Coastal Gujarat Power Ltd (CGPL) is a wholly owned subsidiary of Tata Power Company Ltd (TPC) and is responsible for building and operating the Mundra Ultra Mega Power Project with a total capacity of 4000 MW, for which coal is being imported from Indonesia. Last year, the company filed a petition before the Central Electricity regulatory Commission (CERC) requesting for revision of tariff discovered through a competitive bidding process. In September 2010 the Indonesian Government notified a regulation which directed the holders of mining permits for coal mines in Indonesia to sell coal in domestic as well as international markets as per the prescribed benchmark price and all pre-existing contractual arrangements were to be aligned accordingly. TPC holds stake in a mining company in Indonesia and is importing coal based on a long term Fuel Supply Agreement (FSA). It is claimed by CGPL that after Indonesian Regulation came into effect on 1.9.2011, the petitioner had to pay higher cost for import of coal on account of which it would lose about 67 paise/kWh, aggregating to annual loss of around 1800 crore. Therefore, to mitigate this purported financial loss the petitioner has filed this case before the commission.

TPC had won the contract for Mundra UMPP under a competitive bidding process. The bidding guidelines emphasize on a fair and transparent process for bidding and allow bidders to pass through risks by quoting various escalable and non-escalable charges. The guidelines provide a two part tariff structure comprised of capacity and energy charge and allow bidders to quote escalable parameter for both these components and also their sub-components. In spite of this provision TPC willingly opted to pass through only 45% of the price escalation related to fuel cost and remaining 55% was quoted in the form of a fixed rate. After having won the bid, the petitioner is now attempting to revise the tariff under the pretext of ‘Change of Law’ and/or ‘Force Majeure’ related provisions of the PPA.

Prayas intervened in this matter in capacity of being one of the authorised consumer representatives before CERC. We have contended that after having conducted a transparent bidding process, revising tariff of the winning bidder is neither in interest of consumers nor competition, as bidders who lost out at that time could now have been more competitive. Also, as far as the PPA and the bidding framework is concerned, there is no connection between the source of the fuel and the PPA agreed tariff, as the bidder is given the flexibility to pass through entire risk associated with fuel price variation at the time of bidding by quoting appropriate level of escalable charges. Further, the PPA also allows the bidder to procure fuel at any cost, from any location, at any point of time. In fact revising tariff discovered through such process will not only set the very wrong precedent of post bidding contract revision but will also encourage future bidders to quote tariff based on risky or unviable fuel arrangements and later on seek tariff revision after winning the bid. Hence, given such larger sectoral implications, we had urged CERC to apprach this case from the point of view of ensuring sanctity of contracts and the spirit behind introducing a fair and transparent bidding process in generation. Thus relief given, if any, must be strictly within the provisions of the PPA and the bidding guidelines. Also detailed submissions were made by us regarding the legal untenability of the claims for relief under

On 15 April 2013 CERC issued its order(s) in this case. The (majority) order upholds our contentions of non-applicability of force majeure or change of law related provisions but still allows the petitioner a 'compensatory tariff' which will be determined subsequently. The order directs forming of a committee with representatives from the state discoms (who opposed the tariff revision on legal grounds) and bankers and financial analyst, a community that has strong interest in tariff revision. One of the members of CERC Shri. S.Jayaraman has disagreed with the majority decision and issued a separate order in which he has articulated his reasons for why the tariff should not be revised. All the submissions made by Prayas in this matter along with order(s) issued by CERC can be downloaded using the links below.

The report of the Parekh committee regarding this matter can be downloaded from the commission's website using this link. In the hearing held on 1st November 2013, Prayas submitted its analysis of the committee recommendations and the same can be downloaded using the link below. The submission highlights shortcomings in the committee approach and hence need for the Commission to indpendently evaluate and establish the need and extent for compensation, if any. More importantly, the submission demands that in order to decide any impact on tariff, the Commission must undertake due public process, which it otherwise follows for all routine tariff matters. Given the peculiar nature of this case, (i.e. contractually and legaly there is no ground for providing any compensation), and considering the fact that any decision in this matter will impact future competition and policy of the power sector as well as tariff of consumers in five different States, the Commission must provide adequate opportunity to all stakeholder, most importantly to the consumers of all these State Distribution Companies, to participate in this process.

However, no public process was conducted by the Commission and the final order in the matter was issued on 2nd Feb 2014. In spite of concluding that there is no force majeure or change in law event, the Commission still decided to award an 'additional compensatory tariff' over and above the PPA agreed rate. Aggreived by this decision of the CERC, Prayas has filed appeal (133 of 2014) before the Appellate Tribunal challenging the said order. Judgement by the Tribunal is still awaited.