BEFORE THE GUJARAT ELECTRICITY REGULATORY COMMISSION GANDHINAGAR. Suo-Motu Petition No.1542 /2015

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1 BEFORE THE GUJARAT ELECTRICITY REGULATORY COMMISSION GANDHINAGAR Suo-Motu Petition No.1542 /2015 In the Matter of: Monitoring of RPO Compliance of the obligated entities for FY of GERC (Procurement of Energy from Renewable Sources) Regulations, 2010 and GERC (Procurement of Energy from Renewable Sources) (First Amendment) Regulations, 2014, notified by the Commission. Respondent No.1: Represented by : Respondent No.2: Represented by: Torrent Energy Ltd. Learned Advocate Ms. Deepa Chawan with Advocate Ms. Reshma Nathani and Shri Chetan Bundela Kandla Port Trust Nobody was present Respondent No. 3: MPSEZ Utilities Pvt. Ltd. Represented by: Respondent No.4: Represented by: Respondent No.5: Represented by: Respondent No.6: Represented by: Respondent No.7: Represented by: S/Shri Nirav Shah, Saurabh Singh and Dipak Gajjar Jubilant Infrastructure Ltd. S/Shri Mahesh Mandwarya with Anoop Shukla M/s. Aspen Infrastructure Ltd. Nobody was present GIFT Power Company Ltd. S/Shri Arvind Rajput and P.R. Chaudhary Gujarat Energy Development Agency S/Shri Anil Purohit with Rakesh Arya 1

2 V/s. Objector No.1: Represented by : Objector No.2: Represented by : Objector No.3: Represented by : Utility Users Welfare Association Shri Bharatsinh Gohil Indian Wind Power Association Shri Ranjeet Singh Indian Wind Energy Association Learned Advocate Shri Hemant Singh with Shri Vikalp Vats. CORAM: Shri P.J.Thakkar, Member Shri K.M. Shringarpure, Member Dated: 31/12/2016 ORDER [1] The Commission has notified GERC (Procurement of Energy from Renewable Sources) Regulations, 2010 and GERC (Procurement of Energy from Renewable Sources) (First Amendment) Regulations, 2014 which, inter-alia, stipulate the Renewable Purchase Obligation (RPO) to be fulfilled by the Distribution Licensees in the State of Gujarat during the period to

3 Regulation 4 of the principal Regulations viz. GERC (Procurement of Energy from Renewable Sources) Regulations, 2010 and GERC (Procurement of Energy from Renewable Sources) (First Amendment) Regulations, 2014, reads as under: 4. Quantum of Renewable Purchase Obligation (RPO) GERC (Procurement of Energy from Renewable Sources) Regulations, Each distribution licensee shall purchase electricity (in kwh) from renewable energy sources, at a defined minimum percentage of the total consumption of its consumers including T&D losses during a year. Similarly, Captive and Open Access user(s) / consumer(s) shall purchase electricity (in kwh) from renewable energy sources, at a defined minimum percentage of his/her total consumption during a year. 4) Substitution of Table 1 of Regulation 4.1 GERC (Procurement of Energy from Renewable Sources) First Amendment, Regulations, 2014 The table 1 provided in Principal Regulation 4.1 shall be substituted by following table 1: 3

4 Minimum Quantum of purchase (in %) from renewable energy sources (in terms of energy in kwh) Year TOTAL Wind Solar Others (Biomass, Bagasse, MSW, etc.) As provided in the above table the RPO for has been fixed at 8% consisting of 6.25% from Wind, 1.25% from Solar and 0.5% from Other renewable sources. 1.1 Regulation 5 of the said Regulations provides an alternate mechanism for fulfilment of R.P.O. which reads as under: 5. Certificates under the Regulations of the Central Commission 5.1 Subject to the terms and conditions contained in these Regulations, the Certificates issued under the Central Electricity Regulatory Commission s (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations, 2010 shall be the valid instruments for the discharge of the mandatory obligations set out in 4

5 these Regulations for the obligated entities to purchase electricity from renewable energy sources. 1.2 Further, the Commission has notified GEDA (Respondent No.7) as the State Agency to monitor the compliance of the RPO vide notification No. 3 of Thus, it is the duty of GEDA to monitor the fulfilment of the RPO by the obligated entities and in case of non-fulfilment of RPO by the obligated entity (ies), it should inform the same to the Commission, for taking appropriate decision regarding non-compliance of RPO by the entity concerned as provided in the Regulations. 1.3 Considering the above facts, the Commission decided to initiate Suo-Motu proceedings in order to verify the compliance of the RPO by the Distribution Licensees of the State and in case of any default, to decide the appropriate actions against the concerned defaulting Distribution Licensee in accordance with the provisions of the Electricity Act, 2003 and GERC (Procurement of Energy from Renewable Sources) Regulations, 2010 read with amendments made thereto. 1.4 On verification of the details, it is observed that one of the Distribution Licensees have complied with RPO targets only partially, while the other has 5

