Electricity Commission Has No Inherent Power To Alter Tariff Under PPA Between Power Generator, Distributor: SC [Read Judgment]

The Supreme Court has interpreted the width and amplitude of inherent powers of the State Electricity Regulatory Commission in Gujarat Urja Vikas Nigam Limited vs Solar Semiconductor Power Company, and has held that the tariff fixed in terms of power purchase agreement (PPA) between the power producer and distributor cannot be altered invoking inherent powers.

The separate but concurring judgments written by Justice Kurian Joseph and Justice R Banumathi examined the scope of powers of Electricity Regulatory Commission under the Electricity Act 2003.

The respondent was a power producing company, which had agreed to set up a solar power plant in Gujarat, and the appellant agreed to purchase and distribute the power generated by the respondent. The PPA executed by both the parties provided that for the projects commissioned before 31.12.2011, the tariff will be as per the tariff order of the Gujarat State Electricity Regulatory Commission (GSERC) issued on 29. 1.2010. The PPA further provided that for projects commissioned after 31.12.2011, the subsequent tariff order in force, or the tariff order dated 29.01.2010, whichever is lower, will be applicable. The projects of the respondent got delayed, and were commissioned only after 31.12.2011. But, the respondent wanted the benefit of higher tariff fixed as per tariff order dated 29.01.2010.

The power producer, therefore, petitioned the commission, seeking application of the higher tariff order issued in 2010. The commission initially refused and this led to appeal. The matter travelled up to Supreme Court, whereupon it was remanded back for fresh consideration. In the second round, the commission ordered the application of higher tariff for the power generated, even though the project was commissioned after the cut-off date fixed in the PPA. The commission justified this by stating that the delay was due to reasons beyond the control of the power generator and held that the commission could order so invoking inherent powers.

In the statutory appeal filed in the Supreme Court under Section 125 of the Electricity Act, the following issues arose for consideration:

• Whether the state commission has inherent powers to extend the control period of tariff order dated 29.01.2010 beyond the control period thereby adversely affecting the sanctity of PPA which was entered into by the parties by consensus-ad-idem?


• Whether the state commission can invoke regulations 80-82 of Conduct of Business Regulations-inherent powers of the commission to grant substantive relief to the generating company like respondent No.1 and thereby alter the terms of the contract arrived at between the parties consensus-ad-idem?

The Supreme Court found fault with the approach of the Commission, which fixed higher tariff under Tariff Order of 2010 in the teeth of clear stipulation in the PPA that lower amongst the Tariff Order of 2010 or subsequent prevalent tariff will be applicable in cases of projects commission after 31.12.2011.  Regarding the scope of inherent power, it was observed: The inherent power is not a provision of law to grant any substantive relief. But it is only a procedural provision to make orders to secure the ends of justice and to prevent abuse of process of the court.

It was also held that the rights and obligations of the parties flow from the terms and conditions of the PPA. A contract, being a creation of both the parties, is to be interpreted by having due regard to the actual terms settled between the parties. Reliance was also placed on the dictum in Gujarat Urja Vikas Nigam Limited vs EMCO Limited and Another (2016) 11 SCC 182, which had held that the power producer cannot go against the terms of PPA, and that the commission cannot modify the tariff fixed by the PPA. It was, therefore, held as follows: The Commission being a creature of statute cannot assume to itself any powers which are not otherwise conferred on it. In other words, under the guise of exercising its inherent power, as we have already noticed above, the Commission cannot take recourse to exercise of a power, procedure for which is otherwise specifically provided under the Act.