(Adarsh Kumar Goel and Rohinton Fali Nariman, JJ.)
M.P. Power Management Company Ltd. _________________ Appellant
v.
M.P. Biomass Energy Developers Association & Ors. ___ Respondent(s)
Civil Appeal Nos. 4550-4551 of 2018 [@ Special Leave Petition (C) Nos. 25150-25151 of 2017], decided on April 26, 2018
The Order of the court was delivered by
Order
1. Leave granted. Heard learned counsel for the parties.
2. The Madhya Pradesh Electricity Regulatory Commission (MPERC) by its order dated 30.11.2016 determined tariff for procurement of power from biomass based power plants. The operative part of the order is as follows:
“14. In compliance to the directions of the Hon’ble APTEL passed in its judgment dated 04.05.2016, the Gross Calorific Value (GCV) at 3100 k Cal/kg and Station Heat Rate (SHR) at 4200 k Cal/kWh are considered. Accordingly, the Commission sets the year wise tariff for generation of electricity from new biomass energy projects commissioned on or after 02.03.2012 as unde:
(a) Commissioned on or after 02.03.2012 and during FY 2012-13
| Year 1 | 6.20 |
| Year 2 | 5.94 |
| Year 3 | 6.11 |
| Year 4 | 6.28 |
| Year 5 | 6.47 |
| Year 6 | 6.68 |
| Year 7 | 6.89 |
| Year 8 | 7.12 |
| Year 9 | 7.37 |
| Year 10 | 7.62 |
| Year 11 | 7.57 |
| Year 12 | 7.92 |
| Year 13 | 8.29 |
| Year 14 | 8.68 |
| Year 15 | 9.09 |
| Year 16 | 9.53 |
| Year 17 | 9.98 |
| Year 18 | 10.45 |
| Year 19 | 10.95 |
| Year 20 | 11.48 |
(b) Commissioned during FY 2013-14 and thereafter:
| Year 1 | 6.58 |
| Year 2 | 6.31 |
| Year 3 | 6.49 |
| Year 4 | 6.68 |
| Year 5 | 6.89 |
| Year 6 | 7.10 |
| Year 7 | 7.34 |
| Year 8 | 7.58 |
| Year 9 | 7.85 |
| Year 10 | 8.13 |
| Year 11 | 8.08 |
| Year 12 | 8.46 |
| Year 13 | 8.85 |
| Year 14 | 9.27 |
| Year 15 | 9.71 |
| Year 16 | 10.17 |
| Year 17 | 10.65 |
| Year 18 | 11.16 |
| Year 19 | 11.69 |
| Year 20 | 12.25 |
15. In view of the aforesaid judgment dated 04.05.2016 passed by the Hon’ble APTEL and the applicable terms and conditions of the tariff order dated 02.03.2012, the tariff mentioned above in para 14 of this order shall be subject to the following terms and conditions:
(a) This tariff shall be applicable till 31.03.2017 or the new tariff order is issued, whichever is earlier.
(b) The projects for more than 2 MW are subjected to the ‘scheduling’ and ‘merit order dispatch principles’ in terms of the para 8:10 of the tariff order dated 02.03.2012 since date of commissioning.
(c) This tariff order is applicable to the projects using rice husk, wheat husk, mulbury and coal (limited to 15% of the total fuel on annual basis) only as a fuel based on which GCV has been decided by the Honb’ble APTEL in its Judgment dated 04.05.2016.
(d) This tariff shall be applicable for the projects for which Power Purchase Agreement has already been executed at the time of commissioning of the project.
(e) The M.P. Power Management Co. Ltd., Jabalpur shall submit, the draft ofthe Power Purchase Agreement to be executed, if any, with the developer of biomass based power projects to be commissioned after the date of this order, for approval of the Commission.
(f) The developers hall have to submit monthly information, as required under para 8.25 of the tariff order dated 02.03.2012, to the M.P. Power Management Co. Ltd., Jabalpur by 10th day of each month following the month of information failing which action as per the provisions of para 8.26 of the tariff order dated 02.03.2012 must be ensured by the M.P. Power Management Company Limited.”
3. The above order was challenged by the respondents before the Appellate Tribunal for Electricity (APTEL). The APTEL dealt with the question whether the concept of ‘Must Run’ (MR) or ‘Merit Order Dispatch’ (MOD) will apply. The MR would require payment for compulsory purchase of electricity irrespective of the requirement while the MOD will require supply of electricity as per requirement so that the initial supply will be at lowest price and thereafter at higher price and so on.
4. The Power Purchase Agreement (PPA) with respondent-Orient dated 18.1.2016 provides as follows:—
“Clause (c): MPERC issued Tariff Order dated 02.03.2012 for sale of electricity to DISCOMs by Biomass based Power Power Plants within the state of Madhya Pradesh, which was subsequently revised on 3.5.2013, in compliance with judgment passed by the Hon’ble Appellate Tribunal for Electricity in Appeal No. 93 of 2012, vide order dated 3rd May 2013.
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5.1 Biomass based power generation plants for more than 2 MW shall be subject to scheduling ‘merit order dispatch principles’.”
