This judgment shall dispose of CWP Nos. 7649, 8285, 8426,8427, 8472, 8492, 8531 and 8532 of 2010 as common questions of law are involved in the petitions.
No Acts & Articles mentioned in this case
High Court of H.P.IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
CWP Nos.7649, 8285, 8426, 8427, 8472,
8492, 8531 and 8532 of 2010-J.
Judgment reserved on : 02/23.07.2013.
Date of decision: 06.08.2013.
1. CWP No.7649 of 2010.
Himachal Pradesh State Electricity Board Limited. ….Petitioner.
Versus
Himachal Pradesh Electricity Regulatory Commission and another.
….Respondents.
2. CWP No.8285 of 2010.
Himachal Pradesh State Electricity Board Limited. ….Petitioner.
Versus
Himachal Pradesh Electricity Regulatory Commission and another.
….Respondents.
3. CWP No.8426 of 2010.
Himachal Pradesh State Electricity Board Limited. ….Petitioner.
Versus
Himachal Pradesh Electricity Regulatory Commission and another.
….Respondents.
4. CWP No.8427 of 2010.
Himachal Pradesh State Electricity Board Limited. ….Petitioner.
Versus
Himachal Pradesh Electricity Regulatory Commission and another.
….Respondents.
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5. CWP No.8472 of 2010.
Himachal Pradesh State Electricity Board Limited. ….Petitioner.
Versus
Himachal Pradesh Electricity Regulatory Commission and another.
….Respondents.
6. CWP No.8492 of 2010.
Himachal Pradesh State Electricity Board Limited. ….Petitioner.
Versus
Himachal Pradesh Electricity Regulatory Commission and another.
….Respondents.
7. CWP No.8531 of 2010.
Himachal Pradesh State Electricity Board Limited. ….Petitioner.
Versus
Himachal Pradesh Electricity Regulatory Commission and another.
….Respondents.
8. CWP No.8532 of 2010.
Himachal Pradesh State Electricity Board Limited. ….Petitioner.
Versus
Himachal Pradesh Electricity Regulatory Commission and another.
….Respondents.
Coram
The Hon’ble Mr. Justice A.M. Khanwilkar, Chief Justice.
The Hon’ble Mr. Justice Kuldip Singh, Judge.
Whether approved for reporting?
1
Yes
Whether the reporters of the local papers may be allowed to see the Judgment?
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For the Petitioner(s) : Mr. Shrawan Dogra, Advocate with
Ms.Nishi Goel, Advocate.
For the Respondents : Mr. N.K.Sood, Senior Advocate with
Mr.Aman Sood, Advocate, for
respondent No.1 in CWP Nos.8426,
7649,8285,8427,8472, 8492, 8531 and
8532 of 2010.
Mr.Ajay Vaidya and Ms. Jyotsna
Rewal Dua, Advocates, fo r
respondent No.2 in CWP No.8426 of
2010.
Ms.Jyotsna Rewal Dua, Advocate, for
respondent No.2 in CWP No.8427 of
2010.
Mr.Ajay Vaidya, Advocate, for
respondent No.2 in CWP No s.7649,
8492, 8531 and 8532 of 2010.
Mr.Nimish Gupta, Advocate, for
respondent No.2 in CWP No.8472 of
2010.
Mr.Tarun Johri, Advocate with
Ms.Akanksha Sharma, Advocate, for
respondent No.2 in CWP No.8285 of
2010.
Kuldip Singh, Judge.
This judgment shall dispose of CWP Nos. 7649, 8285, 8426,
8427, 8472, 8492, 8531 and 8532 of 2010 as common questions of law
are involved in the petitions.
2. In all petitions, Annexure P-2 Himachal Pradesh Electricity
Regulatory Commission (Power Procurement from Renewable Sources
and Co-generation by Distribution Licensee) (First Amendment)
Regulations, 2007 dated 12.11.2007 and Annexure P -13 order dated
29.10.2009 of respondent No.1 reviewing order dated 18.12.2007 have
been assailed. Annexure P-14 passed by respondent No.1 on different
dates in favour of respondent No.2 in each petition fixing enhanced tariff
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has also been assailed. In order to appreciate the controversy, it is
necessary to give relevant facts of each petition.
CWP No.7649 of 2010.
3. It has been pleaded that Electricity Act, 2003 (for short ‘2003
Act’) came into force on 10.06.2003. The respondent No.1 in purported
exercise of powers under Sections 62, 86 and 181 of the Act vide
notification dated 18.06.2007 framed Himachal Pradesh Electricity
Regulatory Commission (Power Procurement from Renewable Sources
and Co-generation by Distribution Licensee) Regulations, 2007 (for short
‘2007 Regulations’). The regulation 6 provides determination of tariff for
electricity from renewable sources. The first amendment in the 2007
Regulations was carried through by Himachal P radesh Electricity
Regulatory Commission (Power Procurement from Renewable Sources
and Co-generation by Distribution Licensee) (First Amendment)
Regulations, 2007 (for short ‘Amended Regulations’) which were notified
on 12.11.2007. The second proviso to sub-regulation (1) of Regulation 6
was amended through amended regulation.
4. In State of Himachal Pradesh many projects were
established for generation of electricity from renewable sources of energy
before coming into force of the 2003 Act. There had been separate
Power Purchase Agreements (PPAs) between the Independent Power
Producer (IPP) and the then Himachal Pradesh State Electricity Board
which are being honoured by the petitioner. An Implementation
Agreement (IA) is entered between the State Government and the
Independent Power Producer (IPP) before a project is established.
Implementation Agreement contains broad terms and conditions for
establishment of power project in the State. The respondent No.2, an
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Independent Power Producer, has also established a power project in
the State of Himachal Pradesh from renewable sources of energy and
has executed an Implementation Agreement with the State of Himachal
Pradesh. Clause 13.3 of the Implementation Agreement of respondent
No.2 provides that the Company shall ensure minimum flow of water
immediately downstream of the weir/barrage/dam for downstream
requirements as directed by the Government/State Pollution Control
Board.
5. In order to give incentives to the power producers in the
power sector for non-conventional/renewable sources of energy, the
Central Government decided to fix rates at which power generated by
Small Hydro Power Producers was to be purchased. The Ministry of
Non-Conventional Energy Sources (MNES), Government of India, issued
policy guidelines for this purpose. On the basis of these policy
guidelines, the Department of Science and Technology and Environment,
Government of India, issued notification dated 22.11.1994 which was
revised on 13.08.1999 and 29.08.1999 giving incentives for the
development of micro hydel power projects. As per these notifications,
the price of the power was fixed at `2.25 per unit if the developers were
desirous of selling the power to petitioner. On 06.05.2000 the rate was
increased to `2.50 per unit with no escalation for projects upto 3MW. On
29.12.2000 the incentives available to Small Hydro Projects upto the
capacity of 3MW were extended to the projects having capacity upto
5MW.
6. In the year 2003, respondent No.1 approved Model Power
Purchase Agreement for Small Hydro Power Projects upto 5MW
approving tariff per unit for purchase of power generated from renewable
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sources of energy `2.50 per unit. It has been pleaded that even if Power
Purchase Agreement is framed on the basis of Model Power Purchase
Agreement, still the mutually agreed Power Purchase Agreement is
required to be approved by respondent No.1 on joint petition filed by
concerned Independent Power Producer and petitioner before Power
Purchase Agreement is finalized and executed between the parties.
7. The respondent No.2 for the sale of power, on 18.03.2006
has entered into a Power Purchase Agreement with petitioner
knowingfully well the tariff fixed for Small Hydro Power Projects from
renewable sources. The para 6.2 of Power Purchase Agreement
provides that Board shall pay for the net saleable energy delivered by the
Board at the interconnection point at a fixed rate of `2.50 per unit/per
kilowatt hour. This rate is firm and fixed without indexation and
escalation and shall not be changed due to any reason whatsoever. The
Power Purchase Agreement dated 18.03.2006 executed between
petitioner and respondent No.2 was approved by respondent No.1 before
its execution. In all Power Purchase Agreements approved by
respondent No.1 after July, 2006, there was a stipulation that the terms
and conditions of the Power Purchase Agreements would be subject to
Regulations intended to be framed by the Commission in near future.
8. The State of Himachal Pradesh reviewed its earlier policy
and formulated Hydro Policy of Himachal Pradesh, 2006 (for short ‘2006
Policy’) making it obligatory for developers to cater to stipulations such as
mandatory 15% water release, LADA charges, payment of revised
compensation to fisheries and towards use of forest land etc. The new
policy maintained the tariff at the rate of `2.50 per unit/per kilowatt hour.
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9. The 2007 R egulations contained second proviso to sub-
regulation 6(1) providing inapplicability of the provisions of Regulations in
question with respect to concluded contracts executed before the framing
of such Regulations. However, impugned amendment dated 12.11.2007
nullified the said inapplicability clause. Therefore, respondent No.1 vide
order dated 18.12.2007 determined a generic tariff at the rate of `2.87
per unit for Small Power Projects upto 5 MW
10. Techman Infra Limited another IPP filed Appeal No.50 of
2008 against the order dated 18.12.2007 before Appellate Tribunal for
Electricity (APTEL). The petitioner also challenged order dated
18.12.2007 before APTEL as Appeal No.65 of 2008. Appeal No.50 of
2008 and Appeal No.65 of 2008 were decided by APTEL by common
order dated 18.09.2009 and partly allowed the appeals.
