- Bookmark
- Share
- CaseIQ
Maharashtra State El... v. Rattan India Power L...
Factual and Procedural Background
This appeal was filed against the order dated 13 November 2020 of the Appellate Tribunal for Electricity (APTEL). APTEL had set aside portions of two earlier orders of the Maharashtra Electricity Regulatory Commission (MERC) and issued two key directions: (i) that issues concerning Supply Grade Reimbursement Mechanism Gross Calorific Value (SGRM GCV) and compensation for “change in law” beyond 31 March 2017 be reconsidered in light of APTEL’s own judgment dated 14 September 2020 in Adani Power Maharashtra Ltd. v. MSEDCL; and (ii) that the generator be fully compensated for additional coal costs, including carrying cost, so as to restore it to the same economic position that would have existed but for the change in law.
The Distribution Company (DISCOM) appealed to the Supreme Court, mainly questioning the potential financial implications of APTEL’s directions, particularly the possibility that unused coal quantities in one month might not be carried forward, allegedly conferring an undue benefit on the generator.
Legal Issues Presented
- Whether APTEL’s Direction 1, which requires MERC to reassess “change in law” compensation issues in conformity with its earlier judgment, is sustainable in light of Supreme Court precedent.
- Whether APTEL’s Direction 2, granting full pass-through of additional coal costs and carrying costs, is consistent with Supreme Court jurisprudence on “change in law”.
- Whether the methodology for carrying forward unutilised monthly coal quantities gives an unjustified advantage to the generator.
Arguments of the Parties
Appellant (DISCOM)
- Contended that if the generator fails to utilise the specific quantity of coal allocated for a particular month, that quantity should not be carried forward. Allowing such carry-forward would allegedly provide the generator with an undue financial benefit.
Respondent (Generator)
- Described the DISCOM’s apprehension as “totally misconceived,” asserting that the impugned APTEL judgment itself demonstrated the correct month-to-month adjustment mechanism.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Maharashtra State Electricity Distribution Company Ltd. v. Adani Power Maharashtra Limited, 2023 SCC OnLine SC 233 | Confirms treatment of issues concerning SGRM GCV and “change in law” compensation beyond 31-03-2017. | The Supreme Court held that APTEL’s Direction 1 is “in tune” with this precedent, thereby upholding the direction. |
| Adani Power Maharashtra Limited (supra) | Addresses full compensation methodology for additional coal costs under the “change in law” framework. | Used to validate APTEL’s Direction 2, which grants a complete pass-through of such costs. |
| Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80 | Lays down the foundational legal principles governing “change in law” compensation in power-purchase arrangements. | The Court noted that Direction 2 follows the law as set out in Energy Watchdog, reinforcing its legality. |
| Adani Power Maharashtra Ltd. v. Maharashtra State Electricity Distribution Company Ltd., Appeal No. 182 of 2019 (APTEL, 14-09-2020) | Provides the substantive framework for reconsideration of SGRM GCV and post-31-03-2017 compensation issues. | Referenced by APTEL and acknowledged by the Supreme Court as the guiding decision for MERC’s fresh consideration. |
Court's Reasoning and Analysis
The Supreme Court first addressed the DISCOM’s challenge to APTEL’s two directions. It held that:
- Direction 1 aligns with the Court’s own ruling in MSEDCL v. Adani Power Maharashtra Ltd., thereby remaining unassailable.
- Direction 2 is similarly justified, being covered by the Court’s earlier decision in Adani Power Maharashtra Ltd. and consistent with the principles in Energy Watchdog.
The bench then evaluated the DISCOM’s specific concern about unused coal quantities not being carried forward. Referring to paragraph 43 of the APTEL judgment, the Court reproduced a chart illustrating monthly coal allocation, delivery, and generation. The chart showed that:
- In February, the generator had a 100 MW coal surplus, which was carried forward.
- In March, although there was a 150 MW potential shortfall, the carried-forward surplus reduced the claim to only 50 MW.
From this illustration, the Court concluded that the generator’s methodology did in fact offset monthly surpluses against later shortfalls, contradicting the DISCOM’s apprehension. Consequently, the Court found no substance in the appellant’s arguments and saw no basis to disturb the APTEL order.
Holding and Implications
The Supreme Court dismissed the substantive challenge and therefore DISPOSED OF the appeal, leaving APTEL’s directions intact. All pending applications were also disposed of.
