APTEL Overturns KERC Order, Restores Original Solar Tariff And Cancels Liquidated Damages In Karnataka

The Appellate Tribunal for Electricity has recently overturned a decision by the Karnataka Electricity Regulatory Commission (KERC) in a case involving a solar power project in the state. The appeal was filed by M/s Celestial Solar Solutions Private Limited, which had challenged KERC’s December 30, 2021, order that dismissed the company’s petition. The dispute centered around the applicable power tariff and the imposition of liquidated damages by the Mangalore Electricity Supply Company Limited (MESCOM).

The case traces back to a competitive bidding process for a 10 MW solar project in Karnataka. M/s Surana Telecom & Power Ltd. won the project with a bid tariff of ₹7.12 per kWh. Following this, a special purpose vehicle, Celestial Solar Solutions Private Limited, was formed, and a Power Purchase Agreement (PPA) was signed with MESCOM on February 12, 2015. However, the project encountered delays due to issues in land acquisition and approvals from the Karnataka Power Transmission Corporation Limited (KPTCL), which eventually led to a change in the project’s location.

Due to these difficulties, Celestial Solar Solutions sought and received multiple extensions from MESCOM to complete the project. The final extended commissioning deadline was set for February 11, 2017. Despite commissioning the project successfully on this date, MESCOM, acting on a directive from KERC, deducted over ₹5.61 crore as liquidated damages from the company’s energy bills. MESCOM also applied a lower tariff of ₹6.51 per kWh, following KERC’s 2015 generic tariff order.

Initially, Celestial Solar Solutions approached the Karnataka High Court, which directed the company to file a petition with KERC. In its 2021 order, the commission rejected the company’s claims of “Force Majeure” and held it liable for the liquidated damages. KERC also upheld the lower tariff as applicable to the project.

The Appellate Tribunal for Electricity, however, found KERC’s decision to be flawed. The Tribunal ruled that Celestial Solar Solutions was entitled to the original tariff of ₹7.12 per kWh as specified in the PPA. It noted that the tariff from a 2013 order, which was ₹8.40 per kWh, was higher than the PPA rate, making the PPA tariff the correct rate to apply. The Tribunal also found that the project extensions granted to the company were justified, nullifying the liquidated damages imposed by MESCOM.

Following this judgment, the Tribunal set aside KERC’s order and allowed Celestial Solar Solutions’ appeal. It directed MESCOM to pay the differential tariff amount along with a carrying cost within three months and instructed the company to continue paying the agreed ₹7.12 per kWh rate in the future.

This ruling marks a significant victory for Celestial Solar Solutions in its prolonged legal dispute. It underscores the importance of honoring PPA terms and acknowledges the challenges developers may face in completing renewable energy projects. The decision also highlights the role of the Appellate Tribunal for Electricity in ensuring fair application of tariffs and protecting the rights of project developers in the renewable energy sector.

This outcome could have broader implications for solar project developers in Karnataka and other states, reinforcing the importance of timely approvals, justified extensions, and adherence to agreed tariffs in the rapidly growing solar energy market.