11. The respondent No.1 in pursuance of order dated
18.09.2009 of APTEL took up the matter again and passed order dated
09.02.2010 and increased generic tariff for Small Hydro Projects upto
5 MW at ` 2.95 per unit as against `2.87 per unit determined vide order
dated 18.12.2007. The petitioner filed Review Petition No.85 of 2010
against the order dated 09.02.2010 which was dismissed on 31.07.2010.
12. It has been pleaded that in cases where PPAs were
executed before notification of the 2007 Regulations or in cases with
respect to PPAs containing no stipulation to the effect that tariff would be
as determined on the basis of Regulations to be framed by respondent
No.1, the new tariff determined by respondent No.1 cannot be made
effective to the PPAs executed before the date of order or before coming
into force of 2007 Regulations.
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13. The respondent No.2 after order dated 18.12.2007 filed
Petition No.11 of 2008 for re-determination of tariff. Some other IPPs
also filed similar petitions before respondent No.1 for re-determination of
tariff even where the PPAs were executed much before the date of
notification of 2007 Regulations. The respondent No.1 on 29.10.2009
held that respondent No.1 has authority to reopen even concluded
contracts. It was also held that tariff would be re-determined separately
in individual cases. The petition No.11 of 2008 of respondent No.2 was
taken up separately and vide order dated 13.05.2010, respondent No.1
enhanced the tariff by 08 paise per unit from `2.50 per unit to `2.58 per
unit primarily on account of impact of 15% mandatory release of water
down stream etc. The respondent No.2 filed Review Petition No.121 of
2010 against the order dated 13.05.2010 which is still pending before
respondent No.1.
14. It has been alleged that concluded contract between
petitioner and Independent Power Producer cannot be changed without
the mutual consent of the parties or where for such change authority is
given in the contract. It has been alleged that respondent No.1 could not
have exercised such authority nor regulation authorizing such action
could be made by respondent No.1. The assumed illegal power gathered
by respondent No.1 by way of impugned amendment cannot be allowed
to change the concluded contract. The impugned action of respondent
No.1 is contrary to common law.
15. The mandate to release particular quantity of water gives no
cause to respondent No.2 to claim re-determination or enhancement of
tariff as determination of tariff had already been done after due
consideration and such determination had been agreed b y petitioner
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and respondent No.2. The petitioner has, thus, assailed Annexures
P-2, P-13 and P-14 dated 13.05.2010.
16. The respondent No.1 has filed reply and has taken some
preliminary submissions. It has been stated that tariff regulations for
Small Hydro Projects were made on 18.06.2007 in pursuance of powers
conferred on respondent No.1 under Section 62 read with Section 181 of
the Act. The respondent No.1 has jurisdiction to make regulations in
matters relating to tariff. The challenge to regulations by petitioner is not
based on lack of jurisdiction. The petitioner has not identified any
provision of the Act to which the amended regulations notified by
respondent No.1 can be held to be inconsistent with. The regulations
were amended after public hearing. The petitioner participated in the said
proceedings, but did not raise any issue which now has been raised in
the petition.
17. The petitioner does not bear the cost of power purchase
and as such is not immediately affected by the application of the
amended regulations. The amended regulations have negligible impact
on the consumer tariff in the State of Himachal Pradesh. The petitioner is
not a person aggrieved. The respondent No.1 has passed additional
costs that are incurred by the developer of a power project on account of
local area development charges, forest charges and increase in
mandatory release of water etc. In normal Power Purchase Agreements
and other supply contracts, new taxes and levies are always passed on
to the buyers. The proviso to regulations clearly underlines the role of
respondent No.1 in the process for considering the effect of change in
statutory laws, rules or government policy on tariff.
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18. On merits, it has been pleaded that 2007 regulations have
not been challenged by the petitioner. As regards regulation 6, the
respondent No.1 has taken the stand that the determination of the tariff is
a legislative function which is discharged by respondent No.1 under the
2003 Act. The respondent No.1 does not become functus officio once it
has determined tariff and/or approved Power Purchase Agreement. The
respondent No.1 has power to revisit tariff, if so required. The role and
function of respondent No.1 has to be seen in the light of mandate of
Section 61 (c) (h) of 2003 Act which mandates the respondent No.1 to
promote investment in generation as well as co-generation and
generation of electricity through renewable sources by giving promotional
tariff. The respondent No.1 under Section 86(1) (e) of 2003 Act has
power to promote co-generation and generation of electricity from
renewable sources.
19. The State Government after the execution of Power
Purchase Agreement by respondent No.2 on 18.03.2006 brought 2006
Policy and changed the policy in relation to water release, LADA and
payment of revised compensation to fisheries and towards use of forest
land. At the time of execution of Power Purchase Agreement, the
respondent No.2 could not have agreed to enhance statutory payments
which were introduced by subsequent policy. The function of
determination of tariff was vested with respondent No.1, Power Purchase
Agreements executed had to be approved by respondent No.1 in
discharge of its statutory functions. The respondent No.1 has not visited
any of the cost parameters that were involved in fixing the tariff at `2.50
per unit per kilowatt hour except allowing new statutory levies which were
not in existence on the date when the tariff was fixed and Power
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Purchase Agreement was approved. The fixing of tariff pursuant to
approval of Model Power Purchase Agreement does not in any manner
affect the statutory jurisdiction of respondent No.1 to regulate tariff of a
generating company for sale to a distribution licensee.
20. The project has a lifecycle of nearly 40 years, therefore, it
cannot be said that respondent No.1 will not have the ability to revisit
tariff during those 40 years. The respondent No.1 has defended the
regulations and amendment carried out in the regulations, so also all
decisions taken by respondent No.1. It has been reiterated that
respondent No.1 has jurisdiction to frame the regulations, carry out
amendments in the regulations in conformity with the 2003 Act and to
revisit tariff fixed in the Power Purchase Agreements between petitioner
and power producers.
21. The respondent No.2 has filed separate reply and has taken
several preliminary objections. It has been pleaded that Section 86(1)(e)
of 2003 Act empowers respondent No.1 to promote co-generation and
generation from renewable sources of energy by providing suitable
measures of connectivity with the grid and sale of electricity to any
person, and also to specify percentage of renewable energy to be
procured as renewable purchase obligation for distribution licensee. The
Section 61(h) of 2003 Act further authorizes respondent No.1 to specify
the terms and conditions for determination of tariff, and in doing so, shall
be guided by co-generation and generation of electricity from renewable
sources. The Section 181 of 2003 Act empowers respondent No.1 to
make regulations. The respondent No.1 was well within its powers to
frame regulations and fix tariff even in the presence of executed contracts
between petitioner and respondent No.2. It has been pleaded that no
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fundamental or constitutional right of the petitioner has been infringed,
the writ petition is not maintainable.
22. On merits, it has been pleaded that 2006 Policy was
formulated after the Power Purchase Agreement between petitioner and
respondent No.2. Therefore, at the time of execution of the Power
Purchase Agreement, the respondent No.2 could not have agreed to
enhance statutory payments which were introduced after the execution of
the Power Purchase Agreement between petitioner and respondent No.2.
It has been pleaded that as per Clause 8.8 of the Power Purchase
Agreement between petitioner and respondent No.2, the petitioner is
under obligation to reimburse to respondent No.2 levies, taxes, duties,
cess etc. imposed by the Government subsequent to the execution of
Power Purchase Agreement. The respondent No.2 has defended
regulations and the amendment carried out in the regulations. The
respondent No.2 has also defended increase in tariff allowed by
respondent No.1 in favour of respondent No.2. The petitioner has filed
separate rejoinders.
CWP No.8285 of 2010.
23. The pleaded case in CWP No.8285 of 2010 of the petitioner
is almost similar as pleaded in CWP No.7649 of 2010. However, in CWP
No.8285 of 2010 Power Purchase Agreement between respondent No.2
and petitioner, according to petitioner, was executed on 05.07.2004.
Similarly, after the order dated 18.12.2007 of respondent No.1,
respondent No.2 filed petition for re-determination of tariff which was
registered Petition No.184 of 2008 and was decided by respondent No.1
vide separate order dated 16.07.2010 and enhanced the tariff by 29
paise per unit from `2.25 per unit to `2.54 per unit primarily on account of
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impact of 15% mandatory release of water downstream etc. The
respondent No.2 has filed Appeal No.179 of 2010 before Appellate
Tribunal for Electricity against the order dated 16.07.2010 seeking further
enhancement, which appeal is still pending. The petitioner has, thus,
assailed Annexures P -2, P-13 and P -14 dated 16.07.2010 on almost
similar grounds as pleaded in CWP No.7649 of 2010. The respondents
have filed no reply(s).
CWP No.8426 of 2010.
