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Aptel rejects GUVNL’s bid to cut solar power tariff in Gujarat

In what could be considered a significant victory for solar power producers of Gujarat, the Appellate Tribunal for Electricity (Aptel) has rejected state-run utility Gujarat Urja Vikas Nigam Ltd’s (GUVNL) demand for reduction of rate paid for purchase of solar power.

A bench of Justice M Karpaga Vinayagam and technical member Rakesh Nath rejected GUVNL’s appeal for reducing solar power purchase tariff claiming that the demand was devoid of merits. The appellate body also upheld order of Gujarat Electricity Regulatory Commission (GERC) of August 2013 that had struck down GUVNL’s demand for re-determination of solar power purchase tariff claiming that capital cost of setting up a solar plant incurred by the developers was significantly less than expected as was assumed while determining the tariff in 2010.

GUVNL is the bulk buyer of power in Gujarat which it distributes to other distribution agencies. It has signed 88 power purchase agreements (PPAs) for a total of 971.5 Mw of solar power for 25 years with the developers in 2010. The tariff determined by GERC was for 25 years was based upon the capital cost of Rs 16.50 crores per MW and debt equity ratio of 70:30 with Rs 15 per unit for first 12 years and Rs 5 per unit for the balance 13 years thereafter. Over 80 solar power producers of Gujarat has opposed the appeal of GUVNL.

In 2013 GUVNL filed a petition in Aptel seeking to lower the rates, on the grounds that solar power developers were making excessive profits as the cost incurred by them in setting up the plant was lower then determined by GERC.

GUVNL also claimed that following reduction in custom duty and exemption of excise duty of the solar power projects.

The state agency claimed that subsequent development after signing of PPAs led to reduction in the capital cost incurred by the project developers between Rs 11-13 crore per MW as against Rs 16.50 crores per MW assumed in the tariff order. Hence, it claimed that tariff order warranted a revision as it was adverse to the interests of the public.

“Admittedly, the present case is based on the Gujarat Solar Policy, 2009, 2010 Order, Amended Solar Policy, 2010 and PPA signed with Gujarat Urja Vikas Nigam Ltd. The said PPA provided a generic tariff determined on normative principles. Therefore, the present action of GUVNL seeking re-determination of tariff based on cost plus basis amounts to acting in violation of the Doctrine of Promissory Estoppel and is liable to be rejected,” the Aptel bench observed in its order.

The Aptel order said that the solar power purchase tariff determined was a promotional tariff announced by GERC in the year 2010. It offered incentive to the generators who invested during the first control period. “The attractive tariff itself was the incentive. This cannot be sought to be taken away long after the generators have acted upon the same,” it added.

Commenting on the development Pranav Mehta, chairman of National Solar Energy Federation of India (NSEFI) said,”This is a significant development for the solar developers who invested in the first phase. This will held the developers in future.”


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