Introduction

The case of NHPC Limited (A Government of India Enterprise) v. Chairman & Managing Director, WBSEDC Ltd., adjudicated by the Central Electricity Regulatory Commission (CERC) on February 10, 2021, addresses significant issues related to the recovery of energy and capacity charges arising from generation shortfalls at the Teesta Low Dam-III Power Station (TLDP-III) in West Bengal. The petitioner, NHPC Limited (NHPC), sought relief for shortfalls in energy and capacity charges attributed to factors beyond its control, including agitation by the Gorkha Janmukti Morcha (GJMM).

Summary of the Judgment

The CERC deliberated on NHPC's petition for recovering energy charges amounting to ₹61.93 Crores due to a shortfall in energy generation of 195.53 MU, as per Regulation 31(6)(a) of the CERC Tariff Regulations, 2014. Additionally, NHPC sought recovery of capacity charges and adjustments under exceptional circumstances using Regulations 54 and 55. The Commission approved the recovery of energy charges based on uncontrollable factors but denied the claims for capacity charge recovery, emphasizing adherence to existing regulations.

Analysis

Precedents Cited

The judgment primarily references the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014. Specific clauses within Regulation 31(6)(a) were pivotal in determining the legitimacy of NHPC's claims. Although the judgment does not cite prior case law, it reinforces the regulatory framework established by CERC in handling tariff adjustments and charge recoveries.

Legal Reasoning

The Commission's decision hinged on the interpretation of Regulation 31(6)(a), which allows for the recovery of energy charges when actual generation falls below the design energy due to reasons beyond the control of the generating company. NHPC demonstrated a shortfall of 207.29 MU, attributing 195.53 MU to uncontrollable factors such as GJMM agitation, inadequate inflow, and natural operational necessities like reservoir flushing.

Key aspects of the legal reasoning include:

• Attribution of Shortfall: The Commission meticulously analyzed the causes of the shortfall, distinguishing between factors within NHPC's control and those beyond it.
• Data Validation: Discrepancies between NHPC's inflow data and that provided by the Central Water Commission (CWC) were examined. The Commission favored NHPC's data due to incomplete and unverifiable submissions by WBSEDC, reinforcing the importance of accurate and comprehensive data in regulatory decisions.
• Regulatory Compliance: While NHPC attempted to leverage Regulations 54 and 55 to recover capacity charges, the Commission held that these provisions were not applicable for capacity charge recoveries, underscoring strict adherence to regulatory stipulations.

Impact

This judgment has substantial implications for industry stakeholders:

• Clarity on Recovery Mechanisms: By upholding the recovery of energy charges under Regulation 31(6)(a), the Commission provides a clear precedent for how generating companies can seek compensation for uncontrollable generation shortfalls.
• Limitations on Regulatory Flexibility: The rejection of capacity charge recovery under the same petition emphasizes the boundaries of regulatory provisions, discouraging companies from seeking ad-hoc adjustments outside established regulations.
• Data Integrity Emphasis: The decision underscores the necessity for accurate and certified data submissions, impacting how generating companies prepare and present their operational data.

Complex Concepts Simplified

Energy Charge Rate (ECR)

The ECR is a critical component determining the amount payable by beneficiaries for the energy supplied. It is calculated using the annual fixed charges (AFC), design energy (DE), auxiliary losses, and free energy for the home state.

Design Energy (DE)

DE refers to the planned annual energy generation capacity of a power station. It serves as a benchmark for performance and billing calculations.

Regulation 31(6)(a) of CERC Tariff Regulations, 2014

This regulation permits the recovery of energy charges when actual generation is less than DE due to factors beyond the generating company's control, allowing for adjustments in subsequent years to compensate for the shortfall.

Regulation 54 and 55

These regulations grant the Commission the power to relax or remove difficulties pertaining to tariff regulations. However, their applicability is confined to specific scenarios as outlined within the regulatory framework.

Deviation Settlement Mechanism (DSM)

DSM provisions facilitate the settlement of deviations in energy supply and demand, ensuring that generating companies receive compensation for energy supplied under unforeseen circumstances.

Conclusion

The CERC's judgment in NHPC Ltd. v. WBSEDC Ltd. reinforces the integrity and application of established tariff regulations. By upholding NHPC's right to recover energy charges attributable to uncontrollable factors, the Commission ensures that generating companies are compensated fairly, fostering a balanced and predictable regulatory environment. The decision also delineates the limits of regulatory flexibility in charge recoveries, compelling stakeholders to adhere strictly to the regulatory provisions. This judgment will serve as a guiding precedent for future cases involving tariff adjustments and charge recoveries in the power sector.