Petition No. 16/MP/2016. Case: Sasan Power Limited Vs M.P. Power Management Company Ltd. and Ors.. Central Electricity Regulatory Commission

Case Number:Petition No. 16/MP/2016
Party Name:Sasan Power Limited Vs M.P. Power Management Company Ltd. and Ors.
Counsel:For Appellant: Sanjay Sen, Sr. Advocate, Vishrov Mukerjee, Janmali M. and Mayank Gupta, Advocates
Judges:Gireesh B. Pradhan, Chairperson, A.K. Singhal, A.S. Bakshi and Dr. M.K. Iyer, Members
Issue:Electricity Act, 2003 - Sections 79, 79(1)(b); Mines And Minerals (development And Regulation) Act, 1957 - Sections 9, 9B, 9C
Judgement Date:February 17, 2017
Court:Central Electricity Regulatory Commission
 
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Order:

  1. The petitioner, Sasan Power Limited, has set up a 4000 MW super critical Ultra Mega power Project based on linked captive coal mine at Sasan, District: Singauli, in he State of Madhya Pradesh (hereinafter referred to as "Sasan UMPP").

  2. The petitioner has filed the present petition under clauses (b) and (f) of sub-section (1) of Section 79 of the Electricity Act, 2003 (hereinafter "2003 Act") read with Article 13 read of the Power Purchase Agreement dated 7.8.2007 and Paragraph 5.17 of the Competitive Bidding Guidelines seeking the following reliefs under 'Change in Law' during the operating period:

    (a) Levy of Forest Transit Fee by the Government of Madhya Pradesh under the Madhya Pradesh Transit (Forest Produce) Rules, 2000;

    (b) Imposition of a new condition in the Environmental clearance dated 30.6.2015.

    (c) Establishment of the District Mineral Foundation and National Mineral Exploration Trust in terms Section 9B and 9C of the Mines and Minerals (Contribution to District Mineral Foundation) Rules, 2015;

    (d) Imposition of levy equivalent to 2% of the royalty to be paid to the National Mineral Exploration Trust in terms of Section 9C of the MMDR Act read with Rule 7(3) of the National Mineral Exploration Trust Rules, 2015.

  3. The petitioner has computed the impact on account of the Change in Law Events as under:

    Period

    Claims

    Levy of forest transit fee on coal produced

    Approximately Rs. 14 crore/annum based on the production schedule as per approved mining plan.

    Environmental clearance @ Rs. 5/tonne of coal produced effective from 30.6.2015

    Rs. 10.0 crore/annum based on the production schedule as per approved mining plan.

    Creation of District Mineral Foundation Trust (under Section 9B of MMDR Act.)

    Rs. 72.2 crore (approx)

    Creation of National Mineral Exploration Trust under Section 9C of MMDR Act.)

    Rs. 4.8 crore (approx)

  4. The petitioner has submitted that in accordance with Article 13.3 of the PPA, the Petitioner notified the procurers on 24.9.2015 and 23.10.2015 about the above stated events amounting to Change in Law' affecting the revenue/cost of the petitioner during the operating period.

  5. The Petitioner has submitted that the events of Change in Law have financial impact on the cost and revenue of the Petitioner during the operating period for which the Petitioner is entitled to be compensated in terms of Article 13 of the PPA. Accordingly, the petitioner has filed the present petition with the following prayers:

    "(a) Declare that the events set out in Paragraphs 16 to 57 above are a "Change in Law" impacting revenues and costs during the Operating period for which the petitioner and/or the Procurers may be compensated in terms of Article 13 of the PAA;

    (b) Restore the Petitioner and/or the Procurers to the same economic condition prior to occurrence of the Changes in Law by permitting the Petitioner to raise Supplementary Bills in terms of Article 13.4.2 of the PPA as per the computations set out in Paragraphs 58 to 63 above to compensate the Petitioner and/or the Procurers as and when the financial impact of the respective Changes in Law arise, either jointly or severally; and/or

    (c) Permit petitioner to provisionally recover 90% of amount paid to support operations of the UMPP as the levy of the transit fee is statutory in nature and being incurred by SPL.

    (d) Award carrying cost/interest for the period between payment by the petitioner (including pendent lite) and reimbursement thereof by the Respondents."

  6. Notices were issued to the respondents to file their replies to the petition. Replies to the petition have been filed by MP Power Management Company Limited (MPPMCL) vide its affidavit dated 18.3.2016, Haryana Power Purchase Centre (HPCC) vide affidavit dated 11.4.2016, Rajasthan Distribution Companies (AVVNL/JVVNL/JdVVNL) vide affidavit dated 1.4.2016 and Distribution Companies of Uttar Pradesh (PVVNL/MVVNL/DVVNL) vide their affidavit dated 7.6.2016. The Petitioner has filed its rejoinder to the replies of the Respondents. The Commission has also heard the learned senior counsel for the Petitioner and learned counsel for the Respondents at length. After consideration of the submissions of the Petitioner and Respondents, the claims of the Petitioner have been dealt with as under:

    (a) Compliance of the provisions of the PPA with regard to Notice under Change in Law;

    (b) Consideration of the claims under Change in Law on merit;

    (c) Carrying cost on the Change in Law events allowed in this order;

    (d) Mechanism for processing and reimbursement of admitted claims under Change in Law.

