Disagreement on Trading Margin Puts Sale of 50 MW of Wind Energy in Limbo
DNH Power Distribution Corporation and SECI failed to arrive at a consensus regarding the trading margin
October 13, 2020
The Joint Electricity Regulatory Commission (JERC) for the state of Goa and union territories has dismissed DNH Power Distribution Corporation Limited’s (DNHPDCL) request seeking the approval of the power sale agreement (PSA) for the purchase of 50 MW of wind power from the Solar Energy Corporation of India (SECI).
DNH Power had filed a petition for the approval of the PSA for the purchase of 50 MW wind power from SECI on a long-term basis. Both parties had executed the PSA on August 29, 2018.
The Central Electricity Regulatory Commission (CERC) had adopted the tariff discovered through the competitive bidding process. However, it had rejected the request to adopt the trading margin of ₹0.07 (~$0.0009)/kWh. The central regulatory body had noted that the issue of trading margin should be decided by mutual consent between the concerned parties.
DNH Power had argued that the trading margin of ₹0.07 (~$0.0009)/kWh was on the higher side and, in the long term, would be detrimental to the interest of the consumers.
After hearing both the parties, the Commission, on June 23, 2020, directed them to arrive at a consensus on the trading margin value and asked them to file an affidavit regarding the mutually agreed value within two weeks.
The affidavit was not filed by both parties within the stipulated time. In its order dated September 02, 2020, the Commission further gave them two weeks to file the affidavit. It noted that the inability to file the affidavit means that both parties have failed to reach a consensus on the trading margin.
Taking all these facts into account, the Commission dismissed DNH Power’s plea to approve the PSA signed with SECI to purchase 50 MW of wind power since no consensus could be reached on the trading margin.
Mercom’s Renewable Energy Regulatory Updates points to a previous CERC order where CERC declined to approve the trading margins of ₹0.07 (~$0.0009)/kWh for SECI for the duration of the PSA and instead put the onus on both the parties to mutually decide on the trading margin. The CERC has been asking the contracting parties to mutually agree on the trading margin in many cases ever since in its tariff approval hearings.