Solar Project Stuck in a Limbo Amidst Delay in Tariff Adoption

The Central Electricity Regulatory Commission (CERC) recently heard a solar developer’s plea for extending the time for commissioning the project considering the delay in the adoption of tariff by the Punjab Electricity Regulatory Commission (PSERC). The Commission said that the extension of time had to be through an agreement between the contracting parties. But at this time, the timeframe for commissioning the project had not lapsed, and there was no reason for intervention.
SB Energy Six had filed a petition seeking directions for the extension of timelines as per the power purchase agreement (PPA) provisions and providing relief from any action to be taken by NTPC and the Punjab State Power Corporation Limited (PSPCL).
Background
SB Energy Six has set up two solar power projects of 300 MW capacity each in Rajasthan.
NTPC had issued the request for selection to develop 2,000 MW of solar power projects with interstate transmission system (ISTS) connectivity in 2018. SB Energy was one of the winners in the auction, and NTPC issued the letter of intent to develop two solar projects of 300 MW each. Power was to be supplied to Punjab’s distribution companies (DISCOMs) from one of the projects.
NTPC and PSPCL signed the power sale agreement (PSA) for a 300 MW project as per the guidelines laid down by the Ministry of Power. The petitioner and NTPC signed the PPA to supply 300 MW of solar from the project on April 8, 2019.
NTPC approached the Commission seeking adoption of the tariff of ?2.60 (~$0.035)/kWh and the trading margin of ?0.07 (~$0.0009)/kWh payable to NTPC under the PSA.
The SB Energy approached NTPC to sign a supplementary PSA with PSPCL and with NTPC extending the timelines.
Later, the timeline was extended until March 31, 2021. Subsequently, it was extended to October 31, 2021.
The solar developer contended that PSERC had earlier observed that it was mandatory to consider the tariff for approving the power procurement from NTPC (including trading margin). Since the review petition was pending adjudication of the Commission, the approval was awaited.
Commission’s analysis
The Commission observed that the respondents were to obtain PSERC’s order adopting the tariff and the trading margin and approving the procurement of the contracted capacity within three months from the date of the PPA.
The Commission noted that the contracting parties had further agreed that if the adoption of tariff, trading margin, and agreements for the procurement of power were not approved by PSERC within the specified time, the agreements would stand canceled unless the parties agreed to extend the timeline.
The central regulator stated that there was reasonable apprehension on the developer’s part that the PSERC would issue its order before the agreed date for commissioning the project.
However, during the hearing, NTPC submitted that the PPA entered into with SB Energy Six and the PSA entered into by NTPC with PSPCL were on a back-to-back basis. NTPC was already pursuing the matter with PSPCL, and unless PSPCL signed the supplementary PSA extending the timeline, NTPC could not sign the corresponding supplementary PPA with the petitioner.
CERC clarified that any extension of time had to be by way of mutual agreement between the parties only. However, as on the date of hearing, there appeared to be no such agreement. Nonetheless, the PPA remained valid. Given all the facts, the Commission said that it could not intervene in the matter.
In September this year, CERC adopted the tariff of ?2.63 (~?0.036)/kWh and a trading margin of ?0.07 (~$0.0009)/kWh for a 300 MW solar project as requested by NTPC in its petition.
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