PUNJAB STATE ELECTRICITY REGULATORY COMMISSION SCO NO. 220-21, SECTOR-34 A, CHANDIGARH Petition No. 31 of 2016 Date of Order: 10.06.2016 Present: Shri D.S. Bains, Chairman Shri S.S. Sarna, Member In the matter of: Petition under Section 86 (1) (b) and 86 (1) (e) and other applicable provisions of The Electricity Act, 2003 for purchase of electricity from solar energy generators in the State of Punjab. AND In the matter of: Punjab State Power Corporation Limited (PSPCL), The Mall, Patiala-147001 ----Petitioner Versus Punjab Energy Development Agency (PEDA), Chandigarh ----Respondent ORDER Punjab State Power Corporation Limited (PSPCL) filed this petition seeking approval of the Commission to procure electricity including the tariff from solar PV power projects (total capacity 500 MW) to be established in the State of Punjab by solar energy generators and also to the Power Purchase Agreement (PPA) executed with the solar energy generators. 2. PSPCL has submitted that Government of Punjab (GoP) issued the New and Renewable Sources of Energy (NRSE) Policy, 2012, which is aimed at the development of renewable energy 1
sources and in particular solar energy generation in the State of Punjab. GoP has designated Punjab Energy Development Agency (PEDA) as the nodal agency for development of renewable energy projects in the State under the said NRSE Policy. 3. In pursuance to above, PEDA initiated competitive bidding process for inviting solar power developers for establishment of an aggregate 500 MW capacity solar projects under phase-iii in the State of Punjab. The minimum and maximum capacity to be allotted to a single company was kept as 50 MW and 150 MW respectively. Bidders could set up the minimum allotted Solar PV capacity of 50 MW in multiples of 5 MW at maximum 10 locations. The allotment of project capacity beyond minimum 50 MW was to be made in multiples of 10 MW. The tender documents issued by PEDA included the draft Implementation Agreement (IA) to be entered into by the successful bidder with PEDA for implementation of the project and draft Power Purchase Agreement (PPA) to be executed with PSPCL for supply of electricity. A total capacity of 500 MW Solar PV power projects has been allotted by PEDA to various developers after concluding the competitive bidding process. The tariff discovered varies from 5.09 per kwh to 5.98 per kwh. Detail of the allocations made and the discovered tariff is attached as Annexure-I of this Order. PEDA has signed the IAs with the selected bidders as envisaged in the bidding documents. The electricity generated by the solar energy projects to be established by the developers shall be procured by PSPCL at the tariff discovered in the bidding process. 2
4. PSPCL submitted that solar energy generation has been promoted by other States and the Central Govt. through policies issued by the Govt. of India. GoP has taken proactive steps to ensure development of solar energy generation capacity at tariff discovered through competitive bidding process. The tariff discovered in the bidding process is less than the tariff that was adopted in the previous bidding process. The procurement of electricity by PSPCL at the tariff discovered in the previous bidding process for 250 MW and 282 MW (229 + 53-rooftop) in FY 2013-14 and FY 2014-15 was approved by the Commission in its Order dated 14.11.2013 in petition no. 52 of 2013 and Order dated 11.05.2015 in petition no. 21 of 2015 respectively, filed by PSPCL. 5. PSPCL further submitted that being the distribution licensee in the State of Punjab, it is required to fulfil its minimum Renewable Purchase Obligation (RPO) specified by the Commission. The quantum of electricity procured from these solar projects would ensure that Solar RPO is adequately met and also sufficiently encouraged. As per the prevailing RPO trajectory fixed by the Commission, with purchase of 500 MW solar power, PSPCL would be excess of the solar power upto 2018-19. The present installed capacity for solar energy generation projects is about 403.27 MW which includes 65 MW from NVVN & SECI. From FY 2017-18 onwards, the annual power purchase cost from these 500 MW solar power projects will be 423.90 crore (approx.) considering an average tariff of 5.65 per kwh. Taking into account the long term benefits of renewable energy, especially solar, PSPCL proposes to procure electricity from these solar projects, which also fulfils the mandate in The Electricity Act, 2003 (Act) that the 3
