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Diversion of gas to other stations, not enough ground to seek compensation: SC dismisses appeal

Supreme court recently dismissed an appeal while assailing the judgement given by the appellate tribunal for electricity and held that the electricity board would not indemnify if there was no provision regarding compensation of full fixed charges and actual variable charges in the power purchase agreement (PPA) in respect of the short supply of energy. 

Initially, the Tamil Nadu electricity regulatory commission disposed of the petition by order dated 30th December 2011, rejecting the claim of the appellant relating to unpaid fixed chargesof Rs.18.06 under Combined Cycle Operation as well as the claim of underpaid variable charges of Rs. 12.77 crores under Combined Cycle Operation for the period between 1st July 2006 to 15th June 2009. This decision was challenged by the appellant in the appellate tribunal for electricity which dismissed the appeal under impugned judgement. The appellant approached supreme court through an appeal under section 125 of the Act. 

Mr Parag P. Tripathi, learned senior counsel for the appellant submits, “it was incumbent upon the Tribunal to have considered that the short supply of gas was due to the diversion of gas to other generating stations and on this account, the 4 Tamil Nadu Electricity Board (hereinafter being referred to as the “Board”) could not have made the appellant  suffer by citing the terms of the PPA.” there   was   sufficient evidence   on   record   regarding   the   communication   between   Gas Authority of India Limited(GAIL) and the Board in reference to the diversion of gas to other generating stations and this has seriously impaired the functionality and efficiency of the appellant company.”, it further mentioned

The court noted that the PPA was not approved under section 86(1)(b) of the electricity act, 2003. There was no clause in PPA which provided for full fixed costs. It clearly mentioned that the fuel supply risk would be shared between the producer and supplier and the board would not be responsible to indemnify. 

“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 12 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 and that was the reason prevailed upon the Commission to arrive at the conclusion that the appellant was not entitled to payment of fuel fixed charges and actual variable charges in respect of supply of energy between 1st July, 2006 and 15th June, 2009 during the period when partial parameters were rejected because of shortage of supply in view of the provision in PPA or tariff regulations.” The court stated in its order while dismissing the appeal. 

[Penna Electricity Limited (Now M/s Pioneer Power Limited) v. The Tamil Nadu Electricity Board & Ors.]

Written by: Shagun Behal

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