6 not complied at all. It is also observed that 3 other licensees have not furnished any details. The Commission therefore directed the Distribution Licensees to submit the reasons for partial/non-compliance of RPO and actions taken for fulfilment of their obligations alongwith the affidavit in support thereof in five copies. 1.5 The State Nodal Agency, viz. GEDA was also directed to make its submissions regarding compliance of RPO by different licensees for FY GEDA was also directed that it may submit other facts which it considers appropriate for consideration of the Commission in five copies with an affidavit in support of its submission. 1.6 We record that GUVNL has filed a Petition No of 2015 for compliance of RPO by its four subsidiary Distribution Licensees. We also record that TPL has filed a Petition No of 2015 for compliance of RPO for TPL- Ahmedabad/ Gandhinagar and Surat distribution license area for FY The Commission in its daily order dated in Petition No of 2015 has recorded as under:- 2.3 The Commission observed that the obligated entities are required to comply the Renewable Purchase Obligation (RPO) during the year and the 6

7 Commission shall verify the compliance of Renewable Purchase Obligation by the obligated entities on completion of the year. The distribution licensees which are obligated entities have to file the petition before the Commission for compliance of the RPO on annual basis or the Commission has to initiate Suo-Motu proceedings for the same. We note that on completion of FY , GUVNL and its subsidiary companies have filed present petition 1518 of We also note that Torrent Power Ltd. filed a Petition No of 2015 for compliance of RPO by them. We also note that the other distribution licensees namely Torrent Energy Ltd., and MPSEZ Utilities Pvt. Ltd. have not filed any petitions before the Commission for compliance of RPO of FY As stated in earlier para 2.1 and 2.2 it is necessary to invite comments and suggestions from stakeholders prior to deciding the compliance of RPO by the obligated entities. We, therefore, decide and direct to the Torrent Power Ltd. to follow the procedures for inviting comments and suggestions from the stakeholders as stated in earlier para 2.2 above by publishing the public notice and hosting the petition on their websites for inviting comments and suggestions from the stakeholders. 7

8 2.5 We also decide to initiate the process of Suo-motu proceedings for verifying and monitoring the compliance of RPO by the Torrent Energy Ltd., MPSEZ Utilities Pvt. Ltd., Kandla Port Trust, Aspen Infrastructure Pvt. Ltd. and Jubilant Infrastructure Ltd. for FY Thus, for the compliance of RPO of above licensees, the Commission initiated the proceedings in above petitions filed wherein Commission had directed to invite comments/suggestions from the stakeholders. GUVNL and TPL uploaded their petition on their website and invited comments/suggestions from the stakeholders as per the decision of the Commission dated in Petition No of 2015 and Petition No of We also note that the following Distribution Licensees have not filed any petition for compliance of RPO. We, therefore, decided to initiate Suo-Motu proceedings for verification of compliance of RPO by these licensees. 1) Torrent Energy Limited 2) Kandla Port Trust 3) MPSEZ Utilities Pvt. Ltd. 4) Jubilant Infrastructure Pvt. Ltd. 5) M/s. Aspen Infrastructure Ltd. 8

9 6) GIFT Power Company Ltd. [2] The Respondent No. 1, TEL submitted that the Commission has issued the GERC (Procurement of Energy from Renewable Sources) (First Amendment) Regulations, 2014 on 4 th March, As per the aforesaid Regulations, the RPO obligation of the obligated entities for FY is as under: Year Minimum Quantum of purchase (%) from renewable energy sources (in terms of energy in kwh) Total Wind Solar Biomass, Bagasse and Others FY The Respondent has made sincere effort and purchased both the Non-Solar & Solar RECs of MUs and 1.89 MUs respectively towards its compliance of the Renewable Purchase Obligation. Based on the source wise minimum percentage for RPO specified by the Commission, the status of compliance is as under: Particulars MU Energy Requirement (MUs) Obligation Wind energy to be procured (@6.25%) (MUs) 9.50 Solar energy to be procured (@1.25%) (MUs) 1.90 Biomass/Bagasse/Others (@0.50%) (MUs) 0.76 Total (8.00%) (MUs) Compliance (Wind energy) 9

10 Wind (MUs) - Non-Solar REC purchased (MUs) Compliance Compliance (as % of Energy Requirement) (%) 6.70% Compliance (Solar energy) Solar (MUs) - Solar-RECs purchased (MUs) 1.89 Compliance (MUs) 1.89 Compliance (as % of Energy Requirement) (%) 1.24% Shortfall of FY Non-Solar (MUs) 0.08 Solar (MUs) 0.01 Total From the above table, it is evident that the respondent has achieved the RPO compliance of 6.70% against the requirement of Non-solar RPO of 6.75% and 1.24% towards solar RPO against requirement of 1.25%. Thus, the Respondent submitted that it has complied the RPO percentage except negligible shortfall which is also mainly on account of variation in sales. The Respondent submitted that the variation is on account of factors beyond its control and relied on the Regulation 4.2 of the GERC (Procurement of Energy from Renewable Sources) Regulations, 2010 to revise the minimum percentage target for the purchase from Renewable Energy Sources for FY [3] The Respondent No.3, MPSEZ Utilities Pvt. Ltd. vide its submissions dated stated that the quantum of capacity addition for installed wind 10

11 capacity in Gujarat has been declining over the past years as can be seen from the following table: Year Capacity (MW) FY FY FY (Upto ) As per GERC (Procurement of Energy from Renewable Sources) Regulations, 2010 the Regulations prescribe the quantum of purchase of RE sources by obligated entities on the basis of the estimation of the capacity addition to supply RE power at preferential tariff in the State. Therefore, the capacity not having been added to supply electricity at preferential tariff in the State and reduction in RE capacity has negatively affected overall availability of RE power. Thus, it is clearly demonstrated that there was a supply constraint for wind power. 3.1 Considering lower requirement of RE power, no wind generator has approached MUPL for supplying power at preferential tariff since last 5 years. Further, the energy for RPO compliance with reference to solar, biomass and bagasse based generation was also very low. Hence no generator has approached to the Respondent No. 3 for supply of RE power at preferential 11

