A full bench of the tribunal on 2nd Dec’13, pronounced a landmark judgment on the issue of fastening of purchase obligation on DISCOMs, for power procurement from fossil-fuel based co-generation (co-gen) units. The petitioner (Lloyds Metal & Energy Ltd) had filed a petition against MERC for not extending relief in terms of determination of separate tariff and fixing of purchase obligation.

APTEL has taken this laudable decision with an intent to answer an important question of “whether fastening of purchase obligation can be one of the methods to pro-mote fossil fuel based co-gen plants or not”

The APTELs decision which was negative to the above question can be read as –

“Upon conjoint reading of the provisions of the Electricity Act, the National Electricity Policy, Tariff Policy and the intent of the legislature while passing the Electricity Act as reflected in the Report of the Standing Committee on Energy presented to Lok Sabha on 19.12.2002, we have come to the conclusion that a distribution company cannot be fastened with the obligation to purchase a percentage of its consumption from fossil fuel based co-generation under Section 86(1)(e) of the Electricity Act, 2003. Such purchase obligation 86(1)(e) can be fastened only from electricity generated from renewable sources of energy. However, the State Commission can promote fossil fuel based co-generation by other measures such as facilitating sale of surplus electricity available at such co-generation plants in the interest of promoting energy efficiency and grid security, etc.“

A favorable decision for Lloyds Metals & Energy Limited, in this case, would have given DISCOMs an additional source to procure power from, to offset their RPO tar-gets. This might have impacted the REC markets consid-erably, as then DISCOMs would have shied away from participating as a prospective buyer of RECs.

The copy of judgment can be assessed here.