Case No. 167 of Coram. Smt. Chandra Iyengar, Chairperson Shri. Azeez M. Khan, Member Shri. Deepak Lad, Member

Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400005. Tel. 022 22163964/65/69 Fax 22163976 Email: mercindia@merc.gov.in Website: www.mercindia.org.in, www.merc.gov.in Case No. 167 of 2014 In the matter of Petition of Prayas (Energy Group) for review of Order dated 15.7.2014 in Case Nos. 118, 154 and 189 of 2013 regarding compensation in Tariff Coram Smt. Chandra Iyengar, Chairperson Shri. Azeez M. Khan, Member Shri. Deepak Lad, Member Prayas (Energy Group)...Petitioner V/s 1. Rattan India Power Ltd. 2. Adani Power Maharashtra Ltd. 3. JSW Energy Ltd. 4. Maharashtra State Electricity Distribution Co. Ltd....Respondents Appearance For the Petitioner: For Respondent No.1: For Respondent No.4: Ms. Ashwini Chitnis Shri. Sanjay Sen, Senior Counsel Ms. Deepa Chawan, Senior Counsel ORDER Dated: 5 November, 2015 1. Prayas (Energy Group) ( Prayas ), Amrita Clinic, Athvale Corner, Karve Road, Deccan Gymkhana, Pune, has filed a Petition under Section 85 of the MERC (Conduct of Business) Regulations, 2004 seeking review of the Commission s Order dated 15 July, MERC Order Case No. 167 of 2014 Page 1 of 21

2014 in Case Nos. 154, 189 and 118 of 2013 regarding compensatory tariff. 2. Prayas prayers are: a. Admit this petition under the section 85 of the Maharashtra Electricity Regulatory Commission (Conduct of Business) Regulations, 2004 and initiate the necessary process. b. In consequence, the implementation of the Order passed in Case Nos. 140 of 2014, 145 of 2014 and 147 of 2014 after the Impugned Order under review should be stayed till this present matter is decided. Based on the review of the Impugned Order, the said Orders may be accordingly recalled, set aside or reviewed. c. Condone any inadvertent technical or procedural error, if any, in filing this petition. d. Not to reject this petition without giving the petitioner a hearing. e. Pass any other Orders or Orders as may be deemed necessary or required. 3. The Petition states as follows: 3.1. The Petition seeks review of the Order dated 15 July, 2014 in Case Nos. 154, 189 and 118 of 2013. Prayas was made a party to these Cases by the Commission in its capacity as an authorised Consumer Representative, and has participated in the proceedings. 3.2. Case Nos. 154 and 189 of 2013 were filed under the Change in Law related provisions of the respective Power Purchase Agreements (PPAs). To substantiate the Change in Law claims, the Petitioners in those Cases had referred to and relied upon the Cabinet Committee on Economic Affairs (CCEA)-approved mechanism for supply of coal to power producers dated February 2013, the amendment to the New Coal Distribution Policy (NCDP) dated 26 July, 2013 and a letter from the Ministry of Power (MoP) addressed to the Secretary, Central Electricity Regulatory Commission (CERC) dated 31 July, 2013. 3.3. M/s. Rattan India Power Ltd. (RIPL, formerly Indiabulls Power Ltd.), which was the Petitioner in Case No. 154 of 2013, had made the following prayers: a. direct the Respondent to adopt the Change in Law in terms of the PPAs dated 22nd April 2010, and adjust tariff to the extent necessary to enable procurement of coal from sources other than the linkage coal, in the terms of the Petitioner s letter dated 21st September 2013, being Annexure P-11 hereto; b. adopt the fuel cost adjustment formula provided in Schedule at Annexure P- 10 of this Petition and allow compensation in terms of the said formula, so as to MERC Order Case No. 167 of 2014 Page 2 of 21

give effect to increase in variable cost and all other consequential cost and expenses thereto, in relation to supply of power under the PPAs dated 22nd April 2010 and 5th June 2010. c. in the alternative to the prayer (b) above, provide a mechanism to be implemented for allowing adequate periodic compensation to the Petitioner that shall offset the incremental cost of procuring fuel from alternative sources to meet the shortfall in quantity and quality of coal actually supplied under linkage by SECL from time to time as against the quality and quantity of coal that was agreed to be supplied under the LoAs; d. direct implementation of a mechanism to allow as pass through the actual additional capital expenditure that may be incurred by the Petitioner for setting up of additional infrastructure equipment for blending domestic coal with imported coal due to shortfall in supply of domestic coal under linkage; e. to pass such other and further Orders or Orders as this Hon ble Commission deems appropriate under the facts and circumstances of the present case. 3.4. Case No. 189 of 2013 was a Petition of M/s. Adani Power Maharashtra Ltd. (APML) for compensation in tariff on account of Change in Law under the PPAs dated 31.03.2010, 19.08.2010 and 16.02.2013. The Petition stated as follows: 3. The present Petition is filed by the Petitioner for the purpose of suitable adjustment in tariff, in Orders to offset the adverse financial consequences that have occurred after the execution of PPAs. It is submitted that the Ministry of Power ("MoP"), GOI has issued a circular dated 31.07.2013 which conveys the decision of the Government that higher cost of import/market based e-auction coal be considered for being made a pass through on a case to case to basis by Central Electricity Regulatory Commission (CERC)/State Electricity Regulatory Commissions (SERCs)to the extent of shortfall in the quantity in the Letter of Assurances (LoAs) / Fuel Supply Agreements (FSA).The Circular is based on a decision taken by the Cabinet Committee of Economic Affair ("CCEA") on 21.06.2013, which further led to an amendment dated 26.07.2013 of the New Coal Distribution Policy, 2007 ('NCDP"). Apart from the amendment of NCDP and the circular of MoP conveying the decision, there are events that are captured herein which fall within the ambit of "Change in Law" events, as they have culminated as a result of decisions taken by the Indian Governmental Instrumentalities as envisaged under the PPA. The Petitioner humbly states that these directions have to be now accorded regulatory approval, keeping in view the background under which such directions have been issued, and the fact that power developers have no control over supply of domestic coal, which being a nationalised commodity, is entirely under the control of the Central Government. 4.It is submitted that the Petitioner seeks adjustment in the tariff quoted in the PPA's dated 31.03.2010, 09.08.2010 and 16.02.2013 executed between the Petitioner and Respondent and adopted by this Hon'ble Commission vide its MERC Order Case No. 167 of 2014 Page 3 of 21