renewable sources are to be promoted. The cost of solar electricity purchase has reduced in the present bidding process as compared to the previous bidding process conducted by PEDA. It has been further submitted by PSPCL that as per provisions of the IA, if the project COD occurs after 31.03.2017, tariff awarded to the developers shall cease to exist and the developers shall get the tariff re-determined from the Commission. 6. PSPCL submitted that in terms of sections 86 (1) (b) and 86 (1) (e) of the Act, the procurement of electricity by it including from renewable sources is to be regulated by the Commission. The regulatory jurisdiction includes giving approval to the procurement of electricity, the terms and conditions for such procurement and also approving the tariff at which the electricity is to be procured by PSPCL. The cost of power so purchased by PSPCL will be a pass through in its Annual Revenue Requirement (ARR) and it is incumbent upon PSPCL to seek the approval of the Commission for the proposed procurement of electricity. 7. In the prayer, PSPCL has requested the Commission to approve the procurement of electricity by it from solar energy generators at the tariff discovered in the competitive bidding process conducted by PEDA as per details in Annexure-I of this Order including the Power Purchase Agreement forming part of the tender documents, and approve, as a pass through, the power purchase cost from these Solar power projects in the ARR. 8. The petition was admitted by the Commission and notice issued to PEDA. PSPCL was directed to file deviations in PPA from the bid documents. The Commission observed that PPAs 4
were signed by PSPCL with the developers in February 2016 whereas the instant petition has been filed on 12.04.2016 after much delay. PSPCL filed the deviations in the PPAs signed with the developers and the draft PPA annexed with the bidding documents on 02.05.2016. In the hearing on 03.05.2016, the Commission noted that despite the notice dated 25.04.2016, PEDA has not filed the reply. Vide Order dated 04.05.2016, the Commission directed PEDA to file reply by 17.05.2016 especially commenting upon the deviations conveyed by PSPCL with a copy to PSPCL. The next date of hearing was fixed as 26.05.2016. 9. In the deviations filed by PSPCL, it has been submitted that the word Transmission Lines has been added in the definition of Project under clause 1.0.0 (Definitions). Further, as provided in the RfP that provision for a pooling sub-station as per CERC guidelines may be made in the PPA, sub-clause 6.4.0 under clause 6.0.0 (Synchronisation & Interconnection Facilities) has been added. It has been provided that power plants located close to each other can set up a pooling sub-station to evacuate power through a common transmission line. A common energy accounting meter with CT/PT shall be installed on the outgoing bay of the pooling sub-station for billing purpose and energy measured on the main meter installed on each incoming line from the individual plants to the pooling station shall be adjusted proportionately. 10. In reply filed on 17.05.2016, PEDA submitted that competitive bidding was carried out through e-tendering mechanism in a transparent manner. Bids were invited for setting 5
up solar PV projects in the State from the solar PV project developers. The RfP documents also provided a draft PPA which was finalized after due diligence by PSPCL. The competitive bidding was carried out by PEDA on the basis of discount to be offered by the bidders in line with Commission s findings in Order dated 05.09.2014 in petition no. 42 of 2014 (Suo-Motu) and Order dated 24.07.2015 in petition no. 43 of 2015 (Suo-Motu). As per the RfP, the date of commissioning of the projects has been stipulated as 12 months from the date of signing of the PPA by the developer with PSPCL. PSPCL has signed the PPAs with the developers on different dates. Therefore, the date of commercial operation (CoD) for the respective projects will be different and not same. However, the control period of the tariff is upto 31.03.2017 and in case the CoD of the project is achieved thereafter, the applicable tariff for the project is to be determined by the Commission. The tariff discovered in the bidding process is between 5.09/kWh to 5.98/kWh. IAs have been signed by PEDA with the successful bidders. PSPCL, being the distribution licensee, is under a bounden obligation to purchase the renewable energy from the allocated solar PV projects under the current phase-iii bidding. PSPCL is also the obligated entity to fulfil the solar renewable purchase obligation (RPO). The total solar generating capacity in the State of Punjab is 463 MW ending April, 2016. As regards PSPCL s contention that with the addition of 500 MW capacity solar projects, excess solar power would be available, PEDA submitted that MNRE, GoI has already written to GoP and also to the Commission for revising the solar RPO as per revised Tariff Policy, 2016 (wrongly mentioned by PEDA as National Tariff Policy, 6
