In a setback to Gujarat Urja Vikas Nigam Limited (GUVNL), the Gujarat Electricity Regulatory Commission (GERC) has dismissed its petition seeking lowering of tariff paid to solar power developers.
GUVNL had filed a petition with GERC seeking reduction in tariff paid for solar power, citing unwanted and windfall gains to developers. It said that GERC had approved the tariff with an assumption that developers would incur capital cost of Rs16.50 crore per MW, while in reality, developers had invested only Rs11–13 crore per MW.
“Instead of Rs12.54, a tariff of Rs9 per unit is more reasonable and prudent. The increased tariff of Rs3.54 per unit is a direct burden on consumers,” it argued.
The solar project developers, on their part, said the petition was misconceived. They said that GUVNL was seeking to apply principles relating to determination of tariff for distribution companies to power generators.
The GERC in its order dated August 8, 2013, dismissed GUVNL’s petition. “The commission had determined the tariff, which is accepted by the parties and also acted upon for more than two years. Thereafter the petitioner has now approached the Commission by way of the present petition, which suffers from the delay. The petition is not maintainable,” GERC said in the order.
GERC said that developers have set up solar power plants based on GUVNL’s promise that it agreed to pay the tariff, and any variance in the tariff agreed between the parties is not permissible.
While GUVNL has the option of approaching the Appellate Tribunal, the decision comes as a big relief for developers.
“An adverse order would have had a tremendous impact on our cash flows. The petition was also not good for Gujarat’s image as an investor-friendly state,” said a developer.
As per power purchase agreements signed with developers, GUVNL will pay tariff of Rs15 per unit for first 12 years, and Rs5 per unit thereafter for next 13 years. In addition to high tariff, there is also a problem of plenty for GUVNL. The existing solar plants produce around 3 million units of electricity every day. At the current tariff, GUVNL is paying Rs1,500 crore annually to developers, causing a heavy strain on its finances.