APERC Go Ahead For AP Discoms Purchase of 7 GW Solar Power from SECI

According to a recent notification, the Andhra Pradesh Electricity Regulatory Commission (APERC) has granted Andhra Pradesh distribution companies (DISCOMs) approval of their proposal to procure 7000 MW solar energy in three tranches from the Solar Energy Corporation of India (SECI), permitting them to enter into tripartite power sale agreement (PSA) subject to the determination of tariff by the appropriate commission as per the provisions of the Electricity Act, 2003. The procurement is expected to be provided from SECI’s manufacturing linked tender projects, where PSA’s have been awaited for a long time, before the first one was signed earlier this year. Of course, both the winners, Adani Green Energy and Azure Power, might yet have to take a hit with markdowns in the power price on the original Rs 2.92 /unit. Final clarity is awaited on the price AP will pay for the power, as even the APERC notification omits it.

The approval is subject to the following further conditions:

• The State Government shall ensure that the transmission and distribution network is adequately strengthened to cater to the injection of the proposed power before the commencement of power supply.
• The DISCOMs are entitled to claim from the Government of AP, wheeling and other charges, if any, in supplying the proposed power.

The Andhra Pradesh Central Power Distribution Corporation Limited (APCPDCL), on behalf of the APDISCOMs, had sought approval for an interim power procurement plan for the 5th Control period. The interim plan envisaged procurement of 7000 MW of solar power from SECI in a phased manner, commencing from September 2024 for a period of 25 years with a ceiling limit of 17000 MU/year:

The DISCOMs further sought permission to enter into a tripartite PSA along with Government of AP and SECI for the procurement of power for 25 years.

The focus of these buys is the supply of power to farmers in the state.  It has been estimated that the subsidy support for free power supply to agriculture is likely to increase from Rs. 8,900 Cr. in FY 2020-21 to around Rs. 17,819 Cr. in FY 2030-31 considering release of new connections of 50,000 per year. Solar purchases at this cost would reduce or control those subsidies considerably.

It is advisable to de-risk the DISCOMs as soon as possible from the burden of agricultural consumption by ensuring direct payment by GoAP through an exclusive payment security mechanism for purchase of power for agriculture needs, so that the DISCOMs’ financial health improves.

After examining the proposal, APERC noted that the demand forecasted is comparable to the indicative forecasts of the resource plan. Therefore, the commission found that the proposed quantum of procurement is in accordance with the projected requirements.

With this, the existing DISCOMs will also be freed from supplying power from their own resources to the agriculture sector, and eventually the supply activity will be taken over by the AP Rural Agriculture Power Supply Company (AP RAPSCom). Considering these facts, the commission approved the said proposal.