Appellate Tribunal For Electricity
Punjab Energy Development Agency ... vs Punjab State Electricity Regulatory ... on 23 March, 2026
Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL No. 286 OF 2015
&
APPEAL No.328 OF 2016
Dated: 23rd March, 2026
Present: Hon`ble Ms. Seema Gupta, Officiating Chairperson
Hon`ble Mr. Virender Bhat, Judicial Member
APPEAL NO. 286 OF 2015
IN THE MATTER OF:
PUNJAB ENERGY DEVELOPMENT AGENCY (PEDA)
Through its Director, Shri Balour Singh,
Having office at Plot No.1-2,
Sector-33 D, Chandigarh- 160034 ... Appellant(s)
VERSUS
1. PUNJAB STATE ELECTRICITY REGULATORY COMMISSION (PSERC)
Through its Secretary,
Having office at SCO No.220-221,
Sector-34-A, Chandigarh-160022.
2. PUNJAB STATE POWER CORPORATION LIMITED(PSPCL)
Through its Chairman-cum-Managing Director,
Having office at The Mall, Patiala - 147001.
3. M/S ATLANTIC POWER PRIVATE LIMITED (APPL)
Through its Managing Director,
Having office at H.No.528,
Behind Tagore Theatre,
Sector-18 B, Chandigarh - 160018. .... Respondent(s)
Page 1 of 35
Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
Counsel on record for the Appellant(s) : Mr. Aditya Grover
Mr. Arjun Grover
Counsel on record for the : Mr. Sakesh Kumar for Res.1
Respondent(s)
Ms. Suparna Srivastva for Res.2
Mr. Tajendar K. Joshi for Res.3
APPEAL NO. 328 OF 2016
IN THE MATTER OF:
M/S ATLANTIC POWER PRIVATE LTD. (APPL)
Through its Managing Director, Avtar Singh Gill,
Having office at H.No.131- Amravati Enclave,
P.O. Chandimandir,
District Panchkula -134102. ... Appellant(s)
VERSUS
1. PUNJAB ENERGY DEVELOPMENT AGENCY (PEDA)
Through its Chief Executive Officer,
Having office at Plot No.1&2,
Sector-33, Chandigarh- 160020.
2. PUNJAB STATE POWER CORPORATION LIMITED(PSPCL)
Through its Managing Director,
Having office at The Mall, Patiala - 147001.
3. PUNJAB STATE ELECTRICITY REGULATORY COMMISSION (PSERC)
Through its Secretary,
Having office at SCO No.220-221,
Sector-34-A, Chandigarh-160022. .... Respondent(s)
Counsel on record for the Appellant(s) : Mr. Tajendar K. Joshi
Page 2 of 35
Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
Counsel on record for the Respondent(s) : Mr. Aditya Grover
Mr. Arjun Grover
for Res. 1
Ms. Suparna Srivastva for
Res.2
Mr. Sakesh Kumar for
Res.3
JUDGEMENT
PER HON'BLE MRS. SEEMA GUPTA, OFFICIATING CHAIRPERSON
1. Appeal No. 286 of 2015 has been filed by Punjab Energy Development Agency, challenging the order dated 26.05.2015 in Petition No. 51 of 2014 and order dated 10.09.2015 in Review Petition No. 6 of 2015 in Petition No. 51 of 2014 passed by the Punjab Electricity Regulatory Commission.
2. Appeal No. 328 of 2016 has been filed by M/s Atlantic Power Private Ltd., challenging the order dated 26.05.2015 in Petition No. 51 of 2014 (hereinafter referred as "Impugned Order") passed by the Punjab Electricity Regulatory Commission.
3. Since these two appeals are cross appeals against the same order and are integrally connected, these are being disposed of by this Common Judgement. For the sake of convenience, the description of the parties is given here under as per appeal No.286 of 2015.
DESCRIPTION OF PARTIES: (as per Appeal No.286 of 2015) Page 3 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
4. Punjab Energy Development Agency (hereinafter referred as "PEDA), the Appellant herein, is the nodal agency for the implementation of the NRSE Policy on behalf of the Government of Punjab for the development of NRSE projects.
5. Respondent No 1 is the Punjab State Electricity Regulatory Commission (hereinafter referred as "PSERC/State Commission") is the State Electricity Regulator exercising the powers and discharging the functions as per the provisions of Electricity Act, 2003.
4. Respondent No 2 is Punjab State Power Corporation Ltd. (hereinafter referred as "PSPCL") is the distribution licensee supplying electricity to the consumers in the state of Punjab as per the provisions of Electricity Act 2003.
5. Respondent No 3 is M/s Atlantic Power Private Limited Power Ltd. (hereinafter referred as "APPL"), is a company incorporated under the provisions of the Companies Act, 1956. M/s APL is Developer of the Project under reference who had preferred the petition seeking re-determination of tariff qua the project before the State Commission (Appellant in Appeal 328 of 2016).
FACTUAL MATRIX OF THE CASE: -
6. The Government of Punjab with the aim to revive the Holy Bein rivulet, significant for its religious ties to Shri Guru Nanak Dev Ji, the first Sikh Guru, who was enlightened there and began his first Holy March in 1500 A.D, during the meeting on 11.03.2009, PSPCL (formerly PSEB) agreed to release 350 cusecs of water from Mukerian Hydel Channel Stage-II into the Holy Bein, and appointed a Project Coordinator to restore the ecology.
Page 4 of 35Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
7. On 10.07.2009, PEDA invited bids for setting up a Mini Hydel Power Project with an estimated capacity of 500 kW on Build, Operate and Own (BOO) basis under the State New & Renewable Source of Energy (NRSE) Policy, 2006, As per the bid documents, the estimated generation potential of the project was assessed at 32.85 lakh units per annum at a Plant Load Factor (PLF) of 75%. In the bid document, the applicable tariff was indicated as Rs 3.49 per unit ( base year 2006-07) with 5 annual escalation @3 % up to 2011-12 as per PSERC tariff order dated 13.12.2007. APPL, on behalf of its consortium, quoted an energy share payable to PEDA on actual generation, being 20% for the first 10 years and 30% for the subsequent 20 years. Pursuant thereto, APPL, alongwith its consortium, emerged as the highest bidder in the tendering process, and an allotment letter dated 20.08.2009 was issued to the said consortium, with APPL as the lead member, for setting up a 500 KW capacity Mini Hydel Project at Terkiana on Holy Bein on BOO basis under the NRSE Policy, 2006, stipulating a completion period of 665 days from the date of allotment.
8. On 27.08.2009, a Memorandum of Understanding (MOU) was executed between the PEDA and APPL for carrying out detailed survey and investigation of the project site and a Detailed Project Report (DPR) was submitted by APPL, which was approved by PEDA vide its letter dated 16.10.2009. As per the DPR submitted by APPL, the project capacity was of 650 KW capacity and estimated annual generation was projected at 54.60 lakh units at a PLF of 95%.
9. On 16.10.2009, an Implementation Agreement (IA) was signed between the PEDA and APPL followed by a Power Purchase Agreement (PPA) on 02.12. 2009, and the 650 kW capacity hydro project was subsequently commissioned and synchronized with the PSPCL 66 KV Grid on 31.08.2010.
