In a rare move, the Central Electricity Regulatory Commission (CERC) has set aside the commissioning of the Anil Ambani-owned
Reliance Power's subsidiary
Sasan Power Ltd's (SPL) first unit.
The deadline set was May 6, but a Reliance Power press release had claimed the unit would be commissioned on March 30. The SPL ultra mega power plant, located in Sasan, Madhya Pradesh, is to comprise six units in all of 660 megawatts (MW) each, adding up to a total installed capacity of 3,960 MW. The plant is committed to supply power at one of the lowest tariffs in the country, an average of Rs 1.19 per kilowatt hour (KWh).
The judgment is a major setback and likely to hit the finances of both SPL and Reliance Power. It will also derail Reliance's efforts to revise the tariff.
The order was passed following a case filed with the CERC against SPL by the Western Regional Load Dispatch Centre (WRLDC), which monitors the flow of power in the Western region for the national grid. The agency moved the CERC in the first week of May, alleging the SPL had violated CERC rulings as well as some of the norms of the Central Electricity Authority. It also charged that SPL had not adhered to the production sharing contract signed with the buyers of its power and demanded the commissioning be quashed.
It was charged that during tests conducted at SPL from March 27 to 30, the unit failed to generate 95 per cent of its contracted capacity for a continuous 72 hours, a pre-condition for commissioning. It could only generate 15 per cent. The load was so low that various tests to check the functioning of the unit could not be carried out.
The CERC order agreed with the WRLDC's contentions. It said that since the WRLDC has to schedule power supply in accordance with commitments made under power purchase agreements, it had every right to ensure it is satisfied with the commissioning of any unit.
A Reliance Power spokesperson expressed surprise at the verdict. "It is surprising that the CERC chose to deal with the merits of an independent engineer's certificate without even hearing Saasn Power or the engineer concerned," he said. "It is a violation of principles of natural justice and is not tenable in law. Sasan Power is approaching the appellate tribunal to quash the untenable order of the CERC."
In an earlier interaction with
Business Today,
Reliance Power's CEO Jayarama P Chalasani too had defended the commissioning saying his buyers were satisfied and that the WRLDC had no locus standi to take up the matter.
With this order, SPL is effectively no longer functioning, and has hence effectively missed its May 6 deadline. As per the provisions of the power purchase agreement, it may have to pay liquidity damages to its buyers, which could be in the range of Rs 20 to 30 crore per month. The company will also have to renegotiate its loans from banks.
Tailpiece: Adding more salt to Reliance Power's wounds, another attempt to commission the unit from June 10 to 13, also failed. The report says that the unit could achieve 95 per cent generation for only 17 hours. It had to reduce generation because of the early monsoon showers which steeply reduced demand. This means the companies' troubles continue. Its buyers all refused to accept the commissioning this time at the first instance.
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