TNERC Consultative Tariff – No need for panic

Tamil Nadu Electricity Regulatory Commission(TNERC)’s recently released Consultative Paper on “Comprehensive Tariff Order on Solar Power” has created some panic in the market owing to the proposed tariff of Rs. 5.78/kWh. (Read our initial analysis of the same here). Several project developers and EPCs with projects in Tamil Nadu were very much concerned after reading reports that the LOIs issued by Tangedco at the tariff of Rs. 6.48/kWh(and 5% escalation for the first 10 years) will no longer be valid. Many of them spoke to us and were clearly very worried about a downward tariff revision. The view that we shared with them was that while prima facie there is a cause for concern, the fine print suggests otherwise and that there is no need to panic. We spoke to a number of reliable stakeholders in the sector, and the most prevalent views are shared below.
1. The allocation of solar projects under the Tamil Nadu policy was done in order to meet the Solar Purchase Obligations(SPO), whereas the proposed tariff in the consultative paper is for

• Projects that opt for sale of power to discoms through the “preferential tariff” route. The projects that have already been allocated through the tendering process will not fall under this category
• Distribution licensees that have to purchase solar power at the price as determined by the TNERC to meet their RPO.

Unless the TNERC specifically mentions that the proposed tariff will be applicable retroactively for projects allocated under the Tamil Nadu Solar policy, there is no need to worry.
2. Section 6 – Applicability of the proposed order
 “The Order shall come into force from the date of its issue. The tariff fixed in this order shall be applicable to all solar power plants commissioned during the control period of this Order. The tariff is applicable for purchase of solar power by Distribution Licensee from SPGs.”
 This means  that even if the tariff is applicable for SPO based projects, this tariff will not be retroactive.  But the tariff may actually be irrelevant for the SPO based projects.
It may be recalled that a petition challenging the legality of the SPO is being examined by the court. Unless the court declares SPO illegal, the proposed TNERC tariff is not going to impact the projects for which LOI have already been issued.
Most important of all, this is only a proposed tariff and stakeholders comments are being sought. The actual tariff might look quite different after the consultants are over.
We will share more updates as we get more opinions from the stakeholders.
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