Before the MAHARASHTRA ELECTRICITY ... - mercindia.org.in 58 42/Order-290 of 2018-07022019.pdf · Order _ Case No 290 of 2018 Page 3 the 12th plan period referred to in the CCEA decision

Order _ Case No 290 of 2018 Page 1

Before the

MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400005

Tel. 022 22163964/65/69 Fax 22163976

Email: [email protected]

Website: www.mercindia.org.in/www.merc.gov.in

Case No. 290 of 2018

Case of M/s Adani Power Maharashtra Limited for approval of relief under Change in

Law for shortfall in domestic coal under SHAKTI Policy.

Coram

Anand B. Kulkarni, Chairperson

Mukesh Khullar, Member

M/s Adani Power Maharashtra Limited … Petitioner

V/s

Maharashtra State Electricity Distribution Co. Ltd. … Respondent

Appearance

For APML : Shri. Saurabh Roy (Adv.)

For MSEDCL : Shri. Ashish Singh (Adv.)

ORDER

Dated: 07 February, 2019

1. M/s Adani Power Maharashtra Limited (APML), “ Adani House”, Near Mithakali Six

Road, Navrangpura, Ahmedabad- 380 009, has filed a Petition under Section 86 read

with Section 63 of the Electricity Act, 2003(EA, 2003) and Article 13 of the Power

Purchase Agreement (PPA) dated 8 September, 2008 (1320 MW), and Article 10 of the

PPAs dated 31 March, 2010 (1200 MW), 9 August, 2010 (125 MW) and 16 February,

2013(440 MW) for approval of relief under Change in Law for shortfall in domestic coal

under Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India

(SHAKTI) policy after 31 March, 2017 along with Carrying Cost.

2. APML’s main prayers are as follows:

a) Hold and declare that introduction of SHAKTI Policy is change in law event.

b) Hold and declare that the Petitioner is entitled to get relief under Change in Law

provision of PPAs for any shortfall/ non-availability of domestic coal after 31.03.2017

vis-à-vis the quantity assured under NCDP 2007.

http://www.mercindia.org.in/www.merc.gov.in


c) Allow recovery of compensation for the period after 31.03.2017 as per the same

methodology as approved in Order dated 7.3.2018 in Case no. 189 of 2013 and 140 of

2014 until the supply of the domestic coal is restored to 100% as assured in the NCDP

2007.

d) Grant carrying cost along with relief for domestic coal shortfall as prayed herein in

respect of the PPAs dated 08.09.2008, 31.03.2010, 09.08.2010 and 16.02.2013; and

e) Approve the interim relief at 75% of the compensation payable based on the

methodology approved in Order dated 07.03.2018 in Case no. 189 of 2013 and 140 of

2014, subject to adjustment based on final order in the present case.

3. APML in its Petition has stated that:

3.1. It owns and operates a generating station of 3300 MW (660 MW X 5) at Tiroda in

Maharashtra. APML and MSEDCL have entered into four PPAs being (a) PPA dated

08 September, 2008 for 1320 MW, (b) PPA dated 31 March, 2010 for 1200 MW, (c)

PPA dated 09 August, 2010 for 125 MW and (d) PPA dated 16 February, 2013 for 440

MW. PPAs provide for relief under Change in Law qua any events subsequent to Cut-

off Date (i.e. 7 days prior to Bid Deadline) under the respective PPAs. Cut-off Date is

14 February, 2008 and 31 July, 2009 under the 1320 MW and under other PPAs

respectively.

3.2. The Ministry of Coal (MoC), Government of India (GoI) on 22 May,2017, notified

SHAKTI Policy whereby:

a. The supply of coal for period after 31 March, 2017 was continued to be restricted to

75% of Annual Contracted Quantity (ACQ) as against 100% of normative quantity

as was assured under NCDP 2007.

b. All the pending applications for LoA were closed and this resulted in taking away

the entire assurance which was there under NCDP, 2007.

3.3. While issuing the Order dated 1 October, 2018 in Case No. 167 of 2018, the

Commission has granted liberty to file fresh Petition in respect of Change in Law for

SHAKTI Policy and carrying cost on the relief granted through the Order dated 07

March,2018 in Case No. 189 of 2013 and 140 of 2014 till 31 March, 2017.

3.4. APML is therefore seeking relief in respect of Change in Law under respective PPAs

for non-availability/ short supply of domestic coal under SHAKTI Policy after 31

March, 2017 along with carrying cost.

3.5. The Commission vide Order dated 07 March, 2018 has held that the impact of the

Change in Law shall be available until the end of FY 2016-17, i.e., till the last year of


the 12th

plan period referred to in the CCEA decision and the NCDP 2013. Further, in

its Order dated 01 October, 2018 in Case No. 167 of 2018, the Commission has also

noted that SHAKTI scheme has stipulated continuation of shortfall in domestic coal.

3.6. In terms of the SHAKTI Policy, coal supply beyond the period of 31 March, 2017 is

continued to be restricted to 75% of the ACQ as against the 100% assurance given

under NCDP 2007. Also, the Applications pending for LOA under NCDP 2007 were

closed. Further, in the said Policy, while introducing the scheme for linkage auction,

GOI has stipulated that the old regime of LoA-FSA would come to finality and fade

away. It means that with the introduction of SHAKTI Policy, there is no grant of coal

linkages as assured under NCDP 2007.

3.7. Thus, even after the end of the 12th

Plan Period (i.e., March 31, 2017), the availability

of domestic linkage coal under the extant policy of the GOI continues to be restricted to

75% of ACQ. Also, all the pending applications for LoA have been closed and hence

there shall be no coal linkage against such pending applications contrary to the

assurance given to supply 100% coal in NCDP, 2007 prevailing at the time of Cut-off

dates for respective PPAs.

3.8. Further, as stipulated at Para B(ii) of the SHAKTI Policy, the Power producers/IPPs

having concluded PPAs based on domestic coal with Distribution Companies are

eligible to participate in bidding process for grant of coal linkages on notified price

through auction by offering discount in the PPA tariff (in paisa/unit). The Policy

stipulates for amending / supplementing the concluded PPA to pass on such discount to

the consumers with the approval of Appropriate Commission. As per the requirement

stipulated in the process for grant of coal linkage under the said Policy, CEA sought

details of the PPAs signed by the developers against coal based thermal power project

for which coal linkage is sought in the specific format, duly authenticated from the

concerned DISCOMs / Lead procurer. APML therefore furnished the PPA details duly

endorsed by the MSEDCL to the CEA. CEA confirmed that APML is eligible for

participation in the process since the PPA is based on Domestic coal as endorsed by the

MSEDCL.

3.9. Accordingly, APML participated in the auction process and became Successful Bidder

for the allocation of 5.84 MMT coal linkages from MCL, SECL and WCL by way of

giving discount (in the range of 1 to 3 paise /unit).

3.10. Under SHAKTI Policy FSA, ACQ was only 5.84 MMT. Therefore, as against the

assurance of 100% coal availability under NCDP, 2007, APML is getting substantially

reduced quantum in terms of SHAKTI Policy. This is in addition to the shortfall as

stipulated in Para (A) of the SHAKTI Policy to restrict coal supply at maximum 75%

even after March 2017.

3.11. As per Judgment of the Supreme Court in Energy Watchdog v. CERC & Ors. dated

11April, 2017 read with provisions of the PPA, introduction of SHAKTI Policy would


qualify for Change in Law since SHAKTI is a policy notified by GoI which is at par

with NCDP and therefore has force of Law. The same is also acknowledged by the

Commission in its Order dated 01 October, 2018 in Case No. 167 of 2018.

