Lower CUF: MERC Declines ACME’s Plea For Penalty Exemption

The Maharashtra Electricity Regulatory Commission (MERC), in its latest judgment, declined to grant ACME any relief for its shortfall in meeting the committed Capacity Utilisation Factor (CUF) from its 300 MW solar project at Bhadla in Rajasthan. ACME had signed a Power Purchase Agreement (PPA) with the Maharashtra State Electricity Distribution Co Ltd (MSEDCL) to sell the power produced from this solar power plant.

The state power regulator’s order came after the subsidiaries of the company—ACME Heergarh Powertech Pvt Ltd and ACME Solar Holdings Pvt Ltd (referred to as ACME together here)—approached the MERC. The company pleaded with the MERC to prevent MSEDCL from imposing a penalty for the shortfall. ACME attributed the delay in commissioning its full capacity by the Commercial Date of Operations (COD) to force majeure events such as the disruption in the supply chain due to events like COVID-19.

The case details revealed that the company had committed to installing 444.75 MW of DC capacities by May 25, 2022 (COD), with a CUF of 29.75%. However, the firm commissioned its project on May 23, 2022, with a capacity of 333.19 MW (DC capacity). The actual CUF of the project stood at 20.77%.

“The shortfall in generation of minimum energy by ACME has resulted in a shortfall of 1176.57 solar MUs in FY 2021-22 and 1174 solar MUs (provisional) in FY 2022-23. The Commission has not exempted MSEDCL for its shortfall in RPO compliance but has only allowed carrying forward the same and finally meeting its cumulative shortfall by March 31, 2025,” MSEDCL said in its petition.

Final MERC order 

MSEDCL also objected to the claims of force majeure and cited the example of another solar project developer—Renew Solar Power—which commissioned its 300 MW power plant under the same circumstances while maintaining its commitments.

The MERC, in its order, rejected ACME’s plea and declined to grant any relief to the company. “Commercial decisions of ACME to declare COD with lower DC panels cannot be attributed to a Force Majeure event. Although disruption in the supply chain is a Force Majeure event, once COD of the project is declared, such a Force Majeure event ceases to exist for such a project. Post-COD of the project, the operation period of the project starts. In the operation period, the developer has to maintain and operate the project. The Force Majeure event of disruption in the supply chain does not have any impact on maintaining and operating the project which declared COD on May 25, 2022. Hence, in the opinion of the Commission, ACME cannot claim any relief under Force Majeure for the operation period,” the order read.

“The Commission rules that ACME is not affected by a Force Majeure event during the operation period and hence cannot claim any exemption from the minimum generation obligation under the PPA. Accordingly, ACME has to pay a penalty for under-generation as per the provisions of the PPA,” the MERC order stated.

In its final ruling, MERC said, “…Shortfall due to under-generation of electricity during the operation period is akin to a shortfall in energy due to delay in COD. As Article 5.5.2 (reproduced in the earlier part of the Order) of the PPA has a clear provision for computing a penalty for under-generation of electricity, MSEDCL is entitled to recover the penalty in accordance with such provisions of the PPA.”