SECI Fails To Wriggle Out of MERC Jurisdiction. Faces MSEDCL Claims for Damages

In an order with possibly far reaching consequences for SECI (Solar Energy Corporation of India), the Maharashtra Electricity Regulator (MERC) has opted to place the central government undertaking on the dock, for a claim brought in by MSEDCL (Maharastra state Electricity Distribution Company Limited).

MSEDCL’s main complaint against SECI, which it opted to bring before the state regulator, was for payment of damages of over Rs 130 crores  caused due to failure to honour a Power Sale Agreement (PSA) SECI had signed it with it for 1000 MW of solar power in 2016. SECI, on its part, chose to challenge the jurisdiction of MERC in the case, with a series of contentions, all of which were eventually set aside by the MERC. The contentions from SECI, broadly, were that-

a)  As it was a central government entity mandated to achieve objectives in a national program (JNNSM scheme), and hence, outside the purview of state level regulators.

b) That it was a generating firm owned by the central government, owing to the generating facilities it owned in Rajasthan and Andaman and Nicobar Islands, hence , like other central owned generation firms, outside MERC’s purview.

c) That the matters relating to the tariff determination and all matters connected thereto of SECI in regard to its dealings with the distribution licensees are governed by the provisions of Section 79 of the EA, 2003 and therefore, fall under the regulatory control of the Central Commission (CERC).

d)That where the CERC has jurisdiction, the role of State Commission is restricted to procurement of power only in terms of Section 86 (1)(b) of the EA read with Rule 8 of the Electricity Rules, 2005.

e) Finally, it didnot need a state level trading license, since CERC had provided it a national trading license, and that even according to the PSA, it had rights to sell the power outside the state too, making this an inter state matter, and hence a case for CERC.

Almost all of SECI’s contentions were demolished on the basis of three key acts. That by charging a trading margin of 7 paise per unit, it was a fit and proper trading agency.

That the power in this case as both being generated, and sold to in the state of Maharashtra, giving the state regulator eminent  jurisdiction over the issue.

And finally, even the PSA clearly specifies only a minimum of 90 percent of the power that needs to be sold to the state, not a maximum. And even should SECI want to sell it outside, it clearly has to give first right of refusal to the MSEDCL.

Thus, SECI and MSEDCL now face an intriguing battle to see how the MERC adjudicates on the dispute.

The solar power developers who have caused SECI to land in this situation could not be confirmed by us at this stage, as one assumes SECI will, in turn, look at getting back any penalties it incurs from them for the delay. As all of its PSA’s are signed with back to back PPA’s with developers.

For now, it has two weeks to prepare its rejoinder to this setback at the MERC. The full order can be viewed here.

Incidentally, another central generator and key solar player, NTPC , in a case at the UPERC, has also taken the same stand of being a central utility, and hence outside the purview of the state regulator in a case (Number 1555/2020). However, as a ‘proper’ generator, besides generating power outside the state in said project, NTPC seems to have a far better chance of actually making its case.