Supreme Court dismisses MSEDCL appeals, APML in big relief

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The Supreme Court bench comprising Justices B.R. Gavai and Vikram Nath dismissed the appeals filed by MSEDCL (Maharashtra State Electricity Distribution Company Limited) against two power companies, GMR Warora Energy and APML (Adani Power Maharashtra Ltd.). The SC bench also upheld the APTEL’s (Appellate Tribunal of Electricity) judgment in favor of the two addressed companies. While hearing the matter, it was determined that the SC came across a number of matters wherein concurrent orders passed by the Regulatory Body and the Appellate Forum were assailed. Such litigation would, in fact, efface the purpose of the Electricity Act. One of the major reasons for the enactment of the Electricity Act was the deterioration in the performance of the State Electricity Boards.

The bench observed that “the stand taken by the DISCOMS that, since the loss being sustained by the generating companies is on account of non-fulfillment of obligation by CIL/Coal Companies, they should be relegated to the remedy available to them in law against the CIL/Coal Companies, is totally unreasonable. The claim was based on a change of NCDP 2007 by NCDP 2013, which, undisputedly, was covered by the term ‘Change in Law’.” The SC highlighted that APTEL has also held that SHR and GCV had to be taken into consideration as per the ‘actual’ or the Tariff Regulations, whichever was lower and as such, balanced the interests of generators as well as consumers. The CERC (Central Electricity Regulatory Commission) as well as the learned APTEL, on the interpretation of Articles 8.3.5 and 8.8.3 of the PPA, were concurrently found that the procurer had delayed the payment by not making the payment within the due date and, as such, GMR was entitled to late payment surcharge. The bench found no reason to interfere with the said concurrent findings of fact.

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In this context, APTEL observed that “it was a fact that there is no guidance in the PPAs or in the bidding Guidelines as to the reference GCV that should be applied in case of the Change in Law claims in Case bid projects where SHR or GCV is not a bid parameter. It, however, held that the overarching principle for Change in Law compensation was that the generating company should not be left within a worse economic position. It held that the GCV ‘as received’ should be the appropriate basis to assess the quantum of shortfall in domestic coal and calculate the Change in Law compensation accordingly.”

Initially, MSEDCL entered into long-term Power Purchase Agreements (PPAs) with Adani Power Maharashtra Limited. These PPAs were entered into in pursuance of the competitive bidding processes conducted by the appellant-MSEDCL under Section 63 of the Electricity Act, 2003  read with the Standard Bidding Guidelines issued by the Ministry of Power. While determining the consequences of a Change in Law, due regard has to be given to the principle, that to compensate the Party affected by such Change in Law is to restore through monthly Tariff Payment, to the extent contemplated in Article 10, the affected Party to the same economic position as if such Change in Law has not occurred. FSA was executed between APML and WCL for domestic coal linkage, subsequently, the FSA was amended and the quantum of coal assured by WCL was transferred to SECL.

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By order, the MERC decided the Case while allowing the claims of APML for relief on account of a Change in Law for 1180 MW capacity, it restricted it to the extent of the minimum supply obligations specified for the CIL subsidiaries for the last four years of the 12th Five Year Plan period i.e. APTEL held that the restitution principle has to be applied. It further held that to protect the interests of consumers, the Generators had itself indicated that the parameters which were more beneficial to the consumers i.e. the lower amongst the actual or as per the Regulations would protect the interests of the consumers. The net heat rate was required to be ex-bus taking into account the internal power consumption of the power station. It further provided that if the price of the fuel was not determined by the Government of India, the government-approved mechanism, or the Fuel Regulator, the same shall have to be approved by the appropriate Regulatory Commission.

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