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Subject Index 

i 

Contents 

Arrangement of Cases 

[Alphabetical] 

APTEL 

• BSES Rajdahani Power Limited., New Delhi v. DERC and 

Santosh Gargya, New Delhi. 19.04.2011 ......... 0839 

• Chhatisgarh State Power Transmission Co. Ltd., Chhattisgarh v. 

M/s R.R. Energy Ltd. and Chhatisgarh State Electricity 

Regulatory Commission, Raipur 24.05.2011 ......... 0898 

• Himachal Pradesh State Electricity Board Vidyut Bhawan, 

Shimla v. Himachal Pradesh Electricity Regulatory 

Commission, Shimla and Ors. 27.05.2011 ......... 0919 

• J.S.L. v. Dakshin Haryana Bijli Vitran Nigam Ltd. and Anr. 24.03.2011 ......... 0797 

• M/s. Enercon (India) Limited and Indian Wind Power 

Association (Rajasthan State Council), Jaipur v. Rajasthan 

Electricity Regulatory Commission, Jaipur and Ors. 30.05.2011 ......... 0987 

• M/s. Ispat Industries Ltd., Maharashtra v. Maharashtra State 

Electricity Distribution Company Ltd. and Maharashtra 

Electricity Regulatory Commission, Mumbai. 08.03.2011 ......... 0808 

• M/s. Tata Power Company Limited., Mumbai v. M/s. Reliance 

Energy Limited., Mumbai and Ors. 24.05.2011 ......... 0853 

• M/s. Tata Steel Limited, Mumbai v. Orissa Electricity 

Regulatory Commission and North Eastern Electricity 

Supply Company of Orissa Limited, Bhubaneswar. 30.05.2011 ......... 1022 

• M/s. Utkal Chamber and Commerce and Industry, 

Bhubaneswar Orissa v. Orissa Electricity Regulatory 

Commission, Bhubaneswar Orissa. 24.05.2011 ......... 0883 

• Madhya Pradesh Power Generation Company Ltd., 

Madhya Pradesh v. Madhya Pradesh Electricity Regulatory 

Commission, Madhya Pradesh and Ors. 06.05.2011 ......... 1041 

• Madhya Pradesh Power Generation Company v. Madhya 

Pradesh State Electricity Regulatory Commission and Ors. 21.04.2011 ......... 0830 

• Maharashtra State Electricity Distribution Company Ltd. v. 

Maharashtra Electricity Regulatory Commission and Ors. 31.05.2011 ......... 0967 

ENERGY LAW REPORTS (JULY - AUG. 2011) 

5

ii Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

• Maharashtra State Power Generation Co. Ltd., Mumbai v. 

Maharashtra Electricity Regulatory Comm., Mumbai and Ors. 24.05.2011 ......... 0871 

• National Thermal Power Corporation Ltd., New Delhi v. Central 

Electricity Regulatory Commission, and Ors. 31.05.2011 ......... 0924 


Electricity Regulatory Commission, New Delhi and Uttar 

Pradesh Power Corporation Ltd., Lucknow. 31.05.2011 ......... 0930 


Electricity Regulatory Commission, New Delhi and Ors. 31.05.2011 ......... 0933 





• New Delhi Power Limited, Delhi v. Delhi Electricity Regulatory 

Commission, New Delhi and Ors. 31.05.2011 ......... 0944 

• NTPC Ltd. v. C.E.R.C and Ors. 19.04.2011 ......... 0850 

• Oil and Natural Gas Corporation Ltd., Ahmedabad v. Gujarat 

Electricity Regulatory Commission, Ahmedabad. 08.03.2011 ......... 0969 

• Punjab State Electricity Board, Patiala v. Punjab State Electricity 

Regulatory Commission, Chandigarh. 04.03.2011 ......... 0822 

• Punjab State Electricity Board, Punjab v. Punjab State Electricity 

Regulatory Commission, Chandigarh 13.04.2011 ......... 0791 

• Rama Shankar Awasthi and Ors. v. Uttar Pradesh Electricity 

Regulatory Commission, Uttar Pradesh and Ors. 27.05.2011 ......... 0941 

• Ratnagiri Gas and Power Private Ltd., Uttar Pradesh v. Central 

Electricity Regulatory Commission, New Delhi and Maharashtra 

State Electricity Distribution Co. Ltd., Mumbai. 27.05.2011 ......... 0914 

• Rosa Power Supply Company Ltd. v. U.P. Power 

Corporation Ltd. and Anr. 06.05.2011 ......... 0787 

• South India Sugar Mills Association, Bangalore v. Karnataka 

Power Transmission Corporation Ltd., Bangalore and Ors. 05.04.2011 ......... 1086 

• State Load Despatch Centre SLDC, Orissa Power Transmission 

Corp. Ltd., Orissa v. Nav Bharat Ventures Ltd. and Ors. 13.04.2011 ......... 0788 

• U.P. Power Corporation Limited, Lucknow v. Central 

Electricity Regulatory Commission and Ors. 24.05.2011 ......... 0858 

• Union of India, South Central Railways and Ors. v. 

A.P.E.R.C. and Ors. 23.05.2011 ......... 0870 

• Uttar Gujarat Vij Company Ltd., Gujarat v. Gujarat State 

Electricity Regulatory Commission, Consumer Education and 

Research Society, Mehsana District Education Foundation and 

Gujarat Urja Vikas Nigam Ltd., Gujarat. 22.03.2011 ......... 0799 

6 

ENERGY LAW REPORTS (JULY - AUG. 2011)

Subject Index 

iii 

High Court 

• Rakesh Kumar Sharma and Sons v. BSES Rajdhani 

Power Ltd. and Anr. 01.06.2011 ......... 1112 

• BSES Rajdhani Power Ltd. v. Rajwant Singh 05.05.2011 ......... 1107 

• Jingle Bell Amusement Park P. Ltd. v. North Delhi Power Ltd. 19.04.2011 ......... 1103 

Arrangement of Cases 

[Chronological] 

APTEL 



• Maharashtra State Electricity Distribution Company Ltd. v. 

Maharashtra Electricity Regulatory Commission and Ors. 31.05.2011 ......... 0967 


Electricity Regulatory Commission, and Ors. 31.05.2011 ......... 0924 


Electricity Regulatory Commission, New Delhi and 

Uttar Pradesh Power Corporation Ltd., Lucknow. 31.05.2011 ......... 0930 





• New Delhi Power Limited, Delhi v. Delhi Electricity Regulatory 

Commission, New Delhi and Ors. 31.05.2011 ......... 0944 

• M/s. Enercon (India) Limited and Indian Wind Power Association 

(Rajasthan State Council), Jaipur v. Rajasthan Electricity 

Regulatory Commission, Jaipur and Ors. 30.05.2011 ......... 0987 

• M/s. Tata Steel Limited, Mumbai v. Orissa Electricity 

Regulatory Commission and North Eastern Electricity 

Supply Company of Orissa Limited, Bhubaneswar 30.05.2011 ......... 1022 

• Himachal Pradesh State Electricity Board Vidyut Bhawan, 

Shimla v. Himachal Pradesh Electricity Regulatory 

Commission, Shimla and Ors. 27.05.2011 ......... 0919 

• Rama Shankar Awasthi and Ors. v. Uttar Pradesh Electricity 

Regulatory Commission, Uttar Pradesh and Ors. 27.05.2011 ......... 0941 

• Ratnagiri Gas and Power Private Ltd., Uttar Pradesh v. Central 

Electricity Regulatory Commission, New Delhi and 

Maharashtra State Electricity Distribution Co. Ltd., Mumbai. 27.05.2011 ......... 0914 

• M/s. Tata Power Company Limited., Mumbai v. M/s. Reliance 

Energy Limited., Mumbai and Ors. 24.05.2011 ......... 0853 


7

iv Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

• Chhatisgarh State Power Transmission Co. Ltd., Chhattisgarh v. 

M/s R.R. Energy Ltd. and Chhatisgarh State Electricity 

Regulatory Commission, Raipur 24.05.2011 ......... 0898 

• M/s. Utkal Chamber and Commerce and Industry, 

Bhubaneswar Orissa v. Orissa Electricity Regulatory 

Commission, Bhubaneswar Orissa. 24.05.2011 ......... 0883 

• Maharashtra State Power Generation Co. Ltd., Mumbai v. 

Maharashtra Electricity Regulatory Comm., Mumbai and Ors. 24.05.2011 ......... 0871 

• U.P. Power Corporation Limited, Lucknow v. Central 

Electricity Regulatory Commission and Ors. 24.05.2011 ......... 0858 

• Union of India, South Central Railways and Ors. v. 

A.P.E.R.C. and Ors. 23.05.2011 ......... 0870 

• Madhya Pradesh Power Generation Company Ltd., 

Madhya Pradesh v. Madhya Pradesh Electricity Regulatory 

Commission, Madhya Pradesh and Ors. 06.05.2011 ......... 1041 

• Rosa Power Supply Company Ltd. v. U.P. Power 

Corporation Ltd. and Anr. 06.05.2011 ......... 0787 

• Madhya Pradesh Power Generation Company v. Madhya 

Pradesh State Electricity Regulatory Commission and Ors. 21.04.2011 ......... 0830 

• BSES Rajdahani Power Limited., New Delhi v. DERC and 

Santosh Gargya, New Delhi. 19.04.2011 ......... 0839 

• NTPC Ltd. v. C.E.R.C and Ors. 19.04.2011 ......... 0850 

• Punjab State Electricity Board, Punjab v. Punjab State 

Electricity Regulatory Commission, Chandigarh 13.04.2011 ......... 0791 

• State Load Despatch Centre SLDC, Orissa Power Transmission 

Corp. Ltd., Orissa v. Nav Bharat Ventures Ltd. and Ors. 13.04.2011 ......... 0788 

• South India Sugar Mills Association, Bangalore v. Karnataka 

Power Transmission Corporation Ltd., Bangalore and Ors. 05.04.2011 ......... 1086 

• J.S.L. v. Dakshin Haryana Bijli Vitran Nigam Ltd. and Anr. 24.03.2011 ......... 0797 

• Uttar Gujarat Vij Company Ltd., Gujarat v. Gujarat State 

Electricity Regulatory Commission, Consumer Education and 

Research Society, Mehsana District Education Foundation and 

Gujarat Urja Vikas Nigam Ltd., Gujarat. 22.03.2011 ......... 0799 

• M/s. Ispat Industries Ltd., Maharashtra v. Maharashtra State 

Electricity Distribution Company Ltd. and Maharashtra 

Electricity Regulatory Commission, Mumbai. 08.03.2011 ......... 0808 

• Oil and Natural Gas Corporation Ltd., Ahmedabad v. Gujarat 

Electricity Regulatory Commission, Ahmedabad. 08.03.2011 ......... 0969 

• Punjab State Electricity Board, Patiala v. Punjab State Electricity 

Regulatory Commission, Chandigarh. 04.03.2011 ......... 0822 

8 


Notifications Subject and Index Circulars 

v 

High Court 

• Rakesh Kumar Sharma and Sons v. BSES Rajdhani 

Power Ltd. and Anr. 01.06.2011 ......... 1112 

• BSES Rajdhani Power Ltd. v. Rajwant Singh 05.05.2011 ......... 1107 

• Jingle Bell Amusement Park P. Ltd. v. North Delhi Power Ltd. 19.04.2011 ......... 1103 


9

vi Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

Subject Index 

Additional Capitalisation—Whether the State Commission was correct in deferring 

the Additional Capitalisation claimed by the Appellant? — Held, Tariff Regulation 

30.2 provides for additional capitalisation for inclusion in the original cost of project, 

subject to prudence check. Additional capitalisation should be considered 

expeditiously by the State Commission as the delay would only add IDC or carrying 

cost besides delaying return on equity to the Appellant. Appellant is directed to submit 

the desired information to the State Commission and the State Commission would 

consider it at the earliest. 

Maharashtra State Power Generation Co. Ltd., Mumbai v. Maharashtra 

Electricity Regulatory Commission, Mumbai and Ors. 

Appeal No. 99 of 2010, Decided on: 24.05.2011 at page 0871 

MANU/ET/0082/2011 

Additional Supply Charges—Whether the additional supply charge determined by 

the Commission in its order dated 18 th May, 2007 with all its amendments and with 

modification of this Tribunal in its order dated 12 th May, 2008 can be made applicable 

to the Appellant? — Held, Appellant cannot be allowed to challenge this Tribunal’s 

order dated 12 th May, 2008 before this Tribunal itself instead of seeking redressal of 

all its grievances before the Supreme Court. Tariff period having been very much in 

operation when the order modifying the Tariff order was issued, the Appellant is 

precluded from taking the defence that the modified Tariff order could not be enforced 

against it. Estoppel against the judgment of the Tribunal is not legally permissible. 

Appellant has acquiesced to the revision of the Tariff order and has paid the revised 

charges. 

M/s. Ispat Industries Ltd., Maharashtra v. Maharashtra State Electricity 

Distribution Company Ltd. and Maharashtra Electricity Regulatory 

Commission, Mumbai, Appeal No. 175 of 2010, 

Decided on: 08.03.2011 at page 0808 

MANU/ET/0071/2011 

Additional Supply Charges—Whether the issues relating to benchmark consumption 

period for calculation of additional supply charge can be re-opened without affording 

any opportunity to the Appellant of being heard? — Held, the benchmark consumption 

charges were levied and paid by the Appellant in accordance with the prevalent 

Tariff order. With the Appellant having paid the charges as were levied in accordance 

with the prevalent Tariff order the issue cannot be revived again to put the Appellant 

in double jeopardy. It is against the cannons of rules that the matter once disposed of 

cannot be revived once again to the determent of lawful interest of a party when its 

account books were closed and who conducted its economic affairs in accordance 

with rules that were prevalent at that time. 



Commission, Mumbai, Appeal No. 175 of 2010, 


MANU/ET/0071/2011 

Adjudication of Charges—Whether the State Commission could find the Appellant 

guilty for the charge which is different from the charges framed by the State 

Commission? — Held, the State Commission ought not to have found the Appellant 

guilty for the charge not framed without allowing the appellant to present its defence 

for the charge. The failure to follow this procedure is a serious violation of Principles 

10 


Subject Index 

vii 

of Natural Justice. The State Commission should have confined itself to the charges 

framed by the Commission and should not have travelled beyond the pleadings and 

the charges in question. 

BSES Rajdahani Power Limited., New Delhi v. Delhi Electricity Regulatory 

Commission and Santosh Gargya, New Delhi 


MANU/ET/0052/2011 

Advance against Depreciation—Whether computation of Advance Against 

Depreciation was erroneous? — Held, as per Clause 5.18 of Regulations, the Distribution 

Licensee shall be entitled to Advance Against Depreciation in addition to allowable 

depreciation. Accordingly, the State Commission considered both Opening Balance 

Sheet and the entries relating to the equity capital secured loans and the security deposits. 

It is noticed that the Appellant has claimed to accept the liability of Rs. 10 crore as per 

Opening Balance Sheet and not the entire amount of security deposits. Hence, the Delhi 

Commission has correctly considered only the total depreciation figure approved and 

considered during the Control Period. This finding is correct and the same is confirmed. 

New Delhi Power Limited, Delhi v. Delhi Electricity Regulatory Commission, 

New Delhi and Ors., Appeal No. 52 of 2008, 


MANU/ET/0093/2011 

Allowance of Depreciation—Whether retrospective revision of means of finance for 

the FY 2002-03 to FY 2006-07 due to allowance of depreciation @ 6.69 per cent for the 

same period, resulting in lower return on equity was justified? — Held, according to 

the State Commission, if means of financing was retrospectively amended then it 

would result in unlawful gain of Rs. 257 crore whereas, the Distribution Company is 

entitled to only 16 per cent return on equity and a free reserve deployed in fixed assets. 

The State Commission has trued up the financials for the period from FY 2003 to 

FY 2007 taking into account the additional amount of depreciation and the carrying 

cost allowed. There was no infirmity in the Order of the State Commission except that 

if the Appellant had to arrange debt at interest rate higher than 9 per cent during the 

period in question then the Appellant may be compensated for the difference in interest 

rate on debt and the carrying cost allowed for that period. This issue is answered 

accordingly. 




MANU/ET/0093/2011 

Benefit Accrued—Whether the Appellant is entitled to rebate either from the date of 

the earlier order dated 20 th December, 2007 or from December 2006, the date from 

when the benefit accrued? — Held, on going through the records, it is seen that the 

benefit accrued from December 2006 on which month the FSA was introduced and 

therefore, Appellant is entitled to rebate from the date when the benefit accrued to 

him, i.e. December 2006. 

J.S.L. v. Dakshin Haryana Bijli Vitran Nigam Ltd. and Anr. 


MANU/ET/0068/2011 

Capital Cost—What is effect of wrong calculation of opening capital cost as on 

31 st March, 2004? — Held, on this issue, the Tribunal earlier delivered judgment dated 

26 th March, 2009 in Appeal No. 103 of 2008: 2009 ELR (APTEL) 397 setting aside the 


11

viii Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

reduction in the capital cost by the Central Commission by Rs. 32 crores and restored 

the capital cost at 607 crores and remanded the matter to the Central Commission. 

Therefore, this issue was also decided in terms of the said judgment in favour of the 

Appellant. The Central Commission is directed to implement the findings given in 

this judgment. 

National Thermal Power Corporation Ltd., New Delhi v. Central Electricity 

Regulatory Commission, New Delhi and Uttar Pradesh Power Corporation 

Ltd., Lucknow, Appeal No. 73 of 2009, 


MANU/ET/0089/2011 

Capital Cost—Whether the decision of the State Commission to limit provisional capital 

cost of Larji Project at Rs. 960 crores, pending the decision of the State Commission on 

the completed cost was justified? — Held, review Petitioner wants that this issue may 

be disposed of without prejudice to the final capital cost determination of the project 

by the State Commission. Accordingly, this issue disposed of without prejudice to the 

final determination of the capital cost by the State Commission. 

Himachal Pradesh State Electricity Board Vidyut Bhawan, Shimla v. Himachal 

Pradesh Electricity Regulatory Commission, Shimla and Ors. 

Review Petition No. 13 of 2010 in Appeal Nos. 56 of 2008 and 

192 of 2009, Decided on: 27.05.2011 at page 0919 

MANU/ET/0087/2011 

Capital Cost—Whether the State Commission had erred in rejecting part of capital 

cost due to IDC, overheads, cost of initial spares and loan subsidy, etc.? — Held, there 

are no specific regulations for determining the overhead cost. It would not be correct 

to determine norms of overhead cost from CEA approved cost. Apart from the overhead 

cost on account of delay in commissioning of the project might have to be disallowed. 

State Commission was directed to determine the overhead cost for the time overrun 

from the scheduled date of commissioning of the project on pro rata basis with respect 

to actual time taken in completion of the project. 50 per cent of the excess overheads 

due to time overrun calculated thus may be disallowed. 

Infusion of debt and equity has to be more or less on pari passu basis as per normative 

debt equity ratio. The State Commission is directed to redetermine the IDC for the 

actual period of commissioning of the project and then work out the excess IDC for the 

period of time overrun on a pro rata basis and limit the disallowance to 50 per cent of 

the same on account of excess IDC. The principle laid down for IDC and overheads 

will also be applicable to the amount of AG&SP loan subsidy. 

State Commission has powers to relax the provisions of the Tariff Regulations, 2005. 




MANU/ET/0082/2011 

Capital Cost—Whether the State Commission was correct in disallowing servicing of 

the capital cost of LNG terminal in view of the peculiar circumstances of the case? — 

Held, the very same issue had been dealt with in Tribunal’s order dated 

25 th March, 2011. According to Regulation 17 of 2004 Regulations of the Central 

Commission, subject to prudence check by the Commission, the actual expenditure 

incurred on completion of the project shall form the basis for determination of final 

Tariff. The LNG terminal has not been commissioned so far. Therefore, its capital cost 

cannot be admitted and serviced through the electricity Tariff. There is no merit in this 

12 


Subject Index 

ix 

contention urged by the Appellant. Therefore, contention of the Appellant in regard to 

the servicing of cost of LNG terminal rejected. 

Ratnagiri Gas and Power Private Ltd., Uttar Pradesh v. Central Electricity 

Regulatory Commission, New Delhi and Maharashtra State Electricity 

Distribution Co. Ltd., Mumbai 


MANU/ET/0086/2011 

Capital Cost—Whether the State Commission was right in attributing the entire delay 

in commissioning of the Unit to the Appellant and disallowing entire time overrun 

related cost to the Appellant without considering the delays and shortcomings on the 

part of the supplier, viz. M/s BHEL? — Held, the capital cost had to be determined on 

the basis of actual expenditure incurred on completion of the project subject to 

prudence check by the State Commission. The State Commission had not examined 

the reasons for delay in commissioning of the project and attributed the entire time 

overrun-related cost with respect to the contractual schedule agreed with BHEL to the 

Appellant. This accordingly is not a prudence check. 

The delay in execution of a generating project could occur due to - (i) factors entirely 

attributable to the generating Company; (ii) factors beyond the control of the generating 

company and (iii) situation not covered by (i) and (ii); 

In the first case, the entire cost due to time overrun had to be borne by the generating 

company. However, the Liquidated Damages (LDs) and insurance proceeds on account 

of delay, if any, received by the generating company could be retained by the generating 

company. In the second case, the generating company could be given benefit of the 

additional cost incurred due to time overrun. However, the consumers should get full 

benefit of the LDs recovered from the contractors/suppliers of the generating company 

and the insurance proceeds, if any, to reduce the capital cost. In the third case, the 

additional cost due to time overrun including the LDs and insurance proceeds could 

be shared between the generating company and the consumer. It would also be prudent 

to consider the delay with respect to some benchmarks rather than depending on the 

provisions of the contract between the generating company and its contractors/ 

suppliers. If the time schedule is taken as per the terms of the contract, this may result 

in imprudent time schedule not in accordance with good industry practices. 

The agreement with the BHEL provided for a reasonable time schedule for completion 

of the project as also a reasonable clause for Liquidity damages. Thus, there seems to 

be no imprudence on the part of the Appellant in selecting the main equipment 

supplier, which happens to be a major state owned equipment-manufacturing 

company and in the terms and conditions of the agreement. 

Based on facts and documents submitted, though it is evident that there was delay on 

the part of BHEL in supply and commissioning of the main plant, though it was not 

established beyond doubt that the entire delay was due to the reasons beyond the 

control of the Appellant. 




MANU/ET/0082/2011 

Capital Expenditure—Whether Central Commission was justified in disallowing the 

capitalisation of undischarged liability expenditure holding that the actual 

expenditure incurred cannot be included as part of capital expenditure where the 

actual cash payment is made subsequently? — Held, the Central Commission by 


13

x Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

mistake disallowed the undischarged liabilities of Rs. 43.45 lacs. This is purely a 

mistake and needs to be corrected by the Central Commission. The issue was allowed 

in favour of the Appellant. Accordingly, the Central Commission is required to pass a 

consequential order on this issue. 


