APTEL Comes Down on State Electricity Regulator on Tariff Cut for a Solar Project

The Appellate Tribunal for Electricity (APTEL), in its recent order, has ruled in favor of a solar developer, allowing the approval for the extension of the scheduled commercial operation date (SCOD) granted by Gulbarga Electricity Supply Company Limited (GESCOM).

The Tribunal also said the solar developer is entitled to a tariff of ₹8.40 (~$0.11)/kWh from the date of commercial operation date of its project and directed GESCOM to make payments accordingly.

Background

Clearsky Solar Private Limited filed a petition with APTEL, challenging the Karnataka Electricity Regulatory Commission’s (KERC) order that did not approve the extension of the scheduled commercial operation date for a solar project.


KERC, in its order dated October 10, 2013, said that the tariff of ₹8.40 (~$0.11)/kWh was to be applicable for power purchase agreements (PPAs) executed on or after April 1, 2013, to March 31, 2018.

In July 2015, KERC issued an order modifying its tariff order dated October 10, 2013. In its new order, the Commission announced a tariff of ₹6.51 (~$0.088)/kWh for projects that have executed PPAs after September 1, 2015, where projects are commissioned between September 1, 2015, and March 31, 2018.

However, the tariff of ₹8.40 (~$0.11)/kWh would be applicable for projects with PPAs executed and submitted for approval before September 1, 2015, for the projects that were to be commissioned between September 1, 2015, and March 31, 2018.

The petitioner informed the Tribunal that PPA for its project was executed on August 29, 2015, and submitted for approval of the Commission on the same day. The project was also commissioned on May 27, 2017. Therefore, the tariff under the existing PPA was not affected by the Commission’s 2015 tariff order.

KERC approved the PPA in a letter issued to GESCOM on September 7, 2015. However, the copy of the said letter was not marked to solar power developers. GESCOM, upon the request of solar power developers, asked the Commission to return the original approved PPAs.

On December 8, 2015, KERC issued a clarification to DISCOMs on forming a special purpose vehicle (SPV) under article 12.11 of the PPA. However, the clarification was issued after a lapse of over three months from the date of execution of PPA, the petitioner mentioned.

In a letter to GESCOM on August 12, 2016, the petitioner requested an extension of the timeline because of a delay in PPA approval, formation of SPV, and evacuation approval. On August 24, 2016, the petitioner wrote another letter to GESCOM requesting an extension of the scheduled commercial operation date due to difficulties in implementing the project.

GESCOM issued a letter to the petitioner, raising an issue related to non-fulfillment of conditions precedent and directing the petitioner to pay ₹360,000 (~$4847).

In response, the petitioner issued a detailed letter to GESCOM, stating that it had already fulfilled the conditions precedent under the PPA and requesting GESCOM to withdraw its claim.

Through its order dated April 12, 2017, the Commission reduced the tariff to ₹4.36 (~$0.059)/kWh that was applicable for all projects that have executed PPAs before April 1, 2017, where projects are commissioned between April 1, 2017, and March 31, 2018.

On May 27, 2017, GESCOM granted its synchronization approval for the petitioner’s solar project, and the petitioner commissioned the project on the same date, which was within the revised scheduled commercial operation date.

The company filed a petition before KERC to approve the extension of the scheduled commercial operation date and maintain the tariff at ₹8.40 (~$0.11)/kWh as stipulated under the PPA. However, the Commission passed an interim order adopting the tariff of ₹4.36 (~$0.059)/kWh as per its order dated April 12, 2017.

In the final order on May 29, 2020, the Commission also disallowed the petition of Clearsky Solar’s request for the extension of the scheduled commercial operation date and tariff at ₹8.40 (~$0.11)/kWh.

Therefore, the petitioner requested the Tribunal to set aside the impugned order dated May 29, 2021, and direct GESCOM to pay the petitioner the tariff of ₹8.40(~$0.11)/kWh. The petitioner also requested the Tribunal to direct GESCOM to refund ₹360,000 (~$4847) collected as liquidated damage.

In its response, GESCOM stated that it granted all approvals and permissions on time depending upon the petitioner’s compliance. The commissioning of the project was delayed as the petitioner could not obtain the required conversion orders of the land, and procure the required raw materials on time.

GESCOM also stated the clause 5.1 of the PPA allowed the revision of applicable tariff if there is a delay in the project’s commissioning. At the time of conditional approval of PPA, GESCOM also stated that the tariff is subject to change by the Commission if there is any delay in the project’s commercial operation.

 Tribunal’s analysis

After analyzing the submissions by both parties and previous orders of KERC, the Tribunal stated that there was no justification for KERC to declare that the petitioner was responsible for the delay in the commissioning of the project. In addition, the liquidated damages need to be paid if the petitioner is responsible for the delay in the commissioning of the project. Therefore, KERC’s decision to impose charges on damages is not justified.

The Tribunal also noted that the passive approach of several state government institutions caused the delay in the commissioning of the project and not because of the petitioner’s negligence.

In its analysis, the Tribunal also noted that GESCOM paid the petitioner at the tariff of ₹4.36 (~$0.059)/kWh without any carrying cost between May 2017 to April 2018. Therefore, the Tribunal directed GESCOM to pay the carrying cost on the difference of tariff amount to the petitioner, as per article 6.4 of the PPA.

The Tribunal also stated that there was no fault of the petitioner in the delay of the commissioning of the project. Therefore, the petitioner is entitled to receive the amount from the date of commissioning, and GESCOM is liable to pay late payment surcharges.

In its analysis, the Tribunal said the petitioner is entitled to a tariff at ₹8.40 (~$0.11)/kWh as the petitioner was not responsible for any delay. In addition, the petitioner is not liable to pay any liquidated damages.

The Tribunal also directed GESCOM to pay the carrying cost to the petitioner within four weeks from the date of the order.

Last month, the Tribunal directed Tamil Nadu Generation and Distribution Corporation Limited to return the performance bank guarantee of ₹200 million (~$2.68 million) and an additional bank guarantee of ₹76 million (~$1.02 million) to the developer without delay.

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