Domestic coal basis in power PPAs can trigger change in law compensation and carrying cost when supply assurances are diluted.

A power procurement bid and PPA were treated as based on domestic coal as the primary fuel, because the bidding documents, pre-execution clarifications, LOI, executed PPA, and regulatory adoption order all reflected that common basis. The later non-availability of domestic coal and policy dilution of supply assurances were held to constitute a change in law, entitling the affected party to compensation and carrying cost on a restitutionary basis. The contractual late payment surcharge was moderated to interest at SBAR, capped at 9% per annum and compounded annually, resulting in only limited relief on that component.

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Issues: (i) Whether the bid and PPA were premised on domestic coal as the primary fuel; (ii) whether non-availability of domestic coal and the subsequent coal policy changes constituted a change in law entitling compensation and carrying cost; (iii) whether the liability towards late payment surcharge required modification.

Issue (i): Whether the bid and PPA were premised on domestic coal as the primary fuel.

Analysis: The bidding documents, clarification exchanged before execution of the PPA, the Letter of Intent, the executed PPA, and the regulatory adoption order all indicated that the bid was evaluated on the basis of domestic coal. The imported coal arrangement functioned as a fallback or eligibility arrangement and did not alter the contractual basis on which tariff was accepted. The parties acted on the common understanding that domestic coal was the primary fuel and that domestic coal escalations would govern the tariff structure.

Conclusion: The bid and PPA were held to be premised on domestic coal, in favour of the respondent.

Issue (ii): Whether non-availability of domestic coal and the subsequent coal policy changes constituted a change in law entitling compensation and carrying cost.

Analysis: The change in law clause was construed in the context of the pre-bid policy regime, the later dilution of coal supply assurances, and the principle that compensation must restore the affected party to the same economic position as if the change had not occurred. The later policy framework and the revised coal allocation regime were treated as changes in domestic law affecting the contractual fuel arrangement. The Court also applied the restitutionary basis recognised in earlier power tariff decisions and held that carrying cost follows from the same principle where payment is deferred because of the change in law event.

Conclusion: Compensation for change in law and carrying cost were upheld in favour of the respondent.

Issue (iii): Whether the liability towards late payment surcharge required modification.

Analysis: Although the contract provided for late payment surcharge at a higher contractual rate, the Court considered the overall equities, the delayed crystallisation of the claim, and the need to avoid excessive burden. It therefore moderated the rate to interest at SBAR, capped at 9 per cent per annum, compounded annually.

Conclusion: The contractual late payment surcharge was modified, partly in favour of the appellant.

Final Conclusion: The concurrent findings on the fuel basis and change in law compensation were maintained, while the interest component was moderated, resulting in only a limited relief to the appellants.

Ratio Decidendi: Where a power procurement bid and PPA are based on domestic coal, later dilution of the assured domestic coal regime constitutes a change in law, and compensation must restore the affected party to its original economic position, including carrying cost, subject to contractual proof and quantification.

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