Petition for approval of PPA and Adoption of tariff for procurement of 60 MW power for a period of 20 years from wind-solar hybrid power projects – EQ

Summary:

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## Key Facts of the Case

| Parameter | Detail |
|———–|——–|
| **Petition filed on** | 18 July 2025 |
| **Procurement volume** | 60 MW |
| **Duration** | 20 years |
| **Discovered tariff range** | ₹4.35 – ₹4.40/kWh |
| **Bidding guidelines** | Ministry of Power’s “Guidelines for Tariff Based Competitive Bidding for Wind‑Solar Hybrid Projects” (21 Aug 2023) |
| **Legal basis for adoption** | Section 63 of the Electricity Act, 2003 |
| **Petitioners’ reason for withdrawal** | Changing SEZ business landscape, demand uncertainty; prefers **medium‑term flexibility** over 20‑year PPA |

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## Respondents’ Objections to Withdrawal

| Ground | Detail |
|——–|——–|
| **Legal obligation** | Under Section 63, once petition filed for tariff adoption, procurer cannot unilaterally terminate LoA/bidding process. |
| **Relied upon judgment** | APTEL order dated 16 Dec 2011 in *Essar Power Ltd. v. UPERC & Ors.* (Appeal No. 82/2011) – held that procurer forfeits right to terminate post‑filing of petition. |
| **Substantive investments** | Respondents incurred costs & kept bank guarantees alive; seek return of EMD/BG and compensation for losses/damages. |

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## MERC’s Legal & Commercial Ruling – Key Highlights

### 1. MERC is not a “mere post office” under Section 63

– The Commission can question whether discovered tariffs are **market‑aligned**.
– Relied on **Supreme Court judgment (8 Jan 2024)** in *Jaipur Vidyut Vitran Nigam Ltd. & Ors. v. MB Power (MP) Ltd.* – held that:
– Forcing DISCOMs to accept non‑market‑aligned bids harms **consumer interest**.
– The **Bid Evaluation Committee (BEC)** can reject all price bids if rates are not market‑aligned.

### 2. Section 86(1)(b) gives MERC wide powers

– The Commission is responsible for **regulating electricity procurement process and pricing** of distribution licensees (including private open access consumers like the petitioners).
– Cited **Supreme Court judgment (2 Jan 2025)** in *Municipal Corporation of Delhi v. Gagan Narang* – held that:
– Section 86(1)(b) powers are of **wide amplitude**.
– The Commission must **balance** generator/DISCOM interests with **consumer interests**.

### 3. Discovered tariff is not market‑aligned

| Benchmark | Tariff |
|———–|——–|
| **Petitioners’ discovered tariff** | ₹4.35 – ₹4.40/kWh |
| MSEDCL hybrid power tariff (recent) | ₹3.42 – ₹3.43/kWh |
| TPC hybrid power tariff (recent) | ₹2.59/kWh |

– MERC held that entering a 20‑year PPA at a **higher tariff** when lower RE options are available would **adversely affect consumer interest**.
– The proposed wind‑solar mix (higher wind contribution) may increase tariff – but that does not justify non‑market‑aligned pricing.

### 4. Withdrawal allowed – but with conditions

– Petitioners’ request to withdraw **granted**.
– **EMD and Bank Guarantee** submitted by respondents shall be returned **within 15 days** from 22 April 2026.
– Respondents are **at liberty to pursue appropriate legal proceedings** for any remaining grievances (e.g., damages, costs).

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## Final Order Summary

| Direction | Detail |
|———–|——–|
| **Petition disposed of as** | Withdrawn |
| **Return of EMD & BG** | Within 15 days from 22 April 2026 |
| **Tariff adoption** | Denied (not market‑aligned) |
| **Respondents’ remedies** | May approach civil/courts for damages, if any |

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## Strategic Business Implications

| Stakeholder | Implication |
|————-|————-|
| **Corporate power procurers (SEZs, commercial parks)** | Cannot assume that a transparent bidding process guarantees tariff adoption – MERC will compare with market benchmarks. Withdrawal before adoption is possible, but may face legal challenge from bidders. |
| **Wind‑solar hybrid developers (bidders)** | High‑tariff bids (especially >₹4/kWh) face **regulatory rejection risk** even if bidding process is compliant. Conduct market‑benchmarked pricing; reliance on LoA alone is insufficient. |
| **Distribution licensees (DISCOMs)** | Reinforces that MERC will protect consumer interest – can reject non‑market‑aligned tariffs under Section 86(1)(b). |
| **Legal / dispute perspective** | APTEL’s *Essar Power* precedent (no withdrawal post‑petition) **not followed** where tariff is not market‑aligned and consumer interest is at stake. Supreme Court’s *MB Power* and *Gagan Narang* prevail. |
| **Future bidding processes** | Procurers should include clear termination rights before Section 63 filing, or face potential claims. Bidders should seek termination compensation clauses in LoA. |

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