Solar Developer's Plea for Penalty Refund Gets Regulator's Approval

The Telangana State Electricity Regulatory Commission (TSERC) approved the extension of a 7 MW solar project’s commissioning date due to force majeure events. It directed the state distribution company (DISCOM) to refund the amount sum of ₹2.42 million adjusted towards the penalty for the delay in commissioning the project.

Enrich Energy filed a petition seeking the declaration of commercial operation date as March 31, 2017, for the 7 MW solar project and reimbursement of ₹2.42 million (~$33,272) adjusted as a penalty.

Background

The Southern Power Distribution Company of Telangana (TSSPDCL) floated a tender on April 01, 2015, for 2,000 MW of solar under the competitive bidding route.


Enrich Energy was declared the successful bidder for setting up a 7 MW solar project at Thattepally village in the Rangareddy district of Telangana with a quoted tariff of ₹5.72 (~$0.078)/kWh. The company submitted an amount of ₹4.9 million (~$67,369) as the performance bank guarantee (PBG) and signed the power purchase agreement (PPA) on February 26, 2016. The project’s scheduled commercial operation date (SCOD) was set as 12 months from the PPA execution date.

The developer could not complete the project on time, and the project was completed on March 31, 2017. As cited by the developer, the reasons for the delay were ‘force majeure’ events affecting execution.

In a letter issued on April 21, 2017, the government of Telangana directed the state DISCOMs to extend the SCOD of all solar projects up to June 30, 2017, without any penalties.

The developer said that the Telangana State Power Coordination Committee (TSPCC), without issuing any notice, invoked the PBG because of the delay in commissioning the project.

TSSPDCL, in its submission, stated that the project was synchronized to the grid on March 31, 2017, with a delay of 34 days, and as per the PPA, it was entitled to encash the PBG. The state DISCOM said that the events stated as ‘force majeure’ did not fall under the ‘force majeure’ clause mentioned in the PPA.

Commission’s Analysis

After going through all the facts, the Commission said that as per the terms of the PPA, the developer had to complete the project and make it operational within 12 months from the date of PPA execution. The date of commissioning of the project as per PPA was February 25, 2017, and whereas the actual commissioning was achieved on March 31, 2017.

The state regulator added that the developer had pleaded delay due to re-organization of districts, the confusion in the revenue authorities’ offices, difficulty in cash flow, and difficulties in procuring labor to carry out project work.

The PPA provided for condonation of delay up to 12 months for reaching SCOD in case of ‘force majeure’ events, which came to February 25, 2018, with penalties as per the PPA.

However, in the instant case, the delay attributed to the petitioner is 34 days only, and even that period got merged into the extension granted by the government.

“The Commission observes that the project developer has accepted the delay and could not have reverted to the Commission seeking to recover the amounts it had voluntarily paid. Since the Commission has considered these aspects in several cases and that the extension of SCOD as accepted by the government, the present request made by the petitioner can be accepted,” the Commission noted.

Considering all the factors, the Commission accorded approval to the commissioning date’s extension and declared the SCOD as March 31, 2017.

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