Telangana releases draft RPO policy for the first time

Telangana State Electricity Regulatory Commission (TSERC) has released draft regulations for the compliance of Renewable Purchase Obligations for the state. These regulations are first of its kind in the state. Before this, the state was following RPO percentages determined by APERC (Andhra Pradesh Electricity Regulatory Commission) through its latest regulation.

 

Comments on these regulations are invited till 9 February 2018.

 

The RPO percentages determined in the regulation are as follows:

In the order, the RPO percentages were only given in terms of total of both solar and non-solar percentages. As per the National Tariff Policy 2016, the solar RPO percentage for states across the country shall reach 8% whereas in the mentioned order, the total RPO percentage (including solar and non-solar is 7.5% ie. 0.5% lower.

The RPO trajectory declared by TSERC as compared to that declared by MoP  for the FY 2018-19 can be seen below:

 
The draft regulation can be accessed here. The public notice can be accessed here.

Telangana Solar Power Policy 2015

The Government of Telangana has recently announced its new solar policy. The new policy will be known as The Telangana Solar Power Policy 2015. The new Policy will come in force from the date of issue and will remain in operation for five (5) years and all the Solar Projects that are commissioned during the operative period will be eligible for the incentives declared under this policy, for a period of ten (10) years from the date of commissioning.

Objectives of the Policy:

The objective of the Policy includes long term energy security, sustainable fuel for energy generation, promoting solar parks in the state and promoting investment in the solar sector. The policy also targets on promoting distributed and decentralized generation and off-grid solar applications.

For availing benefits under this policy, power generated through solar projects has to be consumed within the state.

Applicability of the Policy – This solar policy shall be applicable for the following solar projects set up within the state –

1)      Solar Power Projects:

a) Grid connected solar power projects based on both Photo Voltaic (PV) as well as Solar Thermal technologies

  • Projects set up for sale of power to TSDISCOM’s.
  • Projects set up for sale of power to third parties within the state.

b) Projects set-up for captive generation/ group captive generation (including those funded and owned by developers).

2)      Solar Roof-top Projects (SRPs) (Grid connected and off grid) – This includes projects which are funded and owned by developers.

3)      Off grid applications.

4)      Any other project which is established based on MNRE/GOI Schemes as amended from time to time.

5)      Solar Parks.

 Incentives Offered:

  • Exemption from the payment of Electricity Duty.
  • Deemed Industry Status will be provided.
  • Pollution Clearance.
  • Facilitation of expeditious approvals through single window clearance.
  • Open Access will be allowed.
  • Exemption from Land ceiling Act.
  • Deemed conversion to Non-agricultural land status.
  • 100% refund of VAT/SGST and 100% refund of Stamp Duty for land purchased for setting up solar project and/or solar park.
  • Exemption from wheeling Charges for captive use within the state.
  • Exemption from payment of Cross Subsidy Surcharge for third party sale within the state.
  • Banking for 100% of energy during all 12 months of the year with must run status for Solar Power Projects.
  • Deemed Public Private Partnership (PPP) Status..
  • Non Agriculture Status for the land where Solar Power Projects will be accorded.

The policy also mentions that solar parks will host solar manufacturing, R&D centers, training facilities and financial institutions within the solar parks.

Surprisingly the policy does not talk about the REC and RPO schemes and its benefits. Also it does not give any specific guidelines about the projects to be developed under REC mechanism, which appears to be serious shortcoming.

The policy offers good number of incentives to the project developer, in terms of tax relaxations, must run status, exemptions from various charges, single window clearance etc..

Considering the state, having a huge potential of 20 GW for solar energy generation, the policy might bring substantial investment in the state. Recently the state invited bids for 2000 MW of solar projects. Now as the policy is offering numbers of incentives to the stake holders, the projects in line might see good response from the investors and stake holders.

The final state solar policy 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

 

TSERC New CSS for FY 2015-16

Regulatory Commission (TSERC) has calculated the Cross subsidy surcharge to be applicable during FY 15-16. The new CSS will be applicable only for the state of telangana.

There was no CSS applicable in telangana till last FY. The new CSS applicable, will have significant impact on the open access power market.

The telangana solar and wind policy are in waiting, will be announced soon, it will be interesting to see whether CSS will be waived off for RE sources or not.

The order can be accessed here.

Telangana Finalizes Tariff for FY 15-16

The Telangana Electricity Regulatory Commission (TSERC)has notified its finalized tariff for the financial year 15-16. The new tariff will be applicable in the Telangana state.

Below are the graphs showing comparison between tariff determined for FY 15-16 & tariff of FY14-15, and graph on the % change in Tariff.

 Wheeling charges: The TSERC has also finalized the wheeling charges & wheeling losses which will be applicable for FY 15-16, are given in the tables below:

The tariff order notified by the commission does not include cross subsidy surcharge and other applicable charges.

