SOUTHERN POWER DISTRIBUTION COMPANY OF TELANGANA LIMITED. vs TELANGANA STATE ELECTRICITY REGULATORY COMMISSION &Ors . on 30 May 2023

J U D G M E N T

PER HON’BLE MR. SANDESH KUMAR SHARMA, TECHNICAL MEMBER

1. The captioned appeals being DFR No. 139 of 2022 and Appeal No. 281 of 2022 have been filed by M/s. Southern Power Distribution Company of Telangana Limited (hereinafter referred as “Appellant”) being aggrieved by the decision of the Telangana State Electricity Regulatory Commission (in short “TSERC” or “State Commission”) directing the Appellant to facilitate synchronization of the generating stations owned by the Solar Power Plant developers, the Respondents in the two captioned appeals.

2. The Appellants challenges the impugned orders dated 12.11.2021 and 09.02.2022 passed by the State Commission in Original Petition No. 2 of 2020 filed by M/s. Tejas India Solar Private Limited (in short “TISPL”) and Original Petition No. 37 of 2021 filed by M/s. BVM Energy & Residency Private Limited (in short “BERPL”) respectively, wherein, the Appellant was directed to synchronise the projects of the developers within 30 days and to grant open- access in accordance with Terms and Conditions of Open Access Regulations, 2005 ("LTOA Regulations").

PARTIES

3. The Appellant No. 1, the common Appellant in the two captioned appeals, is a Government Company engaged in the business of Distribution of Electricity in the State of Telangana and is the only Appellant in the first captioned appeal and the Appellant No. 2 in the second captioned appeal is the officer of the Appellant No. 1 entrusted with the responsibility inter-alia to take necessary action in compliance with the directions issued.

4. The Telangana State Electricity Regulatory Commission, Respondent No.1 in the first captioned appeal and the Respondent No. 2 in the second captioned appeal, is a statutory authority constituted under the Electricity Regulatory Commission Act, 1998 and inter alia vested with powers to adjudicate the dispute in hand.

5. The Respondent No. 2, the TISPL in the first captioned appeal and the Respondent No. 1, the BERPL in the second captioned appeal, are the Solar Power Developer (in short “SPD”) and have commissioned Solar Power Projects (in short “SPPs”) in the State of Telangana.

6. The Transmission Corporation of Telangana Limited, Respondent No.3 herein, is the Transmission Licensee of the State of Telangana inter-alia vested with the function of State Load Dispatch Centre (in short “SLDC”) for the State of Telangana.

FACTUAL MATRIX

7. During the hearing held on Interlocutory Applications (in short “IA”), the Appellant argued that the State Commission has erred in issuing directions for the synchronization and grant of Open Access to the SPDs of TISPL and BERPL, the only issue which require adjudication, which is one of grievances filed for interim stay, as such, will be same as disposing of the appeals on their merit, therefore, with the consent of the contesting parties, it was decided to adjudicate the captioned appeals itself.

8. As, the questions of law and the factual matrix in the two captioned appeals are identical, therefore, the two appeals are dealt together and the first captioned appeal i.e. Appeal No. 281 of 2022 is taken up for adjudicating against the issue raised in these appeals.

9. The factual matrix of the first captioned appeal i.e. DFR No. 281 of 2022 filed by the Appellant against the State Commission as Respondent No. 1 and TISPL as Respondent No. 2 is noted in brief in the succeeding paragraphs.

10. In 2015, the Government of Telangana notified "The Telangana Solar Power Policy 2015" (in short “Solar Policy"), effective from 01.06.2015 and having tenure of five years, thus effective up to 31.05.2020, for ensuring long- term energy security in the State and to promote a sustainable fuel mix in generation through higher contribution of solar energy inter-alia providing incentives and other measures for SPPs to be setup in the State of Telangana for supplying electricity to the distribution companies of the State of Telangana or to third parties located within the State.

11. As per clause 11 of the Solar Policy, all the incentives available to the SPDs were subjected to the commissioning of the SPPs within the time limit stipulated in the PPA or within a maximum period of 2 years from the date of application whichever is earlier, failing which the incentives available under the policy automatically stands cancelled.

12. TISPL, initially, proposed to set up a 6 MW capacity SPP and accordingly, on 16.09.2015, applied for technical feasibility approval for the 6 MW SPP.

