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

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					</table>Rajasthan Electricity Regulatory Commission (<a href="https://www.rerc.rajasthan.gov.in/" target="_blank" rel="noopener">RERC</a>) has directed the Solar Energy Corporation of India (<a href="https://www.seci.co.in/" target="_blank" rel="noopener">SECI</a>) to compensate Palimarwar Solar House for the higher expenses incurred on developing two 20 MW solar projects due to an increase in customs duty on solar inverters and changes to the Customs Tariff Act.
Background
Palimarwar Solar House was one of the successful bidders in an auction conducted by SECI. The company commissioned two solar projects, each with a capacity of 20 MW, in Barmer, Rajasthan.
The petitioner explains that a change in customs duty exemption on machinery for solar projects and an increase in customs duty on solar inverters from 5% to 20% effective from February 2, 2021, led to significant financial implications for their projects.
Moreover, complexities arose with changes to the Customs Tariff Act, necessitating Special Economic Zones (SEZs) to pay Countervailing Duty (CVD) and Anti-Dumping Duty (ADD) when transferring components from SEZs to domestic tariff areas, representing a departure from prior practices.
The petitioner detailed the application of these changes to their solar module glass supplies, specifically noting the imposition of ADD and CVD on textured tempered glass, resulting in additional financial burdens.
The petitioner calculated additional expenses of ₹7.46 million (~$90,092) due to the change in customs duty on solar inverters, and the changes in the law led to an extra levy of ₹1.06 million (~$12,801) for CVD and ADD on solar module glass. The cumulative financial impact was ₹8.53 million (~$103,019).
Given the considerable financial strain caused by these shifts, the petitioner sought reimbursement for the incurred expenses and a fair resolution to mitigate the direct impact on their projects.
The petitioner requested the Commission&#8217;s involvement in reconciling documents between themselves and SECI. They emphasized that this step would facilitate a factual understanding verified by both parties, potentially saving valuable time during the final hearing of the petition.
Regarding the issue of jurisdiction, Rajasthan Urja Vikas Nigam (RUVNL) argued that Article 16 of the power purchase agreement (PPA) grants jurisdiction to the appropriate courts in Delhi rather than Rajasthan. As per Article 16 of the PPA, legal proceedings involving matters, claims, or disputes arising from the agreement fall under the jurisdiction of appropriate courts in Delhi.
In their rejoinder, the petitioner contested RUVNL&#8217;s jurisdictional claim and asserted that all disputes related to the power sector fall within the regulatory ambit of the regulatory commissions, as outlined by the Electricity Act.
In its submission, SECI raised the issue of jurisdiction. It argued that the jurisdiction for the dispute lies in Delhi, based on the governing law clause in the PPA.
SECI emphasized that the petitioner needed to provide pertinent documents and establish a clear correlation between projects and supplied goods or services, accompanied by actual payment details of custom duties and associated charges. It sought the Commission&#8217;s clarification on the cut-off date for compensation payment and proposed an annuity-based compensation methodology based on specific parameters.
Additionally, SECI contended that RUVNL should reimburse SECI for the compensation owed to the petitioner.
RUVNL countered that the petitioner should have followed the rules outlined in the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, which require prior notice and computation of the impact on the tariff in cases of change in law events. It highlighted that the petitioner failed to adhere to the dispute resolution mechanism specified in the PPA.
Commission’s analysis
The Commission observed that the petitioner&#8217;s main request for a direction to SECI to reimburse ₹8.53 million (~$103,019), along with interest, until the payment is received due to Change in Law events.
The regulator initiated a reconciliation process as requested by the petitioner, which involved SECI, the petitioner, and RUVNL. SECI oversaw the process as the nodal agency and subsequently confirmed the reconciliation with the petitioner, and the documents were sent to RUVNL for verification. RUVNL confirmed the reconciliation and emailed the reconciled amount of ₹7.46 million (~$90,092) to SECI. The petitioner then endorsed the revised claims by SECI in agreement with all parties involved.
The Commission acknowledged the completion of the reconciliation process, conducted transparently under SECI&#8217;s guidance. Importantly, all parties unanimously agreed on a reconciled amount of ₹7.46 million for the petitioner&#8217;s Change in Law claim. As a result, the issue was resolved and disposed of based on unanimous agreement.
Regarding the issue of jurisdiction, the Commission highlighted that Section 86(1)(f) of the Electricity Act 2003 mandated it to adjudicate disputes between licensees and generating companies. Therefore, the contention raised by RUVNL was unfounded.
It ruled that the petitioner would be eligible for carrying costs from when actual payments were made to the authorities until the issuance of the Commission&#8217;s Order.
The carrying cost will be computed at the actual interest rate paid by the petitioner for securing funds, as supported by an auditor&#8217;s certificate. Alternatively, the carrying cost may be calculated using the interest rate on working capital as per the applicable RERC Tariff Regulations or the late payment surcharge rate specified in the PPA, whichever rate is the lowest.
The discount rate for annuity payments related to the petitioner&#8217;s expenditure due to Change in Law events will be 9%. The tenure of the annuity payments will extend for 15 years.
Furthermore, the liability of SECI/RUVNL for monthly annuity payments will commence from the 60th (sixtieth) day from the date of the Commission&#8217;s Order. In case of any delay in the Monthly Annuity Payment beyond this 60-day period, a late payment surcharge for the corresponding delayed period will be applicable according to the respective PPAs and PSAs.
Additionally, given that the project&#8217;s Commercial Operation Date (COD) has already been achieved, the payment of the amount corresponding to the number of months elapsed since the COD up until the payment date can be made on a lumpsum basis.
The remainder of the Change in Law compensation (the total change in law claims payable minus the change in law claims paid upfront) will be disbursed to the petitioner using the monthly annuity rate.
In September last year, the Ministry of New and Renewable Energy said the <a href="https://www.mercomindia.com/mnre-notifies-bcd-gst-as-change-in-law-events" target="_blank" rel="noopener">imposition</a> of basic customs duty and hike in GST should be treated under Change in Law events unless disallowed by specific provisions in the tender documents or contracts.
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.

