NEW DELHI: The Centre has asked wind energy-producing states to ensure regulatory approval of power purchase agreements (PPAs) signed when tariffs and equipment costs were higher, and use special powers under the Electricity Act to issue directions to autonomous regulators in public interest, if necessary.
Wind energy tariffs set by regulators varied between Rs 4 and Rs 6 per khH but tumbled toRs 3.46 per kwH after the sole wind energy auction in February. This prompted many states to seek lower tariffs from old projects, while several State Electricity Regulatory Commissions (SERCs) held back approval of PPAs already signed, raising serious concerns among wind energy developers and lenders.
The Ministry of New and Renewable Energy (MNRE) has written to seven states for invoking Section 108 of the Electricity Act, 2003.
“It has come to the notice of the MNRE that some SERCs are not according consent for wind power projects which were commissioned before March 31, and for which PPAs have already been signed,” said a letter from Bhanu Pratap Yadav, joint secretary, MNRE, to the principal secretaries (power) of Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Rajasthan and Tamil Nadu.
“This creates an atmosphere of uncertainty in the wind power sector and going back on contractual documents like PPAs may not be appropriate.” The August 21letter adds that the matter was discussed at a meeting chaired by NITI Aayog vice-chairman Arvind Panagariya and he too had “reiterated that the government should not go back on contractual agreements.”
“I request you (principal secretaries) to kindly take up the matter with the SERCs for grant of consent,” Yadav added.
While SERCs are autonomous, Section 108 empowers states to issue “directions in matters of policy involving public interest” to state regulators, which have to “be guided.”
The section also leaves what constitutes public interest to the state government’s discretion. A direction to regulatory bodies can help developers in Andhra Pradesh, for example, where the SERC has been withholding approval of 832.4 MW of wind projects for which the state discom has already signed PPAs.
Similarly, Karnataka’s SERC has put 490 MW of wind power plants on hold.
Long wait for approval
The matter was brought to notice at a meeting of all stakeholders in the wind energy business chaired by Anand Kumar, secretary, MNRE, on July 28. A number of developers had complained about the attitude adopted by some state power regulators and discoms.
MNRE officials thereafter held a meeting with the regulators to discuss the issue. Minister of power and new and renewable energy Piyush Goyal also strongly stressed that contracts should be honoured.
“The government is very clear that the legal framework has to be respected,” he told ET, as reported in the August 18 edition. However, developers expressed reservations about the letter’s tone. “It would have had more effect had it been signed by the secretary himself and if its tone had been sterner,” said one developer.