Electricity tribunal sets aside MERC order on power buy

The Appellate Tribunal For Electricity (ATE) has set aside the order of the Maharashtra Electricity Regulatory Commission (MERC) granting approval to the power purchase agreement (PPA) between the Tata Power Company (TPC) and Brihanmumbai Electric Supply and Transport (BEST) for 800 mw power.
It has also asked the commission to consider the claim of Reliance Energy (REL) on TPC's power.
The ATE judgement provides the much-needed relief to REL. In case of an adverse ruling, REL would have taken a hit of around Rs 490 crore in a year. And this would have ultimately resulted in an additional burden of 60 paisa a unit on REL's customers.
While approving the Annual Revenue Requirement (ARR) of the three utilities for financial year 2007-08, MERC allocated 762 mw power to REL which supplies power to the suburbs of Mumbai from TPC's generation capacity of 1777 mw, 647 mw to BEST which provides power to the island city and 477 mw to TPC's own bulk supply operations.
The TPC supplies power directly to key installations, including railway, water works, airport and municipal hospitals.
A dispute broke out when REL moved the MERC, challenging the PPA signed between TPC and BEST. MERC accepted the plea by TPC and BEST that it doesn't have the powers to intervene in the commercial transaction between the two companies and rejected REL's plea in November last year.
REL subsequently challenged MERC's ruling before the ATE, which set aside the judgement of the state power regulator and directed it to consider REL's claim over TPC's power.
TPC's generation capacity is 1777 mw and that of REL is 500 mw. There is a shortfall of around 200 to 300 mw between the city's generation capacity and the demand that is being fulfilled by drawing excess power from the state grid.
However, during summer, the demand would shoot up by another 200 to 300 mw.
The state power utility Mahavitaran has firmly refused to allow further overdrawl of power as many parts of the state are reeling under power cuts ranging from 12 to 16 hours.
Who would foot the bill for extra power which is available between Rs 10 and Rs 12.50 a unit? BEST has taken care of its customers by having PPA for 800 mw. But REL, whose share in TPC's generation has already depleted by 153 mw due to MERC's order, would have to procure another 250 to 300 mw for its customers.
When contacted, BEST's general manager Uttam Khobragade, spoke about challenging the ATE order in the apex court as this judgement goes against the basic principle of the law that, ‘no contract can be challenged in the court of law unless it is against the law or public good'. However, TPC refused to comment on the judgement.
BS Reporter / Mumbai May 7, 2008
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