The dismissal by Punjab power commission will not only stall implementation of pollution control norms at the plant but also set a wrong example for others
The Punjab State Electricity Regulatory Commission (PSERC) on December 21, 2018, dismissed Talwandi Sabo Private Limited's (TSPL) petition requesting an in-principle approval on tariff adjustment for the potential cost it would incur to comply with environmental norms. This was for a pollution control technology the plant needed to meet the environmental norms enforced by the Centre for coal-fired thermal power plants.
The order has effectively stalled the implementation process by the plant, which is reportedly planning to file a review with the Appellate Tribunal for Electricity (APTEL).
What's this about?
TSPL had filed a petition in July 2017 and the norms were announced in December 2015. The norms mandate control of emissions of particulate matter, sulphur dioxide and nitrogen oxides as well as water consumption. The plant, which was originally supposed to be compliant by December 2017, got a revised deadline of December 2019 from the Central Pollution Control Board (CPCB). This revision took place after Ministry of Power and Ministry of Environment, Forest and Climate Change (MoEF&CC) had mutually agreed to revise implementation deadline of all power stations and complete the process by December 2022.
These costs were based on the project feasibility study undertaken by Tata Consulting Engineers (TCE) on its behalf. The company had requested a tariff increment under Section 13 of power purchase agreement, which allows for tariff adjustment in a scenario that qualifies as change in law. TSPL had simultaneously announced a tender for flue gas desulphurisation (FGD) system and selective non-catalytic reactor (SNCR) system in January 2018.
Quoting from the environmental clearance of the plant as well as the APTEL judgment on JSW Energy’s Ratnagiri Power Station from 2013, the commission accepted the view of the state discom and Punjab State Power Corporation Ltd (PSPCL) that the implementation of the norms does not constitute change in law.
In the order, the commission said granting the in-principle approval would “defeat the sanctity of the competitive bidding process as the other bidders, who had participated in the competitive bidding, would be prejudicially affected”.
According to PSERC, TSPL was aware of all the risks and liabilities, including environmental challenges associated with the project at the bidding stage itself, and should have made funds available at that time in line with the environmental clearance granted to the project.
This order is also significant as power plants at other state commissions may adopt similar approach and not grant relief to the power stations set up under Section 63 of the Electricity Act–even the APTEL order was for a power plant set up under this Section. Furthermore, the commission also said the operating conditions in the case of Adani Power were completely different from the case of the present power plant, thus rejecting the position taken by Central Electricity Regulatory Commission (CERC) in the Adani case.
What's wrong?
This order and the original APTEL order were based on an incorrect premise. While bids by power companies should have included the scenario as specified in the environmental clearance, the notion of a vitiated bidding process as a result is false. In the general scenario, hardly any power plant included the cost of an FGD system as part of the environmental costs.
Power plants had made efforts to comply with the norms as they stood under the business as usual scenario. Clarification on change in law scenario, specifically for power plants under Section 63 as given by the Centre under Section 107 of the Electricity Act, 2003, should have paved the way for transition. However, that has not been the case.
In our interactions with state electricity regulatory commissions where thermal power plants exist, we have realised that there is a need to incorporate the in-principle approval approach. This could have helped power plants, especially ones under Section 63, to seek remedy appropriately. This has been one of the key reasons why there have been hurdles in implementation in various ways, including the TSPL order.
Another associated issue has been the challenge of seeking technical clearances from CEA–this only adds to the delay in the final order, again seen in the timeline of the TSPL order. The reason for the CEA clearance has been the absence of cost benchmark, which is partially correct. CERC has a guideline on determining the cost of FGD for large thermal power units since 2013, while all ERCs have been undertaking technical assessments of detailed project reports and feasibility studies on their own.
Regulators are becoming the new bottleneck, and there are urgencies to address their concerns at the earliest. Further delays in the implementation process are undesirable, given that the implementation deadline has already been missed once. To have another delay happen, that too due to regulatory intransigence, doesn’t bode well.
(The author is a programme manager of the energy group in New Delhi-based non-profit Centre for Science and Environment)
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