The Central Electricity Regulatory Commission (CERC) recently ruled that the solar developers must settle the ‘Change in Law’ claims mutually with the power procurers and approach the Commission only for the adjustment of the amount in the monthly tariff or charges.

ACME Jaipur Solar had filed a petition seeking compensation for the additional expenses incurred due to the introduction of goods and services tax (GST) under the ‘Change in Law’ clause and following the power purchase agreement (PPA) provisions.

The respondents in the petition were Madhya Pradesh Power Management Company (MPPMCL), Delhi Metro Rail Corporation (DMRCL), and Rewa Ultra Mega Solar (RUMSL).

Background

ACME Jaipur Solar is a generating company engaged in the business of development, building, owning, operating, and maintaining utility-scale grid-connected solar power projects.

In its petition, the developer had pleaded with the commission to direct the respondents to pay the GST claims for the period when the developer was not registered under GST, but its vendors were.

The developer further requested that the respondents provide compensation by considering a pre-GST tax rate of 11% on 40% value of services and 15% tax rate on balance 60% value of services, which increased to 18% post-GST.

During the hearing, the solar developer submitted that the ‘Change in Law’ rules had no application where the other party to the agreement had already contested the ‘Change in Law’ events and where such matters had been reserved for the order.

Commission’s analysis

The Commission observed that the affected parties in the case should settle the ‘Change in Law’ claims mutually and should approach the Commission only for the determination of the amount of compensation as per the ‘Change in Law’ rules.

CERC added that the ‘Change in Law’ rules provided that if there was a formula in the agreement for adjusting and recovering the amount of the impact of ‘Change in Law,’ it should be applied. Otherwise, it should be decided as per the provisions of the ‘Change in Law’ rules.

The central regulator said that the process and methodology prescribed in the ‘Change in Law’ rules provided a mechanism for the time-bound settlement of claims decisively.

“Under the rules, the substantive rights are not being taken away; it is to be applied retrospectively in all pending proceedings,” the Commission added.

Considering the facts, the Commission asked the solar developer to approach the procurers to settle the ‘Change in Law’ claims mutually.

Last month, CERC ruled that power generators and procurers should mutually settle claims under the ‘Change in Law’ provisions. Azure Power had filed three separate petitions seeking relief on account of ‘Change in Law’ because of the introduction of goods and services (GST) laws.

Earlier, CERC had ruled that the affected parties should settle the ‘Change in Law’ claims mutually and approach the Commission only to verify the compensation amount. The Central Commission had passed the order after hearing two petitions filed by the Solar Energy Corporation of India regarding compensation on the grounds of ‘Change in Law’ due to the imposition of safeguard duty and the increase in customs duty on the import of solar inverters.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.