' MUHAMMAD IQBAL KALHORO, J.--In these petitions the common question that calls for determination pertains to the authority of the respondent No,2/National Electric Power Regulatory Authority (for short, NEPRA) to determine tariff in respect of Captive Power Plants (CPPs) and New Captive Power Plants (N-CPPs) commonly known as Small Power Producers (SPPs). To make a point that in petitioners' case the NEPRA has no authority to determine tariff, reference has been made to Power Acquisition Requests submitted by the respondent No,3/Hyderabad Electric Supply Corporation (for short, HESCO) to the NEPRA seeking permission to purchase power; and Power Procumbent Agreements signed by the petitioners and HESCO for purchase of electric power service. On the basis of these documents, the petitioners have impugned 2012 notice (replacing tariff policy of 2007) and determinations (fixing tariff rates) dated 30.05.2013.
2. The facts narrated in all these petitions are somewhat similar to each other except difference in the name and description of the companies or their locations (for instance in C.P. D-No,1434/2013, the distribution company is Faisalabad Electric Supply Company /FESCO and C.P No,D-3273/2013, it is Sukkur Electric Supply Company Ltd/SEPCO ) or where dates of Power Acquisition Requests and Power Procurement Agreements are cited, the same are reproduced herewith briefly in general terms, the object is to maintain necessary context of the issue, which is legal one, for convenience and understanding. The petitioners are different companies incorporated under the laws of Pakistan within the definition of either Captive Power Plants or New Captive Power Plants. Captive Power Plant in technical parlance means industrial undertakings or other business concerns carrying out the activity of power production for self-consumption, who intend to sell power, surplus to their requirement, to a Distribution Company or a Bulk Power Consumer. To control the persistent energy crises, the NEPRA in pursuance of sections 32 and 47 of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (for short, the Act, 1997) made Interim Power Procurement (Procedures and Standards) Regulations, 2005 (for short 2005 Regulations) for carrying out its functions and to prescribe power procurement procedures and the standards for the companies involved in transmission and distribution of power till framing of relevant rules by the Federal Government. As per mechanism provided therein, the transmission and distribution companies could on the basis of Power Acquisition Request get approval from NEPRA for purchasing electricity from generation companies at the most effective price. This was to allow distribution companies to purchase power from small power producers at competitive rates with minimum oversight. To overcome energy crises NEPRA caused a notice published in daily Dawn dated 15.06.2007 whereby allowing Captive Power Plants having surplus power up to 50 Mega Watt generation capacity to sell power to the buyers at mutually agreed rates. Responding to that notice, it is stated, the petitioners approached the Central Power Procurement Agency (hereinafter referred to CPPA) that was responsible for procurement of power on behalf of distribution companies for generation license that was accordingly issued to the petitioners and it is the case of the petitioners that pursuant to the Article 6 of the Generation License and in line with the terms of Power Procurement Agreements they were allowed to charge mutually agreed tariff. Therefore, the petitioners agreed to sell electricity to HESCO on the terms and conditions as set out in the Power Procurement Agreement. In the year 2009 a policy was issued by the Pakistan Electric Power Company (Private) Ltd. (PEPCO) for New Capital Power Producers to further improve scheme for purchasing power from Captive Power Plants and to encourage New Captive Power Plants to sell power from 10 Mega Watt to a maximum of 49 M.W to distribution and transmission companies out of total capacity available at a single location. That policy it is said, envisaged various incentives to the New Captive Power Plants through bilateral agreements. The petitioners after finding the said incentives favorable, invested huge amounts of money in establishing installations for producing the electricity. Contrary to that, NEPRA circulated a notice dated February 1, 2012 whereby it modified the permission granted through the 2007 notice in respect of determination of tariff to the effect that all SPPs/N-CPPs intending to sell electric power to DISCOS/CPPA/BPCs (Bulk Power Consumer) were required to approach NEPRA directly for determination of tariff under Tariff (Standards and Procedures) Rules, 1998 (hereinafter referred to as 1998 Rules) or through distribution companies/CPPA under 2005, Regulations. It is that notice and the subsequent determination of tariff by NEPRA passed on Power Acquisition Requests submitted by the HESCO to purchase power that the petitioners are aggrieved with. The petitioners have stated that such determination of tariff amounts to reneging on the earlier promise made by the NEPRA in the 2007 notice that had allowed the petitioners to charge the tariff as mutually agreed between them and HESCO. It is the claim of the petitioners that such exercise by the NEPRA is illegal, arbitrarily and is interfering in the payment of Fuel Cost Component and it is also against the commitments made to the petitioners who were made to believe that the tariff rates would be determined mutually by them with the distribution companies. Due to such notice the petitioners have come under severe financial constraints and are not able to honour their commitments. It is also the claim of the petitioners that they have invested huge capital in the New Captive Power Plants with a clear understanding and knowledge that the tariff would not be unilaterally determined by the NEPRA, as it was against the terms and conditions of the Power Procurement Agreements.
