ICRA believes that the recent Supreme Court orders upholding statutory powers of state power regulators to review tariffs of power purchase agreements is a positive development for generation entities.
This would cover generation companies that are in dispute with buyers over tariff review for events that are uncontrollable.
"While these orders are a positive development for the independent power producers, it is assumed that tariff re-determination or compensation-related issues are unlikely to be resolved quickly. Further, orders issued by power regulators - whichever way they may favour - are likely to be contested and Supreme Court has noted in one of the cases that the final orders issued by the regulators shall be subject to scrutiny", Sabyasachi Majumdar, Senior Vice President, ICRA said.
On July 5, 2016, Supreme Court upheld an order issued by Appellate Tribunal for Electricity for re-determination of tariff by Gujarat Electricity Regulatory Commission in case of power purchase agreements signed by IPPs - Tarini Infrastructure (TIL) and Junagadh Power Projects (JPPPL) with the Gujarat Urja Vikas Nigam (GUVNL).
TIL operates two small hydro power projects of 3 MW and 2.6 MW, while JPPPL operates a 10 MW biomass-based power project in Gujarat.
Supreme Court has also recently refused to stay proceedings by Central Electricity Regulatory Commission (CERC) in case of tariff compensation matter for Coastal Gujarat Power (CGPL) and Adani Power (APL).
This is a positive for these power producers, given that CERC is currently evaluating tariff compensations, post APTEL's order dated April 7, 2016. The tribunal had directed CERC to assess the extent of the impact of force majeure events on the projects of APL and CGPL and provide them such relief as may be available under the respective power purchase agreements.