Regulatory Commission, and Ors., Appeal No. 168 of 2010, 


MANU/ET/0088/2011 

Capital Expenditure—Whether exclusion of part of capital expenditure validly 

incurred but pending actual disbursement/payment from the capital cost for the 

purposes of Tariff was proper? — Held, the question of additional capitalisation 

under Regulation 18 would refer to the capital expenditure actually incurred after the 

date of commercial operation in respect of deferred liabilities and in respect of the 

works deferred for execution. But Regulation 17 would refer to the actual expenditure 

incurred before the date of commercial operation of the generating station after 

completion of the project that too in respect of the liabilities served and incurred. The 

entire value of the capital asset, as soon as the same is put into operation is recoverable 

by way of capital cost under Regulation 17 itself, not withstanding the fact that the 

part of the payment for the capital asset has been retained. Issue is covered in Appeal 

Nos. 133, 135 of 2008 NTPC v. CERC and Ors. dated 16 th March, 2009 and Appeal Nos. 

151 and 152 of 2007 NTPC v. CERC and Ors. dated 10 th December, 2008 and decided 

accordingly in favour of Appellant. 

NTPC Ltd. v. C.E.R.C and Ors., Appeal No. 159 of 2010, 


MANU/ET/0053/2011 

Categorisation in terms of description—Whether the Respondent No. 3 was in terms 

of description under HTP-II(B) categorisable under that category? — Held, Respondent 

No. 3’s is admittedly not an institution run by Government; it is a set up of private 

charitable trust which is not expressly provided for in HTP-II(B) even though purpose 

for which supply is required is the same i.e. education. It was in the Commission’s 

mind as to behind which principles or purpose these three categories were made but 

it is, of course, clear that the Commission was not right in saying that the Respondent 

No. 3 falls under HTP-II (B). 

Uttar Gujarat Vij Company Ltd., Gujarat v. Gujarat State Electricity 

Regulatory Commission, Consumer Education and Research Society, Mehsana 

District Education Foundtion and Gujarat Urja Vikas Nigam Ltd., Gujarat 


MANU/ET/0069/2011 

Categorisation in terms of description—Whether the State Commission Authority 

had the power to decide the question as to whether the categorisation of the 

Respondent No. 3 should be at HTP-II(B) instead of HTP-II(A)? — Held, the function 

of change of such category by interpretation of Tariff order or by amendatory process 

rests with the Commission as it is intrinsically related to Section 61(a) of the Act. 





MANU/ET/0069/2011 

Computation of Coal Consumption—Whether State Commission was right in 

changing the basis of computation of coal consumption? — Held, in the State 

14 


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xi 

Commission’s Tariff Regulations notified on 21 st November, 2005, it was decided to 

follow the norms as per Central Commission’s Regulations. According to the 

Regulation 22 of Central Commission Regulations the quantum of fuel is to be 

calculated on the Gross Calorific Value (GCV) of fuel “as fired” and not the Net 

Calorific Value (NCV). State Commission has correctly used the GCV of Coal “as 

fired” and gross station heat rate norms as per the Central Commission to calculate 

the consumption of coal. 

Punjab State Electricity Board, Patiala v. Punjab State Electricity Regulatory 

Commission, Chandigarh, Appeal No. 153 of 2007, 


MANU/ET/0072/2011 

Condonation—Whether an application to condoned the delay of 1,329 days was 

maintainable? — Held, on perusal of the affidavit praying for the condonation of long 

delay, there was no sufficient cause shown to condone the huge delay of 1,329 days in 

filing the Application. The impugned order was passed as early as on 18 th May, 2007. 

There is no diligence on the part of the Applicant/Appellant to approach the 

Commission to ensure that separate process is undertaken by the Commission by 

producing the relevant materials. There is no sufficient cause shown by the Applicant/ 

Appellant to condone the enormous and abnormal delay of 1,329 days which has not 

been satisfactorily explained. Therefore, this Petition is dismissed. 

Maharashtra State Electricity Distribution Company Ltd. v. Maharashtra 

Electricity Regulatory Commission and Ors., IA No. 93 of 2011 

in DFR No. 372/2011, Decided on: 31.05.2011 at page 0967 

MANU/ET/0094/2011 

Construction of Line—Whether Respondent No. 1 had committed any wrong by 

approaching the State Government for approval under Section 68 of the Electricity 

Act, 2003 pending Appellant Board’s approval for construction of his line? — Held, 

to comply with the provision for installation of any overhead line, the Respondent 

No. 1 was required to switch over from 33 KV to 132 KV and was required to lay a 

independent/dedicated line at 132 KV connected to Appellant’s EHV substation. 

Accordingly, the Respondent No. 1 approached the Appellant Board to carry out the 

entire work related to erection of 132 KV line and associated terminal line bay at 132 

KV Raigarh substation of Appellant. Appellant Board agreed to undertake the works 

subjected to payment of full costs of works including 15 per cent supervision charges. 

The Respondent No. 1 could as well have entrusted the works related to construction 

of line to any Class-1 Electrical Inspector as per provisions of Indian Electricity 

Rules, 1956. Thus, the role of Appellant Board was restricted to that of a Class-1 

Electrical Contractor. Getting prior approval of the State Government for any overhead 

line is mandatory, irrespective of who constructs the line. This approval was also 

necessarily required even if the line was constructed by the licensee, i.e. Appellant 

Board. The requirement of prior approval under Section 68 of the Act cannot be replaced 

by mere sanction of a licensee to undertake the works as a contractor. Respondent No. 

1 has correctly met with requirements of the Act and had not done anything wrong by 

obtaining the State Government’s approval under Section 68 of the Act. 

Chhatisgarh State Power Transmission Co. Ltd., Chhattisgarh v. M/s R.R. 

Energy Ltd. and Chhatisgarh State Electricity Regulatory Commission, Raipur 


MANU/ET/0084/2011 

Cost of Employees—Whether the State Commission was right in allowing a sum of 

Rs. 1,661.41 crores as employees cost? — Held, State Commission had referred to the 


15

xii Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

Tribunal orders and applied the principles contained in the Tribunal’s order for fixing 

the employees cost. State Commission found that no worthwhile measures were 

adopted by the Board to reduce the employees cost during the year in question. Even 

the voluntary retirement scheme which has been suggested by the Tribunal was not 

adopted. Relying on IEL v. Punjab State Electricity Commission), State Commission 

has approved Rs. 1,661.41 crores as employees cost for the year 2007-08. There is 

nothing wrong in this finding. 




MANU/ET/0072/2011 

Cost of Maintenance—Whether disallowance Cost of Maintenance Spares was 

correct? — Held, this issue was also covered in favour of the Appellant in following 

judgments: 

(a) judgment dated 13 th June, 2007 in Appeals No. 139 and 140 of 2006 

(b) judgment dated 21 st August, 2009 in Appeal Nos. 54 and 74 of 2009 NTPC v. 

CERC and Ors. 

The cost of maintenance cost needs to be calculated on the total capital cost inclusive 

of the additional capitalisation. Thus, Appellant is entitled to claim the cost of the 

maintenance spares by adding into the maintenance cost. Thus, this point is also 

answered in favour of the Appellant. 


Regulatory Commission, New Delhi and Ors., Appeal No. 59 of 2010, 


MANU/ET/0091/2011 

Cost of Maintenance—Whether disallowance of cost of maintenance spares was 

right? — Held, this issue has been covered in favour of the Appellant in the following 

judgments: 

(a) judgment dated 13 th June, 2007 in Appeals No. 139 and 140 

(b) judgment dated 21 st August, 2009 in Appeals No. 54 and 74 of 2009 NTPC v. 

CERC and Ors 

Despite the ratio decided by this Tribunal, the Central Commission has not followed 

the principle decided on 13 th June, 2007. Mere pendency of the Appeal against the 

judgment of this Tribunal will not dilute the ratio of this Tribunal so long it is not set 

aside. The issue was accordingly allowed in terms of the said decision. 




MANU/ET/0088/2011 

Cost of Maintenance—Whether the Central Commission should have considered the 

cost of maintenance of liquid fuel in determining the working capital requirements 

and also determined the heat rate on Naptha as an alternative fuel? — Held, though 

RGPPL started first of the power blocks using Liquid fuels (Naphtha and HSD), these 

were never envisaged for commercial operation due to prohibitive cost, reduced hot 

gas path component life and higher Heat Rate etc. Gas/LNG prices are market driven 

and even if the domestic gas serves as the fuel for the power block, LNG terminal is 

expected to make financial contribution to the revenue stream thereby, justifying the 

16 


Subject Index 

xiii 

cost incurred in the long run. As domestic gas has been allocated for the power project, 

use of LNG facility is being planned to be utilised for LNG tolling. Thus, issue was 

accordingly decided against the Appellant. 



Distribution Co. Ltd., Mumbai, Appeal No. 191 of 2010, 


MANU/ET/0086/2011 

Cost of Maintenance—Whether the disallowance of Cost of Maintenance Spares was 

justified? — Held, on this issue, the Tribunal in Appeal No. 133 and 135 of 2008 dated 

16 th March, 2009 and Appeal No. 34 and 74 of 2009 dated 21 st August, 2009 has passed 

the judgment in favour of the Appellant but the Central Commission has not chosen to 

follow the ratio decided by this Tribunal on the ground that the decisions were 

challenged before the Hon’ble Supreme Court and the same is pending. Mere pendency 

of the appeal against the judgment in the Hon’ble Supreme Court and mere undertaking 

given by the Appellant that it would not implement the Tribunal judgment order 

pending decision would not dilute the ratio of the decision of this Tribunal. Thus, 

Appellant is entitled to claim in terms of the judgments rendered by this Tribunal. 

Accordingly, the issues are answered in favour of Appellant. 


Regulatory Commission, New Delhi and Ors. 


MANU/ET/0090/2011 

Decapitalisation of Asses on Cumulative—What is the Impact of de-capitalisation of 

assets on cumulative repayment of loan — Held, when asset is not in use it is only 

logical that the capital base for the purpose of tariff is also proportionately reduced. 

Appellant will not earn any depreciation, return on equity and O&M charges. Despite 

the decapitalisation, the Appellant was required to pay interest on the loan. The 

cumulative repayment of the loan proportionate to those assets decapitalised required 

to be reduced. Ratio in Appeal Nos. 139, 140 etc. of 2006, dated 13 th June, 2007 applied. 

NTPC Ltd. v. C.E.R.C and Ors. 


MANU/ET/0053/2011 

Denial of Expenses—Whether determination of inflation factor was incorrect and 

contrary to the MYT Regulations leading to the denial of employee and Administrative 

& General expenses? — Held, the Consumer Price Index and the Whole-sale Price 

Index numbers are declared by the Government on a weekly basis. They are available 

on the official website of the Government. The State Commission did not think it fit to 

use the data available for immediately preceding five years in the indexation of inflation 

for the FY 2007-08, which is contrary to the Regulation 5.4 of Multi Year Tariff 

Regulations, 2007. State Commission is directed to recompute the inflation factor and 

consequently, the O&M expenses for each year of the control period in accordance 

with Regulation 5.4 and to allow for the expenses for the Control Period after including 

the Consumer Price Index/Whole-sale Price Index during the FY 2006-07 along with 

the carrying cost. 




MANU/ET/0093/2011 


17

xiv Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

Depreciation—Whether depreciation up to 90 per would be admissible? Held, In 

view of the decision already taken by this Tribunal in Appeal Nos. 139, 140 etc. of 

2006, dated 13 th June, 2007 this matter was decided accordingly in favour of Appellant. 



MANU/ET/0053/2011 

Disallowance of Cost—Whether disallowance of Cost of Electrolyser Rectifier was 

justified? — Held, existing Rectifier is old and there is a non-availability of the spares 

due to the closure of the original equipment manufacturer and as such there are 

chances of failure and in case of such failure, the immediate replacement is difficult to 

arrange which would cause threat to entire generation capacity. Therefore, the Central 

Commission is directed to allow the said claim. Accordingly, the finding on this issue 

is set aside and the matter is remanded back to the Central Commission to pass 

consequential orders on this issue. 


Regulatory Commission, New Delhi and Ors., Appeal No. 61 of 2009, 


MANU/ET/0090/2011 

Disallowance of Cost—Whether disallowance of costs of various projects was proper? 

— Held, this issue has already been decided by the Tribunal in its judgment dated 

6 th July, 2006 in Appeal No. 113 of 2006. There is no justification or reason to disallow 

cost of various projects based on bench mark. State Commission directed to implement 

the directions of the Tribunal given in the judgment dated 6 th July, 2006. 





MANU/ET/0087/2011 

Disallowance of Cost—Whether disallowance of employees cost related to Larji and 

Khauli Projects right? — Held, this issue had been decided by the Tribunal by judgment 

dated 6 th July, 2006. State Commission directed to implement the directions issued by 

the Tribunal in its judgment dated 6 th July, 2006 relating to employees cost of Largi 

and Khauli Projects. 





MANU/ET/0087/2011 

Disallowance of Expenditure—Whether disallowance of expenditure incurred as 

capital expenditure but, booked in the books as revenue expenditure was justified? — 

Held, this issue had been rejected by the judgments rendered by this Tribunal as against 

the Appellant. The said judgment is in Appeal No. 82 of 2009 NTPC v. CERC and Ors. 

dated 27 th July, 2010. Accordingly, the ground of this issue is rejected as against the 

Appellant. 





MANU/ET/0089/2011 

18 


Subject Index 

xv 

Disallowance of Expenditure—Whether disallowance of expenditure incurred 

towards RLA studies was justified? — Held, this issue has been decided against the 

Appellant in judgment dated 16 th March, 2009 in Appeals No. 133 and 135 of 2008 

NTPC v. CERC and Ors. and judgment dated 21 st August, 2009 in Appeal No. 74 of 

2009 NTPC v. CERC and Ors. Accordingly, the ground on this issue raised by the 

Appellant is rejected. 




MANU/ET/0090/2011 

Disallowance of Expenses—Whether State Commission was right in not allowing 

prior period expenses relating to Financial Year 2005-2006? — Held, State Commission 

had explained for the disallowance of the prior period expenses of Rs. 8.66 crores on 

the ground that prior period expenses relating to the period for which it remained 

capped cannot be allowed. 


Commission, Chandigarh 


MANU/ET/0072/2011 

Disallowance of Interest—Whether disallowance of interest during construction (IDC) 

was justified? — Held, this issue had been also decided in favour of the Appellant in 

following judgment: 

(a) judgment dated 16 th March, 2009 in Appeal No. 133 and 135 etc. of 2008, NTPC 

v. CERC and Ors. 

(b) judgment dated 10 th December, 2008 in Appeals No. 151 & 152 of 2007 NTPC v. CERC 

and Ors. 

The issue before this Tribunal is treatment of the internal resources/equity of Appellant 

which is in addition to equity contribution. This Tribunal had held that Appellant is 

entitled to claim deemed interest on such loans during construction. Therefore, the 

question of reducing the said amount from the capital cost does not arise. On this 

point, the issue is decided in favour of the Appellant. 




MANU/ET/0091/2011 

Disallowance of Interest—Whether disallowance of interest during construction (IDC) 

was justified? — Held, as held in the judgments namely, (a) Judgment dated 

16 th February, 2009 in Appeal Nos. 133 and 135 of 2008 NTPC v. CERC and Ors. 2009 

ELR (APTEL) 337 and (b) Judgment dated 10 th December, 2008 in Appeals No. 151 

and 152 of 2007 NTPC v. CERC and Ors. 2008 ELR (APTEL) 916, the “First-in First- 

Out” method cannot be adopted but the NTPC is entitled to claim deemed interest on 

such a loan which is repaid during the construction from internal accruels over and 

above equity contribution. The Central Commission in the impugned order disallowed 

the same by making wrong calculations and accordingly, the, Central Commission to 

correct the calculations and pass the appropriate order. 




MANU/ET/0096/2011 


19

xvi Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

Disallowance of Interest—Whether disallowance of interested during construction 

incurred on renovation and modernisation in excess of the normative 30 per cent 

equity was justified? — Held, this issue is covered in favour of the Appellant in the 

judgments referred to as below: 

(a) judgment dated 16 th February, 2009 in Appeal Nos. 133 and 135 of 2008 NTPC 


(b) judgment dated 10 th December, 2008 in Appeals No. 151 and 152 of 2007 NTPC 


IDC claimed is on the amount incurred on renovation and modernisation in excess of 

30 per cent normative equity. In view of the ratio decided earlier by this Tribunal, this 

issue is answered in favour of the Appellant. 





MANU/ET/0089/2011 

Disallownace of Cost of Maintenance—Whether disallowance of cost of maintenance 

spares was proper? — Held, cost of maintenance spares needs to be calculated on the 

total capital cost inclusive of additional capitalisation. Cost of maintenance spares 

has to be included into capital cost. Issue covered in Appeal Nos. 139, 140 etc. of 2006, 

dated 13 th June, 2007 and Appeal No. 54 of 2009 NTPC v. CERC and Ors. dated 

21 st August, 2009 and decided accordingly in favour of Appellant. 



MANU/ET/0053/2011 

Disconnection of Electricity Supply without Show Cause Notice—Whether in a case 

of fraudulent abstraction of electricity or in case of pilferage in terms of case reported 

in M.P. Electricity Board v. Harsh Wood Product, supply of electricity could be 

disconnected without giving any Show Cause Notice? — Held, Rule 22(b)4 permits 

the Board to forthwith disconnect the electricity supply without notice if it is a case of 

Fraudulent Abstraction of Energy (FAE). When Board defects that any consumer had 

committed any malpractice with reference to his use of electrical energy including 

authorised alternations to installations, unauthorised extension and use of devices to 

commit theft of electrical energy, may, without prejudice to its other rights, disconnect 

the supply of electricity forthwith and may call upon the consumer to make payment 

for compensation of the unauthorised use of electricity which is now stated to be a 

theft of electricity. Respondent had laid no challenge to the demand raised upon him. 

Respondent is enjoying the electricity under the interim orders of this Court but 

admittedly he has not paid even the admitted user charges. Such a consumer deservers 

little sympathy. Impugned Judgment reversed. 

BSES Rajdhani Power Ltd. v. Rajwant Singh 

R.S.A. No. 84/2007 and CM No. 4113/2007, 


MANU/DE/1932/2011 

Efficiency Factor—Whether computation of efficiency factor was erroneous? — Held, 

the Appellant had not proposed any Efficiency Factor in its MYT Petition in accordance 

with the MYT Regulations. The State Commission has compared the O&M expenses 

of the Appellant with similar urban distribution companies in other states and found 

the expenses of the Appellant on higher side. Accordingly, the State Commission has 

20 


Subject Index 

xvii 

decided to introduce efficiency factor of 2 per cent, 3 per cent and 4 per cent for FY 

2009, FY 2010 and FY 2011, respectively. Therefore, the State Commission finding on 

this issue is justified. 




MANU/ET/0093/2011 

Electricity Charges—Whether Respondent No. 2 was liable to pay electricity charges 

due, while vacating the premises and the relief sought is in the face of Regulation 15 

of the Delhi Electricity Supply Code and Performance Standards Regulations, 2007? 

— Held, Regulation 15 imposes an obligation on a purchaser of existing property 

electricity connection wherein is lying disconnected. The present was not the case of 

sale-purchase of property. 

Regulation 46 of the Delhi Electricity Supply Code and Performance Standards 

Regulations, 2007 makes consumer of electricity liable to get a special reading done at 

the time of change of occupancy or on the premises falling vacant and to obtain No 

Dues Certificate from the Distribution Company such as the Respondent No. 1 herein. 

The Respondent No. 1 is also obliged to arrange for such special reading and to 

deliver the final bill including all arrears till the date of billing at least three days 

before the vacation of the premises. The Respondent No. 1 especially after being warned 

cannot be negligent in complying with its obligations and non-compliance of which 

may be prejudice to the Petitioner. 

Respondent No. 1 accordingly directed to secure itself in the manner stated and otherwise, 

qua the dues, if any from the Respondent No. 2 and to ensure that all its claims against 

the electricity meter in the name of the Respondent No. 2 in concerned premises are paid 

before the stipulated date of vacation. If the Respondent No. 1 is found to be wanting in 

the same, it shall not be entitled to deny the electricity connection to the Petitioner or any 

subsequent transferee/occupant thereof for the reason of the said dues. 

Rakesh Kumar Sharma and Sons v. BSES Rajdhani Power Ltd. and Anr. 

WP (C) No. 5208/2010 and CM No. 10270/2010, 


MANU/DE/2237/2011 

Employees Allowance—Whether allowance of employees cost except for an amount 

of Rs. 3.75 Crores on account of deviation from the Punjab State Electricity Board pay 

scales was justified? — Held, the Tribunal in its impugned judgment has given a clear 

finding in Paragraph 17. There is no error on the face of the records on this issue. 

Accordingly, the plea of the review Petitioner on the issue of employee cost is rejected. 





MANU/ET/0087/2011 

Employees Allowance—Whether allowance of undischarged liability was justified? 

— Held, on this issue, the Tribunal had decided the same in favour of the Appellant in 

the following decisions: 

(a) judgment dated 16 th March, 2009 in Appeal No. 133 and 135 etc. of 2008, NTPC v. 

CERC and Ors. 

(b) judgment dated 10 th December, 2008 in Appeals No. 151 & 152 of 2007, NTPC v. 

CERC and Ors. 


21

xviii Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

The words “actual expenditure incurred” contained in Regulation 17 would refer to 

the liabilities incurred and the same would not refer to the actual cash outflow. During 

the hearing, the learned Counsel for the Commission stated that the impugned order 

had actually allowed the claim of Appellant with regard to undischarged liability 

but, there is a mistake in the table which would be corrected. This point is decided in 

favour of the Appellant and the matter is remanded for correcting mistakes in the 

table. 




MANU/ET/0091/2011 

Employees Allowance—Whether allowance undischarged liability was justified? — 

Held, the issue already stands decided and covered in favour of the NTPC by the 

judgments namely (a) judgment dated 16 th March, 2009 in Appeal No. 133 and 135 etc. 

of 2008, NTPC v. CERC and Ors. 2009 ELR (APTEL) 337 and (b) Judgment dated 10 th 

December, 2008 in Appeals No. 151 & 152 of 2007, NTPC v. CERC and Ors. 2008 ELR 

(APTEL) 916, wherein it was held that since the words “actual expenditure incurred” 

contained in Regulation 17 of the Regulations of 2004 only rational interpretation 

would be that the Appellant would be required to recover the actual capital expenditure 

incurred without the reference to the actual cash flow. Even though the Central 

Commission has followed this ratio and allowed the undischarged liability, it has 

made wrong calculations thereby it disallowed the undischarged liability in respect 

of the amount of Rs. 15,591.00 and 26,821.00 lacs. The Central Commission accordingly 

directed to correct the mistake and make a correct calculation and to pass consequential 

orders accordingly. 




