Adani's Maharashtra project gets MERC nod for compensatory tariff

MahaVitaran plans to challenge it in Appellate Tribunal for Electricity

In a big relief for Adani Power, the Maharashtra Electricity Regulatory Commission (MERC) has approved a compensatory tariff of Rs 1.01 a unit for its 1,320 Mw Tiroda power project in the state.

This will be above the tariff of Rs 2.67 a unit according to the power purchase agreement between Adani Power Maharashtra Ltd (APML) and the Maharashtra State Electricity Distribution Company (MahaVitaran). However, MERC has proposed a reduction of 20 per cent in return on equity. Thereby, the total power purchase cost from the 800 Mw for MahaVitaran works out to Rs 3.56 a unit.

A MahaVitaran official told Business Standard: “We will have to bear an annual burden of Rs 400 crore due to the proposed compensatory tariff of Rs 1.01 a unit. MahaVitaran proposes to challenge the MERC order in the Appellate Tribunal for Energy (ATE).” Adani Power was not available for comment.

MERC however, said that the indicative compensatory energy charge would be reduced when APML  progressively secured 100 per cent domestic linkage coal for 800 Mw.

The compensatory tariff of Rs 1.01 a unit is final, after MERC had, in its ruling delivered in August last year, cleared an interim compensatory tariff of 57 paise a unit over and above the PPA tariff applicable only for the sale of power above the initial 520 Mw. MERC has clearly said that there is no question of a weighted average tariff being applied on 1,320 Mw. The present matter does not deal with the compensation for shortfall in the quantity of  coal, but for relief on account of non-availability of coal from the Lohara coal blocks. The  compensatory energy  charge, being a temporary mechanism, would be reviewed after a period of three years.

APML had approached MERC in July 2012 with a plea for a revision in tariff after change of source of fuel and the subsequent rise in coal procurement cost.  

MERC therefore observed that, “The present case is about compensation for replacement of coal from Lohara coal blocks by costlier sources of coal, which is market-driven. The adoption of non-escalable parameters will not address the issues in the matter.”

Ashok Pendse, the consumer representative on MERC said, “This matter has not attained finality because it is already in the ATE, where the increase in tariff initially proposed as an interim and now as final by MERC itself has been challenged. The rise has been challenged because the competitive bidding guidelines under Section 63 of the Electricity Act, 2003 do not permit such things and it is the contention of the consumers.”

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