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Daily News Wrap-Up: APTEL Criticizes MERC for Denying Petitioner Relief

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					</table>The Bihar Electricity Regulatory Commission (<a href="https://berc.co.in/" target="_blank" rel="noopener">BERC</a>) recently directed the Bihar State Power Holding Company (<a href="https://www.bsphcl.co.in/" target="_blank" rel="noopener">BSPHCL</a>) to compensate a solar developer for &#8216;Change in Law&#8217; claims due to the imposition of service tax and goods and services tax (GST).
Regarding the carrying cost, the Commission noted that the power purchase agreement (PPA) had no provision for restoration of the petitioner to the same economic position had the &#8216;Change in Law&#8217; event not occurred. Without such provision, the question of allowance of carrying cost did not arise.
Azure Power Eris, a wholly-owned subsidiary of Azure Power, had filed a petition requesting an amendment in the PPA executed between Azure Power Eris and the North Bihar Power Distribution Company (NBPDCL) and the South Bihar Power Distribution Company (SBPDCL) regarding the additional cost accrued due to the imposition of GST laws.
Background
Bihar State Power Holding Company initiated a competitive bidding process to select solar power developers to set up 100 MW solar projects.
Azure Power submitted a bid for a 10 MW project and was selected as the successful bidder. In compliance with the provisions of the request for proposal (RfP), Azure Power informed Bihar State Power Holding Company regarding the execution of the project through a special purpose vehicle (SPV), namely Azure Power Eris.
Azure Power Eris executed the PPA for the 10 MW project with North and South Bihar Power Distribution Companies &#8211; the subsidiaries of Bihar State Power Holding Company &#8211; on January 17, 2015.
Azure Power Eris achieved the project&#8217;s commercial operation date on July 14, 2016. Later, in 2018, the developer filed a petition seeking relief per the &#8216;Change in Law&#8217; clause of the PPA.
The Commission found no merit in the case and rejected the petitioner&#8217;s claims regarding the &#8216;Change in Law&#8217; events.
Aggrieved by the Commission&#8217;s order, Azure Power Eris approached APTEL which <a href="https://mercomindia.com/aptel-bihar-regulator-revisit-solar-gst-claims/">remitted</a> the case back to the Commission to revisit.
Azure Power Eris argued that the &#8216;Change in Law&#8217; provision of the PPA protected it from any change in tax or introduction of any tax after the effective date, resulting in any additional recurring expenditure to be incurred by the petitioner.
The developer added that the enactment of service tax laws and GST laws were also covered under the &#8216;Change in Law&#8217; provision (Article 12), which covered the enactment, coming into effect, promulgation, amendment, modification, or repeal in India, of any law, including rules and regulations framed under such law.
Due to the enactment of the service tax and the GST laws, the petitioner was required to bear additional recurring expenditure after the effective date for the operation and maintenance (O&amp;M) of the project.
Bihar State Power Holding Company, in its reply, said that the petitioner was accountable to Bihar utilities for fulfilling all the obligations assumed under the PPA.
The Holding Company added that outsourcing the O&amp;M contract was entirely a commercial decision undertaken by the developer, and the risk and reward for the same should have to be borne by it.
Azure Power, in its reply, said that as a &#8216;standard industry practice,&#8217; the O&amp;M activities of the solar project were outsourced to the parent company of the petitioner due to its experience in providing such services in the most effective and cost-efficient manner.
Commission&#8217;s analysis 
The Commission observed that the &#8216;Change in Law&#8217; clause under Article 12 of the PPA was not disputed. In terms of APTEL&#8217;s ruling, the petitioner&#8217;s engagement with a third-party vendor for O&amp;M services was a purely commercial decision. It did not disentitle the relief sought for the increase in cost on account of the &#8216;Change in Law&#8217; provisions of the PPA.
The state regulator noted that the petitioner was a 100% subsidiary company of the O&amp;M service provider, and it was in direct control of the O&amp;M service provider.
The Commission noted that Bihar State Power Holding Company had rightly pointed out that the present PPA had no provision for restoration of the developer to the same economic position as if &#8216;Change in Law&#8217; had not occurred. With the absence of such a provision in the PPA, the question of allowance of carrying cost did not arise.
Considering the case&#8217;s facts, figures, and circumstances, the state regulator directed Bihar State Power Holding Company to pay its share of &#8216;Change in Law&#8217; claims, including service tax claims of ₹331,630 (~$4,166) and GST claims of ₹2.59 million (~$32,542), based on supplementary bills of the petitioner supported with auditor&#8217;s certificate.
Last December, the Central Electricity Regulatory Commission <a href="https://mercomindia.com/commission-rejects-solar-developers-claim/" target="_blank" rel="noopener">rejected</a> a solar energy developer&#8217;s compensation petition for the additional tax burden on operation and maintenance expenses and carrying costs due to a &#8216;Change in Law&#8217; event.
Subscribe to Mercom&#8217;s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don&#8217;t miss any critical updates from the renewable industry.