RERC Grants Solar Developer Compensation Under Change in Law Due to Duties

The United States solar sector installed 3.9 GW of solar capacity in the first quarter (Q1) of 2022, a 24% year-over-year (YoY) decrease <a href="https://mercomindia.com/us-solar-market-adds-record/" target="_blank" rel="noopener">compared</a> to 5 GW installed in the same period last year.
According to the latest US Solar Market Insight report, released by the Solar Energy Industries Association (<a href="https://www.seia.org/" target="_blank" rel="noopener">SEIA</a>) and <a href="https://www.woodmac.com/" target="_blank" rel="noopener">Wood Mackenzie</a>, Q1 represented the weakest quarter for US solar installations in two years.
However, solar accounted for 50% of all new electricity-generating capacity added to the US grid in the first quarter of 2022.
“The solar industry is facing multiple challenges that are slowing America’s clean energy progress, but this week’s action from the Biden administration provides a jolt of certainty businesses need to keep projects moving and create jobs,” said Abigail Ross Hopper, President, and CEO of SEIA.
“President Biden has clearly taken notice of how drags on the industry are hampering grid resiliency. By acting decisively, this administration is breathing new life into the clean energy sector, while positioning the US to be a global solar manufacturing leader,” she said.
<a href="https://mercomindia.com/wp-content/uploads/2022/06/US-capacity-additions.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-36511 size-full" src="https://mercomindia.com/wp-content/uploads/2022/06/US-capacity-additions.png" alt="US capacity additions" width="752" height="467" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/06/US-capacity-additions.png 752w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/06/US-capacity-additions-300x186.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/06/US-capacity-additions-650x404.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/06/US-capacity-additions-624x388.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/06/US-capacity-additions-600x373.png 600w" sizes="(max-width: 752px) 100vw, 752px" /></a>
Utility-scale solar
The utility-scale solar market saw the sharpest decline in Q1 2022 and experienced its lowest quarter of installations since 2019 and the lowest number of new projects added to the pipeline since 2017.
According to Wood Mackenzie’s pipeline data, 17.6 GW of projects in development were delayed by at least a year, and 450 MW of projects were canceled outright. New procurement for utility-scale solar was 2.4 GW in Q1 2022, the lowest level since 2017. This was caused by typical first quarter slowdowns, policy-driven supply chain challenges, and higher equipment pricing.
Community solar
Community solar installations in Q1 2022 were 197 MW; this is a year-over-year increase of 16%. Community solar installations in 2022 are expected to contract due to uncertainty around the anti-circumvention investigation, interconnection issues, and long timelines for new community solar policy and rulemaking.
Residential solar
In contrast to other segments, the residential solar market saw record-setting growth in this quarter as customer demand and sales pipelines continued to increase. Consumer demand continues to grow in most state markets, with California, Florida, and Texas leading. These top markets also achieved record capacity deployments and accounted for more than 50% of nationwide residential solar installed in this quarter.
Anti-circumvention investigation
This week, Biden <a href="https://mercomindia.com/president-biden-waives-duties-solar-module-imports/" target="_blank" rel="noopener">announced</a> a 24-month duty exemption on solar modules and cells imported from Cambodia, Malaysia, Thailand, and Vietnam to ensure that the domestic solar industry has a sufficient supply of the components.
In March, the Department of Commerce <a href="https://mercomindia.com/us-probe-solar-module-imports-southeast-asia/" target="_blank" rel="noopener">announced</a> it would initiate an anti-circumvention investigation of Chinese anti-dumping and countervailing duties on solar cells and modules imported from Cambodia, Malaysia, Thailand, and Vietnam. This investigation was initiated by a petition which alleges that solar cell and module manufacturers circumvent existing anti-dumping and countervailing duties tariffs that apply to Chinese imports by manufacturing solar cells and modules in the four named countries using raw inputs from China.
With trade uncertainty in place, the solar market is eying the fate of clean energy policies in a federal reconciliation bill, the report said. Long-term tax credits, manufacturing incentives, and other provisions will significantly boost solar and storage deployment and help keep pace with President Biden’s clean energy goals.

