J U D G M E N T

1. These appeals arise from a judgment of the Appellate Tribunal for Electricity1 dated 26 July 2024.

2. Kerala State Electricity Board Limited, the appellant, floated two separate tenders for the procurement of power through a competitive bidding process under Section 63 of the Electricity Act 20032. The first was for procuring 450 MW of power and the second was for 400 MW.

1 “APTEL”

2 Signature Not Verified “Act”

Digitally signed by Chetan Kumar D 11a :t 3e 0: :2 50 02 I4 S. T10.14 1 Reason:

3. Two entities emerged as L1 bidders in respect of the two tenders which were floated. However, the L1 bidders did not bid for the entire tender quantum. The L1 bidder in the first bid offered to supply only 200 MW out of the total quantum of 450 MW. Similarly, the L1 bidder in the second bid offered to supply only 100 MW as against the 400 MW for which the bid had been invited. The appellant invited the other bidders to match the tariff quoted by the L1 bidders for the remaining quantum. None of the other bidders in the first bid were willing to match the tariff quoted by the L1 bidder therein. However, in relation to the second bid, the L2 to L5 bidders conveyed their willingness to match the tariffs quoted by the L1 bidder.

4. With regard to the first bid, despite the L2 bidder refusing to match the tariff of the L1 bidder, the appellant accepted its tariff for 115 MW and justified it on the ground that the tariff was competitive and less than the tariff quoted by the L1 bidder in the second bid. Since the tariff quoted by the remaining bidders in the first bid was either equal to or more than the tariff derived in the second bid, the appellant did not consider their offers. Therefore, in the first bid out of the tendered quantity of 450 MW, the appellant accepted offers for a quantum of 315 MW and issued letters of acceptance to L1 and L2 for 200 MW and 115 MW, respectively.

5. With regard to the second bid, the appellant accepted the offers of the L2, L3, L4 and L5 bidders, who matched the tariff quoted by the L1 bidder. As against the tendered quantity of 400 MW, the appellant accepted offers for a total quantum of 550 MW. The appellant justified this decision in view of the “likely power shortages in the forthcoming years” and on the ground that the tariff offered was competitive.

6. Seven Power Supply Agreements3 were accordingly executed with the various generators for a total quantum of 865 MW of power. The appellant sought the approval of the Kerala State Electricity Regulatory Commission4 to adopt the tariff laid down in the respective PSAs. The KSERC prima facie observed that the appellant had deviated from the standard bidding guidelines issued by the Ministry of Power, Government of India5 and failed to obtain prior approval from the KSERC or the Central Government in relation to these deviations. Accordingly, by an Order dated 30 August 2016, the KSERC approved the PSAs with the L1 bidders in both bids, but with regard to the remaining PSAs, it deferred the decision to obtain the approval of the Central Government and the views of the Government of Kerala with respect to the process of bidding which was adopted by the appellant.6

7. In view of the critical need for power procurement in the state, KSERC passed orders in 2016-2017 permitting the appellant to provisionally procure power from the generators and, as a consequence, the appellant states that it has been procuring power under the four PSAs since then till 2023.

3 “PSAs”

4 “KSERC”

5

“standard bidding guidelines”

OP No. 13 of 2015

8. In 2020, the appellant moved the KSERC seeking approval of the fuel surcharge rate under some of the unapproved PPAs in the second bid. The KSERC did not approve the fuel surcharge rate and directed the appellant to limit payment at the rate of the L1 bidder in the second bid until the PSAs were approved. The case travelled to the APTEL and in parallel, the appellant filed a petition before the KSERC seeking final orders on the appro