Renewable Energy Firm Wins Compensation Amid Regulatory Shifts And Safeguard Duty Impositions

In a recent development, ReNew Sun Waves Private Limited (RSWPL), a company engaged in solar power projects, filed a petition before the Central Electricity Regulatory Commission. The petition sought approval for a “Change in Law” and compensation due to the financial impact of recent events, specifically the imposition of safeguard duty on solar cells/modules and changes in customs duty rates.

RSWPL, a generating company and a project entity of ReNew Solar Energy (Jharkhand Four) Limited, is setting up a 300 MW Solar Power Project based on Photovoltaic technology. The petition involved Solar Energy Corporation of India Limited (SECI) as Respondent No. 1 and Bihar State Power Holding Company Limited (BSPHCL) as Respondent No. 2.

The core argument in the petition revolved around various notifications affecting the solar power project. RSWPL contended that changes in safeguard duty rates and customs duties, including the rescission of a key notification in 2021, had increased project costs. The company also highlighted the impact of changes in Goods and Services Tax (GST) rates.

The petition was initially disposed of by the Commission in December 2021, following the Electricity (Timely Recovery of Costs due to Change in Law) Rules 2021. However, the matter was revisited following directions from the Appellate Tribunal for Electricity (APTEL) in April 2022. The Commission, in June 2022, reviewed the case and instructed both parties to complete their pleadings.

RSWPL later submitted additional information in July 2022, emphasizing the increase in GST rates as another change in law event. SECI responded in January 2023, contesting certain claims made by RSWPL.

After hearing submissions from both parties, the Commission reserved the matter for orders in April 2023. In the final decision, the Commission acknowledged that various notifications, including those related to safeguard duty and customs duty, constituted a “Change in Law” event under the Power Purchase Agreement (PPA) dated August 13, 2019.

The Commission held that RSWPL was entitled to compensation for the additional costs incurred due to these regulatory changes. It specifically mentioned the 2020 Safeguard Duty Notification, rescission of the Basic Customs Duty (BCD) Notification No. 1/2011, and the increase in social welfare surcharge and Integrated Goods and Services Tax (IGST) as valid reasons for compensation.

Regarding the financial implications, the Commission directed SECI and Bihar Discoms to reconcile and pay the additional compensation claims made by RSWPL. The compensation was to be calculated at a discount rate of 9% over a 15-year annuity period.

Additionally, RSWPL was deemed eligible for carrying costs, representing compensation for the time value of money between the date of incurring additional expenses and the date of receiving compensation. The Commission specified that carrying costs would be calculated at the actual rate of interest paid by RSWPL, the rate of interest on working capital as per applicable regulations, or the late payment surcharge rate as per the PPA, whichever is the lowest. The Commission allowed compensation for both pre-Commercial Operation Date (COD) and post-COD periods, subject to further orders from the Supreme Court in a related matter. The decision aimed to restore RSWPL to the same economic position as if the regulatory changes had not occurred, ensuring fairness and adherence to the principles of the PPA.

Please view the document below for more details.