ANDHRA PRADESH ELECTRICITY REGULATORY COMMISSION

4th & 5th Floors, Singareni Bhavan, Red Hills, Hyderabad-500 004

 

 

R.P. (SR) No. 9 of 2007

in

O.P.No.19 of 2006

 

Dated: 22.03.2007

 

 

Present

Sri K. Swaminathan, Chairman

Sri Surinder Pal, Member

Sri R.Radha Kishen, Member

 

Between

 

M/s Vemagiri Power Generation Limited                                                                                                        ...                   Petitioner

 

 

and

 

1. Transmission Corporation of Andhra Pradesh Ltd,

2. Eastern Power Distribution Company of A. P. Ltd,

3. Southern Power Distribution Company of A.P. Ltd

4. Central Power Distribution Company of A. P. Ltd,

5. Northern Power Distribution Company of A. P. Ltd.                                                                                   …                  Respondents

 

 

 

This petition coming on for hearing on 17.03.2007 in the presence of Sri C.Kodanda Ram and Sri Challa Guna Ranjan, Advocates for the petitioner  and Sri P. Shiva Rao, Advocate, for the respondents  and having stood over for consideration to this day, the Commission delivered the following:

 

O R D E R

 

This review petition is filed under Section 10 (4) of the Andhra Pradesh Electricity Reform Act, 1998 (hereinafter “the Reform Act”) r/w Section 94 (1) (f)  of the Electricity Act, 2003 (hereinafter “Act 2003”) seeking review of the Commission’s Order dated 30.12. 2006 in O.P. No.19 of 2006 and praying the Commission to (a) permit the petitioner to be impleaded in the proceeding and allow it to address its submissions to this Commission; (b) direct respondents that the proposed amendment to clause 2.1 of the Power Purchase Agreement (hereinafter “PPA”) be restored to ‘Installed Capacity’ or be amended to ‘Installed Capacity of 370 MW’ instead of ‘limited to 370 MW’; and (c) withdraw the Commission’s approval to the proposed amendment to clause 6.2 of the PPA.

 

2.        The following are the averments made in the review petition :

(a)       Due to shortage in the supply of Natural Gas and the inability of Gas Authority of India Limited to supply the allocated quantities of Natural Gas to the petitioner, Respondent No.1 (hereinafter, R-1) filed a petition before the Commission for deletion of the alternate fuel clause from the definition of ‘Fuel’ in the PPA between the parties herein entered into in the year 2004.

 

(b)       While the matter was pending, the petitioner submitted proposals to the Government of Andhra Pradesh (hereinafter “GoAP”) for arriving at an amicable solution on the issue of deletion of the alternate fuel provision from the PPA, which were referred by GoAP to a committee for examination in depth on the said issue. Based on the recommendations  of the Committee, the respondents submitted certain amendments to the PPA to GoAP for its approval. After examination, GoAP proposed further necessary action, following which all the respondents herein filed O.P.19 of 2006 for grant of consent by this Commission to the proposed amendments. The Commission invited objections and suggestions on the proposed amendments to the PPA from the public and accordingly notification was published on 01.07.2006.

 

(c)       During the pendency of the proceedings before the Commission, APDISCOMs (collectively the respondents No.2 to 5 herein) proposed certain modifications to the proposed amendments as well as certain additional amendments. A.P. Power Coordination Committee (hereinafter “APPCC”) proposed to the petitioner certain additional amendments in clauses 2.1 and 6.2 of the PPA through letters dated 12.10.2006 and 04.10.2006. By letter dated 24.10.2006, the petitioner herein rejected any amendment to the said two clauses of the PPA. The proposed amendments to clauses 2.1 and 6.2 of the PPA did not form part of the public notice published on 01.07.2006 and hence the petitioner at that time did not have any knowledge with regard to approval of the proposed amendments to the above-mentioned clauses.

 

(d)       The petitioner was not provided any effective opportunity to present its case before this Commission and the proposed amendments to clauses 2.1 and 6.2 of the PPA were not consented to by the petitioner. The Commission did not have jurisdiction to approve the proposed amendments to the terms of the PPA when such proposed amendments had not received the petitioner’s consent.

 

(e)       Rationale for such proposed amendments were premised on flawed reasoning resulting in an error apparent on the face of the record.  Objectors in the public hearings conducted by the Commission did not pray for the specific amendments,  as is apparent from the Commission’s Order (dated 30.12.2006 in O.P.No.19 of 2006).  The Commission did not take into account specific and categorical rejection of the proposed amendments to clauses 2.1 and 6.2 of the PPA by the petitioner. During the course of the proceedings, the petitioner herein was not given any notice regarding the proposed amendments to clauses 2.1 and 6.2 of the PPA.

