Regulator Refrains DISCOM from Coercive Action against a Solar Developer

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The Maharashtra Electricity Regulatory Commission (MERC) has directed the Maharashtra State Electricity Distribution Company (MSEDCL) to refrain from taking any coercive action against a solar power generator until the dispute on financial closure and scheduled commercial operation date is resolved.

The order was passed in response to an interlocutory application filed by Avaada MH Sustainable seeking an extension of the scheduled commercial operation date for a 250 MW solar power project.

Background

In the original petition filed by Avaada MH Sustainable, it had requested an extension citing certain force majeure events.

The solar power generator said that it has completed 200 MW of the project capacity and is in the advanced stage of commissioning the balance 50 MW.

The petitioner cited the following reasons for the delay:

  • Delay by MSEDCL in the execution of the power purchase agreement (PPA) after the Commission had asked MSEDCL to do so within two weeks from February 16, 2021
  • Delay by the Maharashtra State Electricity Transmission Company (MSETCL) in granting connectivity to the project
  • Delay by MSETCL in approving the design and program for transmission infrastructure
  • Delay on account of the COVID-19 pandemic
  • Delay on account of torrential rainfall at the project site, which resulted in a flood-like situation

Avaada, in its submission, stated that MSEDCL had unilaterally amended the provision of PPA related to the timeline for the financial closure from 18 months to 12 months, which may lead to a penalty for any delay.

It added that the financial closure was required to be achieved by January 17, 2022, which even without the extension on account of COVID-19 was achieved on December 27, 2021.

MSEDCL clarified that on account of a typographical error in the PPA dated August 10, 2021, concerning the financial closure date (18 months instead of 12 months) cannot be taken into account.

Commission’s analysis 

The Commission noted that as per the submission of the petitioner, it has strong apprehension that MSEDCL might levy liquidated damages on the applicant or may encash the performance bank guarantee (PBG).

The Commission observed that the main dispute was regarding the dates of financial closure and scheduled commercial operation date as specified in the PPA and the request for selection (RfS).

The provisions of the PPA state that the project should be commissioned within 15 months for projects being set up in the solar park, and within 18 months for projects being set up outside the solar park from the effective date of the PPA on July 17, 2020.

The Commission added that MSEDCL’s argument of a typographical error in writing the dates for financial closure needed to be decided on its merit after hearing all the parties in the main matter.

MERC said that the solar power generator had already achieved financial closure on December 27, 2021, which was not disputed by MSEDCL.

The Commission added that as per the provisions of PPA, if the extension of the scheduled operation date is allowed by them in the main matter, the penalty amount will be required to be returned to the petitioner within 30 days of the achievement of the commissioning date.

Therefore, there was no need to impose such a penalty when the dispute on the date of financial closure and scheduled commercial operation date was yet to be decided in the main matter.

In August last year, MERC extended the scheduled commercial operation date of Avaada Sunce Energy’s (Avaada) 350 MW solar project by 59 days. The extension was granted because of certain force majeure events, including COVID-19 and disruption in the import of modules from China, impacting the project’s progress.

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