Page 5 of 35Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
10. On 31.01.2011, the power plant was forced to shut down on account of agitation by the local population due to severe water-logging in the agricultural fields, arising from an increase in the ground water level caused by the release of water from MHC-II into the Holy Bein. APPL, requested PEDA for resolution of the issue.
11. In the meetings held on 07.02.2011 & 15.02.2011, implementation of an Escape channel was considered to be the feasible solution and same was to be constructed by Developer -APPL, and compensation of the cost of escape channel was envisaged by way of additional generation. Final approval of drawings and proposal was to be accorded by PSPCL and PID.
12. Initial drawings were submitted by developer on 23.02.2011 and after incorporating comments of the consultant and after several rounds of discussion with PSPCL and consultant and PID, drawing was approved by PEDA, PSPCL and PID on 05.10.2011. In the meantime, on 10.08.2011, a Tripartite Agreement (TPA) was executed between the PEDA, APPL and PSPCL for facilitating the restoration of the project. Pursuant thereto, on 03.04.2012, the work of Escape channel and allied works were completed by APPL and operation of the hydro project was restored.
13. On 18.11.2013, APPL, resorted to the Arbitration proceedings and filed Arbitration Case petition titled "M/s Atlantic Power Private Limited versus Punjab Energy Development Agency before the Punjab & Haryana High Court, seeking appointment of nominee arbitrator on behalf of PEDA, so as to enable the two arbitrators already appointed by the APPL to appoint a third arbitrator to act as the Presiding Chairman of the Arbitral Tribunal with regard to payment of energy share to PEDA .
Page 6 of 35Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
14. On 12.08.2014, APPL filed Petition No. 51 of 2014 before the State Commission seeking re-determination of tariff by treating April 2012 as the commissioning year, and submitted that due to construction of escape channel and closure of the project, the cost of the project has increased from Rs. 699 lacs to Rs. 1182 lacs and consequently the cost of generation has gone up from Rs. 2.74 per unit to Rs 5.63 per unit. APPL also sought waiver of the payment of energy share payable to the PEDA out of the energy generated and sold to the distribution licensee.
15. On 29.08.2014, Arbitration Case (No. 3 of 2014) preferred by APPL before the Punjab & Haryana High Court came to be dismissed as withdrawn, with liberty granted to file a fresh petition in the event the tariff was not determined in accordance with law, considering that APPL had already approached PSERC for determination of tariff.
16. On 26.05.2015, State Commission passed the Order, impugned in the present appeal, holding that "54(i) The prayer of the petitioner for determination of tariff is not allowed. The tariff for the project shall remain as per PPA i.e. as determined by the Commission in its Order dated 13.12.2007 under NRSE Policy-2006 of the Government of Punjab and agreed to in IA dated 16.10.2009, PPA dated 02.12.2009 and TPA dated 10.08.2011 by the parties.
(ii)The petitioner is entitled to recover cost of Escape Channel (without interest) from the percentage energy share of PEDA. The petitioner shall satisfy PEDA about the actual cost incurred by the petitioner on the construction of Escape Channel and associated works. PEDA shall also not charge interest on the amount in arrears on account of its percentage energy share since the synchronization of the project. After recovery of cost of the Escape Channel and associated works, the Page 7 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 petitioner shall be liable to deduction of percentage energy share from the energy bills of the petitioner and PEDA/PSPCL, as the case may be, shall be entitled to percentage energy share as agreed to in the IA, PPA and TPA. It is made clear that PSPCL is not liable to compensate the petitioner from its energy share after it becomes entitled to the same on the commissioning of its 18 MW MHP-11 Project.
The petition is disposed of, in terms of above decisions and directions."
18. APPL preferred review (Petition No. 5 of 2015) of the Impugned Order, against the denial of compensation on account of interest liability on the loans availed during the period of closure of project and for construction of escape channel as well as Operation and maintenance expenses for the period when project was closed, which was disposed of by State commission vide order dated 06.11.2015. PEDA also preferred review (Petition No. 6 of 2015) before the State Commission, with regard to new facts about discharge of water, however same was dismissed by the State Commission vide order dated 10.09.2015. Aggrieved by the Impugned Order, both PEDA & APPL have preferred Appeal No. 286 of 2015 and Appeal No 328 of 2016 respectively before this Tribunal. Following Paragraphs summarises the submissions made by the parties and our considerations and view.
SUBMISSIONS URGED ON BEHALF OF PEDA
19. It is submitted that recovery from energy share of PEDA by APPL lies outside the jurisdiction of the State Commission. APPL considering the dispute to be arbitral in nature, sought appointment of an Arbitrator. By the doctrine of election, APPL could not later raise the same issue before the State Commission, nor could the Commission assume jurisdiction. APPL approached the State Commission by invoking Section 86(1)(a) of the Electricity Act, 2003, which empowers the Commission only to determine tariff, not to restrain PEDA from Page 8 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 recovering energy share. Hence, the impugned orders on energy share are without jurisdiction.
20. The State Commission has erred while attributing the liability on account of cost incurred towards construction of the escape channel upon the PEDA. Under Clause 7.5 of the Implementation Agreement (IA), costs arising from Force Majeure events after project completion must be added to project cost. State Commission erred in holding that tariff was bidded; in reality, tariff remained same as generic tariff determined by the State Commission and bids were based on highest energy share. It is a settled position of law that the fundamental parameter forming the very basis of a bid cannot be altered, yet in the present case, the energy share, which constituted the basis of allotment of the Project, has been impermissibly altered by the State Commission while passing the Impugned Order.
21. State Commission failed to quantify escape channel costs and instead directed APPL to satisfy PEDA regarding actual expenditure, which is impractical. State Commission has wrongly observed that since the final design approved by PSPCL did not contain approval for discharge of 20% additional water, the APPL was not entitled to recover the cost of the escape channel by generating additional energy in terms of the MoM dated 15.02.2011. This finding completely ignores the undisputed fact that even after construction of the escape channel, the discharge of water into the Holy Bein was not fully restricted and the APPL continued to remain free to discharge water into the Holy Bein up to 20% over and above the quantity permitted through the approved escape channel.
22. State Commission has erred in construing the TPA dated 10.08.2011 as mandatory under the IA. The IA required a TPA only in specific contingencies, which did not arise here. The contractual framework was confined to the IA and PPA. The Commission misapplied the TPA provisions. The State Commission Page 9 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 has thus misconstrued the date of signing of TPA mentioned therein in the IA, as at the time of signing the IA, none of the parties were aware about the contingency which has occurred.
