APTEL Favors Solar Developers On Tariff Denial by BERC

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In a recent judgement, the Appellate Tribunal for Electricity (APTEL) has ruled in favour of three solar developers who were aggrieved on account of being denied the benefit of a certain tariff determination by an order passed by Bihar State Electricity Regulatory Commission (BERC).

The developers — Responce Renewable Energy Ltd, Glatt Solutions Pvt Ltd, and Sunmark Energy Project Ltd — had entered into Power Purchase Agreements (PPAs) with three discoms operating in Bihar — South Bihar Power Distribution Company Ltd and North Bihar Power Distribution Company Ltd — some time in 2012 and 2013. The Commercial Operation Date (COD) planned at that stage was not met by the developers, there being delays for various reasons such as change of locations.

The developers had sought extension of the COD, but their request was rejected by BERC by a common order passed in May 2015 concerning all the three projects. The commission, which governs the generic levelised tariff determination exercise for such cases, determined the tariff for a control period of three years by way of three different tariff orders:

• Passed in 2012, the first order set the tariff at Rs. 10.90/kwh for the first control period ending with FY 2012-13
• Passed in February 2016, the second order set the tariff, which was later revised to Rs. 7.02/kwh by a corrigendum order passed in March 2016, for the second control period without specifying the same. The corrigendum later specified the control period to be from FY 2013-14 to FY 2015-16, stating that the tariff so determined would be applicable to projects commissioned upto March 2017, with the PPAs having been signed upto March 2016. “However,” added BERC, “till such time new tariff [i.e. third order] is determined, tariff determined in this order shall remain applicable for the projects for which the PPA is signed before issuance of new tariff order [i.e. before Oct 2016] and the projects are commissioned within one year from the date of signing of PPA [i.e. Oct 2017].”
• Passed in October 2016, the third order set the tariff at Rs. 5.67/kwh for the third control period beginning with FY 2016-17.

APTEL notes that upon the insistence of the discoms, the developers entered into fresh PPAs in 2016, as a result of which the previous PPAs were “extinguished”, “superseded”, “substituted” and “novated”. “Thus, there is absolutely no doubt that, for all practical purposes, the rights of the parties will have to be regulated with reference to the fresh PPAs,” opines the tribunal.  Further, the developers achieved COD within a year of the execution of the fresh PPAs.

The relevant details of the fresh PPAs are given below:

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As per the above details, the point of contention between the developers and the commission can be summarised thus: Since the three developers’ fresh PPAs were commissioned before March 2017 but signed after March 2016, the projects would ideally not fall under the applicability of the Corrigendum. But since the PPAs were signed before the third tariff order’s issuance (October 2016) and commissioned within a year of the signing of the PPAs, the three developers’ projects would be governed by the corrigendum order “till such time new tariff is determined.”

APTEL poses the problem thus: “The next tariff order dated 18.10.2016 had admittedly come in before the COD was achieved in each of these cases. The crucial question that needs to be addressed is as to whether the corrigendum order amounts to extension of control period beyond the control period for which it was meant and as to whether the subsequent tariff order dated 18.10.2016 would supervene and come into effect from 01.04.2016 notwithstanding the benefit that had been extended by the tariff order for the project that has been commissioned within one year of the PPA signed during the previous control period.”

BERC and the discoms contest that the corrigendum order had run its course as soon as the third tariff order came into effect in October 2016. They contended that the corrigendum order was bad in law since it amounted to extending the control period and that its benefit should not be given to the developers. Disagreeing with this view, APTEL explains that the corrigendum order only determined the tariff to be applied for the period till a new tariff order was passed. It was not tantamount to extending the control period.

“We see no reason why the Tariff Order dated 18.10.2016 should apply retrospectively in as much as there is nothing in the said order for it to be made applicable accordingly,” said the tribunal, adding, “the general rule that the tariff order continues to apply till new order is passed naturally means that such new tariff order comes into force on the date on which it is passed.”

Since the three developers signed fresh PPAs before the third tariff order’s issuance and commissioned their projects within a year of PPA signing, the tariff for their PPAs stood determined by the corrigendum order until the issuance of the third tariff order. “The subsequent order passed on 18.10.2016 cannot take away from them the benefit of the tariff order which had come to be applied to them by virtue of the previous order,” said APTEL.

According to APTEL, the only implication of BERC’s common order, passed in May 2015, which rejected of COD extension is that the developers lost the benefit of the first tariff order passed in May 2012.

As a result, the tribunal set aside BERC’s order which denied the developers the benefit of the second tariff order as amended by the corrigendum order and directed the developers to execute fresh PPAs. APTEL ordered that:

• The developers are entitled to the tariff determined by the second order and modified by the corrigendum order for a period of twenty five years.
• The discoms are obliged to pay necessary arrears of tariff and also account for carrying cost in accordance with the PPAs.