12 tariff due to very low requirement. Thus, the Respondent was unable to procure the same. The condition to procure the renewable energy generation at preferential tariff in FY was beyond the control of the Respondent No.3 due to which the Respondent No.3 was not able to procure the RE generation at preferential tariff. There is consistent revenue gap for the years , , and as per multi year tariff orders passed by the Commission. In the tariff order of FY issued by the Commission in Case No. 1471/2014 dated , the Commission has recognised the revenue gap of Rs Crores for FY Thus the Respondent is not able to recover even the cost of supply fully. In such circumstances the purchase of RE power would worsen the situation and it will be an extra burden on consumers and impact on retail tariff. 3.2 Further, the renewable energy projects are preferring to supply power to Distribution Licensees under the REC mechanism and not at preferential tariff as sale of RECs is a lucrative option for the renewable energy generators. The additional cost of RECs to a new Distribution Licensee such as Respondent No.3 means an extra burden on the consumers and impact on retail tariff. The impact of REC procurement by Respondent No.3 for the FY is stated below: 12

13 Particular UOM FY Total Energy MUs requirement Power Purchase Cost Rs./unit 4.48 (PPC) without RE Cost of power purchase Rs. Crores without RE RPO level % 8.00% RPO level - Solar % 1.25% RPO level Non-Solar % 6.75% Energy from conventional sources MUs Renewable Energy MUs Purchase required Non-Solar MUs Solar MUs 2.52 Floor price of REC (Non- Rs./Unit 1.5 Solar) Tariff REC Solar Tariff Rs./Unit 7.85 Renewable Energy Rs. Crores 4.02 Purchase Cost Total Power Purchase Rs. Crores Cost (PPC) Per unit cost of power Rs./unit 4.68 Difference in PPC Rs./unit 0.20 Difference in cost of power Rs. Crores 4.02 From the above table, the Commission may be appraised that the impact of REC on the consumer tariff for the FY would be Rs. 0.20/unit which is considerably high for the new industries and commercial consumers who are still in nascent stage of their operations in the SEZ area. Additionally, it is 13

14 respectfully submitted that since the Respondent has started functioning as a deemed distribution licensee only from August 2010 and its activities are still at nascent stage not only. This additional cost for RECs would mean an extra burden on consumers and impact on retail tariff. 3.3 The Respondent, therefore, requested the Commission to grant an exemption from RPO compliance for FY in view of the nascent stage of operations, impact on retail tariff and increase in revenue gap considering the factors beyond the control of the licensee. [4] Jubilant Infrastructure Limited, Respondent No.4, submitted that it is getting power supply for two of its companies namely Jubilant Life Science Unit 1 and 2 through DGVCL as a consumer for FY [5] Aspen Infrastructure Limited, Respondent No.5, requested to exempt from RPO compliance till it reaches to maturity of development, i.e. anticipated load of 40 MVA and starts procuring power from other sources. It is further submitted that in the year also the situation has not changed and the Respondent has procured power from MGVCL as a consumer. Hence, in accordance with the decision of the Commission, the RPO is not applicable to Aspen Infrastructure Limited. In view of the above, it is requested to the 14

15 Commission to exempt the Respondent from compliance of RPO for the financial year [6] The Respondent No.6, Gift Power Company Limited, submitted that the load is very low and GIFT Power Company Limited is purchasing power from UGVCL to supply to its consumers. GIFT Power Company Limited is a consumer of UGVCL having consumer No , since 24 th May, 2013 and receiving power from UGVCL to serve the consumers of GIFT Power Company Ltd. 6.1 GIFT Power Company Limited is a distribution licensee and purchasing power from UGVCL, which is one of the entities, required to comply with RPO Regulations notified by the Commission. UGVCL is purchasing and supplying power to the consumers which is consisting of conventional and renewable energy component. Therefore, the energy supply by UGVCL to GIFT Power Company Limited is also having the renewable energy component. Therefore, GIFT Power Company Limited complies with percentage quantum of RPO notified by the Commission. GIFT Power Company Limited has purchased 4.03 MUs energy from UGVCL during FY consisting of renewable energy component as purchased by UGVCL. Therefore, GIFT Power Company Limited may be considered as complying with RPO Regulations notified by the 15

16 Commission for FY Considering the above facts, the Commission may consider the GIFT Power Company Limited has complied with RPO Regulation for FY [7] Utility Users Welfare Association vide its submission dated stated that the Commission has fixed the RPO target of 8 % which includes 6.25 % from wind, 1.25 % from solar and 0.5 % from other renewable sources for FY Torrent Energy Limited Dahej has not complied the RPO targets as per the provision of Regulations framed by the Commission. The failure to comply the target fixed by the Commission attracts the action under appropriate section of the E.A.2003 for the non-compliance and violation of the Regulations framed by the Commission. 7.2 TEL-D and other private licenses as mentioned are having the mentality not to obey the provisions of the Electricity Act, 2003 as well as the Regulations made thereunder is naked evidence in front of the Commission and consumers in this case. The argument of TEL-D to protect the consumers from higher tariff burden is a story. 16

