NEW DELHI: Power regulator Central Electricity Regulatory Commission (CERC) has allowed compensation to GMR Group for running its power plant on imported coal in the event of coal shortage. 

The order issued late on Thursday evening will have significant impact on the power generation industry that is grappling with stressed assets. Power plants will now be able to run their plants on imported coal if Coal India is not able to meet its commitments and claim the extra costs in electricity tariffs. The dispensation was available to power companies till March 2017.

Association of Power Producers director general Ashok Khurana said, “We welcome CERC decision of allowing the additional cost of coal to meet the deficit of annual contracted quantity (ACQ) under contract with Coal India, as Change in law. This decision will resolve the issue impacting 15 GW, facing huge cash deficit on this account. CERC has correctly interpreted the shortfall in coal beyond March 2017 under SHAKTI Scheme as 'change in law' under the PPA.”

This order of CERC sets the precedence for all generators who were unable to recover the full costs of coal to be compensated, he said.

Law firm J Sagar Associates, which represented GMR Warora Energy Limited before CERC said this is first such order where compensation for shortfall in coal from Coal India has been allowed for a period beyond March 2017 recognising that shortfall in supply of coal is a continuous cause of action.

On earlier occasions, relief had been limited to 31.03.2017 necessitating generators to again approach regulatory for seeking relief. In some cases, generating companies are yet to receive compensation beyond March 2017 despite Supreme Court having allowed the same by way of its judgment in Energy Watchdog vs CERC in April 2017.

In the order, CERC said, the monthly change in law compensation payment shall be effective immediately. At the end of the year, the power companies shall reconcile the actual payment made towards change in law with the books of accounts duly audited and certified by statutory auditor. The reconciliation statement duly certified by the auditor shall be kept in possession by the petitioner so that same could be produced on demand from discomson in July 2012.