The Appellate Tribunal for Electricity (APTEL) has set aside the Karnataka Electricity Regulatory Commission’s (KERC) order rejecting a petition by Hero Future Energies requesting a power purchase agreement (PPA) execution date extension.

APTEL remanded the case to the state regulator for a fresh evaluation. It directed KERC to re-examine the legitimacy of the commissioning timeline extension that was granted to the appellant and the resulting claim for ₹120.5 million (~$1.405 million) in liquidated damages sought by HESCOM.

Background

The appellant, Hero Future Energies, executed a PPA with HESCOM in 2014 for its 50 MW solar project. The PPA included a provision for dispute resolution through arbitration.

HESCOM sought KERC’s approval for the PPA. The Commission approved the PPA, subject to removing the arbitration clause.

The appellant requested the extension of the PPA execution date to when HESCOM informed it about KERC’s decision. Hero Future Energies reasoned that it faced issues with financing the project because it did not have the original PPA copy, and lending institutions considered it effective only after a regulatory commission’s approval.

HESCOM accepted the date extension, and both parties signed a supplementary PPA to accommodate the request. The distribution company then approached KERC to approve the supplementary PPA.

The Commission highlighted certain deficiencies in the PPA and directed the reduction of the project tariff from ₹7.47 (~$0.089)/kWh to ₹6.50 (~$0.077)/kWh since this tariff was applicable on the project commissioning date.

The appellant approached KERC seeking a declaration of ₹7.47 (~$0.089)/kWh as the tariff and the supplementary PPA’s approval. The Commission approved the tariff but denied the extension granted by HESCOM to the appellant.

After KERC’s decision, HESCOM claimed ₹120.5 million (~$1.405 million) from the appellant as liquidated damages for the extended period. The appellant approached APTEL, seeking approval for the extension period.

It argued that the time extension provided by HESCOM was valid; therefore, the claim for liquidated damages was without merit. It submitted that the project was delayed because of circumstances beyond its control and that HESCOM’s delay in providing necessary approvals and actions contributed to the commissioning delay.

HESCOM maintained that liquidated damages were applicable due to Hero Future Energies’ failure to meet the original PPA commissioning timelines.

Tribunal’s Analysis

APTEL instructed KERC to determine the appropriate financial restitution for the appellant, including the methodology for calculating interest in any delayed payments. This includes determining the appropriate financial compensation for the appellant, specifying whether the interest calculation should be simple or compound, and establishing the applicable interest rate.

Recently, the APTEL dismissed a petition filed by the Siddhayu Ayurvedic Research Foundation seeking to relax the banking regulations under the Distribution Open Access Regulations due to the impact of the COVID-19 pandemic.

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