The Tamil Nadu Electricity Regulatory Commission (TNERC) has directed the state distribution company (DISCOM) to make payments to a wind energy generator with a 6% annual interest within a month.

Background

Rajaguru Spinning Mills Private Limited, a wind energy generator, filed a petition requesting the Commission to direct the Tamil Nadu Generation and Distribution Corporation (TANGEDCO).

to pay ₹20.28 million (~$270,535) for the wind energy and interest of ₹3.20 million (~$42,796) for the delay in payment.

The company, which has a 1.5 MW wind energy project in Dindigul, Tamil Nadu, signed a power purchase agreement (PPA) with TANGEDCO. It also signed two PPAs with Dindigul Electricity Distribution Circle to supply wind energy.

TANGEDCO agreed to pay a tariff of ₹3.51(~$0.047)/kWh. It also accepted to pay ₹0.25 (~$0.0033)/kWh for drawing reactive power up to 10% of the net energy generated and ₹0.50 (~$0.0067)/kWh for drawing reactive power more than 10% of the net energy generated.

The agreement specified that TANGEDCO must pay the wind energy generator within 30 days of receiving the invoice. In case of delay beyond 30 days, TANGEDCO was liable to pay 1% monthly interest.

In its petition, the company informed the Commission that TANGEDCO was liable to pay ₹23.49 million (~$313,093) for procuring power from 2017 to 2020. However, TANGEDCO had failed to clear the invoices.

The company issued a legal notice to DISCOM to claim the payment. However, DISCOM replied that the bills had been processed, but funds were awaited from the headquarters.

TANGEDCO agreed to pay the amount with a 6% interest on delayed payment within 30 days from December 22, 2020, against the contractual interest of 12%. However, it did not comply with the Commission’s direction and said it would release the payments before March 9, 2021.

The wind energy generator refused to accept 6% interest and requested the Commission consider the contractual interest rate of 12%.

TANGEDCO’s response

TANGEDCO said the company was claiming 18% annual interest on delayed payments, which was against the terms of the PPA.

TANGEDCO said its revenue collection had come down due to the Covid-19 pandemic, which was the reason for the delay in payment.

TANGEDCO told the Commission that its fund flow would be adversely affected if it was directed to pay ₹23.49 million (~$313,093) to the wind generator.

Commission’s analysis

After examining submissions made by both parties, the Commission said TANGEDCO is liable to pay 1% per month interest for the delay in settlement of invoices.

It also observed that TANGEDCO had not settled the dues despite the petitioner agreeing to 6% interest, and ₹80 million (~$1.066 million) was due to the wind energy generator. Even though TANGEDCO was directed to comply with its directions within 15 days for compliance, it had failed to do so.

Expressing displeasure over the non-compliance, the Commission directed TANGEDCO to verify the claim of the generator and make payments with a 6% interest within a  month. If TANGEDCO failed to pay within a month, it would be liable to pay 12% interest in line with the applicable tariff order.

The Commission said it would not accept any further delay in settlement. If TANGEDCO failed to pay dues at 6% interest within a month, the amount paid over and above at 6% interest would not be allowed as a pass-through in annual recurring revenue, and TANGEDCO would have to bear the difference in interest.

In September 2021, TNERC directed TANGEDCO to pay 1% interest per month for delayed payment to three wind generators for the energy supplied.

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