The matter came up for hearing on March 18,2002.

R .S.Mann, CHAIRMAN
S.K.Sharma, MEMBER
L.S.Deol, MEMBER

Vide interim order No.1135-1136 dated 14.12.2001,the Commission had directed the PSEB not to enter into any Purchase Agreement Which includes provision for escrow arrangements unless the Commission otherwise approves.

2. The Commission had further directed the Board to file its reply to the petition.With a copy to NTPC by December 31, 2001 positively. The Board vide its letter no.4139/ISB/PERC-1 dated December 24,2001 noted the directions of the Commission regarding provision of escrow arrangement in the PPAs. Regarding filing of reply to the petition filed by NTPC, the Board requested at least a fortnights time more to file the reply. The Commission considered the request of the Board in its meeting held on December 31,2001 and decided to allow the Board vide memo No.93/94/PERC-1/ISB dated January 11,2002 with copy of the same to Sr. Manager (Commercial),NTPC. The petition was listed for hearing on March 18,2002 wherein both the petitioner and the respondent were heard by the Commission.

3. The petitioner in his petition has stated that the applicant NTPC is a Govt. of India enterprise with registered office in New Delhi and local office in Chandigarh. The applicant is engaged in the business of generation and sale of electricity to various State Electricity Boards, and the successor entities including PSEB. The applicant has been supplying electricity to the Board for the last several years and as on the date of petition, the applicant had an arrangement to supply 744 MW of electricity including 74 MW out of unallocated portion of Central Sector shares. The purchaser is required to make due payment for the electricity supplied by the applicant in terms of the agreement and arrangement with the applicant.

4. The petitioner has submitted that the purchaser has not been making due payment to the applicant and there has been a huge short-fall in the payment to the applicant every month. As on August 31, 2001, the Board owes the applicant a sum of Rs.204.99 crores including a surcharge of Rs 25.92 crore for the electricity supplied in the past.

5. The petitioner has further stated that the applicant understands that the purchaser has signed or is in the process of signing Power Purchase Agreements with Power Trading Corporation, Independent Power Producers/ other Power Producers from Projects in operation/to be commissioned in future. The applicant has further stated the purchaser has signed/agreed to sign Escrow Agreements with the above and other project developers earmarking receivables of the purchaser for securing payments of the amount becoming du to the above project developers.

6. The applicant has further stated that Escrow arrangement proposed with the new power producers will seriously prejudice the interest of the applicant in regard to payment of the outstanding amounts and the amounts becoming due for electricity generated and supplied by the applicant to the purchaser. Further signing such Escrow agreements and earmarking receivable in the above manner to the exclusion of the applicant will prejudice the public interest and the interest of the consumers. It is thereby stated that the purchaser should not be allowed to secure its receivable in favour of new generating companies without making proper arrangements for payments of theoutstanding amount and the amount becoming due to the exdisting generating companies such as applicant who is supplying electricity to PSEB at the rates which are substantially lower fthan those at which the purchaser is contracting to purchase power from the new generators.

7. The applicant has also stated that he is vitally interested in ensuring that Escrow arrangements proposed between the purchaser and Power Trading Corporation / other power producers do not supersede payment obligations that the purchaser has in respect of supplies it has been receiving from the applicant at much lower cost than the new/proposed supplies at considerably higher cost.

8. The petitioner has further brought out that similar application moved by the applicant before the Orissa Electricity Regulatory Commission was allowed by that Commission with the directions that payment obligation for NTPC must be taken into account before any new Escrow arrangement that GRIDCO may enter into and that NTPC be impleaded as an affected party while appearing for approval of PPA with any IPP.

9. It has, therefore, been prayed by the petitioner that the new Escrow arrangment be entered into by the Board after ensuring that it is able to meet its payment obligations in respect of ixisting supplies from the applicant, such that existing supplies have a preferential charge on the revenues of the purchaser over the charge of the new supplies and / or pass such other order as the commission may deem fit in the circumstances mentioned.

10. The respondent in the reply to the petition has raised preliminary objection that the petition is not maintainable as per Section 13 (a) & (h) of Electricity Regulatory Commissions Act, 1998, it is the Central Electricity Regulatory Commission which is vested with the powers to arbitrate or adjudicate upon disputes involving generating companies or transmission utilities in regard to matters connected with the clauses (a) to (c). Accordingly, adjudication of all issues relating to fixation of tariff etc. and other incidental matters in respect of generating companies covered under section 13 falls within the jurisdiction of Central Electricity Regulatory Commission. Further the issue raised in the petition does not pertain to PSEB alone but relates to all the SEBs and other such utilities and as such falls within the jurisdiction of CERC. The respondent has further pleaded that under section 22 of the ERC Act, 1998 the power to regulate power purchase and procurement process of the transmission and distribution utilities including price at which power shall be procured by SEB from generating companies falls within the jurisdiction of the Commission but none of the clauses of this section confer any right on the applicant to become a party to any such issues / disputes. The respondent has further stated that PSEB has an arrangement of India to draw 670 MW of power excluding power allocated portion of Central sector.

