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CERC Denies Solar Developer’s Plea To Review Discount Rate of Annuity Pay

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The Central Electricity Regulatory Commission (CERC) has rejected the petition of the solar developer, Madhya Pradesh Power Management Company Ltd (MPPMCL), in which it had requested a review of the previous ruling in which CERC had set the discount rate for annuity payment at 10.41%.

MPPMCL claimed that in its prior order, CERC ignored MPPMCL’s responses and written representations. It further said that the ruling was predicated on the settlement of claims in 13 years with annuity payments split on a monthly basis while the variable annuity rate average of the last 6 months SBI MCLR (1-year tenure) + 250 basis points were not evaluated.

The petitioner further stated that there was no need for ACME Jaipur Solar Power to seek 560 basis points because the loans obtained are in the range of 9.25% to 9.75%, as evidenced by the Lenders Agreement. 

According to MPPMCL, failing to examine the reply and written submission on these points amounts to an error on the face of the record.

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In an earlier decision dated 20.08.2021, the CERC stated, “Because the actual deployment of capital by way of debt or equity and their cost in terms of rate of interest or return, respectively, is unidentified, the rate of 10.41% can be taken as the uniform rate of compensation for the entire expenditure incurred on account of GST Laws or Safeguard Duty.”

According to the Commission, compensation for ‘Change in Law’ cannot be a source of profit, and hence there cannot be a greater rate of return than the current normative cost of debt.

As a result, the Commission concluded that 10.41% should be the discount rate of annuity payments towards the expenditure made by the Respondent SPDs on GST or Safeguard Duty as a result of the ‘Change in Law.’

In the current petition, the CERC ignored MPPMCL’s request, stating that the petitioner’s concerns had already been addressed in the prior petition and that the court’s decision to set the discount rate at 10.41% was calculated.

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It further stated that the MPPMCL had omitted to bring out any clerical or mathematical flaws in the Orders, or faults deriving from any unintentional slip or omission, which may be addressed at any moment.

In October 2021, the Ministry of Power suggested new guidelines through an official notification, in which impacted power-producing businesses and transmission licensees were to be restored to the same economic position as before the ‘Change in Law.’ This was to be accomplished by modifications to monthly tariffs.

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