 

(f)       Insofar as the proposed amendment to clause 2.1 of the PPA is concerned, such amendment leads to inconsistencies and grounds for misinterpretation in the PPA, leading to possibility of potential disputes in future. APDISCOMs did not provide any cogent reason or rationale for carrying out of such proposed amendments. The impugned order would result in providing legal sanctity to proposed unilateral amendments to concluded contracts between the parties. The words ‘Installed Capacity of the Project’ is replaced by the words ‘370 MW’, as approved by this Commission by its Order, will create conflict between clause 2.1 and other clauses of the PPA and will create confusion and generate grounds for misinterpretation leading to disputes in future.

 

(g)       Approving proposed amendment to clause 6.2 of the PPA was immaterial and unnecessary to the issue under this Commission’s consideration. The analysis of the Commission, of computation of O&M expenses to be incurred over the extended period of the PPA, as reported in paragraphs 37, 38, 39 and 40 of the Order is premised on incorrect hypothesis and assumptions. The assumption that O & M cost of combined cycle power projects will be within the norms approved by CERC (Central Electricity Regulatory Commission) is not realistic. The basic premise of the Commission for approving amendment to clause 6.2 of the PPA, i.e., that the projected loss of the petitioner being only at Rs.14 crores, is based on an unrealistic estimation of the O & M cost and therefore, the same is erroneous and severely flawed

 

(h)       There are a catena of judgments of the Hon’ble Supreme Court of India that where a party is denied its right of fair hearing or is not given adequate opportunity to be heard, such actions of the authority will be contrary to the principles of natural justice and are liable to be set aside. This proposition has been affirmed in Swadeshi Cotton Mills Vs. Union of India, AIR 1981 SC 818, Tribhuvandas Bhimji Zaveri and another Vs. Collector of Central Excise (1997) 11 SCC 276, Punjab National Bank and others Vs. Kunj Behari Mishra (1998 (7) SCC 84, Yoginath D.Bagde Vs. State of Maharashtra and another, AIR 1999 SC 3734, M.Chockalingam and another Vs. Commissioner of Income Tax, Madras and another, AIR 1963 SC 1456.

 

(i)        The Commission has the power to give or withhold its consent or approval to what is submitted before it with mutual consent of the parties. It is humbly submitted that this Commission would not have the mandate in law to approve the proposed arrangements of power purchase on the application of the licensees where the other party to the arrangement i.e., the generating company, objects to such proposed terms, since any approval of such unilateral terms may prove to be infructous if the generating company does not consent to the proposed terms.

 

(j)        The Commission u/s 21(4) and (5) of the Reform Act acquires jurisdiction to give its consent to a PPA or to amendments to PPA only if the parties to the PPA mutually agree on the terms of such PPA or amendments to the PPA. The Commission does not have the jurisdiction to reopen the PPA and abrogate to itself, the power to approve the proposed amendments of the terms of the PPA when the other party i.e., the generating company has not consented to such proposed amendments. The Commission exceeded its jurisdiction in approving proposed amendments to clauses 2.1 and 6.2 of the PPA which amendments have not been consented to by the petitioner.

 

3.        Before admitting the petition, notice was ordered to be issued to the parties. On 17.03.2007, the Commission primarily heard the counsel for the petitioner, on the maintainability of the review petition, who reiterated the various averments mentioned in the petition and further submitted that:

 

(a)       the project of the petitioner was conceived and developed after obtaining permission to establish the same through competitive bidding process as per the policy of the Government of India issued in 1995.  The project was originally proposed to be a project with Naphtha as fuel, later on modified to Gas with Naphtha as alternate fuel.  However, the respondents, realizing that in the absence of availability of gas they will be burdened with payment of fixed costs, due to generation of electricity from Naphtha not being affordable, being too costly, have filed petition before the Commission in O.P. No. 25 of 2004 on 09-07-2004 for deletion of the alternate fuel clause in the PPA.  In the meanwhile, Act 2003 came into force, which provided for promotion of competition and market development. 

 

(b)       In several appeals, the Appellate Tribunal for Electricity (hereinafter “the Tribunal”) held that a PPA once entered cannot be amended.  However, on the proposals made by the respondents and keeping in view the non-availability of Natural Gas, it was agreed to postpone declaration of Commercial Operation Date (hereinafter “COD”) so as to alleviate the difficulty of payment of fixed cost and declaration of COD based on Naphtha,  the alternate fuel. 