3.12. The SHAKTI policy envisages the short supply or non-availability of coal beyond the

12th

Plan i.e. beyond 31 March, 2017, therefore the impact of Change in Law would

commence from the date the policy is affecting the supply of coal i.e. 01 April, 2017.

This is in line with the judgment of the Supreme Court in Energy Watchdog which has

held that insofar as procurement of Indian coal is concerned, to the extent the supply

from Coal India or other Indian sources are cut down, relief is to be granted to the

affected party under Change in Law provisions of the PPA from the date the policy

affects or impacts the supply of coal. It is pertinent to note that the Supreme Court has

not restricted the principle of granting relief under Change in Law to any date rather it

has stated that relief is to be granted as long as there is cut down in coal supply by CIL

or other Indian sources.

3.13. Change in Law provisions of the respective PPAs mandate that the affected party is to

be restored to the same economic position as if Change in Law did not take place. Since

actual coal materialization as a consequence of the SHAKTI Scheme is still much

below the 100% normative quantity assured under the NCDP, 2007, the relief for

Change in Law ought to continue beyond 31 March, 2017 till such time 100% assured

coal under NCDP 2007 is supplied by Coal India Ltd.

3.14. The Commission has already approved a mechanism for claiming relief under Change

in Law for domestic coal shortfall through the Order dated 7 March, 2018 in Case No.

189 of 2013 and 140 of 2014 for the period upto 31 March, 2017. Since the basis of

domestic coal shortfall remains the same albeit through successor SHAKTI Policy in

place of NCDP, APML is entitled for relief on similar basis.

3.15. Therefore, it is requested to approve the shortage/ non-availability of coal vis-à-vis the

quantity assured under NCDP as Change in Law and allow APML to claim

compensation as per the methodology approved by the Commission in the Order dated

07 March, 2018 in Case No. 189 of 2013 and 140 of 2014 for the Period from 1 April

2017.

3.16. As per Article 13.2 and 10.2 of the 1320 MW and 1200/125/440 MW PPAs

respectively, Change in Law relief is based on the Restitution Principle and requires the

affected party to be restored to the same economic position as if the Change in Law

event had not occurred. One of the key ingredients for such restitution as contemplated

under the PPAs would be payment of 'carrying cost'. Thus, payment of carrying cost is

imperative to achieve the true objective of restitution. This aspect was also recognized

by the Supreme Court of India in the Energy Watchdog v. CERC & Ors. Judgment.

3.17. Payment towards Change in Law events results in additional burden to APML and if

not reimbursed immediately by the procurer, results in increase in working capital


interest. Grant of carrying cost is in line with Section 61(b), (c) and (d) of the EA, 2003

to conduct generation, transmission and distribution on commercial principles. Carrying

cost is also a well-established concept which has been re-emphasized by the GoI in

Clause 8.2.2 of the Tariff Policy, 2016.

3.18. ATE in its Order dated 13 April, 2018 in the matter of Adani Power Ltd Vs CERC &

Others (Appeal No. 210 of 2017) has held that the impact of Change in Law is to be

done in the form of adjustment to the tariff which is nothing less then re-determination

of the existing tariff and that interest (i.e. carrying cost) is payable till re-determination

of tariff.

3.19. ATE in its Judgment dated 20 December, 2012 in Appeal No. 150 of 2012 had

recognized the principle of carrying cost. ATE Judgment in Appeal No. 210 of 2017 as

decided on 13 April, 2018 would reveal that the said judgment is merely upholding the

Law as laid down in the SLS Case. Recently, based on the above ATE judgment, this

Commission vide Order dated 19 April, 2018 has allowed carrying cost while approving

Change in Law compensation under Case No. 102 of 2016 at the rate applicable for

working capital interest calculation as per MYT Regulations, 2015.

3.20. Therefore, it is requested to grant carrying cost from the date the Change in Law events

have affected APML to the date of Order by the Commission in the present case in

respect of relief granted under (i) the Order dated 189 of 2013 & 140 of 2014 dated 07

March, 2018 and (ii) Order under the present Petition in order to achieve the objective

of restitution.

3.21. The Commission’s Order in Case No. 102 of 2016 relates to one of the PPAs under

consideration in the present Petition and therefore the Commission may consider the

rate applicable for working capital interest calculation as per MYT Regulations, 2015

for carrying cost claimed under the present Petition.

3.22. The Commission has already held that shortage/non-availability of domestic coal

supply is Change in Law and allowed compensation to APML for the same PPAs for

the period up to March 2017 keeping in view the applicability of CCEA decision up to

31 March, 2017. As the coal supply post March 2017 is also restricted by the GoI

through a policy decision, APML has a very strong prima facie case for succeeding in

the case and getting relief from the Commission. Further, admittedly APML had to

procure imported coal to the extent of shortfall by incurring higher cost. APML is under

severe financial stress due to non-recovery of the relief for domestic coal shortfall and

unable to continue operations. Shutdown of power plant due to non-availability of

sufficient funds for working capital needs would cause irreparable loss to it. Therefore,

it is requested to grant interim relief and direct MSEDCL to pay 75% of the

compensation subject to adjustment based on final decision in the Case. Such interim

payment also benefits the MSEDCL/End Consumer since the burden of carrying cost

will get reduced to that extent. It is pertinent to note that CERC, in IA No. 57 of 2017 in


Case No. 97/MP/2017 vide Order dated 28 September, 2017, has approved interim

relief at 75% of the amount claimed in similar matter.

4. MSEDCL in its submission dated 3 December, 2018 has stated that:

4.1. SHAKTI policy is framed with the broad perspective to provide the coal, to the utilities

having either no linkages or to provide the linkages to utilities having imported coal

based power plants, for reduction in power generation cost. As a part of this policy,

CIL/SCCL is to grant coal linkages on notified price on auction basis for Independent

Power Producers (IPPs) having already concluded domestic coal based Power Purchase

Agreement (PPAs), with the bidding parameter being levellised discount on existing

tariff that the IPP is willing to provide. This was expected to result in a win-win

situation for IPPs having a long term supply security of coal from a source of their

choice while consumers will benefit from a lower tariff.

4.2. SHAKTI policy also assures to provide additional coal quantum in future. As provided

in the policy, coal supply to the LOA/FSA holders continue to get 75% of ACQ and the

coal supply to these capacities may be increased in future based on coal availability.

Further, there are no directives specified by MoC for any pass through of coal cost

similar to NCDP 2013. SHAKTI policy has given the coal linkage for the IPPs

contracted under Section 63 PPAs with an assurance that the coal linkage may be

increased in future on basis of availability. MoC is taking the efforts to make the

incremental coal supply as committed in the policy. Instead of following up with coal

supplier for additional supply of coal, APML by wrong interpretation of SHAKTI

Policy is seeking compensation under Change in Law.

4.3. Hence the contention of APML, that SHAKTI policy envisages the short supply or non

availability beyond 12th

Plan i.e. beyond 31 March, 2017, and therefore the change of

law event has occurred, is no correct. NCDP 2013 has a specific provision of cost pass

through for alternate source of coal supply on account of shortage of linkage coal.

Contrary to this, there is no specific provision of any directive for similar pass-through

in the SHAKTI policy.

4.4. As per PPA provisions, to make the claims under Change in Law, the seller shall have

to provide to procurer and the Commission, the documentary proof of such increase /

decrease in cost for establishing the impact of change in Law. Hence the contention of

APML that the SHAKTI policy is continuation of NCDP 2013 is completely deceptive.

In fact there is assurance of coal to FSA/LOA under the old regime and the new coal

linkage is granted for those IPPs who had signed PPAs with Discoms.

