The Central Electricity Regulatory Commission (CERC) has approved a tariff of ₹2.69 (~$0.0325)/kWh (300 MW, 180 MW, 150 MW) and ₹2.70 (~$0.0326)/kWh (450 MW, 120 MW), in addition to a trading margin of ₹0.07 (~$0.00084)/kWh for 1,200 MW ISTS connected wind power projects (Tranche-XI) on a “build-own-operate” basis.

The Commission acknowledged the increase in GST rates on renewable energy devices, following the Ministry of Finance’s notification post-July 6, 2021, as a Change in Law event.

Wind power developers are entitled to relevant remedies, as specified in the power purchase agreements (PPAs), after incurring additional expenditure attributable to the Change in Law event.

Background

The Solar Energy Corporation of India (SECI) filed a petition under Section 63 of the Electricity Act, 2003, for the adoption of tariff for the wind power projects (Tranche-XI) connected to the inter-state transmission system (ISTS).

SECI sought the adoption of the following:

• Adoption of the tariff which was determined through the competitive bid process for the total capacity from wind power projects based on the terms and conditions in the PPAs signed with developers and the power sale agreements signed with buying entities/distribution licensees.
• Approval of the trading margin of ₹0.07 (~$0.00084)/kWh, as agreed upon by the buying entities/distribution licensees in the signed power sale agreements (PSAs).
• Acknowledgment of the power sale agreement clauses that any changes in rates of safeguard duty, GST, and basic customs duty after July 6, 2021, will be considered a Change in Law.

The respondents in this case were ReNew Naveen Urja (Respondent 1), Anupavan Renewables (Respondent 2), Green Infra Wind Energy (Respondent 3), Azure Power (Respondent 4), Adani Renewable Energy (Respondent 5), Two Wind Energy (Respondent 6), Madhya Pradesh Power Management Company (Respondent 7), Chhattisgarh State Power Distribution Company (Respondent 8), and Uttar Pradesh Power Corporation (Respondent 9).

On May 25, 2021, SECI issued a tender, a draft PPA, and the draft PSA  documents to set up 1,200 MW ISTS-connected wind power projects (Tranche-XI) on a “build-own-operate” basis.

The wind power projects are scheduled to be commissioned in the year 2023-24, and these projects will help the distribution licensees meet their Renewable Purchase Obligations apart from providing power at very economical rates.

An e-reverse auction was conducted on September 9, 2021′ and a letter of award (LOA) was granted to ReNew Naveen Urja Private Limited (300 MW), Green Infra Wind Energy (180 MW), Anupavan Renewables (150 MW), Adani Renewable Energy Holding Fifteen (450 MW), Azure Power India (120 MW) on October 21, 2021.

Following the grant of LOA, SECI agreed to sell wind power to distribution licensees, namely, Madhya Pradesh Power Management Company and Uttar Pradesh Power Corporation.

This sale is conducted under the PSA executed with them at the rates of ₹2.69 (~$0.0325)/kWh [300 MW, 180 MW, 150 MW] and ₹2.70 (~$0.0326)/kWh [450 MW, 120 MW], in addition to a trading margin of Rs.0.07 (~$0.00084)/kWh upon the commissioning of the specified capacity.

The case was considered on February 7, 2023, and the respondents were notified to submit their responses.

The petitioner was instructed to provide a response addressing (i) how incorporating the predetermined change in law relief of ₹0.0045 (~$0.000)/kWh for a change of ₹100,000 (~$1,208.59)/MW in the project cost does not deviate from the wind guidelines, which stipulates that the ‘quantum & mechanism’ of compensation payment for Change in Law should be determined by the appropriate Commission, and (ii) whether there is any approval from the appropriate Commission or another competent authority for the inclusion of such a clause.

The respondents raised their respective objections to the ongoing tariff adoption proceedings initiated by the petitioner.

SECI asserted that the concerns raised by the respondents regarding bid validity and other matters lack legal merit.

Commission’s Analysis

Under Section 63 of the Act, the Commission is mandated to approve the tariff once it is satisfied with the transparency of the bidding process, aligning with guidelines issued by the Central Government.

The Commission noted that SECI made unilateral amendments post-bid, impacting the standard terms. SECI asserted that the proposed changes were communicated to the bidders.

Recognizing the selection of successful bidders through competitive bidding, the Commission adopted individual tariffs as agreed by SECI and the successful bidders.

The regulator said that the respondents had sought recognition of an increase in GST rates from 5% to 12%, post-bid submission, citing GST notifications. SECI did not oppose this and left it to the Commission to issue an appropriate order.

The Commission acknowledged the increase in GST rates as a Change in Law event, entitling wind power developers to applicable reliefs.

Respondents 1 and 3 requested considerations of delays in tariff adoption and corresponding extensions of timelines. The Commission noted that contractual already account for such extensions, negating the need for a separate directive.

Respondents also raised objections related to the statutory obligations, PPA execution beyond bid validity, and tariff viability concerns. SECI argued these objections are irrelevant to tariff adoption proceedings and should be addressed in independent proceedings.

The Commission emphasized that the present proceedings focus on tariff adoption, and respondents can pursue concerns related to the PPAs through separate petitions.

CERC recently allowed a renewable energy developer to claim compensation to offset the financial and commercial impact of change in law events because of increased goods and service tax rates.

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