Don't see further litigation on CERC order - Moneycontrol.com

Adani Power sees less likelihood of any further litigation on Central Electricity regulatory Commission's order , which proposes to provide compensatory tariff to the company for the power purchase agreements with Gujarat and Haryana. "One hopes there is much less likely hood of any litigation as there is going to be joint and consensus based decision of all the concerned including utilities, us, bakers and analyst," Ameet Desai, Director, Adani Power told CNBC-TV18 today. CERC on Tuesday issued an order allowing a compensatory tariff to Adani Power for its PPA with Gujarat and Haryana following the company's petition for hike in tariffs due to escalation in imported coal prices. Adani Power had appealed to CERC after Gujarat and Haryana refused to pay higher rates for the electricity generated from the company's Gujarat coal-based plant. Although the Guatam Adani owned company was unable to anticipate the quantum of compensatory package, he is hopeful that fair tariff will emerge from discussion with concerned parties. CERC order demanded to set up a committee consisting members of Adani power, state utilities, bankers and analysts to study escalation in coal prices and come up with a compensatory package. Desai further cleared that CERC order does not set any precedent for other power companies for renegotiation of tariffs under power purchase agreements. He stressed that CERC order very clearly puts restriction on renegotiation of tariffs. Below is the verbatim transcript of the interview Q: How hopeful are you that you will be in line for lot of compensation from the Central Electricity Regulatory Commission (CERC) order without State Electricity Boards (SEBs) taking this order to court or the prospect of further litigation? A: Rather than first speaking about the prospect of litigation, as you would appreciate this is a very land mark order because it takes care of a much unanticipated situation which is not just affecting one particular player and it is a systemic kind of problem which is currently ailing the industry. This order paves the way for working as a task force which is going to be comprising of all the stake holders, the utilities, us and a banker and an independent financial analyst to come to a consensus understanding and submit the report within 30 days by April 30 to the honorable commission. That should be paving the way for having a solution which hopefully should not be litigated further. Q: There don't seem to be too many details in terms of what exactly the compensatory tariff is for you. Do you have any clarity on that or will you know only by the end of this month? Could you share some details on what exactly the order indicates? A: The order does indicate certain norms which this committee should follow. It also allows the committee to evolve its own norms. But the basic principle overriding the whole issue is that there is a very clear need for a compensatory additional tariff and that would be hard for me to give a number as of now. And that would also amount to prejudging the whole committee. Though there would be expectations on various sides but it would also not be fair to the process to talk about them as of now. All I can tell you is the way the consideration and the norms have been articulated in the order, the likelihood of a fair tariff evolving from this deliberation is pretty high. Q: You had asked for a Rs 1.10 per unit hike. Do you think the compensation will be anywhere close to that and even if it is, do you see it as just a temporary arrangement, not a durable fix to the problems you could be running in with escalating fuel prices? A: This Rs 1.10 is a part of our submission. We have articulated and clearly shown that if the formula were to be followed it could for one of the power purchase agreements (PPAs) be Rs 1.10 and for another it could be Rs 0.64 or so. This is going to be linked to the fuel prices and therefore the order very clearly says that this mechanism once agreed should also be reviewed from time to time. So with the prices changing, if they go further up we believe that there would be a possible formula where the price of fuel adjustment factor would come through and if there is an advantage in terms of fuel price, it would certainly result in lowering the tariff. The point is that there has to be a transparent and an objective mechanism so that the abnormality in the prices can be addressed between the utility and the generator on an ongoing basis. Q: Are you clear that this is not going to go into a further litigative loop because we understand that public interest litigation (PIL) may be filed on the issue quite soon? We also understand that the CERC was not completely all together on that decision, there was one dissenting member. What is the locus standi of the CERC and what do you think will be the next move from some of these SEBs? A: I am not a legal eagle, but locus standi of CERC is unquestionably established. They have very clearly articulated this in great detail in their order. They have talked about various policy measures that they are entitled to intervene in. They have taken recourse through a particular section of the act under which they are acting. They have very clearly said that it is their duty to balance out the interest of the consumers as well as the generators. It comes out very clearly that CERC is seized of the need to provide a compensatory increase in the tariff on one hand, but also balance out the interest of the consumers on the other. Given that kind of an approach and given that there is going to be a committee comprising of all stake holders, one cannot completely rule out any possibility. But one hopes that there is much less likelihood of any litigation because it is going to be a joint and a consensus based decision of all t he concerned including the utilities and us and independent bankers and analysts. Q: Could there be some apprehension that going forward because of this precedent which is very good for you, might open up the gates for a lot of renegotiation claims from other power producers every time fuel cost escalations happen for some reason even when they have signed firm PPAs? A: If one reads the order which very clearly puts a restriction or no to renegotiation. The order is very clear in its intent that there is no renegotiation that is being allowed. It is only in a way a temporary additional compensation tariff package which has to be worked out. And it has to be linked to the abnormality of the fuel price situation. So in a very hypothetical situation if in next one-two years Coal India starts supplying coal that all the power producers need, and if the coal costs goes down then, there would be a downward revision in the tariff. As I said this is purely a hypothetical situation but whether this will open up the gates for renegotiations? From my limited understanding after reading the order, the answer is 'no' there would be no renegotiation but wherever the merit of the case would permit, the respective regulator would not shy away from looking into such a possibility. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNGzFRsxOzCpwqcOB5ToIluQrwHykg&url=http://www.moneycontrol.com/news/business/don39t-see-further-litigationcerc-order_846720.html

Put the internet to work for you. via Personal Recipe 2910127