Best Power, Solar and Energy Project Disputes: Arbitration or Regulator? Lawyer

Power and energy projects involve long-term contracts, large investments and many parties: developers, EPC contractors, equipment suppliers, O&M operators, lenders, and the distribution companies or traders that buy the power. Disputes arise over delayed commissioning, equipment performance, changes in taxes and duties, curtailment of generation, and the chronic problem of late payment by distribution companies. Where the dispute is fought, and under which law, depends on who the parties are.

This page is for power developers, EPC and O&M contractors, equipment suppliers and investors in solar, wind, hydro, thermal and transmission projects. In short: disputes between generating companies and distribution licensees under power purchase agreements go to the electricity regulatory commissions under the Electricity Act, which may refer them to arbitration; disputes under EPC, supply and O&M contracts are ordinary contractual disputes and usually go to arbitration under the contract; and claims such as change in law and late payment surcharge have their own regulatory frameworks.

Getting the forum right at the start is essential. A PPA dispute filed directly in arbitration, bypassing the commission, risks an award without jurisdiction.

Is this your situation?

Common energy disputes

The forum question: Gujarat Urja v Essar

Section 86(1)(f) of the Electricity Act, 2003 gives the state electricity regulatory commission the function to adjudicate upon disputes between licensees and generating companies, and to refer any dispute for arbitration. Section 79(1)(f) gives the same function to the Central Electricity Regulatory Commission for matters within its jurisdiction, such as generating companies owned or controlled by the central government, and inter-state generation and transmission.

In Gujarat Urja Vikas Nigam v Essar Power (2008), the Supreme Court held that disputes between licensees and generating companies can be resolved only by the commission or an arbitrator appointed by it, and that Section 86(1)(f) overrides an arbitration clause in the PPA. The arbitration clause does not allow the parties to bypass the commission. Later decisions have applied this to most PPA disputes between generators and distribution licensees.

So, a developer with a dispute against a distribution company under a PPA should file a petition before the appropriate commission. The commission may decide it or refer it to arbitration, in which case the arbitrator is appointed by the commission. Disputes between a developer and its own EPC contractor or O&M operator are different; they are purely contractual and go to arbitration under their own contracts.

How we handle energy disputes

Time and typical cost range

Our fees are agreed in writing at the start, stage by stage, and are not linked to the outcome.

Documents needed

Where each dispute goes

Change in law claims

PPAs from competitive bidding usually allow the generator to recover additional costs caused by a change in law after the bid date: for example, new taxes, increased duties, safeguard duty on imported solar modules, or GST replacing earlier taxes. The generator must usually notify the change promptly, show the additional cost, and seek approval of the compensation from the commission.

Commissions and APTEL have decided many such claims, including on safeguard duty and GST for solar projects, and have generally allowed compensation where the change occurred after the bid date and affected the project's costs. Under the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, compensation is recovered through a formula-based monthly tariff adjustment. Disputes now focus on the calculation and the evidence of actual costs.

Late payments by distribution companies

Late payment by distribution companies has long troubled the sector. The Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 set a late payment surcharge on delayed dues, regulate access to power exchanges for defaulting distribution companies, and provided a scheme for liquidating outstanding dues in instalments. Many PPAs also have their own late payment surcharge and payment security mechanisms, such as letters of credit.

A generator facing delayed payments should claim the surcharge in its invoices, invoke the letter of credit where available, and, if needed, petition the commission for directions on payment. Since these disputes are between a generator and a licensee, they generally go to the commission, not to contractual arbitration.

Laws that apply

How we work

We are a litigation and advisory practice led by Advocate BK Singh, with offices in Dwarka (New Delhi) and Vaishali (Ghaziabad). This is what you can expect:

• Forum clarity: regulator or arbitration, decided correctly at the start.
• Data-driven claims: generation, SCADA and test data analysed with experts.
• Notice discipline: change in law and force majeure notices on time.
• Payment focus: late payment surcharge and security mechanisms pursued.
• Written fee terms: agreed stage by stage, never linked to the outcome.

Mistakes in energy disputes

EPC disputes in renewable projects

Solar and wind EPC contracts are usually turnkey: the contractor designs, procures, builds and commissions the plant by a scheduled date, with liquidated damages for delay and for any shortfall in performance. Delay disputes often involve land acquisition, right of way for transmission lines, connectivity approvals, and import delays for modules or turbines. Many of these risks are allocated to the developer in the contract, so the contractor's extension of time claims depend on showing which events delayed the critical path.

