Case Note & Summary
Background: This civil appeal under Section 125 of the Electricity Act, 2003 was filed by M/s. KKK Hydro Power Limited against the judgment dated 17.10.2014 passed by the Appellate Tribunal for Electricity (APTEL) in Appeal No. 198 of 2013. That appeal arose from the order dated 05.07.2013 of the Himachal Pradesh Electricity Regulatory Commission (Commission), which dismissed the appellant's petition for payment of arrears at an enhanced tariff. The appeal also involved an application by the Commission to be impleaded as a party respondent, which was allowed. Facts: The Government of Himachal Pradesh and the appellant executed an Implementation Agreement and a Power Purchase Agreement (PPA) on 30.03.2000 for the establishment of the Baragran Hydro Electric Power Project of 3 MW capacity on Sanjoin Nallah, a tributary of River Beas in District Kullu. The PPA fixed the tariff at ₹2.50 per kWh, stating that the rate was firm and fixed and would not be changed for any reason. The Commission was constituted on 30.12.2000 under the Electricity Regulatory Commissions Act, 1998. The 3 MW project was commissioned on 05.08.2004. Later, the appellant sought augmentation of capacity to 4.90 MW, and a supplementary Implementation Agreement was executed on 05.07.2007. The Commission conditionally approved a draft PPA on 04.12.2007, subject to observations including that tariff and other terms and conditions of the PPA shall be subject to the Himachal Pradesh Electricity Regulatory Commission (Power Procurement from Renewable Sources and Cogeneration by Distribution Licensee) Regulations, 2007. A fresh PPA dated 11.03.2008 was executed for the revised capacity of 4.90 MW, retaining the ₹2.50/kWh fixed tariff but explicitly making it subject to the said Regulations. Pursuant to the Regulations, the Commission issued a Tariff Order on 18.12.2007 for small hydel projects not exceeding 5 MW, fixing the tariff at ₹2.87/kWh. After an APTEL remand, the Commission enhanced the tariff to ₹2.95/kWh by orders dated 09/10.02.2010. The appellant sought execution of a supplementary PPA with the enhanced tariff and filed a petition before the Commission. A supplementary PPA dated 10.09.2010 was executed enhancing the tariff to ₹2.95/kWh, but the HPSEB added a caveat that the enhancement was without prejudice to its legal rights. The HPSEB paid the enhanced tariff prospectively but arrears for the period from April 2008 to August 2010 remained unpaid. The appellant filed Petition No. 6 of 2011 seeking payment of ₹2,77,50,960 as arrears. During pendency, the HPSEB cleared the bill and released the first installment on 26.02.2011, leaving only the interest issue. Meanwhile, the HPSEB filed Petition No. 118 of 2012 seeking recall of the conditional approval order. Legal Issues: The Commission framed six issues: (1) whether the Commission has power to look into pre-existing agreements; (2) relevance of condition (v) in the consent letter; (3) binding force of Model PPA; (4) power to amend PPA and requirement of Commission approval; (5) conformity of executed PPA with approval; and (6) entitlement to directions. Before the APTEL, the central issue was whether the tariff for the original 3 MW plant and the additional 1.90 MW plant required redetermination under the Regulations and whether a common tariff should apply. Arguments: The appellant contended that the tariff was subject to the Regulations of 2007 and should be enhanced for the entire capacity, entitling it to arrears. The HPSEB contended that the original tariff was firm and fixed and sought recall of the approval, adding a caveat to the supplementary PPA. The Commission held that it lacked jurisdiction over pre-existing PPAs and that the parties should have aligned terms with the Regulations. Court's Analysis: The Commission dismissed both petitions, holding that it could not interfere with PPAs concluded before its existence and that the consent order was conditional but not liable to recall. On appeal, the APTEL distinguished between the two capacities: it held that the tariff for the 3 MW plant required no redetermination, but the tariff for the additional 1.90 MW plant required redetermination under the Regulations of 2007. Because the entire capacity was injected and evacuated from the same bus bars, the APTEL directed a common tariff as the weighted average of the tariffs for the two plants. The appellant was held entitled to arrears for the difference. Accordingly, the Commission's order was set aside to that extent, and the Commission was directed to pass a consequential order. Pursuant to this direction, the Commission fixed the tariff at ₹2.60/kWh by order dated 11.06.2015, and the parties executed a supplementary PPA dated 03.11.2015 incorporating this tariff effective from 14.07.2008. Decision: The provided judgment text ends at paragraph 15 and does not include the Supreme Court's final operative decision. The extracted records show that the appeal is pending before the Supreme Court and the final outcome is not available in the supplied excerpt.
