Punjab Electricity Regulator Holds Solar Power Curtailment Unjustifiable

The Punjab State Electricity Regulatory Commission (PSERC) has held the curtailment of power generated by seven solar project developers in 2020 unjustifiable. It directed the Punjab State Power Corporation Limited (PSPCL) to release the payment for the power injected into the grid along with late payment surcharges. The power is said to be utilized by the state power distribution company (DISCOM) to meet its demand requirements.

The petition was filed by the Solar Power Developers Association (SPDA). Aditya Singh, the Associate Partner at Link Legal, was the counsel for SPDA. The Commission directed the DISCOM to release the deducted amount of 5% from the monthly energy invoices for April, May, and June 2020.

Background

 SPDA filed a petition with the Commission to declare the curtailment notices issued by the DISCOM illegal from April 1 to 7, 2020. It also asked the Commission to direct DISCOM to refund the 5% deductions against the monthly energy invoices without reason or justification.


The association stated that its seven members own and operate power projects in Punjab and supply power to DISCOM under long-term PPAs. The members complied with their respective PPAs obligations and accordingly raised invoices for the supply of energy.

However, DISCOM invoked the force majeure clause on account of the Covid-19 pandemic. It directed solar power developers to shut down their solar projects until further instructions.

The association also informed the Commission that the Ministry of New and Renewable Energy (MNRE) confirmed that the must-run status to renewable power generation facilities remains unchanged during the period of lockdown.

However, in its curtailment notice, DISCOM stated the Covid-19 led to a crash in its system and asked the developers to curtail power. While instructions were issued to must-run renewable power generating stations not to supply power, DISCOM drew power from other sources.

DISCOM failed to demonstrate that imposition of the lockdown had affected its obligation to supply power as both DISCOM and solar power developers continued to be operational. Therefore, the Covid-19 pandemic could not qualify as a force majeure event.

The association also noted that DISCOM also released only part payments towards invoices generated by solar power developers from April 2020 to June 2020 without any justifications. DISCOM also informed the solar power developers that it deducted a 5% amount from their invoices.

DISCOM’s response

DISCOM contended that the members of the association had signed separate PPAs with DISCOM. Therefore, solar power developers should file separate petitions with the Commission to claim relief against selling power under their respective PPAs.

DISCOM also claimed due to the sudden decline in power demand during the lockdown period; it had to curtail its power purchase. Therefore, DISCOM had to serve force majeure notices to solar power developers.

As per the force majeure notice, DISCOM did not pay ₹328.8 million (~$4.46 million) against 60.1 MUs power supplied by solar power developers.

DISCOM had also informed the Commission that since it was passing through economic distress, it was forced to deduct 5% from the gross energy bills of renewable energy generators for April to June 2020. While acknowledging the impact of COVID-19 on DISCOM’s energy sales between April and May 2020, the Commission had reduced its renewable purchase obligations (RPO) targets for the financial year 2020-21.

In June, the state electricity regulator approved carrying forward the shortfall in RPO compliance in FY 2019-20 to FY 2020-21. The Commission allowed a 3.5% (both for solar and non-solar combined) reduction in the RPO target for FY 2020-21.

Commission’s analysis

The Commission said that the terms and conditions of PPAs need to be read in line with the provisions of the State Grid Code Regulations (SGC). The SGC Regulations specified that the system operator evacuates the available solar and wind power and treats them as must-run facilities. Therefore, solar power could only be curtailed in case of grid security, which the system operator had not indicated in its notice to solar power generators.

While there was a reduction in power demand due to the shutdown of commercial and industrial establishments, the decline in power demand could not be termed a load crash.

The Commission said that power demand had gone up slightly during the curtailment period from April 1 to 7, 2020. Even then, DISCOM opted for the curtailment of solar power while drawing power from conventional energy sources.

The Commission ruled that DISCOM’s action of curtailing solar power was unjustifiable. It also directed DISCOM to release the payment for power injected into the system along with late payment surcharges per the PPA provisions.

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