HARYANA ELECTRICITY REGULATORY COMMISSION
SCO 180, SECTOR 5, PANCHKULA 134 109, HARYANA   

 CASE NO. HERC/PRO –5  OF 2001

Date of Order:  22.01.2002

Application filed by National Thermal Power Corporation  Limited under section 11 read with section 14 and 19 of the Haryana Electricity Reform Act, 1997 in the matter of approval of Escrow Agreement between Haryana Vidyut Prasaran Nigam Limited and Power Trading Corporation, independent Power Producers/Any other Power Producer.

 ORDER

The petitioner, National Thermal Power Corporation Limited (NTPC) is a Government of India enterprise with registered office at NTPC Bhawan, Core-7, SCOPE Complex, New Delhi-110003 having its local office at 5796, Duplex, Modern Housing Complex, Manimajra, Chandigarh. 

2.          The hearing on the application submitted by NTPC in the matter of approval of Escrow Agreement between Haryana Vidyut Prasaran Nigam Limited (HVPN) and Independent Power Producers/other power producers was held on 30^th October, 2001.  The application is stated to be submitted under section 11 read with section 14 and 19 of the Haryana Electricity Reform Act, 1997 (the Act).

3.         The counsel for NTPC states that NTPC is a Govt. of India enterprise engaged in the business of generation and sale of electricity to various State Electricity Boards, successor entities including HVPN, a Government of Haryana undertaking with office at Shakti Bhawan, Sector 6, Panchkula.  HVPN at present holds two licences one for Transmission & Bulk supply and the other for Distribution and Retail Supply of electricity in the State of Haryana and is successor entity to Haryana State Electricity Board (HSEB) in regard to various power purchase agreements of electricity.  It is also stated that the petitioner has been supplying electricity to HSEB/HVPN for the last several years and at present it has an arrangement to supply 1129 MW of electricity including 181 MW to HVPN out of unallocated portion of Central Sector share. HVPN is required to make due payment for the electricity supplied to it by NTPC in terms of agreements.  It has been submitted by the petitioner that HVPN has not been making due payment of the money becoming due to the petitioner and there has been a huge shortfall in the payment to the petitioner every month.  As on 31.8.2001 HVPN owes the applicant a sum of Rs.522.91 crores including a surcharge of Rs.288.46 crores for the electricity supplied in the past. 

4.     The counsel for the petitioner has further submitted that it is understood that HVPN has signed/is in process of signing of Power Purchase Agreement with Power Trading Corporation (PTC)/Independent Power Producers/other Power Producers for projects in operation/ to be commissioned in the future.  The petitioner also understands that HVPN has signed/agreed to sign Escrow agreements with the above and other Project Developers earmarking receivables of HVPN for securing payment of the amount becoming due to the above project developers.

 5.    The counsel for NTPC has submitted that Escrow agreements proposed by HVPN with new power producers will seriously prejudice its interest in regard to payment of the outstanding amounts and the amounts becoming due for the electricity generated and supplied by it to HVPN. Further, signing such Escrow agreements and earmarking receivables in the above manner to the exclusion of the petitioner will prejudice the public interest and the interest of the consumers. 

6.     The counsel for NTPC has submitted that NTPC is vitally interested in ensuring that Escrow agreements proposed between the HVPN and Power Trading Corporation/other power producers do not supersede payment obligations that the HVPN has in respect of supplies it has been receiving from the NTPC at a lower cost with new/proposed supplies at considerably higher cost. 

7.     The petitioner has prayed that the Commission may order that new Escrow arrangements would be entered into by the HVPN after ensuring that it is able to meet its payment obligations in respect of existing supplies from the NTPC, such that existing supplies have a preferential charge on the revenues of HVPN over the charge of the new supplies and/or pass such other order as the Commission may deem fit in the circumstances mentioned by NTPC. 

8.     During the hearing and in written arguments, the counsel for NTPC submitted that the petitioner has a right to lodge a caveat under section 148-A of Civil Procedure Code before the Haryana Electricity Regulatory Commission which is a statutory body exercising judicial power under the Haryana Electricity Reform Act, 1997.  In this particular case, NTPC is actually an affected party since they are supplier of electricity to the respondent. 

