Resolving Power Disputes: CERC Rules On Grid Constraints And Force Majeure In Energy Agreements

The Central Electricity Regulatory Commission (CERC) addressed a review petition filed by GMR Energy Trading Limited and GMR Warora Energy Limited concerning a dispute with Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO). This case pertained to grid constraints experienced during late 2015 and early 2016, which impacted power supply as per their Power Purchase Agreement (PPA).

Initially, GMR sought compensation for full capacity charges under the PPA, arguing that grid constraints were not natural Force Majeure events, contrary to TANGEDCO’s stance. In 2022, CERC ruled in favor of GMR, requiring TANGEDCO to pay charges for the contracted capacity. However, upon appeal, the Appellate Tribunal for Electricity (APTEL) declared grid constraints as natural Force Majeure events and remanded the matter to CERC.

In January 2024, CERC reaffirmed that TANGEDCO was not obligated to pay for parts of the contracted capacity affected by grid constraints. GMR filed a review petition, arguing that TANGEDCO’s methodology penalized them twice by reducing tariffs at both availability calculation and capacity charge stages. They contended this violated the fixed nature of the contracted capacity in the PPA.

CERC acknowledged an apparent error in its January order, agreeing that the contracted capacity of 150 MW must remain unchanged for tariff calculations, even during Force Majeure events. The commission clarified that TANGEDCO’s liability is limited to charges for power supplied and available at the drawl point, exempting GMR from penalties for availability below normative levels due to grid constraints.

The order directed both parties to reconcile transmission charges within one month based on the modified interpretation. This resolution underscores the complexities of interpreting Force Majeure clauses and highlights the importance of clarity in PPAs for ensuring equitable outcomes.

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