Power tribunal scraps CERC order on compensatory tariff

Appellate Tribunal for Electricity has set aside electricity regulator CERC's order for granting compensation for increase in fuel costs to projects won through competitive bidding.

Reacting to the decision, shares of Tata Power dropped 3.83 per cent while Adani Power lost 2.92 per cent on the BSE. "The Central Commission has no regulatory powers under Section 79(1)(b) of the said Act (Electricity Act, 2003) to vary or modify the tariff or otherwise grant compensatory tariff to the generating companies in case of a tariff determined under a tariff-based competitive bid process...," APTEL said in an order on Thursday.

"In view of this...the impugned Order dated February 21, 2014 is hereby set aside," it said. The Central Electricity Regulatory Authority (CERC) in its order on February 21, 2014, had granted nearly Rs 830 crore compensation for Adani Power's 4,620 mw Mundra plant in Gujarat for making up for losses incurred by the project due to higher cost of imported Indonesian coal. Similarly, the CERC had allowed higher tariff as well as compensation of Rs 329.45 crore for Tata Power's 4,000 mw Mundra project to compensate for increase in the price of imported coal.

Meanwhile, Tata Power in a statement said, "Order dated April 15, 2013 and February 21, 2014 passed by CERC were set aside and the matter was remanded back to the CERC to consider the relief to be granted to CGPL for force majeure event. CERC has also been directed to conclude the said exercise expeditiously within a period of three months from today." 

The company also observed from APTEL order that "promulgation of Indonesian Regulation qualified as force majeure but relief can be granted as per Power Purchase Agreement." In case of Adani Power, the CERC has said that Gujarat has to pay Rs 420.24 crore, while Haryana has to shell out Rs 409.51 crore as compensation from the commissioning date till March 31, 2013.

For the Mundra plant, Adani Power has inked two power purchase agreements (PPAs) with Gujarat - each for 1,000 mw - and PPAs with two Haryana utilities for total capacity of 1,424 mw. Rest of the electricity generated from the plant is sold on merchant basis. The CERC had allowed higher tariff as well as compensation of Rs 329.45 crore for Tata Power's 4,000 mw Mundra project to compensate for increase in the price of imported coal.