Adani power: Former CERC member disagreed on compensatory tariff

  • Hitender Rao, Hindustan Times, Chandigarh
  • Updated: Sep 03, 2014 11:26 IST

Even as the Supreme Court on August 25 granted a stay in favour of Haryana power distribution companies by stating the orders of the Central Electricity Regulatory Commission (CERC) and Appellate Tribunal for Electricity (APTEL) allowing M/s Adani Power Limited (APL) a compensatory tariff of 61 paise were rendered inoperative, the-then CERC member, S Jayaraman had also expressed disagreement with the orders of CERC chairperson and two members.

In a separate order issued on April 2, 2013, Jayaraman said the petitioner (Adani), a corporate house having long experience in building industrial projects as well as dealing with imported coal, has participated in the tender invited by Haryana and Gujarat for 25 years of power supply. The bid documents provided for opportunity to quote firm, partly variable and fully variable for fixed as well as fuel charges.

“Many tenderers quoted variable prices whereas the petitioner has quoted firm prices for 25 years fully knowing the fluctuating market conditions with regard to coal price as well as variations in rupee exchange. It is obvious that the petitioner has built up adequate provisions in the rates to cover the variations. It is also obvious that the petitioner is using the notifications of the Indonesia government as an opportunity to cover some of its commercial risks or to improve his margins further. The prices quoted are firm and power purchase agreement (PPA) provides only two occasions where the prices can be varied -- under force majeure and under change of law. The above two conditions have been ruled out. The petitioner’s attempt to invoke Section 79 to raise the prices arrived at under Section 63 through competitive bidding is untenable. Hence, I am of the view that the petition is nothing but a misuse of the process of law and is liable to be dismissed,” Jayaraman said.

Jayaraman, in fact, also questioned the jurisdiction of the CERC in the matter saying the present case primarily involved adjudication of disputes raised by the petitioner (Adani) and was outside the scope of regulatory power.

“The regulatory power is a general power vested in the commission, which can be exercised while formulating regulatory policies. The regulatory power cannot be invoked for settlement of individual disputes arising out of commercial relations between the parties though power of regulation is considered to be expansive and vast,” he wrote.

Jayaraman said renegotiation of tariff cannot be ordered when such tariff has been discovered through the international competitive bidding process. The re-negotiation of tariff in such cases defeats the competitive bidding process.

The former CERC member said the petitioner (Adani) may have resorted to aggressive and predatory bidding to win the bids by edging out the other competitors for which the petitioner is accountable. Consumers of Haryana and Gujarat should not be made to pay for the miscalculation of the petitioner, if any. As the price of imported coal has considerably come down, the petitioner even does not have a case on the basis of unwarranted and unprecedented rise in Indonesian coal price. Moreover, nothing prevents the petitioner to further explore the possibility of domestic coal to reduce its dependence on imported coal, he wrote.

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