24. In this petition also, petitioner has almost taken the same
pleas as in CWP No.7649 of 2010. However, in this petition, Power
Purchase Agreement between respondent No.2 and petitioner was
executed on 21.04.2004. The respondent No.2 after order dated
18.12.2007 of respondent No.1 filed Petition No.62 of 2008 for
re-determination of tariff. Several Independent Power Producers also
filed petitions for re-determination of tariff even where Power Purchase
Agreements were executed before notification of 2007 Regulations. The
respondent No.1 on 29.10.2009 answered the common question by
holding that respondent No.1 had authority to reopen even concluded
contracts. The Petition No.62 of 2008 was taken up separately by
respondent No.1 and on 22.05.2010 in the case of respondent No.2 tariff
was enhanced by 3 paise per unit from `2.50 per unit to `2.53 per unit
primarily on account of impact of 15% mandatory release of water
downstream etc. The respondent No.2 was not satisfied with the
enhancement given by respondent No.1, therefore, respondent No.2
had filed Review Petition No.108 of 2010 seeking review of order dated
22.05.2010 which is still pending. The petitioner has, thus, assailed
Annexures P-2, P-13 and P-14 dated 22.05.2010. The respondent No.1
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has filed reply and has taken similar stand as pleaded by respondent
No.1 in reply filed in CWP No.7649 of 2010. The respondent No.2 has
also filed the reply and has taken similar stand as taken by respondent
No.2 in CWP No.7649 of 2010. The petitioner has filed common rejoinder
to the replies of respondents No.1 and 2 with submission to adopt the
rejoinders filed by petitioner in CWP No.7649 of 2010.
CWP No.8427 of 2010.
25. The petitioner in this petition has also taken almost similar
pleas as taken by petitioner in CWP No.7649 of 2010, but Power
Purchase Agreement between respondent No.2 and petitioner was
executed on 07.06.2004. The respondent No.2 after the order dated
18.12.2007 of respondent No.1 filed Petition No.70 of 2008 for
re-determination of tariff. Several Independent Power Producers filed
petitions for re-determination of tariff even where Power Purchase
Agreements were executed before notification of 2007 Regulations. The
respondent No.1 on 29.10.2009 answered the common question by
holding that respondent No.1 had authority even to reopen concluded
contracts. The Petition No.70 of 2008 was taken up separately by
respondent No.1 and on 22.05.2010 in the case of respondent No.2 tariff
was enhanced by 15 paise per unit from `2.50 per unit to `2.65 per unit
primarily on account of impact of 15% mandatory release of water
downstream etc. The respondent No.2 was not satisfied with the
enhancement given by respondent No.1, therefore, respondent No.2
filed Review Petition No.135 of 2010 seeking review of order dated
22.05.2010 which is still pending. The petitioner has, thus, assailed
Annexures P-2, P-13 and P-14 dated 22.05.2010. The respondent No.1
has filed reply on the same lines as in reply filed in CWP No.7649 of
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2010. The respondent No.2 has not filed reply. The petitioner has filed
common rejoinder to the replies of respondents No.1 and 2 with
submission to adopt the rejoinders filed by petitioner in CWP No.7649 of
2010.
CWP No.8472 of 2010.
26. In this petition also, the petitioner has taken similar pleas as
taken by petitioner in CWP No.7649 of 2010, but Power Purchase
Agreement between respondent No.2 and petitioner was executed on
24.06.2004. The respondent No.2 after the order dated 18.12.2007 of
respondent No.1 filed Petition No.97 of 2008 for re-determination of tariff.
Several Independent Power Producers also filed petitions for
re-determination of tariff in their cases even where Power Purchase
Agreements were executed much before the date of notification of 2007
Regulations. All these petitions were taken together for determination of
question as to whether respondent No.1 had jurisdiction and power to re-
determine the tariff, particularly, in respect of the concluded contracts.
The respondent No.1 vide order dated 29.10.2009 answered the
common question by holding that respondent No.1 had authority to
reopen even the concluded contracts. The Petition No.97 of 2008 was
taken up independently and on 05.06.2010, the tariff in the case of
respondent No.2 was enhanced 14 paise per unit from `2.50 per unit to
`2.64 per unit primarily on account of impact of 15% mandatory release
of water downstream etc. The respondent No.2 was not satisfied with the
enhancement made by respondent No.1, therefore, respondent No.2 filed
Review Petition No.142 of 2010 seeking review of the order dated
05.06.2010 for further enhancement of tariff. The Review Petition is still
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pending. The petitioner has, thus, assailed Annexures P -2, P-13 and
P-14 dated 05.06.2010.
27. The respondent No.1 has filed the reply on the same lines as
in CWP No.7649 of 2010. The respondent No.2 has filed separate reply
and took several preliminary objections. The respondent No.2 has
pleaded that 2007 Regulations as amended vide notification dated
12.11.2007 are valid. The petitioner having submitted to the jurisdiction
of respondent No.1 is estopped from challenging the said regulations.
The respondent No.1 has been empowered to frame regulations
consistent with 2003 Act. The framing of regulations is a legislative
function of respondent No.1. The petition is not maintainable on account
of delay and laches. The petition is only an afterthought and a counter-
blast to the orders passed by respondent No.1 for reopening the
concluded Power Purchase Agreement. The making of tariff is a
continuous process which can be amended or altered. The said power
can be exercised by respondent No.1 on the application of generating
Company or on its own motion. The Power Purchase Agreement dated
24.06.2004 between petitioner and respondent No.2 was one sided
contract. It is the duty of the respondent No.1 to invoke Section 86(1)(e)
to issue appropriate directions with a view to promote generation of
electricity from renewable source of energy. This calls for reopening of
Power Purchase and wheeling agreements by respondent No.1. The
impugned regulations do not infringe any constitution right of petitioner.
The orders dated 29.10.2009 and 05.06.2010 passed by respondent
No.1 have attained finality without any appeal.
28. On merits, it has been pleaded that one of the legislative
function of respondent No.1 is to frame regulations which would promote
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co-generation and generation of electricity from renewable sources of
energy. The respondent No.1 has power and jurisdiction to reopen Power
Purchase Agreements. The impugned regulations are in conformity with
2003 Act and National Electricity Policy, 2005, which mandates the
promotion of generation of electricity through renewable source or non-
conventional source of energy. The State Government has reviewed its
earlier policy and formulated 2006 Policy making it obligatory to the
developers to cater to stipulations such as mandatory water release of
15% of the minimum river flow observed, LADA charges and
compensation to fisheries, payment towards use of forest land as lease
to Revenue Department etc. which were not in existent when tariffs were
announced in 2000. The 2006 Policy has come into effect with
retrospective effect and has not considered the impact of these changes
on fixed tariff. There is no illegality in amending the regulations. The
petitioner has filed common rejoinder to the replies of respondents No.1
and 2 with submission to adopt the rejoinders filed by petitioner in CWP
No.7649 of 2010.
CWP No.8492 of 2010.
29. The petitioner has taken almost similar pleas in this petition
as taken in CWP No.7649 of 2010, but Power Purchase Agreement
between respondent No.2 and petitioner was executed on 20.07.2004.
The respondent No.2 after the order dated 18.12.2007 of respondent
No.1 filed Petition No.5 of 2009 for re-determination of tariff. Several
Independent Power Producers also filed petitions for re-determination of
tariff even where Power Purchase Agreements were executed before the
notification of 2007 Regulations. All these petitions were taken up
together for determination of common question as to whether the
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respondent No.1 had jurisdiction and power to determine the tariff,
particularly in respect of concluded contracts. The respondent No.1 vide
order dated 29.10.2009 answered the common question that it has
authority to reopen even concluded contracts. The Petition No.5 of 2009
was taken separately and as per order dated 08.06.2010, the tariff in the
case of respondent No.2 was enhanced by 5 paise per unit from `2.50
per unit to `2.55 per unit primarily on account of impact of 15%
mandatory release of water downstream etc. The respondent No.2 was
not satisfied with the enhancement made by respondent No.1 and filed
Review Petition No.137 of 2010 seeking review of order dated
08.06.2010, which petition is still pending. The petitioner has, thus,
assailed Annexures P-2, P-13 and P-14 dated 08.06.2010.
30. The respondent No.1 has filed reply on similar lines as in
reply filed in CWP No.7649 of 2010. The respondent No.2 has also
contested the petition by filing separate reply which is on same lines as
filed by respondent No.2 in CWP No.7649 of 2010. The petitioner has
filed common rejoinders to the replies of respondents No.1 and 2 with
submission to adopt the rejoinders filed by petitioner in CWP No.7649 of
2010.
CWP No.8531 of 2010.
31. The petitioner in this petition has also taken similar pleas as
taken by petitioner in CWP No.7649 of 2010, but Power Purchase
Agreement between respondent No.2 and petitioner was executed on
28.04.2004. The respondent No.2 after the order dated 18.12.2007 of
respondent No.1 filed Petition No.43 of 2008 for re-determination of tariff.
Several Independent Power Producers also filed petitions for
re-determination of tariff even where the Power Purchase Agreements
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were executed before the notification of 2007 Regulations. The
respondent No.1 on 29.10.2009 answered the common question by
holding that respondent No.1 had authority to reopen even concluded
contracts. The Petition No.43 of 2008 was taken up separately by
respondent No.1 and vide order dated 10.06.2010, tariff in the case of
respondent No.2 was enhanced by 15 paise per unit from `2.50 per unit
to `2.65 per unit primarily on account of impact of mandatory release of
15% water downstream etc. The petitioner has, thus, assailed Annexures
P-2, P-13 and P-14 dated 10.06.2010.
32. The respondent No.1 has contested the petition by filing
reply on the same lines as filed by respondent No.1 in CWP No.7649 of
2010. The respondent No.2 has also contested the petition by filing reply
on the same lines as filed by respondent No.2 in CWP No.7649 of 2010.
