Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-005700-005700 – 2014 |
| Diary Number | 32833/2013 |
| Judge Name | HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Bench |
HON’BLE MR. JUSTICE J.B. PARDIWALA HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Precedent Value | Affirms requirement of PPA approval and regulatory alignment |
| Overrules / Affirms | Affirms APTEL and TNERC decisions |
| Type of Law | Electricity regulatory, contract law |
| Questions of Law | Whether a PPA’s single “Date of Commercial Operation” clause can override unit-wise COD in CERC/TNERC regulations and whether continuous open-cycle supply prior to project COD is “firm power.” |
| Ratio Decidendi | The Court held that any PPA entered or amended after the 2003 Act must be aligned with regulations under Section 86(1)(b). Regulatory definitions of “Date of Commercial Operation” for each unit prevail over broader PPA definitions. Continuous, scheduled supply from the gas turbine open cycle unit from its synchronization on 29.10.2005 qualified as firm power, entitling the respondent to fixed charges. An unapproved PPA conflicting with statutory regulations cannot override the statutory regime. The decision ensures recovery of fixed costs in a reasonable manner under Section 61(d) of the 2003 Act. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon |
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| Facts as Summarised by the Court |
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Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts and tribunals on electricity regulatory and PPA interpretation |
| Persuasive For | Other High Courts, Appellate Tribunal for Electricity |
| Distinguishes | State of Himachal Pradesh v. JSW Hydro Energy Ltd. (2025) on contractual cap on free power |
| Follows |
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What’s New / What Lawyers Should Note
- PPA-defined “project” COD cannot override statutory requirement of unit-wise COD under CERC/TNERC regulations.
- Continuous, scheduled open-cycle generation before combined-cycle COD qualifies as firm power, attracting fixed charges.
- Unapproved PPAs conflicting with regulations are not binding; regulatory alignment directives under Section 86(1)(b) prevail.
- Letters treating pre-COD supply as infirm power do not override regulatory definitions or entitlement to fixed charges.
- Regulators may realign existing and amended PPAs with applicable Central and State tariff regulations.
Summary of Legal Reasoning
- Statutory Framework
- Pre-2003: Section 43A(2) of 1948 Act and 1992 notification prescribed unit-wise COD by synchronization and two-part tariff (fixed + variable).
- Post-2003: One-year transitional window under proviso to Section 61; from 01.04.2004 CERC (2004) Regulations; from 03.08.2005 TNERC (2005) Regulations under Section 178.
- PPA Approval and Alignment
- Section 86(1)(b) mandates regulatory approval of PPAs.
- Unapproved PPAs conflicting with regulations must be aligned (Tata Power, KKK Hydro, PTC India).
- Conflict of Definitions
- PPA’s project-wide COD (certificate on ≥47.52 MW) conflicts with regulations’ unit-wise COD (per gas/steam turbine synchronization).
- “Infirm Power” in regulations means pre-unit-COD generation; continuous scheduled open-cycle supply constitutes “firm power.”
- Entitlement to Fixed Charges
- Continuous supply from 29.10.2005 met unit COD criteria; regulator correctly awarded pro-rata fixed charges for the relevant period.
- Estoppel by correspondence cannot override statutory scheme.
Arguments by the Parties
Appellant (TANGEDCO)
- PPA COD clause covers only combined-cycle project; pre-combined-cycle supply is “infirm power,” entitling variable charges only.
- Correspondence shows respondent’s admission to infirm classification.
- No conflict between PPA clause and CERC/TNERC regulations; PPA terms enforceable without regulation approval.
- Higher fixed charges would burden public consumers; reliance on State of Himachal Pradesh v. JSW supports contractual freedom.
Respondent (Penna Electricity Ltd.)
- Amended PPA not approved under Section 86(1)(b); unapproved PPA terms yield to statutory regulations.
- 1992 notification and 2004/2005 regulations require unit-wise COD by synchronization; continuous supply from open-cycle unit qualifies as firm power.
- TNERC correctly realigned PPA with regulatory definitions under its guiding principles.
- Expert tribunals’ concurrent findings deserve deference.
Factual Background
Respondent’s power purchase agreement was originally executed in 1998 and amended on 25.08.2004. Its open-cycle gas turbine unit was synchronized to the grid on 29.10.2005 and supplied power continuously until 30.06.2006. Appellant treated pre-combined-cycle COD supply as infirm power (variable charges only); respondent claimed firm power (fixed + variable). TNERC and APTEL ruled in favour of firm-power treatment and fixed charges. Appellant appealed to the Supreme Court.
Statutory Analysis
- Electricity (Supply) Act, 1948: Section 43A(2) and 1992 notification prescribe unit-wise COD and two-part tariff.
- Electricity Act, 2003
- Section 61: Tariff regulation; one-year transitional clause.
- Section 62: Commission’s power to determine tariff.
- Section 63: Tariff by bidding; does not displace approval requirement.
- Section 86(1)(b): Mandatory PPA approval and regulatory alignment.
- Section 178: Power to make tariff regulations.
- CERC (Terms & Conditions of Tariff) Regulations, 2004 (w.e.f. 01.04.2004)
- Definition of “Date of Commercial Operation” (unit and station).
- Definition of “Declared Capacity” and “Infirm Power.”
- TNERC Tariff Regulations, 2005 (w.e.f. 03.08.2005)
- Broadly identical definitions and unit-wise COD requirements.
Alert Indicators
- ✔ Precedent Followed – Existing requirement for PPA alignment with regulatory definitions affirmed.