The Appellate Tribunal for Electricity (APTEL) has set aside the Maharashtra Electricity Regulatory Commission’s (MERC) order approving Maharashtra State Electricity Distribution Company’s (MSEDCL) proposal to procure 2,000 MW/4,000 MWh battery storage capacity through competitive bidding.

APTEL also quashed the letters of intent issued to the appellants after their bids were accepted. It directed MSEDCL to return the security deposits and bank guarantees within four weeks of receipt of the judgment.

The Tribunal held that the tariff discovered through the bidding process should not have been approved by MERC because a new condition requiring the use of battery storage systems for at least 6,300 cycles during the contract period was introduced after the bids were submitted.

Background

Diwakar Renewable & Infra, OPG Power Generation, Onward Solar Power, Mahati Industries, and Bhilwara Energy filed a batch of appeals. It held that the bidding process was vitiated by the introduction of a new condition after its completion.

MERC had issued an earlier order, through which it adopted the tariff for the procurement of capacity from 2,000 MW/4,000 MWh, one-cycle battery energy storage systems, to be delivered through a competitive bidding process, with viability gap funding (VGF) support from the Power System Development Fund (PSDF) for a period of 15 years.

MSEDCL issued the tender in July last year.

The Ministry of Power issued the VGF program in June last year, under which battery storage developers were eligible for funding of up to ₹1.8 million (~$18,793)/MWh.

The program stated that the battery system should preferably have a two-hour discharge duration and average 1.5 cycles a day, while also allowing the eligible entity or distribution licensee to vary the duration and number of cycles as required.

MSEDCL later issued amendments to the tender documents stating that the project configuration was changed from 2,000 MW/4,000 MWh with two cycles to one cycle.

The appellants participated in the bidding process and submitted bank guarantees. The auction was conducted in November last year, and the lowest tariff discovered was ₹165,998 (~$1,773)/MW/month.

MSEDCL then approached MERC seeking approval for the adoption of the discovered tariff and the competitive bidding outcome.

MERC approved the procurement of 2,000 MW/4,000 MWh battery storage capacity at ₹165,998 (~$1,733)/MW/month for 15 years.

The appellants argued that a Ministry of Power’s order issued after the submission of bids imposed a new condition requiring MSEDCL to retain the contractual right to use a battery storage system for at least 6,300 cycles during the contract period without additional cost.

They contended that this was contrary to the Request for Selection (RfS) and draft Battery Energy Storage Purchase Agreement (BESPA).

According to the appellants, this post-bid condition altered the technical and financial basis on which they had submitted their bids and could affect their eligibility for VGF support.

MSEDCL argued that the Ministry’s letter did not change the terms of the RfS or the draft BESPA. It argued that the 6,300-cycle reference only conferred a contractual right on MSEDCL and did not impose a mandatory obligation on bidders.

Commission’s Analysis

APTEL noted that under the amended RfS, MSEDCL had invited proposals for a battery storage system with a total discharge capacity of 2,000 MW/4,000 MWh, a two-hour discharge duration, and an average of one cycle per day.

This meant 5,475 cycles over the 15-year contract period. The Tribunal observed that the bidders submitted their technical and financial bids on the understanding that they would not be required or asked to schedule BESS charging more than once per day.

The Tribunal found that the Ministry of Power’s order came after the last date for submission of technical and financial bids. The letter approved MSEDCL’s request to move from 1.5 cycles per day to a single-cycle-per-day operation, subject to the condition that MSEDCL retain the contractual right to use BESS for at least 6,300 cycles during the contract period without additional cost.

APTEL held that this approval was conditional. Therefore, MSEDCL had no option but to incorporate a clause in the BESPA giving it the right to use BESS for at least 6,300 cycles during the contract period.

It also rejected the undertaking given on behalf of MSEDCL that it would compensate the appellants if the Government of India denied VGF support.

It held that the undertaking was based on an email from MSEDCL’s Chief Engineer, who is not a decision-making authority. There was also nothing to show that MSEDCL’s board had approved the offer or that regulatory approval had been obtained for such spending.

The Tribunal noted that the new 6,300-cycle condition constituted a clear deviation from the RfS and the draft BESPA. It said the condition was introduced much after the submission of technical and commercial bids and therefore violated the bidding process.

APTEL also observed that changing the number of cycles after the bidding process had concluded amounted to changing the rules of the game after the game had commenced, which is not permissible.

This March, MERC approved MSEDCL’s petition to procure 250 MW/500 MWh of battery storage capacity, with an additional 500 MW/1,000 MWh of greenshoe capacity, at a tariff of ₹219,001 (~$2,560)/MW/month for 12 years.

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