    1. Compliance with the provisions of notice for Change in Law events:

  7. The claims of the petitioner in the present petition pertain to the Change in Law events during the operating period. Article 13.3 of the PPA envisages for notification of the Change in Law events to the Procurers as under:

    "13.3 Notification of Change in Law

    13.3.1 If the Seller is affected by a Change in Law in accordance with Article 13.2 and wishes to claim a Change in Law under this Article it shall give notice to the Procurer of such Change in Law as soon as reasonably practicable after becoming aware of the same or should reasonably have known of the Change in Law.

    13.3.2 Notwithstanding Article 13.3.1, the Seller shall be obliged to serve a notice to all Procurers under this Article 13.3.2 if it is beneficially affected by a Change in Law. Without prejudice to the factor of materiality or other provisions contained in this Agreement, the obligation to inform the Procurer contained herein shall be material. Provided that in case the Seller has not provided such notice, the Procurer shall have the right to issue such notice to the Seller.

    13.3.3 Any notice served pursuant to this Article 13.3.2 shall provide, amongst other things, precise details of:

    (a) the Change in Law; and

    (b) the effects on the Seller of the matters referred to in Article 13.2.

  8. The petitioner has submitted that a consolidated notice was issued to all the procurers on 24.9.2015 and 23.10.2015 regarding the Change in Law events that took place during the period between the cut-off date and the start of the operating period which would affect the cost or revenue of the project during the operating period. In this regard, no response was received from the procurers. HPCC has submitted that the petitioner should have given notices for change in law events to the Procurers as soon as reasonably practicable. The petitioner has submitted that issue of levy of transit fee was discussed in the meeting held on 4.4.2014 with the Procurers and subsequent meetings we well. The petitioner was forced by DFO to pay transit fee under protest to ensure uninterrupted supply of coal to the project and accordingly, issued notice dated 24.9.2015 to the procurers.

  9. We have considered the submission of the petitioner. Under Article 13.3 of the PPA, the Petitioner is required to give the notice about occurrence of Change in Law events as soon as reasonably practicable after being aware of such events. The Petitioner has stated that the issue of transit fee was discussed in the meeting held with the Procurers on 4.4.2014 and thereafter. The Petitioner gave notices dated 24.9.2015 and 23.10.2015 to the Procurers. In the said notices, the Petitioner has brought out the occurrence of Change in Law events and apprised the Procurers about the impact of such events. The Procurers have not responded to the notices of the Petitioner. Thereafter, the Petitioner has filed the present petition. In our view, the requirement of Article 13.2 of the PPA has been complied with.

    1. Consideration of the claims of the Petitioner under Change in Law on merit

  10. The Petitioner has approached the Commission under Article 13 of the PPA read with Section 79 of the Act and Para 5.17 of the Competitive Guidelines for compensation of the cost incurred by the petitioner due to "Change in Law" during the operating period. Section 79(1)(b) and (f) of the Act provides as under:

    79 (1). The Central Commission shall discharge the following functions, namely,

    (a).........................

    (b) to regulate the tariff of generating companies other than those owned or controlled by the Central Government specified in clause (a), if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State.

    ........................................

    (f) to adjudicate upon disputes involving generating companies or transmission licensee in regard to matters connected with clauses (a) to (d) above and to refer any dispute for arbitration

    As per the above provision, the Central Commission has the power to adjudicate the dispute involving a generating company covered under clause (b) of sub-section (1) of Section 79 of the Act i.e. a generating company having a composite scheme for generation and sale of electricity in more than one State. The generating station of the petitioner is an UMPP and is supplying power from the generating station to more than one State and therefore, any adjudications of the dispute regarding tariff falls within the jurisdiction of this Commission. Further, Para 5.17 of the Competitive Bidding Guidelines published by the Ministry of Power vide OM No. 23/11/2004-R & R (Vol-II) dated 19.1.2005 provides as under:

    "5.17 Where any dispute arises claiming any change in or regarding determination of the tariff or any tariff related matters, or which partly or wholly could result in change in tariff, such dispute shall be adjudicated by the Appropriate Commission"

    Appropriate Commission has been defined in the PPA dated 7.8.2007 between the petitioner and the procurers as "the Central Electricity Regulatory Commission constituted under the Electricity Act, 2003". Therefore, under the provisions of the Competitive Bidding Guidelines, this Commission is the Appropriate Commission for adjudication of tariff related...

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