MANU/ET/0096/2011 

Employees Cost for the Common Expenditure—Whether the State Commission was 

justified in not allowing the employees cost for the common expenditure on employees 

incurred by the State Electricity Board to the share of the Appellant? — Held, the State 

Commission has already passed orders with respect to common expenses including 

the employees cost in the main Tariff order dated 7 th March, 2006. This order has not 

been challenged and has attained finality and cannot be interfered with in this Appeal 

which is confined to the impugned order dated 17 th June, 2009. 

Madhya Pradesh Power Generation Company, Jabalpur v. Madhya Pradesh 

State Electricity Regulatory Commission and Ors. 


MANU/ET/0051/2011 

Establishment Cost—Whether MYT Regulations with respect to allowance of 

establishment cost were inappropriate? — Held, according to the State Commission, 

it has approved the Establishment Expenses based on the methodology described in 

the MYT Regulations, 2007. Therefore, the finding on this issue rendered by the State 

Commission is correct. 




MANU/ET/0093/2011 

22 


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xix 

General Provident Fund—Whether order of State Commission disallowing a sum of 

Rs. 13.62 Crores incurred by the review Petitioner/Appellant on interest on General 

Provident Fund was justified? — Held, the Tribunal had given a clear finding on this 

issue in Paras 13 and 14 of the impugned judgment. Petitioner/Appellant has raised 

the same issues as raised in the main appeal and also made new submissions which 

are not permissible in the review. Court did not find that there is any error apparent 

on the face of the record in this matter. Accordingly, rejected the claim of the review 

Petitioner on the issue of General Provident Fund. 





MANU/ET/0087/2011 

Grid Code—Whether an appeal is maintainable against the Dismissal Order passed 

in the Review Petition? — Held, impugned order dated 5 th May, 2008 was passed by 

the Central Commission in the review petition rejecting the review petition affirming 

the original order dated 31 st December, 2007. Appeal is not maintainable as against 

the dismissal order passed in the review petition. There is no appeal as against the 

original order dated 31 st December, 2007 and the order has become final. Therefore, 

Appellant in this appeal cannot contend that the Central Commission acted without 

jurisdiction in granting open access. The Central Commission is vested with the 

jurisdiction in matters of inter state transmission and open access. The provisions of 

Orissa Grid Code (OGC) are not open access conditions for inter-state open access. 

They are merely connectivity conditions. Therefore, it cannot be stated that the Central 

Commission has acted contrary to the provisions of OGC. 

State Load Despatch Centre SLDC, Orissa Power Transmission Corp. Ltd., 

Orissa v. Nav Bharat Ventures Ltd., Hyderabad and Ors. . 


MANU/ET/0065/2011 

Heat—Whether State Commission was right in not allowing relaxation in heat rate to 

2666.67 Kcal/kWh as claimed by the Appellant in respect of Guru Govind Singh 

Super Thermal Power Station (GGSSTP) due to higher heat rate of 2 out of 6 units 

without valid reasons? — Held, State Commission has approved station heat rate at 

2,500 kcal/kWh for GGSTPS and GHTP in accordance with Central Commission 

norms. We also find that adequate justification for relaxation of heat rate norms in 

case of two units of GGSTPS has been given by the Appellant. Even though the Central 

Commission has not specified any norms for the units installed at GNDTP, the State 

Commission allowed station heat rate at 3,000 kcal/kWh i.e at par with Tanda Thermal 

Station of NTPC. State Commission allowed higher norms for GNDTP as allowed 

earlier by the Central Commission for Tanda for 2007-08. So, this fixation of station 

heat rate is perfectly valid. 




MANU/ET/0072/2011 

Incentive Tariff—Whether the State Commission was right in reducing the incentives 

to the extent as stated when the Distribution Licensees, in their Application for 

determination of Tariff in ARR had sought no changes in the incentive Tariff for 

HT/EHT consumers? — Held, the impact of reduction of incentive on EHT/HT 

consumer’s Tariff is 5 per cent to 6 per cent. The Distribution Licensees have prayed 


23

xx Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

for a combination of increase in Retail Supply Tariff, Reduction in Bulk Supply Tariff, 

Government Subsidy etc. The Distribution Companies envisaged the continuance or 

reduction of the then prevailing Bulk Supply Tariff for the year 2007-08 and for the 

Government Subsidy while submitting the Retail Supply Tariff application for the 

year 2007-08. There was an agreement between the Distribution Licensees and the HT 

Consumers for the Supply of Electricity in which the Appellants have consented for 

the change of Tariff by the State Commission from time to time. The Appellant having 

agreed to pay the energy charges as determined by the State Commission, cannot turn 

around now and question the order of the Commission for revising the Tariff. The 

State Commission has given various reasons while revising the incentives to a 

particular extent in HT and EHT category. The State Commission is to be guided by 

Section 61(d) of the Electricity Act. As per this Section, the State Commission shall 

have to take into consideration the consumer’s interest and at the same time, the State 

Commission should ensure the recovery of the cost of the Electricity in a reasonable 

manner. In the impugned Tariff order, the incentive Tariff has not been fully withdrawn. 

On the other hand, the incentive Tariff component is revised considering the cost of 

the power as per Section 61(d) of the Act. The State Commission has reduced the rate 

of incentive for HT and EHT Consumers for higher level of consumption without 

changing the basic Tariff. The State Commission has specifically observed that the 

consumers who have not reduced the contract demand for a period of three years 

w.e.f. 1 st April, 2005 were entitled to get the incentive Tariff. Thus, the State Commission 

has only reduced the rate of incentive for the HT and EHT consumers for the higher 

level of consumption. The State Commission has given suitable and valid reasonings 

while reducing the rate of incentives in the HT and EHT category. 

M/s. Utkal Chamber and Commerce and Industry, Bhubaneswar Orissa v. 

Orissa Electricity Regulatory Commission, Bhubaneswar Orissa 

Appeal Nos. 62 of 2007, Decided on: 24.05.2011 at page 0883 

MANU/ET/0083/2011 

Interest of National Loan—Whether interest allowed on notional loan for the FY 2006-07 

was lower and a deviation from the past practice (8.55 p.a. v. 9.20 per cent p.a.)? — 

Held, the rate of 8.5 per cent considered by the Delhi Commission was based on the 

loan taken by the Appellant in the FY 2004-05. The interest rates have subsequently 

increased. As such, the Delhi Commission has not considered the cost of refinanced 

Delhi Power Company Loan for allowing interest on notional loan. The Delhi 

Commission has also ignored the fact that the capital interest rate is to be applied for 

the period 2006-07. Therefore, the Delhi Commission is directed to allow the interest 

on notional loan for a particular year based on the market related interest rate prevailing 

in that year. The said claim has to be considered by the State Commission along with 

the carrying cost. 




MANU/ET/0093/2011 

Jurisdiction of Tribunal to decide on—Whether the Tribunal has jurisdiction to enter 

into the question of validity of the Regulations? Whether the norms set up by the 

Commission are reasonable in the light of facts and circumstances of the case and 

whether the order of the Commission suffers from lack of reasonableness? — Held, the 

appeal was held to be as not maintainable in its present form. To direct the Commission 

to effect an amendment of the regulation would entail encroaching upon the power of 

Judicial Review, which cannot be directed because such power or jurisdiction is not 

vested. The impugned order of the Commission dated 26 th May, 2010 cannot be the 

24 


Subject Index 

xxi 

subject matter of challenge in an appeal under Section 111 of the Electricity Act. The 

Regulation 57 dealing with power to remove difficulties is inappropriate and cannot be 

taken as resort to for downgrading the benchmarks. Regulation 56 as it is there in the 

regulation does not entitle the Commission to come down from the norms and it is only 

when Regulation 58 is exercised to amend Regulation 56 that the Commission may in 

its wisdom lower down the norms and benchmarks. Further, Regulations 59.2 and 59.3 

of Regulation 59 are exercisable in adjudicatory process, not in legislative jurisdiction. 

The Commission’s impugned order accordingly does not suffer from lack of reason 

and objectivity of facts. 

The Commission can always undertake any study of norms even after the rejection of 

the prayer for amendment so as to consider the feasibility or otherwise of bringing out 

an amendment of the Regulations in course of the determination of the Tariff 

application. Within the present Parameters of Regulation 56 the Commission can 

deviate from the norms if it so wishes and deems fit. The Commission is at liberty if it 

would deem proper to amend Regulation 56 on the strength of Regulation 58 so as to 

widen its power to deviate. It, in the course of determination of Tariff may exercise any 

of the powers as is available to it in a suitable situation in their respective jurisdiction. 

Since the prayer for amendment was refused by a reasoned order, no interference was 

held to be called for. 

Madhya Pradesh Power Generation Company Ltd, Madhya Pradesh v. Madhya 

Pradesh Electricity Regulatory Commission, Madhya Pradesh and Ors. 


MANU/ET/0064/2011 

Loan Repayment—Whether equating depreciation to normative loan repayment was 

justified? — Held, issue has already been covered in favour of the Appellant in the 

following judgments of this Tribunal: 

(a) judgment dated 16 th February, 2009 in Appeal Nos. 133 and 135 of 2008 

NTPC v. CERC and Ors. 

(b) judgment dated 13 th June, 2007 in Appeals No. 139 and 140 

These decisions have been rendered as the strength of the judgment of Hon’ble Supreme 

Court in Delhi Electricity Regulatory Commission v. BSES Yamuna Power Limited and Ors. 

Mere pendency of the appeal against the judgment of this Tribunal in the Hon’ble 

Supreme Court and mere undertaking given by the NTPC as not to implement the 

order of the Tribunal pending decision in the Second Appeal does not dilute the ratio 

of the decision of this Tribunal which is binding on the Central Commission. Therefore, 

the issue is also decided in terms of the decision rendered by this Tribunal. Accordingly, 

this issue is decided in favour of the Appellant. 


Regulatory Commission, and Ors. 


MANU/ET/0088/2011 

LT Consumer—Whether the procedure followed by the State Commission in crosssubsiding 

the burden of Low Tension (LT) Consumers to Extra High Tension (EHT) 

Consumers/High Tension (HT) Consumers was proper when the constant endeavour 

should be to reduce the element of the cross-subsidy? — Held, in the impugned order 

the State Commission has not determined the cost of supply and cross-subsidy by the 

subsidising category of the subsidised category to show whether the objective of the 

Act and Tariff policy to gradually reduce the cross-subsidy has been met or not. The 


25

xxii Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

State Commission should have clearly determined the cost of supply and cross-subsidy 

for each category of consumer in the impugned order. State Commission directed to 

determine the cost of supply and cross-subsidy for each category of consumers in 

future Tariff orders and ensure that the objective of the Act and the Policy to gradually 

reduce the cross-subsidy is met. 




MANU/ET/0083/2011 

Maintenance of Appeal—Whether the appeal as framed is maintainable? — Held, 

the association comprised of thirty members having sugar mills in Karnataka and the 

sugar factories with cogeneration units in Karnataka are 34 in numbers. In terms of 

the resolution of Committee, the Secretary of the Association was duly authorised to 

present this appeal. The appeal thus was preferred by a registered body in its 

representative capacity to urge therein common view points.. Hence, appeal was held 

to be as maintainable. 

South India Sugar Mills Association (Karnataka), Bangalore v. Karnataka 

Power Transmission Corporation Ltd., Bangalore and Ors. 


MANU/ET/0067/2011 

O&M Expenditure—Whether the State Commission was correct in not allowing the 

employees cost as claimed by the Appellant and in not following the Tariff regulations 

framed by the State Commission to include the assets added by the Appellant during 

the Financial Years 2006-07 and 2007-2008 for the purpose of calculating the operation 

maintenance expenditure allowable to the Appellant ? — Held, State Commission in 

the orders dated 3 rd July, 2008 and 24 th March, 2009, has given valid reasonings as to 

why the entire claim made by the Appellant could not be allowed. The State Commission 

has correctly held that there is no justification to deviate from the Regulations and 

determined the employees’ cost of the Appellant. Even though, the Appellant claimed 

Rs. 2,225.01 crores towards employees’ cost, the State Commission has allowed a 

reasonable cost of Rs. 1,773.55 crores in 2008-09, based on the WPI increase. 

Punjab State Electricity Board, Punjab v. Punjab State Electricity Regulatory 



MANU/ET/0066/2011 

O&M Expenses—Whether the Central Commission could have allowed the O&M 

expenses without warranty spares to Anta, Auriya, Dadri and Kawas Gas Power 

Stations when these stations had a provision for warranty spares for first 10 years of 

operation? — Held, the warranty period for supply of free spare has already expired. 

On the expiry of warranty period, the generating station should be governed by the 

norms applicable to the generating stations without warranty spares. The O&M norms 

as applicable to the gas-based generating stations without warranty spares shall 

apply. The Central Commission has given a reasoned and correct order for deciding 

O&M norms as applicable to the gas based stations without warranty spares for the 

four gas stations where the ten years warranty period has already expired. 

U.P. Power Corporation Limited, Lucknow through its Executive Engineer v. 

Central Electricity Regulatory Commission, through its Secretary and Ors. 

Appeal Nos. 100, 103 of 2009 and 146, 151 of 2010, 


MANU/ET/0080/2011 

26 


Subject Index 

xxiii 

O&M Expenses—Whether the claim for higher O&M expenses is barred by 

constructive res judicata as the same point was not raised in the appeal filed by 

Respondent No. 2 before the Tribunal challenging the Tariff order for the gas power 

stations for the period 2004-09? Has the Tariff order passed by the Central Commission 

merged in the Appellate order which could not be changed by the Central Commission 

on an application moved by the Respondent? Whether after passing the Tariff order 

disposing of the main petition of the Respondent No. 2, the Central Commission has 

become functus officio and could not have entertained the application filed by the 

Respondent No. 2 regarding enhancement of O&M expenses? — Held, present case 

was different where the Central Commission had reserved its decision on the petition 

of the Respondent No. 2/NTPC to revise O&M expenses. The Central Commission 

had also sought additional information from the Respondent No. 2/NTPC which 

was furnished through the IA. All the issues decided against the Appellant. 





MANU/ET/0080/2011 

O&M Expenses—Whether the Commission was justified in not allowing escalation 

of other aspects such as O&M expenses in terms of the Tariff Regulations for 

determination of Tariff? — Held, the Commission had duly considered the escalation 

in O&M expenses as per the Regulations. The Commission had followed 

Regulation 25(4) to provide escalation @ 5.72 per cent per annum. The levelised generic 

Tariff is not subject to true-up and in the case of wind power projects this provision 

cannot be made applicable. In any case, in the levelised base Tariff for FY 2009-10 

escalation of O&M cost at 5.72 per cent per annum has been provided and therefore 

the O&M escalation as provided in the base Tariff also gets passed on to the Tariff for 

the projects to be Commissioned during FY 2010-11. 

M/s. Enercon (India) Limited and Indian Wind Power Association (Rajasthan 

State Council), Jaipur v. Rajasthan Electricity Regulatory Commission, Jaipur 

and Ors., Appeal No. 186 of 2010, Decided on: 30.05.2011 at page 0987 

MANU/ET/0095/2011 

Operation and Maintenance—Whether line in question was a dedicated transmission 

line of generating company for evacuation of power from its generating station or is a 

“service line” for meeting the requirements of a consumer? — Held, Section 10 of the 

Act requires any generating company to establish, operate and maintain dedicated 

transmission line. Dedicated transmission line requires prior approval of the State 

Government which had been obtained by the generator. Sub-section (3) of Section 68 

of the Act empowers the State Government to impose conditions, including ownership 

and operation of the line while granting such approval. State Government has 

according impose 19 conditions on the generator while granting approval under 

Section 68(1). The 18 th Condition in the said approval provides that operation and 

maintenance of the line shall be under taken necessarily by the Respondent No. 1 

company. Thus, the line in question is a dedicated transmission line of a generating 

company and have to be operated and maintained by the generating company. 

Respondent No. 1 generating units were operating and power was being sold to 

Appellant Board at 33 KV. It was because of Clause 4.1.2 of State Commission’s grid 

Code notified on 30 th December, 2006, Respondent No. 1 had to upgrade evacuation 

system to 132 KV. This upgradation from 33 KV to 132 KV was because of its generating 

capacity was more than 9 MW. Its startup power requirement was only 

11 KVA for which existing 33 KV line was adequate. On this ground also 132 KV line 


27

xxiv Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

in question is a “dedicated transmission line” to evacuate power from generating 

station of Respondent No. 1 and not a “service line” to meet startup power requirement. 




MANU/ET/0084/2011 

Payment of Loan—Whether equating depreciation to normative loan payment was 

justified? — Held, on this issue, the Tribunal in Appeal No. 133 and 135 of 2008 dated 

16 th March, 2009 and Appeal No. 34 and 74 of 2009 dated 21 st August, 2009 has passed 

the judgment in favour of the Appellant but the Central Commission has not chosen to 

follow the ratio decided by this Tribunal on the ground that the decisions were 

challenged before the Hon’ble Supreme Court and the same is pending. Mere pendency 



pending decision would not dilute the ratio of the decision of this Tribunal. It does not 

in any manner empower the Central Commission to hold that the claim of the Appellant 

based on the principles laid down by this Tribunal cannot to be considered in the 

light of the undertaking given by the Appellant. Thus, Appellant is entitled to claim in 

terms of the judgments rendered by this Tribunal. Accordingly, the issues are answered 

in favour of Appellant. 




MANU/ET/0090/2011 


right? — Held, this issue is covered in favour of the Appellant in the following 

judgments: 

(a) judgment dated 16 th March, 2009 in Appeal Nos. 133 and 135 of 2008, NTPC v. CERC 

and Ors. 

(b) judgment dated 13 th June, 2007 in Appeals No. 139 and 140 of 2006 

The Hon’ble Supreme Court had also on the same issue of depreciation has decided in 

the Delhi Electricity Commission v. BSES Yamuna Power Limited. Therefore, this issue 

is also decided in favour of the Appellant in line with the judgments referred to above. 




MANU/ET/0091/2011 


justified? — Held, according to the Appellant, the Central Commission continued to 

adjust depreciation against normative loan repayment despite the judgment by this 

Tribunal in favour of the Appellant in Appeal No. 133, 135 etc. of 2008 dated 16 th 

March, 2009 and in Appeal No. 139/140 of 2006 dated 13 th June, 2007, which were in 

line with the judgment of Hon’ble Supreme Court in Delhi Electricity Regulatory 

Commission v. BSES Yamuna Power Limited and Ors. The Central Commission 

accordingly to consider the decisions of the Tribunal and to accordingly pass the 

consequential order. 




MANU/ET/0096/2011 

28 


Subject Index 

xxv 

Plant Load Factor—Whether State Commission was right in not allowing incentives 

for generation above the target Plant Load Factor/Availability? — Held, State 

Commission had considered the Plant Load Factor of the generation and has come to 

the conclusion that the average generation of all generators has been lower than the 

average of the target Plant Load Factor and hence the incentive was not awarded. 

Finding of State Commission upheld. 




MANU/ET/0072/2011 

Power Purchase Cost—Whether disallowance of Power Purchase Cost of Rs. 24.56 Cr. 

in True up for FY 2005-06 was justified? — Held, the State Commission has allowed 

power purchase cost of Rs. 1,057.74 crores as against the audited amount of Rs. 1,082.30 

crores in the true up for FY 2005-06. However, the State Commission has not given 

any reason for disallowance of power purchase cost. Accordingly, State Commission 

directed to consider the submissions of the Petitioner/Appellant and pass a reasoned 

order. 





MANU/ET/0087/2011 

Power Purchase Cost—Whether order of State Commission not allowing the interest 

on additional power purchase cost contrary to the directions of the Tribunal was 

correct? — Held, the Tribunal has considered all the pleadings of the Appellant 

including the Tribunal’s judgment in earlier appeal and there was no error on the face 

of the records. Reconsideration of issue afresh at the review stage is not permissible. 

Accordingly, the issue is rejected. 



Review Petition No. 13 of 2010 in Appeal Nos. 56 of 2008 and 192 of 

2009, Decided on: 27.05.2011 at page 0919 

MANU/ET/0087/2011 

Power Purchase Cost—Whether sale of electricity was wrongly treated as controllable, 

contrary to the MYT Regulations? — Held, the State Commission has to act in 

accordance with the MYT Regulations in determination of Tariff. On perusal of the 

relevant MYT Regulations, it is evident that supply margin is a function of sale and 

the sale has been specified as an “Uncontrollable” parameter. The Appellant cannot 

be disincentives for the lower sales on account of sale of power when no incentive is 

provided for reduction in the net Power Purchase Cost, charged to the consumers. 

Under Section 43 of the Electricity Act, 2003, the Appellant is under universal supply 

obligation. On 21 st October, 2009, the State Commission issued directions to the 

Distribution Companies to maintain uninterrupted power supply and to ensure that 

the electricity that could not be served shall not exceed 1 per cent of the total energy 

supplied in units in any particular month. Therefore, the finding of the State 

Commission on this issue besides being contrary to the Regulations, is also not keeping 

in view the reality since it does not take into account the demand and availability 

situation, operation of under frequency relays, etc. and the implication of Section 43 of 

the Electricity Act, 2003. In fact, Regulation 4.16 of Multi Year Tariff Regulations, 

2007 provides that for any uncontrollable cost the truing up shall be done annually 

while for controlled cost the truing up shall be done only at the end of the 


29

xxvi Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

Control Period which is also limited to only depreciation and return on capital 

employed. This Regulation has not been taken note of by the State Commission. 

Therefore, the finding on this issue rendered by the State Commission is set aside. 




MANU/ET/0093/2011 

Recovery of Depreciation—Whether recovery of Depreciation up to 90 per cent was 

justified? — Held, this issue held to be covered in favour of the Appellant by the 

judgment dated 13 th June, 2007 in Appeal No. 139/140 of 2006, wherein it was decided 

that it will be only fair to allow the unpaid portion of the depreciation after plant has 

lived its designated useful life. Despite the directions of the Tribunal in the above 

issues, the Central Commission continued to adjust depreciation against the normative 

loan repayment and has not dealt with the issue of depreciation up to 90 per cent. As 

the mere pendency of the Appeal against the judgment of this Tribunal in the Hon’ble 

Supreme Court cannot be taken as a ground for not following the ratio decided by this 

Tribunal which has not yet been set aside by the Hon’ble Supreme Court that apart, 

the impugned order does not deal with the claim of the Appellant with regard to the 

issue dealing with depreciation. The approach was held to be wrong. The ratio which 

has been decided in the earlier decision by the Tribunal is binding precedent to the 

Central Commission to follow the same till the said decision is set aside. Accordingly, 

the said issues c & d are answered in favour of the Appellant. 




MANU/ET/0096/2011 

Redresal of Grievances—Whether alternative remedy under Sections 42(5) or 42(6) 

of the Electricity Act, 2003 being available, the petition was maintainable ? — Held, if 

the sum demanded was not shown as due at any time earlier, there could be no 

question of the said amount being at in earlier point of time due from the consumer. 

