Summary
Maharashtra's distribution company challenged APTEL decisions awarding Adani Power Maharashtra and GMR Warora Change in Law compensation for the domestic coal shortfall caused when the 2013 coal distribution policy cut Coal India's assured supply below the 100 per cent promised in 2007. The Supreme Court dismissed the appeals. Station heat rate and gross calorific value are to be taken at the tariff-regulation norm or actuals, whichever is lower, with calorific value measured on an 'as received' basis, as the expert regulators found. Compensation covers the entire shortfall, not only the reduced percentages in the 2013 policy. Late payment surcharge was rightly allowed.
Issues
- Whether Change in Law compensation for shortfall in domestic linkage coal under competitively bid PPAs should be computed on the station heat rate and gross calorific value declared in the bid, or on the norms in the tariff regulations or actuals, whichever is lower.
- Whether the shortfall in domestic coal is to be measured against the 100 per cent normative supply assured under NCDP 2007 or only against the reduced percentages of Annual Contracted Quantity in NCDP 2013.
- Whether GMR was entitled to late payment surcharge under Articles 8.3.5 and 8.8.3 of its PPA on Change in Law amounts withheld by the procurer.
Provisions considered
- Sections 3, 63, 70, 73, 76, 77, 79, 84, 86 and 113, Electricity Act, 2003The PPAs were concluded through Case 1 competitive bidding under Section 63 and the Ministry of Power's 2005 Guidelines, whose clause 4.7 requires any change in Indian law affecting cost or revenue to be adjusted separately; the policy letter of 31.07.2013 and the Tariff Policy of 28.01.2016 issued under Section 3 have the force of law; the CEA, CERC, State Commissions and APTEL are expert bodies whose concurrent technical findings the Court will not lightly substitute. (¶¶ 47, 56, 57, 88, 94, 95, 96, 97, 98, 99, 102, 103, 104, 147, 148)
- Paragraphs 2.2 and 5.2 of NCDP 2007, as modified, New Coal Distribution Policy, 2007 and Office Memorandum of 26.07.2013 (NCDP 2013)NCDP 2007 assured supply of 100 per cent of normative requirement through FSAs, Coal India being responsible even by importing; NCDP 2013 cut domestic supply to 65, 65, 67 and 75 per cent of ACQ for the last four years of the 12th Plan, allowing import or e-auction coal with higher cost to be passed through on a case to case basis, as reiterated by the Ministry of Power letter of 31.07.2013 and clause 6.1 of the 2016 Tariff Policy; this change is a Change in Law. (¶¶ 60, 61, 62, 63, 75, 76, 77, 78, 80, 81, 82, 83, 125, 126, 130, 131, 151)
- Article 10 (Change in Law); Articles 8.3.5 and 8.8.3 (GMR PPA), Power Purchase AgreementsArticle 10.2.1 requires the affected party to be restored, through monthly tariff payments, to the same economic position as if the Change in Law had not occurred; the late payment surcharge provisions applied because the procurer did not pay within the due date. (¶¶ 5, 6, 7, 8, 135, 155)
Held
- Station heat rate and gross calorific value are not bid parameters in Case 1 bidding, where only Case 2 bids are evaluated on quoted heat rate; the bid heat rate is given under test conditions and linking compensation to it would not restore the generator's economic position. The CERC and APTEL concurrently held, after stakeholder consultation in framing tariff regulations, that heat rate is taken at the regulatory norm or actuals, whichever is lower, balancing generators and consumers, and calorific value 'as received', grade slippage making 'as billed' inappropriate, with the CEA even recognising a loss between 'as received' and 'as fired'. Following Reliance Infrastructure and Vivek Narayan Sharma, the Court will not substitute its view for such expert findings absent illegality or arbitrariness. (¶¶ 49, 54, 58, 105, 106, 107, 112, 113, 114, 116, 118, 120, 121, 122, 123, 153)
- Following Energy Watchdog and the three-Judge Bench in Adani Rajasthan, restitution under the Change in Law clause requires compensation for the entire shortfall against the 100 per cent normative supply assured by NCDP 2007, not limited to the trigger levels of NCDP 2013; the claim rests on Change in Law, not on a rise in coal price or force majeure, and the generators cannot be relegated to remedies against Coal India under the FSA. The argument that a higher heat rate rewards inefficiency fails because heat rate also depends on plant load factor, which the coal shortage itself depressed. (¶¶ 132, 133, 134, 135, 139, 151)
- Distribution companies, as State instrumentalities, cannot take positions contrary to the Union's policy that higher fuel costs be passed through, nor contradict their own earlier stands, as UHBVNL had sought regulatory norms and third-party certified calorific value and MERC had applied the lower of norm or actual for auxiliary consumption; repeated challenges to concurrent regulatory findings efface the purpose of the Electricity Act. The plea that compensation could run only from 31.07.2013 and not 01.04.2013 lacked any foundation in the pleadings, the policy applying to the financial years from 2013-14. (¶¶ 136, 137, 138, 140, 141, 143, 144, 145, 146, 150, 152)
Result
Civil Appeal No. 684 of 2021, against APTEL's judgment dated 14.09.2020 in Appeal No. 182 of 2019, and Civil Appeal No. 6927 of 2021, against APTEL's judgment dated 16.07.2021 affirming the CERC order dated 15.11.2018, dismissed without costs; concurrent findings on station heat rate, gross calorific value, the extent of coal shortfall and late payment surcharge upheld.