Jodhpur VIDVNL v. RERC: Upholding Levelised Tariff under RERC Regulations 2014
Introduction
The case of Jodhpur Vidyut Vitran Nigam Limited (JDVVNL) v. Rajasthan Electricity Regulatory Commission (RERC) adjudicated by the Appellate Tribunal for Electricity on February 12, 2020, marks a significant precedent in the interpretation and application of tariff mechanisms for renewable energy sources in India. This case revolves around the determination of tariffs for wind energy projects transitioning from the Renewable Energy Certificate (REC) mechanism to the preferential tariff mechanism as stipulated under the RERC Regulations 2014.
The primary parties involved include JDVVNL as the appellant representing the distribution licensee, and RERC along with other entities as respondents. The core issue centers on whether the RERC correctly applied the lower of the levelised tariff or the purchase rate for the year in which the wind power plant was commissioned without amending Clause 35 of the 2014 Regulations.
Summary of the Judgment
The Appellate Tribunal reviewed two appeals filed by JDVVNL challenging the RERC's order dated June 20, 2016, which mandated the payment of tariffs based on the levelised tariff determined for the year of commissioning without considering the lower purchase rate, as stipulated under Clause 35 of the RERC Regulations 2014.
Upon thorough examination, the Tribunal upheld the RERC's decision, finding no legal infirmity or material irregularity. The Tribunal concluded that since no competitive bidding was conducted for wind power during the relevant years, the levelised tariff as determined under the 2014 Regulations was applicable. Consequently, the Appeals No. 231 of 2016 and No. 399 of 2017 filed by the appellants were dismissed.
Analysis
Precedents Cited
The appellants referenced a judgment from the Hon'ble Supreme Court in the case of Gujrat Urja Vikas Nigam vs. EMCO and others (Civil Appeal No. 1220/15), where the Court emphasized the binding nature of Power Purchase Agreements (PPAs) and the necessity to adhere to contractual obligations post-formation. This precedent was utilized to argue that RERC's interpretation of the tariff clause was inconsistent with the contractual terms agreed upon in the PPA.
However, the Tribunal distinguished this case by highlighting that the regulation at issue provided a specific mechanism for tariff determination, which must be adhered to unless explicitly amended.
Legal Reasoning
The Tribunal meticulously analyzed Clause 35 of the RERC Regulations 2014, which outlines the tariff applicable when a generator opts to switch from the REC mechanism to the preferential tariff mechanism. The clause stipulates that the applicable tariff should be the lower of:
- The levelised tariff determined for the year the plant was commissioned.
- The lowest purchase rate achieved by the Discom in that year.
The appellants contended that RERC failed to consider the purchase rates outlined in existing PPAs and unjustly applied the levelised tariff. However, the Tribunal observed that no competitive bidding was conducted for wind energy during the commissioning years in question. Consequently, there were no valid lower purchase rates available that met the criteria of being from the same commissioning year, as specified in Clause 35.
Furthermore, the Tribunal noted that the RERC's interpretation was consistent with the regulation's intent and the contractual framework, thereby negating the appellants' claims of illegality.
Impact
This judgment reinforces the authority of regulatory frameworks in determining tariffs for renewable energy, especially in the absence of competitive bidding mechanisms. It underscores the necessity for both Discoms and generators to adhere to stipulated regulations and clauses within their PPAs unless formally amended.
Future cases involving tariff disputes will likely reference this judgment to justify the application of levelised tariffs when lower purchase rates are either non-existent or do not meet the stipulated conditions. Moreover, it emphasizes the importance for renewable energy generators to understand and navigate regulatory provisions when opting between different tariff mechanisms.
Complex Concepts Simplified
Levelised Tariff
The levelised tariff is a fixed rate determined over the entire operational life of a power plant. It accounts for all costs, including capital, operation, and maintenance, spread evenly across the expected electricity generation. This ensures stability in revenue for the power producer.
Preferential Tariff Mechanism
Under the preferential tariff mechanism, generators can receive tariffs that are more favorable than standard rates, often to incentivize renewable energy production. In this context, it allows wind energy generators to switch their tariff determination method from REC to a preferential structure.
Renewable Energy Certificate (REC) Mechanism
The REC mechanism is a market-based instrument that allows renewable energy generators to earn certificates for the electricity they produce, which can then be sold to Discoms to help them meet their Renewable Purchase Obligations (RPOs).
Conclusion
The Appellate Tribunal for Electricity's decision in Jodhpur VIDVNL v. RERC solidifies the interpretation and application of tariff determination under the RERC Regulations 2014. By upholding the levelised tariff in the absence of competitive bidding, the Tribunal affirmed the regulatory framework's integrity and its role in ensuring fair and consistent tariff structures for renewable energy generators. This judgment serves as a critical reference for future disputes, emphasizing the importance of adhering to established regulations unless formally amended.
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