India: Indian Energy Law Bi-monthly Round Up - Review Of Significant Energy Law Updates (September 2022 And October 2022)

In the last two months, some noteworthy judgments and statutory updates have taken place in the field of Energy laws in India.

In this Newsletter, we shall be summarizing the following:

STATUTORY UPDATE

I. National Repowering Policy for Wind Power Projects, 2022

The Ministry of New and Renewable Energy, recently on 17 October, 2022, released 'Draft Policy for Wind Repowering, as National Repowering Policy for Wind Power Projects, 2022' ("Draft Policy"), which will supersede the 'Policy for Repowering of the Wind Power Projects' issued on 5 August 2016.

The Draft Policy has been issued with the objective of repowering older wind turbines with sub 2 MW capacity with higher capacity and higher efficiency turbines, in order to maximize energy (kWh) yield per sq. km. of the project area.

Some of the key features of the Draft Policy are as under:

Eligibility

• All wind turbines with the rated capacity below 2 MW, and which have completed their design life;
• For a set of existing Wind turbines which are situated on a contiguous land and have a single Polling Sub Station ("PSS"), more than 90% of total capacity of the project has completed its design life.

Arrangement of Power Purchase

• The concerned Discom shall continue to procure power, in terms of PPA till the PPA tenure, generated corresponding to last three (3) year's generation prior to repowering;
• The developer shall be at liberty to sell additional wind power capacity to the Discom and can sell to a third party subject to refusal by the Discom to procure additional wind power;
• The developer would be exempted from its obligation of supplying power to the Discom during the period of execution of repowering, subject to maximum period of two (2) years.

Incentive for the Developer

• Additional interest rate rebate of 0.25% by IREDA;
• Availability of all fiscal and financial benefits offered to New Wind projects.

Incentive for the State

• The Wind RPO Compliance of the concerned State, to the extent of average PLF for last three years of the concerned project, shall be exempted till commissioning of the repowered Project;
• An enhanced RPO multiplier shall be provided to the repowered Project for remaining period of PPA.

JUDGMENTS

II. Tariff order once passed cannot be amended during 'truing up' exercise: Supreme Court

Judgment: BSES Rajdhani Power Ltd. v. Delhi Electricity Regulatory Commission and BSES Yamuna Power Ltd. v. Delhi Electricity Regulatory Commission¹

Brief Facts

The Appellants, BSES Rajdhani Power Ltd. and BSES Yamuna Power Ltd., are Distribution Licensees as per Section 2(17) of the Electricity Act, 2003 ("Act"). The Delhi Electricity Regulatory Commission ("DERC") vide its tariff order dated 26 August, 2011 ("Tariff Order") had, while determining Annual Revenue Requirement ("ARR") for the FY 2011-12 and true up for the FYs 2008-09 and 2009-10, altered the methodology of computation of certain components including AT&C losses, depreciation, salary for FR/SR employees and Fringe Benefit Tax at the stage of truing up. The Tariff Order was challenged before the Appellant Tribunal of Electricity ("APTEL"), however, the same was dismissed.

Issue

Whether it is permissible to amend the Tariff Order at the stage of 'truing up'?

Decision

The Hon'ble Supreme Court noted that 'truing up' is the adjustment of actual amounts incurred by the Distribution Licensee against the projected amounts determined under the ARR. While setting aside the orders of the DERC and the judgment of the APTEL, to the extent impugned, the Apex Court observed that the 'truing up' exercise cannot be undertaken to retrospectively change the methodology of tariff determination and re­open the original tariff determination order. It further observed that Tariff Order is quasi-judicial in nature and remains final and binding on the parties unless it is amended or revoked under Section 64(6) of the Act or set aside by the Appellate Authority. The Apex Court ruled that DERC, at the stage of truing up, has changed the methodology, which is impermissible in law and undertaking such an exercise on the pretext of prudence check and truing up would, thus, amount to de novo determining of the tariff.

