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Home News Power Sector News CERC can revise long term PPA unilaterally - Attorney General

CERC can revise long term PPA unilaterally - Attorney General

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attorney generalThe country's highest law officer has cleared the way for a hike in tariff of electricity from private producers by saying the central regulator can reopen longterm supply agreements in cases such as rise in fuel price. Going by the power ministry's recent calculations, power tariffs of projects such as the Adani's Mundra plant, which is up and running, could go up by Re 1 per unit at current imported coal prices.

 The opinion from attorney general G E Vahanvati, expressed in response to queries from the Forum of Regulators — the apex body of state electricity regulators — is a shot in the arms of private power producers Essar Group, Tata Group, Adani Group and Reliance Power. These companies , which are either already operating or are setting up plants, have been citing increase in imported coal prices to press for raising the tariffs they had bid for their projects. The consumer states have opposed the move.

The forum had sought legal opinion on a few tariff-related issues, including the appropriate regulator to settle issues for companies that have signed power purchase pacts with multiple states.

 CERC is the appropriate commission to decide on tariff-related disputes for companies selling power to multiple states, having secured power projects after competitive bidding, according to the legal response posted on the Forum of Regulators' website.

The legal opinion was sought by the forum, said Pramod Deo, chairman of CERC. Deo is also the chairman of the forum.

But Vahanvati said, "Rationalization of electricity tariff is also a must. All this has to be done by appropriate commissions . If a PPA breaks down and the generator approaches the central commission for redetermination of tariff, can the central commission say it will not discharge its regulatory functions only because the PPA has already been entered into? Is it so sacrosanct that it cannot be disturbed at all?"

Coal prices have risen — in several instances by five times —as a result of additional taxes or changes in law affected by governments of coal-exporting countries. Major exporting nations like Australia and Indonesia have raised tax levels in recent times. This has pushed up fuel costs for all imported coalfired power projects as well as units based on domestic supplies as these from captive mines in these countries.Adani Power Ltd had approached the Central Electricity Regulatory Commission (CERC) last month to consider a rise in its power tariff after customers declined to pay higher rates for power generated from its imported coal-based power plant in Mundra, Gujarat.

Adani Power has entered into two power purchase agreements (PPAs) of 1,000 megawatts (MW) each with the Gujarat government at Rs.2.35 per unit and Rs.2.89 per unit, respectively. It entered into a similar accord with the Haryana government at Rs.2.94 per unit.

 An Adani Power official said the legal opinion has reconfirmed their faith in the system.

Adani Power, in its petition, had said the state electricity regulatory commissions of Haryana and Gujarat would not have jurisdiction to revise the tariff to make it uniformly applicable to both the states and hence it had approached CERC. Adani also said that the generation cost of power using imported coal has increased to Rs.3.30 per unit, while it earns about Rs.2.35 per unit.

It wrote to Gujarat Urja Vikas Nigam Ltd (GUVNL), a state-run power generation, distribution and transmission company, in 2011 on this. The state utility in September 2011 stated that it was impossible for it to revisit the tariff.

Adani Power has announced a consolidated loss of Rs.809.81 crore in the three months ended 30 June. In contrast, it had posted a net profit of Rs.181.45 crore in the year-ago period, reflecting the crisis in the power sector. It attributed the loss mainly to the high price of imported coal.


Source- ET


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