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CERC can revise power tariffs despite pacts, says Attorney General Goolam Vahanvati

According to reports, Attorney General of India Goolam Vahanvati has said the power regulator can regulate and revise electricity tariffs irrespective of the contracts signed by power producers with distribution companies.

The opinion of the country’s top legal officer offers a ray of hope to power generators like Tata Power, Reliance Power and Adani Power, which own 12,000 MW capacity imported coal-based plants.

These companies had been seeking tariff hikes to compensate for the steep rise in imported coal prices due to regulatory changes in countries like Indonesia and Australia, besides depreciation of the rupee.

State regulators and distribution companies with which these plants have signed long-term power supply contracts have refused to pay more. The power ministry had refused to intervene but referred the matter to the Central Electricity Regulatory Commission (CERC). But Vahanvati said companies cannot be denied a hearing even if they have signed legally-binding contracts. “All these cases of concluded PPAs (power purchase agreements) are now arising by reason of one aspect, namely increase in the price of inputs, which has led to the demand for revising tariff,” the attorney general said in his opinion to the Forum of Regulators, a body of Central and state electricity regulators.

“However, the matter can be looked at from a converse point of view also,” Vahanvati said. “If a tariff is fixed under a PPA on the higher side, and then there is a sharp decline in the cost of the inputs for generating power, and an application is made to the Commission for downward revision of the tariff, the Commission may not decline to interfere merely on the ground of a concluded PPA being sacrosanct, without considering the statutory duty to act as a regulator.”

The Association of Power Producers has welcomed the attorney general’s opinion.

“After the attorney general’s opinion, the power producers have got a forum to agitate and convince the adjudicating body to look at revising power tariffs under concluded contracts,” said Ashok Khurana, director-general of the association. Vahanvati, however, said a final call on the issue would have to be taken by CERC.

Several projects, including Reliance Power’s Krishnapatnam ultra mega power project (UMPP), Tata Power’s Mundra UMPP, Adani Power’s Mundra power plant and Essar Power’s Salaya Project have sought tariff revisions due to the increase in input costs.

Last month, the CERC had asked Tata Power to initiate a consultation process with states on PPAs. Tata Power wants state utilities of Gujarat, Maharashtra, Punjab, Haryana and Rajasthan to pay higher price for electricity being supplied from Mundra UMPP.

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