Introduction

The case of NHPC Limited (A Government of India Enterprise) v. Punjab State Power Corporation Ltd. And Others adjudicated by the Central Electricity Regulatory Commission (CERC) on February 4, 2021, addresses the intricate issue of recovering under-recovered energy charges due to generation shortfalls in hydro power projects. The petitioner, NHPC Limited, sought to recover energy charges amounting to ₹8.19 crore for the financial year (FY) 2016-17, attributing a shortfall of 55.84 million units (MU) in energy generation to factors beyond their control, as stipulated under Regulation 31(6)(b) of the CERC Tariff Regulations, 2014.

The respondent, Punjab State Power Corporation Ltd. (PSPCL), along with other co-respondents, contested the recovery, arguing that the shortfall was attributable to operational inefficiencies and factors within NHPC's control. The case fundamentally revolves around the interpretation and application of regulatory provisions concerning energy charge recovery in scenarios of generation discrepancies.

Summary of the Judgment

The CERC, after thorough deliberation, ruled in favor of NHPC Limited, allowing the recovery of ₹3.49 crore of under-recovered energy charges for FY 2016-17 from the beneficiaries during FY 2018-19. The Commission meticulously analyzed the reasons behind the shortfall in energy generation, distinguishing between factors within and beyond NHPC's control. Key points from the judgment include:

• NHPC's Chamera-II Hydro Power Station experienced a shortfall of 55.84 MU in FY 2016-17 against a design energy of 1499.89 MU.
• The shortfall was categorized into factors within control (0.89 MU) and beyond control (54.95 MU), the latter primarily due to deficient inflows and silt flushing.
• NHPC was permitted to recover the shortfall from beneficiaries, after adjusting for revenue received under the Deviation Settlement Mechanism (DSM).
• The Court emphasized adherence to Regulation 31(6)(b) of the CERC Tariff Regulations, 2014, in facilitating energy charge recovery under specified conditions.

Analysis

Precedents Cited

The judgment references previous orders, notably Petition No. 220/MP/2011, where a similar petition related to capacity charges was dismissed. However, the Commission distinguished the current case, asserting that the earlier petition did not pertain to energy charges recovery under Regulation 31(6)(a) of the 2014 Tariff Regulations, thereby establishing the current case's uniqueness and applicability under existing regulatory frameworks.

Legal Reasoning

The Central Electricity Regulatory Commission's legal reasoning hinged on a detailed assessment of the factors leading to the shortfall in energy generation. The Commission employed the following logical framework:

• Classification of Shortfall: Differentiating between shortfalls due to controllable factors (like unit outages) and uncontrollable factors (such as deficient inflows and mandatory silt flushing).
• Data Verification: Reliance on data provided by the India Meteorological Department (IMD) due to the unavailability of certified inflow data from the Central Water Commission (CWC).
• Methodological Clarity: Scrutinizing NHPC's methodology for calculating the maximum possible generation, ensuring it aligns with CERC's prescribed formulas.
• Adjustment Mechanism: Incorporating revenue earned under DSM to offset the energy charge shortfall, ensuring that NHPC is neither unduly burdened nor beneficiaries unfairly disadvantaged.

The Commission concluded that the majority of the shortfall was indeed due to factors beyond NHPC's control, thereby legitimizing the recovery of under-recovered energy charges as per Regulation 31(6)(b).

Impact

This judgment has significant implications for the hydro power sector and regulatory practices:

• Regulatory Precedence: Establishes a clear pathway for generating companies to recover under-recovered energy charges when shortfalls are justifiably beyond their control.
• Operational Transparency: Encourages power generating entities to maintain meticulous records and transparent methodologies in energy generation and billing processes.
• Balancing Stakeholder Interests: Strikes a balance between the financial viability of power generators and the economic interests of power beneficiaries.
• Future Litigation: Serves as a reference point for similar disputes, potentially reducing litigation through established procedural clarity.

Complex Concepts Simplified

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

This regulation allows hydro generating stations to recover under-recovered energy charges in cases where actual energy generation falls short of the design energy due to reasons beyond the control of the generating company. Recovery is permissible on a rolling basis, ensuring that past shortfalls are adequately addressed in subsequent financial years.

Deviation Settlement Mechanism (DSM)

DSM is a regulatory framework that manages deviations in power generation and consumption from the agreed schedules. It ensures that both excess and deficient energy injections are accounted for, with financial adjustments made accordingly to maintain grid stability and fairness in transactions between generators and consumers.

Design Energy (DE)

Design Energy refers to the anticipated annual energy generation capacity of a hydro power station, factoring in auxiliary consumption and free energy allocations. It serves as a benchmark for performance assessments and regulatory compliance.

Conclusion

The NHPC Ltd. vs. Punjab State Power Corporation Ltd. case underscores the importance of regulatory clarity in the power sector. By meticulously delineating the conditions under which energy charge recoveries are permissible, the CERC has fortified the procedural framework governing power generation and billing. This judgment not only affirms NHPC's entitlement to recover under certain conditions but also delineates the responsibilities of power generating entities to operate transparently and in adherence to regulatory standards. Moving forward, this case serves as a pivotal reference for similar disputes, fostering a more balanced and equitable power distribution ecosystem.