APTEL Upholds Delay Damages For 2 MW Solar Project, Remands INR 8.40 Tariff Dispute To KERC

The Appellate Tribunal for Electricity (APTEL) has partly allowed an appeal filed by Jayamal Energy LLP concerning delays in commissioning its 2 MW solar power project in Tumkur, Karnataka. The tribunal upheld the developer’s liability for damages due to the delay but remanded the dispute over the applicable power purchase tariff to the Karnataka Electricity Regulatory Commission (KERC) for fresh examination.

The appeal, numbered 78 of 2023, was filed against KERC and Bangalore Electricity Supply Company Limited (BESCOM). The dispute involved the project’s scheduled commercial operation date (SCOD), the validity of extensions granted for commissioning delays, and the tariff applicable to the solar power project.

Jayamal Energy LLP signed a Power Purchase Agreement (PPA) with BESCOM on July 2, 2015. However, APTEL clarified that the effective date of a PPA is the date on which it receives approval from the State Commission, rather than the date of signing. Accordingly, the tribunal determined August 25, 2015, as the effective date of the agreement. Based on this date, the SCOD for the project was fixed as February 25, 2017.

BESCOM had previously granted extensions to the developer, citing force majeure events that affected the project’s commissioning timeline. However, APTEL upheld KERC’s decision holding Jayamal Energy LLP liable for damages arising from the delay.

The tribunal observed that the developer had failed to provide BESCOM with written notice of the force majeure events as required under the PPA. It noted that compliance with this contractual requirement was essential for claiming relief on such grounds. The tribunal also referred to the Supreme Court’s position that the prescribed notice requirement constitutes a strict condition precedent for invoking force majeure provisions.

Furthermore, the PPA limited extensions for force majeure events to a maximum period of three months. Consequently, the tribunal held that the permissible extension period could not extend beyond May 25, 2017. Since the solar project was commissioned on August 31, 2017, the delay beyond the permitted period amounted to three months and six days. The developer therefore remained liable for the unexcused delay.

However, APTEL directed KERC to reconsider the tariff applicable to the project. The PPA had originally provided for a tariff of ₹8.40 per unit, while KERC subsequently issued a reduced generic tariff of ₹4.36 per unit on April 12, 2017.

Relying on the precedent in Smt. Sharada Doddi v. GESCOM, the tribunal instructed KERC to conduct a fresh inquiry within one month to determine whether Jayamal Energy LLP had crystallised its entire capital cost before the SCOD of February 25, 2017.

If KERC confirms that the capital cost had been crystallised before the deadline, the original tariff of ₹8.40 per unit will apply, along with carrying costs from the date of actual commissioning. Otherwise, the reduced tariff will remain applicable.

The ruling leaves the damages decision intact while requiring further examination of the tariff entitlement, making the final outcome dependent on KERC’s findings regarding the project’s capital cost.