Karnataka govt overrules regulator’s order to reduce discom tariff

BENGALURU: In an unprecedented step, the Karnataka government has overruled a regulatory order that had reduced the tariff the state discom would pay for wind energy projects for which power purchase agreements were signed before this fiscal year.

The state has invoked special provisions under Section 108 of the Electricity Act to veto the decision of the Karnataka Electricity Regulatory Commission (KERC) — largely an autonomous body — to insist that developers whose PPAs were signed before March 31 this year, should be paid Rs 4.50 per unit, and not Rs 3.74 per unit as the KERC had laid down. The regulatory order had jeopardised many wind projects.

Section 108 of the Act says that state electricity commissions should be “guided by such directions in matters of policy involving public interest as the state government may give it” and that in such matters “the decision of the state government thereon shall be final”.

“The order has not yet reached my office,” said M K ShankaralingeGowda, chairman, KERC. “I will examine it once it does.”

The controversy arose after KERC passed an order on September 4 setting a fresh wind energy tariff of Rs3.74 per unit. Until then, discoms paid Rs 4.50 per unit, as set by the KERC’sorder of February 2015. But following the first wind auction held by the Solar Corporation of India in February this year, which saw the winning tariff fall to Rs 3.46 per unit, the KERC felt that wind projects’ capital costs had fallen considerably and the wind tariff too should be suitably revised downwards.

PPAs become operational only after regulatory approval, which usually takes months and is generally regarded as a formality. The KERC’sSeptember 4 order, however, stated that even PPAs which had already been signed but not yet approved by it would be endorsed only at the new tariff of Rs 3.74 per unit.“The tariff determined in this order shall also be applicable for projects which have entered into PPAs with any discomprior to the date of this order that are not approved by the Commission, if they so opt,” the order stated.

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