GERC rejects retroactive solar tariff cut

Gujarat Urja Vikas Nigam Limited (GUVNJ) had earlier petitioned Gujarat Electricity Regulatory Commission (GERC) proposing a retroactive tariff cut for the solar projects operating in the state citing that the capital costs had fallen considerably by the time the projects had been commissioned in the state. GUVNL had argued that the capital costs approved in an order dated 29.1.2010 which amounted to Rs. 16.50 crores per MW was much higher than the capital costs actually realized during the period and requested GERC to re-evaluate the front loaded tariffs (applicable for the first 12 years) offered to the project developers.
GUVNL argued that the developers invested only between Rs. 11 and Rs. 13 crores per MW and contributed less than 30% of the equity which was the basis for the evaluation of the tariff. GERC has stated that the PPA signed between GUVNL and the project developers was acted upon due faith between both parties and that a revision of the PPA tariff violates the faith put by the developers on the off-taker. Furthermore, GERC also stated that the normative tariff determined in the tariff order was accepted by GUVNL before signing of the PPA and that a clause for revision of the tariff was not present in the PPA between the developer and GUVNL. These were the reasons stated for the dismissal for the  revision of the tariff.
It should be noted that GUVNL signed 88 PPAs for a total installed solar capacity of 946.5 MW of solar PV projects. Gujarat currently hosts over 50% (over 800 MW) of the country’s total installed total capacity primarily due to this lucrative PPA signed with the developers. The fact which made the PPA attractive was not only the tariff offered (a levelised tariff of about Rs. 12.5 per kWh) but also the front loading of tariffs (higher tariff during the first 12 years of operation) which greatly helped in maintaining good cash flows across the initial operational period of the project – a term where loans would be repaid. This ruling by GERC is favors the project developers who were apprehensive about incurring losses due to unforeseen reductions in tariff.
GERC’s ruling can be accessed in its entirety here.
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