APERC Approves Cancellation of Two Wind PPAs, Orders Discom to Pay Compensation

The Andhra Pradesh Electricity Regulatory Commission (APERC) has issued a new order, ruling that the power purchase agreements (PPAs) entered into by wind developers Vibrant Greentech and Chaitanya Projects with the Southern Power Distribution Company of Andhra Pradesh (APSPDCL) were not binding for the state distribution company.

The ruling came in response to the petitions filed earlier by the wind developers, requesting the commission to act upon the signed PPAs and direct the discom to pay them for wind power supply from the commercial operation date (March 30, 2017), including interest in terms of the PPA.

Upon careful consideration, the commission asked the discom to pay for the power received from the developers up to the date of disconnection at ₹2.93/kWh as compensation within two months from the date of the order (July 5, 2021). It also allowed the developers to sell their power in the market as per the provisions of the Electricity Act, 2003.

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Chaitanya Projects’s 0.8 MW wind power project is in Tamil Nadu and Vibrant Greentech’s 4.25 MW wind project is in the Anantapur district of Andhra Pradesh, which was commissioned on March 29, 2017 and a PPA was signed with APSPDCL at a tariff of ₹4.84/kWh for 25 years from the commissioning date on March 30, 2017.

A year prior to this, the commission had notified the levelized generic tariff for FY 2016-17 as ₹4.84/kWh without accelerated depreciation and ₹4.25/kWh with accelerated depreciation. The generation-based incentive was offered to the wind energy generator at ₹0.5/kWh of electricity fed into the grid for between four years and ten years. Then, in December 2017, APERC had approved the PPAs for 41 wind projects totalling 841.32 MW, each of which were entitled to a tariff of ₹4.8/kWh.

In February 2017, the Principal Secretary, Energy, had stated that New and Renewable Energy Development Corporation of Andhra Pradesh (NREDCAP) had approved a large number of wind power projects. Even though the state was facing financial difficulties paying the high tariffs prevailing at the tie, and had met its quota of renewable energy additions. He directed them to review the cancellation of all such projects that had not been commissioned within two years from the date of the singing of the memorandum of understanding. Once the projects were canceled, the discom should cancel the PPAs.

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The Government of Andhra Pradesh later directed the discoms not to enter into any PPA unless the tariff was less than ₹3/kWh.

Thus, APSPDCL submitted to the commission that it had revoked the PPA as a result of the financial crisis facing the discom at a time the price of power in the open market was ranging between ₹2/kWh and ₹3/kWh.

 APERC noted that since it had directed the discoms not to enter into new PPAs without its specific approval, the 41 PPAs were neither valid nor enforceable.

APERC also noted that the power generated from the projects post the PPAs was beyond the approved capacity of wind power as ordered by the commission in the Retail Supply Tariff Order for FY 2016-17. Since the discoms were not bound to pay the tariff indicated in the PPAs, as a result of their invalidity,  the commission calculated a weighted average of the tariff discovered in 2017 through the bidding process for wind power projects in the country and arrived at a tariff of ₹2.93/kWh.

Thus, the commission directed the APSPDCL to compensate the wind developers at ₹2.93/kWh for the power supplied by the developers and received by the discom up to the time of disconnection of the project. The full order can be accessed here.

It remains to be seen of the affected developers go in appeal against this order of the APERC. The fact that their projects did get grid connection, and the state disco has also acknowledged lifting power generated, could create grounds for contesting the decision that invalidates their existence.