1. Dispute over classification of electricity supplied by a gas turbine in open cycle mode as firm or infirm power under the Electricity Act, 2003. (Para 1 , 2 , 3 , 4 , 14 , 15 , 23 )
Back
Next 
2025 Supreme(SC) 2053
SUPREME COURT OF INDIA
J.B. PARDIWALA, K. V. VISWANATHAN, JJ.
Tamil Nadu Generation And Distribution Corporation Ltd. – Appellant
Versus
M/s Penna Electricity Limited – Respondent
Civil Appeal No. 5700 of 2014
Decided On : 16-12-2025
Important Points
Power purchase agreements must be aligned with regulatory frameworks and cannot be enforced if unapproved, particularly regarding classifications impacting fixed charges.
Subject
Regulatory Law - Electricity Regulation
Act Referred
Headnote
(A) Electricity Act, 2003 - Section 43A - Power Purchase Agreement (PPA) - Dispute over classification of power as "firm" or "infirm" based on the Date of Commercial Operation (COD); APTEL’s ruling upheld; PPA amended post-2003 Act not approved by TNERC is unenforceable. The relevant period for fixed charges established as from 29.10.2005 due to continuous power supply. (Paras 2, 5, 7, 30, 37)
(B) Legal Principle - A PPA must align with existing regulations. Amendments to such agreements are required to be approved by the regulatory authority; unapproved contracts cannot bind parties in conflict with regulations. (Paras 12, 27, 36)
(C) Firm vs. Infirm Power - Power supplied pre-COD deemed "firm" due to continuous delivery and compliance with regulatory requirements, establishing entitlement to fixed charges. (Paras 30, 31)
Facts of the case:
The appeal arose from a ruling by a regulatory tribunal affirming fixed charges for electricity supplied between a disputed COD of 29.10.2005 and 01.07.2006. The appellant contended the classification of power as "infirm" due to the terms of the PPA, while the respondent argued its continuous supply constituted "firm power."
Findings of Court:
The court determined that the power supplied was firm power and affirmed the decision of the regulatory authorities requiring the appellant to pay fixed charges for the relevant period, rejecting the appellant's claims for infirm characterization.
Issues: The court addressed the proper classification of power supplied prior to COD, the enforceability of the PPA, and compliance with regulatory requirements.
Ratio Decidendi: The court emphasized the need for PPAs to align with applicable regulations and affirmed continuous power supply as justification for fixed charges despite the contractual definitions of power classification.
Result: Appeal dismissed, the judgment below is upheld.
(B) Legal Principle - A PPA must align with existing regulations. Amendments to such agreements are required to be approved by the regulatory authority; unapproved contracts cannot bind parties in conflict with regulations. (Paras 12, 27, 36)
(C) Firm vs. Infirm Power - Power supplied pre-COD deemed "firm" due to continuous delivery and compliance with regulatory requirements, establishing entitlement to fixed charges. (Paras 30, 31)
Facts of the case:
The appeal arose from a ruling by a regulatory tribunal affirming fixed charges for electricity supplied between a disputed COD of 29.10.2005 and 01.07.2006. The appellant contended the classification of power as "infirm" due to the terms of the PPA, while the respondent argued its continuous supply constituted "firm power."
Findings of Court:
The court determined that the power supplied was firm power and affirmed the decision of the regulatory authorities requiring the appellant to pay fixed charges for the relevant period, rejecting the appellant's claims for infirm characterization.
Issues: The court addressed the proper classification of power supplied prior to COD, the enforceability of the PPA, and compliance with regulatory requirements.
Ratio Decidendi: The court emphasized the need for PPAs to align with applicable regulations and affirmed continuous power supply as justification for fixed charges despite the contractual definitions of power classification.
Result: Appeal dismissed, the judgment below is upheld.
Legal Category Hierarchy
-
energy law
- electricity regulation
- power purchase agreements
- administrative law
Advocates appeared:
For the Appellant(s) : Mr. Amit Anand Tiwari, Sr. A.A.G. Mr. Sabarish Subramanian, AOR Ms. Saushriya Havelia, Adv. Mr. Vishnu Unnikrishnan, Adv. Ms. Tanvi Anand, Adv. Ms. Jahnavi Taneja, Adv. Mr. Pranjal Mishra, Adv. Ms. Arjoo Rawat, Adv. Mr. Danish Saifi, Adv.
For the Respondent(s): Mr. Syam Divan, Sr. Adv. Mr. Buddy A. Ranganadhan, Adv. Mr. Satyaseelan, Adv. Mr. Sameer Sharma, Adv. Ms. Shefali Tripathi, Adv. Mr. Yashvardhan Singh, Adv. Mr. Ankit Kumar Sinha, Adv. Mr. Sriyut Shukla, Adv. Ms. Nina Nariman, Adv. Mr. Shaishir Divatia, Adv. Mr. Hasan Murtaza, AOR
For the Appellant(s) : Mr. Amit Anand Tiwari, Sr. A.A.G. Mr. Sabarish Subramanian, AOR Ms. Saushriya Havelia, Adv. Mr. Vishnu Unnikrishnan, Adv. Ms. Tanvi Anand, Adv. Ms. Jahnavi Taneja, Adv. Mr. Pranjal Mishra, Adv. Ms. Arjoo Rawat, Adv. Mr. Danish Saifi, Adv.