 

(c )      This petition is more in the nature of seeking amendment to the order of consent given to the PPA entered into between the parties in respect of clauses 2.1 and 6.2.  However, the respondents themselves have come forward with regard to allowing clause 2.1 to remain as it existed prior to the Order of the Commission.   The other clause, i.e. the clause 6.2,  which relates to ‘Buy-Out’ is not important at this stage of the PPA as it relates to a situation that may arise after the completion of the period of PPA, when the APDISCOMs may choose to take over the project and not at this stage. 

 

(d)       The amended PPA as submitted by the respondents herein in O.P.No.19 of 2006 was agreed upon by the parties as a package, after detailed commercial negotiations and cannot be disturbed without the consent of the petitioner herein.

 

(e)      Thus the issue of maintainability of the petition is not an issue. It is prayed that the Commission may admit the petition, since the petition is maintainable.  

 

4.        The point that arises for consideration is :

           “Whether the review petition is maintainable”

 

5.        The counsel for the petitioner laboured hard to contend that the petitioner was not provided with effective opportunity to present its case and that the amendments proposed to clauses 2.1 and 6.2 of the PPA were not consented to by it. The request for proposed amendments to clauses 2.1 and 6.2 of the PPA was filed before the Commission on 06.11.2006 and it did not form part of the public notice issued on 01.07.2006 and consequently, the petitioner was unaware of the proposed approval of these amendments proposed by APDISCOMs. The Commission did not invite objections from the petitioner with regard to such modified amendments. The petitioner had no reason to believe that the proposed amendments to clauses 2.1 and 6.2 of the PPA have been filed before the Commission for its consent by APDISCOMs since it had specifically and categorically rejected such proposed amendments by its letter dated 24.10.2006 to APPCC. As a result, adverse consequences of such proposed amendments were not brought out in its entirety before the Commission and it amounts to violation of principles of natural justice.

 

6.        The next contention of the counsel for the petitioner is that the negotiations in the context of gas shortage and deletion of alternate fuel clause were based on commercial negotiations and finalized as a package. The draft PPA which was agreed upon and initialed between the parties does not contain any amendment to clauses 2.1 and 6.2. Unilateral change of commercial clauses, which formed part of the ‘negotiated and agreed package’ is inequitable in principle.

 

7.        The further contention of the counsel for the petitioner is that the Hon’ble Appellate Tribunal for Electricity in its recent judgment dated 02.06.2006 in Appeal No. 1 of 2005 and batch, held that the Commission has no authority to reopen the concluded contract or PPA. It is also held therein that agreements entered into by the Board (predecessor-in-interest of the respondents herein)  and the developers are statutory and binding on the respondents herein, as well as on the Commission. The Commission cannot, therefore, either nullify or modify the concluded contracts in purported exercise of regulatory powers vested in it. The rationale of the above judgment is affirmed by the Tribunal in Rithwik Energy Systems Ltd Vs. APTRANSCO and others in Appeal No. 90 of 2006 and batch and similar views were expressed by it in several other appeals.

 

8.        Before adverting to the various contentions raised on behalf of the petitioner, it is necessary to dwell on the proceedings set in motion which led to passing of the order dated 30.12.2006 by the Commission in O.P.No.19 of 2006. Grant of consent to PPA or amendment to PPA is an elaborate exercise. In the case on hand, the Commission invited objections and suggestions from the public as required under law on the proposed amendments to the PPA entered into between the petitioner and the respondents. The circumstances that led to negotiations, submission of proposals to GoAP on 02.03.2006, constitution of Committee by GoAP, its recommendations, receiving objections / suggestions by general public, response of the respondents, holding public hearing on 17.07.2006 and 27.07.2006, Commission’s analysis on the various issues with regard to the proposed amendments, etc., have all been discussed in detail in the said Order. As there is no dispute with regard to the process of grant of consent to the proposed amendments as such, it is not necessary to go into detail.

