CERC Allows Compensation To Developer Over Compliance To SC Order On GIB

The Central Electricity Regulatory Commission (CERC) has ruled in favour of Avaada Sunrays Energy Private Limited (ASEPL) in a Change in Law dispute linked to its 320 MW solar project in Rajasthan, allowing the developer to seek compensation for additional costs arising from regulatory and legal changes after bid submission.

The company developed the project in Jaisalmer under a 2,000 MW solar tender issued by NHPC Limited, with a discovered tariff of ₹2.56/kWh. The company had approached the central regulator through a petition seeking recognition of two events as a change in Law under the power purchase agreement and claiming compensation of about ₹44.35 crore.

Key Change in Law claims

The developer cited two developments that led to additional expenditure. The first was the increase in Goods and Services Tax on solar power generating systems from 5% to 12% effective October 1, 2021, which translated to an effective 13.8% rate for composite supply works contracts. The second was compliance with the Supreme Court’s April 19, 2021 order mandating protection of the endangered Great Indian Bustard, which required installation of bird diverters on overhead transmission lines in potential habitat areas.

Respondents contest claims

Punjab State Power Corporation Limited (PSPCL), one of the key respondents, opposed the petition on several grounds. It argued that the claims were filed beyond the three-year limitation period and contended that the developer had waived its right to Change in Law claims to ensure the tariff remained economical for regulators. PSPCL also stated that the discovered tariff was already comparable with recent solar bids that factor in such costs.

Commission’s findings

The Commission rejected these arguments and held that both the GST amendment and the Supreme Court’s order occurred after the bid submission date and therefore qualify as Change in Law events. It also clarified that the earlier waiver provided by ASEPL was limited to Basic Customs Duty and did not apply to other legal or tax changes.

On the issue of limitation, the Commission ruled that the petition was filed within the permissible timeframe, noting that the cause of action for bird diverter installation arose only after the technical requirements were finalised in 2022.

Compensation mechanism and next steps

CERC directed the parties to reconcile the additional expenditure based on project-specific invoices and establish a one-to-one cost correlation. The approved compensation will be paid through the annuity method over 15 years using a discount rate of 9.12%. The Commission also allowed carrying costs to cover the period between expenditure and reimbursement.

However, it clarified that the enforcement of payments related to carrying costs and post-commissioning expenses will remain subject to the final outcome of a pending Supreme Court case involving Telangana Northern Power Distribution Company.