In Bihar, DISCOMs Penalized for Not Fulfilling RPO Shortfall

The order comes following the review of a petition submitted by Bihar State Power Holding Company


Recently, the Bihar State Power Holding Company Ltd. (BSPHCL) wrote to the state’s electricity commission BERC seeking its approval to carry forward the shortfall in the renewable purchase obligations (RPO) for the financial year 2018-19 to the next year.

The commission has dismissed the petition and decided to penalize the DISCOMs instead.

Government agencies in India are taking RPO compliance cases seriously, and we are seeing more and more compliance cases being taken up by state electricity commissions.

The Case

BSHPCL had petitioned the state body on behalf of the North Bihar Power Distribution Company Limited (NBPDCL) and South Bihar Power Distribution Company Limited (SBPDCL).

In the petition, it was mentioned that the two distribution companies (DISCOMs) have tied up for renewable power with the Solar Energy Corporation of India (SECI), National Thermal Power Corporation (NTPC) but the renewable energy from them will be made available to Bihar only after FY 2020-21.

The DISCOMs have also purchased solar renewable energy certificates (RECs), but as they could not get the required number of solar RECs, they are now unable to comply with their solar RPO for FY 2018-19 fully.

The BERC observed that it is evident that the solar RECs were available on the exchanges at floor price right from April 2018 to November 2018, but no attempt was made to purchase them. For the first time, DISCOMs attempted to purchase RECs at the end of FY 2018-19, when the price of RECs was already higher than the floor price, and the bid price offered by the DISCOMs fell below the market clearance price. Consequently, they could not purchase the solar REC at the quoted price.

In its order, the commission noted that it is evident that the solar RECs were available in the market and the cost of solar REC was higher than the floor price but lower than the forbearance price as determined by the CERC order dated March 30, 2017. Therefore, the reason cited for non-fulfillment of solar RPO in FY 2018-19 does not seem to be acceptable.

The commission also stated that both the DISCOMs had earlier sought approval to carry forward the shortfall in RPO as part of the tariff petition for FY 2018-19, and it had declined the proposal in the tariff order dated February 25, 2019.

Commenting on the lackluster approach of the DISCOMs, the commission noted that had they made sincere efforts to fulfill the RPO obligations in the light of the amended provisions of the regulations (which were in the knowledge of the petitioner), this situation would not have arisen.

In its order, the BERC stated, “The unfulfilled RPO will be dealt according to BERC (RPO, its Compliance and REC Framework Implementation) Regulations. According to the regulations, if an obligated entity does not fulfill the RPO during any year and does not purchase the certificates, it will have to deposit an amount the commission will determine on  the basis of the shortfall in units of RPO and the forbearance price decided by the CERC into a separate fund, to be  created and maintained by such obligated entity.”

In November 2018, the BERC had revised the regulations about RPO compliance and REC framework implementation.

Unlike other cases recently where government agencies have been allowed to comply with RPOs retroactively, this is a welcome decision taken by BERC which sends a strong message that RPO compliance will be strictly enforced.