The Maharashtra Electricity Regulatory Commission (MERC) has directed the Maharashtra State Electricity Distribution Company Limited (MSEDCL) to file a modified request for selection (RfS) for floating open tenders under the Mukhyamantri Saur Krishi Vahini Yojana (MSKVY) program.

Background

The state distribution company had filed a petition with the state Commission seeking approval to float open tenders with a ceiling tariff of ₹3.30 (~$0.04)/kWh. It had also requested the Commission to consider the procurement of power through this process to fulfill its renewable purchase obligation (RPO) targets.

At present, MSEDCL has 4.05 GW of contracted capacity, while 1.11 GW is yet to be signed. To meet its RPO targets, MSEDCL has to procure 5 GW of solar power in the next two years. Out of this, 3 GW has been planned through the MSKVY program.

Considering the benefits of decentralized generation under the program, MSEDCL has floated tenders for solar power procurement through competitive bidding under the program in the past two years.

The tenders floated by MSEDCL have largely been undersubscribed and have exhibited the same pattern for the last two years. Out of the total tendered capacity of 6.5 GW under the program, bids for only 1.87 GW of capacity were received. The power purchase agreement (PPA) for only 250 MW solar capacity has been executed so far, and 283 MW is currently under process.

Considering this, MSEDCL proposed adopting an open tender policy by publishing distribution sub-station wise solar evacuation capacity in the agriculture-dominated districts.

In its submission, the Maharashtra Energy Development Agency (MEDA) added that the individual solar projects installed under the program should be first registered with MEDA.

Commission’s Analysis

The Commission said that to expedite the bidding process, MSEDCL had proposed the methodology of open tenders with monthly frequency.

It noted that the DISCOM had submitted ceiling rates for the bidding process as per the methodology presented by it.

The state regulator said that according to the proposal by MSEDCL, the initial tender document would form the base for all future bidding processes until the targeted capacity is fulfilled. Such an approach will take several months.

“Due to the proposed methodology of continuous bidding until the fulfillment of the target capacity, there is a possibility that bidders will quote only the ceiling tariff, which will be contrary to the intent of competitive bidding. To avoid this, MSEDCL should adopt the approach of other agencies like Solar Energy Corporation of India (SECI), wherein it initially invites the expression of interest (EoI) to assess the scale of bids. If the bids received are less than the anticipated capacity, then bids are called for less capacity (usually 80%) of the EoI received,” MERC added.

MERC added that the DISCOM had proposed the option of providing land to bidders only if three months of continuous bidding process did not offer a satisfactory response. However, the DISCOM already has enough low response experience in the last two years, so instead of waiting for three months, if the land is available, MSEDCL should include it upfront from day one.

Further, the Commission noted that MSEDCL should include a formula for arriving at the per-unit impact of the ‘change in law’ compensation to be recovered over PPA’s tenure.

Given these facts, the Commission directed MSEDCL to make necessary changes to the RfS document to address the issues and submit a fresh petition for the Commission’s approval. It also asked MSEDCL to submit operational details of already commissioned projects under the MSKVY program and whether they have faced any operational difficulty.

In May this year, MERC approved the tariff ranging between ₹3.28 (~$0.043)/kWh to ₹3.30 (~$0.044)/kWh for the procurement of power from 283 MW of solar projects by MSEDCL. The DISCOM had filed a petition to adopt tariffs for the long-term (25 years) procurement of power from 283 MW of projects under the MSKVY program.

Before that, the state reissued a tender for 1,350 MW of solar projects to be developed across 30 districts under the same program. The ceiling tariff has been raised to ₹3.30 (~$0.04)/kWh, up from ₹3.15 ($0.044)/kWh previously.

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