Solar Developer to be Compensated for Additional O&M Cost Incurred Due to GST Imposition

The Bihar Electricity Regulatory Commission (<a href="https://berc.co.in/" target="_blank" rel="noopener noreferrer">BERC</a>) has approved the request of the Bihar State Power Holding Company Limited (<a href="http://bsphcl.bih.nic.in/" target="_blank" rel="noopener noreferrer">BSPHCL</a>) to carry forward the shortfall in its renewable purchase obligation (RPO) for the financial year (FY) 2019-20 to FY 2020-21.
The Commission further added that the power company could purchase either solar power or solar renewable energy certificates (RECs) to fulfill the RPO shortfall for FY 2019-20.
Earlier, BSPHCL had filed a petition on behalf of North Bihar Power Distribution Company Limited (<a href="https://www.nbpdcl.co.in/(S(pcyzjxj0ggfndgou525uv5ji))/frmhome.aspx?lang=hi" target="_blank" rel="noopener noreferrer">NBPDCL</a>) and South Bihar Power Distribution Company Limited (<a href="https://www.sbpdcl.co.in/(S(dghhshutoruhtbavz2jewf0t))/frmQuickBillPaymentAll.aspx" target="_blank" rel="noopener noreferrer">SBPDCL</a>) for seeking an exemption of the REC shortfall in achieving the RPO target for FY 2020. It had also requested for exemption of the shortfall in RPO target until the first quarter of FY 2020-21 due to the outbreak of the COVID-19 pandemic.
BSPHCL then filed a revised petition addressing the shortcomings in the earlier petition and asked for the approval to carry forward the balance REC shortage in the achievement of its RPO for the FY 2020 to FY 2021.
The petition noted that Bihar is dependent on the central government’s programs to fulfill its RPO targets. Bihar is one of the least developed states for solar, with only 111 MW of solar projects currently in operation, according to Mercom India’s <a href="https://mercomindia.com/product/india-solar-project-tracker/" target="_blank" rel="noopener noreferrer">Solar Project Tracker</a>.
It stated that although the distribution companies have tied up for solar and wind power with the Solar Energy Corporation of India (<a href="https://www.seci.co.in/" target="_blank" rel="noopener noreferrer">SECI</a>) and <a href="https://www.ntpc.co.in/" target="_blank" rel="noopener noreferrer">NTPC</a>, the renewable power from such sources will be made available to Bihar from FY 2021 onwards.
Recently, the state <a href="https://mercomindia.com/bihar-tariffs-450-mw-solar-power/" target="_blank" rel="noopener noreferrer">adopted</a> tariffs of ₹2.60 (~$0.035)/kWh and ₹2.44 (~$0.03)/kWh to procure 300 MW and 150 MW of solar power from NTPC and SECI. The state has also <a href="https://mercomindia.com/bihar-removes-ceiling-tariff-solar-project/" target="_blank" rel="noopener noreferrer">called</a> for bids to set up 250 MW of solar projects.
The Commission noted that the RPO target for the FY 2020 was 11.5%, which included 4.75% of solar RPO and 6.75% of non-solar RPO. Similarly, for FY 2021, the RPO target has been set at 14.25%, which includes 6.75% of solar RPO and 7.5% of non-solar RPO. For the financial year 2022, the RPO target is 17%, which includes 8% of solar RPO and 9% of non-solar RPO.
<a href="https://mercomindia.com/wp-content/uploads/2020/06/Bihar-Electricity-to-be-Procured-from-Renewable-Sources-by-Obligated-Entity-as-Percentage-of-Total-Consumption.png"><img loading="lazy" decoding="async" class="aligncenter size-full wp-image-19866" src="https://mercomindia.com/wp-content/uploads/2020/06/Bihar-Electricity-to-be-Procured-from-Renewable-Sources-by-Obligated-Entity-as-Percentage-of-Total-Consumption.png" alt="Bihar - Electricity to be Procured from Renewable Sources by Obligated Entity as Percentage of Total Consumption" width="529" height="262" srcset="https://cms.mercomindia.com/wp-content/uploads/2020/06/Bihar-Electricity-to-be-Procured-from-Renewable-Sources-by-Obligated-Entity-as-Percentage-of-Total-Consumption.png 529w, https://cms.mercomindia.com/wp-content/uploads/2020/06/Bihar-Electricity-to-be-Procured-from-Renewable-Sources-by-Obligated-Entity-as-Percentage-of-Total-Consumption-300x149.png 300w" sizes="(max-width: 529px) 100vw, 529px" /></a>
The Commission underlined that proper planning is required on the part of the DISCOMs to purchase the required RECs when the market conditions are more favorable to them.
BSPHCL, in its submission, had stated that the REC trading session in March 2020 suffered due to the sudden outbreak of COVID-19 in the country and the subsequent lockdown.
Mercom <a href="https://mercomindia.com/covid-19-pandemic-takes-toll-solar-rec-trading/" target="_blank" rel="noopener noreferrer">reported previously</a> that March witnessed a significant drop in the trading volume of solar as well as non-solar renewable energy certificates. The non-solar clearing price came spiraling down to the floor price of ₹1,000 (~$13.25) on both the exchanges. Even though this is the end of the financial year 2019-20, the market didn’t see any demand that could fuel the market sentiment.
The petition added that the cash collection of both DISCOMs suffered a severe dip due to the closure of cash collection counters. It was not possible to arrange the required fund for the purchase of solar REC in March 2020 due to this liquidity crunch.
The Commission said that it was satisfied with the efforts made by the DISCOMs to fulfill the RPO requirements. The Commission also noted the difficulties faced by the DISCOMs in non-participation in the trading session in March due to country-wide lockdown. Taking all these factors into account, the Commission approved the request of BSPHCL to carry forward the shortfall in RPO for the FY 2020 into FY 2021.
Recently, BERC <a href="https://mercomindia.com/bihar-lowers-late-payment-surcharge-discoms/" target="_blank" rel="noopener noreferrer">reduced</a> the rate of late payment surcharges payable by the DISCOMs and transmission licensees to ease their burden during the ongoing coronavirus crisis. The Commission specified a reduced LPS rate of 0.75% per month, down from 1.25% previously, for payments delayed by DISCOMs to interstate transmission licensees and the BSPHCL beyond the permitted 60-day grace period.

