J 2016 SCC OnLine APTEL 105 2310 Cnluacin 20240808 150736 1 36

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2016 SCC OnLine APTEL 105
Appellate Tribunal for Electricity at New Delhi

(BEFORE RANJANA P. DESAI, CHAIRPERSON AND I.J. KAPOOR, TECHNICAL MEMBER)
In the Matter of
Jaiprakash Power Ventures Limited (Ertwhile M/s. Bina Power
Supply Company Ltd. Since Merged with Jaiprakash Power
Ventures Limited) Sector 128, Noida-201304 Uttar Pradesh …
Appellant;
Versus
1. Madhya Pradesh Electricity Regulatory Commission 5th Floor,
Metro Plaza, Arera Colony, Bittan Market, Bhopal-462 016
Madhya Pradesh … Respondent No 1.
2. Madhya Pradesh Power Transmission Company Limited
Nayagaon, Rampur, Jabalpur-482008 Madhya Pradesh …
Respondent No 2.
3. Madhya Pradesh Power Management Company Ltd. Shakti
Bhawan, Vidyut Nagar, Rampur, Jabalpur-482008 Madhya
Pradesh … Respondent No 3.
4. State Load Despatch Centre, Madhya Pradesh Power
Transmission Company Limited Nayagaon, Rampur, Jabalpur-
482008 Madhya Pradesh … Respondent No 4.
Appeal No. 34 of 2016 And IA No. 87 of 2016 And IA No. 88 of 2016
Decided on August 22, 2016
Counsel for the Appellant(s): Mr. Sanjay Sen, Sr. Adv, Mr. S. Venkatesh, Mr. Varun
Singh, Mr. Shashank Khurana Mr. Anuj P. Agarwala
Counsel for the Respondent(s): Ms. Mandakini Ghosh Ms. Ritika Singhal for R-1, Mr.
Manoj Dubey for R-2 and R-4, Mr. M.G. Ramachandran, Mr. Manoj Dubey, Mr.
Shubham Arya for R-3
The Judgment of the Court was delivered by
I.J. KAPOOR, TECHNICAL MEMBER:— The present Appeal is being filed by Jaiprakash
Power Ventures Ltd. (hereinafter referred to as the “Appellant” under Section 111 of
the Electricity Act, 2003 challenging the legality, validity and propriety of the
Impugned Order dated 07.01.2016 passed by the Madhya Pradesh Electricity
Regulatory Commission (hereinafter referred to as the “State Commission”) in
Petition No. 54 of 2015.
2. The Appellant, M/s. Jaiprakash Power Ventures Ltd. is a Generating Company
within the meaning of Section 2 of the Electricity Act, operating a 2 × 250 MW (Phase-
1) Bina Power plant in the State of Madhya Pradesh.
3. The Respondent No 1 is the Electricity Regulatory Commission for the State of
Madhya Pradesh exercising jurisdiction and discharging functions in terms of the
Electricity Act, 2003. The Respondent No 2 is Madhya Pradesh Power Transmission
Company Limited (“MPPTCL”) is State Transmission Utility in the state of Madhya
Pradesh. The Respondent No 3 is Madhya Pradesh Power Management Company
Limited (“MPPMCL”). The Respondent No 4 is State Load Despatch Centre (“SLDC”) in
the state of Madhya Pradesh.
4. Aggrieved by the Order dated 07.01.2016 passed by the State Commission, the
Appellant has preferred the present appeal broadly on the following grounds:
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a) The State Commission while passing the Impugned Order adopted a pedantic
approach by superintending the focal issue raised by the Appellant, i.e. that each
participant of the Electrical System including the Appellant generator and the
Respondents have the responsibility of operating the electrical system in an
efficient manner which is also enshrined under the Preamble of the Electricity
Act, 2003 and the policies framed thereunder and relegated the dispute into a
purely contractual matter.
b) The State Commission while passing the Impugned Order has consigned the
focal issue raised by the Appellant about the efficiency of Appellants' generation
into a simpliciter contractual dispute. The Appellant in the Petition before the
State Commission had urged that ‘Technical Minimum’ generation of the
Appellant's generation capacity is not being maintained by the Respondent No 4,
SLDC and the Respondent No 3, Procurer on the pretext that the same is limited
to the Contract/Agreement between the Appellant and the Respondent No. 3.
The Appellant's contention that it is an accepted practice that ‘Technical
Minimum’ generation as a concept is only relatable to the Generating Plant/Unit's
physical generation capacity and not an agreement was entirely ignored by the
State Commission on the solitary premise that the same is not defined under the
PPA or the Regulations framed by the State Commission.
c) The Appellant in the proceedings before the State Commission had raised a
larger sectoral issue which was germane in the current market scenario wherein
the State Utilities have tied up PPA's more than their actual demand. In the
present scheme of things it is most imperative that the State Commission as a
regulator ensures that the electrical system (which includes the generator) of the
state operates in the most efficient and economical manner which it has failed to
do so in the present case.
d) The State Commission in passing the Impugned Order has failed to address the
larger issue of efficiency of the operation of Appellant's Power Plants by
pedantically interpreting the PPA signed between the Appellant and the
Respondent No. 3.
e) The State Commission in passing the Impugned Order has failed to appreciate
that the Statutory PPA was not signed with the intent that the Appellant would
only receive the Capacity Charges without actually generating power leading to
inefficiency in the operations of the Appellant. Whereas the objective behind the
PPA is that the Appellant would generate power in an efficient manner and the
Respondent No. 3 will off take such generated power on payment of the
regulated Tariff. The State Commission has also failed to appreciate that
inefficient generation cannot be the intent behind the Agreement or the Act and
the Regulations framed thereunder.
5. Facts of the present Appeal:
a) On 15.11.1994 the Appellant was incorporated under the Companies Act, 1956
by the name of Bina Power Supply Company Limited (BPSCL).
b) On 21.12.1994 Jaiprakash Hydro-Power Limited was incorporated under the
Companies Act, 1956. Subsequently, the name of the company was changed to
Jaiprakash Power Ventures Limited (JPVL) on 23.12.2009.
c) On 17.06.2008 a Meeting was held between the representative of the
Government of Madhya Pradesh (“GoMP”)/Madhya Pradesh State Electricity
Board (“MPSEB”) and the Appellant herein. As per the minutes of the meeting
recorded the Appellant undertook to supply 42% of the installed capacity of the
proposed capacity of plant i.e. 5 × 250 MW Phase-I (2 × 250 MW) and Phase-II
(3 × 250 MW) based on availability of the coal (for Phase II) for the plant to the
State and/or its Nominated Agencies for period of 25 years at the Tariff approved
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by the State Commission.

