The Tamil Nadu Electricity Regulatory Commission (TNERC) has introduced amendments to its Renewable Energy Purchase Obligation (RPO) Regulations, 2023, aimed at addressing concerns related to the rising costs of electricity purchases, particularly from renewable energy sources like wind and solar power. The changes were made under the powers provided by the Electricity Act of 2003 and have now been officially incorporated into the Tamil Nadu Electricity Regulatory Commission (Renewable Energy Purchase Obligation) (Amendment) Regulation, 2024. These amendments come into force from the date of the original 2023 regulations.
One key amendment is the revision of the definition of “Pooled Cost of Power Purchase.” Previously, this term referred to the average price at which electricity is purchased by distribution licensees, including costs from self-generation. The new definition excludes purchases based on liquid fuels, purchases from traders, short-term purchases, and renewable energy sources. A crucial part of this change is that when the Average Pooled Cost of Power Purchase (APPC) exceeds the preferential tariff rate set by the Commission for renewable energy, the distribution licensee must pay 75% of the preferential tariff to renewable energy generators.
The need for this amendment arose as the APPC of Tamil Nadu Generation and Distribution Corporation (TANGEDCO) has exceeded the preferential tariff in recent years. This is primarily due to the increasing costs of conventional fuels, which has led to higher electricity purchase prices. As a result, the Commission felt the need to establish a cap to ensure a reasonable Pooled Cost of Power Purchase.
The issue has been the subject of judicial proceedings. The Madras High Court, in a ruling in 2013, clarified that the amendment regarding the cap on APPC should only be implemented once the APPC surpasses the preferential tariff rate. The court’s decision indicated that the cap was necessary to prevent renewable energy generators from gaining excessive profits when the APPC exceeds the preferential tariff. The court further stated that the cap could only take effect from the date when the APPC rate first breaches the preferential tariff.
In 2019, the Appellate Tribunal for Electricity (APTEL) also addressed the issue. The Tribunal ruled that the APPC rate should be reviewed annually. If the APPC rate exceeds the preferential tariff for any given year, the 75% cap on the preferential tariff rate should apply. This ruling provided further clarity on how the cap should be implemented. Following this, TANGEDCO appealed the APTEL’s decision before the Supreme Court, which, however, did not stay the Tribunal’s order.
The Commission has now incorporated the findings of the APTEL and the High Court into the updated regulations. The amendment reflects the evolving nature of the energy market, especially in the context of renewable energy. The revised definition of Pooled Cost of Power Purchase will help balance the interests of renewable energy producers and distribution licensees, ensuring fair payments for renewable energy while maintaining reasonable electricity prices for consumers. This move is expected to further stabilize the renewable energy market in Tamil Nadu and promote sustainable growth in the energy sector.
Overall, the amendments aim to create a fairer framework for renewable energy purchases in the state, addressing both the concerns of energy producers and the financial sustainability of distribution licensees like TANGEDCO. The Commission’s decision to implement these changes is aligned with both judicial precedents and the state’s commitment to fostering renewable energy development.
