The Supreme Court affirmed the decision of the Appellate Tribunal for Electricity and held that the Electricity Board would not indemnify as there was no provision in the amended Power Purchase Agreement (PPA) for compensation of full fixed charges and the actual variable charges in respect of short supply of energy.

The bench of Justice Ajay Rastogi and Justice C.T. Ravikumar observed that “The submission made by learned counsel for the appellant that because of the diversion of gas to the other generating stations of the Board, at least on this account, the Board could not have made the appellant to suffer by citing the terms of PPA, on the first blush appears to be attractive but has no legs to stand for the reason that in the absence of there being any provision for compensation for capacity charges and variable charges due to the fact that the plant was not able to maintain the normative availability/PLF on account of shortage of fuel in terms of the Central Government’s Tariff Regulations, 2004, at least the respondent Board cannot be said to be at fault...”

In this case, initially the appellant had filed a petition under Section 86(1)(f) of the Electricity Act 2003 (Act) whereby the Tamil Nadu Electricity Regulatory Commission disposed of the petition. The claim of the appellant relating to the unpaid fixed charges of Rs. 18.06 crores under Combined Cycle Operation as well as the claim of underpaid variable charges of Rs. 12.77 crores under Combined Cycle Operation were rejected.

Against the order of Regulatory Committee, the appellant preferred an appeal before, the Appellate Tribunal for Electricity which was dismissed. Assailing the order of Appellate Tribunal, the appellant approached the Apex Court by preferring an appeal under Section 125 of the Act.

Senior Advocate Parag P. Tripathi appeared for the appellant and Senior Advocate K. Radha Krishnan appeared for the respondent-Board.

The Counsel for the appellant contended that the shortage of gas supply was due to the diversion of gas by GAIL to other generating stations and therefore, the electricity board could not have made the appellant to suffer by citing the terms of PPA.

The Apex Court noted that appellant was an Independent Power producer, which supplied the entire power generated to the electricity board only. The PPA entered between the parties was entered based on notification of Government of India and in terms of the notification, any fuel supply risk was to be shared between the generator and fuel supplier and was not by the Board to indemnify.

“If there is any risk in the supply, the same has to be shared between the generator and the fuel supplier The notification has classified that the Board will not take any fuel supply risk and is not supposed to indemnify in the given situation.” observed the Court.

Moreover, there was a bi­-partite agreement executed between appellant and the GAIL, to which the respondent Board was not privy. Therefore, if any default was committed by GAIL in supply of natural gas to the appellant, the Board was not supposed to indemnify.

Accordingly, the appeal was dismissed.

Cause Title- M/s Penna Electricity Limited (Now M/s Pioneer Power Limited) v. The Tamil Nadu Electricity Board & Ors.

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