300 MW Hybrid Project: MERC Approves Reduced Tarrif Of Rs 2.56/KWh

300 MW Hybrid Project: MERC Approves Reduced Tarrif Of Rs 2.56/KWh

Maharashtra Electricity Regulatory Commission (MERC) recently ordered that the voluntarily offered tariff of Rs. 2.56 per unit be applicable for supply of 300 MW RE wind-solar hybrid power by T.P. Saurya Limited (subsidiary of Tata Power) to Maharashtra State Electricity Distribution Co. Ltd (MSEDCL).

A three-judge bench comprising Sanjay Kumar, IM Bohari and Mahesh Khullar, directed both the parties to sign PPA within 15 days from the date of the order.

The Petition

T.P. Saurya Limited (TPSL) was the petitioner seeking review of the order given by the commission on 11 March, 2022 and revision of the tariff to Rs. 2.56 per unit from Rs 2.49 per unit, the tariff determined by the Commission in its earlier order.

Maharashtra Electricity Regulatory Commission, Cuffe Parade-Colaba - Government Organisations in Mumbai - Justdial

The reason furnished by the petitioner was that cost of steel had increased drastically during the period of winning the bid and the order by the Commission. M/s. Maharashtra State Electricity Distribution Company Ltd. and M/s Azure Power India Pvt. Ltd. were the respondents in the case.

How It Played Out

The Commission had ordered on March 11, 2022 to disallow the tariff at Rs. 2.62 per unit discovered through competitive bidding and proposed the tariff of Rs. 2.49 per unit to the successful bidders. The bidding process had started one year before on 07.05.2021. MSEDCL had issued a Request for Selection (RfS) for procurement of 500 MW wind-solar hybrid power on long term basis through competitive bidding process (EReverse Auction) from grid connected inter and intra state projects. On July 9, 2021, TPSL and APIPL were declared as the successful bidders for development of hybrid projects at a tariff of Rs. 2.62 per unit for a capacity of 300 MW respectively. However, the Commission struck down the tariff later as mentioned above, prompting the petition at present.

The TPSL argued that the cost of steel had increased drastically from the date of submission of bid till March 11, 2022 when the Commission struck down the tariff. The increase in steel prices led to a 3.35% increase in the total cost of the project thereby amounting to Rs.0.07 per kWh increase in tariff. TPSL requested the Commission to consider the drastic increase in the price of steel which admittedly is an essential commodity for manufacturing Solar PV Panels and WTGs.

The Judgement Of The Commission

The MERC bench of judges noted that during the bidding exercise, the discovered tariff was Rs. 2.62 per kWh while now TPSL was proposing discounted tariff of Rs. 2.56 per unit. The impugned order had not redetermined the discovered tariff. It had only applied a test of market reflectiveness. During the said exercise, the discovered tariff Rs.2.62 per unit was found to be on higher side and accordingly the petition of MSEDCL for tariff adoption was rejected. The reasons as to why Rs 2.62 tariff was not adopted was because the option of procuring same power at cheaper tariff (Rs. 2.49 per unit landed tariff at Maharashtra periphery) was available with MSEDCL.

Now, MSEDCL has stated that such an option is not available as SECI had exhausted such capacity at a lower tariff. Under such circumstances, the obvious option was to direct MSEDCL to conduct a fresh bidding process, however, this would take time, delaying the availability of RE power for MSEDCL, further increasing RPO shortfall of MSEDCL. Therefore, considering the fact that TSPL in the present petition had voluntarily offered a tariff of Rs. 2.56 per unit, which is lower than the discovered tariff of Rs. 2.62 per unit, the Commission was inclined to adopt a tariff of Rs. 2.56 per unit.

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