JUDGMENT

PER HON’BLE SMT. SEEMA GUPTA, TECHNICAL MEMBER (ELECTRICITY)

1. The present Appeal has been preferred by the Appellant - Tamil Nadu Generation and Distribution Corporation Limited (“TANGEDCO”) challenging the order dated 13.08.2024 passed by the Respondent No.1- Tamil Nadu Electricity Regulatory Commission ("TNERC/ State Commission") in DRP No. 3 of 2024, whereby the State Commission has allowed Respondent No. 2's claim for fixed costs and also directed the Appellant to make payment of such fixed costs along with interest at the rate of 12% per annum up to the date of actual payment.

2. The Appellant, Tamil Nadu Generation and Distribution Corporation Limited, is the distribution licensee for the State of Tamil Nadu and is wholly owned by the State Government and is the successor of the erstwhile Tamil Nadu Electricity Board, formed pursuant to its unbundling under a transfer scheme, in terms of Section 131 of the Electricity Act 2003 (“EA 2003”).

3. Respondent No. 1, The Tamil Nadu Electricity Regulatory Commission is a statutory body set up in accordance with the provisions of the EA 2003. Respondent No. 2, SEPC Power Private Limited (“SEPC”), is a power generating company and has set up a 525 MW coal- based thermal power plant in the State of Tamil Nadu.

4. The Appellant and the Respondent No. 2 executed a Power Purchase Agreement (“PPA”) for Tuticorin Thermal Power Project, Stage-IV – 01x525 MW (the “Project”) and Addendum 1 to the PPA was executed on 30.10.1998. Though the PPA was signed in 1998 but the project remained on paper for 12 years. It was only on 18.08.2009, after the Appellant expressed the need for power from the Project to meet the power requirement of the State, the Respondent No. 2 filed a Petition being M.P. No. 18 of 2010 before the State Commission, seeking directions for implementation of the Project. Pursuant to the directions of the Commission dated 09.05.2011, on 10.01.2012, the parties signed Addendum 2 to the PPA to incorporate norms in line with the TNERC (Terms and Conditions for determination of Tariff) Regulations 2005.

5. In the P.P.A.P. No. 5 of 2012 filed by Respondent No.2 seeking approval of Addendum 2 to the PPA, the State Commission vide its order dated 30.04.2015 approved the capital cost of INR 3514 Crores for the Project subject to condition that the Respondent No. 2 shall achieve financial closure within 3 months from the date of the order and that COD shall be achieved within a period of 39 months from such financial closure; The Respondent No. 2 achieved financial closure on 30.10.2015 and filed Petition M.P. No. 27 of 2016 seeking approval of the financial closure achieved on 30.10.2015. Thereafter, on 06.03.2018, the Respondent No.2 submitted the Coal Supply and Transportation Agreement (“CSTA”) executed on 09.02.2018 with Jera Global Markets Ltd. (“JERA”) and the Coal Handling Agreement (“CHA”) executed on 26.02.2018 with Seaport Logistics Pvt. Ltd. for the Appellant’s approval. The Appellant proposed that Variable Fixed Charge (“VFC”) shall be subject to ceiling mechanism based on domestic coal price and the Respondent No 2, by way of Affidavit filed before the State Commission offered a fixed discount for a period of three years, which were subject to review after three years.

7. On 10.01.2020, the State Commission passed an order in M.P. No. 27 of 2016, approving the revised financial closure date of 30.10.2015, the CHA and the CSTA, and directed that the revised Scheduled COD will be 6 months from the date of availing start-up power. The State Commission further issued directions to amend the CSTA, CHA and PPA as per the order and submit for its approval. In line with the directions issued in the State Commission Order, the Addendum 3 to the PPA was signed, in which ceiling mechanism was incorporated; the ceiling VFC was determined based on the annual merit order cut off, and where no such cut-off is determined or published, then on the basis of domestic coal price from T