III. State Commissions do not have the authority to adjudicate matters related to electricity theft: Gujarat High Court

Judgment: Mitulbhai Ranchodbhai Lakhani v. Gujarat Electricity Regulatory Commission²

Brief Facts

Dakshin Gujarat Vij Co. Ltd. had raised supplementary bills towards compounding charges after discovering that the Petitioner, Mitulbhai Ranchodbhai Lakhani, who was its consumer, had engaged in "direct theft of electricity". The Petitioner had filed a petition before the Gujarat Electricity State Regulatory Commission ("GERC"), seeking an investigation into the fabrication of a false theft case against him, which was rejected by GERC on the ground that it did not have jurisdiction to adjudicate upon the issues pertaining to theft of energy. The said judgment of GERC was challenged by the Petitioner before Gujarat High Court.

Issue

Whether the State Electricity Commissions have jurisdiction to entertain matters related to electricity theft?

Decision

The Hon'ble Gujarat High Court concurred with GERC's observation that it cannot exercise its authority granted under the Act to decide matters relating to electricity theft. The Court made this determination basis Section 86 of the Electricity Act, 2003 ("Act"), which while addressing the duties of the State Commissions, does not provide the Commission with the authority to handle such situations. The High Court further affirmed that the Act itself contains a complete mechanism under Sections 135, 153, and 154, and its vested only with the Special Court established under the Act.

IV. The terms 'provide relief' in Change in Law clause of the PPAs is of widest amplitude making Seller entitled to carrying cost as well: APTEL

Judgment: Parampujya Solar Energy Pvt. Ltd. and Anr. v. Central Electricity Regulatory Commission & Ors.³

Brief Facts

Parampujya and Wardha ("Appellants) filed six petitions before the Central Electricity Regulatory Commission ("CERC"), thereby claiming for restitution in the wake of Change in Law ("CIL") pursuant to the introduction of Goods and Services Tax ("GST") and Safeguard Duty ("SGD") regime. As a consequent relief, it prayed for direction for compensation including carrying cost based on the change brought by the GST laws. The CERC partly allowed the petitions by a common Order, holding that the enactment of GST laws constitutes a CIL event. It held that the Appellants have been subjected to an extra burden by way of the consequent increase in construction costs caused by the new GST laws. Thus, the Appellants shall be eligible to compensation for the same. However, it declined the claim of carrying cost basis that the Power Purchase Agreements ("PPAs") did not have any explicit restitutive provision therein. Aggrieved by this decision of the CERC, the Appellants took their matter before the Appellate Tribunal for Electricity ("APTEL").

Issue

Whether CIL provision contained in PPAs provide for an inherent restitution mechanism in order to offer complete relief in case of a CIL occurrence, including carrying cost?

Decision

The APTEL, while setting aside the impugned order of the CERC, held that CIL provisions of the said PPAs included the restitutionary concept. It observed that once a new tax system is deemed to be a CIL event, the subsequent relief of carrying cost flows from the principal relief of compensation. Since, the effects of the new tax regime would begin on the day the law came into effect, the relief meant to be offered under the contracts would be incomplete without a pass through of the burden from the day of implementation of the tax. The APTEL also interpreted Article 12 of the PPAs, that contains the CIL provisions, and held that as it was broadly phrased, the words must be read and comprehended in their usual, natural, and grammatical sense. Thus, observing that the term 'relief' in CIL provision of PPAs shall also include the remedy that an adjudicatory forum may grant in relation to any real or perceived injustice or damage or something a party may demand as a legitimate right. Accordingly, the APTEL remanded the matters back to CERC for taking up the claim cases of the Appellants for necessary orders.

The Authors would like to acknowledge the assistance rendered by Ms. Sidhika Dwivedi, a fifth-year student from Symbiosis Law School, Noida and Ms. Nabira Farman, a fifth-year student from Faculty of Law, Jamia Milia Islamia, New Delhi.

Footnotes

1. 2022 SCC OnLine SC 1450 dated 18.10.2022.

2. C/SCA/20013/2022 dated 10.10.2022.

3. Appeal No. 256 of 2019 dated 15.09.2022.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.