Adani and Tata Power: Power consumers in Hry may get further burdened | india | Hindustan Times
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Adani and Tata Power: Power consumers in Hry may get further burdened

With the appellate tribunal for electricity (APTEL) directing the Central Electricity Regulatory Commission (CERC) to assess the extent of impact of ‘force majeure’ event on the projects of Adani Power and Coastal Gujarat Power Ltd (CGPL) and give them such relief as may be available to them under their respective power purchase agreements (PPA) signed with the Haryana Power Utilities, electricity consumers in the state may have to bear the burden of the revised power tariff. Force majeure is an event which cannot be anticipated by human foresight or if anticipated is too strong to be controlled.

india Updated: Apr 14, 2016 15:40 IST
Hitender Rao
Power sector experts say that if Haryana power companies fail to challenge the APTEL order before the Supreme Court, the CERC will determine the revised tariff in terms of the force majeure clause of the PPA.
Power sector experts say that if Haryana power companies fail to challenge the APTEL order before the Supreme Court, the CERC will determine the revised tariff in terms of the force majeure clause of the PPA.(HT Photo)

With the appellate tribunal for electricity (APTEL) directing the Central Electricity Regulatory Commission (CERC) to assess the extent of impact of ‘force majeure’ event on the projects of Adani Power and Coastal Gujarat Power Ltd (CGPL) and give them such relief as may be available to them under their respective power purchase agreements (PPA) signed with the Haryana Power Utilities, electricity consumers in the state may have to bear the burden of the revised power tariff. Force majeure is an event which cannot be anticipated by human foresight or if anticipated is too strong to be controlled.

The APTEL’s order of April 7 also said the entire exercise should be done within three months.

Additional chief secretary (power) Rajan Gupta, when asked about the state’s response to the APTEL judgment, said the department was studying it and a decision whether to challenge it would be taken subsequently.

Power sector experts, however, say that if Haryana power companies fail to challenge the APTEL order before the Supreme Court, the CERC will determine the revised tariff in terms of the force majeure clause of the PPA.

“Consumers will be further burdened as the revised tariff will be passed in the form of fuel surcharge adjustment (FSA) for the previous years. Moreover, the power tariff will be in for upward revision as the revised tariff load will reflect in the annual revenue requirement (ARR) filed by distribution companies before state power regulator,’’ said a power sector official.

Power purchase contracts

Haryana contracted 1,424 megawatt (MW) power from Adani Power in 2007 from its power project at Mundra in Gujarat. Adani Power’s bid was based on blend of domestic and imported coal in the ratio of 70:30. The state also signed power purchase agreement for 400 MW power from CGPL under ultra mega power project (UMPP) based on 100% imported coal. Power from M/s Adani was contracted at a levelised tariff of Rs 2.94 per unit for 25 years at state periphery through its dedicated network whereas in the case of CGPL, 380 MW of power was contracted at a levelised tariff of Rs 2.26 per unit also for a period of 25 years.

Companies sought tariff increase

Both the power companies later sought an increase in the tariff due to change in Indonesian regulations on coal invoking provisions of force majeure and change in law in the CERC. The central commission though held that force majeure and change in law were not applicable in the case, but in February 2014 allowed APL and CGPL a compensatory tariff of 61 paise and 52 paise respectively to mitigate their hardship on account of increase in imported coal prices in addition to allowing arrear payment with effect from date of operation.

SC granted stay

Haryana’s power distribution companies filed an appeal in the APTEL against the CERC orders, along with a stay application on recovery of compensatory tariff, but APTEL declined. It decided that arrears for 2012-2013 may not be paid till final decision but directed the payment of dues thereafter regularly as per the CERC order. The distribution companies then filed an application in the Supreme Court which granted a stay in Haryana’s favour on August 25, 2014 and ordered APTEL to decide the matter expeditiously.

The APTEL, in its April 7, 2016 order, said: “We hold that promulgation of Indonesian regulation has resulted in a force majeure impacting the projects of Adani Power and CGPL adversely. The generators would, therefore, be entitled to relief only as available under the power purchase agreements (PPAs).”

How much burden?

Power officials said after a compensatory tariff of 61 paise and 52 paise was allowed by the CERC in 2014 for APL and CGPL respectively to mitigate their hardship on account of increase in the prices of imported coal, the distribution companies were additionally burdened with an about Rs 1,400 crore annually and Rs 35,000 crore for 25 years. “And all this would have to be passed onto the consumer eventually. One can expect a similar financial burden to be passed on to the consumers,’’ said an official.