GERC waives RPO shortfall; second year of non-compliance

In a very disappointing order, the Gujarat State Electricity Commission (GERC) decided to waive off the shortfall in RPO for the year 2012-13. In a petition filed by the Discoms, they had asked for a waiver on the grounds that not enough RE capacity was commissioned in the state and even from those commissioned, several developers opted for the REC mechanism. GERC interpreted CERC’s REC regulations to apply mainly to non-RE resource states.

Its order states:

“From the above [reading of the CERC regulations], it transpires that the REC was introduced for the fulfillment of RPO for the States who are not having geographical conditions which is suited for RE generations and due to which they are unable to comply with the RPO envisaged in NAPPCCC and the Electricity Act, 2003. However, the State of Gujarat has very high potential of wind and solar generation. But the distribution licensees in the State could not fulfill their non-solar RPO due to lower capacity addition and unwillingness of the Wind Generators to supply electricity at the preferential tariff determined by the Commission. Under such a condition, procurement of RECs, would unjustifiably burden the consumers of the State.”

It is interesting to note that in the assessment of RPO compliance for the year 2011-12, GERC had allowed a roll-forward of RPO on the grounds that sufficient RECs were not available.

From the order of 2011-12:

“Non-compliance was primarily due to non-availability of RE power. Though the REC mechanism has been introduced to meet such contingency, availability of RECs was also not adequate. Further, no solar REC was available during the F.Y 2011-12. We, therefore, decide to carry forward the shortfall in procurement of renewable energy during FY 2011-13 by the aforesaid entities to FY 2012-2013.”

Further, GERC’s regulations clearly provide that purchase of RECs is a valid way to meet RPO. This year, GERC even decided to do away with the formality of a roll-forward and instead waived the entire shortfall:

“As pointed out above, both GUVNL and Torrent Power have made sincere efforts to fulfill their obligation under the RPO Regulations. They have been able to establish the fact of non-availability of renewable energy power in the market and also the lack of interest on the part of renewable energy power generators in concluding Power Purchase Agreements with the utilities despite the revision of the wind tariff by the Commission.”

“Any carry forward of the same would add to the burden on the licensees and the consumers. In view of the above, we decide to revise the RPO for the year 2012-13 at actual for the year as a special case in view of the prevailing market conditions at that time.” In our opinion, the order will certainly set a bad precedent for RPO compliance. It is second year in a row that GERC has shied away from enforcing RPO. It provides a strong incentive to Discoms in Gujarat to do even less in the coming year towards fulfilling its obligations.

The order can be read here

Relevant media article – Business Week