India: Projects, Energy & Infrastructure Monthly Newsletter | February 2021

Aligning regulatory restriction on share transfer

• The discrepancy in the provisions of Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar PV Power Projects issued on August 03, 2017 (Bidding Guidelines) and the Central Electricity Regulatory Commission (CERC) (Grant of Connectivity, Long-term Access and Medium-term Open Access in inter-State Transmission and related matters) Regulations, 2009 (Connectivity Regulations), in relation to the change of shareholding, have been a matter of concern.
• The Bidding Guidelines entail a restriction on the parent company to maintain a minimum of 51% shareholding in the project linked special purpose vehicle (SPV) till 1 year after the Commercial Operation Date (COD). As a result, a parent can transfer up to 49% of its shareholding in the SPV within the lock-in period. On the other hand, the Connectivity Regulations restrict the transfer of connectivity and Long-Term Access (LTA) in entirety, with the only exception of transfer of connectivity from the parent company to a wholly owned subsidiary (and vice versa) after expiration of 1 year from COD¹ . Therefore, in case of Connectivity Regulations, the parent of the SPV cannot transfer any of its shares in the SPV till the connectivity is transferred to the SPV upon expiry of the lock-in period.
• It has been a long standing demand of the industry to make the provisions of the Connectivity Regulations and the Bidding Guidelines, in this regard, consistent. The Ministry of Power (MoP), acknowledging the need for such a change, has issued directions to the CERC on February 12, 2021 to align the inconsistency.
• The Central Government is empowered to issue directions in policy matters involving public interest to the CERC² under Section 107 of the Electricity Act, 2003 (Act), as iterated under:
  
  Section 107. (Directions by Central Government):
  
  (1) In the discharge of its functions, the Central Commission shall be guided by such directions in matters of policy involving public interest as the Central Government may give to it in writing.
  (2) If any question arises as to whether any such direction relates to a matter of policy involving public interest, the decision of the Central Government thereon shall be final.
• Accordingly, the MoP has directed the CERC to amend the Connectivity Regulations to align the relevant provision under the Connectivity Regulations with the Bidding Guidelines. Once aligned, if a SPV is utilizing the connectivity granted to a parent company, the parent would still be allowed to part with up to 49% of its shareholding in the SPV during the lock-in period, being 1 year from the COD.
• This is certainly a positive step. We can now expect the CERC to evaluate the direction and amend the Connectivity Regulations. In order to give effect to the same, CERC would issue draft amendments for stakeholder comments. Post receipt of comments, the amendments would be formalized and notified. Once the amendment has been notified, the mentioned change will be deemed to be implemented.
• In what can be seen as a recent step to achieve the aim of enabling quicker clearance of deals by unclogging a major roadblock and fastening fund raising for renewable projects, the Central Government seems to have heard the calls of market players who were in requisition of the same.

SC allows CERC to resume Administrative Operations and pass Orders on Reserved Matters

• Supreme Court (SC) vide its order dated January 20, 2021 in Contempt Petition(C) No. 429/2020 in Civil Appeal No. 14697/2015 titled as K K Agarwal v. Sanjiv Nandan Sahai & Anr has allowed the Central Electricity Regulatory Commission (CERC) to pronounce judgments in reserved matters considering the appointment of Member (Law) by CERC. In addition, the Court also has permitted adjudicatory functioning of CERC upon the Member Law joining the Commission. CERC's functioning was stalled by virtue of Court's Order dated August 28, 2020 for SC's directives as issued through Order dated April 12, 2018 in State of Gujarat & Ors. vs Utility Users' Welfare Association & Ors.³

SC vacates Order of Interim Injunction by Punjab and Haryana High Court on privatization of Chandigarh's DISCOM

• SC vide order dated January 12, 2021 has placed on hold the stay Order dated December 01, 2020 passed by the Punjab and Haryana High Court (HC) thereby allowing the process of privatisation of Electricity Distribution Company of the Union Territory of Chandigarh (DISCOM) to continue.
• In pursuance of a notification by the Central Government in May 2020 to privatize DISCOMs in UTs, the Chandigarh Administration in November 2020, issued a request for proposal inviting bidders to participate in competitive bidding process to acquire a 100% stake in its DISCOM. Opposing the privatisation, a Writ Petition was filed by the 'UT Powermen Union of Chandigarh' in the HC on grounds of being 'unjust and illegal', wherein the HC granted an interim injunction.

GERC allows INR 1.99/kWh Tariff determined in GUVNL's 500 MW Solar Auction

• The Gujarat Electricity Regulatory Commission (GERC) has allowed the tariff of INR 1.99/kWh ascertained in the competitive bidding process of 500 MW of grid-connected power from solar projects conducted by the Gujarat Urja Vikas Nigam Ltd (GUVNL). GERC has directed GUVNL to execute the Power Purchase Agreements (PPAs) within 30 days from January 01, 2021 which is the date of issuance of the Letter of Award (LoA) to the winning bids. As per GUVNL, the successful bidders are expected to Commission the projects within 18 months of signing of the PPAs. The record-breaking tariff of INR 1.99/kWh was quoted by NTPC Ltd for 200 MW, Torrent Power Ltd for 100 MW, Al Jomaih Energy and Water Co Ltd for 80 MW, and Aditya Birla Renewables for 120 MW.

SC disposes-off appeals involving interpretation of Section 121 of the Electricity Act, 2003

• SC has passed an order dated January 29, 2021 in C.A. No. 226-227/2021, involving interpretation of Section 121 of the Electricity Act, 2003. SC held that the Appellate Tribunal for Electricity (APTEL) does not have power under Section 121 of the Electricity Act, 2003 to adjudicate or decide any matter pending before the State Commission. The power under Section 121 is only limited to instruct/direct/issue order to the appropriate commission to perform its duty as provide in the statute.
• Civil Appeals were filed before SC against two orders dated December 24, 2020 and January 12, 2021 passed by APTEL which were adjudicated on merits by APTEL as no legal member had been appointed to the Central Electricity Regulatory Commission (Central Commission). SC observed that APTEL took up the case and decided the same on merits on its own despite the fact that the respondent had approached Central Commission.
• Considering the facts of the case, SC observed that a bare reading of Section 121 of Electricity Act, 2003 states that the APTEL can instruct/direct/issue order to the appropriate commission to perform its duty as provide in the statute. Moreover, it does not authorize the APTEL to decide the cases pending before the tribunal. Therefore, SC set aside the order dated December 24, 2021 and other consequential orders therein.
• Further, SC directed the parties to approach Central Commission for adjudication of the dispute. The court further held that as the Appellant had complied with the erroneous order of APTEL and had granted short-term open access. Therefore, the short-term open access will be continuing only for a week from the date of this order and will cease thereafter.

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Footnotes

1. Regulation 8A, Central Electricity Regulatory Commission (Grant of Connectivity, Long-term Access and Medium-term Open Access in interState Transmission and related matters) (Seventh Amendment) Regulations, 2019

2. In accordance with Section 2(9) of the Act, "Central Commission" refers to the Central Electricity Regulatory Commission.

3. Civil Appeal No. 14697/2015

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