Introduction

The case of Azure Photovoltaic Private Limited v. Gulbarga Electricity Supply Company Limited & Anr. before the Appellate Tribunal for Electricity (ATE) on August 12, 2021, revolves around disputes arising from the execution of a Power Purchase Agreement (PPA) between Azure Photovoltaic (the Appellant) and Gulbarga Electricity Supply Company Limited (GESCOM) & Anr. (the Respondents). The central issues pertain to the imposition of liquidated damages due to delays in achieving the Commercial Operation Date (COD) and the unilateral reduction of tariff rates by GESCOM. This commentary delves into the background, judicial reasoning, and implications of the Tribunal's decision.

Summary of the Judgment

The Appellate Tribunal reviewed the Karnataka Electricity Regulatory Commission's (KERC) decision on August 24, 2017, which set aside previously granted extensions and directed GESCOM to impose reduced tariffs and recover liquidated damages from Azure for delays in achieving COD. Azure contested the KERC's decision, arguing that the delays were primarily due to GESCOM's failure to provide an approved PPA in a timely manner and unforeseen force majeure events.

After a comprehensive examination, the Tribunal partially allowed Azure's appeal. It upheld the imposition of liquidated damages for a 31-day delay in achieving COD but confirmed that the applicable tariff should remain at Azure's original bid rate of ₹6.96 per unit, rejecting GESCOM's attempt to reduce it to ₹6.51 per unit.

Analysis

Precedents Cited

The Tribunal referenced several key precedents and regulatory guidelines, notably:

• Electricity Act, 2003: Governing the regulatory framework within which electricity PPAs operate.
• Bidding Guidelines dated 19.01.2005 (updated 21.07.2010): These guidelines dictated the competitive bidding process under which Azure's bid was accepted.
• Tariff Orders (2013 & 2015): These orders established the baseline tariffs for solar PV projects and were pivotal in determining the applicable rate in this case.

The Tribunal emphasized the importance of adhering to statutory guidelines and the integrity of competitive bidding processes in setting tariffs.

Legal Reasoning

The Tribunal's reasoning hinged on several legal principles:

• Attribution of Delays: Azure demonstrated that significant delays in the project were attributable to GESCOM's failure to provide an approved PPA promptly, which hampered Azure's ability to fulfill the PPA's conditions within the stipulated timeframe.
• Force Majeure Consideration: The Tribunal acknowledged that the delays resulting from the Cauvery river water-based riots constituted force majeure, thereby justifying further extensions beyond the initially granted period.
• Tariff Applicability: The Tribunal scrutinized the applicability of the 2013 and 2015 Tariff Orders, concluding that the reduction to ₹6.51 per unit was not legally tenable for Azure, as the conditions stipulated in the 2015 Tariff Order did not apply to her PPA.

In essence, the Tribunal balanced the contractual obligations with equitable considerations arising from delays beyond the Developer's control.

Impact

This judgment has significant implications for the renewable energy sector, particularly in the context of power PPAs. Key impacts include:

• Protection of Competitive Bidding Integrity: By upholding the original bid tariff, the Tribunal reinforces the sanctity of competitive bidding processes, discouraging arbitrary tariff manipulations post-agreement.
• Clarity on Liquidated Damages: The decision provides a nuanced approach to liquidated damages, recognizing both the Developer's obligations and external factors beyond their control.
• Strengthening Regulatory Oversight: The ruling underscores the role of regulatory bodies like KERC in ensuring fair play between Discoms and Developers, fostering a more accountable energy sector.

Complex Concepts Simplified

Conclusion

The Tribunal's decision in the Azure PV vs. GESCOM case underscores the delicate balance between enforcing contractual obligations and recognizing equitable factors that may impede performance. By upholding Azure's original tariff and partially enforcing liquidated damages, the Tribunal not only safeguards the interests of competitive bidding but also ensures that Developers are not unduly penalized for delays beyond their control.

This judgment serves as a pivotal reference for future disputes in the renewable energy sector, emphasizing the need for clear contractual terms, timely regulatory approvals, and the equitable application of penalties. It fosters a more stable and predictable environment for investors and stakeholders in India's burgeoning renewable energy landscape.