13. As against the application of TISPL for technical feasibility approval for connectivity at 33/11 kV Kodakandla Sub-Station at Gajwei (Mandal), Medak (District), the Appellant vide letter dated 01.12.2015, gave conditional technical feasibility approval for connecting the proposed 6 MW solar plant at Kodakandla sub-station 33 kV, with the condition that the TISPL furnishing a bank guarantee corresponding to the proposed capacity at the rate of Rs. 2,00,000/- per MW, additionally, TISPL ensures completion of the project within two years which included execution of line works up to the point of interconnection, installation of necessary equipment for injecting power and metering and integration of communication systems to transfer real time data to the SLDC.

14. On 22.12.2015, TISPL submitted the performance bank guarantee of Rs. 12,00,000/-, as against the proposed capacity of 6 MW, from Indian Overseas Bank with validity until 21.02.2018.

15. Subsequently, on 18.09.2017, the Divisional Engineer (Elec.) Gajwel in its address to Superintending Engineer, Siddipet stated that the work pertaining to evacuation of power from 3 MW Solar Power Project at 33KV level by TISPL was inspected and found to be complete, accordingly, vide order dated 13.10.2017, the Superintending Engineer (Siddipet) issued a work completion report in respect of 3 MW capacity for third party sale.

16. Thereafter, TISPL vide letter dated 16.10.2017 requested the Appellant to synchronise the 3 MW plant to the grid under "phase - I" of the project based on the work completion report.

17. However, the Appellant argued that the report was silent relating to the installation of SCADA/DAS systems, a mandatory condition for granting the technical feasibility approval in the first place, and a statutory requirement under Section 25.25 of Regulation No 4 of 2018 (the State Electricity Grid Code), thereafter, in response to the observation of the Appellant, the TISPL on 14.11.2017 informed SLDC that the installation of the SCADA/DAS system would require another sixty days to complete and requested SLDC to give clearance for synchronising the plant to the grid as further delay would have an adverse effect on their financials.

18. The request of synchronization of TISPL was rejected by SLDC stating that it is mandatory to transmit the real time plant data before synchronising the plant.

19. On 16.01.2018, the Appellant issued notice for the invocation of the bank guarantee furnished by TISPL on the ground that TISPL had failed to commission the project as proposed, i.e., to submit work completion report by 21.12.2017 and generate electricity from the SPP having sanctioned capacity of 6 MW, which was replied through request letter dated 19.01.2018 by TISPL for withdrawing the notice invoking the bank guarantee.

20. Thereafter, being aggrieved by non-synchronisation of SPP by the Appellant, TISPL filed the O.P. No. 2 of 2020 before the State Commission seeking direction to the Appellant to synchronise their solar plant of 3 MW to the 33/11 kV Kodakandla Substation and grant long-term open access, also praying for declaring the encashment of bank guarantee by the Appellant as arbitrary and illegal, consequently, issuing direction to repay the amount of Rs.12,00,000/- with interest @1.25 % per month, however, the Appellant countered the prayer before the State Commission submitting that the SPD had failed to complete the project within the stipulated time, and that the bank guarantee was encashed because of the failure of the SPD to synchronise the proposed 6 MW SPP within the specified time.

21. On 12.11.2021, the State Commission passed the Impugned Order accepted the submission of the Appellant regarding encashment of the bank guarantee, nevertheless, directed the Appellant to facilitate synchronisation of the plant to the grid within 30 days and also facilitating the grant of open access as per extant regulations, clarifying that the SPD deserves a "special consideration" in exercise of its mandate under Section 86(1)(e) of the Electricity Act.

22. The factual matrix of the second captioned appeal i.e. DFR No. 378 of 2022 filed by the Appellant against the State Commission as Respondent No. 2 and BERPL as Respondent No. 1 is identical to the first captioned appeal except certain facts relating to calendar dates and technical parameters i.e. capacity of the SPP etc, as briefed hereunder.

23. The SPD being BERPL vide application dated applied for setting up of a 8 MW SPP to be connected at 33/11 kV at Chillepally SS, Siddapur Village, Jharasangam Mandal, Sangareddy District, Telangana State for 3rd party sale.

24. In pursuant to the aforesaid application, the Appellant through TSSPDCL, on 09.12.2015, issued technical feasibility to the Respondent for grid connectivity at 33 kV side of 33/11 kV Chillepally SS at 33KV voltage level emanating from 33 KV Jharasangam feeder existing on 132/33 KV Zaheerabad SS in Medak (Dist) for establishing 7 MW solar plant under 3rd party sale subject to the condition of furnishing bank guarantee from any nationalized bank for Rs. 2,00,000/- per MW, accordingly, on 05.01.2016, BERPL furnished the bank guarantees of Rs 14,00,000/- to the Appellant for commencing their project.