9.     It has also been submitted by the counsel for the NTPC that this Commission has jurisdiction under section 11(b), (c), (d) and (e) to regulate working of the licensee, to promote their working in efficient, economical and equitable manner and further to regulate purchase, distribution, supply and utilization of electricity, quality of service, tariff etc. keeping in view the interests of parties supplying power and consumers who are consuming power. Counsel for NTPC has referred to a judgement of the Karnataka High Court wherein the term ‘regulation’ is widely interpreted citing AIR 1986 Karnataka Page 21 and has argued that the word ‘regulation’ is a word of broad import having wide meaning comprehending all facets not only specifically enumerated in the Act but also embraces within its fold the powers incidental to regulation envisaged in good faith in the interest of general public. 

10.   Further the counsel for NTPC has submitted that the Commission has jurisdiction for approval of power purchase agreements which may be entered into in future by HVPN Limited with Independent Power Producers or Power Trading Corporation or any other Power Producers under chapter VI of the Haryana Electricity Reform Act, 1997.  Every party including general public has the right to present their view point before the Commission. NTPC is one such party who has the right to put their view point before the Commission for future agreement accepted by the Commission which HVPN enters into with other power producers. 

11.   The counsel for NTPC further stated that in similar circumstances the Maharashtra Electricity Regulatory Commission and the Orissa Electricity Regulatory Commission had passed orders in favour of NTPC on a similar matter. 

12.   The respondent,  Haryana Vidyut Prasaran Nigam Limited (HVPN) have submitted that the petition filed by the petitioner suffers on the basic ground of jurisdiction and that present petition is not covered under any of the sections of the Reform Act referred to in the petition.  It has been stated that section 11 of the Reform Act deals with the functions of the Commission and the instant petition does not qualify under any of the functions assigned to the Commission.  The petitioner is supplying power to the respondents under the provisions of the existing Power Purchase Agreements (PPA) and no violation of any of the provisions of these PPAs has been cited.  Section 14 of the Reform Act deals with Licensing of Transmission & Supply business. The respondents are abiding by the provisions of the licence granted by the Commission.  Similarly, section 19 of the Reform Act deals with amendment of Licences, which again is not related to the present petition.  Even otherwise, if the petitioner feels aggrieved by any of the contractual provisions, it could invoke the arbitration clause of the PPA, which exists for resolving any dispute between the parties.  The present petition is not covered under section 37 of the Reform Act dealing with arbitration by the Commission, as under this provision, the Commission can take cognisance of any dispute arising between Licensees.  The petitioner is not a Licensee under the Reform Act.  It has been submitted on behalf of  the HVPN that  the petition may be rejected on this ground of being outside the jurisdiction of the Commission. 

13.   It has been stated by HVPN that HVPN is getting power from the petitioner from its different projects as per the terms and conditions of the respective PPAs entered into for individual projects.  It has been contended by the HVPN that it was among the first few States, which settled all outstanding dues of the petitioner by issuing Bonds, as required by the petitioner and to the entire satisfaction of the petitioner.   The terms and conditions of the PPA already entered into by the petitioner with the respondent are binding. PPA with NTPC does not prohibit or restrict HVPN from entering into other PPAs.  Therefore, the prayer made by the petitioner is not maintainable and the petition may be dismissed on this ground. 

14.    It has been stated by the HVPN that it has not entered into any such PPA with either Power Trading Corporation (PTC) or any other IPP wherein Escrow arrangement has been made.  However, there is no provision in any of the PPAs signed between the petitioner and HVPN which stops HVPN to either enter into any PPA or Escrow arrangement with any other generator.  As such, this petition seeking to place unfair restrictions on HVPN’s freedom to conduct its trade/business warrants summary dismissal not being based on law or equity. 

