Recognition of Environmental Regulatory Changes as 'Change in Law' under Transmission Service Agreements: A Commentary on Fatehgarh-Bhadla Transmission Limited v. Adani Renewable Energy Park Rajasthan Limited

Introduction

The case of Fatehgarh-Bhadla Transmission Limited v. Adani Renewable Energy Park Rajasthan Limited And Another adjudicated by the Central Electricity Regulatory Commission (CERC) on January 8, 2020, represents a significant precedent in the intersection of energy infrastructure development and environmental conservation. The dispute arose between Fatehgarh-Bhadla Transmission Limited (FBTL), an inter-state transmission licensee, and Adani Renewable Energy Park Rajasthan Limited (AREPRL), concerning the classification of environmental regulatory changes under the Transmission Service Agreement (TSA) dated January 10, 2018.

Summary of the Judgment

FBTL filed a petition seeking to have the notification of the Great Indian Bustard (GIB) Arc coordinates, issued by the Deputy Conservator of Forest, Jaisalmer, on February 28, 2019, classified as a "Change in Law" event under Article 12 of the TSA. This classification was crucial for FBTL to claim relief for the consequential re-routing of the transmission line, which would result in increased project costs and delays. The CERC examined whether the imposition of environmental restrictions, leading to the required re-routing, constituted a change in law as defined in the TSA. Ultimately, the Commission acknowledged the event as a "Change in Law" but deferred granting immediate relief, directing FBTL to implement the project and approach for relief post-completion.

Analysis

Precedents Cited

The judgment referenced previous cases involving environmental clearances and their impact on contractual obligations within energy infrastructure projects. Notably, it considered directives from the National Green Tribunal and guidelines from the Ministry of New and Renewable Energy (MNRE) concerning the protection of endangered species like the GIB. These precedents underscored the judicial inclination to balance infrastructural development with ecological conservation, influencing the Commission's interpretation of the TSA's provisions.

Legal Reasoning

Central to the Commission's reasoning was the definition of "Change in Law" under Article 12.1.1 of the TSA, which includes alterations in the interpretation or application of laws by governmental bodies. The Commission found that the forest authorities' imposition to re-route the transmission line to protect the GIB habitat met this criterion. Although regulations mandating environmental protections existed prior to the bid deadline, the specific application and enforcement related to the GIB Arc coordinates represented a substantive change in the legal landscape affecting the project.

Impact

This judgment has far-reaching implications for future transmission projects, particularly in ecologically sensitive regions. It establishes that enforced environmental conservation measures can be recognized as "Change in Law" events, entitling project developers to seek relief under TSAs. Consequently, companies must incorporate potential environmental regulatory changes into their risk assessments and contractual frameworks. Additionally, it reinforces the authority of environmental bodies in shaping project execution and compliance.

Complex Concepts Simplified

Transmission Service Agreement (TSA)

A TSA is a contract between a transmission service provider (TSP) and a long-term transmission customer (LTTC) outlining the terms for providing electricity transmission services. It includes clauses that manage risks, costs, and responsibilities for both parties.

Change in Law

Under Article 12 of the TSA, a "Change in Law" refers to significant alterations in legislative or regulatory frameworks that impact the execution of the agreement. This can include new environmental regulations, changes in permitting requirements, or shifts in legal interpretations that affect project costs or feasibility.

Great Indian Bustard (GIB) Arc

The GIB Arc refers to the designated habitat area crucial for the conservation of the Great Indian Bustard, a critically endangered bird species. Any infrastructure projects within this zone must adopt measures to prevent habitat disruption and reduce mortality from collisions with power transmission lines.

Conclusion

The CERC's judgment in the FBTL vs. AREPRL case serves as a pivotal reference point for managing contractual relationships in the face of environmental regulatory changes. By recognizing the imposition of environmental conservation measures as a "Change in Law" under TSAs, the Commission underscores the necessity for equitable accommodation of ecological concerns within energy infrastructure projects. This decision not only affirms the legal protections afforded to endangered species but also mandates that project developers engage proactively with environmental regulations, thereby fostering sustainable development practices.