Orders dated 28.12.2010, 19.05.2011 and 27.12.2012 respectively for the reasons mentioned above which is a "Change in Law" under Article 10 and has occurred after the date which is seven days prior to Bid deadline. The bid deadline was 07.08.2009 and the date which is seven days prior to the bid deadline for the purpose Of application of Change in Law is 31.07.2009 35. In light of the above, the Petitioner therefore humbly prays to the Hon'ble Commission that the Hon'ble Commission may be pleased to: a) Approve the Operational Methodology proposed for calculation of incremental energy charge as compensation and direct the Respondents to pay the revised tariff based. on the pass through mechanism proposed herein for the actual cost of generation for the power supplied by using imported coal/eauction coal/open market coal purchased on account of shortfall in domestic coal supply through linkage at notified prices for Power Sector under PPAs dated 31.03.2010, 09.08.2010 and 16.02.2013 from the date of commencement of power supply under the respective PPAs. b) pass such further or Orders as this Hon'ble Commission may deem just and proper in the circumstances of the case. 3.5. As per the Record of Proceedings of the hearing held on 19 December, 2013 in Case Nos. 154 and 189 of 2013, the Commission has recorded as follows: 2. The Commission mentioned that these two cases were heard simultaneously because of the fact that both the Petitioners approached the Commission for compensation over and above the tariff discovered though Competitive Bidding. The Petitioners have relied upon the change in NCDP and advisory issued by the MoP on 31 July 2013. As per said MoP's letter, the C1L has indicated that it will not be able to supply the coal as per Letter of Assurance and coal will have to be imported to bridge the gap. The issue of possible increase in cost of power was discussed and CERC's advice was sought. The decision of the Government was conveyed vide letter dated 31 July, 2013. In the Press Note issued by MoC, it appears that this decision is in the context of the 78000 MW which are to be commissioned by 31.3.2015. It is to be seen as to how many projects are impacted by this decision in the State of Maharashtra. The enforceability / legal force of the said MoP's communication and whether it amounts to "Change in Law" needs to be analysed and addressed. The judgment of the individual cases will be dependent on the said issues. On prima-facie reading of the said MoP's communication, it appears that it could have long-term implications on the competitively discovered PPA rates under Section 63 of the Electricity Act, 2003 and also raises the question of "Sanctity of Contracts". Therefore, while each Case needs to be dealt separately based on the facts of that case, overall framework needs to be taken into consideration and the legal approach and methodology to be adopted in all these cases needs to be similar. MERC Order Case No. 167 of 2014 Page 4 of 21

Further, the issue of increasing tariff for compensating shortage of coal will have impact on retail power tariff in the State. The views of Government of Maharashtra should also be sought in these matters. 3.6. Prayas had participated in the proceedings, and had submitted that in none of the cases were there any events which constituted Change in Law, and that the 'Change in Law' related provisions do not apply in the respective Cases. 3.7. The question of applicability of Change in Law provisions effectively questions the core maintainability of the said Petitions and, therefore, goes to the root of the jurisdiction of the Commission. Prayas had also pointed out that the Commission had ruled in an earlier matter (Case No. 50 of 2012) that any advice issued by a Central Ministry to a State Commission is not binding in nature and can only be considered as a guiding principle. Thus, whether to act on such advice or not was the State Commission s discretion. In other words, the Commission would have to make an independent conclusion and not merely rely on such advice. Therefore, it was argued by Prayas that, in case the Commission decides to act on this particular advice (of July, 2013) of the MoP, it will have to establish the reasons for such action and will have to clearly pronounce the legal principles under which it is taking such steps. 3.8. Thus, the main contentions of the Petitioners in Case Nos. 154 and 189 of 2013 were entirely based on the applicability of the provisions of the Change in Law Article of the respective PPAs in the context of the CCEA decision, the advice issued by the MoP and changes made to the NCDP, 2007. Case No.118 of 2013 was filed by a Generator whose PPA is based on imported coal, and hence changes in domestic coal policy are not relevant to its PPA/Case. 3.9. Till February 2014, Case No. 118 of 2013 was not combined with Case Nos. 154 and 189 of 2013. However, through its Daily Order dated 18 February, 2014 the Commission stated the following in Case No.118 of 2013: Heard the advocates of the Petitioners, Respondents and the Consumer Representatives. The Commission is in the process of appointing a Consultant to evaluate the aspects relevant to the above mentioned case, i.e. legal aspects, Sanctity of Contracts under Section 63 of the Act, implications of Ministry of Power s communication dated 31 July 2013, methodology of computation of incremental cost, etc. The Consumer Representatives may submit any specific issues, which need to be included in the Terms of Reference for the Consultant MERC Order Case No. 167 of 2014 Page 5 of 21

