Enron is continuing its battle to recover what it considers to be overdue payments from the Maharashtra State Electricity Board (MSEB) for electricity produced by the controversial Dabhol Power Company (DPC).

The two sides will now plead their cases before the Maharashtra Electricity Regulatory Commission. This follows the rejection by DPC of MSEB's legal notice to rescind its agreement to purchase electricity from India's first independent power generator.

From Enron's point of view, MSEB had undertaken to purchase power from DPC at rates which, when gas prices soared late last year, turned out to be around four times higher than those charged by other local power generators. MSEB, with the backing of the state and federal governments, has disputed and refused to pay certain payments requested by DPC.

Legality of agreement is disputed

In its legal notice issued in May, MSEB claimed it could rescind its agreement with DPC on the grounds that it was invalid in Indian law. Enron claims the legal notice is not acceptable and MSEB does not have the right to rescind the agreement.

Under the disputed agreement, payments to DPC by MSEB are guaranteed by a letter of credit (L/C) which is in turn backed by a sovereign government counter guarantee.

MSEB has refused DPC's request for an escrow account and for an increase in L/C cover. Enron is the operator of DPC, India's first independent power generator.

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