The Appellate Tribunal For Electricity (Aptel) has set aside certain components of the solar tariff fixed by the Tamil Nadu Electricity Regulatory Commission (TNERC) and directed the State regulator to pass a consequential order within three months.
In separate petitions, Welspun Renewables Energy Private Limited and National Solar Energy Federation of India (NSEFI) challenged the diverse components of the tariff determined by the TNERC through a comprehensive order on solar power dated March 28, 2016.
The tariff was applicable from April 1, 2016, for one year. The tariff was fixed at ₹5.10 per unit for solar photovoltaic projects, without accelerated depreciation benefits.
The TNERC and the Tamil Nadu Generation and Distribution Corporation Ltd (Tangedco) were named as respondents.
Aptel combined both the petitions, since the challenges were on similar grounds that the rate fixed for the components were not based on sound legal, regulatory and economic principles.
Solar power tariffs are determined on various operational and financial parameters such as capital cost, depreciation and return on equity among others.
Welspun and National Solar Energy Federation of India challenged the way capital cost was determined. The capital cost is one of the most important parameters for tariff determination of power projects.
The major components of a photovoltaic power plant are PV modules, inverters, control panels, switch yard, machineries and equipment.
The total capital cost also includes cost of land, power evacuation lines and replacement of capital equipment if any during the lifetime.
The TNERC had fixed capital cost at ₹5.05 crore per MW for photovoltaic projects.
The petitioners said the other State regulators had fixed a much higher capital cost in the range of ₹5.18 crore/MW to ₹6.15 crore/MW and that the TNERC did not take into account the final benchmark capital cost of ₹5.3002 crore fixed by the Central Electricity Regulatory Commission (CERC).
Another issue raised was the way depreciation was calculated.
The TNERC arbitrarily and without recording any reasons decided to adopt 90% of depreciation uniformly spread at the rate of 3.6% per annum over 25 years, the petitioners said.
They pointed out that generally a front-loaded depreciation is allowed during the initial years, as the higher rate of depreciation in the beginning provides additional cash flows that can be utilised for debt servicing.
Adverse financial impact
However, the depreciation fixed by TNERC has adverse financial impact on the project, it said.
Aptel directed the TNERC to re-determine the capital cost, depreciation and return on equity aspects in the solar tariff order.