d) On 12.08.2008 an MoU was executed between GoMP and the Appellant for
establishing and operating 5 × 250 MW thermal power station (herein referred to
as the “Project”) in Two Phases based on the availability of coal for Phase-II.
e) On 30.01.2009 an Implementation Agreement (“IA”) was executed between the
GoMP and the Appellant. As per the Concessional Energy clause of the IA, the
Appellant was to provide to the GoMP or its Nominated Agency on an annualized
basis 5% of the net power generated by the Project at Variable Charges as
determined by the State Commission.
f) On 05.01.2011 a Power Purchase Agreement (herein referred to as “PPA”) was
executed between the Appellant and the Respondent No. 3. The Appellant and
the Respondent No. 3 agreed to terms envisaged in the PPA for developing,
commissioning, operation and maintenance of the Power Station and for
generation and sale of energy from the Power station by the Appellant to the
Respondent No. 3.
g) On 20.07.2011 a PPA was executed between the Appellant and GoMP for
procurement of power on Variable Charges basis. GoMP has nominated
Respondent No. 3 on behalf of GoMP to receive 5% net power at variable
charge/cost to be determined by the State Commission.
h) On 25.07.2011 to consolidate the power portfolio of the Jaypee Group, two group
power entities i.e. the Appellant and JKHCL were merged with JPVL. The Hon'ble
High Court of Himachal Pradesh at Shimla has approved the merger scheme on
the said date.
i) On 31.08.2012 the Appellant achieved COD of Unit I of its Power Plant. Further,
in April 2013 the Appellant achieved COD of its Unit II of the Power Plant.
j) From August, 2012 to May, 2015, the Respondent No. 3 through Respondent 2
and 4 has been scheduling a minimum of approx. 140 MW unitwise from the
Appellant's Power Plant. The Appellant is operating a 2 × 250 MW Power Plant
out of which 350 MW (65%+5%) has been contracted with Respondent No 3.
Further, As per Appellant the Technical Minimum level of operation for the
Appellant's Power Plant is at 55% load of unit capacity of 250 MW i.e. at about
140 MW. Therefore, the off take of 140 MW by the Respondent No. 3 was as per
the Technical Minimum generation capacity of the Appellant's Power Plant.
k) On 22.05.2015 the Respondent No. 3 issued a letter to the Respondent No. 2/4
inter-alia stating as follows:— “It is worth to mention the installed capacity has
achieved up to 15100 MW. The total system demand is being met at present
about 7000 MW average. It is expected that the demand may go up to 7500-
7700 MW during remaining month of May’15. In view of the new MOD
implemented from 22nd May 2015, it is observed that the variable cost & position
of generating units have been changed which may have to keep in consideration
while backing down of power available from the DC on bar of generating units. In
case of thermal power generating units the backing down of power is to limited
up to 70% in case of capacity below 250 MW and 60% in case of above 250 MW,
as intimated from the SLDC and WRLDC in past. As such, it is to clarify that,
MPPMCL would allow scheduling in such circumstances where the back down is
required, that unit shall generate 70%-60% of the entitled power to MP on real
time”.
l) Subsequently, the Respondent No. 2/4 issued a letter on 01.06.2015 which was
inter-alia challenged by the Appellant before the State Commission. The relevant
extracts of the letter dated 01.06.2015 are as follows:—
“The Chief General Manager (Power Management), M.P. Power Management
Co. Ltd. Jabalpur vide letter No. MPPMCL/PM/224 dated 22.05.2015 (copy
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enclosed) has intimated that in case of thermal power generating units the
backing down of power is to be limited up to 70% of the entitled power to MP
in case of capacity below 250 MW and 60% in case of above 250 MW. The
above letter of CGM (PM), MPPMCL further clarified that MPPMCL would not
permit generation more than above-mentioned limits of technical minimum
generation under surrender conditions. In view of the above, whenever the
power surrender instructions to technical minimum quantum of MP is issued
the same shall be limited to 60%/70% (as the case may be) of the contracted
ex-bus capacity of MP.”
m) In response to the letter dated 01.06.2015 of the Respondent No. 2/4, the
Appellant on 03.06.2015 communicated to Respondent no 2/4 that the definition
of Technical Minimum is for Machine/Unit, as explained in the letter dated
22.05.2015 from MPPMCL. This Technical Minimum cannot be applied to the
contracted capacity.
n) The Respondent No. 2/4 on 03.06.2015 responded to the Appellant saying that
the technical minimum is for the unit. However, it is the responsibility of the
generator to have long term procurers for its full capacity and if not, to sell the
balance quantity through bilateral/collective transactions. The only long term
customer of having 37.5% contracted capacity in the station cannot take
responsibility of supporting technical minimum for full unit capacity.
o) Even though the Technical Minimum of the Appellant's Unit of 250 MW was at
140 MW, the Respondent No. 2/4 issued a scheduling of 109.56 MW on
27.08.2015. The Appellant on the same date responded to the Respondent No.
2/4 with regard to the scheduling sought by stating that the technical minimum
of 250 MW machine is approx. 140 MW (export), which has been historically and
religiously followed by SLDC. Therefore any deviation below 140 MW (export) on
account of oil and other expenses (including reduction in efficiency) would be to
the account of Respondent No. 3.
p) On 28.08.2015 the Respondent No. 2 communicated to the Appellant and stated
that as decided by MPPMCL technical minimum of contracted power comes to 109
MW. Hence the Appellant herein is instructed to maintain 109 MW as per
schedule given by SLDC. Excess generation may be treated as non-compliance of
SLDC instruction.
q) The Appellant on the same date responded to the Respondent No. 2 and stated
that all things regarding technical minimum have been cleared in earlier
communications and unit cannot be run at 109 MW and unit will be run
accordingly to previous communications.
r) The Respondent No. 2 on 06.09.2015 communicated to the Appellant stating that
“JP Bina Unit # 1 has been synchronised at 5.16 hours and schedule was given
by SLDC. JP Bina unit is over injecting into the grid since it attained the load
more than 110 MW. This is violation of grid code. It is requested to adhere to
schedule given by SLDC.”
s) The Appellant on 06.09.2015 issued a letter to Respondent No. 2 inter-alia
stating that “Jaypee Bina can't have merchant power tie up in anticipation of MP
giving generation schedule; these require 24 hrs notice to tie up the balance 30-
40MW capacity on Power Exchange to ensure machine operation above technical
minimum. In the interim if “Jaypee Bina is not scheduled at technical minimum
then the deviation on account of DSM, any penalty on account of over injection
and the difference in additional cost would be to the account of Respondent No.
3.”
t) The Appellant filed Petition No. 54 of 2015 before the State Commission seeking
the following prayers:—
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a) Set aside the Impugned Letter dated 01.06.2015 issued by the Respondent
No. 2 and 4.
b) Allow the recovery of any additional cost incurred by the Petitioner in
operating in accordance with the directions issued by the Respondent No. 2
and 4.
c) Grant such order, further relief/s in the facts and circumstances of the case as
this Hon'ble Commission may deem just and equitable in favour of the
Petitioner.
u) On 14.12.2015 the Appellant plant received the MOD from the Respondent No. 3.
As per Appellant the MOD so being prepared by the Respondent No. 3 was not on
the basis of variable cost but on the basis of variable cost, transmission losses
and statutory taxes.
v) The State Commission passed the Impugned Order on 07.01.2016 inter-alia
holding as follows:—“16. In view of the above, it is observed by the Commission
that the use of expression like Technical Minimum by the respondents in the
impugned communication has no relevance since the provisions under the PPA
executed between the procurer and the petitioner are explicitly clear for
commercial and technical obligation to be met by each of them. It is further
observed that the respondent (MPPMCL) is responsible only up to the contracted
capacity of the generating unit as per PPA. Any unscheduled available capacity
within the contracted capacity is compensated by way of fixed cost/capacity
charges paid by the Respondent No. 2 in terms of PPA. Besides, the petitioner is
responsible at its own expenses for maintaining the technical requirement during
operation of the plant while making its obligations under the power purchase
agreement. Therefore, no merit is found in the prayer of the petitioner for
recovery of any additional cost incurred by the petitioner in operating in
accordance with the directions issued by the Respondent No 1 in the impugned
communication. In view of the above observations and discussions, the subject
petition is dismissed and disposed-of.”
w) Aggrieved by the Impugned Order, Appellant has preferred the present Appeal.
6. QUESTIONS OF LAW
As per Appellant, following questions of law arise for consideration in the present
Appeal:
I. Whether the State Commission in passing the Impugned Order has adopted a
pedantic approach by superintending the focal issue raised by the Appellant,
i.e. that each participant of the Electrical System including the Appellant
generator and the Respondents have the responsibility of operating the
electrical system in an efficient manner which is also enshrined under the
Preamble of the Electricity Act, 2003 and the policies framed thereunder?
II. Whether the Appellant in the proceedings before the State Commission had
raised a larger sectoral issue which was germane in the current market
scenario wherein the State Utilities have tied up PPA's more than their actual
demand? Whether in the present scheme of things it is most imperative that
the State Commission as a regulator ensures that the electrical system (which
includes the Appellant) of the state operates in the most efficient and
economical manner which it has failed to do so in the present case?
III. Whether the State Commission in passing the Impugned Order has failed to
address the larger issue of efficiency of the operation of Appellant's Power
Plants by pedantically interpreting the PPA signed between the Appellant and
the Respondent No. 3?
IV. Whether the State Commission in passing the Impugned Order has failed to
appreciate that the Statutory PPA was not signed with the intent that the
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Appellant would only receive the Capacity Charges without actually generating
power leading to inefficiency in the operations of the Appellant? Whether the
objective behind the PPA is that the Appellant would generate power in an
efficient manner and the Respondent No. 3 will off take such generated power
on payment of the regulated Tariff? Whether the present Impugned Order has
not considered the above and the State Commission has also failed to
appreciate that inefficient generation cannot be the intent behind the
Agreement or the Act and the Regulations framed thereunder?
V. Whether the State Commission in passing the Impugned Order could brush
aside the focal issue raised by the Appellant against Respondent SLDC on the
basis of the Affidavit filed by the Respondent No. 2?
VI. Whether the State Commission in passing the Impugned Order has failed to
address the issue of ‘Technical Minimum’ as an industry practise only the
pretext that the same is not defined under the State Commission's
Regulations or the PPA signed between the Appellant and the Respondent No.
3?
VII. Whether the State Commission has erred in passing the Impugned Order by
not going into the losses incurred by the Appellant due to scheduling below
‘Technical Minimum’ on the premise that Respondent No. 3 is only obligated
to pay capacity charge for the un-requisitioned capacity?
VIII. Whether the State Commission in passing the Impugned Order has failed
to appreciate that CERC Draft Notification/CERC Order though not
notified/passed in the context of the Appellant/Respondents but in fact is
applicable upon all generators who are directed by the Procurer/SLDC to
operate below the ‘Technical Minimum’?
IX. Whether the State Commission has erred in passing the Impugned Order as
the Respondent SLDC in terms of the Extant Regulations and the scheme of
the Act has to act as the apex body and safeguard the interest of the
generator as well as the procurer?
X. Whether the State Commission in passing the Impugned Order has erred in
not appreciating that as an industry wide practice it is the SLDC/RLDC who
object to scheduling below ‘Technical Minimum’ if such a requisition is made,
as the same was also observed in the Explanatory Memorandum issued by the
Central Commission which lead to the Draft Indian Grid Code being notified
for public comments?
XI. Whether the State Commission has failed to appreciate that mandate of
Section 32 is to ensure ‘Optimum Scheduling’ and not ‘Scheduling’ as being
interpreted in the Impugned Order?
XII. Whether the State Commission in passing the Impugned Order has wrongly
relied upon Article 4.3.5 of the PPA to hold that the Respondent No. 3 procurer
can requisition any capacity from the generator without considering the fact
that Article 4.3.5 is not the objective behind the Agreement as ultimately the
Agreement was entered for the purpose of setting up a power plant to supply
70% power? Whether Article 4.3.5 of the Agreement is only an exceptional
provision which comes into play in exceptional scenarios and cannot be used
to regulate the manner in which supply of power will be effected between
parties?
XIII. Whether the State Commission in passing the Impugned Order has wrongly
considered Article 4.3.3 of the PPA which does not cast any obligation upon
the generator to sell the un-requisition capacity but only provides an enabling
provision?
XIV. Whether the State Commission in passing the Impugned Order has
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erroneously held that the payment of ‘Capacity Charges’ is the only obligation
of the Respondent No. 3 procurer especially when the said procurer has not
invoked Article 4.3 in terms of the PPA?
XV. Whether the State Commission in passing the Impugned Order incorrectly
held that ‘Technical Minimum’ is of no relevance especially when the Central
Commission is now seeking to amend the existing Gird Code to ensure that
generation below ‘Technical Minimum’ is curtailed as a practice and therefore
it is a larger issue at play presently?
XVI. Whether the State Commission has erred in not appreciating that the issue
of operation below ‘Technical Minimum’ is an issue which affects the financial
health of all generators in times to come?
XVII. Whether the State Commission has erred in not considering the submission
of the Appellant that the MOD being prepared by the Respondent No. 3 is
contrary to the Extant laws and hence cannot be the basis for the Respondent
No. 3 scheduling power below the ‘Technical Minimum’ capacity of the
Appellant's generating unit/plant?
XVIII. Whether the State Commission has gravely erred by accepting the
contention of the Respondents that due to ‘proposed regulation of power’ the
scheduling of the Appellant was done below the commercially accepted 140
MW which is the ‘Technical Minimum’ of the Appellant's Generating Unit
without appreciating that ‘Regulation of Power’ per se as a concept has also
not been defined under the extant Regulation of the State Commission or the
PPA signed between the Appellant and the Respondent No. 3.?
XIX. Whether the State Commission in passing the Impugned Order has failed to
appreciate that Appellant's station, being a thermal power station, is a Base
Load Station by design and such stations are designed to operate at a near
constant load and such frequent changes in load can cause severe damage to
the plant and its equipment?
XX. Whether the State Commission in passing the Impugned Order has failed to
appreciate that in the present market scenario where admittedly the
Respondent No. 3 is power surplus greater responsibility is required to be
exercised by the Respondent SLDC in ensuring that the Appellant's Power
Plant is not operated below its technical minimum especially since the
Appellant is the only generator with 70% tied up capacity with the State
Procurer?
XXI. Whether the State Commission in passing the Impugned Order has failed to
appreciate that the Appellant's Power Project has been established for the
specific purpose of ensuring supply of power to the State of Madhya Pradesh
and therefore higher regulatory accountability is required to be exercised by
other State Players to ensure that no undue financial and technical prejudice
is caused to the Appellant?
XXII. Whether the State Commission in passing the Impugned Order has failed
to appreciate that due to sudden and erratic scheduling being sought the
Appellant had been compelled to incur losses and to maintain its ‘Technical
Minimum’ by supplying power on day ahead basis in open market?
XXIII. Whether the State Commission in passing the Impugned Order has
wrongly relied solely upon Article 7.1.1 by not seeing the other comprehensive
provisions of the PPA such as Article 6.1.3 wherein it was the obligation of the
Procurer to keep available the entire contracted capacity unless a notice from
the Procurer under Article 4.3.3 was issued which has not been done till date?
7. We have heard at length Mr. Sanjay Sen, the learned senior Counsel for the
Appellant and Mr. M.G. Ramachandran, the learned Counsel for Respondent No 3, Ms.
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Mandakini Ghosh, the learned Counsel for the State Commission and Mr. Manoj Dubey,
the learned Counsel for Respondent No 2 and Respondent No 4 and considered the
arguments put forth by the rival parties and their respective written submissions on
various issues identified in the present Appeal. Gist of the same is discussed
hereunder.
8. The learned Counsel for the Appellant has made following submissions on the
various issues raised in the Appeal for our consideration:
a) In scheduling optimum power from the Generator it is the duty and responsibility
of the Respondent No. 4 to ensure that the generator is not asked to operate
below its machine's Technical Minimum Capacity as the same would cause severe
operational prejudice to the generator, including the requirement to operate the
plant inefficiently on the basis of expensive fuel oil. However, in the present case
the SLDC blindly relied on the letter issued by the Respondent No. 3 to interpret
the ‘Technical Minimum’ of the Appellant's generating capacity to the contracted
capacity in terms as provided in the Power Purchase Agreement dated
05.01.2011.
b) The State Commission completely erred in holding that technical minimum is to
be read in terms of the contract and not the installed capacity of the plant. This
view of State Commission is different from the view of other State Commissions
like MERC Judgment dated 29th January, 2016 passed in Petition No. 121 of 2015
titled Maharashtra State Electricity Distribution Co. Ltd. v. Maharashtra Veej
Grahak Sanghatana and UPERC Judgment dated 20.01.2016 passed in Petition
No. 1070/2015 titled Rosa Power Supply Company Limited v. UPSLDC
c) The Merit Order placed before the State Commission was issued on the basis of
misconceived principles. The State Commission has turned a blind eye towards
the issue of Merit Order Despatch (MOD) and has not recorded any findings on
the issue.
d) Technical Minimum of a Generation Power Plant is based upon the
Unit/Plant Capacity and not the Contracted Capacity.
i. ‘Technical Minimum’ as a concept means the technical parameters below which
the machines should not be permitted to operate as below this level the
machines become unstable and inefficient. This aspect has been recognised by
the Commissions, utilities, generating companies etc. from the very inception.
ii. It is an accepted practice that ‘Technical Minimum’ Generation as a concept is
only relatable to the Generating Plant/Unit's physical generation capacity and
not an agreement between a generator and DISCOM. The Technical Minimum
of the Appellant's Power Plant is not being maintained by the SLDC on the
pretext that the same is limited to the Contract/Agreement between the
Appellant and the Respondent No. 3. The said restriction has been imposed by
the SLDC pursuant to the letter dated 22.05.2015 of the Respondent No. 3
which was challenged before the State Commission.
iii. This issue of Technical minimum was deliberated at length by the Central
Commission in Petition No. 142/MP/2012 wherein the Central Commission
vide its order dated 02nd September 2015 held as follows:—
“45. From the submissions of CEA, it is inferred that the technical
minimum of thermal generating units should not be less than 50% of MCR
loading of the unit for old as well as new plants. In our view operation of
thermal generating station on technical minimum has commercial
implication for the generator in terms of increase in heat rate, secondary
fuel oil consumption and auxiliary energy consumption which enhances the
actual energy charges and the same cannot be loaded to other beneficiaries
which are not being regulated. Therefore there is a need for adjusting the
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implication of enhanced energy charges from the revenue earned from sale
of regulated power apart from normative energy charges and fixed charges.
The Commission has proposed amendment to the Central Electricity
Regulatory Commission (Indian Electricity Grid Code) Regulations, 2010 by
prescribing a technical minimum of 55% along with compensation
mechanism to make good the loss of the generating station. Therefore, the
issue of operation of the thermal generating unit at technical minimum and
its operational and financial implication during the period of regulation of
power supply shall be dealt with in accordance with the amendment to the
Grid Code which will be finalized and notified shortly.”
iv. The Central Commission issued Draft Notification of the Central Electricity
Regulatory Commission (Indian Electricity Grid Code) (Fourth Amendment)
Regulations, 2015 in July, 2015, wherein the Central Commission had sought
to introduce the definition of “Technical Minimum Schedule” at sub-regulation
6.3 B of Draft Regulations which is as follows:—
“The technical minimum schedule of operation in respect of ISGS shall
be 55% of the MCR loading of unit/units of generating station.”
v. In the Explanatory Memorandum of the draft regulations issued by Central
Commission, following was specified for specifying minimum technical
operation of generating stations on unit basis:
“36. It is proposed that the technical minimum may initially be kept as
55% of Installed Capacity/MCR of unit/units for old as well as new plants in
due consideration of CEA recommendations and giving some margin over
the recommended technical minimum of 50% by CEA. However, the
operation at 55% loading has commercial implication for the generator in
terms of increase in heat rate, secondary fuel oil consumption and auxiliary
energy consumption, thereby increasing the actual energy charges. The
generator will have to be compensated for this increase in energy charges.
37. It is felt that any reduction in loading of units below 85% on account
of low despatch schedule given by beneficiaries/RLDCs may have to be
compensated by the beneficiaries. The Standard Bidding Documents (SBD)
for case-II/UMPP projects brought out by Ministry of Power provide for heat
rate degradation for part load operation corresponding to different unit
loadings. In accordance with the same, following heat rate degradation for
part load operation corresponding to different unit loadings may be
provided:
…………………………….
…………………………….
…………………………….
Below 55%, the station may go for reserve shut down.
38. The generating company may be allowed to seek relief at the end of
the year based on average unit loading due to low despatch schedule given
by beneficiaries/RLDC but not because of any other reason including short
supply of fuel/shortage of fuel; Commission may allow compensation for
increase in station heat rate, secondary fuel oil consumption and auxiliary
energy consumption after prudence check on a petition to be filed by the
generating company giving requisite details of unit loadings, forced
outages, planned outages, PLF, generation at generator terminal, energy
sent out exbus, actual heat rate, number of start-ups, actual secondary fuel
oil consumption, actual auxiliary energy consumption etc. In case of gas
based stations, compensation shall be decided based on the characteristic
curve provided by the manufacturer and after prudence check of the actual
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operating parameters of station heat rate, auxiliary energy consumption.

