APTEL Denies Tariff Cut for a Delayed Solar Project, Allows Recovery of Liquidated Damages

The Appellate Tribunal for Electricity (APTEL), in a recent order, directed a solar developer to pay liquidated damages to the Gulbarga Electricity Supply Company (GESCOM) for the delay of 31 days in the commissioning of a 40 MW solar power project.

However, Azure Photovoltaic, the solar developer, was entitled to a tariff of ₹6.96 (~$0.094)/kWh to supply power to GESCOM from the project’s commercial operation date (COD), APTEL said.

It directed the DISCOM to pay the solar developer the differential tariff between ₹6.96 (~$0.094)/kWh and ₹6.51 (~$0.088)/kWh from the commercial operation date until it starts paying ₹6.96 (~$0.094)/kWh.

The parties were told to submit the supplementary power purchase agreement (PPA) executed between the solar developer and GESCOM for approval.


Azure Photovoltaic had appealed to APTEL challenging the Karnataka Electricity Regulatory Commission’s (KERC) decision. The Commission had set aside the extensions granted by GESCOM and asked the developer to pay liquidated damages for the delay in the commissioning of the project.

Background

Azure Photovoltaic is a special purpose vehicle (SPV) of Azure Power India. In 2014, the Karnataka Renewable Energy Development Limited (KREDL) invited bids to develop 500 MW of solar power projects. After evaluating the proposals received, KREDL accepted Azure Power’s bid to develop a 40 MW solar project in Chitradurga district.

Azure Photovoltaic entered into a PPA with GESCOM on January 23, 2015, and received the PPA copy from GESCOM only in April 2015.

On May 25, 2015, GESCOM informed the developer that the PPA had been approved by the Commission. However, after signing the modified PPA, Azure Photovoltaic requested GESCOM to grant an extension to meet the commercial operation date.

Later, GESCOM extended the commercial operation date to January 23, 2017. The draft supplemental agreement to the PPA handed over by GESCOM to the developer for execution lowered the tariff to ₹6.51 (~$0.088)/kWh. However, the developer had signed for a tariff of ₹6.96 (~$0.094)/kWh in the original PPA.

Subsequently, the developer and GESCOM entered into a supplemental PPA on March 10, 2017. The developer noted that the supplemental PPA revised the commercial operation date as January 23, 2017, but did not mention that the tariff would be reduced to ₹6.51 (~$0.088)/kWh.

The project was progressing based on the extended dates until another force majeure event in the form of Cauvery River water-related riots occurred in Karnataka, and work came to a halt.

Ultimately, the project achieved commercial operation by March 26, 2017. It raised invoices at the rate of ₹6.51 (~$0.088)/kWh for GESCOM from the date of achieving commercial operation date, i.e., from March 26, 2017. However, no payment was received by the developer from GESCOM.

Tribunal’s analysis

The Tribunal observed that the developer was liable to pay liquidated damages for the delay of 31 days. The delay was because of the protests in connection with the Cauvery river water sharing dispute. On the reduction of tariff from ₹6.96 (~$0.094)/kWh to ₹6.51 (~$0.088)/kWh, the Tribunal noted that the tariff of ₹6.96 (~$0.094)/kWh was arrived at in a competitive bidding process.

The Tribunal said that the applicable tariff as per Article 12.1 of the PPA was ₹6.96 (~$0.094)/kWh and that the tariff could not be revised to ₹6.51 (~$0.088)/kWh.

The Tribunal added that if the PPA was entered into on or after April 01, 2013, and up to March 31, 2018, for solar projects, the approved rate was ₹8.40 (~$0.113)/kWh. However, the tariff in terms of PPA was adopted by the GESCOM was at ₹6.96 (~$0.094)/kWh. If there were a delay in the commissioning of the project, the lower tariff would be applicable. Since the PPA-approved tariff was ₹6.96 (~$0.094)/kWh, it would be applicable.

The Tribunal said that the developer was liable to pay liquidated damages to GESCOM for a delay of 31 days in commissioning the project but was entitled to a tariff of ₹6.96 (~$0.094)/kWh. The GESCOM should pay the developer a differential tariff between ₹6.96 (~$0.094)/kWh and ₹6.51 (~$0.088)/kWh from the commercial operation date.

Last month, KERC rejected Photon Suryakiran’s petition asking for Bangalore Electricity Supply Company (BESCOM) not to reduce the tariff of the delayed solar project from ₹7.05 (~$0.095)/kWh to ₹6.51 (~$0.087)/kWh.

Earlier, KERC had ruled that ACME Kudligi Solar was liable for a reduced tariff of 80% of the quoted tariff and liquidated damages for a delayed 20 MW solar project. The Commission had directed BESCOM to recover liquidated damages after six weeks from the date of the issuance of the order.

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