Supreme Court forces Reliance Infrastructure to buy electricity at high cost

A Supreme Court judgement has forced Reliance Infrastructure to continue with at least 262mw purchase of electricity from the open market to meet requirements of its Mumbai customers. Reliance Infra wanted to buy the power at a cheaper rate from Tata Power but the court on Wednesday ruled out excess supply to the Anil Ambani company.

The apex court allowed Tata Power to sell 800mw and 477mw electricity to government-owned power supply utility, Brihanmumbai Electricity Supply and Transport (BEST), and the Tata’s own distribution arm, respectively, setting aside a petition filed by Reliance Infra. The company was asking for supply of 762mw from Tata Power but now it will get 500mw.

In a media statement Tata Power said, “The Supreme Court has also held that Section 23 of the Electricity Act, 2003 does not give any jurisdiction to Maharashtra Electricity Regulatory Commission (MERC) to allocate any power to a non-contracting discom.” This implies that the company was under no obligation to sell power to Reliance if the latter did not agree to signing a contract with Tata Power.

Reliance Infrastructure has been asked to pay cost of Rs 1 lakh for each appeal filed by Tata Power and by BEST, said the Tata statement. Kuljit Singh, partner, Ernst & Young, said the decision would mean more customers for power generated by Tata Power and add another source of power for BEST though Reliance would need to look for additional sources of electricity.

Reliance Infra, which supplies electricity to Mumbai suburbs, has a total requirement of about 1,400mw. At present, Tata Power supplies 500mw to Reliance Infra without any long-term agreement. An equal amount is procured from its coal-based generation capacity of 500mw at Dahanu near Mumbai. About 400-mw is bought from the open market. After the court order, Reliance indicated signing PPA with the Tatas for 500mw. While Tata Power supplies electricity at a bulk rate ranging between Rs 3.90 per unit to Rs 4.10 per unit under PPA, electricity rates in the open market vary between Rs 9 to Rs 14 a unit.

A Reliance Infrast
ructure spokesperson said the ruling does not impact the company as it had already agreed to settle the power allocation dispute with Tata Power. “Power purchase cost is a pass through in tariff. It does not impact the profits of the distribution company. Reliance was asking for higher allocation for the benefit of its 27 lakh suburban consumers who had been enjoying the higher allocation for several years,” he said.
A senior Tata Power official said the company could commit only 500mw to Reliance Infrastructure provided the latter agrees to enter into a long-term power purchase pact.

Shares of Tata Power, country’s largest private power producer, rose 1.24 per cent at Rs 912.65 on the Bombay stock Exchange. Reliance Infra scrip rose 1.07 per cent to Rs 801.45.

Reliance Infra had moved to the MERC objecting to the PPAs. Prior to its PPAs with BEST and Tata Power (Distribution), Tata Power was supplying 762mw of its 1,777mw produce to Reliance Infra, while BEST was procuring 647mw. MERC, however, approved the PPAs.

Source: mydigitalfc

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