Headnote
A) Electricity Law - Regulatory Jurisdiction - Power of Commission over Pre-Existing Agreements - Electricity Act, 2003, Sections 86(1)(b) and 125; Electricity Regulatory Commissions Act, 1998 - The Commission held that it lacked power to look into PPAs executed prior to its existence, as neither the Act of 2003 nor the Regulations of 2007 provided for such interference. This issue arose from Petition Nos. 6 of 2011 and 118 of 2012 regarding tariff enhancement and recall of conditional approval. Held that the Commission's consent order was conditional and the parties were required to align PPA terms with the Regulations of 2007, but the APTEL later clarified the extent of redetermination for additional capacity only (Paras 1, 6, 8, 15). B) Electricity Law - Tariff Determination for Renewable Energy - Redetermination of Tariff for Additional Hydel Capacity - Himachal Pradesh Electricity Regulatory Commission (Power Procurement from Renewable Sources and Cogeneration by Distribution Licensee) Regulations, 2007; Electricity Act, 2003, Section 86(1)(b) - The APTEL held that the tariff for the original 3 MW plant required no redetermination, but the tariff for the additional 1.90 MW plant commissioned on 10.07.2008 required redetermination as per the Regulations of 2007. The Commission's conditional approval and the PPA clause made tariff subject to these Regulations, and the Tariff Order for small hydel projects applied to such capacity. Held that the distinction between the two plants directed separate tariff treatment, with the additional capacity eligible for redetermined tariff (Paras 3, 8-10). C) Electricity Law - Common Tariff for Combined Capacity - Weighted Average Tariff - Electricity Act, 2003, Section 86(1)(b) - Since the entire capacity of the power project was injected and evacuated from the same bus bars, the APTEL directed that a common tariff for the whole project should be determined as the weighted average of the tariffs for the 3 MW and 1.90 MW plants. The appellant was also held entitled to arrears on account of the difference in tariff for the period already paid at the existing tariff. Held that the weighted average approach harmonized the dual tariff structure while preserving entitlement to arrears (Para 3). D) Electricity Law - Amendment and Approval of Power Purchase Agreement - Supplementary PPA and Caveat - Electricity Act, 2003, Section 86(1)(b) - The parties executed a supplementary PPA on 10.09.2010 enhancing tariff to ₹2.95/kWh, but HPSEB added a caveat that the enhancement was without prejudice to its legal rights. The Commission observed that parties ought to have worked out terms after due consideration of the Regulations, and later the APTEL set aside the Commission's order to the extent of rejecting redetermination. Held that a supplementary PPA executed without fresh approval may still be subject to regulatory scrutiny and that unresolved issues were to be addressed in consequential orders (Paras 3, 12-13).
Issue of Consideration
Whether the tariff for the appellant's 3 MW and additional 1.90 MW hydel power plants required redetermination under the Himachal Pradesh Electricity Regulatory Commission (Power Procurement from Renewable Sources and Cogeneration by Distribution Licensee) Regulations, 2007, and whether the appellant was entitled to arrears at a common weighted average tariff.
Law Points
- Power Purchase Agreement tariff fixed clause subject to regulatory regulations
- Commission's conditional approval under Section 86(1)(b) of Electricity Act 2003
- Tariff redetermination under HP Electricity Regulatory Commission Regulations 2007
- Weighted average tariff for combined capacity
- Commission lacked power to review pre-existing PPAs
- APTEL directed redetermination for additional capacity
