The Appellate Tribunal for Electricity (APTEL) has upheld the Rajasthan Electricity Regulatory Commission’s (RERC) decision dismissing a petition filed by a wind energy generator contending that regulations should not retroactively impact power purchase agreements (PPA).

Background

As a wind energy generator, Mangalam Cement challenged the dismissal of its petition by the RERC. The appeal sought to void an electricity bill and two letters issued by Jaipur Vidyut Vitran Nigam (JVVNL), demanding compliance with the PPA terms and claiming interest on the ₹8.44 million (~$101,462) deposited with JVVNL.

The petitioner set up projects in Rajasthan in 2007, 2008, and 2010, with PPAs signed for 20 years. However, issues arose with the 2014 RERC tariff regulations designed for a five-year control period from April 1, 2014, to March 31, 2019. JVVNL applied these regulations to Mangalam Cement’s PPAs, resulting in a disputed bill.

The 2004 policy of the state government mandates wheeling charges and offers power banking options with distribution companies, with payments based on unutilized energy at the pooled rate.

In contrast, the 2014 tariff regulations aim to alter these provisions, reducing the banking period to one month and limiting the power producer’s entitlement to 10% of unutilized banked energy at 60% of the large industrial power tariff.

Mangalam Cement argued before RERC that the 2009 and 2014 regulations should not apply retrospectively to its PPAs.

Disagreeing with Mangalam Cement, RERC upheld its earlier order and dismissed the review petition.

The petitioner argued that the 2014 regulations are inapplicable to their PPAs as these regulations target cases requiring tariff determination during a control period, which does not apply in this case.

Commission’s Analysis

The Tribunal observed that the wheeling and banking agreement specifies payment for unutilized banked energy at 60% of energy charges applicable for large industrial power tariffs, with a clause stating that the banking of energy is subject to RERC orders and amendments. This, the Tribunal found, was indicative of an intention not to maintain a fixed payment structure for unutilized banked energy throughout the entire 20-year period.

Agreeing with RERC’s observations, the Tribunal noted that tariff charges cannot remain static, requiring periodic determination based on licensee costs and prevailing factors. While the 2014 tariff regulations are applicable for a five-year control period, it was equally true that their non-applicability to previously executed wheeling and banking agreements is not explicitly stated.

Citing a Supreme Court’s judgment, the Tribunal emphasized that regulations under Section 178 of the Indian Electricity Act intervene and supersede existing contracts, obliging regulated entities to align contracts with new regulations. Consequently, pre-existing PPAs must be adjusted and harmonized with regulations introduced post-execution.

Based on this legal precedent, the Tribunal concluded that the Mangalam Cement’s case is subject to the 2014 regulations, which take precedence over existing PPAs. Therefore, the agreements must be modified and aligned with the 2014 regulations.

In September, RERC granted approval to Rajasthan Urja Vikas Nigam to extend the PPAs with 12 wind power generators by five years.

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