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India’s Solar Developers Object to Retroactive Tariff Cut

According to reports, SunBorne Energy Holdings LLC, backed by billionaire Vinod Khosla, Moser Baer India Ltd. (MBI), and three other companies asked a regulator to dismiss an attempt by the government of the Indian state of Gujarat to cut the tariff paid for solar power.

The five solar project developers argued for the dismissal at a hearing held by the Gujarat Electricity Regulatory Commission yesterday saying such a move would violate laws, according to Hemant Sahai, a lawyer representing the group.

The developers are objecting to measures proposed by Gujarat Urja Vikas Nigam Ltd., the state-run bulk buyer of solar power, which submitted a petition to the regulator this month requesting a 28 percent cut in the rate it pays for electricity from solar plants. The move in Gujarat, home to more than half of India’s solar power capacity, adds to the number of jurisdictions including Greece, Spain, Romania and the Czech Republic working on cuts for solar power.

The developers say their 25-year power purchase agreements with GUVNL, signed in 2010, don’t allow for tariff revisions. By law, the contracts can only be revisited in order to boost electricity generation, by mutual consent, or if the developers fail to build their projects on time, according to a copy of a written submission by the solar companies.

GUVNL Managing Director Raj Gopal didn’t respond to phone calls and e-mails seeking comment. GUVNL in its petition said it wants to reduce the tariff for 88 projects comprising 971.5 megawatts of solar capacity because of “unjustified and windfall gains” by the owners, which include Adani Enterprises Ltd. (ADE) and Tata Power Co. (TPWR)

The Gujarat Electricity Regulatory Commission will hold its next hearing on the matter on Aug. 5. Then, other project developers will be heard and GUVNL will have a chance to respond, Sahai said in a phone interview late yesterday.

The regulator set the tariff in January 2010 after consultations between the industry and government. Gujarat state regulations allow a tariff order to be challenged within 60 days. GUVNL has no legal ground to contest the tariff more than three years later, according to the developers.

Any profits made don’t give GUVNL the right to backtrack on the contracts, they said in the submission to the regulator.

“It is a settled economic principle, as recognized by judicial precedents, that each project involves a bundle of risks,” they said. “Where an investor assumes such bundle of risks, he is entitled to whatever returns that he is able to make.”

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