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M/s KKK Hydro Power Limited v. Himachal Pradesh State Electricity Board Ltd.

Civil Appeal · 2025 INSC 1057Decided 29 Aug 2025
C.A. No.-003005-003005 - 2015
Justice Sanjay Kumar · Justice N.V. Anjaria

Background

The appellant company built a 3 MW hydel power project in Himachal Pradesh in 2000 at a fixed tariff of Rs. 2.50/kWh under a Power Purchase Agreement (PPA) with the State Government, later expanding capacity to 4.90 MW with a supplementary PPA approved by the State Electricity Regulatory Commission. Years later, the company and the Electricity Board privately executed a further supplementary PPA in 2010 unilaterally raising the tariff to Rs. 2.95/kWh, without ever submitting it to the Commission for approval, based on a mistaken belief that a Commission order meant for other producers applied to them too. When the company later sought an even higher tariff for the whole project by treating both plants together, the Commission rejected the claim, but the Appellate Tribunal for Electricity (APTEL) partly ruled in the company's favour, applying the unapproved 2010 tariff to the smaller plant and ordering a weighted-average tariff for the combined project.

Decision Breakdown

The Supreme Court held that APTEL erred in giving effect to the 2010 supplementary PPA's enhanced tariff, because Section 86(1)(b) of the Electricity Act makes clear that the price at which electricity is purchased from a generator is not a matter of private negotiation: any tariff and any PPA embodying it must be reviewed and approved by the State Commission, which the 2010 PPA never was. However, since the Electricity Board itself had not appealed the APTEL order and the weighted-average tariff had already been acted upon for years, the Court chose not to unsettle that arrangement at this late stage, while explicitly clarifying the correct legal position for future cases. It rejected the company's separate claim to extend the higher tariff to the original 3 MW plant as well, and dismissed the appeal, while allowing an unrelated impleadment application.

Lesson Learnt

A power generating company and an electricity distribution licensee cannot privately agree to fix or change the tariff for power supply on their own: any purchase price agreed between them must be reviewed and approved by the State Electricity Regulatory Commission before it has legal effect.

Official source (sci.gov.in)View Judgment (PDF)

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