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View: Pursuit of lower solar tariff – Fate of successful bidders in competitive bidding

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View: Pursuit of lower solar tariff - Fate of successful bidders in competitive bidding

Uttar Pradesh has become the latest state to renege on winning bids for solar projects, after the Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) cancelled 184MW worth of projects discovered through auctions. The irony is, developers are not sure if they will get any legal protection against this arbitrary action of UPNEDA and till date, we have not heard about the initiation of any legal proceeding challenging this action of UPNEDA.

In the recent past, we have seen many bid cancellations on the alleged ground of consumer interest. Whatever little precedent we have on bid cancellation matters, we have seen distribution companies heavily rely on the consumer interest ground to justify their action. Surprisingly, the Appellate Tribunal of Electricity (APTEL) in one such dispute justified the cancellation of winning bids. It’s a matter of larger debate whether moving the goalposts is allowed.

Currently, successful bidders of Dholera Solar Park Bid are before APTEL against the retendering attempt of GUVNL after issuance of the Letter of Award.

In this article, I am making an endeavour to assess the legal remedy available to similarly placed developers. First, let us take a look at a brief timeline of a few previous such cases:

2015-2018

BSES Rajdhani Power Limited conducted a competitive bidding process for procurement of power from solar PV projects. Successful bidders were declared. Letter of Intent was issued to successful bidders. The tariff was submitted before DERC for adoption.

BSES approached DERC requesting it to allow withdrawal of the tariff adoption petition on the ground that tariffs are continuously falling, and that they will go for retendering in the consumer’s interest to award the bid on the tariff much lower than the discovered tariff.

On the consumer interest ground, DERC, without hearing successful bidders, allowed withdrawal and went to the extent of holding that BSES has the right to cancel the bidding process without assigning any reason.

APTEL, in Appeal No. 22 of 2016, validated the act of cancellation of the bidding process and refused to give any relief to the developer i.e. SunEdison. (SunEdison Judgement).

2020-2021

GUVNL conducted a competitive bidding process for procurement of power from solar PV projects. Successful bidders were declared. Letter of the award was issued to successful bidders. The tariff was submitted before GERC for adoption.

After the passage of considerable time, GUVNL approached GERC seeking withdrawal of the tariff adoption petition on the ground that there is reasonable expectation that retendering will result in lower tariffs than the tariff discovered.

GERC allowed withdrawal without hearing out successful bidders, allegedly for the interest of consumers at large and public interest.

The matter is still pending for final adjudication before APTEL. APTEL has restrained GUVNL from disturbing the rights of successful bidders till the final hearing is concluded.

2021

UPNEDA floated a bid for procurement of power from solar PV projects. Successful bidders were declared. Developers were asked repeatedly to keep extending bid validity on the pretext that LOI will be issued post-grant of approval from the competent authority.

UPNEDA informed successful bidders about the cancellation of the bidding due to alleged grounds of the inaction of developers, and it also took shelter of a lower tariff. Till date, developers have not approached any legal forum for redressal of their grievances.

The trend continues

If we review the aforementioned three cases, we will find one thing in common: the procurer refuses to recognise the rights of the successful bidder and takes shelter of the bald statement of lower tariff to defeat accrued rights of developers. Further, the trend which started with BSES’s bid cancellation is still continuing. Unfortunately, APTEL lost an opportunity in the BSES case to convey a clear message to the procurer that your discretion ends when you communicate your consent.

What went wrong?

Sun Edison approached APTEL against the DERC order which allowed BSES to abrogate the completed bidding process. APTEL, in its order refused, to consider the law laid down by the same tribunal in Essar Power Judgment (Appeal No. 82 of 2011) wherein APTEL had held that procurer’s right to cancel the bidding process ends when it communicates its acceptance to procurer and submits tariff for the adoption.

APTEL heavily relied on the consumer’s interest argument of BSES to deny legitimate expectations of the developer. APTEL overlooked the fact that DERC was under an obligation to scrutinise the fact i.e., the factual submission of BSES concerning falling rates of tariff. APTEL also ignored the established position settled by Essar Judgment that the procurer loses its right to withdraw the bid once it submits the same before the Commission. APTEL in Essar Judgment has gone to the extent of holding that the right to terminate based on market conditions will be foreclosed post-issuance of the report of the evaluation committee.

