Greetings to you and your loved ones!
We extend a warm welcome as we reconnect with you through our newsletter for the month of July 2023. In our continuous commitment to keep you well-informed about the ever-evolving legal landscape of the energy sector in India, we have curated the latest updates which includes regulatory and policy developments, and noteworthy judgements.
REGULATORY UPDATES
- Draft R&D Roadmap for Green Hydrogen Ecosystem
The Ministry of New and Renewable Energy (MNRE) has revealed a draft roadmap focused on research and development (R&D) priorities for efficient manufacturing and storage of green hydrogen. The roadmap aims to enhance storage methods, durability, and safety while promoting widespread adoption of green hydrogen as a clean energy resource. Objectives of such roadmap include developing advanced storage techniques, validating underground storage solutions, indigenous materials for hydrogen tanks, and pilot demonstrations for various applications. MNRE had invited comments on this draft roadmap from the public until July 19, 2023.
- Amendments to Andhra Pradesh Electricity Regulatory Commission Renewable Purchase Obligations (RPPO) Regulations, 2022
On July 14, 2023, the Andhra Pradesh Electricity Regulatory Commission (APERC) notified the first amendments to APERC Renewable Power Purchase Obligation (RPPO) (Compliance by purchase of Renewable Energy / Renewable Energy Certificates) Regulations, 2022. Vide these amendments, the purchase of renewable energy by a captive open access consumer will be counted towards fulfilling their RPPO and entities with such obligations can purchase additional renewable energy beyond their requirements up to 100% (hundred percent). The mandated percentage of renewable energy procurement should not fall below the specified RPPO set by the government or APERC, whichever is higher. Entities exceeding RPPO targets will receive Green Star Certificates within 3 (three) months after the end of the financial year. Non-obligated entities, including domestic consumers at any voltage level, can procure renewable energy.
- Guidelines for Medium and Long-Term Power Demand Forecast
The Central Electricity Authority notified guidelines for medium- and long-term power demand forecast. These guidelines aim to provide a basic framework of medium-term and long-term power demand forecast for a DISCOM/State/Union Territory. The forecast should be prepared for medium-term, which is more than 1 (one) year and up to 5 (five) years, and also for longer term, which is at least the next 10 (ten) years. The guidelines also stipulate that a detailed power demand forecasting exercise should be undertaken once in every 5 (five) years and be reviewed and updated daily.
- Electricity (Second Amendment) Rules, 2023
On July 26, 2023, the Ministry of Power (MoP) notified the Electricity (Second Amendment) Rules, 2023. The newly substituted Rule 15 elaborates on the procedure for Subsidy Accounting and Payment as per Section 65 of the Electricity Act, 2003. It states that a quarterly report is to be issued by the State Commissions for every distribution licensee in its jurisdiction. Such report is to be submitted by the distribution licensee within 30 (thirty) days from the end of the respective quarter, and the State Commission is to examine the report, and issue it with any corrections, within 30 (thirty) days of the submission. Rule 20 provides for a Framework for Financial Sustainability, which stipulates that the Aggregate Technical and Commercial Loss reduction trajectory which is to be approved by the State Commissions is to be in accordance with the trajectory agreed by the respective State Governments, along with the approval of the Central Government under any national scheme or programme.
- Guidelines for Tariff Based Competitive Bidding Process for Procurement Power from Grid Connected Wind Power Projects
On July 26, 2023, the Ministry of Power (MoP) notified the Guidelines for Tariff Based Competitive Bidding Process for Procurement Power from Grid Connected Wind Power Projects (Guidelines) to facilitate renewable capacity addition and fulfilment of Renewable Purchase Obligation (RPO) requirements via a transparent procurement framework based on competitive bidding. The Guidelines are applicable to projects with a bid capacity of 10 (ten) MW and above and 50 (fifty) MW and above connected to the intra-state and inter-state transmission systems, respectively. The procurer has the option to set a maximum capacity which may be allotted to a single bidder and the tariff quoted by the bidders cannot exceed the benchmark tariff specified by the procurer. Further, the bids will be allocated based on bucket filling i.e., bidder with the lowest tariff and then other bidders with tariff falling within 2-5% (two to five percent) of the lowest bidder’s tariff. Once the bid has been selected, the wind power generator must furnish a performance bank guarantee equivalent to 5% (five percent) of the estimated capital cost for the project or the limit stipulated by the Ministry of Finance, whichever is lower.
- Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar PV Power Projects
On July 28, 2023, the Ministry of Power (MoP) notified the Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar PV Power Projects (Guidelines) with the objective of providing a transparent framework for procurement of power at competitive prices in consumer interest from solar phot-voltaic power plants, as well as improving the bankability of projects and ensuring reasonable interest to investors. The bidders must fall within 2-5% (two to five percent) of the lowest bidder’s tariff to be allocated the power capacity, and only a maximum of 50% (fifty percent) of the total capacity specified in the request for selection can be allocated to a single bidder. There is now a separate timeframe for both evaluation of technical bids and financial bids, and ideally the entire bidding process must be completed within 110 (one hundred and ten) days. There has also been an increase in commencement of supply schedule, 24 (twenty-four) months for 1,000 (one thousand) MW capacity projects and 30 (thirty) months for projects above 1,000 (one thousand) MW capacity.
