Tamil Nadu: Solar developers get relief as APTEL quashes power regulator’s unviable tariff order

The Appellate Tribunal for Electricity (APTEL) observed that Tamil Nadu Electricity Regulatory Commission (TNERC), in its Solar Tariff Order dated March 28, 2016, determined the tariff/capital cost without cogent or adequate reasoning while also being divergent from its own regulations.

November 14, 2019 Uma Gupta

APTEL said that only 85% of the capital cost was recoverable through TNERC's adopted rate of depreciation.

Image: Adani

Lobby group National Solar Energy Federation of India Limited and Welspun Renewables Energy Private Limited had appealed to APTEL against Tamil Nadu Electricity Regulatory Commission’s Solar Tariff Order dated 28.03.2016, citing that it adopted unrealistically low tariffs by arbitrarily determining the capital cost.

According to the appellants, the capital cost of Rs 5.05 Crore/MW independently adopted by TNERC “is significantly lower than the capital costs determined by the central and various other state electricity regulatory commissions [Rs 5.18 to Rs 6.15]… and does not reflect the cost of electricity supply.”

After hearing the matter, APTEL has set aside Tamil Nadu power regulator’s order and directed it to follow the CERC’s final order on benchmark capital cost for discovering the fair tariff.

Further, in line with the methodology and principles adopted by central and various other state electricity regulatory commissions, TNERC has been directed to consider compensation for evacuation from the pooling sub-station at the generator’s end, up to the grid sub-station, over and above the benchmark capital cost as considered by CERC.

The appellants (NSEFI and Welspun Renewables Energy) contended TNERC’s decision to adopt 90% of depreciation uniformly spread at the rate of 3.6% per annum over 25 years, saying that it impacted debt servicing and return on equity.

To this end, APTEL has directed the State Commission to re-compute depreciation by adopting differential method, while ensuring that aggregate depreciation provided is not less than the 90% of the capital cost.

Noting that maintenance spares are an essential component for the efficient and continued operations of a solar generation plant, APTEL has directed TNERC to re-compute the tariff by factoring costs for maintenance spares in addition to module degradation and reduction of generation.

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