3. The respondents have filed their Para-wise comments, according to which, under Rule 6 of the National Electric Power Regulatory NEPRA Licensing (Generation) Rules, 2000 (for short, Rules, 2000), a licensee can charge only such tariff that is approved by NEPRA. Generation license to the companies was approved by NEPRA through a determination that contains a specific mention that grant of license will be subject to the provision of the Act, 1997 and the Rules framed thereunder, the said determination also provides for that deciding tariff, rate and charges etc. For sale of electricity by the generation companies/New Captive Power Plants shall be responsibility of NEPRA in terms of section 7 (3) of the Act, 1997. As per scheme of Sections 32 and 47 of the Act, 1997, 2005 Regulations are framed whereby the contracts relating to sale of power by generation companies to the distribution and transmission companies have been made subject to the approval by the NEPRA. Under the permission of NEPRA, the transmission or distribution companies are allowed to negotiate with the generation company the terms and conditions of Power Acquisition Contract but before executing such contracts they are required to seek approval from NEPRA in terms of 5(1) of 2005 Regulations. All such contracts are required to have a statement disclosing justification of the rates, terms and conditions proposed to be agreed with the sponsor. After a thorough examination of all related aspects NEPRA grants approval of the Power Procurement Agreement and allows Transmission Company to enter into the sale/purchase contract with the generation companies. Regarding 2007 Notice, it is stated that it was issued whereby the distribution and transmission companies were permitted to purchase idle capacity of captive unit in the country on mutually agreed rates without compromising the consumer-end tariff. In the year 2009, PEPCO framed a Financial Model in the name of NCCP Policy whereby certain advantages and incentives were extended to certain selected companies. Although the distribution companies were allowed to purchase power from the Captive Power Plants on mutually agreed rates but prior approval from NEPRA was mandatory under the law which was not sought by the power purchasers before entering into the Power Procurement Agreements. It has been pointed out, that under the Act, 1997 the rates approved by NEPRA become effective when they are notified in the Official Gazette by the Federal Government. It is claimed that the petitioners do not fall within the definition of Captive Power Plants but are the generation facility established to sell electricity. When electricity is to be sold to an entity, which then sells it to general public, NEPRA gets fully empowered to determine tariff in terms of Sections 7 and 31 of the Act, 1997 r/w 6 of 2000 Rules. Since in the cases in hand the electricity was proposed to be sold to HESCO, it was specifically directed through determination dated 03.01.2011 that notwithstanding proposal of any tariff in any document the tariff, which shall be applicable, would be determined and approved by the NEPRA being sole authority under the Act, 1997. It is also stated that determining tariff by Government or any Government Agency would be inconsistent with the provisions of Sections 7(3) and 12 of the Act, 1997. That was the reason why in the present cases NEPRA did not accept the tariff and directed the distribution companies to file the draft Power Procurement Agreements to be signed with the generation companies, they proposed to purchase electricity from, for approval in terms of 2005 Regulations. Pursuant to such directions, HESCO filed Power Acquisition Request along with the copy of signed Power Procurement Agreements. In terms of Section 7(6) of the Act, 1997 and in accordance with 2005 Regulations NEPRA while approving the draft Power Procurement 'Agreements protected the interests of the end-consumers by rationalizing the generation tariff agreed by the petitioners and HESCO, which was essentially done on the basis of information provided by the petitioners; and as per the benchmarks established by NEPRA relating to gas-based Independent Power Projects (IPPs).
