GERC ISSUES TARIFF FRAMEWORK FOR PROCUREMENT OF WIND POWER BY DISTRIBUTION LICENSEES

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Gujarat Electricity Regulatory Commission (GERC) issued tariff framework for procurement of power by distribution licensees from wind turbine generators and other commercial issues for the state of gujarat.

The Commission had issued the previous generic Tariff Order on 30th August 2016, for procurement of power by Distribution Licensees from wind power projects in Gujarat. The Control Period of GERC Wind Power Tariff Order 2016 expired on 31st March 2019. Accordingly, the Commission published a Discussion Paper detailing the proposed tariff framework for the prospective period as well as the intervening period.

The Discussion Paper was published on the Commission’s website http://www.gercin.org in downloadable format on 28th January 2020, inviting comments from stakeholders by 25th February 2020. The Commission received written objections/suggestions from eight stakeholders. The Commission examined the objections/suggestions received and fixed the date for a public hearing on the proposed Tariff framework for Wind energy RE Projects on 28th February 2020.

It is clarified in the recent order that in the Discussion Paper, the Commission has only summarised some important provisions of ‘Wind Power Policy-2016’, and has not proposed to modify the clause related to Sanctioned Load/Contract Demand for MSME segment or other consumers. Hence, provisions of policy related to the Sanctioned Load/Contract Demand for the MSME segment or other consumers shall be applicable unless otherwise modified. The Commission has mandated that Distribution Licensees shall procure REpower from Wind Energy projects through competitive bidding, to discover the most competitive price. The contention that the fall in competitively discovered prices only reflects the price competition and is not related to technology up-gradation or reduced production cost, is not relevant. To reduce the cost of regulation and to give ample clarity to investors investing in such projects, the Commission has taken a conscious decision to consider the same equal to the latest Tariff discovered through Competitive Bidding by State-owned DISCOMs for Wind Power Projects and adopted by the Commission.

The Commission retains the approach for tariff determination as proposed in the Discussion Paper with minor modification and to provide more clarity following para, “It is proposed that the tariff for such projects shall be considered equal to the latest Tariff discovered through Competitive Bidding by State own DISCOMs for Wind Power Projects and adopted by the Commission.” is replaced by “It is proposed that the tariff for such projects shall be considered equal to the weighted average of the latest Tariff discovered through Competitive Bidding by State-owned DISCOMs for Wind Power Projects and adopted by the Commission.” 

The Commission accepts that there are certain merits in stipulating a pre-defined Control Period. However, given the fast-moving nature of developments in this sector, the Commission is of the view that it would be appropriate to have a predefined control period up to 31st March 2022. it is to clarify that if any new WTG commission and connect with existing Wind Farm pooling substation, the Metering point shall be considered at the pooling sub-station as per prevailing practice. The Commission has modified the Clause as: “The metering point, as well as the interface point for grid connectivity, shall be the nearest GETCO sub-station.” 

 The Commission clarifies that the Developer’s share shall reduce from 100% in the first year after commissioning to 50% in the sixth year after commissioning. In case the CDM benefit starts from the 3rd year after commissioning, then the corresponding percentage share, i.e., 80% shall be retained by the Developer, with its share reducing to 50% by the sixth year.

The Commission has not proposed any change in the existing Banking facility in the Discussion Paper. However, Banking Charges have been removed. The Commission is of the view that the same is appropriate and provides sufficient encouragement for RE sources and GETCO may issue extension on case to case basis to the Developers if they fail to commission the Wind Farm Substation and Transmission Line within the stipulated period due to unforeseen reasons.

On Tariff, the commission states that the rationale for the rate of Rs. 1.75/kWh for purchase of surplus power generated by the wind projects. The projects registered under the Renewable Energy Certificate (REC) mechanism are entitled to additional benefits under the REC mechanism. Hence, surplus power from such projects shall be purchased at 85% of the above rate of Rs. 1.75/kWh, which works out to Rs. 1.50/kWh.

In the view that the payment of electricity duty on electricity generated and utilized for self-consumption/sale to the third party within the State is prerogative of the State the Commission has modified the Clause as “Concessional Benefit and Exemptions Payment of electricity duty on electricity generated and utilized for self-consumption/sale to the third party within the State, shall be governed following the provisions of the Gujarat Electricity Duty Act, 1958 and its amendments from time to time.”

The order added that “Wind Power Projects availing Open Access for third-party sale and captive use of wind energy will be eligible for availing RECs as per CERC REC Regulations and subsequent amendments. In case of Wind Power Projects availing Open Access for captive use/third-party sale and opting for REC, the surplus power after set-off will accordingly be purchased by the concerned Distribution Licensee at Rs. 1.50 per kWh.

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