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KERC quashes KPTCL termination letter to R K Powergen

Written by: Staff

Bangalore, Mar 23: The Karnataka Electricity Regulatory Commission (KERC) has quashed an order issued by the Karnataka Power Transmission Corporation Limited (KPTCL) terminating a Power Purchase Agreement (PPA) it had entered into with a private power generator using biomass for the purchase of 20 mw of power.

The KERC, in its order, said the KPTCL's termination order was ''unsustainable'' as it was ''illegal, arbitrary and malafide.'' Stating that there was no reason for termination of the PPA, the Commission obverved that ''The respondent is making vain attempts to justify the termination of the PPA, whereas, in fact, there is no case at all for such termination.

''By issuing an order of termination without any reason and without following due procedure, the respondent has thrown to the winds all cannons of law, specially the principles of natural justice and equity,'' it said, adding ''The line of reasoning now being adopted by the respondent to support termination, to say the least, is not only absurd, but also dangerous.'' The petitioner, R K Powergen Private Limited, had entered into a PPA with KPTCL on October 18, 2001 for setting up a 20 MW capacity bio-mass-based power project at Hiriyur taluk in Chitradurga district. The PPA had been approved by the Commission vide order dated October 12, 2001. Even as Powergen was in the process of setting up the power plant, KPTCL, had on July five, 2003, had communicated termination of the said PPA with immediate effect.

The petitioner was also informed through the letter that in case it intended to continue to develop the project and sell power to KPTCL, a fresh PPA should be executed. The reason for cancelling the PPA was non-achievement of financial closure.

The Commission, in its order, observed ''We are constrained to warn that if they adopt the same attitude in respect of the PPAs approved by the Commission, then the developers will lose confidence in the PPAs.'' An order of termination or for that matter any order ought to be self-supportive and not leaning on crutches. It said ''KPTCL has exposed itself to the charge of uttering nothing, but a ''thinly veiled falsehood and contradicting itself by stating non-existent reasons for supporting the termination.'' The Commissions said ''The records show that the petitioner has achieved Financial Closure and commissioned the power project, despite the Force Majeure conditions, well within the time stipulated in the PPA and has duly intimated such compliance to the Respondent by issue of letters referred to above.

''It is astonishing to see that a project aproved at the level of Chairman and Managing Director of KPTCL and a PPA approved by the Commission is terminated without any justifiable reason by an Officer of the rank of General Manager.

''A responsible and forward-looking public utility Company like KPTCL, keeping the interest of the public upper most in mind, is expected to extend all possible assistance to a developer, of course, within the legal framework, to come forward and invest in the State.

''On the contrary, in this case, we find that the respondent is found to be eager to put an end to the project by terminating the PPA with utter disregard to the safeguards and procedure provided in the PPA itself and after such termination make the petitioner kneel down before it and re-negotiate for a lower tariff. While charging the petitioner with dishonouring the terms of PPA, the respondent has virtually turned the PPA upside down. The malafide intention of the respondent is writ large in this case.'' Stating that the decision to terminate the PPA by KPTCL was taken in a ''casual and arbitrary manner without sufficient and convincing reasons for the said termination,'' the order said no reason had been mentioned and as an afterthought it was mentioned during the hearing that the reason was mentioned in the show cause notice issued on January three, 2003.


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