Introduction

The case of Jaipur Vidyut Vitran Nigam Ltd., Through Managing Director, Vidhyut Bhavan And Others (S) v. Rajasthan Electricity Regulatory Commission Through Its Secretary, Vidyut Vinyamak Bhawan And Another (S) was adjudicated by the Appellate Tribunal for Electricity on September 14, 2019. This comprehensive judgment addressed complex issues surrounding the Change in Law provisions within Power Purchase Agreements (PPA) in the context of coal linkage policies in India.

The central parties involved were Adani Power Rajasthan Limited (hereinafter referred to as "Adani Rajasthan") and the Rajasthan Discoms (distribution licensees). The crux of the dispute revolved around compensation claims by Adani Rajasthan due to alterations in coal supply policies affecting their thermal power project.

Summary of the Judgment

The judgment combined two appeals — Appeal No. 202 of 2018 filed by Rajasthan Discoms and Appeal No. 305 of 2018 filed by Adani Rajasthan against the Rajasthan Electricity Regulatory Commission (RERC)'s order dated May 17, 2018. RERC had partially allowed Adani Rajasthan's claims for compensation under the Change in Law provisions but had restricted it from the Commercial Operation Date (COD) to the execution of Fuel Supply Agreements (FSA) under the SHAKTI Scheme.

Upon review, the Tribunal upheld RERC's decision regarding the basis of Adani Rajasthan's bid being on domestic coal but set aside certain restrictions on compensation claims. The Tribunal directed Rajasthan Discoms to compensate Adani Rajasthan for the shortfall in domestic coal supply, aligning with previous legal precedents.

Analysis

Precedents Cited

A pivotal precedent in this case was the Energy Watchdog case, where the Supreme Court of India held that changes in coal policy by governmental bodies constituted a Change in Law under PPAs. Additionally, prior Tribunal judgments, such as GMR Kamalanga Energy Ltd. v. CERC & Ors. and Adani Power (Mundra) Ltd. v. CERC & Ors., were instrumental in shaping the Tribunal's reasoning.

Legal Reasoning

The judgment delved into the definitions and applicability of Change in Law within the PPA framework. Central to the Tribunal's reasoning was the interpretation of the New Coal Distribution Policy (NCDP) of 2007 and its amendments in 2013, alongside the SHAKTI Scheme.

The Tribunal affirmed that the RERC correctly identified Adani Rajasthan's bid as being based on domestic coal, backed by assurances in the memorandums and letters from governmental bodies. The inability of Adani Rajasthan to secure domestic coal allocations due to policy changes by Indian Governmental Instrumentalities (such as the Standing Linkage Committee and the Ministry of Coal) constituted a Change in Law, entitling them to compensation.

Furthermore, the Tribunal addressed the claim for Carrying Cost, which Adani Rajasthan argued was essential for restoring their economic position. Drawing parallels with previous judgments, the Tribunal upheld the award of carrying costs, emphasizing adherence to restitutionary principles under the PPA.

Impact

This judgment solidifies the interpretation of Change in Law within PPAs, particularly emphasizing that policy shifts by government bodies impacting coal supply are valid grounds for compensation. It underscores the necessity for regulatory bodies to consider economic restitution for power producers adversely affected by policy changes.

For future power procurement and regulatory frameworks, this sets a clear precedent that assurances or policies influencing input resources like coal are integral to the economic viability of power projects. It mandates that regulatory commissions judiciously honor compensation claims in line with foundational legal principles and contractual obligations.

Complex Concepts Simplified

• Change in Law: A legal definition within PPAs that refers to alterations in laws or policies by government bodies which affect the cost or operation of power projects.
• Restitutionary Principles: Legal doctrines ensuring that a party is restored to the position they were in prior to a particular event or occurrence.
• Carrying Cost: Compensation for the time value of money and additional expenses incurred due to policy changes affecting project costs.
• Fuel Supply Agreement (FSA): Contracts that outline the terms under which fuel (in this case, coal) is supplied to power plants.
• SHAKTI Scheme: A policy initiative aimed at transparent allocation of coal linkages to power producers in India.

Conclusion