17 7.3 In view of above, the Commission is requested to initiate action against defaulter TEL and other distribution licensees for non-compliance of provisions of RPO Regulations and directions of the Commission. The Commission is requested to grant relaxation to the consumers also if any relief or relaxation is granted to Distribution Licensees to balance the justice. [8] The objector, Indian Wind Power Association vide its submission dated , stated that the Hon ble APTEL in Appeal No. 24 of 2013 & I.A. No. 39 of 2013 permitted the adjustment of excess solar purchase against shortfall in non-solar RPO due to the circumstances prevailing at that time. It is submitted that deviation from express provisions of the Regulations cannot be allowed to be a recurring feature. The contention that wind generators were not coming forward to supply power at preferential tariff has also been shown to be clearly specious. Thus, no ground exists in the present case for permitting the adjustment of excess solar purchases for fulfilment of non-solar RPO. 8.1 The Hon ble APTEL in its judgment dated in Appeal No. 258 of 2013 clearly held that set off non-solar RPO with excess solar energy purchase should not be made as a regular practice and the State Commission should 17

18 ensure that the distribution licensees do not deliberately try to alter the technology specific RPOs to defeat the purpose of giving separate RPOs to solar and non-solar technology. 8.2 The default on part of the obligated entities to fulfill RPO and repeatedly requesting the Commission to carry forward the same should be dealt with sternly and right actions be taken against them under Regulation 9.1 of the GERC (Procurement of Energy from Renewable Sources) Regulations, In this issue, the Hon ble APTEL had held that non-availability of REC is a precondition for carry forward. Hon ble APTEL in judgment dated , in O.P. No. 1, 2 and 4 of 2013 has clearly stated that if the Regulations recognised REC mechanism as a valid instrument to fulfill the RPO, the carry forward/ review should be allowed strictly as per the provisions of the Regulations keeping in view the availability of RECs. 8.3 The Commission may reject the plea of licensees/obligated entities to carry forward the RPO as it defeats the very purpose of formulating RE policy, negates one of the objectives of the Electricity Act, 2003 of promotion of environmentally benign policies and the mandate that the State Commission has to promote renewable sources of energy. The plea of the licensees 18

19 counter act the APTEL judgments dated in O.P. Nos. 1, 2 and 4 of 2013 and judgment dated in Appeal No. 258 of [9] InWEA submitted that the Commission may initiate a penal action against the Distribution Licensees as specified in Regulation 9 of the GERC (Procurement of Energy from Renewable Sources) Regulations, 2010 and amendments thereto. In pursuance of the powers conferred by Regulation 4.2 and 9 of the said RPO regulations, the Commission may direct the licensees to deposit an amount into a separate fund based on the forbearance price towards the shortfall in the wind RPO. It is a settled principle of law that when a penalty has been envisaged under a legal set up for grant of an exemption, then without imposition of penalty no exemption can be granted. 9.1 In view of above, the Commission may direct the obligated entity to deposit penalty amount into a separate fund. The Commission may also empower an officer of the State Agency to procure from the Power Exchange the certificates to the extent of the shortfall in the fulfilment of the obligations, out of the amount in the fund. In case Distribution Licensees fail to deposit the amount as directed by the Commission within 15 days of the 19

20 communication of the direction, such inaction may be considered as breach of license condition of the licensee. The Commission may also not allow adjustment of excess solar purchase towards compliance of non-solar RPO for the FY [10] The Indian Wind Turbine Manufacturers Association submitted that from the details submitted by GEDA regarding the RPO compliance of the obligated entities it is observed that it is a regular practice of obligated entities not to comply the renewable purchase obligations, despite the availability of the RECs. MUPL has consistently failed to comply the RPO The clearing volume of RECs was always lower than the sell bid for a particular month and closing balance of the RECs increased month by month. The price of REC is as low as the floor price determined by the Central Commission. REC should have been procured at the floor price by MUPL since there were enough RECs available in the FY Thus, MUPL had not made any attempt to fulfil shortfall in RPO. It is therefore, requested to the Commission that the requirement of fulfilment of RPO by the obligated entities should not be carried forward or waived off and non-compliance of RPO Regulation may be treated as default on the part of MPSEZ Utilities 20

21 Private Limited and the Commission may impose penalty as per the GERC RPO Regulations. [11] Following two preliminary issues arise in the present petition: (1) Whether RECs are meant to fulfill RPO of the resource rich States? and (2) Whether the clarificatory Order dated can be relied upon for interpreting in any matter whatsoever the judgment dated passed in Appeal No.21 of As regards Issue No.1, para 33 of the APTEL Judgment dated in Appeal No. 21 of 2014 clearly provides that the Hon ble APTEL, while discussing and explaining the role of RECs, has held that RECs are also required for meeting the RPO of the obligated entities of resource rich States. This puts to rest any doubts created by the obligated entities that RECs are meant to fulfil RPO of only resource less states Issue No. 2 is of reliance by obligated entities on clarificatory order dated so as to interpret that availability of RECs is not a pre-condition for exercising revision of RPO norms. In this regard, it is necessary to refer the judgment dated in OP Nos. 1, 2 and 4 of 2013 wherein judgment 21