Amount of short payments became due only after realisation of mistake and the 

assessment of the short-charged amount, and on raising the bill therefore. Though the 

electricity consumed by the Petitioner from 30 th November, 2002 to July, 2003 was 

more; the bill was raised for a lesser consumption owing to the inadvertent application 

of a wrong multiplying factor. Thus, the entire electricity claimed to have been consumed 

by the Petitioner cannot be said to have been billed by the Respondent. In case the 

consumer is under-billed on account of clerical mistake such as where the 

multiplication factor had changed, but due to oversight the department issued bills 

with 500 as multiplication factor instead of 1,000, the bar of limitation cannot be 

raised by the consumer. Thus, petition is not maintainable owing to the alternative 

remedies available under Section 42(5) or 42(6) of the Act. 

Jingle Bell Amusement Park P. Ltd. v. North Delhi Power Ltd. 

W.P. (C) 8647/2007, Decided on: 19.04.2011 at page 1103 

MANU/DE/1339/2011 

Refinancing of Loan—Determination of consequences of refinancing of loan? — Held, 

the difference between the 2004 Regulations and the previous Regulations regarding 

refinancing of loans is that as per the new Regulations refinancing is permitted at the 

cost of beneficiaries as long as it benefits them, whereas as per the previous Regulations 

refinancing of loan was permitted at the cost of the generator and the resulting benefit 

or loss was to their account. The Tariff Regulations, 2004 have to be applied to the 

refinancing done after these regulations came into force and cannot be applied to the 

30 


Subject Index 

xxvii 

prior period when the refinancing had already been done by the Appellant and costs 

associated with refinancing have been borne by the Appellant. Regulation in question 

will apply where loans have been swapped and costs associated with refinancing 

have been borne by the beneficiaries. It will not be fair to the Appellant if the Respondent 

beneficiaries take advantage of the refinancing without taking all associated 

obligations allowed to such refinancing. Ratio in Appeal Nos. 139, 140 etc. of 2006, 

dated 13 th June, 2007 applied. 



MANU/ET/0053/2011 

Refinancing of Loan—What are the consequences of Refinancing of Loans? — Held, 

this issue has been covered in favour of the Appellant in the judgment dated 13 th June, 

2007 in Appeals No. 139, 140, etc. of 2007. In this decision, it has been specifically 

held that the Tariff Regulation 2004 have to be applied to the refinancing done by the 

Appellant after these Regulation came into force and it cannot be applied to the prior 

period, i.e. when refinancing had already been done by the Appellant and costs 

associated with refinancing have been borne by the Appellant. So this decision is 

binding on the Commission. Accordingly, issue was decided in favour of the Appellant. 


Regulatory Commission, and Ors. 


MANU/ET/0088/2011 

Rejection of Claim—Whether the Central Commission erred in rejecting the claim of 

the Appellant for servicing of the regulatory asset as per the agreement reached between 

the Appellant and Respondent No. 2? — Held, this issue has also been dealt with in 

the judgment of this Tribunal in Appeal No. 191 of 2010. Accordingly, this issue is 

decided against the Appellant. 





MANU/ET/0086/2011 

Repayment of Loans—Whether treating the depreciation as the deemed repayment of 

loans wherever depreciation is higher than the normative repayment of loan was proper? 

— Held, depreciation has to be considered as a mere expense. It should not be considered 

to be an item allowed for repayment of loan. It includes depletion of resources during 

the process of use. It is ordinarily not a source of funds under commercial accounting. It 

enables a utility to work out the charges to be recovered from consumers for supply of 

electricity. Since the charge is recoverable from the consumer, depreciation is a source of 

funding for replacement of cost. Thus, treating depreciation as a deemed repayment of 

loan is not correct. Issue is covered by Appeal Nos. 133, 135 etc. of 2008 NTPC v. CERC 

and Ors., dated 16 th March, 2009 and Appeal Nos. 139, 140 etc. of 2006 dated 13 th June, 

2007 and decided accordingly in favor of Appellant. 



MANU/ET/0053/2011 

Repayment of Loan—What is the impact of decapitalisation of assets on cumulative 

repayment of loan? — Held, this issue was covered in favour of the NTPC by the judgment 

dated 13 th June, 2007 in Appeal No. 130 and 140 of 2007. In this decision, it has been held 

that when the asset is not in use, the capital base for the purpose of Tariff is also 


31

xxviii Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

proportionately reduced. However, despite the decapitalisation, interest on loan is required 

to be paid. Whereas, 10 per cent salvage value of the depreciated asset should be non-tariff 

revenue, the interest on loan has to be borne by the beneficiary. If the salvage value is more 

than 10 per cent, the amount realised above 10 per cent should be counted as additional 

revenue. If salvage value is less than 10 per cent, it will be counted as loss in the revenue. 

Therefore, cumulative repayment of the loan proportionate to the assets decapitalised 

required to be reduced. But the Central Commission has not followed this ratio passed by 

this Tribunal. Therefore, this point is also answered in favour of the Appellant. 




MANU/ET/0088/2011 

Return of Equity—Whether the Commission did not apply the correct rate of MAT 

including surcharge for the purpose of grossing up the rate of return on equity. — 

Held, the Commission applied the correct rate of MAT for the purpose of grossing up 

the rate of return on equity. 

As apparent vide order dated 16 th July 2009, the order dated 31 st March, 2010 was a 

levelised Tariff determination order based on the base Tariff order dated 16 th July, 2009. 

Within the control period during FY 2009-10 to 2013-14 all Tariff determination orders 

that would be passed subsequent to the base Tariff order for 2009-10 will have 

uniformity amongst themselves as also with the base Tariff order dated 16 th July, 2009. 

Whatever components allowed in the base Tariff order were necessarily been followed 

and will be followed in the subsequent Tariff orders except the variation in the cost of 

cement, coal and lending rate of SBI that relate to capital cost of a wind power project. 

Surcharge on MAT was not considered from 2 nd to 20 th year alike in the base Tariff 

order. If surcharge on MAT had to be allowed for 2 nd to 20 th Year in the case of the 

Appellant then the project developers who Commissioned wind power plants in 

FY 2009-10 would be discriminated against. Since the levelised Tariff is not subject to 

true up and the amount of surcharge varies from year to year, it would not be possible 

for the Commission to consider surcharge of MAT from 2 nd to 20 th year. 



and Ors., Appeal No. 186 of 2010, 


MANU/ET/0095/2011 

Show Cause Notice—Whether it was mandatory upon the State Commission to issue 

and serve a Show Cause Notice on the person concerned with specific allegations while 

initiating the proceedings under Section 142 of Electricity Act, 2003 to enable him to give 

reply to those allegations? — Held, a Show Cause Notice is the foundation on which the 

charge has to be built-up. Such Show Cause Notice should contain specific allegations. 

Failure in issuing Show Cause Notice in the penalty proceedings which is the mandatory 

procedure and the failure to give opportunity to the person concerned to meet those 

allegations would amount to the failure to follow the principles of natural justice. 

BSES Rajdahani Power Limited., New Delhi v. Delhi Electricity Regulatory 

Commission and Santosh Gargya, New Delhi 


MANU/ET/0052/2011 

Startup Power—Whether a generating company could also be termed as a consumer 

merely because he would be drawing “startup power” from grid occasionally? — 

Held, requirement of startup power is essential for every generating station and is 

32 


Subject Index 

xxix 

very limited both in quantum (MW) and duration terms. Respondent No. 1 have 

applied for startup power under Section 43. A “startup power” consumer can have a 

contract demand up to maximum of 10 per cent of highest generating capacity unit of 

generating station. Further, his total drawal from the grid during the month is also 

restricted to 10 per cent load factor. In other words at full contracted demand, he can 

draw power from grid for less than three hours in a day (720 × 0.1/30 hours per day). 

Further, his operational time is also restricted to one shift operation. With such 

restrictions, supply given to a generator as “startup power” cannot be termed in 

pursuance to Section 43 of the Electricity Act, 2003. Consumer as defined in the Act is 

a person who is supplied with electricity for his own use. Here, startup power is 

supplied to Respondent No. 1 to startup its generating unit. Once generating unit is 

synchronised with the grid, the power so generated is supplied to Appellant. Without 

startup power, generators cannot start and produce power. Thus, in way, startup 

power is supplied for the benefit of Appellant only. From this point of view, a generator 

taking startup power from distribution licensee and supply power to same licensee 

on startup, cannot be termed as a consumer. 




MANU/ET/0084/2011 

Supervision Charges—Whether the Appellant was entitled for supervision charges 

for supervision of proper synchronisation of generator with the grid through its own 

technical experts to avoid mishaps during synchronisation as far as possible? — 

Held, levy of 15 per cent supervision charges are justified in cases where an asset is 

established by consumer and is handed over to licensee for operation and maintenance. 

The rationale for such view is that since the asset is to be maintained by licensee for 

whole of its life. Licensee has to replace any part of the asset which got defective 

during life time at his costs. He is entitled to claim supervision charges. Thus, no 

reason forced to interfere with the findings of the State Commission. 




MANU/ET/0084/2011 

Tariff—Whether a single component of Tariff be revised by the Central Commission 

without considering that 14 per cent ROE is not available to Respondent No. 2 and 

without asking the Respondent No. 2 to submit its annual revenue requirements? — 

Held, each element of the Tariff has to be determined on the norms following 

commercial principles, encouraging competition and safeguarding the consumer 

interest and at the same time ensure recovery of the cost of electricity in a reasonable 

manner. Central has decided to allow O&M expenses to the four gas stations of NTPC 

as applicable to Gas power stations without warranty spares. The Central Commission 

has recorded in the impugned order that it is yet to frame the regulations under the 

Section 62(5) and without the regulations being in place, NTPC could not be directed 

to file its ARR. The existing regulations of the Central Commission provide for a 

normative Tariff and there is no provision to file ARR. Thus the filing of ARR was not 

according to the scheme of things as existing in the Tariff Regulations. 





MANU/ET/0080/2011 


33

xxx Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

Tariff—Whether amendment of the Tariff order dated 31 st March, 2010 passed by the 

Commission is not maintainable? — Held, regulator has power to amend the Tariff or 

any part of the Tariff but not frequently more than once except in respect of any 

changes expressly permitted under the terms of any fuel surcharge formula as may be 

specified in the regulations. When Tariff or part of Tariff is to be amended, the 

provisions in relation to determination of Tariff have to be complied with. It is against 

the principle of judicial ethics that a statutory Authority that passed an order under 

the law ventures to interfere with their order by amendment thereof when the appeal 

is pending before this Tribunal. It is not clear to us as to whether the present Appellants 

are likely to be affected by the proposed amendment of the Tariff order. If the proposed 

amendment of the Tariff order is totally unconcerned with the Appellants then we are 

to say that we may not stand in the way. The carriers of the appeal must not be 

inconvenienced and prejudiced to suffer an amendment of Tariff order which itself 

has been challenged by the Appellants and that too during the pendency of the appeal. 

Application disposed of with direction that it is only if the proposed amendment 

proceedings do not affect the present Appellants and are totally unconcerned with 

them that the Respondents may proceed with the intended proceedings for the 

amendment of the Tariff order. 

Rama Shankar Awasthi and Ors. v. Uttar Pradesh Electricity Regulatory 

Commission, through its Chairman, Uttar Pradesh and Ors. 

IA No. 83 of 2011 in Appeal No. 121 of 2010, 


MANU/ET/0092/2011 

Tariff—Whether order of State Commission fixing the Tariff which Tata Power 

Company had to charge from its various consumers including the Reliance Energy as 

a Distribution Licensee for the FY 2003-04 and 2004-05 was right? — Held, the 

impugned order dated 11 th June, 2004 passed by the State Commission was based 

upon the earlier order dated 31 st May, 2004, passed by the State Commission which 

had already been set aside. Analysing the validity of the impugned order would 

amount to review of earlier judgment rendered by this Tribunal which is not 

permissible under the law. Impugned order had given effect to the order dated 

31 st May, 2004 by following a particular methodology for fixing a particular Tariff 

which has been recovered by the Tata power Company as well as the Reliance Energy 

Company Limited from their consumers for several years. If that methodology is 

disturbed at this stage, without getting the result of the final adjudication of the Hon’ble 

Supreme Court , it would result in a totally unworkable situation. It was 

held as improper to decide the issue afresh till these issues are decided by the 

Hon’ble Supreme Court. 

M/s. Tata Power Company Limited., Mumbai v. M/s. Reliance Energy Limited., 

Mumbai and Ors., Appeal No. 56 of 2005, 


MANU/ET/0079/2011 

Tariff—Whether State Commission was right in disallowing balance 54 MUs as 

metered sales for deciding the energy balance on truing up for the earlier Tariff 

period 2005-2006? — Held, in the metered sales, the Appellant included 116 MUs of 

energy on account of theft. The revenue on this account had been depicted at 

Rs. 22.17 crores but this figure was not compatible with the average energy realisation 

from the sale of energy from the concerned categories. State Commission has worked 

out the equivalent sale of energy on this account as 62 MU and has accordingly, 

amended figures relating to the metered sales on proportionate basis. This calculation 

34 


Subject Index 

xxxi 

cannot said to be unjustified as the Appellant has not been able to furnish any 

details to justify its claim. 




MANU/ET/0072/2011 

Tariff—Whether the Commission did not follow the provisions of the Tariff Regulations 

for calculation of the repayment of loan amount, which according to the Appellants is 

equivalent to the depreciation allowable annually? — Held, the Commission did not 

follow the provisions of the Tariff Regulation for calculation of the repayment of loan 

amount, which would be equal to the amount of depreciation allowable annually and 

the same has to be corrected by the Commission. The Commission followed the 

provisions of the Tariff Regulations, 2009 by the principle of harmonious construction 

of the different provisions thereof. 



and Ors., Appeal No. 186 of 2010, Decided on: 30.05.2011 at page 0987 

MANU/ET/0095/2011 

Tariff—Whether the Commission failed to implement the various provisions of the 

Tariff Regulations, 2009 by the principle of harmonious construction of the different 

provisions thereof. — Held, Part-III of the Regulations, 2009 was taken note of for 

determination of Tariff for the projects to be commissioned during FY 2010-11. It was 

held that no consideration arises in the instant case in respect of Regulation 134 

which the Commission has already applied in the order dated 6 th August, 2010 for 

rectification of the mistake occurred in the order dated 31 st March, 2010 and the same 

was not challenged in the appeal. For the purpose of determination of Tariff for any 

subsequent year within the control period the base Tariff order dated 16 th July, 2009 

has to be made applicable read with indexation mechanism as provided in Regulation 

85 and while doing so the misconception that the provisions of Part-III of the regulations 

are not considered is misplaced. The indexation formula was accordingly devised to 

incorporate such changes as were considered necessary in determination of Tariff for 

subsequent years. 



and Ors., Appeal No. 186 of 2010, 


MANU/ET/0095/2011 

Tariff—Whether the determination of Tariff by the Commission is justifiable based 

on relevant material and evidence as alleged by the Appellant? Whether the 

determination of Tariff by the Commission corresponds to legal principles and the 

national Tariff policy? — Held, the Commission over looked the evidence placed 

before it by the Appellant and without examining them arrived at a decision, which 

accordingly was held to be difficult to sustain. The appeal was accordingly allowed 

in part. The case was remanded back to the Commission for re-examination on the 

issue through re-hearing upon consideration of the relevant materials as would be 

placed before it by the Appellant. 

South India Sugar Mills Association (Karnataka), Bangalore v. Karnataka 

Power Transmission Corporation Ltd., Bangalore and Ors. 


MANU/ET/0067/2011 


35

xxxii Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

Tariff—Whether the impugned order had taken into consideration, the policy 

directives of the State Government issued under Section 108 of the Act in public interest 

which has categorically directed that there should be no Tariff hike till the year 2009 

and it is the responsibility of the Distribution Companies to bring down the 

distribution losses and AT&C losses as per the State Commission’s Business Plans 

failing which, the Distribution Companies should meet the non-achievable targets by 

means of their own financial arrangements? — Held, as per Section 12 of the Orissa 

Electricity Reform Act, 1985, the directions issued by the State Government shall be 

consistent with the object of the Act. As per Section 108 of the Electricity Act, the State 

Government can issue policy directions to the State Commission involving public 

interest. The State Commission is also entitled to issue policy directives considering 

the subsidies to be allowed for the supply of electricity to any class or any classes of 

consumers. If the State Government has to provide the subsidy or any Tariff concession 

to the class of consumers, the same has to be mentioned and subsidy has to be provided 

up-front. In the letter dated 1 st February, 2007, nothing of this sort has been mentioned. 

Therefore, this cannot be treated as a direction under Section 108 of the Act. That 

apart, the power of the Tariff fixation of the State Commission cannot be vested with 

any other Authority of the State Government to issue any directions in the name of 

Policy directives. 




MANU/ET/0083/2011 

Tariff—Whether the Ombudsman or the Consumer Grievance Redressal Forum had 

the Authority and power to decide the question of transferability or otherwise of a 

consumer from one category to another category as was prayed before them by the 

Respondent No. 3? — Held, if a particular entity is of the opinion that it has been 

wrongly categorised or that there has been wrong application of the Tariff order because 

of misunderstanding or misinterpretation then it is the Commission that has to clarify 

the confusion and make the position clear. Therefore, the Grievance Redressal Forum 

or the Ombudsman has no jurisdiction to entertain a petition from a HT consumer for 

change of one category, for the purpose of Tariff determination, to another category. 





MANU/ET/0069/2011 

Tariff—Whether the order dated 12 th May, 2008 passed by this Tribunal in the case of 

Eurotex prospective or retrospective? — Held, Tribunal’s order directing the MSEDCL 

to refund the amount of energy charges and other incidental charges on the basis of the 

benchmark fixed as per the Tariff order dated 18 th May, 2007 cannot be made applicable 

to other consumers without any notice and that too with retrospective effect. 



Commission, Mumbai 


MANU/ET/0071/2011 

Tariff—Whether the order, passed by State Commission staying the operation of its own 

Tariff order was justified? — Held, on 19 th April, 2011, the Appellant filed reply requesting 

the State Commission not to grant stay without hearing them. On 19 th April, 2011, the 

State Commission granted one month’s time to the Appellant for filing reply. In the 

36 


Subject Index 

xxxiii 

meantime, the State Commission passed order dated 26 th April, 2011 granting stay of its 

own Tariff order dated 28 th March, 2011. Impugned stay order pending review passed on 

26 th April, 2011 was without valid reasons. Hence, order dated 26 th April, 2011 set aside. 

Rosa Power Supply Company Ltd. v. U.P. Power Corporation Ltd. and Anr. 

Appeal No. 60 of 2011 and IA No. 102 of 2011, 


MANU/ET/0063/2011 

Tariff—Whether the State Commission has erred in not determining the Tariff of the 

Appellants based on the actual cost of supply according to the provisions of the Act, the 

Policy and the Regulations? — Held, if the cross-subsidy calculated on the basis of cost 

of supply to the consumer category is not increased but, reduced gradually, the Tariff of 

consumer categories is within ±20 per cent of the average cost of supply except the 

consumers below the poverty line. Tariffs of different categories of consumers are 

differentiated only according to the factors given in Section 62(3) and there is no Tariff 

shock to any category of consumer, no prejudice would have been caused to any category 

of consumers with regard to the issues of cross-subsidy and cost of supply raised in this 

appeal. The State Commission has expressed difficulties in determining cost of supply 

in view of non-availability of metering data and segregation of the network costs. There 

was no need to make distinction between the distribution charges of identical consumers 

connected at different nodes in the distribution network. It would be adequate to 

determine the voltage-wise cost of supply taking into account the major cost element, 

which would be applicable to all the categories of consumers connected to the same 

voltage level at different locations in the distribution system. The State Commission 

accordingly directed to determine cross-subsidy for different categories of consumers 

within next six months from FY 2010-11 onwards and ensure that in future orders for 

ARR and Tariff of the distribution licensees, cross-subsidies for different consumer 

categories are determined according to the directions given in this judgment and that 

the cross-subsidies are reduced gradually as per the provisions of the Act. 

M/s. Tata Steel Limited, Mumbai represented through Rajesh Chintak, Chief 

Resident Executive v. Orissa Electricity Regulatory Commission and North 

Eastern Electricity Supply Company, of Orissa Limited, Bhubaneswar 



MANU/ET/0097/2011 

Tariff—Whether the State Commission was correct in not allowing the Tariff for the 

entire life time of the project as submitted by the Appellant? — Held, the issue has 

been decided in Appeal No. 191 of 2010 challenging the order of the Central 

Commission for not allowing the Tariff which was agreed between the Appellant and 

Respondent No. 2, the major beneficiary of the project. The Central Commission is not 

expected to mechanically accept the Tariff as per the agreements or understanding 

reached between the Project stakeholders. There is also no provision of Regulatory 

Assets in the Regulations. The annual fixed charges claimed by the Petitioner for a 

period up to 31 st March, 2032 are in deviation of the norms specified in the 2009 

Regulations. Regulation 38 of the 2009 Regulations provides for determination of 

generation Tariff in deviation of the norms specified in the 2009 Regulations subject 

to the condition that the levelised Tariff over the useful life of the project on the basis 

of norms in deviation does not exceed the levelised Tariff calculated on the basis of 

norms specified in these regulations. The Petitioner, in its petition, has not demonstrated 

the existence of the above condition warranting the consideration of levelised Tariff 

over the useful life of the generating station by the Commission. Hence, the Tariff for 

the generating station is determined for a period of five years from 1 st April, 2009 to 


37

xxxiv Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

31 st March, 2014, based on the norms specified by the Commission in the 2009 

regulations. 




Decided on: 27.05.2011 at page 0914, MANU/ET/0086/2011 

Tariff—Whether the State Commission was legally competent to interpret and clarify 

its order for Tariff determination? — Held, at the same time, the Commission has no 

jurisdiction to adjudicate upon a petition of an individual consumer and give relief to 

only such individual consumer by conscious distraction from the Tariff order. 





MANU/ET/0069/2011 

Tariff—Whether the State Commission was right in considering Advance Against 

Depreciation Company-wise instead of Station-wise? — Held, issue was dealt with in 

details by the Tribunal in its judgment dated 27 th April, 2011 in Appeal No. 191 of 2009 in 

the matter of Maharashtra State Power Generation Co. Ltd. v. Maharashtra Electricity Regulatory 

Commission and Ors. State Commission accordingly directed to re-determine station-wise 

AAD as per its Regulations by following the judgment of this Tribunal referred to above. 

Each Tariff proceeding is a separate and distinct cause of action. Failure of the Appellant 

to challenge an issue in earlier Tariff order does not bar the Appellant to challenge that 

issue in a subsequent Tariff order. Actual repayment of allocated loans can be apportioned 

power station-wise. State Commission directed to determine station-wise AAD. 




MANU/ET/0082/2011 

Tariff—Whether the Tariff of the Appellant being Extra High Voltage (EHV) consumer 

getting supply directly through the transmission system of the transmission licensee 

should include the elements of fixed charges relating to the distribution network of the 

distribution licensee and the distribution system losses? — Held, according to the Tariff 

Policy, the Tariff of all categories of consumers except those below poverty line have to 

be within ± 20 per cent of the total average cost of supply. The variation of Tariffs of 

different category with respect to average cost of supply held to be as not correctly 

determined by the State Commission. The State Commission erred in clubbing different 

consumer categories having different Tariff in one category based on voltage of supply. 