For the Respondent(s): Mr. Syam Divan, Sr. Adv. Mr. Buddy A. Ranganadhan, Adv. Mr. Satyaseelan, Adv. Mr. Sameer Sharma, Adv. Ms. Shefali Tripathi, Adv. Mr. Yashvardhan Singh, Adv. Mr. Ankit Kumar Sinha, Adv. Mr. Sriyut Shukla, Adv. Ms. Nina Nariman, Adv. Mr. Shaishir Divatia, Adv. Mr. Hasan Murtaza, AOR
Table of Contents
2. Whether the Power Purchase Agreement's project-based commercial operation date overrides regulatory unit-based definitions for determining entitlement to fixed charges versus variable charges. (Para 3 , 9 , 10 )
3. Unapproved power purchase agreements must be aligned with regulatory definitions of commercial operation date, which recognize individual units rather than the entire project. (Para 5 , 7 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 32 , 33 , 34 , 35 )
4. Power purchase agreements are subject to regulatory approval and must be aligned with regulations; unit-based commercial operation dates prevail over project-based contractual definitions. (Para 25 , 29 , 30 , 31 )
5. Appeal dismissed; directions for payment of fixed charges for the relevant period affirmed. (Para 37 , 38 )
6. Are Power Purchase Agreements (PPAs) between generating companies and distribution licensees unregulated?
No, PPAs are not unregulated and are subject to approval by the Regulatory Commission under Section 86(1)(b) of the Electricity Act, 2003, to ensure that the allocation of power and pricing are reasonable. (Para 24 , 25 )
7. Must existing Power Purchase Agreements be modified to comply with new regulatory frameworks?
Yes, existing PPAs must be modified and aligned with regulations made by the Regulatory Commission, as regulatory interventions can make inroads into existing contracts to ensure consistency with the law. (Para 25 , 26 )
8. In combined cycle power plants, is the Commercial Operation Date (COD) determined by the entire project or individual units?
According to CERC and TNERC Regulations, COD is determined in relation to a unit. For combined cycle stations, separate CODs apply to gas turbine and steam turbine units, rather than a single project-wide date. (Para 21 , 22 , 29 )
9. When is electricity generated prior to the project's overall commercial operation date considered firm power?
Electricity is considered firm power if the specific generating unit has achieved its commercial operation date through successful trial runs and delivers power on a continuous basis, regardless of the overall project's COD. (Para 30 , 31 , 34 )
JUDGMENT :
K.V. Viswanathan, J.
1. The present appeal calls in question the correctness of the judgment and order dated 10.07.2013 passed by the Appellate Tribunal for Electricity (for short ‘APTEL’) in Appeal No.112 of 2012.
2. The Tamil Nadu Electricity Regulatory Commission (for short ‘TNERC’) and the APTEL have concurrently found in favour of the respondent. It has been held that the power generated by the respondent by the open cycle gas turbine for the period from 29.10.2005 to 30.06.2006 (hereinafter called as ‘Relevant Period’) and supplied to the appellant could not be termed as “infirm power” and that it could only be treated as “firm power”. The consequence of the said finding was that the Commercial Operation Date (for short the ‘COD’) for the Gas Turbine in Open Cyc006Ce was held to be 29.10.2005 (i.e. the synchronization date) and since power was delivered on a continuous basis, the appellant was ordered to pay fixed charges for the relevant period.
3. Aggrieved, the appellant is in appeal. The principal argument is that any sale of electricity prior to “COD” would be infirm power and would entail the supplier only to variable charges i.e., the cost of the fuel. To support this, the appellant relies on the clause in the Power Purchase Agreement (for short ‘PPA’) originally entered on 29.04.1998 and undisputedly amended on 25.08.2004. According to the appellant, under the PPA, as amended, date of commercial operation was the day on which the project achieved entry into commercial operation i.e., 01.07.2006.
4. The relevant clauses under the PPA dealing with Date of Commercial Operation are as under: -
“Date of Commercial Operation “means the Day on which Project achieves Entry into Commercial Operation”” “4.2 Entry into Commercial Operation
(a) The Project shall be deemed to have achieved Entry into Commercial Operation on the date of issue by the Company to the Board of the Certificate of Project Completion, provided that the Company shall not be entitled to issue such a certificate unless during the Capacity Test to establish Entry into Commercial Operation conducted pursuant to the provisions of Section 4.1, the Project achieves a Tested Capacity of at least 47.52 MW.
(b) If the Tested Capacity at the time of Entry into Commercial Operation is more than 55.44 MW then any revision in the Contracted Capacity, and the adjustment in the Fixed Charges shall be mutually decided between the Parties.”
Attention is also drawn to the definition of “infirm power” under the PPA which reads as follows: -
“"Infirm Power" means the Electricity produced by the Project and delivered to the Board prior to the Date of Commercial Operation at the Supply Point, not on any request or Despatch Instruction of the Board, in respect of which the Board shall pay to the Company, Variable Charges calculated as per the formula pursuant to Section 7.3.”
FINDINGS OF THE TNERC:-
5. The TNERC recorded the following findings: -
a) Any PPA executed after the enactment of the ELECTRICITY ACT , 2003, (for short ‘2003 Act’) should have been placed before the TNERC for approval under Section 86(1)(b) of the 2003 Act, but both the parties in this case have failed to do so.
b) That the original PPA dated 29.04.1998 and the amended PPA dated 25.08.2004 which incorporated the requirements of combined cycle power project were not placed before the TNERC especially when the amended PPA was executed after the enactment of the 2003 Act.
c) Though the original PPA was dated 29.04.1998 and was based on the notification of the Government of India dated 30.03.1992 issued by the Ministry of Power under Section 43A(2) of the Electricity (Supply) Act, 1948 (for short the ‘1948 Act’) the notification ceased to have force from 10.06.2004 i.e. after one year of the commencement of the 2003 Act.
d) The PPA dated 25.08.2004 should have been aligned with the 2003 Act and the Regulations framed thereunder.
e) Though the TNERC notified the Tariff Regulations on 03.08.2005, the Central Ele
