Electricity Act, 2003 — Ss. 61, 62, 63, 86(1)(b), 125 — Power Purchase Agreement (PPA) — Approval by State Commission — Alignment with Regulations — Date of Commercial Operation (COD) — “Unit” vs “Project” — Firm power vs Infirm power — Gas turbine open cycle operation — Amended PPA executed after enforcement of Electricity Act, 2003 without approval of State Commission — PPA defining COD with reference to “Project” and not “Unit” — CERC Tariff Regulations, 2004 and TNERC Regulations, 2005 defining COD separately for each generating unit — Continuous supply of electricity after synchronization of gas turbine in open cycle — Held, PPA inconsistent with statutory regulations and liable to be aligned — Power supplied after synchronization and continuous operation treated as firm power — Fixed charges payable on pro-rata basis — Concurrent findings of TNERC and APTEL upheld — Appeal dismissed.

Electricity Act, 2003 — Ss. 61, 62, 63, 86(1)(b), 125 — Power Purchase Agreement (PPA) — Approval by State Commission — Alignment with Regulations — Date of Commercial Operation (COD) — “Unit” vs “Project” — Firm power vs Infirm power — Gas turbine open cycle operation — Amended PPA executed after enforcement of Electricity Act, 2003 without approval of State Commission — PPA defining COD with reference to “Project” and not “Unit” — CERC Tariff Regulations, 2004 and TNERC Regulations, 2005 defining COD separately for each generating unit — Continuous supply of electricity after synchronization of gas turbine in open cycle — Held, PPA inconsistent with statutory regulations and liable to be aligned — Power supplied after synchronization and continuous operation treated as firm power — Fixed charges payable on pro-rata basis — Concurrent findings of TNERC and APTEL upheld — Appeal dismissed.

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B. ANALYSIS OF FACTS

1. The respondent-generator entered into a Power Purchase Agreement dated 29.04.1998, which was subsequently amended on 25.08.2004, for supply of electricity to the appellant-distribution licensee.

2. The generating station comprised gas turbine units capable of operating in open cycle and combined cycle modes.

3. The gas turbine in open cycle mode was synchronized with the grid on 29.10.2005, after successful testing, and supplied electricity on a continuous basis till 30.06.2006 (“relevant period”).

4. The appellant treated the power supplied during the relevant period as “infirm power”, contending that:

   • Commercial Operation Date (COD) under the PPA was only 01.07.2006, when combined cycle operation commenced, and

   • prior supply entitled the generator only to variable charges.

5. The respondent claimed that:

   • under applicable CERC Tariff Regulations, 2004 and TNERC Regulations, 2005, COD was unit-specific, and

   • power supplied after synchronization of the gas turbine unit constituted firm power, entitling it to fixed charges.

6. The Tamil Nadu Electricity Regulatory Commission (TNERC) held in favour of the respondent, directing payment of fixed charges for the relevant period.

7. The Appellate Tribunal for Electricity (APTEL) affirmed the TNERC’s decision.

8. Aggrieved, the appellant approached the Supreme Court under Section 125 of the Electricity Act, 2003.

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C. ANALYSIS OF LAW

1. Regulatory Supremacy over Contractual Terms

The Court reiterated that:

• Terms of a Power Purchase Agreement are not unregulated private contracts.

• Under Section 86(1)(b) of the Electricity Act, 2003, PPAs require approval and regulatory oversight.

• Even existing or amended PPAs must be aligned with statutory regulations framed under the Act.

Reliance was placed on:

• Tata Power Co. Ltd. v. Reliance Energy Ltd.

• KKK Hydro Power Ltd. v. HPSEB Ltd.

• PTC India Ltd. v. CERC

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2. Conflict between PPA and Tariff Regulations

The Court found a clear inconsistency between:

• The amended PPA, which defined COD with reference to the “Project” and required achievement of 47.52 MW, and

• The CERC Tariff Regulations, 2004 and TNERC Regulations, 2005, which:

  • define COD unit-wise, and

  • treat synchronization and successful trial run of a unit as the relevant COD for that unit.

The PPA’s failure to recognize unit-specific COD was held to be contrary to the regulatory framework.

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3. Firm Power vs Infirm Power

The Court held that:

• Under the Regulations, “Infirm Power” is electricity generated prior to commercial operation of the unit.

• Once a unit is synchronized, tested, and supplies power continuously and reliably, such power cannot be treated as infirm.

Applying the regulatory definitions, the power supplied by the respondent:

• after synchronization on 29.10.2005, and

• on a continuous basis,

was held to be firm power, entitling the generator to fixed charges in addition to variable charges.

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4. Estoppel, Waiver, and Correspondence

The Court rejected the appellant’s plea of waiver or estoppel based on correspondence between the parties, holding that:

• Such letters merely reflected differing understandings of COD, and

• Could not override the statutory definitions and regulatory mandate governing tariff and COD.

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5. Deference to Expert Regulatory Bodies

The Court emphasized that:

• TNERC and APTEL are expert bodies under the Electricity Act.

• Their concurrent findings, being consistent with statutory provisions and regulations, did not warrant interference under Section 125.

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D. DECISION / OPERATIVE PART

1. The Supreme Court held that:

   • The amended PPA was required to be aligned with the CERC and TNERC Tariff Regulations.

   • Power supplied by the respondent after synchronization of the gas turbine unit during the relevant period constituted firm power.

2. It was held that the respondent was entitled to fixed charges for the period from 29.10.2005 to 30.06.2006.

3. The judgments and orders passed by the TNERC and APTEL were affirmed.

4. The appeal was dismissed, with no order as to costs.

5. The appellant was directed to pay the balance amount, if any, within 12 weeks, after adjusting sums already paid pursuant to interim orders.