Also for the Appellants’ category average Tariff per unit has been incorrectly determined 

at assumed load factor of 80 per cent. The State Commission was directed to determine 

the average Tariff for Appellant’s another category according to the directions given in 

Paragraphs 39 and 40. Accordingly, the matter was remanded to the State Commission 

to re-determine the variation of average Tariff for different consumer categories with 

respect to average cost of supply and provide consequential relief to Appellant’s 

consumer category in terms of the Tariff policy, if any, after hearing all concerned. 


Resident Executive v. Orissa Electricity Regulatory Commission and North 

Eastern Electricity Supply Company, of Orissa Limited, Bhubaneswar 



MANU/ET/0097/2011 

38 


Subject Index 

xxxv 

Technical and Chemical Loss—Whether State Commission was right in determining 

the transmission and distribution losses at 19.5 per cent as against 22 per cent as 

claimed by the Appellant for the year 2007-08? — Held, State Commission has accepted 

that there can only be a gradual reduction of such losses after substantial investments 

to improve the transmission and distribution system in addition to comprehensively 

drawing up base line data, introduction of energy audit at all levels and enforcing 

accountability where loss exceeds the prescribed limits. Appellant failed to take steps 

to initiate series of measures that would bring down the technical and commercial 

losses. State Commission was justified in retaining the loss level at 19.50 per cent as 

earlier prescribed. 




MANU/ET/0072/2011 

Transit Loss—Whether non-consideration of normative transit loss for coal received 

through Railway system was correct? — Held, this issue has been covered by this 

Tribunal in favour of the Appellant in the judgment dated 13 th June, 2007 in Appeal 

No. 139 and 140 of 2007. In this case, the Tribunal has specifically directed to allow 

the transit loss of 0.8 per cent on the requirement of coal between 62.8 per cent and up 

to 80 per cent of the Plant Load Factor. But the Central Commission in the impugned 

order has failed to consider this claim at all. Though, the Central Commission has 

filed second appeal against the judgment dated 13 th June, 2007, the Hon’ble Supreme 

Court has specifically directed the Central Commission to proceed to determine the 

other issues i.e. issues not challenged by the Central Commission. Hence, the 

Commission ought to have allowed the claim of NTPC with regard to normative 

transit loss of coal which has not even been challenged before the Supreme Court. 

Therefore, this issue also decided in favour of the Appellant. 




MANU/ET/0088/2011 

Truing-up of Finances Whether the State Commission was justified in changing the 

methodology of calculation of coal consumption and cost of coal at the time of truing-up 

of the finances as compared with methodology adopted at the time of initial Tariff 

order? — Held, the State Commission correctly worked out the cost of coal taking into 

account the Station Heat Rate and Gross Calorific Value of coal according to the Tariff 

regulations. In the main Tariff order, the State Commission had adopted Net Calorific 

Value contrary to the Regulations while adopting the Station Heat Rate according to the 

Regulations without even indicating that it was deviating from the Regulations and 

without giving any justification for deviation from the Regulations. In the true up order, 

the State Commission corrected the error committed in the main order. Incorrect 

application of the Regulation in main order cannot be perpetuated in the true up order. 




MANU/ET/0051/2011 

Truing-up of Finances—Whether the State Commission was justified in not revising 

the normative interest on working capital pursuant to the revision in various elements 

of Tariff occasioned on by the truing-up of the finances of the Appellant for the Tariff 

year 2006-07 on account of the coal cost and common expenses ? — Held, question 


39

xxxvi Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

related to interest on working capital due to increase in cost of fuel and common 

expenses of the Electricity Board, in view of findings on the cost of fuel and common 

expenses of the Electricity Board, the Appellant was held to be not entitled to any 

increase in the interest on working capital. 




MANU/ET/0051/2011 

Undischarged Liability—Whether Appellant was entitled to undischarged liability? 

— Held, the issue has already been covered in favour of the Appellant in the following 

judgments: 



(b) judgment dated 10 th December, 2008 in Appeals No. 151 & 152 of 2007, NTPC v. 

CERC and Ors. 

In view of these judgments, the Appellant is entitled to claim over this issue. 

Accordingly, the Central Commission is directed to follow the decision decided by 

this Tribunal in the judgments referred to above. 



Ltd., Lucknow 


MANU/ET/0089/2011 

Undischarged Liability—Whether disallowance of Undischarged liability was 

justified? — Held, in respect of the issue of undischarged liability, this Tribunal in the 

following decisions decided the same in favour of the Appellant: 



(b) judgment dated 10 th December, 2008 in Appeals No. 151 and 152 of 2007, NTPC 


The Central Commission is agreeable that the matter be remanded to the Central 

Commission for implementing the judgment of this Tribunal in respect of the 

Generating Station in question. Accordingly, the same is remanded to the Central 

Commission to pass the appropriate order. 




MANU/ET/0090/2011 

Wheeling Charge—Whether ONGC could raise the issue of wheeling charges when 

it had agreed to pay the same as per provisions of amended policy? — Held, in view 

of intentional delay by GETCO to wheeling agreement, Appellant has right to raise 

the issue despite his conditional acceptance vide letter dated 12 th March, 2009. 

Oil and Natural Gas Corporation Ltd. (ONGC), Ahmedabad v. Gujarat 

Electricity Regulatory Commission, Ahmedabad 


MANU/ET/0070/2011 

Wind Energy Generators—Whether all 34 Wind Energy Generators of ONGC were 

commissioned and connected to grid prior to 7 th January, 2009? — Held, from 

40 


Subject Index 

xxxvii 

commissioning certificates issued by GEDA and assertion of GETCO (R-2), it is clear 

that the Wind Energy Generators were in fact commissioned and connected to grid 

prior to 7 th January, 2009. The State Commission ought to have ascertained these facts 

regarding commissioning and grid connectivity from full dump of memory contents 

of energy meters installed at Wind Energy Generator site. However, this was admittedly 

not done. Under these circumstances, all Wind Energy Generators were commissioned 

and connected to grid prior to 7 th January, 2009 and then same should have been dealt 

with accordingly. 




MANU/ET/0070/2011 

Wind Energy Generators—Whether Government of Gujarat’s amendment to 2007 

Policy date 7 th January, 2009 fixing wheeling charges for captive Wind Energy 

Generators was legally tenable in terms of Electricity Act, 2003. — Held, after enactment 

of Electricity Act, 2003, State Commission is sole Authority to specify wheeling charges. 

Government of Gujarat had no power to change the wheeling charges specified by 

State Commission vide its Order No. 2 of 2006 dated 10 th August, 2006. Enhancement 

of wheeling charges in amendment to 2007 Policy vide Government Resolution dated 

7 th January, 2009 is void abnitio. 




MANU/ET/0070/2011 

Wind Energy Generators—Whether State Commission was right in holding that issue 

cannot be raised on the ground that commissioning of 24 Wind Energy Generators 

were not brought to its notice during proceedings and Appellant had agreed to be 

covered by amended policy? — Held, GETCO (R-2) had not allowed ONGC, the 

Appellant wrongly to wheel power from its Wind Energy generators to more than two 

captive location despite the clarification issued by Government of Gujarat in this 

regard. Hence, GETCO (R-2) cannot be allowed to take advantage of its own wrong. 

The State Commission should have decided the case on its own merits and not on the 

basis of observations made above and ought to have ascertained the fact about 

commissioning of Wind Energy Generators from full dump of meters provided at 

Wind Energy Generators and passed the order accordingly. 




MANU/ET/0070/2011 

Wind Energy Generators—Whether there was any provision for restriction up to two 

locations per Wind Energy Generator in State Government Wind Policy 2007 and on 

this ground GECTO (R-2) delayed entering into wheeling agreement with ONGC? — 

Held, specific restriction of up to two captive locations per Wind Energy Generator as 

provided in 2002 Policy was dropped in 2007 Policy of State Government. In fact, the 

words “up to two locations” in 2002 Policy were replaced by word “locations” in 

2007 Policy. The change cannot be assumed to have occurred inadvertently. There 

was no restriction on number of captive locations per Wind Energy Generator in 

Government of Gujarat’s Wind Power Policy 2007. GETCO (R-2) had delayed the 


41

xxxviii Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

signing of wheeling agreement to wheel power from Appellant’s Wind Energy 

Generators to desired locations. 




MANU/ET/0070/2011 

Withdrawal of Petition—Whether permission can be granted to withdraw the petition? 

— Held, in view of the fact that the South Central Railway decided not to pursue 

further with the appeal in view of the competitive Tariff offered by the Andhra State 

Commission for the year 2011-12, permission to withdraw the petition granted. 

Union of India, South Central Railways and Ors. v. A.P.E.R.C. and Ors. 

DFR No. 1986 of 2010, Decided on: 23.05.2011 at page 0870 

MANU/ET/0081/2011 

Working Capitals—Whether interest rate considered on new loans for working capital/ 

capital expenditure for MYT period (9.50 per cent p.a. v. 11.25 per cent p.a.) was lower? 

— Held, the Delhi Commission, though has stipulated interest rate @ 9.5 per cent 

per annum for all loans, has stated in the impugned order that it may true-up the interest 

rate for new loans to be taken for capital investment and for working capital requirement, 

if there is a deviation in the Prime Lending Rate of the scheduled commercial banks by 

more than 1 per cent on either side. It is also pointed out by the State Commission that 

the issue is already covered by the judgment of this Tribunal dated 6 th October, 2009 in 

Appeal No. 36 of 2008. Therefore, the Delhi Commission may consider the issue relating 

to the interest rate for new loans in the true-up exercise. Accordingly, this issue is 

answered in line with the observations made by the Delhi Commission. 


New Delhi and Ors. 


MANU/ET/0093/2011 

Working Capital—Whether equity component for margin of working capital 

requirement was not considered by the Delhi Commission? — Held, the State 

Commission has considered the entire Working Capital requirement by way of loan 

contrary to the norms of debt and equity ratio of 70:30. The State Commission relies on 

Regulation 5.10 but, this Regulation would not support the contention of the State 

Commission. The MYT Regulations stipulate that Weighted Average Cost of capital, 

as computed in the Regulation 5.10, needs to be applied on Regulated Rate Base 

which includes the working capital. This apart, Regulation 5.8 and Regulation 5.9 

provide for the formula for calculating the Regulated Rate Base for a particular year 

and for computing the return on capital employed by multiplying the Weighted 

Average Cost of capital with Regulated Rate Base. Under those Circumstances, the 

Delhi Commission is directed to re-compute the Weighted Average Cost of capital for 

each year of the Control Period, along with the carrying cost. 




MANU/ET/0093/2011 

Working Capital—Whether exclusion of cost of initial spares for determination of 

maintenance spares for computing interest on working capital was justified? — Held, 

even though the Regulation 51(e) refers to the Regulation 21(v)(a)(iv), the same had 

not been taken into consideration by the Central Commission to give the finding on 

this issue. The Central Commission has not followed this Regulation quoted which 

42 


Ratio Subject Decidedndi Index 

xxxix 

states the value of the maintenance spares should be taken at 1 per cent of the historical 

cost escalated at 6 per cent per annum from the date of commercial operation. The 

Central Commission excluded the cost of initial spares from the historical capital cost 

on which the working capital is calculated even though such cost of initial spares 

duly formed part of capital cost as per the Regulation 21(v)(a)(iv) of the Tariff 

Regulation. Therefore, the findings on this issue in the impugned order is set aside. 

The Central Commission is directed to pass a consequential order in the light of the 

Regulations referred to above. Accordingly, this issue is decided. 




MANU/ET/0096/2011 

Ratio Decidendi 

Fraudulent Abstraction of Energy—“Rule 22(b)4 permits the Board to forthwith 

disconnect the electricity supply without notice to him if it is a case of fraudulent 

abstraction of energy (FAE).” 


R.S.A. No. 84/2007 and CM No. 4113/2007, 


MANU/DE/1932/2011 

Capital Cost—“The entire value of the capital asset, as soon as the same is put into 

operation is recoverable by way of capital cost under Regulation 17 itself, not 

withstanding the fact that the part of the payment for the capital asset has been 

retained.” 


Appeal No. 159 of 2010, 


MANU/ET/0053/2011 

Tariff—“The State Commission has correctly worked out the cost of coal taking into 

account the Station Heat Rate and Gross Calorific Value of coal according to the Tariff 

regulations.” 




MANU/ET/0051/2011 


43

xl Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

44 


0787 

a 

b 

c 

d 

e 

f 

2011 ELR (APTEL) 0787* 

BEFORE THE APPELLATE TRIBUNAL FOR ELECTRICITY, NEW DELHI 

(APPELLATE JURISDICTION) 

Rosa Power Supply Company Ltd. 

v. 

U.P. Power Corporation Ltd. and Anr. 

APPEAL NO. 60 OF 2011 AND IA NO. 102 OF 2011 

DECIDED ON: 06.05.2011 

Coram 

M. Karpaga Vinayagam, J. (Chairperson) and V.J. Talwar, Member (Technical) 

ISSUES AND FINDINGS 

Whether the order, passed by State Commission staying the operation of its own 

Tariff order was justified? 

Held, on 19 th April, 2011, the Appellant filed reply requesting the State Commission 

not to grant stay without hearing them. On 19 th April, 2011, the State Commission 

granted one month’s time to the Appellant for filing reply. In the meantime, the 

State Commission passed order dated 26 th April, 2011 granting stay of its own 

Tariff order dated 28 th March, 2011. Impugned stay order pending review passed on 

26 th April, 2011 was without valid reasons. Hence, order dated 26 th April, 2011 

set aside. 

Appeal Allowed 

Counsel 

For Appellant/Petitioner/Plaintiff: Ramji Srinivasan, Sr. Adv., Shally Bhasin and 

Shikha Sarin, Advs. 

For Respondent(s)/Defendant: Payal Chawla and Mohit, Advs., Vikas Singh, Sr. Adv. 

for R 1, Meenakshi Arora, Adv. for R 1 and Kunal Verma, Adv. for R 2 

ORDER 

g 

h 

i 


1. The Appeal has already been admitted. Notice has been issued in both the Appeal 

as well as in IA No. 102/2011 seeking for stay. 

2. Mr. Ramji Srinivasan, the learned Senior Counsel for the Applicant/Appellant 

vehemently insists for stay of the impugned order dated 26 th April, 2011 staying the 

operation of its own Tariff order in view of the fact that no reasons at all have been 

given by the State Commission in the impugned order for granting such stay. 

3. On the other hand, Mr. Vikas Singh, learned Senior Counsel appearing for the 

Respondent No. 1 with equal vehemence is opposing the grant of stay on the ground 

that valid reasons have been mentioned in the petition filed by them for review 

before the State Commission on the basis of which the stay order of the Tariff order 

had been passed. 

* MANU/ET/0063/2011 


45

0788 

Energy Law Reports (ELR) [Vol. 2, Part 1, 2011] 

4. We have heard the learned Senior Counsel for the parties who argued at length. 

We have considered their respective submissions. 

5. Admittedly, the grounds urged by the learned Senior Counsel for the Respondent 

No. 1 in justification of the impugned order are not reflected in the impugned order. 

6. The final Tariff order had been passed on 28 th March, 2011. The Respondent 

No. 1 filed a petition under Section 94(1) (f) of the Act before the State Commission 

on 18 th April, 2011 seeking review of the Tariff order dated 28 th March, 2011 as well 

as for stay of the said order. 

7. On 19 th April, 2011, the Applicant/Appellant filed reply requesting the State 

Commission not to grant stay without hearing them. On 19 th April, 2011, the State 

Commission granted one month’s time to the Applicant/Appellant for filing reply. 

8. In the meantime, the State Commission passed order dated 26 th April, 2011 granting 

stay of its own Tariff order dated 28 th March, 2011. Though we do not want to make 

any opinion on the merits of the main review, prima facie, we feel that the impugned 

stay order pending review passed on 26 th April, 2011 is without valid reasons. 

Therefore, we feel that we could grant stay of the order dated 26 th April, 2011 pending 

disposal of the main Appeal. 

9. At this stage, i.e. while we dictate this order, Mr. Vikas Singh, learned Senior 

Counsel for the Respondent No. 1 intervened and suggested that the main Appeal 

itself may be disposed of by directing the State Commission to proceed with the 

enquiry of review petition and dispose of the same within the time frame. In view of 

this statement, which is agreed by the learned Senior Counsel for the Appellant 

also, we deem it fit to set aside the impugned order and give suitable direction by 

disposing of the main Appeal itself. 

10. Accordingly, the State Commission is directed to proceed with the review petition 

and allow the parties to file their respective statements and documents, if any, and 

hear them and decide the matter in accordance with law preferably within a period 

of one month from the date of receipt of this order. 

11. Thus, the impugned order dated 26 th April, 2011 is set aside and the main 

Appeal No. 60 of 2011 is allowed. No costs. 

a 

b 

c 

d 

e 

f 

2011 ELR (APTEL) 0788* 



State Load Despatch Centre SLDC, Orissa Power Transmission Corp. Ltd., Orissa 

v. 

Nav Bharat Ventures Ltd., Hyderabad and Ors. 

g 

h 

APPEAL NO. 100 OF 2008 

DECIDED ON: 13.04.2011 

Coram 

M. Karpaga Vinayagam, J. (Chairperson) and Rakesh Nath, Member (Technical) 

i 

* MANU/ET/0065/2011 

46 


a 

b 

c 

State Load Despatch Centre SLDC, and Anr. v. Nav Bharat Ventures Ltd. and Ors. 

(M. Karpaga Vinayagam, J. (Chairperson)) 


Whether an appeal is maintainable against the Dismissal Order passed in the Review 

Petition? 

Held, impugned order dated 5 th May, 2008 was passed by the Central Commission 

in the review petition rejecting the review petition affirming the original order dated 

31 st December, 2007. Appeal is not maintainable as against the dismissal order 

passed in the review petition. There is no appeal as against the original order dated 

31 st December, 2007 and the order has become final. Therefore, Appellant in this 

appeal cannot contend that the Central Commission acted without jurisdiction in 

granting open access. The Central Commission is vested with the jurisdiction in 

matters of inter state transmission and open access. The provisions of Orissa Grid 

Code (OGC) are not open access conditions for inter-state open access. They are 

merely connectivity conditions. Therefore, it cannot be stated that the Central 


0789 

Appeal Dismissed 

d 

e 

f 

g 

h 

i 

Subsidiary Legislations referred to 

CERC (Open Access in Inter State Transactions), Regulation, 2004, Regulation 35 

[p. 0790, para 1 b] 

Orissa Grid Code [p. 0790, para 2 h] 

Counsel 

For Appellant/Petitioner/Plaintiff: R.K. Mehta, Antaryami Upadhyay, S. Lakhi Singh, 

Marie Riba and Gaurav Srivastava 

For Respondent(s)/Defendant: K. Gopal Choudhary, Jyoti P. Ch. Manager, SRLDC, 

Swapna Seshadri, Mullapudi Rambabu and Sanjay Sen, Advs. 

JUDGMENT 

M. Karpaga Vinayagam, J. (Chairperson) 

1. State Load Despatch Centre is the Appellant. Challenging the order dated 

5 th May, 2008 passed in the review petition filed by the Appellant before the Central 

Commission, the present Appeal has been filed by the Appellant. The short facts are 

follows: 

(a) Nav Bharat Ventures Limited, Hyderabad is the first Respondent herein. 

It owns 30 MW captive Generating Plant. The first Respondent entered into an 

agreement for the sale of surplus power to Reliance Energy Trading Limited, 

the Fifth Respondent. The Fifth Respondent in turn entered a further agreement 

to sell the power to the distribution utilities in AP. 

(b) The Reliance Energy Trading Ltd. (R-5) made an application on 18 th October, 2007 

to the Southern Regional Load Dispatch Centre (R-2) for a short-term open access 

for 25 MW for a short period from 7 th January, 2008 to 31 st January, 2008. As 

per the short term Open Access Regulations the Southern Regional Load 

Dispatch Centre sought the consent from the Appellant through Eastern Regional 

Load Dispatch Centre for the above transaction on 19 th October, 2007. On 

22 nd October, 2007, the Appellant denied the consent mainly on the ground of 

non-installation of the telemetering and communication equipments by 

ENERGY LAW REPORTS (JULY - AUG. 2011) 47

0790 


Respondent No. 1. The Respondent No. 2 by the letter dated 26 th October, 2007, 

informed the Reliance Company (R-5) that it was not able to approve the 

transactions, as no consent had been obtained from SLDC, the Appellant. 

(c) Aggrieved by the said decision conveyed by the Appellant SLDC, the 

Nav Bharat Ventures Ltd, the first Respondent approached the Member Secretary, 

Eastern Regional Power Committee under Regulation 35 of the CERC (Open 

Access in Inter State Transactions), Regulation, 2004 for redressal of its grievance. 

That application was forwarded by the Committee to the Central Commission 

for consideration. 

(d) At that stage, the Nav Bharat Ventures Ltd, the first Respondent filed a 

Petition No. 156 of 2007 before the Central Commission for the relief and directions 

to be issued to the Appellant for the approval of open access. After hearing the 

parties, the Central Commission passed an order dated 31 st December, 2007 

directing that the open access be allowed and the Regional Load Dispatch Centres 

were directed to schedule the transactions applied for even if the application/ 

clearance was received after normal cut-off date subject to the availability of 

spare transmission capacity. 

However, open access transactions was denied by the Appellant despite the 

directions of the Central Commission by the order dated 31 st December, 2007. 

Therefore, the Nav Bharat Ventures Ltd., the first Respondent filed a Petition 

before the Central Commission in Petition No. 10 of 2008 seeking for the fresh 

directions to the SLDC Appellant to allow the open access. During the pendency 

of the said application, the first Respondent also filed a Petition No. 11/2008 

under Section 142 of the Act for non compliance of the order dated 31 st December, 2007. 

Accordingly, the Central Commission initiated proceedings under Section 142 

and Show Cause Notice was issued. 

(e) At that stage, on 17 th March, 2008, the Appellant filed a Review Petition in 

Petition No. 37 of 2008 in the main Petition No. 156 of 2007. On 5 th May, 2008 

a review Petition No. 37 of 2008 had been disposed of by Central Commission 

rejecting the Review Petition by which the Appellant was directed to grant 

open access even though the required equipment for transmitting real time 

data to SCADA, though installed by the first Respondent in the meantime had 

not been made operational. Ultimately, in pursuance of the above order the 

Appellant gave its consent for grant of open access to the First Respondent 

and as such the orders dated 31 st December, 2007 and 5 th May, 2008 have been 

complied with. 

(f) The Appellant although complied with the order of the Central Commission 

has filed the present Appeal as against the said order since other CGPS are 

insisting for grant of open access on the basis of impugned order. 

2. According to the Appellant, the open access had been granted to the Respondent, 

but even then the Appellant was constrained to file this Appeal since the other 

CGPS may also seek for open access without complying with the provisions of 

Orissa Grid Code which provided for the installation of communication facilities 

on the basis of the impugned order. 