5. The MPERC Tarrif Order dated 2.3.2012 provided as follows:
“8.10 Biomass based power generation plants for more than 2 MW shall be subject to the scheduling and merit order dispatch principles.”
6. The APTEL held that notwithstanding Clause 8.10 in the Tariff Order, MR principle will apply in view of Regulation 9 of the MPERC Regulation 2010. The APTEL observed:
“16.2 Thus, we do not agree with the State Commission to keep the Biomass Power plants in scheduling as mentioned in the Clause 8.10 of the tariff order dated 02.03.2012 but at the same time, the clause 9 of the Regulation supports the Biomass plants under non-scheduling category and as per clause 5.6 of the tariff order dated 02.03.2012, the Biomass plants should be given ‘Must Run Status’. Further this Tribunal in various judgments upheld that the State Commissions should follow their own condition of the Regulations while determining the Tariff Order.
16.3 It is also to state that in the tariff order dated 02.03.2012, a two part tariff was introduced and thereby the biomass power plants can survive with fixed charges to meet their capital cost, O&M expenses etc. even if the plants are in scheduling so that the generators can pay back their commitments towards loan re-payment to the nationalized banks and to financial institutions. In the subsequent tariff orders, the two part tariff was replaced by single part tariff. In the single part tariff if the biomass generators are kept under scheduling and dispatch principles it is difficult for the generators to meet their expenditures like payment of loan, O&M expenses etc. and thereby the biomass plants are forced to close down and thereby the principle of promotion of renewable energy sources will be defeated.
16.4 In view of above, we feel that the biomass generating plants are to be kept under must run status so that the obligated entities can fulfill their RPO obligation and thereby the object of National Tariff Policy and promotion of co-generation and renewable energy generation can be fulfilled. Further, the biomass generation can survive in the State of M.P. It is pertinent to mention that the Appellant plants are supplying power from the date of commissioning without any scheduling by the State Load Dispatch Centres. In the light of the above, the very basis for providing for scheduling and merit order principles and not giving must run status contained in the Tariff Order dated 02.03.2012 ceased to apply. Further, in general we feel that merit order principle would apply when there is a two part tariff but in the case of single part tariff, there is no question of applying merit order dispatch principle.
16.5. Accordingly, we are not agreeing with the decision of the State Commission that the project for more than 2 M.W. are subject to scheduling and merit order principles in terms of the para 8.10 of the Tariff Order dated 02.03.2012 since date of commissioning.
We set aside the conditions (a), (b), and (d) specified in para 15 of the impugned Tariff Order dated 30.11.2016.”
7. We have heard learned counsel for the parties on the correctness of the issue whether the principle of MR will apply or of MOD in relation to respondents 2, 3 and 4 having regard to the agreement with the said parties.
8. We find that the APTEL was in error in holding that MR principle will apply based on Regulation 9 of the MPERC Regulation 2010. The fact remains that the said Regulation stands substituted by MPERC Tariff Order 2012 and thereafter in the PPA it was agreed that Clause 8.10 of the Tariff Order as amended on 03.05.2013 will apply. The said Tariff Order has now become final between the parties to the agreement which provides for single part tariff. Thus the findings of two part tariff cannot be sustained. We are unable to uphold the findings that clause 8.10 of the tariff order dated 02.03.2012 will not apply in these circumstances.
9. Accordingly, we set aside the impugned order and restore the order of the MPERC dated 30.11.2016 insofar as condition (b) of Para 15 quoted above is concerned. The remaining conditions will remain unaffected.
10. The appeals are, accordingly, disposed of.
11. Pending execution application(s) may now be decided in accordance with law.
Petition(s) for Special Leave to Appeal (C) No(s). 25150-25151/2017
M.P. Power Management Company Ltd _________________ Appellant
v.
M.P. Biomass Energy Developers Association & Ors ____ Respondent(s)
Date: 26-04-2018 These matters were called on for hearing today.
(Before Adarsh Kumar Goel and Rohinton Fali Nariman, JJ.)
For Petitioner(s) Mr. Mukul Rohtagi, Sr. Adv.
Mr. Purushaindra Kaurav, Adv. Gen(MP)
Mr. Mishra Saurabh, AOR
Mr. Nitin Gour, Adv.
Ms. Anuradha Mishra, Adv.
Mr. Varun Mohan, Adv.
For Respondent(s) Mr. C. Aryama Sundaram, Sr. Adv.
Mr. M.G. Ramachandran, Adv.
Mr. Nikunj Dayal, AOR
Mr. Pramod Dayal, Adv.
Ms. Payal Dayal, Adv.
Ms. Rhea Luthra, Adv.
Mr. S. Venkatesh, Adv.
Mr. Somesh Srivastava, Adv.
Mr. Pratyush Singh, Adv.
Mr. Vikas M., Adv.
Mr. Sandeep Rajpurohit, Adv.
Mr. Lakshmi Raman Singh, AOR
UPON hearing the counsel the Court made the following
ORDER
12. Leave granted.
13. The appeals are disposed of in terms of the signed order.
14. Pending application(s), if any, shall also stand disposed of.
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