Tariff appeals against state regulators to become costly for cos

NEW DELHI: The government plans to make it costly for gencos (generation companies) or discoms (distribution companies) to challenge orders of state electricity regulatory commissions (SERCs), a move that aims to check “non-serious” litigations often used to delay payments but could also impact efforts to seek rightful compensation by entities.

The power ministry’s latest draft amendment to the Electricity Rules says any party seeking to challenge a SERC’s decision regarding recovery of higher costs as a result of ‘change in law’ clause will have to deposit 75% of the payable amount before moving APTEL (Appellate Tribunal for Electricity).

The deposit in case of disputes on other issues will be 50% of the payable amount, says the draft adding that any excess deposit resulting from APTEL verdict will be returned within 90 days, says the draft. But in case APTEL or the Supreme Court deems the appeal frivolous, 18% late payment surcharge will be levied on the appellant.

The ministry says the proposal is in accordance with the advice. In its April 20 judgement in a dispute between GMR Warora Energy Ltd and CERC, the apex court had observed the implication of non-essential litigations on consumers and advised the ministry to evolve mechanisms to ensure timely payment and avoid unnecessary litigation.

Arguably, the proposal could improve payment cycles, a bane for the power sector at present. But it is likely to raise the hackles of gencos as an appeal will entail locking up huge sums as deposits, especially for imported coal-based gencos whose bids to seek higher tariffs could involve very large sums such as in the cases of Tata Power and Adani Power.

The latest changes in the rules, amended thrice since they were notified in 2005, also says generation companies and industries setting up captive power plants or energy storage systems will not need a licence to build, operate or maintain dedicated transmission lines for connecting with the grid.

This will apply to consumers with a minimum requirement of 25 MW in case of inter-state norms and 10 MW for intra-state lines. This provision will be a positive for green energy, especially green hydrogen projects.

For improved transparency and operational efficiency of distribution companies, the draft caps at 3% the gap -- "for any reason" -- between approved annual revenue requirement and estimated revenue from approved tariffs. It also stipulates that such a gap, along with carrying costs, will have to be liquidated in maximum three annual instalments from the subsequent financial year.

On open access charges, the draft proposes rationalisation through a formula and also caps the charges for short-term access to state transmission lines at 110% of the rates for long-term contracts. The additional surcharge on open access consumers will be 50% of the charges for the same category of consumers.