CERC | Electricity Act read with Trading Margin Regulations gives contracting parties freedom to mutually agree on Trading Margin for any trading transaction

Central Electricity Regulatory Commission (CERC): A coram of Justice P.K. Pujari (Chairperson), M.K. Iyer (Member) and I.S. Jha (Member) disposed of a petition filed under Section 63 of the Electricity Act, 2003 seeking adoption of tariff for 1000 MW (Tranche-II) Wind Power Projects connected to the Inter-State Transmission System (ISTS) and selected through competitive bidding process as per the Guidelines issued by the Ministry of New and Renewable Energy (MNRE).

In terms of the above guidelines issued by the MNRE, the petitioner was designated as the nodal agency for setting up of the above Power Projects. The petitioner had issued the RfS document along with draft PPA and PSA documents and floated the same on the portal of Telecommunication Consultant India Limited. The successful bidders were selected by way of e-reverse auction of nine technically qualified bidders and the final tariff was arrived at after the completion of the same.

The petitioner had submitted that the projects will help the Buying Utilities in meeting their RPO requirements and provide power at very economical rates. The petitioner had also submitted that the tariff determined under the reverse auction process and even with the tariff margin discovered in the competitive bid process is lesser than the procurement cost of conventional power and thus, would be beneficial for the Buying Utilities and the consumer at large. The petitioner had prayed for adopting the trading margin of Rs. 0.07/kWh.

 The Commission was to examine if the process as per the provisions of the Guidelines has been followed in the present case for arriving at the lowest tariff and for the selection of the successful bidder. It was to also see whether to allow for the adoption of the tariff for the wind power plants under Section 63 of the Act.

 The Commission concluded that selection of the successful bidders and the tariff of the Project had been carried out by the petitioner through a transparent process of competitive bidding in accordance with Guidelines issued by MNRE. Accordingly, in terms of Section 63 of the Act, the Commission adopted the tariff for the Projects as agreed to by the successful bidders which should remain valid throughout the period of PSAs and PPAs.

With respect to the Trading margin, this Commission held that the Act read with the Central Electricity Regulatory Commission (Fixation of Trade Margin) Regulations, 2010 gives freedom and choice to the contracting parties to mutually agree on the Trading Margin for any kind of long term trading transaction. Accordingly, the Commission cannot adopt any Trading Margin for long term transactions under the Trading Margin Regulations. [Solar Energy Corporation of India Ltd. v. Ministry of New and Renewable Energy, 2019 SCC OnLine CERC 215, decided on 03-12-2019]

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