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Less power for SERCs PDF Print E-mail
Tuesday, 31 October 2017 04:01
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SC verdict on electricty commission power worrying

While providing relief to Tata Power and Adani Power, the Central Electricity Regulatory Commission (CERC) had used its powers to regulate tariffs under the Electricity Act of 2003, and argued that while one part of its job was to look after the interests of consumers, another part was to look after the health of the industry. So, in the Tata/Adani case, it argued the case for a compensatory tariff to take into account the new rules in Indonesia that jacked up coal prices. The case went back and forth between the electricity appellate tribunal (Aptel) and Aptel finally ruled in favour of CERC’s compensatory tariff. When the matter reached the Supreme Court (SC), however, SC ruled against Aptel and said that CERC could not interfere with a power purchase agreement (PPA) that was sacrosanct. Another ruling by SC, last week, also restricts the power of regulators. In this case, Gujarat Urja Vikas Nigam Limited vs Solar Semiconductor Power Company, the issue was about the date of commissioning of the project—under the PPA, if the plant was commissioned before a certain date, one price would be paid for the electricity; but, if the commissioning was delayed, a different price would be paid. While the commissioning was delayed, the Gujarat regulator ruled it was for reasons beyond the company’s control and so the first tariff would be the applicable one.

While the two judges gave separate judgments, they were concurring. They argued that while the “Commission is competent to adopt a procedure which is at variance with any of the other provisions of the Regulations … in view of the special circumstances”, there cannot “be a Regulation which is not in conformity with the provisions of the Act or Rules”. In another place, the ruling is “under the guise of exercising its inherent power, as we have already noticed above, the Commission cannot take recourse to exercise of a power, procedure for which is otherwise specifically provided under the Act”.

It is not clear if, in the future, the SC will also curtail state or central regulators from offering substantive relief to power suppliers/buyers on grounds the PPA is inviolate. Given the length of the PPA and how underlying conditions can change overnight, it is critical that the regulators have the power to order changes in the contract. If they do not, the only option will be for power suppliers/buyers to breach the contract by, shutting down in the case of suppliers and refusing to buy in the case of state electricity boards/distribution companies. Since instability is not good for the industry, the SC rulings are unfortunate.

 

 

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