1. Tata Power, Adani Power demand compensation; here’s why

Tata Power, Adani Power demand compensation; here’s why

Gujarat-based thermal power plants of Tata Power and Adani Power have placed fresh demands for compensatory tariffs before the Central Electricity Regulatory Authority (CERC) for the under-recoveries suffered by their Mundra units on account of unforeseen increase in imported (Indonesian) coal prices.

By: | New Delhi | Updated: June 13, 2016 6:32 AM
tata power

In April, Aptel had set aside the commission’s order saying that compensatory tariff could only be granted if the case fell under either FM or change in law, both of which was disallowed by the regulator earlier.(Reuters)

Gujarat-based thermal power plants of Tata Power and Adani Power have placed fresh demands for compensatory tariffs before the Central Electricity Regulatory Authority (CERC) for the under-recoveries suffered by their Mundra units on account of unforeseen increase in imported (Indonesian) coal prices. This follows the electricity appellate tribunal Aptel’s order to invoke force majeure (FM) in their cases.

According to sources, Tata Power has sought nearly Rs 3,300 crore in relief for the period between FY13- FY16. On its part, Adani Power is understood to have sought close to Rs 3,000 crore as compensation for the four-year period in the form of tariff increases, based on sample calculation for a month submitted to the commission. For the period after FY16, the fuel costs are sought to be a pass-through on a monthly basis.

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Analysts believe that if the companies’ proposals are approved by the commission, then the compensatory tariff amount in totality could be higher than approved by the regulator in 2014. “Now that the case is to be decided within the framework of the power purchase contract and its implication in case of FM, we expect some of the balancing done by the commission earlier to reduce the burden on consumers will not play a role now,” a lawyer representing the Adani Power in CERC told FE.

The crucial difference between the methods adopted by CERC in 2014 and those suggested by the companies now is that the regulator had tried to balance the interest of consumers as well as the developers. The commission had penciled in a sacrifice of 1 percentage point on return on equity (RoE) by the companies. However, now that Aptel has sent the case back to CERC to consider it under the clause of FM, the companies’ calculations factor in all under-recoveries on account of expensive Indonesian coal.

In 2014, based on recommendation of the Deepak Parikh committee, the commission had decided to grant relief of Rs 830 crore to Adani Power and Rs 329 crore to Tata Power for 2012-13.

It had also approved monthly pass through of fuel under-recovery for future years. However, the case has since been heard in Supreme Court as well as Aptel.

“For incurring such unforeseen financial burden, Coastal Gujarat Power (CGPL) had availed funds through various lending institutions for which CGPL incurred huge financial cost. CGPL ought to be restituted for such additional financial cost (for the past period) as the same is a direct consequence of the promulgation of Indonesian Regulations. It is pertinent to note that the aforesaid sample calculations does not include such interest cost,” Tata Power said in its submission to the Central Electricity Regulatory Commission.

The case has come back to the regulator after nearly three years since it decided the compensatory tariff. Since Aptel declared the case to be fit for consideration under force majeure, lawyers and experts believe that commission should be able to deliver the judgment soon.

“Since CERC is headed by technocrats, even good judgments sometimes do not stand the scrutiny of law as the case moves to courts or tribunals. This was the reason compensatory tariff order from 2014 was struck down as it wasn’t vetted by a legally competent person on CERC,” another lawyer said on condition of anonymity.

In April, Aptel had set aside the commission’s order saying that compensatory tariff could only be granted if the case fell under either FM or change in law, both of which was disallowed by the regulator earlier.

The tribunal remanded the case back to the commission to consider relief within the scope of the contract under force majeure. The tribunal has also set July as the deadline for a decision on these petitions. The next CERC hearing will take place on June 15.

  1. E
    ELA SEN
    Jun 13, 2016 at 5:59 am
    Small is beautiful but BIG is powerful. How easily they get Tariff relief! Do the small-s get similar benefits? How does it affect country's exchequers that I also eager to know.
    Reply

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