The compensation worked out by the Commission shall be borne by the
entity which caused the plant to be operated at technical minimum. In case
of generating stations not regulated by the Commission, the generating
company shall have to factor these provisions in the PPA for sale of power
in order to claim compensation for operating at the technical minimum
schedule.”
vi. Therefore, in terms of the above it is an accepted Industry and Technical
Practice that ‘Technical Minimum’ as a concept can only be made applicable on
the Unit Capacity of a Generating Station as it relates to the physical
generation ability of a Unit. The Draft IEGC has now been notified on 6th April,
2016 wherein the provision in Relation to ‘Technical Minimum’ has been
incorporated in the Grid Code.
vii. Since the Commissioning of the Plant by the Appellant, it is an accepted
operational practice that a minimum threshold of 140 MW per Unit has been
maintained by the Respondents in procuring and scheduling power from the
Appellant's Generating Station. If the contention of the Respondents is to be
accepted then the Technical Minimum of the Appellant generation power plant
would be kept at 96 MW per Unit i.e. 70% of the Contracted Capacity per Unit.
viii. It was always known between parties including SLDC that the Appellant unit
cannot operate below 140 MW and whenever Appellant had a higher tie up
from its balance un-contracted capacity, the Respondent No 3 has taken
benefit of the same and has scheduled power much below 96 MW for the
Respondent No. 3 based on its requisition. The ability to tie-up the untied
capacity in the short term is based on market dynamics. The generator can
only offer power in the power exchange. Whether that offer will result in
contract of sale depends on the then existing market conditions.
ix. The SLDC has also failed to appreciate that it is an accepted industry practise
that the RLDC/SLDC often reject the scheduling from procurers or force
technical minimum scheduling upon procurers/buyers if their schedule results
in operating the plant below the technical minimum of the generating station.
It is incumbent upon the SLDC to follow the aforementioned practice in order
to optimize the scheduling and dispatch.
x. The CERC in its Statement of Reasons to the IEGC 4th Amendment Regulation
has elaborately stated the requirement of maintaining Technical Minimum
Generation even when the power scenario is in surplus and also the need to
compensate the generators if the scheduling is below the 85% PLF.
e) The Respondent SLDC while discharging its functions has to act as an
independent autonomous body.
i. The Respondent SLDC without exercising its powers of regulating, scheduling
and dispatch of electricity in an optimum manner within the State of Madhya
Pradesh, has wrongly issued the challenged communications to the Appellant.
The SLDC at the behest of the Respondent No. 3 has forced the Appellant to
operate its plant much below the Technical Minimum operation level of its
plant capacity.
ii. The Judgment of this Tribunal in Appeal No 175 of 2012 titled as Tata Power
Company Limited v. Maharashtra Electricity Regulatory Commission may be
referred to which states as follows:—
“29. Let us now discuss the issue. The State Load Despatch Centre (R2)
is constituted under Section 31(1) of the Act as an independent body,
which was responsibility for carrying out optimal scheduling and dispatch of
electricity within the State. SLDC while dispatching its statutory function is
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covered by the provisions under Section 33(1) of the Act. Under Section 33
(1) of the Act, SLDC has to decide the request for scheduling made by the
Appellant only in accordance with the parameters prescribed under the Act.
Thus, SLDC is required to take into account only issues relating to
transmission and the transmission network when deciding any request for
scheduling of power. “In view of the above observations of this Tribunal, it
is abundantly clear that the SLDC while discharging its functions has to act
as an independent autonomous body and cannot in any manner act as an
extended arm of the Government Utility.
iii. As per clause 4.3.5 of the PPA, it is the Procurer, who is required to issue
Notice to the Appellant to the effect that it will not procure its contracted
capacity for a particular period. The SLDC cannot now be permitted to say that
the letter dated 28.08.2015 is a notice under Clause 4.3.5 of the PPA, which
notice had to be issued by the Respondent Procurer, who is a party of the PPA
(and not the SLDC). The notice for seeking power below the contracted
capacity has till date not been issued by the Respondent Procurer. It is only
after such notice, the Appellant can plan the sale of its un-scheduled capacity.
The procurer has been drastically reducing the schedules on a day ahead basis
for a base load thermal power plant, which is both contrary to the intention of
the contract and impractical for day to day operations.
iv. As per Regulation 1.6.6 of the State Commission's Grid Code, the SLDC is
obligated not to unduly discriminate or prefer amongst any stakeholders.
However, in the present case, SLDC in the guise of carrying out its
responsibility of optimum scheduling and dispatch of electricity has issued the
impugned communications fixing the Technical Minimum of the Appellant's
Power Plant to the contracted capacity with the Respondent No. 3.
v. The running of Project below technical minimum has led to severe expenditure
on account of secondary fuel consumption and other related costs which has
not been compensated to the Appellant.
vi. Further, for any offer of power on Exchange the Appellant cannot take
recourse to FSA Coal (obtained under Coal India's linkage policy) and is
necessarily compelled to procure Coal from open market, which substantially
increases the cost of generation. This makes the offer uncompetitive. If the
procurer had followed the due procedure stipulated under the PPA then this
situation could have been avoided and an equitable opportunity would have
been given to the Appellant to ensure that its generation is suitably tied up.
vii. As an accepted practice if there is any difference between the scheduling of
the Procurer and the generators availability, the RLDC/SLDC refuse scheduling
and direct the parties to come at a settlement and such RLDC/SLDC under no
circumstance impose the requisition of the procurer upon the generator.
Reference has been made to the communication of WRLDC dated 03.06.2015
wherein it was stated “that WRLDC schedules contracts which are mutually
agreed. In case of disagreement, it is not a contract and hence from now
onwards such disputed requisitions shall be scheduled as zero.”
viii. The action of SLDC to ensure that the requisition of procurer i.e. Respondent
No. 3 is implemented at any cost without considering the technical minimum
limitations of the Appellant is also contrary to the mandate of Section 32 of
the Act.
f) The Act mandates “Optimum Scheduling and Dispatch”
i. The Act or the Regulation in no manner indicates that the SLDC shall act only
to promote procurement by state utilities without considering the technical
capabilities of the Appellant's generating plant. If the intent of the legislature
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was to limit the operation of SLDC to the contract entered into between the
procurer and the generator, then the legislature would not have used the word
‘optimum’ in Section 32 of the Act. The sole purpose of incorporating the word
‘optimum’ in Section 32 is to entrust the responsibility upon SLDC to balance
the interest of both the procurer as well as the generator, which the said
Respondent SLDC has failed to do in the present case.
ii. The Respondent No. 3 procures 70% of the power generated from the
Appellant's plant, which is a substantial portion of the entire generation by the
Appellant. Further, in such circumstances, wherein the Respondent No. 3 has
tied up PPA's for more than its actual demand, the Respondent SLDC is
obligated to ensure that the electrical system (which includes the generator)
of the state operates in the most efficient and economical manner. In such a
situation, greater regulatory responsibility, judiciousness and ownership is
required to be exercised by the Respondents, in ensuring that the Appellant's
Power Plant is not operated below its Technical Minimum ability especially
since the Appellant is the only generator with 70% tied up capacity with the
State Procurer.
g) Any off take/scheduling below the contracted capacity has to be done
strictly in accordance with the Terms and Conditions of the PPA.
i. Any off take/scheduling below the contracted capacity can only be made if two
conditions are satisfied i.e.
a) Firstly, a due Notice under Article 4.3.5 is to be issued by the Procurer to
the Generator for the lower quantum specifying the period for which such a
supply would be taken, and
b) Secondly, when the said Quantum is either above ‘Technical Minimum’ of
the Unit Capacity or Zero in cases of RSD as enumerated in the 4th
Amendment of the IEGC.
ii. In the present case, the requirement of Article 4.3.5 of the PPA has admittedly
not been fulfilled till date. Therefore, by virtue of Section 54 of the Contract
Act, 1872, the Respondent No. 3 is in breach of the PPA signed between the
Appellant and the Respondent No. 3.
Section 54 of the Contract Act is reproduced below:—
“When a contract consists of reciprocal promises, such that one of them
cannot be performed, or that its performance cannot be claimed till the
other has been performed, and the promisor of the promise last mentioned
fails to perform it, such promisor cannot claim the performance of the
reciprocal promise, and must make compensation to the other party to the
contract for any loss which such other party may sustain by the non-
performance of the contract.”
Therefore, in terms of the above quoted Section 54 of the Contract act,
1872 since the Respondent No. 3 has not followed the procedure as
prescribed under Clause 4.3.5 the said Respondent cannot claim equity in
its favor. Moreover, the financial hardship caused to the Appellant will have
to be appropriately compensated.
iii. Further, in terms of the PPA the exact period of shortfall in off take of power is
to be informed to the Appellant as the words “for a period specified in such
notice” mentioned in Article 4.3.5 of the PPA.
iv. The Article 4.3.4 of the PPA dated 5th January 2011, provides for sharing of
“sales realization in excess of Energy Charges”. It is an agreed and accepted
position that a share in profit is equally applicable to share in loss. Therefore,
the claim of the Appellant must be considered on account of losses incurred in
this additional light.
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v. The performance of the Contract cannot be permitted to be done in an

inefficient and uneconomical manner which is contrary to the very preamble of
the Electricity Act, 2003 and the various policies framed thereunder and in
terms of Regulation 6.3 B of the IEGC any scheduling below the ‘Technical
Minimum’ of the Unit Capacity would result into RSD.
h) The MOD is not in accordance with the Regulations of the State
Commission and MP Balancing and Settlement Code, 2009.
i. The entire case of the Respondents was predicated on the averment that the
Respondent procurer is seeking scheduling of power in terms of the MOD
being prepared by it and therefore, the scheduling from the Appellant's
Generating station has gone down from 140 MW to 109 MW and to 94 MW
since May, 2015.
ii. The MOD received by the Appellant from the Respondent No. 3 itself shows
that it is not in accordance with the Regulations of the State Commission and
the Balancing and Settlement Code, 2009. The MOD has been prepared after
including Cess on Intrastate Sales at the rate of Rs. 0.15/unit, when in fact
the Regulation only provides for the MOD to be prepared on the basis of
variable cost only. The inclusion of Cess in the MOD is in contravention to
Regulation 5.3 of the State Commission's (Balancing and Settlement Code),
2009.
iii. The MOD is being implemented on total cost (after considering Transmission
Losses and Statutory Duties and Taxes) basis whereas the same should be on
energy cost only. The above is in violation of Regulation 5(3) of Madhya
Pradesh Electricity Balancing and Settlement Code, 2015.
iv. The concept of MOD is to ensure that the most efficient fuel gets dispatched
first. For this small hydro, solar power, wind power is termed as “must run”
plants. The merit order stack is based on cost of fuel alone and local taxes,
which are only applicable to IPPs, cannot be considered for purposes of
deciding MOD.
v. If the said MOD is incorrect, then the entire basis of Respondents' arguments
to limit the Appellant's generation to ‘Technical Minimum’ of the contracted
capacity are not sustainable since the Appellant's cost of energy is lower than
several State owned generating stations, its power (under a proper MOD
principle) would be dispatched, without the need to reduce the schedules
below the technical minimum.
vi. The Respondents are in fact operating the MoD to ensure that preference is
given to the more expensive and inefficient State Generating Stations which is
not permissible in law.
i) MP grid operations have to be in consent with the IEGC, as amended from
time to time.
i. The CERC has notified the draft Amendment to Indian Electricity Grid Code
(“IEGC”) on 06.04.2016 which includes the issue of ‘Technical Minimum’ of
Generating Stations and its consequent compensation to generators. Further,
the CERC has kept the requisite regulation i.e. Sub-Regulation 6.3(B) in
abeyance as the modalities for operation of low system demand are yet being
finalized by National Load Dispatch Centre (“NLDC”).
ii. In terms of Section 86(1)(h) of the Electricity Act, 2003, the State Grid Code
has to be consistent with the Grid Code specified by the CERC. Therefore,
even though the concept of ‘Technical Minimum’ at present does not find
mention in the State Commission's Grid Code but by virtue of the CERC
(IEGC) 4th Amendment read with Section 86(1)(h) the said concept of
‘Technical Minimum’ and Reserve Shut Down (“RSD”) below ‘Technical
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Minimum’ is also applicable upon the State of Madhya Pradesh.

