High-powered row over quasi-judicial body

High-powered row over quasi-judicial body

Hyderabad: Independent power producers (IPPs) and social activists have separately moved the Andhra Pradesh high court on the powers of the Andhra Pradesh Electricity Regulatory Commission (Aperc), a quasi-judicial body, one opposing and the other in support of powers conferred on it.

The dispute assumes significance as it involved four IPPs, all of them listed on Indian bourses, which were established to reap gains from the merchant sale of 20% power production, or some 300MW, over a 15-year period involving some Rs20,115 crore of profit.

The issue also assumes significance as the activists argue that electricity consumers would be forced to bear the burden since the power-starved government bodies will have no other option but to buy power in the open market at high prices to meet requirements.

IPPs are challenging the powers of the electricity regulator in seeking objections from consumers and holding public hearings on the state government’s 13 October order that allowed IPPs to sell 20% of power production in the open market.

The power firms argue that the regulator was not entitled to seek and hear objections on the directives of the government issued under Section 108 of the Electricity Act, 2003, which are in the nature of directives and not suggestions.

The government order is set to benefit GVK Industries Ltd (220MW) and Gautami Power Ltd (464MW) of the GVK group; Konaseema Gas Power Ltd (445MW) of the VBC group; and Vemagiri Power Generation Ltd (370MW) of the GMR group.

Together, these companies can sell some 300MW of power in the open market at attractive prices compared with the lower tariffs prescribed under power-purchase agreements (PPAs) with the government.

Opposition parties are also up in arms against the directives of the government, accusing it of going against its earlier stand of buying the entire power production at a lower tariff under the agreements and burdening consumers.

Even as Andhra Pradesh chief minister K. Rosaiah declined to roll back the contentious order, the power regulator invited objections against the government’s directives and began public hearings. Several non-profit organizations and political parties made detailed submissions, opposing the move to allow power utilities to sell electricity in the open market.

The interests of consumers were being compromised through the new directives, argued B.V. Raghavulu, state secretary of the Communist Party of India (Marxist), and K. Narayana, secretary, Communist Party of India, while arguing before Aperc on 18 November.

M. Venugopala Rao, a social activist, told the regulator that the government’s failure in ensuring fuel supply to the four IPPs made them keep their plants idle for over three years. This had forced the state power utilities to buy the required power in the open market.

In the process, the power utilities had suffered an additional burden of Rs5,123 crore by buying some 13,413 million units in the open market in three years at an average price of Rs8.10 a unit.

The latest order makes the state power utilities forgo 20% of PPA capacities, resulting in an additional financial burden for purchasing the shortfall in the open market at high prices, Rao said.

Gautami Power moved the high court arguing that Aperc had failed to note that it had no jurisdiction to entertain any objections against the directions issued by the state government under Section 108. The regulator should have, therefore, passed consequential orders approving amendments to PPA in the light of the directives of the government allowing IPPs to sell 20% of their power production in the open market, it argued.

Gautami Power also said the order was based on the recommendations of a committee that took into account losses suffered by IPPs for want of gas supplies.

It has urged the court to quash the public hearings on the new government directives.

Meanwhile, challenging the directives of the state government in allowing IPPs to sell a portion of their power production as merchant power at high prices, a social activist body, the People’s Monitoring Group on Electricity Regulation (PMGER), has moved the high court. Arguing that the government directives go against the spirit of the Electricity Act 2003, it has urged the court to suspend the government order issued by the Andhra Pradesh government. Referring to the claim of IPPs that they suffered some Rs1,100 crore of losses for want of gas supplies to their completed units, the convener of PMGER, M. Thimma Reddy, submitted to the court that the latest government order would benefit IPPs by some Rs20,115 crore over 15 years. Saying that the government order was excessively in favour of IPPs, forcing the consumers to suffer a heavy burden, he urged the court to set aside the order as it was against the public interest and allow the regulator to function independently.

IPPs argue that amendments to PPAs through the latest government order help them compensate for the losses they suffered on account of keeping their power plants idle for years for want of gas supplies.

“We suffered huge losses in serving the interest costs on the debt raised for completing the 460MW project at over Rs2,000 crore," said M.S.P. Rama Rao, managing director of Konaseema Power. “We hope to recover (some of this) through the sale of merchant power as permitted by the Andhra Pradesh government."

G.V. Sanjay Reddy, vice- chairman of GVK Power and Infrastructure Ltd, had told analysts on 30 October that the company will start selling 20% of its power capacity in the open market sooner rather than later.

“The regulator (Aperc) has to basically clear it (the government order)," he said. “The government order has been issued under Section 108, which basically means the regulator has no choice. It is a directive to the regulator that this has to be implemented," Reddy said.

Bullish on the prospects of the company following merchant power sales, its chief financial officer, George Issac, said: “Today, I am effectively supplying to the local state electricity board at Rs2.85 per unit. Now, the same power I am going to sell at a minimum price of Rs4.25 to Power Trading Corp. (through the merchant power route). So for every unit that I sell on a merchant basis, the additional realization that I get will be roughly in the region of Rs1.40 to Rs1.50 per unit, which directly goes into my profitability. The whole scenario is going to change once we start selling merchant power from these two projects."