The Central Electricity Regulatory Commission (CERC) has issued an order directing Solar Energy Corporation of India (SECI) and distribution companies to compensate Azure Power‘s special purpose vehicle companies, Azure Power Maple and Azure Power Forty One, for the additional expenditure incurred due to installation of bird diverters on transmission lines.

The compensation has been ordered in compliance with the Supreme Court order of 2021, which mandated the installation of bird diverters on all existing and future overhead power lines in the priority and potential habitats of the endangered Great Indian Bustard (GIB).

The order comes close on the heels of the CERC awarding compensation to Adani Green Energy on the same ground.

Background

Azure Power Maple had set up a 300 MW solar power project in Rajasthan after winning a bid by SECI in 2019 to supply power at ₹2.54 (~$0.030)/kWh. Azure Power Forty One also won another SECI bid in 2019 to set up another 300 MW solar project in Rajasthan at ₹2.58 (~$0.031)/kWh. The projects were commissioned in 2022 and 2023 respectively.

Azure Power Maple had installed 4,834 bird diverters at a cost of ₹9.89 million (~$118,000) for its 300 MW project, and Azure Power Forty One installed 1,253 bird diverters at a cost of ₹2.57 million (~$30,700) for the other 300 MW project.

The company approached CERC seeking compensation and an appropriate adjustment mechanism under the ‘Change in Law’ clause of their power purchase agreements (PPAs) with SECI to offset the financial impact of the additional expenditure.

Commission’s Analysis

The CERC held that the Supreme Court’s April 2021 order mandating the installation of bird diverters amounts to a ‘Change in Law’ event under Article 12 of the PPAs signed by Azure Power with SECI.

The Commission ruled that Azure Power is entitled to compensation towards the additional expenditure incurred in installing bird diverters as per the ‘Change in Law’ clause in the PPAs. It directed the contracting parties to reconcile the additional expenditure and carrying costs.

CERC determined that the compensation should be paid as monthly annuities for 15 years using a discount rate of 9.12% for Azure Power Maple’s project and 9% for Azure Power Forty One’s project. It also allowed carrying costs at the actual interest rate paid by Azure Power or the late payment surcharge rate specified in the PPA, whichever is lower. The monthly annuities will start from the date when the actual payments were made to the vendors until the date of issuance of this Order.

Monthly annuity payment will start from the 60th day from the date of this order or from the date of submission of claims by the petitioners, whichever is later, CERC said.

Once a supplementary bill is raised in terms of this order, the provision of a late payment surcharge in the PPA would kick in if the payment is not made within the due date.

The Commission clarified that its directions regarding compensation for the period after the commercial operation date of the projects will be subject to the final order of the Supreme Court in a pending case on the issue.

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.

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