Regulation 4(1) of 2005 Regulations stipulates that the power procurement company will have to seek permission from NEPRA before negotiating the Power Procurement Agreement and considering the demand supply gap, the unanimous permission is granted to the distribution companies; however in compliance of regulation 5 of 2005 Regulations the distribution company needs to submit the draft Power Procurement Agreement to NEPRA for approval. While examining the Power Procurement Agreements in the present case, NEPRA noted that reference Fuel Cost Component was negotiated without proper working and analysis and no criterion regarding efficiency was adopted in the financial model/policy and the impact of low underline efficiency was not evaluated while agreeing the fuel cost. The most important factor of thermal efficiency was entirely ignored hence in order to assess the actual efficiency of the power plant, technical information including brochures of manufacturers of the equipment were sought from the petitioners and after analyzing every bit of documents, the NEPRA adopted the thermal efficiency of 37.5% in simple cycle mode and 43% in combined cycle mode. As regards to Fix Cost Component the distribution companies were directed to justify the same however, on their failure NEPRA decided to determine the same on the basis of established benchmark applicable in the case of IPPs. Since the gas is precious fuel, hence NEPRA decided to allow the fuel cost component from 1st December 2013 on combined cycle mode to benefit the end-consumer. As the fixed cost component was on higher side resulting in additional burden on the end-consumers, NEPRA in terms of section 7(6) of the Act, 1997 acted not only to strike balance amongst the investor and consumer but to protect the consumer from lower efficiency and higher fixed cost component that was agreed without any basis and documentary evidence and was allowed merely on the basis of the manufacturer's documents submitted by the petitioners as well as their return on equity and financing cost along with interest payment. In the comments of the respondents reference to section 72 of Contract Act, 1872 has also been made to indicate that petitioners cannot take undue advantage of the rates proposed by any other agency except NEPRA, hence transmission and distribution companies are allowed to make payments and adjustments to power generation companies/the petitioners in accordance with the determination dated 30.05.2013.
4. Mr. Omer Soomro, learned counsel for the petitioners argued that the impugned notice and determination were illegal and unlawful as 2007 Notice, whereby the investors were permitted to charge mutually agreed tariff did not contemplate any condition that tariff would be decided subsequently. He next contended that the petitioners had invested millions of rupees in setting up generation facilities to produce and sell surplus power while relying and acting on the 2007 Notice; that it was incentive-oriented and had allowed them to charge tariff that was mutually agreed between them and distribution and transmission companies; that subsequent alteration in tariff by NEPRA was detrimental to the interests of the petitioners; that concession regarding fixation of tariff on mutual basis could not be withdrawn as it would be against the terms and conditions of the Power Procurement Agreements. He then made a reference to the principle of promissory' estoppel and stated that if a person acted on a promise or a commitment made to induce him to so act, the maker of such promise or commitment would be estopped from reneging on his words afterwards.
Explaining the same, he argued that the 2007 Notice got published by the NEPRA was modified on 01.02.2012, but prior to that Letter of Intention and Power Procurement Agreements were already signed/executed by the petitioners, with the HESCO whereby tariff rates were mutually agreed, therefore NEPRA was estopped from determining tariff unilaterally with reference to previously signed Power Procurement Agreements. He further argued that 2005 Regulations were introduced by NEPRA as an interim measure, however, through 2007 Notice and 2009 Policy requirement of seeking approval of NEPRA for determination of tariff for Captive Power Plants generating power up to 50 megawatts was waived with a view to alleviate energy crises. He maintained that the 2012 Notice itself acknowledged that NEPRA had given permission to Small Power Producers (SPPs or N- CPPs) to sell power at rates mutually agreed with the distribution companies; that such admission had rendered issuance of impugned determination, that too with retroactive effect illegal and nullity in the law. He however contended even 2012 Notice was not applicable on the petitioners and same was illegal, mala fide and Against the natural norms of justice. He also made reference to the regulation 5(5) of 2005 Regulations to show that impugned determination was in violation of the said regulation as no procedure provided for therein was followed by NEPRA while determining the tariff and, according to him, on that sole score it was liable to be quashed. He expressed that 2005 Regulations did not confer any right on NEPRA to hold public hearings in the process of determining tariff, yet it did so to deliberate and determine tariff with the parties in respect of Power Procurement Agreements, although such determination already stood agreed and acted upon in terms of 2007 Notice. He then stated that any decision about fixation of tariff taken in the light of those public hearings was not only illegal but having no force and ultra vires of the applicable law.
