CERC Orders Solar Developers & SECI To Mutually Settle Change in Law Claims

The Central Electricity Regulatory Commission (CERC) in its two recent decisions has denied project developers’ request to intervene in cases involving claims arising from Change in Law (CIL) events before the petitioners tried to reach a mutual settlement with the concerned parties in their Power Purchase Agreements (PPAs).

Three project developers were engaged in CERC’s recent decisions on petitions involving CIL rules: Tata Power Renewable Energy Limited (TPREL), SB Energy Three Private Limited, and SB Energy Four Private Limited.

In 2016 and 2017, Tata Power Renewable Energy Limited (TPREL) signed PPAs with SECI, following which the Goods and Services Tax (GST) was implemented. 

In 2020, the Ministry of New and Renewable Energy (MNRE) emphasized that, because CERC had previously established the method to be followed in CIL situations due to GST application, there was no need for every developer to approach the commission for specific orders in comparable cases.

As a result, SECI launched conversations to reconcile TPREL’s CIL claims, but eventually gave the developer a letter approving just a portion of the claims. SECI defended its stance by stating that the assertions had not been validated by the distribution companies (DISCOMS).

TPREL argued that the DISCOMS’ approval was irrelevant since they were not parties to TPREL’s PPAs with SECI, but the latter dismissed this claim.

Tata Power then petitioned CERC, requesting the commission to rule that the adoption of GST is constituted to CIL since it caused additional costs on the firm.

CERC concurred with SECI since the clauses of the PPAs clearly addressed SECI’s back-to-back Power Sale Agreements (PSAs) with the DISCOMS. Thus, without the agreement of DISCOMS, the payment of CIL claims would be impossible.

The commission also noted that in CIL events, the affected party [TPREL] and the other parties [SECI and the DISCOMS] are needed to settle CIL claims among themselves and approach CERC only in accordance with Rule 3(8) of the CIL Rules, which specifically addresses the verification and adjustment of claim amounts.

SBE Three Private Limited and SBE Four Private Limited, which signed PPA with SECI in 2017 and 2018 for 100 MW and 200 MW solar projects, respectively, appealed CERC for in-principle permission for a CIL event: Land Tax Notices by the Finance Department (Tax Division), Government of Rajasthan, in 2019 and 2020. 

In response to their petitions, CERC stated that because there was no provision in the PPAs or the CIL Rules for the issuance of ‘in-principle approval,’ the commission saw no reason to issue the required permission. Further, it stated that the petitioners might contact SECI for the settlement of CIL claims amongst themselves as and when the tax regulations are applied, and then seek CERC for additional assistance.