23. The State Commission has wrongly attributed delay in approval of escape channel drawings on 05.10.2011, after a delay of seven months. The contingency was unforeseen by any of the parties and although the primary obligation to assess feasibility and conduct detailed investigations rest with the Developer- APPL, the PEDA, in the larger interest of the Project, took proactive steps to resolve the issue and it was specifically agreed that the Developer-APPL would submit drawings for creating an alternate route for water flow, i.e., the escape channel, to PSPCL and PID for approval. In the instant case as soon as the APPL submitted the final proposal on 27.06.2011 to PEDA / PID same was immediately approved on 05.07.2011
24. The contention of the APPL that the TPA did not provide for supply of additional water for 20% extra generation towards compensation for the cost of the escape channel is misconceived. The TPA, while factoring in additional generation as compensation, expressly provided under Clause 13(B) and (C) that the Developer shall generate up to 5 million units of electricity per annum and, beyond that, share 50% of the excess energy with PSPCL towards compensation for excess water drawn from MHC-II. Further, as per the bid documents, generation of 3.285 MU per annum was envisaged against 350 cusecs of water at 75% PLF, and even after accounting for 20% additional generation, the total generation would remain below 4 MU per annum. Though not specifically worded, however the generation from the project after accounting for 20% extra generation was duly capped in the TPA. Further, it is not the case of the APPL that water to the extent of 350 cusecs plus 20% was unavailable in MHC-II. It was feasible to discharge water post-generation both through the approved Page 10 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 escape channel as well as into the Holy Bein to enable generation of additional energy, the APPL failed to establish that such additional generation was not possible.
25. The State Commission has wrongly observed that the Developer-APPL has come under economic stress during the period for which the he was not at all responsible, as the PEDA and PSPCL continue to gain dominance in the matter. Despite repeated reminders and contractual obligations, the Developer-APPL has neither installed flow meters nor handed over control of regulation gates to PSPCL, leaving no effective mechanism to regulate water drawal.
26. The State Commission has wrongly fastened the entire liability for construction of the escape channel upon PEDA, overlooking the fact that the tender was issued on the basis of assured discharge of 350 cusecs from MHC-II and envisaged a discharge capacity of 500 cusecs, with a clear stipulation that the bidder would undertake detailed investigations and surveys at its own level and submit a Detailed Project Report ("DPR"). In the present case, the Developer- APPL, after conducting its own detailed survey, submitted a DPR projecting significantly higher generation of 5.46 MU per annum at 95% PLF, as against the tendered expectation of 3.285 MU per annum at 75% PLF,
27. The State Commission has erred in holding that the Appellant-PEDA did not pursue recovery of its energy share and that an amount exceeding Rs. 1 crore was already due and payable by the Developer-APPL, despite the admitted position that the APPL has failed to pay any percentage energy share since commissioning of the Project. PEDA had repeatedly requested both the APPL and PSPCL for recovery of the energy share and only a solitary payment of Rs. 5,70,000/- was made by PSPCL to PEDA from the energy bills payable to the APPL.
Page 11 of 35Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
28. The State Commission has also erred in holding that the PEDA benefited from the delayed completion of the Project on the premise that it was entitled to a percentage energy share for the extended period, whereas, in fact, the APPL was liable to pay energy share to the PEDA strictly on the basis of actual energy generated in accordance with the agreed terms and conditions, and no fixed or assured amount towards energy share was payable. The grouse of the Developer-APPL, of having spent additional cost on the construction of escape channel, was well taken by the concerned departments, including but not limited to the PEDA & PSPCL and APPL was facilitated with option to recover the same by way of 20% extra generation of energy from the project; and in case the APPL failed to do so, the same in no eventuality can be attributed upon the PEDA.
29. Without prejudice, the State Commission has erred in law in fastening the entire liability for the cost incurred by Developer -APPL towards construction of the escape channel solely upon PEDA, ignoring that the decision to conceptualize and implement the Project was a joint decision of PSPCL and PEDA, with clearly defined allocation of roles and responsibilities. Without prejudice thereto, the Impugned Orders have been passed despite the State Commission itself having noted that PID was required to de-silt the Holy Bein to enable it to carry a discharge of 500 cusecs of water and bidder was to undertake detailed studies and investigations and submit a DPR accordingly.
30. Without prejudice, the State Commission has further erred in directing that the energy shares payable to the Appellant-PEDA shall be adjusted, while holding that the energy share payable to PSPCL upon commissioning of its 18 MW project shall remain unaffected, despite the admitted position that the decision to conceptualize and implement the Project was taken jointly by PID, the PEDA and PSPCL. All concerned departments acted collectively at every stage of the Project, and therefore, fastening the entire financial burden exclusively Page 12 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 upon the Appellant-PEDA is arbitrary, discriminatory and contrary to settled principles of law.
31. The State Commission has failed to appreciate the contradictory and inconsistent stand taken by the Developer, who, during the pendency of the petition preferred by it, alleged non-availability of sufficient water for generation of additional energy, but subsequently, while filing its reply to the review petition, took a complete volte-face by contending that its plant was incapable of generating 20% additional energy on the ground that the plant parameters were fixed as per the DPR and that the intake, forebay, penstock and tailrace were designed only for 350 cusecs discharge. This plea is factually incorrect and contrary to the approved DPR, which provided for a 650 kW plant with 10% overload capacity and an intake size of 4.0 m × 2.5 m, yielding a cross-sectional area of 10 sq. m, through which, even at a conservative velocity of 1.5 m/sec, a discharge of approximately 15 cumecs (about 530 cusecs) could pass. Further, the drawings annexed by the Developer with its reply to the review petition were neither approved nor correct, as they incorrectly depicted the depth of the RCC intake duct as 3.356 m instead of the approved 2.5 m; in case the drawing submitted by the Developer along with the reply to the review Petition were relied upon, then, by taking the depth as 3.356 m, the discharge which can pass through the intake duct comes out to be 4.0 x 3.356 x 1.5 = 20.36 cumecs or 711 cusecs. Hence, the Petitioner had all the very opportunity to fetch 20% extra energy.
32. The State Commission has failed to appreciate that the water exit system from the powerhouse was designed with a discharge capacity of 350 cusecs through the escape channel, in addition to provision for further discharge of 20% thereof, i.e., 70 cusecs, into the Holy Bein, which itselfis capable of carrying substantially higher discharge than 70 cusecs, as is evident from the communication dated 29.05.2015 issued by the PID. Accordingly, the available Page 13 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 water exit system was technically capable of handling discharge significantly in excess of an aggregate of 420 cusecs.Further, under the Tripartite Agreement dated 10.08.2011, control of the intake regulation gates of the powerhouse was to vest with PSPCL to regulate inflow into the Mini Hydel Project, while release of requisite water into the Holy Bein was to be effected through regulation gates to be provided by the Developer-APPL at the tailrace and controlled by the Punjab Irrigation Department. However, the Developer has neither made the intake and tailrace regulation gates operational nor handed them over to PSPCL and PID in terms of the contractual arrangements.
