APTEL Upholds SECI’s Trading Margin of ₹0.07/kWh for Solar and Hybrid Projects

The Appellate Tribunal for Electricity (APTEL) has upheld the Solar Energy Corporation of India’s (SECI) plea regarding the trading margin of power. The Tribunal refused to reduce the margin from ?0.07 (~$0.0009)/kWh to ?0.02 (~$0.0003)/kWh as approved by the Delhi Electricity Regulatory Commission (DERC) and the Punjab State Electricity Regulatory Commission (PSERC) in their earlier orders.
SECI had approached APTEL, challenging the orders passed by the Delhi and Punjab Commissions, asking the respective distribution companies (DISCOMs) in the state to decrease the trading margin to ?0.02 (~$0.0003)/kWh.
In its order dated December 31, 2020, Delhi Commission had approved the procurement of 200 MW of solar power by the Tata Power Delhi Distribution Limited (TPDDL) under the power sale agreement (PSA) signed with SECI and had lowered the trading margin to ?0.02 (~$0.0003)/kWh.
In a similar order, Punjab Commission had approved the procurement of 500 MW of wind-solar hybrid power by the Punjab State Power Corporation Limited (PSPCL) and slashed the trading margin to ?0.02 (~$0.0003)/kWh.
Background
In 2017, the Ministry of Power had issued the guidelines for a tariff-based competitive bidding process to procure power from grid-connected solar projects.
The Ministry of power had stated that the trading margin as notified by the appropriate commission (or in the absence of such notification, as mutually decided between the intermediary procurer and the end procurer) would be payable by the end procurer to the intermediary procurer.
Later, in 2019, the Ministry of New and Renewable Energy (MNRE) made amendments to the guidelines. MNRE clarified that a trading margin of ?0.07 (~$0.0009)/kWh would be payable by the end procurer to the intermediary procurer.
On January 2, 2020, CERC said that for transactions under long-term contracts, the trading margin should be decided mutually between the trading licensee and the seller.
On June 26, 2019, SECI entered into a PSA with Tata Power Distribution to procure 200 MW solar power.
In the other case, on January 3, 2020, Punjab DISCOM entered into a PSA with SECI to procure 500 MW wind-solar hybrid power under the ISTS wind-solar hybrid program (Tranche-II).
Later, Punjab DISCOM filed a petition for the approval of the procurement of 500 MW of wind-solar hybrid power under the PSA entered into with SECI. PSPCL requested the approval of tariff and trading margin of ?0.02 (~$0.0003)/kWh payable to SECI.
SECI had stated that Punjab DISCOM’s unilateral decision on the trading margin of ?0.02/kWh keeping aside mutual consent of the same at ?0.07 (~$0.0009)/kWh while signing of PSA might bring a sense of insecurity in the renewable sector and impact in commissioning of the projects.
SECI argued that the orders passed by Delhi and Punjab Commission reducing the trading margin to ?0.02 (~$0.0003)/kWh were erroneous and liable to be overruled.
SECI also noted that CERC – and not the State Commissions – had the exclusive right to decide on the applicable trading margin.
Tribunal’s analysis
The Tribunal observed that both the orders reducing the trading margin had been passed by the State Commissions without authority. As a result, the orders were not valid, it said.
The State Commissions had committed an error in applying the regulation of short-term trading to long-term purchases, the Tribunal said.
Further, APTEL noted that the nature of the transactions being interstate operations and not intrastate, the State Commissions had no jurisdiction to deal with the trading margin of the interstate trading licensee (SECI).
The Tribunal further added that it was clear that Tata Power Distribution had proceeded with the transaction based on trading margin being ?0.07 (~$0.0009)/kWh. Tata Power Distribution had mutually agreed with SECI on the trading margin of ?0.07 (~$0.0009)/kWh. The decision of Delhi Commission to modify the mutually agreed term of trading margin was not only out of jurisdiction but also against the regulatory framework.
Similarly, the Tribunal noted that Punjab Commission had unfairly ignored the provisions of the PSA, providing for the trading margin of ?0.07 (~$0.0009)/kWh to SECI.
APTEL stated that it was surprising that the Punjab Commission had also ignored the fact that Punjab DISCOM had reconciled to the obligations of the agreed terms of tariff and trading margin of ?0.07 (~$0.0009)/kWh.
The Tribunal concluded that Punjab Commission was also erroneous in its decision by going against the agreed terms on trading margin.
In January this year, the West Bengal Electricity Regulatory Commission approved the PSA executed between India Power Corporation Limited and SECI to purchase 100 MW solar-wind hybrid power. The PSA was approved for a tariff of ?2.69 (~$0.036)/kWh with a trading margin of ?0.07 (~$0.0009)/kWh.
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