4.5. APML has reproduced only the selective portion of the policy and is creating the false

impression that SHAKLTI policy will lead to shortfall in coal supply. In fact, SHAKTI

policy is the assurance of coal linkage to the IPPs who have already signed PPAs and is

also assuring them an increase in coal supply in future. Policy should be read

harmoniously with next statement in totality and not in part i.e. ….would continue to get


coal at 75% of ACQ even beyond 31.03.2017. The coal supply to these capacities may

be increased in future based on coal availability. APML has composed the relevant

suitable portions of the policy to co-relate it with NCDP 2013 and to get relief under

Change in Law.

4.6. APML has wrongly interpreted the efforts of MoC about the assurance and future Coal

supply. APML accepted that it was allocated the 5.8475 MTPA of coal for 2120 MW

capacities (balance capacity of the plant after considering already signed FSA of

1180MW). Hence it is clear that APML has got coal linkage for 3300MW capacity.

Hence there is no shortfall of coal linkage for Tiroda Power Plant after getting

allocation from SHAKTI policy.

4.7. APML’s contention that due to the SHAKTI policy the availability of coal is restricted

up to 75% of ACQ is wrong and misleading. As per CIL web site data and the data

available with the MSEDCL, the availability of domestic coal is increased by 11% and

APML and Adani Power Rajasthan Ltd is to be supplied with 9.9MT of coal during the

year 2018-2019 from various coal mines of SECL like Korba , Raigarh, korea rewa

mines, Mahanadi coal field, Basundhara and Talcher mine. Thus, instead of following

up with the coal suppliers, APML has filed petition for compensation due to Change in

Law.

4.8. The carrying cost sought by APML is not justifiable in as much as the Parties had never

specifically agreed to compensate towards carrying cost on account of the impact of the

Change in Law, more particularly not contemplating the inclusion of the same in Clause

10.3 of the PPA.

4.9. The ATE in the case of SLS Power Ltd. Vs. APERC & Ors., Appeal No. 150 of 2011

has specifically rejected the similar relief, as sought by the Applicant/Petitioner herein

qua claim of carrying cost de hors the terms of the PPA.

4.10. Further as per Clause 10.3.4 of the PPA, The Commission is the final authority for

determination of the compensation and unless and until such compensation is not being

determined by the Commission, MSEDCL cannot be compelled to make any payment

towards the alleged demand of compensation, which otherwise has been rejected by the

Commission.

4.11. The carrying cost is recognized normally in cases of monies being denied at the

appropriate time. There is no dispute on the fact that the amount payable gets

determined and becomes payable only after such determination, and thus there is no

liability to make payment until the decision of the Appropriate Commission on Change

in Law. Therefore, amounts do not become legally due and payable until the decision of

the Appropriate Commission. In view of the above MSEDCL requests the Commission

not to allow any carrying cost. Further the Commission may not grant the relief to

APML for Change in Law under SHAKTI policy.


5. During the hearing held on 4 December, 2018 APML reiterated its submissions as made

in its Petition. MSEDCL raised a preliminary issue against APML that it has not

followed the mandatory/obligatory clauses of the PPAs which were essential

requirement for any claim to be sought under Change in Law. MSEDCL stated that

APML has not followed due procedure as provided under the provisions of the PPA and

had not notified MSEDCL about the effect of Change in Law. In reply, APML stated

that since the Petition was filed before the Commission seeking only declaratory relief,

the Notice to MSEDCL was not served. APML further stated that it will serve notice to

MSEDCL as required under the relevant clauses of PPA. The Commission granted a

week to APML to file its submissions and reserved the matter for final Orders.

6. APML in its additional submission dated 10 December, 2018 has stated that:

6.1. The present Petition has been filed in pursuance of this Commission’s Order dated 1

October, 2018 in Case No. 167 of 2018 which was filed seeking review of Orders of

this Commission in Case No. 189 of 2013 and 140 of 2014. Vide Order dated 01

October, 2018, the Commission was pleased to dismiss the said Review Petition but, in

its wisdom, had granted liberty to file fresh petition in respect of Change in Law for

SHAKTI Policy and carrying cost.

6.2. SHAKTI Policy has replaced the earlier policy i.e. NCDP by stipulating the treatment to

be given to the applications for coal linkage, LoA and FSAs under the NCDP. The

SHAKTI Policy has resulted in short supply/ non-availability of coal even after the end

of the 12th

Plan Period (i.e., 31 March, 2017). In terms of the Supreme Court’s order

and judgment in Energy Watchdog v. CERC & Ors. dated 11 April, 2017, shortfall in

the domestic coal supply after 31 March, 2017 is Change in Law. As a natural corollary

and extension of the same principle, the shortfall in domestic coal supply under the

SHAKTI Policy, is Change in Law.

6.3. The effect of relief under Change in Law has to be from the date the Change in Law

occurred and not from date of Order of the Commission. (clause 13.4.1 of the 1320 MW

PPA and clause 10.5 of the 1200 MW, 440 MW and 125 MW PPA).

6.4. APML disagrees with the contention of MSEDCL that there has to be a direction for

pass through. There need not be any mention of pass through in the SHAKTI Policy to

enable APML to get Change in Law relief. The principle of restitution in the PPA itself

is enough to enable APML to get relief. Even NCDP 2013 didn’t specifically mention

pass through, yet relief was given. Hence, if any event qualifies for Change in Law, the

relief to be provided under principle of restitution under PPA needs to be followed and

no further direction is required for pass through.

6.5. Contention of MSEDCL that no notice of Change in Law event was served for the

shortfall under SHAKTI policy is misleading. There was no occasion for a fresh notice

for coal shortfall under SHAKTI Policy as the shortfall in coal supply was already


under consideration in Case Nos. 189 of 2013 and 140 of 2014 decided on 7 March,

2018 and in Case No. 167 of 2018 decided on 1 August, 2018.

6.6. As the Petition for Change in Law for shortfall in coal (including SHAKTI) was

pending before this Commission there was no occasion for APML to privately deal with

MSEDCL on the said issue.

6.7. Through FSAs entered under Shakti Policy, APML got combined quantum of 5.84

MTPA for Gross PPA capacity of 2120 MW from SECL, WCL & MCL. Hence, there

is shortfall in coal supply with reference to normative coal requirement assured under

NCDP 2007. Further, in view of the restriction of coal supply to 75%, there is further

increase in curtailment of coal supply.

6.8. It has claimed Carrying Cost based on the principle of restitution as enumerated in the

Change in Law provisions of the PPAs. Further, decision of ATE granting carrying cost

dated 20 December, 2012 in Appeal No. 150 of 2012 in the matter of SLS Power had

recognized the principle of carrying cost (SLS Decision). The said decision is binding

and applicable in full force upon this Commission. The SLS decision was upheld by the

ATE again in Appeal No. 210 of 2017 as decided on 13 April, 2018. Even this

Commission has upheld Carrying Cost in its judgement dated 19 April, 2018 in Case

No. 102 of 2016.

6.9. Carrying cost is also a well-established concept which has been re-emphasized by the

GoI in Clause 8.2.2 of the Tariff Policy, 2016. The Tribunal in its Order dated 13 April,

2018 in the matter of Adani Power Ltd Vs CERC & Others (Appeal No. 210 of 2017)

has held that the impact of Change in Law is to be done in the form of re-determination

of the existing tariff and interest (i.e. carrying cost) is payable till re-determination of

tariff.

6.10. Delay in grant of the relief would not only aggravate the financial situation of APML

but also place additional burden of avoidable carrying cost on the end consumers

Therefore, considering the consumer interest as of paramount importance, the prayers in

the present Petition ought to be allowed.

6.11. MSEDCL in its reply to the Petition has referred to the ATE Judgment dated 20

December, 2012 in Appeal No. 150 of 2011 (SLS Power Ltd. Vs APERC & Ors.) and

has submitted that the ATE has rejected the similar relief as sought by APML herein.

