Regulator ‘can step in’ if power buyers seek PPA revision

The Central Electricity Regulatory Commission can step in if power procurers are willing to pay more to the generators, despite power purchase agreements in place.

Dr Pramod Deo, Chairperson, CERC, the regulator would come into the picture only after procurers/ utilities state their willingness to pay more and also establish that they are unable to obtain cheaper power from other sources.

He was referring to the plea of imported coal-based plants, which had earlier committed to supply power through PPAs now wanting higher rates to offset the increase in imported coal cost, especially from Indonesia.

He said the Indonesia policy change to price coal exports at the benchmark rates (market rates), would not affect generators who had tied up for mining coal there, as the price difference would go to the account of their Indonesian entities.

Tata Power wrote to the Power Ministry expressing its inability to absorb the hike in coal cost, while Reliance Power has slowed construction of its 4000 MW Krishnapatnam ultra mega power project, stating that lenders were unwilling to release funds with input fuel cost far above projections made.

The Power Ministry has already said increase in PPAs rates was an issue between the generators and procurers.

At the annual general meeting of Tata Power, Mr Ratan Tata, Chairman, touched upon the issue and said Tata Power would receive dividends from its coal subsidiary operating in Indonesia and that would to some extent offset the outgo from parent company.

In June, the Association of Power Producers wrote to the Power Secretary, stating that projects totalling 43,000 MW were awarded after the introduction of the competitive bidding guidelines of which 13,000 MW were based on imported coal.

Developers bid for the projects based on their bilateral agreements and arrangement with fuel suppliers, predominantly in Indonesia and as such existing contractual provisions do not protect coal price variations due to ‘change in law.’

In general, Power producers here with arrangements in Jakarta were set to ship out coal at $26- $30 a tonne, which is less than 50 per cent of international benchmark rates.