Regulatory Updates

As the nation has entered the final week of the 21 day nation-wide lockdown announced by the Indian Prime Minister with effect from 25 March 2020 pursuant to the COVID – 19 outbreak, we take a stock of key regulatory measures taken on Central as well as State levels by authorities which have a direct impact on the power sector. We have set out below an overview of the key regulatory updates impacting the power sector:

Ø  CENTRAL GOVERNMENT

Ministry of Finance

§  Disruption in supply chains due to spread of coronavirus qualifies as a Force Majeure (FM) event:

On 19 February 2020, Ministry of Finance had clarified that the disruption in supply chains due to spread of coronavirus in China or any other country will be covered under the FM clause. Ministry of New and Renewable Energy (MNRE) has further clarified that spread of coronavirus should be considered as a case of natural calamity and FM clause under the contractual agreements may be invoked, wherever considered appropriate, following the due procedure stipulated therein.

Ministry of Home Affairs (MoHA)

§  Essential operation of power generation, transmission and distribution units/services and coal and mineral production and transportation:

On 24 March 2020, MoHA issued its Guidelines inter alia exempting (a) power generation, transmission and distribution units/services; and (b) coal and mineral production, transportation and activities incidental to mining operations, from being shut down as a part of the nation-wide lockdown for containment of COVID-19 epidemic in the country.

Ministry of Power (MoP)

§  Essential operation of power generation utilities:

On 25 March 2020, MoP issued a Notification for classifying operation of power generation utilities as an essential service and granted permission for material movement needed by them during the nation-wide lockdown.

§  Operation and maintenance of inter-state transmission network:

On 25 March 2020, MoP issued a Notification classifying electrical power transmission as an essential service and requiring the availability and continuity of the transmission network for providing uninterrupted service during the nation-wide lockdown.

§  Payment Security Mechanism (PSM) to be reduced by 50%:

On 27 March 2020, MoP issued an Order stating that power may be scheduled even if the PSM is established for 50% of the amount for which it is required to be otherwise established contractually .

§  3 months’ moratorium for Discoms to make payment:

On 28 March 2020, MoP issued directions to Central Electricity Regulatory Commission (CERC) to (a) provide a moratorium of 3 months to Discoms to make payments to generating companies and transmission licensees; and (b) to specify reduced rates of Late Payment Surcharge (LPSC). MoP further requested the State Governments to issue similar directions to State Electricity Regulatory Commissions (SERCs).

§  Clarification to previous letters issued by MoP dated 27.03.2020 and 28.03.2020:

On 06 April 2020, MoP clarified the following:

·         The obligation to pay for power within 45 days of the presentation of the bill or as provided in the Power Purchase Agreements (PPA) remains unchanged;

·         LPSC shall apply at reduced rate only for the period between 24 March 2020 to 30 June 2020 and after 30 June 2020, the LPSC shall be payable at the rate given in the PPA/Regulations. This is applicable only on those payments that become overdue during the period between 24 March 2020 to 30 June 2020 and not on those payments which were already overdue before 24 March 2020; and

·         Obligation to pay for capacity charges as per the PPA shall continue, as does the obligation to pay for transmission charges.

Ministry of New and Renewable Energy (MNRE)

§  Time extension in Scheduled Commissioning Date  of Renewable Energy (RE) projects on account of an FM event:

On 20 March 2020, MNRE directed all RE projects implementing agencies to treat delay on account of disruption in the supply chains due to spread of coronavirus in China or any other country as a FM event and accordingly, grant suitable time extensions for scheduled commissioning dates, based on evidence/documents.

§  Essential operation of RE power generation utilities:

On 26 March 2020, MNRE issued a Notification classifying operation of RE power generation utilities as essential services and granted its permission for material movement needed by them during the nation-wide lockdown.

§  ‘Must Run’ status for RE generating stations:

·       On 01 April 2020, MNRE issued a Office Memorandum (O.M.) clarifying that the ‘Must Run’ status of RE generating stations remains unchanged and that the payments to RE generators should be done on a regular basis as was  done prior to nation-wide lockdown;

·       On 04 April 2020, MNRE issued a O.M. in furtherance of its O.M. dated 01 April 2020 and clarified that the ‘Must Run’ status of RE generators remains unchanged and that any curtailment but for grid safety reason would amount to deemed generation

§  Invoicing for RE supplied:

On 01 April 2020, MNRE decided that the billing/invoicing for RE generating stations shall continue as follows:

·       Where billing is done through a Regional Energy Account or a State Energy Account, invoices may be accepted over e-mail and due date should be calculated as per the PPA;

·       Where billing is done through Joint Meter Reading (JMR) and where JMR is available, invoices may be accepted over-email. Where JMR cannot be signed due to lockdown, invoice generated by a RE generator based on meter reading may be accepted. Alternatively, Discoms may choose to pay on the basis of the invoice for the same month of the previous year, if it is lower and for newly commissioned projects, Discoms may choose to pay on the basis of the invoice of the previous month, if it is lower; and

·       All RE developers will be required to submit hard copies of invoices within 15 working days from the date on which the lock down is lifted for necessary adjustment, if any, from the subsequent bill.

Coal India Limited (CIL)

§  Extension of time limit for payment by customers:

CIL has further extended the time limit for payment for the coal booked by its consumers, by 2 more weeks i.e., till 21 April 2020 from its earlier deadline of 07 April 2020.

§  Maintaining supplies amid default by generating companies:

Despite the generating companies defaulting in making timely payments, CIL has maintained coal supplies to generating companies due to COVID-19 pandemic and the nation-wide lockdown.

