Supreme Court Holds TANGEDCO Liable To Pay Fixed Charges To DisCom For Power Supplied Before Full Commissioning

In a relief for the power generators, the Supreme Court on Tuesday (December 16) held that the electricity supplied by them from the date of synchronization of their power generation to the grid is entitled to receive fixed charges, even if the entire project is not fully commissioned.

Holding thus, a bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan affirmed the concurrent findings of the Appellate Tribunal for Electricity (APTEL) and Tamil Nadu Electricity Regulatory Commission (TNERC), while dismissing the Tamil Nadu Generation and Distribution Corporation Ltd.'s (TANGEDCO) appeal, which claimed that the Respondent-Power Generator is not entitled to 'fixed charges' for the intervening period between the synchronization of their power generation to the grid and its official full commission.

The core legal dispute revolved around the classification of 153 million units of electricity supplied by the Respondent from its open-cycle gas turbine between October 29, 2005, and June 30, 2006. TANGEDCO had treated this as “infirm power,” warranting only variable (fuel) charges. The respondent argued that it was “firm power,” attracting fixed charges as well. Respondent's gas turbine was synchronized and supplied power continuously from October 2005, while the full combined-cycle plant was commissioned later in July 2006.

The dispute arose after Appellant-TANGEDCO refused to pay fixed charges for the intervening period between October 29, 2005, and June 30, 2006, stating that the amended Power Purchase Agreement (PPA) fixed the date of commercial operation i.e., the date on which the project achieved entry into commercial operation, as 01.07.2006, rendering the Respondent ineligible to claim fixed charged for the intervening period.

Refusing to interfere with the impugned ruling, the judgment authored by Justice Viswanathan observed:

“The respondent, having supplied continuous power, cannot be denied the annual fixed charges for the relevant period, and if it were done so, they will permanently lose that amount, which will be unjust and contrary to law.”

The Court noted a conflict between the PPA and applicable Central Electricity Regulatory Commission Regulations and TNERC regulations on the definition of Commercial Operation Date (COD). While the PPA linked COD to completion of the entire project, the regulations adopted a unit-wise approach, recognising COD separately for each generating unit.

Since the amended PPA had not received TNERC approval, the Court held that it could not override statutory regulations.

Applying the regulatory framework, the Court held that the gas turbine unit achieved COD on 29 October 2005, the date of grid synchronisation, and therefore, power supplied thereafter could not be classified as “infirm”.

“Applying the Regulations, we have no doubt in our mind that it is firm power and that for the said period, as rightly held by the fora below, the respondent was entitled to fixed charges.”, the court said.

“For all these reasons, we find no good ground to interfere with the impugned judgment. The judgment passed by the TNERC directing that fixed charges shall be payable for the relevant period as affirmed by the APTEL in the impugned judgment dated 10.07.2013 in Appeal No. 112 of 2012 calls for no interference and the said directions are affirmed.”, the court held.

The appeal was dismissed.

Cause Title: TAMIL NADU GENERATION AND DISTRIBUTION CORPORATION LTD. VERSUS M/s PENNA ELECTRICITY LIMITED

Citation : 2025 LiveLaw (SC) 1213

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Appearance:

For Appellant(s) : Mr. Amit Anand Tiwari, Sr. A.A.G. Mr. Sabarish Subramanian, AOR Ms. Saushriya Havelia, Adv. Mr. Vishnu Unnikrishnan, Adv. Ms. Tanvi Anand, Adv. Ms. Jahnavi Taneja, Adv. Mr. Pranjal Mishra, Adv. Ms. Arjoo Rawat, Adv. Mr. Danish Saifi, Adv.

For Respondent(s) : Mr. Syam Divan, Sr. Adv. Mr. Buddy A. Ranganadhan, Adv. Mr. Satyaseelan, Adv. Mr. Sameer Sharma, Adv. Ms. Shefali Tripathi, Adv. Mr. Yashvardhan Singh, Adv. Mr. Ankit Kumar Sinha, Adv. Mr. Sriyut Shukla, Adv. Ms. Nina Nariman, Adv. Mr. Shaishir Divatia, Adv. Mr. Hasan Murtaza, AOR