The Andhra Pradesh Electricity Regulatory Commission (APERC) has waded into the row over attempts to renegotiate signed power purchase agreements (PPAs) by ordering state power distribution companies to honor the contracts.
Regulatory approval of the solar power price set in public tenders is usually issued as a formality but power companies had dug in their heels to await the regulatory stamp of approval after an attempt by the state government to renegotiate the prices had been stymied by the courts.
The power prices in question range from Rs2.72-3.15/kWh and formed the basis of power purchase agreements signed by power companies with project developers SB Energy, Ayana Renewable Power, Sprng Energy and Engie after a tender held by the Solar Energy Corporation of India.
Regulator APERC has now ordered the Southern Power Distribution Company of Andhra Pradesh Limited and its Eastern counterpart to honor the agreements.
Chief Minister Reddy
Renewables developers have been under siege since national and state elections in May which saw the leader of the regional YSR Congress party, YS Jaganmohan Reddy, elected chief minister of Andhra Pradesh. Reddy immediately set about attempting to reverse the renewable energy achievements and pledges made by his predecessor N Chandrababu Naidu, of the Telugu Disam regional party.
Under the new regime, Reddy set up a committee to renegotiate solar tariffs signed off into PPAs under Naidu and project developers reacted by challenging the tariff renegotiation plan in the high court of Andhra Pradesh. On July 25, the court stayed the tariff renegotiation order.
Reddy had cited the financial distress of the state’s power distribution companies when making the move and referred to “abnormally priced wind and solar power purchase agreements” signed by Naidu as he ignored advice from the Ministry of New and Renewable Energy (MNRE) not to renegotiate signed PPAs.
MNRE minister RK Singh responded by stating the move to renegotiate power prices had unnerved global investors and affected the business environment in India.
Hosting 12% of India’s solar and wind power capacity, Andhra Pradesh is one of the top players in India’s renewable energy sector. In the last fiscal year the state sourced 18% of its electricity from renewables.
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If this is the end of the tariff battle, Developers have the last laugh and AP CM learns a bitter lesson. In his zeal to prove that all what his predecessor did was wrong, he danced and jumped beyond his contortion level and has a perilous fall. He should now adopt a methodical approach if he intends to steer the state forward. Hasty and rash decisions to undo the past is a dangerous weapon that can boomerang and undermine to deliver embarrassment .
On the contrary, if he sticks to his obstinacy and works his way to court , the issue trickles a new chapter that will slow down renewable energy capacity addition in the immediate future.