22 dated passed in Appeal No. 21/2014 was made a part, strict directions were issued by the Hon ble APTEL to all the State Commissions for fulfilment of RPO norms. The obligated entities should not have relied upon the clarificatory order dated which is in conflict with the order of the Full Bench. Also, the said clarificatory order cannot change the implementation of the judgment dated passed by the Full Bench of Hon ble APTEL. It is a settled principle of law that full bench judgment prevails over small bench and since the clarificatory order was passed by a two members/or division bench, the same cannot change the nature of judgment passed in OP No. 1,2 and 4/2013 dated The Hon ble APTEL has in its order dated in Appeal No. 258 of 2013 and Appeal No. 21 of 2014 held as under: (i) The concept of RECs was introduced in order to address the mismatch between availability of RE sources and the fulfilment of RPO. The REC mechanism aims at promoting investment in the RE projects and to provide an alternative mode to RE generators for recovery of their costs. (ii) The RECs are deemed to be purchase of renewable energy. The said para also recorded that the Hon ble APTEL did not agree to contentions of the 22

23 respondents that RECs are not to be considered as renewable source of energy. (iii) Both RECs and physical Renewable Energy have to be considered while fulfilling the RPO norms as mandated by Section 86 (1) (e) of the Electricity Act, 2003 and various Regulations framed by the Commission. The obligated entities have an option to meet their respective RPOs, which have been mandated under Section 86 (1) (e) of the Act and the Regulations framed under it, either by directly procuring energy from renewable sources of energy in physical form or purchasing RECs, since RECs are considered as deemed procurement of renewable energy. (iv) The RECs, which were evolved basically to exploit the renewable energy sources in the States having abundant potential of renewable energy for the benefit of States which do not have adequate potential of renewable energy sources, is also useful for meeting the RPO of the obligated entities of resource rich States. Hence, the contention that RECs are not to be looked at in resource rich States while fulfilling RPO is not valid. (v) The RECs are valid instrument for discharge of mandatory RPO. RECs are an alternative mechanism to physical procurement of renewable energy and 23

24 the RECs are issued in terms of energy injected by a renewable energy source into the grid. RECs procured by the obligated entities have to be treated as deemed energy purchase from such RE source and then the said RECs are added to the physical renewable energy procured directly from the renewable energy sources by the obligated entities to ascertain the total percentage of the renewable energy procured in a year. Therefore, purchase of RECs for the purpose of compliance of Regulation 4.1 of the GERC RPO Regulations has to be considered as deemed procurement of energy from renewable energy source. (vi) The test before any revision in the RPO can be done by the Commission: i. Under Regulation 4.2, the Commission suo-motu or at the request of the licensee can revise the percentage targets for a year keeping in view supply constraints or other factors beyond the control of the licensee, ii. Under 5 th proviso to Regulation 9, in case of any genuine difficulty in complying with RPO because of non-availability of power from renewable sources of energy or the RECs, the obligated entity can approach the Commission and the Commission may carry forward the requirement to the next year, 24

25 iii. Actual renewable energy generation is below normative generation from tied up renewable energy sources due to reasons beyond the control of the distribution licensee, iv. Force Majeure such as natural calamity resulting in supply constraint v. Inadequate capacity addition in the State and RECs could not be purchased due to non-availability of RECs despite efforts made by the distribution licensees. In a resource rich State where the State Commission had set up RPO targets keeping in view the anticipated capacity addition in the State, the State Commission may also revise the target due to inadequate renewable capacity addition in the State, vi. Minimum energy purchase obligation for renewable sources of energy was fixed on estimated energy consumption of the licensee in the ARR based on estimated growth but the actual consumption has been much lower due to slow growth or negative growth or due to force majeure. Thus, RPO on actual energy consumption was met but minimum energy purchase target fixed in the ARR based on anticipated energy consumption could not be met. 25

26 vii. A distribution licensee has proposed to meet a part or full RPO by purchase of RECs but RECs could not be purchased, despite efforts made by the licensee, due to non-availability of RECs. (vii) No revision in RPO can be done in the event if there is availability of RECs and that RECs are deemed to be renewable energy source. The only exception to the above principle is recorded in para 51 of the judgment where, if an obligated entity has tied up adequate capacity of RE at preferential tariff but due to actual generation being lower than the normative generation on account of the reasons (i) beyond the control of the obligated entity or (ii) there is natural calamity in the State and energy consumption has gone down or (iii) renewable energy generation in the State has been affected due to natural calamity, only then the RPO revision is permissible. The shortage/non-availability of RECs may not be a precondition to revision of RPO targets set under Regulation 4.1 of the GERC RPO Regulations IWEA has already filed a review petition before the Hon ble APTEL on the ground that the clarificatory order dated in Appeal No. 187 of 2015, 258 of 2013 and 21 of 2014, does not refer to the Renewable Energy 26

27 Certificates while undertaking revision of RPO targets, which is contrary to the entire intent and scope of the judgment dated In this review petition, IWEA has also filed an application seeking stay on the continuation of the present proceedings until the said review petition is disposed of. Hence, the Commission ought to put on hold the present proceedings since in the event the obligated entities are aware that the availability of RECs should not be considered while considering RPO revision The Obligated entities raised the issue during the last hearing that the powers which have been conferred upon the Hon ble APTEL under Section 121 of the Act, 2003 are only administrative and procedural and any orders or directions passed by exercising jurisdiction under the said Section are not binding while adjudicating the present proceedings. In support of above submissions, the obligated entities have relied upon the following judgments: 1. PTC India Limited Vs. CERC, (2010) 4 SCC 603 passed by Hon ble Supreme Court of India, 2. Judgment dated in OP No. 2 of 2015 by APTEL. 27