Ø  APPELLATE TRIBUNAL FOR ELECTRICITY

On 1 April 2020, Appellate Tribunal for Electricity has issued an Order on its motion directing that all the interim orders which were subsisting on 16 March 2020 and expired or will expire thereafter shall stand automatically extended till 31 May 2020 or until further orders, except where any orders to the contrary have been passed by the Supreme Court.

Ø  CENTRAL ELECTRICITY REGULATORY COMMISSION

§  Reduction of LPSC:

On 28 March 2020, CERC issued an Order for implementation of direction of MoP, regarding reduction of LPSC, wherein it has provided the following relaxation(s):

·         A moratorium to generating companies and inter-state transmission licensees on payment of instalments of term loan and deferment of the payment of interest in respect of working capital facilities during the period from 1 March 2020 up to 31 May 2020, without treating the interest as waived. Such entities shall however be required to continue to discharge their debt service obligations after the lifting of the nation-wide lockdown and arrange for working capital for day to day operation of their assets;

·         A reduced LPSC of 12% per annum, i.e. 1% per month payable by the Discoms along with the late payment towards the invoices raised between the period of 24 March 2020 to 30 June 2020 only; and

·         Generating companies and inter-state transmission licensees whose tariff have been determined under Section 63 of the Electricity Act, 2003 by CERC may claim relief on the LPSC in terms of the FM provisions of the respective PPAs and Transmission Service Agreements read with the CERC Regulations.

§  Extension of time to file petitions for determination of tariff for existing generating stations/units:

On 6 April 2020, CERC has issued an Order permitting the generating companies whose tariff orders for FY 2014-19 have already been issued to file the Tariff Petitions for FY 2019-24 period along with truing up petitions for FY 2014-19 period by 30 June 2020. This Order is not applicable for generating stations/units or existing transmission assets where final tariff orders for the period of FY 2014-19 have not been issued by CERC yet.

§  Implementation of real-time power market deferred:

On 20 June 2020, CERC has amended the relevant regulations, including the Indian Electricity Grid Code Regulations 2010 (read with amendments thereto from time to time), to defer the implementation of the real-time power market to 01 June 2020 or such other date as may be notified by CERC.

Ø  STATE GOVERNMENTS

Gujarat

§  Extension in time limit for payment of electricity bills

The last date to pay the electricity bills for the months of March and April 2020 have been extended till 15 May 2020 by the Government of Gujarat.

Uttar Pradesh

§  Fixed charges waived on power for industrial and commercial consumers:

The Government of Uttar Pradesh has waived off fixed charges for industrial and commercial users during the period of COVID-19 lockdown and has stated that the bills for the aforesaid category of users will be raised on actual readings during March and April, 2020.

Maharashtra

§  8% cut in electricity tariff for 5 years:

The Government of Maharashtra has announced an average of 8% electricity tariff cut for the next 5 years to help businesses and people tide over the COVID-19 crisis.

Punjab

§  Relief to the consumers in the State of Punjab: 

On 07 April 2020, the Government of Punjab has inter alia (a) reduced the fixed charges for consumers; (b) extended the due date of electricity bills payable by the consumers; and has further (c) extended 1% rebate to consumers who pay bills online through digital modes by the original due date.

Ø  STATE ELECTRICITY REGULATORY COMMISSIONS

Gujarat Electricity Regulatory Commission (GERC)

§  Extension in time limit for payment of annual license fee:

On 1 April 2020, GERC has extended the time limit for submitting annual license fees by all licensees till 30 June 2020.

Telangana State Electricity Regulatory Commission (TSERC)

§  Billing of Low Tension (LT) consumers as per previous billing cycles:

On 6 April 2020, TSERC through an interim Order has allowed for billing of the LT consumers to be done during the lockdown period upon estimation based on the previous billing cycles.

Delhi Electricity Regulatory Commission (DERC)

§  Mitigation of impact of COVID-19 on Discoms and consumers of Delhi:

On 07 April 2020, DERC has issued its Order inter alia (a) relaxing the time period for payment of consumer electricity bills by 15 days; (b) allowing a moratorium on the payment of fixed charges for next 3 billing cycles beginning from 24 March 2020 to the consumers covered under public utilities, industrial and non-domestic tariff categories; (c) deferring the annual load assessment exercise for all consumers; (d) special rebate scheme for prompt payment by consumers; and (e) payment of LPSC at the reduced rate of 12% p.a.

Maharashtra Electricity Regulatory Commission (MERC)

§  Measures to minimise public interface in view of coronavirus epidemic:

On 26 March 2020, MERC has issued a Practice Direction providing certain relaxation in the MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005  to all the Discoms from performance of services which are not directly linked to maintaining continuity of power supply.

Tamil Nadu Electricity Regulatory Commission (TNERC)

§  Extension of validity of previous Tariff Orders for RE projects

On 31 March 2020, TNERC has issued an Order extending the validity of previous Tariff Orders for RE projects until a new Order is issued.

Himachal Pradesh Electricity Regulatory Commission (HPERC)

§  Tariff Order for previous FY shall continue to be applicable

On 23 March 2020, HPERC has directed that the Tariff Order issued for the Himachal Pradesh State Electricity Board shall continue to be in operation after 31 March 2020 subject to the condition that the tariff allowed shall be adjusted against the final tariff to be approved.

-       Divya Chaturvedi (Partner, Dispute Resolution), Saransh Shaw (Senior Associate, Dispute Resolution) and Srishti Rai (Associate, Dispute Resolution).

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