Delayed Project: CERC Slashes Developer's Awarded Capacity, Imposes Penalty

The Central Electricity Regulatory Commission (CERC), in its latest order, has slashed the awarded capacity and imposed penalties on a solar developer for delayed commissioning of its plant in Rajasthan. The case involved a dispute between SBSR Power Cleantech Eleven Private Limited (SBSR), the Solar Energy Corporation of India (SECI), and Delhi discoms Tata Power Delhi Distribution Limited (TPDDL) and BSES Yamuna Power Limited (BYPL).

The controversy centred on the delayed commissioning of a 300 MW solar project in Bikaner, Rajasthan, developed under a Power Purchase Agreement (PPA) with SECI.

Under back-to-back Power Sale Agreements (PSAs), SECI had tied up the power with Delhi discoms—200 MW for TPDDL and 100 MW for BYPL. The dispute emerged after SBSR failed to commission the entire capacity within the stipulated timeline and later sold part of the project’s capacity to a third party following SECI’s refusal to grant further extensions.

Background of the Dispute

As per the details of the case, shared in the order, SBSR sought an extension of the Scheduled Commissioning Date (SCoD) and requested relief from liquidated damages and encashment of its Performance Bank Guarantee (PBG). The developer attributed project delays to the COVID-19 pandemic and delays in regulatory approval of the PSAs by the Delhi Electricity Regulatory Commission (DERC), arguing that the agreements became effectively enforceable only after such approvals.

After SECI declined to extend the SCoD beyond May 20, 2022, SBSR contended that the contracted capacity automatically stood reduced to the 150 MW commissioned by the long-stop date, the order said. The company also argued that the additional 62.5 MW commissioned later was outside the PPA’s scope and could be sold to third parties, noting that SECI had issued a No Objection Certificate (NOC) allowing such a sale to the Electricity Department of Goa.

DISCOMs and SECI Push Back

TPDDL and BYPL opposed the developer’s claims, asserting entitlement to their full contracted share and alleging that diversion of 62.5 MW to third-party buyers constituted a breach of contract. They argued that regulatory approval delays did not prevent commissioning, pointing out that SBSR successfully commissioned 150 MW despite pending approvals. The discoms also sought encashment of the PBG and liquidated damages to compensate for renewable purchase obligation (RPO) shortfalls.

SECI maintained that multiple extensions totaling 502 days had already been granted and that the May 20, 2022 long-stop date was final. While confirming issuance of the NOC for third-party sale to prevent idle capacity, SECI clarified that the move was without prejudice to the rights of the discoms.

CERC’s Findings and Order

In its ruling, CERC upheld the contractual framework and issued the following key directions:

• Contracted capacity reduced: The Commission ruled that the PPA capacity stands officially reduced from 300 MW to 150 MW, corresponding to the capacity commissioned by the long-stop date.

• No obligation to supply 62.5 MW: The Commission held that SBSR is not obligated to supply the 62.5 MW commissioned after the deadline to TPDDL or BYPL, as this capacity now falls outside the PPA.

• Penalties imposed:

  • SBSR must pay pro-rata penalties through encashment of the PBG for 100 MW commissioned between January 19, 2022 and May 20, 2022.

  • The developer is also liable for penalties related to the remaining 150 MW that was never commissioned under the PPA.

• RPO indemnification rejected: CERC denied the discoms’ request for indemnification for RPO shortfalls, stating that supply obligations reduce proportionately when contracted capacity is reduced under the PPA.

Contractual Terms Upheld

CERC emphasised the primacy of contractual provisions, citing the Supreme Court’s “Sasan judgment,” which limits regulatory intervention in rewriting contract terms. The Commission noted that Article 4.6.2 of the PPA explicitly provides for automatic reduction of capacity if commissioning is delayed beyond 24 months from the effective date.

The Commission also observed that delays linked to COVID-19 and transmission access had already been addressed through earlier extensions. Additionally, the NOC enabling third-party sale was viewed as a valid novation, effectively discharging the 62.5 MW capacity from the original PPA.

The order brings clarity to the allocation of risks and obligations in delayed renewable projects, reaffirming strict adherence to contractual timelines and provisions in SECI-backed solar tenders.