28 11.12 In reply to the above submission, IWEA submitted that a bare reading of the Section 121 of the Act, provides that Hon ble APTEL has absolute powers to issue orders, instructions or directions upon the Regulatory Commission for the performance of their statutory functions. The Statutory Functions of a Commission are enumerated under Section 86 of the Electricity Act, 2003 which also includes the Section 86 (1) (e) pertaining to Renewable Purchase Obligations. The Hon ble APTEL under Section 121 has absolute powers to issue directions upon Regulatory Commission for discharge of their duties as per law or the legal principles/protocols. The obligated entities are wrong to argue that above directions are not binding and is only procedural and is meant for the staff of the Commission. Judgment dated passed in OP No. 1, 2 and 4 of 2013 demonstrates that there is a mandate by the Hon ble APTEL to all the Regulatory Commissions for enforcement of RPO norms as per the Regulations, orders of APTEL and principles laid down therein Para 28 (4) of the said Judgment wherein while issuing directions upon the Regulatory Commissions for enforcement of RPO norms, Hon ble APTEL has directed the said Commissions to follow the broad directions contained in 28

29 the order dated in Appeal No. 21/2014 and 258/2013. Thus, what APTEL has done through OP No. 1, 2 and 4 judgment is that it has laid down a legal framework/protocol which has to be strictly followed while performing "statutory functions" in enforcing RPO regulations It is the case of IWEA that the findings in Appeal 21 of 2014 are broad directions in the nature of "legal principles" which have been incorporated by the 3 Judge Bench in OP No. 1, 2 and 4 of 2013 much before the passage of the clarificatory order dated by a 2 Judge Bench The "legal principles" laid down in Appeal No. 21 of 2014, since the same are incorporated in the 3 Judge Bench judgment in OP No. 1, 2 and 4 of 2013 before the passage of the 2 Judge Bench clarificatory order, makes the said clarificatory order completely irrelevant for interpreting the 3 Judge Bench judgment dated in OP No. 1, 2 and 4 of The 3 Judge Bench judgment in OP No. 1, 2 and 4 of 2013 has to be relied when this Commission undertakes its "statutory functions" enshrined under Section 86 (1) (e) of the Electricity Act, 2003 pertaining to enforcement of RPO Regulations. The scope of directions or orders issued under Section 121 of Electricity Act, 29

30 2003 is to enable the Regulatory Commissions to perform their "statutory functions" as per law. No one can take away this right of Hon'ble APTEL to lay down the law or legal framework/ protocol under Section 121 for discharge of "statutory functions" by the Commissions. Such laying down of law or legal principles cannot be wished away by the obligated entities when they advance arguments that the said law or legal principles laid down by Hon'ble APTEL are "not binding". In OP No. 1, 2 and 4 of 2013, by incorporating the legal principles laid down in Appeal No. 21 of 2014 before the passage of the 2 Judge Bench clarificatory order, has laid down the law and the legal principle/protocol which is required to be kept in mind and followed by this Hon'ble Commission for discharge of its "statutory functions" while adjudicating the present proceedings The arguments of the obligated entities that the directions contained in the 3 Judge Bench judgment passed in OP No. 1,2 and 4 of 2013 are "not binding" as the same are "procedural", are not valid. The said obligated entities cannot make such a line of argument before either the Commission or the Hon'ble APTEL in order to interpret in any manner that the judgment passed by the Hon'ble APTEL under Section 121 of the Electricity Act, 2003 is only 30

31 "procedural" and "not binding". In this context it is relevant to refer to the order dated passed by the Hon'ble APTEL in OP No.1 of 2015 wherein the Hon'ble APTEL expressed its anguish on the conduct of the Delhi Electricity Regulatory Commission in not implementing its earlier directions given in OP No. 1 of As regards the interpretation being given by the obligated entities to the PTC judgment of the Hon'ble Supreme Court it is to be noted from the perusal of the PTC judgment which pertain to Section 121 of the Electricity Act, 2003, that the only question which was decided was that whether the Hon'ble APTEL has powers of "Judicial Review" to test the "Validity of the Regulations" framed by a Regulatory Commission. It was only in this context held by the Hon'ble Supreme Court that under Section 121 the Hon'ble APTEL cannot exercise judicial review of a Regulation. Any other interpretation as may be given by the obligated entities of the said judgement would be mischievous and bad in law As regards the reliance on Judgment in O.P. No. 2 of 2015, on perusal of the above judgment it is clear that the same is a reiteration of what has 31

32 been held by the Hon'ble Supreme Court in the PTC judgment. IWEA does not dispute the fact that under Section 121 of the EA, 2003 no directions can be issued upon a Regulatory Commission for adjudicating a particular case in a particular manner or to perform statutory functions (Section 86) in a particular manner No one can take away the right of Hon'ble APTEL to lay down the law or legal protocol under Section 121 for discharge of statutory functions by the Commissions. Such laying down of law or legal framework/ principle cannot be wished away by the obligated entities when they advance arguments that the said law or legal principle laid down by Hon'ble APTEL are "not binding". In OP No. 1, 2 and 4 of 2013, by incorporating the legal principles laid down in Appeal No. 21 of 2014 before the passage of the 2 Judge Bench clarificatory order, the Hon'ble APTEL has laid down the law and the legal principle/protocol which is required to be kept in mind and followed by this Hon'ble Commission for discharge of its statutory functions while adjudicating the present proceedings. 32