Impact of SunEdison Judgment

Till the pronouncement of the Sun Edison Judgment, procurers were cognizant of the existence of Essar Power Judgment and were aware that post completion of the bidding process they have no option except entering into PPA and submitting the tariff to the Commission for adoption. The Sun Edison Judgment became a weapon in the hands of the procurer to show to the world its seriousness towards the noble cause of green energy without even worrying about the burden of the procurement cost (because bidding does not necessarily mean award of the project).

Ray of hope

Present benches of APTEL are cognizant of the fact that it is their bounden duty to a) assess the economic impact of any judgment b) balance the interest of all stakeholders c) recognise that the provisions concerning the promotion of renewable energy have not been deleted from the Electricity Act, 2003.

APTEL in OP No. 6 of 2019 restrained AP DISCOM from withdrawing the tariff adoption petition from APERC, and further restrained AP DISCOM from conducting public hearing on Section 63 tariff.

In the GUVNL-Dholera dispute, APTEL restrained (at interim stage) GUVNL in spite of the fact that the GUVNL counsel kept relying on SunEdison Judgment to submit that procurer is the king of the bidding process and it can cancel the tender process without assigning any reason.

How many SunEdison, Dholera, UPNEDA?

Industry is watching the proceedings of the Dholera bid with high hopes. APTEL is prima facie satisfied with the merit of the dispute and has passed an interim order in favour of the developers. The matter is pending before the Tribunal for adjudication, therefore it will not be proper to comment on the merits of the particular case.

However, a moot question remains: will the Tribunal, while deciding any future bid cancellation dispute, have to deny relief to developers — even when convinced with the merits of the case — on the sole ground that they are bound by the ratio of the Sun Edison Judgment? In my respectful submission, the Tribunal can take the following alternate views to ignore the binding value of the Sun Edison Judgment:

— The Tribunal may endeavour to differentiate between the facts of the matter at hand and the facts of the Sun Edison Judgment, and hold that the ratio of the Sun Edison Judgment does not apply in the instant matter.

— The Tribunal may refer the bid dispute to a larger bench if they find that doing justice in that particular bid dispute is difficult because of the findings of the Sun Edison judgment that give unfettered rights to discoms to cancel the bidding process at any time whatsoever. It is a settled proposition of law that a judgment of a Co-ordinate Bench will be respected and applied by another Co-ordinate Bench, and in respect of a disagreement judicial discipline demands that the later Co-ordinate Bench should refer the matter to a larger Bench.

— Judicial forums show restraint in exercising the third option to place reliance on the principle of per incuriam. The Tribunal may rely on the principle of per incuriam to hold that the Sun Edison Judgment has ignored the binding precedent of Essar Power and for this reason alone, the ratio of the Sun Edison Judgment, which gives unfettered right to discoms to cancel the bidding process, need not be followed.

— A decision is given per incuriam when the Court has acted in ignorance of a previous decision of its own. APTEL, in a judgment dated 29.05.2019 in Appeal No. 250 of 2016, refused to bind itself to the findings of Appeal No. 250 of 2015 and held that the judgment of Appeal No. 250 of 2015 is per incuriam for the fact that it did not comply with the ratio given by the same tribunal.

APTEL, on 07.06.2021(Appeal No. 131 of 2020), again relied on the principle of per incuriam to provide relief to captive power developers by ignoring its earlier decision.

The time has come for courts to realise that our commitment for a greener world will not be achieved merely by legislative actions, and that the judicial wing, while undertaking the task of performing its judicial function, is also required to perform its role in this direction. APTEL has been consistently vide its judgments giving confidence to renewable energy developers and investors that their investment is protected. The following para from the judgment delivered by APTEL in the matter titled “Tamil Nadu Spinning Mills Association vs. Tamil Nadu Electricity Regulatory Commission” says it all:

“While consumer interest and financial health of distribution licensee are important provisions in regard to third party sale, open access and renewable energy sources are of equal significance. The Parliament in its wisdom has considered it necessary that in larger public interest the environment-friendly sources be promoted by balancing such other interests. In competing interests, balance has to be struck. Moving pendulum-like from one end to the other is an ad-hoc and myopic approach not expected of such a high-powered statutory regulatory authority as TNERC. It is, if we may use such analogy, akin to stretching the sheet to cover one extremity only to render the other unjustly uncovered.”

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