iii. In terms of the observations of the Hon'ble Supreme Court in the case of
Central Power Distribution Co. v. CERC (2007) read with Section 86(1)(h) of
the Electricity Act, 2003, the Amendments made in the CERC (lEGC) 4th
Amendment are also required to be followed by the State Commission.
Therefore, the State Commission must amend the MPERC Grid Code to bring it
into parity with the latest Amendments in the CERC notified IEGC.
iv. Since the IEGC has been amended as on 06th April, 2016 Clause 6.3B has
come into effect and is applicable upon the State of Madhya Pradesh in terms
of Section 86(1)(h) of the Act.
j) The Appellant has a Legitimate Expectation to be protected against
Regulatory certainty and consistency.
i. Right from the inception, the Appellant was aware that the Technical Minimum
Operation of the Appellant's Unit was largely based upon the Unit's generation
ability and not upon the contracted capacity with Respondent No. 3.
ii. The Respondents by fixing the Technical Minimum of the Appellant's
Generating Unit much below the accepted and followed industry practice has,
arbitrarily and unfairly, taken away the Appellant's legitimate expectation to
be protected against violations of Regulatory consistency and certainty.
k) Orders passed by the other State Commissions on the issue of Technical
Minimum.
i. Other State Commissions are also debating about the issue of Technical
Minimum and the unanimous direction of all Commissions is to either operate
a Plant (irrespective of the agreement) at its Technical Minimum or grant
Reserve Shut Down. The practice has been universally accepted.
I) Order passed by the commission has failed to correctly interpret Clause
7.1.1 of PPA
i. The State Commission in the Impugned Order has failed to take note of the
term “prudent utility practices” mentioned in clause 7.1.1 of the PPA. The said
term has been defined in the definition section of the PPA. Prudent Utility
practices in the PPA has been defined to mean practices, methods, techniques
and standards that are generally accepted by electric utilities for the purpose
of ensuring physical safety and efficiency of the Power Station and its various
components.
ii. A conjoint reading of the clause 7.1.1 along with the definition of prudent
utility practices would show that it is unviable and impractical for the
Appellant to function against the generally accepted practice for the physical
safety of its power station.
9. The learned Counsel for the State Commission has made following submissions
on the various issues raised in the Appeal for our consideration:—
a) The basic allegation of the Appellant is that the State Commission dismissed the
Petition while taking a narrow view of the entire situation. The Appellant has
contested that the State Commission has interpreted the PPA and the
Regulations cited by it in a narrow and restrictive manner to reach an incorrect
conclusion.
b) The Appellant wants that its power plant be allowed to schedule at the ‘technical
minimum threshold’ of 140 MW and to recover additional cost incurred allegedly
by it in operating its plant as per the directions of Respondent No. 4/SLDC.
c) The Respondent No. 4, SLDC vide communication dated 01.06.2015 instructed
the Appellant as:
“Whenever the power surrender instruction to technical minimum quantum
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of MP is issued the same shall be limited to 60%/70% (as the case may be) of
the contracted ex-bus capacity of MP.”
d) The Appellant approached the State Commission under incorrect provisions of
the Act. The Appellant filed Petition 54 of 2015 under Section 86(1)(f), (h) and
(k) of the Act, 2003. Clause (1) of Section 86 provides that the State
Commission shall adjudicate upon the disputes between the licensees and
generating companies whereas, in Petition no. 54 of 2015, the Appellant
challenged the legality, validity and proprietary of the directions issued by
Respondent SLDC which is not the licensee. Secondly the other Sections invoked
by the Appellant, 86(1)(h) and (k) pertain to the general functions of the State
Commission relating to specifying M.P. Electricity Grid Code and discharge such
other functions as may be assigned to the State Commission under the Act.
e) The Appellant has relied heavily upon the Draft CERC (Indian Electricity Grid
Code) (Fourth Amendment) Regulations, 2015 to show ‘technical minimum
schedule for Operation and Generating Stations’, however these Regulations are
meant for Inter State Generating Stations (ISGS) whereas, the Appellant's power
plant is not ISGS as per the provisions of M.P. Electricity Balancing and
Settlement Code and M.P. Electricity Grid Code and therefore cannot rely upon
the aforementioned Regulations.
f) The State Commission in its Impugned Order has observed that the use of the
term “Technical Minimum” by SLDC/Respondent No. 4 and M.P. Power
Management Company/Respondent No. 3 had no relevance since the provisions
of the PPA executed between the Appellant and Respondent No. 3 are explicitly
clear with regards to the commercial and technical obligation to be met by each
of them. The State Commission vide Impugned Order has rejected the
Appellant's prayers for compensation in light of the PPA executed between the
Appellant and Respondent No. 3. Therefore, there is no question for grant of
compensation for distress sale and excess oil usage due to lowered generation.
g) The Appellant has challenged the Impugned Order on the following grounds:
(i) The State Commission has failed to address the issue of ‘Technical Minimum’
as an industry practice. The State Commission has erred in relying upon the
PPA and the MPERC Grid Code;
(ii) The State Commission has erred by not accounting for the damage caused to
the Appellant's unit due to frequent changes in load. The State Commission
has erred by not directing Respondent No. 3 to compensate the Appellant for
the distress sale of its' power on lEX and increased use of oil due to
lower/inefficient generation;
(iii) The State Commission has misinterpreted the provisions of the PPA that
Respondent No. 3 is only obligated to pay capacity charge for unrequisitioned
capacity. Such a narrow and pedantic interpretation will result in inefficient
generation which could not have been the intent behind the PPA, the Act and
the Regulations framed therein;
(iv) The State Commission has failed to appreciate that the MOD prepared by
Respondent No. 3 is incorrect and is in violation of Regulation 5(3) of the
Madhya Pradesh Balancing and Settlement Code, 2015.
(v) The State Commission has failed to realize that the Respondent No. 4 has
erroneously acted in contravention of Section 32 of the Act by directing the
Appellant to schedule below 140 MW is the ‘Technical Minimum’ of the
Appellant's generating unit;
h) The State Commission had correctly rejected the Appellant's prayer for setting
aside the impugned letter dated 01.06.2015 issued by Respondent no. 4 and
disallowing recovery of any additional cost incurred by the Appellant in operating
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of the plant on account of the directions issued by Respondent no. 2. The State
Commission has refrained from allowing recovering of additional cost in light of
the provisions of the PPA, executed between the Appellant and Respondent no.
3. The terms of the PPA are explicitly clear and the Appellant is adequately
compensated by Respondent no. 3 under the PPA for any unscheduled/unavailed
contracted capacity.
i) The State Commission has passed the Impugned Order on examination of the
following two issues while considering Petition 54 of 2015 filed by the
Appellant:
i. Whether the instructions of backing down of power issued by Respondent
no. 4 to the Appellant on the basis of contract capacity with Respondent
No. 3 are incorrect and bad in law?
ii. Whether the Appellant can be allowed to recover additional cost incurred by
it while operating the power plant, as per the directions of Respondent no.
3, communicated to it by Respondent no. 4?
The State Commissions finding on these two issues are as follows:
Issue No. (i): Whether the instructions of backing down power issued by
Respondent no. 4 to the Appellant on the basis of contract capacity with
Respondent No. 3 are incorrect and bad in law?
a) The scheduling instructions issued by SLDC/Respondent no 4 to the Appellant
on the basis of contract capacity with Respondent No. 3 are correct and good
in law.
b) The Appellant has argued that the scheduling instructions issued by
Respondent no. 4/SLDC required the Appellant to operate its power plant
below its technical minimum capacity and thus the same are in violation of
the Prudent Utility Practices since the instructions require the plant to operate
at a level which is highly inefficient and uneconomical. However these
averments made by the Appellant are untenable in view of the PPA, MPERC
Grid Code.
c) The Appellant and the Respondent No. 3 have executed PPAs for supply of
70% (inclusive of 5% of net generated power at variable cost) of the installed
capacity of Appellant's 2 × 250 MW (Phase 1), i.e. 350 MW for a period of 25
years at a tariff to be approved by the State Commission. The PPA between
the Appellant and Respondent No. 3 is explicitly clear and has the necessary
provisions for commercial and technical obligations/arrangements that have to
be met by each party to the contract. It is stated that the PPA does not
provide for any kind of minimum generation to be compulsorily maintained by
the Appellant. The Appellant is entitled to sell any unscheduled Available
Capacity to an entity other than the Respondent No. 3/procurer on one hand
and also entitled to recover the Fixed (capacity) charges corresponding to
such unscheduled Available Capacity from the procurer on the other hand. The
same has also been acknowledged by the Appellant as being an enabling
provision.
d) Under the PPA, no restrictions have been imposed on the Respondent no. 3, to
limit the quantum of ‘Available Capacity’ to be scheduled by it between zero
and the full contracted capacity declared available by the Appellant. Article
4.3.3, 4.3.4, 4.3.5 of the PPA dealing with ‘Available Capacity’ provides that
Respondent No 3 may, at any time and without assigning any reason request
the Appellant to schedule whole or part of contracted/available capacity.
However, the PPA provides for the Appellant to be compensated by way of
fixed cost to be paid by Respondent No. 3, in terms of PPA, in the event the
Respondent No. 3 off takes less than the contracted capacity. It is reiterated
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that the Respondent No. 3 is responsible only up to the contracted capacity of

the generating unit as per the PPA and any unscheduled available capacity
within the contracted capacity is compensated by way of fixed cost to be paid
by Respondent No. 3 in terms of PPA.
e) Further, in the event the Respondent No. 3 does not schedule full contracted
power under the PPA, the Appellant may arrange to sell the remaining power
to third party as per terms & conditions of the agreement (Article 4.3.3, 4.3.4.
and 4.3.5 of the PPA).
f) The Appellant's 2 × 250 MW generating plant has only one beneficiary-
Respondent No. 3 for 70% and the 30% remains with the Appellant as
mercantile capacity.
g) The lEGC 2016 mentions that the relief of adjustment in energy charges due
to lowered generation as envisaged under the aforementioned Regulations will
be only available to generating plants whose tariff is determined/adopted by
the CERC. Further, the IEGC 2016 carves out an exception for generating
plants which are not regulated by the CERC and specifically state that in case
of generating stations not regulated by the Commission, the generating
company shall have to factor these provisions in the PPA for sale of power in
order to claim compensation for operating at the technical minimum schedule.
The relevant extracts of IEGC 2016 are as given below:
“4. In case of a generating station whose tariff is neither determined nor
Adopted by the Commission, the concerned generating company shall have
to factor the above provisions in the PPAs entered into by it”
h) Respondent No. 3 prepares MOD list on monthly basis considering variable
cost and the same is provided to all stake holders including SLDC on regular
basis. Respondent No. 3 has notified the procedure of preparing MOD vide its
letter No. 1270 dated 18.12.2013. As per the PPA, the answering respondent
has full rights to schedule power to the extent of its choice. The Appellant had
not sought any relief regarding ‘Merit Order Despatch’ in its petition filed
before the State Commission. Secondly, the question raised by the Appellant
regarding preparation of MOD had been adequately replied/addressed by
Respondent No. 3 during the course of proceedings and as recorded in the
Impugned Order.
Issue No (ii): Whether the State Commission has correctly disallowed the
Appellant's prayer seeking recovery of additional cost incurred by it, if
any due to lowered operation?
a) The Appellant has prayed that it be allowed to recover additional cost from
Respondent no. 3 since it is incurring heavy operational cost while running its
power plant at the capacity instructed by the SLDC/Respondent no. 4. From
the aforementioned provisions of the PPA, it is clear that in the event
Respondent No. 3 requisitions less than the contracted energy of 350 MW
from the Appellant, Respondent No. 3 is liable to pay the full fixed charges for
the unscheduled/unavailed power from the Appellant. The Appellant is also
free to sell the unavailed power to any third party. Therefore, there is no
compulsion on Respondent No. 3 to off-take any amount of minimum power
under the PPA. It also untenable that the Appellant will be financially
aggrieved as Respondent No. 3 is paying the Appellant fixed/capacity charges
for the unavailed power under the PPA. Further, the Appellant has admitted
that it has been selling the unavailed power on the lEX. Also, the Appellant
has tied up only the 70% of the installed capacity with Respondent No. 3.
Therefore, the Appellant is at liberty to sale the non-contracted 30% power
through any other route also which the Appellant does from balance 30% of
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its non-contracted capacity through Short Term Open Access for sale of
additional power. The Appellant has been selling the 30% on a merchant basis
in the past and may continue doing so in the future. This will ensure that the
Appellant is able to maintain the generation of both the units at the desired
levels without inflating the ARRs of the state distribution licensees by forcing
them to off-take expensive surplus power from its generating units.
b) The Appellant has also prayed that it be allowed to maintain a generation of
140 MW per unit as an otherwise lowered generation will damage the plant's
equipment. Article 7.1.1 of the PPA which deals with efficient and economical
operation of the power station provides that the Appellant is made responsible
at its own expenses to ensuring the operation of power station in an efficient,
coordinated and economical manner so as to meet its obligation under the PPA
and also to avoid any adverse effect on the grid operation. Therefore, any
financial impact suffered by the Appellant due to alleged damage to the
generation plant which in turn is caused by lowered generation is to be
absorbed by the Appellant. The PPA envisages such aforementioned costs (if
at all incurred) to be the Appellant's responsibility even if caused by lowered
generation as long as the levels of generation have been maintained so as to
not adversely affect the grid operations.
c) As per Article 7.1.1 in PPA it is clear that the Appellant may not seek
scheduling of power at ‘Technical Minimum’ nor can they seek any
compensation for lowered generation under the lEGC 2016. It is once again
reiterated that the lEGC 2016 is applicable to ISGS units and CGS where
many constituents are having share as per their allocation and responsible for
submission of requisition up to 55% of their share. The Appellant's 2 × 250
MW generating plant has only one beneficiary-Respondent No. 3 for 70% and
the 30% remains with the Appellant as mercantile capacity. Further, the lEGC
clearly states that for entities not regulated by the CERC, compensation may
be sought at the end of the year only if such provision is included in the PPA.
Clearly, the Appellant cannot seek compensation for increased oil usage due to
lowered generation and distress sale on lEX as the PPA for sale of power does
not provide for compensations for operating at the technical minimum
schedule (as understood under the IEGC 2016 for ISGC and CGS).
j) In view of the afore-mentioned, the State Commission has correctly
passed the Impugned Order while dismissing Petition no. 54 of 2015.
10. The learned counsel for the Respondent No 3, MPPMCL has made following
submissions on the various issues raised in the Appeal for our consideration:—
a) The Appellant's contention is that the Respondent No 3 should be responsible for
maintaining technical minimum of the installed capacity of the Unit instead of
limiting the same to the contracted capacity agreed between the Appellant and
the Respondent No 3.
b) POWER PURCHASE AGREEMENT (“PPA”):
i. The contracted capacity in the PPA dated 05.01.2011 is not for the full installed
capacity of the Appellant's power plant. The contracted capacity is 70% of the
installed capacity.
ii. As per the PPA, there is no obligation for the Respondent No 3 to schedule any
minimum capacity of power and there is no provision of technical minimum
limits.
iii. The Appellant is made responsible at its own expenses to ensure the
operation of power station in an efficient, coordinated and economical manner
so as to meet its obligation under the PPA and also to avoid any adverse effect
on the grid operation.
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c) Technical minimum as approved by the Central Electricity Regulatory

