Carrying Cost is compensable for Change in Law events, and the affected party must be restored to its original economic position, supporting claims for compound interest.

JUDGMENT :

MANOJ MISRA, J.

1. This appeal under Section 125 of the ELECTRICITY ACT , 2003¹[2003 Act] impugns the order dated 06.10.2023 passed by the Appellate Tribunal For Electricity²[APTEL] in Appeal No.341 of 2023 to the extent it disallows Carrying Cost to RattanIndia Power Limited³[RPL] (the appellant) on compounding interest basis.

FACTS

2. RPL is supplying power to Maharashtra State Electricity Distribution Co. Ltd.⁴[MSEDCL] (first respondent) under two long term Power Purchase Agreements⁵[PPA] (i.e., dated 22.04.2010 and 05.06.2010 for supply of 450 MW and 750 MW, respectively) with MSEDCL.

3. In connection therewith, RPL filed a petition (i.e., Case No.84 of 2016) under Section 86 of the 2003 Act before the Maharashtra Electricity Regularity Commission⁶[MERC] seeking compensation on account of various Change in Law events affecting the project from the date of commencement of supply of power by RPL along with the Carrying Cost, and requested MERC to allow the compensation with effect from the date of commencement of supply.

4. MERC vide order dated 05.04.2018 had allowed certain Change in Law claims. However, it held: (i) increase in rates of Chhattisgarh Paryavaran Upkar Cess and Chhattisgarh Vikas Upkar Cess do not qualify as Change in Law events; (ii) PPAs executed between MSEDCL and RPL do not provide compensation for Carrying Cost and therefore, RPL is not entitled to claim Carrying Cost on its approved Change in Law events; (iii) compensation for approved Change in Law events would be payable from Scheduled Delivery Date (for short SSD) and not for the period prior to SDD, even though supply of power commenced prior to SDD.

5. Aggrieved therewith, RPL filed Appeal No.263 of 2018 before APTEL, which was allowed vide its order dated 18.10.2022. The operative portion of the order dated 18.10.2022 is reproduced below:

“The impugned order to the extent it ruled against the appellant on the three above mentioned subjects is set aside. The matter to that extent is remitted to the State Commission for fresh decision bearing in mind the observations recorded as above. We shall also expect the State Commission to pass all consequential orders including quantification of the amounts payable by the licensee unto the appellant. Of course, for such purposes the Commission will ascertain the calculations from the appellant and then take the views of the licensee before determining the actual liability. We direct that the Commission shall pass all necessary orders in the wake of such determination including by taking appropriate measures such that the claims are duly satisfied in a time bound manner, expeditiously and at an early date, not later than three months from the date of this judgment.”

(Emphasis supplied)

6. Key observations/ findings in the remand order of APTEL dated 18.10.2022 are as follows:

(i) Impact of levy of Environment Cess and Development Cess by the State of Chhattisgarh adds to the burden of RPL inasmuch as it is passed through against the procurement of fuel from sources in the State of Chhattisgarh (paragraph 5 of the order).

(ii) Carrying Cost is payable as per the provisions of PPA to compensate the affected party for time value of funds deployed on account of Change in Law events (paragraphs 7 to 11 of the order).

(iii) Liability to compensate for Change in Law events will arise from the date of actual supply of power rather than SDD, particularly, in a case where supply has commenced prior to SDD (paragraphs 13 and 14 of the order).

7. Pursuant to the remand order dated 18.10.2022 requiring MERC to compute the amounts payable by MSEDCL to RPL for restoring it to the same economic position as if the Change in Law event had not occurred, RPL filed an application (i.e., M.A. in Diary No.257 of 2022) before MERC with the following prayer:

(a) Direct MSEDCL to make payment of Rs.98.79 Cr. (including Carrying Cost of Rs.54.13 Cr.) in accordance with the order dated 18.10.2022 passed by APTEL in Appeal No.263 of 2