Not all SECI Project’s Tariff will be adopted by CERC

Flip-Flop of CERC

Till the pronouncement of the order by CERC in Petition №52/AT/2021, it was an accepted (in the industry) proposition that CERC will adopt tariffs for all such bids which have been invited by SECI & NTPC. CERC had not appreciated objections of DISCOMs on the ground of jurisdiction and has adopted tariffs and has passed change in law orders of SECI/NTPC bid projects.

CERC has relied on the word “Composite Scheme” while assuming jurisdiction. For satisfying criterion of composite scheme, CERC had observed following in Petition №188/MP/2017-

“From the above it is observed that if under a scheme there is generation or sale of electricity in more than one State then the same is covered under the expression of the “Composite Scheme” and is consequently under the jurisdiction of the Central Commission.”

CERC relied on provisions of bid documents which had envisaged selling of 90% capacity to host state and remaining 10% to outside of the state. It is important to note that actual sale to two state was not necessary for CERC to exercise the jurisdiction and in most of the decided cases actual sale was only to one state, however bid documents had provision for selling electricity to more than one state.

In a nutshell, CERC has exercised jurisdiction over following type of projects (bid by SECI/NTPC), if such project documents provisioned sale (even if actual sale does not happen) to more than one state (Even if in actual, they were selling to one state):

a) Generation in State A and Sale of entire quantum in State B;

b) Generation in State B and Sale of entire quantum in State B.

It was a routine matter before CERC to adopt SECI/NTPC Projects tariff, till it pronounces order in Petition №52/AT/2021.

Instant Matter

SECI had filed the Petition under Section 63 of the Electricity Act, 2003 (hereinafter referred to as ‘the Act’) for adoption of tariff for 150 MW grid-connected floating solar power projects. The present bid was floated by SECI on behest of UP Power Corporation Limited (“UPPCL”). SECI filed tariff adoption petition before CERC and made following submission on the jurisdiction:

a) SECI is an inter-trading licensee;

b) SECI is owned and controlled by the Central Government, the activities undertaken by SECI falls under the scope and ambit of Section 79(1)(a) of the Act.

c) In the instant case, SECI has been allowed to sale electricity to other DISCOM as well, if there is payment default by SECI. SECI placed heavy emphasis on this ground and compare it with 10% logic of CERC and submitted that in the instant case as well, sale to two or more DISCOM is envisaged, therefore it is composite scheme.

CERC has rejected all submission and distinguished the instant matter with earlier matters on the ground that earlier matters were of JNSM Scheme and this scheme specifically envisaged sale to more than one state. Therefore, CERC was right in exercising jurisdiction over those matters. Para 31 of the Instant Matter quoted hereinbelow:

“31. Thus, in respect of the Projects under the above JNNSM Scheme, the Commission had observed that as per the provisions of the Scheme, MNRE was required to specify the total State-wise capacity for the Projects based on commitments from the State for off-take of not less than 90% of power and for the remaining 10% of power, the host State is required to facilitate inter-State transfer of power to sell to other buying entities and thus, the JNNSM Scheme, itself envisaged that the power from the project developed under the Scheme shall be supplied to more than one State. In the above background, the Commission had exercised its jurisdiction in the said matters.”

Implication/View

A) CERC may have distinguished the instant matter with earlier orders. However, this judgment will give one more argument to Distribution Companies (“DISCOMs”) which have challenged Change in Law orders on the ground of jurisdiction. DISCOMs are mainly contending that to qualify transaction as a composite scheme, there has to be actual sale of electricity to more than one DISCOM. In most of the cases, entire electricity is being procured by one state.

B) It appears CERC was in haste while writing this judgment. At one para it justified its earlier orders and at various places it made statements which are in direct contradiction of its earlier change in law/adoption orders. Few contradictory paras from order:

35. As per the above provisions of the Guidelines, where a procurer is single distribution licensee, the Appropriate Commission for the purpose of these Guidelines, including for adoption of tariffs shall be the State Electricity Regulatory Commission of the concerned State where the distribution licensee is located, whereas in case of combined procurement where the distribution licensees are located in more than one State, the Appropriate Commission is the Central Commission.

36. The present case is not a case of combined procurement where the distribution licensees are located in more than one State as provided in Clause 2.2.1(b) quoted above, where the Appropriate Commission would be the Central Commission. Hence, the aforesaid contention of SECI deserves to be rejected.

C) SECI will have to necessarily file an appeal against this order because SECI is heavily relying on Central Generating Station and Inter-Trading Licensee argument before APTEL to defend earlier change in law orders. Almost all change in law orders have been challenged by DISCOMs and these two main arguments of SECI has been rejected by CERC in the instant case. DISCOMs will rely on this order (before APTEL) to counter Developers’ and SECI’s Change in Law claim. If this order will not be stayed/reversed, SECI will have only one argument to defend Change in law orders i.e. bid documents envisaged composite scheme.

D) The distinction brought by CERC between earlier orders and the instant matter, does not appear to be sustainable. In the instant matter as well, there is a default provision which enables SECI to supply to other DISCOM’s.

I believe if CERC/Generators will solely rely on the “Composite Scheme” argument before APTEL, then there are greater chances that all change in law orders of CERC will be reversed. God forbid if it happens because jurisdiction goes to the root of the matter and APTEL, will have no option except to ask each state commissions to adjudicate change in law matters. Let’s hope SECI files an appeal and get stay on this order at the earliest.