However, it is observed that ATE in the said judgment has allowed carrying cost. The

relevant para is extracted hereunder:

“35.5 The principle of carrying cost has been well established in the various

judgments of the Tribunal. The carrying cost is the compensation for time value

of money or the monies denied at the appropriate time and paid after a lapse of

time. Therefore, the developers are entitled to interest on the differential amount

due to them as a consequence of re- determination of tariff by the State


Commission on the principles laid down in this judgment. We do not accept the

contention of the licensees that they should not be penalized with interest. The

carrying cost is not a penal charge if the interest rate is fixed according to

commercial principles. It is only a compensation for the money denied at the

appropriate time.”

6.12. Therefore, it is prayed to grant carrying cost from 01 April, 2017 to the date of Order at

rate applicable for working capital interest calculation as per MYT Regulations, 2015.

7. APML in its further additional submission dated 18 December, 2018 has stated

that:

7.1. The contention by MSEDCL that notice is not served for SHAKTI Policy is incorrect as

many letters were written to MSEDCL (i) in relation to SHAKTI Policy and amendment/

approval of PPA as required under the SHAKTI Policy and (ii) in relation to

continuation of restriction of coal supply to 75% and its consequences on APML as well

as MSEDCL/ end Consumers before filing the present Petition.

7.2. On 2 August, 2017, APML informed MSEDCL about SHAKTI Policy and requested to

authenticate the PPA details to be submitted to CEA. In response vide letter dated 9

August, 2017, MSEDCL has certified the details to be submitted to the CEA for

participation under SHAKTI option. Subsequently, Supplementary PPA was signed on

24 January, 2018 and approved by the Commission on 20 March, 2018.

7.3. APML through number of letters intimated to MSEDCL that the coal supply restriction

of 75% of ACQ continued even under SHAKTI Policy and as a result, APML is forced

to utilize costlier imported coal to mitigate such shortage in coal supply which resulted

in severe financial hardship on APML. Letters dated 8 September, 2018, 1 and 19

October, 2018, 1, 13 and 27 November, 2018 have indicated the shortfall in coal supply.

Therefore it is clear that APML has filed the Petition before the Commission on 10

October, 2018 after giving ample notices to MSEDCL regarding SHAKTI Policy and the

shortage in coal supply there under.

7.4. In the submission filed by APML on 3 June, 2017 (in Case No. 189 of 2013) i.e. after

remand by the ATE based on the Supreme Court Judgment dated 11 April, 2017 in

Energy Watchdog case, APML prayed for grant of relief for past period as well as for the

future period. Subsequently, APML in the affidavit filed on 9 November, 2017,

specifically made submission regarding continuation of restriction of coal supply to

75%.

7.5. MSEDCL in its Written Submission dated 27 November, 2017 (in Case No. 189 of

2013), while replying to the submission of APML in affidavit dated 9 November, 2017,

stated that issues relating to SHAKTI Policy are irrelevant for the purpose of relief in the

Case No. 189 of 2013. The same is recorded at Para 19.13 of the Commission’s Order

dated 7 March, 2018 in Case No.189 of 2013. The above fact makes it evident that the


issue related to relief for coal shortages under SHAKTI Policy was already pleaded

before the Commission and both APML as well as MSEDCL have made submissions in

that regard.

7.6. Therefore, MSEDCL now cannot take a stand that APML has not given notice under

SHAKTI Policy. It is pertinent to note that, no objection was raised by MSEDCL with

regard to notice, any time earlier including its recent Reply dated 3 December, 2018 filed

in present Petition. This is because SHAKTI is continuation of earlier Change in Law.

Therefore, the contention of MSEDCL is only an afterthought and raised during the

hearing on 4 December, 2018. In view of the above, the contention of MSEDCL that

APML has not given notice about SHAKTI Policy does not sustain.

8. MSEDCL in its additional submission dated 26 December, 2018 (Reply to APML’s

Rejoinder dated 10 December, 2018) has stated that:

8.1 The Clause No. 13.3 of 1320 MW PPA and Clause 10.4 of 1200 MW/125 MW /440

MW PPA clearly provides that for any Change in Law under Article 13/Article 10 for

the respective PPAs a seller (APML) should give notice to the procurer (MSEDCL) of

such Change in Law as soon as reasonably practicable after becoming aware of the same

or should reasonably have known of the Change in Law. Further this Notice shall

provide , precise details of ;

(a) The Change in Law and

(b) The effects on the Seller of the matters referred

8.2 In accordance with above PPA clauses, APML has not served a Notice on it regarding

SHAKTI policy as a Change in Law mentioning precise details of the Change in Law

and the effects on the Seller (APML).

8.3 Ministry of Coal has issued Notification dated 22 May, 2017 regarding introduction of

SHAKTI Policy and has given certain guidelines for allocation of coal linkages to power

sector. Under SHAKTI policy there are different options to get the coal allocations for

power plants as;

Coal Linkage on auction basis for IPPs:

A. Having PPA based on Domestic Coal

(a) Bid for discount in existing tariff (paise/unit)

(b) A minimum discount in tariff to be determined

(c) Discount to be adjusted from Gross amount at time of billing

B. Without PPA

(a) Bid for linkages over CIL notified price

(b) PPA to be submitted within 2 years

C. Having PPA based on Imported Coal

(a) Transparent Bidding process of linkages


8.4 As per Coal allocation under B(ii) option of SHAKTI policy APML had applied for

obtaining the coal linkage from CIL. One of the pre-requisites for this was to furnish the

details of Power station and relevant information in prescribed format to CEA. APML

vide letter dated 2 August, 2017 requested MSEDCL for providing the details of PPA for

furnishing in Bid document of SHAKTI policy under B(ii) option for receiving the coal

linkage for Tiroda Power plant. However, in additional submission APML has

contended that this request letter is the Notice of Change in Law for SHAKTI Policy.

This is completely misleading and should not be considered as notice of Change in Law.

8.5 Further APML has contended that various letters were written to MSEDCL mentioning

the present coal scenario. These letters are not Notice as per the provisions under PPA

and should not be considered as Notice of Change in Law.

8.6 Hence, MSEDCL request the Commission to reject APML’s instant Petition as the

letters given to MSEDCL are not precise Notice with Change in Law details as per the

provisions of PPA signed between APML and MSEDCL and also not to grant the relief

to APML for Change in Law under SHAKTI policy.

Commission’s Analysis and Ruling

9. The Commission notes that APML has filed the present Petition under Section 86 read

with Section 63 of the EA, 2003 and Article 13 of the PPA dated 08 September, 2008

(1320 MW), and Article 10 of the PPA dated 31 March, 2010 (1200 MW), 09 August,

2010 (125 MW) and 16 February, 2013(440 MW) entered into with MSEDCL. APML is

seeking approval for relief under Change in Law for shortfall in domestic coal under

SHAKTI policy from 1 April, 2017 along with Carrying Cost.

10. The Commission also notes that MSEDCL has raised preliminary objection that APML

has not complied with mandatory requirement of notifying Change in Law event to

procurer under the PPA before filing this Petition. In this regard, relevant provisions of

PPAs are reproduced below:

PPA Dated 8 September, 2008

13.3 Notification for Change in law:

13.3.1 If the seller is affected by a Change in Law in accordance with Article

13.2 and wishes to claim a Change in Law under this Article, it shall give

notice to the Procurer of such Change in Law as soon as reasonably

practicable after becoming aware of the same or should reasonably have

known of the Change in Law.

13.3.2 Notwithstanding Article 13.3.1, the seller shall be obliged to serve a

notice to the procurer under this Article 13.3.2 if it is beneficially affected by


a Change in Law. Without prejudice to the factor of materiality or other

provisions contained in this Agreement, the obligation to inform the

Procurer contained herein shall be material. Provided that in case the Seller

has not provided such notice, the Procurer shall have the right to issue such

notice to the Seller.

