Relief for Adani, TATA & Essar as Gujarat Govt. approves power tariff hike

After a long-pending petition by Adani & Others over power tariff hike, the Gujarat government has given a decision. These power projects will be allowed the power tariff hike by amending their PPAs with Gujarat Urja Vikas Nigam Limited (GUVNL). The ordeal which was ongoing since 2010 has now come to a deciding point and the troubled power projects are given relief.

However, the increase in the tariff will be directly passed on to the consumers at an approximate rate of INR 40 paisa/unit.

TATA & Adani had earlier approached CERC seeking higher tariff on the grounds of their cost going up due to the “Change in Law” in Indonesia in 2010, following a regulation passed by South-East Asia Nation.

However, in 2013 CERC rejected their plea of force majeure and “change in law”, but constituted a committee to suggest payment of compensatory tariff to the power company.

The apex court’s directive was followed by recommendations of a committee constituted by the Gujarat government to look into the possibility of “contribution by each stakeholder, including banks, project developers and procurers, by way of concessions for mitigating hardship”.

Gujarat Solar Power Policy 2015

Gujarat came up with its new solar power policy on 13th August 2015, which would be operative up to March 31, 2020. This new policy intends to facilitate and promote large scale promotion of the solar power generation capacities in the state and the interests of all the investors, developers, consumers and various other stakeholders.

The main features of the Policy are as follows:

-The minimum size of a MW scale project shall be 1 MW and 1 Kw for KW scale projects.

-Any company or group of individuals shall be eligible for setting up a solar generating plant, irrespective of whether they or not fall under REC mechanism in accordance with Electricity Act 2003.

-There are project based provisions and incentives provided for Rooftop solar PV systems with net metering depending on the type of consumers. The same are listed in the table below (Click on the table for a larger view) :

The state is blessed with several natural resources of energy that augments its renewable energy growth. Through its proactive planning on capacity addition front it has successfully managed to eliminate the demand supply deficit. In sync with the solar power policy the Government has also launched the Industrial Policy 2015, through which Government would encourage private participation in all energy generation to meet the growing demands in the state.

The Gujarat power policy document can be accessed here.

The CEA installation and operations of meters regulation 2014 can be accessed  here.

The Industrial Policy document can be accessed here.

GERC RPO Regulation Applicable on Captive and OA consumers

The Gujarat Electricity Regulatory Commission (GERC) in a notification dated 1st July 2015, has made  RPO (Renewable Purchase Obligation) regulation applicable on captive and Open Access consumers of the state.

The quantum of RPO applicable on the OA and Captive users will be same as for the distribution licensee. The percentages of RPO targets applicable in the state are shown in the graph below:

Earlier the RPO regulation was not applicable for Captive and OA users as there were ambiguities among the regulations of various states and the pending court cases by affected stakeholders, caused the major issues for applicability of RPO on such consumer.  But with the recent Supreme Court Judgement (Read here) on the issue has cleared all the major doubts, and as results we have seen good response in the recent trade sessions and also some states coming forward and enforcing RPO regulation on the OA and captive users.

The recent Notification of the GERC can be read here.

 

GERC (Gujarat) Proposes Tariff for Solar Projects

The Gujarat Electricity Regulatory Commission (GERC) in a draft notified earlier this month has proposed tariff for the solar projects. The Tariff proposed in the Discussion Paper will be applicable to the projects commission during July 1, 2015 to March 31, 2018. The commission through a separate public notice has invited comments and suggestions from the interested stake holders by 22nd June 2015.

The details of the tariffs proposed are in the table below:

Below is the graph for comparison between tariffs of CERC and GERC for previous years:

Wheeling Charges:

  • For Injection at 66 kV voltage level and above, transmission charges as applicable to normal open-access customers and transmission and wheeling loss @ 7% of the energy fed into the grid.
  • For Injection at 11 kV or above and below 66 kV, wheeling in the area of the distribution licensee will be allowed on payment of distribution loss @ 3% of the energy fed in to the grid. In the other case of wheeling within the State but in the area of a different distribution licensee will be allowed on payment of transmission charges as applicable to normal Open-Access Customers and transmission and distribution loss @ 10% of the energy fed in to the grid.

Cross subsidy Charges: As a promotional measure for solar power no cross-subsidy surcharges would be levied in case of third-party sale.

It is worth noticing that GERC had calculated its tariffs back in 2012 for coming years I.e. FY 13, FY14 & FY 15, while CERC revises its tariffs every year. The difference visible between tariffs of CERC and GERC for previous years is because the GERC hasn’t revised its tariff after 2012 and it is that period during which the capital cost of the solar modules fell drastically and so the difference didn’t reflect on the tariffs of GERC as it wasn’t revised.

