CERC approves compensation for RSWPL, offset solar duty impact

26 Dec 2023 CW Team

Compensation, to be disbursed at a discounted rate of 9% over a 15-year annuity period, will also cover carrying costs incurred from the date of actual payments to authorities until the issuance of this order.

RSWPL, in response to legislative changes, filed a petition under section 79 of the Electricity Act 2003, seeking approval for a "Change in Law" mechanism to offset financial impacts from safeguard duty on solar cells/modules and increased customs duty on solar inverters.

The company had signed a Power Purchase Agreement (PPA) with Solar Energy Corporation of India (SECI) for a 300 MW solar project in Mandhopura village, Rajasthan.

RSWPL requested remedies following the imposition of safeguard duty on July 29, 2020, and subsequent changes in customs duty on January 6, 2011. The petitioner argued that these events constituted a "Change in Law," justifying compensation to counter increased costs.

Considering the bid date (February 15, 2019), PPA execution (August 13, 2019), and the Scheduled Commercial Operation Date (December 20, 2020), the Commission acknowledged the impact of safeguard duty imposed on July 30, 2020, and new GST rates effective October 1, 2021. These events qualified as a "Change in Law," entitling RSWPL to compensation.

RSWPL contended that the increased costs, resulting from Change in Law events, affected working capital requirements and, consequently, the interest on working capital. The company sought compensation, suggesting an interest rate for carrying costs at 14% per annum or an equivalent rate to the late payment surcharge clause of the PPA.

SECI argued for a 9% interest rate and a 15-year term for loan repayment, while Bihar DISCOMs rejected the interest claim on working capital.

The Commission determined a 9% discount rate and a 15-year annuity period as appropriate for Change in Law compensation. SECI/DISCOMs are liable for monthly annuity payments starting 60 days after this order or claim submission, with late payment surcharge applicable for delays beyond the 60th day.

RSWPL claimed entitlement to carrying costs, opposed by SECI and Bihar DISCOMs. The Commission, citing the PPA and the Supreme Court's Uttar Haryana judgment, ruled in favor of RSWPL's entitlement to compensation (pre- and post-COD), including carrying costs.

The Commission directed contracting parties to reconcile additional expenditure and carrying costs, with DISCOMs obligated to pay SECI reconciled claims, irrespective of DISCOMs' payment to SECI. This decision comes after CERC approved an annual transmission charge of Rs 248.67 million (~$2.98 million) for Apraava Energy's acquisition of Fatehgarh IV Transmission.

The Central Electricity Regulatory Commission (CERC) has granted approval to ReNew Sun Waves (RSWPL) for compensation, both pre and post the commercial operation date (COD), aimed at mitigating the financial impact of safeguard duty on solar cells/modules and the increased customs duty on solar inverters. Compensation, to be disbursed at a discounted rate of 9% over a 15-year annuity period, will also cover carrying costs incurred from the date of actual payments to authorities until the issuance of this order. RSWPL, in response to legislative changes, filed a petition under section 79 of the Electricity Act 2003, seeking approval for a Change in Law mechanism to offset financial impacts from safeguard duty on solar cells/modules and increased customs duty on solar inverters. The company had signed a Power Purchase Agreement (PPA) with Solar Energy Corporation of India (SECI) for a 300 MW solar project in Mandhopura village, Rajasthan. RSWPL requested remedies following the imposition of safeguard duty on July 29, 2020, and subsequent changes in customs duty on January 6, 2011. The petitioner argued that these events constituted a Change in Law, justifying compensation to counter increased costs. Considering the bid date (February 15, 2019), PPA execution (August 13, 2019), and the Scheduled Commercial Operation Date (December 20, 2020), the Commission acknowledged the impact of safeguard duty imposed on July 30, 2020, and new GST rates effective October 1, 2021. These events qualified as a Change in Law, entitling RSWPL to compensation. RSWPL contended that the increased costs, resulting from Change in Law events, affected working capital requirements and, consequently, the interest on working capital. The company sought compensation, suggesting an interest rate for carrying costs at 14% per annum or an equivalent rate to the late payment surcharge clause of the PPA. SECI argued for a 9% interest rate and a 15-year term for loan repayment, while Bihar DISCOMs rejected the interest claim on working capital. The Commission determined a 9% discount rate and a 15-year annuity period as appropriate for Change in Law compensation. SECI/DISCOMs are liable for monthly annuity payments starting 60 days after this order or claim submission, with late payment surcharge applicable for delays beyond the 60th day. RSWPL claimed entitlement to carrying costs, opposed by SECI and Bihar DISCOMs. The Commission, citing the PPA and the Supreme Court's Uttar Haryana judgment, ruled in favor of RSWPL's entitlement to compensation (pre- and post-COD), including carrying costs. The Commission directed contracting parties to reconcile additional expenditure and carrying costs, with DISCOMs obligated to pay SECI reconciled claims, irrespective of DISCOMs' payment to SECI. This decision comes after CERC approved an annual transmission charge of Rs 248.67 million (~$2.98 million) for Apraava Energy's acquisition of Fatehgarh IV Transmission.