Adjudicating Change In Law: The CERC’s Decision On ISTS Charges And Its Impact On Renewable Energy Projects

Reading Time: 2 minutes

In a notable decision by the Central Electricity Regulatory Commission (CERC) dated March 27, 2024, a complex legal matter involving Scatec India Renewables One Private Limited (SIROPL) and several respondents, including the Solar Energy Corporation of India Limited, GRIDCO Limited, and the Ministry of New and Renewable Energy, was addressed. This case sheds light on the intricate interplay of law, policy, and contractual agreements in the renewable energy sector.

SIROPL, an entity created to develop a wind power project, found itself entangled in a web of regulatory and policy changes. At the heart of the dispute was the Ministry of Power’s (MoP) order, which introduced restrictions on the waiver of Inter-State Transmission System (ISTS) charges, pivotal for the project’s economic viability. SIROPL argued that this constituted a “Change in Law” under the terms of its Power Purchase Agreement (PPA), affecting its project completion timeline and financial obligations.

The project, which aimed at setting up a 300 MW wind power facility, was a part of India’s ambitious efforts to boost renewable energy capacity. The government, to encourage investment in this sector, had previously offered waivers on ISTS charges for transmitting electricity through the inter-state transmission systems generated from solar and wind sources. This policy was instrumental in mitigating transmission costs for renewable energy developers, thereby fostering growth in the sector.

However, the MoP’s subsequent orders, especially the one dated November 23, 2021, introduced limitations on the waiver of ISTS charges, directly impacting projects like SIROPL’s. The order stated that the waiver would only apply to projects commissioned up to June 30, 2025, with further restrictions on extensions due to force majeure or government agency delays.

SIROPL’s plea to the CERC was multifaceted. It sought recognition of the MoP’s order as a “Change in Law”, thereby entitling it to compensation for delays beyond the waiver period of ISTS charges. Additionally, it highlighted the challenges posed by the unavailability of the GSS (Grid Sub-Station), a critical component for the project’s connectivity and operationalization.

The CERC, in its deliberation, had to balance the principles of contract sanctity with the dynamic nature of policy and regulation in the energy sector. It emphasized the importance of transparent and fair regulatory practices to ensure the sustainable development of renewable energy in India. The decision underscored the commission’s role in adjudicating disputes that arise in the rapidly evolving energy landscape, reaffirming its commitment to fostering an environment conducive to growth while protecting the interests of all stakeholders involved.

This case exemplifies the complexities inherent in the renewable energy sector, where policy shifts and regulatory decisions can significantly impact project economics and timelines. It highlights the need for a nuanced understanding of the legal frameworks and agreements that govern these projects, underscoring the importance of regulatory clarity and stability in attracting and sustaining investment in renewable energy.

Please view the document here for more details.