Compensatory tariff to Tata & Adani Power: Case goes back to square one

APTEL refers case back to CERC; CERC to decide in six months fate of power tariff that was requested to be revised due to global factors

The contentious issue of deciding compensatory tariff for Tata Power’s 4,000 MW ultra mega power project and Adani Power’s 1,980 MW power plant in Mundra Gujarat is back to where it started. The APTEL had struck down regulatory powers of Central Electricity Regulatory Commission and asked to consider case of cost pass through as "change of law".

The case was being fought in Appellate Tribunal of Electricity (APTEL) between Tata Power and Adani Power with state utilities of Gujarat, Rajasthan, Maharashtra, Punjab and Haryana. The three-year-old tariff pertains to pass through of cost escalation due to change in imported coal prices and regulations in the Indonesian coal market. Both Tata Mundra UMPP and Adani power plant run on imported coal.

APTEL, which allowed pass through of increased cost last year, has now thrown back the case to Central Electricity Regulatory Commission (CERC). It has asked the commission to decide the tariff as per power purchase agreements and under ‘force majeure’ or ‘change in law’.

This could hold positive for Tata Power and Adani Power as the cost pass through was allowed under the same regulation earlier.

In an order dated February 2014, CERC decided a compensatory tariff to be paid by the states procuring power to the two power companies with effect from the commissioning date of the units. The compensatory tariff was over and above the tariff agreed in the power purchase agreement.

Tata’s Mundra UMPP was awarded compensatory tariff at 52 paise per unit and Adani's project got 41 paise per unit, over the remaining life of the project. The power procuring states of Mundra UMPP are Gujarat, Rajasthan, Maharashtra, Punjab and Haryana. Adani Power has two power purchase agreements for its project in Mundra with the state utilities of Gujarat and Haryana.

The five procuring states appealed against the order in APTEL and also moved Supreme Court to get a stay on the order. SC directed APTEL to expedite the hearing. APTEL in July ruled in favour of Tata and Adani allowing the compensatory tariff calculated by CERC.

The five states contested the tariff again in the APTEL. It’s now that the APTEL has ruled that CERC cannot decide the quantum of compensation. The APTEL while giving case back to CERC has asked the latter to deliver an order in six months. The case will be dealt under force majeure or change in law, which was earlier struck down by CERC.