TNERC Introduces Amendments To Regulate Renewable Energy Purchase Costs In Tamil Nadu

The Tamil Nadu Electricity Regulatory Commission (TNERC) recently introduced amendments to its Renewable Energy Purchase Obligation (RPO) regulations 2024. The amendments focus on the definition and calculation of the “Pooled Cost of Power Purchase.” This is a key concept that determines how much the distribution licensee pays for electricity, including self-generation while excluding purchases from traders and short-term energy purchases.

One significant change in the amendment is the introduction of a limit on how much the Average Pooled Cost of Power Purchase (APPC) can exceed the preferential rate set for renewable energy. In cases where the APPC is higher than the preferential rate for renewable energy generators, the distribution licensee will only pay 75% of the preferential tariff for that particular year.

This amendment comes after a series of legal challenges and judgments that shaped the current regulatory framework. In particular, a 2013 judgment by the Madras High Court addressed the issue of when the APPC should be capped at 75% of the preferential tariff. The court allowed the implementation of this cap only when the APPC exceeded the preferential rate. Additionally, the Appellate Tribunal for Electricity (APTEL) weighed in on this matter in 2019, ruling that the 75% cap should only be applied in years when the APPC exceeds the preferential tariff. They emphasized that the APPC rate fluctuates from year to year, and the cap should be applied accordingly.

The APTEL ruling was later challenged by the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) in the Supreme Court of India, but no stay was granted on the APTEL judgment. Consequently, the Commission has accepted APTEL’s views in its subsequent orders, which led to the current amendment being introduced.

This regulatory change aims to balance the rising costs of conventional fuels and the need to keep renewable energy tariffs fair and sustainable. By capping the payment at 75% of the preferential tariff, the amendment seeks to prevent renewable energy generators from benefiting unjustly when their tariffs fall below the pooled cost of power purchase. It also reflects the ongoing efforts to ensure the stability and affordability of power purchases in Tamil Nadu, while encouraging the growth of renewable energy sources like wind and solar.

The introduction of this amendment marks an important step in regulating power purchases, ensuring a fair approach to energy costs, and supporting the transition to renewable energy in the state.