Andhra Regulator Orders RE Developers to Share Tax Cut Gains With Consumers

The Andhra Pradesh Electricity Regulatory Commission (APERC) has recognised the reduction in the effective Basic Customs Duty (BCD) on imported solar modules and the reduction in Goods and Services Tax (GST) on renewable energy devices and components as "Change in Law" events under power purchase agreements (PPAs) executed between renewable energy generators and the state's distribution companies. In a suo motu order, the Commission ruled that the reduction in the effective customs duty incidence on imported solar modules from 44% to 40%, effective February 2, 2025, and the reduction in GST from 12% to 5% on renewable energy devices and components, effective September 22, 2025, qualify as Change in Law events. It directed that the financial benefits arising from these statutory changes must be passed on by generating companies to Andhra Pradesh's distribution utilities (APDISCOMs) and ultimately to electricity consumers. Instructions From MoP The Commission initiated the proceedings following communications from the Ministry of Power and the Solar Energy Corporation of India (SECI), which sought regulatory intervention to ensure timely pass-through of benefits resulting from the tax reductions. APERC noted that the Ministry of Power had advised State Electricity Regulatory Commissions to adopt a uniform approach in line with the Central Electricity Regulatory Commission's (CERC) orders to minimise litigation and ensure consistent implementation across states. Referring to earlier CERC rulings, APERC observed that Change in Law provisions are intended to restore the economic position of the affected parties and therefore apply equally to increases and decreases in statutory levies. The Commission said any reduction in taxes, duties or cess resulting in financial gains should be transferred to procurers and consumers. To facilitate implementation, APERC laid down a uniform framework. The benefit from the customs duty reduction will apply to projects where the bid submission date was prior to February 2, 2025, and the relevant invoice was issued, or payment and tax discharge occurred, on or after that date. Similarly, the GST benefit will apply where the bid submission date was before September 22, 2025, and invoices or tax payments were made on or after September 22, 2025. Submit Project-Wise Details The Commission directed all eligible renewable energy generators to submit project-wise details of invoices, taxes originally paid, revised tax incidence and the resultant savings, duly certified by a Statutory Auditor or Chartered Accountant, within 60 days of the order. APDISCOMs have been instructed to verify and reconcile the claims within 30 days of receiving complete information, while the corresponding tariff adjustment or financial settlement must be completed within a further 30 days. APERC also clarified that the provisions of the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, will apply wherever relevant, and any disputes relating to applicability, quantification or implementation of the benefits may be brought before the Commission for adjudication. In its concluding observations, the Commission said timely pass-through of benefits arising from reductions in statutory levies is essential to uphold regulatory certainty, transparency and consumer protection, adding that the order provides a uniform framework for implementing Change in Law benefits arising from reductions in customs duty and GST applicable to renewable energy projects.