The court on March 15 ordered the state discoms to comply with the terms of the PPAs and release pending payments, according to the rates agreed under them, within six weeks of the date of the order.

Andhra Pradesh Supreme Court (AP) order asking the state power discoms to uphold the sanctity of the Renewable Energy Purchase Pacts (PPAs) signed before 2019 will increase their incremental power purchase costs by Rs 10,500 crore for FY22.

The court on March 15 ordered the state discoms to comply with the terms of the PPAs and release pending payments, according to the rates agreed under them, within six weeks of the date of the order.

The order resolved a two-year-old dispute between the AP government and renewable energy developers, with the state government attempting to renegotiate the energy pacts, citing the quoted rate as being too high. The AP decision was later followed by other states such as Gujarat and Punjab.

The Andhra Pradesh Electricity Regulatory Commission had lowered the annual revenue requirement (ARR) for the state discoms based on average purchase cost of Rs 2.55/unit from the PPA level of Rs 4.5/unit. However, in an interim injunction issued in 2019, a single court of the court approved the purchase cost of Rs 2.43/unit for solar energy and Rs 2.44 for wind.

Vikram V, vice president & sector head – corporate assessments at ICRA, said that assuming these additional power purchase costs are approved as regulatory assets to be depreciated over a five-year period, the increasing impact on power supply costs for discos will increase. is estimated at 54 paise/unit, causing an 8.5% upward pressure on the average retail supply rate for the discos. As a result, timely and adequate rate determination by the state electricity regulator for AP discos also remains a critical monitor. Despite pressures on power costs, average retail rates for discos have remained unchanged as per tariff orders issued since FY2019. said Vikram V.

A senior industry official said there is every possibility the state discoms will challenge the order in the Supreme Court.

“The discos will do everything they can to buy time. Even the Supreme Court is likely to uphold the Supreme Court’s verdict, as it is a clear case of upholding the sanctity of a contract,” the official said.

“Furthermore, I do not see any new wind installations for supply within the state. Although developers can continue to plant for interstate projects on the PGCIL network,” the official said.

However, the decision will improve general investor sentiment for the country as a whole, which was negatively impacted after the AP discom matter and several other states that followed suit, said Rupesh Sankhe, VP and energy analyst at Elara Securities.


This post AP discos’ power purchase costs rise by Rs 10,500 crore in FY22 was original published at “https://www.financialexpress.com/industry/ap-discoms-power-purchase-cost-to-rise-by-rs-10500-crore-in-fy22/2463487/”

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