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APTEL Orders Assam Regulator to Reassess Tariff for 5 MW Solar Project

In a significant move, the Appellate Tribunal for Electricity (APTEL) has instructed the Assam Electricity Regulatory Commission (AERC) to revisit and redetermine the tariff of ?8.78/kWh that was approved for the 5 MW solar project by Suryataap Energies and Infrastructure in Sonitpur district, Assam. The decision is intended to correct what APTEL deemed an erroneous tariff determination, emphasizing the need to align with market benchmarks and regulatory norms, particularly in the context of capital costs.

Background of the Dispute

The case stemmed from an appeal by the Assam Power Distribution Company (APDCL) challenging AERC’s 2017 order. AERC had established a project-specific tariff for Suryataap Energies’ solar project based on financial year (FY) 2016 benchmarks. APDCL contested this decision, questioning the appropriateness of the tariff in light of evolving market conditions.

The key grounds for the appeal were centered on the belief that the tariff did not sufficiently account for the updated capital costs or the prevailing market norms for the commissioning period of the project. APDCL argued that the tariff set by AERC was unsustainable and did not align with industry standards.

Tribunal’s Analysis

Upon reviewing the case, APTEL found that Regulation 8 of the AERC Tariff Regulations, 2012 mandates the Commission to determine tariffs based on project-specific costs, including the capital expenditure involved in solar power generation. APTEL noted that capital costs are a critical factor in setting appropriate tariffs for such projects. In its findings, the Tribunal pointed out that AERC had based its tariff on an outdated and flawed capital cost structure, leading to an unsustainable tariff for the solar project. APTEL further stressed that if the Commission had doubts regarding the data or documents provided by Suryataap Energies, it should have instead determined capital costs by using the prevailing market benchmark norms at the time of the project's commissioning.

As a result, APTEL remanded the case back to AERC with instructions to reassess and determine a more accurate and sustainable tariff for the solar project, based on the latest capital cost benchmarks and regulatory guidelines.

Broader Implications

This decision highlights the importance of accurate and up-to-date capital cost considerations when determining tariffs for renewable energy projects. It also underscores the role of regulatory bodies in ensuring that tariffs remain fair and reflective of actual market conditions.

Recently, APTEL has been involved in several similar cases, such as allowing Andhra Pradesh discoms to retrospectively adjust wind project tariffs by deducting Generation Based Incentive amounts. This ruling is part of a broader trend where APTEL is actively overseeing tariff determinations to ensure that they adhere to regulatory standards and are not detrimental to the sustainability of renewable energy projects.

In addition, APTEL has also dealt with appeals in other sectors of the renewable energy market, including rooftop solar, where it rejected an appeal for enforcing a higher tariff than initially agreed upon in the Power Purchase Agreement (PPA).

The APTEL ruling is a critical reminder of the need for regulatory bodies to regularly update tariff structures to reflect current market realities and cost trends. By mandating the re-determination of the tariff for Suryataap Energies’ solar project, APTEL aims to ensure that tariffs remain fair, sustainable, and in line with the evolving renewable energy landscape.