Change in the Government brings or attempts to bring various change in the way of the functioning of the administration. Sometimes, they also attempt to travel to the path prohibited by law.
There are murmurs in the corridor that the Punjab Government is contemplating to bring legislation to reduce the tariff approved by the electricity regulatory commissions. Therefore, it becomes relevant to analyse whether the state has any role to play in the matter of the determination of the tariff.
Even if the subject governing ‘electricity’ is in the Concurrent List of the Constitution of India, the state does not have competence to legislate if there is any Central Statute on this subject. Once a Central Act, namely, the Electricity Act, 2003 (the 2003 Act) is in place, the State cannot legislate on this or issue directions. The State Act or the State actions cannot be contrary to the Central Act. The State has no power to enter into this area as there is a Central Act holding the field. The Electricity Act is a complete code in itself and that its power under Sections 61 and 62 of the 2003 Act, of fixing tariff has been validly exercised.
One of the major reasons why the Electricity Act was enacted was to distance the Government from the determination of the tariffs. It is with this avowed object, the Electricity Regulatory Commission Act, was enacted in the year, 1998. As there was a need to harmonize and rationalize the Indian Electricity Act, 1910, Electricity Supply Act, 1948 and the Electricity Regulatory Commission Act, 1998 a new self-contained comprehensive legislation, namely the Electricity Act, was enacted.
Solar Developers were invited as a part of the initiative taken by the government to setup plants for generating electricity through alternative sources of energy in view of the heavy dependency of the country on fossil fuels. Placing reliance on the representations given by relevant government, these Plants were set up years ago and have been functioning since then.
The peculiarity of these contracts is that the rate quoted by the generator of electricity had to be accepted by the PSERC which has the statutory power under the Electricity Act, 2003 to fix the tariff/rate at which the power would be supplied. After following the procedure prescribed under the Electricity Act, the tariff is approved by PSERC. After the tariff was approved, developers started generating the power and supplying the same to the DISCOMS. Bills were being raised and being paid at the tariff rate approved by PSERC, since years by the DISCOMS.
If the State was dissatisfied with the said order, it had the option of filing an appeal before the APTEL under Section 111 of the 2003 Act. As the State has failed to file an appeal against the tariff approval order of PSERC, the order passed by the PSERC fixing the tariff has become final.
The sanctity of the contract cannot be changed at the whims and fancies of the Government in power.
Government of Punjab needs to understand that the rates of 2015-16 are as per the prevalent conditions and are not high as alleged. GoP has further forgot that once a contract is signed, it is the contract alone which would prevail and that neither the State nor the DISCOMS can give a direction to the developers to unilaterally reduce their tariff.
Hon’ble Supreme Court in “Bangalore Electricity Supply Company Limited v. Konark Power Projects Limited”[1] and “Gujarat Urja Vikas Nigam Limited v. Solar Semiconductor Power (India) Private Limited”[2] held that even electricity regulatory Commission cannot vary the tariff agreed and that the terms of the power purchase agreement (which is the concluded contract) alone should prevail.
Further, Hon’ble Supreme Court of India in “State of Haryana v. State of Punjab”[3] that merely because there is a change in the Government, the decisions taken by the earlier Government cannot be ignored. Further Supreme Court in “Energy Watchdog v. Central Electricity Regulatory commission” held that the regulatory power of approving tariff is given to the Electricity Regulatory Commission only and the State has no jurisdiction to enter into that area.
Developers have invested huge sums of money and have borrowed equally large sums of the money to establish these Plants. They have calculated a return of investment based upon the tariff agreed etc. If the same is curtailed or refused, it would virtually destroy the substratum of their financial arrangement and would drive them into debt.
Any attempt to reduce the tariff by State Government will be against the specific provisions of the Electricity Act and the terms of the power purchase agreement and the State has absolutely no role to play in this area.
[1] (2016) 13 SCC 515
[2] 2017 (16) SCC 498
[3] 2002 (2) SCC 507
