Project Commissioning Delay Causes Solar Developer to Pay for Damages in Karnataka

Welspun Renewables Energy Private Limited files and loses its petition against BESCOM, KREDL, and KPTCL


The Karnataka Electricity Regulatory Commission (KERC) has passed an order stating that Welspun Renewables Energy Private Limited is entitled to a tariff of ₹7.01 (~$0.098)/kWh for its 16 MW solar project, while a tariff of ₹6. 51 (~$0.091)/kWh will apply to another 34 MW of solar project. These tariffs will apply for a period of 25 years.

The ruling came in the wake of Welspun Renewables Energy Private Limited’s petition against Bangalore Electricity Supply Company Limited, Karnataka Renewable Energy Development Limited, and Karnataka Power Transmission Corporation Limited.

The petitioner has asked the commission to declare that it is not liable to any liquidated damages to the BESCOM as the commercial operational date (COD) was within 18 months and had requested the commission to accept the delay in COD as they were due to force majeure (unforeseeable) events.

In its order, the commission instructed Welspun Renewables Energy to pay liquidated damages for the delay in commencement of the supply of power to Bangalore Electricity Supply Company Limited (BESCOM) from its 34 MW solar power project.

The commission cited the Supreme Court of India, stating that the delay in achieving the commissioning of the project, the generating company is liable to pay damages, as per the power purchase agreement and it does not find any merit in the petitioner’s argument that such damages cannot be levied.

Welspun Renewables had also requested the commission to split the PPA into two separate agreements for the 16 MW and 34 MW projects, as these had been constructed and commissioned at two different locations and power is evacuated to two separate sub-stations

In its reply, the commission ordered that BESCOM will pay to Welspun Renewables the differential amount of the tariff for the energy supplied from the 16 MW solar power project within six weeks from the date of this order.

In determining the tariff of ₹6. 51 (~$0.091)/kWh for 34 MW solar project, the commission cited the appellate tribunal for electricity:

“It is a settled practice under the Section 62 of the Act that tariff determination process under various regulations for a new project begins from the COD of the said project as per extant regulations of the control period where COD of the project takes place. Subsequently, the tariff of such project is adjusted based on regulations/orders of the subsequent control period and it is not linked to the date of signing/approval of the PPA. If the PPA is approved at a later date or in other control period the tariff is applicable from the COD date as per prevalent regulation at that time.”

Background of the Case

Karnataka Renewable Energy Development Limited (KREDL) had invited bids to develop 50 MW of solar in the Kustagi Taluk in the Koppal district. Welspun Renewables Energy Private Limited won the bid under the name Welspun Solar Kannada Pvt.Ltd and entered into a PPA to develop the project, with a tariff of ₹7.01 (~$0.098)/kWh.

The land identified by the petitioner in the  Rampura Village in  Chitradurga District ran into trouble because KPTCL informed the company that only 16 MW for solar power was possible at the Rampura sub-station. Therefore, Welspun Renewables then approached KREDL to split the capacity and the PPA to 16 MW and 34 MW respectively.

Later, there was a delay in injecting power to the grid at the delivery point despite commissioning the project because of  trees coming too close to lines during heavy winds.

After that, Welspun issued invoices for the months of August and September 2016 at the tariff rate of₹7.01 (~$0.098), but the BESCOM unilaterally changed the tariff to ₹6. 51 (~$0.091) per unit, which Welspun Renewables accepted after protest and asked not to be penalise further because the reason for delay was beyond its control.

Welspun Renewables in its petition argued that the tariff issued through competitive bidding under Section 63 of the Electricity Act 2003 is ₹7.01 (~$0.098) per unit and there is no provision under the PPA to revise the tariff by any party. It claimed that revising the tariff to ₹6. 51 (~$0.091) per unit is highly unjust, illegal, and violates the PPA.

It also stated that the tariff is not determined by the commission under Section 62 of the Electricity Act 2003, but adopted under Section 6, and therefore it cannot be revised by any of the parties or the commission.

The respondents argued that the commissioning of a solar project or achieving commercial operation means injection of the power generated from the solar power project into the grid. As this was not the case, the petitioner’s claim that there was no delay in commissioning of the project, but only in injection of power, is not acceptable.

Recently, there have been a slew of rulings against commission delays of solar projects in Karnataka clearly indicating there is no leeway for any delays in project timeline.

Last month in a similar case, KERC penalized Marakka Solar Power Project LL.P for delay in commissioning a 1 MW project.

KERC also dismissed a petition Emmvee Photovoltaic Power Private Limited, stating that the solar power developer is not entitled to the relief due to project commissioning delay which resulted in a 30 percent tariff reduction for the developer.

A rooftop project commissioning delay in another case in front of KERC cost the installer a 36 percent reduction in tariff.

Image credit: Flickr