 "Pramod Deo")
The Appellate Tribunal for Electricity (Aptel) has struck down the Central Electricity Regulatory Commission (CERC)’s order on compensatory tariff. Former CERC chairman Pramod Deo, during whose tenure the compensatory tariff order was passed, talks to Sanjay Jog on the issue. Edited excerpts:
On what grounds has Aptel struck down CERC’s compensatory rate order?
Aptel held that the central government’s guidelines on competitive bidding do not provide for general regulatory powers to override the terms of power purchase agreements (PPAs). Accordingly, the central government has not delegated or prescribed any power in the commission to grant compensatory rate. According to Aptel, the commission has no power to modify the rate or grant compensatory rate to the generators.
What relief has the tribunal granted to Tata and Adani’s projects?
In its judgment, the tribunal draws attention to Article 12.7 of the PPA, which speaks of performance of obligation being hindered due to force majeure (unexpected circumstances, such as war, that can be used as an excuse when they prevent somebody from doing something that is written in a contract). It observes that the 12th edition of Concise Oxford English Dictionary defines the word ‘hinder’ as “make it difficult for (someone) to do something or for (something) to happen”. Thus, in this case, the generators continuing to supply electricity to the procurers, will not necessarily lead to the conclusion that there was no occurrence of force majeure. The generators could get fuel-cost adjustment charge. The tribunal, therefore, directed CERC to assess the extent of impact of force majeure in the light of this judgment.
Can you explain the philosophy behind CERC’s judgment?
It saw merit in the plea that promulgation of the Indonesian regulation has led to abnormal increase in the cost of generation of electricity making the project unviable. Unless the generators’ concerns are addressed, the possibility of their defaulting on obligations under the PPA cannot be ruled out. That will affect consumers’ interest. Utilities will have to invite fresh bids to meet their power requirements. It will affect investment in the electricity sector, which will. In view of all this, CERC saw it necessary to intervene in the interest of consumers, investors, and the power sector.
What were the legal grounds on which CERC’s order was based?
On April 2, 2013, the Commission unanimously decided that the claims of Adani Power and Tata Power’s Coastal Gujarat Power for force majeure and change in law were not admissible. However, by majority of three with one member dissenting, it was held that considering public interest, in exercise of regulatory powers provided under Section 79 of the Electricity Act, the Commission can provide redressal to generating companies and proceeded to constitute an expert Committee to look into the alleged difficulties faced by Adani Power and find an acceptable solution.
What were the legal grounds on which the Supreme Court delivered its order?
According to the Supreme Court, CERC has the power to regulate the tariff of the generating stations falling under its jurisdiction, keeping in view the objects of the Electricity Act to promote competition, encourage investment in the power sector and to protect consumers’ interest. The power to regulate tariff will also extend to the tariff determined through competitive bidding.
The apex court ruled that CERC can fashion a relief even in the case of generating stations’ tariff discovered through competitive bidding, by providing for suitable adjustment in tariff while retaining the sanctity of competitive bidding under Section 63 of the Act.
