HC asks PSPCL to pay fixed charges to pvt power plants
Citing Covid-19 restrictions, the PSPCL in March 2020 had invoked the force majeure (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) of power purchase agreements with private thermal plants to not to purchase power from them till restrictions are on
Patiala: The Punjab and Haryana high court has directed the cash-strapped Punjab State Power Corporation Limited (PSPCL) to pay fixed charges to Nabha Power Limited and Talwandi Sabo Power Limited for the period of lockdown during Covid-19 restrictions. This will cost PSPCL around ₹300 crore, said officials privy of the development.
Citing Covid-19 restrictions, the PSPCL in March 2020 had invoked the force majeure (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) of power purchase agreements with private thermal plants to not to 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 on the basis of 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 on the basis of 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.
The TSPL and NPL (L&T Rajpura) had moved the court. The 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 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 PSPCL suffered a loss of ₹175 crore in first week of restrictions as sales nosedived and it paid fixed cost for not purchasing power from plants as per the agreement.
Setting aside the notices of the PSPCL, justice Raj Mohan Singh said the petitioners have absolute right to claim capacity charges in terms of the power purchase agreement. Force majeure in terms of Article 12 of the power purchase agreement does not envisage such provision for non-payment of capacity charges. The parties cannot resile from their payment obligations on account of force majeure, read the judgment.
PSPCL chairman-cum-managing director Baldev Singh Sran was not available for comments. Officials, however, said the PSPCL will have to shell out almost ₹300 crore in the wake of the judgment.
The PSPCL engineers rued that the government didn’t defend the case properly. “It was a matter of saving ₹300 crore, but no senior lawyer was engaged by the Punjab government. Secondly, the Punjab government has waived instalments to mining contractors, cattle fair contractors and even liquor contractors by considering Covid-19 restrictions as force majeure. The government should order an audit of private thermal plants which are using lopsided PPAs to exploit the PSPCL, they said.