US Installed 3.9 GW Solar Capacity in Q1 2022, a 24% YoY Slump

The US <a href="https://www.commerce.gov/" target="_blank" rel="noopener">Department of Commerce</a> has rejected a circumvention petition filed by an anonymous group of domestic solar manufacturers known as American Solar Manufacturers Against Chinese Circumvention, or A-SMACC, seeking an inquiry into the imports of solar products produced in Chinese-owned factories in Asia.
The Department of Commerce pointed explicitly to the companies&#8217; anonymity that comprised A-SMACC and said it was the driving factor behind the petition&#8217;s rejection. The group had argued that identifying its members could expose them to retribution from the Chinese industry.
The department held that names of A-SMACC members should be publicly identified so that interested parties could comment on the nature of their business and how it related to the case. It also rejected A-SMACC&#8217;s attempt to target specific companies instead of countries or regions.
On August 16, 2021, A-SMACC <a href="https://mercomindia.com/daily-news-wrap-up-engie-commissions-solar-project/" target="_blank" rel="noopener">asked</a> the Department of Commerce to initiate a circumvention inquiry on imports of solar products produced in Chinese-owned factories in Malaysia, Vietnam, and Thailand.  It argued that imports of solar modules produced in Chinese-owned factories in these countries should be subject to the current anti-dumping and countervailing duty orders on Chinese cells and modules.
The Solar Energy Industries Association (<a href="https://www.seia.org/" target="_blank" rel="noopener">SEIA</a>) had <a href="https://mercomindia.com/proposed-steep-duties-could-cost-us-seia/" target="_blank" rel="noopener">opposed</a> the petition by the anonymous group. It said that the United States solar industry could miss out on 18 GW of solar deployment by 2023 due to steep duties proposed by the group. The petition sought 50-250% duties on imported crystalline silicon photovoltaic (PV) panels and cells from Malaysia, Vietnam, and Thailand. These countries account for 80% of overall panel imports of the US.
Solar manufacturers in India had filed a similar petition but under the aegis of the Indian Solar Manufacturers Association (ISMA), a registered association of companies engaged in manufacturing solar cells and modules. The Ministry of Commerce and Industry had announced that the Directorate General of Trade Remedies had initiated an anti-dumping probe on imports of solar cells imported from China, Vietnam, and Thailand.
According to the DGTR notification, there was positive evidence of the effect of price undercutting, price suppression, and price depression on the domestic industry.

US Commerce Department Rejects Anonymous Petition for Tariffs on Asian Solar Imports

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