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SC reserves verdict on compensatory tariffs to Tata Power, Adani Power

LiveMint logoLiveMint 30-03-2017 Apurva Vishwanath

New Delhi: The Supreme Court on Thursday reserved its verdict in a case to determine if an electricity regulatory body can alter competitively bid tariffs to award compensation to Tata Power Ltd and Adani Power Ltd.

The apex court’s ruling will put to rest a decade-old issue on compensatory tariff.

A bench comprising justices Pinaki Chandra Ghose and Rohinton F. Nariman heard a batch of appeals filed against a 2016 ruling of the Appellate Tribunal for Electricity (Aptel) which held that an unforeseen increase in the cost of coal would be a ‘force majeure event’ under the power purchase agreements (PPAs) between power generating companies and distributors.

Aptel directed the Central Electricity Regulatory Commission (CERC) to grant relief to Tata and Adani in accordance with the PPAs.

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The apex court’s ruling will have bearing on the December 2016 ruling of the CERC allowing Tata and Adani to charge their customers more to recover the higher costs stemming from an increase in the price of imported coal.

In July 2016, the apex court had refused to stay the CERC proceedings determining compensation for increased production costs for power firms. The court, however, said that CERC’s final ruling will be subject to its scrutiny.

A change in Indonesian regulations in 2010 increased the cost of coal imported by Tata Power and Adani Power from that country to fuel their electricity plants, forcing the companies to seek a higher price. Tata Power’s wholly-owned subsidiary Coastal Gujarat Power Ltd (CGPL) and Adani Power’s Mundra project in Gujarat have PPAs with state discoms in Rajasthan, Gujarat, Haryana and Punjab.

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