MERC Provides Relief To Renew Power On Project Delay Plea

In a ruling that follows a well trodden path for multiple wind energy developers in Maharashtra, the Maharashtra Electricity Regulatory Commission (MERC), has provided relief to Renew Power SPV (Special Purpose vehicle) Renew Vayu Urja Private Limited (Renew) in a case against the MSEDCL (Maharashtra State Electricity Distribution Company Ltd). Maharashtra Energy Development Agency (MEDA) and  and Maharashtra State Electricity Transmission Company Ltd. (MSETC) were the other respondents. The judgement, uploaded on the MERC site on July 14, can be viewed here.

Renew’s plea primarily centered around seeking a direction to MSEDCL for not encashing the Performance Bank Guarantee and
Declaration of Extension of Scheduled Commercial Operation Date on account of Force Majeure for its 76 MW project.

The project got embroiled in delays owing to multiple reasons, from a change in size caused by grid transmission issues, to name change of the developer, leading ultimately to delays in financial closure (FC) and Scheduled Day of Comissioning (SCOD).

The MSEDCL , seem to have tripped up mostly on account of the delays it caused by insisting that power evacuation in the name of any entity other than bidder will not be allowed.

However, the commission noted two critical things One, that in the overall project of 500 MW won by various bidders in this case, virtually every winner had faced the same set of grid connectivity related issues, and been allowed extensions. Secondly, MSEDCL seems to have ignored the commissions previous order in Case No. 131 of 2019 had specifically held that delay in getting grid connectivity in the name of the Developer after diligent follow ups by the generator is a force majeure event.

The MERC therefore allowed  extension of the SCOD from 31 July 2019 to 4 January 2020, on account of above Force Majeure event. As RVUPL’s 76 MW wind project has been commissioned on 26 December 2019 i.e. before such extended date of SCOD and hence RVUPL should not be subjected to any penalty on account of delay in commissioning of the project on agreed SCOD.

Regarding condition of compensating MSEDCL for any penalty for shortfall in RPO, the Commission noted that such condition was never part of RFS or PPA document. Therefore, MSEDCL cannot impose such condition at this delayed stage.

The Commission noted that the PPA provides for imposition of penalty on generators on account of delayed commissioning. But where the delay is due to a Force Mejeure event, the penalties become irrelevant. With the  project being commissioned on 26 December 2019, which is within extended SCOD of 4 January the Commission directed MSEDCL to return the Bank Guarantee to RVUPL as per provisions of the PPA without adjusting any damages.

The judgement, while a fair reflection of the ground situation, is yet another of the issues developers face AFTER they have won the rights to a project . It’s a story that is true for virtually every industry in India, and an area where an incredible amount of work and effort needs to be devoted to  ensure better , faster and more productive execution.