Firms can pass on pollution control cost to state discoms
Setting the stage for meeting costs for pollution mitigation by passing it on to tariff, the Appellate Tribunal for Electricity (APTEL) has asked the Punjab government to treat investment made by Vedanta promoted-talwandi Sabo Power and Larsen & Toubro’s Nabha Power as “change in law relief.”
This will allow the companies to recover costs for setting up flue-gas desulfurization (FGD) – mandated under the ministry of environment norms – from the tariff to be paid by the stateowned power distributor.
APTEL simultaneously rejected an appeal filed by the Maharashtra State Electricity Distribution Company against state regulator’s order allowing Adani Power’s 3300 Tiroda plant to load the increased cost on to tariffs. Vedanta’s Sterlite Power had signed a share-purchase agreement for taking over the Punjab government’s special purpose vehicle on September 1, 2008.
On the same day, a power purchase agreement (PPA) was executed between TSPL and erstwhile Punjab State Electricity Board for sale of power from its 1,980 (3x660) Mw plant.
The company contended that almost seven years after that the Environment (Protection) Rules, 1986 were amended by the MOEF on December 7, 2015 introducing the standards of emission and the level of water consumption for all coal based thermal power plants in India.
L&T, on its part, argued that the cutoff date for specifications of the 1,400 Mw Nabha power project was October 10, 2009. The share purchase agreement and PPA with the Punjab government was executed on January 18, 2010.
“This judgment seeks to resolve the challenge of addressing how to implement sustainable development in brownfield thermal plants, treating the 2015 notification as a change in law event. It gives a path to effectively implement the Central Pollution Control Board’s phased timelines for revised emission norms across 189 thermal power plants, aggregating 167 Gw of installed capacity,” said Amit Kapur, joint managing partner, J Sagar Associates.
Kapur cited the Central Electricity Authority’s estimates that the equipment cost would be around ~45-50 lakh per Mw, besides other costs including taxes.
“This would translate into over ~1 trillion in capital expenditure,” he added.