25. Consequently, the Appellant vide letter dated 15.02.2016 accepted the proposal with the condition that the plant has to be commissioned and synchronized with the grid within two years i.e. on or before 22.12.2017 from the date of issue of bank guarantee i.e. from 23.12.2015.

26. However, the SPD failed to commission and synchronize the project within two years from the date of issuing of the bank guarantee to the Appellant i.e. on or before 22.12.2017 claiming unforeseeable and force majeure events and subsequently sought time for extending the feasibility of the Solar Power project, further, BERPL submitted Demand Draft for Rs. 14 Lakhs dated 26.12.2017 requesting the Appellant not to encash the bank guarantee.

27. Thereafter, on 17.07.2018, BERPL requested the Appellant for granting the permission for synchronization of their SPP informing that their project was completed in all respects and is ready for synchronization.

28. It is was argued by the Appellant that the request for seeking permission for synchronization of their SPP was enclosed without any supporting documents certifying completion of the project work.

29. Being aggrieved by the decision of rejection of permission for synchronization, BERPL filed the O.P. No. 37 of 2021 before the State Commission praying similar relief as sought by TISPL i.e. Respondent No. 2 in the first captioned appeal, seeking direction to issue synchronization and to grant open access to enable BERPL to supply power from its 7 MW project for its captive users or the scheduled consumer(s).

30. The Appellant argued that the State Commission, while passing the Impugned Order dated 09.02.2021 directed the Appellant to facilitate synchronization within 30 days and grant Long Term Open Access to the SPP of BERPL, ignoring the Clause 11 of the TSPP-2015 and the fact that the validity period of the technical feasibility for the BERPL’s SPP expired on 22.12.2017.

31. Aggrieved by the Impugned Orders passed in O.P. No. 2 of 2020 and in O.P. No. 37 of 2021, the Appellant has filed the captioned appeals.

Analysis and Conclusion

32. The only issue under dispute is whether the synchronization and grant of open access to the SPPs for supplying electricity to captive users or for third party sale can be denied if the SPPs fails to comply with the terms and conditions of the Solar Policy i.e. whether the Appellant can deny the permission citing reasons that the SPPs have not been commissioned by the SPDs within the time specified as per the Solar Policy or the PPAs signed.

33. It is important to note here that the SPDs has not claimed any benefit under the Solar Policy before this Tribunal, as envisaged in the initial proposal, and only seeking for connectivity / synchronization as a Generator/ Captive Generator for sale of energy to third party/ captive users.

34. The Appellant has emphasised that the commissioning of the SPPs was delayed as against the provisions of the Solar Policy and therefore, the State Commission has erred in directing the Appellant to synchronise the SPPs and grant open access.

35. It is therefore, important to note the relevant extracts of the Solar Policy, quoted as under:

“1. PREAMBLE In the last decade, due to increasing thrust of Governments across the world towards fuel conservation and clean energy, solar power capacity has increased by over 45 times and stands at about 184 GW in 2014. In India, capacity additions in solar power have been even more remarkable. In contrast to mere 10 MW in 2010, total solar capacity in India has grown to nearly 3000 MW in 2015. --------- Telangana has a vast solar potential with average solar insolation of nearly 5.5 kWh/m2 for more 300 sunshine days. Government of Telangana (GoTS), intends to make use of the positive environment in solar market and push given by GoI for substantially harnessing the solar potential in the state of Telangana. This policy of GoTS on solar has provisions which aims at creating an enabling environment for prospective solar power developers to harness substantial quantum of solar power in the best possible manner. This in turn is expected to meet the objective of GoTS to provide competitive, reliable power supply to its consumers and also to ensure a sustainable fuel mix in the long run. -----

3. OBJECTIVES: This solar policy has the following specific objectives:

1. Realize and harness the vast solar power potential of the State.

2. Contribute to long-term energy security of the state and promote a sustainable fuel mix in generation through higher contribution of solar energy.

3. To promote solar parks

4. To promote public as well as private investment in solar power generation

5. To promote decentralized and distributed generation

6. To promote grid connected and off-grid solar applications and effective energy conservation measures.

7. To promote all technologies of harnessing solar energy.

4. OPERATIVE PERIOD

This policy shall come into operation with effect from the date of issue and shall remain applicable for a period of five (5) years. All Solar Projects that are commissioned during the operative period shall be eligible for the incentives declared under this policy, for a period of ten (10) years from the date of commissioning - unless otherwise the period is specifically mentioned.

