The Supreme Court resolved a long-standing dispute between Gujarat Urja Vikas Nigam Limited (GUVNL) and Essar Power Limited (EPL) over diversion of power from a 1996 Power Purchase Agreement (PPA). The Court set aside parts of the Appellate Tribunal for Electricity’s (APTEL) ruling and held that GUVNL is entitled not only to compensation for wrongful diversion of power to Essar Steel Limited (ESL) at the HTP-1 tariff rate but also to reimbursement of proportionate fixed charges for electricity that was never supplied to it.
GUVNL argued that EPL was under a binding obligation to declare the full availability of its 515 MW plant and to allocate power strictly in the agreed proportion. It maintained that the wrongful diversion not only entitled it to compensation at the HTP-1 tariff rate (minus variable costs), as already recognised, but also reimbursement of fixed charges which it had paid for capacity that was never supplied. GUVNL stressed that the earlier settlement of ₹64 crore (covering the period 1998–2004) was not a final resolution but only an agreed methodology for computing diversion losses. It further asserted that since EPL itself sought and implemented half-hourly metering based on Central Electricity Authority (CEA) recommendations in 2005, the same standard should govern computation of diverted energy.
EPL, on the other hand, maintained that its obligation was confined to supplying the contracted capacity and that there was no duty to declare plant availability on a proportionate basis. It argued that GUVNL’s claim for reimbursement of fixed charges was an attempt to go beyond what had already been settled by the Gujarat Electricity Regulatory Commission (GERC) and upheld in earlier rounds of litigation. EPL also relied on the PPA language, which expressly spoke of hourly availability blocks, to resist GUVNL’s plea for half-hourly computation. It further contended that the ₹64 crore settlement closed earlier disputes and could not be reopened.
The Bench of Justices Sanjay Kumar and Alok Aradhe found that EPL could not charge fixed costs from both GUVNL and ESL for the same diverted electricity, terming such recovery ‘unsustainable.’ The Court also upheld the use of half-hourly computation for measuring diverted power, noting that Essar itself had sought and implemented such a methodology pursuant to Central Electricity Authority recommendations in 2005.
While allowing GUVNL’s claim for fixed charge reimbursement, the Court left open certain factual verifications including the exact quantum of deemed generation incentive refund and deductions made by GUVNL to be decided by the Gujarat Electricity Regulatory Commission (GERC).
