BENGALURU: Karnataka’s power regulator has finally started approving old power purchase agreements (PPAs) with wind energy developers, kindling hopes that discoms and regulators will stop resisting older PPAs on grounds of steep fall in tariffs in recent auctions for such projects.
Karnataka Electricity Regulatory Commission (KERC) has endorsed at least one wind energy power purchase agreement (PPA) at the original tariff of Rs 4.50 per unit, ending a month-long dispute with the state government. MK Shankarlinge Gowda, chairman at KERC, however, said, “There will be no blanket approval of all the PPAs. We are evaluating each project on a case-by-case basis.”
One wind energy developer, whose PPA with a Karnataka discom has yet to be endorsed by KERC, said it has received communication from the discom that its PPA would be approved at Rs 4.50 per MW following payment of a processing fee.
ET has seen a copy of the letter dated November 23 where the discom has stated that 270.5 MW of PPAs signed before March 31, 2017, would be approved at the old tariff. Discoms and regulators are reluctant to honour older PPAs because of a fall in proposed tariffs in later auctions.
Ministry of New and Renewable Energy (MNRE) had in August wrote to seven main wind energy producing states to ensure that PPAs signed at higher tariffs — when capital costs were also higher — were approved and duly honoured by their regulators and discoms.
In Karnataka, the dispute arose after KERC passed an order on September 4, setting a fresh wind energy tariff of Rs 3.74 per unit, terminating its earlier order of February 2015 that had fixed the tariff at Rs 4.50 per unit. The lowering of tariff was prompted by wind energy auctions held by Solar Corporation of India (SECI) under MNRE, which saw winning tariffs drop sharply.
KERC declared that all PPAs it had not yet approved would be passed only at the new tariff of Rs 3.74 per unit. This created a problem for 599 MW of PPAs, which had been signed with various discoms in Karnataka at a tariff of Rs 4.50 per unit, but were awaiting KERC approval.
Of these, 270.5 MW of projects had PPAs signed and had even been commissioned before March 31, 2017, and were already supplying power at the tariff of Rs 4.50 to Bangalore Electricity Supply Co (Bescom) and Hubli Electric Supply Co (Hescom).
The developers concerned balked at renegotiating their tariffs, and the Karnataka government agreed with them.
In end-October, the government invoked Section 108 of the Electricity Act — which allows the state government to give directions in the ‘public interest’ to the power regulator, which otherwise is a statutory, autonomous body — to insist that the 270.5 MW should be approved at the old rate of Rs 4.50 per unit.
KERC, in response, had questioned whether such an order was indeed in the ‘public interest’ and cited high court judgments saying state governments could not interfere in tariff matters. The Karnataka government had replied that in this case, the tariff was indeed a matter of public interest. Now, KERC seems to be finally falling in line with the government.