Tamil Nadu Electricity Regulatory Commission (TNERC) directed the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) to rework the late payment surcharge at 12% per year for the delayed payments. The regulator heard two separate petitions filed by a wind power generator.

The wind power generator had offered to reduce the interest rate to 6% per year if TANGEDCO paid the due amount within 60 days. Since TANGEDCO failed to clear the dues, the Commission has now asked TANGEDCO to pay interest at 12% per year for dues beyond 30 days of receipt of the bill.

Background

SRB Consultancy Private Limited, a wind power generator, filed a petition with the Commission to order TANGEDCO to release the total late payment surcharge (interest on delayed payment) of ₹3.6 million (~$48,458) calculated at the rate of 1% per month from April 2012 onwards as agreed in the power purchase agreement (PPA). It had also requested the Commission to direct TANGEDCO to release all future payments on time.  Its wind project in the Tirupur district of Tamil Nadu was commissioned on March 06, 2012.

In another petition, SRB Consultancy had requested the Commission to order TANGEDCO to pay ₹3.4 million (~$45,766) as a late payment surcharge at the rate of 1% per month from June 2011 to date.

The second wind project of 1.5 MW capacity in the Tirunelveli district of Tamil Nadu was commissioned on March 30, 2011.

In its submission, SRB Consultancy said that there was still a substantial amount of money that was to be paid in addition to the payments delayed. The developer added that even after sending repeated request letters, TANGEDCO overlooked the issue and failed to pay the amount.

It further added that even when the payments were made, it was without any interest for the delay, which violated the terms of the PPA.

The wind generator said that all wind generators are entitled to interest on delayed payments at the rate of 1% per month for every month’s delay from the due date.

Earlier, in a similar case, Tamil Nadu regulator had ordered TANGEDCO to pay wind generators ₹6.69 million (~$91,586) along with interest at 1% per month towards delayed payments for the supply of wind power.

Commission’s Analysis

In its analysis, the Commission noted that TANGEDCO is liable to pay a 1% interest for every month of delayed payment beyond 30 days. It added that TANGEDCO, having failed to avail the respondent’s offer for a reduced rate of 6% per year, was liable to pay interest at 12% per year for dues beyond 30 days of receipt of the bill.

The Commission added that the limitation period for the money claim is three years from the date on which the cause of action arose.

“The present petition was filed on July 26, 2017, and if the date of payment is before July 26, 2014, the claim for interest on such delayed payment is barred by limitation,” the Commission noted.

Based on these facts, the Commission directed the state DISCOM to rework the calculation for payment of interest at 12% per year for the delayed payment taking into account the limitation factor of three years.

Recently, the Ministry of Power  proposed ‘Late Payment Surcharge Rules 2020.’ As per the proposed rules, the surcharge on the outstanding payment will increase by 50 basis points each month after the first month’s expiry, subject to a maximum of the applicable bank rate plus 200 basis points.

In the last few months, many states like Punjab, Bihar, and Karnataka reduced the late payment surcharge because of the COVID-19 pandemic.

Regulatory updates in the renewable energy sector can be hard to keep track of. Subscribe to Mercom’s real-time Regulatory Updates and for regular updates.

Image credit: Photo by Karsten Würth on Unsplash