Construction Industry News
The Central Electricity Regulatory Commission (CERC) has approved ReNew Sun Waves (RSWPL) for compensation both before and after the Commercial Operation Date (COD), with the aim of mitigating the financial impact of safeguard duties on cells/ solar modules and increasing customs duties on solar energy. investors.
The compensation, payable at a reduced rate of 9% over an annuity period of 15 years, will also cover costs incurred from the date of actual payments to the authorities until the issuance of this order.
RSWPL, in response to the changes in the law, filed a petition under section 79 of the Electricity Act 2003, seeking approval of a “change in law” mechanism to offset the financial impact of safeguard duties on solar cells/modules and increasing customs duties on solar inverters.
The company had signed a power purchase agreement (PPA) with Solar Energy Corporation of India (SECI) for a 300 MW solar project in Mandhopura village, Rajasthan.
RSWPL sought remedies following the imposition of safeguard duties on July 29, 2020 and subsequent changes in customs duties on January 6, 2011. The petitioner argued that these events constituted a “change in law” that justified compensation to offset rising costs.
Taking into account the tender date (February 15, 2019), the execution of the PPA (August 13, 2019) and the planned date of commercial operation (December 20, 2020), the Commission recognized the impact of the obligation to safeguard imposed on July 30, 2020 and the new GST rates will apply from October 1, 2021. These events qualified as a "change in law" and entitled RSWPL to compensation.
RSWPL argued that higher costs, resulting from events related to the law change, affected working capital requirements and, consequently, interest on working capital. The company demanded compensation and proposed an interest rate for costs of 14% per annum or a rate equivalent to the default clause in the PPA.
SECI argued for 9% interest and a 15-year term for repayment of the loan, while the Bihar DISCOMs rejected the claim of interest on working capital.
The Commission has set a discount rate of 9% and an annuity period of 15 years, appropriate to compensate for changes in the law. SECI/DISCOMs are responsible for monthly annuity payments beginning 60 days after this order or filing of a claim, with a late payment fee applicable for delays after the 60th day.
RSWPL claimed the right to bear the costs, which was opposed by SECI and Bihar DISCOM. The Commission, citing the PPA and the Uttar Haryana judgment of the Supreme Court, ruled in favor of RSWPL's right to compensation (before and after COD), including transportation costs.
The Commission has ordered the Contracting Parties to reconcile additional expenses and costs, requiring DISCOM to pay claims settled with SECI, regardless of DISCOM's payment to SECI. This decision comes after CERC approved an annual transmission fee of Rs 248.67 million (~$2.98 million) for Apraava Energy's acquisition of Fatehgarh IV Transmission.
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