom will have no obligation to supply power to them
  • Those consumers that draw power from both the Discom and other sources will also have the 48 hour prior intimation requirement. Also, once the decide to draw power from a source other than the discom, they will have to do so for the entire 24 hour period. They will also have additional surcharges during peak hours.
  • To top it all, the Ajmer Discom gave 4 days to the industry to choose which option they would like to go with

These changes will obviously make the open access proposition a non-starter. The 48 hour prior notice requirement is a big hindrance. At the same time the 24 hour block provision will make the purchase of power from power exchanges un-viable. The higher tariff’s will hurt too.

To be fair to the Discom’s, the need for prior intimation is well appreciated – it will enable them to plan their power procurement better. However, there are better way to achieve that. As in every other case, its the intent of the Discom’s that wrong here as well. As a detailed article in the Business Standard recently mentioned, the requirement to have the Discom the supplier of last resort will be critical in making open access a reality.

As for the circulars, RERC has put a stay on them for the time being, after several industries applied for relief.

REC Trading Report – January 2012

As we approach the end of the compliance period i.e in March 2012, REC market reached its peak both in traded volume and prices. Total traded volume increased to over 170,000 ( an increase of 54% over previous month), while the prices at both the exchanges increased to Rs. 3,051/REC ( vs. Rs. 2,950/REC in the previous month; increase of 3%). Overall, the market crossed Rs 50 crore in value, a sharp increase from last month (December 2011 value was close to Rs 33 crore).

Total demand increased by about 50% over the previous month (from 285,000 to 432,500 ) whereas RECs offered for sale increased marginally by 7% (last month REC offered for sale decreased by 3%). The jump in demand was expected as we near the end of the first effective compliance period in March 2012.

The ratio of RECs traded to that available for sale has also increased. This shows clear willing to sell off available RECs at the current prices. Despite the sharp increase in demand and RECs offered for sale, price increased only marginally, signalling that prices have peaked. We can only expect another jump perhaps in March, when there will be a rush to meet compliance requirements.

Vishal Pandya was quoted in the Hindu Businessline in an article that reviewed the Jan 2012 trading session:

“RECs that are available for sale next month have reduced to about 26,000 only. Considering low number of issuance happening due to non-availability of wind generation, market may offer good opportunities for sellers for next few months as all the existing RECs have been exhausted now,”

No Solar RECs were traded this month.

Try India’s First Online RPO Calculator here

REC Trading Report – December 2011

REC markets continue to grow, albeit more slowly than in the earlier months. Total treaded volume increased to approximately 120,000 (an increase of 14%), while price increased marginally to Rs 2,950/ REC (vs. Rs 2,900 last month; IEX prices). Prices at PXIL increased to Rs 2,950 from Rs 2,800 last month.

Total demand volume grew marginally from 278,000 to 285,000 (an increase of 2.5%), while RECs bid for sale decreased by 3% to 180,000. This was on the back of significantly lower level of issuance this month – only 87,000 RECs were issued, as compared to 136,000 last month (a decrease of 36%). This is due to low generation (this is a seasonal phenomenon) in wind and small hydro generation. Issuance volumes are expected to grow from next month, once RECs are issued to sugar mills (the crushing season started in early November). Seller participation remained high at 82% of the total RECs available for sale.

Flat demand is a likely indicator that early buyers have met a significant portion of their RPO requirement and are price sensitive (a barrier seems to exist at Rs 3,000/ REC price point). Short of strong enforcement signals, we can expect demand to only spurt in February and March now, when a lot of fence sitters today get into the market for purchases before the end of the compliance period.

High seller participation in the previous month and this, flat demand and expectation of higher issuances next month are pointers that demand and prices have peaked for the meantime.

No Solar RECs were traded this month.

The December trading session was a milestone one for REConnect – we became the largest REC trader in the country.

Press coverage:

Hindu Businessline quoted Vishal Pandya below:

“The price hike has been very marginal, which reflects that the prices are very near to their maturity,” says Mr Vishal Pandya, Director, REConnect Energy Solutions, a consultancy that specialises in facilitating REC trading.

“The future market movement will depend heavily upon how the new demand shapes up as next month onwards we can expect additional supply of RECs coming into the market,” Mr Pandya told Business Line today.


Try India’s First Online RPO Calculator here

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