The Rajasthan Electricity Regulatory Commission has given an important decision in the Petition filed by ACME Aklera Power Technology Pvt. Ltd. against Solar Energy Corporation of India Limited and Rajasthan Urja Vikas and IT Service Limited. The case was focused on compensation for “Change in Law” events under the Power Purchase Agreement signed on 10 June 2019. The Petitioner asked the Commission to adopt a proper mechanism for adjustment and compensation related to financial and commercial impact caused by such changes, including carrying cost and interest on carrying cost. The matter was heard by Dr. Rajesh Sharma, Chairman, and Shri Hemant Kumar Jain, Member.
The Commission examined the claims in detail and has clearly stated its position on each point. One important decision is that the impact of a particular government notification or order that came after the date of the PPA but before the legal change date of 1 July 2019 cannot be passed on to the respondents. This means the Commission has not allowed this part of the claim. The respondents will not be responsible for this cost under the “Change in Law” clause. This finding brings clarity to how claims will be assessed when a notification falls in the period between signing of the PPA and the official date of change.
For the parts of the claim that were accepted as valid “Change in Law” impact, the Commission has allowed carrying cost to the Petitioner. This carrying cost will apply from the date when the Petitioner actually made the payments for the additional cost until the date of the Order. This ensures that the Petitioner is compensated for the financial burden it carried during the period of impact. However, the Commission has made it clear that the Petitioner will not receive interest on the carrying cost itself. This settles the dispute on whether carrying costs can also earn further interest.
The Commission has also set out a clear formula for calculating the rate of carrying cost. The rate will be the lowest among the three values. These include the actual interest rate the Petitioner paid to arrange funds, supported by an Auditor’s Certificate, the interest rate on working capital as defined in the relevant RERC Tariff Regulations, or the Late Payment Surcharge rate specified in the PPA. By choosing the lowest rate among these three, the Commission aims to maintain fairness and prevent undue financial burden on the respondents.
To ensure that the compensation is delivered in a structured way, the Commission has decided to convert the admitted “Change in Law” amount into monthly annuity payments. For this purpose, it has fixed a 9% discount rate. The annuity period will be 15 years or the remaining term of the PPA, whichever is shorter. This approach allows the Petitioner to receive the payment steadily over time rather than as a lump sum. The respondents will have to start these monthly annuity payments from the 60th day after the date of the Order, or from the day the Petitioner submits its claim following the Commission’s instructions, whichever is later. If there is any delay beyond this timeline, the respondents will have to pay a Late Payment Surcharge at the rate given in the PPA or PSA. The Commission has ended the Order by stating that there will be no order regarding cost, completing the decision, and giving all parties clear directions on their obligations going forward.
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