CERC Allows Adani Subsidiary Compensation For ‘Change of Law’ Events

CERC Allows Adani Subsidiary Compensation For 'Change of Law' Events

The Central Electricity Regulatory Commission (CERC), in its latest judgement, allowed compensation to Mahoba Solar (UP) Private Limited MSUPL) a subsidiary of Adani Green. The central commission allowed the compensation on account of ‘change of law’ events. 

These include the imposition of increased safeguard duty on the imports of solar cells and modules and the imposition of increased GST on solar equipment. The firm was involved in constructing, operating, and maintaining solar projects at the Bhadla Solar Park in Rajasthan. It won a bid from the Solar Energy Corporation of India (SECI) in 2018 and offered to trade solar power at Rs 2.54 per unit.

It received its letter of award on July 27, 2018, and signed its Power of Sale (PSA) on August 2, 2018. It also signed a Power Purchase Agreement (PPA) on November 30, 2018. Meanwhile, the government brought a notification to increase the safeguard duty on solar cells and modules on July 30, 2018. The firm has its Scheduled Commercial Operation Date (SCOD) on October 4, 2019. The firm claimed inflated expenditure for these events, described as ‘change of law’ events’. 

The CERC, in its Order, held that MSUPL was entitled to compensation (pre-COD & post-COD) towards additional expenditure on account of the Change in Law event in terms of Article 12 of the PPAs up to the date of reimbursement by the Respondents. 

“MSUPL shall also be eligible for carrying cost starting from the date when the actual payments were made to the Authorities till the date of issuance of this Order, at the actual rate of interest paid by the Petitioners for arranging funds (supported by Auditor’s Certificate) or the rate of interest on working capital as per applicable RE Tariff Regulations prevailing at that time or the late payment surcharge rate as per the PPA, whichever is the lowest. Once a supplementary bill is raised by MSUPL in terms of this Order, the provision of Late Payment Surcharge in the PPA would kick in if the payment is not made by the Respondents within the due date,” the Order said.

It also asked the contracting parties to reconcile additional expenditures along with carrying costs by exhibiting clear and one-to-one correlation with the projects and invoices. “The Commission further directs that the responding Discom i.e. BYPL, is liable to pay SECI all the above reconciled claims that SECI has to pay to MSUPL. However, payment to MSUPL by SECI is not conditional upon the payment to be made by BYPL to SECI,” the Order added.

CERC, however, said that the Order should not be enforced until an order in a similar matter pending before the Supreme Court is passed.