SUBMISSIONS URGED ON BEHALF OF RESPONDENT NO.1-PSERC
33. Both PEDA as well APPL have contended that in a petition under Section 86(1)(a), the State Commission could only decide the tariff and that compensation only for the cost of the escape channel is not envisaged under the section and moreover PEDA has additionally submitted it could not have been fastened with the liability for compensating the cost of escape channel and the same ought to have been passed on to consumer, if the generator could not absorb the same. In this context it is submitted that it was the error on the part of PEDA about its judgment that the Holy Bein could take 350 cusecs of water, whereas it could only take 200 cusecs, and it failed to understand as to what would happen to 150 cusec excess water. Accordingly, the State Commission fixed the liability on PEDA. The State Commission further observed that including the cost of the escape channel in the project cost would unjustly increase the tariff for consumers of PSPCL and therefore held that the Developer-APPL should be compensated from PEDA's share of energy. It is submitted that during the period from completion of the project and its synchronization with the grid on 31.08.2010 until the execution of the Tripartite Agreement on 10.08.2011, the project was undoubtedly under economic and financial stress, as it was unable to earn Page 14 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 sufficient revenue to service its debt and meet operation and maintenance expenses. The State Commission cannot ignore the fact that no party other than the developer -APPL, who had invested in the project by raising term loans, was subjected to such financial stress during the said period, while with the passage of time the respondents continued to gain a position of dominance. In these circumstances of economic duress, for which the Developer-APPL was neither responsible nor blamed, the APPL was constrained to agree to the terms of the Tripartite Agreement, including Clause 15 thereof, on the basis of which PEDA/PSPCL have contended that the expenditure incurred towards construction of the Escape Channel was voluntarily agreed to be borne by the petitioner and was of no concern to PEDA/PSPCL. State Commission is of the considered view that although the additional cost incurred by the APPL on construction of the Escape Channel does not entitle it to re-fixation of the tariff by including the same in the project cost, the APPL is nonetheless entitled to be compensated for the expenditure so incurred, notwithstanding Clause 15 of the Tripartite Agreement.
SUBMISSIONS URGED ON BEHALF OF APPL
34. It is an admitted fact that APPL has commissioned and synchronized the hydro power plant with the Grid on 31.08.2010 and on 31.01.2011, the power plant was forced to shut down due to severe water-logging in the agricultural fields, arising from an increase in the ground water level caused by the release of water from MHC-II into the Holy Bein. It is submitted that PSPCL, PEDA and the APPL signed the Tripartite Agreement (TPA) on 10.08.2011, after a lapse of approximately 7th months from the closure of the plant for construction of the escape channel. With regard to the contention that in the TPA, APPL had agreed to bear the cost of construction of the escape channel and the associated works, it is submitted that the APPL executed the TPA under economic and financial Page 15 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 duress, as during the aforesaid period it was compelled to incur continuous operation and maintenance expenses without earning any revenue, or in the alternative, earning substantially reduced revenue on account of operation of the plant at curtailed discharge.
35. Further, the one-sided nature of the Tripartite Agreement is evident from the fact, inasmuch as the Minutes of Meetings dated 07.02.2011 and 15.02.2011 categorically recorded that while the cost of construction of the escape channel would initially be borne by the APPL, it would be duly compensated for extra cost so incurred; however, this assurance was not reflected in the TPA. It is further submitted that even the designs of the escape channel were approved by PSPCL, PEDA and PID only on 05.10.2011, after an inordinate delay of about 9 months.
36. The APPL commenced construction of the escape channel and completed the same at about Rs 2.10 crore considering term loan of Rs 1.50 crore from a bank and balance Rs 0.60 crore as equity by the promoters. Upon completion of the escape channel, water discharge of 350 cusecs was permitted and regular generation of power commenced on 30.04.2012, whereas prior thereto the plant had remained completely shut for a continuous period of three months, namely February, March and April 2011, and thereafter was constrained to operate at an average discharge of only about 140 cusecs till completion of the escape channel. During the period of closure, the Appellant also suffered substantial financial loss on account of O&M expenses and other incidental charges and upon aggregation of all such expenses, including interest and allied costs, the total additional cost incurred in running the project amounted to Rs 4.82 Crore.
37. In the Impugned Order, liability of compensation of the cost of escape channel has been affixed on PEDA, against their entitlement of energy share and APPL has been directed to satisfy PEDA regarding the actual cost incurred on construction of the escape channel and associated works, while clarifying that Page 16 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 PSPCL would not be liable to compensate the Appellant from its energy share after it became entitled thereto upon commissioning of its 18 MW MHP-II Project. It is submitted that neither PEDA nor PSPCL disputed that the claimed cost incurred on construction of the escape channel. In the Impugned Order, though it has been observed that the project remained closed for three months and thereafter operated at a reduced discharge, leading to insufficient revenue for debt servicing and meeting O&M expenses during the period from synchronization on 31.08.2010 till 30.04.2012, however compensation was restricted to only to the cost incurred by the APPL on construction of the escape channel and that too without interest. It is submitted that The APPL continued to incur interest on loans for the project and the escape channel and also suffered O&M expenses during the said period, including the complete shutdown, for which it was also entitled to compensation. The Commission further erred in declining re-determination of tariff, as the energy share of PEDA was inadequate even to compensate the Appellant for the cost of the escape channel.
38. Though the Minutes of Meeting dated 15.02.2011 record a decision that the Developer-APPL would be compensated by generation of 20% additional power, the same was neither practical nor feasible, particularly as the APPL was not even a participant in the said meeting. Hydro power generation is governed by fixed parameters of discharge and head, and as per the bid documents and approved DPR, the project was designed for a discharge of 350 cusecs and a head of 7.1 meters for optimum generation, which parameters stood finalized at the time of construction of the project in the year 2010. The presumption of PEDA, PSPCL and the State that an increase of 20% in discharge would result in a corresponding increase of 20% in generation is wholly erroneous in fact and in engineering principles. The forebay, intake, penstock and tailrace outlet were designed exclusively for a discharge of 350 cusecs, and any excess discharge would reduce the net available head, thereby lowering plant efficiency and Page 17 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 adversely affecting the turbine, gearbox, induction generator, auxiliaries, transformers, protection systems and SCADA, all of which were designed for an installed capacity of 650 kW. Consequently, no additional energy was available for such compensation.
39. It is further submitted that the alleged 10% overload is based solely on rare and temporary variation in head, i.e., Mukerian Hydel Channel level variation from 7.25 m to 7.75 m, and is not meant for continuous operation, as sustained overload would adversely affect and damage the turbine, gearbox, induction generator, auxiliary panels, transformers, breakers, generator breaker, capacitor bank and the SCADA system, all of which are designed for 650 KW only. PEDA is erroneously confusing availability of water with discharge, as although the Mukerian Hydel Channel carries approximately 10,000 cusecs of water, electricity generation is possible only upon permitted intake/discharge through the MHP, which was designed, approved and constructed for 350 cusecs only, and therefore the claim of 20% extra discharge is wholly imaginary and without any technical or factual basis.
40. With regard to the contention that APPL has preferred the Arbitration route and filed a petition before the Punjab and Haryana High Court under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator, it is submitted that withdrawal of same was permitted on the ground that APPL had already approached the State Commission for determination of tariff and the order passed by the High Court does not restrict APPL claim before State Commission to only determination of tariff. APPL has been consistent in its claim and from the very first day submitted that PEDA has failed to perform its duty. Merely because the APPL stated before the High Court that the issue relating to energy share was arbitral in nature does not imply that the same could not be adjudicated by the State Commission. Arbitration is only an alternate mechanism Page 18 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 for adjudication of disputes, the distinction being that the lis is decided by an arbitrator appointed under the Arbitration and Conciliation Act, 1996. The issue relating to the jurisdiction and appointment of an arbitrator stands conclusively settled by the judgment of the Supreme Court dated 13.03.2008 in "Gujarat Urja Vikas Nigam Ltd. v. Essar Power Limited" Appeal (Civil) No. 1940 of 2008.