Commission in the amendment to the Indian Electricity Grid Code (Fourth
Amendment), Regulations, 2016
i. The technical minimum criteria has been approved by the Central Electricity
Regulatory Commission (vide Amendment dated 06.04.2016 to Indian
Electricity Grid Code Regulations at 55% of Unit capacity. Though the
amendment has been notified but has not been given effect to in the absence
of the detailed procedure notified by the National Load Dispatch Centre
(NLDC).
ii. Moreover, the amendment is applicable to the Inter-State Generating Stations
units where many constituents are having share as per their allocation and
responsible for submission of requisition upto 55% of their share. The
Appellant's power plant is not an Interstate Generating Station as per the M.P.
Electricity Balancing and Settlement Code and M.P. Electricity Grid Code. Even
assuming that the Amendment is applicable to the Appellant's power plant,
the Answering Respondent is responsible for the 70% of the Plant's capacity
and 30% is left with the Appellant. The 30% capacity remains with the
Appellant as merchantile capacity and the Appellant for the purposes of 30%
capacity is to be treated as deemed beneficiary.
iii. The Appellant's contention that the technical minimum should be on the basis
of total generating station capacity and not the contracted capacity of a
particular purchaser is erroneous. In a scenario where generator is not having
long term PPA of a full quantum, it is for the generator to have some form of
arrangement (medium-term open access/third party/sale through power
exchange) so that the technical minimum quantum could be achieved, which
is required for ensuring grid stability and security during low load, high
availability condition etc. For an example, ‘A’ has a Power Plant having
capacity of 500 MW. ‘A’ enters into a PPA with ‘B’ for a capacity of 200 MW.
The technical minimum of the plant is 275 MW (55% of 500 MW). If the
Appellant's contention is to be accepted, then ‘B’ would be forced to purchase
not only full contracted capacity but also additional 75 MWs (275-200 MW)
that it had never contracted for. It is for ‘B’ to purchase the proportionate of
the contracted capacity to the installed capacity namely 55% of the 200 MW
i.e. 110 MW only.
d) MERIT ORDER:
i. The Appellant has incidentally raised issues on merit order when the same has
no application to the matter in issue.
ii. The scheduling done by the Respondent No. 3 is also in strict compliance of
the Merit Order dispatch principles. The same is in the larger public interest.
The Respondent No. 3 is bound to protect and safeguard the consumers and
to provide cheaper power in the State of Madhya Pradesh.
iii. Scheduling and requisitioning of power is done keeping in view these
principles in most impartial manner, not only by the Respondent No. 3, but
also by SLDC and the same is based on the Balancing and Settlement Code,
2009 issued by the State Commission which provides for economical dispatch
based on Merit Order. The procedure of preparing Merit Order has been
notified by the Respondent No. 3 vide letter dated 18.12.2013. The
Respondent No. 3 is following the same methodology since then and any party
including the Appellant has never challenged it.
iv. The Merit Order dispatch is being made in accordance with the State
Commission's Balancing and Settlement Code, 2009. The Respondent No. 3
backs down costly power to save on the account of variable cost as the fixed
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charges are payable in terms of the PPA. The Merit Order is prepared on a
monthly basis keeping in view the variable cost and is provided to all the
stakeholders including SLDC on a regular basis.
v. The State Commission, to the knowledge of the Respondent No. 3, has never
observed that Merit Order Dispatch is being prepared on unacceptable
principles. Even otherwise, if Merit Order Dispatch is prepared taking in to
consideration the capacity charges along with variable charges in one case and
only variable charges in the other, then too, in both cases the Appellant's
generating station finds place at the highest levels, i.e. to say that, the
Appellant's generating station delivers costliest power in both the cases.
vi. The Appellant's submission that Merit Order is wrong as the Merit Order is
prepared based on variable charges at common point i.e. Madhya Pradesh
periphery for all the generators supplying power to Madhya Pradesh as some
plants are within the State and some are outside. In the most impartial
manner, the total variable costs are brought out at a common platform for
comparison and as such equal treatment is given to all. This procedure has
throughout been in the knowledge of the Appellant and from time to time, all
the stake holders have been apprised of this information.
vii. The Respondent No. 3 further submits that the issue of merit order is
between the Respondent No. 3, the consumers at large and for the State
Commission to decide. The merit order is decided on consideration of various
factors including the meeting of sustained load demands in the State of
Madhya Pradesh. The Appellant cannot compel the Respondent No. 3 to
schedule power, so long the Appellant is being paid the fixed charges in terms
of the applicable regulations of the State Commission and in accordance with
the PPA entered into between the parties.
viii. The allegation made by the Appellant on the aspect of merit order proceeds
on a fundamentally wrong assumption that the generating units of the State
Generating Companies are always being run in an inefficient manner and that
the Appellant's units are being run in an efficient manner. Many of the State
Generating Units are old. The Appellant ought to be in a position to compete
in an efficient manner to produce electricity at which cheaper cost of
generation as compared to the cost of generation of the old generating units,
despite paying cess of 15 Paise per unit. The cess of 15 Paise per unit is a cost
of generation. Ultimately, the Respondent No. 3 is concerned with the total
procurement cost i.e. variable cost, fixed cost need to be paid in any case. The
total variable cost would include Electricity Duty and Cess payable on the
units of electricity generated. These cannot be excluded for the purpose of
comparison.
ix. There is absolutely no rational for the Respondent No. 3 to procure costly
power by considering all the cost factors, when cheaper power is available.
Accordingly, if the imposition of 15 Paise Cess on the power generated by the
Appellant increases the cost of the power procurement of the Appellant as
compared to other generating stations, the Respondent No. 3 is duty bound to
purchase the power from other generating stations and thereby reduce the
financial impact on the consumers at large.
x. In the context of the above, the Regulation notified by the State Commission
on merit order need to be decided with the object and purpose to be achieved.
It is, therefore, wrong on the part of the Appellant to contend that additional
cost item such as Electricity Duty, Cess etc. should not be considered while
determining the merit order. There is absolutely no warrant for such
allegations being made.
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xi. Clause 5.3 of the Madhya Pradesh Electricity Regulatory Commission

(Balancing and Settlement Code) provides as under: “Merit Order Operation:
Discorns, will give their requisitions based on their individual Merit Order i.e.
in ascending order of cost of energy (i.e. variable cost) of ISGS, SSGS,
Bilateral and Collective transactions allocated to individual Discorn”
xii. The merit order operation is on the cost of energy i.e. variable cost. The cost
of energy i.e. variable cost under the Tariff Regulations includes the cess to be
paid on units of electricity generated and sold. If there is no generation, no
cess is paid. The term ‘cost of energy’, therefore, would include the cess
payable as per Clause 5.3.
e) Appellant's obligation regarding the sale of power to third party for
maintaining the technical minimum of the Plant
i. The Respondent No. 3 had provided 140 MW as technical minimum for the unit
in the past when the power requirement was matching to availability,
however, after commissioning of new plants of 4680 MW having comparatively
very less variable cost, the gap between the demand and availability is
reduced and now the Respondent No. 3 has surplus power. The Respondent
No. 3 having surplus power at a cheaper price is not obliged to provide higher
percentage as technical minimum to the Appellant as the same is not in the
interest of the consumers in the State at large. In any event, the provision in
the past of scheduling 140 MW does not in any manner take away the rights
of the Respondent No. 3 to claim equitable treatment of taking appropriate
power to meet the obligation of Technical minimum.
ii. Further, a perusal of some of the instances for the period of August 2015 to
November 2015 filed by the Respondent No. 3 (when the Respondent No. 3's
requisition was for technical minimum of its contracted capacity) would show
that the Appellant has arranged to sell the remaining power i.e. against 30%
of its un-contracted capacity through Power Exchange and had run their unit
at required technical minimum quantum.
iii. From the period of August 2015 to November 2015, the machines of the
Appellant's power plant was on generation for a total of 5684 time blocks, out
of which for only 159 time blocks, the Appellant failed to arrange third party
sale. However, during such instances, the Appellant has run the units at their
technical minimum of 140 MW. There cannot be any allegation to the effect
that the Appellant has been forced either by the Respondent No. 3 or SLDC to
operate below its technical minimum.
iv. In the appeal, the Appellant had challenged the above decision of the State
Commission. The Appellant has also raised the issue of the merit order to
contend that the power generated by the Appellant should be given
preference in the merit order over the power generated by various other
generating stations. The Appellant claims that the Appellant has been
discriminated by considering an extra element of 15 Paise cess imposed by
the Government of Madhya Pradesh. All these allegations of the Appellant
have been found baseless and dealt with the right perspective by the State
Commission as brought out hereunder;
The impugned Order clearly brings about that the concept of
‘technical minimum’ has no application to the generation and supply
of electricity by the Appellant's generating unit in the State of
Madhya Pradesh. This is because—
a. the PPA does not provide for any concept of ‘technical minimum’. The PPA
inturn clearly states that the Respondent No. 3 will pay the capacity charges
for the un-availed capacity out of the contracted capacity. In terms of the PPA,
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the Respondent No. 3 has no obligation whatsoever to pay in excess of the

contracted capacity, namely, beyond 350 MW up to 500 MW;
b. the capacity in excess of the contracted capacity of 350 MW (175 MW in case
of one unit) is the responsibility of the Appellant to deal with it in such
manner as it considers appropriate, namely, whether on Long Term basis or
Medium Term basis or on Short Term basis or off-loaded through the platform
of Power Exchange or use for any captive purpose extra;
c. besides the PPA, there is no provision for the ‘technical minimum’ either in the
State Grid Code or the State Commission's Balancing and Settlement
Mechanism,
d. the’ technical minimum’ is provided only in IEGC notified by the Central
Commission by way of amendment on 06.04.2016, these aspect have not so
far been implemented by the Central Commission;
e. On its term, Clause 6.3(b) of IEGC which deals with ‘technical minimum’
applies only to the Central Generating Stations and Inter State Generating
Stations. Clause 6.3(b) does not apply to any other categories of the
generating stations;
f. Thus, the IEGC notified by the Central Commission bringing into effect the
concept of ‘technical minimum’ for the first time restricts the same to the
Central Sector Generating Stations or the Inter State Generating Stations;
g. There is no dispute that the Appellant is neither a Central Sector Generating
Station nor an Inter State Generating Station. The Appellant is, therefore, not
covered by Clause 6.3 B (i) which reads as under: “6.3 B Technical Minimum
Schedule for operation of Central Generating Stations and Inter-State
Generating Stations.
“1. The technical minimum for operation in respect of a unit or units of a Central
Generating Station of Inter State Generating Station shall be 55% of MCR
loading or installed capacity of the unit of a generating station.
2. The CGS or ISGS may be directed by concerned RLDC to operate its unit's at or
above the technical minimum but below the normative plant availability factor on
account of grid security or due to the fewer schedules given by the beneficiaries”
The above has been further clarified in Clause 6.3B (4) as under:
“4. In case of a generating station whose tariff is neither determined nor adopted
by the Commission, the concerned generating company shall have to factor the
above provisions in the PPAs entered into by it for sale of power in order to claim
compensations for operating at the technical minimum schedule”
h. In terms of the above, the issue of ‘technical minimum’ in the case of other
generating stations or units will be applicable only if there is a provision in the
PPA dealing with the same. In the absence of any provision in the PPA, the
concept of ‘technical minimum’ cannot be enforced;
i. In the PPA dated 05.01.2011, there is no provision dealing with ‘technical
minimum’. In fact, Clause 7.1.1 of the PPA provides for no obligation on the
Respondent No. 3 to maintain any such thing as and when the category
‘technical minimum’ comes into force, There is no such statutory requirements
to maintain the ‘technical minimum’. In any event, even if there is any
statutory effect of mandating the ‘technical minimum’, the same is the
responsibility of the Appellant and not of the Respondent No. 3;
j. The contention that the IEGC amendment makes an inroad into the PPA dated
05.01.2011 is totally misconceived. Firstly, the IEGC itself says that it is not
applicable to other than the Central Sector Generating Stations and ISGS.
There is no question of any inroad being made in the PPA. The reliance place
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on PTC's judgement on Regulations superseding the contract has no

