State Commissions Can’t Decide On Trade Margins In ISTS Projects: APTEL

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The Appellate Tribunal For Electricity (APTEL), in its latest judgment, ruled that State Commissions do not have the jurisdiction to take a call on the trade margins for Inter-State Transmission System (ISTS) power projects. The apex tribunal passed the order while hearing a case between the Solar Energy Corporation of India (SECI) against an impugned order of the Uttar Pradesh Electricity Regulatory Commission (UPERC).

The case was related to the review of fixation of the trade margins for SECI and methodology for tariffs for the sale and trade of renewable power from selected wind power producers between SECI and UPPCL (UP Power Corporation Limited). The State Commission, in its order, had directed SECI to adjust the trading margin in the process. The APTEL, in its order, questioned to the jurisdiction of the UPERC on the issue and quashed the order passed by the UPERC.

APTEL said that the trade margins could be adopted either by the Central Electricity Regulatory Authority (CERC) or mutually decided by the consenting players. In this case, SECI and UPPCL were the consenting authorities who signed a Power Sales Agreement (PSA) into this regard.

“…even to the fact that UPERC has no jurisdiction in reviewing or modifying the tariff adopted by the Central Commission and also having no jurisdiction over the trading margin, which is to be mutually decided by the SECI and UPPCL in accordance with the relevant CERC Regulations and the PSA signed between SECI and UPPCL has already agreed to Rs. 0.07/kWh,” the written order of APTEL read. 

This comes after the CERC, in the related order, had ordered that the trading margin be decided with mutual agreement by the trading licensee and the seller. The APTEL order said, “..Central Commission in its order has categorically stated that as per the relevant Regulations, the Trading margin is to be decided with mutual agreement by the Trading Licensee and the seller, whereas the Guidelines notified by Government of India prescribes that the Trading margin shall be as notified by the Appropriate Commission i.e., Central Commission in this case or in the absence of such notification as mutually agreed with distribution licensee(s),” the order said.

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The background

The Indian government, on December 8, 2017, had notified norms for a tariff-based competitive bidding process for procurement of power from grid-connected wind power projects. Under the norms, it talked about the role of an intermediary procurer, which can act as a power trader responsible for trading power from the wind power producers to the distributors. It also empowered them to charge ‘trading margin fees’ as notified by the appropriate commission, or in the absence of such notification, these could be mutually agreed with the discoms. 

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SECI had issued a Request for Selection (RfS) for selecting ISTS grid-connected wind projects with a total capacity of 1200 MW (Tranche-VII). The document mentioned the trading margin as the quantum mutually agreed between SECI and buying entities in this case or as decided by the CERC. Through the bid, it chose four wind power producers with the lowest bid at Rs 2.79/unit to Rs 2.83/unit and a pooled average tariff of Rs 2.8091. 

CERC while adopting the tariff adopted the individual tariff and also asked SECI and UPPCL to mutually decide on the trading margins. On the other hand, the PSA signed between SECI and UPPCL had talked about a trading margin of Rs 0.078/unit.

“We, therefore, find no merit in the contentions made by the State Commission, the Trading margin of Rs. 0.07/kWh as mutually agreed by SECI and UPPCL through the PSA, shall be final, the decision of the State Commission in directing UPPCL to suitably adjusting the Trading margin cannot be agreed to, the Impugned Order is set aside to this limited extent,” the final order of APTEL read.