In two separate orders on Saturday, the Central Electricity Regulatory Commission (CERC) has spelt out how Tata Power and Adani power would be compensated for the deleterious effect of the unforeseen, post-September 2011 hike in Indonesian coal price on the viability of their Mundra (Gujarat) power stations.
The regulator, which had approved bailout packages for the two stations in April 2013 — in the form of a temporary, actual cost-escalation-based compensatory tariffs, has now awarded compensations of 52 paise/unit for Tata Power and 71 paise/unit for Adani Power for 2013-14. Additionally, while Adani Power would get lumpsum compensation of R420 crore and R409 crore, respectively, from Gujarat and Haryana discoms for the loss on account of fuel cost increase for the period up to March-end 2013, Tata Power’s consumers (discoms) in five states — Maharashtra, Rajasthan, Haryana and Punjab, besides host state of Gujarat — amongst them will have to pay up R326 crore for the the company’s similar losses in 2012-13 in 36 equal monthly instalments.
The regulator has also recommended formula for calculating quantum of compensatory tariff for the period beyond March 2013
The CERC order has ramifications for the power sector in the country. Analysts say it could herald a trend of other producers also asking for similar regulatory succuor to address cost escalations not envisaged at the time of the finalisation of the power purchase agreements (PPAs). For example, Reliance Power, whose Sasan UMPP has seen 20% increase in project costs due to the weakening of the rupee, has made a plea to the regulator for approval to capitalise additional expenditure, even as there is no such provision in the PPA.
These PPAs, it may be noted, were signed after the companies won the contracts through competitive bidding, wherein they quoted non-escalable fuel charges.
Significantly, the regulator sought to apportion the burden of the fuel cost hike in the Adani Power and Tata Power cases amongst all stakeholders — the buyers (SEBs/discoms), banks and the companies themselves. From now on, the compensatory tariff will be computed by taking the difference between the actual fuel costs for