APTEL Upholds ‘Change in Law’ Claims for O&M Expenses

APTEL Upholds ‘Change in Law’ Claims for O&M Expenses

The Appellate Tribunal for Electricity (APTEL) has set aside a 2022 order of the Madhya Pradesh Electricity Regulatory Commission (MPERC) in a case concerning GST-related cost claims by ReNew Clean Energy Private Limited, an independent power producer (IPP).

The tribunal ruled in favour of ReNew, recognizing the introduction of the Goods and Services Tax (GST) as a “Change in Law” event and allowing the company to claim compensation beyond project commissioning, including operation and maintenance (O&M) costs and carrying cost.

PPA Signed In 2015

The case stems from a Power Purchase Agreement (PPA) signed on May 10, 2015, between ReNew and Madhya Pradesh Power Management Company Limited (MPPMCL) for a 51-megawatt (MW) solar project in the state. The imposition of GST from July 1, 2017, led to an increase in project costs, prompting ReNew to seek compensation under the Change in Law clause of the PPA.

In its June 2022 ruling, the MPERC had acknowledged the GST as a Change in Law but limited the compensation only to costs incurred up to the scheduled commercial operation date (SCOD). It rejected claims related to increased O&M expenses and denied any carrying cost on delayed compensation—leading ReNew to appeal.

APTEL Objected To MPERC’s Stand 

APTEL strongly disagreed with the Commission’s restrictive interpretation, drawing on its own precedent in the Parampujya Solar Energy Pvt. Ltd. case. It held that there was no justification to exclude post-SCOD expenses or outsourced O&M costs from relief under the PPA. The tribunal also ruled that denying carrying cost contradicted the restitution principle, citing relevant Supreme Court judgments and the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021.

“It would be completely unfair and unjust to deprive the project developer of the impact of Change in Law events on expenditure beyond SCOD,” APTEL said, adding that outsourced O&M activities are a valid commercial choice and should not be excluded from compensation.

Fate Of Carrying Cost 

Regarding carrying cost, the tribunal noted that even though the PPA did not contain an explicit restitution clause, the language of Article 11.6.4 implied entitlement to compensation for the full impact of the Change in Law event—carrying cost included.

While setting aside MPERC’s order, APTEL directed the Commission to reconsider the claims after a prudence check and pass appropriate consequential orders. However, it ruled that enforcement of any final order would remain subject to the outcome of Civil Appeal of 2022 pending before the Supreme Court, which concerns a related issue under the Parampujya case.

The ruling reinforces the principle that developers are entitled to full economic restitution for statutory changes that affect project viability, marking another key decision in India’s evolving renewable energy jurisprudence.