TNERC Amends RPO Regulations And Key Changes To Pooled Cost Of Power Purchase

The Tamil Nadu Electricity Regulatory Commission (TNERC) has announced amendments to its Renewable Energy Purchase Obligation (RPO) Regulations, 2023. These changes, made under the powers granted by section 181 and read with sections 61, 66, and 86(1)(e) of the Electricity Act, 2003, are intended to address specific concerns regarding the calculation of the Pooled Cost of Power Purchase (APPC). The amendments were made following the necessary procedures, including a draft publication as required by the Electricity Act.

The new amendment is officially titled the “Tamil Nadu Electricity Regulatory Commission (Renewable Energy Purchase Obligation) (Amendment) Regulation, 2024.” It will come into effect on the same date as the original 2023 RPO Regulations.

One of the key changes in this amendment is the revised definition of the ‘Pooled Cost of Power Purchase’. According to the new clause, the Pooled Cost of Power Purchase is defined as the weighted average price that the distribution licensee, such as TANGEDCO, pays for electricity. This price includes the cost of self-generation and the cost from all long-term energy suppliers, but specifically excludes costs related to liquid fuels, purchases from traders, short-term purchases, and renewable energy sources.

The amendment introduces a significant change in the treatment of cases where the Average Pooled Cost of Power Purchase (APPC) exceeds the preferential tariff rates fixed by the TNERC for renewable energy generators. Specifically, it stipulates that when the APPC of a distribution licensee like TANGEDCO surpasses the preferential tariff set by the Commission for renewable energy sources in a given year, the distribution licensee is required to pay only 75% of the preferential tariff rate for that particular category or sub-category of renewable energy generators.

This change has become necessary due to the recent increases in the Pooled Cost of Power Purchase for TANGEDCO, which has exceeded the preferential tariffs set by the TNERC, particularly for wind and solar energy. The rising cost of conventional fuels has been a key factor contributing to this increase. By introducing a cap on the APPC, the Commission aims to ensure a fair and reasonable Pooled Cost of Power Purchase.

The TNERC’s decision to implement these changes is also influenced by recent judicial and appellate decisions. The Hon’ble High Court of Madras, in its judgment on W.P. No. 22097 of 2013, ruled that the previous amendment to the TNERC RPO Regulations, 2010—which included the provision to cap the APPC rate at 75% of the preferential tariff—could be applied from the date when the APPC exceeded the preferential tariff.

Additionally, the Hon’ble Appellate Tribunal for Electricity (APTEL), in its order dated May 31, 2019, supported the view that when the APPC rate surpasses the preferential tariff rate for a given year, the distribution licensee should only pay 75% of the preferential tariff rate. This view was challenged by TANGEDCO before the Hon’ble Supreme Court of India (Civil Appeal No. 9268 of 2019), but no stay was granted on APTEL’s judgment.

In light of these legal precedents, the TNERC has decided to revise the definition of the Pooled Cost of Power Purchase in its RPO Regulations, 2023, to reflect the changes discussed above. This amendment is part of TNERC’s ongoing efforts to balance the interests of all stakeholders in Tamil Nadu’s energy sector, ensuring both the viability of renewable energy projects and the affordability of electricity for consumers.