13.3.3 Any notice served pursuant to this Article 13.3.2 shall provide,

amongst other things, precise details of:

(a) the Change in Law; and

(b) the effects on the Seller of the matters referred to in Article 13.2.

PPA dated 31 March, 2010, 9 August, 2010 and 16 February, 2013

10.4 Notification of Change in law:

10.4.1 If the seller is affected by a Change in Law in accordance with Article

10.1 and the Seller wishes to claim relief for such a Change in Law under

this Article 10, it shall give notice to the Procurer of such Change in Law as

soon as reasonably practicable after becoming aware of the same or should

reasonably have known of the Change in Law.

10.4.2 Notwithstanding Article 10.4.1, the seller shall be obliged to serve a

notice to the Procurer under this Article 10.4.2, even if it is beneficially

affected by a Change in Law. Without prejudice to the factor of materiality

or other provisions contained in this Agreement, the obligation to inform the

Procurer contained herein shall be material.

Provided that in case the Seller has not provided such notice, the Procurer

shall have the right to issue such notice to the Seller.

10.4.3 Any notice served pursuant to this Article 10.4.2 shall provide,

amongst other things, precise details of:

(a) the Change in Law; and

(b) the effects on the Seller.

11. Thus, as per Articles of the PPA, it is mandatory for the Seller (APML) to serve the

Notice to the procurer (MSEDCL), if it wishes to claim relief under Change in Law.

Such notice should include details of Change in Law and effect of it on the Seller.

Subsequent to such Notice, both parties may agree or disagree on such claim of Change

in Law. Decision of the Commission on compensation for event of Change in Law is

final and binding on both the parties subject to right of appeal provided in the applicable

Law.


12. Admittedly, APML has not served Notice to MSEDCL notifying Change in Law on

account of SHAKTI Policy. In reply, APML has stated that it was not able to do that as

matter of Change in Law on account of shortage in Coal supply was pending before this

Commission. In this regard, the Commission notes that in Case No. 189 of 2013 and 140

of 2014 which was decided on 7 March, 2018, the issue of Coal Shortage was related to

NCDP 2013 and not with SHAKTI Policy. Relevant part of Order is reproduced below:

“15. The Commission notes that Impugned Order dated 7 March, 2018 was issued in the

matter remanded back by APTEL vide its Judgment dated 4 May, 2017. Original matter

in Case No. 189 of 2013 and 140 of 2014, which was remanded back by APTEL for fresh

consideration of the Commission, was filed for Change in Law relief on account of

shortage of coal as per NCDP, 2013. Since, the scope of original matters was limited to

NCDP, 2013 which covers time period upto 31 March, 2017, the Commission has

restricted Change in Law relief upto 31 March, 2017. The Commission also notes that

during remand back proceedings, APML has never pleaded / prayed /emphasized on

SHAKTI Policy for continuing Change in Law relief beyond 31 March, 2017. Reference

of SHAKTI policy in affidavit dated 9 November, 2017 was limited to the Competitive

bidding process in which APML has participated and not in terms of Change in Law

effect to be admissible for Original Petition. Therefore, the issue which was never

pleaded in the original matter cannot be ground for review of the Order in that matter.

The issue raised by APML in this review Petition, seeking extension of Change in Law

relief beyond March 2017 not being part of original Petition is clearly outside the scope

of review of the order thereon. Accordingly the issue raised by APML to give Change in

Law relief as per SHAKTI Policy is rejected.[Underline added]

Thus, APML’s claim that issue of coal shortage on account of SHAKTI Policy was

pending before the Commission is not correct. However, in the same Order, the

Commission allowed APML to file separate Petition for seeking compensation on

account of SHAKTI Policy.

13. Accordingly, APML has filed this Petition seeking compensation under Change in Law

on account of SHAKTI Policy. The Commission notes that requirement of serving notice

under the PPA for claiming compensation under Change in Law is a mandatory

provision under the PPA. APML has contended that it has informed the MSEDCL about

coal shortage even after notification of SHAKTI Policy at several times which fulfills

the requirement of notice under the PPA. Whereas, MSEDCL contended that PPA

stipulate details to be provided along with such notice, and hence letters informing coal

shortage situations cannot be treated as notice under the PPA. In this regard, the

Commission notes that MSEDCL is relying on technical requirement of serving notice

for rejecting APML’s claim. It is a matter of fact that issue of Coal Shortage on account

of NCDP Change was sub-judice before the Commission and was decided on 7 March,

2018. Further, subsequent to SHAKTI Policy, APML has written several letters to

MSEDCL providing Coal Shortage situation. One of such letter dated 8 September, 2018

reads as follows:


“ As you are aware, APML had secured linkage coal of 5.8475 MTPA under SHAKTI

policy of Ministry of Coal. But as the coal supply restriction under NCDP 2013 is

continued at 75% of ACQ even under SHAKTI policy, the position has not improved

as expected. We are therefore forced to utilize costlier imported coal to mitigate the

shortage in coal supply from Coal India Ltd. This has been resulting in severe

financial hardship to us due to under recovery of energy charges and consequential

burden on end consumer. Hence due to non-availability of funds for procurement of

coal, presently, Tiroda Plant is operating at super-critical coal stock position.”

(Underline added)

From the above letter, it is observed that APML has communicated adverse impact of

coal shortage after notification of SHAKTI Policy to MSEDCL. Thus, even though

APML has not served a notice which it usually serves for other incidences of Change in

Law, it cannot be denied that APML has not apprised MSEDCL about adverse financial

implication of SHAKTI Policy. In 25 year long PPA, it is expected that both the parties

work in the spirit of the PPA provisions. Hence, in the opinion of the Commission, it

would not be proper to reject the claim of Change in Law merely on technical ground of

not serving proper notice when broad implications of such event have already been

communicated in writing in other forms and energy generated from such alternate coal

source has actually been consumed by MSEDCL. Hence, the Commission decides to

address the issues in this Petition on its merits.

14. The Commission notes that in its Order dated 7 March, 2018 in Case No. 189 of 2013, it

has dealt with issue of Coal shortage in terms of New Coal Distribution Policy (NCDP),

2013. APML has contended that SHAKTI Policy has extended the dispensation of

NCDP, 2013. Hence, it is pertinent to refer Order dated 7 March, 2018. Relevant part of

the Order is reproduced below:

“

21. APML and MSEDCL have entered into various PPAs for supply of power from

Units 1 to 5 of the Tiroda TPP, as follows:-

Table 1: PPAs between APML and MSEDCL

Particulars Unit 2 Unit 3 Unit 1 Unit 4 Unit 5

Installed Capacity 660 MW 660 MW 660 MW 660 MW 660 MW

Contracted in the

PPA(s) dated 8 September, 2008

*1200 MW in PPA dated 31 March, 2010

*125 MW in PPA dated 9 August, 2010

*440 MW in PPA dated 16 February, 2013

Total PPA

Contracted Capacity 1320 MW from Units 2 & 3 1765 MW from Units 1,4 and 5

Originally envisaged

coal

source as per

Definition in PPAs

Coal from Captive Mine, Linka

ge Coal and Imported Coal

Domestic Coal

Originally envisaged

coal

Source as per

No Schedule relating to Coal

Source

Schedule 5 A of PPA: Details of Generation

Source as submitted in the RfP Bid


Particulars Unit 2 Unit 3 Unit 1 Unit 4 Unit 5

Schedule of PPA Primary Fuel – Domestic Coal

FSA for all 5 Units

Captive Coal Block (800 MW)

Linkage with SECL/WCL (1180MW)

Imported Coal Supply for Five Years and Long-

Term Coal Linkage (1320 MW)

Schedule 5 B of PPA: Details of Primary Fuel

as submitted in the RFP Bid

Primary Fuel – Domestic/Imported Coal

Fuel Source for all 5 Units

Captive Coal Block (800 MW)

Linkage with SECL/WCL (1180MW)

Imported Coal Supply for Five Years and Long-

Term Coal Linkage (1320 MW

Current coal supply

arrangement

Linkage Coal

through FSA:

520 MW;

Tapering

Linkage (for

Captive Coal

Block): 140

MW

Tapering

Linkage (for

Captive Coal

Block)

Linkage Coal

through FSA

MoU with CIL

subsidiaries

MoU with CIL

subsidiaries

Note: * Units 1, 4 & 5 have been contracted in a combined manner with MSEDCL

through 3 different PPAs.