2014). PEDA submitted that with this likely revision, PSPCL would require additional solar power for meeting its RPO. CERC REC Regulations provide for the issuance of RECs to distribution licensee procuring solar power in excess of the RPO, which are tradable (on the energy exchanges). PEDA submitted that setting up of the said solar PV power projects will be in the interest of the State. Agreeing to the prayer made by PSPCL in the petition to the extent of seeking approval of the Commission for procurement of solar energy from the projects as per Annexure-I of this Order at the tariff discovered in the competitive bidding process conducted by PEDA and approval of the cost of such power purchase in ARR of PSPCL, PEDA requested the Commission to accept the same. However, as regards part of PSPCL s prayer for approval of the draft PPA appended with the tender documents, PEDA submitted that the PPA has been amended by PSPCL as per its requirements, which has been executed by PSPCL with the developers accordingly. PSPCL has invoked the jurisdiction of the Commission under section 86(1)(b) and 86(1)(e) of the Act seeking approval of the PPA. These sections do not stipulate seeking approval of the terms and conditions for procurement of electricity by PSPCL from the Commission. PEDA contended that in view of above, the approval of the PPA sought for by PSPCL does not fall under the ambit of ibid sections. 11. After hearing the parties on 26.05.2016, the Order was reserved vide Commission s Order dated 31.05.2016. 12. The Commission has carefully gone through the submissions made by PSPCL and PEDA. PSPCL filed this petition to seek 7
approval of the Commission (i) for procurement of electricity by it from solar PV power projects at the tariff discovered in the competitive bidding process conducted by PEDA as per details in Annexure-I of this Order (ii) for the Power Purchase Agreement forming part of the tender documents, and (iii) pass through of the power purchase cost from these solar PV power projects in the ARR of PSPCL. PEDA undertook the competitive bidding process through e- tendering for procurement of 500 MW power from grid connected solar PV power projects (Phase-III) to be set up in the State of Punjab. Request for Proposal document (RfP) for the same was issued by PEDA after obtaining approval of Govt. of Punjab in June, 2015. The RfP document included detailed information and instructions to the bidders as also the evaluation criteria, besides the format for bid submission and other relevant details. The bidders were required to submit their bids on the basis of discount to be offered on the generic tariff determined by CERC for solar PV power projects for FY 2015-16. The same tariff for such projects was approved/determined by the Commission in Order dated 24.07.2015 in petition no. 43 of 2015 (Suo-Motu). On the successful completion of the competitive bidding process, PEDA allocated 10 projects of 50 MW capacity each to various project developers. The tariff discovered for the 10 projects ranges from 5.09 per kwh to 5.98 per kwh as brought out in Annexure-I of this Order. PEDA signed the Implementation Agreements with all the successful bidders. Also, PSPCL signed the PPAs with all the project developers for procuring the electricity to be generated from the ibid solar PV power projects. 8
13. PSPCL submitted that Central Govt. as well as other States are promoting solar energy generation. Punjab Govt. has also taken proactive steps to develop solar energy generation through competitive bidding process. In FY 2013-14 and FY 2014-15, on the basis of similar competitive bidding process conducted by PEDA, solar capacity of 250 MW and 282 MW was allotted to solar project developers for setting up projects in Punjab. The tariff for the said projects was approved by the Commission. PSPCL has further submitted that it is obligated for compliance of RPO specified by the Commission. The present solar PV capacity installed in the State is about 403 MW including 65 MW from NVVN and SECI. Keeping in view the long term benefits of solar power, PSPCL proposes to procure electricity from the 500 MW projects allotted by PEDA in phase-iii bidding for which PPAs have already been signed by it with the developers. PSPCL has emphasized that this would also fulfil the mandate in the Act with regard to promotion of renewable energy sources. The tariff discovered in the present competitive bidding process is less than that in the previous biddings. The deviations in the PPAs signed by PSPCL with the developers and the draft PPA annexed with the bidding documents pertain to the addition of the word Transmission Lines in the definition of Project and provision for pooling sub-station for evacuating power through a common transmission line for power plants located close to each other under the relevant clause for Synchronization & Interconnection Facilities. 14. PEDA while providing details of the bidding process brought out in para 12 above, submitted that PSPCL is under obligation to 9
