RERC clarifies LPS adjustment framework in Adani-RUVNL dispute
The Rajasthan Electricity Regulatory Commission has issued an order in the dispute between Adani Power Limited and Rajasthan state distribution companies over the methodology for computation and adjustment of Late Payment Surcharge (LPS) under the Power Purchase Agreement (PPA) for the 1,200 MW Kawai thermal power station.
In its order on Petition No. RERC/2249/2024, the Commission examined differing interpretations of Articles 8.3.2 and 8.3.5 of the PPA dated January 28, 2010.
On the issue of whether LPS is payable for the day on which payment is made, the Commission ruled in favour of Adani Power. It held that where payment is made beyond the due date, LPS is chargeable for the day of payment as the PPA provides for surcharge calculation “for each day of the delay”.
However, the Commission ruled in favour of the Rajasthan distribution companies on the issue of whether a supplementary bill is required before adjusting LPS. The order stated that Article 8.3.5 of the PPA specifically requires the seller to claim LPS through a supplementary bill.
The Commission held that an LPS claim comes into existence only after it is raised through a supplementary bill and, in the absence of such a claim, no adjustment can be made against payments received.
The order further clarified that LPS is to be calculated on a day-to-day basis but compounded with monthly rests, rejecting Adani Power’s contention for daily rests.
On the applicable interest rate, the Commission stated that from June 3, 2022 onwards, LPS computation would be governed by the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, subject to the ceiling prescribed under the PPA. The ruling aligns with the contention of the Rajasthan Discoms that the lower rate under the 2022 Rules should apply.
The dispute arose after Rajasthan Urja Vikas Nigam Limited revised its LPS adjustment methodology with effect from April 1, 2020, shifting from daily adjustment to monthly adjustment after issuance of supplementary bills.
Adani Power had argued that the revised methodology violated the contractual order of payment appropriation and challenged the change under the doctrine against approbation and reprobation.
The order was issued by the Commission bench comprising Dr. Rajesh Sharma, Chairman, along with Members Hemant Kumar Jain and Vijay Pal Singh. The petition has been disposed of accordingly.
The featured photograph is for representation only.
