Case Note & Summary
The judgment involves two civil appeals concerning the determination of compensatory tariff for Change in Law events under long-term Power Purchase Agreements (PPAs) between distribution companies (DISCOMs) and generating companies. The core dispute arose from the shortfall in domestic coal supply, leading to the need for alternate coal procurement. The Maharashtra Electricity Regulatory Commission (MERC) had allowed compensation but restricted it based on minimum supply obligations and used the middle value of the assured coal grade for Gross Calorific Value (GCV) and the superior of bid SHR or MYT Regulations norms. The Appellate Tribunal for Electricity (APTEL) framed three issues regarding the correct basis for computing compensation. The Supreme Court analyzed the PPAs, the New Coal Distribution Policy (NCDP) 2007 and 2013, and the Ministry of Power's letter. The court held that for computing the quantity of alternate coal, the actual GCV as received should be used, not the middle value of the assured grade, as the latter does not reflect the actual shortfall. Regarding Station Heat Rate (SHR), the court held that the SHR as per the bid documents should be used, as it is the contractual basis. The court allowed the appeals, setting aside the MERC's orders on these points and remanding for fresh computation.
Headnote
A) Electricity Law - Change in Law - Compensation - Gross Calorific Value - The issue was whether the reference GCV for computing compensatory fuel charge should be the middle value of the assured coal grade or the actual GCV as received. The court held that the actual GCV as received should be used to reflect the true shortfall and compensation. (Paras 23-24) B) Electricity Law - Change in Law - Compensation - Station Heat Rate - The issue was whether the SHR submitted in the bid or the superior norm under MYT Regulations should be used. The court held that the SHR as per the bid should be used, as it forms the basis of the PPA. (Paras 23-24) C) Electricity Law - Change in Law - Compensation - Coal Shortfall - The court considered the impact of NCDP 2013 and MoP letter dated 31.07.2013 on the entitlement to compensation for alternate coal costs. Held that the cost of alternate coal procured to meet shortfall is a pass-through in tariff as a Change in Law event. (Paras 13-14)
Issue of Consideration
Whether the MERC was correct in determining the basis for computing Change in Law compensation under PPAs, specifically regarding the reference GCV of domestic coal and the SHR to be used.
Final Decision
The Supreme Court allowed the appeals, holding that for computing Change in Law compensation, the actual GCV as received should be used, and the SHR as per the bid documents should be used. The matter was remanded to MERC for fresh computation.
Law Points
- Change in Law
- compensatory tariff
- coal shortfall
- Gross Calorific Value
- Station Heat Rate
- Electricity Act 2003 Section 63
- Tariff Policy 2016