Developers, in turn, face liquidated damages under their PPAs for delayed commissioning, and seek to pass them down to the EPC contractor. Back-to-back clauses and caps on liability decide how much can be passed down. A clear delay analysis, using the baseline programme and the actual progress, is the core evidence on both sides.

Module and equipment warranties

Solar modules typically carry a product warranty of 10 to 12 years and a performance warranty of 25 years or more, guaranteeing a minimum output degrading by a stated percentage each year. Inverters, trackers and transformers have shorter warranties. Claims arise when modules show faster degradation, potential induced degradation, hotspots, delamination or microcracks.

Warranty claims require testing, often by flash testing a sample of modules at an accredited laboratory, and electroluminescence imaging to show defects. Many module suppliers are foreign manufacturers, and their warranty terms may require claims to be made within short periods and in specific forms. Act quickly, test independently, and preserve the defective modules as evidence.

O&M performance guarantees

O&M contracts usually guarantee plant availability, for example 99% of the time, and sometimes a minimum generation or performance ratio. Shortfalls lead to liquidated damages or bonus-malus payments. Disputes concern how availability is measured, what events are excluded (grid outages, force majeure, owner's instructions), and whether the operator followed the agreed maintenance schedule.

Monthly O&M reports, maintenance logs and SCADA data are the main evidence. Developers should review the reports each month and dispute errors promptly, since long acceptance of reports may be treated as agreement.

Lenders and step-in rights

Most energy projects are financed by banks or financial institutions, with security over the project assets, assignment of the project contracts, and direct agreements with the counterparties giving lenders step-in rights. A dispute that threatens the project's cash flow, such as termination of the PPA or a major EPC claim, can trigger defaults under the loan agreements.

Keep lenders informed in accordance with the facility agreements, and check whether their consent is needed before starting arbitration, settling claims, or terminating contracts. Lenders may also be able to cure defaults under the PPA through their step-in rights, which can be used to prevent termination.

Appeals to APTEL

Orders of the state commissions and CERC can be appealed to the Appellate Tribunal for Electricity under Section 111 of the Electricity Act, within 45 days, with a power to condone delay. APTEL's orders can then be appealed to the Supreme Court on substantial questions of law under Section 125. The appeal process can be long, and interim relief from APTEL, such as a stay of a commission order or a direction to pay a portion of dues, is important in the meantime.

Where a commission referred a dispute to arbitration, the award is governed by the Arbitration Act, and challenges go to the court under Section 34, not to APTEL.

International disputes in energy projects

Energy projects in India often involve foreign equipment suppliers, foreign EPC contractors and foreign investors. Supply and EPC contracts with foreign parties frequently choose SIAC or ICC arbitration seated in Singapore or London. An award from such an arbitration is a foreign award enforceable in India under Part II of the Arbitration Act.

Foreign investors may also have rights under bilateral investment treaties, though India terminated most of its older treaties from 2017 and its newer treaties are narrower. Treaty claims are separate from contractual arbitration and have their own procedure. See international arbitration.

Curtailment of renewable generation

Solar and wind plants have "must-run" status under the Indian Electricity Grid Code, meaning they should not be curtailed except for grid security or safety. In practice, distribution companies and load despatch centres have sometimes curtailed renewable generation for commercial reasons, such as cheaper power being available. Generators have challenged such curtailment before the commissions and APTEL, and in several cases have obtained compensation for generation lost due to curtailment not justified by grid security.

The evidence required is the curtailment instructions from the load despatch centre, the plant's generation data during curtailment, the irradiation or wind data showing what could have been generated, and the grid conditions at the time. Record each curtailment as it happens, with the instruction and the reason given.

Termination of PPAs and tariff renegotiation

Some distribution companies have tried to renegotiate or terminate PPAs signed at tariffs that later became higher than market rates, especially for older solar projects. Courts and APTEL have generally held that a validly executed PPA, approved by the commission, cannot be unilaterally reopened by the buyer simply because tariffs have fallen. The Andhra Pradesh High Court's decisions on the state's attempt to revise renewable tariffs in 2019 are an example.

A generator facing such an attempt should insist on the PPA's terms, continue to supply and invoice, and approach the commission for directions if payments are withheld. Where a state seeks to terminate, the PPA's termination and compensation provisions apply, and the commission's approval may be needed.

Transmission and connectivity disputes

A plant is only as good as its evacuation. Disputes arise over delayed transmission connectivity, changes in connectivity rules, transmission charges and losses, and the waiver of inter-state transmission charges for renewable projects commissioned within specified dates. These matters fall largely within the jurisdiction of CERC or the state commissions under their connectivity and open access regulations, and are decided there rather than in contractual arbitration.