The dispute between Powergrid Southern Interconnector Transmission System Limited (PSITSL) and the Central Electricity Regulatory Commission (CERC) is a significant case in the domain of energy infrastructure and regulatory oversight in India. The appeal, numbered 194 of 2022, was adjudicated by the Appellate Tribunal for Electricity with a judgment delivered on 12th August 2024. This case primarily revolved around the interpretation of Force Majeure and Change in Law clauses in the context of delays and additional costs in large-scale transmission projects.
Background of the Case
PSITSL, a fully owned subsidiary of Power Grid Corporation of India Limited (PGCIL), was incorporated as a Special Purpose Vehicle (SPV) to develop the “Strengthening of Transmission System beyond Vemagiri” project. This project, critical for ensuring reliable power supply across southern India, was awarded to PGCIL under the Tariff Based Competitive Bidding route. Following the award, PGCIL acquired 100% shareholding in PSITSL and assumed responsibility for the project’s completion.
The dispute arose when PSITSL filed a petition with CERC under Section 63 read with Section 79 of the Electricity Act, 2003, seeking relief for delays in project execution caused by what they claimed were Force Majeure events and Change in Law circumstances. PSITSL argued that these unforeseen events significantly impacted their ability to meet the Scheduled Commercial Operation Date (SCOD), resulting in financial losses that they sought to recover.
Key Facts and Figures
- Petitioner: Powergrid Southern Interconnector Transmission System Limited (PSITSL)
- Respondent: Central Electricity Regulatory Commission (CERC)
- Date of Judgment: 12th August 2024
- Judges: Hon’ble Mr. Sandesh Kumar Sharma (Technical Member) and Hon’ble Mr. Virender Bhat (Judicial Member)
- Project Value Involved: Rs. 488.40 crore (as claimed by the petitioner for cost overruns)
- Relief Sought: Time extension of 289 days and an increase in the adopted annual non-escalable charges by 7.75%
Legal Arguments
Force Majeure Claims
PSITSL cited multiple events as Force Majeure, including severe right-of-way (ROW) issues, general elections, heavy rainfall, demonetization, and wildlife clearances. These, they argued, were beyond their control and had directly contributed to delays in project execution. A detailed breakdown of the delays and the reasons cited were provided to the tribunal, highlighting the challenges faced, particularly in the Krishna District of Andhra Pradesh, where local unrest and law and order issues severely impacted construction activities.
Change in Law Arguments
The Change in Law claims were centered around several regulatory changes that occurred after the project’s initiation, such as the introduction of the Goods and Services Tax (GST) and revised policies on land compensation by the state governments of Andhra Pradesh and Karnataka. PSITSL argued that these changes led to a significant increase in project costs, which they were entitled to recover under the Transmission Service Agreement (TSA).
CERC’s Position
The CERC rejected PSITSL’s petition, declining to recognize the delays as Force Majeure events and denying the requested time extensions and cost recoveries. CERC argued that the petitioner should have anticipated and mitigated the risks associated with the ROW issues and other delays, which were foreseeable and manageable through prudent utility practices.
Conclusion
The tribunal, led by Hon’ble Mr. Virender Bhat (Judicial Member), undertook a meticulous examination of the facts, legal provisions, and precedents. The tribunal acknowledged the complexity of the project and the challenges faced by PSITSL. However, it also emphasized the need for stringent adherence to contractual obligations and the importance of risk management in large infrastructure projects.
In its judgement, the tribunal partially agreed with PSITSL’s claims, recognizing that some of the Force Majeure events, particularly the ROW issues in Krishna District, were indeed beyond the petitioner’s control. The tribunal noted that these issues were severe enough to constitute Force Majeure under the TSA.
