MERC Approves Combined Short-Term Wind Power Procurement To Lower Costs For SEZs

Posted On - 3 August, 2024 • By - King Stubb & Kasiva

Summary

The Maharashtra Electricity Regulatory Commission (MERC) approved a petition by three Special Economic Zones (SEZs)—Mindspace Business Parks Private Limited, Gigaplex Estate Private Limited, and KRC Infrastructure and Projects Private Limited—to procure wind power on a short-term basis from M/s. Manikaran Power Limited (MPL)[1]. This decision allows the SEZs to purchase power from wind generators whose contracts with MSEDCL have expired, aiming to lower power costs for the SEZs and their consumers. The approval is for a period from August 1, 2023, to July 31, 2024, at rates of Rs 2.25/kWh for Group I wind projects and Rs 2.52/kWh for Group II to IV projects.

Case Timeline

  • July 25, 2023: The SEZs file a petition (Case No. 168 of 2023) with MERC under Section 86 (1) (b) of the Electricity Act, 2003, seeking approval for combined short-term wind power procurement.
  • May 7, 2024: An E-hearing is conducted where the petitioners reiterate their request and arguments.
  • June 21, 2024: MERC issues its order approving the petition.

Issues Raised

  1. Approval for Short-Term Power Procurement: The primary issue is whether to grant approval for the SEZs to procure wind power on a short-term basis.
  2. Approval of Tariff Rates: The second issue is whether to approve the tariff rates offered by MPL for the wind power.
  3. Other Issues: Additional concerns include the potential extension of the power procurement arrangement and the timely filing of petitions.

Appellant’s Arguments

  • Need for Power Procurement: The petitioners highlight their unsuccessful attempts to procure power through competitive bidding and emphasize the necessity of the proposed arrangement to meet their power demands.
  • Cost Reduction: They argue that the offered wind power tariffs are significantly lower than the rates approved by MERC in previous orders, leading to substantial cost savings for the SEZs and their consumers.
  • Renewable Energy and RPO Compliance: The petitioners stress that procuring wind power will help them fulfill their Renewable Purchase Obligation (RPO) and cater to the increasing demand for green energy from their consumers.

Respondent’s Arguments

  • As this is a regulatory order by MERC rather than a legal case with opposing parties, there are no explicit respondent arguments presented in the document.

Order

MERC’s order approves the petition, permitting the SEZs to procure wind power on a short-term basis from MPL for the specified period. The order also addresses the following:

  • Tariff Approval: The offered tariff rates of Rs 2.25/kWh and Rs 2.52/kWh are deemed competitive and in line with market trends, considering previous approvals and the potential for cost reduction.
  • EPA/PPA Submission: The SEZs are directed to submit copies of the final Energy Purchase Agreement/Power Purchase Agreement (EPA/PPA) to MERC for record-keeping.
  • Extension of Arrangement: The request to extend the arrangement is considered premature and not allowed at this stage due to the lack of sufficient information.
  • Timely Filing of Petitions: The petitioners are instructed to be more vigilant in filing such petitions in advance to avoid time constraints and ensure a smoother process.

Analysis

MERC’s decision is grounded in several factors:

  • Precedents: Previous approvals for similar short-term wind power procurement at the same rates provide a basis for the decision.
  • Cost-Benefit Analysis: The lower wind power tariffs compared to other sources indicate potential cost savings for consumers, aligning with MERC’s objective of ensuring affordable electricity.
  • Renewable Energy Promotion: The procurement of wind power supports the broader goal of increasing renewable energy adoption and meeting RPO targets.

Overall, MERC’s ruling demonstrates a balanced approach that considers the need for reliable power supply, cost reduction for consumers, and the promotion of renewable energy sources. The decision also emphasizes the importance of timely and proactive filings by the petitioners in future cases.

[1] https://merc.gov.in/wp-content/uploads/2024/06/Order_Case-No-168-of-2023.pdf