He in his arguments made references to several provisions of the Act, 1997 to illustrate that the object of the NEPRA was to advance the goal of reducing regulatory control on the contracts entered into by the power producers with the distribution companies. He also stated that tariff- determidation benchmark applied in the case of IPPs could not be employed in the case of he petitioners as they, to no extent were made at par with the IPPs, who were given sovereign and fuel risk guarantees and in this regard he quoted Article 7 of the 2009 Policy. His yet another line of arguments was that NEPRA could not change tariff agreed between the parties when it was not hurting interest of the end-consumer. According to him, while issuing the impugned determination, NEPRA erroneously calculated gas cost component, fixed cost component and insurance rates thereby making the determination entirely invalid and illegal. At the fag-end of his arguments, learned counsel read Article 157 of the Constitution to establish that only the Federal Government had the authority to determine tariff and in presence of such unambiguous mandate in the constitution there was no place for NEPRA to step in and determine the tariff already agreed and acted upon by the parties. He lastly quoted Sections 31, 32, 33 of the Act, 1997 and Regulations 3, 4, 5 of 2005 Regulations in support of his arguments and to build up his case that once, while acting upon 2007 Notice the rates were agreed in Power Procurement Agreements, any change or alteration therein undertaken unilaterally by NEPRA was against the natural norms of justice and the principle of promissory estoppel. Learned counsel relied upon following case laws in support of his arguments. He relied upon the case of Manzoor Hussain and others v. Wall Muhammad and another (PLD 1965 SC 425).
5. Mr. Ajaz Ahmed Zahid, learned counsel for HESCO, on the other hand, contended that under the Act, 1997 and also in terms of 2008 Rules, NEPRA had the authority to determine tariff and that power was without any condition. According to him, any regulations inconsistent with the object and scheme of the Act, 1997 had no force of law. He further stated that the concept of New Captive Power Plants was entirely different than the Captive Power Plants, policy about them was approved by the WAPDA in 2006 and they were the power plants already available with the industry for self- generation but with surplus energy; that they were allowed to sell the additional power in order to overcome energy crises. Against that, he contented, policy about New Captive Power Plants was approved in 2009 by the PEPCO for generation and sale of electricity from the new Power Plants having new machinery hence, in their respect tariff composition was different. While referring to the case of the petitioners relating to 2007 Notice, he argued that it was under Captive Power Plants Policy and was a one-time-arrangement to be done away with in due process of time and that be the position, the petitioners could neither make the said notice a basis for raising the case here nor was it relevant for deciding the subject dispute. Learned counsel further argued that the Letter of Intent (LOI) signed by the petitioners was not in accordance with the terms of 2009 Policy, which though stipulated that HESCO could purchase electricity under Power Procurement Agreement but that was to be done only after approval of power acquisition request was granted by the NEPRA.
While questioning the claim of financial loss made by the petitioners owing to impugned determination, he vehemently contended that it was a misstatement, for in terms of the Power Procurement Agreement the HESCO was under obligation to return to the petitioners all the investment made by them in installing the generation plant within first seven years of its operation and thereafter the apparatus/machinery were to become all petitioners' property, as such there was no likelihood, in any case, that some financial loss would be incurred by the petitioners. He next emphasized that the petitioners were very much knowledgeable about the fact that NEPRA had statutory obligation to determine the tariff and with that belief that they had approached NEPRA for issuance of generation license and it was also in their knowledge that Power Procurement Agreement would be signed by the HESCO with them only when the permission in respect of power acquisition request was granted by the NEPRA. He also informed that the Power Acquisition Agreement was submitted to the NEPRA on 07.12.2011 (C.P.D. No,4191/2014, different dates in other matters), the approval thereon however was granted on 30th May 2013 and after accepting the terms and conditions of Power Acquisition Request, the petitioners signed the Power Procurement Agreements with the HESCO; thereafter payments were made to the petitioners on invoices showing rates determined by NEPRA. He stated that once such payments were received by the petitioners, they were estopped from filing the petitions challenging the tariff. According to him, after signing the Power Procurement Agreements, the petitioners could not retract from their obligations and conditions on any excuse as the same were signed by them after accepting the expressions enunciated in Power Acquisition Request; that the petitioners at the time of signing the Procurement Agreements could have turned down the terms and condition thereof if they didn't suit them, but after a lapse of sufficient time they could not be allowed to backtrack. He also pointed out to the relevant paras of the agreements showing NEPRA's prerogative to determine the tariff. He relied upon the cases reported in 1998 SCM R 1404, 1992 SCM R 1652 and 2012 SCM R 773.