at the earliest. The Terms of Reference for the Consultant after approval of the Commission will be made available to all the parties and the Consumer Representatives. The parties and the Consumer Representatives are directed to submit their views on the matters highlighted in the Terms of Reference and discuss the same with the Consultant. After submission of detailed report by the Consultant, the Secretariat of the Commission will communicate the next date of hearing in this matter. A separate hearing with respect to the Judgement of Hon ble ATE in Appeal No. 20 of 2012 will be scheduled after five weeks. 3.10. Regulation 85 of the MERC (Conduct of Business) Regulations, 2004 deals with review of decisions, directions, and orders as follows: 85. (a) Any person aggrieved by a direction, decision or orders of the Commission, from which (i) no appeal has been preferred or (ii) from which no appeal is allowed, may, upon the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the direction, decision or orders was passed or on account of some mistake or error apparent from the face of the record, or for any other sufficient reasons, may apply for a review of such orders, within forty-five (45) days of the date of the direction, decision or orders, as the case may be, to the Commission. (b) An application for such review shall be filed in the same manner as a Petition under these Regulations. (c) The Commission, shall for the purposes of any proceedings for review of its decisions, directions and orders be vested with the same powers as are vested in a civil court under the Code of Civil Procedure, 1908. (d) When it appears to the Commission that there is no sufficient ground for review, the Commission shall reject such review application. (e) When the Commission is of the opinion that the review application should be granted, it shall grant the same provided that no such application will be granted without previous notice to the opposite side or party to enable him to appear and to be heard in support of the decision or orders, the review of which is applied for. 3.11. Mere perusal of the Impugned Order dated 15 July, 2014 in Case Nos. 154, 189 and 118 of 2013 highlights the following apparent errors: a. The Commission has failed to make any findings that there is a Change in Law event, or how any Change in Law related provision is applicable. b. That being a jurisdictional fact must necessarily be decided once such an MERC Order Case No. 167 of 2014 Page 6 of 21

issue is raised. In any event, the same goes to the core of the present matters. c. The Petitions (Case Nos. 154 and 189 of 2013) were based on applicability of Change in Law related provisions of the respective PPAs. In spite of this, the Impugned Order fails to address the key issue regarding enforceability / legal force of the MoP communication and whether it amounts to "Change in Law" as per the respective PPAs. d. Detailed submissions challenging applicability of the Change in Law provisions were made before the Commission. The Impugned Order records that these submissions were made but fails to address them at all, much less give any reasons regarding the applicability/validity or otherwise of these contentions. e. The Impugned Order fails to invoke any legal principles or provisions while deciding a framework for pass-through of costs over and above the PPAagreed tariff. The Order also fails to explicitly mention under what circumstances and which legal or contractual provisions that framework can be made applicable, if at all. f. The Impugned Order does not provide any reasons as to why Case No. 118 of 2013 is being considered along with Case Nos. 154 and 189 of 2013 pertaining to Change in Law regarding domestic coal as the relevant project is based on imported coal. 3.12. A failure to address a jurisdictional issue is in itself an error apparent. On what constitutes an error apparent, the Supreme Court of India in Civil Appeal No. 9439 of 2003 (Sant Lal Gupta & Ors. Vs. Modern Co-operative Group Housing Society Ltd. and Ors.) has ruled as follows: An error apparent on the face of the record means an error which strikes one on mere looking and does not need long drawn out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. Such errors may include the giving of reasons that are bad in law or inconsistent, unintelligible or inadequate. It may also include the application of a wrong legal test to the facts found, taking irrelevant considerations into account and failing to take relevant considerations into account, and wrongful admission or exclusion of evidence, as well as arriving at a conclusion without any supporting evidence. MERC Order Case No. 167 of 2014 Page 7 of 21

3.13. The points listed above highlight lack of reasoning in the Impugned Order regarding key issues raised by both Petitioners and Respondents, which certainly qualifies as an error apparent on the face of the record. Additionally, failure to invoke the necessary legal and /or contractual provisions under which the Commission has acted or decided to act and has developed a framework for passthrough of costs that are over and above the PPA terms and conditions, is also a serious and apparent error. More importantly, these issues also highlight how the Impugned Order is not in compliance with Regulation 74 of the MERC (Conduct of Business) Regulations, 2004, which states that every order made by the Commission shall be a reasoned order. 4. In its Reply dated 4 February, 2015, RIPL has stated that: 4.1. In Case No. 154 of 2013, RIPL s Petition contained elaborate grounds detailing the fact that the decision of the CCEA, the notification of the Central Government amending the NCDP read with the letter dated 31 July, 2007 of the MoP constitute a Change in Law event as per Article 10 of the PPAs dated 22 April, 2010 and 5 June, 2010. 4.2. In respect of the Petition in Case No. 154 of 2013, there can be no question of maintainability as any dispute between a generating company and a Distribution Licensee has to be adjudicated/ decided by the State Electricity Regulatory Commission as per Section 86 (1) (f) of the EA, 2003 4.3. RIPL has also filed a review Petition (Case No. 158 of 2014) on the grounds, interalia, that the Impugned Order dated 15 July, 2014 does not contain findings with respect to the recognition of events such as the CCEA resolution dated 21 June, NCDP 2013 dated 26 July and MoP advice dated 31 July, 2013 as events of Change in Law. 4.4. Since the Impugned Order dated 15 July, 2014 does not contain findings with respect to Change in Law by these events is not a ground concerning jurisdiction of the Commission to pass the Impugned Order dated 15 July, 2014. As per Section 86 (1) (f) of the EA, 2003, any dispute between a generating company and a Distribution Licensee has to be adjudicated/ decided by a State Electricity Regulatory Commission. Jurisdiction of an adjudicatory body falls from the statute. If the statute provides that a Regulatory Commission has to necessarily adjudicate any dispute between a generating company and a Licensee, that cannot be taken away by an argument that a dispute does not pertain to a particular provision under MERC Order Case No. 167 of 2014 Page 8 of 21