41. It is further submitted that in terms of the bid documents of PEDA, release of discharge to the extent of 350 cusecs into Kali Bein was expressly assured, pursuant to the concurrence of the PSEB/PSPCL conveyed vide Memo No. Spl- 1 dated 25.05.2009. The DPR was prepared on the specific pre-condition that a full supply discharge of 350 cusecs would be made available in Holy Bein, in accordance with the bid documents. PEDA was, therefore, obligated to ensure continuous release of 350 cusecs of water into Kali Bein, which alone would enable regular generation of power up to 650 kW. However, PEDA failed to ensure the assured discharge of 350 cusecs in Kali Bein. It is also submitted that a MHL at the same site had been allotted on a BOO basis to M/s Polyplex Corporation Ltd. with an assurance of release of 500 cusecs of water; however, it was subsequently found that Kali Bein could not carry such discharge, leading to reduction of assured discharge to 350 cusecs and a corresponding reduction in project capacity from 750 kW to 500 kW, on account of which M/s Polyplex Corporation Ltd. withdrew from the project. These material facts were never disclosed to the APPL at the time of bidding.
42. PEDA has sought to contend that, in terms of the bid documents, the developer was required to conduct a survey of the project site, details of which were provided in Annexure-II to the bid documents, wherein the site was described as Western Bein (Holy Bein) Terkiana Head Works from RD 0 to RD 450 of MHC-II. The general layout drawing of the site was also annexed to the bid documents. APPL duly conducted the survey of the project site in accordance Page 19 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 with the information so provided, however APPL can not be asked to survey Holy Bein of 130 Km from the project site to the Hari ke Pattan where the Bein falls.
43. The construction of the escape channel did not form part of the original scheme of the Mukerian Hydro Project, as the entire 350 cusecs of water was intended to be released into Holy Bein for feeding the Holy Sarovar of Gurudwara Sahib at Sultanpur Lodhi, however, in reality, Kali Bein was incapable of carrying more than about 125 cusecs. This position stands corroborated by the subsequent approval granted by the Irrigation Department to revised designs and drawings for release gates, under which only 125 cusecs of water is now permitted to be released into the Bein instead of 350 cusecs. These facts demonstrate that the information provided by PEDA in the bid documents regarding assured discharge was fundamentally defective and amounted to material misrepresentation, and that PEDA failed to ensure the assured discharge of 350 cusecs into Kali Bein, thereby perpetrating a fraud upon the developer-APPL.
44. The PEDA has contended that the incident constitutes a Force Majeure event under the Implementation Agreement, and it is admitted that Clause 7.5(v) of the I.A. dated 16.10.2009 provides that the additional cost incurred for remedial or alternative measures shall be added to the Project Completion Cost. The APPL had specifically contended before the State Commission that the expenditure incurred towards construction of the escape channel ought to be capitalized and included in the project cost, with a corresponding re-determination of tariff; however, the State Commission, in its discretion, did not accept the said contention. It is submitted that in the event this Tribunal is pleased to accept the plea of the Appellant, the cost so incurred may be directed to be added to the project cost and the tariff be re-determined accordingly, however for such purpose, the cost would necessarily include not only the capital expenditure of Page 20 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 Rs 2.10 crore incurred on construction of the escape channel, but also the operation and maintenance expenses, interest costs and allied charges incurred during the period of complete shutdown of the plant from 29.01.2011 to 30.04.2012.
45. Regarding the contention of PEDA with regard to non-provision of flow meters by APPL, it is submitted that flow meters have no nexus with the discharge of water from the MHP, as ultrasonic sensors are installed at the intake and tailrace channels and the discharge is continuously monitored and regulated through the SCADA system controlling plant operations. Control mechanism of the discharge gate does not alter or enhance the discharge capacity, since the intake area of the plant is fixed by design. As already stated, the designed discharge capacity of the MHP is 350 cusecs and the construction of the escape channel has not, in any manner, enhanced or altered the discharge capacity of the plant.
46. State Commission has rightly held that the Appellant-PEDA stood to gain an enhanced percentage energy share by wrongly assuring that a discharge of 350 cusecs would safely pass through Holy Bein. It is submitted that but for such assurance, the APPL would not have agreed to offer a 20% energy share to PEDA. The contention of PEDA that the energy share was only to be computed on actual generation is misleading, as in the event of reduced generation insufficient even to cover O&M expenses, interest and other costs, the 20% energy share could not have been offered. In view of the foregoing, the appeal filed by the PEDA is liable to be dismissed by this Tribunal.
SUBMISSIONS URGED ON BEHALF OF RESPONDENT NO.2 -PSPCL
47. It is submitted that, on the issue as to whether the construction of the Escape Channel constitutes a force majeure event and whether the cost thereof Page 21 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 is required to be added to the capital cost for re-determination of tariff for the project, the State Commission, while unequivocally holding that the tariff determined pursuant to the competitive bidding process cannot be reopened or re-determined, has nevertheless taken cognizance of the fact that the generator was compelled to incur substantial additional expenditure on account of circumstances neither contemplated nor factored in at the bidding stage and wholly beyond the control of the generator, such expenditure having arisen, inter alia, due to the dominant bargaining position exercised by the Respondents during the relevant period, and it is in these circumstances that State Commission has deemed it just and appropriate to compensate the generator for the cost incurred towards construction of the Escape Channel.
48. Since PEDA derived commercial advantage in the form of enhanced energy share, it was held liable to bear the cost. The generator was allowed to recover the actual cost of construction, without interest, from PEDA's energy share, subject to it duly satisfying PEDA, the actual cost incurred on the construction of the Escape Channel and associated works. PEDA was directed not to charge interest on arrears of its energy share since synchronization. Once recovery was complete, the agreed percentage energy share would resume, with PEDA/PSPCL entitled to its share strictly under the IA, PPA, and TPA. PSPCL shall not be liable to compensate the generator after commissioning of its 18 MW MHP-II Project. This approach balanced restitution for unforeseen expenditure with consumer interest and the sanctity of competitive bidding.
49. While PEDA had agreed to release 350 cusecs of water, responsibility for safely carrying it rested with the generator. Upon release of 200 cusecs, the inadequate cross-section of the Holy Bein caused waterlogging and farmer resentment, leading to project shutdown. The construction of the Escape Channel was thus permitted to enable the generator to ensure full generation Page 22 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 from its plant, at the request of PEDA. Its design and construction did not fall within PSPCL's scope, and no liability can be fastened upon PSPCL so as to burden consumers with higher tariff. Any issue relating to compensation is a matter strictly inter se between PEDA and the generator. The generator has already been adequately compensated relating to the construction of the Escape Channel, and accordingly the present Appeals being devoid of merit, are liable to be dismissed by this Tribunal.
