Disclaimer

By clicking, "I Accept" below, you accept and acknowledge the following:

The purpose of this website is to provide general information and insights about TLH, Advocates & Solicitors, and not to advertise or solicit work in any manner whatsoever.

Please note that as per the Bar Council of India Rules, advocates in India are prohibited from advertising or soliciting work in any form or manner. You acknowledge that you are visiting this website at your discretion and that there has been no solicitation, invitation, or inducement of any sort whatsoever from TLH, Advocates & Solicitors or any of its professionals in relation to this website.

The content available on this website does not constitute legal or other professional advice and should not be substituted for advice relevant to particular circumstances.

The access and use of this website does not establish any fiduciary or other relationship between you and TLH, Advocates & Solicitors or any of its advocates.

Please read the ‘Terms of Use’ and our ‘Privacy Policy’ before accessing this website.

Blog default background
Blog
Dispute Resolution

Tussle over green energy Tariff in Andhra Pradesh may have wider ramifications

Authors:
No items found.
January 9, 2020
5 min read
Share this post
Copied!

The Andhra Pradesh government recently constituted a High Level Negotiation Committee (HLNC) to renegotiate tariffs set under Power Purchase Agreements (PPAs) entered into by its power distribution companies (DISCOMs) with wind and solar power generators. The government said that high tariffs had driven the DISCOMs into nearly Rs 20,000 crore of losses as of July 2019.The state government went on to say that the tariffs fixed by the Andhra Pradesh Electricity Regulatory Commission (APERC) and the bidding process had not revealed the true market price and directed power producers to halve the tariffs to Rs 2.44 per KWh for solar projects and Rs 2.43 for wind.

This led to a backlash from the Centre, which said it would result in similar actions by other states and undermine the authority of agencies responsible for determining tariffs. But AP’s energy department decided that recovery notices would be issued to power generators for losses caused to DISCOMs and that all PPAs in the pipeline would be cancelled. Industry associations consequently moved the Andhra Pradesh High Court (APHC), which has put a halt to the stand-off for now by dismissing the HLNC and directing AP to clear the dues of power generators.

Challenges faced by PPAs

The Electricity Act, 2003 has several provisions on tariff determination. Under Section 62, a commission is empowered to determine and approve tariffs, while Section 63 lays down that the bidding processes should be transparent and in accordance with the Centre’s guidelines. As with any long-term energy project, tariff revisions are usually permitted in two scenarios: change in law or by force majeure. In all other cases, disputes can be classified as: `

(a)   Cases where disputes arise with respect to the exact tariff order applicable, with commissioning delays (a common occurrence) leading to uncertainty. In such cases, the Supreme Court has adhered strictly to the PPA and discouraged exercise of inherent regulatory power by a state commission after a PPA has been executed. `

(b)   Cases where one of the parties unilaterally seeks tariff re-determination. In this context, judicial precedents indicate that a distinction exists between PPAs under Section 62 and Section 63. In the latter case, the SC has consistently rejected pleas for redetermination of tariffs.

Contention of Parties involved

Energy players have submitted to the APHC that the DISCOMS have failed to fulfil payment obligations; were seeking to unilaterally and arbitrarily reduce tariffs; and were threatening to terminate PPAs which could not be altered without the consent of all parties. Further, the AP government was overreaching its authority since it was not a party to any PPA, they argued.

But the AP government held that one of the major reasons for DISCOMs’ financial troubles “is the issue of abnormally priced wind and solar PPAs entered in the recent years”. It contended that it could issue the order since: (i) electricity fell under the concurrent list; (ii) Sections 11, 65 and 108 of the Act gave it power and; (iii) the GO was issued in public interest.

However, APHC was of the view that tariff determination was not a policy decision under the state’s purview and directed APERC to look into it. Pending such adjudication, APHC ordered a reduction in current tariff as an interim measure.

Practical Implications

While the SC has consistently leaned towards maintaining the sanctity of PPAs, the APHC has deviated from such an approach. By its interim order, it has set a worrying precedent as DISCOMs in other states can follow suit. This will threaten the sanctity of PPAs and have an adverse impact on foreign and domestic investments.

The Union Ministry of Renewal Energy had also directed DISCOMs to issue Letters of Credit to private renewable energy producers for failing to clear their dues. The DISCOMS have filed a writ petition before the APHC, resulting in a stay. How the court adjudicates on this remains to be seen.

For now, albeit briefly, DISCOMS can breathe a sigh of relief!

Note: This Article was published in the New Indian Express on November 27, 2019.

The views and opinions expressed in this article belong solely to the authors and do not reflect the position of Tatva Legal Hyderabad.

No items found.
Andhra Pradesh, Electricity Act, Green energy, Power purchase agreements, Tariff

Footnotes

Share this post
Copied!

Latest posts

July 10, 2025
From PSUs To Private Companies: Enforceability of Employment Bonds in India
This article explores the enforceability of employment bonds in India, focusing on their legal standing, key court decisions, and what makes such agreements valid or void in both public and private sectors.
Read more
Arrow Right
Corporate Law
July 9, 2025
SEBI’s New Disclosure Norms for Related Party Transactions: Redefining Corporate Governance in Listed Companies
The article revolves around corporate governance reforms introduced by SEBI related to Related Party Transactions (RPTs).
Read more
Arrow Right
Dispute Resolution
July 8, 2025
Revisiting the IBC-RERA Interplay in light of Umang Realtech
The article examines the evolving jurisprudence around the interface of the Insolvency and Bankruptcy Code (IBC) and the Real Estate (Regulation and Development) Act (RERA), with particular focus on the recent Umang Realtech decision.
Read more
Arrow Right
Corporate Law
June 14, 2025
The Finfluencer Effect: Unravelling Market Manipulation
Recently, the Indian stock market regulator, Securities and Exchange Board of India (SEBI) published a discussion paper addressing the growing concern pertaining to financial influencers, or finfluencers, providing financial advice. These influencers often lack the requisite qualifications and accountability for their recommendations.
Read more
Arrow Right
Employment Law
June 14, 2025
Contract Labour Deployment in India - Demystifying the Future Conceived by the Code on Occupational Safety, Health & Working Conditions, 2020
The business of human resource deployment by contractors for their clients has grown and evolved globally. In India, the contractor-sourced industrial workforce grew by about 293% between 2002-03 and 2021-22.[1] Recently, India has unfurled four labour codes that revamp its existing labour laws to meet the needs of the Indian workforce such as contract labour deployment.
Read more
Arrow Right
Corporate Law
June 14, 2025
Exploring Unchartered Territory? Laws for the Void
What can the Indian space sector learn from the Avengers? Besides, the incredible budget and scale, the key takeaway would be - bringing experts together to achieve phenomenal results. We all remember the fascinating back stories, the strength of and the role each member plays to fill an essential need under the able guidance of a strong leader.
Read more
Arrow Right
View All Blogs
Arrow Right