1. Dispute over unpaid fixed and variable charges for power generation under a Power Purchase Agreement — claim for compensation due to fuel shortage — appeal under Electricity Act, 2003. (Para 1 , 2 , 3 , 15 )
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2023 Supreme(SC) 220
SUPREME COURT OF INDIA
Ajay Rastogi, C.T. Ravikumar, JJ.
M/S PENNA ELECTRICITY LIMITED (NOW M/S PIONEER POWER LIMITED) - APPELLANT(S)
VERSUS
THE TAMIL NADU ELECTRICITY BOARD & ORS. - RESPONDENT(S)
Civil Appeal No(S). 706 of 2014
Decided On : 15-03-2023
Important Points
IMPORTANT POINT
Claim relating to unpaid fixed charges and underpaid variable charges – If there is any risk in supply, same has to be shared between generator and fuel supplier.
Claim relating to unpaid fixed charges and underpaid variable charges – If there is any risk in supply, same has to be shared between generator and fuel supplier.
Subject
Contract Disputes - Power Purchase Agreement
Act Referred
ELECTRICITY ACT: S.86(1)(f), S.125
Headnote
Electricity Act, 2003 – Section 86(1)(f) – Claim relating to unpaid fixed charges and underpaid variable charges – Appellant is an Independent Power Producer(IPP) operating and maintaining a Combined Cycle Gas Turbine Power Generating station and entire power generated by appellant is to be supplied to Board – There is no clause in Power Purchase Agreement (PPA ) which provides for full fixed cost, even when appellant fails to meet PLF – Appellant has not been able to demonstrate any provision either under Act, 2003 or under PPA although has not been approved by competent authority under Act, 2003 which may protect right and interest of appellant – Responsibility of fuel linkage either heavy fuel or natural gas would be that of appellant to generator – If there is any risk in supply, same has to be shared between generator and fuel supplier – There is no clause in PPA which provides for payment of full fixed cost to generator, even when generator fails to meet PLF – In given circumstances, any compensation by way of deemed generation or released heat rate due to partial loading of machine, arising due to shortage to fuel supply which is sole responsibility of appellant, is not applicable as per amended PPA – Furthermore, there is no provision for compensation by way of deemed generation or partial norms due to operation of power plant at partial load due to shortage of fuel in Central Government’s Tariff Regulations, 2004 which admittedly were in force when agreement was entered into between parties – In absence of there being any provision for compensation for capacity charges and variable charges due to fact that plant was not able to maintain normative availability/PLF on account of shortage of fuel in terms of Central Government’s Tariff Regulations, 2004, at least respondent Board cannot be said to be at fault – Finding returned by Tribunal in impugned judgment upheld. (Paras 15, 16, 18, 20, 21, 22 and 23)
Facts of the case:
Instant appeal has been filed under Section 125 of Electricity Act, 2003 assailing the judgment and order of the Appellate Tribunal for Electricity dismissing the appeal filed at the instance of present appellant.
Findings of Court:
No clause of the PPA has been pointed out indicating if there is a short supply of gas due to diversion of gas to other generating station of the Board, the respondent Board has to indemnify the appellant.
Result : Appeal dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. K. Radhakrishnan, Sr. Adv. Mr. D.Kumanan, AOR Mrs. Deepa. S, Adv. Ms. Racheeta Chawala, Adv. Ms. Divya Singh, Adv. Ms. Bano Deswal, Adv.
For the Respondent(s): Mr. Parage.P.Tripathi, Sr. Adv. Mr. Buddy.A.Ranganadhan, Adv. Ms. Nandini Tomar, Adv. Mr. Raunak Jain, Adv. Mr. A. V. Rangam, AOR
For the Appellant(s) : Mr. K. Radhakrishnan, Sr. Adv. Mr. D.Kumanan, AOR Mrs. Deepa. S, Adv. Ms. Racheeta Chawala, Adv. Ms. Divya Singh, Adv. Ms. Bano Deswal, Adv.