Now the GERC has proposed new tariff which is quite lower (approx. 5.5%) than the tariff finalized by the CERC. A public hearing on the matter will take place on 29th June 2015.

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

 

GERC Maintains Leniency over RPO Compliance

The Gujarat Electricity Regulatory Commission (GERC) in its orders Dated 16th Jan 2015, has given relief to the state distribution companies against their RPO compliance for the year 13-14. The summary of the GERC orders is given below:

 Orders on GUVNL: GUVNL complied with 5.26% out of 6% obligations for non-solar and achieved 2.18% of Solar against 1% obligation. But overall attained a renewable purchase level of 7.44% against the RPO of 7%. Highlighting this the GUVNL requested before the commission to adjust its excess solar energy purchased into the non-compliance in the Non-solar part. While the Indian Wind Energy Association (IWPA) objected saying that this would result in loss for the wind generators as there is huge amount of Non-solar REC’s available for purchase.

 The commission in its order granted the permission for adjusting the excess purchase by GUVNL from Solar against the wind and other category compliance saying that the solar energy is costlier than the Non-solar energy and further more purchase of non-solar renewable would result in an additional burden on consumers of the distribution licensee.

Order on MPSEZ Utilities – MPSEZ Utilities submitted that it is having a revenue gap and therefore the enforcement of RPO on them will further burden the deemed licensees of SEZ areas. The commission in the order said that looking to the nascent stage of operation of the deemed distribution licensees of SEZ and quantum of power requirement by them for fulfillment of RPO, which is very less, so the commission exempted the licensee from applicability of RPO for FY 13-14.

 Order on Torrent Power ltd. – Torrent power submitted that it has complied with RPO of 4.55% in case of Non-solar against total 6%, and solar RPO of .07% against 1% in the regulation. Saying that due to non-availability of Renewable Energy and factors beyond control, which lead to shortfall in RPO compliance for FY13-14. And requested before commission to revise the RPO percentage of FY 13-14 to the actual targets achieved by the company. IWPA in its submission said that the distribution company had the option of redeeming REC’s from exchange, as huge no. of solar and non-solar REC’s are available for sell.

 The commission in the order said that the petitioner has made sufficient efforts to fulfill the solar and non-solar energy and REC’s as well, also said due to non-availability of renewable energy and factors beyond controlled resulted in shortfall in RPO compliance. And said that any further purchase of REC’s will result in the burden for consumers hence we cannot force the petitioner to buy more REC’s. The commission ordered to revise the RPO of the petitioner company as non-solar RPO at 4.55 % and Solar RPO at 0.07 % for FY 2013-14.

 The decision of GERC to allow the defaulted distribution companies, adjusting their non-renewable RPO with their excess solar energy, and waiving off RPO for Deemed Distribution licensees (Torrent Energy Ltd and MPSEZ Utilities Pvt. Ltd.), and also reducing RPO to match the extent of sourced energy, will adversely impact the REC market which is going through a bad stage.

 These steps even though appear to be practical may give other states chance to be more lenient over RPO enforcement, which could result in effecting the renewable industry badly as they rely on strict RPO enforcement. The step of giving solar power beneficial treatment over other RE power could be discouraging to other RE generators. May be the stagnancy in the REC market is the result of domino effect started by GERC and some other regulatory commissions.

The GERC Order on GUVNL & MPSEZ can be accessed here, and the order on torrent power can be accessed here.

GERC Computes Additional Surcharge

Gujarat Electricity Regulatory Commission (GERC) in its order dated 25th September 2014 has computed the additional surcharge payable by the Open Access Consumers for the control period of 1st October 2014 to 31st March 2015.

The order has come as per the GERC Open Access Regulation which states that additional surcharge shall be determined every 6 months periods.

The GUVNL (Gujarat Urja Vikas Nigam Limited) furnished the data to the commission as per the guidelines defined and proposed an additional surcharge of Rs. 0.33/kWh.

The commission in its order based on the data submitted by GUVNL, approved additional surcharge at Rs. 0.26/kWh.

The Additional Surcharge will be applicable to the consumers of MGVCL, UGVCL, PGVCL and DGVCL, who avail power through open access from any source other than their respective DISCOMs and will be applicable for the open access transaction commencing from 1st October, 2014 to 31th March, 2015.

The relevant order can be accessed here.

Our previous blog post on APTEL order on solar tariff of Gujarat can be read here.

Contributed by Dheeraj Babariya.

APTEL’s Judgement on Solar Tariffs in Gujarat

Gujarat Urja Vikas Nigam Limited (GUVNL), had filed a petition before Gujarat Electricity Regulatory Commission in 2013, asking for revision in Solar Tariffs determined by the commission in its order dated 29th January, 2010. The state commission, after hearing the parties, had dismissed this petition.