DISCUSSION AND ANALYSIS
50. Heard Mr. Aditya Grover, learned Counsel on behalf of PEDA, Mr Tajendra Joshi learned Counsel on behalf of APPL (the generator), Mr Sakesh Kumar learned Counsel on behalf of the State Commission and Ms Suparna Srivastava, learned Counsel on behalf of PSPCL and perused the written submissions of the parties and revenant documents. The State Commission in the Impugned Order has held that tariff for the project shall be as determined in tariff order dated 13.12.2007 and no re-fixing of tariff was permitted, however, generator is entitled to be compensated for the cost of construction of Escape Channel, (without interest) from the percentage energy share of PEDA, and generator-APPL to satisfy the PEDA with regard to actual cost incurred on the construction of Escape Channel. PEDA (Appellant in Appeal No 286 of 2015) is aggrieved with regard to recovery of cost of escape Channel from the energy share of PEDA, while in terms of Implementation Agreement it is covered under the force majeure clause and, accordingly, its cost should have been added in the project Cost. PEDA has also contended that State Commission has acted beyond its jurisdiction with regard to adjustment of compensation against PEDA's energy share while determining the tariff under Section 86 (1)(a). APPL ( the Appellant in Appeal No 328 of 2016) is aggrieved by the findings that it is to be compensated only with regard to cost of escape channel, ( as per satisfaction of PEDA) and prayed Page 23 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 for compensation of entire cost including escape channel cost, carrying cost, interest as well as O&M expenses incurred during the period of plant closure and generation of electricity at lower then rated capacity till completion of scape Channel. It has also been contended by APPL that energy share of PEDA is not sufficient to compensate such cost. Based on the elaborate submissions advanced by the parties, the following issues emerge for consideration.
Issue No 1: Whether construction of the Escape Channel constitutes a force majeure event in terms of Implementation Agreement warranting addition of its cost to capital cost for tariff re-determination.
51. As noted above, the bids for setting up the hydro project with estimated potential of 500 kW was invited by PEDA, in which location of project, estimated annual generation as well as tariff applicable was indicated from 1st to 30th year; as Rs 3.928 for the year 2010-11 and Rs 4.4045 for balance year in terms of order dated 13.12.2007 passed by the PSERC. Bid document also indicated that discharge of 200 Cusecs has been released into the Western Bein from the Mukerien Hydel Channel II, and same shall be increased to 350 Cusecs, which shall be sufficient to generate 500 kW for the proposed project. Against the applicable tariff mentioned from 1st year to 30th year in Annexure III of the bid document, the bidders were required to indicate the quantum of energy share in order to secure the project and obviously, bidder quoting highest energy share would emerge as successful bidder. Pursuant to the bidding process, APPL along with its consortium emerged as successful bidder, as it undertook to share 20% of the energy for the initial ten years and 30% for the subsequent twenty years, thereby agreeing to receive 80% of the generic tariff for the first ten years and 70% thereof for the balance twenty years.
52. An MOU was executed between PEDA and APPL on 27.08.2009 to undertake further investigation and prepare the DPR. APPL thereafter submitted Page 24 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 the DPR for approval, in which considering discharge of 350 Cusecs in Holy bein, the capacity of project was envisaged as 650 kW with a 10 % overload capacity and 95% PLF of the project and an Implementation agreement was signed between PEDA and APPL on 16.10.2009 to undertake the project. The project was commissioned on 31.08.2010 and there is no dispute that Holy bein could not take discharge of 350 cusecs, as the same resulted in flooding of adjoining agricultural fields. Owing to public agitation on this account, the generation project remained shut down for a period of three months, from February 2011 to April 2011, and thereafter operated at a reduced capacity until completion of the Escape Channel in August 2011.
53. There is no dispute between the parties with regard to technical requirement of construction of escape channel, as same is considered essential to operate the generation project at its rated capacity. However, with regard to compensation for the cost of escape Channel, many contentions have been made by PEDA, some of which are contradictory like; a) referring to Force Majeure clause in Implementation Agreement contended to include it as additional Capital Cost meaning thereby increase in tariff to be passed on PSPCL and ultimately to consumer, b) referring to Tripartite agreement, contented that APPL has voluntarily agreed to build the escape channel at their cost and as such APPL should have been compensated by way of extra generation by utilizing envisaged 20% extra Discharge c) contended the liability of compensating the cost of escape channel only upon PEDA, while it was joint responsibility of PEDA/PSPCL/ PID for declaration of discharge of 350 cusecs in Holy bein in the Bid Document. The Contention noted above at b & c are dealt in subsequent paragraph, Insofar as contention (a) is concerned,, it is of relevance to consider the provisions of Force Majeure clause contained in the Implementation agreement; which defines Force Majeure as an event political and nonpolitical event as contained in Clause 7.2 and 7.3, and which is beyond Page 25 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 the reasonable control of party affected and claiming force majeure. It is also not disputed that the requirement to build escape channel, or flooding of agricultural field due to constraints in Holy bein to handle discharge of 350 cusecs in not on account of APPL. We note that in the Implementation Agreement, it is evident that there is no force majeure which relates to non - achievement of conditions specified in the bid documents, like the present one, to be constituted as a force majeure condition, on the part of APPL as well as Respondents.
54. In our view, the limitation in achieving a discharge of 350 cusecs at Holybein is not attributable to any supervening event post-bidding, but is the consequence of inadequate investigation and erroneous estimation by the tendering authority. It is a settled principle that an agency inviting tenders is bound by the assurances and conditions set out in the bid document and is under an obligation to exercise due diligence while framing bid specifications. In the present case, the entire bidding process was premised upon the assured discharge of 350 cusecs of water, which formed the basis for determined the plant size and the quantum of energy generation, thereby enabling bidders to assess financial viability and quote energy share to PEDA. Since the bids were submitted on the basis of the conditions specified in the bid document, and as tender documents and contracts constitute binding obligations, neither party can resile therefrom. The non-feasibility or non-achievement of the stated discharge cannot be construed as a force majeure event under the Implementation Agreement, nor can it justify inclusion of the cost of the escape channel in the capital cost so as to warrant an increase in tariff beyond the generic tariff specified in the bid document, which is applicable for the Mini/Micro hydel projects. Accordingly, we find no infirmity in the Impugned Order insofar as it declines re-determination of tariff on this ground, and the Impugned Order to that extent is upheld.
