Terminating the four long-term power supply agreements signed by the Kerala State Electricity Board (KSEB) in the Design, Build, Finance, Own and Operate (DBFOO) mode, in addition to triggering a power shortage, would also have required the utility to pay close to ₹500 crore in damages.
The State government had communicated this aspect of the issue to the Kerala State Electricity Regulatory Commission in October while asking it to reconsider its May 10, 2023 decision not to approve the 25-year contracts totalling 465 MW.
“In case of termination of agreement by the utility, as per clause 31.3.2 of the DBFOO power purchase agreement, the KSEB will be liable to pay damages. The termination payment of the four unapproved contracts amounts to approximately ₹500 crore,” the October 10 letter from the Additional Chief Secretary (Power) to the Secretary, Regulatory Commission, notes.
On Friday, the KSEB filed a review petition before the commission seeking approval for the contracts. In October, the Cabinet had decided to restore the contracts and invoke Section 108 of the Electricity Act to urge the commission to rethink its decision.
In view of this development, the Appellate Tribunal for Electricity (APTEL), to which the KSEB had appealed against the commission’s decision, had directed the KSEB to withdraw its petition and file a plea before the commission.
The issue pertains to four contracts signed with Jhabua Power Ltd, Jindal Power Ltd, and Jindal Thermal Power Ltd in 2014 for the supply of 465 MW in the DBFOO mode. The commission, through the May 10 order, had declined approval for them citing procedural irregularities.
However, the decision proved contentious as the weak southwest monsoon pushed the State into a power shortage and the KSEB was unable to source alternative supply at rates comparable to the prices under the ‘unapproved’ contracts.
As an ‘interim arrangement,’ the commission had allowed the KSEB to source power from the ‘unapproved’ contracts until alternative arrangements were made.
In the meantime, the government intervened and decided to continue with the contracts citing public interest and the need to avert a power crisis.
In its petition submitted to the commission on Friday, the KSEB requested it to “recall/review” its May 10 order and grant approval for the four power supply agreements.
