UPPCL Secures Approval For 500 MW Solar Power Procurement At ₹2.60/kWh With Revised Trading Margin

UPPCL (Uttar Pradesh Power Corporation Limited) has filed a petition seeking approval for the procurement of 500 MW of solar power under a long-term agreement of 25 years. This power will be procured through a tariff-based competitive bidding process conducted under the Solar Inter-State Transmission System Tranche XI Scheme. The petition includes the approval of the Power Supply Agreement (PSA) dated 28th December 2023 and the Supplementary Power Supply Agreement (SPSA) dated 7th March 2024. The goal of this procurement is to meet the rising power demand in Uttar Pradesh and help UPPCL comply with the Renewable Purchase Obligation (RPO) set by the Ministry of Power, as per its notification dated 20th October 2024.

In its order dated 13th May 2024, the Central Electricity Regulatory Commission (CERC) adopted a tariff of ₹2.6 per kWh for the 500 MW of solar power to be supplied by three solar power developers (SPDs) to UPPCL. This tariff was determined based on the competitive bidding process. The CERC order also references the agreements executed between UPPCL and SECI under this arrangement.

Regarding the trading margin, CERC’s regulations allow the transacting parties to mutually decide on a trading margin, with a ceiling of ₹0.07 per unit. The law does not require any specific approval from the central commission for this margin. The payment risk for the project developers is mitigated through a payment security mechanism provided by UPPCL. This is expected to reduce the cost of supply for state consumers. However, the state commission does not have the authority to take action on the interstate trading margin due to legal limitations.

The commission approved the procurement of 500 MW of solar power at a tariff of ₹2.60 per kWh, along with a trading margin of ₹0.07 per kWh. However, if SECI fails to provide adequate payment security, such as an escrow arrangement or an irrevocable, unconditional revolving letter of credit to the solar developers, the trading margin will be limited to ₹0.02 per kWh. The PSA and SPSA agreements between UPPCL and SECI have also been approved. Finally, the commission advised UPPCL to negotiate a lower trading margin for future long-term power procurements to benefit consumers. The petition has been disposed of in line with these decisions.