For the Respondent(s): Mr. Parage.P.Tripathi, Sr. Adv. Mr. Buddy.A.Ranganadhan, Adv. Ms. Nandini Tomar, Adv. Mr. Raunak Jain, Adv. Mr. A. V. Rangam, AOR
Table of Contents
2. Appellant claims compensation for fuel diversion and payment on quantum meruit; Respondent contends fuel supply risk rests with the generator per agreement and government notification. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 )
3. The court found no contractual or regulatory provision for compensation due to fuel shortage, noting that fuel supply risk was explicitly excluded from the Board's responsibilities. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 )
4. In the absence of specific contractual or regulatory provisions, a power purchaser is not liable for fuel supply risks or compensation for failure to meet plant load factors. (Para 16 , 20 , 21 , 22 )
6. Who bears the risk of fuel supply in an IPP agreement based on the 1995 Government of India notification?
The responsibility for fuel linkage rests with the Independent Power Producer (IPP). Any fuel supply risks must be shared between the IPP and the fuel supplier; the State Electricity Board does not assume fuel supply risk. (Para 16 , 19 , 20 )
7. Is a generator entitled to fixed charges if it fails to meet the Plant Load Factor (PLF) due to fuel shortage?
Not unless there is a specific provision in the Power Purchase Agreement (PPA) or the applicable Tariff Regulations allowing for such compensation or deemed generation. (Para 16 , 21 , 22 )
8. Does the diversion of fuel by the purchaser to other stations create a liability for compensation in the absence of a contractual clause?
No. Without a specific provision in the PPA or Tariff Regulations for compensation due to fuel shortage or diversion, the purchaser cannot be held liable for the generator's inability to maintain normative availability. (Para 22 )
JUDGMENT :
Rastogi, J.
1. The instant appeal has been filed under Section 125 of the Electricity Act, 2003(hereinafter being referred to as the “Act 2003”) assailing the judgment and order of the Appellate Tribunal for Electricity dismissing the appeal filed at the instance of the present appellant.
2. The appellant initially filed a petition under Section 86(1)(f) of the Act, 2003 and sought the following reliefs:
(a) direct the Respondent to make the payment of Rs.25.63 Crores towards fixed charges and Rs.8.10 Crores towards payment due on the actual variable charges payable in respect of the power generated and availed for 153.26 millions unit during the period 29.10.2005 to 30.06.2006 to the Petitioner.
(b) direct the Respondents to make the payment to the Petitioner of the sum of Rs.18.06 Crores towards under recovered fixed charges in respect of operations of the generating station of the Petitioner for the period 01.07.2006 to 15.06.2009.
(c) direct the Respondents to make the payment to the Petitioner of the sum of Rs.12.77 crores towards under recovered additional cost of generation (variable charges) in respect of operations of generating Station of the Petitioner for the period 01.07.2006 to 15.06.2009.
(d) direct the respondent to take immediate decisions on the use of Naphtha or any other compatible fuel as alternate/ supplemental fuel to increase and maintain the PLF of the plant as contemplated in the amending PPA dated 25.08.2004 in future thereby enabling the plant being operated at optional level so as to ensure the advantage to the Respondent and also the assured return to the Petitioner. The permission to use of the Naphtha/other compatible fuel should also contemplate dispatching the plant under merit order under gas based tariff only. If the Respondent desires otherwise, the Petitioner should be assured of the fixed charges.
(e) For any reason if the Respondent were not to consider any or all of the relief claimed above by the Petitioner, to direct the Respondent to make the payments due to the Petitioner as in prayer (a), (b) and (c) above and relieve the Petitioner from the obligations of the amendment PPA dated 25.08.2004.
3. The Tamil Nadu Electricity Regulatory Commission thereby disposed of the petition by order dated 30th December 2011, rejecting the claim of the appellant relating to unpaid fixed charges of Rs.18.06 under Combined Cycle Operation as well as the claim of underpaid variable charges of Rs. 12.77 crores under Combined Cycle Operation for the period between 1st July, 2006 to 15th June, 2009.
4. This came to be challenged by the appellant in appeal before the Appellate Tribunal for Electricity(hereinafter being referred to as the “Tribunal”). After the matter came to be heard, taking into consideration the material on record, the Tribunal returned a finding in paras 35, 36 and 38(1) and (2), and dismissed the appeal under the impugned judgment. The relevant paras are as under:
“35. We find that there is no provision for compensation for capacity charges and variable charges due to the fact that the plant was not able to maintain the normative availability/Plant Load Factor on account of shortage of fuel in the Central Commission’s Tariff Regulations, 2004 which were in vogue when the amended PPA was entered into between the parties or in the Sate Commission’s Tariff Regulations, 2005. Admittedly, the State Commission’s Tariff Regulations were made effective subsequent to the signing of the PPA. The State Commission could not intervene in allowing amendment in the provisions of the PPA in this regard which were voluntarily agreed by both the parties and which are not in contravention to any provision of the Act or Rules or the Regulations.
36. Therefore, there is no infirmity in the findings of the State Commission in not agreeing to interfere with the provisions of the PPA declaring the PPA unworkable with regard to compensation for fixed charges for the above period due to shortage of supply
