TNERC rejects plea against Tangedco paying Rs 536 crore to private firm

CHENNAI: Tamil Nadu Electricity Regulatory Commission (TNERC) has dismissed a miscellaneous petition filed by the Power Engineers Society of Tamil Nadu (PESOT) challenging Tangedco’s decision on March 30, 2020, to pay fixed charges amounting to Rs 536.55 crore to the PPN Power Generating Company after the expiry of the fuel supply agreement in 2016.

In the order, the commission dismissed the petition on the grounds of maintainability accepting the respondent’s arguments that the commission lacks inherent jurisdiction to take cognisance of the issue raised in the main petition.

PESOT said that the PPN entered into a power purchase agreement with the then-TNEB in 1997 as an Independent Power Producer (IPP) to generate power at an affordable rate using locally available natural gas from the Cauvery basin. However, the PPA allows the use of costlier naphtha as a secondary fuel until natural gas is available but the agreement is limited to fifteen years only as an outer limit. The cost of the power supplied by PPN touched as high as Rs 21.80 per unit.

The PESOT noted that after the expiry of the fuel supply agreement on April 25, 2016, Tangedco rightly stopped paying fixed charges. However, after the lapse of 47 months of stoppage of fixed charges, Tangedco reversed its earlier decision not to pay fixed charges through its board proceeding dated March 30, 2020, to pay the fixed charges with retrospective effect from April 26, 2016, amounting to Rs 530 crore plus Rs 12 crore as interest.

“Having paid through the nose all these fifteen years it is a big surprise as to how Tangedco chose to continue with the PPA all of a sudden knowing fully well that it is severely affecting it and its consumers and also the state government,” it said, demanding the recovery of payment made to the PPN and punishing Tangedco for the violation to the provision of section 142 of the Electricity Act 2003.

Tangedco argued that the commission has power only to adjudicate on subjects enumerated under section 86 of the Electricity Act, but in the present case, the entire adjudication is based purely on the PPA entered between it and PPN and the petitioner is a complete third party and hence the commission cannot entertain the petition.

On the payment of fixed charges, Tangedco said that PPN in its representation to the Finance Secretary dated June 6, 2019, requested to take up the matter to place before the Tangedco board for consideration and release of withheld fixed charges based on their monthly invoices already submitted to the utility.