SC refuses to stay CERC proceedings on compensatory tariff for power firms

Supreme Court says Central Electricity Regulatory Commission proceedings on compensatory tariff will continue, but CERC’s final order will be subject to scrutiny


CGPL, Adani Power went to CERC seeking higher tariffs on the grounds that their input costs had gone up due to a devaluation in the rupee. Photo: Mint
CGPL, Adani Power went to CERC seeking higher tariffs on the grounds that their input costs had gone up due to a devaluation in the rupee. Photo: Mint

New Delhi: The Supreme Court on Friday refused to stay proceedings of the Central Electricity Regulatory Commission (CERC), determining compensation for increased production costs for power firms Adani Power Ltd and Tata Power Co. Ltd.

“The CERC proceedings will continue. However, its final order will be subject to our scrutiny,” the apex court said.

Appeals were filed by power companies against an April order of the Appellate Tribunal for Electricity (Aptel), which had ruled that regulatory commissions cannot award compensatory tariffs to make up for higher costs incurred by generators when tariffs have been determined through competitive bids.

Aptel had, however, stated that the price the power companies agreed to sell power at would not be binding on them if there is a significant increase in the price of coal.

In doing so, Aptel referred the case back to CERC, asking them to determine appropriate relief available to the companies within their power purchase agreements (PPAs).

The two firms had bid to supply power at a certain price, but saw their models being turned on their head by an increase in the price of imported coal (the fuel they planned to use) as well as a change in law in Indonesia, the country from which they were importing coal. Subsequently, they sought to renegotiate their original contracts.

Tata Power’s wholly-owned subsidiary Coastal Gujarat Power Ltd (CGPL) and Adani Power went to the CERC seeking higher tariffs on the grounds that their input costs had gone up due to a devaluation in the rupee and higher costs of coal imported from Indonesia, owing to a regulation passed by the Southeast Asian nation.

On 2 April 2013, CERC rejected Adani’s plea of force majeure (unforeseeable circumstances) and “change in law”, but constituted a committee to suggest payment of compensatory tariff to the power company. CGPL’s request was rejected on 15 April that year. On 21 February 2014, CERC fixed a compensatory tariff payable to Adani Power.

Adani Power has PPAs with Haryana utilities (Uttar Haryana Bijli Vitran Nigam Ltd and Dakshin Haryana Bijli Vitran Nigam Ltd) to supply 1,424 megawatts of power, produced using imported coal. It had also won a competitive bid to supply power to Gujarat Urja Vikas Nigam Ltd for 1,000 megawatts. The production was to be done at Adani’s Mundra project in Gujarat. In its agreement with the Haryana utilities, Adani did not include a clause for addressing increase in tariff for a 25-year period.

Several other power companies including CGPL, the GMR Group and Sasan Power Ltd, wholly-owned by Reliance Power Ltd, stand affected by Aptel’s ruling.

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