Tata, Adani Allowed to Recover Higher Fuel Costs from Customers
Tribunal has allowed firms to recover higher costs under force majeure norms
New Delhi: Tata Power and Adani Power stand to benefit as the Appellate Tribunal for Electricity (Aptel) has allowed their imported coal-based power plants in Mundra, Gujarat, to recover higher fuel costs from consumers under force majeure provisions.
The tribunal held that a change in Indonesian law, which impacted the coal price of the two generators, does not constitute change in law under the power purchase agreements, but may constitute force majeure. It struck down the compensatory tariff mechanism evolved by the Central Electricity Regulatory Commission (CERC) to the two firms, saying the regulator does not have powers to modify tariff discovered through tariff-based bidding.
In a statement to the BSE, Tata Power said Aptel allowed the appeals of distribution companies of its Mundra plant challenging compensatory tariff determined by CERC. Email sent to Adani Power remained unanswered.
“Promulgation of Indonesian regulation qualifies as force majeure but relief can be granted only as per the power purchase agreement (PPA). Orders dated 15.04.2013 and 1.02.2014 passed by CERC were set aside and the matter was remanded back to CERC to consider relief to be granted to CGPL (Coastal Gujarat Power Ltd) for force majeure event,” the statement quoted the order.
Association of Power Producers director general Ashok Khurana said: “With this order, the process seems to be moving into a decisive and positive phase where a final outcome can possibly be expected soon. Force majeure situation permits both the procurers and generators greater flexibility in terms of reaching an agreed way forward with necessary oversights.”
Shares of the two firms tumbled after the news in morning trade on the BSE, but made some recovery later in the day. Tata Power dived as much as 8.7% during the day before closing 3.83% down at .₹ 64.10 on Thursday. Adani Power fell 11.6% and closed 2.92% lower at .₹ 33.20. CERC had in April 2013 allowed CGPL, Tata Power’s unit operating the 4,000 MW Mundra UMPP and Adani Power’s 1980 MW plant, to raise power tariffs from the projects to compensate for an unexpected increase in coal cost due to change in Indonesian law.
In February 2014, the commission decided 52 paise per unit compensatory tariff for Tata Power’s plant and 41 paise per unit for Adani Power’s project.
Five procuring states of the two projects moved the Supreme Court that stayed the compensation and referred the matter back to Aptel.
Electricity tribunal has held that a change in Indonesian law did not constitute change in law under PPA