22. As will be seen from the above Table, the generation capacity having FSA is 520

MW of Unit 2 and 660 MW of Unit 1, i.e., 1180 MW. The generation capacity

having MoU is 660 MW of Unit 4 and 660 MW of Unit 5, i.e., 1320 MW.

……………….

29. The Supreme Court has, thus, identified the events of Change in Law, and the PPA

provides for consequent relief to the extent that the assured supply from CIL and its

subsidiaries is reduced due to such Change in Law, including the CCEA decision of

21 June, 2013 and the subsequent NCDP Amendment of 2013.

30. GoI notified the NCDP 2007 on 18 October, 2007 assuring supply of 100% of the

normative coal requirement to the IPPs at the price notified by CIL….

………..

31. It is evident from a plain reading of the NCDP 2007 that GoI had given an

unequivocal commitment to meet the coal requirement of all IPPs/ Generators

through linkage/FSA for domestic coal up to 100% of their normative requirement.

Further, the commitment to supply domestic coal through linkage/FSA was also

applied to all future capacity addition. The NCDP 2007 also provided that, in case


of shortfall in domestic coal, CIL may even import coal to meet the full

requirements under FSAs, which reflects GoI’s commitment to supply coal through

linkage/FSA to all existing and future Power Projects.

…..

32. Thus, the CCEA decision of 21 June, 2013 effectively approved amendment of the

NCDP 2007 so as to curtail the supply of domestic coal through linkage/FSA at the

CIL-notified price, as against the assured 100% normative quantity, to 65-75% of

the ACQ in the 12th

Plan Period. The balance coal requirements were to be met

through imports on a cost-plus basis, with the higher cost of imported coal to be

considered for pass through. Further, as per the mechanism approved by CCEA,

FSAs were to be executed only for the generation capacity covered under 78000

MW (with approved coal linkages), and a separate mechanism was to be explored

for supply of coal to the generation capacity of 4660 MW and other similar cases

which did not have any coal linkage.

…..

36. The revised Tariff Policy of 28 January, 2016 also refers to and reiterates the MoP

Advisory (which was itself in pursuance of the CCEA decision) to pass-through the

cost of meeting the shortfall through imports or e-auction coal against the quantum

of domestic coal from CIL which was earlier assured:

……….

37. In terms of the ratio laid down by the Supreme Court in the Energy Watchdog

Judgment, it is clear that the change in the coal supply assurance contained in the

NCDP 2007 brought in through various directives and culminating in the NCDP

2013 notified by the MoC constitutes a Change in Law event. Therefore, Generators

relying on domestic coal supply from CIL and whose bids were based on such

supply, having been adversely affected by the curtailment in the supply of coal and

non-issuance of domestic coal linkage/ LoA/FSA, are entitled to relief on account of

such Change in Law in terms of their PPAs

……..

42. ..............In the present Petition, APML has not sought any relief on account of

Change in Law for this 800 MW capacity, and the Change in Law event discussed in

this Order is not applicable to this capacity.............

...............

43. In view of the foregoing, the Commission concludes that the Change in Law

provisions are applicable to the generation capacity tied up under PPAs from both

Units 1 & 2 (1180 MW) as well as Units 4 & 5 (1320 MW) to the extent discussed

above.

.........

C. QUANTUM OF DOMESTIC COAL AND BASE PRICE FOR COMPENSATION

FOR CAPACITY TIED UP UNDER PPAs FROM 1180 MW CAPACITY HAVING

FSAs (Units 1 & 2)

...........

72. From the CCEA decision and the consequent NCDP 2013 and MoP Advisory

quoted earlier, it is clear that the shortfall in domestic coal supply by CIL for Units


1 & 2 having FSA has to be determined with reference to the minimum assured

supply of 65%, 65%, 67% and 75% for the corresponding year of the 12th Plan

Period. The Change in Law for these Units having FSA is to the extent that the

assured quantity of coal supply has been curtailed from 100% of the normative

requirement under NCDP 2007 to 65%-75% of the requirement under NCDP 2013.

Hence, if in any year the actual coal supply by CIL is, say, only 50% and the

minimum assured quantum for the relevant year was 75%, the shortfall in CIL

supply for the purpose of Change in Law relief would be 25 % (100% earlier

assured minus 75% now assured), and not 50% (100% earlier assured minus 50%

actually supplied). The shortfall in actual coal supply against the revised assured

quantum is a contractual matter between APML and CIL in the background of the

NCDP 2013, and not on account of Change in Law. The Commission also finds

merit in MSEDCL’s contention that the quantum of coal offered by CIL should be

considered for determining the shortfall rather than the actual off-take out of it by

APML. Hence, the shortfall in domestic coal supply by CIL should be assessed with

reference to the maximum of (1) actual quantum of coal offered for offtake by CIL,

and (2) the minimum assured quantum as per the NCDP 2013 for the respective

year.

………

D. QUANTUM OF DOMESTIC COAL AND BASE PRICE FOR COMPENSATION

FOR CAPACITY TIED UP UNDER PPAs FROM 1320 MW CAPACITY HAVING

MOU (Units 4 & 5)

……….

78. As discussed earlier, this 1320 MW capacity was included in the additional capacity

of 4660 MW referred to in the CCEA decision and the NCDP 2013. Had there been

no shortage of coal, this generation capacity would also have got linkage coal

under the earlier NCDP 2007 dispensation. The basic principle of compensation for

Change in Law is that the economic position of APML as on 7 days prior to the cut-

off date is to be restored to the extent that it is affected by the Change in Law. Had

the NCDP 2007 continued to be operative, APML was assured of being supplied

100% of its normative coal requirement at the CIL notified price. If, however, due to

the Change in Law in terms of NCDP 2013, either the quantity or the price has been

changed to APML’s disadvantage, the entire differential in quantity and price

would have to be allowed to restore APML to the same economic position as it was

on the cut-off date.

……….

84. In view of the foregoing, the effective date for compensation for the impact of

Change in Law as approved in this Order shall be the later of (1) SDD, (2) NCDP

2013 (26 July, 2013), and (3) the actual date of commencement of power supply

under the respective PPAs. The impact of the Change in Law shall be considered till

the end of FY 2016- 17, i.e. the last year of the 12th

Plan referred to in the CCEA

decision and the NCDP 2013.”


15. Thus, in terms of Order dated 7 March, 2018 in Case No. 189 of 2013, the Commission

has concluded as follows:

(a) Seven days prior to cut-off date, NCDP 2007 was applicable which assured supply of

100% normative coal requirement at the CIL notified price.

(b) Shortfall in coal supply with reference to assured normative quantity under

NCDP, 2007, needs to be compensated under Change in Law provisions of PPA.

