Wind Cos Move HC Against Auc­tion of Tamil Nadu Projects

The Economic Times - - Economy: Macro, Micro & More - Kaavya.Chan­drasekaran @times­group.com

New Delhi: Wind en­ergy com­pa­nies have moved the Madras High Court against the Tamil Nadu elec­tric­ity dis­tri­bu­tion com­pany’s move to auc­tion wind en­ergy projects with a new base price, and the sec­tor reg­u­la­tor’s de­ci­sion to al­low the auc­tion. In­dian Wind En­ergy As­so­ci­a­tion (IWEA), an in­dus­try body of wind en­ergy de­vel­op­ers, has moved the high court, chal­leng­ing a Tamil Nadu Elec­tric­ity Reg­u­la­tory Com­mis­sion (TNERC) order to al­low Tamil Nadu Gen­er­a­tion and Dis­tri­bu­tion Co (TANGEDCO) hold a wind auc­tion for 500 MW with the base price set at ₹ 3.46 per unit — a record low tar­iff found in the first and only wind auc­tion in the coun­try held in Fe­bru­ary.

IWEA in its pe­ti­tion called TNERC’s order is­sued on June 2 “ar­bi­trary, il­le­gal, un­just and de­serv­ing to be quashed”. It ar­gued that since an ear­lier tar­iff order of the reg­u­la­tor was valid till April 1, 2018, any fresh tar­iff re­lated order could only be passed af­ter this pe­riod had ex­pired. TNERC had passed a com­pre­hen­sive tar­iff order on wind en­ergy, ap­pli­ca­ble for two years start­ing April 1, 2016, set­ting the wind power tar­iff at ₹ 4.16 per kilo­watt hour (kWh). Wind en­ergy tar­iffs so far had been set by state reg­u­la­tors and mostly var­ied be­tween ₹ 4 and ₹ 6 per kWh. Union re­new­able en­ergy min­is­ter Piyush Goyal, how­ever, has been call­ing for auc­tion­ing of re­new­able en­ergy projects. So, the first wind auc­tion was held in Fe­bru­ary by Solar En­ergy Cor­po­ra­tion of In­dia, a firm un­der his min­istry.

It saw wind en­ergy tar­iffs fall sharply to ₹ 3.46 per unit.

This prompted many states, in­clud­ing Tamil Nadu, Andhra Pradesh and Gu­jarat, to seek rene­go­ti­a­tion of old power pur­chase agree­ments (PPAs) signed at higher tar­iffs, and to en­sure that all fu­ture PPAs they sign with wind de­vel­op­ers should have tar­iffs not ex­ceed ₹ 3.46 per kWh. Hence, TANGEDCO’s move to hold a wind auc­tion with base price of ₹ 3.46 per kWh. Wind de­vel­op­ers fear this will lead to a size­able de­cline in their profit mar­gins.

The Madras High Court’s de­ci­sion may have di­rect bear­ing on other states’ moves to hold auc­tions for wind projects and re­duce tar­iffs. The court has al­ready held one hear­ing on the mat­ter. TNERC, TANGEDCO and IWEA all de­clined to com­ment since the mat­ter is sub ju­dice.

“The tar­iff (of ₹ 4.16 per unit) has been fixed by the com­mis­sion tak­ing note of all pa­ram­e­ters and fac­tors,” IWEA said in its pe­ti­tion. “The same has not been ques­tioned by the li­censee or any other per­son. Un­der such cir­cum­stances, the tar­iff is bind­ing on all. Sud­denly, it is not open to the re­spon­dents to re­sort to a re­verse bid­ding process and that too with ₹ 3.46 per unit as the up­per limit,” it said.

The pe­ti­tion also pointed out that the fi­nal guide­lines for states choos­ing to hold wind auc­tions had not yet been is­sued by the Cen­tre, though draft guide­lines had been cir­cu­lated. “Tar­iff can be fixed on the ba­sis of bid­ding only if the same is en­abled by the guide­lines fixed by the cen­tral gov­ern­ment,” it said.

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