Page 26 of 35Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 Issue No 2: Who bears liability for the cost of the Escape Channel -- the generator, PEDA, or PSPCL
55. Referring to Tripartite agreement, it has been contended on behalf of PEDA that APPL has voluntarily agreed to build the escape channel at their own cost and as such APPL should have been compensated by way of extra generation by utilizing envisaged 20% extra Discharge and has disputed the affixing of liability of compensating the cost of escape channel only upon PEDA. It is an admitted position that after commissioning of the project on 31.08.2010, APPL was directed by PEDA on 29.01.2011 to stop the release of water due to flooding of adjoint agricultural field and consequently the generation of the project was stopped from 31.01.2011 as conveyed by APPL vide its letter dated 31.01.2011. In order to resolve the issue, the matter was deliberated at Govt level in meetings dated 07.02.2011 and 15.02.2011 and in the meeting dated 15.02.2011 chaired at secretary level, Govt of Punjab, it was decided that Escape Channel, need to be built and to recover the cost of escape channel, regulator, and other associated works, the developer may be allowed to use 20% additional discharge. Decisions taken in the meeting dated 15.02.2011, as noted in the MOM is reproduced below:
"1. PEDA will prepare the drawings for the proposed regulator on Holy Bein, associated works, culverts and the escape channel into tail race of MHC-II (18MW) Project and send the same for vetting and approval by PSPCL and Chief Engineer, Drainage, PID. The operation of the proposed regulator in the bein will rest with the Drainage Deptt. So as to maintain the discharge in the bein as per the requirement.
2. PSPCL and Irrigation Drainage Deptt. Will vet the drawings within 10 days, so as to execute the proposal expeditiously.
3. The Developer of Mini Hydel Project will utilize 420 cusecs of discharge upto the commissioning of MHC-II 18 MW project, but the discharge shall be limited to 350 cusecs after the commissioning of 18MW Page 27 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 project. This is subject to final approval of drawings and proposal by PSPCL & PID Deptt.
4. The Developer of MHP Project will construct and incur the entire expenditure required for implementation of this scheme. The expenditure to be incurred by the developer will be compensated from the 20% extra energy available to him upto commissioning of MHP-II 18MW project, for a period to be calculated by PEDA which will receive its share of the energy as per the original bid.
5. From the date of commissioning of PSPCL MHC-II (18MW Project), part of PEDA's share of energy out of MHP Project at Terkiana (650KW), will be given to PSPCL, to compensate for the energy loss due to the small rise in tail race water level of MHC-II 18 MW project. The details will be mutually worked out between PEDA & PSPCL."
56. From the minutes of meeting, it is interesting to note that there was no representation of APPL, while it was attended by representatives of PSPCL, PID and PEDA, consultant and liability of construction of Escape Channel was placed upon the developer. Though there was consensus among the participants in the meeting that developer need to be compensated for the construction of Escape channel and other associated works, however feasibility/ acceptance of developer for compensation of cost of escape channel by way of extra generation by utilizing extra discharge up to 420 cusecs, till commissioning of 18 MW project of PSPCL, was not ascertained. It is further noted that in the said meeting, PEDA has agreed to share some of its energy share to PSPCL, from APPL project, to compensate for the energy loss due to small rise in tail race water level of MCHII 18 MW project of PSPCL, details were to be decided mutually between PEDA and PSPCL. Subsequently, PEDA vide its letter dated 19.04.2011 addressed to PSPCL (with a copy marked to APPL), confirmed that upon commissioning of PSPCL's MHC -II ( 18 MW ) project, its entire energy share from APPL project shall be given to PSPCL.
Page 28 of 35Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
57. PEDA has relied upon clause 15 of the Tripartite Agreement, between PEDA, PSPCL and APPL signed on 10.08.2011, in order to dispute affixing of liability on PEDA to compensate for the cost of Escape channel through adjustment of its energy share, referred clause is reproduced hereinbelow:
"15 The entire cost of the construction of the escape channel, regulator and associated works including syphon etc. for crossing the Holy Bein as per the design & drawings will be borne by M/s. Atlantic Power Private Limited."
58. In the context of Clause 15 of the TPA, State Commission, in the Impugned Order, has observed that Project has come under the financial stress due to closure of the project and it is only the developer i.e. APPL who has invested into the project and respondents assumed dominance position and dictated the terms in signing of TPA and the developer had no option but to sign the Tripartite agreement. We agree with the observation of the State Commission in this regard. Regulators play a crucial role in balancing the interests of developers, investors, consumers and their job is essentially to take a balanced approach where multiple stakeholders have competing priorities. It is of relevance to note that despite all the concerned stakeholders (PEDA, PID, PSPCL) acknowledging in the meeting on 15.02.2011 that the developer need to be compensated for the cost of escape channel and associated works, no reference to how developer be compensated has been mentioned in the Tripartite agreement. It is also an admitted fact that APPL's project was closed for three months ( February 2011 to April 2011) thereafter operated at lower capacity due to discharge of only 140 cusecs of water and resumed generation on normal basis only on 30.04.2012 after completion of Escape Channel, thus during this entire period it is not difficult to imagine the economic duress conditions of APPL which has been acknowledged by State Commission and in spite of Clause 15 of the Tripartite Agreement, the State Commission has held that APPL to be entitled for compensation for the cost incurred towards construction of Escape Channel.
Page 29 of 35Judgement in Appeal Nos. 286 of 2015 & 328 of 2016
59. PEDA has contended, that no delay in approval of drawings can be attributed on the part of PEDA because as soon as the APPL submitted the final proposal on 27.06.2011 to PEDA / PID same was immediately approved on 05.07.2011. We also take note, that in the minutes of meeting held on 15.2.2011, responsibility of preparing the drawing has been entrusted upon the PEDA, and construction of Escape channel on the developer, however the drawings were said to be prepared and submitted by the developer-APPL on 23.02.2011 and after several rounds of discussion, drawings were finally approved on 05.10.2011 as recorded in the Impugned Order. We don't feel it necessary to affirm the actual date of approval of drawings, more so when there is no dispute with regard to time taken in construction of Escape Channel. However, we note that considerable time has been taken in finalisation and approval of drawings, while it was the developer-APPL, who was suffering on account of less generation during this entire period.
60. We are in agreement with the observations recorded in the Impugned Order with regard to economic duress of the Developer. It has been held in the Impugned Order that cost of Escape channel (without interest) shall be compensated by PEDA by way of its energy share, which has been disputed by PEDA that State Commission fell beyond its jurisdiction with regard to energy share as same was arbitral in nature and as such it could not have altered the bidding condition and PEDA also contended that it was the joint responsibility of PEDA/PID and PSPCL with regard to declaration of 350 cusecs of water in the Holy bein. It is a fact that construction of escape channel was neither envisaged in the Bid documents, MOU and IA and in the event, bidders knew that they have to construct Escape channel at the time of bidding, the only variable available with the bidder was to adjust the same in the energy share they want to offer, as applicable tariff was already known. The entire bidding process was conducted by PEDA, with assurance of 350 cusecs of water discharge and Page 30 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 bidders submitted their bid on that basis, and it is only the PEDA which receives the energy share from the project. In the event bidders knew that 350 cusecs of water discharge can not be effected and there would be extra cost to be incurred on construction of escape channel, the energy share quoted by the bidders could have been different or rather less. We therefore hold that there is no error in the Impugned Order with regard to affixing the liability for compensation of cost of escape channel upon PEDA.
