In Brief
This case addresses whether electricity generating companies and distribution licensees can agree on tariffs for power supply without regulatory approval. A hydropower company signed a Power Purchase Agreement in 2000 at ₹2.50/kWh. After expanding capacity, it sought to raise the tariff to ₹2.95/kWh via a 2010 supplementary agreement with the State Electricity Board, without Commission approval. The Electricity Regulatory Commission rejected this, and the appellate tribunal ordered a weighted average tariff of ₹2.60/kWh instead. The Supreme Court dismissed the company's appeal, holding that tariff fixation is exclusively a regulatory function under the Electricity Act, 2003. Parties cannot unilaterally or even mutually agree on tariffs; Commission approval is mandatory. The Court clarified this principle to prevent similar breaches in future.
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