The Central Electricity Regulatory Commission (CERC) has granted compensation to Adani Solar Energy Jaisalmer One (ASEJOPL), a special purpose vehicle of Adani Green Energy, under the ‘Change in Law’ provision due to policy changes post the signing of the power purchase agreement (PPA) for its 450 MW wind-solar hybrid power project in Rajasthan.

ASEJOPL had sought compensation for costs incurred due to the Supreme Court’s order on installing bird diverters in the endangered Great Indian Bustard (GIB) habitat, increase in basic customs duty on solar inverters, increase in Goods & Services Tax (GST) rates, and the consequent rise in social welfare surcharge and integrated GST on imports for its project.

The company had signed a PPA with Solar Energy Corporation of India Limited (SECI).

CERC directed SECI and Chhattisgarh and Haryana distribution companies to reconcile ASEJOPL’s additional expenditure due to these events and pay the compensation.

Background

ASEJOPL executed PPAs with SECI in December 2019 to set up the 450 MW wind-solar hybrid project, which achieved commercial operation in December 2022.

The project had an effective PPA date of November 8, 2019, with a quoted tariff of ₹2.67 (~$0.032) per kWh.

The project was impacted by certain regulatory changes and orders that increased its costs.

These included the Supreme Court’s order in April 2021 on installing bird diverters, an increase in basic customs duty on solar inverters in February 2021, and a GST rate hike in September 2021.

ASEJOPL then approached CERC seeking compensation under the ‘Change in Law’ clause of the PPAs.

Commission’s Analysis

The Commission held that the Supreme Court’s order on bird diverters, though modified later, qualifies as it impacted ASEJOPL’s costs before the modification. The GST rate hike also met the criteria for ‘Change in Law’ compensation.

Regarding the customs duty hike, CERC held that revoking an exemption notification leading to increased duty on solar inverters from 5% to 20% is a ‘Change in Law’ event.

It also allowed compensation for the consequent increase in social welfare surcharge and integrated GST on imports.

CERC reasoned that since ASEJOPL could not have foreseen these events before bidding, it is entitled to restitution to restore its economic position. It approved annuity payments using benchmarks and carrying costs within specified limits to ensure compensation without undue gains.

The Commission directed that the compensation be paid as annuities over 15 years at a discount rate of 9.12%. Late payment surcharge would apply if not paid within the stipulated period. SECI or the DISCOMs must start making ‘Monthly Annuity Payments’ 60 days after this order.

ASEJOPL will receive carrying costs (interest) from the actual payments made until the CERC order date. The interest rate will be either the actual rate supported by an auditor’s certificate, the working capital interest rate from Renewable Energy Tariff Regulations, or the late payment surcharge rate.

 

Last month, the Supreme Court considered limiting the undergrounding of power transmission lines to the Priority Area of 3,163 sq. km of the endangered GIB habitat.

Following the compensation awarded to Adani Green Energy, it is likely that other solar and wind developers with projects in the GIB habitat and installed bird diverters may approach the regulators for similar relief.

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