Summary
Wind generators under the Renewable Energy Certificate mechanism signed a PPA with Gujarat Urja in March 2012 at a fixed tariff of Rs. 2.64 per unit for 25 years plus tradable RECs, instead of the preferential tariff of Rs. 3.56. After the Central Commission amended the REC Regulations in July 2013 to require sale 'at' rather than 'not exceeding' the pooled cost of power purchase, the State Commission re-determined the tariff at the year-on-year pooled cost and APTEL affirmed. The Supreme Court set both orders aside: no regulation required prior approval of renewable PPAs; the amendment was expressly prospective and its Statement of Reasons protected existing PPAs, so the freely negotiated contract bound the parties; the generators' belated claim was opportunistic; and findings of coercion rendered without pleadings or proof were untenable.
Issues
- Whether a power purchase agreement between a wind generator under the REC mechanism and a distribution licensee required prior approval of the State Commission to be enforceable.
- Whether the 2013 amendment to the Central Commission's REC Regulations, substituting sale 'at the pooled cost of power purchase' for 'at a price not exceeding' it, obliged revision of a PPA executed before the amendment at a fixed tariff.
- Whether the State Commission and APTEL could hold the PPA unenforceable as the product of coercion or unequal bargaining power without specific pleadings and proof.
Provisions considered
- Regulation 5(1)(c) with Explanation, Regulation 9, and the Second Amendment of 2013, Central Electricity Regulatory Commission (Terms and Conditions for Recognition and Issuance of Renewable Energy Certificate) Regulations, 2010Eligible generators could sell to the distribution licensee at a price not exceeding the pooled cost while trading RECs; the 2013 amendment requiring sale at the pooled cost came into force on publication and, per its Statement of Reasons, did not affect PPAs already executed at lower prices. (¶¶ 5, 6, 13, 40, 57, 59, 61, 66)
- Sections 61, 62, 64, 86(1)(b) and 86(1)(e), Electricity Act, 2003Tariff determination is a statutory function and State Commissions regulate procurement and promote renewable energy; but absent a regulation mandating approval, a PPA voluntarily entered within the existing framework binds the parties, as held in EMCO, Transmission Corporation of A.P. v. Sai Renewable and Solar Power Company. (¶¶ 4, 39, 49, 50, 51, 52, 53, 54, 55)
- Regulations 3, 4 and 9, Gujarat Electricity Regulatory Commission (Procurement of Energy from Renewable Sources) Regulations, 2010Impose renewable purchase obligations on distribution licensees and others but contain no requirement of prior State Commission approval of PPAs with renewable generators. (¶¶ 10, 42, 43, 46, 47)
- Order VI Rule 4, Code of Civil Procedure, 1908A plea of coercion or duress must be pleaded with full particulars and established by evidence; a bald allegation is insufficient, following Bishundeo Narain, Shanti Budhiya Vesta Patel and New India Assurance v. Genus Power. (¶¶ 68, 69, 70, 71)
Held
- No provision in the State Commission's regulations or elsewhere mandated prior approval of PPAs voluntarily entered into for renewable energy; the State Commission had approved a model PPA incorporating the Central Commission's tariff terms, no conflict with it or any regulation was shown, and the Multi Year Tariff Regulations were not shown to apply. APTEL's finding that the PPA was inoperative for want of approval cannot be sustained. (¶¶ 45, 46, 47, 48)
- Having chosen the REC route with a fixed tariff of Rs. 2.64 plus tradable RECs over the preferential tariff of Rs. 3.56, the generators could not, eighteen months later and only after the Second Amendment, seek re-determination at the year-on-year pooled cost; this was an opportunistic attempt to apply a subsequent change to an existing contract, which cannot be countenanced. Parties to a PPA entered into with equal bargaining power within the existing central and State regulatory framework are bound by its terms unless a later amendment expressly overrides existing contracts. (¶¶ 56, 57, 58, 59, 60, 63)
- Regulation 1(2) of the Second Amendment brought it into force on publication and its Statement of Reasons clarified that it applied prospectively and did not affect PPAs already executed below the pooled cost; amendments to laws or regulations are prospective unless expressly retrospective, and PTC India, which concerned regulations of general application introducing a new regime, does not compel a different result. (¶¶ 61, 62, 63, 64, 65, 66)
- The State Commission's finding of coercion and unequal bargaining power, rubber-stamped by APTEL, rested on no pleadings with particulars and no shred of evidence; established companies negotiating with expert and legal advice cannot be found to have been coerced on a bare allegation, and a judicial tribunal dealing with commercial bargains must not casually render findings of coercion or fraud without proof. (¶¶ 67, 68, 69, 70, 71)
Result
Appeals allowed with costs; APTEL's orders dated 06.12.2018 and 24.07.2020 and the State Commission's order dated 01.07.2015 re-determining the tariff under the PPA set aside.