Discount strategy shorted out for OPG Power in Tamil Nadu, as APTEL abandons TNERC order


Strong points :

  • The APTEL (Electricity Appeals Tribunal) order effectively blocks OPG Power on the “conditional” discount it offered to TANGEDCO, the discom state of Tamil Nadu. OPG had hoped that by doing so, it would advance in the dispatch of Merit Orders (MOD) and ensure more than 85% offtake of the electricity it generates.

In an interesting order On January 4 from APTEL which exposed the risk of offering tactical discounts without a clear strategy apparently, Chennai-based OPG Power Generation suffered a setback. The company, which had signed a PPA on 12.12.2013 for the supply of 74 MW of PSTN power for the period from 01.06.2014 to 30.09.2028 to TANGEDCO, at Rs 4.91 / kWH, seems ready to pay a heavy price. tribute for a faulty discount plan.

The problem arose in February 2013, when, in a series of letters, with the third letter replacing the previous two, OPG Power offered TANGEDCO a rebate on the electricity produced and supplied by it, in order to “support the finances state hit by flooding “. “We are offering a discount of Rs. 1.20 per kWh on the monthly energy charge (MEPn) contained in the PPA. This discount is valid for a period of 5 years and can be extended as needed. We hope that our request will be favorably received and we ask you to consider, if possible, a schedule of 85% of the subscribed capacity ”. (Underline ours)

As a result of the latter, and its acceptance by TANGEDCO, it appears that OPG discovered that the rebate did not really help it sell more electricity at the lower rate, as even that rate was not sufficient to raise it high enough on the ranking of commissions on the merits of the state. order, which goes through the cheapest suppliers. So after realizing that it wasn’t helping, the producer decided to withdraw their rebate offer, claiming that since it was not part of the original PPA, it was eligible.

TANGEDCO disagreed, saying the rebate was unconditional and couldn’t be faulted for not being able to absorb more than 85% of the electricity produced by OPG. When the case was brought before the TNERC, the state regulator sided with OPG, holding TANGEDCO responsible for paying the tariff to the producer for the electricity supplied by it at the tariff indicated in the PPA of 12.12.2013.

Now, by the MYT ordinance of 11.08.2017, the State Commission approved the cost of purchasing electricity at the source for the control period from the financial year (FY) 2016-17 to the 2018-19 financial year (in paragraph 4.15.12), second defendant (generator) having been indicated as one of these sources of supply, the energy charges he has to pay having been mentioned as Rs. 3.12 / kWh , obviously taking into account the discount offered by the producer by letter of 03.02.2016, relating respectively to the 2016-17, 2017-18 and 2018-19 financial years.

By its letter of 07.08.2018, TANGEDCO ordered the generator to continue supplying electricity to the energy load of Rs. 3.1170 / kWh after receiving a discount of Rs.1.20 / kWh.

At APTEL, the judiciary declared that “On our reading of the documents relevant to the resolution of this dispute, we are clear in our mind that the tone, the content and the content of the letter of 03.02.2016 leave no room for doubt. on this discount offer. so done was not only voluntary, but absolute and unconditional. (See the part highlighted in bold above by us).

Stating this clearly, the offer was for a period of five years, at a minimum, with at best a demand for best efforts to source electricity from TANGEDCO.

APTEL: stated that TNERC erred in inferring that this was a conditional offer and that it is not correct for OPG Power to claim that there was neither adoption nor formal approval of the reduced price or that she was entitled to waive the discount offered by letter of 03.02.2016 at any time. Since the discounted price was approved by the Commission by the Tariff Adoption Order and the subsequent MYT order. From this point of view, a separate amendment to the EIA was not necessary. No public interest suffered from the price reduction.

Once the parties acted on the financial conditions, as modified by the surrender, these became part of the contract and could not be withdrawn unilaterally, in particular before the expiration of an agreed period of five years for which there was an unequivocal commitment.

He stated that the State Commission made a serious error in making inferences as to the intention behind the letter of 03.02.2016 by extraneous considerations, which is inadmissible to do so.

OPG Power (generator) had used the rebate to move up in the MOD and the efforts to remove it are clearly a dishonest attempt to evade the financial obligations that flow from it.

With that, APTEL effectively denied the request, leaving OPG to wonder what might have been.

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