5. APPLICABILITY OF THE POLICY This solar policy shall be applicable for the following solar projects set up within the state-

1) Solar Power Projects (SPPs)

a) Grid connected solar power projects based on both Photo Voltaic (PV) as well as Solar Thermal technologies  Projects set up for sale of power to TSDISCOMS  Projects set up for sale of power to third parties within the state

b) Projects set-up for captive generation/ group captive generation (including those funded and owned by developers). ----------- For availing benefits under this policy, power generated from any of the above modes, has to be consumed within the state. ---------

11. EASE OF BUSINESS – ENABLING PROVISIONS

The State, in order to encourage solar based generation, has prepared the following measures for improving the ease of doing business. However the project developer has to ensure that the generation is within the time limit stipulated in the PPA or within a maximum period of 2 years from the date of application whichever is earlier, failing which the provisions under this policy automatically stands cancelled. The following provisions are for Solar Power Projects (SPP) and solar parks, wherever applicable.”

36. It cannot be disputed that the Solar Policy was notified by the State Government of Telangana with clear objective of promoting solar generation in the State through realising and harnessing vast solar potential of the State, ensuring energy security through sustainable fuel mix, private sector participation in solar power generation etc.

37. From the above, it can, therefore, be construed that the purpose and objective of Solar Policy has been the promotion of Solar Power by extending certain benefits and incentives to various Solar Projects commissioned during the period covered by the policy, however, such benefits and incentives can be extended only to the SPPs which are commissioned within the specified time period, otherwise, the projects shall be treated as any other generating project under the provisions of the Act and the Rules / Regulations framed thereunder.

38. We find no merit in the argument of the Appellant that any SPP which is not commissioned within the specified time can be denied synchronization and grant of open access under the relevant provisions of the Act and the Rules and Regulations framed thereunder.

39. The generation of electricity is a delicenced activity, however, connectivity to the grid and supply to licensees and consumers is governed by the provisions of the Electricity Act, 2003.

40. The relevant provisions of the Electricity Act, 2003 (in short “the Act”), which govern the synchronization and grant of open access vis-a-vis duties of the distribution licensee are reproduced hereunder for ready reference.

a) Sub-section 47 of Section 2 “(47) "open access" means the non-discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission;”

b) Section 7 “Any generating company may establish, operate and maintain a generating station without obtaining a licence under this Act if it complies with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73.”

c) Section 9

“(1) Notwithstanding anything contained in this Act, a person may construct, maintain or operate a captive generating plant and dedicated transmission lines: Provided that the supply of electricity from the captive generating plant through the grid shall be regulated in the same manner as the generating station of a generating company: 1 [Provided further that no licence shall be required under this Act for supply of electricity generated from a captive generating plant to any licensee in accordance with the provisions of this Act and the rules and regulations made thereunder and to any consumer subject to the regulations made under sub-section (2) of section

42. ]

(2) Every person, who has constructed a captive generating plant and maintains and operates such plant, shall have the right to open access for the purposes of carrying electricity from his captive generating plant to the destination of his use: Provided that such open access shall be subject to availability of adequate transmission facility and such availability of transmission facility shall be determined by the Central Transmission Utility or the State Transmission Utility, as the case may be: Provided further that any dispute regarding the availability of transmission facility shall be adjudicated upon by the Appropriate Commission.”

c) Section 42 “(1) It shall be the duty of a distribution licensee to develop and maintain an efficient, co-ordinated and economical distribution system in his area of supply and to supply electricity in accordance with the provisions contained in this Act.

(2) The State Commission shall introduce open access in such phases and subject to such conditions, (including the cross subsidies, and other operational constraints) as may be specified within one year of the appointed date by it and in specifying the extent of open access in successive phases and in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies, and other operational constraints:”

41. It is thus clear that any person can construct, operate and maintain a generating station or a captive generating plant without obtaining a licence and its connectivity shall only be governed by the provisions that it complies with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73 of the Act i.e. the Regulations notified by the Central Electricity Authority under section 177 of the Act.

42. Further, captive generating plants also enjoys the right to open access for the purposes of carrying electricity from his captive generating plant to the destination of his use in terms of section 9 of the Act, as quoted above.

43. Additionally, it is the duty of the distribution licensee to develop and maintain the distribution system in his area of supply whereas the State Commission shall introduce open access within the State without discriminating provision for the use of distribution system or associated facilities with such lines or system.

44. Therefore, the Appellant’s argument that the synchronization of the SPP can be denied due to delay in commissioning of the SPP lacks merit, as it is the right of a generating station to seek connectivity/ synchronization with the grid if it complies with the Regulations notified under section 177 of the Act.

