The Appellate Tribunal for Electricity (APTEL) has overturned the Andhra Pradesh Electricity Regulatory Commission’s (APERC) termination of a power purchase agreement (PPA) for 60 MW of Guttaseema Wind Energy Company’s 80 MW wind project.

APTEL ruled that the synchronization of the first 20 MW unit on March 22, 2018, should be treated as the commercial operation date (COD) for the entire project under the PPA’s terms.

As a result, APTEL held that the project met the contractual COD deadline. It directed the Southern Power Distribution Company of Andhra Pradesh (APSPDCL) to immediately synchronize the 20 MW unit that had been completed and certified in 2019 but never commissioned.

It also ordered synchronization of the remaining 40 MW and granted deemed generation compensation to Guttaseema for the 20 MW that remained idle due to the APSPDCL’s inaction.

Background

The petitioner, Guttaseema Wind Energy, set up an 80 MW wind project in Andhra Pradesh’s Anantapur District under the state’s 2008 Wind Power Policy. The project received approval from the Non-conventional Energy Development Corporation of Andhra Pradesh. In 2013, the petitioner signed an implementation agreement. A PPA was signed with APSPDCL on May 9, 2016, under which the petitioner would supply power at ₹4.84 (~$0.057)/kWh for 25 years from the COD.

The project was to be commissioned within two years, according to the PPA. The petitioner commissioned the first 20 MW unit by March 22, 2018. It then completed an additional 20 MW in 2019, including obtaining the necessary certifications for synchronization. However, despite several written requests, the distribution company (DISCOM) failed to grant synchronization approval.

On July 1, 2020, APSPDCL issued a notice terminating the PPA for the uncommissioned 60 MW, citing failure to achieve COD within the required timeframe. The petitioner challenged this before APERC, which upheld APSPDCL’s decision. The Commission ruled that each generating unit had to be commissioned within two years and that only the 20 MW unit, which was synchronized in 2018, could be covered under the PPA.

The petitioner appealed to APTEL, arguing that Article 1.4 of the PPA, along with its explanation, clearly stated that for non-conventional power projects, the COD would be deemed as the synchronization date of the first unit. Based on this provision, it claimed the entire project had met the required COD deadline. It also contended that the 20 MW completed in 2019 could not be synchronized solely because the DISCOM failed to respond.

APSPDCL and APERC contended that the project missed its two-year commissioning deadline and that allowing synchronization at the old tariff would be unjust, particularly given the declining costs of renewable energy. They also argued that the explanation in Article 1.4 conflicted with the main clause and should be ignored.

Tribunal’s Analysis

APTEL noted that Article 1.4 of the PPA defined COD as the date a generating unit is declared operational following performance testing. The attached explanation further states that, for non-conventional energy projects, the COD of the entire project is the date of synchronization of the first unit.

Contrary to APERC’s interpretation, the Tribunal found no contradiction between the main clause and the explanation. It held that the reason was a valid part of the contract, intended to clarify how COD should apply to such projects. APTEL emphasized that both parties had agreed to this clause knowingly and that APERC had also approved the PPA in this form. The Tribunal also observed that similar language exists in other PPAs approved by the Commission.

Addressing APERC’s concerns about developers misusing fixed tariffs, APTEL noted that delays in commissioning could harm developers by reducing the window for recovering costs under the 25-year PPA. It rejected the contention that the clause allowed developers to delay projects for financial gain. The Tribunal also highlighted that the DISCOM had previously allowed synchronization of a 10 MW unit beyond the two-year window, weakening its argument.

Reaffirming that commercial contracts should be interpreted per their clear terms, APTEL ruled that the COD for the entire 80 MW project was March 22, 2018. Since that date fell within the stipulated timeframe, the PPA’s termination was unwarranted.

The Tribunal quashed the termination notice, ordered synchronization of the remaining units, and granted deemed generation compensation from May 2019 onward for the 20 MW unit left idle.

In December last year, APTEL affirmed the rights of power generators to terminate their PPAs with the Southern Power Distribution Company of Andhra Pradesh due to persistent defaults on payment obligations.

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