11. The respondent has contested that the purchaser has not been making payments of the money becoming due on account of power purchased from the applicant and that there has been a huge short-fall in the payment. It has been stated that purchaser has been making regular payments for power thus purchased during the entire contractual period. It has been highlighted that the fact that purchaser is one of the best paying State Electriciy Board has been accepted by the applicant it self as is evident from the letters written by CMD to the Chairman of the Board in which the applicant has also quoted that the outstanding smount as on 31.3.2001 as incicated in the report of expert group is only Rs. 97.61 crore as against total amount of Rs.6484.38 crores outstanding against other beneficiaries of Northern Region. It has further been stated that outstanding smoount against purchaser for the entire period upto March 2001 is only Rs. 16.50 crores whereas purchaser is purchasing power from the applicant worth Rs.60 to 70 crores every month for the past so many years.

12. It has further been stated that the purchaser was unable to liquidate some energy bills due to severe financial crunch after April 2001. Keeping in view the liquidity constraints with purchaser, the applicant was requested to accept 50% of current energy bills through Non SLR-Bonds duly guaranteed by State Government and balance in cash. This was not agreed to by the applicant resulting in non clearance of dues.

13. It has further been stated that the respondent have not signed any PPA with Escrow arrangement after 17.4.2000.. Also presently the purchaser is not in the process of signing any PPA with PTC, IPPs or any other power producers for projects in operation / to be commissioned in near future with Escrow arrangement.

14. The respondent has further pleaded that no escrow account against any PPAs signed so far has been opened and purchaser has no intention to do so in future. It has also been brought out that the applicant had forced the beneficiers to sign PPAs with escrow arrangement for its projects which is wholly/contradictoy to its stand of opposing the signing of PPAs between the SEBs and other power producers / suppliers with escrow arrangements. The respondent is of the view that applicant has no locus standi to oppose the signing of PPAs by the purchaser, though the purchaser of its own is not in favour of signing any PPA in future with the provision of escrfow arrangemnt.

15. The respondent has further pleaded that Orissa Electricity Regulatory Commission order has no relevance with this case as the facts and circumstances of that case may be entirely different and the purchase of power and has seldom defaulted in making payments in the past. As such, the fears and assumptions projected by applicant in ths petiton are ill conceived and the application, based on these assumptions, needs rejection.

16. The commission heard both the parties and noted as follows:-

1. The preliminary objections raised by the PSEB that the petition of NTPC is not maintainable under Section 13 (a) confers right on the CERC to regulate the tariff by generating companies owned or controlled by the Central Govt. In the petition no such point regarding tariff has been raised by the NTPC. Section 13 (h) deals with the function of the CERS to arbitrate or adjudicate upon disputes involving generating and transmission utilities in regard to matters connecter with clause (a) to (c) of section 13 which deals with the Regulation of tariff and interstate transmission of energy. Such issue has also not been raised by NTPC in their petition against PSEB.
   
   

2. The prayer of NTPC falls clearly in the purview of the Punjab State Electricity Regulatory Commission. In the petition the NTPC has made certain prayer about inclusion of provision of Escrow arrangement in the PPAs entered into/to be entered by the Board with PTC,IPPs and other Power Producers. The PPAs entered into by the Board clearly fall within the jurisdiction of the Commission under Section 22 (c) of the Act and consequently any provision made thereunder including that of Escrow arrangements falls within its jurisdiction. Further, the Commission noted that similar petition has been entertained by various other State Commissions for consideration thereby accepting the jurisdictions raised by the Board are not mainainable.
   
   

3. The Commission further noted that though the outstanding dues of the Applicant as on March 31,2001 had been liquidated by Respondent, the total outstanding dues as on date were substantial. Any disruption in supply of power by the NTPC to PSEB on the grounds of outstanding dues would affect the power availability in the State substantially and as such it was vitally important and in public interest also to ensure that such a situation does not arise. The Commission also noted that comparative position viz-a-viz other States does not help the situation as the fact that payments have not been made by the respondent as per agreed terms of payment for the electricity supplies made by the applicant, cannot be denied. There is also no denying the fact that signing of PPA which provides for Escrow arrangements and earmarking of receivables in the above manner to the exclusion of the applicant will prejudice the interest of the applicant in regard of payment of outstanding dues as well as the public interest and the interest of the consumer with regard to availability of power and on reasonable rates. It was noted that the board itself is also bound by the agreement it has entered into with the applicant for purchase of power and is therefore, bound to make regular payments as per these agreements for the power purchased from the applicant. The Board, therefore, should not act in a manner that it becomes impossible or increasingly difficult for it to keep its own commitments and agreements in this regard. The Commission also noted that the prayer of the applicant was limited only to the effect that new Escrow arrangements be entered into by the purchaser only after ensuring that it is able to meet its payment obligations in respect of existing supplies from the applicant and the existing supply have preferential charge on the revenues of the purchaser over the charge of new supplies.

17. The Commission feels that this demand of the applicant is reasonable and therefore, orders that the Board may not enter into any new PPAs with Escrow arrangements without insuring that it is able to meet its payment obligations in respect of existing supplies from the applicant and that existing supply have preferencial charge on the revenues of the purchaser over the charge of new supplies. To this purpose, the Board will hear NTPC as an interested party before proposing any new Power Purchase Agreement with Escrow arrangements. The NTPC, if dissatisfied with the decision/recommendations of the Board or otherwise if des ires it may appear before the Commission at the time of hearing for the approval of the PPA by the Commission. The Board is also directed to serve to the petitioner a copy of any Petition/Application that may be filed by the Board before the Commission for approval of any PPA containing provision for escrow arrangement.

18. The parties to the petition will bear their own costs.

Place : Chandigarh
Dated : April 29, 2002