Trilegal successfully represented three subsidiaries of Sprng Energy before the Telangana State Electricity Regulatory Commission (TSERC) in a dispute with the Telangana Discoms (TS Discoms) seeking payment of outstanding dues towards monthly tariff along with late payment surcharge. Further, the opening of payment security in the form of a Letter of Credit was also sought.
Non-payment of dues under the PPA is an industry-wide issue, which has impacted several renewable energy developers in Telangana who had approached the TSERC in similar proceedings. Notably, the three Sprng entities were cumulatively owed over INR 200 crores towards monthly tariff since November 2020 as well as late payment surcharge accrued on such amount. Further, the Sprng entities were left with no remedy or payment security under the PPA as the TS Discoms had failed to create a letter of credit in contravention of the provisions of the agreement between the parties.
In a judgment having industry-wide ramifications in Telangana, which may hopefully pave the way for other states, the TSERC noted that the outstanding amounts were undisputed and thus amounted to a fundamental breach of the obligations of the TS Dicsoms under the PPAs. The TSERC directed the TS Discoms to make payment of the outstanding dues towards monthly tariff along with late payment surcharge within 45 days of the order. It was further directed that the TS Dicoms open an irrevocable revolving letter of credit in favour of the Sprng entities as per the provisions of the PPAs.
This approach will likely be affected by the Ministry of Power’s Electricity (Late Payment Surcharge and Related Rules), 2022 (LPS Rules) in states that have opted for the instalment scheme thereunder. The efficacy of the LPS Rules remains to be seen in coming months. However, in states that have not opted for the scheme under the aforesaid rules and even otherwise, the need for expeditious orders from regulatory commissions directing Discoms to make timely payments of admitted outstanding dues cannot be overstated.
The matter was led by our Disputes Partner Jafar Alam, who was assisted by Deep Rao Palepu, Counsel; and Saahil Kaul, Senior Associate.
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