MERC Directs MSEDCL to Pay Late Payment Surcharge to Wind Generator

In an order that highlighted both the dire straights of MSEDCL and it’s impact on payments to generators, the Maharashtra Electricity Regulatory Commission (MERC) has ordered the state discom MSEDCL to pay late payment charges on its outstandings to a wind power generator TCIL. The discom, in its response to the petitioner had tried to avoid liability on the basis of both it’s financial troubles and applicability of limitation on the contract. It had even cited the limits on working capital funding imposed by REC to try and wriggle out o its obligation to pay on time to its suppliers.

The petitioner, Transport Corporation of India Ltd (TCIL) had filed the case on 22 January, 2022 seeking Late Payment Surcharges (LPS) with interest on principal amount for its wind generating units purchase agreements.

TCIL also wanted the respondent, Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) to pay the costs of the present petition.

The Petition 

As per the petition, TCIL was engaged in the business of generation of wind energy, under Wind Energy Purchase Agreement (WEPA), with details as follows:

Installed capacity of 2.5 MW At Village Ghatnandre Talula Kavathemahakal Dist Sangli with 13 September 2005 to 28 September 2018 as WEPA duration.

Installed capacity of 2.5 MW At Biranwdj / Sangli for WEPA period 24 April 2006 to 30 March 2019.

1.5 MW Installed capacity at Village Jarandi Taluka Tasgaon Sangli for WEPA period 18 June 2007 to 26 March 2020.

For the three WEPAs, LPS is allowed after 45 days @ 2% per annum above SBI STLR (Short Term Lending Rate).

As per TCIL, the details of the payment due on MSEDCL are as follows:

Claimed period of pending LPS from January 2017 to March 2020

Late Payment surcharges (LPS) on the principal amount (Unrecorded)- Rs 165. 12 Lakhs

Surcharge on LPS as per Order- Rs. 60.50 Lakhs

The petition seeks an order for immediate payment of overdue of LPS from MSEDCL, which is bound to follow the terms of the WEPAs as agreed upon. Additionally, substantial sums of money are due under invoices raised (still outstanding). The invoice payment amounts together with interest is due and payable. Other than the LPS, MSEDCL is overlooking payment of the principal amount too, as claimed by the petition.

MSEDCL has neither made the payment on delayed tenure or replied to the communications of TCIL.

MERC’s Notings 

The MERC notes that TCIL has approached the Commission for following issues with regards to the payment:
Issue I: LPS amount on the delayed payments as per provisions of its WEPAs: TCIL has sought payment of LPS of amount Rs. 165 lakhs along with the interest on the principal amount for its Wind Generating Units purchase agreements for the period from January 2017 to March 2020. The Petitioner further contended that the claim of LPS is within the limitation period as per the SC Judgment for exemption of limitation period except first two entries of the claim of LPS.

Issue II: Penal Interest @ 1.25% per month on the outstanding DPC amount: MSEDCL has contended that orders in the matter of penal interest on LPS are case specific and thus, cannot have a blanket application in general. Further, the Commission said imposition of 1.25% penalty on LPS only in case of non-adherence of the timeline specified in that order itself, which is absent in the present cases.

MERC’s Order 

The Commission has directed MSEDCL to settle the outstanding payments within stipulated timeline. In case of violation of timeline, the Commission has ordered to levy interest of 1.25% per month on outstanding LPS.

Finally, the order as stated by MERC:

“Maharashtra State Electricity Distribution Co. Ltd. to make the payment of Late Payment Surcharge (LPS) from 15 March 2017 to March 2020 to the Petitioner, within a month from the date of this Order.
In case, Maharashtra State Electricity Distribution Co. Ltd, fails to pay the LPS amount as per above timelines, then penal interest will accrue thereafter at 1.25% per month on any outstanding LPS.”