The Central Electricity Regulatory Commission (CERC) has come out with a formula to compute the compensation for Adani Power and Tata Power for the under-recoveries suffered by their Mundra-based power plants due to an abrupt spike in Indonesian coal prices in 2011. The commission’s order, which followed the electricity appellate tribunal’s April 2016 order asking the commission to invoke force majeure (FM) in their cases, will take effect only after the Supreme Court gives a go-ahead to it in a related case.
Although the new order — unlike the one issued in 2013 — doesn’t require the CERC to reduce the burden on consumers and factor in all under-recoveries on account of expensive Indonesian coal, analysts said the new formula might not result in a substantial rise in compensation amounts. “Power had earlier reported that the total compensation as per (the 2013 formula) would be R2,100 crore at the end of December 2015. Considering that the current formula resembles the earlier one, the amount would likely be in the vicinity of that, ” an analyst said on the condition of anonymity. He, however, said that the corresponding figure for Adani Power was not immediately known.
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The lump-sum compensation amounts due to both the companies remain unknown as the commission has published a sample formula only for March, 2016. Neither company has come out with any estimate of the compensation. The commission has allowed the companies to recover the difference in the cost of Indonesian coal before and after it was benchmarked to international prices. The commission, however, didn’t allow the recovery of carrying cost for the past period but allowed the same for future.
The compensatory case has been under dispute for over four years now since the original petitions were filed by these companies in 2012. In this period, the CERC had initially passed an order that was challenged first before Aptel and then in the Supreme Court by states that procure power from these plants. “Even after considering the indicative compensatory tariff, the cost would be much lower and competitive than the average purchase price of all five states, and is substantially lower than the current market (prices),” Tata Power said in a statement. It added that the CERC order was an important step in resolving the major impasse affecting imported coal based power projects in the country that got impacted due to extraneous factors well beyond the control of developers.
Discoms in Rajsathan, Haryana, Punjab, Gujarat and Uttarakhand, among others, procure power from the two Mundra plants.