MERC Declines To Give Relief To EESL Over ‘Change of Law’ Claim

MERC Declines To Give Relief To EESL Over 'Change of Law' Claim

The Maharashtra Electricity Regulatory Commission (MERC) in its latest order declined any relief to the Energy Efficiency Services Ltd (EESL). The case was related to the petition of the government entity, seeking compensation of Rs 27 crore. EESL sought this amount due to the rise of taxations on solar equipment during the developmental phase of these solar projects.

As per the case details, EESL was implementing solar power projects for selling the solar power to MSEDCL. As per the agreement, EESL was bound to sell solar power from its proposed 200 MW solar power projects to MSEDCL. The PPA was signed on January 20, 2019 between the two parties.

EESL commissioned 168 MW of this capacity across Maharashtra between August 31, 2018 and November 8, 2022. On June 15, 2022, the PPA between EESL and MSEDL was amended to retrospectively to adjust the clause regarding the sale and purchase of solar energy for calculating deemed energy.

The petitioner in its petition before the MERC said that as the GST rates for solar equipment rose from 5% to 12%, it was bound to get Rs 27 crore in compensation from the MSEDCL. The state power regulator in its petition declined the petition, citing delays in project executions and other lacunae.

“The combined reading of the PPA clauses 2.1 & 15.1.1 (as cited above) makes it clear that notification of new law or amendment of existing law or introduction / change in tax, duty or cess after the “Effective Date” qualifies as Change in Law. However, the Commission observes that in this particular case, both the Notification dated 31 December 2018 (GST rate increase from 5% to 8.9% ) and 30 September 2021(GST rate increase from 8.9% to 13.8%) resulting increase in GST rates on Solar power generating systems, are occurred much prior to the “Effective Date” (i.e. the date of commissioning of last unit of the Project) which is yet not achieved and therefore those MoF Notifications does not qualify as a Change in Law events,” the MERC order said.