Summary and Analysis of M/s KKK Hydro Power Limited vs Himachal Pradesh State Electricity Board Limited & Others 2025 INSC 1057
1. Heading of the Judgment
M/s. KKK Hydro Power Limited vs. Himachal Pradesh State Electricity Board Limited & Others
Civil Appeal No. 3005 of 2015, decided on August 29, 2025
2. Related Laws and Sections
The judgment primarily interprets and applies the following legal provisions:
The Electricity Act, 2003: This is the main governing law for the electricity sector in India.
Section 86(1)(b): This is the most crucial section in this case. It mandates that the State Electricity Regulatory Commission must regulate the process by which distribution companies (like HPSEB) purchase power, including approving the price at which electricity is procured through Power Purchase Agreements (PPAs).Himachal Pradesh Electricity Regulatory Commission (Power Procurement from Renewable Sources and Cogeneration by Distribution Licensee) Regulations, 2007 (The Regulations of 2007): These state-specific regulations outline the framework for determining tariffs for renewable energy projects.
3. Basic Judgment Details
Parties:
Appellant: M/s. KKK Hydro Power Limited (a power generating company).
Respondents: Himachal Pradesh State Electricity Board Limited (HPSEB - the power distributor) and the Himachal Pradesh Electricity Regulatory Commission (the regulator).Subject Matter: A dispute over the correct tariff (price per unit of electricity) that HPSEB should pay KKK for power supplied from its 4.90 MW hydro project.
Final Outcome: The Supreme Court dismissed KKK's appeal. The approved tariff for the entire 4.90 MW project remained the weighted average of ₹2.60 per kWh, as finalized by the regulator.
4. Explanation of the Judgment
This case involves a hydro power project that was expanded after new electricity regulations came into force. The core issue was whether the higher, newer tariff could be applied to the entire project or only to the new, expanded capacity.
Background and Sequence of Events
Original Project (3 MW): In 2000, KKK signed an Implementation Agreement (IA) and a Power Purchase Agreement (PPA) with the Himachal Pradesh government and HPSEB to set up a 3 MW plant. The PPA fixed a firm and unchanging tariff of ₹2.50 per unit for 40 years. This was before the Electricity Regulatory Commission was established.
Capacity Expansion (+1.90 MW): In 2007, KKK decided to increase the project's capacity to 4.90 MW. A supplementary PPA was signed in 2008 for the revised capacity, but it still mentioned the old tariff of ₹2.50/unit. However, it also contained a new clause stating that the tariff would be subject to the Regulations of 2007.
New Tariff Regulations: In 2007, the State Commission issued new regulations and set a tariff of ₹2.87/unit (later revised to ₹2.95/unit in 2010) for small hydro projects.
Unauthorized Supplementary Agreement: Relying on the new ₹2.95/unit tariff, KKK and HPSEB signed a supplementary PPA in 2010 among themselves, changing the tariff from ₹2.50 to ₹2.95/unit. Crucially, they never got this new agreement approved by the Electricity Regulatory Commission.
Dispute: HPSEB paid the higher rate for a while but then stopped paying arrears. KKK approached the Commission, which ruled that the unilateral supplementary PPA was invalid and that the correct tariff for the entire 4.90 MW project was only ₹2.50/unit.
APTEL's Decision: The appellate tribunal (APTEL) gave a mixed ruling. It held that:
The original 3 MW plant, based on a pre-Commission PPA, was not entitled to the enhanced ₹2.95 tariff.
The new 1.90 MW capacity, added after the 2007 Regulations, was entitled to the new tariff.
Since power from both plants was supplied together, a single "weighted average" tariff should be calculated for the entire project.Supreme Court's Analysis: KKK appealed to the Supreme Court, demanding the higher ₹2.95 tariff for the entire project.
The Core Legal Principle Established by the Supreme Court
The Supreme Court focused on a fundamental legal principle under Section 86(1)(b) of the Electricity Act, 2003. The Court firmly stated that:
The tariff (price) for electricity is not a private matter to be decided by mutual agreement between a power generator and a distributor. It is a regulated activity that must be reviewed and approved by the State Electricity Regulatory Commission.
The Court strongly criticized KKK and HPSEB for executing the 2010 supplementary PPA without the Commission's approval, calling it a unilateral and legally invalid act.
Why KKK's Appeal was Dismissed
No Approval for New Tariff: The Supreme Court agreed with the State Commission that the 2010 supplementary PPA, which increased the tariff to ₹2.95, was illegal and unenforceable because it lacked the mandatory approval of the regulator.
No Parity with New Projects: The Court rejected KKK's argument that its entire project should be treated at par with new projects. The original 3 MW PPA from 2000 was a concluded contract before the regulator existed, and its fixed tariff could not be reopened.
No Interference with Final Outcome: Although the Supreme Court found that APTEL had also erred by partly validating the unapproved 2010 agreement (for the 1.90 MW portion), it decided not to reverse the final outcome because:
HPSEB had not appealed against the APTEL order.
The weighted average tariff of ₹2.60/unit had already been calculated by the Commission and was being implemented since 2015.
upsetting this settled position would create unnecessary chaos.
Final Ruling
The Supreme Court dismissed KKK's appeal. The tariff for the project remained the weighted average of ₹2.60/unit. The Court used this case to issue a strong warning: no company can privately fix or change electricity tariffs; it must always be approved by the electricity regulator.
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