Tariff Relief For Welspun, NSEFI Through APTEL in Tamil Nadu

By Prasanna Singh/ Updated On Mon, Nov 18th, 2019

The Appellate Tribunal for Electricity (APTEL), the final authority, other than the Supreme Court, for adjudicating on power-related issues, has provided relief to Welspun Renewables Energy Private Limited, in its appeal against an order of the TNERC. (Tamil Nadu Electricity Regulatory Commission) with the TANGEDCO as co-respondent. The TNERC order was passed on 28th March 2016, and applicable for one year starting April 1, 2016.

The 63-page order by the APTEL judges, uploaded to the site on November 13, sets aside specific components of the solar tariff fixed by the Tamil Nadu Electricity Regulatory Commission (TNERC) and directed the State regulator to pass a consequential order within three months.

The issue reached APTEL after TNERC fixed tariffs payable to Welspun at ₹5.10 per unit for solar photovoltaic projects, without accelerated depreciation benefits.

Welspun Renewables, challenged the method of determining the capital cost of its projects, as this had a key impact on determining the final tariff by TNERC. The National Solar energy Federation of India (NSEFI), which had also filed a similar appeal, was also clubbed in the same order as an appellant.

The total capital cost usually includes the cost of PV modules, inverters, control panels, switchyard, other machinery and cost of land, power evacuation lines and replacement of capital equipment if any during the lifetime of the plant.

The TNERC had fixed capital cost at ₹5.05 crore per MW for photovoltaic projects in the state.

Contending that the other State regulators had fixed a much higher capital cost in the range of ₹5.18 crore/MW to ₹6.15 crore/MW, it was claimed that TNERC did not take into account the final benchmark capital cost of ₹5.3002 crore fixed by the Central Electricity Regulatory Commission (CERC) for that year. The TNERC, in its wisdom, had considered the draft order of the CERC of 23.12.2015, and not the final order of 23.03.2016, while determining tariffs.

The calculation of depreciation was another sore point.

The TNERC adopted 90% of depreciation uniformly spread at the rate of 3.6% per annum over 25 years, a method that deprived the petitioners of the benefits of front-loading depreciation, impacting project cash flows.

Aptel directed the TNERC to re-determine the capital cost, depreciation and return on equity aspects in the solar tariff order.

The APTEL comprises a Chairperson who has been a Judge of the Supreme Court or Chief Justice of a High Court, one Judicial Member who has been or qualified to be a judge of High Court, two Technical Members who are electricity sector experts and one Technical Member who is an expert from petroleum and natural gas sector. Each bench has at least one Judicial and one Technical Member – creating a very effective combination of legal and industry (technical/financial) expertise. This has been an important factor responsible for the effective and expeditious disposal of appeals within the stipulated time frame of 180 days.