Supreme Court upholds APTEL's order restoring higher tariff for electricity charge from solar plants in Karnataka

New Delhi: The Supreme Court has upheld a direction issued by the Appellate Tribunal of the Electricity to Bangalore Electricity Supply Company Ltd to pay surcharge to Hirehalli Solar Power Project LLP and others and higher tariff at the rate of Rs 8.4 per unit as per the Power Purchase Agreement.

A bench of Justices P S Narasimha and Pankaj Mithal said the apex court must be mindful and measured to enable a systematic and coherent development of electricity law by the regulatory commissions and the tribunal.

The court stressed that the restrictive scope of exercise its appellate jurisdiction only in cases which involved not just a 'question of law' but a 'substantial question of law'.

Referring to appellate jurisdiction under Section 125 of the Electricity Act, 2003, the bench said that the restrictive scope of appellate jurisdiction is a product not only of the statutory preconditions, but also a necessary measure to enable freedom to statutory regulator and tribunal to develop sectorial laws through a principled and consistent approach.

In its August 27 judgment, the bench granted extension of the scheduled commissioning date under a force majeure clause for the commercial operation of the solar power project in Chitradurga.

The court set aside the Karnataka Electricity Regulatory Commission's order that reduced the tariff payable to Hirehalli Solar Power Project, a solar energy project by land-owning farmers, from Rs 8.40 per unit to Rs 4.36 per unit.

The question before the court was whether the extension of the scheduled commissioning date was justified under the force majeure clause of a 2015 PPA, and consequently, whether the reduction in the tariff payable to solar power developers was appropriate.

The Karnataka government had in 2014 introduced a policy to identify and promote solar energy projects by land-owning farmers. These solar power plants of 1-3 MW capacity would generate and sell power to state discoms at the tariff determined by the KERC.

Some of the farmers had applied under the policy and were termed as solar power developers. Hirehalli Solar Power Project LLP was a special purpose vehicle to undertake the solar power project in Chitradurga district in the state. In 2015, Hirehalli entered into a power purchase agreement with farmers and the solar power project was to commence its commercial operation within 18 months.

However, due to delay caused by land use conversion, grid connectivity, and evacuation approvals, farmers had requested a six-month extension, which was approved by BESCOM in 2017. Despite this, KERC subsequently reduced the tariff and imposed liquidated damages, rejecting the extension on the grounds that the force majeure clause did not apply.

The APTEL, however, ruled in favour of the farmers, holding that they were entitled to the benefit of the ‘force majeure’ and they could not be blamed for the delay as the time taken for approvals by the government authorities was not within their control, thus the extension of time was warranted and the commissioning of the project on August 24, 2017 was within the extended period of 24 months.

The court rejected the contentions of the appellant that force majeure would not apply in this case as the power purchase agreement contained express provision for it.