6. Heard and perused the material placed before us by the counsel during the arguments. The petitioners' main concern as we have noted above is in relation to the authority of NEPRA to determine tariff in the context of the Power Procurement Agreements signed by them with the HESCO for sale of electric power. According to them these agreements in fact form a promissory estoppel having binding effect not only on the HESCO but NEPRA is equally bound by the terms of these agreements as it has granted license for generation of power only after going through the agreements wherein it is clearly provided that the tariff would be mutually agreed between the parties. The petitioners were granted generation license in terms of 2000 Rules, rule 6 thereof is in respect of tariff and has material relevance to the controversy in hand. Its sub-clause (1) reads "Subject to the terms of the pooling and settlement arrangement, the licensee shall charge only such tariff for the provision of electric power or the ancillary services as may be approved or specified by the Authority", under the scheme of said rule NEPRA has to specify the tariff, inter alia, by keeping 1998 Rules. In Part III of these rules, the standards and guidelines are provided and in terms of sub-rule (2) to rule 17 NEPRA is vested with the power to modify, amend or revoke at any time the standards or guidelines by publishing the proposed amendment, modification or revocations in the Official Gazette thirty days earlier than the effective date thereof. There is however one condition that the effectiveness of these modifications would be held back in respect of proceedings pending before NEPRA at the time such modifications or revocations become effective. It indicates an obvious reference to the authority of NEPARA to streamline guidelines and standards to cope up with constantly changing times. The intention appears to make NEPRA dynamic in its approach and responsive to the demanding situations for all times to come so that the very object i.e, regulation of generation, transmission and distribution of electric power and the interest of end-consumer is protected. Therefore, modification in 2007 notice through 2012 notice does not appear to be illegal, in our view NEPRA by changing the policy in respect of tariff only performed its statutory duty in accordance with law. Making modification in guidelines and standards or in rates at any time is the statutory prerogative, the law has vested NEPRA with and that cannot be taken away on any grounds, much less on the expressions made in the Power Procurement Agreements. In Sub-Rule (3) to Rule 17 of 1998. Rules as many as thirteen standards are provided on the basis of which NEPRA is required to determine, modify or revise the tariffs, a reading of these standards would show that while fixing the tariff NEPRA has to take into consideration every component involved from process of generation of power to its distribution; and from the interest of the licensee to the predictability of the tariff for consumers has also been taken care of therein. With this all inclusive set up provided in the law for building up tariff structure, any argument questioning the authority of NEPRA vis-a-vis tariff determination cannot be subscribed to nor can be agreed to a proposition that by 2007 Notice NEPRA waived its lawful duty or abdicated its official prerogative to determine tariff, for all times to come. To give such a meaning to 2007 Notice would be against the concept and language of very law (the Act, 1997) under which NEPRA came into being and the petitioner were awarded licenses for generating and selling electric power services.
7. The impugned determination indicates that after considering every factor relating to tariff the rates were fixed by NEPRA. The petitioners have not questioned the detailed analysis of the attending facts and efficacy of formula (which makes reference to every cost component in addition to other factors) applied by NEPRA while determining the tariff but their case here is, that due to principle of promissory estoppel NEPRA is devoid of any authority to make amendments in the tariff. Our understanding, and that is based on the study of case law decided by the Hon'ble Supreme Court on the subject, is that the doctrine of promissory estoppel cannot be invoked for directing to do a thing that was against the law, when the representation was made or the promise was held out; and no authority can be made bound by a promise or representation not lawfully extended or given. For reliance the case of M/s Army Welfare Sugar Mills Ltd and others v.
