The Appellate Tribunal of Electricity (Aptel) has delivered a potential blow to debt-laden Adani Power after it quashed orders by state commissions allowing compensatory tariff for its plants in Maharashtra and Rajasthan. However, the tribunal has given the company some breathing room by stating in its order that the bench had not expressed an opinion on whether the events warranting compensation could be classified as “change in law” or force majeure.
Adani Power’s plants in Maharashtra and Rajasthan were awarded compensatory tariff by the respective state electricity commissions but they had refused to classify the same under force majeure or change in law.
Referring to its order in April relating to tariff increases for the Mundra plants of Tata Power and Adani Power, Aptel observed that state commissions had no jurisdiction to award an increase in tariff unless they did it under force majeure and change in law clauses covered by the power purchase agreements (PPAs).
* Aptel quashes compensatory tariff granted to Adani Power’s Tiroda & Kawai units
* Tribunal said tariff hike valid only under ‘force majeure’ and ‘change in law’
* Order to adversely impact Adani Power’s cash flow
* Leaves room for seeking relief under ‘force majeure’ and ‘change in law’
“We have held that the appropriate commission has no regulatory power to grant compensatory tariff to the generating companies where the tariff is discovered by a competitive bidding process under Section 63 of the said Act. We have also held that if a case of ‘Force Majeure’ or ‘Change in Law’ is made out, relief available under the power purchase agreements can be granted under the adjudicatory power of the Appropriate Commission,” Aptel said in its order.
“Adani Power will likely treat the earlier order on compensatory tariff as its template for future course of action. The company will likely approach the regulators to seek relief under force majeure or change in law,” a source involved in these cases told FE.
An industry source observed that while the order will hurt Adani Power in the short run, the company can approach the state regulators seeking compensation under either force majeure or change in law. If the tribunal’s April order in the case of the Mundra power plants is any indication, Adani Power could end up getting a higher compensation quantum under the terms of the PPA.
Maharashtra procures almost the entire 3,300 MW capacity from Adani’s Tiroda plant. Tiroda Phase I, with a capacity of 1,980 MW, had received a compensatory tariff in lieu of de-allocation of its captive Lohara coal block with coal costs being treated as a pass-through item. Additionally, in August 2014, it received received a compensatory tariff for shortage of domestic coal against a fuel supply agreement with Coal India. The total increase in tariff worked out to be Rs 1.95 per unit.
Similarly, in June 2014, Adani Power had approached the Rajasthan electricity commission seeking relief for its 1,320 MW Kawai plant on account of shortage domestic coal and increased prices of Indonesian coal. Kawai was given an interim tariff hike of Rs 0.25 per unit till the final judgment but the commission had refused to treat shortage of coal and hike in coal prices as force majeure or change in law.