Order states that Adani Power Ltd cannot terminate the PPA with Gujarat Urja Vikas Nigam Ltd for non-execution of the fuel supply agreement with the Gujarat Mineral Development Corporation

The Gujarat Electricity Regulatory Commission, in its order on 31st August, has directed a power company to honour its Power Purchase Agreement (PPA) signed with the state's electrical services company at the same pre-determined rate.
 

The agreement signed between Gujarat Urja Vikas Nigam Ltd (GUVNL) and Adani Power Ltd (APL) fell through after the latter issued a notice to the government entity stating that it was terminating the PPA on grounds of non-availability of coal from the Gujarat Mineral Development Corporation (GMDC). The PPA, which was signed on 2 February 2007, states that APL would supply 1,000MW of electricity to GUVNL for 25 years @ Rs2.35 per kilowatt-hour (kWh). 

But GUVNL objected to the termination of the PPA and filed a petition before the Gujarat Electricity Regulatory Commission. When Consumer Education and Research Society (CERS) joined the petition to protect the interests of electricity consumers of Gujarat, it was opposed by APL. 

Subsequently, KK Bajaj, Hon. Director, CERS, said that society should be allowed to join the petition as the termination of the PPA would have put an additional burden of Rs1,156 crore on the consumers of Gujarat. The Commission, in its order dated 17 April 2010, allowed CERS to join the proceedings as per Section 94 (3) of the Electricity Act, 2003.

In its representation, CERS stated that according to the PPA clause, APL will provide electricity by use of imported coal, indigenous coal or blended coal and does not depend only on GMDC. Therefore, the PPA should not be terminated based on non-availability of coal from GMDC, argued CERS. The entity also cautioned the Commission that this being the first-of-its-kind case of termination of a PPA, the verdict will set a precedent for the power sector.

Finally, on 31st August, the commission ruled in the favour of GUVNL. The order  stated: "Adani Power Ltd cannot terminate the PPA dated 2 February 2007 on the basis of it not having executed the fuel supply agreement with GMDC and, therefore, cannot be relieved  of its obligation from the supply of power  to the GUVNL in accordance with the terms of the PPA." — Moneylife Digital Team