Punjab State Electricity Regulatory Commission (PSERC) has rejected a solar power company’s plea seeking compensation to offset the financial and commercial impact of increasing central goods and services taxes (CGST) on solar cells.

Background

Petitioner SAEL Solar Solutions had entered into a power purchase agreement (PPA) with Punjab State Power Corporation (PSPCL) on June 21, 2022, to supply 50 MW of power at a tariff of ₹2.65 (~$0.031) per unit.

It filed a petition to get compensation on account of a ‘change in law’ because of an increase in CGST for solar cells from 5% to 12%.

Per the PPA, a ‘change in law’ is deemed to have occurred when any event increases or decreases project costs. The change in law notice must be sent within 60 days from the date of occurrence.

The petitioner also submitted that it was entitled to carrying costs because of rising capital expenditure, which increased debt and equity requirements.

PSPCL argued for SAEL’s plea to be dismissed. The petitioner issued the ‘change in law’ notice in November 2022, after 60 days from signing the PPA.

Commission’s Analysis

The Commission observed that the central tax rate change, which was issued in September 2021, before the e-reverse auction process of the bidding conducted on October 22, 2021, cannot be considered a ‘change in law’ under the PPA.

It noted that the petitioner’s notice to PSPCL did not fulfill the 60 days from the ‘change in law’ event” time limit even from the PPA date.

Additionally, it did not contain details of the ‘change in law’ and its effect on project costs. The notice also did not include supporting documentary evidence.

The Commission dismissed the petitioner’s request for a grant of carrying cost and interest on it.

In September 2024, PSERC issued separate additional surcharge rates for full and partial open access power consumers. It approved a surcharge of ₹1.29 (~$0.015)/kWh for both full and partial open access consumers, including those utilizing green energy, for using open access beyond the contract demand maintained with the distribution licensee.

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