3. The learned Counsel appearing for the Respondent No. 1 strenuously has raised 

a preliminary objection stating that the order impugned was passed in the review 

petition dated 5 th May, 2008 confirming the earlier order dated 31 st December, 2007, 

and rejecting this review petition, and therefore the Appeal as against the dismissal 

a 

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f 

Punjab State Electricity Board, Punjab v. Punjab State Electricity Regulatory Commission 


order in Review Petition is not maintainable as held by this Tribunal in various 

judgments. It is further contended that the first Respondent has already arranged 

for and provided PLCC for connectivity purposes as such the order passed on 

31 st December, 2007 which was affirmed by the Central Commission by the order 

dated 5 th May, 2008 had been fully complied with and as such the issue does not 

survive any more. 

4. As admitted by the Appellant, on the basis of the mere apprehension entertained 

by the Appellant that some other parties may also seek for similar relief claiming 

that they are not required to arrange for the PLCC and the Data Communication 

facilities in earlier impugned order, the present appeal has been filed. As correctly 

pointed by the Respondent, the order impugned 5 th May, 2008 was passed by the 

Central Commission in the Review Petition No. 37 of 2007 rejecting the Review 

Petition affirming the original order dated 31 st December, 2007. It is settled law, the 

Appeal is not maintainable as against the Dismissal Order passed in the Review 

Petition. 

5. Admittedly, there is no appeal as against the original order dated 31 st December, 2007 

passed in Petition No. 156 of 2007. Hence, in this Appeal, there can be no scope for 

seeking the order dated 31 st December, 2007 to be set aside as that order has become 

final. Therefore, the Appellant in this Appeal cannot contend that the Central 

Commission acted without jurisdiction in granting open access. The Central 

Commission is vested with the jurisdiction in matters of inter state transmission 

and open access. 

6. The provisions of OGC are not open access conditions for inter state open access. 

They are merely connectivity conditions. Therefore, it cannot be stated that the Central 


7. In view of the above this Appeal is liable to be dismissed not only on the ground 

that it is not maintainable but also on the ground that it is devoid of merit as 

pointed out by the learned Counsel for the Respondent. 

8. Hence, the Appeal is dismissed. No order as to costs. 

0791 

g 

2011 ELR (APTEL) 0791* 



Punjab State Electricity Board, Punjab 

v. 

Punjab State Electricity Regulatory Commission, Chandigarh 

h 

i 


DECIDED ON: 13.04.2011 

Coram 

M. Karpaga Vinayagam, J. (Chairperson), Rakesh Nath, Member (Technical) and 

P.S. Datta, J., Member (Judicial) 

* MANU/ET/0066/2011 


49

0792 



Whether the State Commission was correct in not allowing the employees cost as 

claimed by the Appellant and in not following the Tariff regulations framed by the 

State Commission to include the assets added by the Appellant during the Financial 

Years 2006-07 and 2007-2008 for the purpose of calculating the operation maintenance 

expenditure allowable to the Appellant ? 

Held, State Commission in the orders dated 3 rd July, 2008 and 24 th March, 2009, has 

given valid reasonings as to why the entire claim made by the Appellant could not 

be allowed. The State Commission has correctly held that there is no justification to 

deviate from the Regulations and determined the employees’ cost of the Appellant. 

Even though, the Appellant claimed Rs. 2,225.01 crores towards employees’ cost, 

the State Commission has allowed a reasonable cost of Rs. 1,773.55 crores in 2008-09, 

based on the WPI increase. 

a 

b 

c 


Case referred to 

SIEL v. Punjab State Electricity Regulatory Commission and Ors. MANU/ET/0024/ 

2006: 2007 APTEL 931 (Discussed) [p. 0794, para 6 a] 

d 

Legislation referred to 

Electricity Act, 2003, Section 14 [p. 0792, para 1 h] 

Subsidiary Legislation referred to 

Punjab State Electricity Regulatory Commission (Terms and Conditions for 

Determination of Tariff) Regulations, 2005, Regulation 28(6) [p. 0793, para 2 f] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Anand K. Ganesan, Swapna 

Seshadri, Ranjitha Ramachandran and Sneha Venkataramani, Advs. 

For Respondent(s)/Defendant: Sakesh Kumar, Adv., J.C. Shukla, Registrar (PSERC) 

and C.S. Rai, Adv. 

e 

f 

JUDGMENT 


1. Punjab State Electricity Board is the Appellant herein. Challenging the order 

impugned dated 3 rd July, 2008, the Appellant has filed this Appeal as against the 

disallowance of the employees’ cost. The short facts are as under: 

(a) The Appellant is a deemed licensee for the electricity transmission, 

distribution and trading in terms of Section 14 of the Electricity Act, 2003. 

(b) The Appellant undertakes generation of electricity also besides the above 

licensed activities. 

(c) Earlier, in the application filed by the Appellant before the State Commission, 

the State Commission passed the order dated 14 th June, 2005 disallowing various 

claims including the claim towards the employees’ cost. Therefore, the Appellant 

filed an Appeal before this Tribunal in Appeal No. 54 of 2005. This Tribunal 

disposed of the said Appeal on 26 th May, 2006 rejecting the contention of the 

Appellant and disallowing the employees’ cost. In that order, the Tribunal 

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held that the employees’ cost of the Appellant should remain capped till the 

performance of the Appellant’s employees is improved. 

In the meantime, the Punjab State Commission notified the Regulations namely 

Punjab State Electricity Regulatory Commission (Terms and Conditions for 

Determination of Tariff) Regulations, 2005 (Tariff Regulations). Under these 

Tariff Regulations, the employees’ cost was to be allowed as the part of the 

operation and maintenance expenditure. 

(d) On 12 th February, 2008, the Appellant filed a petition in Petition No. 5/2008 

before the State Commission for determination of the Revenue Requirements 

and Tariff for the year 2008-09 and also truing-up for the year 2006-2007 and 

2007-2008. In the said Petition, the Appellant claimed the operation maintenance 

expenditure which includes employees’ cost on the assets added by the Appellant 

during the Tariff years 2006-2007 and 2007-2008. 

(e) The State Commission disposed of the said petition through the order 

dated 3 rd July, 2008 by determining the Annual Revenue Requirements and 

Tariff for the Tariff year 2008-09. However, in the said order, the State 

Commission disallowed the employees’ cost claimed by the Appellant and 

kept the employees’ cost at the capped levels and allowed only the wholesale 

price index escalation. 

(f) The Appellant thereupon filed a Petition for review over this claim but the 

same was dismissed by the State Commission by the order dated 

24 th March, 2009. Challenging these orders the present Appeal has been filed. 

2. Assailing the findings in the impugned order with reference to the disallowance 

of the employees’ cost, the Learned Counsel for the Appellant has submitted that 

the State Commission has wrongly disallowed the employees’ cost claimed on the 

basis of the actual expenditure incurred but has merely allowed such expenditure 

only on the basis of the normative expenditure. It is further contended by the Appellant 

that the State Commission has not taken into account the additional fixed assets as 

per Regulation 28(6) of the Tariff Regulations, 2005 even though the Appellant had 

shown substantial improvement in employees’ efficiency and productivity. 

3. In reply to the above contentions, the learned Counsel appearing for the State 

Commission submitted that the State Commission in the impugned order has correctly 

allowed the reasonable cost in the Tariff order following its previous orders in 

accordance with the Regulations in the light of the fact that there was no material to 

show that the Appellant has taken steps to improve the performance parameters 

and as such the order impugned does not call for interference. 

4. In the light of the above contentions urged by both the parties, we will have to 

consider the following question that may arise for consideration in this Appeal: 

Whether the State Commission was correct in not allowing the employees cost 

as claimed by the Appellant and in not following the Tariff regulations framed 

by the State Commission to include the assets added by the Appellant during 

the Financial Years 2006-07 and 2007-2008 for the purpose of calculating the 

operation maintenance expenditure allowable to the Appellant? 

5. According to the Appellant, the State Commission did not consider the various 

steps or initiatives which have been taken by the Appellant to ensure the substantial 

improvement in the employees efficiency and productivity and that, on the other 

hand, the State Commission mechanically followed the previous orders passed thereby 

0793 


51

0794 


the employees cost has been capped. Learned Counsel for the State Commission 

refuted this submission in justification of the impugned order. 

6. The Learned Counsel for State Commission has cited the decision rendered by 

this Tribunal in SIEL v. Punjab State Electricity Regulatory Commission and Ors. 1 reported 

in 2007 APTEL 931. The relevant paragraphs on this issue are given below: 

(139) It is significant to note that in so far as the increase in DA and merger of 

DA with DP of the employees of the Board is concerned on the own showing 

of the Board, the benefits have been extended in order to maintain parity with 

the employees of the State Government. These benefits have been extended on 

the ostensible ground that when the electricity undertaking was transferred to 

the Board, it was stipulated that the salary allowances etc of the transferred 

employees were not to be less favourable than the Government employees. It 

appears to us that this condition applied only to the salary and allowances 

etc, which were in vogue on the date of the transfer. This stipulation does not 

in any manner guarantee same salary, allowances for the PSEB employees as 

may be admissible to the employees of the State Government in comparable 

posts. There is no obligation on the part of the Board to extend same salary 

and allowances to the employees of the Board as are payable to the employees 

of the State Government. The process of reforms which has been triggered by 

the Act of 1998 and the Act of 2003 will lose its momentum in case 

salaries/incentives are not linked to the performance of the employees. There 

is nothing on record to show that there has been improvement in the performance 

of the employees of the Board. Benefit should be made available for rewarding 

efficiency in performance. Automatic availability of benefits generates inefficiency 

and indolence. 

(141) The principle adumbrated by the Supreme Court applies to the case in 

hand. In spite of the fact that the Commission had capped the employees’ cost 

by its first Tariff order and there was no ground for holding that there has 

been improvement in the functioning of the employees of the Board, the 

Commission having regard to the increase in the employees’ cost allowed 

cumulative increase of 15.61 per cent for the year 2005-06 in the approved 

level of employees’ cost of Rs. 1,274.66 crores. Thus, the employees’ cost for 

the year 2005-06 was worked out at Rs. 1,473.63 crores. This increase of 

15.61 per cent was calculated by the Commission on the basis of growth in 

wholesale price index of all commodities starting from the year 2001-04 to 

2005 every year. 

(144) We also make it clear that we cannot allow a pass through of 

Rs. 1,700 crores as employees’ cost as demanded by the Board. No worthwhile 

measures were adopted by the Board to reduce the employees’ cost during the 

years in question. Even voluntary Retirement Scheme, which could have been 

one of the options, was not adopted on the ground that the State Government 

was not in a position to find funds. These are mere excuses. The State 

Government itself had taken stand during the year 2002-03 that the employees’ 

cost of Rs. 1,316.50 crores claimed by the Board was quite high. The Government 

was of the view that the employees’ cost at Rs. 1,123.83 crores should be 

allowed based on norms of 3-5 employees per MU of energy sold. Subsequently, 

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1 Ed.: MANU/ET/0024/2006 

52 


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the same Government changed its stance for the year 2004-05. It seems to us 

that it is not prudent for the Board to employ excessive manpower. 

(145) In the circumstances, we decline to interfere with the decision of the 

Commission disallowing increase in the employees’ cost for the year 2003-04 

and allowing only Rs. 1,473.63 crores as employees’ cost for the year 2004-05. 

7. On going through this judgment, it is noticed that the observation made by this 

Tribunal in the above judgment, would clearly reveal that unless there has been 

substantial improvement in the performance of the employees of the Board, there 

cannot be any automatic allowance with reference to the actual expenditure as the 

automatic availability of benefits generates inefficiency and indolence. 

8. The Appellant has contended that the State Commission has not considered 

employees’ cost for the assets added during the years 2006-07 and 2007-08 even 

though Regulation 28(6) of the Tariff Regulations, 2005 provides for allowing operation 

and maintenance expenditure which included employees’ cost for additional assets 

added during the year. This contention is wrong. As a matter of fact, it has taken 

note of the Regulations 28(6) of the Tariff Regulations, 2005 and allowed operation 

and maintenance expenditure for the fixed assets added during the year on pro rata 

basis from the date of commissioning. 

9. In the absence of revised manpower norms and considering very high employees’ 

cost of the Appellant, the state Commission found no justification in allowing any 

additional employees cost on this account. While making this observation, the State 

Commission took into consideration all the observations made by this Tribunal in 

its judgment dated 26 th May, 2006 to the effect that employees’ cost of the Appellant 

will remain capped until performance parameters are improved. The State Commission 

has also considered the submissions made by the Appellant to the effect that it has 

taken all possible measures to restrict the number of its employees and put-up a ban 

on creation of new posts as well as fresh recruitment. 

10. Besides this, the State Commission has also taken note of the contention of the 

Appellant that the cost such as terminal benefit, LTA and medical reimbursement 

are uncontrollable cost and its prayer to allow these cost separately. In this context, 

it is to be pointed out that the State Commission has followed a consistent policy 

and took into consideration the principle of applying WPI increase over the 

employees’ cost as determined under Commission’s Regulations framed in the year 

2005 and has been consistently followed the same in the subsequent Tariff orders. 

11. In the opinion of the State Commission, the Appellant had sufficient time to 

evolve suitable strategy for curtailing wherever possible as well as drawing up 

suitable Rules and Regulations with a view to ensuring that such cost can be kept 

under control. But even then, the Appellant has not taken the required steps. Therefore, 

the State Commission found that it is not appropriate to consider the Appellant’s 

uncontrollable cost apart from the totality of the expenditure incurred. Under these 

circumstances, the State Commission had found no justification for allowing 

additional employees’ cost for the assets added during these years in the absence of 

revised manpower norms and considering the already high employees’ cost of 

the Appellant. 

12. The State Commission in its earlier orders repeatedly noticed that the employees’ 

cost of the Appellant was one of the highest among the State Electricity Boards and 

therefore, capped the same for the year 2003-04 and 2004-05 to the level of 2002-03. 

0795 


53

0796 


The Appellant itself had earlier admitted that it had surplus manpower. On the 

basis of these factors and also the mandate given by this Tribunal in the judgment 

dated 25 th June, 2006, the State Commission found that the employees’ cost of the 

Board, shall have to be remained capped since the performance parameters did not 

improve. 

13. The Appellant in its Table 4.23 has taken its projection for the employees cost 

for the year 2008-2009. These things have been taken into account by the State 

Commission while considering the primary contentions of the Appellant. 

The discussions made by the State Commission is contained in Paras 4.9.2, 4.9.3, 

4.9.5 and 4.9.6. The same are reproduced below: 

Para 4.9.2 The Board has also referred to a host of measures being undertaken 

to control employee cost including freezing fresh recruitment, complete ban on 

creation of new posts, outsourcing of security works, reduction in generation 

incentive by 10 per cent, withdrawal of compassionate appointments to 

dependants of deceased employees, introducing special schemes for employees 

to avail long leave for self employment, computerization of cash collection 

centers etc. In addition, the Board has commissioned M/S. Price Waterhouse 

Coopers to undertake a study of its man power requirements, whose report is 

expected in July 2008. 

Para 4.9.3 The Board’s main contention is that it has taken all possible measures 

to restrict the number of its employees and there has been a virtual ban on 

creation of new posts as well as fresh recruitment. Given the fact that the 

Board is not in a position to make any further radical reduction in staff strength, 

the Board contends that it is reasonable to allow actual employee cost as 

incurred. The Board has specially emphasized the fact that almost Rs. 600 crores 

of its total employee cost in 2008-09 constitute uncontrollable costs such as 

terminal benefits, LTA and medical reimbursement and the Commission needs 

to take special note of this factor and allow these costs separately even if it 

otherwise intends to cap employee cost in accordance with its Regulations. 

Finally, the Commission held: 

Para 4.9.5 In the light of the position brought out in the foregoing para, the 

Commission does not find sufficient justification to deviate from the Regulations 

in determining the employee cost of the Board. The WPI increase as on March 2008 

against the corresponding period in the previous year stands at 6.68 per cent. 

The Commission takes this into account and applying the same on the employee 

cost determined for 2007-08 arrives at the allowable employee cost of 

Rs. 1,773.55 crores in 2008-09. 

Para 4.9.6 The Board, in its letter dated 16 th May, 2008 has submitted that 

O&M expenses which include employee cost be allowed for the assets added 

during the year on prorate basis from the date of commissioning in accordance 

with Regulation 28(6) of the PSERC Tariff Regulations. The Commission, however, 

for the reasons already elaborated in Para 2.10.4 of this order, finds no 

justification in allowing any additional employee cost 

14. The above paragraphs would indicate that the State Commission has taken into 

account the Regulation 28(6) of the Tariff Regulations and has given reasons as to 

why the entire claim made by the Appellant on employees’ cost could not be allowed. 

As a matter of fact, the State Commission has specifically held that the State 

Commission does not find justification to deviate from the Regulations in determining 

a 

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54 


a 

b 

c 

d 

J.S.L. v. Dakshin Haryana Bijli Vitran Nigam Ltd. and Anr. 

(M. Karpaga Vinayagam, J. (Chairperson) and V.J. Talwar, Member (Technical)) 

the employees cost of the Appellant as the WPI increase as on March 2008 against 

the corresponding period in the previous year stands at 6.68 per cent and applying 

the same on employees cost determined for the year 2007-08, the State Commission 

has arrived at the allowable employees cost of Rs. 1,773.55 crores in FY 2008-09. 

15. Even though the Appellant claimed Rs. 2,225.01 crores towards employees’ cost, 

the State Commission allowed reasonable cost of Rs. 1,773.55 crores, based on the 

WPI increase and on the strength of sound reasonings. 

Summary of our Findings 

16. The State Commission in its elaborate discussions made in the orders dated 

3 rd July, 2008 and 24 th March, 2009, has given valid reasonings as to why the entire 

claim made by the Appellant could not be allowed. The State Commission has 

correctly held that there is no justification to deviate from the Regulations and 

determined the employees’ cost of the Appellant. Even though, the Appellant claimed 

Rs. 2,225.01 crores towards employees’ cost, the State Commission has allowed a 

reasonable cost of Rs. 1,773.55 crores in 2008-09, based on the WPI increase. 

17. In view of the above, there is no merit in the Appeal. The Appeal is dismissed. 

No order as to cost. 

0797 

e 

f 

2011 ELR (APTEL) 0797* 




DECIDED ON: 24.03.2011 

J.S.L. 

v. 

Dakshin Haryana Bijli Vitran Nigam Ltd. and Anr. 

Coram 


g 

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Whether the Appellant is entitled to rebate either from the date of the earlier order dated 

20 th December, 2007 or from December 2006, the date from when the benefit accrued? 

Held, on going through the records, it is seen that the benefit accrued from 

December 2006 on which month the FSA was introduced and therefore, Appellant is 

entitled to rebate from the date when the benefit accrued to him, i.e. December 2006. 

Appeal Disposed of 

Counsel 

For Appellant/Petitioner/Plaintiff: Kumar Saurabh, Adv. 

For Respondent(s)/Defendant: Anand K. Ganesan, Adv. for HERC and M.R. Baskar, 

Adv. for Respondent No. 1 

* MANU/ET/0068/2011 


55

0798 


ORDER 


1. We have heard Counsel for the parties. 

2. The Appellant filed an Application before the Commission praying for the 

declaration that the Appellant is entitled for rebate from the date of introduction of 

the FSA i.e. December 2006 on which month the benefit accrued. 

3. Though this plea was contested by the Licensee, the Respondent herein, stating 

that this rebate would apply only from the date of issuance of circular dated 

5 th November, 2008, the Commission thought it fit to hold that the Appellant is 

entitled to the rebate not from the date of circular but from the date of its earlier 

order dated 20 th December, 2007. 

4. Aggrieved over this finding with reference to the date from which the Appellant 

is entitled to get the rebate, this Appeal has been filed contending that the Appellant 

is entitled for the Rebate from December 2006. 

5. The only question that arises for consideration is that whether the Appellant is 

entitled to this rebate either from the date of the earlier order dated 20 th December, 2007 

or from December 2006? 

6. On going through the impugned order it is clear that the Commission has held 

that the Appellant is entitled for the rebate but this was applicable only from the 

date of the earlier order dated 20 th December, 2007 since this issue has already been 

decided in the said matter filed by another party. This ground, in our view, is not a 

valid one. We are only concerned with the question whether the Appellant is entitled 

for the rebate from the date when the benefit accrued. 

7. On going through the records, it is seen that the benefit accrued from December 2006 

on which month the FSA was introduced and therefore we are of the view that the 

Appellant is entitled to rebate from December 2006. Accordingly, we set aside the 

order impugned remanding the matter to the Commission to decide the matter afresh 

in the light of our findings after hearing the parties concerned including the consumers 

similarly placed. 

8. With this observation, the Appeal and other applications are disposed of. 

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0799 

a 

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2011 ELR (APTEL) 0799* 



Uttar Gujarat Vij Company Ltd., Gujarat 

v. 

Gujarat State Electricity Regulatory Commission, Consumer Education and 

Research Society, Mehsana District Education Foundtion and 

Gujarat Urja Vikas Nigam Ltd., Gujarat 


DECIDED ON: 22.03.2011 

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Coram 

Rakesh Nath, Member (Technical) and P.S. Datta, J., Member (Judicial) 


Whether the Ombudsman or the Consumer Grievance Redressal Forum had the Authority 

and power to decide the question of transferability or otherwise of a consumer from 

one category to another category as was prayed before them by the Respondent No. 3? 

Held, if a particular entity is of the opinion that it has been wrongly categorised or 

that there has been wrong application of the Tariff order because of misunderstanding 

or misinterpretation then it is the Commission that has to clarify the confusion and 

make the position clear. Therefore, the Grievance Redressal Forum or the Ombudsman 

has no jurisdiction to entertain a petition from a HT consumer for change of one 

category, for the purpose of Tariff determination, to another category. 

Whether the State Commission Authority had the power to decide the question as to 

whether the categorisation of the Respondent No. 3 should be at HTP-II(B) instead of 

HTP-II(A)? 

Held, the function of change of such category by interpretation of Tariff order or by 

amendatory process rests with the Commission as it is intrinsically related to 

Section 61(a) of the Act. 

Whether the State Commission was legally competent to interpret and clarify its 

order for Tariff determination? 

Held, at the same time, the Commission has no jurisdiction to adjudicate upon a 

petition of an individual consumer and give relief to only such individual consumer 

by conscious distraction from the Tariff order. 

Whether the Respondent No. 3 was in terms of description under HTP-II(B) categorisable 

under that category? 

