The Uttar Pradesh Electricity Regulatory Commission made a significant decision on Wednesday. It approved the Power Supply Agreement for the Adani Group's massive 1,500 MW Mirzapur thermal energy project. The approved tariff stands at Rs 5.38 per unit. This rate emerged from a competitive bidding process conducted under Section 63 of the Electricity Act, 2003.
Commission Rejects 'Post Office' Role
UPPCL and Mirzapur Thermal Energy Pvt Ltd, an Adani subsidiary, filed a petition with UPERC. They sought approval for the power supply agreement dated May 16, 2025. The agreement covers the procurement of 1,500 MW of power from a new thermal station in the state.
During the hearing, petitioners argued the Commission's role was limited. They claimed UPERC must simply adopt the tariff discovered through bidding. However, the Commission firmly rejected this narrow view.
UPERC Chairman Arvind Kumar made the Commission's position clear. "The Commission is not a post office," the order stated. It asserted its regulatory mandate under Section 86(1)(b) of the Electricity Act. This power allows it to examine issues and protect consumer interests, even when adopting a tariff under Section 63.
Focus on Savings from FGD Removal
A central issue involved the removal of Flue Gas Desulphurization systems. These FGD systems control pollutants in thermal plants. In July 2025, the Union environment ministry issued a notification. It relaxed the mandatory installation of FGD systems in coal-based plants, provided certain chimney height norms were met.
This policy shift reduced capital costs for developers. MTEUPPL calculated an estimated saving of Rs 270.3 crore from the FGD removal. However, the company also accounted for additional expenses. These included increasing the chimney height from 125 metres to 275 metres and upgrading water recycling infrastructure.
Chairman Arvind Kumar termed this Rs 270.3 crore figure as 'indicative' or tentative. The Commission identified a procedural lapse. When UPPCL filed the petition, it did not present a quantified estimate of the savings, even though it was expected. UPERC reprimanded the parties for this delay before the figure was officially recorded.
Strict Conditions for Consumer Benefit
The Commission imposed strict conditions to ensure transparency. It directed UPPCL to establish a robust quarterly reporting mechanism. This system will verify actual savings as contracts are renegotiated and finalized.
UPERC cited Supreme Court and Appellate Tribunal judgments. These clarified that while Section 63 requires tariff adoption, the Commission retains its regulatory powers. It must ensure consumer interest and can examine 'change in law' impacts before adoption.
The ruling states that benefits from 'Change in Law' events must flow to consumers. This includes savings from FGD removal and impacts from GST revisions. The PSA adoption was made conditional on future adjustments. UPERC directed UPPCL and MTEUPPL to reach a consensus on the final tariff impact before project commissioning. If they fail, the Commission will adjudicate based on verifiable data.
Consumer Advocacy and GST Impact
The decision triggered pushback from consumer groups. Avadhesh Kumar Verma, president of the Uttar Pradesh Rajya Vidyut Upbhokta Parishad, challenged the Rs 270.3 crore estimate. He cited a February 2025 Rajya Sabha reply by Union Minister of State for Power Shripad Naik. The reply pegged FGD costs between Rs 85 lakh and Rs 1.2 crore per MW. Verma argued savings for a 1,500 MW project could be substantially higher.
On GST, the Commission acknowledged a September 2025 revision. It raised GST on coal from 5% to 18% while abolishing the compensation cess. This will impact fuel costs. Since fuel charges are a pass-through under the PSA, changes will automatically reflect in energy charges during operations. UPERC instructed UPPCL to monitor any potential impact on capital costs and maintain proper compliance documentation.
The UPERC order emphasizes its role as an active regulator, not a passive approver. It aims to ensure that cost savings from regulatory changes ultimately benefit the electricity consumers of Uttar Pradesh.
