Regulator's remarks forced Andhra to relook at renewable tariffs: Officials

No customer tariff hike this year, discoms saddled with losses

The Andhra Pradesh government, which has attracted controversy after cancelling agreements the previous regime entered into, has maintained that its action on power-purchase agreements (PPAs) is on account of adverse regulatory observations on them.

The government has launched a salvo against infrastructure projects approved by the previous government. 

Among the worst affected are renewable power projects, for which the state formed a committee to “review, negotiate and bring down” tariffs.

However, state government officials said they had taken a cue from a direction of the Andhra Pradesh State Electricity Regulatory Commission (APERC), which wrote to the power 

department, asking for a review of renewable energy tariffs and a reduction of the power-purchase duration to five years from 25. 

“There were many requests received from various stakeholders to review existing power-purchase agreements which have a duration of 25 years in view of subsequent reduction in wind and solar energy in particular,” said the letter dated February 2019, addressed to the principal secretary (energy) of Andhra Pradesh.

A copy of the letter has been reviewed by Business Standard. 

The APERC asked the state government to take a legal view from the advocate general “to advise on the legal feasibility and possibility of reviewing the PPA in force and restricting the period to five years”. 

It said action would be taken accordingly. The previous government did not take it further.

Officials said they were acceding to the regulator’s request, which was “ignored” by the previous government. 

“Our decision to review and negotiate tariffs is not suo motu. It is what the APERC mandated. We set up a committee to look into the renewable PPAs and a final decision rests with the regulator,” said a senior state government official.

Developers of wind and solar power have moved the Andhra Pradesh High Court, calling the step to review tariffs “illegal and unconstitutional”. 

The APERC’s letter referred to the submission of several stakeholders during the consultation process for deciding retail power tariffs for FY20, in February this year. Several participants 

including members of opposition parties and non-government organisations cited the high cost of renewable power in Andhra Pradesh compared to that of other states.

“The cost of renewable energy in 2019-20 is projected at Rs 4.60, which is highest among all other sources of energy … it is desirable that cheaper sources of renewable energy are explored,” said an industry association in its submission to the APERC.

A submission by a member of the CPI(M) in Vijayawada stated PPAs in respect of NCE Generators would not be made for more than five years. 

“PPAs shall be reviewed in view of the reduction of prices of wind and solar power and new PPAs shall be entered into,” he said.

The APERC in reply to these submissions said it would seek a legal view on the matter. Then it wrote to the state government as mentioned above.

In its filing on average revenue requirement (ARR) for 2019-20, discoms in Andhra Pradesh estimated a loss of Rs 9,415 crore. It stated a revenue requirement of Rs 28,788 crore.

Despite the revenue gap, the discoms did not apply for customer tariff hikes, which the APERC approved. 

A power subsidy of Rs 7,064 crore was approved by the regulator to provide free electricity to agricultural consumers. 

The department cited the poor financial situation of its discoms as the reason to review tariffs.

The discoms have dues of Rs 20,000 crore.