Karnataka Government, Regulator Spar Over Wind Power Tariffs

Karnataka Government, Regulator Spar Over Wind Power Tariffs

In an embarrassing development, the Karnataka government and its power regulator exchanged letters sticking to their positions in a dispute over whether power from wind projects commissioned before March 31 this year should be paid Rs 4.50 per unit or Rs 3.74.

While the Karnataka Electricity Regulatory Commission (KERC), in its letter of November 9, invoked high court judgments to maintain that the state government had no right to interfere with its decisions on tariffs, the government replied the very next day asking the regulator to reconsider its stance since the matter involved “public interest”.

KERC had passed an order on September 4 reducing the fixed wind tariff to Rs 3.74 per unit from the Rs 4.50 per unit it had set two years ago, and further laid down that all wind projects it had yet to approve would be endorsed only at the new lowered rate. This created a problem for 270.50 MW of wind projects which had been commissioned before March 31 and were already supplying power to Karnataka’s power distribution companies at Rs 4.50 per unit, but whose power purchase agreements (PPAs) awaited KERC’s approval. The order required them all to renegotiate their PPAs at Rs 3.74.

Disagreeing with the KERC’s decision, the state government, in an order passed on October 27, invoked the rarely used Section 108 of the Electricity Act to insist that KERC approve all wind projects commissioned in 2016-17 at Rs 4.50 per unit, which was the prevailing rate then. Section 108 says that state electricity commissions should be “guided by directions in matters of policy involving public interest as the state government may give it”, and that in such matters “the decision of the state government shall be final”.

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KERC, in its November 9 letter to the state’s additional chief secretary for said that the government should not intervene on matters of tariff, since these did not constitute “matters of policy involving public interest”. It pointed to two judicial decisions, one by the Uttarakhand High Court and the other by the Delhi High Court, which supported this position. The Uttarakhand court judgment of 2011 had said: “Section 108 itself recognises that government policy is only guidance to the state commission … The state commission is not bound by the said policy directions.”

“The scope and limitations of the directions to be issued under Section 108 … particularly in respect of tariffs … are already considered elaborately in the (legal) decisions cited,” the letter form KERC said. “It appears that the state government was not apprised of the principles of the judgments stated above before issue of the directions.”

In response, the November 10 letter from BV Srinivasiah, an undersecretary in the state energy department, said the government had not tried to dictate in matters of tariff, but only their enforcement. “Government has given directions only for procurement of wind power in terms of the tariff determined by the commission,” it said. “As power is required by the state, and also to meet the RPO (renewable purchase obligation) requirements of future years, and to encourage green and clean renewable energy generation, government directs that it is in the public interest to procure this power from wind generators in terms of the existing policy of the government.” Read more

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