APTEL Orders Rs 8.40/unit Payment to Karnataka Developer, Reversing KERC Order

In a major win for developer Clearsky Solar Private Limited (CSPL), the Appellate Tribunal for Electricity (APTEL) has ruled in favour of the solar developer and directed Gulbarga Electricity Supply Company Limited (GESCOM) to pay it compensation on account of delays in the commercial operation of a solar project in Karnataka.

The present ruling came in response to an appeal filed by CSPL, which had challenged Karnataka Electricity Regulatory Commission’s (KERC) order passed in May last year. The order disallowed CSPL’s petition to seek approval of the extension of Scheduled Commercial Operation Date (SCOD) granted by GESCOM along with the continuation of tariff incorporated under a Power Purchase Agreement (PPA) executed between CSPL and GESCOM in August 2015.

In the said PPA, CSPL was given the contract to set up a solar project and supply electricity generated from it to GESCOM at a tariff of Rs. 8.40/kWh. The Scheduled Commercial Operation Date (SCOD) was decided to be February 2017. In the course of the execution of the project, however, GESCOM received requests from various solar power developers to extend the SCOD for applications under the Farmers Scheme, a policy intended to benefit farmers with capacity of 1 MW to 3 MW.

In January 2017, GESCOM held a meeting with several solar power developers (including CSPL) for considering the proposed extension, in which CSPL explained to GESCOM that various force majeure (extenuating factors beyond the control of parties bound by contract) events that had affected its solar projects and created the need for extension. These events included delay in approval of PPA, delay in approval of SPPA due to the confusion created by KERC, delay in grant of land conversion and delay on account of demonetisation. Consequently, the request was accepted by GESCOM, which extended the SCOD to May 2017 for CSPL.

However, in May 2020, KERC passed an order, disallowing CSPL’s petition to seek approval of the extension received from GESCOM. The solar developer then approached APTEL, contending that KERC had erroneously set aside the extension of timelines. The Supplementary PPA signed in March 2017 was also set side and the tariff incorporated under the PPA at Rs. 8.40/kWh was “unreasonably” reduced to Rs. 4.36/kWh, in addition to liquidated damages of Rs. 3,60,000. This order, argued CSPL before the tribunal, was “wholly arbitrary” and “passed to the complete detriment of CSPL in utter violation of the settled principles of law.”

Further, contended CSPL, KERC had ignored the fact that the construction of the entire project (along with the associated infrastructure) was completed well within the original SCOD (February 2017) contemplated under the PPA. But the so completed solar project could not be put to commercial operation due to want of a formal order for land conversion (i.e. from agricultural to non-agricultural) which was to be granted by government authorities. Although, CSPL had diligently pursued such land conversion order could not be granted in a timely manner for reasons beyond its control, stated the developer.

Aggrieved by KERC’s order, CSPL filed the following appeals before the tribunal:

• Set-aside KERC’s order.
• Declare and hold that CSPL is entitled to a tariff of Rs. 8.40/kWh from the date of COD (date of commissioning) of its project and direct GESCOM to make payments accordingly.
• Declare and hold that the timeline for achieving SCOD under the PPA stands revised to May 2017 and approve the supplementary PPA signed in March 2017.
• Declare and hold that CSPL has fulfilled the conditions precedent and achieved COD of its project well within the prescribed timelines as provided under the PPA read with the supplementary PPA.
• Declare and hold that GESCOM has wrongfully realised Rs. 3,60,000 from CSPL as liquidated damages on account of non- fulfilment of conditions precedent and direct GESCOM to forthwith refund such amount.

According to GESCOM’s side of the story, KERC’s order was passed on the correct principles of the law. CSPL failed to make out a case against the GESCOM, said the discom. It stated that while it did grant all approvals and sanctions in a timely manner depending upon the compliance of CSPL, it was forced to do so due to delays created by the developer in obtaining the necessary conversion of the land, which created an inordinate delay in the commissioning of the project. GESCOM argued that CSPL had only filed the present appeal before APTEL to “harass and extort monies” from the discom. It labeled the appeal “frivolous, vexatious and [with] no grounds”

After considering all the facts of the matter, the tribunal gave a judgement resoundingly in favour of CSPL and accepted its appeals. APTEL stated:

“The following order is made:

• Appeal is allowed setting aside the impugned order [KERC’s order]. The Appellant [CSPL] is entitled for Rs. 8.40/kWh from the date of commissioning the project.
• The Appellant is entitled for differential tariff from the date of COD and the same shall be paid by the Respondent Discom [GESCOM] to the Appellant.
• The Appellant is also entitled for carrying cost/late payment surcharge on the differential amount of tariff so also dues of energy charges if any, that were not paid from COD till it is paid, in terms of Article 6.4 of the PPA.
• Appellant is not liable to pay any damages so also liquidated damages.
• The Respondent Discom shall pay the amounts indicated above to the Appellant within four weeks from the date of receipt of this Order.”