Unnecessary litigation by DISCOMs resulting in huge cost of electricity for consumers: Supreme Court

The Supreme Court recently took exception to power distribution companies (DISCOMs) and power generating companies pursuing unnecessary and unwarranted litigation under the Electricity Act,2003 against orders passed by the Central Electricity Regulatory Commissions (CERC) and the Appellate Tribunal for Electricity (APTEL) [GMR Warora Energy Limited v. Central Electricity Regulatory Commission (CERC) and Others].

A division bench of Justices BR Gavai and Vikram Nath noted that the even reasoned orders passed by the CERC and APTEL were being challenged by DISCOMs

Consequently, on account of pendency of their appeal, non-payment of dues would entail paying of heavy carrying cost to the power generators by the DISCOMs, which, in turn, is passed over to the end consumer, the Court noted.

"Unwarranted litigation, which wastes the time of the Court as well as adds to the ultimate cost of electricity consumed by the end consumer, ought to be avoided. Ultimately, the huge cost of litigation on the part of DISCOMS as well as the Generators adds to the cost of electricity that is supplied to the end consumers," the Court observed.

It, therefore, urged the Central Government's Ministry of Power (MOP), to consider evolving a mechanism so as to ensure that unnecessary and unwarranted litigation under the Electricity Act 2003, on the part of DISCOMs as well as the other power generators, is curbed.

The Court was considering a batch of cross-appeals moved by various DISCOMs and power generating companies, challenging the concurrent findings of CERC and the APTEL under the Electricity Act

The power generating companies had been awarded power purchase agreements (PPAs) by the said DISCOMs.

The power generating companies had previously filed a petition before the CERC seeking relief with regard to 'change in law' events which had occurred with regard to the PPAs.

The CERC had allowed certain claims and disallowed certain claims.

In appeal, the APTEL further allowed certain other claims which had been denied by CERC.

This led to the appeal before the top court.

The Supreme Court observed that in its decision in Uttar Haryana Bijli Vitran Nigam Limited (UNHVNL) & Anr. v. Adani Power Limited & Ors., it was held that the ‘change in law’ events will have to accrue from the date on which rules, orders, notifications are issued by the instrumentalities of the State.

"Even in spite of this finding, the DISCOMS are pursuing litigations after litigations," the Court noted.

The Court opined that the DISCOMs have been filing these appeals just for the sake of filing them and lamented the fact that appeals are being preferred against the findings reached by two statutory bodies which have expertise in the field.

Apart from the cost of litigation being handed down to final consumers, the Court noted that the non-quantification of dues by the Electricity Regulatory Commissions and the delayed payment of the dues by the DISCOMs are also detrimental to the interests of the end consumers.

"If timely payment is not made by DISCOMS, under the clauses in the PPA, they are required to pay late payment surcharges, which are much higher. Even in case of ‘Change in Law’ claims, the same procedure is required to be followed. Ultimately, these late payment surcharges are added to the cost of electricity supplied to the end consumers. It is, thus, the end consumers who suffer by paying higher charges on account of the DISCOMS not making timely payment to the Generators," the Court observed.

Consequently, the Court asked the Central government to consider evolving a mechanism so as to ensure timely payment by the DISCOMs to the generating companies, which would avoid huge carrying cost to be passed over to the end consumers.

"The Union of India, through MoP, may also evolve a mechanism to avoid unnecessary and unwarranted litigation, the cost of which is also passed on to the ultimate consumer," the Court added while dismissing the appeals.

[Read Judgment]