The petitioner has filed common rejoinder to the replies of respondents
No.1 and 2 with submission to adopt the rejoinders filed by petitioner in
CWP No.7649 of 2010.
CWP No.8532 of 2010.
33. In this petition also, petitioner has taken similar pleas as
taken by petitioner in CWP No.7649 of 2010, but Power Purchase
Agreement between respondent No.2 and petitioner was executed on
28.04.2004. The respondent No.2 after the order dated 18.12.2007 of
respondent No.1 filed Petition No.53 of 2008 for re-determination of tariff.
Several Independent Power Producers also filed petitions for
re-determination of tariff even where Power Purchase Agreements were
executed before notification of 2007 Regulations. The respondent No.1
on 29.10.2009 held that it had authority to reopen even concluded
contracts. The respondent No.1 proceeded to decide Petition No.53 of
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2008 separately and vide order dated 08.06.2010 enhanced the tariff in
the case of respondent No.2 by 5 paise per unit from `2.50 per unit to
`2.55 per unit primarily on account of impact of 15% mandatory release
of water downstream etc. The respondent No.2 was not satisfied with the
enhancement made by respondent No.1 and filed Review Petition
No.139 of 2010 seeking review of order dated 08.06.2010, which is still
pending. The petitioner has, thus, assailed Annexures P -2, P-13 and
P-14 dated 08.06.2010.
34. The respondents No.1 and 2 have contested the petition by
filing separate replies on the same lines as filed by them separately in
CWP No.7649 of 2010. The petitioner has filed common rejoinder to the
replies of respondents No.1 and 2 with submission to adopt rejoinders
filed by petitioner in CWP No.7649 of 2010.
35. We have heard learned counsel appearing for the parties.
We have also gone through the written submissions of the learned
counsel for the parties. Mr. Shrawan Dogra, Advocate, for the petitioner,
has submitted that the State Commission had framed the Himachal
Pradesh Electricity Regulatory Commission (Terms and Conditions for
Determination of Tariff) Regulations, 2004, dated 08.06.2004 (for short
‘2004 Regulations’) in exercise of powers conferred by sub-section (1),
and clause (zd) of sub-section (2) of Section 181 and all other enabling
powers under the Act. The Regulation 4 of said regulations provides for
determination of tariff, whereas, Regulation 5 provides guiding factors for
determination of tariff. The State Commission after framing 2004
Regulations has exhausted its power for framing regulations providing
terms and conditions for determination of tariff and has no jurisdiction for
framing 2007 Regulations. In any case, 2004 Regulations still hold the
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field as those have not been repealed by 2007 Regulations. The 2004
Regulations do not provide revisiting of State Commission to determine
tariff in concluded contracts. The delegatee has no powers other than
powers delegated. The State Commission has no jurisdiction to amend,
alter or modify the Power Purchase Agreements by framing regulations.
The amendment carried out by the State Commission in 2007
Regulations retrospectively taking away vested rights of the parties by
way of Power Purchase Agreements is wrong, illegal and without
jurisdiction. The dispute with respect to concluded contracts can be
determined by Civil Court or in a given situation by the High Court while
exercising extraordinary jurisdiction.
36. Mr.Shrawan Dogra, Advocate, further submitted that the
Power Purchase Agreements have been executed by the Independent
Power Producers with the petitioner after approval of the State
Commission. The concluded contracts between petitioner and
Independent Power Producers cannot be reopened by the State
Commission. The power to frame regulations under 2003 Act to the
State Commission cannot be extended to the extent to empower itself to
revisit tariff after reopening concluded contracts between the petitioner
and Independent Power Producers. Only with the mutual consent of the
parties the concluded contracts can be reopened. There is nothing in
concluded Power Purchase Agreements between petitioner and
Independent Power Producers authorizing the State Commission to
reopen concluded contracts.
37. Ms. Jyotsna Rewal Dua, Advocate, has submitted that
petitioner has challenged amended regulations dated 12.11.2007, but
2007 Regulations dated 18.06.2007 have not been challenged. In other
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words, jurisdiction of State Commission to frame 2007 Regulations dated
18.06.2007 has not been questioned. The authority h aving power to
frame the regulations has power to amend the regulations. The petitioner
while challenging the amended regulations dated 12.11.2007 has not
pleaded violation of any specific provision of 2003 Act for framing those
regulations. The fixing of tariff by the State Commission under 2003 Act
is not static. The State Commission in a given situation is under
obligation to intervene, amend and modify the tariff in accordance with
2003 Act, Rules and Regulations. The State Commission has taken note
of 2006 Policy requiring the Independent Power Producers to fulfill some
new conditions. In that scenario, the State Commission has revised the
tariff which cannot be said to be illegal.
38. Mr.Ajay Vaidya, Advocate, while reiterating the submissions
made by Ms.Jyotsna Rewal Dua, Advocate, has submitted that petitioner
cannot derive advantage from Power Purchase Agreements even though
executed with the approval of the State Commission. He has submitted
that Independent Power Producer had no bargaining power while
executing Power Purchase Agreement. The State Commission has
jurisdiction to amend 2007 Regulations dated 18.06.2007 by way of
amendment dated 12.11.2007. At the time of execution of Power
Purchase Agreements, the new obligations required to be fulfilled by
Independent Power Producers under 2006 Policy were not in existence,
therefore, the new obligations could not be factored in the Power
Purchase Agreements approved by the State Commission. Under these
circumstances, according to learned counsel, re-determination of tariff by
the State Commission after 2006 Policy cannot be said to be wrong,
illegal. Ms. Akanksha Sharma, Advocate, has reiterated the submissions
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made by Ms. Jyotsna Rewal Dua, Advocate and Mr.Ajay Vaidya,
Advocate.
39. Mr.N.K.Sood, Senior Advocate, appearing on behalf of the
State Commission, in all the petitions, has fairly submitted that the State
Commission is neither to advance the case of the petitioner nor of other
respondents. The Commission is to project its case before the Court. He
has submitted that the State Commission has jurisdiction to amend 2007
Regulations by way of amendment dated 12.11.2007 and thereafter to
revisit tariff. According to Mr.Sood, the tariff fixed by the State
Commission is always open to amendment, modification in accordance
with law in case of change in factors for determination of tariff. The
determination of tariff cannot be construed to the extent that once tariff is
fixed then under no circumstance tariff can be changed. The State
Commission will be failing in its duty for not re-determining the tariff even
if it is so required in law. The learned Senior Advocate has supported all
orders passed by the State Commission and regulations framed and
amended by the State Commission from time to time.
40. On the basis of submissions made by learned counsel for
the parties, the following points emerge for determination:-
(i) Whether the Himachal Pradesh Electricity Regulatory
Commission (HPERC) had jurisdiction under the
Electricity Act, 2003, to amend the Himachal Pradesh
Electricity Regulatory Commission (Power
Procurement from Renewable Sources and
Co-generation by Distribution Licensees, Regulations),
2007, by the Himachal Pradesh Electricity Regulatory
Commission ( Power Procurement from Renewable
Sources and Co-generation by Distribution Licensees)
(First Amendment), Regulations 2007 retrospectively
taking away vested rights crystallized by way of
concluded contract in the form of Power Purchase
Agreements.
(ii) Whether HPERC created under the Electricity Act,
2003, can give to itself powers to adjudicate upon the
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subject-matter of dispute falling under the jurisdiction
of Civil Court or extraordinary jurisdiction of the High
Court like adjudication of the effect of Power Purchase
Agreement, a concluded contract.
(iii) Whether Power Purchase Agreement which is
required to be approved by HPERC before executing
by both the parties is a statutory contract and whether
HPERC has jurisdiction to amend, alter or modify such
Power Purchase Agreement by framing regulations.
41. In order to appreciate the controversy, it is appropriate to
refer to certain relevant provisions of the Act:-
“61.Tariff regulations.-The Appropriate Commission shall,
subject to the provisions of this Act, specify the terms and conditions
for the determination of tariff, and in doing so, shall be guided by the
following, namely:-
(a) the principles and methodologies specified by the Central
Commission for determination of the tariff applicable to
generating companies and transmission licensees;
(b) the generation, transmission, distribution and supply of
electricity are conducted on commercial principles;
(c) the factors which would encourage competition,
efficiency, economical use of the resources, good
performance and optimum investments;
(d) safeguarding of consumers’ interest and at the same
time, recovery of the cost of electricity in a reasonable
manner;
(e) the principles rewarding efficiency in performance;
(f) multi-year tariff principles;
(g) that the tariff progressively, reflects the cost of supply of
electricity, and also, reduces and eliminates cross-
subsidies within the period to be specified by the
Appropriate Commission;
(h) the promotion of co-generation and generation of
electricity from renewable sources of energy;
(i) the National Electricity Policy and tariff policy:
Provided that the terms and conditions for determination of
tariff under the Electricity (Supply) Act, 1948 (54 of 1948), the
Electricity Regulatory Commissions Act, 1998 (14 of 1998) and the
enactments specified in the Schedule as they stood immediately
before the appointed date, shall continue to apply for a period of one
year or until the terms and conditions for tariff are specified under
this section, whichever is earlier.”