 

9.        Suffice it to say that the entire challenge to Order dated 30.12.2006 passed by the Commission in O.P.No.19 of 2006 revolves around grant of consent to the amendments in respect of clauses 2.1 and 6.2 of the PPA which were proposed by the respondents in its affidavit dated 06.11.2006 in spite of rejection of the said proposed amendments by the petitioner herein. In this context,  it is necessary to state that during public hearing held on 17.07.2006 and 27.07.2006,  the issue of the buy-out provision after termination of the PPA was raised and the respondents were asked to clarify the matter. In pursuance thereof, by letter 04.10.2006 the APPCC (an entity co-ordinating the activities of all the respondents herein) on behalf of the respondents proposed amendments to clause 6.2 of the PPA.  Subsequently, by letter dated 12.10.2006, the APPCC on behalf of the respondents also proposed to amendments to Article 2.1 and paras 1 and  3 of Article 3.2 of the PPA. In response to the said two communications, the petitioner by its letter 24.10.2006, responded by intimating APPCC that modifications to Articles 2.1 and 6.2 are not necessary. With regard to paras 1 and 3 of Article 3.2, however, the petitioner agreed to the proposed modifications.

 

10.      Even though the petitioner has stated that modification to Articles 2.1 and 6.2 are not necessary, the APPCC,  through the Chief General Manager (Comml & RAC) on behalf of R-4 and respondents No.2, 3 and 5 proposed amendments to the said two Articles, requesting the Commission to take a view in the matter and include the proposed amendments while issuing consent to the amendments. The fact that the petitioner was requested to accept the said modifications and its response that modification to Article 2.1 and 6.2 are not necessary would go to show that the petitioner had prior knowledge of the proposed amendments. The Commission after careful consideration of the matter and for the reasons recorded in its Order dated 30.12.2006 (in O.P.No.19 of 2006) granted consent to the amendments proposed, in exercise of regulatory powers vested in the Commission u/s 24(4) of the Reform Act and Section 86 of the Act, 2003. 

 

11.      It is well-settled proposition in law that review jurisdiction cannot be used as appellate jurisdiction. Mere mistake in appreciation of evidence or an inference drawn from material placed before the Commission, would not amount to “mistake” or “error apparent on the face of record” as contended by the counsel for the petitioner. Where decision was taken by the Commission on appreciation of oral and documentary evidence, review jurisdiction cannot be invoked on the said grounds.

 

12.      During the course of hearing in O.P. No.19 of 2006, the Commission heard the matter at length on all the issues relating to grant of consent to the proposed amendments. After careful consideration of the material placed before it, objections of the general public and other stakeholders on various issues and concerns expressed during the public hearing as well as the written responses, the Commission issued its Order dated 30.12.2006 and granted consent to the amendments proposed to the PPA as mentioned in detail in Annexures I to IV appended to the said Order.  Thus the Order dated 30.12.2006 was passed by the Commission after consideration of all relevant facts and on appreciation of evidence, both documentary and oral. While doing so, the Commission was required to take certain views in the matter of grant of consent considering different propositions, especially in the light of apprehensions of general public. In our view, reconsideration of the said order sought by the petitioner would amount to substituting one view with another and the same is not permitted under law.

 

13.      No doubt power of review can be exercised for correcting a mistake, but it should not be exercised to substitute a view.  In the case of Lily Thomas Vs Union of India reported in (2000) 6 SCC 224 = AIR 2000 SC 1650, the Hon’ble Supreme Court held that the power of review can be exercised for correcting a mistake but not to substitute a view. The Hon’ble Supreme Court in the case of M/s. Jain Studios Ltd Vs Shin Satellite Public Co. Ltd  reported in AIR 2006 SC 2686 observed that the power of review can be exercised with extreme care, caution and circumspection and only in exceptional cases. In Commission’s view, there is no mistake or error apparent on the face of record requiring review of the order dated 30.12.2006.  The Commission, therefore, does not agree with the counsel for the petitioner that because of mistake or error apparent on the face of record or that there exists other sufficient reason to necessitate this Commission to review the order dated 30.12.2006 with regard to Articles 2.1 and 6.2 of the PPA.   For the said reason there is no necessity to advert to the different judgments cited by the counsel for the petitioner in support of various grounds for review of the impugned order.  It is not out of place to mention here that if aggrieved by the Order dated 30.12.2006 passed by the Commission in O.P.No.19 of 2006, the petitioner is at liberty to seek remedy elsewhere and not by way of filing the present petition to review the Order passed by the Commission. 

 

14.      For the reasons mentioned above, the Commission is of the view that the petitioner has failed to make out a case for the maintainability of the petition. In the result, the petition is not admitted as not maintainable.

 

 

The order is corrected and signed on this 22nd  day of  March, 2007

 

 

 

 

Sd/-

Sd/-

Sd/-

(R.RADHA KISHEN)

(SURINDER PAL)

(K.SWAMINATHAN)

MEMBER

MEMBER

CHAIRMAN

 

                                                                    

 

 

 

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