Held, Respondent No. 3’s is admittedly not an institution run by Government; it is 

a set up of private charitable trust which is not expressly provided for in HTP-II(B) 

even though purpose for which supply is required is the same i.e. education. It was 

in the Commission’s mind as to behind which principles or purpose these three 

* MANU/ET/0069/2011 


57

0800 


categories were made but it is, of course, clear that the Commission was not right in 

saying that the Respondent No. 3 falls under HTP-II (B). 

a 


Cases referred to 

BSES Rajdhani Power Ltd. v. DERC 2009 ELR (APTEL) 0363 (Discussed) 

[p. 0804, para 10 f] 

Dakshin Haryana Vijli Vitran Nigam Ltd. v. DLF Services and Ors. 2007 (APTEL) 766 

(Mentioned) [p. 0804, para 10 h] 

Dakshin Haryana Vijli Vitran Nigam Ltd. v. Haryana Electricity Regulatory Commission 

and Ors. MANU/ET/0009/2006: 2007 (APTEL) 356 (Discussed) 

[p. 0805, para 10 b] 

Maharashtra State Electricity Distribution Company Ltd. v. Lloyds Steel Industries Ltd. 

AIR 2008 SC 1042 (Discussed) [p. 0805, para 10 b] 

Polyplex Corporation Ltd., Ghaziabad v. Uttrakhand Power Corporation Ltd. MANU/ 

ET/0009/2007: 2007 ELR (APTEL) 115 (Dissented) [p. 0804, para 10 g] 

Venkaeswar v. State of Andhra Pradesh MANU/SC/0020/1965: AIR 1966 SC 828: 

(1966) 2 SCR 172 (Mentioned) [p. 0805, para 10 a] 

Legislations referred to 

Bombay Public Trust Act, 1950 

Section 42(5) [p. 0804, para 10 d] 



Section 61(a) [p. 0808, para 16 c] 

Section 62(3) [p. 0805, para 11 i] 

Section 86 [p. 0803, para 7 d] 


Companies Act, 1956 [p. 0801, para 1 a] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Swapna Seshadri, Ranjitha 

Ramachandran and Sneha Venkataramani, Advs. 

For Respondent(s)/Defendant: B.M. Baishnav, Adv. for Resp. 3 and S.R. Pandey, 

Legal Advisor for GERC 

JUDGMENT 


1. The Appeal is directed against the judgment and order dated 20 th April, 2009 

passed in Misc. Application No. 06 of 2009 and the order dated 10 th May, 2010 

passed in Review Petition No. 967 of 2009 by the Gujarat State Electricity Commission, 

the Respondent No. 1 herein. The Respondent No. 2 is a Consumers Right Organisation 

in India and duly recognised by the Government of Gujarat, Respondent No. 3 

is an institution registered under Bombay Public Trust Act and is running various 

educational institutions said to be on commercial basis at Vidyanagar, and 

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Respondent No. 4 is a State Government enterprise incorporated under the Companies 

Act, 1956 and is a bulk purchaser of power in the State of Gujarat for sale to the 

distribution companies including the Appellant. The Respondent No. 3 is a high 

tension consumer (HT) of the Appellant. The said Respondent No. 3 entered into an 

agreement on 8 th February, 2007 with the Appellant for supply of electricity against 

300 KVA contracted demand, since increased to 425 KVA by a further agreement 

dated 22 nd August, 2007 which clearly mentioned that the Tariff category applicable 

to the Respondent No. 3 would be HTP-II (A) as described by the Commission in the 

Tariff order. The State Commission determined Tariff applicable for retail supply to 

the consumers in the state including the Appellant herein by an order dated 

31 st July, 2007 in Case No. 898 of 2006. The HT consumers have been by the said 

order categorised into three categories by the Commission which is as under: 

Category 

HTP-I 

HTP-II(A) 

HTP-II(B) 

Uttar Gujarat Vij Company Ltd., Gujarat v. GSERC and Ors. 

(P.S. Datta, J., Member (Judicial)) 

Applicability/Description 

This Tariff will be applicable for supply of electricity to HT 

consumers contracted for 100 kVA and above for regular power 

supply and requiring the power supply for the purpose not 

specified in Rate HTP-II(A) and HTP-II(B). Research and 

Development units recognised by the Ministry of Science and 

Technology, Department of Scientific and Industrial Research 

and Government shall pay at HTP-1 rates. Water works and 

sewerage pumping stations run by local authorities and GW and 

SB, GIDC Water Works and Agricultural Consumers having the 

Contracted demand 100 KVA and above shall pay at HTP-I rates. 

This Tariff shall be applicable for supply of energy to HT 

consumers contracting for 100 KVA and above, requiring power 

supply for Railways (Other than Railway Workshops Chargeable 

under the Rate HTP-I and Railway Traction), hotels, amusement 

parks, resorts, water parks, aerodromes, cinemas, auditoriums, 

banks, studios, offices, film production etc. requiring and given 

separate point of supply and such other establishments as may 

be approved from time to time. 

This Tariff shall be applicable to supply of energy to HT consumers 

contracting for 100 KVA and above, requiring power supply for 

residential colonies, townships, educational institutions governed 

by the government, and Defence Establishments (Establishments 

under the Armed Forces and the Ministry of Defence, other than 

the units of public sector undertakings under the Ministry of 

Defence), requiring and given separate point of supply. 

2. This classification continued to operate in the various successive Tariff orders 

passed by the Commission from time-to-time including the Tariff order for the Financial 

Year 2009-10 dated 17 th June, 2009. 

3. On 17 th September, 2007 the Respondent No. 3, the said private educational 

institution made an application to the Appellant that the Tariff categorisation in 

respect of it should be changed from HTP-II (A) to HTP-I, which the Appellant by 

their reply dated 29 th April, 2007 rejected on the ground that HTP-I category was 

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not applicable to the Appellant. Then the Respondent No. 3 made a complaint 

before the Consumers Grievances Redressal Forum being Complaint No. Reg. 

No. UG-03-002-2007-08 which also rejected the complaint by an order dated 

31 st January, 2008 holding the same view as given by the Appellant. Then the 

Respondent No. 3 approached the Ombudsman, Gujarat being Case No. 17 of 2008 

which also upheld the order of the Consumer Grievance Redressal Forum. Being 

undaunted by the defeat the Respondent No. 3 and Respondent No. 2 filed 

Misc. Petition No. 6 of 2009 before the State Commission praying for the relief which 

was turned down by the redressal forum and the Ombudsman. The Commission by 

the order dated 20 th April, 2009 held that the Respondent No. 3 should be categorised 

under HTP-II (B) category instead of HTP-I as was prayed for by the said Respondent 

No. 3 and directed the Appellant to review its agreement with Respondent No. 3 

vis-à-vis the Tariff applicability as per HTP-II(B) category. The relevant extract from 

the order of the Commission is below: 

7.2. According to above Tariff schedule, the Co-Petitioner is not covered under 

HTP-II (A) category as it is a public charitable trust and is thus not a commercial 

entity. Looking to the functional area of the Co-Petitioner (which is providing 

educational activities), it is similar to educational activities provided by 

Government educational institutions. It is, therefore, appropriate that the 

co-Petitioner’s activities are considered and based on the same, the appropriate 

Tariff schedule be made applicable to them. We, therefore, decided the HTP-II 

(B) Category is the appropriate Tariff category applicable to the Co-Petitioner. 

7.3 Accordingly, Respondent No. 1 is directed to make necessary changes in 

the Tariff category of the Co-Petitioner which will be applicable to the 

co-Petitioner prospectively from the date of this order. 

The agreement executed by the parties is required to be revised by the Respondent 

No. 1 by incorporating the HTP-II (B) Tariff as appropriate Tariff applicable to 

the Co-Petitioner. Henceforth, the Respondents are directed to bill the 

Co-Petitioner on HTP-II (B) basis. 

4. Against the order dated 20 th April, 2009, the Appellant filed an application for 

review before the Commission being Review Petition No. 967 of 2008 and in the 

course of hearing the Appellant placed before the Commission a number of decisions 

of this Tribunal as also of the Hon’ble Supreme Court which we shall consider 

when we will go to our own deliberation on the issue, in support of the contention 

that the Commission is without any jurisdiction to entertain a petition of an individual 

consumer. Revision Petition was dismissed by the order dated 10 th May, 2010 by the 

Commission holding that there was not point of review. Hence, this Appeal. 

5. All the Respondents were served with notice more than once but none of them 

appeared to contest the appeal. We, in such, circumstances requested Mr. Sanjay Sen, 

learned Advocate, who was present before the Tribunal in connection with another 

case to assist this Tribunal as Amicus Currie and thankfully he did so. Mr. Sen submitted 

that from the very nature of description of HTP-II(B), it does not appear that the 

Respondent No. 3 would fall thereunder. We have heard Mr. M.G. Ramachandran, 

learned Advocate appearing for the Appellant who has raised two pertinent points 

namely-(a) jurisdiction of the Commission to entertain the petition by the Respondent 

No. 3, an individual consumer and (b) legality of the order. 

6. These two issues give rise to following specific issues which arise for consideration 

of this Tribunal: 

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(i) Whether the Ombudsman or the Consumer Grievance Redressal Forum has 

the Authority and power to decide the question of transferability or otherwise 

of a consumer from one category to another category as was prayed before 

them by the Respondent No. 3. 

(ii) Has the State Commission Authority and power to decide the question as 

to whether the categorisation of the Respondent No. 3 should be at HTP-II(B) 

instead of HTP-II(A)? 

(iii) Is the dispute whether the Respondent No. 3 should be classified under 

HTP-II(B) instead of HTP-II(A) is a billing dispute or a dispute falling under 

exercise of Tariff determination? 

(iv) Whether the State Commission is legally competent to interpret and clarify 

its order for Tariff determination? 

(v) Whether the Respondent No. 3 is in terms of description under HTP-II(B) 

categorisable under that category? 

7. All these issues overlap one another but these are the issues we are to answer. 

Section 86 describes the functions of the State Commission in Sub-section (1) thereof 

and we just for the purpose of this Appeal quote Clause (a) and (k) thereto which 

are as under: 

Section 86. Functions of State Commission - (1) The State Commission shall 

discharge the following functions, namely: 

(a) determine the Tariff for generation, supply, transmission and wheeling 

of electricity, wholesale, bulk or retail, as the case may be, within the 

State. 

(b) xxx xxx xxx 

(c) xxx xxx xxx 

(d) xxx xxx xxx 

(e) xxx xxx xxx 

(f) xxx xxx xxx 

(g) xxx xxx xxx 

(h) xxx xxx xxx 

(i) xxx xxx xxx 

(j) xxx xxx xxx 

(k) discharge such other functions as may be assigned to it under this Act. 

8. Sub-section (5) of Section 42 reads as under: 

Section 42 (5) Every distribution licensee shall, within six months from the 

appointed date or date of grant of licence, whichever is earlier, establish a 

forum for redressal of grievances of the consumers in accordance with the 

guidelines as may be specified by the State Commission. 

9. As regards, the Ombudsman he has been recognised with an Authority in the 

following language: 

(6) Any consumer, who is aggrieved by non-redressal of his grievances under 

Sub-section (5), may make a representation for the redressal of his grievance to 

an Authority to be known as Ombudsman to be appointed or designated by 

the State Commission. 

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(7) The Ombudsman shall settle the grievance of the consumer within such 

time and in such manner as may be specified by the State Commission. 

10. Thus, we find that an individual consumer for redressal of his individual grievance 

has to approach the grievance redressal forum and then being aggrieved with the 

decision of this forum to approach the Ombudsman who shall settle grievance of 

such consumer in such manner and within such a time as may be specified by the 

State Commission. What exactly are the powers and functions of the Ombudsman 

have not been specified in the Act, but it only appears that Ombudsman derives his 

jurisdiction when an individual consumer brings before him a dispute with a 

distribution licensee. The Act does not provide for any appeal against the order of 

the Ombudsman. It can not therefore by gainsaid that when the powers and functions 

of the State Commission have been specifically determined in terms of Section 86 

the Ombudsman is necessarily precluded from entering into the domains of the 

State Commission. In common parlance, the Ombudsman is approached by an 

individual consumer when a dispute called a “billing dispute”, arises. If we read 

Sub-section (5), (6) and (7) of Section 42 of the Act together it becomes clear that the 

dispute which the forum for redressal of grievance of the consumer or an Ombudsman 

is called upon to adjudicate has to be a dispute in relation to a distribution licensee 

and in that perspective such a dispute may necessarily be a billing dispute or 

disputes of like nature. But all such disputes which the forum is called upon to 

adjudicate has to be against a distribution licensee. It is against the decision of the 

forum that a consumer may approach the Ombudsman who is to settle such disputes 

or grievance so to speak. The liability for the distribution licensee to establish a 

forum for redressal of grievance of the consumers or that of the Commission to 

appoint an Ombudsman entails that the forum or the Ombudsman will hear the 

complaint against a distribution licensee. As such, the grievances arising out of 

specific act on the part of a distribution licensee may give rise to cause of action to 

an individual consumer. This reasoning of ours appears to have been fortified by 

several decisions of this Tribunal as also a decision of the Hon’ble Supreme Court 

which we now present here. In BSES Rajdhani Power Ltd. v. DERC reported in 2009 ELR 

(APTEL) 0363, the question arose whether approach to the Commission was justified 

in the context of the fact where Respondent No. 2 requested the Appellant for 

surrendering the electric connection and refund of security amount. The Appellant 

failed to respond whereupon the complaint was filed by the Consumer before the 

State Commission which entertained the complaint and then only the Appellant 

admitted the mistake against whom commission awarded penalty and compensation. 

In the appeal before the State Commission this Tribunal held that Commission has 

no jurisdiction to entertain the appeal holding that it was purely a dispute between 

a consumer and a distribution licensee. In Polyplex Corporation Ltd., Ghaziabad v. 

Uttrakhand Power Corporation Ltd. 1 reported in 2007 APTEL 115 we find that it was 

explicitly a billing dispute. Obviously, this Tribunal held that the approach to the 

said Commission was wrong. In Dakshin Haryana Vijli Vitran Nigam Ltd. v. Haryana 

Electricity Regulatory Commission and Ors. reported in 2007 (APTEL) 356, it was held 

in a batch of appeals that it is well settled that no Authority however higher or 

supreme it be, cannot usurp the jurisdiction of a statutory Authority created specifically 

for the purpose. It was held that it is the specific provision which excludes the 

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general provision. Reference was also made to Venkaeswar v. State of Andhra Pradesh 2 

reported in AIR 1966 SC 828. In another case namely, Dakshin Haryana Vijli Vitran 

Nigam Ltd. v. DLF Services and Ors. reported as 2007 (APTEL) 766 the same proposition 

was again reiterated. In Maharashtra State Electricity Distribution Company Ltd. v. 

Lloyds Steel Industries Ltd. reported in AIR 2008 SC 1042, the Hon’ble Supreme Court 

had the occasion to examine the issue against certain factual background which is 

thus, the Respondent No. 2 Company approached the State Commission complaining 

that a demand notice issued by MSEDCL should be declared illegal and that the 

said company be permitted to avail its power supply to the level of 90 MVA without 

recovery of any additional charges and to further direct that the Appellant MSEDCL 

to refund the certain amount of money for reinstatement of contract demand to the 

original level of 90 MVA alongwith interest at the rate of 12 per cent from the date 

of payment till the date of refund. Being aggrieved with the decision of the MSEDCL 

the Respondent Company approached the Commission In this context their Lordships 

of the Supreme Court observed as follows: 

A complete machinery has been provided in Section 42(5) and 42(6) for redressal 

of grievances of individual consumers. Hence wherever a forum/Ombudsman 

have been created, the consumers can only resort to these bodies for redressal 

of their grievances. In the face of this statutory provision we fail to understand 

how could the Commission acquire jurisdiction to decide the matter when a 

forum has been created under the Act for this purpose. 

The Hon’ble Supreme Court referred to the provisions of Sub-section (5), (6) and (7) 

of Section 42 and Section 86 of the Act to show as to who stands in which place 

under the law so that there cannot be any usurpation of jurisdiction of one over the 

other. 

11. We have found what the law is. We have found that an individual consumer 

has no right to approach the Commission when his dispute is with the distribution 

licensee. Our question now is - whether the dispute raised by the Respondent No. 3 

and 4 with the Respondent No. 1 is really a dispute which grievances redressal 

forum or the Ombudsman can legally and factually address. The factual background 

of the decisions so far mentioned above is clearly distinguishable from ours in as 

much as here the question is whether the order for determination of Tariff in terms 

of the Tariff categorisation pursuant to which an individual consumer and the 

distribution licensee entered into an agreement can be interpreted or clarified by an 

Ombudsman who is not the author of the said Tariff determination order and whether 

the Ombudsman has Authority to entertain a petition for change of one category to 

another. Be it clearly mentioned that the order for determination of Tariff according 

to the category was made by the Commission on 31 st July, 2007 in case No. 898 

of 2006 and the agreement was entered into between the Appellant and the Respondent 

No. 3 in terms of which the contract demand was fixed on 425 KVA, and so far as 

the applicability of the Tariff category is concerned it would be as per the said 

agreement HTP-II(A). Therefore, the Tariff determination order is prior to the agreement 

dated 22 nd August, 2007. Now, by the parties agreement the Respondent No, 3 came 

to be classified under HTP-II(A). Section 62(3) is relevant here. It provides: 

Section 62(3). The Appropriate Commission shall not, while determining the 

Tariff under this Act, show undue preference to any consumer of electricity 

but may differentiate according to the consumer’s load factor, power factor, 

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voltage, total consumption of electricity during any specified period or the 

time at which the supply is required for the geographical position of any area, 

the nature of supply and the purpose for which the supply is required. 

(Emphasis supplied) 

It is only to be hoped that while determining the impugned Tariff category-wise the 

Commission would must in its mind the aforesaid provisions of the law. 

12. Now, under HTP-1 Category fall research and development units attached to 

the Ministry of Science and Technology, water works and sewerage pumping stations 

run by local authorities, and GW& SB, GIDC water works and agricultural consumers. 

Notably, the Respondent No. 3 wanted to be shifted to and categorised under this 

HTP-1, not HTP-II(B). It was not its case that it be categorised under HTP-II(B). 

The grievance redressal forum and the Ombudsman held that the Appellant cannot 

be shifted from HTP-II(A) to HTP-I. Under HTP-II(B) falls residential colonies, 

townships, educational institutions governed by Government and defence 

establishments. Under HTP-II(A) in which by agreement the Respondent No. 3 was 

categorised fall Railways, hotels, amusement parks, resorts, water parks, aerodrams, 

cinemas, auditorium, bank, studios, offices films production, etc. 

13. Now, these are the categories made by the Commission in the Tariff order dated 

31 st March, 2007. In the Tariff order it has not been expressly mentioned as to under 

which category the Respondent No. 1 which is a HT consumer running a number 

of educational institutions not governed by the Government would fall. Before 

answering the question whether the Commission’s impugned order is justifiable on 

merit or not it is necessary to say who is the competent Authority under the statute 

to clarify, explain, interpret or if need be amend the Tariff order. A consumer grievance 

redressal forum or for that matter an Ombudsman cannot possibly give an 

interpretation or clarification of what a quasi-judicial or quasi-legislative Authority 

intended to mean by framing a Tariff order particularly when they do not have the 

appellate or revision jurisdiction over the Commission. In fact, private educational 

institutions running on commercial basis or otherwise do not find mention in express 

words in either of the three categories. There is word “etc.” that can act as esjusdem 

generis to include a private educational institution, if according to the Commission 

the categorisation of HTP-II(A) would include all such private educational institutions 

and that the said HTP-II(A) category is intended to cover the institutions and entities 

which are run from commercial view point or that these entities and institutions as 

mentioned in HTP-II(A) serve a common purpose. There is no word “etc.” either in 

HTP-I or HTP-II(B). To our mind, the power of clarification or interpretation or 

amendment of the order of the Commission lies with the Commission who is the 

author of the order and it is only in accordance with the Tariff determination order 

that an agreement between a distribution licensee and a consumer follows. Therefore, 

if a particular entity is of the opinion that it has been wrongly categorised or that 

there has been wrong application of the Tariff order because of misunderstanding 

or misinterpretation then it is the Commission that has to clarify the confusion and 

make the position clear. Therefore, in our estimation redressal forum or the 

Ombudsman cannot give legal interpretation of the Tariff determination order made 

by a Commission and/or entertain a petition of a consumer for change of one category 

to another which involves powers of adjudication of fixation of Tariff. 

14. Still the fact remains that the approach was made by an individual consumer. 

Before we answer this question we have to answer the question on merit as to 

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whether the Respondent No. 3 really falls under HTP-II(B) as categorised by the 

order dated 31 st July, 2007 by the Commission. Here there is an express mention of 

power supply for residential colonies, townships, defence establishments attached 

to the Ministry of Defence and the education institutions governed by the Government. 

The educational institutions governed by the Government means the institutions 

owned and run by the Government. Respondent No. 3’s is admittedly not an institution 

run by Government; it is a set up of private charitable trust which is not expressly 

provided for in HTP-II(B) even though purpose for which supply is required is the 

same i.e. education. It was in the Commission’s mind as to behind which principles 

or purpose these three categories were made but it is, of course, clear that the 

Commission was not right in saying that the Respondent No. 3 falls under HTP-II(B) 

to which the Respondent No. 3 even did not aspire for. It is the salutary principle of 

law that we cannot read anything more in the order which is not there. There is no 

scope of supposition and assumption. The Commission also could not ignore the 

fact that expressly the Respondent No. 3 is not covered by the HTP-II(B). The State 

Commission has also decided to place Respondent No. 3 in HTP-II(B) prospectively 

and not retrospectively. Thus, Commission also seems to be aware that it is not 

merely a clarification but amendment to the Tariff order to include a category which 

was not specifically included in HTP-II(B) category. 

15. This situation gives rise to the last question - when an individual consumer 

approached the Commission or when the Commission found the arena of dispute 

to be resolvable only by the Commission itself what was required of the Commission 

to do. As the law stands, a commission cannot make any order for a particular or 

individual consumer irrespective of whether such consumer has good merit in his 

case or otherwise by departing from its Tariff determination order which is a product 

of a quasi-legislative Authority. For, a law cannot be molested to afford relief to an 

individual howsoever hardship he is beset with. Appropriate course of action would 

then be to amend the law which is always generic. The law stands thus that the 

Commission’s function is not to redress grievances of a particular consumer amongst 

thousands of consumers attached to different distribution licensees in a particular 

area or areas. Unquestionably, the matter requires an interpretation or clarification 

or amendment of the order by the Commission alone on the ground that its 

categorisation leaves scope for confusion. The Commission states that the Respondent 

No. 3 should be treated like an educational institution governed by Government. 

Well, if this is the perception of the Commission then there may be in Gujarat 

hundreds of such educational institutions who administer education in the same 

manner as the Respondent No. 3 does. If, according to the Commission a special 

dispensation is necessary for such institutions which are not covered under HTP-II(B) 

then appropriate course would have been to issue a public notice to all the concerned 

distribution licensees and all such entities/persons so as to have them heard before 

it proceeds to amend the Tariff order, provided of course the Commission is of the 

opinion that such institutions do not fall under any of the categories. Whatever the 

Commission would think it proper to do it is legitimately authorised to do covering 

the entities or institutions who are similarly circumstanced the like Respondent 

No. 3. That is to say, by an order covering all such institutions or entities it can 

amend the Tariff instead of making a special dispensation to a particular educational 

institution by an interpretation which unless the category HTP-II(B) is amended 

cannot be covered with. It is not our jurisdiction to say under which categorisation 

Respondent No. 3 should be placed, for it is within the domain of the Regulator. 

