The Tamil Nadu Electricity Regulatory Commission has slammed the Tamil Nadu Electricity Board for adopting “delay tactics”, in a case relating to a payments-dispute between the board and an independent power producer.
The Commission said this in its order passed on Friday in relation to a decade-old dispute between PPN Power Generating Company Pvt Ltd and TNEB. The dispute relates to a claim made by PPN on TNEB for a sum of Rs 190 crore, which PPN reckons is the difference between what is due to it by TNEB and what the board has actually paid.
The Commission went into several issues such as capital costs (which, incidentally, have not yet been finalised even after a decade of the project's commissioning), rated capacity of the plant, interest charges and prompt payment rebates, and has asked PPN to re-draw the invoices for previous years in accordance with the Commission's ruling on each of the parameters.
The result of the exercise would determine whether TNEB has to pay PPN or if PPN has to refund any amount to the board.
With this order, the financially-stressed TNEB has obtained a reprieve of sorts, because if the order had been to make a payment, the board would have pressed to find resources for compliance. It is pertinent to note that in April last year, the Board lost a similar dispute with another power producer, GMR, and was directed to pay Rs 480 crore in six months time.
Observations
However, more interesting than the order itself are the observations of the Commission on TNEB — such as the “delay tactics”.
The observation that TNEB resorts to “delay tactics” was made in the context of the board asking the Commission to defer adjudicating on the issue until the capital costs of the 330 MW, gas-based power project is determined. (Both the capital costs and the rated capacity have a bearing on the ‘fixed cost' part of the tariff, and hence on the payments due to the power producer.)
“As and when final capital cost is determined, adjustments between both the parties would take place in accordance with the PPA and therefore there is no case for deferring adjudication. We consider it as delay tactics of the Respondent (TNEB),” the Commission's order says.
“Dangerous position”
A clause in the power purchase agreement between the parties which says that if PPN is found to have made an excess claim, it shall be liable to repay the excess with interest — a check against a possible tendency to inflate claims. On this the Commission observed that TNEB wants to exercise the role of an adjudicator in deciding what component of an invoice is to be admitted and what component disallowed. “This is a dangerous position,” it says, noting that it had made similar observations in other cases also.
“Fallacious argument”
TNEB argued that it was entitled to a prompt payment rebate, even if the payment was substantial but not full. TNEB argues that it is eligible for rebate so long as the bill has been settled substantially if not almost entirely. “The Commission would like to observe that this is a fallacious argument which contradicts the PPA, which mandates that entire payment should be made to be eligible for rebate.”
The order also finds fault with PPN for not passing on the benefits of lower interest rates (got from ‘floating rate' loans) to TNEB and not filing annual invoices in time.