a contract. 4.5. The language of Section 86 (1) (f) talks about any dispute which may arise between a generating company and Distribution Licensee to be adjudicated by a Regulatory Commission. This dispute can be held either in favour or against the Petitioner, but this cannot be a question of jurisdiction. A dispute not falling under a particular provision of a contract, as is being alleged by Prayas, is a question to be decided on the merits of a case. 4.6. Prayas is alleging that, since there is no finding of Change in Law in the Impugned Order dated 15 July, 2014, the Commission did not have jurisdiction to pass it. This reasoning is incorrect since, without prejudice to the considered stand of RIPL, the Commission is always vested with regulatory powers under Section 86 (1) (b) to adjudicate such disputes. Thus, Section 86 conferred the jurisdiction on the Commission to pass the Impugned Order dated 15 July, 2014, which jurisdiction could not have been taken away even if the dispute did not fall under any particular provision of the contract or PPA. The existence of jurisdiction has to be determined on the basis of the jurisdictional facts pleaded in the Petition and not the final Order passed by the Commission on the merits of the case. 4.7. The Judgment of the Supreme Court in Civil Appeal No. 9439 of 2003, cited by Prayas, does not support its case on the issue of jurisdiction. As stated earlier, even if a dispute does not fall within a particular provision or a contract or a PPA, that does not mean that there is no jurisdiction vested with the Commission to adjudicate the dispute when such jurisdiction is expressly made out as per Section 86. In this context, RIPL refers to the Judgments of the Supreme Court in Essar Power v. GUVNL reported in (2008) 4SCC755. 5. At the hearing on 24 February, 2015, Prayas set out the background of the Petition. The tariff impact is upwards of Rs. 1,000 crore per year in one Case alone. The Impugned Order is not on firm legal footing, which constitutes an error apparent. In their original Petitions, APML and RIPL had claimed relief in terms of their PPAs on account of Change in Law events. In another Order in Case No. 50 of 2012, the Commission had held that the advice of MoP is not binding, but only a guiding principle. Attention was also drawn to the Commission s RoP and Daily Order dated 19 December, 2013 and 18 February, 2014. In this context, the Commission has not addressed the issue of the legal provisions it relied upon to modify the terms of the competitively bid contract. There are three circumstances under which this might be done: two have been provided in the PPAs, and one under Section 86. The MERC Order Case No. 167 of 2014 Page 9 of 21

Order does not explicitly invoke any of these. That constitutes an error justifying review. The Commission may admit the Petition accordingly, and stay the effect of the subsequent consequential Orders. RIPL reiterated the contentions in its Reply, particularly paras. 4 to 7, to show that the legal foundation of the Impugned Order was not in question. In the original proceedings, RIPL s case was in terms of Change in Law, but the Commission allowed partial compensation (regarding which RIPL has sought review). The statute gives the Commission jurisdiction, and the PPAs recognise that: certain tariff-related disputes are to be adjudicated by the Commission. The Impugned Order cites the circumstances and events with regard to coal supply and the dispensations provided by other Commissions. Prayas responded that a plain reading of the Impugned Order does not show under what powers the jurisdiction was exercised, or even whether the claim of Change in Law was accepted or not. Prayas also pointed out that it had not received a copy of RIPL s Reply. The Commission directed RIPL to serve Prayas, and gave time for a Rejoinder. 6. In its Rejoinder dated 11 March, 2015, Prayas stated as follows: 6.1. Prayas is not disputing the jurisdiction of the Commission to act in such matters, but is highlighting the fact that the Commission cannot act de hors the provisions of the statute and/or the PPAs. The key issue is that, based on mere perusal of the Impugned Order, it is not clear under which provisions of the statute or the PPAs the Commission has exercised its jurisdiction to amend the tariff discovered through a transparent bidding process conducted under Section 63 of the EA, 2003. Under the present scheme of things, the Commission can exercise its jurisdiction to revise a competitively discovered tariff only under the following circumstances: i. In case of a force majeure event, as defined under the provisions of the PPAs; ii. In case of a Change in Law event, as defined under the PPAs; or iii. If the Commission chooses in its sole discretion to exercise its regulatory powers under Section 86. However, such discretion is subject to the provisions of the statute, i.e. the competitive bidding guidelines, the EA, 2003 and the PPAs. The extent to which and whether a Commission can use its regulatory powers to reduce the so-called hardship faced by a winning bidder who is seeking post facto modification to the discovered tariff is a contentious issue, and such actions are presently being challenged before the Appellate Tribunal for Electricity (ATE) in Appeal Nos. 296 of 2013, 218 of 2014 and 166 of 2014. MERC Order Case No. 167 of 2014 Page 10 of 21

