### Variable charge deductions for monthly availability shortfalls are invalid if not expressly prescribed by governing regulations.

In brief

The question

1. Whether the State Commission has the statutory or contractual authority to impose graded deductions on variable charges (energy charges) based on shortfalls in monthly availability

The court held

The Tribunal held that the graded deductions from variable charges were ultra vires the Regulations and the PPA; it set aside the Impugned Order on this point and directed Respondents to refund withheld amounts with carrying cost within four weeks

It also directed

The Tribunal affirmed the Appellant’s entitlement to PLC and remanded the matter to the State Commission for the specific purpose of determining and finalizing the amount payable in accordance with Regulation 6.3B of the IEGC

01Facts

The Appellant, HNPCL, operates a 1040 MW coal-based thermal power plant in Andhra Pradesh

pp. 2-3

Following a history of litigation regarding tariff determination, HNPCL filed O.P. No. 12 of 2024 before the Andhra Pradesh Electricity Regulatory Commission (APERC) for Multi-Year Tariff (MYT) determination for the Fifth Control Period (FY 2024-25 to FY 2028-29)

pp. 4-5

APERC issued an Impugned Order on 30.12.2025, which included a graded penalty deducting variable charges if monthly plant availability fell below normative levels and failed to specifically adjudicate on Part Load Compensation (PLC) claims

p. 5

The Appellant challenged five issues, but by mutual consent, the Tribunal narrowed the adjudication to the legality of deductions from variable charges and the entitlement to PLC

p. 6

02Issues

i.1. Whether the State Commission has the statutory or contractual authority to impose graded deductions on variable charges (energy charges) based on shortfalls in monthly availability

p. 6 · ¶ 8

ii.2. Whether the Appellant is entitled to Part Load Compensation (PLC) and if the State Commission failed to adjudicate upon the quantification of the same

p. 17 · ¶ 25

03Law Applied

The Tribunal applied the CERC (Terms and Conditions of Tariff) Regulations, 2024, and APERC Regulation 1 of 2008, which establish a two-part tariff system

p. 9, 12

Under these regulations, Capacity Charges (Fixed Costs) are linked to plant availability, while Energy Charges (Variable Costs) are strictly linked to actual scheduled energy supplied

p. 9, 14

a Regulatory Commission cannot deviate from the prescribed methodology of a Regulation through an adjudicatory order without a formal amendment to the Regulation

pp. 14-15

Relevant precedents included PTC India Ltd. v. CERC regarding the binding nature of regulations

p. 16

CERC (Indian Electricity Grid Code) (Fourth Amendment) Regulations, 2016, regarding Part Load Compensation

p. 18

Provisions in the judgment · 4 · Linked ones open on LawLens

Electricity Act, 2003 Section 111 Section 62 Section 86 Section 181

04Reasoning

Regarding Issue 1, the Tribunal reasoned that both the statutory framework (CERC/APERC Regulations) and the PPA clearly bifurcate fixed and variable costs. Fixed costs already contain an "in-built deterrent" because they are reduced proportionately if availability is low

p. 10, 14

The Tribunal rejected the State Commission’s "gap-filling" argument, noting that the Commission cannot impose additional penalties on energy charges—which are intended only for fuel cost recovery—because such a mechanism does not exist in the Regulations or the PPA

p. 15

Even if DISCOMs face higher costs for replacement power, the Commission must act within the "regulated framework" and cannot substitute its own view for statutory prescription

p. 14

Regarding Issue 2, the Tribunal found that the PPA explicitly provides for PLC under Clause 1.2.5 of Schedule-F

p. 18

Since the Respondents did not dispute the entitlement but only the process (True-Up), and the Impugned Order lacked a final determination on the quantified claim, the Tribunal found a need for reconciliation and formal determination

pp. 18-19