Gujarat Approves Proposal to Tweak Change in Law Clause for Solar Projects
July 25, 2019
The Gujarat Electricity Regulatory Commission (GERC) has approved the proposed deviations to the competitive bidding guidelines for procuring power from grid-connected solar projects by Torrent Power Limited.
Torrent Power Limited had petitioned the commission seeking its approval for deviations from the Ministry of Power’s (MoP) guidelines for future tenders for sourcing solar PV power from grid-connected solar projects to fulfill renewable purchase obligation (RPO) of its license areas.
Torrent Power Limited had sought the approval for deviation and submitted that the clause of ‘Change in Law’ in the MoP’s guidelines is too wide, creating ambiguity for seeking frequent tariff revisions and leading to uncertainty.
Torrent Power Limited had proposed to modify the clause to provide for ‘Change in Law’ like additional tax, duty, cess, on the generation of electricity (leviable on the final output in the form of energy) or the sale of electricity to be passed through. Regarding safeguard duty, specific relief was proposed based on the feedback received from various solar generators and in line with the prevalent practice in the state of Gujarat to ensure bid competitiveness.
While going through submission made by Torrent Power Limited, the commission observed that the deviation had been proposed to bring clarity to the ‘Change in Law’ which may occur during the construction period as well as the operation period of the project. According to the commission, it also brings clarity for the bidders, so they know before bidding as to what the changes are in taxes or surcharge or cess which do not qualify for ‘Change in Law’ and other events which do. It would also clarify the introduction or modification in the rates of safeguard or anti-dumping duty, which have a direct effect on the project cost, which qualify as ‘Change in Law’.
The commission noted that the net effect of the ‘Change in Law’ needs to be proved concerning its impact on the estimated revenue from the sale of electricity during the operation period or a change in proposed tariff. The procurer also needs to submit necessary evidence in support of the claim to the other party.
The commission observed that the proposed amendment brings clarity among the bidders and would avoid future litigations.
In 2018, the state commission had approved Torrent Power Limited’s petition for the acceptance of deviations from MoP’s guidelines for the procurement of solar and wind power.
Image credit: EDF Renewables