Bihar Commission Allows DISCOMs to Carry RPO Shortfall to Next Year

The Bihar Electricity Regulatory Commission (<a href="https://berc.co.in/" target="_blank" rel="noopener noreferrer">BERC</a>) has approved ₹4.15 (~$0.058)/kWh as the tariff to procure 2 MW of power from floating solar PV projects in Darbhanga.
Floating solar projects have great potential in a state like Bihar, where land acquisition is a challenge.
This tariff was proposed by the Bihar State Power (Holding) Company Limited (<a href="http://bsphcl.bih.nic.in/" target="_blank" rel="noopener noreferrer">BSPHCL</a>) and Bihar Renewable Energy Development Agency (<a href="http://www.breda.bih.nic.in/" target="_blank" rel="noopener noreferrer">BREDA</a>). The Commission added that the procurement would meet the stipulated long-term RPO trajectory of the DISCOMs.
Earlier, a joint petition was filed by BSPHCL and BREDA for the approval of the tariff. The project is being set up in Darbhanga, and the power is to be purchased by the North Bihar Power Distribution Company Limited (NBPDCL) and the South Bihar Power Distribution Company Limited (SBPDCL).
The Commission has also directed the petitioners to draft the PPA in line with the guidelines for the tariff-based competitive bidding process for the procurement of power from grid-connected solar PV power projects issued by the Ministry of Power (<a href="https://powermin.nic.in/" target="_blank" rel="noopener noreferrer">MoP</a>).
The tender for the projects was initially <a href="https://mercomindia.com/bihar-tender-floating-solar-projects/" target="_blank" rel="noopener noreferrer">floated</a> on August 22, 2019, and the last date for the submission of bids was September 12, 2019. As there were no bidders, the tender was extended eight times. Finally, four bidders submitted bids on the last bid date, which was October 27, 2019.
After the competitive bidding, the price of ₹4.15 (~$0.058)/kWh, as quoted by Avaada Energy Private Limited, was found to be the lowest price.
The petitioners had claimed that during the year 2019-20 and 2020-21, they would face a deficit of solar power, whereas, in the year 2021-22, they would have surplus solar power. However, in its supplementary submission, BSPHCL revised its calculation and said that the DISOMS would face a shortage of power in all the three years.
The petitioners had also submitted that apart from the Bihar Renewable Energy Policy 2017, the state of Bihar has also started Jal-Jeevan Hariyali Program, which includes promoting solar projects to be installed on rooftops, ground-mounted, and water bodies.
The Commission observed that BREDA had not taken adequate care while floating the tender as certain provisions of the RfP were not in line with the draft PPA. The two inconsistent points were:
<ul>
<li>As per the RfP, the developer should commission the project within 12 months of the effective date of the PPA. On the other hand, the PPA mentions that the developer should commission the project within 18 months.</li>
<li>There is a provision to encash performance guarantee and a reduction in the rate of tariff in the RfP. In case the project is delayed beyond 24 months from the effective date of the PPA, the PPA should be terminated, the document states. However, in the PPA, it is mentioned that the PPA will be terminated if the project is delayed beyond 30 months.</li>
</ul>
The Commission asked the petitioner to reexamine the draft PPA and ensure that there are no discrepancies from the guidelines.
The Commission also noted that the petitioners had claimed that the price discovered during competitive bidding was lower than the BERC’s FiT (feed-in-tariff) of ₹4.17 ($0.06)/kWh, but the Commission observed that these two could not be compared as the FiT for the FY 2019-20 is applicable only for ground-mounted projects and not floating solar PV projects.
Last year, the state Commission <a href="https://mercomindia.com/bihar-discoms-penalized-not-fulfilling-rpo-shortfall/" target="_blank" rel="noopener noreferrer">penalized the DISCOM</a> for not fulfilling its RPO shortfall.
Image credit: Joint Crediting Mechanism (JCM)

Bihar Adopts Tariff of ₹4.15/kWh for Procuring 2 MW of Power from Floating Solar Projects

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