Intent Is Not to Terminate Solar and Wind PPAs but to Arrive at Mutually Agreed Tariff_ Andhra

On Friday, September 13, 2019, the Andhra Pradesh High Court heard arguments from legal representatives of the state government and developers in the matter of the state government’s attempt to renegotiate tariffs for power purchase agreements signed between distribution companies (DISCOMs) and renewable energy developers.

At the beginning of the hearing, the advocate general (AG) representing the DISCOMs submitted that they did not intend to terminate power purchase agreements signed by wind and solar energy developers (petitioners) in the state.

The AG argued that the state government was not a stranger to electricity operations and was acting within its rights to attempt to bring DISCOMs and renewable energy developers to the table to negotiate tariffs for which PPAs have already been signed. Therefore, the state government is competent to appoint the High-Level Negotiation Committee (HLNC) to manage power purchase by DISCOMs in Andhra Pradesh.

The DISCOM and state representatives also argued that there was no coercion from their side to renegotiate tariffs and their intent was mainly to encourage developers to arrive at a mutually agreeable tariff. They also clarified that they had put thermal power generators on standby only to make sure that power consumers do not suffer in case both parties are not able to negotiate tariffs successfully.



According to the AG, the state was not trying to alter the PPAs and unilaterally reduce tariffs, but they were “exploring options”. The AG also argued that the HLNC consisted of experienced professionals from the power sector and could not be discredited. The advocate also argued that the tariff reduction was in the interest of the welfare of the consumers and that the Electricity Act, allowed that only the state regulatory commission can amend the tariff. Finally, he requested the court to dispose the petition of the developers and allow the Andhra Pradesh Electricity Regulatory Authority to decide on the matter.

Legal representatives of Axis Wind Farms, one of the developers involved in the case, also made their submissions. They argued that the state government was not a part of the PPA and did not have the right to make their case on the basis of the tariff negotiation clause mentioned in the PPA. Further, the letter issued by the state government asking for renegotiation cannot stand in the court of law.

An important point made by the developers was that the state in its letter asked developers to reduce tariffs to ₹2.43 ($0.034)/kWh and issue invoices accordingly, and this could not be interpreted as an attempt for renegotiation.

According to the representatives of the developers, wind and solar power would only impact retail tariffs by 15% to 20% and could not cause financial distress of the state DISCOMs. They stated that this financial distress was caused due to the mismanagement of DISCOMs.

The representative also argued that the state could not make allegations of corruption by the developers without any documentary evidence.

The hearing could not be completed due to shortage of time, and the high court called for an extension for the interim stay order on this case. The case has now been posted to September 18, 2019 for further submissions.

These developments come on the heels of the state’s new chief minister Jaganmohan Reddy’s newly-formed committee to deliberate and bring down the costs in all the high-priced PPAs for wind and solar power projects signed during the term of the previous government, alleging corruption.

In August 2019, Mercom reported that Andhra Pradesh’s decision to withdraw 21 wind power PPAs including that of Axis Wind Farms was stalled by the Appellate Tribunal for Electricity (APTEL).

In July 2019, Andhra High Court Imposed a stay order on the state’s move to reduce solar and wind tariffs. As reported previously by Mercom, these nine renewable energy project developers that approached the court are: ReNew Power, Azure Power, ACME Solar, Axis Wind Farms, Khandke Wind Energy, Vena Energy Power, Ecoren Energy, Vayu Urja Bharat and Waneep Solar (special purpose vehicles of Hero Future Energies).