CERC Holds That Change In Law And Force Majeure Disputes Under PPAs Are Tariff Disputes And Cannot Be Referred To Arbitration

The Central Electricity Regulatory Commission ("CERC"), by its order dated 17.01.2026 in the matter of MB Power (Madhya Pradesh) Limited v. PTC India Limited and Anr. ¹, reaffirmed that disputes relating to change in law and force majeure claims under a PPA are tariff disputes falling within CERC's jurisdiction, and therefore cannot be referred to arbitration.

The petition was filed by MB Power (Madhya Pradesh) Limited ("MB Power"), seeking declarations that (i) its back-to-back short-term PPA with PTC was non-compliant with the Ministry of Power's Short-Term Bidding Guidelines, (ii) the PPA stood frustrated due to force majeure arising from Coal India's circular altering coal allocation mechanisms, and (iii) such events also constituted change in law, relieving MB Power from supply obligations and associated liabilities. During proceedings, MB Power sought reference of the matter to arbitration, relying on the judgement dated 28.08.2024 passed by APTEL in Madhya Pradesh Power Management Co. Ltd. v. DVC and Anr. ²("DVC Judgement"), which held that non-tariff contractual disputes must be referred to arbitration where an arbitration agreement exists.

CERC rejected this plea and held that the primary disputes in the petition concern change in law and force majeure claims, which directly impact tariff and contractual compensation. Applying the DVC judgment, CERC observed that disputes relating to change in law, force majeure and cost impact on tariff are expressly classified as tariff disputes, which fall within CERC's adjudicatory and regulatory jurisdiction under Section 79(1) of the Electricity Act, 2003 ("EA 2003"). Further, allegations of non-conformity with Short-Term Guidelines also involve regulatory oversight functions vested in CERC and therefore cannot be treated as private contractual dispute referable to arbitration. Accordingly, CERC held that the disputes are not arbitrable, refused to refer the matter to arbitration and directed that the petition will proceed for hearing on merits

CERC holds it has jurisdiction over payment and PPA disputes involving composite generation schemes

CERC by its order dated 28.01.2026 in the matter of KSK Mahanadi Power Company Limited v. Southern Power Distribution Company of Andhra Pradesh Limited & Ors.³, reaffirmed that, while CERC has jurisdiction over tariff related disputes arising from a composite scheme, it can exercise its discretion to refer such disputes to arbitration. In cases where the dispute is non-tariff in nature, such reference to arbitration is mandatory under Section 79(1)(f) of EA 2003.

The generator approached CERC alleging non-payment of tariff, capacity charges and transmission charges and unilateral deductions from invoices by the distribution licensee and also challenged the termination of the PPA. The distribution licensees objected to CERC's jurisdiction, contending that the disputes were purely contractual money claims, not involving tariff determination or regulation, and therefore ought to be referred to arbitration or adjudicated by the State Commission under Section 86(1)(f) of EA 2003.

CERC rejected the objections and held that once a generating company supplies power under a composite scheme in more than one state, CERC becomes the appropriate commission under Section 79(1)(b) of the EA 2003. Further, 'regulation of tariff under Section 79 of the EA 2003 includes not only tariff fixation but also matters having a direct bearing on tariff implementation. Accordingly, CERC concluded that it possesses adjudicatory jurisdiction over the present dispute and not the State Commission. However, CERC, while exercising its's discretionary power to refer disputes to arbitration under 79(1)(b) read with Section 79(1)(f) of EA 2003, proceeded to refer both tariff related disputes and non-tariff relate disputes to arbitration and directed appointment of arbitrator under Regulation 49(1)(a) of the CERC (Conduct of Business) Regulations, 2023.

Footnotes

1 Petition No. 71/MP/2023.

2 2024 SCC OnLine APTEL 76.

3 Petition No. 91/MP/2018 and batch

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