Andhra Court Quashes Government Order Asking Solar and Wind Developers to Reduce Tariff

In the interim, the court orders Andhra government to pay ₹2.43/kWh and ₹2.44/kWh to wind and solar developers respectively

September 26, 2019


In a much-needed relief for the renewable developers, the Andhra High Court has quashed the state government’s order and letter issued to renewable developers to reduce their quoted tariffs.

Considering the health of the distribution companies (DISCOMs) in the state, and that fact that developers need liquidity to keep the projects in operation, the court has directed them to immediately pay ₹2.43 ($0.034)/kWh and ₹2.44 ($0.034)//kWh to wind and solar developers respectively. However, this is only an interim relief for the outstanding payments by the DISCOMs. The court has said that the interim arrangement is being suggested to balance the interests of both the parties. The arrangement is considering the argument by the developers that the projects will soon turn into non-performing assets (NPAs) and their investors would initiate insolvency and other proceedings. On the other hand, the DISCOMs claim that they are bleeding financially. This is an interim relief the court has suggested until the matter is completely resolved. A timeframe of six months was also suggested to Andhra Pradesh Electricity Regulatory Commission (APERC) in the other batch of writ petitions to dispose the case.

Court has reiterated that the state cannot curtail power from any of the solar or wind projects for reasons other than what is mentioned in the power purchase agreement (PPA). Mercom had reported last month that the Amaravati High Court had issued an order asking the state load despatch center (SLDC) and the state’s transmission company (APTRANSCO) to stop the curtailment of power from solar and wind energy projects in response to complaints by the developers.

As reported previously by Mercom, on September 13, 2019, the Andhra Pradesh High Court had heard arguments from legal representatives of the state government and developers in the matter of the state government’s attempt to renegotiate tariffs for power purchase agreements signed between the DISCOMs and renewable developers. The advocate general (AG) representing the DISCOMs had submitted that they did not intend to terminate power purchase agreements signed by wind and solar energy developers in the state. The AG was acting within its rights to attempt to bring DISCOMs and renewable energy developers to the table to negotiate tariffs for which PPAs have already been signed.

The DISCOM and state representatives had also argued that there was no coercion from their side to renegotiate tariffs and their intent was mainly to encourage developers to arrive at a mutually agreeable tariff. According to the AG, the state was not trying to alter the PPAs and unilaterally reduce tariffs, but they were “exploring options”.

The developers on the other hand argued that the state government was not a part of the PPA and did not have the right to make their case on the basis of the tariff negotiation clause mentioned in the PPA. Further, the letter issued by the state government asking for renegotiation cannot stand in the court of law.

An important point made by the developers was that the state in its letter had asked the developers to reduce tariffs to ₹2.43 ($0.034)/kWh and issue invoices accordingly, and this could not be interpreted as an attempt for renegotiation.

The hearing could not be completed due to shortage of time, and the high court called for an extension for the interim stay order on this case. The case had been posted to September 18, 2019 for further submissions.

“Clarity on all aspect of this order will only come post publication of the order. Prima facie, it appears that the Hon’ble High Court has quashed Government Order and Letter dated 12.07.2019 issued by DISCOMs however it has blessed action of State Govt/DISCOM by judicial order for at least interim period (by directing DISCOM to pay future rates as well on the interim rate),” commented Advocate Aditya K Singh.

These developments come on the heels of the state’s new chief minister Jaganmohan Reddy’s newly-formed committee to deliberate and bring down the costs in all the high-priced PPAs for wind and solar power projects signed during the term of the previous government, alleging corruption.

In August 2019, Mercom reported that Andhra Pradesh’s decision to withdraw 21 wind power PPAs including that of Axis Wind Farms was stalled by the Appellate Tribunal for Electricity.

In July 2019, Andhra High Court Imposed a stay order on the state’s move to reduce solar and wind tariffs. As reported previously by Mercom, these nine renewable energy project developers that approached the court are: ReNew Power, Azure Power, ACME Solar, Axis Wind Farms, Khandke Wind Energy, Vena Energy Power, Ecoren Energy, Vayu Urja Bharat and Waneep Solar (special purpose vehicles of Hero Future Energies).

Also in a separate petition, where in the APERC was hearing about the reduction in tariff, the developers had challenged the jurisdiction and the court has directed the APERC to decide its jurisdiction within six months.