6.2. In case of a Change in Law or force majeure event, the PPAs provide for a framework and methodology for pass-through of costs. Therefore, if the Commission is satisfied that such an event has occurred, it will have to rely on the specific provisions of the PPAs to deal with the costs arising on account of such event. However, if the Commission feels compelled to exercise its regulatory powers under Section 86, it will have to first establish the need and extent of such relief and also provide enough reasons to justify such action. Thus, it follows that the choice of framework or methodology to be adopted for granting relief, if any, concerns the issue of exercise of jurisdiction, i.e. under which provisions of the statute or the PPAs the Commission has chosen to grant relief. 6.3. However, the Impugned Order fails to provide any reasons for the Commission s decision to develop a framework for granting compensatory tariff over and above the PPA agreed rates. Further, the Impugned Order merely cite judgements of other Commissions as well as the decision of the CCEA, advice by the CERC to the MoP and a letter written by the Secretary, MoP to State Commissions. However, none of these Orders or letters or decisions are binding on the Commission in any manner, nor can these mere citations qualify as a reason for developing the framework for granting compensatory tariff. Further, the need to clearly and unambiguously establish the jurisdiction becomes even more crucial in such a matter where such actions of the Commission: a) Are likely to impose large tariff burden on the consumers; b) May result in significant financial benefit to the project developers who have knowingly and willingly taken such risks to win contracts, and are seeking post-facto changes to competitively discovered tariff; c) Grant relief beyond the scope and provisions of the PPAs and, d) May set a precedent for future competition in the sector. 6.4. In light of the above factors, it becomes critical for the Commission to clearly and unambiguously establish the reasons, along with the legal provisions, under which it is providing relief over and above the PPA terms and conditions. Unfortunately, the Impugned Order, while imposing large tariff burden on consumers, fail to provide adequate reasons for any of the issues above. Therefore, it is a serious violation of principles of natural justice, and also a decision that is bad in law and an error apparent on the face of record, and hence merits review by the Commission. This also is a serious violation of the Commission s Conduct of Business Regulations, which mandates that all Orders issued by the Commission shall be reasoned Orders. MERC Order Case No. 167 of 2014 Page 11 of 21

6.5. Lastly, the submission of RIPL that, though the Change in Law related claims have not been addressed in the Impugned Order, Prayas cannot raise this issue as it is not impacted by this decision, is highly inappropriate and legally untenable. The decision of the Commission to grant compensatory relief over and above the PPA agreed tariff will impose an additional tariff burden of more than Rs. 2,000 crore per year on consumers of the Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL). Therefore, the consumers are the primary party affected on account of the Impugned Order. Further, there is no question of locus standi of Prayas, as it is at the behest of the Commission that Prayas was made a party to the proceedings pertaining to Case Nos. 154 and 189 of 2013 and has made studied submissions which, though not dealt with, are well documented in the Impugned Order. Thus, there is no issue of locus standi as any person aggrieved by an Order or decision or direction can file a review Petition so long as the conditions for review are fulfilled. Not issuing a reasoned Order and/or not addressing key prayers of any of the parties concerned (not just the Petitioners) is an error apparent on the face of record and hence merits a review, as is being sought by Prayas. Therefore, the argument that Prayas cannot raise such issues is not only legally untenable but also inappropriate and objectionable, as it seeks to prevent consumers from participating in such crucial regulatory processes. Moreover, such demand is against the letter and spirit of the EA, 2003, which explicitly encourages the Commissions to designate individuals and/or organisations to participate in the regulatory processes and represent consumer and public interest. 7. Vide its additional submission dated 20 March, 2015, RIPL has stated as under: 7.1. Under Section 86 (1) (f), any dispute between a generating company and a Licensee has to be adjudicated/ decided by a State Electricity Regulatory Commission. Jurisdiction before an adjudicatory body falls from the statute. If the statute provides that a Commission has to necessarily adjudicate any dispute between a generating company and a Licensee, the same cannot be taken away by an argument that a dispute does not pertain to a particular provision under a contract. The language of Section 86 (1) (f) talks about any dispute which may arise between a generating company and Licensee to be adjudicated by a Regulatory Commission. This dispute can be held either in favour or against the aggrieved party, but this cannot be a question of jurisdiction. This issue has been conclusively dealt with by the Supreme Court reported in (2008) 4SCC755 (Gujarat Urja Vikas Nigam Ltd. vs. Essar Power Ltd.): MERC Order Case No. 167 of 2014 Page 12 of 21

