Energy Injection Without Valid EPA Will Not Be Compensated, Reiterates MERC

The Maharashtra Electricity Regulatory Commission (MERC) has issued an order declaring that the Maharashtra State Electricity Distribution Company Limited (MSEDCL) is not obliged to sign an energy purchase agreement (EPA) with Bothe Windfarm Development Private Limited for 6.3 MW of wind projects.

Additionally, it directed the state distribution company (DISCOM) to reimburse Bothe Windfarm for the energy injected from its three wind turbine generators (WTG) aggregating 6.3 MW during the financial year (FY) 2014-2015 to FY 2016-17.

Background: 

The wind developer had filed a petition seeking for the Commission to direct MSEDCL to sign an EPA for 6.3 MW of wind projects commissioned in December under the scope of the MSEDCL’s Wind Policy 2014.


The developer set up 199.7 MW of wind projects in the Satara district of the state, of which 101 MW was commissioned on March 31, 2014. The remaining 98.7 MW was commissioned between April and December 2014, including the disputed 6.3 MW of projects. Bothe Windfarm stated that the 98.7 MW of projects were set up and commissioned under the MSEDCL’s Wind Policy 2014.

EPAs were signed for 101 MW of projects between March and August 2014, while the EPAs for 92.4 MW were signed in 2017. No EPAs were signed for the remaining 6.3 MW. The wind developer said that after numerous attempts, MSEDCL signed EPAs for 92.4 MW of the 98.7 MW of projects, but denied signing EPAs for the remaining three projects with a total capacity of 6.3 MW.

Bothe Windfarm sought for the Commission to direct MSEDCL to sign the EPAs for these projects and to reimburse it for the energy injected to the tune of ₹415.5 million (~$5.5 million) for the period between December 2014 to January 23, 2020. It also sought for the Commission to impose a tariff of ₹5.70 (~$0.076)/kWh for the power supplied after January 23, 2020, along with late payment surcharges at the rate of 15% per year.

Bothe Windfarm explained that these projects were set up and commissioned in December 2014 and had been injecting power into the grid ever since. It noted that since MSEDCL has been using the power generated by these projects to meet its renewable purchase obligations (RPO), it cannot refuse to sign an EPA.

In its response, the MSEDCL contended that it was under no obligation to execute an EPA with the developer, and it had not given any consent for the same. It cited a previous letter which said that the MSEDCL would not guarantee the purchase of the power and that it did not make any such promises or guarantees to Bothe Windfarm.

The DISCOM also reiterated the Commissions’ directive that generators cannot keep injecting power into the grid without a valid EPA or open access permission.

Upon analysis of the case and applicable policies, the Commission said that it could not conclude that the wind developer had set up these projects solely on the assurance of the MSEDCL’s Wind Policy, 2014, as they had claimed. It noted that Bothe Windfarm has failed to comply with the relevant mandates. It concluded that the MSEDCL need not sign an EPA for the 6.3 MW with the developer under either the Wind Policy 2014 or the RE Policy 2015.

The developer also suggested that there was an implied contract between the parties because MSEDCL did use the generated power to meet its targets between December 2014 and January 2020. In this regard, the Commission said MSEDCL is obliged to compensate the developer for power consumed between FY 2014-2015 and FY 2016-2017.

The MERC explained that since the DISCOM had switched to acquiring power to meet its RPO targets through competitive bidding in 2017, it need not compensate the developer for power consumed after this point. It said that the power used by the MSEDCL from FY 2017-2018 onwards could be treated as an “energy injection without a valid EPA” and need not be compensated for.

It further directed to pay for this power at the average power purchase cost (excluding renewable power) in addition to the floor price of non-solar RECs applicable for the respective year. The state body further added that no carrying costs would apply.

Last year, the DISCOM received the approval from the MERC for deviations in the standard bidding document for the long-term procurement of 500 MW of wind power.The approval was sought for wind projects for which the energy purchase agreements (EPAs) had expired or are about to expire in FY 2019-20.

Previously, the Commission had directed MSEDCL to procure wind power through the competitive bidding route from wind power projects whose EPAs with MSEDCL had expired. In that order, the Commission had mentioned that as the wind generators had their EPAs with MSEDCL for several years and their projects were already commissioned, MSEDCL may take appropriate deviations from provisions of the competitive bidding guidelines with prior approval. The rate discovered in the bidding process would be dealt with by the MERC during the tariff adoption process for meeting the requirement of fulfilling its non-solar RPO.