application as in the present case, the Regulation itself expressly states its
non application to a generating station other than the CGS or ISGS. Secondly,
even the Indian Electricity Grid Code has so far not been implemented to
maintain the’ technical minimum’.
k. In the circumstances, the adoption of ‘technical minimum’ in the State of
Madhya Pradesh was only a voluntary act on the part of the Respondent No. 3
in a bonafide attempt. The’ technical minimum’ was not mandated on the
Respondent No. 3.
I. Despite the above, the Respondent No. 3 was willingly taking the part of the
electricity under ‘technical minimum’ which is proportionate to its contracted
capacity viz-z-viz the total installed capacity of the power plant. It is the
responsibility of the Appellant to find other purchasers at a price which would
enable the Appellant to sell electricity to them to the extent of meeting the
‘technical minimum’ qua the balance 150 MW capacity as against the installed
capacity of 500 MW (175 MW out of 250 MW in respect of one unit).
11. After having a careful examination of all the issues brought before us,
our observations on the various issues raised under the questions of law are
as follows:—
a) On Question No. 1 i.e. Whether the State Commission in passing the
Impugned Order has adopted a pedantic approach by superintending the
focal issue raised by the Appellant, i.e. that each participant of the
Electrical System including the Appellant generator and the Respondents
have the responsibility of operating the electrical system in an efficient
manner which is also enshrined under the Preamble of the Electricity Act,
2003 and the policies framed thereunder?
i. The preamble of the Electricity Act, 2003 states as:
“An Act to consolidate the laws relating to generation, transmission,
distribution, trading and use of electricity and generally for taking
measures conducive to development of electricity industry, promoting
competition therein, protecting interest of consumers and supply of
electricity to all areas, rationalization of electricity tariff, ensuring
transparent policies regarding subsidies, promotion of efficient and
environmentally benign policies, constitution of Central Electricity
Authority, Regulatory Commissions and establishment of Appellate Tribunal
and for matters connected therewith or incidental thereto.”
The preamble of the Electricity Act, 2003 specifies the broader
framework for taking measures conducive to:
• Development of electricity industry,
• Promoting competition therein,
• Protecting interest of consumers and supply of electricity to all areas,
• Rationalization of electricity tariff,
• Ensuring transparent policies regarding subsidies,
• Promotion of efficient and environmentally benign policies.
Promotion of efficient policies is one of such area in addition to other
objectives such as protecting interest of the consumers.
ii. The State Commission while passing the Impugned Order has observed at
Para 12 as:
“12. On combined perusal of the contents in the petition and also the
arguments/counter reply put forth by the parties in this matter, it is noted
that the following documents have been referred by the parties:
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a) Power Purchase agreement (PPA) entered into by the Petitioner and

Respondent No. 2 on 5th January’ 2011 whereby, the power is supplied from
the petitioner's power plant and purchased by M.P. Power Management Co.
Ltd., Jabalpur. The three Distribution Companies in the State are the
confirming parties in the aforesaid PPA.
b) Clause 1.10.1 and 8.3.1(a) of the M.P. Electricity Grid Code (Revision 1),
2005.
c) Draft amendment to CERC (Indian Electricity Grid Code) with regard to the
Technical minimum criteria.
d) M.P. Electricity (Balancing and Settlement Code), 2009.
e) Section 54 of the Contract Act, 1872.
iii. Further the State Commission has dealt with the issue of Technical Minimum
in Para 13, 14 and 16, of the Impugned Order dated 07.01.2016 the issue of
optimum scheduling and despatch by Respondent No. 4 under section 32 of
the Electricity Act, 2003 has been dealt with in Para 15 and 16.
Hence we do not find that while passing the Impugned Order the State
Commission has adopted a pedantic approach.
iv. We note that the State Commission in its Order dated 07.01.2016 have dealt
with every related aspect on the efficient performance of the generating
stations and the responsibility thereof and adopted a well reasoned approach
in its Order dated 07.01.2016.
v. Hence this issue is decided against the Appellant.
b) On Question No. 2 i.e. Whether the Appellant in the proceedings before
the State Commission had raised a larger sectoral issue which was
germane in the current market scenario wherein the State Utilities have
tied up PPA's more than their actual demand? Whether in the present
scheme of things it is most imperative that the State Commission as a
regulator ensures that the electrical system (which includes the
Appellant) of the state operates in the most efficient and economical
manner which it has failed to do so in the present case?
i. On the issue of operation of electrical system in the State in the most efficient
and economical manner and role of Regulator to ensure the same in the
current market scenario where State utilities have tied up PPA's more than
their actual demand, we note that the State Commission in exercise of the
powers conferred by Section 181 read with Sections 39(2)(d)(i), 40(c)(i), 66,
86(1)(c) and 86(2)(i) of the Electricity Act, 2003, had notified Balancing and
Settlement Code (BSC) in October 2009 which was applicable within the
geographical area of the State of Madhya Pradesh. The Preamble of the BSC
2009 states as:
“1. Preamble
1.1 The National Electricity Policy (NEP) envisages implementation of the
Availability Based Tariff (ABT) at State level to establish a credible
settlement mechanism for Intra-day power transfers among Intra-State
Entities. As per the Tariff Policy, this framework should be extended to
Generating Stations (including Grid connected Captive Plants of capacities
as determined by the SERC). This Code has been specified to give effect to
the intentions of Section 5.7.1(b) & (d) of the NEP as well as Section 6.2(1)
& 6.3 of the Tariff Policy.”
ii. The provisions of Section 5.7.1(b) and (d) of the National Electricity Policy as
well as Section 6.2(1) of the Tariff Policy state as:
National Electricity Policy
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“5.7.1(b)- The ABT regime introduced by CERC at the national level has
had a positive impact. It has also enabled a credible settlement mechanism
for intra-day power transfers from licenses with surpluses to licenses
experiencing deficits. SERCs are advised to introduce the ABT regime at the
State level within one year.
5.7.1(d)- Development of power market would need to be undertaken by
the Appropriate Commission in consultation with all concerned.
National Tariff Policy
6.2 Tariff structuring and associated issues
(1) A two-part tariff structure should be adopted for all long term
contracts to facilitate Merit Order dispatch. According to National Electricity
Policy, the Availability Based Tariff (ABT) is to be introduced at State level
by April 2006. This framework would be extended to generating stations
(including grid connected captive plants of capacities as determined by the
SERC). The Appropriate Commission may also introduce differential rates of
fixed charges for peak and off peak hours for better management of load.
Hence the above provisions of National Electricity Policy and National
Tariff Policy identify the need of establishing a framework for implementing
Merit Order Despatch which itself is based on principle of efficient and
economical despatch.
iii. As per Section 5.3 of the BSC 2009, the principle of Merit Order Despatch has
been identified by the State Commission.
“General Principles: Scheduling
5.3 Merit Order Operation: Discoms, will give their requisitions based
on their individual Merit Order i.e. in ascending order of cost of energy (i.e.
variable cost) of ISGS, SSGS, Bilateral and Collective transactions allocated
to individual Discom.”
iv. As per the learned Counsel of the State Commission, the Appellant had not
sought any relief regarding ‘Merit Order Despatch’ in its petition filed before
the State Commission. Secondly, the question raised by the Appellant
regarding preparation of MOD had been adequately replied/addressed by
Respondent No. 3 during the course of proceedings and as recorded in the
Impugned Order.
v. Regarding the issue of “Technical Minimum”, the State Commission in the Para
13 of the Impugned Order stated that the term/expression i.e, “Technical
Minimum” for thermal power plant is not mentioned in any provision of the
Power Purchase Agreement executed between the parties in the matter or M.P.
Electricity Grid Code or Balancing and Settlement Code notified by this
Commission. Moreover, Clause 6.3(b) for Technical Minimum Schedule for
“Operation of Generating Stations” in CERC's draft notification is for Inter
State Generating Stations (ISGS) whereas, the petitioner's power plant in the
subject matter is not ISGS as defined in M.P. Electricity Balancing and
Settlement Code and M.P. Electricity Grid Code. In the Para 16, State
Commission observed that the use of expression like Technical Minimum by
the respondents in the impugned communication has no relevance since the
provisions under the PPA executed between the procurer and the petitioner
are explicitly clear for commercial and technical obligation to be met by each
of them. Besides, the Appellant is responsible at its own expenses for
maintaining the technical requirement during operation of the plant while
making its obligations under the power purchase agreement. As the Appellant
in its petition before the State Commission has not specifically sought the
level of Technical Minimum to be identified by the State Commission and only
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contended that the Technical Minimum to be considered for the Unit and not
for the contracted capacity for scheduling purposes, we do find that the State
Commission has discharged its role in ensuring efficient and economic
operation of electrical system in the State.
vi. Hence this issue is also decided against the Appellant.
c) On Question No. 3 i.e. Whether the State Commission in passing the
Impugned Order has failed to address the larger issue of efficiency of the
operation of Appellant's Power Plants by pedantically interpreting the
PPA signed between the Appellant and the Respondent No. 3? and
Issue No 12 i.e. Whether the State Commission in passing the
Impugned Order has wrongly relied upon Article 4.3.5 of the PPA to
hold that the Respondent No. 3 procurer can requisition any capacity
from the generator without considering the fact that Article 4.3.5 is
not the objective behind the Agreement as ultimately the Agreement
was entered for the purpose of setting up a power plant to supply 70%
power? Whether Article 4.3.5 of the Agreement is only an exceptional
provision which comes into play in exceptional scenarios and cannot
be used to regulate the manner in which supply of power will be
effected between parties?
i. Under Section 32 of the Electricity Act, 2003, it is provided that the State Load
Despatch Centre shall be responsible for optimum scheduling and dispatch of
electricity within the State, in accordance with the contracts entered into with
the licensees and the generating companies operating in that State.
ii. The relevant provisions of the PPA dated 05.01.2011 entered between the
procurer i.e. M.P. Power Trading Company Ltd. (now M.P. Power Management
Co. Ltd.), Jabalpur and the Appellant are as under:
“1. Definitions
“Available Capacity” shall mean such the contracted capacity declared available
by the Company in accordance with the ABT;
“Contracted Capacity” shall mean the capacity equivalent to 65% of the Phase
I (2 × 250 MW) and 37% of the Phase II (3 × 250MW) (subject to availability of
coal for Phase II 3 × 250 MW) of Power Station's Installed Capacity contracted with
the Procurer as terms of this Agreement.
……………………………………
……………………………………
……………………………………
4.3 Right to Contracted Capacity and Scheduled Energy
4.3.3 If the Procurer does not schedule the whole or part of the Available
Capacity for any reason whatsoever, the Company shall be entitled to make
available such Available Capacity not scheduled by the Procurer, to any other
person without losing the right to receive the Capacity Charges from the Procurer
for such unscheduled Available Capacity. During this period, this Company will
continue to receive the Capacity Charges from the Procurer. For any such third party
sale, all open access charges including losses, as may be applicable, shall not be
payable by the Procurer. The Company shall maintain accounts and provide all
details regarding price of sale etc. to the Procurer in respect of such sales under this
Article.
4.3.4 In the cases referred in Article 4.3.3, the sale realization in excess of
Energy Charges shall be equally shared by the Company and the Procurer. In the
event, the Company makes available such Available Capacity to any direct or
indirect Affiliate of the Company/shareholders of the Company without obtaining
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the prior written consent of the Procurer, the Company shall be liable to make
available such Available Capacity to such entity at a tariff being not less than the
Tariff.
4.3.5 Where the sale under Article 4.3.3 by the Company is consequent to a
notice issued by the Procurer to the Company indicating its unwillingness to
schedule the whole or part of the Available Capacity for a period specified in such
notice, the Procurer shall be entitled to request the Company for the resumption of
availability of the Available Capacity at any time, however, the Company shall not
be liable to resume such availability earlier than the period specified in the said
notice, and subject to the provisions regarding scheduling as per the Grid Code.
……………………………………
……………………………………
……………………………………
7.1.1 The Company shall be responsible at its own expense for ensuring that the
Power Station is ‘operated and maintained in an efficient, coordinated and
economical manner and in accordance with all legal requirements, including the
terms of all Consents, Clearances and Permits, Prudent Utility Practices, and in
particular, the Grid Code, so as to meet its obligations under this Agreement and so
as not to have an adverse effect on the Grid operation.”
iii. The State Commission while issuing the Impugned Order has considered the
above provisions of PPA. The State Commission has observed that the
Respondent No. 3 is responsible only up to the contracted capacity of the
generating unit as per PPA. Any unscheduled available capacity within the
contracted capacity is compensated by way of fixed cost/capacity charges paid
by the Respondent No. 3 to the Appellant in terms of PPA.
iv. Hence we do not find any merit on the issue raised by Appellant on the failure
of State Commission in addressing the issue of efficiency of the operation of
Appellant's Power Plant.
v. Hence both the above issues are decided against the Appellant.
d) On the Question No. 4 i.e. Whether the State Commission in passing the
Impugned Order has failed to appreciate that the Statutory PPA was not
signed with the intent that the Appellant would only receive the Capacity
Charges without actually generating power leading to inefficiency in the
operations of the Appellant? Whether the objective behind the PPA is that
the Appellant would generate power in an efficient manner and the
Respondent No. 3 will off take such generated power on payment of the
regulated Tariff? Whether the present Impugned Order has not
considered the above and the State Commission has also failed to
appreciate that inefficient generation cannot be the intent behind the
Agreement or the Act and the Regulations framed thereunder?
i. The PPA was signed by the Parties for supply of power for 25 years. From the
various provisions of the signed PPA, it is evident that intent of PPA was to pay
Capacity Charges to the Appellant even without scheduling of power for the
contracted capacity from the Appellants plant. Considering the dynamic
requirement of power demand/surpluses, it seems that the provision
regarding right to contracted capacity and scheduled energy was incorporated
in the PPA under Para 4.3. The provisions of PPA under this section deals with
the option of providing such Available Capacity not scheduled by the Procurer,
to any other person without losing the right to receive the Capacity Charges
from the Procurer for such unscheduled Available Capacity. The State
Commission while issuing the Impugned Order has considered the various
provisions of the PPA including provisions of Para 4.3.
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ii. The PPA was signed between the Parties for supply of 70% (inclusive of 5% of
net generated power at variable cost) of the installed capacity of Petitioner's 2
× 250 MW (Phase I) of the power station for a period of 25 years at the Tariff
to be approved by the Commission.
iii. The Tariff of the Appellant Power Plant is being determined by the State
Commission in accordance with the Tariff Petition filed by the Appellant as per
Generation Tariff Regulations issued by the State Commission. The Generation
Tariff Regulations are issued by the State Commission for a specific Tariff
Period after considering dynamics of the power market, promoting efficiency,
balancing the interest of Consumers as well as Generators and consultation
with the Stakeholders. The State Commission issues the Tariff orders after
scrutiny of the petition and consultation with the Stakeholders and proper due
diligence.
iv. The issue of efficiency of power generation from the Appellants Power Plant
was not at all the matter raised by the Appellant before the State
Commission. The Appellant had raised its claim before the State Commission
to allow the recovery of any additional cost incurred in operating in accordance
with the directions issued by the Respondent No 2 herein.
v. In view of above, we are not inclined to accept the allegations on the issue as
raised by the Appellant.
vi. Hence this issue is decided against the Appellant.
e) On the Issue raised in Question No 5, 6, 7, 8, 15, 16, 19, 20 & 22 related
to Technical Minimum, we observe as follows:
i. The term ‘Technical Minimum’ is provided in the Indian Electricity Grid
Code (IEGC) notified by the Central Commission in exercise of its powers
under Section 79(1)(h) of the Electricity Act, 2003. Clause 6.3(B) of the IEGC
provides on the aspect of Technical Minimum as under:
“6.3B-Technical Minimum Schedule for operation of Central
Generating Stations and Inter-State Generating Stations
1. The technical minimum for operation in respect of a unit or units of a Central
Generating Station of Inter-State Generating Station shall be 55% of MCR
loading or installed capacity of the unit of a generating station.
2. The CGS or ISGS may be directed by concerned RLDC to operate its unit(s) at
or above the technical minimum but below the normative plant availability
factor on account of grid security or due to the fewer schedules given by the
beneficiaries.
……………………………………
……………………………………
……………………………………
“4. In case of a generating station whose tariff is neither determined nor
adopted by the Commission, the concerned generating company shall have
to factor the above provisions in the PPAs entered into by it for sale of
power in order to claim compensations for operating at the technical
minimum schedule”
ii. As per the IEGC itself, the Technical Minimum in the case of entities other
than the Central Sector Generating Units and Inter State Generating Stations
have to be in accordance with the PPA entered into between the parties.
iii. By the time the Impugned Order was passed by State Commission, the
amendment had not become effective. The amendment is still not given effect
to pending the detailed procedure to be notified by the National Load Dispatch
Centre. In view of the above, the Respondents are right in their contention
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that there is no legal mandate as at present in the State of Madhya Pradesh