61. There is no doubt that APPL has filed a petition for seeking appointment of an arbitrator before the High court of Punjab and Haryana and subsequent to filing a petition before State Commission for redetermination of tariff, permission was granted to withdraw the petition with liberty to file afresh in the event the tariff was not determined in accordance with law. It is noted that no restriction have been placed upon APPL with regard to raising of issues before the State Commission. It is also an admitted fact that PEDA itself has given up its energy share in APPL projects to PSPCL for compensating them for their energy loss in their 18 MW project on account of slight rise in tail race head. While dealing with the petition filed by APPL for redetermination of tariff for its project, the State Commission did not find merit in re-determination of tariff, but taking cognizance of the fact that the generator was compelled to incur substantial additional expenditure in construction of Escape Channel, the State commission held that APPL is entitled to be compensated for the extra cost incurred and liability of compensation was affixed on PEDA. In such a situation, while determining the tariff under Section 86 (1) (a), of the Electricity Act, State Commission could have directed PEDA to pay for the cost of Escape Channel upfront, being held responsible for incurrence of extra cost, which is well within the jurisdiction of State Commission. In an alternative, instead of mulching PEDA with upfront payment of cost for the Escape Channel, State Commission directed to adjust the cost of escape channel against the energy share of PEDA in APPL project, in our Page 31 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 view, such a direction cannot be said to fall outside the jurisdiction of the State commission while determining tariff under Electricity Act. In view of the forgoing deliberation, we find no error in the Impugned Order on this issue.
62. It has been contended on behalf of APPL, that energy share of PEDA is insufficient to compensate for the cost of Escape Channel. We find merit in these submissions, specially in the view that PEDA has made a settlement with PSPCL whereby it agreed to transfer its energy share to PSPCL post commissioning of its 18 MW project to compensate it for the energy loss due to rise in tail race head. In terms of implementation agreement, APPL has quoted the energy share of 20 % for first 10 years and 30 % for subsequent 20 years to and considering that liability has been affixed on PEDA to compensate for the cost of escape channel, the said cost shall be adjusted from the energy share due to PEDA in terms of Implementation Agreement, and only subsequent to adjustment of the cost of escape channel, PEDA can transfer its energy share to PSPCL post commissioning of their 18 MW project. Matter of adjustment of compensation, to PSPCL, for the energy loss if any, shall be settled between PSPCL and PEDA. PEDA is at liberty to make upfront payment to APPL for the outstanding cost on account of construction of the Escape Channel and continue with its arrangement of allocating its energy share from the APPL project to PSPCL, post commissioning of its project.
Issue No 4 : Can cost of Escape Channel be compensated to APPL by extra 20 % discharge
63. It has been contended by PEDA that the cost of the Escape Channel could have been compensated by producing additional energy on account of the extra discharge, and that APPL failed to utilize the same. Theoretically, more water can result in higher energy generation, but only if the turbine and generator are designed to accommodate the increased flow. In practice, however, turbines are Page 32 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 optimized for a specific flow range, and efficiency may decline beyond that point. Excess discharge can also lead to cavitation, vibration, or mechanical damage, and in certain cases the generator may not be rated for higher output. Further, there may be hydraulic constraints in the penstock, gates, and other structures, which may not safely pass the additional flow.
64. In view of the above, we find merit in the submissions of APPL that increased discharge does not ispo facto result in additional energy generation and there machines being not capable of generating extra energy even if higher discharge is allowed. As already mentioned above, the developer was not consulted before arriving at such a decision and though some submissions have been made by PEDA before this Tribunal, however PEDA has not drawn our attention to any such feasibility assessment/ consultation with developer to establish whether APPL's project is capable of producing extra energy if allowed 420 cusecs of discharge instead of 350 cusecs as stated in the bid, to compensate for the cost of Escape Channel. Accordingly, the decision taken in the meeting dated 15.02.2011 that the cost of the Escape Channel to be borne by APPL, could be compensated if extra discharge of 420 cusecs was allowed until commissioning of the 18 MW project of PSPCL lacks any technical or feasibility basis. It is therefore unnecessary for us to delve further in this, regarding other contentions like absence of flow meter to monitor the actual discharge more than 350 cusecs. This issue is, therefore, decided against PEDA.
Issue No 5 : Amount of compensation for Escape Channel
65. It has been contended on behalf of APPL that it should be compensated for the complete cost incurred including cost of Escape channel, carrying cost, interest and O&M expenses incurred when the project remained closed or operated at lower capacity and tariff be re-determined. In the preceding Page 33 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 paragraphs, the Impugned Order has been upheld regarding disallowing of tariff re-determination. With regard to cost claimed on other accounts by PEDA, we are of the view that the economic duress of APPL has been appreciated both by State Commission as well as this Tribunal, in spite of clause 15 of the TPA, and considering that matter of compensating APPL for the cost of Escape Channel has also been discussed in the meeting dated 15.02.2011, it was in the interest of justice and to encourage small hydro generation projects, this Tribunal has upheld the Impugned Order with regard to compensation for the cost of Escape Channel ( without interest). We cannot ignore the fact, that APPL never took up the matter with PEDA for compensating it with the cost of Escape Channel and other related cost, even after signing of TPA, as our attention has not been drawn to any communications/representation with PEDA in this regard and APPL chose to conveniently include all the cost in the capital cost in the petition filed before State Commission and has simply asked for re-determination of tariff, meaning thereby that same shall need to be passed on to the consumer. We also take note that in the Impugned Order it has been held that PEDA will also not charge interest on the amount in arrears on account of its energy share. As per the submissions made by PEDA, they have received only Rs 5,70,000/-, for their energy share in the project. Considering the circumstances of the present case, we do not find merit in the contention of APPL with regard to compensation towards carrying cost, interest, O&M expenses, or any other additional costs beyond the cost of construction of the Escape Channel. The said contention of APPL is accordingly rejected.
66. We, however take note that in the Impugned order, the State Commission has left the finalization of cost of Escape channel to be decided amongst PEDA and APPL and as contented by both the parties, we are also of the view that there may be issues in reaching settlement of the cost between the PEDA and APPL because of competing expectations and accordingly, the Impugned Order is Page 34 of 35 Judgement in Appeal Nos. 286 of 2015 & 328 of 2016 interfered and matter is remanded to the State Commission for undertaking the prudence check of cost incurred by APPL for the works related to construction of Escape Channel, for which APPL shall be compensated for the cost so approved by adjustment against PEDA's energy share in terms of the Implementation Agreement.
ORDER
67. In view of above deliberations, the Impugned Order is modified to the limited extent that the State Commission shall undertake a prudence check of the cost incurred by APPL towards construction of the Escape Channel and APPL shall be compensated for the cost of escape channel so worked out (without interest ) against the energy share of PEDA in terms of Implementation Agreement. Only upon full adjustment of the cost of Escape Channel to APPL, from energy share of PEDA or by upfront payment for the outstanding cost of escape channel by PEDA to APPL, if they wish to do so, PEDA can give its energy share to PSPCL to compensate it for the energy loss.
The Captioned Appeals and pending IAs, if any, are disposed of in above terms PRONOUNCED IN THE OPEN COURT ON THIS 23rd day OF MARCH, 2026.
(Virender Bhat) (Seema Gupta)
Judicial Member Officiating Chairperson
REPORTABLE / NON-REPORTABLE
pd/dk/ag
Page 35 of 35