comply with the RPO specified by the Commission. As per PEDA, the solar capacity in the State of Punjab is 463 MW ending April, 2016. As regards PSPCL s contention that the addition of 500 MW solar capacity allotted under phase-iii would result in excess capacity, PEDA submitted that the revised Tariff Policy, 2016 provides for revising the solar RPO as provided in the Policy and MNRE has already taken up the matter in this regard with the State Govt. and also requested the Commission to consider revising the solar RPO. The excess capacity would be utilized for complying with the likely revision in the RPO. PEDA also contended that as per CERC REC Regulations, the distribution licensees procuring solar power in excess of the RPO are eligible for issuance of RECs which are tradable in the energy exchanges. PEDA has requested the Commission to accept the prayer of PSPCL to the extent it seeks approval of the Commission for procurement of solar energy from the projects as per details in Annexure-I of this Order at the tariff discovered in the competitive bidding process conducted by it and allow pass through of cost of such power purchase in the ARR of PSPCL. However, with regard to prayer of PSPCL for approval of the draft PPA annexed with the tender documents, PEDA pointed out that section 86(1)(b) and 86(1)(e), under which the jurisdiction of the Commission has been invoked by PSPCL, do not cover approval of the terms & conditions of the procurement of electricity by PSPCL. As such, approval of PPA does not fall under the ambit of these sections of the Act. 15. The Commission is mandated under the Act, National Electricity Policy and the Tariff Policy notified by the Ministry of 10
Power, Govt. of India to promote generation of electricity from renewable sources of energy. The Commission in its Order dated 24.07.2015 in Petition No. 43 of 2015 (Suo-Motu) in the matter of determination of generic levellised generation tariff for renewable energy power projects for FY 2015-16 had observed: 11. Further, Para 6.4 (2) of the Tariff Policy notified by Ministry of Power, Govt. of India on 06.01.2006 provides that procurement of electricity from renewable sources of energy for future requirements shall be done, as far as possible, through competitive bidding under Section 63 of The Electricity Act, 2003. Accordingly, the Commission decides that if tariff based competitive bids are invited for purchase of electricity from RE Power Projects and the per unit tariff offered by the lowest bidder is less than the aforementioned tariff, a petition shall be filed by the procurer for consideration and adoption of tariff by the Commission under Section 63 of The Electricity Act, 2003. The Commission further decides that till such time tariff based competitive bidding is resorted to, bidding may be carried out on the basis of discount to be offered by the prospective bidders on the generic tariffs determined by the Commission in this Order, which would be the maximum / ceiling tariff for the purpose. The revised Tariff Policy, 2016 also provides that States shall endeavour to procure power from renewable energy sources through competitive bidding to keep the tariff low, except from waste to energy plants. With regard to the issue of surplus solar capacity contemplated by PSPCL after commissioning of the ibid solar 11
projects of 500 MW capacity, the Commission notes that PEDA has submitted that as per the revised Tariff Policy, 2016 the solar RPO needs to be revised upwardly and the solar capacity being created would adequately provide for compliance of revised solar RPO. PEDA also contended that as per CERC REC Regulations, the distribution licensee procuring solar power in excess of the RPO is eligible for issuance of RECs which are tradable in the energy exchanges. Notwithstanding the above, the Commission notes that as per the information furnished by PSPCL for purchase of solar power for FY 2015-16, there is likely to be a shortfall in solar RPO compliance by about 109.44 MU* (as per calculation below) after taking into account the shortfall of 1.68 MU for FY 2014-15 carried over to FY 2015-16, which will spill over to FY 2016-17, to be complied by PSPCL, with or without penalty, as per decision of the Commission in due course of time on merits of the case. * [solar power purchase by PSPCL in FY 2015-16: 386.48 MU; input energy as per T.O. 2015-16: 49424 MU; solar RPO specified: 1% i.e. 494.24 MU; shortfall: 109.44 MU {494.24 - (386.48-1.68)}]. Considering the information furnished by PSPCL vide letter no. 246 dated 12.04.2016 in ARR of PSPCL for FY 2016-17, the projections for the input energy available to PSPCL for consumption in its area of distribution, work out to 51,007 MU. The solar RPO at 1.3% specified by the Commission would be 663 MU which after including the shortfall of FY 2015-16 (110 MU) works out to 773 MU. To meet this requirement, the major contribution would be from 463 MW existing capacity as the 500 MW capacity under consideration is likely to be added, mostly at the end of the 12