for the Appellant's generating unit to maintain the Technical Minimum as per
the provisions of the Indian Electricity Grid Code notified by the Central
Commission or any other Regulations notified by the Central Commission or
State Commission.
iv. The Appellant has contended that the IEGC is required to be followed by all
concerned including the generating units which are only Intra State
Generating Entities and not merely by the Central Sector Generating Units and
Inter State Generating Stations. It has also been contended that in terms of
Section 86(1)(h) of the Electricity Act, 2003 that the Grid Code to be notified
by the State Commission is to be consistent with the Grid Code notified by the
Central Commission. There is no dispute on the scope of the applicability of
the Indian Energy Grid Code to the State Generating Units. The IEGC would
apply to all entities connected to the Grid irrespective of whether they are
connected to the Inter State Grid or the Intra State Grid. Both the Inter State
and Intra State Grid are integrated. Respondent No. 3, MP Discoms and other
entities in the State of Madhya Pradesh connected to the integrated Grid are
required to follow the IEGC. The issue is not on the applicability of IEGC to the
Intra State Entities such as Respondent No. 3, MP Discoms and the
Appellant's Generating Units. The issue is whether within the scope of IEGC as
notified by the Central Government and amended from time to time, is there
any requirement for the generating units other than the Central Sector
Generating Units and Inter State Generating Stations to implement Technical
Minimum and more, particularly, is there any requirement under the IEGC or
any other Regulation for a State Entity such as Respondent No. 3 acting on
behalf of MP Discoms to schedule power to the extent of the Technical
Minimum qua the installed capacity, when Respondent No. 3 had contracted
not for the entire capacity but only part of the capacity.
v. In the absence of any mandatory provision either under the IEGC notified by
the Central Commission or the State Grid Code notified by the State
Commission or under any other statutory Regulation, the obligation of
Respondent No. 3 to schedule power is traceable only to the PPA executed
between Respondent No. 3 and the Appellant. Clause 6.3B (4) of the IEGC
also affirms the above in respect of the generating stations other than the
Central Sector Generating Stations and Inter State Generating Stations.
vi. It cannot be disputed that the Technical Minimum has envisaged the
operation of the generating units qua its installed capacity and not in respect
of the part of the installed capacity. The issue, however, is not in regard to the
quantum of generation that should be undertaken for meeting the Technical
Minimum of the generating unit but is in regard to the obligation of a Procurer
which had contracted to procure only part and not the whole of the capacity of
the generating units.
vii. The provisions of the PPA do not contain any mandate on Respondent No. 3
to schedule a specific quantum of electricity, though it provides for payment
of fixed charges for any unscheduled available capacity within the contracted
capacity. On the other hand, Clause 7.1.1 of the PPA specifically provides that
the Appellant shall be responsible to operate and maintain the generating
station in accordance with the legal requirements and in particular, the Grid
Code.
viii. As per IEGC 2016, in order to claim compensation because of lower
schedule, provision under Clause 6.3 B (4) provides that “In case of a
generating station whose tariff is neither determined nor adopted by the
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Commission, the concerned generating company shall have to factor the

above provisions in the PPAs entered into by it for sale of power in order to
claim compensations for operating at the technical minimum schedule”.
ix. In view of above in the absence of any statutory requirement or PPA
conditions mandating the Respondent No. 3 to schedule minimum quantum of
power from the generating unit of the Appellant, the Respondent No. 3 cannot
be compelled to schedule at near constant load or the quantum of power to
reach the Technical Minimum of 140 MW for the generating unit of the
Appellant to operate.
x. The Appellant must have made necessary arrangements for sale of balance
power (other than the contracted capacity of 70% with the Respondent No 3)
so as to avoid any such situations where the unit has to operate below
technical minimum causing difficulties in the operation of the Unit and causing
financial distress to the Appellant.
xi. We do not find any error on the related issues raised by the Appellant in the
Impugned Order issued by the State Commission.
xii. Hence all the issues as above are decided against the Appellant.
f) On Question No. 9 i.e. Whether the State Commission has erred in passing
the Impugned Order as the Respondent SLDC in terms of the Extant
Regulations and the scheme of the Act has to act as the apex body and
safeguard the interest of the generator as well as the procurer? And
Question No. 11 i.e. Whether the State Commission has failed to
appreciate that mandate of Section 32 is to ensure ‘Optimum
Scheduling’ and not ‘Scheduling’ as being interpreted in the Impugned
Order?, we observe as follows:
i. Admittedly Respondent No. 3 had contracted to purchase only 70% of the
capacity of generating station of the Appellant. In the Impugned order the
State Commission has referred to clauses 4.3.3, 4.3.4, 4.3.5 and 7.1.1 of the
PPA entered into between the Appellant and Respondent No. 3 and has
concluded that on combined reading of the provisions of the PPA, there is no
obligation on the part of Respondent No. 3 to maintain the technical
requirements as claimed by the Appellant.
ii. As per Section 32 of the Electricity Act, 2003, SLDC have been given the
responsibility for optimum scheduling and dispatch of electricity within the
State, in accordance with the contracts entered into with the licensees and the
generating companies operating in that State.
iii. In the Impugned Order, the submissions of SLDC have been recorded as
under normal conditions scheduling instructions to generators are issued
considering requisition received from buyers/beneficiaries. While SLDC cannot
increase the schedule of a generator unless there is a requisition from
Buyer/Beneficiaries, it can curtail the schedule of the generator in order to
have safe and secure operation of grid in case of transmission constraints. The
SLDC through affidavit dated 10.12.2015 to the State Commission stated as
under;
“The contention of the petitioner that the SLDC has marginalized its
activity to the functions of a Post Office is not true and is not acceptable. As
per Clause 31(2) of the Electricity Act, 2003, the State Load Despatch
Centre shall not engage in the business of trading in electricity.
Accordingly, in normal conditions the injection schedules for generators is
issued considering requisitions of buyers/beneficiaries. The injection
schedule to the petitioner was issued considering the requisition received
from MPPMCL. The SLDC has no power to increase injection schedule of a
-----------------------------------------------------------------------------------------------------------------------------------------------------------
generator on its own unless there is a requisition from buyer/beneficiary.

However, SLDC may curtail the injection schedule of generator and
corresponding drawal schedule of buyer(s) in order to operate the system
in a secure and reliable manner when there is constraint in the
transmission corridor. While finalizing the schedules, SLDC always perform
this activity. However, till now SLDC has not encountered with any major
transmission constraint in intrastate corridor necessitating curtailment of
schedules and on one or two occasions only the drawal by a Short Term
Open Access customer was curtailed.”
In our view, the optimum scheduling by the SLDC shall mean the
scheduling of power with its control area considering the availability of the
generators and corresponding requisition from the Buyers/Beneficiaries of
that Generators as per Power Purchase Agreements and considering power
transmission corridors' availability to ensure safe and secure operation of
the electrical grid.
iv. Hence we do not find any infirmity in the Impugned Order issued by the State
Commission on this issue raised by the Appellant.
v. Hence both the above issues are also decided against the Appellant.
g) On Question No. 10 i.e. Whether the State Commission in passing the
Impugned Order has erred in not appreciating that as an industry wide
practice it is the SLDC/RLDC who object to scheduling below ‘Technical
Minimum’ if such a requisition is made, as the same was also observed in
the Explanatory Memorandum issued by the Central Commission which
lead to the Draft Indian Grid Code being notified for public comments?
i. As per Appellant, the SLDC has failed to appreciate that it is an accepted
industry practise that the RLDC/SLDC often reject the scheduling from
procurers or force technical minimum scheduling upon procurers/buyers if
their schedule results in operating the plant below the technical minimum of
the generating station and it is incumbent upon the SLDC to follow the
aforementioned practice in order to optimize the scheduling and dispatch.
ii. We have already made it clear that under Section 32 of the Electricity Act,
2003, it is provided that the State Load Despatch Centre shall be responsible
for optimum scheduling and dispatch of electricity within the State, in
accordance with the contracts entered into with the licensees and the
generating companies operating in that State.
iii. The concept of Technical Minimum was not there in PPA, M.P. Electricity Grid
Code as well as in MP Balancing and Settlement Code. The concept of
Technical Minimum has been incorporated in the IEGC by an amendment
dated 6.4.2016 notified by the Central Commission. We have already held that
the Respondents are right in their contention that there is no legal mandate as
at present in the State of Madhya Pradesh for the Appellant's generating unit
to maintain the Technical Minimum as per the provisions of the Indian
Electricity Grid Code notified by the Central Commission or any other
Regulations notified by the Central Commission or State Commission.
iv. The Appellant has extensively relied on the Explanatory Memorandum, the
State of Object and Reasons issued by the Central Commission in regard to
the 4th Amendment to the IEGC whereby the Technical Minimum concept has
been brought into force and in particular in view of Clause 6.3B (4) of the
IEGC, there is no basis on which Respondent No. 3 can be compelled to
schedule power to the extent of 70% of the installed capacity of a generating
unit.
v. We do not find any merit in the issue raised by the Appellant.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

h) On the Question No. 13 i.e. Whether the State Commission in passing the
Impugned Order has wrongly considered Article 4.3.3 of the PPA which
does not cast any obligation upon the generator to sell the un-requisition
capacity but only provides an enabling provision? And
Question No. 14 i.e. Whether the State Commission in passing the
Impugned Order has erroneously held that the payment of ‘Capacity
Charges’ is the only obligation of the Respondent No. 3 procurer
especially when the said procurer has not invoked Article 4.3 in terms
of the PPA?, we decide as follows:
i. The Appellant has contended that the Article 4.3.3 of the PPA does not cast any
obligation upon the Generator to sell the un-requisition capacity but only
provides an enabling provision.
ii. The provisions under article 4.3.3 are reproduced once again as:
“4.3.3: If the Procurer does not schedule the whole or part of the
Available Capacity for any reason whatsoever, the Company shall be
entitled to make available such Available Capacity not scheduled by the
Procurer, to any other person without losing the right to receive the
Capacity Charges from the Procurer for such unscheduled Available
Capacity. During this period, this Company will continue to receive the
Capacity Charges from the Procurer. For any such third party sale, all open
access charges including losses, as may be applicable, shall not be payable
by the Procurer. The Company shall maintain accounts and provide all
details regarding price of sale etc. to the Procurer in respect of such sales
under this Article.”
iii. The State Commission in the Impugned Order under Para 15(iv) and Para (vi)
has decided as:
“(iv) The contracted capacity in the PPA is not the full installed capacity
of the petitioner's power plant. In the PPA, the Available Capacity is defined
as such of the Contracted Capacity declared available by the Company.
Accordingly, the Company (petitioner) is entitled to sell any unscheduled
Available Capacity other than the procurer (Respondent No. 2) on one hand
and also recover the Fixed (capacity) charges corresponding to such
unscheduled Available Capacity from the procurer on the other hand. As per
the PPA, no restriction is imposed on the procurer to limit the quantum of
Available Capacity to be scheduled by the procurer between zero and the
full contracted capacity declared available by the petitioner.
…………………………..
…………………………..
…………………………..
(vi) In view of the above provisions under PPA, the “Fixed Charges” being paid/to
be paid by the Respondent No. 2 (procurer) against unscheduled Available
Capacity in terms of clause 4.3.3 of PPA take care of all promises on the part
of the Respondent No. 2. Therefore, the contention of petitioner with reference
to section 54 of the Contract Act, 1872 has no merit in light of provisions
under the PPA (contract).”
iv. While we agree that the provision under PPA regarding sale of Un-requisition
power by the Generator is an enabling provision, the State Commission has
not wrongly considered this fact in its Impugned Order while considering the
payment of fixed charges for the contracted capacity by the Procurers
irrespective of the level of scheduling.
-----------------------------------------------------------------------------------------------------------------------------------------------------------
v. Hence both the issues are decided against the Appellant.