Implications: The generator remains entitled to a full pass-through of additional coal costs and the carrying-forward methodology for monthly coal shortfalls. The decision reaffirms existing Supreme Court jurisprudence on “change in law” compensation and does not create new precedent, but it clarifies that concerns about month-to-month coal adjustments are unfounded when the generator follows the demonstrated offset method.
B.R. Gavai, J.:— This appeal challenges the order passed by the Appellate Tribunal for Electricity dated 13.11.2020. The operative part of the order reads thus:—
“77. In view of the foregoing conclusions, we set aside the impugned order passed on 03.04.2018 by the Maharashtra Electricity Regulatory Commission in case No. 154 of 2013 and case no. 147 of 2014 to the extent thereby the above-mentioned five issues were determined and direct that:—
(i) the matter relating to issues of SGRM GCV and of compensation for change in law beyond 31.03.2017 be considered afresh in light of judgment dated 14.09.2020 by this tribunal in Appeal No. 182 of 2019 Adani Power Maharashtra Limited (APML) v. Maharashtra State Electricity Distribution Company Limited, as per decisions summarized in para 35 above; and
(ii) the full impact of additional cost actually incurred in procurement of coal from alternative sources to the extent of shortfall in supply of linkage coal and it being utilized on monthly basis for the period in question, and the consequent carrying cost, be given pass through such that the appellant is fully compensated and put in the same economic position as it would have been but for change of law, as concluded in paras 70 and 76 above.
78. The appeal is allowed in above terms.”
2. Shri Balbir Singh, learned Additional Solicitor General of India (‘ASG” for short) appearing on behalf of the Distribution Company (“DISCOM” for short), submits that though the respondent gets a specific quantity for a particular month out of the Annual Contracted Quantity (ACQ), in the event the same is not utilized for a particular month, it is not carried forward to the next month, thereby giving undue benefit to the generator.
3. Shri Sajan Poovayya, learned Senior Counsel and Mr. Vishrov Mukerjee, learned counsel appearing on behalf of the Generator submit that the said apprehension is totally misconceived as could be seen from the impugned judgment.
4. We find that the apprehension is not well merited. Insofar as direction No. 1 is concerned, the same is in tune with the view taken by us in Maharashtra State Electricity Distribution Company Ltd. v. Adani Power Maharashtra Limited 2023 SCC OnLine SC 233. Insofar as, direction No. 2 is concerned, the same is also covered by the judgment of this Court in Adani Power Maharashtra Limited (supra) following the law laid down in Energy Watchdog v. Central Electricity Regulatory Commission (2017) 14 SCC 80.
5. Insofar as the apprehension with regard to unutilized coal quantity for a particular month being not carried forward to the next month is concerned, the same is also without substance. In this respect, it will be relevant to reproduce paragraph 43 of the impugned judgment, wherein the learned Tribunal has recorded the submission of the respondent/generator, which is extracted below:—
“43. The appellant, on the other hand, argues that MERC has erred in stating that computation of compensation for monthly coal quantum variation shall be on an annual basis. It is submitted that demand and consequent offtake of coal changes month to month and is subject to various factors such as Plant Load Factor (PLF), demand, actual coal supplied etc. Thus, it is possible that in a given month there is no (or low) demand of coal than the quantity of coal offered by CIL for offtake. If compensation is calculated cumulatively on annual basis, the aforesaid surplus may get set off against shortfall in coal in another month, when the demand of coal was higher than the quantity of coal supplied. This is illustrated by example based on date (Considering capacity of 1000 MW) as tabulated below:—
Month Coal Assured Coal Delivered Actual Generation Shortfall January 850 MW 750 MW 800 MW 50 MW February 850 MW 800 MW 700 MW +100 MW March 850 MW 600 MW 750 50 MW”
6. The chart itself would show that for the month of February the coal assured was 850 MW, the coal delivered was 800 MW and the actual generation was 700 MW. As such, for the said month the generator had surplus coal for production of 100 MW energy. The same has been carried forward for the month of March. It is clear from the chart that though for the month of March the assured coal was 850 MW, the actual coal delivered was only 600 MW and the generation was 750 MW. If the apprehension of the learned ASG was to be of substance, then the generator could have claimed a shortfall of 150 MW, however, the surplus coal of 100 MW from the month of February has been carried forward and the shortfall claimed is only 50 MW.
7. If this methodology is adopted by the generator, we do not find that the apprehension of the learned Additional Solicitor General of India would be substantiated.
8. The appeal is, accordingly, disposed of.
9. Pending application(s), if any, shall stand disposed of.
Alert