The tariff order can be accessed here.

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.

APERC Approves Fixed Cost Tariff for Biomass

APERC (Regulatory Commission for the states of Andhra Pradesh and Telangana) on 19th July 2014 has rolled out an order determining the fixed cost component of the tariff Payable for the Biomass from the 11th year to 20th year of Operation.

The Details on the tariff approved is as below:

The average escalation is 4.7% over the 10 years.

The Honourable commission has ordered that an incentive of Rs 0.50 per unit for all generation above 80% PLF shall be paid by the concerned DISCOM to the all such generators. The commission also directed that the Electricity Duty paid by the Biomass project developers during this period shall be reimbursed.

More detail on the order can be accessed here.

Our previous blog post on the variable cost here.

Contributed by Bhanu Tejja

Impact of Andhra Pradesh Reorganization Act, 2014

The Andhra Pradesh Reorganization Act, 2014 came into effect from 2nd June, 2014 and the new states of Andhra Pradesh and Telangana came in to existence from that date.

Reorganization Act 2014, Anantapur and Kurnool Districts which previously fell within the jurisdiction of APCPDCL have been reassigned to APSPDCL.

Before Bifurcation                         After Bifurcation

1.       NPDCL                                    1. TGNPDCL

2.       CPDCL                                    2. TGSPDCL

3.       EPDCL                                    3. APNPDCL

4.       SPDCL                                    4. APSPDCL

1.       Impact of Bifurcation                                                                            

Thus, consequent to the amended AP Reorganization Act 2014, the jurisdiction of the DISCOMs have been altered. Correspondingly,

  • Power purchase quantity of each Discom
  • Power purchase cost of each Discom
  • Aggregate Revenue Requirement of each Discom
  • Subsidizing and subsidized consumers

Included in the filings of each Discom will undergo corresponding changes, along with the volume of power supplied to subsidized consumers. All these changes will feed into the cost of service for each DISCOM, which will impact the level of subsidy to be provided to each DISCOM.

2.       Share of Powers between DISCOM

Following substation will be become Inter Discom Points between APSPDCL and TGSPDCL.

  1. 11 KV feeder originating from TGSPDCL Substation of Mahbubnagar District is feeding power to Kurnul District.
  2. Two 11 KV feeders originating from APSPDCL SS of Kurnul District are feeding power to Mahbubnagar District.
  3. Two 11 KV feeders Originating from Srisailam Right Bank of APGNECO are situated in Kurnool District but serving power to consumers of Mahbubnagar.

Commission has granted permission to avail interstate transaction between APSPDCL and TGSPDCL using existing Infrastructure and energy settlement till March 2015. If power plant is connected at any of these feeders, the contradiction arising out of geographical location has to be resolved.

Further, the respective shares of power allocated between the four Discoms originally fixed in G.O.Ms.No.58, dated 07.06.2005 under the 3rd Transfer scheme has been amended in G.O.Ms.No.20, dated 08.05.2014. As per the GO, the revised share of 46.11% for Seemandhra is higher than the existing allocation of 38.07% (increase of 8.04%), while the new 53.89% allocation for Telangana is lower than the existing 61.93% allocation. Allocation of power to new DISCOMS is another political issue.

4.       Merit Oder Dispatch and Energy Settlement codes: 

A common merit order dispatch month wise for all Discoms. i.e., for entire state has been previously considered by the Commission in its earlier examination of the filings. This merit order dispatch is no longer relevant in the light of the creation of the two new states of Andhra Pradesh and Telangana and the respective DISCOMs have to redraw the merit order dispatch for the two states separately.

Energy settlement codes and polices of old AP may be redefined.

5.       Tariff Order for FY-14-15 :

Thus, the existing tariff filings mentioned in the reference cited, which were a valid base for the Commission to issue a Retail Supply tariff order on 29.03.2014 have now been overtaken by events and the creation of two new states. These filings can no longer be considered by the Commission for the purpose of determining tariffs because the jurisdiction of the four DISCOMs in the two new states has been changed. Significant Policies involving budgetary Support need to be confirmed by newly formed states.

6.       Impact of Subsidy:

Further the DISCOM filing contains zero tariff proposals for certain categories of consumers. This zero tariff was proposed as per then extant policy of the erstwhile Government of Andhra Pradesh which anticipated payment of subsidy to meet the deficit u/s 65 of the Electricity Act, 2003.

In this scenario, subsidies and polices of new state will have impact on Cross Subsidy Surcharge. For the new state it is more likely that subsidies will be announced which will have impact on CSS.

Under this condition it is difficult to predict Impact of Bifurcation on existing PPAs.

Contributed by Nikhil Dhamankar.

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