NTPC Secures Tariff Adoption For 1,500 MW Solar Projects At ₹2.60-₹2.65/kWh After Competitive Bidding

Posted On - 9 October, 2024 • By - King Stubb & Kasiva

Summary

The Central Electricity Regulatory Commission (CERC) passed an order on 23rd September 2024, adopting the tariff for 1500 MW of solar power projects awarded to NTPC.[1] These projects were awarded after a competitive bidding process, with the final tariffs ranging from ₹2.60 to ₹2.65 per kWh. The solar power developers selected were Anboto Solar Private Limited, Apraava Energy Private Limited, Avaada Energy Private Limited, and ReNew Solar Power Private Limited. The adoption of the tariff was done in line with Section 63 of the Electricity Act, 2003, following the guidelines laid out by the Ministry of Power, Government of India, for procurement of power from grid-connected solar PV power projects.

Case Timeline

  • 25th July 2023: NTPC issued a Request for Selection (RfS) along with draft Power Purchase Agreement (PPA) and Power Sale Agreement (PSA) documents for setting up 1500 MW ISTS-connected solar power projects.
  • 29th December 2023: The financial bids of six qualified bidders were opened, and five bidders were shortlisted.
  • 4th January 2024: An e-reverse auction was conducted, finalizing tariffs for the selected projects.
  • 24th January 2024: NTPC issued Letters of Award (LoAs) to successful bidders.
  • 13th August 2024: NTPC signed the PSA for 300 MW with Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) and the corresponding PPA with Anboto Solar Private Limited.
  • 23rd September 2024: CERC issued the final order for adoption of the tariff.

Issue Raised

The main issue raised was whether the CERC should adopt the tariff discovered through a competitive bidding process under Section 63 of the Electricity Act, 2003, despite some of the awarded capacity not being fully tied up with signed PPAs and PSAs. NTPC had approached the commission within the statutory time limit for adoption of the tariff, although PPAs and PSAs for the entire 1500 MW capacity had not yet been executed.

Appellant’s Arguments and Respondent’s Arguments

Appellant’s Arguments (NTPC)

  1. Timely Filing of Petition: NTPC argued that, according to Clause 10.4 of the Solar Guidelines, it was obligated to file the petition for adoption of the tariff within 15 days of discovering the tariffs through the e-reverse auction. The execution of PPAs and PSAs was not a precondition for filing the petition, and NTPC filed the petition within 21 days of issuance of the Letters of Award.
  2. Efforts for PSA and PPA Execution: NTPC submitted that it was making all necessary efforts to finalize the PPAs and PSAs and had already signed agreements for 300 MW of the total awarded capacity. The balance capacity was still under discussion with various State Utilities/Discoms.
  3. Transparent Bidding Process: NTPC maintained that the competitive bidding process had been conducted transparently in accordance with the Solar Guidelines, and the tariffs discovered were reasonable.

Respondents’ Arguments

None of the respondents (i.e., the successful bidders and MSEDCL) filed replies in the matter despite multiple opportunities provided by the commission. Consequently, the arguments were based on NTPC’s submissions and the guidelines under which the bidding and tariff adoption process took place.

Order

The CERC adopted the tariff for the 1500 MW solar power projects, stating that the selection of successful bidders and the tariffs discovered were in compliance with the Solar Guidelines issued by the Ministry of Power. The commission emphasized that, under Section 63 of the Electricity Act, it was required to adopt the tariff as long as the competitive bidding process was transparent and in accordance with the guidelines.

The CERC observed that NTPC had acted in a timely manner by approaching the commission within the specified 15 days after the discovery of the tariffs, as per the guidelines. The commission also took note of NTPC’s efforts in negotiating and signing the PSAs and PPAs for the awarded capacity, even though the entire capacity had not yet been fully contracted.

However, CERC directed NTPC to strictly adhere to the timelines provided in the Solar Guidelines in future cases. It also mandated that NTPC must place on record any future PSAs and PPAs as soon as they were signed.

Analysis

The order reflects the CERC’s obligation under Section 63 of the Electricity Act to adopt tariffs discovered through a transparent competitive bidding process, provided the process aligns with the government guidelines. In this case, NTPC conducted the bidding and tariff discovery process in adherence to the Solar Guidelines, ensuring transparency and adequate competition.

The judgment also highlights the challenges faced in the power sector regarding timely execution of PSAs and PPAs. NTPC faced delays in signing agreements for the entire 1500 MW awarded capacity due to ongoing negotiations with various State Utilities and Discoms. Despite this, CERC proceeded with the adoption of tariffs for the capacity that had been awarded, subject to the condition that NTPC continued its efforts to finalize the contracts for the remaining capacity.

This decision by the CERC reflects a flexible approach towards the adoption of tariffs while maintaining the integrity of the competitive bidding process. It provides clarity on how regulatory authorities may handle situations where awarded capacity has not yet been fully contracted. The order also emphasizes the importance of adhering to statutory timelines and encourages procurers to fulfill their obligations promptly to avoid delays in the renewable energy procurement process.

[1] https://www.cercind.gov.in/2024/orders/88-AT-2024.pdf