Introduction

The case of BSES Rajdhani Power Limited v. DERC adjudicated by the Appellate Tribunal for Electricity on March 18, 2011, revolves around the Tamil Nadu Electricity Board (Appellant) challenging the Comprehensive Tariff Order (CTO) issued by the Tamil Nadu State Regulatory Commission (State Commission) on March 20, 2009. The CTO pertains to power procurement from wind energy generators, and the Appellant contested various provisions of this order, asserting undue hardship and procedural lapses.

The key issues addressed in this appeal include the reduction of the control period, fixation of capital costs, interest rates on loans, banking of wind energy, Renewable Energy Purchase Obligations (RPO), transmission and wheeling charges, Clean Development Mechanism (CDM) benefits, evacuation of wind energy, adjustment of generated energy, scheduling and system operation charges, competitive bidding processes, and the safeguarding of consumer interests.

Summary of the Judgment

The Appellate Tribunal for Electricity meticulously examined each contention raised by the Tamil Nadu Electricity Board against the State Commission's CTO. After a thorough analysis, the Tribunal upheld the majority of the State Commission's decisions, finding them in compliance with the Electricity Act, 2003, and the National Tariff Policy. Key findings include:

• The reduction of the control period from three to two years was justified and aligned with the State Commission's regulations.
• The capital cost fixation of Rs.5.35 crores per MW was validated based on recommendations from apex bodies like the Ministry of New and Renewable Energy Sources and the Indian Renewable Energy Development Agency.
• An interest rate of 12% was deemed reasonable considering prevailing market rates and the absence of preferential rates for renewable energy generators.
• Banking charges were rightfully maintained at 5%, and the proposal to increase them to 15% was rejected.
• The Renewable Energy Purchase Obligation set at 13% for 2009-10 and 14% for 2010-11 was found achievable and in line with the Board's submissions.
• Transmission and wheeling charges were appropriately fixed at 5% for HT/EHT consumption and 7.5% for LT services, countering the appellant's demand for a 15% rate.
• Clean Development Mechanism benefits were fairly shared between developers and consumers as per recommendations.
• Evacuation of wind energy was regulated in accordance with existing laws and regulations, ensuring non-discriminatory access.
• Adjustment of generated energy and scheduling charges were appropriately addressed to balance operational efficiency and cost recovery.
• The absence of a competitive bidding process was justified based on the non-firm nature of wind energy and previous stances against such processes.
• Consumer interests were safeguarded by ensuring that wind energy tariffs remained among the lowest compared to other states.

Ultimately, the Tribunal dismissed the appeal, confirming the State Commission's CTO without prescribing costs.

Analysis

Precedents Cited

The Judgment references previous decisions and regulatory frameworks governing renewable energy procurement. Notably, it aligns with:

• Section 86 (1) (e) of the Electricity Act, 2003: Mandating state commissions to promote renewable energy sources.
• Section 61 of the Electricity Act, 2003: Ensuring consumer interests are safeguarded while allowing reasonable cost recovery.
• National Tariff Policy (NTP): Providing guidelines for tariff determination and setting minimum purchase obligations for renewable energy.
• Forum of Regulators (FOR): Recommendations on sharing CDM benefits between developers and consumers.
• Previous Tribunal cases, such as Appeal No. 93 of 2009, reinforcing the State Commission's authority in tariff settings.

Legal Reasoning

The Tribunal assessed each contention based on statutory provisions, regulatory guidelines, and the merit of arguments presented by both parties. Key aspects of the legal reasoning include:

• Control Period Reduction: Validated as per the State Commission's regulations and stakeholder consultations.
• Capital Cost Fixation: Justified through reliance on authoritative recommendations and absence of contradictory data.
• Interest Rate Determination: Found reasonable against market standards and lack of preferential lending rates for renewables.
• Banking Mechanism: Maintained existing charges and periods based on historical data and operational feasibility.
• RPO Targets: Affirmed due to the Board's demonstrated capability to meet and exceed the set obligations.
• Transmission and Wheeling Charges: Supported the current rates, noting consistent loss figures and regulatory compliance.
• CDM Benefits Sharing: Approved the FOR-recommended gradual sharing approach to balance incentives.
• Evacuation and Energy Adjustment: Ensured compliance with the Electricity Act and uniform treatment across use cases.
• Scheduling Charges: Recognized the unique operational demands of wind energy, justifying proportional charges.
• Competitive Bidding: Acknowledged the discretionary power of the State Commission and the impracticality of bidding for non-firm energy sources.
• Consumer Interests: Emphasized lower wind energy tariffs contributing to reduced overall consumer costs.

Impact

This Judgment reinforces the authority of State Commissions in setting tariffs and regulations for renewable energy procurement. It establishes a clear precedent that:

• State Commissions have broad discretionary powers to determine terms that balance promoter interests, operational feasibility, and consumer benefits.
• Regulatory decisions based on comprehensive consultations and authoritative recommendations are upheld even when challenged by major stakeholders.
• Mechanisms like banking of wind energy and CDM benefit sharing are crucial for incentivizing renewable energy adoption and are subject to regulatory fairness.
• The alignment of state-level decisions with national policies and legal frameworks ensures consistency and supports national renewable energy targets.

Future cases involving tariff settings, renewable energy procurement, and stakeholder challenges can reference this Judgment to understand the balance between regulatory directives and operational constraints.

Complex Concepts Simplified

Control Period

The control period refers to the duration for which the tariff rates set by the regulatory body remain valid before they are subject to revision. In this case, the State Commission reduced the control period from three years to two years to adapt to changing market conditions.

Banking of Energy

Banking energy allows wind energy producers to store surplus electricity generated during periods of high wind availability and low demand. This stored energy can be utilized or sold when generation is low or demand is high, ensuring a more stable and efficient energy supply.

Clean Development Mechanism (CDM)

CDM is a framework established under the Kyoto Protocol allowing emission-reduction projects in developing countries to earn certified emission reduction (CER) credits. These credits can be traded, and in this context, the Tribunal approved a sharing model between developers and consumers to incentivize renewable energy projects.

Renewable Energy Purchase Obligation (RPO)

RPO mandates that a certain percentage of the total electricity consumed by distribution companies must be procured from renewable energy sources. This ensures the promotion and integration of sustainable energy into the grid.

Transmission and Wheeling Charges

These are fees levied for the transport of electricity from generating stations to consumer locations via the transmission and distribution network. Adjusting these charges affects the overall cost of power procurement and delivery.

Conclusion

The BSES Rajdhani Power Limited v. DERC Judgment serves as a comprehensive affirmation of the State Commission's authority in regulating renewable energy procurement and tariff setting. By meticulously addressing each contention, the Tribunal underscored the importance of balanced regulatory frameworks that foster renewable energy adoption while safeguarding consumer interests and ensuring operational feasibility. This decision not only consolidates existing regulatory practices but also provides a clear roadmap for future adjudications in the renewable energy sector, promoting sustainable energy growth in alignment with national policies.

The Judgment signifies a pivotal step in India's renewable energy landscape, reinforcing the regulatory mechanisms essential for balanced and sustainable energy development.