33 11.20 The Commission is bound to take into account the legal principles/ protocol laid down by the Hon'ble APTEL in the 3 Judge Bench judgment in OP No. 1, 2 and 4 of 2013 wherein the entire legal principles/protocol pertaining to RECs as given in the judgment of Appeal No. 21 of 2014 has been incorporated much before the passage of 2 Judge Bench clarificatory order The Hon ble Tribunal has passed an order/judgment in O.P.No. 1/2013, 2 of 2013 and 4 of 2013 in which it is stated that the directions issued by the Tribunal to all SERCs for fulfilment of RPO norms be implemented by all the SERCs as the decision of Hon ble APTEL in above petitions is of full bench. The clarificatory order issued by the Hon ble Tribunal against the judgment dated in Appeal No. 258 of 2013 and Appeal No. 21 of 2014 is not changed. The judgment of passed by the Hon ble APTEL in O.P. No. 1, 2 and 4 of 2013 stood before the clarificatory order. Hence, no proceedings for compliance of judgement dated based on the clarificatory order can be initiated overlooking the judgment passed in O.P. No. 1, 2 and 4 of 2013 dated We note that in the review petition filed before the Hon ble APTEL, the review 33

34 petitioner sought review of the order dated passed by Hon ble APTEL in Appeal No. 258 of 2013 and 21 of 2014 and clarificatory order thereon in specific appeal filed by the Indian Wind Energy Association and Indian Wind Power Association and it is different and distinct from the order in O.P No. 1, 2 and 4 of 2013 dated The Commission is dealing with the order dated read with the clarificatory order dated in I.A. No. 187 of 2015 passed by the Hon ble Tribunal. The Commission is deciding the present matter as remanded back by the Hon ble APTEL. The scope of remand is limited by the Hon ble APTEL, as is apparent from the relevant para of the judgement dated in Appeal No. 258 of 2013, Appeal No. 21 and I.A. No. 28 of 2014 reproduced below: 71. Summary of our findings: (i) The National Tariff Policy and the Regulation of the Central Commission and the State Commission recognize REC as valid instrument for fulfilling Renewable Purchase Obligation cast upon the obligated entities under Section 86(1)(e) of the Electricity Act, Purchase of REC would be 34

35 deemed as purchase of energy from renewable energy source for fulfilling RPO obligation. When a legal fiction has been created by a statute, the same should be given full effect. (ii) An obligated entity has option to fulfill its RPO either by procuring renewable energy in physical form or by REC or partly by REC and partly by physical renewable energy. However, a distribution licensee has to exercise the option based on economic principles. An obligated entity other than the distribution licensee may also opt for purchase of REC for fulfilling its RPO obligation to avoid the issues involved in banking, open access, sale of surplus power, etc., or if the RPO requirement is too small. (iii) Renewable energy generators like conventional generators have been given freedom under the Electricity Act in respect of choice of site, choice of counter-party buyer, freedom from tariff regulation when the generating company supplies to a trader or directly to a consumer. So far, the renewable energy generators were not able to exercise this freedom due to various constraints. The REC mechanism has opened up the market for renewable energy generators helping in expeditious exploitation of renewable energy potential in the country thus, serving the object of the Electricity Act, Thus, REC mechanism has to be encouraged. By 35

36 treating REC as a valid instrument for discharge of mandatory RPO as set out in the Regulations, the State commission has only followed the mandate of the Electricity Act, 2003 under Section 86(1)(e) for promotion of renewable sources of energy in the State. (iv) The State Commission can revise the RPO before or during a year or after passing of year under Regulation 4.2 of RE Regulation 2010 as explained under paragraphs 47 to 51 above. If the distribution licensee has not made efforts to procure requisite renewable energy to fulfill the RPO and also has not procured REC, the State Commission should not revise RPO under Regulation 4.2. However, while revising the RPO targets, the State Commission has to ensure that such revision should not defeat the object of the Electricity Act and the Regulations. (v) If the RPO targets are revised under Regulation 4.2 due to inadequate capacity addition in a resource rich State, such reduction has to be uniform for all the entities. (vi) Under 5th proviso to Regulation 9, if the Commission is convinced that the obligated entity has faced genuine difficulty in meeting the RPO due to non-availability of power from renewable sources or the REC, it may allow carry forward the compliance requirement to the next year. 36

37 However, before exercising power under Regulation 9, the State Commission has to satisfy itself that there was difficulty in meeting the RPO from purchase of REC. Therefore, non-availability of REC is a precondition for carry forward under Regulation 9. (vii) Admittedly there was substantial reduction in capacity addition of wind energy and other sources of renewable energy in the State during FY due to reasons beyond the control of the distribution licensee. Under such a condition the State Commission can reduce RPO targets for the wind energy and other energy. However, such reduction due to capacity constraints has to be uniform for all the obligated entities in the State. (viii) In the present case, the State Commission has revised the RPO targets for various distribution licensees as per the actual. This way the State Commission has set up different RPO targets for four States owned distribution licensees, Torrent Power Surat and Ahmedabad at different levels for the same reason of inadequate capacity addition. This is not permissible. The State Commission has incorrectly revised the RPO for the deemed distribution licensees to zero or nearly negligible amount due to 37

