BENGALURU: Wind power developers in Karnataka are up in arms over a September 4 tariff order of the state power regulator, which they claim is unfair to projects of 599 MW, for which power purchase agreements (PPAs) have already been signed.
The order reduces the feed-in tariff — the price at which state electricity distribution companies (discoms) are required to buy wind power — from Rs 4.50 per kwH, set by an order passed in October 2015, to Rs 3.74 per kwH.
The order further adds: “The tariff determined in this order shall also be applicable for the projects which have entered into PPAs with any discom prior to the date of this order that are not approved by the Commission, if they so opt”.
After a developer and a discom sign a PPA, it has to be sent to the power regulator for approval. This approval often takes time and is widely regarded as a formality. In the present case, however, the regulator, the Karnataka Electricity Regulatory Commission (KERC) is refusing to endorse PPAs pending before it, which were signed at the earlier tariff of Rs 4.50 per kwH.
“Of the 599 MW awaiting ratification by the KERC, 273 MW have already been commissioned,” said Balram Mehta, secretary, Wind Independent Power Producers Association (WIPPA). “They are running at full capacity. They are already supplying power to BESCO (Bangalore Electric Supply Co), HESCO (Hubli Electric Supply Co) and GESCO (Gulbarga Electric Supply Co) at the earlier tariff of Rs 4.50 per kwH.”
The remaining 326 MW are in construction stage. The concerned developers have all been told to sign fresh PPAs at a tariff to Rs 3.74 per kwh, or opt out. “They have started returning PPAs,” said a developer not wanting to be named. “Ultimately, they will return all. We have not decided what should be done, but this seems a very arbitrary thing for KERC to do.”
Another affected developer pointed to a paradox in the KERC’s approach. “Projects commissioned or close to commissioning, with PPAs signed but not yet endorsed by the regulator, are being forced to sign new PPAs at the lower price of Rs 3.74 per kwH,” he said. “But projects with PPAs approved by the regulator get up to March 31, 2018, to complete construction, at the earlier tariff of Rs 4.50 per kwH.”
“This destroys investor confidence,” said a third developer. “Faith in government processes is simply gone.” “PPAs of projects that were completed and commissioned before March 31this year will be protected,” MK Shankaralinge Gowda, KERC chairman, told ET. “But those signed afterwards and not yet approved by KERC will have to follow the new tariff.”
The tariff order also makes it clear that mere signing of a PPA is not enough. It says: “A PPA becomes an enforceable document only after approval of the Commission. Any developer acting on a PPA, which is not approved by the Commission, will be doing so at his own risk.”
The new tariff order is an outcome of the first ever wind auction conducted by Solar Energy Corporation of India (SECI) in February this year, which received a lowest winning bid of Rs 3.46 per kwH.