Introduction

The case of Adani Power Rajasthan Limited v. Rajasthan Electricity Regulatory Commission (RERC) addresses pivotal issues concerning compensation for change in law events under the Power Purchase Agreement (PPA) between power generators and procurers. This appellate judgment, delivered on January 29, 2020, by the Appellate Tribunal for Electricity in New Delhi, consolidates appeals from both Adani Power and Rajasthan Discoms against decisions rendered by RERC in previous petitions.

The central debate revolves around whether specific statutory changes, including levies and surcharges introduced post the PPA's effective date, qualify as "Change in Law" events warranting compensation to Adani Power. The parties involved are:

• Appellant: Adani Power Rajasthan Limited
• Respondents: Rajasthan Electricity Regulatory Commission and several Jaipur Vidyut Vitran Nigam Limited entities

Summary of the Judgment

The Tribunal analyzed two main appeals:

• Appeal No. 284 of 2017: Filed by Adani Power challenging the disallowance of certain change in law events, including carrying costs.
• Appeal No. 09 of 2018: Filed by Rajasthan Discoms contesting the allowance of certain change in law events.

After thorough examination, the Tribunal upheld Adani Power's claims for specific statutory levies as valid "Change in Law" events under Article 10 of the PPA. Conversely, it dismissed the Discoms' challenges against these allowances. Additionally, the Tribunal affirmed the entitlement of Adani Power to carry forward carrying costs resulting from delayed compensation approvals.

Analysis

Precedents Cited

The judgment extensively referenced previous decisions to establish a consistent legal framework:

• Sasan Power Limited v. CERC (2017): Affirmed that levies imposed on rail transportation qualify as "Change in Law" events.
• Uttar Haryana Bijli Vitran Nigam & Ors. v. Adani Power Ltd. (2019 SCC 325): Reinforced the principle of restitution under Article 13.2, mandating compensation to restore the affected party's economic position.
• Energy Watchdog v. CERC (2017 SCC 80): Highlighted the scope of "Change in Law" provisions within PPAs.

These precedents collectively underscored the judiciary's stance on ensuring that power producers are compensated for unforeseen statutory changes impacting their operational costs.

Legal Reasoning

The Tribunal delved into the provisions of Article 10 of the PPA, which delineates the framework for "Change in Law" events. Key points of the legal reasoning included:

• **Definition of Change in Law:** Emphasized that statutory levies, such as Swachh Bharat Cess and Krishi Kalyan Cess, fall within the ambit of Article 10.1.1 as they impose additional non-recurring expenditure on the seller.
• **Scope During Operating Period:** Clarified that changes affecting operational costs are eligible for compensation, aligning with the purpose of restoring the economic position of the affected party.
• **Carrying Cost:** Supported the inclusion of carrying costs based on established jurisprudence, asserting that delayed compensations impose undue financial burdens on the generator.
• **Integration with Precedents:** Leveraged previous judgments to substantiate the interpretation that taxes on inputs for power generation are integral to the supply of power and thus qualify as "Change in Law" events.

Impact

This judgment has significant implications for future power purchase agreements and regulatory practices:

• Generators' Rights: Strengthens the position of power generators to claim compensation for statutory changes affecting their costs.
• Regulatory Clarity: Provides clearer guidelines for regulatory commissions in assessing and compensating for "Change in Law" events.
• Contractual Consistency: Ensures that PPAs are interpreted in a manner that balances contractual obligations with statutory changes, promoting fairness and economic stability for both parties.
• Jurisprudential Consistency: Aligns with higher court rulings, fostering uniformity in the application of "Change in Law" provisions across similar cases.