56.In the present case we have already noted that there an implied conflict between Section 86(1)(f) of the Electricity Act, 2003 and Section 11 of the Arbitration and Conciliation Act, 1996 since under Section 86(1)(f) the dispute between licensees and generating companies is to be decided by the State Commission or the arbitrator nominated by it, whereas under Section 11 of the Arbitrary and Conciliation Act, 1996, the Court can refer such disputes to an arbitrator appointed by it. Hence on harmonious construction of the provisions of the Electricity Act, 2003 and the Arbitration and Conciliation Act, 1996 we are of the opinion that whenever there is a dispute between a licensee and the generating companies only the State Commission or Central Commission (as the case may be) or arbitrator (or arbitrators) nominated by it can resolve such a dispute, whereas all other disputes (unless there is some other provision in the Electricity Act, 2003) would be decided in accordance with Section 11 of the Arbitration and Conciliation Act, 1996. This is also evident from Section 158 of the Electricity Act, 2003. However, except for Section 11 all other provisions of the Arbitration and Conciliation Act, 1996 will apply to arbitrations under Section 86(1)(f) of the Electricity Act, 2003 (unless there is a conflicting provision in the Electricity Act, 2003, in which case such provision will prevail.) 57. In the present case, it is true that there is a provision for arbitration in the agreement between the parties dtd. 30.5.1996. Had the Electricity Act, 2003 not been enacted, there could be no doubt that the arbitration would have to be done in accordance with the Arbitration and Conciliation Act, 1996. However, since the Electricity Act, 2003 has come into force w.e.f. 10.6.2003, after this date all adjudication of disputes between licensees and generating companies can only be done by the State Commission or the arbitrator (or arbitrators) appointed by it. After 10.6.2003 there can be no adjudication of dispute between licensees and generating companies by anyone other than the State Commission or the arbitrator (or arbitrators) nominated by it. We further clarify that all disputes, and not merely those pertaining to matters referred to in Clauses (a) to (e) and (g) to (k) in Section 86(1), between the licensee and generating companies can only be resolved by the Commission or an arbitrator appointed by it. This is because there is no restriction in Section 86(1)(f) about the nature of the dispute. 58. We make it clear that it is only with regard to the authority which can adjudicate or arbitrate disputes that the Electricity Act, 2003 will prevail over Section 11 of the Arbitration and Conciliation Act, 1996. However, as regards, the procedure to be followed by the State Commission (or the arbitrator nominated by it) and other matters related to arbitration (other than appointment of the arbitrator) the Arbitration and Conciliation Act, 1996 will apply (except if there is a conflicting provision in the Act of 2003). In other words, Section 86(1)(f) is only restricted to the authority which is to adjudicate or arbitrate between licensees and generating companies. Procedural and other matters relating to such proceedings will of course be governed by Arbitration and Conciliation Act, 1996, unless there is a conflicting provision in the Act of 2003. MERC Order Case No. 167 of 2014 Page 13 of 21

7.2. The issue of jurisdiction is also dealt with in the Competitive Bidding Guidelines and also the PPAs. Para. 5.17 of the Guidelines reads as follows: Arbitration 5.17 Where any dispute arises claiming any change in or regarding determination of the tariff or any tariff related matters, or which partly or wholly could result in change in tariff, such dispute shall be adjudicated by the Appropriate Commission. All other disputes shall be resolved by arbitration under the Indian Arbitration Act, 1996. 7.3. The Competitive Bidding Guidelines and Standard Bidding Documents, which includes the PPA, are all recognised and made part of section 63 of the EA, 2003. According to Article 14.3.1 of the PPAs: 14.3.1 Where any Dispute (i) arises from a claim made by any Party for any change in or determination of the Tariff or any matter related to Tariff or claims made by any Party which partly or wholly relate to any change in the Tariff or determination of any of such claims could result in change in the Tariff or (ii) relates to any matter agreed to be referred to the Appropriate Commission under Articles 4.9.1, 103, 15.3 or clause 12.9.4 of Schedule 12 hereof, such Dispute shall be submitted to adjudication by the Appropriate Commission. Appeal against the decisions of the Appropriate Commission shall be made only as per the provisions of the Electricity Act, 2003, as amended from time to time. 7.4. Hence, the allegation regarding issue of jurisdiction is wrong. This Clause of the PPAs reveals the following: i. That there indeed can be a change in or determination of tariff. ii. There can be claims that a party can make, which may result in change of tariff. iii. The State Commission and not the Arbitrators will have jurisdiction to decide matters relating to change in or determination of tariff. iv. Article 14.3.2 specifically provides a mechanism for Arbitration on matters which are not covered under Article 14.3.1. Clearly, the parties to the PPAs recognise that tariff determined through Section 63 of EA, 2003 process can be the subject matter of determination and/or change. Also, such determination or change cannot be brought in privately, through an arbitral route, but would require the judicial intervention of the statutory Commission. MERC Order Case No. 167 of 2014 Page 14 of 21

7.5. The jurisdictional basis for filing the Petition cannot be questioned. Article 14.3.1 is recognition of the law relating to jurisdiction of the statutory Commission as provided in the EA, 2003. Apart from Article 14.3.1, the recognition of the Commission s jurisdiction on matters relating to change in or determination of tariff is also recognized in paragraph 5.17 of the Competitive Bidding Guidelines issued by the Central Government. 7.6. Prayas has alleged that the Commission has failed to render any finding that there is a 'Change in Law' event, and hence there is a jurisdictional error for which the review has to be allowed. It is also alleged that the Petitions in Case Nos. 154 and 189 of 2013 were clearly based on applicability of Change in Law provisions of the respective PPAs. It is alleged that, in spite of the same, the Impugned Order fails to address the key issue regarding enforceability/ legal force of the MoP s communication and whether it amounts to Change in Law as per the respective PPAs. This is misconceived since the Impugned Order has not proceeded on the basis of the Change in Law principles given in the PPAs. It is the case of RIPL, which is the subject matter of a separate review Petition wherein RIPL has highlighted the fact that the Commission erred in not considering the case under the Change in Law provisions in the PPAs. Be that as it may, the Commission in paras. 7.1 to 7.3 of the Impugned Order has taken judicial notice of judgments passed by the ATE, the Uttar Pradesh Electricity Regulatory Commission (UPERC) and the CERC in cases relating to shortfall in coal supply and the consequential arrangements that were permitted under those Orders. The Commission has proceeded to exercise its regulatory powers under the statute to address certain concerns of the power developer. Such regulatory powers have also been used by the Commission in the case of Adani Power Maharashtra Ltd vs. MSEDCL in Case No. 68 of 2012. 7.7. The Commission's jurisdiction is vested under the statute. While adjudicating a dispute relating to tariff, the Commission can exercise its regulatory jurisdiction in a manner that ensures recovery of cost of generation in a reasonable manner as enshrined in Section 61. In para. 23 of the Order dated 15 July, 2014 in Case No. 154 of 2013, the Commission has held as follows: 23. The Commission is aware of acute shortage of domestic coal and the need to import coal for making power available to the Consumers in the State of Maharashtra. However, the Commission is not keen to set aside the Tariffs discovered through competitive MERC Order Case No. 167 of 2014 Page 15 of 21

