JSW Energy got yet another jolt on Thursday, as Maharashtra Electricity Regulatory Commission (MERC) rejected its petition to pass on increased fuel costs to the state utility. The JSW Group’s subsidiary had moved the state electricity regulator, asking them to let them raise the price of power sold to the state utility: Maharashtra State Electricity Distribution Company, or MSEDCL.
MERC, in its order, said the commercial difficulty JSW Energy faced on account of unavailability of fuel from its supplier cannot be a ground for not performing the power purchase agreement. “The risk, therefore, has to be entirely borne by the party who has so contracted,” said the order passed by V P Raja, MERC chairman and Vijay L Sonavane, a member of the commission.
The 1994-incorporated JSW Energy signed a power purchase agreement with the utility to sell 300 megawatts of electricity at a price of Rs 2.71 per unit. The dispute began after the company’s coal supplier for its 1,200-megawatt Ratnagiri power plant walked out of the supply contract. The coastal power project is based on imported coal from Indonesia.
Ever since, the company has been buying coal from the international spot market, the prices of which have been soaring. Its this extra cost, that JSW sought to be “adjusted” into the power price.
Said the order: “If a person enters into a contract on the basis that the raw material available to the person on the date of the contract is Rs x such a person cannot rescind the contract on the basis that the raw material on the date of performance of the contract or during the performance of the contract has increased from Rs x.”
FORCES OF NATURE
JSW Energy had earlier argued that since their fuel supplier, Sungai Belati Coal of Indonesia, has used the clause of ‘force majeure’ with them, they could use the same to seek an escalation of the power price. Force majeure is a clause which provides for unforseen incidents which can affect the fulfillment of contracts.
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MSEDCL told the regulator in an affidavit that this part is not covered in the areas force majeure conditions of their contract. “There is no provision in the power purchase agreement, which specifically provides that price of coal is determined on the basis of coal sourced from the notified mines of the coal seller,” the utility told the regulator.
“We are in the process of reviewing the MERC order,” said a spokesperson of JSW Energy. “We will take appropriate steps as may be advised,” he said when questioned on the future course of action.
MSEDCL officials could not be reached immediately for comments.