The Supreme Court has ruled that power generating stations must strictly comply with declared generation obligations under the Punjab State Grid Code, 2013.
The Court held that a generating station attracts penalty if it fails to demonstrate its declared power generation capability when the State Load Despatch Centre (SLDC) issues a requisition.
A Bench of Justice Sanjay Kumar and Justice K. Vinod Chandran delivered the judgment in Punjab State Power Corporation Limited v. Talwandi Sabo Power Limited.
The Court clarified that this liability arises regardless of intent, mens rea, or unlawful profit.
Court Separates “Gaming” From Demonstration Failure
The Supreme Court distinguished “gaming” of the grid from failure to demonstrate declared generation capability.
The Bench explained that allegations of gaming require proof of intentional misdeclaration and commercial gain. Authorities must also conduct an inquiry following principles of natural justice.
However, Regulation 11.3.13 creates a separate strict liability framework. Under this provision, a generating station faces mandatory penalties if it cannot demonstrate its declared capability.
The Court observed that the regulation exists to maintain grid discipline and ensure reliable real-time power scheduling.
Dispute Arose From January 2017 Incidents
The case arose after the Punjab State Load Despatch Centre found that Talwandi Sabo Power Limited allegedly misdeclared its generation capacity on several dates in January 2017.
Authorities imposed penalties exceeding ₹162 crore after the company allegedly failed to demonstrate its declared capability despite receiving notices from the SLDC.
The Punjab State Electricity Regulatory Commission upheld the penalties.
However, the Appellate Tribunal for Electricity later removed the penalties. It held that authorities had failed to prove deliberate manipulation or commercial gain.
Supreme Court Rejects Company’s Defence
Before the Supreme Court, the appellants argued that generating stations carry a continuous obligation to accurately declare and maintain generation capability.
They submitted that declared capacity directly affects fixed charges and incentive payments. According to them, the demonstration mechanism plays a crucial role in maintaining grid discipline.
The respondents argued that misdeclaration can arise only where authorities prove deliberate profiteering or intentional suppression.
The company also relied on issues such as low coal stock and machinery shutdowns.
Regulation 11.3.13 Creates Strict Liability
Rejecting the company’s submissions, the Supreme Court held that the Appellate Tribunal wrongly mixed up the concepts of gaming and demonstration failure.
The Court clarified that Regulation 11.3.13 functions as a stand-alone strict liability provision.
The Bench held that authorities need not prove intention or unlawful enrichment before imposing penalties under the regulation.
According to the Court, failure to demonstrate declared capability itself constitutes a civil breach.
Four Time-Block Rule Explained
The Supreme Court also clarified the operational framework under the Grid Code.
The Court held that generating stations must demonstrate declared capability within four time-blocks after receiving notice from the SLDC.
The Bench further clarified that the block during which the notice is issued counts as the first time-block.
The Court observed that the SLDC’s authority to seek demonstration directly relates to ensuring better system operation.
Supreme Court Restores Penalties
After examining the facts, the Court found that Talwandi Sabo Power Limited repeatedly failed to achieve declared generation levels within the prescribed time-blocks.
In one instance, the company revised its declared capacity downward after receiving notice instead of demonstrating the earlier declared capability.
The Court also rejected reliance on earlier regulatory decisions concerning fuel substitution and minor operational deviations.
Finding those precedents distinguishable, the Supreme Court restored the penalties imposed by the Punjab State Electricity Regulatory Commission.
The Bench set aside the Appellate Tribunal’s judgment and directed refund of surcharge amounts paid by Punjab State Power Corporation Limited along with applicable interest.