38 financial impact, low energy consumption, nascent stage of operation etc., in contravention to the Regulations. (ix) We find that RPO compliance of GUVNL for wind energy was satisfactory but compliance of biomass and other non-solar energy was quite low due to which there was default in fulfilling the non-solar RPO. Thus, during FY there appeared to be inadequate generation of biomass and other non solar energy sources in the State. The State Commission has to examine the reasons for the same and take necessary measures for accelerating capacity addition of biomass and other sources of renewable energy in the State. (x) We remand the matter to the State Commission to reconsider the whole issue afresh in light of our findings in this judgment. The State Commission is empowered to reduce the RPO targets for all the entities uniformly in view of reduction in capacity addition of wind energy and other sources in the State during the FY However, the consequences of shortfall with respect to the revised RPO for different distribution licensees/deemed distribution licensees has to be decided by the State Commission according to Regulation 9. 38

39 (xi) We do not find any infirmity in the State Commission relaxing the RPO for those deemed distribution licensees who purchase energy from GUVNL/distribution licensees at retail supply tariff and their consumption is included in determining the RPO of the supplying distribution licensee. (xii) In the circumstances of the case, we do not want to interfere with the decision of the State Commission to set off the shortfall in non-solar energy purchase with excessive solar energy procured during FY However, we have given certain directions in this regard for future in paragraph 68 above. (xiii) As regards public hearing for review of RPO, we have already given the necessary directions in our judgment in Appeal No. 24 of which have been reproduced under paragraph 27. In the said judgement Hon ble APTEL decided that the Commission is empowered to revise the RPO target during the year or after completion of the year under Regulation 4.2 of the RPO Regulations. If RPO target is revised under Regulation 4.2 due to inadequate capacity addition of the renewable sources of generation, the same shall be uniformly applicable to all obligated 39

40 entities. Under Regulation 9, the Commission is empowered to carry forward the RPO in case of non-availability of RE generation. It is necessary to refer the relevant para 3 and 4 of the I.A.No. 187 of 2015 in Appeal No. 258 of 2013 & 21 of 2014 which read as under: 3. Once the court gives a judgment, it becomes functus officio. Therefore, we do not want to change or in anyway dilute the judgment dated However, in the present case the Tribunal while interpreting the regulations has also discussed the various conditions under which the State Commission may revise the RPO targets after the completion of the financial year under Regulation 4.2 due to supply constrains or factors beyond the control of the licensee. The Tribunal has held that if RPOs are revised due to the inadequate capacity addition in the State, the same percentage will be applicable to all the obligated entities. 4. We feel that in the present case where we have described various conditions under which the Commission may revise RPOs targets, it is necessary for us to give the clarificatory regarding implementation of the judgment without anyway changing the findings in the judgment. We, therefore, clarify that in case the State Commission decides to revise 40

41 targets due to inadequate capacity addition in the State the same may be done keeping in view overall availability of renewable energy resources in the State and other relevant factors and after hearing all concerned and not merely on the basis of actual RPO achievement by the various entities. With this clarificatory the application is disposed off. [12] We have carefully considered the submissions made by the parties. The issue emerged in the present case is with regard to shortfall in RPO compliance by the distribution licensees which are the obligated entities. The Distribution Licensees contended that the aforesaid shortfall is due to the reasons beyond the control of the respondent Distribution Licensees while some of the objectors have contended that the contention of the obligated entities is not valid because there was sufficient quantum of RECs available during the FY , which the respondent Distribution Licensees have not purchased to comply with the obligations cast upon the respondent Distribution Licensees. Consumer Education Research Society has supported the contention of the respondent distribution licensees stating that the RPO specified by the Commission is higher and it needs to be revised based on the actual compliance of the RPO by the respondent obligated entities. CERS has further submitted that purchase of RECs is a burden on the consumers 41

42 as it impacts the tariff. It is the arms twisting method adopted by the wind generators who are not signing the PPAs with the Distribution Licensees and are compelling the licensees to purchase the RECs. Therefore, the Commission should consider the actual purchase of renewable energy by the respondent Distribution Licensees for non-solar RPO compliance as revised RPO of the Discoms. [13] Now we deal with the issue regarding whether the revision of RPO targets of FY prayed by the respondent Distribution Licensees and exemption from requirement of transferring the fund to a designated account for FY towards shortfall in compliance of Non-Solar RPO is permissible or not. The Distribution Licensees submitted that the aforesaid shortfall in compliance of Non-Solar RPO was beyond their control and hence, the Commission may exempt them in view of the provisions of Regulation 7 read with Regulation 9 of the GERC (Procurement of Energy from Renewable Sources) Regulations, 2010 and amendment thereto, which are reproduced below: If the distribution licensee is unable to fulfil the obligation, the shortfall of the specified quantum of that year would be added to the 42

43 specified quantum for the next year. However, credit for excess purchase from renewable energy sources would not be adjusted in the ensuing year. 7.2 Despite availability of renewable energy sources, if the distribution licensee fails to fulfil the minimum quantum of purchase from renewable energy sources, it shall be liable to pay compensation as per clause 9 of these Regulations. The aforesaid Regulations recognize that the Commission may carry forward the shortfall of RPO percentage if it is not fulfilled by the obligated entity when genuine difficulty is faced by the obligated entity for fulfilment of RPO. Whenever the carry forward of RPO percentage is allowed by the Commission, the same will be added to the RPO notified for the next year as per the Regulations. It also provides that whenever there is excess purchase of renewable energy by the obligated entity, no set-off be given for such surplus energy against the RPO percentages of the next year. It also provides that when the RPO target is not met by the obligated entity despite availability of renewable energy sources, the Commission may impose penalty on the obligated entities. Here, the availability of renewable energy sources needs to 43