Creating further uncertainty for power companies eager to make use of the regulator-allowed facility of actual-cost-escalation-based compensatory tariffs to save their projects troubled by unforeseen increases in fuel costs/rupee volatility, the Supreme Court on Monday questioned the rationale of the relevant regulatory decision.
Pulling up Tata Power and Adani Power for asking for concessions in power purchase agreements now, even though the contracts were won by them by taking part in tariff-based competitive bidding, the apex court rendered the recent interim order by the Appellate Tribunal for Electricity (Aptel) on the matter inoperative. A bench headed by Justice JS Khehar asked Aptel to decide the matter as expeditiously as possible.
In the interim order, Aptel had awarded compensatory tariffs of 54 paise/unit for Tata Power’s 4,000 mw Mundra UMPP and 41 paise/unit for Adani Power’s 4,620 mw Mundra power station for the period between March 2013 and March 2014, but disallowed the lumpsum amounts of R330 crore and R830 crore respectively for the two firms for the cost increase in the September 2011-March 2013 period due to the unforeseen spike in Indonesian coal price.
The Central Electricity Regulatory Commission (CERC) had, in two separate orders earlier this year, spelt out how Tata Power and Adani power would be compensated for the deleterious effect of the unforeseen, post-September 2011 hike in Indonesian coal price on the viability of their Mundra (Gujarat) power stations. Apart from the bulk compensation for the pre-March 2013 period, it had formulated the process for recovery of compensatory tariffs on a financial year basis.
For the period beyond March 2014, compensatory tariffs, it said, would be calculated by taking into account the differential between the prevailing coal price in the international market and the prices quoted by Tata Power and Adani Power in bidding for these projects.
Both Tata Power and Adani Power had to take haircut of 1% each on their return on equity in the respective projects. Further, profits from their coal mining operations in Indonesia were also deducted to the extent of coal supplies to their Mundra plants for calculation of compensatory tariff. March 2013 was taken as the cut-off date by the CERC for fixation of compensatory tariff for the two plants as petitions were filed by Tata Power and Adani Power with the regulator in April 2013.
Analysts said that now that imported coal prices have fallen off from their peaks, the formula would factor in the price decreases also.
The observations made by the apex court on Monday would mean that Tata Power and Adani Power cannot for now charge hiked tariff for the post-March 2014 period as ordered by the tribunal on July 21.
The apex court also pulled up the Haryana electricity distribution companies which had sought a stay on Aptel’s order that validated compensatory tariffs to Tata Power and Adani Power.
However, it said that “on merits we are tentatively 100% with (the discoms). But you participated in the committee set up to decide on compensating the firms (for higher cost continued…