Supreme Court Upholds Equal Cost Sharing for Coal Shortages under the Electricity Act

Introduction

The Supreme Court has refused to hear a group of appeals by several power distribution companies (DISCOMs). This is in reference to an earlier ruling by the Appellate Tribunal for Electricity (APTEL) that stated the financial implications of a coal shortage should be proportionately distributed among all electricity buyers from a given power plant. The Court reinforced the principle of the equitable distribution of costs within the electricity sector by stating no DISCOM can during such coal shortages assert the right to a prioritized power supply.

Case Background and Timeline

The dispute corresponds to a “Change in Law” event due to a coal supply shortfall at GMR Kamalanga Energy Limited’s (GKEL) 1050 MW power plant in Odisha. GKEL, due to domestic coal shortages, had to use costly imported coal, which increased generation costs.

CERC (2018): Ruled that the excess costs due to imported coal must be shared equally among all procurers. APTEL (2023): Confirmed CERC’s decision and dismissed claims of exclusive linkage or priority supply.

Supreme Court (2025): Dismissed DISCOM appeals, affirming the findings of CERC and APTEL.

Key Issues

• Whether DISCOMs could argue priority rights based on their Power Purchase Agreements (PPAs) or earlier linkage arrangements.
• Whether the additional cost caused by imported coal should be socialized to all procurers or only the affected DISCOMs.
• Whether the appeal contained a substantial question of law under Section 125 of the Electricity Act, 2003.

Court’s Findings

The Supreme Court held that: Coal from all sources, domestic or imported must be apportioned among DISCOMs in proportion to the power supplied. No DISCOM can claim priority or exclusivity based on the date or terms of its PPA. Appeals under Section 125 are maintainable only on substantial questions of law. Concurrent factual findings of CERC and APTEL cannot be reopened unless they are perverse or arbitrary. Accordingly, the Court dismissed the appeals, upholding the principle of proportional cost sharing.

Conclusion

This judgment enhances consistency in the power sector, further building on the “shared burden” principle under the Electricity Act. The Court’s determination that “Change in Law” events such as coal shortages need to allocate risks equitably helps in contract stabilization while discouraging overt preferential claims.

This ruling also highlights the limited appellate scope under Section 125, encouraging strategic restraint in the exercise of such a power where technical regulatory issues are involved, such as those determined by the CERC and APTEL.