Federation of Pakistan (1992 SCM R 1652) can be cited. Therefore, if at all any promise is construed to have been held out by NEPRA through 2007 Notice to the petitioners. Its validity and legality still can be analyzed on the benchmark as to whether NEPRA's purported promise 2007 notice) amounted to doing of something that was against the law. We are of the view that power to determine tariff lies with NEPRA in terms of section 7 of the Act, 1997 and nowhere, it is provided that such powers are delegable or the mutual consent of the companies either generating or distributing electric power services would take away such authority from NEPRA. Any such agreement executed between the companies is subject to approval by NEPRA and unless such approval is granted, the companies would not be allowed to go ahead and charge tariff mutually consented by them. In this case publication of a notice in 2007 stipulating fixation of tariff on mutually agreed rates between the generation and distribution companies was an interim setup that was always opened to modifications and amendments likely to be made in terms of 1998 Rules. It did not constitute any biding promise on the part of NEPRA nor did it put any legal impendent before it to perform statutory duty relating to determination of tariff. Undoubtedly, neither the 2007 notice can be read in isolation of the relevant laws, which have given ample power to NEPRA to decide tariff to be charged by the companies nor it can be assigned such import or meaning that is ultra vires to the provisions of the Act, 1997 or the sister rules and regulations. Our view is that it merely provided guidelines in respect of fixation of tariff for the time being .As an interim measure till it was revoked or amended according to law. Such meaning and interpretation is always inherent in such like notices which announce a policy in respect of some matter that is governed by the statutory laws, inasmuch as otherwise the very policy would be illegal and non- implementable. A policy that is inconsistent with the provisions of governing law is neither permissible nor any action taken in terms thereof has the protection of law, and it is liable to be struck down. In the said context any argument regarding its legitimacy beyond 2012 notice would be a fallacy and not sustainable; and any such attempt to interpret it beyond the mandate of 1997, Act would amount to taking away statutory obligations of NEPRA to determine tariff. A word on Section 7 of the Act, 1997 would be relevant here as it provides a complete mechanism and outline about powers and functions of NEPRA whereby it has been made exclusively responsible for regulating the provisions of electric power service. According to it, NEPRA has mandate to grant licenses for generation, transmission and distribution of electric power; to prescribe procedures and standards for investment programs by generation, transmission and distribution companies; to prescribe and enforce performance standards for generation transmission and distribution companies; to establish a uniform system of accounts to be maintained by generation, transmission and distribution companies; to prescribe fee including fee for grant of licenses and renewal thereof; to prescribe fines for contravention of the provision of the Act, 1997 and to review its orders, decisions or determination; to settle the disputes between the licensees; to issue guidelines and standards operating procedures and perform any other function which is either incidental or consequential to any of the aforesaid functions. In terms of subsection (3) to the said section it is to determine tariff, rates, charges, and other terms and conditions for supply of electric power services by the generation, transmission and distribution companies and to recommend to the Federal Government for notification thereof. It can review organizational affairs of generation, transmission and distribution companies to avoid any adverse effect on the operation of electric power services and to ensure continuous and efficient supply of such services. It is to encourage uniform industry standards and code of conduct for generation, transmission and distribution companies and also tender advice to the public sector project. While doing all that, NEPRA has to give guidelines not inconsistent with the provision of the Act, 1997 to protect interest of consumers and the companies providing electric power services. Additionally, we like to make reference to section 32 of the Act, 1997 to fortify our above discussion; it speaks about tariff in no unambiguous words as the authority of NEPRA to determine it, prescribe procedures and standards for determination, modification or revision of rates, charges and terms and conditions for generation electric power, transmission, inter-connection, distribution services and power sales to consumers by licensees and until such procedures and standards are prescribed it can determine, modify or revise such rates, charges and terms and conditions. While doing so, utmost concern NEPRA has to have, inter alia, is to protect consumers against monopolistic and oligopolistic prices. That being the mandate of law, NEPRA is competent to make any modification in the policy already announced in relation to tariff and there is no condition attached to its exercising such powers in any manner. The role of NEPRA on the subject matter also came under discussion in the matters of Human Rights cases, No,7734- G/2009 etc titled as Alleged Corruption in Rental Power Plants etc. Before the Hon'ble Supreme Court reported in 2012 SCM R 773. It is observed as under:- "Role of NEPRA.
36. The object and purpose of introducing NEPRA was to regulate the provisions of electric power services and to determine tariff, rates, charges and other terms and conditions for supply of electric power services by the generation, transmission and distribution as per section 7 of the Act, 1997, which has been reproduced in the preceding paragraphs. However, neither the process was undertaken with due diligence nor the policy already in vogue since 2006 on wards introduced by the previous Government for running power plants to cater the requirements of shortage of electricity was followed.
37. It may be observed here that the NEPRA did not play its due role in the process of RPPs, firstly for the reason, that bids were invited on the basis of reference tariff of the fuel; secondly, the NEPRA was directed to follow the guidelines already issued in respect of IPPs (guidelines 1.9 and 1.10), which have already been reproduced herein above, but in our opinion NEPRA being an independent regulatory body had to perform its functions according to law. As per prescribed procedure, NEPRA could not be oblivious of its duty of determining tariff in accordance with the mandatory provisions of the Act, 1997. It may be noted that as per section 7(3)(a) of the Act, 1997, NEPRA is exclusively responsible for determining tariff, rates, charges and other terms and conditions for supply of electric power services by the generation, transmission and distribution companies and recommend to the Federal Government for notification. One of the most important aspects of the case is that under section 7(6) of the Act, 1997, the NEPRA is mandated to protect the interests of consumers and companies providing electric power services in accordance with the guidelines, not inconsistent with the provisions of the Act, laid down by the Federal Government.
