The Haryana Electricity Regulatory Commission (HERC) has amended the formula for calculating the net worth criteria for selecting a Qualified Coordinating Agency (QCA), which acts as the intermediary between state load dispatch centres and power generators.

The Commission accepted the request of the petitioners, CleanMax and ASK Automotive, to amend the formula for calculating the net worth of QCAs.

It stated that the formula for calculating net worth was leading to a double deduction of liabilities.

The Commission amended Clause 6 (v) of the Procedure for Forecasting, Scheduling and Deviation Settlement of Solar and Wind Generation that requires a QCA to have at least ₹15 million (~$174,386) net worth in the previous financial year.

The Commission replaced the existing formula for calculating the net worth by removing liabilities as a separate section with the following formula:

Net worth = Share Capital + Reserve – Revaluation Reserve – Intangible Asset – Miscellaneous Expenditure to the extent not written off – Carried Forward Losses

Background

Automobile component manufacturer ASK Automotive invested 100% equity in the development of a CleanMax’s 6.6 MW captive solar power project (CMES POWER 2). The captive solar power project was commissioned and received long-term open access from Haryana Vidyut Prasaran Nigam.

The captive power project was set up in CleanMax’s 50 MW solar park and was connected to the pooling substation.

Under Clause 6 of the Procedure for Forecasting, Scheduling and Deviation Settlement of Solar and Wind Generation, the pool generators must appoint a QCA.

Under the same clause, the net worth is calculated as follows:

Net worth = Share Capital + Reserve – Revaluation Reserve – Intangible Asset – Miscellaneous Expenditure to the extent not written off – Carried Forward Losses – Liabilities

However, an error in the methodology used to calculate net worth resulted in a double deduction of liabilities.

The petitioner argued that liabilities had already been deducted from the assets in the form of accumulated losses, as well as deferred and miscellaneous expenditures not written off.

CleanMax informed the Commission that, due to an error in calculating the net worth for QCAs, it had failed to select a QCA.

Due to no QCA being selected, both CleanMax and ASK Automotive informed the Commission that they were incurring enduring losses owing to stranded power.

Commission’s Analysis

The Commission noted the ambiguity in the interpretation of the current net worth formula for selecting QCAs.

It also stated that, due to the miscalculation, liabilities were deducted twice, which was contrary to prevailing legal and accounting standards.

The Commission also noted that, due to the current formula for calculating net worth used for QCA selection, only a few applicants were qualifying for QCA.

The regulator replaced Clause 6 of the Procedure for Forecasting, Scheduling and Deviation Settlement of Solar and Wind Generation with the following text:

“The QCA shall have the capability to handle multiple plant owners connected to a pooling station to be well-positioned to de-pool deviation charges. The financial strength of the QCA shall be such that it shall be in a position to handle the risk of penalties due to deviation charges applicable to pool generator. Considering this, the net worth of the QCA shall be at least ₹15 million (~$174,386) in the previous financial year (Net worth = Share Capital + Reserve – Revaluation Reserve – Intangible Asset – Miscellaneous Expenditure to the extent not written off – Carried Forward Losses), which shall reflect from its audited accounts duly certified by the Charted Accountant.”

Recently, the HERC issued regulations on the Deviation Settlement Mechanism and related matters to maintain grid discipline and security.

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