SECI Wins Appeal Against Kerala State Commission’s PSA Modifications In 300 MW Solar Power Dispute

In a recent legal dispute, the Appellant, Solar Energy Corporation India Limited (SECI), challenged an order issued by the Kerala State Electricity Regulatory Commission. The Commission’s order was in response to a petition filed by Kerala State Electricity Board Limited (KSEB), which sought the Commission’s approval for the purchase of 300 MW of solar power under a specific solar scheme initiated by SECI. Additionally, the Commission was asked to approve a Power Sale Agreement (PSA) between SECI and KSEB.

The Commission approved both the power procurement and the PSA but required some modifications. One significant change involved the definition of “Commission” in the PSA, which SECI found problematic. SECI argued that the Commission, being a state authority, did not have the jurisdiction to regulate the tariff or trading margins related to inter-state transactions involving SECI. They contended that such matters fell under the purview of the central regulatory authority.

The Commission responded by maintaining that it had not altered the tariff but merely recorded SECI’s submissions and set a cap on the tariff payable by KSEB. The Commission believed this action was within its jurisdiction, citing its role in overseeing power agreements and their implementation.

SECI argued that the central authority should oversee all aspects of the transaction since it involved multiple states. They pointed out that the state commission’s role should be limited to approving the agreement at the initial stage, not modifying or regulating its terms later. They also highlighted that disputes arising from these agreements should be handled by the central authority.

The Commission, however, defended its position by stating that it had the legal right to make modifications and oversee such agreements under its existing powers. It argued that the state commission could address issues other than tariff disputes, based on its regulatory scope.

A closer examination of the legal framework revealed that the central and state authorities have distinct roles. The central authority primarily regulates inter-state transactions and disputes involving generating companies or transmission licensees, while the state authority handles local issues and initial approvals of power agreements. The central authority’s role includes setting terms and conditions for tariffs and addressing disputes related to their regulation, while the state authority focuses on ensuring that local distribution companies adhere to the initial agreement.

The tribunal concluded that the state commission had exceeded its jurisdiction by directing modifications to the PSA and regulating aspects of the tariff and trading margins. It found that such disputes and regulatory actions should fall under the central authority’s jurisdiction, especially given the inter-state nature of the transaction.

As a result, the tribunal decided to overturn the Commission’s order concerning the modifications and clarifications it had imposed on the PSA. The appeal was allowed, and the previous order from the Commission was set aside, affirming that the central authority should oversee such matters. The decision was announced publicly on August 13, 2024.