Summary
A generating company and a distribution licensee cannot by private agreement execute a power purchase agreement or fix the tariff for supply of electricity within a State without the review and approval of the State Electricity Regulatory Commission under Section 86(1)(b) of the Electricity Act, 2003. APTEL erred in giving effect to an unapproved supplementary PPA enhancing the tariff, but as the Board had not appealed and the resulting weighted-average tariff had long been acted upon, the Court declined to interfere and dismissed the generator's appeal for the enhanced tariff on its entire project.
Issues
- Whether a supplementary PPA enhancing the tariff from Rs. 2.50 to Rs. 2.95 per kWh, executed by the generator and the distribution licensee without approval of the State Commission, could be enforced.
- Whether the generator was entitled to the enhanced tariff determined under the 2007 Regulations for its entire 4.90 MW project, including the original 3 MW plant covered by a PPA executed before the Commission was constituted.
- Whether the Court should interfere with APTEL's direction for a weighted-average tariff when the Board had not appealed against it.
Provisions considered
- Section 86(1)(b), Electricity Act, 2003The State Commission must regulate the electricity purchase and procurement process of distribution licensees, including the price at which electricity is procured from generating companies through PPAs. The Court held this puts it beyond doubt that fixing the purchase price is not a matter of private negotiation; both the price and the PPA incorporating it must be reviewed and approved by the Commission, which the parties failed to obtain for the supplementary PPA. (¶¶ 8, 25, 26, 27, 31)
- Section 125, Electricity Act, 2003The appeal to the Supreme Court against APTEL's judgment was filed under this provision. (¶ 1)
- Regulation 6, second proviso (as amended), Himachal Pradesh Electricity Regulatory Commission (Power Procurement from Renewable Sources and Cogeneration by Distribution Licensee) Regulations, 2007The amended proviso allows the Commission, after recording reasons, to review or modify a PPA approved before the Regulations commenced or where there has been a change in statutory law, rules or State policy after approval. The Court noted that the change in the State's water-royalty policy adversely affected the appellant and left it open to the appellant to seek relief from the Commission under this proviso. (¶¶ 18, 20, 30)
Held
- Under Section 86(1)(b) of the Electricity Act, 2003, the price for purchase of electricity and the PPA incorporating it must be reviewed and approved by the State Commission. The Commission's order enhancing the small-hydel tariff to Rs. 2.95 per kWh directed modification only of existing PPAs stipulating Rs. 2.87; the appellant's PPA stipulated Rs. 2.50, so that order did not apply to it, and the appellant and the Board were bound to approach the Commission before enhancing the tariff. Having instead executed the supplementary PPA on their own, the Commission was fully justified in ignoring it and declining to enforce it. (¶¶ 24, 25, 26, 27)
- APTEL overlooked the binding mandate of Section 86(1)(b) when it held that the unapproved supplementary PPA could be given effect for the additional 1.90 MW plant and that no adverse inference could be drawn against the appellant for not obtaining the Commission's approval. (¶¶ 27, 31)
- Because the Board did not appeal against APTEL's direction for a weighted-average tariff and the resulting tariff of Rs. 2.60 per kWh, incorporated in a later supplementary PPA, had been acted upon for a long time, the Court declined to interfere at that late stage, while clarifying the legal position to prevent a similar error in future. (¶¶ 28, 31)
- The appellant's PPA dated 30 March 2000, executed before the Commission was constituted, distinguishes its case from projects that entered PPAs after the Commission's establishment; no parity can be drawn, and the plea for the enhanced tariff of Rs. 2.95 per kWh for the entire project, including the original 3 MW plant, is without merit. (¶¶ 29, 32)
- A generating company and a distribution licensee cannot, by private agreement, execute a PPA on their own or stipulate a tariff of their choice for supply within a State without seeking the review and approval of the Electricity Regulatory Commission under Section 86(1)(b). (¶ 31)
Result
Appeal dismissed. IA No. 4 of 2016 allowed and the Commission impleaded as respondent No. 4; Registry to amend the cause title. The appellant is left free to approach the Commission under the amended proviso to Regulation 6 of the 2007 Regulations regarding the change in water-royalty policy. Other pending applications dismissed.