KSEB ordered to pay ₹157 crore for electricity purchase from Anil Ambani's firm

Thiruvananthapuram: In a big blow to the Kerala State Electricity Board Ltd (KSEB), the Appellate Tribunal for Electricity (APTEL) has ordered it to pay ₹25.41 per unit for the electricity supplied by BKPL, a company owned by Anil Ambani, without any contract.

APTEL’s order would result in an expenditure of ₹157.34 crore, plus interest for eight years, for the KSEB, as the cost of 6.19 crore units of electricity, which it was compelled to purchase under a High Court order issued with the intention of averting a possible disaster. The price of a unit of power is likely to reach ₹40, considering the interest.

BKPL (BSES Kerala Power Limited) was established in 1996 as a subsidiary of BSES, a company within the Reliance group, with the support of the Kerala State Industrial Development Corporation. BKPL set up a plant in Kochi to generate power from naphtha and entered into a Power Purchase Agreement (PPA) with KSEB in 1999. The term of this contract ended in October 2015.

In November 2014, before the end of the PPA, KSEB had indicated to BKPL that it might require additional quantities of electricity, following which the latter procured and stored 6,800 tonnes of naphtha at its plant and 4,100 tonnes in a depot belonging to the Indian Oil Corporation (IOC). However, the need for additional power did not arise and the naphtha was not utilised.

Complaints were raised over the danger of storing such large quantities of naphtha, leading to the intervention of the High Court. Subsequently, the court ordered that the naphtha should either be shifted from the site or converted to electricity before July 1, 2017. This forced KSEB to purchase the electrcicity it did not require.

The Regulatory Commission had ordered that the price of the power to be paid by KSEB to BKPL could be based on the RTC clearing rates of the Power Exchange.

APTEL has now quashed this order. According to the tribunal, even though BKPL’s power purchase agreement with KSEB ended in 2015, the contract could be considered valid till October 2017, as KSEB was expected to purchase more electricity. APTEL also ordered KSEB to pay fixed charges for the electricity supplied till October 2017. The order further said that KSEB has to pay the amount demanded by BKPL for power supplied in 2017, when no agreement existed.

BKPL generated and supplied to the grid 6.192 crore units of electricity between May 25 and June 24, 2017. The expenses for producing this power came to ₹69.6 crore. The Regulatory Commission had refused to accept BKPL’s plea to direct KSEB to pay ₹157.34 crore for the power, considering additional expenses related to fixed charges, lease amount, income tax and other charges.

BKPL filed an appeal before APTEL against the Regulatory Commission’s order, following which the tribunal issued the latest order after hearing the arguments of the Regulatory Commission and KSEB. APTEL’s order also said that KSEB should pay interest until the entire dues are cleared.