CERC Judgement on SB Energy’s 300 MW Bhadla Project Compensation

A plea  by SB Energy at the CERC, with SECI and Rajasthan Urja Vikas Nigam as respondents, was disposed off by the commission with a now predictable template on most of the contentions. In doing so, the CERC has served to iterate what seems to be well established rules for such situations. The final order gives a full perspective in that sense.

The case, involving a 300 MW solar project won by SB Energy at Bhadla in Rajasthan that was allotted in 2017, came up for final hearing and judgement on  May 13, with the order being posted a day later.

SB Energy’s key contentions were for compensation owing to launch of GST and then, the Safeguard Duty, as both fall within the ‘change in law’ definitions, besides extra costs for its O&M which it outsourced to Sterling and Wilson Solar, and finally, interest costs and carrying costs for the period of delay in receipt of payments.

The CERC decided as below:

(i) The enactment of the „GST laws‟ is squarely covered as “Change in Law” under the first and last bullet in seriatim of Article 12 of the PPA and entitles the Petitioner to relief under Article 12 of the PPAs.

(ii) The imposition of Safeguard Duty qualifies as „Change in Law‟ under the PPAs and entitles the Petitioner to relief under Article 12 of the PPAs.

(iii) The liability of payment on account of GST Laws and imposition of Safeguard duty on procurement of Solar PV panels and associated equipment by the Petitioners shall lie with the Respondents till the Commercial Operation Date (COD) for the contracted capacity and energy as per Article 4.4 of the PPAs.

(iv) SECI is directed to pay to the Petitioner as per mutually agreed mechanism for payment of such compensation on annuity basis spread over the period not exceeding the duration of the PPAs, subject to the outcome of Petition No. 536/MP/2020 filed by SECI for approval of annuity methodology including annuity rate.

(v) The compensation to be paid to the Petitioners is not conditional upon the payment to be made by the Respondent RUVNL to Respondent SECI. However, the Respondent SECI is eligible to claim the same from the Respondent RUVNL on ‘back to back‟ basis. The Commission also directs the Respondent RUVNL to expeditiously settle such claims in term of the PSA.

(vi) The first instalment of the claim shall be paid within sixty days of the date of this Order or from the date of submission of claims by the Petitioner whichever is later failing which it will attract late payment surcharge as provided under PPA/PSA.

b) Issue No.2: The claim on account of additional tax burden on O&M is not maintainable. This is because developers make a bid with a blended price, without sharing a breakup. The decision to outsource O&M is a business call of the developer, and the risks therein must be borne by them.

c) Issue No.3: The claims on account of ‘Carrying cost‟, ‘Interest on Working Capital‟ and ‘Return of Equity‟ are not admissible, not being covered in the PPA at all.