Supreme Court Affirms Right Of Power Generators To Fixed Charges From Date Of Grid Synchronisation

Summary

In a significant judgment strengthening the regulatory position of power generators, the Supreme Court of India has held that electricity supplied from the date of grid synchronisation of a generating unit with the grid constitutes “firm power”, entitling the generator to fixed charges, even if the entire project has not yet achieved full commercial commissioning.

In this final move, the Court dismissed the appeal from the Tamil Nadu Generation and Distribution Corporation (TANGEDCO). By doing so, they stood by the earlier decisions made by both the Tamil Nadu Electricity Regulatory Commission (TNERC) and the Appellate Tribunal for Electricity (APTEL). Essentially, the Court didn’t see any justification for overturning the earlier decisions, which effectively puts the dispute to rest and upholds the original findings.

This specific ruling came out of the TANGEDCO v. M/s Penna Electricity Limited. carries major implications for how gas-based and combined-cycle power projects are managed and billed throughout India.

Case Timeline

• 29 April 1998: Original PPA executed between TNEB (predecessor of TANGEDCO) and the generator.
• 25 August 2004: Amended PPA executed introducing combined-cycle gas turbine technology.
• 29 October 2005: Gas turbine unit synchronised with the grid; continuous power supply commenced.
• 29 October 2005 – 30 June 2006: Electricity supplied during the disputed period.
• 1 July 2006: Combined-cycle plant achieved full commercial operation.
• TNERC Order: Directed payment of fixed charges for the disputed period.
• 10 July 2013: APTEL affirmed TNERC’s decision.
• 16 December 2025: Supreme Court dismissed TANGEDCO’s appeal and affirmed regulatory findings.

Issues Raised

1. Whether electricity supplied after grid synchronisation but prior to full project commissioning constitutes infirm power or firm power.
2. Whether fixed charges are payable for power supplied during the period between synchronisation and the declared COD under the PPA.
3. Whether an unapproved PPA can override statutory tariff regulations framed under the Electricity Act, 2003.
4. Whether COD should be determined on a project-wise basis or a unit-wise basis.

Appellant’s Arguments (TANGEDCO)

TANGEDCO contended that:

• Under the amended PPA, the COD was explicitly fixed as 1 July 2006, being the date of full project commissioning.
• Any electricity supplied prior to COD constituted “infirm power”, for which only variable (fuel) charges were payable.
• The generator had, through correspondence, agreed to treat power supplied prior to COD as infirm power, thereby attracting principles of waiver and estoppel.
• The regulatory framework did not mandate unit-wise COD and allowed contractual flexibility.
• Allowing fixed charges for the disputed period would burden consumers with higher tariffs and violate public interest.

Respondent’s Arguments (M/s Penna Electricity Limited)

The generator argued that:

• The amended PPA was never approved by TNERC as required under Section 86(1)(b) of the Electricity Act, 2003, and therefore could not override statutory regulations.
• Under the CERC Tariff Regulations, 2004 and TNERC Regulations, COD is determined unit-wise, not project-wise.
• The gas turbine unit had successfully completed trials, achieved synchronisation, and supplied power continuously from 29 October 2005, making the supply firm power.
• Treating continuous, scheduled supply as infirm power would be unjust and contrary to tariff principles ensuring cost recovery.
• Similarly placed generators had been paid fixed charges, indicating discriminatory treatment.

The Court’s Ruling

In this decision, the Supreme Court of India laid out a few essential principles. First, it clarified that the law comes before private deals. Specifically, the rules established under the Electricity Act of 2003 take priority over any Power Purchase Agreements (PPAs) that haven’t been formally cleared by the State Commission.

The Court also took a practical look at how we define when a plant is actually “running.” It supported a unit-by-unit approach for the Commercial Operation Date (COD), ruling that a gas turbine’s COD should be the very day it first links up with the grid. Once that connection is made and the power starts flowing consistently, that electricity can’t be dismissed as “temporary” or “infirm” power anymore.

Finally, the ruling addressed the money side of things. The Court pointed out that stopping a generator from collecting fixed charges once they are online causes real, unfair financial pain. This would fly in the face of the legal goal to let companies recover their costs fairly. Ultimately, the Court backed the previous findings from the Tamil Nadu Commission and the Appellate Tribunal, confirming that these producers deserve to be paid.

Analysis

This judgment clarifies how Indian electricity law handles the tension between private contracts and government regulations. The ruling settles three major issues that have caused confusion in the power industry.

1. The Power of the Regulator

The Court made it clear that PPAs are not just private deals. Because they operate under the Electricity Act, 2003, they must be overseen by the state. Any PPA signed or changed after 2003 needs official approval. Without that stamp of approval, the law’s standard regulations take priority over whatever is written in the contract.

2. Operational Readiness

By backing the idea of a “unit-wise” COD, the Court showed it really understands the nuts and bolts of how power plants are constructed. If you look at gas or combined-cycle plants, they don’t just flip a single switch for the whole facility; different sections often go live at completely different times.

3. Financial Fairness for Generators

This ruling is really about the financial survival of power producers. The core argument is simple: if a company is successfully pumping reliable electricity into the system, they have a right to recover their fixed costs. Blocking these payments just because other parts of the plant are still under construction would cause long-term financial damage that the industry just can’t afford to absorb.

Conclusion

This ruling provides a much-needed sense of security for power producers and is bound to strengthen investor confidence in India’s regulatory framework. Moving forward, utility companies will likely have to review their older contracts and billing processes to ensure they actually align with these legal standards.

Essentially, the Supreme Court has closed the gap between private contract terms and statutory law. By deciding that power supplied after connecting to the grid qualifies as “firm” power, the Court has made it clear: the law, not just the wording of a contract, is the final word on how tariffs are handled. This case will undoubtedly become the go-to reference for future legal battles involving phased project launches and the recovery of fixed charges.