The Appellate Tribunal for Electricity (APTEL) has dismissed an appeal by the Hubli Electricity Supply Company (HESCOM), upholding the Karnataka Electricity Regulatory Commission's (KERC) 2021 order that granted a tariff increase for a solar project to offset the higher costs due to changes in tax laws. 

APTEL affirmed KERC’s decision, allowing an incremental tariff hike of Rs 0.39 /kWh for 22 years, over the existing tariff of Rs 2.91/kWh. This adjustment ensures the recovery of Rs 217.5 million for the solar project. 

The Karnataka Renewable Energy Development Limited (KREDL) initiated a request for proposals to develop 1,200 MW of solar projects within the 2,000 MW Pavagada Solar Park. Adyah Solar Energy won the project and signed a power purchase agreement (PPA) with HESCOM on April 28, 2018, at a tariff of Rs 2.91 /kWh. 

However, in July 2018, the Ministry of Finance introduced the Safeguard Duty (SGD) and Integrated Goods and Services Tax (IGST) on imported solar modules to protect domestic manufacturers. 

Adyah Solar, which used imported modules, petitioned KERC, seeking to classify the SGD and IGST as a ‘Change in Law’ event. The company claimed Rs 317.5 million in additional costs and requested a corresponding tariff increase. 

In June 2021, KERC ruled in favour of Adyah Solar, recognising the imposition of SGD and IGST as a ‘Change in Law’ event. KERC awarded Rs 217.5 million in reimbursement and approved a tariff increase of Rs 0.39 /kWh for 25 years. 

HESCOM challenged the ruling, arguing that tariff determination under Section 62 of the Electricity Act should not apply, as the project's tariff was initially set via competitive bidding under Section 63. 

APTEL dismissed HESCOM’s appeal, affirming KERC’s legal authority under Section 86(1)(b) of the Electricity Act, which allows state commissions to regulate electricity procurement prices, including those affected by changes in the law. The Tribunal upheld KERC's decision, noting that neither the bidding guidelines nor the PPA included a provision to address changes in the law. 

APTEL also rejected HESCOM’s claim that the compensation of Rs 673 million over 22 years was excessive compared to the initial claim of Rs 317.5 million. It stated that spreading the compensation over 22 years accounted for the time value of money, ensuring a fair recovery for Adyah Solar without placing undue burden on consumers. 

In a recent ruling, APTEL also overturned a decision by the Jharkhand State Electricity Regulatory Commission that had granted Tata Steel an exemption from renewable purchase obligations. 

(Mercom)