TNERC Proposes Amendments To Renewable Energy Purchase Obligations Regulations In Tamil Nadu

The Tamil Nadu Electricity Regulatory Commission (TNERC) has issued a draft notification dated June 26, 2024, seeking comments and suggestions on proposed amendments to its regulations concerning Renewable Energy Purchase Obligations (RPO). This draft aims to amend the existing 2023 regulations, reflecting the need to address recent changes and judicial directives affecting energy purchase costs and obligations.

In recent years, the cost associated with the power purchase of Tamil Nadu Generation and Distribution Corporation (TANGEDCO) has increased, surpassing the preferential tariff rates set by the Commission for renewable energy sources, particularly wind and solar power. This rise in costs, primarily due to the escalation of conventional fuel prices, has necessitated a revision in the way the pooled cost of power purchase is calculated.

The Commission proposes that the pooled cost of power purchase, which is the average price at which a distribution licensee purchases electricity, should exclude costs related to liquid fuels, short-term purchases, and renewable energy sources. Moreover, when the average pooled cost exceeds the preferential rate fixed for a specific category of renewable energy generators, the pooled cost for that year should be capped at 75% of the preferential tariff rate for the respective year of commissioning of those generators.

This proposed amendment is significant because it aims to balance the financial sustainability of TANGEDCO with the need to promote renewable energy. The adjustment ensures that renewable energy generators are compensated fairly while preventing any undue financial burden on the distribution licensee and, by extension, the consumers.

The background for this amendment includes various judicial interventions. The High Court of Madras, in a judgment, highlighted the necessity of implementing a cap on the pooled cost of power purchase to prevent generators from unjustly benefiting when the preferential tariff falls below the pooled cost. The court emphasized the importance of sustainable development and the need for a continuing market for environmental components or carbon credits, thus supporting the introduction of this cap from the date of the actual breach.

Furthermore, the Appellate Tribunal for Electricity (APTEL) in its order stated that the cap of 75% on the preferential tariff should only be applied when the pooled cost exceeds the preferential tariff for a particular year. This dynamic approach requires annual evaluation to determine whether the cap should be implemented. The APTEL’s findings were upheld despite being challenged by TANGEDCO in the Supreme Court of India, which did not grant a stay on the Tribunal’s judgment.

The TNERC has already incorporated these judicial views in its recent orders, thus aligning its regulatory framework with the court’s directives. The proposed amendment is an effort to formalize these changes within the regulatory structure governing renewable energy purchase obligations.

The draft notification has been made available for public review, and the TNERC has invited stakeholders to submit their objections or suggestions within thirty days from the date of publication. Comments can be sent in duplicate along with a soft copy to the Secretary of the TNERC at their office in Chennai or via email.

This participatory approach ensures that the final regulations will consider the perspectives and concerns of all affected parties, thereby fostering a more inclusive and balanced regulatory environment. The TNERC aims to finalize these amendments after considering all received feedback, ensuring that the regulations support both the growth of renewable energy and the financial health of the power distribution system in Tamil Nadu.

Please view the document here for more details.