Supreme Court: CERC Tariff Cap Cannot Override Free Power Clauses in Power Purchase Agreements

The Supreme Court has held that tariff regulations set by the Central Electricity Regulatory Commission (CERC) cannot override a state’s contractual entitlement to free power under a Power Purchase Agreement (PPA).

In a dispute between JSW Hydro Energy and Himachal Pradesh, the Court reinstated the state's contractual right to receive 18% free power, overturning a lower order that had reduced it to 13% citing CERC tariff guidelines.

The Court clarified that regulatory frameworks under the Electricity Act cannot dilute binding PPA terms agreed by the parties. (State of Himachal Pradesh v. JSW Hydro Power)