(c) APML had not sought any relief on account of Change in Law for 800 MW capacity

relating to Lohara Coal Block, and this Order is not applicable to 800 MW capacity

(d) Shortfall in domestic coal supply for 1180 MW capacity of Units 1 & 2 having

FSA has to be determined with reference to the minimum assured supply of 65%,

65%, 67% and 75% (as per NCDP, 2013) for the corresponding year of the 12th Plan

Period. Hence, if in any year the actual coal supply by CIL is, say, only 50% and the

minimum assured quantum for the relevant year was 75%, the shortfall in CIL supply

for the purpose of Change in Law relief would be 25 % (100% earlier assured minus

75% now assured), and not 50% (100% earlier assured minus 50% actually supplied).

(e) As against, 100 % assured normative supply under NCDP, 2007, there is no FSA for

1320 MW capacity of Units 4 & 5. Hence, entire differential in quantity and price is

allowed to restore APML to the same economic position with respect to 1320 MW.

(f) The impact of the Change in Law under this Order is applicable till the end of FY

2016- 17, i.e. the last year of the 12th

five year Plan referred to in the CCEA decision

and the NCDP 2013.

16. Against the above background, the Commission now deals with APML’s claim of

Change in Law relating to SHAKTI Policy. This policy has been notified by the Ministry

of Coal (MoC), Government of India (GoI) on 22 May, 2017. Under the provisions of

PPAs, an event arising from the actions of an authority covered within the definition of

‘Indian Governmental Instrumentality’ would be covered within the definition of

“Change in Law”. “Indian Government Instrumentality’ as defined under the PPA

includes any Ministry of the Government of India. The Ministry of Coal being Ministry

under the Government of India is satisfying the requirement of ‘an Indian Government

Instrumentality’ under the PPAs. Further as per Energy Watchdog Judgment of the

Supreme Court, if there is a change in any consent, approval or licence available or

obtained for the Generation Project, which results in a change in the cost of generation

and supply of the contracted power, it would be governed by the Change in Law

provisions of the PPAs. Accordingly, any change in the assurance of supply of coal by

amendment to the NCDP 2007 is a Change in Law for which relief can be claimed by

the Seller. Relevant part of Supreme Court Judgment is reproduced below:


...53. However, in so far as the applicability of clause 13 to a change in Indian

law is concerned, the respondents are on firm ground. It will be seen that under

clause 13.1.1 if there is a change in any consent, approval or licence available or

obtained for the project, otherwise than for the default of the seller, which results

in any change in any cost of the business of selling electricity, then the said seller

will be governed under clause 13.1.1. It is clear from a reading of the Resolution

dated 21st June, 2013, which resulted in the letter of 31st July, 2013, issued by

the Ministry of Power, that the earlier coal distribution policy contained in the

letter dated 18th March, 2007 stands modified as the Government has now

approved a revised arrangement for supply of coal. It has been decided that,

seeing the overall domestic availability and the likely requirement of power

projects, the power projects will only be entitled to a certain percentage of what

was earlier allowable. Both the letter dated 31stJuly, 2013 and the revised tariff

policy are statutory documents being issued under Section 3 of the Act and have

the force of law. This being so, it is clear that so far as the procurement of Indian

coal is concerned, to the extent that the supply from Coal India and other Indian

sources is cut down, the PPA read with these documents provides in clause 13.2

that while determining the consequences of change in law, parties shall have due

regard to the principle that the purpose of compensating the party affected by

such change in law is to restore, through monthly tariff payments, the affected

party to the economic position as if such change in law has not occurred.

Further, for the operation period of the PPA, compensation for any

increase/decrease in cost to the seller shall be determined and be effective from

such date as decided by the Central Electricity Regulation Commission. This

being the case, we are of the view that though change in Indonesian law would

not qualify as a change in law under the guidelines read with the PPA, change in

Indian law certainly would.

54. However, Shri Ramachandran, learned senior counsel for the appellants,

argued that the policy dated 18th October, 2007 was announced even before the

effective date of the PPAs, and made it clear to all generators that coal may not

be given to the extent of the entire quantity allocated. We are afraid that we

cannot accede to this argument for the reason that the change in law has only

taken place only in 2013, which modifies the 2007 policy and to the extent that it

does so, relief is available under the PPA itself to persons who source supply of

coal from indigenous sources. It is to this limited extent that change in law is held

in favour of the respondents. Certain other minor contentions that are raised on

behalf of both sides are not being addressed by us for the reason that we find it

unnecessary to go into the same. The Appellate Tribunal’s judgment and the

Commission’s orders following the said judgment are set aside. The Central

Electricity Regulatory Commission will, as a result of this judgment, go into the

matter afresh and determine what relief should be granted to those power

generators who fall within clause 13 of the PPA as has been held by us in this

judgment.”

17. As SHAKTI Policy has been notified by an Indian Government Instrumentality i.e. the

Ministry of Coal and it is notified on 22 May, 2017 which is after the cut off date under

the PPAs, the Commission holds that notification of ‘SHAKTI Policy’ is an event of

Change in Law under the PPAs signed between APML and MSEDCL.


18. Now to analyze impact of SHAKTI Policy on APML, relevant clauses of Policy are

reproduced below:

“ The proposal of Coal linkages Allocation Policy for Power Sector has been

under examination in this Ministry. With the approval of Cabinet Committee on

Economic Affairs (CCEA), the following policy guidelines for allocation of Coal

linkages to Power Sector have been decided:

(A) Under the old regime of LoA-FSA:

………..

iii. The capacities totaling about 68,000 MW as per the decision of CCEA dated

21.06.2013 would continue to get coal at 75% of ACQ even beyond 31.03.2017.

The coal supply to these capacities may be increased in future based on coal

availability.

…………

(B) The following shall be considered under a New More Transparent Coal

Allocation Policy for Power Sector, 2017 – SHAKTI (Scheme for Harnessing and

Allocating Koyala (Coal) Transparently in India):

.........

(ii) CIL/SCCL may grant coal linkages on notified price on auction basis for

power producers / IPPs having already concluded long term PPAs (both under

section 62 and section 63 of The Electricity Act, 2003) based on domestic coal.

Power producers/IPPs, participating in auction will bid for discount on the tariff

(in paise/unit). Bid Evaluation Criteria shall be the non-zero Levellised Value of

the discount (applying a pre-notified discount rate) quoted by the bidders on the

existing tariff for each year of the balance period of the PPA. Ministry of Coal

may, in consultation with Ministry of Power, work out a methodology on

normative basis to be used in the bidding process for allocation of coal linkages to

IPPs with PPAs.

…….”

19. Thus, as per SHAKTI Policy, Coal supply to APML’s plant will be governed by the

following:

(a) Generating capacities whose coal supply was curtailed as per CCEA decision dated

21 June, 2013 for the remaining period of 12th

five year plan i.e. up to 31 March,

2017, will continue to get coal at 75% of ACQ even beyond 31 March, 2017. The

coal supply to these Generating capacities may be increased in future based on coal

availability.

(b) IPP having already concluded PPA under Section 63 of the Electricity Act, 2003

may get Coal allocation after participating in auction process by quoting discount in

tariff.


20. MSEDCL in its submission has rightly stated that SHAKTI Policy does not deal with

only shortage of Coal but has also provided methodology for allocating new coal FSA

through various auction routes. Accordingly, by exercising option under clause (B) (ii)

of the SHAKTI Policy, APML has successfully participated in auction conducted under

SHAKTI Scheme for 5.8475 MTPA coal for 2120 MW capacity of its Tiroda plant with

tariff rebate of 1 to 3 paise/kWh. The Commission in its Order dated 20 March, 2018 in

Case No. 70 of 2018 has allowed modification in PPA for allowing such rebate against

5.8475 MTPA of coal allocated under SHAKTI Scheme. Thus, subsequent to coal

allocation under SHAKTI scheme, APML has FSA for 1180 MW under old regime and

for 2120 MW under new regime, thereby having FSA for total capacity of 3300 MW i.e.

installed capacity of APML’s plant at Tiroda (5 x 660 MW).

