The Appellate Tribunal for Electricity (Aptel) has said that the Central Electricity Regulatory Commission has no powers to determine a ‘compensatory tariff’ to Adani Power and Tata Power to help them meet the costs of higher coal prices. However, it has also said — to the apparent delight of the companies — that the Indonesian government changing regulations causing a steep hike in coal imported from that country is a force majeure event, or, one that could not have been foreseen. It has directed CERC to determine within three months the damage the event has caused to the power projects and “give them such relief as may be available to them under their respective PPAs”. It is not clear what relief is available to the companies within the PPA under the force majeure clause. Anil Sardana, the MD of Tata Power, expects a raise of around 25 paise — much lower than the 53 paise that CERC awarded as “compensatory tariff” in February 2014, but nevertheless likely to be more rewarding due to the plunge in coal prices.
It is hard to agree that Indonesia revising regulations is an ‘act of God’ kind of unforeseen development. You may not expect an earthquake or a tsunami, but you should factor in governments changing rules. The companies showed poor judgment and they want consumers to bear the consequences. Giving these companies a tariff hike is also unfair to the bidders who lost. But on the other hand, the fuel prices are unviable and (as noted in the Aptel order) the companies cannot seek to terminate the contract.
Perhaps, there is a middle path. Why not fix the tariff in such a way that the companies only break even and not make profits? Neither would the projects need to be closed down for want of viability, nor would consumers have to bear the brunt of a bad business decision.
Senior Deputy Editor