SC rejects R-power’s commercial operation date for Sasan UMPP

IN A setback to Reliance Power, the Supreme Court Thursday rejected the commercial operation date (COD) suggested by the firm for the first unit of its 4,000 MW Sasan Ultra Mega Power Plant (UMPP). The judgment is likely to impact the company’s cash flow since acceptance of the COD would have pave the way for the project to recover more than Rs 1,050 crore from power procurers.

A bench of Justices Kurian Joseph and Rohinton F Nariman underlined that the constitutional court must step in and “thwart any waiver” of contractual obligations if it was contrary to public interest.

“On the facts of this case, it is clear that the moment electricity tariff gets affected, the consumer interest comes in and public interest gets affected,” said the bench, adding that the COD, as pressed by the Sasan power was to be accepted in this case.

The bone of contention in this matter related to the COD, based on which the power tariff rates were to change. The UMPP had declared the COD of its first unit to be March 31, 2013, on the basis of a certificate obtained from the independent engineer. As Sasan power was to supply electricity at a very low rate for the first year, accepting March 31, 2013 as the COD had to mean only one day of electricity at that rate.

This was successfully challenged by Western Regional Load Despatch Centre (WRLDC) before the Central Electricity Regulation Commission, which rejected the said COD and set the COD as August 16, 2013 based on commissioning of the plant.

By its order in August 2014, the CERC said the COD suggested by the company could not be accepted as the full load could not be achieved by then, and it further directed Sasan Power to sell electricity at 70 paisa instead of Rs 1.19 per unit, which was the quoted tariff for the third year. Sasan Power was supposed to sell power for the first two financial years at 70 paisa per unit, and then at for Rs 1.19 per unit.

Reliance Power appealed in the Appellate Tribunal of Electricity (APTEL) against this order. APTEL found favour with the certificate by the independent engineer and accepted the COD suggested by the UMPP.

But the Supreme Court, on an appeal against the APTEL order, held that neither the independent engineer’s certificate was a conclusive proof nor was the case of waiver by the procurers in their e-mail exchanges — as put forth by the firm, was tenable in law as well as under the contract to accept March 31, 2013 as the COD.

“The independent engineer’s test certificate can pass muster and that there is a waiver on facts is not a possible conclusion, and such finding is, therefore, perverse and hence set aside,” said the bench as it reinstated the CERC’S judgment.