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ERC Gives A Shock To Chandrababu For His Power Politics!

AP Government led by Chandrababu Naidu suffered yet another setback for stepping out of line with regard to the PPA cancellation episode. The Electricity Regulatory Commission (ERC) on Monday night issued orders rejecting APGENCO’s unilateral ‘cancellation’ of the power purchase agreements (PPAs) that are with the commission. Chandrababu Naiud’s administration played havoc with newborn State Telangana with the cancellation drama and made Telangana lose close to 1350 MW of power. ERC’s orders comes as a relief for Telangana but it is yet to be seen if CM Naidu honors the decision. The CM earlier dismissed even the CEA’s authority to resolve the PPA issues.

In a very detailed 34-page order on the PPA cancellation dispute between Telangana and Andhra Pradesh, issued by Dr. V.Bhaskar, Chairman and members Sri R.Ashoka Chari, Sri P.Rajagopal Reddy, the ERC set the record straight that the PPAs can’t be cancelled now after following tariff systems as per very those PPAs for years. The ERC also found APGENCO’s unilateral approach violative of the clauses of Electricity Act. It even termed APGENCO calling the PPAs ‘draft PPAs’ as wrong and cited reasons for the same. Among other things, it found APGENCO withdrawing PPAs of generating stations located within Telangana baseless. It said “These generating stations have been allocated to TGGENCO under the transfer scheme and are not owned by APGENCO. Telangana GENCO is the successor to the former APGENCO’s assets in the newly created state of Telangana and APGENCO cannot claim ownership of these projects and rights over the disposition of power produced by these stations. After the reorganisation of the state on 02.06.2014, it is not a successor party to the PPAs mentioned above which relate to generating units are located in Telangana. It therefore cannot seek to withdraw them.”

The ERC in its order also pointed that AP Genco did not give prior notice to Discoms about the cancellation of PPAs which is violative of natural justice.

It concluded in it’s findings that the decision to cancel the PPAs does not hold water under the Electricity Reforms Act 1998 and the National Electricity Act 2003. 

Noting that the PPAs have been filed in a hurry to get them classified as outside the ambit of Section 5.1 of the NTP that was requiring the use of competitive bidding for tariff determination, the ERC went on to prove that explicit ‘approval’ of ERC is not necessary for PPAs and so the very basis of AP’s argument that the PPAs are not approved is wrong.

ERC further noted that the units of APGENCO have been sustained by all the consumers at large who have serviced the capital cost and other expenses of APGENCO through tariff paid through the distribution companies. So ERC said it is not now open to APGENCO to now claim that it is free to sell electricity to a restricted set of these consumers (only in AP State) or to any other person as it is not bound by the PPAs . Once the tariff orders have been issued and the utilities have acted on the basis of such orders and that too for several years there is no merit in the position taken by any agency that the PPA is void.

ERC also pointed that all the PPAs specifically mention that disputes must first be settled by prior negotiation between the Chief Executives of the two parties and if not resolvable, the arbitrator (APERC in most cases) should be approached for resolution. It said “APGENCO has manifestly not followed the procedure prescribed in the PPAs with regard to the alleged dispute it has with the TSSPDCL on the validity of the PPAs. There was no prior meeting of the Chief Executives of the two parties. No reference was made to the APERC.”

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