CERC Asks NTPC to Refund Solar Developer’s ₹10 Million Deducted as Liquidated Damages

The Central Electricity Regulatory Commission (CERC) has directed the National Thermal Power Corporation (NTPC) to refund the performance bank guarantee (PBG) of ₹10 million (~$140,800) along with interest to Prayatna Developers Private Limited within two months from the issue of this order.

The amount was deducted as liquidated damages from the bills of Prayatna Developers (a subsidiary of Adani Green Energy), the petitioner in this case. The company is developing 50 MW (5X10 MW) of solar projects at Mahoba in Uttar Pradesh.

Background

Prayatna Developers filed a petition with the CERC against NTPC, which had said that it would invoke the performance bank guarantees (PBGs) submitted by the company for a delay in commissioning of the projects.


Prayatna Developers requested the Commission to direct NTPC to refund ₹10 million (~$140,800) deducted as liquidated damages from the company’s bill. It also asked the Commission to hold and declare that the scheduled commissioning date of the company stands extended by ten days due to the delay caused by the respondents in inspecting the 33 kV meters of the Prayatna Developer’s power projects.

The respondents, in this case, were NTPC, Uttar Pradesh Power Transmission Corporation Ltd. (UPPTCL), Uttar Pradesh Power Corporation Limited (UPPCL), and Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL).

In May 2016, the company had signed five power purchase agreements (PPAs) of 10 MW each with NTPC at a tariff of ₹4.78 (~$0.07)/kWh.

The company underwent several challenges in getting the sealing of the energy meters done as per the state regulations.

The petition states that the petitioner had to commission the projects by May 28, 2017.

In June 2017, the petitioner wrote to UPPCL requesting it to direct DVVNL to seal 33 kV meters. The project finally got commissioned on June 7, 2017.

However, after six months in December 2017, the developer approached the NTPC seeking an extension of 10 days for the commissioning of the project and requested it not to encash the PBG of ₹10 million (~$140,800).

In April 2018, instead of encashing the PBG, NTPC agreed that the liquidated damages would be deducted from the monthly bill on the clarification that it was done at the request of the petitioner. The NTPC clarified that the amount deducted will not be a ground for claiming full or partial late payment surcharge. Later, the petitioner served a notice for arbitration.

NTPC submitted that since it was within the reasonable control of the petitioner to approach the concerned authority in time and arrange for the compliance with the requirement of sealing the meters, it cannot be held to be a force majeure event.

The Commission observed that the solar projects were ready for synchronization even before May 2017. DVVNL sealed the 33 kV ABT meters installed at the project end only on June 5, 2017. After two days, the projects were successfully commissioned.

Further, the Commission said that the delay in commissioning was due to delay in sealing of the meters installed by the respondents. The PPA dictates that this was their joint responsibility.

With this conclusion, the Commission also extended the scheduled commissioning date (SCoD) of the projects to June 7, 2017, besides asking NTPC to refund the amount deducted as liquidated damages.

In December 2019, it was reported that CERC granted an extension to solar projects in Rajasthan for a delay in road construction.

Previously, Mercom reported that ruling in favor of developers, CERC directed NTPC to pay the PBGs to the tune of ₹255 million ($3.7 million) to three developers in Bhadla Solar Park.