High court directs PSPCL to pay capacity charges to two power firms - Hindustan Times
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High court directs PSPCL to pay capacity charges to two power firms

By, Chandigarh
Feb 04, 2023 01:36 AM IST

A division bench of the Punjab and Haryana high court has dismissed PSPCL’s appeal against the single judge order of July 2022, according to which PSPCL was told to pay capacity charges to these two firms

Punjab State Power Corporation Limited (PSPCL) has lost the second round of litigation in the Punjab and Haryana high court on payment of capacity charges to two firms -- Nabha Power Limited and Talwandi Sabo Power Limited-- for the period of lockdown during Covid-19 restrictions in 2020.

The high court division bench of justice AG Masih and justice Alok Jain upheld the single-judge order observing that it is binding on the PSPCL to make the payment.
The high court division bench of justice AG Masih and justice Alok Jain upheld the single-judge order observing that it is binding on the PSPCL to make the payment.

A division bench of the Punjab and Haryana high court has dismissed PSPCL’s appeal against the single judge order of July 2022, according to which PSPCL was told to pay capacity charges to these two firms. As per reports, the amount involved is 300 crore. However, the exact charges to be paid are not mentioned in the judgment. The dispute was for the payment of capacity charges for the period between March 24, 2020, and May 25, 2020, for which provisions of force majeure were invoked by the state government owing to the Covid-19 induced lockdowns.

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It was in March 2020, citing Covid-19 restrictions, the PSPCL had invoked the force majeure clause (a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties) for power purchase agreements with private thermal plants to not purchase power from them till restrictions are on. The PSPCL had invoked the clause to save 20 crore daily during the Covid-induced lockdown and further restriction when power demand had dipped.

The power purchase agreement (PPA) prescribed a two-fold tariff regime i.e. capacity charges paid to the generating company based on the declared availability of the generating company irrespective of whether the PSPCL and Punjab State Load Dispatch Centre (SLDC) have scheduled electricity or not. Energy charges are paid to the generating company based on scheduled generation (the actual electricity supplied).

The PSPCL had served notices to all L&T Rajpura, Talwandi Sabo Power Plant, GVK Goindwal, and all other independent power producers and even factories, which have co-generation capacity. Nabha Power Limited and Talwandi Sabo Power Limited had moved court against the move in 2020. They said that the Central government has asked the distribution companies to pay capacity charges (fixed charges) even for the lockdown period, thus the PSPCL can’t deny them by invoking force majeure. The PSPCL, however, contended that the PPA was between two entities in which force majeure guidelines are well specified. The imposition of the Covid-19 lockdown, the circumstances are beyond PSPCL control, and thus situation qualifies as force majeure under the PPA in as much as it prevents the performance of obligations on the part of the procurer, including the PSPCL, of scheduling the power from your generating station, the power corporation said in the notice.

The high court division bench of justice AG Masih and justice Alok Jain upheld the single-judge order observing that it is binding on the PSPCL to make the payment. “More so, the capacity charges are unfettered even in the event of invocation of force majeure. The capacity charges cannot be denied as the same is towards the heavy cost incurred by the respondents (firms) in setting up the said plants,” the bench said, adding that it was “very strange” that on one hand, the PSPCL invoked the force majeure clause on the basis of lockdown imposed by the Central government but conveniently denies the import of instructions issued by the ministry of power on the issue.

“Had it been a reverse situation that the respondent (plants) would have put to notice the appellant or the SLDC that it could not supply the electricity due to non-availability of staff and labour occurring out of complete lockdown, the things would have been different,” the bench remarked adding that the plants despite difficult times performed their duties.

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