“62. Determination of tariff.- (1) The Appropriate Commission shall
determine the tariff in accordance with the provisions of this Act for
–
(a) supply of electricity by a generating company to a
distribution licensee:
Provided that the Appropriate Commission may, in case
of shortage of supply of electricity, fix the minimum and
maximum ceiling of tariff for sale or purchase of electricity in
pursuance of an agreement, entered into between a
generating company and a licensee or between licensees,
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for a period not exceeding one year to ensure reasonable
prices of electricity;
(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity;
Provided that in case of distribution of electricity in the same
area by two or more distribution licensees, the Appropriate
Commission m ay, for promoting competition among distribution
licensees, fix only maximum ceiling of tariff for retail sale of
electricity.
(2) The Appropriate Commission may require a licensee or a
generating company to furnish separate details, as may be specified
in respect of generation, transmission and distribution for
determination of tariff.
(3) The Appropriate Commission shall not, while determining
the tariff under this Act, show undue preference to any consumer of
electricity but may differentiate according to the consumer’s load
factor, power factor, voltage, total consumption of electricity during
any specified period or the time at which the supply is required or
the geographical position of any area, the nature of supply and the
purpose for which the supply is required.
(4) No tariff or part of any tariff may ordinarily be amended,
more frequently than once in any financial year, except in respect of
any changes expressly permitted under the terms of any fuel
surcharge formula as may be specified.
(5) The Commission may require a licensee or a generating
company to comply with such procedure as may be specified for
calculating the expected revenues from the tariff and charges which
he or it is permitted to recover.
(6) If any licensee or a generating company recovers a price or
charge exceeding the tariff determined under this section, the
excess amount shall be recoverable by the person who has paid
such price or charge along with interest equivalent to the bank rate
without prejudice to any other liability incurred by the licensee.”
“64. Procedure for tariff order.- (1) An application for determination
of tariff under section 62 shall be made by a generating company or
licensee in such manner and accompanied by such fee, as may be
determined by regulations.
(2) Every applicant shall publish the application, in such
abridged form and manner, as may be specified by the Appropriate
Commission.
(3) The Appropriate Commissioner shall, within one hundred
and twenty days from receipt of an application under sub-section
(1) and after considering all suggestions and objections received
from the public,-
(a) issue a tariff order accepting the application with
such modifications or such conditions as may be
specified in that order;
(b) reject the application for reasons to be recorded in
writing if such application is not in accordance with
the provisions of this Act and the rules and
regulations made thereunder or the provisions of any
other law for the time being in force:
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Provided that an applicant shall be given a
reasonable opportunity of being heard before
rejecting his application.
(4) The Appropriate Commission shall, within seven days of
making the order, send a copy of the order to the Appropriate
Government, the Authority, and the concerned licensees and to the
person concerned.
(5) Notwithstanding anything contained in Part X, the tariff
for any inter-State supply, transmission or wheeling of electricity, as
the same may be, involving the territories of two States may, upon
application made to it by the parties intending to undertake such
supply, transmission or wheeling, be determined under this section
by the State Commission having jurisdiction in respect of the
licensee who intends to distribute electricity and make payment
therefor.
(6) A tariff order shall, unless amended or revoked, continue
to be in force for such period as may be specified in the tariff order.”
“86. Functions of State Commission.- (1) The State
Commission shall discharge the following functions, namely:-
(a) determine the tariff for g eneration, supply,
transmission and wheeling of electricity, wholesale,
bulk or retail, as the case may be, within the State:
Provided that where open access has been
permitted to a category of consumers under
section 42, the State Commission shall determine
only the wheeling charges and surcharge thereon,
if any, for the said category of consumers;
(b)regulate electricity purchase and procurement
process of distribution licensees including the price at
which electricity shall be procured from the
generating companies or licensees or from other
sources through agreements for purchase of power
for distribution and supply within the State;
(c) facilitate intra-State transmission and wheeling of
electricity;
(d) issue licences to persons seeking to act as
transmission licensees, distribution licensees and
electricity traders with respect to their operations
within the State;
(e) promote cogeneration and generation of electricity
from renewable sources of energy by providing
suitable measures for connectivity with the grid and
sale of electricity to any person, and also specify,
for purchase of electricity from such sources, a
percentage of the total consumption of electricity in
the area of a distribution licensee;
(f) adjudicate upon the disputes between the licensees
and generating companies and to refer any dispute
for arbitration;
(g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with the Grid
Code specified under clause (h) of sub-section (1) of
section 79;
(i) specify or enforce standards with respect to quality,
continuity and reliability of service by licensees;
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(j) fix the trading margin in the intra-State trading of
electricity, if considered, necessary;
(k) discharge such other functions as may be assigned
to it under this Act.
(2) The State Commission shall advise the State
Government on all or any of the following matters, namely:-
(i) promotion of competition, efficiency and economy
in activities of the electricity industry;
(ii)promotion of investment in electricity industry;
(iii)reorganization and restructuring of electricity
industry in the State;
(iv)matters concerning generation, transmission,
distribution and trading of electricity or any other
matter referred to the State Commission by that
Government;
(3) The State Commission shall ensure transparency while
exercising its powers and discharging its functions.
(4) In discharge of its functions, the State Commission
shall be guided by the National Electricity Policy, National Electricity
Plan and Tariff Policy published under section 3.”
“173. Inconsistency in laws.- Nothing contained in this Act or
any rule or regulation made thereunder or any instrument having
effect by virtue of this Act, rule or regulation shall have effect in so
far as it is inconsistent with any other provisions of the Consumer
Protection Act, 1986 (68 of 1986) or the Atomic Energy Act, 1962
(33 of 1962) or the Railways Act, 1989 (24 of 1989).”
“174. Act to have overriding effect.- Save as otherwise
provided in section 173, the provisions of this Act shall have effect
notwithstanding anything inconsistent therewith contained in any
other law for the time being in force or in any instrument having
effect by virtue of any law other than this Act.”
“181.Powers of State Commissions to make regulations.- (1)
The State Commissions may, by notification, make regulations
consistent with this Act and the rules generally to carry out the
provisions of this Act.
(2) In particular and without prejudice to the generality of the
power contained in sub-section (1), such regulations may provide
for all or any of the following matters, namely:-
(a) period to be specified under the first proviso
of section 14;
(b) the form and the manner of application under
sub-section (1) of section 15;
(c) the manner and particulars of application for
licence to be published under sub-section (2)
of section 15;
(d) the conditions of licence under section 16;
(e) the manner and particulars of notice under
clause (a) of sub-section (2) of section 18;
(f) publication of the alterations or amendments
to be made in the licence under clause ( c)
of sub-section (2) of section 18;
(g) levy and collection of fees and charges from
generating companies or licensees under
sub-section(3) of section 32;
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(h) rates, charges and the terms and conditions
in respect of intervening transmission facilities
under proviso to section 36;
(i) payment of the transmission charges and a
surcharge under sub-clause (ii) of clause (d)
of sub-section(2) of section 39;
(j) reduction and elimination of surcharge and
cross subsidies under second proviso to sub-
clause (ii) of clause (d) of sub-section (2) of
section 39;
(k) manner and utilization of payment of
surcharge under the fourth proviso to sub-
clause (ii) of clause (d) of sub-section (2) of
section 39;
(l) payment of the transmission charges and a
surcharge under sub-clause(ii) of clause ( c)
of section 40;
(m) reduction and elimination of surcharge and
cross subsidies under second proviso to sub-
clause (ii) of clause ( c) of section 40;
(n) the manner of payment of surcharge under
the fourth proviso to sub-clause (ii) of clause
( c) of section 40;
(o) proportion of revenues from other business
to be utilized for reducing the transmission
and wheeling charges under proviso to
section 41;
(p) reduction and elimination of surcharge and
cross-subsidies under the third proviso to sub-
section (2) of section 42;
(q) payment of additional charges on charges of
wheeling under sub-section (4) of section 42;
(r) guidelines under sub-section (5) of section
42;
(s) the time and manner for s ettlement of
grievances under sub-section (7) of section
42;
(t) the period to be specified by the State
Commission for the purposes specified under
sub-section(1) of section 43;
(u) methods and principles by which charges for
electricity shall be fixed under sub-section(2)
of section 45;
(v) reasonable security payable to the distribution
licensee under sub-section(1) of section 47;
(w) payment of interest on security under sub-
section (4) of section 47;
(x) electricity supply code under section 50;
(y) the proportion of revenues from other
business to be utilized for reducing wheeling
charges under proviso to section 51;
(z) duties of electricity trader under sub-section
(2) of section 52;
(za) standards of performance of a licensee or a
class of licensees under sub-section (1) of
section 57;
(zb) the period within which information to be
furnished by the licensee under sub-section
(1) of section 59;
(zc) the period within which the cross-subsidies
shall be reduced and eliminated under clause
(g) of section 61;
(zd) the terms and conditions for determination of
tariff under section 61;
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(ze) details to be furnished by licensee or
generating company under sub-section(2) of
section 62;
(zf) the methodologies and procedures for
calculating the expected revenue from tariff
and charges under sub-section (5) of section
62;
(zg) the manner of making an application before
the State Commission and the fee payable
therefor under sub-section (1) of section 64;
(zh) issue of tariff order with modifications or
conditions under sub-section (3) of section
64;
(zi) the manner by which development of market
in power including trading specified under
section 66;
(zj) the powers and duties of the Secretary of the
State Commission under sub-section (1) of
section 91;
(zk) the terms and conditions of service of the
secretary, officers and other employees of
the State Commission under sub-section(2) of
section 91;
(zl) rules of procedure for transaction of
business under sub-section (1) of section 92;
(zm) minimum information to be maintained by a
licensee or the generating company and the
manner of such information to be maintained
under sub-section(8) of section 128;
(zn) the manner of service and publication of
notice under section 130;
(zo) the form of preferring the appeal and the
manner in which such form shall be verified
and the fee for preferring the appeal under
sub-section(1) of section 127;
(zp) any other matter which is to be, or may be,
specified.
