Tariff for Delayed Solar Project in Karnataka Reduced to ₹6.51kWh from ₹7.05kWh

The Karnataka Electricity Regulatory Commission (KERC), in a recent order, has rejected Photon Suryakiran’s petition asking for Bangalore Electricity Supply Company (BESCOM) not to reduce the tariff of the delayed solar project from ₹7.05 (~$0.095)/kWh to ₹6.51 (~$0.087)/kWh.

Photon Suryakiran also requested BESCOM to pay dues of ₹52.34 million (~$701,867) against invoices raised for energy supplied from December 2016 to January 2018 without reducing the tariff.

Background

In 2014, the Karnataka government had issued a request for proposal (RfP) to develop a solar photovoltaic (PV) power project in Karnataka.


The Karnataka Renewable Energy Development Limited (KREDL) accepted a bid from a consortium that included Today Green Power Private Limited (lead member) and two others to develop a 10 MW solar PV project at Pavagada taluka in Karnataka’s Tumakuru district.  The tariff for the same was set at ₹7.05 (~$0.095)/kWh.

Photon Suryakiran is a special purpose vehicle incorporated by the consortium to develop the PV project and executed the power purchase agreement (PPA) with BESCOM on January 13, 2015. However, the petitioner received a copy of the effective, executable, and valid PPA, duly approved by the Commission after five months, i.e., June 6, 2015.

According to the PPA, the petitioner was required to fulfill certain ‘conditions precedent’ within 365 days from the effective date. However, to perform the conditions precedent and raise funds from financial institutions for the financial closure of the project, Photon Suryakiran needed an executable and a valid agreement duly approved by KERC.

The petitioner had alleged that BESCOM failed to provide an effective, executable, and valid PPA in due time and took 144 days to provide it, which reduced the time to fulfill the ‘conditions precedent’, from 365 days to 221 days.

In a letter addressing BESCOM in June 2016, the petitioner requested a six-month extension in the scheduled commissioning date due to the delay in issuing the PPA, affecting the project timeline.

Liquidated damages

Photon Suryakiran requested BESCOM to adjust the liquidated damages against delay in project commissioning from the monthly energy bills, and after recovery of the same, ensure the payment of monthly energy bills on due dates itself.

Thereafter, the petitioner and BESCOM executed a supplemental PPA on April 12, 2017, incorporating the necessary changes concerning project location without altering any other terms of the PPA.

Monthly invoices

The petitioner raised the monthly invoices for the energy supplied at ₹7.05 (~$0.095)/kWh; however, the invoices were met by BESCOM at the reduced rate of ₹6.51 (~$0.087)/ kWh for the delay in project commissioning.

BESCOM’s response

BESCOM, in its response, has stated that it is in no way concerned with the delay in PPA approval, and it cannot be made responsible for the same. It further stated that the delay in handing over the PPA is not reason enough for the delayed project implementation.

BESCOM stated that the RfP also clearly states that the ‘effective date’ commenced from the execution of the PPA and that non-receipt of the original PPA cannot be considered an event of ‘force majeure’.

According to BESCOM, there was a delay in project commissioning, which meant that the petitioner is entitled to a tariff of ₹6.51 (~$0.087)/kWh as per the Commission’s Generic Tariff Order, which was applicable at the time when the developer commissioned the project. BESCOM claimed that there had been no unilateral modification of tariff as contended by the petitioner.

Commission’s review

According to the Commission, the delay in PPA approval by the Commission and consequent delay in handing over the PPA cannot be brought under ‘BESCOM Event of Default’.

The Commission stated that BESCOM could have granted an extension of the scheduled commissioning date on the grounds of delay in handing over the approved PPA had the petitioner proved the force majeure events affecting the developer.

The Commission also observed that the petitioner, without receiving the PPA approved by the Commission, faced difficulties in raising funds from financial institutions, land and equipment procurement, and other construction-related activities. It conveys that the petitioner had not commenced any activities towards project financing, land procurement, etc.

Thus, the Commission deemed that Photon Suryakiran is not entitled to the tariff of ₹7.05 (~$0.095)/kWh and the payment of dues as requested.

Recently KERC ruled that ACME Kudligi Solar was liable for a reduced tariff of 80% of the quoted tariff and liquidated damages for a delayed 20 MW solar project in Karnataka.

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