JUDICIAL UPDATES
- Solar Energy Corporation of India Limited v. Uttar Pradesh Electricity Regulatory Commission & Uttar Pradesh Power Corporation Limited, Appellate Tribunal for Electricity, Appeal No. 199/2023
On July 6, 2023, the Appellate Tribunal for Electricity (APTEL) allowed Solar Energy Corporation of India’s (SECI) appeal against the Uttar Pradesh Electricity Regulatory Commission’s (UPERC) decision approving power procurement subject to protection of pooled tariff with trading margin adjustment. SECI had entered into contracts for wind power purchase and filed a petition with the CERC for tariff adoption. UPERC’s approval required SECI to protect the pooled tariff by adjusting the trading margin. The issue in this matter was whether UPERC had jurisdiction over tariff and trading margins. The APTEL ruled that CERC was responsible for determining trading margins for interstate trading licensees, including SECI. APTEL set aside UPERC’s decision, stating that the mutually agreed trading margin between SECI and UPPCL, stated in their power purchase agreement, should be final and UPERC’s directive for adjustment was not acceptable.
- Paschimanchal Vidyut Vitran Nigam Limited. v. Raman Ispat Private Limited & Ors., Supreme Court, Civil Appeal Nos. 7976/2019
On July 17, 2023, the Supreme Court ruled that Section 238 of the Insolvency and Bankruptcy Code (IBC) overrides provisions of the Electricity Act, 2003. Paschimanchal Vidyut Vitran Nigam Limited (PVVNL) sought unpaid electricity dues from Raman Ispat Private Limited and argued that Sections 173 and 174 of the Electricity Act, 2003 provides for an overriding effect over any other law, including provisions of the IBC, and thus PVVNL should be able to independently recover its dues and not be a part of the liquidation process. The Supreme Court explaining the waterfall mechanism which elaborates on the order of distribution of assets mentioned under Section 53 of the IBC, highlighted that secured creditors who do not relinquish their securities and debts owed to any Central or State Governments fall lower in the priority list as compared to unsecured creditors. PVVNL, despite having government participation, is not a government entity and thus, is not subjected to this priority list and so the Court directed the liquidator to decide the claim in the manner required by law within ten weeks.
- Paschimanchal Vidyut Vitran Nigam Limited. v. Raman Ispat Private Limited & Ors., Supreme Court, Civil Appeal Nos. 7976/2019
In the first petition, the Petitioner was selected by SECI to develop a 50 MW solar project in Uttar Pradesh, while in the second petition, the Petitioner was selected by NTPC to develop a 50 MW solar project in Karnataka. The Petitioners initially sought compensation for higher expenses under “Change in Law,” due to introduction of GST, carrying costs, GST on O&M services, and GST on post COD expenditures. The Central Electricity Regulatory Commission (CERC), in the first petition, allowed petitioner’s claim for GST, while denying the claims for O&M services and carrying cost, and in the second petition, allowed the petitioner’s claim for GST, while denying the claims for safeguard duty, O&M, and carrying cost. On an appeal to the APTEL, the CERC’s orders were set aside, and the petitions were remanded to the CERC for a fresh hearing. In the fresh hearing, based on the judgment in the matter of Parampujya Solar Energy Private Limited & Anr. v. CERC & Ors. passed by the APTEL, the CERC concluded that both petitioners are entitled to compensation for the impact of GST and safeguard duty, while also noting that enforcement of relief for the post COD period is subject to further orders from the Hon’ble Supreme Court in the ongoing case of Telangana NPDC v. Parampujya Solar.
- Hindustan Power Exchange Limited v. Grid Controller of India Limited, CERC, Petition No. 122/MP/2023
In this case, the petitioner sought the CERC’s approval for introduction of High Price Contracts in the High Price Day Ahead Market (HP-DAM), High Price Term Ahead Market (HP-TAM) and High Price Contingency Contracts (HP-Contingency) under the CERC (Power Market Regulations), 2021. The CERC approved the proposal for HP-DAM, HP-TAM, and HP-Contingency, as they ensure a level playing field and improve competition in the power market. Introducing high-price market segments is consequential to the CERC’s introduction of price caps. But the proposal for introducing HP-Day Ahead Contingency and HP-Intraday Contracts for hydropower generators was not approved by the CERC as it felt that the proposal did not fulfil the requirement of having a separate high-priced market segment.
DISCLAIMER
The content provided in this newsletter is intended for general awareness and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein. If you have any questions about any of these developments or would like to see something different next month, reach out to us at knowledge@sarthaklaw.com.
We will be back next month with another update. Until then, stay safe and stay healthy!