(3) All regulations made by the State Commission under this Act
shall be subject to the condition of previous publication.”
42. Regulation 6 of 2007 Regulations is as follows:-
“6. Determination of Tariff for electricity from Renewable sources:
(1) The Commission shall, by a general or special order,
determine the tariff for the purchase of energy from renewable
sources and co-generation by the distribution licensee, or the State
Transmission Utility or the transmission licensee, engaged in the
activity of bulk purchase and sale of electricity to the distribution
licensee;
Provided that the Commission may determine tariff including
augmentation costs of the grid beyond interconnection point-
(i) by a general order, for small hydro projects not exceeding 5
MW capacity;
and
(ii) by a special order, for small hydro projects of more than 5
MW and not exceeding 25 MW capacity, on individual project basis:
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Provided further that, unless otherwise provided in the PPA,
the PPA approved by the Commission, prior to the commencement
of these regulations, shall continue to apply for such period as
mentioned in the PPA:
Provided further that the Commission shall adopt the tariff if
such tariff has been determined through transparent process of
bidding in accordance with the guidelines issued by the Central
Government.
(2) The Commission shall determine the tariff separately for
each category of renewable source mentioned in clause (m) of
regulation 2.
(3) While deciding the terms and conditions of tariff for energy
from renewable sources and co-generation, the Commission shall,
as far as possible, be guided by the principles and methodologies
specified by the Central Commission, the National Electricity Policy,
the Tariff Policy and the tariff regulations notified by the Central
Commission.
Provided that the Commission, may for sufficient reasons
and after exercising due diligence and applying prudency check,
deviate from the terms and conditions of the generation tariff
notified by the Central Commission:
(4) While determining the tariff, the Commission may, to the
extent possible consider to permit an allowance based on
technology, fuel, market risk, environmental benefits and social
contribution etc., of each type of renewable source.
(5) While determining the tariff, the Commission shall consider
appropriate operational and financial parameters.
(6) The tariff for small hydro projects not exceeding 5 MW
capacity determined by the Commission shall be applicable for a
period of 40 years from the date as notified by the Commission;
(7) The tariff for small hydro projects not exceeding 5 MW
capacity, determined by the Commission is subject to review after
every 5 years and such revised tariff shall be applicable to power
purchase agreements entered into after that date.”
43. The Regulation 3 of Amended Regulations vide which
amendment has been carried out in Regulation 6 of 2007 Regulations
with effect from 12.11.2007 is as follows:-
“3. Amendment of regulation 6.- In sub-regulation (1) of regulation 6
of the said regulations,-
(a) the words “or the State Transmission Utility or the
transmission licensee, engaged in the activity of bulk
purchase and sale of electricity to the distribution
licensee” shall be omitted;
(b) in the first proviso the words “ including augmentation
costs of the grid beyond interconnection point” shall
be omitted;
and
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(c) for the second proviso, the following proviso shall be
substituted, namely:-
“Provided further that,-
(i) where the power purchase agreement,
approved prior to the commencement of
these regulations, is not subject to the
provisions of the Commission’s regulations on
power procurement from renewable sources;
or
(ii) where, after the approval of the power
purchase agreements, there is change in the
statutory laws, or rules, or the State Govt.
Policy;
the Commission, in order to promote co-generation or
generation of electricity from renewable sources of energy,
may, after recording reasons, by an order, review or modify
such a power purchase agreement or a class of such power
purchase agreements.”
44. As per Section 61 of 2003 Act, the State Commission shall
specify the terms and conditions for determination of tariff and shall be
guided by factors mentioned in that Section. The Section 61(h) provides
that the State Commission shall take into consideration the promotion of
co-generation and generation of electricity from renewable sources of
energy. The Section 62 provides determination of tariff in accordance
with 2003 Act. Sub-section (4) of Section 62 provides for amendment of
tariff as per restrictions provided therein. The procedure for tariff order is
provided in Section 64 and sub-section (6) of Section 64 provides that a
tariff order shall, unless amended or revoked continue to be in force for
such period as may be specified in tariff order. The functions of the State
Commission are provided in Section 86 and clause (e) of sub-section (1)
of Section 86 is to promote co-generation and generation of electricity
from renewable sources of energy by providing suitable measures for
connectivity with the grid and sale of electricity to any person and also
specify for purchase of electricity from such sources, a percentage of the
total consumption of electricity in the area of a distribution licensee. The
Section 174 of the Act provides overriding effect of the Act, whereas,
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Section 181 provides powers of State Commission to make regulations.
Clause (zd) of sub-section (2) of Section 181 refers to the terms and
conditions for determination of tariff under Section 61. The Central
Commission has also more or less similar powers under 2003 Act.
Points No.(i),(ii) & (iii).
45. The Points No.(i),(ii) and (iii) are interconnected and
overlapping, therefore, all of them are taken up collectively for
determination. The Section 181 provides making of regulations consistent
with 2003 Act and Rules by the State Commission to carry out the
provisions of 2003 Act. On behalf of the petitioner, it has been contended
that State Commission has framed 2004 Regulations and, therefore,
exhausted the power given to it under 2003 Act. The 2007 Regulations
have been framed beyond the regulations making power of the State
Commission. The 2007 Regulations do not provide repeal of 2004
Regulations and, therefore, 2007 Regulations cannot co-exist in the
presence of 2004 Regulations covering the same field. These
contentions have no force. In the first place, the petitioner has not
challenged the validity of 2007 Regulations. The petitioner has
challenged the validity of amendment carried out in 2007 Regulations on
12.11.2007. The Regulation 7 of 2007 Regulations provides
notwithstanding anything contained contrary in the HPERC (Terms and
Conditions for determination of Tariff) Regulations, 2004, and in the
HPERC (Terms and Conditions for Open Access) Regulations, 2005,
framed by the Commission under Section 181 of the Act, 2007
Regulations dated 18.06.2007 shall have overriding effect. Therefore,
the field covered by 2007 Regulations dated 18.06.2007 has overriding
effect over 2004 Regulations.
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46. It has been contended on behalf of the petitioner that the
State Commission has no jurisdiction under 2003 Act to amend
regulations by way of amendment carried out in the regulations on
12.11.2007 to take away vested rights crystallized in the form of Power
Purchase Agreements between petitioner and Independent Power
Producers. The reliance has been placed upon Mst. Rafiquennessa
versus Lal Bahadur Chetri (since deceased) and after him his legal
representatives and others AIR 1964 SC 1511. In that case, efficacy of
Section 5 of the Assam Non-Agricultural Urban Areas Tenancy Act, 1955,
was considered by the Supreme Court. The Assam Non-Agricultural
Urban Areas Tenancy Act, 1955, was passed and published in the
gazette on 06.07.1955 during the pendency of the appeal. It has been
held what is prohibited by Section 5(1)(a) is the eviction of the tenant,
and so, inevitably, the section must come into play for the protection of
the tenant even at the appellate stage when it is clear that by the
proceedings pending before the appellate Court, the landlord is seeking
to evict the tenant, and that obviously indicates that the pending
proceedings are governed by Section 5(1)(a), though they may have
been initially instituted before coming into force of the Assam Non-
Agricultural Urban Areas Tenancy Act, 1955. It has been held that the
High Court was right in coming to the conclusion that the dispute
between the parties must be governed by the provisions of Section 5(1)
(a). This judgment in no case supports the case of petitioner.
47. In support of the submissions that regulations cannot be
framed retrospectively unless specifically provided in 2003 Act, the
learned counsel for the petitioner has relied upon Hukam Chand etc.
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versus Union of India and others AIR 1972 SC 2427, wherein it has
been held as follows:-
“6…….Perusal of Section 40 shows that although the power of
making rules to carry out the purposes of the Act has been
conferred upon the Central Government, there is no provision in the
section which may either expressly or by necessary implication
show that the Central Government has been vested with power to
make rules with retrospective effect. As it is Section 40 of the Act
which empowers the Central Government to make rules, the rules
would have to conform to that section. The extent and amplitude of
the rule making power would depend upon and be governed by the
language of the section. If a particular rule were not to fall within the
ambit and purview of the section, the Central Government in such
an event would have no power to make that rule. Likewise, if there
was nothing in the language of S.40 to empower the Central
Government either expressly or by necessary implication, to make a
rule retroactively, the Central Government would be acting in excess
of its power if it gave retrospective effect to any rule. The
underlying principle is that unlike Sovereign Legislature which has
power to enact laws with retrospective operation, authority vested
with the power of making subordinate legislation has to act within
the limits of its power and cannot transgress the same. The initial
difference between subordinate legislation and the statute laws lies
in the fact that a subordinate law making body is bound by the terms
of its delegated or derived authority and that Court of law, as a
general rule, will not give effect to the rules, thus made, unless
satisfied that all the conditions precedent to the validity of the rules
have been fulfilled (see Craies on Statute Law, p.297 Sixth Edition).”
