KERC Yet To Decide On State Order On Lower Wind Energy Tariffs

KERC Yet To Decide On State Order On Lower Wind Energy Tariffs

Two weeks after Karnataka government ordered the state’s electricity regulator to call back its September decision to cut wind power tariffs and approve all power purchase agreements with wind developers signed before March 31, 2016, the latter has yet to officially respond.

“We have to consult legal experts and then decide how to respond,” said M K Shankarlinge Gowda, chairman of Karnataka Electricity Regulatory Commission (KERC). “The main thing is to see whether the order has been issued in public interest.”

People close to the regulator said KERC may ignore the said order as it believes it overstepped the government’s jurisdiction.

The government order, passed on October 27, had invoked the rarely used Section 108 of the Electricity Act to insist that wind developers whose PPAs were signed in 2016-17, should be paid Rs 4.50 per unit and not Rs 3.74 per unit as KERC had laid down in September.

The regulator on September 4 had set a fresh wind energy tariff after terminating its earlier order of February 2015, which had prescribed a tariff of Rs 4.50 per unit.

Though the KERC is a statutory, autonomous body, Section 108 says that the state electricity commissions should be “guided by such 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”.

The controversy now is over the scope and applicability of section 108.

“What the government has said is binding,” a state government official said. “The terms of the section 108 clearly say so.”

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But KERC has a different view. “The main thing is to see whether the order has been issued in public interest,” its chairman Gowda said.

Another person close to the regulator claimed KERC had the final say on tariff matters. “The government can’t overrule anything the commission says except on policy issues,” the person said.

He also claimed that it was KERC’s order that was in the “public interest” since it meant a lower tariff for consumers.

His position is bolstered by an Uttarakhand High Court order of January 2011. “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 state government cannot issue a policy on tariff matters,” the HC order had said.

Dibyanshu, partner at legal firm Khaitan and Co, said KERC can contend that the approval of power purchase agreements (PPAs) and determination of tariff are statutory functions of the regulator.

“It may also use certain judgments of the Appellate Tribunal for Electricity (APTEL) to take the view that while it shall take policy directions by the state government into consideration, being an independent statutory authority, it is not bound by such policy directions,” Dibyanshu said.

Wind power developers see the matter differently, insisting that the government order is indeed in public interest.

“Public interest is a larger debate than merely the tariff being paid for power,” a developer said on condition of anonymity. “By doing what KERC has done, investor faith in Karnataka has been shaken. The government has to look at all aspects,” the person said.

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Developers have already taken the matter to APTEL.

“The resolution of the issue will depend on APTEL’s decision,” said Dibyanshu of Khaitan and Co. Read more

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