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Home News Power Sector News Power companies seek higher rates for coal, wind and solar electricity

Power companies seek higher rates for coal, wind and solar electricity

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Power Tariff hikeThe sun is not shining as brightly as we thought; the wind is not blowing as fast as it was supposed to; and coal is more costly than we imagined. So raise our tariffs just as you did for Tata PowerBSE 2.37 % and Adani PowerBSE -0.42 % — that's the mantra for at least 20 companies that have approached regulatory bodies seeking higher rates for electricity they generate from wind, solar or coalfired plants.

Many others are queuing up with consultants, lawyers and regulatory experts, sensing an opportunity to charge higher rates than what is prescribed in power purchase agreements.

Tata Power and Adani Power secured favourable regulatory orders after they struggled with plants that suddenly became unviable as Indonesia changed its law and made coal exports costly.

'Solar Radiation Not as Strong in Rajasthan, Andhra'
Sector experts say that the two companies successfully argued that they had no control on the situation as a foreign country, from where coal was being shipped to the two plants in Mundra, decided to change the law.

Many solar power firms say they have a much stronger case as solar radiation in Rajasthan and Andhra Pradesh is not as strong as claimed by the government when they set up their projects and agreed on a particular tariff.

At least seven solar power project developers with a total capacity of 470 mw have approached the Central Electricity Regulatory Commission (CERC) seeking higher tariff, said a legal expert dealing with some of the petitioners.

Ironically for entrepreneurs, the Narendra Modi government in Gujarat is using a similar logic, but to cut tariffs. It had earlier demanded lowering of tariffs from 80 companies setting up solar plants with a total capacity of 1,000 mw. The logic: The equipment costs are much lower than what the government thought when tariffs were agreed.

Not to be left behind, windmills also need to be propped up. Officials at state utilities that buy electricity generated by windmills say that some developers are now complaining that wind speeds are not as strong as initially expected. Many companies that run windmills have approached regulators on the grounds that changes in tax rates have made them unviable at current tariffs.

Green Infra Corporate, TADAS Wind and BPL Vayu are some of the wind power project developers seeking higher tariff. "It is not a good trend since the tariff-based bidding mechanism has gone for a toss.

The CERC order is opening up a Pandora's box for the consumers who will witness their electricity bill going up by 7-8% if the regulators approve demands of power producers for tariff hikes," said a consultant with a leading firm requesting anonymity. He added that none of the coal-based ..

power producers have given any benefits to the state utilities and consumers if their fuel prices went down.

Essar Power that was keenly watching the outcome of Tata Power and Adani Power's case, has moved a petition before the Gujarat Electricity Regulatory Commission. It is seeking compensation for its 1,000 mw power generation project running on imported coal that became expensive. Aryan Coal too is waiting for the regulator to admit its tariff hike petition for a 200 mw project.

Shapoorji Pallonji Group that earlier sought termination of its agreement to supply 1,000 mw of electricity generated from imported coal to distribution companies of Gujarat may also approach the state regulator.

Many natural gas-fired power projects also want higher tariff although fuel scarcity is a bigger concern for them.

Experts feel that the CERC orders for Tata Power and Adani Power might have given hopes to many but the long regulatory battle has been a lesson for investors in power sector.

"Recent CERC orders are encouraging for power producers that were unable to earn cost reflective tariff. Also, long-drawn regulatory battles have proved to be a good lesson for the project developers who will not bid aggressively in future. Also, there won't be much need of opening power purchase agreements as the new bidding norms have clear provisions for passing on the fuel costs to consumers," said Debashish Mishra, senior director with Deloitte.

Besides Tata Power and Adani Power, Reliance Power's petitions seeking tariff hike for Krishnapatnam and Sasan ultra mega power projects for 8,000 mw are already pending before CERC.

Adani Power is seeking tariff revision under the provisions of its power-supply agreements signed with Rajasthan and Maharashtra for its total 2,500 mw coal-based thermal power projects at Kawai and Tiroda.

Source- Economic Times


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