48. The learned counsel for the petitioner has also relied upon
the State of Madhya Pradesh and others versus Tikamdas AIR 1975
SC 1429, in which it has been held as follows:-
“5……..There is no doubt that unlike legislation made by a
sovereign Legislature, subordinate legislation made by a delegate
cannot have retrospective effect unless the rulemaking power in
the concerned statute expressly or by necessary implication
confers power in this behalf……..”
49. In Bihar State Electricity Board and another versus Usha
Martin Industries and another (1997) 5 SCC 289 after noticing
Electricity (Supply) Act, 1948, it has been held that the tariff is fixed by
exercise of statutory powers. It is not fixed as a result of any bargaining
by and between the Board and the consumers. The consumer has no
option but to pay the tariff fixed by the Board in exercise of the powers
conferred by Section 49. Again, in Pawan Alloys & Casting Pvt. Ltd.,
Meerut versus U.P. State Electricity Board and others (1997) 7 SCC
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251, it has been held that the Board exercises its statutory powers under
Section 49(1) of the Act by fixing uniform rates of tariff for electricity
charges.
50. The Supreme Court in West Bengal Electricity Regulatory
Commission versus CESC Ltd. (2002) 8 SCC 715 and after noticing
the Electricity Regulatory Commissions Act, 1998 and other statutory
provisions held that collective reading of Sections 22, 29, 30 leaves no
room of doubt that under the 1998 Act, it is the Commission and the
Commission alone which is authorized to determine the tariff and the
State Commission has rightly understood its statutory obligation. In
BSES Ltd. versus Tata Power Co. Ltd. and others (2004) 1 SCC 195,
it has been held that the legal position has undergone a complete change
with the enforcement of the Electricity Regulatory Commissions Act,
1998. In view of Section 29 of the Act, the tariff for intra-State
transmission of electricity and tariff for supply of electricity in wholesale,
bulk or retail has to be determined by the Electricity Regulatory
Commission of the State and a licensee cannot by its unilateral action
enhance the charges.
51. In Binani Zinc Limited versus Kerala State Electricity
Board and others (2009) 11 SCC 244, the Supreme Court has held as
follows:-
“31. The State Electricity Boards are entitled to frame tariff in terms
of the provisions contained in the 1948 Act. The tariff so framed is
legislative in character. The Board as a statutory authority is bound
to exercise its jurisdiction within the four corners of the statute. It
must act in all fields including the field of framing tariff by adopting
the provisions laid down in the 1948 Act or the Rules and the
Regulations framed thereunder.”
“41. We have, however, no hesitation in finding that the State
Electricity Board had the requisite jurisdiction to revise a tariff till
such time as the Commission was constituted and the purposes of
the 1998 Act could be achieved through it. Till the time the
Regulatory Commission was not constituted by the State of Kerala,
the power to determine tariff remained with the Board under the
Electricity (Supply) Act, 1948 as it was not repealed by the
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Electricity Regulatory Commissions Act, 1998. Parliament could not
have intended to bring about a situation where no authority would
be empowered to determine the tariff between the date of coming
into force of the ERC Act, 1998 and the constitution of the
Commission. It is only after the Regulatory Commission is
constituted that it will be the sole authority to determine the tariff.”
52. In Transmission Corporation of Andhra Pradesh Limited
and another versus Sai Renewable Power Private Limited and
others (2011) 11 SCC 34, the Supreme Court has held as follows:-
“36. Fixation of tariff is, primarily, a function to be performed by the
statutory authority in furtherance to the provisions of the relevant
laws. We have already noticed that fixation of tariff is a statutory
function as specified under the provisions of the Reform Act, 1998;
the Electricity Regulatory Commissions Act, 1998 and the Electricity
Act, 2003. These functions are required to be performed by the
expert bodies to whom the job is assigned under the law. For
example, Section 62 of the Electricity Act, 2003 requires an
appropriate Commission to determine the tariff in accordance with
the provisions of the Act. The Regulatory Commission has been
constituted and notified under the provisions of Section 3 read with
Section 11 of the Reform Act, 1998 which in terms of Sections 11(1)
(c) and (e) is expected to fix the tariff as well as the terms of
licence.”
53. There is no doubt that under the Electricity (Supply) Act,
1948 (for short ‘1948 Act’) the Board had the jurisdiction to fix the tariff.
The State Commission has the power to determine the tariff under the
Electricity Regulatory Commission Act, 1998. In fact, power and
jurisdiction of the State Commission to determine and fix the tariff under
2003 Act has not been disputed by any side, what has been argued on
behalf of the petitioner is that c oncluded contract, tariff fixed with the
approval of the Commission between petitioner and Independent Power
Producers before the enforcement of 2007 Regulations in the form of
Power Purchase Agreements cannot be reopened by the State
Commission through backdoor by amending Regulation 6 of 2007
Regulations on 12.11.2007. The argument of the petitioner is that
Regulation 6 of 2007 Regulations cannot be amended by the State
Commission retrospectively to revisit concluded contracts between
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petitioner and Independent Power Producer. The very jurisdiction of the
State Commission to amend Regulation 6 of 2007 has been questioned.
54. In all the petitions, the Power Purchase Agreements of
Independent Power Producers with the petitioner with the approval of the
State Commission are before the amendment of Regulation 6.
Therefore, relevant facts of CWP No.7649 of 2010 on the point are
enough to understand the controversy. In CWP No.7649 of 2010, Power
Purchase Agreement between petitioner and respondent No.2 was
executed on 18.03.2006 fixing tariff at the rate of `2.50 per unit per kilo
watt per hour. There is no dispute that Power Purchase Agreement
dated 18.03.2006 was approved by the State Commission before
execution. Thereafter, Regulation 6 of 2007 Regulations dated
18.06.2007 was amended with effect from 12.11.2007 empowering the
State Commission to revisit tariffs already fixed.
55. The question arises whether Power Purchase Agreement
dated 18.03.2006 and similar agreements are statutory contracts or not.
In India Thermal Power Ltd. versus State of Madhya Pradesh and
others (2000) 3 SCC 379, the Supreme Court has held as follows:-
“11. It was contended by Mr.Cooper, learned Senior Counsel
appearing for appellant GBL and also by some counsel appearing
for other appellants that the appellant/IPPs had entered into PPAs
under Sections 43 and 43-A of the Electricity Supply Act and as
such they are statutory contracts and, therefore, MPEB had no
power or authority to alter their terms and conditions. This
contention has been upheld by the High Court. In our opinion the
said contention is not correct and the High Court was wrong in
accepting the same. Section 43 empowers the Electricity Board to
enter into an arrangement for purchase of electricity on such terms
as may be agreed. Section 43-A(1) provides that a generating
company may enter into a contract for the sale of electricity
generated by it with the Electricity Board. As regards the
determination of tariff for the sale of electricity by a generating
company to the Board, Section 43(1)(2) provides that the tariff shall
be determined in accordance with the norms regarding operation
and plant-load factor as may be laid down by the authority and in
accordance with the rates of depreciation and reasonable return and
such other factors as may be determined from time to time by the
Central Government by a notification in the Official Gazette. These
provisions clearly indicate that the agreement can be on such terms
as may be agreed by the parties except that the tariff is to be
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determined in accordance with the provision contained in Section
43-A(2) and notifications issued thereunder. Merely because a
contract is entered into in exercise of an enabling power conferred
by a statute that by itself cannot render the contract a statutory
contract. If entering into a contract containing the prescribed terms
and conditions is a must under the statute then that contract
becomes a statutory contract. If a contract incorporates certain
terms and conditions in it which are statutory then the said contract
to that extent is statutory. A contract may contain certain other
terms and conditions which may not be of a statutory character and
which have been incorporated therein as a result of mutual
agreement between the parties. Therefore, the PPAs can be
regarded as statutory only to the extent that they contain provisions
regarding determination of tariff and other statutory requirements of
Section 43-A(2). Opening and maintaining of an escrow account
or an escrow agreement are not the statutory requirements and,
therefore, merely because PPAs contemplate maintaining escrow
accounts that obligation cannot be regarded as statutory.”
(emphasis supplied)
Thus, simply Power Purchase Agreement dated 18.03.2006 or similar
agreements were approved by the State Commission that by itself is not
enough to term such Power Purchase Agreements as statutory contracts.
However, the term contained in the PPA in question regarding
determination of tariff is certainly a statutory arrangement.
56. In PTC India Limited versus Central Electricity
Regulatory Commission, through Secretary (2010) 4 SCC 603, one of
the question before the Supreme Court was whether capping of trading
margin could be done by CERC (Central Commission) by making a
regulation in that regard under Section 178 of 2003 Act. The Central
Electricity Regulatory Commission (Fixation of Trading Margin)
Regulations, 2006, were notified on 23.01.2006 which came into force
from the date of their publication in the official gazette. The Supreme
Court has held as follows:-
“55. To regulate is an exercise which is different from making of the
regulations. However, making of a regulation under Section 178 is
not a precondition to the Central Commission taking any
steps/measures under Section 79(1). As stated, if there is a
regulation, then the measure under Section 79(1) has to be in
conformity with such regulation under Section 178. This principle
flows from various judgments of this Court which we have discussed
hereinafter. For example, under Section 79(1)(g) the Central
Commission is required to levy fees for the purpose of the 2003 Act.
