Andhra HC asks power producers to approach regulator over new tariffs

Hyderabad: The Andhra Pradesh high court on Tuesday dismissed a petition filed by solar and wind power producers opposing the YSR Congress Party government’s decision

Hyderabad: The Andhra Pradesh high court on Tuesday dismissed a petition filed by solar and wind power producers opposing the YSR Congress Party government’s decision to review power purchase agreements (PPAs) they signed with the previous Telugu Desam Party government, dealing a setback to the alternative energy utilities.

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A division bench headed by justice M Ganga Rao, which heard a batch of petitions filed by nearly 40 renewable energy producers, suggested that they approach the AP Electricity Regulatory Commission instead. The high court had on September 18 reserved its verdict on the petitions.

“The court cannot decide on the matters that are under the purview of the regulatory commission. The petitioners can raise their objections before the commission,” the bench said, and directed that the commission resolve the matter within six months.

Since coming to power in assembly elections, held simultaneously with the April-May Lok Sabha polls, chief minister YS Jagan Mohan Reddy has revisited several projects undertaken by the TDP under former chief minister N Chandrababu Naidu, including the Polavaram multi-purpose irrigation project , and slashed funding to the plan to build a brand new capital city in Amaravati .

The court, however, set aside a government order dated July 1 that called for the appointment of an expert committee to renegotiate the PPAs signed by the alternative energy producers with the Telugu Desam Party government that was defeated by the YSR Congress in the April 11 assembly election.That came against the backdrop of a government assurance to the court that it would approach the AP Electricity Regulatory Commission instead of directly reviewing the PPAs.

The only relief the solar and wind power producers received was in the form of a court directive to power distribution companies in Andhra Pradesh to continue purchasing power from them at a tariff of Rs 2.44 paise per unit until the disposal of the matter by the Commission. The PPAs signed by the previous government for wind and solar power had set an average tariff of ₹4.70 per unit and ₹5.8 per unit, respectively.

It has also directed the state to avoid curtailing generation from renewable power plants without prior notice.

During the course of the hearings, power producers argued that the state government had no say in the contracts which were signed between the distribution companies and the developers and that because the PPAs had been approved by the regulatory commission, the agreements could not be renegotiated.

The state government argued that the TDP administration had favoured a few companies by signing high-cost PPAs, causing a loss to the distributors -- the reason for the decision to lower the tariffs. Subsequently, the state government told the court that it would approach the regulatory commission again to revise the PPAs, instead of doing it through an expert committee.

On the day he assumed power as chief minister, on May 30, Jagan Reddy announced his decision to review the PPAs signed with solar and wind power producers on the pretext that the agreements smacked of corruption and that they resulted in a loss of over Rs 2,200 crore to the state exchequer.

Within a few days, he appointed a cabinet sub-committee headed by finance minister B Rajendranath Reddy to review the PPAs and renegotiate tariffs with the power producers.

The move snowballed into a controversy, with the National Democratic Alliance (NDA) government at the Centre intervening and asking the Reddy government to revoke the decision. On July 9, Union minister of state (independent charge) for power and renewable energy RK Singh wrote a letter to the chief minister, warning that revisiting the PPAs would halt the foreign investments in the sector.

The Union minister virtually ruled out irregularities in signing the PPAs and attached documents pertaining to bidding by the power producers. He pointed out that the tariffs were fixed by the Central Electricity Regulatory Commission at the national level and state electricity regulatory commissions in the states.

“Power purchase agreements are contracts binding on all signatories. If the contracts are not honoured, the investments will stop coming. For the above reasons, it will be wrong and against the law to cancel all the PPAs,” he wrote to the chief minister.

Credit ratings agency CRISIL also warned that the plan to review PPAs could bring 5.2 gigawatts (GW) solar and wind energy projects with an estimated debt exposure of over ₹21,000 crore under stress.

Senior electric engineer and power sector expert K Raghu, who has argued several cases before the regulatory commission in the past, said the state government had the right to renegotiate PPAs if it believed there had been irregularities in signing the pacts or that the power tariffs were too high.

“The PPAs are not sacrosanct but can be reviewed any time. However, the government has to move the regulatory commission seeking a review of the PPAs, instead of doing it through its own committees,” Raghu said.