APTEL Allows Transfer of RECs to New Owners of a Bagasse-Based Power Project

After taking over Hasanpur Sugar Mills, Magadh Sugar was denied the transfer of RECs by CERC


The Appellate Tribunal for Electricity (APTEL) passed an order directing the Power System Operation Corporation (POSOCO) and the Bihar Renewable Energy Development Agency to allow the registration and accreditation of the renewable energy certificates (RECs) to the new corporate entity after a change in ownership.

The APTEL ordered that the benefit of the REC program, including the benefits already accrued in favor of Upper Ganges Sugar & Industries, the previous owner of Hasanpur Sugar Mills, be transferred to the current owner Magadh Sugar and Energy.

Case Background

The case concerns the claim for accrued benefits under the REC program drawn from the operations of a bagasse-based power project run on the premises of Hasanpur Sugar Mills.

The sugar mill was earlier owned and controlled by Upper Ganges Sugar & Industries Limited and later transferred to the petitioner Magadh Sugar and Energy on April 1, 2015. Incidentally, Upper Ganges had registered and accredited itself with National Load Dispatch Center (NLDC) from January 22, 2015, as a beneficiary of the REC program for the power generated at Hasanpur Sugar Mills.

However, according to the REC guidelines, whenever there is a change in the legal status of the eligible entity, the changes should be immediately intimated to the state and central agency concerned, and a new application should be filed for accreditation with the respective state agency and registration by the central agency.

In all other cases involving a change in the name of the ‘eligible entity’, only the entity’s name is to be updated in the records of the state and the central agency, after the eligible entity informs about the matter. In this case, the entity concerned is Magadh Sugar and Energy.

However, these clauses were amended on March 16, 2018.

As per the new amendment, whenever there is a change in the legal status of a ‘registered entity’ (Hasanpur Sugar Mills), which has requested transfer of REC to the new entity (Magadh Sugar and Energy), the latter is supposed to request for revocation of the project from the REC mechanism. it is supposed to request for re-accreditation and re-registration or fresh accreditation and fresh registration of the project under the REC program.

After verifying, the state agency is to accredit the new legal entity and update the central agency. Subsequently, the central agency would register the new legal entity and transfer ownership of existing valid RECs.

In cases involving a change in the name of the registered entity, it is required to inform the state and the central agency concerned within one month from the date of the said change.

Magadh Sugar took over the ownership and operations of Hasanpur Sugar Mills from Upper Ganges and applied for a change in name per the ‘pre-amended model guidelines’ and stated that the process cannot be considered as a case of change in the legal status of the eligible entity.

The NLDC did not grant the request, and Magadh Sugar filed a petition before the Central Electricity Regulatory Commission (CERC). Later, on May 7, 2018, Magadh Sugar filed for new registration under the amended guidelines. But the request was declined by Power System Operation Corporation, citing a delay in the application by Magadh Sugar.

Meanwhile, the CERC was not convinced with the arguments made by Magadh Sugar, who claimed that the transfer of Hasanpur Sugar Mills from Upper Ganges was only a case of the name change.

The CERC was of the view that in cases where there is a change in legal status, the entity is required to apply afresh for accreditation and registration. According to the Commission, the petitioner must comply with the Commission’s regulations and procedures to benefit from the REC mechanism.

During the hearing, the petitioner’s counsel conceded that the transfer of the asset, i.e., Hasanpur Sugar Mills, by its erstwhile owner, Upper Ganges to Magadh Sugar, constitutes a clear case of change in the legal status, as it is not a case of mere change of name. The counsel argued that it involves a change in ownership, by transfer.

This was stated in the terms of the approval granted by the National Company Law Tribunal by its order dated March 2, 2017.

Meanwhile, the APTEL observed a delay in applying for new registration even after the NCLT order. The application was moved on May 7, 2018, although their legal counsel ill-advised.

However, the APTEL further observed that Magadh Sugar could not be made to suffer the loss of benefits of the REC program that had accrued favoring the erstwhile owner Upper Ganges in respect of the co-generation project because it was ill-advised earlier.

APTEL observed that such benefits being forfeited or exhausted was in nobody’s interest. Such REC benefits deserve to be transferred to the hands of Magadh Sugar only if its application dated May 7, 2018, is accepted.

The APTEL directed the NLDC to pass a fresh order, accept the registration or accreditation of Hasanpur Sugar Mills in favor of Magadh Sugar, and provide for the benefit of the REC program, including the benefits already accrued in favor of Upper Ganges before the change.

The benefits are mandated to be passed on to Magadh Sugar within one month of the judgment.

In July last year, CERC had directed the NLDC to issue RECs due to a renewable generator. Simbhaoli Power Private Limited is an Uttar Pradesh-based renewable power generator with a bagasse-based co-generation project. It had filed a petition with the CERC, asking for it to consider a procedural delay by the state load dispatch center, due to which it was denied RECs for March 2019. It further sought the Commission to direct the UPSLDC to issue these RECs.

RECs play a vital role in helping companies meet their renewable purchase obligations. They encourage the sale and growth of renewable energy and help the country meet its national renewable energy goals. However, these certificates have not been traded since the APTEL order in August 2020 postponing the trading of RECs.

Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.