Follow India Renewable Energy News on WhatsApp for exclusive updates on clean energy news and insights

APTEL Rules That Definition Clause in Power Purchase Agreement Can Be Used for Levying Charges

In a landmark ruling, the Appellate Tribunal for Electricity (APTEL) has affirmed that a definition clause in a Power Purchase and Wheeling Agreement (PPWA) can serve as a valid charging provision. This decision rejects the argument that such clauses are unenforceable, reinforcing the legal standing of definition clauses in contractual disputes.

M/s KCP Limited, which operates a 3.75 MW mini hydel power project in Andhra Pradesh, had signed a PPWA with AP Transco for captive consumption. Several years later, AP Discom issued bills demanding Rs2.44 crore as a surcharge on reactive power drawn from the grid.

KCP Ltd. contested this charge, arguing that:

• The PPWA did not explicitly include a separate provision for Reactive Power Surcharge (RPS).
• Clause 1.13(b) of the agreement only defined "Surcharge on Reactive Power" but did not explicitly classify it as a chargeable item.

Despite these arguments, the Andhra Pradesh Electricity Regulatory Commission (APERC) ruled in favor of AP Transco, leading KCP Ltd. to appeal the decision before APTEL.

APTEL’s Ruling

APTEL dismissed the appeal, holding that Clause 1.13(b) was enforceable because:

• It not only defined RPS but also specified the applicable rate (10 paise per unit), the manner of levy, and the liable party.
• The placement of a clause within the ‘definitions’ section does not impact its enforceability as long as:
• It is clear and unambiguous.
• It aligns with public policy.
• It does not contradict any other provision of the PPWA or existing laws.

This ruling reinforces that even a definition clause in an agreement can serve as a basis for levying charges if it meets legal clarity and intent.