GERC dismissed Hindustan Zinc’s plea, ruling that all carbon credit revenues, including VERs, must be shared with GUVNL under PPA terms, and upheld the interest on delayed sharing.
July 08, 2025. By EI News Network
The Gujarat Electricity Regulatory Commission (GERC) has issued a ruling involving Hindustan Zinc Ltd. and Gujarat Urja Vikas Nigam Ltd.(GUVNL), rejecting the company’s claim that Verified Emission Reduction (VER) revenues are exempt from revenue-sharing provisions under its Power Purchase Agreements (PPAs).
The order settles a long-standing dispute over the scope of ‘CDM benefits’ and affirms that all carbon credit revenues, regardless of the certification mechanism,must be shared with the distribution licensee.
Hindustan Zinc had argued that only Certified Emission Reductions (CERs), issued under the Clean Development Mechanism (CDM) of the UNFCCC, fell under Article 12.12 of the PPAs. According to the company, VERs, certified by voluntary mechanisms like VCS or Verra, were entirely distinct and thus outside the purview of the contractual sharing obligation.
GUVNL contended that all forms of carbon credit revenues, including CERs and VERs, must be shared because they contribute to reducing the overall project cost and serve the consumer interest, as envisaged under GERC’s 2006 Tariff Order.
In its ruling, the Commission sided with GUVNL and clarified that ‘CDM benefits’ as mentioned in the PPAs should be interpreted in the broader regulatory context.
GERC noted that while CDM was the dominant carbon certification mechanism at the time of the 2006 Tariff Order, the regulatory intent was always to ensure that all carbon credit revenues, irrespective of their source, be shared by developers operating under cost-plus tariff models.
The Commission emphasised that CERs and VERs are functionally similar, as both monetise emission reductions, and therefore, cannot be selectively excluded. Consequently, GERC directed Hindustan Zinc to share 25 percent of the VER proceeds earned between 2007 and 2009, amounting to INR 85.93 lakh.
The ruling also addressed a second major issue concerning interest on delayed benefit sharing. Hindustan Zinc contested the deduction of INR 1.03 crore as interest, claiming that GUVNL had first demanded VER-related disclosures only in 2017, seven years after the sale of the credits in 2010. However, GERC dismissed this argument, observing that the company had failed to comply with its annual reporting obligations under Article 12.12, despite receiving prior notices.
The Commission stated that the delay deprived GUVNL of the time value of money and upheld the interest deduction as a necessary correction to ensure consumers were not short-changed.
By dismissing the company’s plea, the Commission has reinforced the view that carbon credit revenues, whether CERs or VERs, are not discretionary gains for developers but regulated benefits that must be shared. The order is expected to serve as a strong precedent for similar disputes, especially those involving renewable energy projects governed by legacy PPAs and cost-plus tariff structures.
The legal significance of the order lies in its unambiguous clarification that the term ‘CDM benefits’ encompasses all carbon credit schemes, not just those certified under the UNFCCC framework.
