Power regulator told to pass on changes in duties to consumers

Offsetting the impact of changes in central or state government duties post bidding, India’s Power Ministry has directed the Central Electricity Regulatory Commission (CERC) to pass on the excess costs to consumers in the form of electricity tariffs in a time-bound manner.

Hailing the power ministry’s move, Shekhar Dutt, director-general, Solar Power Developer Association (SPDA) told pv magazine that these directions will remove the complexities involved in pass-through under Change in Law clause.

“Time bound process would eliminate the financial uncertainties for the stakeholders—be it developers, lenders or the DISCOMs. It’s especially a big relief to solar power developers seeking pass-through for the impact of GST on the project cost!” he said.

Not everyone sees the announcement so positively, however.

“Although Change in Law clause may help the project owner to get compensation from the awarding authority, he can also exit the contract if it is no longer profitable. This will finally increase the tariff per kWh and put almost 3-4 GW of PV projects under risk,” Dharmendra Kumar, IHS Markit analyst told pv magazine.

As per directions of the power ministry, the Central Commission will determine the per unit impact of change in domestic duties, levies, cess and taxes, which will be passed on. It will circulate a draft order for determination of per unit impact under change in law to all the States/beneficiaries on the 14th day of filing the petition. Any objection/representation must be submitted within 21 days of the filing.

Meanwhile, the order for pass-through giving the calculation for per unit impact will be issued within 30 days of the filing. The impact of such a change in law shall be effective from the date of the change in law.

In case CERC has already passed an order to allow pass through of changes in domestic duties, that will apply to all cases and no additional petition would need to be filed in this regard.

While issuing these directions under section 107 of the Electricity Act, 2003, the Ministry noted that power generating companies are facing difficulties in getting pass-through of changes in costs, due to any change in domestic duties, levies, cess and taxes imposed by the government.

The difficulty is mainly due to the considerable time the approval process takes, which results in severe cash flow problems for the power generating companies. This has also resulted in stressing the power sector.