TANGEDCO Wants Retroactive Solar Tariff Cuts

• Tamil Nadu Generation & Distribution Company (TANGEDCO) reportedly has asked tender winners from the February auction to bring down their winning tariff bids to match the results of the auction conducted recently
• Winning bid in the Jan-Feb 2017 tender was 4.40 INR ($0.0657) per kWh; but TANGEDCO wants them to bring it down to 3.47 INR ($0.054) per kWh
• It is reportedly unwilling to sign PPAs for the higher tariff and has apparently offered developers to cancel their projects
• Affected developers now plan to file a petition with the state regulatory authority to force TANGEDCO accept the previous winning price bid

Solar power project developers continue to be pressured by electricity distribution companies (DISCOMs) in India to renegotiate previously agreed solar power tariffs. Latest in the list is Tamil Nadu Generation & Distribution Company (TANGEDCO) which has unofficially asked winners of a solar auction held in January-February to reduce tariffs to 3.47 INR ($0.0540) per kWh, down from 4.40 INR ($0.0657) per kWh, in order to match the winning bid of a later auction, reported business daily The Economic Times (ET).  

In February 2017, TANGEDCO had received then low price bid of 4.40 INR ($0.0657) per kWh for a 500 MW tender it issued in January (see Lowest TANGEDCO Tender Bid At 4.40 INR/kWh).

In July 2017, TANGEDCO awarded Raasi Green Earth 100 MW capacity for a winning tariff of 3.47 INR ($0.0540) per kWh (see NLC Wins 449 MW In Tamil Nadu Tender).

Two meetings were held between TANGEDCO officials and the winning developers, according to ET, but TANGEDCO has not put anything in writing. However, developers were told that they are free to cancel their projects as no PPAs have been signed.

The aggrieved parties now plan to file a petition with the Tamil Nadu Electricity Regulatory Commission (TNERC) in order to force TANGEDCO to sign PPAs with the original tariff. Originally, TNERC had ordered to sign all PPAs related to the first auction and submit these within a month.

Tamil Nadu has joined the list of states – including Gujarat, Andhra Pradesh, Uttar Pradesh, Karnataka and Jharkhand – where DISCOMs are unwilling to sign PPAs for original winning tariffs of solar tenders.

In view of DISCOMs pushing for retroactive tariff cuts, the Indian Banks' Association (IBA) is now backing solar developers. It has recently approached India's Ministry of Power asking for intervention of the government (see Indian Banks Against Retroactive Tariff Cuts). The retroactive tariff cuts could affect the ability of developers to pay back loans on time and might also discourage investor sentiment in the long run, fears IBA.