The Appellate Tribunal for Electricity (APTEL), in a recent order, condoned the delay in the commissioning of a 2 MW project by Vatsala Ballary Solar Projects and asked the Bangalore Electricity Supply Company (BESCOM) to make the payments as agreed in the power purchase agreement (PPA) without any delay.

The Tribunal, in its ruling, approved the delay of six months as initially granted by BESCOM to the developer without any preconditions.

Vatsala Ballary Solar Projects had filed an application with APTEL challenging the order of the Karnataka Electricity Regulatory Commission (KERC), in which the Commission had reduced the tariff to ₹4.36 (~$0.059)/kWh from ₹8.40 (~$0.113)/kWh and had imposed liquidated damages for the delay in commissioning of the project.

Background   

The developer set up the solar project in response to a program floated by the state government for land-owning farmers, encouraging them to establish such projects. The 2 MW project is located in the Bellary district of Karnataka. The scheduled commercial operation date of the project was January 2, 2017, but the project achieved the commercial operation date on July 2, 2017.

The developer, in its submission, said that the delay occurred on account of the conversion of land, as the matter took ten months at the level of government agencies. The developer said that the delay in the commissioning of the project came under the ‘force majeure’ clause of the PPA.

As per the provision of the PPA, the extension of the commissioning date was subject to an amicable resolution by the parties.

The developer approached BESCOM seeking an extension. BESCOM agreed to grant an extension of six months, and this was communicated to the developer by a letter dated March 2, 2017.

Later, the State Commission issued an order directing that no such extension would be granted without its approval. Subsequent to the order, the board of directors of BESCOM approved the extension of six months but added a precondition that it would be subject to the approval of KERC.

After the said events, BESCOM declined to pay the agreed tariff without the approval of extension by the State Commission. To seek approval, the solar developer filed a petition with KERC, who then rejected the petition observing that there had been a delay of seven months on the developer’s part in applying for land conversion and hence proceeded to reduce the tariff to ₹4.36 (~$0.059)/kWh from ₹8.40 (~$0.113)/kWh.

Tribunal’s analysis

The Tribunal observed that the provisions of the PPA provide discretion to the parties to amicably resolve the issue of delay in commissioning of the project. BESCOM had agreed to the extension of six months and had communicated this to the developer.

The Tribunal noted that the KERC order dated March 16, 2017, cannot take away the agreement’s effect in which BESCOM had accorded extension. Also, the condition added by the board of directors of BESCOM regarding the prior approval of KERC was also incorrect.

APTEL added that the State Commission was wrong in looking into the reasons for the delay to deny the benefit of the extension agreed upon by the parties and the contractual rate of purchase of electricity by BESCOM.

Considering all the facts, the Tribunal condoned the delay in commissioning of the project and asked BESCOM to honor its financial obligations at a tariff of ₹8.40 (~$0.113)/kWh under the agreed terms of the PPA.

In August last year, APTEL had set aside KERC’s earlier order reducing the tariff for five solar projects. It ruled that the solar developers were entitled to ₹8.40 (~$0.113)/kWh as per the PPA.

Earlier, KERC had approved a tariff of ₹8.40 (~$0.113)/kWh as per the PPA signed between BESCOM and the project developer, Cambria Solar. The Commission also approved the extension of six months granted by BESCOM for the solar project’s commissioning date.

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