An order imposing regulatory fees could be passed even in the
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absence of a regulation under Section 178. If the levy is
unreasonable, it could be the subject-matter of challenge before the
appellate authority under Section 111 as the levy is imposed by an
order/decision-making process. Making of a regulation under
Section 178 is not a precondition to passing of an order levying a
regulatory fee under Section 79(1)(g). However, if there is a
regulation under Section 178 in that regard then the order levying
fees under Section 79(1)(g) has to be in consonance with such
regulation.”
“56. Similarly, while exercising the power to frame the terms and
conditions for determination of tariff under Section 178, the
Commission has to be guided by the factors specified in Section 61.
It is open to the Central Commission to specify terms and conditions
for determination of tariff even in the absence of the regulations
under Section 178. However, if a regulation is made under Section
178, then, in that event, framing of terms and conditions for
determination of tariff under Section 61 has to be in consonance
with the regulations under Section 178.”
“57. One must keep in mind the dichotomy between the power to
make a regulation under Section 178 on the one hand and the
various enumerated areas in Section 79(1) in which the Central
Commission is mandated to take such measures as it deems fit to
fulfil the objects of the 2003 Act. Applying this test to the present
controversy, it becomes clear that one such area enumerated in
Section 79(1) refers to fixation of trading margin. Making of a
regulation in that regard is not a precondition to the Central
Commission exercising its powers to fix a trading margin under
Section 79 (1)(j), however, if the Central Commission in an
appropriate case, as is the case herein, makes a regulation fixing a
cap on the trading margin under Section 178 then whatever
measures the Central Commission takes under Section 79(1)(j)
have to be in conformity with Section 178.”
“58. One must understand the reason why a regulation has been
made in the matter of capping the trading margin under Section 178
of the Act. Instead of fixing a trading margin ( including capping) on
a case-to-case basis, the Central Commission thought it fit to make
a regulation which has a general application to the entire trading
activity which has been recognized, for the first time, under the
2003 Act. Further, it is important to bear in mind that making of a
regulation under Section 178 became necessary because a
regulation made under Section 178 has the effect of interfering and
overriding the existing contractual relationship between the
regulated entities. A regulation under Section 178 is in the nature of
a subordinate legislation. Such subordinate legislation can even
override the existing contracts including power purchase
agreements which have got to be aligned with the regulations
under Section 178 and which could not have been done across the
board by an order of the Central Commission under Section
79(1)(j).”
“66. While deciding the nature of an order (decision) vis-à-vis a
regulation under the Act, one needs to apply the test of general
application. On the making of the impugned 2006 Regulations,
even the existing power purchase agreements (PPA) had to be
modified and aligned with the said Regulations. In other words, the
impugned Regulations make an inroad into even the existing
contracts. This itself indicates the width of the power conferred on
CERC under Section 178 of the 2003 Act. All contracts coming into
existence after making of the impugned 2006 Regulations have also
to factor in the capping of the trading margin. This itself indicates
that the impugned Regulations are in the nature of subordinate
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legislation. Such regulatory intervention into the existing contracts
across the board could have been done only by making regulations
under Section 178 and not by passing an order under Section
79(1)(j) of the 2003 Act. Therefore, in our view, if we keep the
above discussion in mind, it becomes clear that the word “order” in
Section 111 of the 2003 Act cannot include the impugned 2006
Regulations made under Section 178 of the 2003 Act.”
“79. Applying the above judgments to the present case, it is clear
that fixation of the trading margin in the inter-State trading of
electricity can be done by making of regulations under Section 178
of the 2003 Act. Power to fix the trading margin under Section 178
is, therefore, a legislative power and the notification issued under
that section amounts to a piece of subordinate legislation, which has
a general application in the sense that even existing contracts are
required to be modified in terms of the impugned Regulations.
These Regulations make an inroad into contractual relationships
between the parties. Such is the scope and effect of the impugned
Regulations which could not have taken place by an order fixing the
trading margin under Section 79(1)(j). Consequently, the impugned
Regulations cannot fall within the ambit of the word “order” in
Section 111 of the 2003 Act.”
57. The summary of findings is given in Para 92 which reads as
follows:-
“92. (i) In the hierarchy of regulatory powers and functions under
the 2003 Act, Section 178, which deals with making of regulations
by the Central Commission, under the authority of subordinate
legislation, is wider t han Section 79(1) of the 2003 Act, which
enumerates the regulatory functions of the Central Commission, in
specified areas, to be discharged by orders ( decisions).
(ii) A regulation under Section 178, as a part of regulatory
framework, intervenes and even overrides the existing contracts
between the regulated entities inasmuch as it casts a statutory
obligation on the regulated entities to align their existing and future
contracts with the said regulation.
(iiii) A regulation under Section 178 is made under the authority
of delegated legislation and consequently its validity can be tested
only in judicial review proceedings before the courts and not by way
of appeal before the Appellate Tribunal for Electricity under Section
111 of the said Act.
(iv) Section 121 of the 2003 Act does not confer power of judicial
review on the Appellate Tribunal. The words “orders”, “instructions”
or “directions” in Section 121 do not confer power of judicial review
in the Appellate Tribunal for Electricity. In this judgment, we do not
wish to analyse the English authorities as we find from those
authorities that in certain cases in England the power of judicial
review is expressly conferred on the tribunals constituted under the
Act. In the present 2003 Act, the power of judicial review of the
validity of the regulations made under Section 178 is not conferred
on the Appellate Tribunal for Electricity.”
(v) If a dispute arises in adjudication on interpretation of a
regulation made under Section 178, an appeal would certainly lie
before the Appellate Tribunal under Section 111, however, no
appeal to the Appellate Tribunal shall lie on the validity of a
regulation made under Section 178.
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(vi) Applying the principle of “generality versus enumeration”, it
would be open to the Central Commission to make a regulation on
any residuary item under Section 178(1) read with Section
178(2)(ze). Accordingly, we hold that CERC was empowered to cap
the trading margin under the authority of delegated legislation under
Section 178 vide the impugned Notification dated 23-1-2006.
(vii) Section 121, as amended by the Electricity (Amendment) Act
57 of 2003, came into force with effect from 27 -1-2004.
Consequently, there is no merit in the contention advanced that the
said section has not yet been brought into force.”
58. The framing of regulations under Section 181 has the effect
of interfering and overriding the existing contractual relationship between
petitioner and Independent Power Producer. The regulations can even
override the existing contracts including the Power Purchase
Agreements. The existing Power Purchase Agreements are to be
modified in terms of the regulations framed under Section 181 and all
enabling powers of the State Commission. The 2007 Regulations dated
12.11.2007 amending 2007 Regulations have not been assailed on the
ground that said regulations contravene any specific provisions of 2003
Act or any other statutory provision. The thrust of challenge is that
regulations cannot be amended to reopen concluded contracts. The
impugned order dated 29.10.2009 would show that the State
Commission held that it has power to review or modify the concluded
Power Purchase Agreements prospectively under amended Regulation 6
to cater to stipulations such as mandatory release of 15% water
discharge, payment of revised compensation to fisheries and towards
use of forest land and LADA charges. The 2006 Policy referred by the
petitioner and the Independent Power Producers in the petitions has
introduced the aforesaid charges after the execution of Power Purchase
Agreements.
59. In PTC India (supra), the Supreme Court has held that
regulations under 2003 Act can even override the existing contracts
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including the Power Purchase Agreements and even existing Power
Purchase Agreements had to be modified and aligned with the said
regulations. The State Commission has ordered reopening of the tariff
prospectively. Therefore, it cannot be said that the existing Power
Purchase Agreements have been reopened retrospectively. The Section
62 (4) provides amendment of tariff as per restrictions contained in that
provision. It is the stand of the State Commission that only 15%
mandatory water discharge, payment of revised compensation to
fisheries and towards use of forest land and LADA charges imposed
under 2006 Policy after execution of Power Purchase Agreements have
been taken into consideration for revising the tariff. It is specific stand of
the State Commission that no other factor has been considered for
revision of tariff. The petitioner has not assailed the tariff on the ground
that after taking various factors into consideration the decision of the
State Commission on merits for fixing tariff is wrong. The petitioner has
assailed amended tariff on the ground of jurisdiction which it has failed.
60. The tariff is to be determined, amended in accordance with
the 2003 Act, Rules and Regulations. The State Commission has the
power to determine the tariff and amend the tariff. The contract, if any,
regarding tariff is to be considered by the State Commission in
accordance with 2003 Act, Rules and Regulations and not under
common law by Civil Court as contended by the learned counsel for the
petitioner. The petitioner and the Independent Power Producer of their
own cannot fix the tariff. It is the duty of the State Commission to fix the
tariff. The petitioner has failed to make out any case for quashing of
amended regulations dated 12.11.2007, order dated 29.10.2009 of the
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State Commission and Annexure P -14 in all the petitions. In view of
above, all the aforesaid points are answered against the petitioner.
61. The result of above discussion is that there is no merit in the
petitions and, therefore, all petitions being CWP Nos.7649, 8285, 8426,
8427,8472, 8492, 8531 and 8532 of 2010, are dismissed, so also the
pending applications, if any. Interim orders, if any, are vacated.
( A.M. Khanwilkar )
Chief Justice.
August 6, 2013. ( Kuldip Singh)
(krt) Judge.
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