APTEL Reviews KERC Order On 50 MW Solar Project Delay And Liquidated Damages

Hero Future Energies filed an appeal challenging the Karnataka Electricity Regulatory Commission’s (KERC) order that denied the company an extension of 180 days for commissioning its solar project. The company argued that the delay was not entirely their fault and was caused by procedural and administrative delays beyond their control. The main dispute began after the original Power Purchase Agreement (PPA) was signed on 19 February 2014. Although the PPA was approved by KERC on 13 March 2014, the approval took 22 days and this delay was not immediately factored into the project timeline.

Hero Future Energies contended that the effective date of the PPA should be considered from the date of KERC’s approval, not the date of signing. They also highlighted that the signed copy of the PPA was only received on 13 August 2014, causing further delays in initiating project financing and land acquisition. Despite this, the company completed the commissioning of the solar plant on 14 August 2015.

To accommodate the delay, the second respondent, Hubli Electricity Supply Company (HESCOM), granted an extension of 5 months and 8 days through a letter dated 17 October 2014. This extension was later formalized through a Supplementary PPA signed on 20 October 2015. However, when this Supplementary PPA was submitted to KERC for approval, KERC pointed out deficiencies and insisted on reducing the tariff from ₹7.47 per kWh to ₹6.50 per kWh, the latter being applicable on the date of commissioning.

When Hero Future Energies took the matter to the High Court, the court directed them to approach KERC. The company filed a petition with KERC, seeking approval of the Supplementary PPA and the originally agreed tariff. While KERC upheld the original tariff of ₹7.47 per kWh, it rejected the extension of 180 days, citing that the delay could not be justified under force majeure clauses or the terms of the PPA.

Following this decision, HESCOM issued a letter demanding ₹12.05 crore in liquidated damages from Hero Future Energies for the delay in commissioning. This amount was partially recovered through deductions from energy bills, prompting the company to approach the Appellate Tribunal for Electricity (APTEL) for relief.

Hero Future Energies argued that similar delays had been treated differently in other cases, and the extension granted by HESCOM should be considered valid. They emphasized that the delay occurred due to KERC’s approval process and procedural issues, and not due to any default on their part. They sought restitution and cancellation of the liquidated damages.

The tribunal acknowledged that delays in approval by the regulator could justify time extensions and that natural justice requires giving the developer a proper opportunity to explain the delays. The tribunal found merit in Hero’s claim for part of the extension and noted that denying the full 180-day extension without a hearing was unjust.