HERC Rejects Petition to Retain Exit Clause of a 36 MW Hydro Project

The petition was filed by Haryana Power Purchase Center for a project it procured power from

May 9, 2019


In a review petition, the Haryana Power Purchase Center (HPPC), had asked the Haryana Electricity Regulatory Commission (HERC) to review its order passed on March 8, 2019, in which it allowed the deletion of an exit clause in the power purchase agreement.

The petition was for a 36 MW hydropower project which HPPC purchased power from. The project is owned by IA Hydro Energy Pvt. Ltd. (IAHEPL).

Initially, HPPC wanted the commission to amend the exit clause to the one given below:

The Purchaser/Company will have the right to terminate this Agreement within 30 days of the order regarding initial determination of tariff by HERC pursuant to the First Tariff Petition filed by the Company under HERC Tariff Regulations in compliance of condition precedent at clause 3.1.1(ii) if the tariff so determined by the Commission is not acceptable.”

However, the commission pointed that retaining the exit clause is likely to put both parties at risk and ordered for the removal of the clause. In response, HPPC filed a petition asking the commission to reconsider the order stating that the HERC cannot make any retrospective changes in the power purchase agreement because that would be against the law.

Broadly, the petitions of HPPC sought the following:

  • Pass an appropriate order to the effect that the Clause 3.3.2, as proposed by HPPC in will be allowed to be retained in PPA
  • Pass an appropriate order to the effect that a cap of 2% will be maintained on all wheeling charges paid by the generator to the state transmission utility

After its review, the commission noted that the ceiling tariff has already been decided by the commission in its order passed in April 2018 and the generator is already supplying power supply at average power purchase cost (APPC) to be adjusted against the final tariff determined by the commission. Therefore, both HPPC and generators have a fair idea about the range within which the tariff is to be determined by the commission. In case the tariff to be determined by the commission exceeds the ceiling tariff agreed upon, the applicable tariff is to be capped at the ceiling tariff. So, retaining unprecedented exit clause is likely to put both parties at risk.

Also, the generator had argued that it has been paying wheeling charges in cash to HPSEB for the transmission of power from the delivery point to the central transmission utility. It added that the charges were never agreed upon between the parties and nothing had been specified about the payment of wheeling charges in cash.

Accordingly, the commission in the order has retained the capping of wheeling charges and losses at 2% of the energy transmitted and directed that wheeling charges actually incurred by the generators in cash should not be subjected to the capping of 2% and should be reimbursed.

Recently, Maharashtra Electricity Regulatory Commission (MERC) passed an order reprimanding the Maharashtra State Electricity Distribution Company Limited (MSEDCL) for not paying the interest accumulated on its principle dues to a small hydro project developer in the state.


In a comprehensive report, Mercom has analyzed whether the move to include large hydropower in the Indian renewable energy mix was a good idea, given the fact that such projects are mired in controversies globally.



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