In a landmark ruling, the Supreme Court of India has decreed that costs arising from coal shortages must be shared equally among all electricity buyers purchasing power from a generating plant. This decision has significant implications for the power sector, particularly in how costs are allocated during supply disruptions.

Case Background

The case centered around GMR Kamalanga Energy Limited (GKEL) in Odisha, which supplies power to Distribution Companies (DISCOMs) in Haryana, Odisha, and Bihar. When faced with coal shortages, GKEL was forced to use more expensive imported coal after domestic supplies fell short. This situation led to a dispute over cost-sharing among the power purchasers.

Key Points of Contention

• Haryana Utilities and GRIDCO challenged the equal cost-sharing arrangement.
• They argued that their contracts guaranteed firm domestic coal supply.
• The utilities claimed they deserved priority due to earlier Power Purchase Agreements (PPAs).

Supreme Court's Verdict

Chief Justice BR Gavai and Justice K Vinod Chandran delivered the ruling, which upheld previous orders by the Central Electricity Regulatory Commission (CERC) and the Appellate Tribunal for Electricity (APTEL). The key points of the judgment are:

1. Coal allocation belongs to the power project as a whole, not to individual contracts.
2. No DISCOM can demand priority supply or avoid incremental costs due to coal shortages.
3. Expenses must be allocated proportionately among all plant beneficiaries.

Implications for the Power Sector

This ruling sets a significant precedent for the Indian power sector:

Equal Cost Sharing

All electricity buyers from a generating plant must share the burden of increased costs due to coal shortages, regardless of their contract terms or the timing of their Power Purchase Agreements.

No Priority Claims

The judgment eliminates the possibility of any DISCOM claiming priority in coal supply based on earlier agreements.

Proportionate Allocation

Incremental costs will be distributed proportionately among all beneficiaries of the power plant.

Regulatory Clarity

The ruling provides clear guidelines for handling cost allocation during supply disruptions, potentially reducing future disputes in the sector.

This Supreme Court decision is expected to bring more stability and fairness to cost allocation in the power sector, especially during periods of resource scarcity. It underscores the principle of shared responsibility among all power purchasers, irrespective of their individual contract terms or historical relationships with power generators.

India's power sector demonstrated resilience in August, with consumption rising despite widespread rainfall across the country. The latest data reveals a noteworthy increase in both power consumption and peak demand, reflecting the nation's growing energy needs even in the face of weather-related challenges.

Consumption Growth

Power consumption in India reached 150.47 billion units in August, marking a 4.4% year-on-year increase from the 144.11 billion units recorded in the same month last year. This growth comes despite factors that typically dampen energy usage, highlighting the robust demand in the country's power sector.

Peak Demand Rises

Alongside the increase in overall consumption, India's peak power demand also saw a significant uptick. In August, peak demand touched 229.71 GW, up from 216.47 GW in the corresponding period of the previous year. This rise in peak demand underscores the growing capacity requirements of India's power infrastructure.

Impact of Rainfall

Experts attribute the moderated growth in power consumption to continuous rainfall across most parts of the country. The increased precipitation led to reduced usage of cooling appliances, which typically drive up power demand during the summer months. India received 743.1 mm of rainfall between June and August, approximately 6% above the long-term average.

Meteorological Outlook

The Indian Meteorological Department forecasts that the trend of above-normal rainfall is likely to continue into September. Monthly average rainfall is expected to exceed 109% of the long-period average. This persistent rainfall pattern is anticipated to keep power demand and consumption relatively subdued in September, as the need for cooling systems remains lower than usual.

Looking Ahead

As India continues to navigate through a period of above-average rainfall, the power sector faces an interesting dynamic. While the increased precipitation may temporarily moderate demand growth, it also highlights the sector's resilience and ability to meet varying consumption patterns.

The power sector's performance in August, despite challenging weather conditions, demonstrates the country's growing energy requirements and the sector's capacity to meet this increasing demand. As climate patterns continue to evolve, the ability of India's power infrastructure to respond to these changes will be key to ensuring stable and sufficient energy supply across the nation.