21. However, as mentioned in clause A(iii) of the SHAKTI Policy, APML will continue to

get only 75% of ACQ for its FSA of 1180 MW signed under old regime, till

improvement happens in coal availability. Further, as per model FSA for auction under

SHAKTI scheme, compensation for short supply of coal is triggered only when the

allocation was below 75% of ACQ. Hence, the Commission notes that even though

APML has now got FSA for its full generating capacity at Tiroda, coal supply under

these FSAs is restricted to 75% of ACQ. Such shortage of Coal linkage allocation needs

to be seen with respect to assurance of 100% normative coal requirement for its power

station under NCDP, 2007 which was prevailing at the time of cut-off date.

22. While opposing claim of compensation under SHAKTI Scheme, MSEDCL has

contended that as against CCEA decision in the year 2013 and NCDP, 2013, there is no

mention about pass through of cost of alternate coal in SHAKTI Policy. In this regard,

the Commission notes that compensation for short supply of coal under NCDP, 2013

was given as per principle of ‘restitution to same economic position’ as stipulated under

the Change in Law provisions in PPA, in accordance with the order of Supreme Court in

Energy Watchdog Judgment, and not just because CCEA/NCDP, 2013 states so. Hence,

in the opinion of the Commission, if event is qualified as Change in Law under the PPA,

then compensation has to be given so as to restitute the affected party to the same

economic position as if such Change in Law has not occurred.

23. As observed earlier, notification of SHAKTI Policy constitutes Change in Law event

under the PPAs. Hence, the Commission rules that APML needs to be compensated for

shortfall of coal on account of reduction in coal supply allocation (not below 75% of

ACQ) under SHAKTI Policy as against 100% normative requirement assured under

NCDP, 2007. Further, till the time new FSA was signed under SHAKTI Policy, the coal

supply had already commenced in the year 2018 without any FSA for corresponding

generating capacity. Thus for that period, as ruled under its Order dated 7 March, 2018

in Case No. 189 of 2013, entire differential in quantity and price is allowed as Change in

Law compensation to restore APML to the same economic position with respect to 1320

MW capacity of Unit 4 and 5.


24. Methodology and parameters to be used for computing relief under the Change in Law

for capacity having FSA and not having FSA has already been mentioned in Order dated

7 March, 2018 in Case No. 189 of 2013. Same methodology and parameters should be

adopted for computing relief under Change in Law for the period beyond 31 March,

2017 till availability of coal improves and APML gets assurance of coal supply

equivalent to 100% of its normative requirement as assured under NCDP, 2007.

25. Notwithstanding the dispensation ruled above, the Commission is of the opinion that in

case of Change in Law event which has a continuing impact, intent of the notice needs to

be understood in broader prospective.

25.1. Such notice should be treated as intimation from the seller to the buyer that cost

of power will become higher on account of higher cost of fuel procured from

alternate source so as to supply the full contracted power as per PPA. Under such

circumstances, before scheduling such power which is generated from the costly

alternate coal/fuel, buyer i.e. the Distribution Licensee who is mandated to keep its

power procurement costs at lowest possible level, could look for the other

alternate cheaper sources of power supply, if available. For a Distribution

Licensee to undertake such measures so as to reduce its cost of power procurement

it is important that it gets proper intimation from the Seller of such possibility of

increase in cost of power from contracted sources well in advance.

25.2. If Distribution Licensee finds such higher rate not competitive in comparison with

other available sources for procurement of power, then it can ask the Generator

not to generate such power using coal from alternate sources. Based on such

inputs, if the Distribution Licensee decides not to schedule energy generated from

costly coal and intimates such decision to Maharashtra State Load Despatch

Center (MSLDC), then for the purpose of approving Daily Schedule, even though

Generator could declare higher availability on account of adequate coal stock

procured from alternate source, SLDC should consider capacity intimated by the

Distribution Licensee as schedulable capacity of such Generator.

25.3. In the past, in order to optimize its power procurement cost, MSEDCL has given

zero schedules/Reserved Shutdowns to Generators which are placed at higher

level in Merit Order Stack. Methodology stipulated in this Order is on those

similar principles. Although such advance intimation of the rate would be an

estimated value only and not the final rate, the methodology will strengthen the

existing MoD mechanism wherein generators are placed in MoD stack based on

its variable rate for previous period.

25.4. With advance intimation of rate, Distribution Licensee will be in better position to

optimize its power procurement cost while the sanctity of giving a notice

containing full details about any incidence of change in law would also be


maintained. It is certainly not a perfunctory exercise, but a choice to the buyer to

evaluate its options while dealing with the cost impact.

26. Accordingly, in line with the above mentioned analysis, in future, APML needs to

intimate to MSEDCL about estimated impact on energy charge for using costly alternate

source of coal whenever it falls short of the allocation under the linkage coal. The

Commission expects that this methodology would be implemented with effect from 1

March, 2019. Meanwhile, MSEDCL and APML should work out modalities including

frequency and time of communicating such advance intimation of estimated impact of

Change in Law within the provisions/principles of the PPAs. Further, APML should

continue its efforts to get maximum possible coal under FSA and wherever possible,

MSEDCL should support such efforts so that cheaper coal is available to APML and

thereby use of costly coal is avoided.

27. As far as issue of carrying cost is concerned, vide Order dated 3 August, 2018 in Case

No 124 of 2018 the Commission has allowed M/s Adani Power Maharashtra Ltd.

(APML) to levy the carrying cost from the effective dates from which it was affected and

incurred expenditure on account of the approved Change in Law events till the date of

that Order. Moreover the Commission finds that in the Judgment dated 20 December,

2012 in Appeal No. 151 of 2011, the ATE has in fact upheld the principle of time value

of money and carrying cost as follows:

“35.5 The principle of carrying cost has been well established in the various judgments

of the Tribunal. The carrying cost is the compensation for time value of money or the

monies denied at the appropriate time and paid after a lapse of time. Therefore, the

developers are entitled to interest on the differential amount due to them as a

consequence of re- determination of tariff by the State Commission on the principles laid

down in this judgment. We do not accept the contention of the licensees that they should

not be penalized with interest. The carrying cost is not a penal charge if the interest rate

is fixed according to commercial principles. It is only a compensation for the money

denied at the appropriate time.”

28. In view of above and considering settled position of Law regarding carrying cost, the

Commission allows APML to claim carrying cost from the date the Change in Law events

have affected it to the date of the present Order. Further the rate of interest for the

payment of carrying cost shall be as specified for the interest on working capital in the

MYT Regulations applicable to the relevant periods.

29. Hence, the following Order:


ORDER

1) Case No. 290 of 2018 is allowed.

2) Shortage of Coal allocation subsequent to 31 March, 2017 qualifies as Change in

Law event.

3) The impact of Change in Law event should be computed from the date it affects

APML. Such payment of compensation is subject to the conditions stipulated in

para 24 above.

4) The Commission allows APML to levy the carrying cost from the effective dates

from which it was affected and incurred expenditure on account of the approved

Change in Law event till the date of this Order.

5) As shortage in linkage coal allocation is likely to continue, before scheduling

power generated from alternate costly coal, methodology stipulated in para 25

and 26 needs to be complied with by both the parties to PPA.

Sd/- Sd/-

(Mukesh Khullar) (Anand B. Kulkarni)

Member Chairperson

Documents

Before the MAHARASHTRA ELECTRICITY ... - mercindia.org.in 58 42/Order-290 of 2018-07022019.pdf · Order _ Case No 290 of 2018 Page 3 the 12th plan period referred to in the CCEA decision