PSERC nixes PSPCL’s 2500-MW renewable power purchase plan
Two PPAs signed with SECI and SJVN in June this year were rejected due to the projected financial burden on consumers
Punjab State Electricity Regulatory Commission (PSERC) has rejected the two power purchase agreements (PPAs) signed by Punjab State Power Corporation Limited (PSPCL) to buy 2500 MW of power from renewable energy resources. This has dented the state government and PSPCL’s efforts to meet its renewable energy targets as no new bidder has come forward to establish solar and wind energy projects.
The Union government has asked the states to meet 43% of its power demand from renewable resources in the coming years.
The power regulator on November 4 dismissed the PSPCL petition seeking approval for the procurement of 923 MW wind-solar hybrid power from the Solar Energy Corporation of India (SECI), for which PPA was executed in June 2024. Similarly, it has rejected the 1450 MW PPA signed with SJVN in June 2024.
The commission, in its order, raised concerns about the financial implications and the overall ‘reasonableness’ of the power procurement proposal.
PSPCL had intended to purchase the hybrid power from SECI at a tariff ranging from ₹3.15 to ₹3.21 per unit, with an additional trading margin of ₹0.07 per unit.
Similarly, the PSPCL entered into an agreement with SJVN for procurement of 1450 MW Solar Power i.e. 1150 MW at ₹2.52/kWh and 300 MW at ₹2.53/kWh (exclusive of trading margin of 7 paisa), subject to the approval of the commission.
While the proposals aimed to meet day-time and night-time demand (with wind power filling in during peak hours), the commission questioned the cost-effectiveness of the arrangement, particularly in light of the higher tariff when compared to sourcing power separately from solar and wind developers.
Both tenders were floated by public sector undertakings, from which the PSPCL has brought the power.
In the SECI case, one of the key objections raised by PSERC was the projected financial burden on consumers. The commission calculated that the procurement of power under the proposed agreement would result in an additional liability of approximately ₹1,590 crore over the lifetime of the projects. This amount includes the higher tariff compared to the average power purchase cost (APPC), as well as a trading margin and transmission losses. Moreover, an estimated ₹428 crore would be paid as a commission to the intermediary trader involved in the transaction.
The commission was also critical of PSPCL’s assertion that the long-term power supply would help in avoiding the purchase of costly peak-hour power. Without firm capacity assurance or battery backup, the proposal did not meet the commission’s expectations for cost-effectiveness and reliability.
Furthermore, the commission questioned PSPCL’s reliance on trading for inter-state power procurement, stating that state utilities should ideally avoid reliance on traders when possible, particularly when the additional trading margins and associated costs could be avoided.
The PSERC suggested that PSPCL could achieve significant savings, up to ₹2,018 crore, by utilising its in-house experience and previous bidding processes to directly procure power from renewable energy developers.
In the case of SJVN, the commission observed that the proposed arrangement would entail an additional financial liability of about ₹1,060 crore over the life of the projects. Out of this, the commission to be paid alone would cost ₹620 crore which is a huge amount to pay to an intermediary agent for just floating a tender and acting as an arranger without any further risk or liability. That huge burden over 25 years would have to be borne by the consumers of the state.
The Commission also suggested that PSPCL could explore setting up its own solar plant, potentially generating over 500 MW of cheaper power.
PSPCL officials said they are mulling to move court against the PSERC orders.
“The projects are viable, cost-effective and needed for future energy needs, thus we have decided to challenge the decision of the regulator in court”, said an official requesting anonymity as he is not authorised to speak to media.
He said that as there is no technical member in PSERC and thus several technical issues were overlooked by the commission. “These will be brought to the attention of the high court in the petition,” the official added.