Aggrieved by this, GUVNL appealed to the Appellate Tribunal for Electricity (APTEL) against the stand taken by GERC. APTEL, after hearing all parties, gave its judgement, on 22nd August 2014, that the petition filed by GUVNL does not hold merit and rightly stands dismissed by GERC.

The following are some of the reasons cited by APTEL for its judgement:

  1. GUVNL quoted reduction of Customs and Excise duties in 2010, to justify reduction in tariff, but it did not approach the commission in 2010. The projects were commissioned by end of 2012, after which GUVNL appealed in 2013.
  2. There is no ‘Change in Law’ clause in the PPA agreement between GUVNL and the project developers.
  3. GERC, while determining the tariffs in 2010, was conscious about the change in environment, and thus fixed the tariff for 25 years, with multiple control periods, so as to review and determine tariffs for each control period as and when required.
  4. Generic tariff order on normative parameters cannot be reviewed for changes that occour during project development.
  5. The project developers have acted as per the tariff order, and withdrawing the incentives now is not justified, as the projects are already running.
  6. PPA can be opened only for giving thrust to renewable energy projects, and not for curtailing the incentives.

As per the Solar Tariff order dated 29th January, 2010, the tariff determined is shown below:

The APTEL judgement can be accessed here.

Gujarat order on Solar Tariff can be accessed here.

Contributed by: Siddhartha

GERC Takes Strict Note on RPO Compliance

Gujarat Electricity Regulatory commission (GERC), has initiated the Suo-Motu proceedings to verify the RPO compliance by the distribution licensees of the state. The Petition has been notified on 11th August 2014, and comments and suggestion have been invited by 30th August 2014 through public Notice. The public hearing will take place on 06th September 2014.

The commission has initiated the Suo-Motu proceedings in response of a petition filed by Torrent Power limited, in which it requested the commission to revise the minimum target of RPO percentage for FY 13-14, to the actual level of compliance achieved by him.

The commission has said that, based on the data furnished by the DISCOM’s it has been observed that the DISCOM’s have complied with the RPO target partially. So the commission has asked DISCOM’s to submit the reasons for their non-compliance of RPO.

In its judgment, the commission gave the reference of a Judgment of honorable APTEL dated 25.04.2014, which can be read as –

“After completion of the financial year, the State Commission has to review the actual performance in respect of RPO and pass necessary direction as per the Regulation either suo-motu or on a petition filed by a party. Such review should be subjected to public notice to invite suggestions and objections of all the stakeholders. Thus, in separate proceeding for annual review of RPO or otherwise by the State Commission either suo-motu or on application from a party, the suggestions and objections of the public should be invited. Accordingly, directed for future.”

The commission may take strict action, if the DISCOMs don’t furnish genuine reasons for their non-compliance.

The GERC Sou-Motu petition can be accessed here

The GERC order on Torrent Power petition can be read here

Contributed by Dheeraj Babariya.

Union Budget FY 14-15 Highlights (Power Sector View Point)

Honorable Finance Minister Mr. Arun Jaitely presented the Union Budget on 10th July, for the financial year FY 14-15. The Finance Minister during his speech of the Union Budget has made some important announcements for the energy industry.

In the Power and Renewable sector perspective, these were the prime focus areas:

  • The Finance Minister extended the 10 year tax holiday for power companies who start production and distribution by March 31, 2017.
  • Rs. 500 crore has been allocated for Setting-up of Ultra Mega Solar Projects in Tamil Nadu, Rajasthan, Gujarat and J&K to promote the Renewable energy.
  • Allocation of Rs. 400 Crore for launching a scheme for solar power driven agricultural pump sets and water pumping stations for energising one lakh pumps.
  • Allocation of Rs. 100 crore for the development of 1 MW Solar Parks on the banks of canals.
  • The Ministry also allocated Rs.100 crore for cleaner thermal energy scheme.
  • Extension of the concessional basic customs duty, of 5 percent, to machinery and equipments required for setting up solar projects.
  • A sum of Rs. 500 cores has been allocated for strengthening of transmission and distribution infrastructure in rural areas under the ‘Deendayal Upadhyaya Gram Jyoti Yojna’.
  • Clean Energy Cess on coal has been increased form Rs.50/ton to Rs.100/ton, to raise more revenue for National Clean Energy Fund, that provides financial support to entrepreneurial ventures and research in the field of clean energy technologies.
  • Apart from these, the government has also said that they are committed to provide 24*7 Electricity to all the households in the country.

As can be inferred from the above, no time frames have been mentioned for some of the above mentioned schemes, but it is expected that concrete guidelines will be laid down with subsequent orders and notifications on the same.

Contributed By: Dheeraj Babariya

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