45. Further, the Appellant contended that the SPD has proposed 6 MW of capacity whereas it has only commissioned 3 MW SPP, as the SPD is not supplying power to the Appellant, the Appellant can not be aggrieved by non- completion or partial completion of the project, additionally, the lower capacity cannot be considered unsafe or unsecured for the distribution grid to the extent of availability of distribution system.

46. Secondly, the Appellant is not seeking any relief or incentive under the Solar Policy, therefore, irrespective of the capacity it enjoys all the rights as enshrined under the Act.

47. On the contrary, the TISPL submitted that it has received information regarding the Appellant creating problems with granting Long Term Open Access (“LTOA”) to other generators, therefore, it took a commercial decision to not construct further due to the risk involved however, by this time, the plant had been constructed to the extent of 3 MW capacity, also submitted that there was no obligation on it under any contract or the Solar Policy or the technical feasibility approval to commission a 6 MW plant, further, reiterated that the minimum capacity in terms of the Solar Policy was 1 MW only as such, there was no default or breach on its part in setting up a plant for 3 MW, and this was accepted by the Appellant and SLDC as well without any protest.

48. As seen, the Solar Policy provides the minimum capacity which can be commissioned as 1 MW and the capacity commissioned by the SPD is 3 MW which is consistent with the Solar Policy, nevertheless, the SPD is not seeking any relief under the Solar Policy before us, therefore, the contention of the Appellant cannot be accepted for denial of synchronization.

49. The Appellant also argued that it has to abide by the policy of the State government to provide 24 hours of reliable power supply to all the consumers including agricultural services, and thus, the Appellant had to make necessary arrangements for adequate power procurement from various conventional & non-conventional sources and as a result of which the network became completely loaded, therefore, the request of synchronization of SPD’s project cannot be considered due to non-availability of distribution corridor.

50. On being asked whether such a plea was taken before the State Commission, the Appellant denied, also against the basis of such a submission before us, the Appellant failed to present any technical study or data confirming that the distribution corridor required for evacuating the power from the SPP is overloaded.

51. It was also countered by TISPL that the solar power generated and injected during the sunlight may result into destabilization of the grid discipline as claimed by the Appellant, finds merit as there was no technical evidence through technical study was placed before us by the Appellant.

52. The issue of encashment of bank guarantee and the delayed commissioning of the project on the ground of non-installation of DAS/SCADA is not required to be adjudicated as it has already been decided in favour of the Appellant and the SPDs are not in appeal on these issues before us.

53. The State Commission vide the Impugned Orders has rightly held that the SPPs attract special consideration in public interest which is also the mandate given to the State Commission under Section 86(1)(e) of the Electricity Act, 2003 i.e. “promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee.”

54. The SPDs during the hearing have passionately put forth their submission that the Appellant unjustly and unreasonably acted in non- compliance, violating the directions rendered through the Impugned Orders, despite not being granted stay by this Tribunal, and continued to disobey the directions by refusing to synchronise the SPPs, further, submitted that it is suffering a significant loss on its investment in setting up the SPPs as it is not receiving any tariff even though it is ready to supply electricity and its BGs have also been encashed.

55. The SPDs also submitted that the Appellant is only trying to delay the synchronization of SPPs through seeking stay in turn effectively rendering the Impugned Orders unimplementable by passage of time and fait accompli, causing irreparable harm to the SPDs on each day that the present frivolous Appeal is kept pending and its solar project is not synchronized.

56. As observed above, the Appellant failed to justify reasons for filing the Interlocutory Applications in the captioned appeals, additionally, in justifying the reasons for filing the captioned appeals itself.

ORDER

For the foregoing reasons as stated above, we are of the considered view that the present appeals being Appeal No. 281 of 2022 and DFR No. 139 of

2022 filed by the Appellant i.e. Southern Power Distribution Company of Telangana Limited are devoid of merit and are dismissed.

The Impugned Orders dated 12.11.2021 and 09.02.2022 passed by the Telangana State Electricity Regulatory Commission in Original Petition No. 2 of 2020 filed by M/s. Tejas India Solar Private Limited and Original Petition No. 37 of 2021 filed by M/s. BVM Energy & Residency Private Limited respectively, are upheld.

All IAs are also disposed of in above terms.

PRONOUNCED IN THE OPEN COURT ON THIS 30th DAY OF MAY, 2023.

(Sandesh Kumar Sharma) Technical Member (Justice Ramesh Ranganathan) Chairperson pr/mkj