Reliance Power applies for hike in Sasan tariff on higher overheads

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SummaryThe Madhya Pradesh Power Management Company Ltd and thirteen other distribution companies from UP, Rajasthan, Punjab, Delhi, Haryana and Uttarakhand were to get power from the project.

Claiming a hit of over Rs 350 crore on account of “change in law”, Reliance Power Ltd has applied for a hike in tariff for its Sasan power project — the country’s first Ultra Mega Power Project — even before the commencement of electricity generation from the proposed project. The reasons cited in the petition include a revision in water charges and hikes in excise duty and royalty on coal.

In the petition moved before the Central Electricity Regulatory Commission, tentatively slated to come up for hearing on January 30, Reliance Power arm Sasan Power Ltd has sought compensation citing that the “change in law” will be “impacting revenues and costs during the operating period.” The petition, filed on January 16, 2013, comes just ahead of the scheduled COD for the first unit of January 31, 2013.

Under the original power purchase agreement (PPA) for the project signed by the developer, electricity was to be delivered by Sasan Power to a clutch of 14 distribution utilities at a levelised tariff of Rs 1.19616/kWh over the 25-year PPA tenure. The Rs 350 crore compensation amount sought by developer, which works out to a tariff hike of slightly over 13 paise per unit, could possibly delay the commissioning schedule of the project, a government official said.

Responding to a query, a Reliance Power spokesperson said the application before the CERC seeks compensation under the ‘Change of Law’ head as provided “under Article 13” of the PPA. On whether the first 660 MW unit of the project would be commissioned by the commercial operation date (COD) of January 31, he quoted a statement, attributed to J P Chalasani, CEO of Reliance Power, saying: “...pre-commissioning activities have started at our 3,960 MW Sasan project and the project is all set to be commissioned in this quarter, well ahead of the bid schedule”.

The move by Reliance Power puts a spanner in the works for the power ministry’s ambitious UMPP programme, wherein developers quoting the lowest tariffs through the competitive bidding were handed out large-sized projects, with pre-project clearances having already been carried out by government agencies prior to the award. Reliance Power, which had bagged three UMPPs, had earlier in mid-2011 stopped work on its Krishnapatnam UMPP in Andhra Pradesh invoking the ‘force majeure’ clause.

Reliance Power, in its petition, has invoked Article 13.2 of the PPA (read with Section 79(1)(b) of the Electricity Act, 2003) seeking certain reliefs to “recoup/adjust” the project economics for certain “changes in law”, including an increase in water charges by the Water Resources Department of Madhya Pradesh (notification dated 21.4.2010), an increase in the rate of royalty on coal by the Union Coal Ministry (notification dated May 10, 2012), levy of ‘clean energy cess’ by the Union Government in the Finance Act, 2010 (Notification dated June 22, 2010 issued by the Ministry of Finance).

Reliance Power has also cited the imposition of excise duty on coal by the Centre in the Finance Act, 2012 (with effect from April 1,2012), change in Income Tax Rates introduced in the Finance Act, 2012 (from April 1, 2012) and an increase in Minimum Alternate Tax Rates (introduced in the Finance Act, 2012 with effect from April 1, 2012) as among the 10 key reasons under the “change of law” head.

The Madhya Pradesh Power Management Company Ltd and thirteen other distribution companies from UP, Rajasthan, Punjab, Delhi, Haryana and Uttarakhand were to get power from the project. Reliance Power was declared successful bidder for the project in Singrauli district in Madhya Pradesh and a letter of intent (LoI) was issued to it on August 1, 2007. On August 7, 2007, a Power Purchase Agreement (PPA) was executed between the Petitioner and the 14 procurers.

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