By Raja Iyer
Even though the Central Electricity Regulatory Commission (CERC) allowed Adani Power, an independent power producer (IPP), to charge compensatory tariff for the increase in the imported cost of coal from power utilities in Haryana and Gujarat, it is not certain whether the company would benefit immediately from the order, India Ratings & Research (Ind-Ra) said in a recent report.
It may be recalled that Adani Power approached CERC for frustration of power purchase agreements (PPAs) on grounds of 'force majeure' due to the change in Indonesian coal regulations. CERC has rejected the petition for frustration of PPAs as well as the demand for revision in tariff as Indonesian regulations are not covered under the provisions of 'change in law' or 'force majeure'.
However, the proposal for a compensatory tariff is based on a pragmatic approach to keep the industry viable and protect the interest of consumers. In case IPPs are forced to supply power at the contracted tariff, they will become unviable ultimately leading to stoppage of supply. This would also mean negative returns on the assets already created and possibly higher cost of power freshly contracted by discoms, the report said.
The CERC order seeks to provide a variable compensatory tariff to Adani Power over and above the tariff discovered through competitive bidding and agreed to in PPAs. However, this compensatory tariff will be through a consultative process between buyers and seller and temporary for a specified period still the fuel situation stabilises.
Ind-Ra believes that the window for a compensatory tariff through consultative process might be used by other IPPs in Case-I bids where the project special purpose vehicle (SPVs) are making losses. Coastal Gujarat Power, promoted by Tata Power Company, and Coastal Andhra Power, promoted by Reliance Power, are the other ultra mega power plants that have approached CERC for a revision in tariff. Simultaneously, new model draft guidelines are in circulation and hence the benefit of this ruling will be applicable on power supplies already bid out, the report said.
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