CERC Votes For Mutual Settlement Of Disputes In ‘Change In Law’ Petitions

The Central Electricity Regulatory Commission (CERC), in a series of recent orders, has decisively pushed parties  petitioning for ‘change in law’ situations to settle their disputes with mutual discussions and understanding. By doing this, the CERC is simply sticking to the letter of the agreements signed in these cases, which do have a provision for rules to be used in case of precisely such an issue.

Till not so long back, a number of such petitions were being treated differently, and orders issued. All this changed when the commission finally laid down a specific formula for cases where no such formula for change in law was specified.

The latest instance of this resolve is in a case involving Azure Power (through two subsidiaries) and SECI (Solar Energy Corporation of India), where Azure Power had sought compensation from SECI due to the change in law event caused by the hike in import duties on solar inverters. The new import duties on solar inverters were notified on Feb 1, 2021 in the Union budget, being hiked from 5% to 20%.

While allowing Azure to adjust the filing fee against future petitions, the CERC specified that” the compensation for Change in Law shall be computed in terms of Rule 3(5) of the Change in Law Rules, which provides that where the agreement lays down any formula, the same shall be in accordance with such formula; or where the agreement does not lay down any formula, it would be in accordance with the formula given in the Schedule to the Change in Law Rules”. The latest order was declared on December 16, but posted only today on the CERC site.

The order was followed by another order involving Renew Power and SECI on the same issue, where SECI had added the rejoinder that the impact of change in law would be known only after the scheduled start of commercial production.

The current rules provide for extra costs to be recovered within a period that can be spread out over 180 months, or as long as the impact of the additional cost that has been provided for in the rules exists.

It says something for the trust level among generators and buyers that even an issue with a clearly laid down procedure for resolution between parties has regularly been taken up for the CERC to adjudicate on, completely absolving the involved parties of any responsibility, so to speak. Why that is so is surely a matter worth thinking about.