bidding and create a situation where contractual obligations agreed to by both the parties in the PPA are reopened... 7.8. Therefore, the allegation of Prayas that the Commission did not have the requisite jurisdiction to deal with the case is wrong. However, while the State Commission has the regulatory jurisdiction to deal with the matter in the manner it has, RIPL is entitled to recovery of all costs under the Change in Law provision in the terms envisaged therein so as to place it in the same economic position which existed 7 days prior to the bid deadline. In this context, RIPL relies upon the submissions made in its review Petition in Case No. 158 of 2014. 7.9. Prayas is alleging that, since there is no finding of Change in Law in the Impugned Order, the Commission did not have jurisdiction to pass that Order. This reasoning is incorrect since, without prejudice to the stand of RIPL in its review Petition, the Commission is always vested with regulatory powers under Section 86 (1) (b) to adjudicate such disputes. Thus, Section 86 of the EA, 2003 conferred jurisdiction on the Commission to pass the Impugned Order dated 15 July, 2014, which jurisdiction cannot be taken away. The existence of jurisdiction has to be determined on the basis of the jurisdictional facts pleaded in the Petition and not the final Order passed by the Commission on the merits of the case. 7.10. The Judgment of the Supreme Court in Civil Appeal No. 9439 of 2003 (Sant Lal Gupta & Others vs Modern Cooperative Group Housing Society Ltd. & Ors), which has been relied upon by Prayas, does not support it on the issue of jurisdiction. In fact, it goes against Prayas in as much as it states that an error apparent on the face of the record means an error which strikes one on a mere looking and does not need a long drawn out process of reasoning on points. 7.11. It is denied that the decision of the Commission will impose an additional tariff impact of more than Rs.2,000 Crore per year on MSEDCL consumers. On the contrary, RIPL will be subject to irreparable injury and suffering if its contractual and legitimate claims on account of Change in Law events of CCEA decision read with amendment to the NCDP are not considered in their entirety as claimed in its review Petition in Case No.158 of 2014. 8. Commission s Analysis and Rulings 8.1. Prayas has raised the following issues as grounds for review of the Impugned Order dated 15 July, 2014 in Case Nos. 118, 154 and 189 of 2013: MERC Order Case No. 167 of 2014 Page 16 of 21

A. The Commission has failed to make any findings that there is a Change in Law event, or how any Change in Law-related provision is applicable. B. The Impugned Order does not address the issue of enforceability or legal force of the MoP communication, and whether it amounts to Change in Law as per the respective PPAs. C. The Impugned Order fails to invoke any legal principles or provisions while deciding a framework for pass-through of costs over and above the PPAagreed tariff. The Order also does not state under what circumstances and which legal or contractual provisions such framework can be made applicable, if at all. D. The Impugned Order is not in compliance with Regulation 74 of the MERC (Conduct of Business) Regulations, 2004 which states that every order made by the Commission shall be a reasoned order. 8.2. Regulation 85 of the MERC (Conduct of Business) Regulations, 2004 governing review reads as follows: 85. (a) Any person aggrieved by a direction, decision or order of the Commission, from which (i) no appeal has been preferred or (ii) from which no appeal is allowed, may, upon the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the direction, decision or order was passed or on account of some mistake or error apparent from the face of the record, or for any other sufficient reasons, may apply for a review of such Order, within forty-five (45) days of the date of the direction, decision or order, as the case may be, to the Commission. The ambit of review is, therefore, limited. The Commission s Regulations governing review are in line with the provisions of Order 47 of the Civil Procedure Code. In the case of S. Bagirathi Ammal Vs. Palani Roman Catholic Mission ((2009) 10 SCC 464), the Supreme Court has held as follows with regard to the claim of error apparent as a ground for review: An error contemplated under Rule of Orders 47, CPC for permissibility of review must be such which is apparent on the face of the record and not an error which has to be fished out and searched. In other words, it must be an error of inadvertence. It should be something more than a mere error and it MERC Order Case No. 167 of 2014 Page 17 of 21

