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Home News Power Sector News Power regulator expected to decide on Tata Power’s compensatory tariff case this month

Power regulator expected to decide on Tata Power’s compensatory tariff case this month

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Mundra UMPPPower regulator Central Electricity Regulatory Commission (CERC) is expected to deliver its verdict this month on permitting Tata Power tariff compensation to recover losses suffered by the Mundra Ultra Mega Power Project (UMPP) due to high prices of imported coal.

The plant has been under the spotlight after the ouster of Cyrus Mistry from Tata Sons. Mistry had raised the issue of the project's losses in a note to board members. Following a directive of the Supreme Court, the CERC has completed hearing on the compensatory tariff case of two imported coal-based power plants, including a 1980mw project of Adani in Mundra, Gujarat.

"The Supreme Court has given time till mid-November for the verdict.

The hearing for the case has been completed and we have reserved the judgment and should come out in the next 10 days," a senior CERC official said.

Experts said the Mundra project became loss making after Indonesia issued new regulations that raised the price of coal, while rupee depreciation added to the woes of the project.

Mistry had alleged in his note that the Mundra project was a drain on Tata Power's finances and carries the risk of considerable future impairment.

Tata Power has not stopped operations at the plant but has sought a rise in tariff for electricity it generates.

The Mundra plant, being operated by Tata Power subsidiary Coastal Gujarat PowerBSE -3.14 % Ltd, is presently operating at 70-80% capacity.

Association of Power Producers Director General Ashok Khurana said, "Cost under recovery in case of Mundra is result of flawed design of bidding documents as no amount of human ingenuity can take correct call on movement of coal prices for 25 years and non-recognition of change in law in coal source country as force majeure.

The same has been accepted by Aptel in its recent judgement."

The Appellate Tribunal for Electricity (Aptel) in April allowed Tata Power and Adani Power's imported coal-based power plants at Mundra in Gujarat to recover higher fuel costs from consumers under force majeure clause. It directed the CERC to look afresh in the compensatory tariff.

Consumers of the project moved Supreme Court against the Aptel order. The Supreme Court has asked CERC to present its verdict by November mid-week. The apex court is set to hear the matter by the end of next month.

CERC had in April 2013 allowed CGPL, Tata Power's unit operating 4,000mw Mundra UMPP, and Adani Power's 1980mw plant to raise power tariffs from the projects to compensate for an unexpected increase inrecoal cost due to change in Indonesian law. In February 2014, the commission decided 52 paise per unit compensatory tariff for Tata Power's plant and 41paise per unit for Adani Power's project.

Five procuring states of the two projects moved Supreme Court that stayed the compensation and referred the matter back to Aptel. The tribunal upheld the tariff, which was challenged again by the distribution companies.

This time Aptel ruled that CERC cannot alter tariff of projects bid competitively and that the case fell under the ambit of force majeure.

Jenissi Management Consultants partner Dipesh Dipu said Tata Power miscalculated the sovereign risk of coal sourcing from another country. "Tata Power bought stake in Indonesian coal mines but that was offset by changes in Indonesia coal regulations and steep rupee depreciation," he said.

Source - ET

 

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