The Central Electricity Regulatory Commission (CERC) has approved tariffs ranging from ₹2.56 (~$0.028)/kWh to ₹2.57 (~$0.029)/kWh discovered at NHPC’s auction for setting up 1,200 MW interstate transmission system (ISTS)-connected solar projects.

For the additional 1.2 GW under the greenshoe option, ₹2.56 (~$0.028)/kWh was approved only for 800 MW of capacity. The Commission limited the capacity allotted to one of the selected bidders, Avaada Energy, under the greenshoe option to 350 MW.

It also approved a trading margin of ₹0.07 (~$0.00078)/kWh, provided it was agreed to by the distribution companies (DISCOMs), and NHPC provides an escrow arrangement or an irrevocable, unconditional, revolving letter of credit to the selected bidders.

Background

The petitioner, NHPC, had issued a request for selection in May 2024 for setting up 2,400 MW ISTS-connected solar projects anywhere in India, including a greenshoe option of 1,200 MW.

It received eight online bids from five bidders. Onward Solar Power, Jevargi Solar Power, Essar Renewables, Avaada Energy, and Mahindra Susten’s subsidiary Migos Hybren were selected after the e-reverse auction, with discovered tariffs ranging from ₹2.56 (~$0.028)/kWh to ₹2.57 (~$0.029)/kWh. The selected bidders were allotted a capacity of 1,200 MW.

The petitioner proposed allocating an additional 1,200 MW of capacity to the successful bidders under the greenshoe option.

After the first round of queries, it allotted 50 MW to Onward Solar, 100 MW to Jewargi Solar, 300 MW to Migos Hybren, and 350 MW to Avaada Energy, leaving 400 MW unallocated.

Following the second round, NHPC allocated 400 MW to Avaada Energy, increasing its allotted capacity under the greenshoe option to 750 MW. Avaada Energy was the only bidder willing to opt for this unallocated capacity.

Following this allocation, the petitioner issued letters of award to the five selected bidders.

The petitioner approached the Commission to approve the discovered tariffs and a trading margin of ₹0.07 (~$0.00078)/kWh. It had delayed in approaching the Commission for tariff approval by 76 days.

It submitted that the tariffs were discovered through a transparent and competitive process that adhered to the government’s bidding guidelines.

The petitioner also contended that the discovered tariffs were lower than the procurement cost of conventional power by DISCOMs, even after adding the trading margin.

On the delay in approaching CERC for tariff approval, the petitioner requested condonation of delay. It stated that internal approvals and filing formalities took time. It added that DISCOMs were reluctant to grant procurement consent due to the availability of surplus solar power, which contributed to the delay.

Commission’s Analysis

The Commission directed the petitioner to strictly adhere to the mandated timelines for approaching it for tariff approval in the future.

It noted that the tariffs were discovered through a transparent and competitive bidding process that complied with the government’s bidding guidelines.

However, the Commission observed that the 750 MW allocated to Avaada Energy under the greenshoe option exceeded the originally envisaged allocation amount. It stated that this allocation might raise concerns regarding the transparency, consistency, and equal treatment of bidders under the greenshoe option.

CERC adopted the discovered tariffs while restricting the capacity allocated to Avaada Energy to 350 MW, as was decided after the first round of queries.

The Commission noted that the central government guidelines did not expressly provide for or define the greenshoe option. It directed all renewable energy implementing agencies, including NHPC, to approach the Ministry of Power for clarification on the greenshoe option. This would include how the capacity under this option would be allocated.

This would also include clarification on limiting the allocation of additional greenshoe capacity to up to 50% of the originally allotted capacity, specifically where surplus capacity remains due to non-acceptance by other bidders.

The Commission also approved the ₹0.07 (~$0.00078)/kWh trading margin, provided that the DISCOMs agreed to it. However, if NHPC fails to provide the successful bidders with an escrow arrangement or an irrevocable, unconditional, revolving letter of credit, the trading margin will be capped at ₹0.02 (~$0.00022)/kWh.

Recently, CERC initiated suo motu proceedings against several interstate transmission licensees following extensive non-compliance with mandatory performance reporting requirements under the regulatory framework.

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