TAMIL NADU GENERATION AND DISTRIBUTION CORPORATION LTD. v. M/S PENNA ELECTRICITY LTD
Interpretation of Power Purchase Agreements (PPA) and Regulatory Framework: Determination of Tariff and Classification of Power as Firm vs. Infirm under the Electricity Act, 2003.
Court: Supreme Court of India
Citation: 2025 INSC 1439
Decision Date: 16-12-2025
List of Laws
The Electricity Act, 2003; The Electricity (Supply) Act, 1948; Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004; Tamil Nadu Electricity Regulatory Commission Regulations, 2005; Power Purchase Agreement (PPA); Tariff Determination; Commercial Operation Date (COD); Infirm Power vs. Firm Power
- Facts: Tamil Nadu Generation and Distribution Corporation Ltd. (TANGEDCO) appealed against a decision by the Appellate Tribunal for Electricity (APTEL) and the Tamil Nadu Electricity Regulatory Commission (TNERC), which favored M/s Penna Electricity Limited. The dispute centered on whether power supplied by Penna's open cycle gas turbine during a specific period should be classified as "infirm power" (subject only to variable charges) or "firm power" (subject to fixed charges). TANGEDCO argued that power supplied before the Commercial Operation Date (COD) should be considered infirm power as per the Power Purchase Agreement (PPA).
- Procedural Posture: TANGEDCO appealed to the Supreme Court after the TNERC and APTEL concurrently ruled in favor of Penna Electricity Limited, holding that the power supplied was firm power and thus subject to fixed charges.
- Issue: Whether the power supplied by the respondent's open cycle gas turbine during the period from 29.10.2005 to 30.06.2006 should be classified as "infirm power" or "firm power" under the PPA and relevant electricity regulations, and whether the amended PPA required approval from the TNERC to be binding.
- Holding: The Supreme Court dismissed the appeal, affirming the decisions of the TNERC and APTEL that the power supplied was "firm power" and that the respondent was entitled to fixed charges.
- Reasoning: The Court reasoned that the amended PPA, which defined the COD based on the entire project (combined cycle operation), conflicted with the Central Electricity Regulatory Commission (CERC) and TNERC Regulations, which define COD in relation to individual units. The Court emphasized that the regulations should prevail over the PPA, especially since the PPA was not approved by the TNERC as required by Section 86(1)(b) of the Electricity Act, 2003. The Court also noted that continuous power was supplied during the relevant period, indicating it was firm power, and that denying fixed charges would be unjust. The Court rejected the appellant's arguments of estoppel and waiver based on correspondence between the parties. The Court held that "the mandate under Section 61(d) of the 2003 Act, is that in the determination of tariff recovery of the cost of electricity in a reasonable manner is to be ensured".
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