Tamil Nadu Electricity Regulatory Commission Ratifies Interim Power Supply Arrangement To Address 2023 Summer Demand

On June 27, 2024, the Tamil Nadu Electricity Regulatory Commission issued an order regarding a petition filed by the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) against SEPC Power Private Limited. The matter revolved around the ratification and approval of power supplied by SEPC Power to the grid under certain guidelines issued by the Ministry of Power, Government of India.

The petition primarily sought approval for the power dispatched from SEPC Power’s 525 MW plant in Tuticorin to the grid on a pass-through basis. This arrangement was in response to the growing demand-supply gap in Tamil Nadu during the extended summer of 2023. The petition covered the period from March 2023 to September 2023, with the possibility of extension if required. Additionally, the petition requested the Commission to fix the tariff for the power supplied during this period, relaxing certain provisions of the Power Purchase Agreement (PPA).

During the proceedings, TANGEDCO highlighted its role as a distribution licensee, responsible for generating and distributing electricity to various consumers in Tamil Nadu. The corporation sources electricity from multiple channels, including its own generating stations, Central Generating Stations, Independent Power Plants, and more. TANGEDCO and SEPC had a longstanding PPA that had undergone several amendments over the years.

The Ministry of Power had issued directives under the relevant sections of the Electricity Act to address the nationwide power demand due to non-operational independent power plants. This directive mandated all coal-based power plants to operate at full capacity and supply power to the grid. Consequently, SEPC Power complied with these directives and supplied power on a pass-through basis.

TANGEDCO emphasized the necessity of this power supply to maintain uninterrupted electricity during the peak summer months. The demand for power peaked at unprecedented levels, with the highest demand recorded at 19,387 MW on April 20, 2023. Despite utilizing various power sources, including solar and wind, the state had to rely on SEPC Power and other intra-state generators to meet the demand.

The Commission carefully examined the petition and the contentions presented by both parties. SEPC Power argued that the benchmark rates fixed by the Ministry of Power were interim and insufficient to cover their actual costs of generation. SEPC highlighted that the directives from the Ministry of Power allowed for a pass-through of the actual cost of generation, not just the benchmark rates.

The Commission noted that the benchmark rates set by the Ministry of Power were not binding if the generating company found them unviable. In such cases, the generating company could approach the Commission for a determination of the adverse financial impact and seek compensation accordingly. The Commission agreed with SEPC’s stance and acknowledged that the rates fixed by the Ministry were interim and subject to the Commission’s final determination.

Ultimately, the Commission ratified the power supplied by SEPC Power from April 16, 2023, to September 30, 2023, on a pass-through basis. The Commission also allowed for the relaxation of PPA provisions to facilitate this arrangement. The payments made by TANGEDCO based on the benchmark rates were considered interim, and SEPC was granted the liberty to pursue its claim for the actual cost of generation in a separate petition.

The Commission’s order provided a temporary resolution to the power supply issues faced by Tamil Nadu during the extended summer of 2023. It ensured that SEPC Power was compensated for its actual costs while maintaining the stability and reliability of the state’s power grid. Both parties were directed to bear their respective costs, and the petition was ordered accordingly.

Please view the document here for more details.