TANGEDCO Liable To Pay Fixed Charges To Penna Electricity For Power Supplied From Grid Synchronization Even If Commissioned Later; Supreme Court Dismisses Appeal Upholding TNERC/APTEL Order
Kiran Raj
The Supreme Court Division Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan on Tuesday, 16 December 2025, dismissed Tamil Nadu Generation and Distribution Corporation Ltd.’s (TANGEDCO) appeal and affirmed the Tamil Nadu Electricity Regulatory Commission’s direction, as upheld by the Appellate Tribunal for Electricity, that M/s Penna Electricity Limited is entitled to fixed charges for electricity supplied from the date its unit synchronized with the grid, even though the generating station was commissioned later. The dispute was whether power supplied between synchronization and the later commercial operation date was “infirm power” attracting only variable charges, as TANGEDCO claimed, or continuous “firm power” carrying fixed charges. The Court directed payment of any balance amount within 12 weeks.
Tamil Nadu Generation and Distribution Corporation Ltd. (TANGEDCO) purchased power under a Power Purchase Agreement originally executed on 29 April 1998 between the Tamil Nadu Electricity Board (its predecessor) and M/s DLF Power (predecessor of M/s Penna Electricity Limited). The project was selected through a competitive bidding process linked to RFQ/RFP issued in 1996 by the Tamil Nadu Industrial Development Corporation Ltd.
After the Electricity Act, 2003 came into force on 10 June 2003, the parties amended the PPA on 25 August 2004, with changes including location, fuel, technology, and tariff. TANGEDCO treated the unit’s generation before commercial operation as “infirm power” and referred to correspondence in October 2005 on payment of only variable charges until COD.
M/s Penna Electricity Limited relied on synchronization of its gas turbine in open cycle mode with the grid on 29 October 2005 and a letter dated 10 November 2005 stating that commissioning procedures were followed and continuous delivery at 30 MW would be made on a firm basis. The dispute focused on whether supply from 29 October 2005 to 30 June 2006 was “infirm” or “firm” power for tariff purposes, with reference to the PPA’s COD framework and the Electricity Act, 2003 (including Section 86(1)(b)) and tariff regulations notified by CERC (effective 1 April 2004) and TNERC (notified 3 August 2005).
The Court examined the regulatory framework governing tariff determination after the enactment of the Electricity Act, 2003, and the continued applicability of earlier tariff notifications. It noted that under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004, the “Date of Commercial Operation or COD in relation to a unit means the date declared by the generator after demonstrating the Maximum Continuous Rating or Installed Capacity through a successful trial run.” The Court recorded that the regulations clearly distinguished between a unit and a generating station, and that in combined cycle stations, individual units could achieve commercial operation independently.
The Court observed that the amended Power Purchase Agreement defined commercial operation at the project level, requiring achievement of a specified combined capacity, which “clearly meant that unless both the gas turbine in the open cycle and the steam turbine in the combined cycle is both completed and synchronized to the grid, capacity of 47.52 MW cannot be achieved.” This approach, according to the Court, was inconsistent with the regulatory scheme.
It was stated that “there is a clear dichotomy between the Regulations and the PPA,” and that unapproved contractual terms could not override statutory regulations. The Court further noted that regulatory provisions required alignment of existing agreements with tariff regulations, even if such agreements pre-dated the regulations.
Addressing the classification of power supplied, the Court recorded that infirm power under the regulations meant “electricity generated prior to commercial operation of the unit of a generating station.” Applying this definition, it found that the gas turbine unit had achieved synchronization, reached base load, and supplied electricity continuously. The Court stated that “applying the Regulations, we have no doubt in our mind that it is firm power.”
The Court rejected arguments based on waiver and estoppel, observing that the correspondence exchanged between the parties ultimately turned on the determination of the correct commercial operation date under the regulations. It also rejected the contention that capacity and reliability testing undertaken later could negate the continuous firm supply already made from the date of synchronization.
The Court recorded that “we find no good ground to interfere with the impugned judgment.” “The judgment passed by the TNERC directing that fixed charges shall be payable for the relevant period as affirmed by the APTEL in the impugned judgment dated 10.07.2013 in Appeal No. 112 of 2012 calls for no interference and the said directions are affirmed.” Consequently, “the appeal is dismissed, no order as to costs.”
The Court further noted that “on 25.08.2014, while passing an interim order staying the judgment of the Tribunal, this Court directed the appellant to pay a sum of Rs. 50 Crores to the respondent, without prejudice to the rights and contentions of either party. It is not disputed that the said amount has been paid. In terms of our directions, the balance amount, if any, shall also be paid to the respondent within a period of 12 weeks from today.”
Advocates Representing the Parties
For the Appellant: Mr. Amit Anand Tiwari, Sr. A.A.G. Mr. Sabarish Subramanian, AOR Ms. Saushriya Havelia, Adv. Mr. Vishnu Unnikrishnan, Adv. Ms. Tanvi Anand, Adv. Ms. Jahnavi Taneja, Adv. Mr. Pranjal Mishra, Adv. Ms. Arjoo Rawat, Adv. Mr. Danish Saifi, Adv.
For the Respondent: Mr. Syam Divan, Sr. Adv. Mr. Buddy A. Ranganadhan, Adv. Mr. Satyaseelan, Adv. Mr. Sameer Sharma, Adv. Ms. Shefali Tripathi, Adv. Mr. Yashvardhan Singh, Adv. Mr. Ankit Kumar Sinha, Adv. Mr. Sriyut Shukla, Adv. Ms. Nina Nariman, Adv. Mr. Shaishir Divatia, Adv. Mr. Hasan Murtaza, AOR
Case Title: Tamil Nadu Generation and Distribution Corporation Ltd. v. Penna Electricity Limited
Neutral Citation: 2025 INSC 1439
Case Number: Civil Appeal No. 5700 of 2014
Bench: Justice J.B. Pardiwala, Justice K.V. Viswanathan
