BHUBANESWAR: After giving tariff shock twice during the peak of Covid-19 pandemic, the Odisha Electricity Regulatory Commission (OERC) has dealt another blow to the State by declaring Vedanta Limited free from obligations to supply power to the State under the existing agreement.
In a recent order, OERC has allowed the second unit of Vedanta’s Jharsuguda power plant (4 X 600 MW) to operate as captive generating plant (CGP) against its current status of an independent power plant (IPP) to enable the company to meet the power needs for its aluminium smelter unit.
Vedanta had prayed the Commission to declare IPP Unit-II (600 MW) of its power plant as a CGP unit and also that it will have no obligation to supply power under the power purchase agreement (PPA) with Gridco signed on December 19, 2012, besides, bringing the PPA to an end.
Earlier on January 27, 2016, the OERC had approved the proposal of Vedanta for conversion of I, III and IV units of the power plant to CGP with effect from April 1, 2015.
The second unit of the Vedanta power plant was dedicated to the State which is entitled to 30 per cent of power (25 per cent at full cost and 5 per cent at variable cost) from the power plant which comes to 600 MW. The unit cost fixed by the OERC for 2021-22 is Rs 2.52 per unit, one of the cheapest power from all thermal sources with which GRIDCO has PPA.
In the considered view of OERC for conversion of the IIP to CGP, “Gridco has tied up with cheaper renewable power sources to procure power in near future. Therefore, if GRIDCO has flexibility to surrender its entitlement as proposed by Vedanta it will make more economical and commercial sense.”
In order to prevent dislocation in the current supply of power, the Unit-II will continue as IPP for the current quarter. Gridco has to exercise its option to avail IPP power from Vedanta for the next quarter within one month of this order failing which the IPP Unit -II of Vedanta shall operate as CGP with effect from January 1, 2022, the order.
The OERC has shown favour to Vedanta despite stiff opposition from the State government and Gridco, the bulk buyer of power from Vedanta. Gridco did not agree to surrender the State’s share of power, stating that conversion of IPP-Unit-II to CGP would seriously affect the availability of power in Odisha.
As per the MoU signed with the State government in 2006, Vedanta was given land and water at concessional rates with coal linkage for setting up the IPP. Besides, the government has granted special economic zone status to the aluminium smelter unit at Jharsuguda.