Public interest limits withdrawal of power purchase approval claims; tariff and capital cost must still be decided on merits.

A state utility could not withdraw its approval application for a continuation agreement after the counterparty had altered its position and invested on the basis of long-standing assurances that the entire generated power would be procured. The withdrawal, sought after hearing and reservation of orders, was treated as inconsistent with earlier conduct, prejudicial to the counterparty, and contrary to public interest. The regulatory commission was also required to examine the tariff petition independently on merits, because approval of the arrangement and determination of tariff and capital cost remain subject to statutory scrutiny for fairness, reasonableness, and consistency with the regulatory framework. The merits-based tariff and capital cost issues therefore had to be decided by the State Commission.

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Issues: (i) whether the appellants could be permitted to withdraw the petition seeking approval of the continuation agreement and thereby defeat the respondent's pending claim for tariff determination; (ii) whether the State Commission was justified in declining to dispose of the respondent's tariff petition on the basis of that withdrawal and in leaving the tariff and capital cost issues to be decided on merits.

Issue (i): whether the appellants could be permitted to withdraw the petition seeking approval of the continuation agreement and thereby defeat the respondent's pending claim for tariff determination.

Analysis: The agreements and correspondence showed a consistent stand over several years that the entire generated power would be procured by the distribution licensees, and the respondent altered its position and invested substantial resources on that basis. The withdrawal request was made after the matters had been heard and reserved for orders, and the grounds later relied upon were already available earlier. In these circumstances, the attempted withdrawal was held to be contrary to the appellants' earlier conduct, inconsistent with public interest, and not permissible as it would prejudice the respondent's accrued position.

Conclusion: The appellants were not entitled to withdraw the approval proceedings.

Issue (ii): whether the State Commission was justified in declining to dispose of the respondent's tariff petition on the basis of that withdrawal and in leaving the tariff and capital cost issues to be decided on merits.

Analysis: Approval of a power purchase arrangement and determination of tariff remain subject to statutory regulatory scrutiny. The Commission must examine whether the arrangement serves public interest and whether the capital cost and tariff are fair, just, and consistent with the governing regulatory framework. Since the respondent's tariff petition was independently maintainable and the tariff could not be finally determined merely by the attempted withdrawal of the appellants' related application, the issues required adjudication on merits.

Conclusion: The State Commission was required to decide the tariff and capital cost matters on merits.

Final Conclusion: The challenge to the appellate tribunal's direction failed, and the regulatory proceedings concerning approval of the arrangement and determination of tariff were left to be decided by the State Commission in accordance with law.

Ratio Decidendi: In proceedings for approval of a power purchase arrangement and tariff determination, a state instrumentality cannot withdraw its application after having induced the counterparty to alter its position and after the matter has been reserved for orders, where such withdrawal would be arbitrary, contrary to public interest, and inconsistent with the regulatory scheme requiring merits-based scrutiny of tariff and capital cost.

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