A distribution licensee's grant of project timeline extensions based on a Force Majeure notice is binding. A regulator cannot reject such extensions without a finding that the cited events were not Force Majeure.

Headnote:(A) Electricity Act, 2003 - Appeal against order of State Electricity Regulatory Commission - Power Purchase Agreement (PPA) - Force Majeure - Extension of time - Liquidated damages - Tariff fixation - The Commission, as a regulator, can scrutinize the correctness and validity of time extensions granted by the distribution licensee, but it cannot reject such extensions without cogent reasons or a finding that the events cited did not constitute Force Majeure. (Para 34)

(B) PPA - Interpretation - Clause 5.7 - Extension of Time - Once a distribution licensee grants an extension of the Scheduled Commercial Operation Date (SCOD) based on a Force Majeure notice from the generator, it cannot later take a contrary stand that the events did not constitute Force Majeure. The extension of SCOD cannot be conditional upon clauses that only apply in the absence of an extension, such as those for liquidated damages (Clause 5.8) or tariff revision (Clause 12.2). (Paras 28-32, 35-36)

(C) PPA - Clause 12.2 - Applicable Tariff - The provision for applying a lower tariff in case of delay is not triggered when the project is commissioned within the extended SCOD granted due to Force Majeure. In such a case, the original tariff from Clause 12.1 of the PPA remains applicable. (Para 36)

(D) Liquidated Damages - The clauses for liquidated damages (Clause 5.8) for delay in commissioning are not triggered when the SCOD has been extended and the project is commissioned within the new SCOD. (Para 35)

Facts of the case:
An appeal was filed against the order of the Karnataka Electricity Regulatory Commission. The Appellant, a solar power project developer, entered into a PPA with the first Respondent (distribution licensee) on 12.02.2015 for a 10 MW solar project. The project faced delays due to land acquisition issues and delays in evacuation approvals from the third Respondent (transmission corporation). The Appellant requested and was granted extensions of the SCOD by the first Respondent via letters dated 08.08.2016 (extension of 4 months) and 07.12.2016 (extension of 2 months, up to 11.02.2017), citing these delays as Force Majeure events. The project was commissioned on 11.02.2017. However, the Commission, in its impugned order dated 30.12.2021, rejected these extensions as having been granted in a routine manner, held the Appellant liable for liquidated damages, and applied a lower tariff (Rs. 6.51/kWh) instead of the contracted tariff (Rs. 7.12/kWh).

Findings of Court:
The Appellate Tribunal set aside the Commission’s order. It held that the first Respondent’s communications granting extensions, without denying the Force Majeure nature of the events, indicated acceptance of the Appellant's grounds for delay. The Commission's rejection of these extensions was baseless as it failed to find that the cited events did not constitute Force Majeure. Consequently, as the project was commissioned within the extended SCOD, there was no delay. Therefore, clauses for liquidated damages and tariff revision were not triggered, and the Appellant was entitled to the original tariff of Rs. 7.12/kWh.

Issues: The main issues were whether the Commission could reject the extensions of time granted by the distribution licensee to the Appellant, and what the applicable tariff and liability for liquidated damages were given the extensions.

Ratio Decidendi: The court ruled that a regulator cannot reject time extensions granted by a distribution licensee in a routine manner without substantive findings. The licensee's grant of an extension based on a Force Majeure notice binds both parties. A project commissioned within the extended SCOD is not in delay, and thus provisions for penalty and tariff revision are not applicable.

Result: Appeal allowed. The impugned order of the Commission was set aside. The Appellant was held entitled to a tariff of Rs. 7.12/kWh. MESCOM was directed to pay the differential tariff with carrying cost within three months and continue paying the said tariff in future. Parties: The Appellant was the project developer (a solar solutions company). The Respondents were the distribution licensee, the state electricity regulatory commission, the transmission corporation, and the state renewable energy development agency. Dissenting opinions: None. The judgment was unanimous from the bench of two members. (No alternative viewpoints or associated key points were present.) (Dissenting Opinions: None.) (Dissenting_opinions: None.) (Dissenting opinions: None.) (Dissenting Opinions: None) (Dissenting Opinions: None) (Dissenting Opinions: There were none as the judgment was unanimous.) (Dissenting Opinions: No dissenting opinions were noted in the judgment.) (Dissenting Opinions: Not applicable.) (Dissent: Not applicable.)