Therefore, the NEPRA cannot close its eyes and determine tariff contrary to the provisions of the Act, 1997. Not only that, under section 31 of the Act, 1997 and Rule 17(2) of the National Electric Power Regulatory Authority NEPRA (Tariff Standards and Procedure) Rules, 1998, the NEPRA is required to lay down procedures and standards for the purpose of determination of tariff. One of the objects thereof is that the Authority should allow preference for competition rather than regulation and adopt policy for tariff determination in terms of rule 17(2) and (6) of the NEPRA Rules. The NEPRA has not adopted the aforesaid procedures and standards in the matter of RPPs. In the circumstances, it can only be inferred that the NEPRA has been inoperative and inactive as far as RPPS are concerned. When we inquired from the learned counsel as to why the NEPRA has not asserted its decision in discharge of function assigned to it, he had no satisfactory answer other than stating that in some of the cases including the unsolicited projects, the NEPRA has followed the said procedures and standards in determining tariff. We are not satisfied with the arguments so advanced by him because the data noted herein above indicates that in the case of Naudero-I, which was an unsolicited project; apparently rates of electricity were determined on the higher side. However, it might not be possible for the NEPRA to discharge its functions because of the instructions and interference by the Ministry of Water and Power, which had been issuing instructions from time to time, but in any case, instead of following mandatory provisions of the Act, 1997 the NEPRA ought not to have compromised its position."
8. We also have had a glance at the Power Procurement Agreements and have found that they have been executed between the petitioners and the HESCO on different dates. They have a specific mention under clause "Governing Law", which reads that "this agreement shall be governed by and construed in accordance with the laws of Pakistan". Presence of that expression though does not either dilute or increase application of law on the parties in any manner in the sphere of their operations but its specific mention therein is not without intention. It reminds the parties that irrespective of any expression contained therein their actions, omissions, rights; any breach thereof or any matter ancillary thereto would be regulated and governed by the laws. Any deviation in this respect under the garb of some other expressions of the agreement would neither be allowable, if found inconsistent with any law nor it can be construed so. We have seen that the policy under which the projects were proposed to be set up stipulated an upfront tariff that was in conflict with the provisions of section 7 of the Act, 1997. The NEPRA's intervention to rationalize tariff, in such circumstances, was not but always expected. In pursuance of law, the distribution companies were directed to file the draft Power Procurement Agreements signed with the petitioners for approval as required in the 2005 Regulations. Complying with the same the HESCO filed Power Acquisition Request along with the copy of signed Power Procurement Agreements. In due process of time, the request for Power Acquisition Request was admitted by NEPRA. During the relevant time the HESCO made a request to NEPRA to allow it to adopt the tariff approved by its Board of Directors and CPPA. In order to see prudence of the agreed tariff and the terms and conditions mentioned in the Power Procurement Agreements, NEPRA examined them in detail particularly the clauses concerning adjustments in the tariff e.g. (i) indexation of tariff, (ii) inflation factor, (iii) fuel cost component, (iv) fixed cost component and (v) financial cost component; and for arriving at a conclusion regarding compatibility of tariff rates, the hearing was also granted to the parties. The NEPRA after appreciating all factors minutely passed an order in pursuance of Regulation 4(1) of 2005 Regulations whereby it granted permission for power acquisition to the HESCO to purchase power from the petitioners on take and pay basis. The power acquisition contract was approved subject to amendments in the relevant sections referring to the tariff. The whole process of determining tariff appears to have been legally executed and no illegality rendering it ultra vires of the Constitution and the relevant law has been pointed out. As we have discussed above, NEPRA has the power to determine tariff and while doing so it has to keep in view the interest of general public and accordingly it can revise, review its earlier decisions or determination, no illegality is found either in the 2012 Notice, or the impugned determination.
However, as the notice was published on February 01, 2012 whereby the arrangement granting permission to the companies either generating or distributing power to charge mutually agreed tariff was done away with, we deem it a cut-off date after which the tariff rates would be charged as per impugned determination of NEPRA and not before that. These petitions were disposed of under short order dated 19.08.2015 along with listed applications without any order as to costs.