The Appellate Tribunal for Electricity (APTEL) has set aside the Tamil Nadu Electricity Regulatory Commission solar order.
This development is a major setback for the development of solar power in Tamil Nadu, and indeed in the country, as the State is expected to be the bulwark of solar power capacity additions in India in the current year.
Acting on a petition filed by the Tamilnadu Spinning Mills Association, which said it was aggrieved over the order’s mandate that industries (and some other specified categories of consumers) needed to buy specified quantities of solar power, which is expensive.
Solar purchase obligation
On October 19, 2012, the Tamil Nadu Government came out with its ‘solar policy’, which sought to create 3,000 MW of solar power capacity in the State by 2015.
The cornerstone of the order is the 'solar purchase obligation’. Specified categories of consumers need to get 6 per cent of their consumption (3 per cent in the first year) from solar power plants. This SPO therefore is expected to create a demand for solar power, and is generally hailed as a model for other states to emulate.
TN Govt's policy directive
The TN Government’s ‘policy directive’ was issued under Section 108 of the Electricity Act, 2003, which empowers state governments to issue such directives “in matters of policy involving public interest''.
With regard to directives under the sections, the state regulatory commission “shall be guided by” the State Government and if there is a question about what is a matter of public interest, “the decision of the State Government shall be final''.
Consequent to this, TNERC issued a suo moto order, entitled ‘Issues relating to Tamil Nadu Energy Policy, 2012', which in effect, technically expanded the State Government’s solar policy.
Now, APTEL has set aside this order.
Last year, the Tamil Nadu Government-owned electricity generation and distribution utility, TANGEDCO, came out with a tender, calling for bids from those who are interested in putting up solar power projects in the State and selling the power to TANGEDCO at prices determined in the bidding process.
As a consequence of that, today there are projects worth about 700 MW that are awaiting the signing of ‘power purchase agreement’ with TANGEDCO — at a price of Rs 6.48 per kWhr, with 5 per cent annual escalation for ten years.
Signing of PPAs
TANGEDCO has dithered in signing the PPAs, because in the meantime consumer associations such as TASMA went to the courts against the order, mainly against the solar purchase obligation.
In the absence of SPO, if TANGEDCO agrees to buy solar power at ‘Rs 6.48 plus’ tariffs, whom will it sell the costly power to?
Now that APTEL has set aside TNERC’s solar order, TANGEDCO has two options. Scrap the solar power purchase programme, which means that the solar power developers, who won projects in last year’s tender, will have to go home disappointed. The legal implications of this needs to be examined.
Second, buy solar power from these projects, but go to TNERC with a request to raise tariffs in order to be able to pay for the costlier solar power. Whether this can happen till the elections are over is a moot point.