SECI asked to compensate the solar developer for the GST and the imposition of safeguard duties

The Central Electricity Regulatory Commission (CERC), in a recent ordinance, ruled that Clean Solar Power (Bhadla), a subsidiary of Hero Solar Energy, was entitled to compensation for additional expenses incurred due to the imposition of a safeguard duty. The Commission clarified that the imposition of a safeguard duty on the importation of solar cells and solar modules constitutes a “change in law” event.

In addition, compensation was not dependent on payment made by Uttar Pradesh Power Corporation Limited (UPPCL).

The Commission, however, dismissed the developer’s claims of “cost of ownership” and said the power purchase agreements (PPAs) did not include a return clause.

Clean Solar Park (Bhadla) had filed a petition, seeking relief under the “Change in Law” provision, because safeguard duties were imposed on the importation of solar modules after the appeal deadline. offers, resulting in an alleged substantial increase in cost.

Background

SECI had launched a call for tenders (RfS) to develop 500 MW of projects in the Bhadla Phase-III solar park in Rajasthan.

Hero Solar Energy had submitted three bids of 100 MW each for grid-connected solar projects. Later, Hero Solar was declared the successful bidder for the three projects for the production and sale of electricity under the National Solar Mission (NSM), Phase-II, Batch-IV Tranche-XI.

The developer signed three PPAs with SECI on April 27, 2018 to set up and sell the electricity of the three solar projects: Bhadla-I, Bhadla-II and Bhada-III.

Uttar Pradesh Power Corporation Limited (UPPCL) is SECI’s purchasing utility under the Electricity Sale Agreement dated March 28, 2018.

In accordance with the PPAs, the planned commissioning date (SCoD) of the projects was April 27, 2019. However, the developer requested an extension of the deadline and SECI extended the SCoD of the projects until August 15, 2019. After that, he requested another extension of the SCoD, and the SECI revised the SCoD of the projects accordingly.

On July 30, 2018, the Ministry of Finance issued a notification imposing a safeguard duty on the importation of solar cells, whether or not they are assembled into modules or panels. The MNRE later issued an instruction to the SECI, stating that the Commission had already passed orders declaring that the imposition of a safeguard duty was a “change of law” event.

Accordingly, the developer provided details of the total amount incurred due to the imposition of the safeguard duty and requested SECI to reimburse said amount.

The SECI confirmed the amounts of 504.52 million yen (~ $ 6.79 million) for Bhadla-I, 492.71 million yen (~ $ 6.64 million) for Bhadla-II and 393 , 29 million yen (~ $ 5.31 million) for Bhadla-III as compensation for the ‘change in law’ and proposed to make payment on a 13-year annuity basis at the rate of pension of 10.41% per year.

In its communication, Clean Solar Park (Bhadla) stated that it was entitled to relief either in the form of a lump sum payment as one-time compensation or a tariff adjustment for the import of solar modules from a capacity of 394.11 MW (DC) compared to the cumulative DC capacity of 452.23 MW, which had to be installed for the 300 MW of AC capacity contracted.

Commission’s analysis

The Commission observed that SECI had written to the UPPCL, requesting it to make the payment of the petitioner’s claims for back-up rights.

The Commission noted that the SCoD for solar projects was April 27, 2019, which SECI subsequently extended until February 18, 2020 for Bhadla-I, February 29, 2020 for Bhadla-II and October 27, 2019 for Bhadla – III.

The state regulator also added that the petitioner had made available all relevant documents to settle his claim for compensation of 1.39 billion yen (~ $ 18.73 million) payable by SECI for expenses. incurred by the developer due to the imposition of backup rights. The SECI confirmed the amounts and offered to pay said amounts on a 13-year annuity basis at the annuity rate of 10.41% per annum.

The regulator further added that the compensation to be paid to the applicant was not subject to the payment to be made by the UPPCL to the respondent SECI.

In addition, the Commission added that the PPAs in this case did not contain any restitution provisions. Therefore, the “cost of ownership” claim was not admissible.

In addition, the Commission added that, in accordance with the provisions of the PPAs, the date of commercial operation means the date on which the commissioning certificate was issued upon successful commissioning of the full capacity of the project or of the last part of the project capacity. Accordingly, the Board concluded that the responsibility for payment for the impact of the GST on the purchase of solar panels and related equipment would rest with the Respondent until the Commercial Operation Date only for the contractual capacity.

Last month, CERC ordered SECI to compensate SB Energy One for increased costs caused by the imposition of the GST and safeguard duties. The Commission noted that the enactment of GST laws and the imposition of safeguard duties could be dealt with under the “change of law” clause.

In another similar order, CERC ordered SECI to compensate another solar developer for increased costs incurred as a result of the imposition of safeguard duties under the “change of law” clause. The Commission added that the compensation of the petitioner did not depend on payment to SECI by the UPPCL.

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