commissioning period of 12 months provided in the PPAs signed in Feb., 2016 i.e Feb., 2017, though some capacity is likely to be added progressively during the interregnum. This is without considering the fact that there may be some slippage in the commissioning of the projects as noted by the Commission in case of projects allotted in the earlier two biddings by PEDA. As such, solar power availability for FY 2016-17 would more or less match with the requirement of solar power for RPO compliance. With regard to the issue of approval of draft PPA sought by PSPCL, the Commission notes that PSPCL, in the first para of the petition, sought approval of the Commission to the PPA executed by it with the solar energy generators, whereas, in the prayer, it has sought approval of the PPA forming part of the tender documents. The Commission also notes that only the draft PPA has been appended as part of the RfP documents with the petition. In this regard, PEDA has submitted that section 86(1)(b) and 86(1)(e), under which the jurisdiction of the Commission has been invoked by PSPCL, do not stipulate approval of the terms & conditions of the procurement of electricity by PSPCL. As such, approval of PPA does not fall under the ambit of these sections of the Act. The Commission observes that in the earlier Orders dated 03.12.2013 in Petition No.52 of 2013 and 11.05.2015 in Petition No.21 of 2015 in similar matters, it had noted that as per the Guidelines for Tariff Based Competitive Bidding Process for Grid Connected Power Projects Based on Renewable Energy Sources issued by Ministry of New and Renewable Energy, Government of India in December, 2012, standard bid documents (SBD) shall be prepared and issued by the Central Govt. in accordance with the 13
guidelines and approval of Appropriate Regulatory Commission shall be obtained unless the bid documents are as per the SBD. In the instant case, the bid documents i.e. RfP including draft PPA were approved by Govt. of Punjab in June 2015 as conveyed by PEDA. Accordingly, the Commission is required to approve the deviations in the PPA signed by PSPCL with the successful bidders and the draft PPA appended with the RfP. The Commission notes that the deviations in the above said PPAs pertain to addition/insertion of (i) the words Transmission Lines in the definition of Project and (ii) provision for setting up a pooling sub-station by power plants located close to each other for evacuating power through a common transmission line to PSPCL/PSTCL sub-station. The Commission considers the said deviations/additions as need based and therefore approve the same. 16. Considering the discussion above, submissions made by PSPCL & PEDA and the statutory provisions, the Commission approves the procurement of power from the solar PV projects by PSPCL at the tariff determined in the competitive bidding process conducted by PEDA on the basis of discount offered by the bidders on the generic tariff for such projects for FY 2015-16 as per details in Annexure-I of this Order. The cost of power purchase from these projects would be considered as pass through in the ARR of PSPCL. The tariff period for supply of power from the said projects would be twenty five (25) years as provided in RfP which is as per Regulation 6(c) of the Central Electricity Regulatory 14
Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2012 adopted by the Commission in its Order dated 19.07.2012 in Petition No. 35 of 2012 (Suo-Motu) with State specific modifications. The tariffs approved above would be applicable upto 31.03.2017 provided the PPAs have been signed on or before 31.03.2016 and the entire capacity covered in each PPA is commissioned on or before 31.03.2017, in line with Regulation 8 of the said Regulations. It is further clarified that barring force majeure / change in law etc., the applicability of the said approved tariff beyond the aforementioned date i.e. 31.03.2017 will not be allowed even if punitive clauses in the PPA are made applicable. Sd/- (S.S. Sarna) Member Sd/- (D. S. Bains) Chairman Chandigarh Dated: 10.06.2016 15
Solar PV Power Projects Annexure-I Sr. No. Name of the Company Capacity (MW) Tariff ( /kwh) 1. Azure Power Pluto Private Limited i.e. 50 5.63 2. SPV company of Azure Power India Private Limited 50 5.64 3. Azure Power India Private Limited 50 5.62 4. Prayatna Developers Pvt. Limited 50 5.80 5. 50 5.95 6. Photon Ojas Pvt. Ltd. i.e. SPV company of Photon Ultrawave Pvt. Ltd. 7. Photon Sunbeam Pvt. Ltd. i.e. SPV company of Photon Ultrawave Pvt. Ltd. 8. Photon Suryodaya Pvt. Ltd. i.e. SPV company of Photon Ultrawave Pvt. Ltd. 9. Magnet Buildtech Pvt. Ltd. i.e. SPV company of Hindustan Clean Energy Ltd. 10. Mytrah Aadhya Power Pvt. Limited SPV company of Mytrah Energy (India) Ltd. 50 5.09 50 5.57 50 5.27 50 5.98 50 5.97 Note: The aforementioned tariff for all projects is applicable without availing benefit of Accelerated Depreciation except for Magnet Buildtech Pvt. Ltd. i.e. SPV company of Hindustan Clean Energy Ltd. (Sr. No.9) for which the tariff is after availing benefit of Accelerated Depreciation. 16