CERC Grants Relief To Wind Energy Firm Against GST Rate Hike

CERC Grants Relief To Wind Energy Firm Against GST Rate Hike

The Central Electricity Regulatory Commission (CERC) in its latest order granted partial relief to Morjar Windfarm Development. The order from CERC came to the fore when the petitioner moved the central agency for its intervention. The Wind Energy, in its petition, asked the CERC to consider the change in GST rates as a ‘change of law’. Accordingly, the company asked for compensation due to the rise in taxation.

The case was filed by Morjar Windfarm Development against Solar Energy Corporation of India (SECI). Goa Government, and two DISCOMS namely, North Bihar Power Distribution Company and  South Bihar Power Distribution Company Limited and BSES Rajdhani Power Limited (BRPL) were also parties in the case. The petitioner had sought compensation against the rise of GST rates from 5% to 12%. It urged the CERC to treat the rise in taxation as a fit case for ‘change of law’.

CERC gave a partial order granting compensation for the period of post commercial operation date (COD) of the projects in question. The Commission has acknowledged the GST rate increase as a ‘Change in Law’ event and directed the parties to reconcile the additional expenditure incurred due to this change. The Commission has also provided guidelines for calculating the compensation and carrying costs.

The order reads, “The directions issued in this Order so far as they relate to compensation for the period post Commercial Operation Date of the projects in question as also towards carrying cost (pre-COD & post-COD) shall not be enforced and shall be subject to further orders of the Supreme Court in Civil Appeal No. 8880/2022 in Telangana Northern Power Distribution Company Limited & Anr. V. Parampujya Solar Energy Pvt. Limited & Ors, and connected matters.”

CERC Grants Partial Order

On the question of compensation over the change in law, CERC notified a five-part ruling, “The petitioner is entitled to compensation on account of a Change in Law corresponding to the mutually agreed project capacity under PPA. Secondly, the petitioner would be paid compensation at the discount rate of 9.12% and an annuity period of 15 years.  The liability of SECI/Discoms for ‘Monthly Annuity Payment’ starts from the 60th day from the date of this order or the date of submission of claims by the Petitioner, whichever is later.”

On the question of payment to the petitioner, CERC stated, “The Petitioner would also be eligible for carrying costs 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 Petitioner 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.”

Main Issue

Under the second portion of the petition, CERC highlighted the cutoff rate payment under the change of law compensation which would be be CoD of the project. The document highlighted, “Since the PPA does not provide any methodology for computing the impact of change in law, the Petitioner has calculated the impact of change in law as per the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021. The Petitioner has taken an annuity period of 15 Years as per the aforesaid rule. The annual rate of interest on the loan component (in %) shall need to be 9.12%.”