Covid, Consumer Focus Lead to ‘Regressive’ HERC Tariff Order for 2020-21

In its tariff order for the year 2020-21, the order of the Haryana Electricity Regulatory Comission throws up some issues which will be watched very carefully from here on. For the solar and broader renewable energy sector of course, the most serious hit is the waiver of the state’s RPO (Renewable Purchase Obligation) backlog till 2018-19, with the blame laid on the Corona pandemic. The next key hit i the imposition of additional charge of Rs 1.15 kWh on open access electricity, ostensibly to ensure better balance for the grid, which is suffering huge extra generation in off peak hours.

The two key state discoms,  Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) and Dakshin Haryana Bijli Vitran Nigam (DHBVNL) were the petitioners here. The commissions order, while coming with the caveat that it comes in the rarest of the rare category due to the exceptional situation the country faces,  does open the door to other state regulators following suit, as every state discom will take the same argument and precedence now.

On the RPO situation, the state’s solar and non-solar RPO backlog as of FY 2018-19 is 1850 million units (MUs) and 905 MUs, respectively. The Haryana Power Purchase Center (HPPC),  in its submission claimed that every effort was made to meet these requirements, but failed due to multiple causes.

The backlog of solar and non-solar RPOs was predicted to  rise to 1,160 MUs and 3,550 MUs in 2020-21. Since  the only option left to clear up the  backlog would be purchase of REC (Renewable Energy Certificates)  of  Rs 1100 crores,  the commission decided to waive the RPO, as these costs would have to be recovered from consumers eventually.

Thankfully,  the HERC did  ask state discoms to clear their RPO backlogs from FY 2020-21 along with the 2021-22  targets by March 31, 2022.  To keep track, discoms have been asked to submit reports by the 10th of every month. Good luck with that, we say.  Incidentally, enforceability of RPO’s  is one of the highlights of the proposed amendments to the electricity Act bill (2020), which is expected to be tabled in parliament soon. The bill provides for much heavier penalties for missing RPO targets, and could possibly take jurisdiction out of the hands of state regulators too.

On Open Access for industrial consumers, discoms had a familiar lament.  The much lower prices in open access was blamed for a gradual shift of industrial consumers towards the option. This , the discoms claim, has created an insurmountable variance between peak and off peak load demand . A figure of 3.848 GW was provided, along with the statement that the grid is incapable of handling variance higher than 2 GW. The Deviation settlement mechanism (DSM) penalties this would attract would, like the REC costs, have to be borne by consumers, was the discom plea.

 The HERC agreed somewhat, by agreeing to the additional charge of Rs 1.15 kWh on open access supplies,  level that would still keep it below discom power rates for industrial consumers in most cases. However, the commission has deferred a decision on the other discom plea to suspend open access altogether during off peak hours.

The issue is critical for the solar sector especially, as worldwide, the commercial and industrial sector (C&I)has become a key driver for the spread of solar energy. In India, our obsession with utility scale supply to the national grid, possibly due to power being on the concurrent list, besides the love for big of course. Smaller, C&I  focused solar parks tend to be much more efficient, especially if allowed to operate without onerous conditions for open access, as Haryana has just imposed. For India to look at the long term need to transition to decarbonising its power sector, these issues will also need to be taken up on priority. Again, something the proposed new electricity act tries to do, to widespread protest off course.

The complete order can be viewed here