CERC Approves a Tariff of ₹2.53 for 1,170 MW Wind-Solar Hybrid Projects
The Commission also endorsed a trading margin of ₹0.07 ($0.00084)/kWh
The Central Electricity Regulatory Commission (CERC) has approved a tariff of ₹2.53 ($0.03)/kWh for a combined capacity of 1,170 MW from wind-solar hybrid power projects of the Solar Energy Corporation of India Limited (SECI). The commission also approved a trading margin of ₹0.07 ($0.00084)/kWh.
The commission has referenced a previous ruling from the Appellate Tribunal for Electricity (APTEL) to assert that the respondents cannot seek relief related to Changes in Law within the scope of the petition submitted by SECI. If they intend to pursue claims associated with changes in law, they must file separate petitions.
SECI filed a petition seeking the approval of a tariff for 1,170 MW wind-solar hybrid power projects (Tranche-V) integrated with the Inter-State Transmission System (ISTS).
SECI floated a tender, along with draft power purchase agreement (PPA) and power sale agreement (PSA) documents, on October 21, 2021.
PPAs were executed between SECI and these successful bidders, with the expectation that the hybrid power projects would be commissioned within 24 months from the effective date of the PPAs.
Additionally, SECI entered PSAs for the entire capacity with distribution licensees, namely MPSEZ Utilities Limited (MUL) and CESC. As per the PSAs, SECI is entitled to a tariff, including the trading margin, to be paid to the distribution licensees.
The matter was heard on August 10, 2023, and following this, the developers were directed to submit their replies, which they have filed since.
Change in Law
In their response dated August 21, 2023, TPSL, a subsidiary of Tata Power Renewable Energy (TPREL), raised a point regarding specific legal developments that transpired after the bid registration for the project on August 3, 2022. Of particular significance was the introduction of an amendment to the Project Import Regulation (PIR) in 2022, which occurred on October 19, 2022, during the customs department’s evaluation of TPSL’s application.
This amendment had implications for the project as it pertained to Basic Customs Duty (BCD), a tariff imposed on imported goods. The changes in customs regulations subsequent to the bid registration could potentially impact the project’s financial considerations and import-related aspects.
TPSL said this amendment removed its ability to benefit from reduced customs duty when importing solar cells and other essential components for the project.
On November 5, 2022, the Karnataka government issued a recommendation letter to TPREL, enabling them to avail themselves of the concessional customs duty rate under the PIR 1986 regime. In alignment with the PIR Amendment 2022, the Central Board of Indirect Taxes and Customs (CBIC) notified the PIR Amendment 2023 on February 1, 2023, which excluded solar power projects from the benefits outlined in the PIR 1986.
As a result, TPSL would no longer enjoy the reduced customs duty rate and would be required to pay a higher Basic Customs Duty (BCD) of 25%, along with applicable Cess and GST, as per the Office Memorandum issued by the Ministry of New and Renewable Energy (MNRE) on March 9, 2021.
The PPA’s definition of Change in Law applies to the PIR Amendments of 2022 and 2023, which were issued by the ‘Indian Governmental Instrumentality’ as mandated by the PPA.
These amendments prevented TPSL from registering its project under the PIR Regime, making the higher BCD rate applicable to their project. This Change in Law event occurred after the bid submission date of January 4, 2022, resulting in additional costs for TPSL, whether recurring or one-time expenses.
Consequently, TPSL contended it is eligible for a tariff adjustment payment.
Two other developers, AMP Energy Green Private Limited and AMP Energy Green Ten Private, also addressed specific legal changes known as Change in Law events. These events encompassed amendments to the Project Import Regulation in 2022 and 2023, as well as the Working Group Report (WGR) release in 2022.
NTPC Renewable Energy also discussed the Change in Law event, specifically the issuance of the WGR.
The commission noted that SECI floated its tender based on the solar-wind hybrid guidelines notified by MNRE.
In terms of Section 63 of the act, the Commission is required to adopt the tariff on being satisfied that the transparent bidding process in accordance with the guidelines issued by the Union government has been followed in determining such tariff.
The commission noted that SECI is the nodal agency and is responsible for overseeing the MNRE program for ISTS, state-specific wind/solar power projects, and wind-solar hybrid projects and serves as an intermediary for buying and selling power under agreements.
On July 12, 2022, SECI awarded letters to three chosen bidders following the e-reverse auction and tariff determination process.
In response to requests from distribution licensees and buying utilities, 1,070 MW was assigned to MUL, and 100 MW was assigned to CESC. Subsequently, SECI entered into a PSA with MPSEZ Utilities on January 5, 2023, and another PSA with CESC on January 11, 2023.
SECI mentioned that they made two changes in the bid documents. First, Clause 10.1 of the RfS (which matches Article 4.5.2 of PPAs) did not include a specific rule in Clause 17.4 of the hybrid guidelines. This rule from the hybrid guidelines says that certain infrastructure must be completed by a certain date to align with the project timeline.
SECI said it made a change in the timeline for completing projects. The hybrid guidelines originally stated that projects had to be completed within 18 months from the PPA signing date. However, in the bid documents, SECI extended this timeline to 24 months from the effective date of the PPAs.
The Commission noted the hybrid guidelines require the evaluation committee to make sure the bidding process and evaluation follow the rules mentioned in the tender.
It also acknowledged that SECI had given two certificates: one says the Bid Evaluation Committee followed RfS rules during technical, commercial, and financial evaluations, and the other confirms they followed the guidelines, amendments, and clarifications without any changes.
Therefore, in accordance with Section 63 of the Act, the Commission approved the individual tariff for the Hybrid Power Project, as accepted by the successful bidders. This tariff is part of the PPAs signed by SECI with the distribution licensees and will remain valid for the duration specified in the PPAs and PSAs.
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