i) On the Question No. 17 i.e. Whether the State Commission has erred
in not considering the submission of the Appellant that the MOD
being prepared by the Respondent No. 3 is contrary to the Extant
laws and hence cannot be the basis for the Respondent No. 3
scheduling power below the ‘Technical Minimum’ capacity of the
Appellant's generating unit/plant?, we observe as follows:
i. The Appellant has raised the issue that the MOD prepared by the
Respondent No 3 is contrary to the extant laws and hence cannot be the
basis for scheduling of power below the technical minimum capacity of
Appellant's Power Station.
ii. The Appellant has made detailed submissions on the failure of Respondent
No. 3 and MP Discoms of not following the merit order to procure electricity
from the generating stations. The Appellant's generating unit's variable
cost is lower and ought to have been scheduled in comparison to the
various other generating units such as of Madhya Pradesh Power Generating
Company Limited, the State Government Undertaking.
iii. On the merit order, the contentions of the Appellant has been that only
variable cost should be considered and not the landed cost which includes
cess about 15 Paisa in the case of the Appellant's generating units towards
electricity duty. As a result of this imposition of such electricity duty by the
Government of Madhya Pradesh selectively on Private Sector Generating
Companies and not on the State Sector Generating Companies, the
electricity generated from the Appellant's generating units have been
shown to be costlier in the merit order. While Respondent No. 3 and the
Appellant had to follow the Madhya Pradesh Electricity Balancing and
Settlement Code, 2015 in regard to the declaration of availability of
scheduling power, dispatch etc, there is, however, no mandate in the said
Code or in any other Regulations requiring the Appellant to maintain the
Technical Minimum.
iv. The issue of discrimination of Private Sector Generating Stations qua the
State Sector Generating Stations in the State of Madhya Pradesh by
imposition of electricity duty only for the Private Sector Generating Stations
and thereby affecting the merit order of such generating stations cannot be
a subject matter of the proceedings before the State Commission. The levy
of electricity duty is a sovereign act on the part of the Government of
Madhya Pradesh. The grievance, if any, in regard to the electricity duty and
its implication on the merit order as alleged by the Appellant due to the
imposition of electricity duty need a different redressal mechanism.
v. The merit order issue is not a matter considered by the State Commission
in the Impugned Order. The issue whether Respondent No. 3 or the
distribution licensees is violating the merit order principles cannot be a
subject matter of the present appeal. The Appellant is not precluded from
raising the issue in separate proceedings if it has any grievance in
accordance with law.
vi. The issue is decided against the Appellant.
j) On Question No. 18 i.e. Whether the State Commission has gravely erred
by accepting the contention of the Respondents that due to ‘proposed
regulation of power’ the scheduling of the Appellant was done below the
commercially accepted 140 MW which is the ‘Technical Minimum’ of the
Appellant's Generating Unit without appreciating that ‘Regulation of
Power’ per se as a concept has also not been defined under the extant
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Regulation of the MPERC or the PPA signed between the Appellant and
the Respondent No. 3?, our views are as follows;
i. In the Impugned Order the State Commission has made reference to the
various provisions of the PPA and observed that the Procurer (Respondent No.
3) may not schedule the whole or part of the Available Capacity for any reason
and in such case Appellant can make available such unscheduled Available
Capacity to any third party. The Respondent No 3 shall continue to pay the
capacity charges to the Appellant for such unscheduled Available Capacity
“Para 15(iii): There is no direct provision regarding “Technical Minimum” in
the above PPA. On combined perusal of Clause 4.3.3, 4.3.4, 4.3.5 and 7.1.1, it
is clear that the Procurer (Respondent No. 2) may not schedule the whole or
part of the Available Capacity for any reason whatsoever, and in such
situation, the petitioner is entitled to make available the unscheduled
Available Capacity to any party other than the procurer without losing the
right to receive the capacity charges from the procurer for such unscheduled
Available Capacity.”
In our view, State Commission has rightly observed that the provisions
of the PPA do not contain any mandate on Respondent No 3 to schedule a
specific quantum of electricity and Respondent No 3 has every right to
schedule the power from Appellant's power plant based on its requirement
and not limiting to 140 MW of technical minimum quantity as specified by
the Appellant.
ii. Further, the State Commission in its Impugned Order at Para 15(viii) has
recorded its observation on the information submitted by the parties regarding
scheduling of Appellant's Power Station at around 140 MW. The Para 15(viii) is
reproduced as below: “Para 15(viii): It is also mentioned in the submissions
filed by the parties in this matter that the procurer (Respondent No. 2) has
been scheduling 140 MW power most of the time in the past. However, the
petitioner had arranged sale of balance power falling short of 140 MW through
collective transactions to ensure the technical minimum quantum of ex-bus
capacity.”
iii. In our view, the commercial and technical obligations to be met by the
Appellant as well as the Respondent No. 3 are explicitly clear in the PPA and
they are safeguarding the interests of the Appellant and providing the
Appellant to make available the unscheduled capacity of the Respondent No. 3
to any party other than the procurer without losing the right to receive the
capacity charges from the Respondent No. 3 for such unscheduled capacity.
iii. Hence this issue is decided against the Appellant.
k) On Question No. 21 i.e. Whether the State Commission in passing the
Impugned Order has failed to appreciate that the Appellant's Power
Project has been established for the specific purpose of ensuring supply
of power to the State of Madhya Pradesh and therefore higher regulatory
accountability is required to be exercised by other State Players to ensure
that no undue financial and technical prejudice is caused to the
Appellant?, our views are as follows;
i. The Appellant's Power Plant has the Power purchase Agreement with the
Respondent No 3 for supply of 70% (inclusive of 5% of net generated power
at variable cost) of the installed capacity of Appellant's Power Station 2 × 250
MW (Phase I) for a period of 25 years at the rate to be approved by the State
Commission.
ii. The Tariff for Appellant's Power Plant is being determined by the State
Commission in line with the Generation Tariff Regulations issued by the State
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Commission under Section 62 of the Electricity Act, 2003.

iii. For Scheduling and Despatch of the Power Station, SLDC is the nodal agency
and discharging its responsibility in line with the Sec 32 of the Electricity Act,
2003.
iv. The Power purchase Agreement signed between the Appellant and
Respondent No 3 specifies all the terms which may impact the Appellant
finically or technically like Tariff for the sale of electricity, Contracted Capacity,
Availability, Scheduling, Tariff norms as per State Commission etc.
v. Hence we do not find any merit in the issue raised by the Appellant regarding
requirement of higher regulatory accountability by other State players towards
the Appellant.
l) On the Question No. 23 i.e. Whether the State Commission in passing the
Impugned Order has wrongly relied solely upon Article 7.1.1 by not
seeing the other comprehensive provisions of the PPA such as Article
6.1.3 wherein it was the obligation of the Procurer to keep available the
entire contracted capacity unless a notice from the Procurer under Article
4.3.3 was issued which has not been done till date?, our observations are
as follows:
i. The Appellant has contended that while passing the Impugned Order, the
State Commission has wrongly relied upon Article 7.1.1 of the PPA but not
taking into consideration the other comprehensive provisions such as Article
6.1.3 and Article 4.3.3.
ii. Regarding efficient and economical operation of the Power Station, Clause
7.1.1 in PPA provides as under:
“7.1.1 The Company shall be responsible at its own expense for ensuring
that the Power Station is operated and maintained in an efficient,
coordinated and economical manner and in accordance with all legal
requirements, including the terms of all Consents, Clearances and Permits,
Prudent Utility Practices, and in particular, the Grid Code, so as to meet its
obligations under this Agreement and so as not to have an adverse effect
on the Grid operation.”
iii. Article 6.1.3 of the PPA states as:
“6.1.3 The Company agrees that the Availability entitlement of the
Procurer for despatch over any settlement period is the exclusive right of
the Procurer and it cannot be offered to any third party other than for
conditions under Article 4.3.3.”
iv. The Article 4.3.3 states as:
“4.3.3: If the Procurer does not schedule the whole or part of the
Available Capacity for any reason whatsoever, the Company shall be
entitled to make available such Available Capacity not scheduled by the
Procurer, to any other person without losing the right to receive the
Capacity Charges from the Procurer for such unscheduled Available
Capacity. During this period, this Company will continue to receive the
Capacity Charges from the Procurer. For any such third party sale, all open
access charges including losses, as may be applicable, shall not be payable
by the Procurer. The Company shall maintain accounts and provide all
details regarding price of sale etc. to the Procurer in respect of such sales
under this Article.”
v. As per PPA the definition of Availability, Available Capacity and Contracted
capacity is reproduced here for comprehensive understanding:
-----------------------------------------------------------------------------------------------------------------------------------------------------------
“Availability Factor” or “Availability” shall have the meaning ascribed

thereto in ABT and shall be reckoned with reference to Installed Capacity as
defined herein.
“Available Capacity” shall mean such the contracted capacity declared
available by the Company in accordance with the ABT; “Contracted
Capacity” shall mean the capacity equivalent to 65% of the Phase I (2 ×
250 MW) and 37% of the Phase II (3 × 250MW) (subject to availability of
coal for Phase II (3 × 250 MW) of Power Station's Installed Capacity
contracted with the Procurer as terms of this Agreement.
vi. Article 6.1.3 of the PPA gives exclusive right to the Respondent No. 3 on their
entitlement on the availability declared by the Appellant as per ABT. This
capacity cannot be offered to any third party except as provided under Article
4.3.3 which provides for third party sale.
vii. The State Commission in its Impugned Order at Para 15(iii) has observed as:
“There is no direct provision regarding “Technical Minimum” in the above
PPA. On combined perusal of Clause 4.3.3, 4.3.4, 4.3.5 and 7.1.1, it is clear
that the Procurer (Respondent No. 2) may not schedule the whole or part of
the Available Capacity for any reason whatsoever, and in such situation, the
petitioner is entitled to make available the unscheduled Available Capacity
to any party other than the procurer without losing the right to receive the
capacity charges from the procurer for such unscheduled Available
Capacity.”
viii. Considering above, we do not find any infirmity in the above observations of
the State Commission as contended by the Appellant.
ix. Hence this issue is also decided against the Appellant.
ORDER
12. We are of the considered opinion that there is no merit in the present Appeal
and IA and the Appeal is hereby dismissed.
13. The Impugned Order dated 07.01.2016 passed by the State Commission is
hereby upheld.
14. No order as to costs.
———
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SCC Online Web Edition, © 2024 EBC Publishing Pvt. Ltd.

Page 1 Thursday, August 08, 2024

2016 SCC OnLine APTEL 105

Appellate Tribunal for Electricity at New Delhi

by the State Commission.

operating parameters of station heat rate, auxiliary energy consumption.

v. The performance of the Contract cannot be permitted to be done in an

Minimum’ is also applicable upon the State of Madhya Pradesh.

that the Respondent No. 3 is responsible only up to the contracted capacity of

c) Technical minimum as approved by the Central Electricity Regulatory

xi. Clause 5.3 of the Madhya Pradesh Electricity Regulatory Commission

the Respondent No. 3 has no obligation whatsoever to pay in excess of the

on PTC's judgement on Regulations superseding the contract has no

a) Power Purchase agreement (PPA) entered into by the Petitioner and

that there is no legal mandate as at present in the State of Madhya Pradesh

Commission, the concerned generating company shall have to factor the

generator on its own unless there is a requisition from buyer/beneficiary.

vi. Hence this issue is decided against the Appellant.

v. Hence both the issues are decided against the Appellant.

Commission under Section 62 of the Electricity Act, 2003.

“Availability Factor” or “Availability” shall have the meaning ascribed

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