JUDGMENT

PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER

1. In this appeal, the Appellant has assailed the order dated 30^th December, 2021 passed by 2^nd Respondent – Karnataka Electricity Regulatory Commission (hereinafter referred to as “the Commission”) in Petition No. 39 of 2018 filed by the Appellant claiming following reliefs:-

(a) To approve the SPPA dated 15.12.2016 executed between MESCOM and petitioner company modifying the original PPA only to record the changed location to Channamanagathihalli village, Chellakere taluk, Chitradurga district, without altering the tariff and other terms and conditions contained therein;

(b) To declare that tariff of Rs.7.12/- per unit is applicable in terms of PPA since tariff order dated 30.07.2015 is not applicable on those projects in respect of which the tariff is discovered through competitive bidding process and for the reasons that the tariff order dated 30.07.2015 excludes the projects which are commissioned between 01.09.2015 to 31.03. 2018 for which the PPAs have been entered into and submitted for approval to KERC prior to 01.09.2015;

(c) To declare that on the basis of difficulties faced in terms of approval by KPTCL, land acquisition and change of location, MESCOM rightly extended the scheduled commissioning date to 11.02.2018;

(d) To direct MESCOM to refund/release all amounts illegally deducted on account of applicable of lower tariffs along with Damages and Liquidated Damages illegally imposed on the company; and to

(e) Provide sufficient opportunity of hearing in person.

2. On the basis of the pleadings as well as contentions of the parties, the Commission had framed following issues for its consideration :-

Issue No.1: Whether the Petitioner proves that there was delay in evacuation approval by KPTCL, acquisition of land and change in location, due to which the delay was caused by respondents in terms of PPA?

Issue No.2: Whether the grounds urged for extension of time for achieving the Conditions precedent and commissioning of the plant are within the provisions of Force Majeure conditions of PPA?

Issue No.3: Whether the 1 st Respondent is entitled to liquidated damage as per Articles 4.3 and 5.8 of the PPA?

Issue No. 4: Whether the Supplemental Power Purchase Agreement dated 15.12.2016 requires the approval of the Commission or otherwise?

Issue No. 5: Whether the petitioner is entitled for the Tariff of Rs. 7.12 per unit for the energy delivered or what should be the Tariff as per terms of the PPA?

Issue No. 6: What order?

3. Ultimately, the Commission disposed off the petition vide impugned order dated 30^th December, 2021. It decided al the above issues against the Appellant. On issue No. 1, the Commission held that there was no delay on the part of the 3^rd Respondent – Karnataka Transmission Power Corporation Limited in according technical approvals as well as in acquisition of land.

4. In Issue No. 2, the Commission held that the extension of six months for achieving condition precedent and six months for Scheduled Commercial Operation Date by 1^st Respondent – Mangalore Electricity Supply Co. Ltd. is not acceptable in terms of the relevant provisions of the Power Purchase Agreement (PPA) executed between Appellant and 1^st Respondent.

5. On issue No. 3, the Commission has held 1^st Respondent entitled to liquidate damages even in the absence of proof of actual damage or loss suffered by it.

6. On issue No. 4, the Commission has opined that the supplementary Power Purchase Agreement dated 15^th December, 2016 does not require its approval.

7. On issue No. 5, the Commission has held that the Appellant’s power project is entitled to tariff of Rs.6.51 per kwh for the term of the PPA as per generic tariff order dated 30^th July, 2015.

8. Finally, the Commission dismissed the petition of Appellant while holding the Appellant entitled to tariff of Rs.6.51 per kwh as fixed by the Commission in the generic tariff order dated 30^th July, 2015 for the term of PPA as per Article 12.2 of the PPA. The

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APPELLATE TRIBUNAL FOR ELECTRICITYM/s Celestial Solar Solutions Private Limited VERSUS Mangalore Electricity Supply Company Limited & OrsAPPEAL No. 71 of 2022 (PDF)

A distribution licensee's grant of project timeline extensions based on a Force Majeure notice is binding. A regulator cannot reject such extensions without a finding that the cited events were not Force Majeure.

APPELLATE TRIBUNAL FOR ELECTRICITY
M/s Celestial Solar Solutions Private Limited VERSUS Mangalore Electricity Supply Company Limited & Ors
APPEAL No. 71 of 2022 (PDF)