Telangana Regulator Directs DISCOM to Settle Solar Developer’s Unpaid Bills

Telangana State Electricity Regulatory Commission (TSERC) has imposed a penalty of ₹50,000 (~$599) on Southern Power Distribution Company of Telangana (TGSPDCL) for failing to comply with a previous order mandating the settlement of unpaid energy bills and Late Payment Surcharges (LPS).

TGSPDCL had also not complied with the directions to open an irrevocable revolving Letter of Credit (LC) as per their Power Purchase Agreement (PPA) with Polepally Solar Parks, the petitioner in the case.

The Commission also ordered an additional ₹300,000 (~$3,597) to be paid to the petitioner.

Background

The petitioner, Polepally Solar Parks, is a generating company engaged in solar energy generation. It operates a 25 MW solar power project in Telangana, supplying electricity to TGSPDCL. Despite the Commission’s order directing TGSPDCL to make outstanding payments, including LPS, and to open an LC under their PPA, TGSPDCL did not comply.

The PPA, originally signed on May 29, 2014, and subsequently amended several times, mandates that payments should be made within 30 days from the meter reading date, with LPS applicable for delays.

In 2022, Polepally Solar Parks sought the following reliefs: compliance with the PPA provisions, immediate release of ₹267.93 million (~$3.21 million) in outstanding payments, payment of ₹71.3 million (~$855,141) in LPS for invoices raised before November 2020, timely future payments, and the opening of an irrevocable revolving LC.

In August 2022, the Commission directed TGSPDCL to settle unpaid energy bills and outstanding LPS within 45 days and put an irrevocable revolving LC in place. However, TGSPDCL did not do so. In December 2022, TGSPDCL said it would pay the principal amount in 12 installments.

Despite waiting beyond the stipulated timeline, Polepally Solar Parks observed a discrepancy of ₹24.8 million (~$297,422) in the outstanding principal amount and noted that LPS had not been accounted for.

The petitioner contended that the Commission is empowered to enforce its orders under Regulations 26 and 45.

Polepally Solar Parks emphasized that TGSPDCL’s delays had jeopardized its ability to service debts and affected the return on its investment. The distribution company had violated the commercial principles set out in Section 61 of the Electricity Act, 2003. Moreover, the situation undermined the promotion of renewable energy generation, contravening Section 86(1)(e) of the Act.

Commission’s Analysis

The Commission noted TGSPDCL’s failure to file a counter affidavit or provide updates on the payments due. Despite multiple opportunities, TGSPDCL did not present any substantial response, leading the Commission to presume non-compliance.

It acknowledged that TGSPDCL had partially complied by arranging to pay the principal amount. However, it failed to pay the LPS and open the LC.

The Commission ruled that it was imposing a penalty of ₹50,000 (~$599) on TGSPDCL for non-compliance with the 2022 order in its entirety.

It also reiterated the necessity for TGSPDCL to comply fully with the original order and directed an additional cost of ₹300,000 (~$3,597) to be paid to the petitioner to ensure justice.

“Under Section 142, a penal provision, a person is obligated to comply with commission orders and regulations. Non-compliance triggers penalties under this section, which has been seldom exercised by commissions. In a significant move, the Commission has now levied costs on distribution companies for unpaid invoices. The order mandates immediate clearance of pending invoices, a ₹50,000 (~$599) penalty for defying the Commission’s order, and payment of ₹300,000 (~$3,597) as additional costs to the petitioner to uphold fairness. This ruling aims to prevent distribution companies from delaying payments and misusing the PRAAPTI Portal to unjustly dispute invoices. It highlights the distribution company’s default in payment and restricts frivolous disputes.” said Aaditya K Singh, Partner at Dentons Link Legal and advocate for Polepally Solar Parks.

In June 2023, The Telangana power distribution companies (DISCOMs) filed a petition with the Commission seeking its approval to amend the PPAs to shift the billing cycle for renewable energy projects from the 24th and 25th of each month to the 1st of the calendar month.

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