15.   HVPN’s representative stated that HVPN had  signed a Memorandum of Understanding with PTC on 30.5.2001 for the purchase of surplus power from the Eastern Region but this MoU does not have any provision for establishing any Escrow Account in favour of PTC.  The payment security mechanism includes establishing revolving letter of credit support by a Fixed Deposit receipt of Rs.2.5 crore pledged in favour of PTC.  It was only in the PPA entered into with M/s Magnum Power Generation Limited in August, 1998 wherein there was a provision for establishing a default escrow.  Accordingly, a default escrow of Rs.4 crores was established with the Oriental Bank of Commerce in December, 1998 as this banker had opened the requisite Letter of Credit and it used to have a revenue collection account for HVPN.  Even this arrangement is not valid today as after 1.10.1999 the HVPN is receiving its revenues from only the two Distribution Companies and not through the Oriental Bank of Commerce and the prayer made by the petitioner is against the fair and free trade policies under the law. 

16.   HVPN has also contested the argument of NTPC that any Escrow arrangement entered into by HVPN will prejudice the public interest and the interest of the consumers. HVPN’s entering into diverse PPA is in the interest of the public at large being an effort to secure abundant power availability to meet the demand of the electricity consumers of Haryana.  In doing so, State Power Utility is fulfilling its basic function and the petition seeks to interfere with and prevent the Utility from its lawful functions.  As such this petition deserves summary dismissal on this ground.

17.   HVPN contends that the argument that the petitioner is supplying electricity at substantially lower rates than others has no relevance to the issue raised in the petition.  HVPN is required to make payment to all its lawful suppliers/generators and the rates are dependent on the individual PPA.  No supplier/generator can be discriminated in the matter of payments on the ground of rates.  It has been argued by the HVPN that order passed by Orissa Electricity Regulatory Commission in the attendant facts and circumstances of GRIDCO are not the same as those of HVPN and the said order is not binding on Haryana Electricity Regulatory Commission.  HVPN has argued that prayer of the petitioner is beyond the contractual provisions and contrary to constitutional and legal rights of HVPN. 

18.   In the end, HVPN has prayed that the petition may be rejected while awarding cost of these proceedings to HVPN. 

19.   We have heard both the parties, counsel for NTPC and representatives of HVPN and considered their written submissions.  After careful consideration of all facts placed before us, the argument of both the parties and their written submissions we observe as under:- 

(a)      The petitioner has submitted the application under Section (11) read with Section 14 and 19 of the Act.  It is true that the Commission is entrusted with the function of regulating the working of the Licensee and also the purchase of power but it will be stretching it too far to include interference with the normal functioning of the licensee.  It is also true that under section 21 of the Act, power purchase agreements are required to be made with, or subject to, the consent of the Commission.  Escrow arrangements, if any,  will form part of power purchase agreements.  As per Regulation (15) of Haryana Electricity Regulatory Commission (Conduct of Business) Regulations, 1998, except where the Commission may provide otherwise for reasons to be recorded in writing, all matters affecting the rights & interests of the Licensee or any other person or class of persons shall be undertaken and discharged through a hearing.

(b)      On behalf of HVPN, it has been categorically stated that at present no escrow arrangements have been agreed to with PTC or any other supplier of electricity. 

(c)      The present matter even if it was a dispute between HVPN and NTPC, is required to be settled in terms of provisions contained in the relevant power purchase agreements. 

(d)       In the order of the Maharashtra Electricity  Regulatory Commission (MERC) cited by the counsel for NTPC, it is clearly mentioned that MSEB had no objection if the caveat application of NTPC was allowed by that Commission.  Even otherwise, MERC is governed by the provisions of the Electricity Regulatory Commission Act, 1998 enacted by Parliament.  The detailed circumstances under which Orissa Electricity Regulatory Commission which is governed by a separate Act of State Legislature allowed the caveat application of NTPC are not clear from the order produced by the counsel for NTPC. 

(e)      Under the Haryana Electricity Reform Act, 1997 this Commission can adjudicate on a dispute between  two licensees.  NTPC is not a Licensee. 

(f)        Therefore, we consider that it is pre-mature for the Commission to interfere at this stage.  NTPC will be free to file their objection at the time of consideration of any Escrow arrangements in respect of any PPA in future proposed by HVPN. 

20.      In view of the foregoing observations, we dismiss the petition filed by NTPC.  Parties to the petition will bear their own cost.

Dated: 22.01.2002
Place :  Panchkula