Regulator Allows Solar Developer to Recover Interest on Extra Expenditure
Carrying cost to be calculated based on the SBI lending rate
January 4, 2023
The Uttar Pradesh Electricity Regulatory Commission (UPERC) has allowed Adani Solar Energy Chitrakoot One (ASECOL) to recover the carrying cost of the additional expenditure the company incurred due to the introduction of safeguard duty (SGD) on imports of solar modules.
The Commission had earlier allowed the developer to claim the additional expenditure under the ‘Change in Law’ provision. Further, it decided in favor of the petitioner which had sought that the carrying cost of the additional expense must also be reimbursed by the procurer.
The Commission directed Noida Power Company (NPCL) to verify the details regarding the SGD claim within a reasonable time.
It also allowed the carrying costs – to be calculated on the SGD amount — at the yearly State Bank of India marginal cost of funds-based lending rate from the date the project was commissioned until the date of order which was December 31 last year.
ASECOL, a step-down subsidiary of Adani Green Energy, had commissioned a 25 MW solar power project at Chitrakoot, Uttar Pradesh. The company had incurred an additional cost of ₹87.7 million (~$1.06 million) on account of SGD.
The company had sought reimbursement for the same along with the corresponding carrying cost.
In December, NPCL sought an additional month to verify the claim of ₹87.7 million (~$1.06 million) spent due to SGD. It also filed objections on the issue of carrying cost. The commission reserved its order and directed NPCL to file a submission on carrying costs.
ASECOL referred to judgments made by the Appellate Tribunal for Electricity in two cases involving Parampujya Solar Energy and Rattan India Power regarding a claim of carrying cost following a change in law event. ASECOL also submitted calculations of the total expenditure (including a tax component) in the matter.
The company stated that they were not pressing for a specific rate of return on equity for claiming the carrying cost but were seeking compensation at the rate of late payment surcharge to provide relief to the affected party for the time value of funds deployed.
NPCL argued that the return on equity was only applicable to investments made on equity and therefore the expenditure incurred due to a change in law event cannot be considered an investment.
NPCL however stated that the commission may allow carrying costs considering the burden on the end consumer.
The Commission allowed ASECOL to claim carrying costs due on the expenditure incurred due to new taxes on imported solar modules, even though the power purchase agreement did not specifically provide for such costs.
The state regulator noted that it was responsible for deciding on relief for change in law events and that the purpose of the clause in the agreement was to alleviate the burden on solar developers. It said relief under the contract could not be fully realized unless the burden was relieved from the date the project was commissioned until December 31, 2022.
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