must be one which must be manifest on the face of record. When does an error cease to be mere error and becomes an error apparent on the face of the record depends upon the materials placed before the court. If the error is so apparent that without further investigation or enquiry, only one conclusion can be drawn in favour of the applicant, the review will lie. Under the guise of review, the parties are not entitled to rehearing of the same issue but the issue can be decided by the perusal of the records and if it is manifest. It can be set right by reviewing the Order. The above principle of review jurisdiction has to be kept in view while deciding the present Petition. 8.3 Grounds A and B 8.3.1 In its Petition in Case No. 154 of 2013, RIPL s prayers were as follows: a. direct the Respondent to adopt the Change in Law in terms of the PPA dated 22 nd April 2010, and adjust tariff to the extent necessary to enable procurement of coal from sources other than the linkage coal, in the terms of the Petitioner s letter dated 21 st September 2013, being Annexure P-11 hereto; b. adopt the fuel cost adjustment formula provided in Schedule at Annexure P- 10 of this Petition and allow compensation in terms of the said formula, so as to give effect to increase in variable cost and all other consequential cost and expenses thereto, in relation to supply of power under the PPAs dated 22 nd April 2010 and 5 th June 2010.5 th June 2010. c. in the alternative to the prayer (b) above, provide a mechanism to be implemented for allowing adequate periodic compensation to the Petitioner that shall offset the incremental cost of procuring fuel from alternative sources to meet the shortfall in quantity and quality of coal actually supplied under linkage by SECL from time to time as against the quality and quantity of coal that was agreed to be supplied under the LoAs; d. direct implementation of a mechanism to allow as pass through the actual additional capital expenditure that may be incurred by the Petitioner for setting up of additional infrastructure equipment for blending domestic coal with imported coal due to shortfall in supply of domestic coal under linkage; It may be noted that, at para. 17 of its Petition, RIPL also stated that Without prejudice to the aforesaid [the claim for relief under the Change in Law provision], and in the alternate the Petitioner submits that this Hon ble Commission has the jurisdiction to determine tariff and/or any component thereof in exercise of powers vested in section 86(1)(a) and section 86(1)(b) of the Electricity Act, 2003... while contractual recourse is available to the Petitioner under change in law MERC Order Case No. 167 of 2014 Page 18 of 21

clause of the PPAs, this Hon ble Commission additionally has regulatory powers to adjust tariff in a manner that offsets the additional cost... 8.3.2 In its Petition in Case No. 189 of 2013, APML had prayed for the following: a) Approve the Operational Methodology proposed for calculation of incremental energy charge as compensation and direct the Respondents to pay the revised tariff based on the pass through mechanism proposed herein for the actual cost of generation for the power supplied by using imported coal / e-auction coal / open market coal purchased on account of shortfall in domestic coal supply through linkage at notified prices for Power Sector under PPA s dated 31.03.2010, 09.08.2010 and 16.02.2013 from the date of commencement of power supply under the respective PPA s.;... At para. 34 of its Petition, APML had also stated that 34. The petitioner humbly submits that coal being a nationalized commodity in India any Change in Law relating to distribution of coal has to be taken cognizance of by the Hon ble Commission. Such cognizance has to be taken in term of the provisions of the PPAs as well under the provisions of the Electricity Act, 2003. In this case, the Central Government has itself conceded that the departure of Central Government companies like CIL and its subsidiaries from their commitments to supply coal to power producers like the Petitioner has to be addressed through appropriate adjustment in tariff and cannot be to the account of the power producer. This fact goes to the very root of the PPAs between the parties which are based on supply of domestic coal assured by the Government by prior notification, and now required to be addressed by exercise of regulatory and adjudicatory powers of the Hon ble Commission. It is submitted that while contractual recourse is available to the Petitioner under the Change in Law clause of the PPAs, this Hon ble Commission, notwithstanding the same, has the regulatory powers to adjust the tariff in a manner that offsets the additional cost incurred by the Petitioner for meeting its commitment under the PPA. 8.3.3 Thus, in their Petitions in Case Nos. 154 and 189 of 2013, respectively, both RIPL and APML had sought that, notwithstanding their claims of Change in Law in terms of the respective PPAs, the Commission invoke its regulatory powers, in the alternative, to enable adjustment of the tariff in a manner that would offset the additional cost incurred by them. 8.3.4 In its Impugned Order dated 15 July, 2014 in those Cases, the Commission stated (in para 8) that The MoP advice dated 31 July, 2013 could have long-term implications on the competitively discovered PPA rates under Section 63 of the MERC Order Case No. 167 of 2014 Page 19 of 21

Electricity Act, 2003 and also raises the question of Sanctity of Contracts Further, para. 23 of the Order states that The Commission is aware of acute shortage of domestic coal and the need to import coal for making power available to the Consumers in the State of Maharashtra. However, the Commission is not keen to set aside the Tariffs discovered through competitive bidding and create a situation where contractual obligations agreed to by both the parties in the PPA are reopened. 8.3.5 Having thus considered the amendment to the NCDP, 2007, resulting from the CCEA decision and reflected in the MoP advice, as being de hors of the PPAs (whose provisions govern the treatment of Change in Law events), the Commission proceeded in Case Nos. 154 and 189 of 2013 to stipulate, as an alternative, a framework for treatment of shortfall in the quantity of linkage coal for providing a compensation in tariff, including compensatory fuel charges. (Prayas also participated in the process leading to that framework, although it might not have been in agreement with it.) This approach underlies the Impugned Order dated 15 July, 2014 and, contrary to Prayas averments, has been expressly stated by the Commission. That being the case, Grounds A and B cited by Prayas as justifying review are not well-founded, having been addressed in the Impugned Order. 8.4 Grounds C and D 8.4.1 In citing Grounds C and D as justification for review, Prayas is in effect also questioning the basis on which the Commission passed the Impugned Order and the powers invoked by the Commission while deciding a framework for pass-through of costs over and above the PPA-agreed tariff, and thus going beyond the limited scope of review. 8.4.2 Under the EA, 2003, the Commission has been vested with dual roles, i.e. the role of a quasi-judicial body in adjudicating disputes and other matters, and the role of a regulator for implementing the wider mandate of the statute. While Section 86(1)(f) refers to its role in adjudication of disputes between Licensees and Generating Companies, Section 86(1)(b) requires it to regulate the electricity procurement process including the procurement price. While Section 61(d) is specifically for guiding the Commission s regulations with regard to tariff determination, its reference to the safeguarding of consumer interest along with recovery of the cost of electricity in a reasonable manner must also be noted. MERC Order Case No. 167 of 2014 Page 20 of 21