Change in Law Restitution Applies to Statutory Ash Utilization Costs Regardless of PPA Tariff Structure

The Appellant operates the Raipur and Raigarh Thermal Power Plants in Chhattisgarh. It entered into Power Purchase Agreements (PPAs) with Respondent No. 2 (CSPDCL), under which it supplies power at "variable cost only," covering fuel charges without a fixed capacity charge.

Following MoEF Notifications dated 25.01.2016 and 31.12.2021, which mandated 100% fly ash utilization, the Appellant incurred additional transportation expenses and raised supplementary invoices.

CSPDCL challenged these claims before the State Commission (CSERC), arguing that such costs are part of Operation and Maintenance (OM) expenses (fixed costs) and are not recoverable under a "variable cost only" PPA.

The CSERC, in its order dated 20.01.2026, held that while the notifications constituted a "Change in Law," the expenses were recoverable only through fixed charges, thus directing the Appellant to refund the collected amounts.

The Appellant challenged this common order before the Tribunal.

1. Whether, in view of the "variable cost only" provisions of the PPA, the Appellant is barred from seeking restitution under the doctrine of Change in Law for costs incurred due to MoEF Notifications

2. Whether fly ash transportation charges, mandated by statutory notifications, can be recovered from the Distribution Licensee despite the contractual classification of tariff

The Court applied the doctrine of "Change in Law" as defined under Rule 2(c) of the Electricity Rules, 2021 and Regulation 3.14 of the CSERC MYT Regulations, 2021.

It relied on the principle of restitution established in PTC India Ltd. v. CERC (2010), which holds that statutory regulations override inconsistent contractual terms.

The court further referenced the MoEFCC Notification dated 31.12.2021, which explicitly states that the 100% ash utilization obligation shall be treated as a Change in Law event.

Additionally, it applied the "Compliance with Law" saving clause (Article 19.5) found in the PPA to harmonize contractual terms with statutory mandates.

The Tribunal reasoned that the doctrine of Change in Law is anchored in the principle of restitution, intended to restore the affected party to their prior economic position regardless of whether the impact falls under "fixed" or "variable" cost nomenclatures.

Although the PPA under Article 14.1 suggested there would be no Change in Law implications because charges were based on "actuals," the Tribunal held that the Appellant never assumed the liability for unforeseen statutory burdens.

Crucially, Article 19.5 of the PPA acts as a mandatory override, requiring the contract to conform to the Electricity Act and MYT Regulations. Regulation 40.5.2.1 of the MYT Regulations expressly allows additional OM costs from statutory compliance (specifically fly ash utilization) to be a "pass-through" over and above routine charges.

The Tribunal rejected the Respondent’s reliance on Sasan Power and Chamundeshwari, noting that contractual sanctity cannot nullify a supervening statutory mandate like the MoEFCC Notification.

It ruled that the State Commission erred in restricting recovery to "fixed charges only," as the statutory pass-through right overrides contractual tariff structures.

The Tribunal quashed the directions for refund of amounts to CSPDCL and the orders for payment of interest and petition fees. The Appeals were allowed, and the Appellant was declared entitled to recover fly ash utilization expenses from Respondent No. 2.