Banking of Renewable Energy is is here to stay: Case Note of the APTEL Order titled “Tamil Nadu Spinning Mills Association”
Hon’ble Appellate Tribunal of the Electricity (“APTEL”) in its order dated 28.01.2021 in a matter titled “Tamil Nadu Spinning Mills Association Vs TNERC & Ors.” held that the Banking of Energy is a physical support to RE generation on account of their generation being infirm and periodical in nature.
In the instant matter, APTEL was hearing a cross appeal filed by both Distribution Company and Wind Energy Generators against order dated 13.04.2018 passed by Tamil Nadu Electricity Regulatory Commission (“TNERC Order”).
FACTS
a) TNERC in its order had ordered following:
i) Increased the banking charges from 12% to 14%.
ii) Withdrawal of Banking Facility from such Captive Wind Generating Stations which are installed or commissioned after 31.03.2018.
iii) Withdrawal of Banking Facility from all wind energy stations which are selling power to third party.
iv) 10% increase in existing wheeling and transmission charges (Existing charges are 40% of normal charges) and Cross Subsidy Charges leviable on RE assets (Existing charges are 40% of normal charges);
v) Determined the “Feed in Tariff” (FIT) for sale of power to the utility at Rs.2.86 without Accelerated Depreciation (AD) and Rs.2.80 with AD and reduced delayed payment levy to 1% interest from 1.5%.
b) TANGEDCO was mainly aggrieved with one portion of the TNERC Order by which TNERC had retained banking facility for existing captive projects. TANGEDCO was also aggrieved with concessional open access charges and had prayed for similar charges for both conventional and non-conventional.
Generators were aggrieved with i) lifting of banking facilities for future third party projects and ii) restriction on availment of banking facilities by captive projects (apart from increase in open access and cross subsidy charges).
c) APTEL had devoted substantial pages of this order in tracing history of banking provisions. TANGEDCO had mainly relied on following submissions for its argument in favour of lifting of banking facilities:
i) Generators have no vested rights to claim continuation of the Banking Facilities;
ii) Electricity Act does not provide any banking right to generators;
iii) Various Commissions have discontinued these rights;
iv) Consumer Interest;
v) Financial Health of DISCOMs.
d) The Hon’ble Tribunal came heavily on TNERC and observed that the TNERC has abdicated its responsibility and has pronounced the order merely based on the submission of DISCOMs without undertaking an independent exercise on claims of DISCOMs. Tribunal reversed the order and held that open access charges and banking facilities will be governed in terms of the regulations which were in existence prior to the pronouncement of the order i.e. TNERC Order will have no effect on the existing system (Like continuation of banking facilties, 40% open access charges, 50% Cross Subsidy Charges etc.) Tribunal also directed Commission to undertake an independent exercise prior to pronouncement of any new order concerning banking or open access charges.
e) Tribunal further requested the Central Government to call upon the Central Electricity Authority to undertake the necessary study and recommend fair and equitable solutions balancing the competing interests bearing in mind the legislative scheme and public policy of the State.
f) Tribunal made following important observations in its order:
i) TANGEDCO in the instant appeal (and every DISCOMs in all public hearings) submitted that Banking of Energy is causing losses to the DISCOM and against the Consumer Interest (As recent as yesterday in KERC public hearing). APTEL in clear terms observed that if consumer interest and financial health of distribution licensee are important, then the provisions concerning third party sale, open access and renewable energy sources are of equal significance.
ii) National Tariff Policy has a statutory force.
iii) DISCOMs were submitting that the Wind Energy Generation has achieved maturity and there is no need for giving any preferential treatment to them. APTEL observed that “There is no doubt that Wind-Power capacity has grown exponentially over the years and the stark reality is that the wind capacity is seasonal and available for only a few months in a year. But the moot question begging for an answer is as to whether the objectives set out in law and State policy have been achieved and the time has arrived for the promotional measures like power banking and ancillary benefits for renewable sources of power to be switched off or rolled back. Given the vintage of NAPCC and INDC, and the continued validity of legislative mandate reflected by Electricity Act, the answer must be given emphatically in the negative.”
iv) APTEL further held that banking facility should be provided whole year because one month-period banking affects the fundamental of functioning of wind (and solar) power projects.
v) The denial of banking facility to third party sale is, contrary to the Section 86 and Section 49 of the Electricity Act.
vi) The Parliament in its wisdom has considered it necessary that in larger public interest the environment-friendly sources be promoted by balancing such other interests. In competing interests, balance has to struck.
vii) The banking is not a sole commercial transaction but is a physical support to renewable energy generating stations.
SIGNIFICANCE OF THE ORDER:
This order will not only be significant for the state of Tamil Nadu but for the entire country and also not only for the banking provisions but for all other incentives which have been given to renewables. We have seen recently that State Electricity Regulatory Commissions have been acceding requests of DISCOMs to withdraw all incentives given to renewables on the pretext that capitals costs of setting up renewable plants are falling down (They heavily rely on competitive bidding data), DISCOMs are making losses due to incentives (they rarely submit any data to support the claim), these incentives do not have any statutory banking etc. Tribunal has taken a pain in this order to trace the history of banking provisions and given a new life and strength to Section 86 (1) (e) of the Electricity Act. This order can be cited in any of such public hearing where any Commission undertakes the half baked exercise of withdrawing any incentives without undertaking a study about financial impact on various stakeholders based on requisite data properly gathered and analysed.
