MERC Approves Combined Short-Term Wind Power Procurement To Lower Costs For SEZs

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The Maharashtra Electricity Regulatory Commission (MERC) recently deliberated on a petition filed by Mindspace Business Parks Private Limited (MBPPL), Gigaplex Estate Private Limited (GEPL), and KRC Infrastructure and Projects Private Limited (KRCIPPL). These companies, collectively referred to as “the Petitioners,” sought approval for the combined short-term procurement of wind power. Their request pertained to the supply period from August 1, 2023, to July 31, 2024. The commission issued its order on June 21, 2024, following detailed considerations.

The Petitioners, operating as deemed Distribution Licensees within their respective Special Economic Zones (SEZs) for Information Technology and Information technology-enabled services (IT & ITeS), presented their case to the commission. They highlighted their current power purchase agreements (PPAs), including an agreement with GMRETL for base power at ₹6.35 per kWh and another with PTC India Ltd. for peak power at ₹7.95 per kWh. These agreements were in place to meet their energy needs until October 2023.

In anticipation of the expiration of these contracts, the Petitioners initiated several competitive bidding processes to secure power supply for the subsequent periods. However, these efforts faced challenges. Notably, their bids for peak power from March to October 2023 resulted in high tariff rates, leading to the cancellation of tenders. As a result, the Petitioners had to rely on monthly procurements from power exchanges to meet their energy demands.

To address the ongoing issue, the Petitioners proposed a new plan for the combined short-term procurement of wind power, aiming to secure up to 70 MW from Manikaran Power Limited (MPL). They received an offer from MPL to supply this power at rates significantly lower than their previous agreements. Specifically, MPL proposed ₹2.25 per kWh for Group I projects and ₹2.52 per kWh for Group II to IV projects. The Petitioners argued that these rates would reduce their overall power purchase costs and benefit consumers by lowering electricity rates.

The commission took note of the Petitioners’ extensive efforts to secure power at reasonable rates through competitive bidding. It acknowledged the repeated challenges faced in these endeavors, including the lack of participation from bidders and the high tariffs discovered. Given these circumstances, the commission considered the offer from MPL to be market-reflective and advantageous for consumers. The proposed rates were significantly lower than those approved in the previous Multi-Year Tariff (MTR) order, which set rates for renewable energy sources at ₹4.90 per kWh.

The commission’s analysis concluded that the offered tariffs of ₹2.25 per kWh and ₹2.52 per kWh from MPL were competitive and in line with current market trends. These rates were deemed beneficial in lowering the average power purchase costs and were expected to result in cheaper electricity tariffs for consumers. Furthermore, the commission highlighted that the wind power procured under this agreement would help the Petitioners meet their Renewable Purchase Obligations (RPOs) and green energy demands without incurring additional fixed charges.

The commission approved the Petitioners’ proposal for combined short-term wind power procurement from MPL for the specified period. It instructed the Petitioners to submit copies of the final Energy Purchase Agreements (EPAs) or Power Purchase Agreements (PPAs) for the commission’s records. Additionally, the commission directed the Petitioners to be more proactive in their future power procurement processes to avoid issues related to time constraints and high tariffs.

The MERC’s decision supports the Petitioners’ efforts to secure affordable and sustainable wind power, ensuring a stable supply while benefiting consumers with reduced electricity costs. This approval underscores the commission’s commitment to fostering competitive and transparent energy procurement processes, ultimately promoting the adoption of renewable energy sources in the region.

Please view the document here for more details.