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In a recent development, the Solar Energy Corporation of India Limited (SECI) has been involved in a legal process to get approval for the tariff rates of wind power projects, specifically for Tranche-XI projects. These projects are set to be connected to the inter-State Transmission System (ISTS) and were selected through a competitive bidding process, following guidelines set by the Ministry of Power, Government of India, back in December 2017.
SECI issued a Request for Selection (RfS) on May 25, 2021, for setting up 1,200 MW ISTS-connected wind power projects. Following this, eleven bids were received, offering a total capacity of 2,910 MW. After a series of evaluations and an e-reverse auction, the tariff was finalized. The projects are anticipated to be commissioned by 2023-24, expected to assist distribution licensees in fulfilling their Renewable Purchase Obligations (RPOs) and to provide power at competitive rates. Winners of the bid included companies like ReNew Naveen Urja Private Limited, Green Infra Wind Energy Limited, Anupavan Renewables Pvt Limited, Adani Renewable Energy Holding Fifteen Limited, and Azure Power India Pvt. Limited.
However, the process has faced several legal and procedural challenges, particularly concerning the provisions related to Change in Law events and the resultant tariff adjustments. Some bidders have raised concerns about the amendments made to the Power Purchase Agreement (PPA) after the bids were submitted, particularly those affecting Change in Law compensations and the financial implications of such changes. Specifically, there was debate over a pre-determined compensation mechanism for changes in project costs due to legislative changes and whether SECI had the requisite approval for such amendments.
During the hearings, various responses and objections were filed by the involved parties, including SECI and the winning bidders. Issues were raised regarding the incorporation of certain clauses without the necessary approvals and the implications of these on the project costs and tariffs. SECI argued that the changes were in compliance with the guidelines and that the bidders, having participated in the auction under these terms, were bound by them. It was highlighted that the principle of restitution, which aims to restore the financial position of a developer to what it would have been without the occurrence of a Change in Law event, was a significant point of contention.
The regulatory body involved took into consideration the submissions from both SECI and the respondents, focusing on whether the bidding process followed the stipulated guidelines and whether the discovered tariffs were transparent and followed the legal framework. The discussions also delved into whether the changes in law, such as adjustments in the GST rate, should be considered as Change in Law events, potentially affecting the project costs and tariffs.
After evaluating the arguments and submissions, the regulatory body concluded that the tariff discovered through the bidding process was transparent and in line with the guidelines. They addressed the concerns raised by the respondents about the changes in law and their impact on project costs, ensuring that the developers would receive the appropriate compensation. The body also acknowledged the need for an extension in the timeline for achieving financial closure and scheduled commissioning dates due to delays in the tariff adoption process.
The decision aimed to provide clarity and regulatory certainty to the developers, reinforcing the importance of adhering to the established bidding guidelines and ensuring fair compensation for changes in law. This resolution seeks to move forward with the wind power projects, contributing to the country’s renewable energy goals and ensuring stable and competitive power rates for distribution licensees.
Please view the document here for more details.
