Maharashtra Proposes Grid Charges on Net Metering Rooftop Solar Systems Over 10 kW

MSEDCL argues that net metering has created additional pressures for distribution licensees


In a significant development that could have huge implications on the state’s rooftop solar segment, the Maharashtra State Electricity Distribution Company Limited (MSEDCL) has proposed considerable grid support charges (GSC) for net metering rooftop solar systems with a capacity of over 10 kW.

MSEDCL, in its petition, said that though net metering helps in meeting the renewable purchase obligations (RPO) targets, the adverse impact of net metering is much more on other consumers of MSEDCL due to the under-recovery of its infrastructure costs for such systems.

It added that rooftop solar systems had become a challenge. The installation of these systems not only reduces the utilization of MSEDCL’s distribution network but also disrupts the power planning and results in the stranded tied-up capacity of generation.

Consequently, it said, net metering consumers, end up paying much lower charges for the network and generation capacity, which was earlier set up for all consumers. The burden of unrecovered expenses gets passed on to other consumers of MSEDCL, the state DISCOM argues in its petition.

MSEDCL added that a part of the fixed cost is being recovered through wheeling charges on a per unit basis. Solar energy is generated during the daytime, and after self-consumption by the consumer, the balance of the electricity is fed into the grid. Due to its combined impact, the utility has to back down thermal generation but is obligated to pay the same fixed cost to generators. When there is no solar generation (evening, seasonal change, a technical problem in the system, etc.), the consumer draws full power as required from the grid and the utility has to keep the network and generators ready to feed this demand. The consumer is using the grid as a storage system for his solar rooftop arrangement under net metering and at the same time loading the balance of the costs on other consumers of the distribution utility such as generators fixed cost and infrastructure cost recovery. So, the burden of such unrecovered expenses from net metering systems is passed on to the other consumers of MSEDCL.

Further, the state DISCOM argued that the net metering facility is per-unit by high-end (LT/HT) consumers which are subsidizing consumers and if there is any decrease in consumption by these high-end consumers from the distribution licensee, it has a direct impact by an increase in tariff of all consumers due to the under-recovery. With increased net metering system installations, an increasing number of consumers are becoming subsidized consumers.

“The exponential rise in the use of net metering will greatly affect the delicate tariff structure designed in line with the Electricity Act and National Tariff Policy with the provision of cross-subsidy mechanism for giving supply to poor consumers and agricultural consumers at low tariffs. Thus, the cross-subsidy balance inbuilt in the tariff structure will get disturbed,” MSEDCL stated in its petition.

The charges for rooftop net metering arrangements will vary depending on the approval of any cost component that affects MSEDCL’s tariff, prevailing REC rates, among other things. The RPO benefits will be adjusted at the year-end during the time of settlement of banked units and after the assessment of the REC requirement.

The MERC Grid-Interactive Rooftop Renewable Energy Generating Systems Regulations, 2019, also talks about the levy of grid support charge.

The clause says:

“The Commission may determine in the retail tariff order such grid support charges to be levied on the generated energy under net metering systems which should cover balancing, banking, and wheeling cost after adjusting the RPO benefits avoided distribution losses and any other benefits accruing to the distribution licensee. These grid support charges would be determined consumer tariff category wise, based on the proposal of the distribution licensee in its retail supply tariff petition, supported by adequate justification.”

Maharashtra’s net metering regulations 2019 also say that the consumers having a sanctioned load up to 10 kW will be exempted from the payment of grid support charges for net metering systems. Such loss from the exemption, says MSEDCL, should be recovered from the consumers having a sanctioned load above 10 kW to avoid the burden on the consumers that do not have net metering.

According to the MSEDCL’s proposal, the charges range from ₹4.46 (~$0.06)/kWh to ₹8.66 (~$0.12)/kWh for domestic consumers and between ₹5.06 (~$0.07)/kWh and ₹8.76 (~$0.12)/kWh for commercial consumers. For industrial consumers, the variation would be between ₹3.60 (~$0.05)/kWh and ₹4.08 (~$0.06)/kWh.

MERC - Grid Support Charges for Net Metering Systems

MSEDCL has proposed the additional fixed/demand charges for rooftop solar consumers,+ not opting for net metering or net billing arrangement.

MERC - Additional Fixed-Demand Charges for Rooftop Solar Systems not opting for Net Metering or Net Billing Arrangement

In addition to the fixed charges, MSEDCL also proposes that the subsidizing consumers also pay cross subsidy surcharge for compensating the consumers for the current level cross subsidy.

The state was recently in the news for the uproar created over its new net metering draft order in which the government proposed to roll back net metering facility for all segments except residential.

Earlier, it was reported that the MSEDCL highlighted that of the 288.8 MW rooftop solar capacity installed as of March 2019, only 11.13 MW (4% of the total capacity), has been installed by the residential segment while the other subsidized consumers have installed the remaining 96%.

Solar installers in the state vehemently opposed this suggestion. They feared that if the draft regulation got approved and implemented in Maharashtra, it would result in the “complete death of the rooftop solar industry.”

If MSEDCL’s proposal to implement these grid support charges reaches fruition, it could further agitate the net metering segment of the state.

Aditya K Singh, an advocate at HSA Advocates, told Mercom, “Developers should challenge the constitutionality of provision which permits MSEDCL to levy grid support charges before High Court. Developers will have to differentiate their case from captive power plants for which APEX Court and Appellate Tribunal have validated grid support charges/parallel operation charges (Transmission Corporation of Andhra Pradesh Limited Vs Rain Calcining & Ors.: Civil Appeal No. 4569 of 2008-Supreme Court of India; Shree Renuka Sugars Limited Vs Gujarat Energy Transmission Corporation Limited: Appeal No. 39 of 2014). MERC should not be permitted to do indirectly what it cannot do directly. The bare reading of charges proposed by MSEDCL reflects that it is creating an unreasonable restriction on solar rooftop consumers from installing solar rooftop.”

Even though distributed generation and especially rooftop solar have multiple benefits from reducing air pollution, T&D losses, meeting RPO goals, and providing freedom for consumers to generate their own power, states have been discouraging net-metering and making it very difficult for rooftop installations.

“As we are seeing around the world, unless utilities take the lead and embrace the shift of power generation from fossil fuel to renewables, they will eventually become obsolete as solar and battery storage costs continue to come down,” said Raj Prabhu, CEO of Mercom Capital Group.

Image credit: Ravin Infraproject

Anjana is a news editor at Mercom India. Before joining Mercom, she held roles of senior editor, district correspondent, and sub-editor for The Times of India, Biospectrum and The Sunday Guardian. Before that, she worked at the Deccan Herald and the Asianlite as chief sub-editor and news editor. She has also contributed to The Quint, Hindustan Times, The New Indian Express, Reader’s Digest (UK edition), IndiaSe (Singapore-based magazine) and Asiaville. Anjana holds a Master’s degree in Geography from North Bengal University, and a diploma in mass communication and journalism from Guru Ghasidas University, Bhopal.