The Delhi Electricity Regulatory Commission (DERC), in a recent order, has directed the distribution company BSES Rajdhani Power (BRPL) to meet the demand put forward by Timarpur-Okhla Waste Management company (TOWMCL), an integrated waste processing facility with a 16 MW waste-to-energy project. TOWMCL has requested that BRPL issue letters of credit regularly, pay late payment surcharges for the delay in processing the bills, and refund the wheeling charges.
TOWMCL had filed the petition after several disputes transpired between it and BRPL over non-compliance with the energy purchase agreement (EPA).
According to the company, BRPL violated numerous terms and conditions of the EPA dated January 20, 2010 (amended on July 27, 2011), especially concerning the non-opening of the letter of credit (LC), which is BRPL’s contractual obligation.
Per the EPA signed in 2010 and the amendment later in 2011, 50% of power being generated by TOWMCL’s waste-to-energy project amounting to 60 MU per year from a 16 MW project is being sold to BRPL.
Letter of credit
According to the EPA, the distribution company (DISCOM) is obligated to provide an unconditional, revolving, and irrevocable LC to TOWMCL. The LC covers the average monthly billing for units indicated in the supply scheduled for the particular calendar quarter. The LC must be updated by the fifth working day of the calendar quarter.
According to the petition, TOWMCL requested BRPL to open the LC right from the beginning, but the latter failed to do so to date despite several written and verbal reminders. The BRPL, in its submission, stated that the LC is only a directory requirement, not a mandatory one, and an LC is required only as a security mechanism and not for payment purposes.
The Commission observed that the opening of LC is not optional but mandatory under the provisions of EPA and directed BRPL to open an unconditional, revolving, and irrevocable LC as per the terms of the EPA.
Non-Payment of Late Payment Surcharge
TOWMCL, in its petition, stated that BRPL is obligated to make full payments against the monthly bills within 30 days of the receipt of the bills. If the bill is not paid within the prescribed time, the same will invite a surcharge of 2% per month on the billed amount.
BRPL had issued a reconciled statement to TOWMCL for the quarter ending December 31, 2020, and cleared the outstanding dues of ₹35.85 million (~$483,088) towards the late payment surcharge due from January 2012 to March 2015.
However, BRPL had not paid the late payment surcharge payable from the due date to the tune of ₹62.20 million (~$838,033).
Keeping in view that the amount withheld for long by BRPL had opportunity cost, the Commission further directed BRPL to pay a simple interest of 0.75% per month (9% per annum) on the amount of ₹35.85 million (~$483,088) from April 1, 2015, to January 18, 2021, within one month from the date of this order.
Earlier in February this year, the Ministry of Power had issued new regulations regarding the late payment surcharge, which will be applicable for power purchase agreements and transmission service agreements in which the tariffs have been determined through competitive bidding.
Refund of wheeling charges
TOWMCL, in its petition, stated that the Commission, in an order passed on December 24, 2013, exempted green energy open access consumers from wheeling charges. However, BRPL imposed the wheeling charges on TOWMCL’s waste-to-energy project imposed on the open access consumers.
TOWMCL has requested a refund of ~₹29.9 million (~$402,835) paid against wheeling charges.
According to BRPL, the exemption provided under the Commission’s order on December 24, 2013, applied to ‘Green Energy Open Access Consumers’ only, and TOWMCL was not included in the same until the Commission passed its clarification order dated May 18, 2015, whereby the word ‘consumer’ stood replaced with ‘customer (buyers & sellers)’. Therefore, the TOWMCL cannot claim for refund of wheeling charges from February 24, 2014, to May 17, 2015, as there was no exemption to the sellers of green energy until the Commission passed the order on May 18, 2015.
Meanwhile, the Commission noted that the clarification mentioned in its order dated May 18, 2015, for both buyers and sellers is effective from December 24, 2013, and directed BSES to refund wheeling charges from February 24, 2014, to May 17, 2015, within one month from the date of this order.
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Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.