It is the Regulator who has to hear all the distribution licensees and the persons 

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likely to be affected by a possible order and then to arrive at a Tariff order to cover 

the institutions resembling the Respondent No. 3. We can only say by way of 

interpretation of the category HTP-II(B), as it is there in the order dated 31 st July, 2007, 

that it does not cover the private educational institutions like the Respondent No. 3. 

If special dispensation is to be given it has to be given to all such institutions 

similarly placed by an appropriate Tariff order. 

16. Thus, our findings are as follows: 

(i) The Grievance Redressal Forum or the Ombudsman has no jurisdiction to 

entertain a petition from a HT consumer for change of one category, for the 

purpose of Tariff determination, to another category. 

(ii) The function of change of such category by interpretation of Tariff order or 

by amendatory process rests with the Commission as it is intrincically related 

to Section 61(a) of the Act. 

(iii) As the same time, the Commission has no jurisdiction to adjudicate upon 

a petition of an individual consumer and give relief to only such individual 

consumer by conscious distraction from the Tariff order. 

(iv) The Respondent No. 3 does not fall under HTP-II(B) category according to 

Tariff order dated 31 st July, 2007. 

17. The result is that the impugned order is unlawful and cannot be sustained. 

18. The Appeal is allowed and the impugned order is set aside. No cost. 

a 

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2011 ELR (APTEL) 0808* 



M/s. Ispat Industries Ltd., Maharashtra 

v. 

Maharashtra State Electricity Distribution Company Ltd. and 

Maharashtra Electricity Regulatory Commission, Mumbai 


DECIDED ON: 08.03.2011 

Coram 



Whether the issues relating to benchmark consumption period for calculation of 

additional supply charge can be re-opened without affording any opportunity to the 

Appellant of being heard? 

Held, the benchmark consumption charges were levied and paid by the Appellant 

in accordance with the prevalent Tariff order. With the Appellant having paid the 

charges as were levied in accordance with the prevalent Tariff order the issue 

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* MANU/ET/0071/2011 

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M/s. Ispat Industries Ltd. v. Maharashtra State Electricity Distribution Company Ltd. and Anr. 


cannot be revived again to put the Appellant in double jeopardy. It is against the 

cannons of rules that the matter once disposed of cannot be revived once again to 

the determent of lawful interest of a party when its account books were closed and 

who conducted its economic affairs in accordance with rules that were prevalent 

at that time. 

Whether the order dated 12 th May, 2008 passed by this Tribunal in the case of 

Eurotex prospective or retrospective? 

Held, Tribunal’s order directing the MSEDCL to refund the amount of energy 

charges and other incidental charges on the basis of the benchmark fixed as per 

the Tariff order dated 18 th May, 2007 cannot be made applicable to other consumers 

without any notice and that too with retrospective effect. 

Whether the additional supply charge determined by the Commission in its order 

dated 18 th May, 2007 with all its amendments and with modification of this Tribunal 

in its order dated 12 th May, 2008 can be made applicable to the Appellant? 

Held, Appellant cannot be allowed to challenge this Tribunal’s order dated 

12 th May, 2008 before this Tribunal itself instead of seeking redressal of all its 

grievances before the Supreme Court. Tariff period having been very much in 

operation when the order modifying the Tariff order was issued, the Appellant is 

precluded from taking the defence that the modified Tariff order could not be 

enforced against it. Estoppel against the judgment of the Tribunal is not legally 

permissible. Appellant has acquiesced to the revision of the Tariff order and has 

paid the revised charges. 



Polychem Ltd. and Anr. v. State of Maharashtra and Ors. MANU/SC/0472/1998: (1998) 

6 SCC 196: 1998 V AD (SC) 556: AIR 1998 SC 2546: 1998 (4) ALLMR (SC) 320: JT 

1998 (5) SC 311: 1998 (4) SCALE 356: (1998) 3 SCR 972 (Discussed) 

[p. 0818, para 23 b] 


Maharashtra Electricity Regulatory Commission (Conduct of Business) Regulations, 2004 

[p. 0816, para 20 e] 

Counsel 

For Appellant/Petitioner/Plaintiff: G. Umapathy, Rohit Singh and Sudha Umpathy, 

Advs. 

For Respondent(s)/Defendant: Abhishek Mitra, Adv. for Respondent No. 2 and 

Ashish Bernad, Adv. for Respondent No. 1 

JUDGMENT 


1. The Appeal is directed against the judgment and order dated 3 rd August, 2010 

passed by the Respondent No. 2, Maharashtra Electricity Regulatory Commission 

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in Case No. 92 of 2009 whereby the Appellant’s prayer for not visiting the Appellant 

with additional supply charge with retrospective effect was rejected. 

2. Before going to the case of the Appellant the back ground requires narration. 

Way back in October 2006, the Respondent No. 2 introduced a concept of Additional 

Supply Charge (ASC) in its earlier Tariff order for Maharashtra State Electricity 

Distribution Co. Ltd. (MSEDCL), Respondent No. 1 herein and the basic premise of 

such additional supply charge was that the consumers having reduced load shedding 

hours vis-à-vis the uniform load shedding hours are required to pay for the costly 

power to mitigate the load shedding through additional supply charge in addition 

to the base retail Tariff. The additional supply charge was specified at Rs. 5.15 per kwh 

in the Commission’s order in Case No. 54 of 2005. 

3. The Commission simplified the method of levy of ASC, by allocating the costly 

power only to industries connected at EHV levels or express feeders like the Appellant, 

railways and industries facing one day load shedding, in accordance with the 

quantum of costly power considered for the purpose of ASC determination. ASC 

was worked out to be levied on 24 per cent of the consumption for continuous 

industries as compared to 42 per cent earlier and 11 per cent of the consumption for 

industries facing one day staggering as compared to 28 per cent earlier… 

4. The Commission continued with the approach of incentivising consumers to 

respond to the levy of Additional Supply Charge, by reducing their consumption 

with respect to the consumption in the previous period. Similarly, the Commission 

felt that disincentive has also to be introduced so that the consumers are encouraged 

to at least restrict their consumption to the benchmark levels. 

5. What will be “bench mark level” and what is to be called “reference period” have 

been and still are the subject matter of controversy right from the beginning when 

the Respondent No. 2 introduced this scheme. 

6. The order dated 18 th May, 2007 which is the first in the series of the orders in 

Case No. 65 of 2006 requires mention. The Commission observed as follows: 

The reference period for comparison of the consumption is elaborated below, 

to enable MSEDCL to pass on the incentive/disincentive appropriately by 

following a common methodology across its billing units. The Commission is 

also of the opinion that it will not be fair to consider the benchmark average 

consumption levels of the previous year, January 2006 to December 2006, for 

this purpose, as the consumers cannot be expected to continuously year-on-year 

reduce their consumption. Hence, the Commission has retained the provision 

of benchmarking the current consumption levels against the monthly average 

consumption during January 2005 to December 2005, while billing Additional 

Supply Surcharge to the consumers 

7. The Commission under paragraph 7.4 of the order as aforesaid determined as to 

what would be reference period for comparison of the consumption in different 

situations and circumstances in Item No. (a), (b), (c), (d), (e) and (f) of Paragraph 7.4 

under the heading ADDITIONAL SUPPLY CHARGE (ASC) MATRIX. For the purpose 

of disposal of the appeal, it is not necessary to examine the situations described in 

a, b, c, d, e and f. What is relevant is Item No. (g) of the said paragraph 7.4 which we 

quote below: 

In case of consumers whose sanctioned load/contract demand had been duly 

increased after the billing month of December 2005, the reference period may 

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be taken as the billing period after six months of the increase in the sanctioned 

load/Contract Demand or the billing period of the month in which the consumer 

has utilised at least 75 per cent of the increased sanctioned load/Contract 

Demand, whichever is earlier. 

8. The MSEDCL (Respondent No. 1) filed a clarificatory petition for clarification on 

the question as to what will be the modality in case sanctioned load/contract load 

Is increased after the billing month of December 2005. Thus the Commission amended 

its Sub-para 7.4 under Para 7 of its original order dated 18 th May, 2007 by an order 

dated 24 th August, 2007 with the following: 

The Commission is further of the opinion that increase in Contract Demand 

will be sought only when there is a significant increase in scale of operations, 

and hence, clarifies that Clause (g) of the order reproduced above, will be 

applicable only in cases, where the increase in Contract Demand is equivalent 

to 25 per cent or more of the Contract Demand during the reference period 

from January 2005 to December 2005. In case of change in contract Demand 

during the above reference period, then the Contract Demand during December 

2005 will be considered as the reference Contract Demand, for operationalistion 

of this clarification. The Commission further clarifies that in case the Contract 

Demand is reduced subsequent to increase of Contract Demand, such that the 

revised Contract Demand is less than 25 per cent higher than the original 

Contract Demand, during the reference period, then this clause will not be 

operative for such consumers, and the reference consumption during January 

to December 2005 will be applicable, (e.g. CD during January to 

December 2005=100 kVA; CD increased during May 2006=200 kVA; Current 

CD=120 kVA; reference period is average monthly consumption during January 

to December 2005 

9. Then, the Commission issued a second clarificatory order dated 11 th September, 2007 

where the Commission held as follows: 

Reference consumption to be considered for levy of ASC 

(a) Cases of increase in Contract Demand/Sanctioned load: 

In the context of the reference period in case of consumers, where 

the Contract Demand has been increased subsequent to the billing 

month of December 2005, the Commission had clarified on Page 25 

and 26 of the clarificatory order under the heading “Reference bill 

period for HT foundries in cases of increase in Contract Demand” 

as under: 

In case of consumers whose sanctioned load/contract demand 

had been duly increased after the billing month of December, 2005, 

the reference period may be taken as the billing period after 

six months of the increase in the sanctioned load/Contract 

Demand or the billing period of the month in which the third 

occasion of the consumer utilizing at least 75 per cent of the 

increased sanctioned load/Contract Demand after increasing 

the Contract Demand is recorded, whichever is earlier. 

The Commission had also clarified at Pages 14 and 15 of the Clarificatory 

Order that: 

Clause (g) of the order reproduced above, will be applicable only in cases, 

where the increase in Contract Demand is equivalent to 25 per cent or 

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more of the Contract Demand during the reference period from January 2005 

to December 2005…. 

In continuation, the Commission clarifies as under: 

(a) The above clarifications on Pages 14, 15, 25 and 26 of he Clarificatory 

order dated 24 th August, 2007 are to be read in conjunction, and not 

independently. 

(b) Though the heading under which the clarification has been given may 

appear to indicate that the clarification is applicable only for HT Foundries, 

the detailed clarifications make it clear that it is applicable for all consumers 

where the Contract Demand/sanctioned load has been increased. 

(c) The reference to sanctioned load is applicable only to consumers where 

the demand is yet to be contracted, and the fixed charges are being billed 

on the basis of sanctioned load. 

(d) The clarification effectively means that in cases where the increase in 

Contract Demand/sanctioned load is equivalent to 25 per cent or more 

of the Contract Demand during the month of December 2005, the consumer 

will get at least three months time (grace period), since the third incidence 

of utilising at least 75 per cent of the increased Contract Demand/ 

Sanctioned Load can occur at the earliest in the third month, as the 

maximum demand meter records only the highest recorded demand in 

the month, and does not record each individual incidence when the 

recorded demand is higher than a specified limit. 

(e) Further, till the reference period is reached under this Clause (billing 

period after six months of the increase in the Contract Demand/sanctioned 

load or the billing period of the month in which the third incidence of 

utilisation of at least 75 per cent of the increased Contract Demand/ 

sanctioned load), the ASC will be levied at the stipulated proportion of 

11 per cent and 24 per cent, as the case may be. Thereafter, the ASC on 

the increase/decrease in consumption vis-à-vis the reference consumption 

will be charged in accordance with the Commission’s orders in this regard. 

(f) Accordingly, the illustration given on Page 15 of the claificatory Order 

dated 24 th August, 2007 in the context of the sample cases put forth by 

MSEDCL, stands modified as follows: 

SI. Sample Contract Current Reference Basis 

No. Case Demand Contract Period 

in 2005 Demand 

kVA kVA Month 

1 Case I 5000 9500 July 2006 Since it is not possible 

to cross 75 per cent of 

increased CD within 

6 months 

2 Case II 9000 10500 Average of 2005 Contract Demand has 

not increased by at 

least 25 per cent over 

2005 levels. 

3 Case III 10000 7000 Average of 2005 

4 Case IV 10000 7000 Average of 2005 

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(b) Cases where the consumers are availing credit for captive 

generation at different location through renewable sources or 

otherwise. 

The Commission had clarified that the billing of increase/reduction 

in ASC units will be done by comparing the reference consumption 

and current consumption on ‘gross’ basis, rather than “net” basis. 

10. The Commission came then with the third clarificatory order dated 17 th December, 2007 

where the Commission repeats its earlier orders and then says as follows: 

In continuation, the Commission clarifies that the above clarifications are also 

applicable for determination of reference period in cases where the increase in 

Contract Demand has occurred during the period from January 2005 to 

December 2005 vis-à-vis the Contract Demand in January 2005. 

11. Now, during the intervening period between the Second clarificatory order and 

the Third clarificatory order a consumer of MSEDCL called M/s. Eurotex Industries 

and Exports Ltd. (for short, Eurotex) which is a HT continuous process industry 

filed a petition being Case No. 28 of 2007 before the Commission explaining the 

apparent practical difficulties in complying with the order on ASC as it stood by 

Second amendment on several grounds and they are as follows: 

(a) During the period from April 2006 to June 2006, M/s. Eurotex carried 

on trial runs of the various production machines for quality stabilisation 

and establishing the requisite parameters and standards of its processing 

activity. During the said period, though the maximum recorded demand of 

M/s. Eutotex was nearly 88 per cent to 95 per cent of 4,900 kVA, the actual 

consumption was in the vicinity of 61 per cent to 74 per cent of the maximum 

energy. On and from July 2006, the actual energy consumption was 

proportionately in line with the increased load of 4,900 kVA and was steady 

thereafter. 

(b) The process of determining the increased Contract demand and the process 

of determination of unit consumption are separate. So far as utilisation of 

increased Contract Demand is concerned, all the new machinery for which 

increased Contract Demand has been increased, are first installed and then 

connected to the supply for trial runs. Thus, the additional demand may be 

utilised within a few hours of being connected to the supply system, which 

may be in the vicinity of 75 per cent. Thereafter, after a few days of trial run, 

all the new installed machinery are stopped for thorough inspection considering 

(i) whether every moving part of the new machinery is functioning well, lubricants 

are reaching to every bearing and there is no excessive heating; (ii) whether 

the finished products manufactured from the new machinery adheres to quality 

and consistency standards-which may require change of parts, technical 

adjustments-which process requires a few days time; (iii) the quantum of unit 

consumption per new machinery - which requires several trial runs and re-runs 

of short durations. This entire process of stabilising the production process 

with the revised Contract Demand requires a duration of three to six months. 

The time taken for stabilisation of increased contractual demand is thus quite 

different from the time taken for stabilisation of unit consumption. M/s. Eurotex 

has contended that the direction to consider either of the two time periods as 

the reference period for computation of applicable ASC is an error apparent 

on the face of the record. 

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(c) As per Clause 7.4(g) of the impugned order, the benchmark units for 

calculation of ASC applicable to M/s Eurotex have been fixed by MSEDCL on 

the basis of its unit consumption during April 2006, which being only 61 per cent 

of the maximum level of consumption does not qualify as proper reference 

consumption. Adoption of this process for computation of applicable ASC 

would defeat the purpose of M/s. Eurotex behind increasing its contractual 

demand. If such a process is adopted, it would lead to stoppage in the utilisation 

of new machinery and idling of labour force. 

(d) If the benchmarking for calculation of the ASC applicable to M/s. Eurotex 

is fixed at low levels, it acts as a fetter to M/s. Eurotex to avail the incentive for 

reduced ASC units, as also provided under the impugned order. 

(e) The effect of the provisions under Clause 7.4(g) of the impugned order, so 

far as the criterion for calculation of ASC units is based on energy consumption 

and the reference period be based on the consumer reaching 75 per cent of the 

Contract Demand, would lead to an anomalous situation. 

12. Thus, Eurotex pleaded that either the provisions or the billing period of the 

month in which the consumer has utilised at least 75 per cent of the increased 

sanctioned load/Contract Demand, whichever is earlier” be deleted from the 

impugned order or in the alternative, a clarification may be provided that 

Clause 7.4(g) in the impugned order shall be applicable only after the expiry of six 

months from the date of increase in the sanctioned load/Contract Demand. Further, 

M/s. Eurotex sought directions upon MSEDCL to refund the amounts of energy 

charges and other incidental charges that M/s. Eurotex has paid to the MSEDCL 

on the basis of erroneous benchmarking of applicable ASC during the month of 

April 2006. 

13. The prayer of the Eurotex was rejected by the Commission by an order dated 

19 th September, 2007 passed in Case No. 28 of 2007 on the ground that the application 

was devoid of any merit and the Commission observed as follows: 

In the aforesaid circumstances, the Commission observes that reconsideration 

of the same issue is not necessary under the present proceedings. So far as 

benchmarking the units for calculation of ASC is concerned, the clarification 

provided under the aforesaid clarificatory Order dated 24 th August, 2007 and 

11 th September, 2007, will have general effect. The revised criterion on the 

reference period for calculation of ASC applicable on HT foundries thereunder, 

is applicable mutatis mutandis on all HT industrial consumers. 

Be it mentioned here that the third clarificatory order on the issue dated 

17 th December, 2007 came after the rejection of the prayer of Eurotex. But, the said 

third clarificatory order dated 17 th December, 2007 did not alter the basic situation 

so far as M/s. Eurotex is concerned. 

14. Now, M/s. Eurotex filed an appeal before this Tribunal being Appeal No. 135 of 

2007 against the order dated 19 th September, 2007 and this Tribunal (Coram: Justice 

Anil Dev Singh, Chairperson, Mr. A.K. Khan, Technical Member) disposed of the 

appeal on 12 th May, 2008 modifying Clause 7.4(g) of the original Tariff order dated 

18 th May, 2007 as follows: 

In the case of consumers whose sanctioned load/contract demand had been 

duly increased after the billing month of December, 2005 the reference period 

may be taken as billing period after six months of the increase and the sanctioned 

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load/contract demand OR the billing period after six months in which the 

consumer has utilised at least the same ratio of energy consumption as percentage 

of increase contract demand that has been recorded prior to the increase in 

sanctioned load/contract demand 

The Tribunal further gave a direction as follows: 

We also direct the first Respondent to refund and adjust against future billings, 

the amount of energy charges and other incidental charges paid by the Appellant 

on the basis of the benchmark units fixed in the third month (i.e. June 2006) 

and additional supply charges be calculated accordingly. 

15. MSEDCL Respondent No. 1 herein however, filed a review petition being No. 5 

of 2008 seeking for review of this Tribunal’s order dated 12 th May, 2008 in Appeal 

No. 135 of 2007 on the ground of error on the face of the record and this Tribunal 

(Coram: Justice M. Karpaga Vinayagam, Chairperson and Mr. A.A. Khan, Technical 

member) by an order dated 30 th April, 2009 dismissed the review petition. We are 

told that Respondent No. 1 MSEDCL filed a civil appeal being No. 6198 of 2009 

against the order of review passed by this Tribunal before the Supreme Court which 

is said to have been disposed of on 7 th September, 2009 and a disposal slip was 

placed before us on the date of hearing of this Appeal and it is submitted that the 

appeal was dismissed (though the disposal slip simply expressed “disposed”.) 

16. Be that as it may, we have finished our introduction and now, we proceed to see 

the case of the Appellant who admittedly was not a party in Case No. 65 of 2006, 

26 of 2007, 28 of 2007 (Eurotex) Appeal No. 135 of 2007 and review Petition No. 5 

of 2008. As said above, the Appellant is an industry drawing power at EHV i.e. 

220 KV. The Appellant filed a petition before the Respondent No. 2 herein, the 

Commission when it was served with notice for payment of additional supply charge 

in tune with the Tariff order dated 18 th May, 2007 since modified by the Tribunal’s 

order dated 12 th May, 2008 amounting to Rs. 14 crores. 

17. Upon receipt of the notice, the Appellant filed a petition praying for keeping the 

Appellant outside the purview of the order for payment of ASC in terms of the 

formula as it stood modified by the Tribunal’s order dated 12 th May, 2008 principally 

on two-fold grounds: 

(a) It was not a party to any of the above proceedings and it should not be 

penalised with such an exorbitant amount of money. 

(b) The Tariff order of the Commission or any of the three clarificatory orders 

which stood modified by the Tribunal while disposing of the appeal of the 

M/s. Eurotex may not be retrospectively applied for in the case of the Appellant. 

18. The Commission by order dated 3 rd August, 2010 dismissed the application of 

the Appellant M/s. Ispat Industries Ltd. On the ground that after the Tribunal’s 

judgment the matter has stood settled and the additional supply charge is applicable 

to all consumers, and the question of the Appellant not being made party is irrelevant. 

19. The Appellant M/s. Ispat Industries Ltd. is now the Appellant before us urging 

the same things as were urged before the Commission and it is now worthwhile to 

narrate all its points in its memo of Appeal. 

20. The memo of Appeal consists of two parts the first part relates to the factual 

background that has already been narrated in the preceding paragraphs, while 

the second part is the case of the Appellant. Now, it is the contention of the 

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0816 


Appellant that the judgment of this Tribunal in Appeal No. 135 of 2007 dated 

12 th May, 2008 was peculiar to the facts and circumstances of the Appellant of 

this appeal namely Eurotex before the Tribunal. Yet, the said order was not 

communicated to this Appellant nor was this Appellant a party to the said 

Appeal No. 135 of 2007 before the Tribunal nor a party before the Commission 

in series of proceedings namely Case No. 65 of 2006, 26 of 2007 and 28 of 2007 

in connection with which the order of ASC and series of clarifications were 

made, and out of which, the appeal of Eurotex arose, so much so that the present 

Appellant had no scope to ventilate its points and attack the very innovative 

scheme introduced on Additional Supply Charge which in fact, has been 

prejudicial to the Appellant, who all of a sudden was only served with a bill 

dated 15 th September, 2009 whereby, ASC has been charged and demand has 

been made for payment of Rs. 14.38 crore. According to the Appellant, the Appellant 

was informed that as per the order the benchmark consumption i.e. October 2006 

is considered for charging of ASC units for the billing month of May 2007 to 

June 2008 as against June 2006 where the maximum consumption was of the 

order of 165 million units as against October 2006 of 158 million units. The 

Appellant had filed an application being IA No. 319 of 2009 in connection with 

Appeal No. 135 of 2007 seeking clarification with prayer that the Tribunal’s 

judgment in Eurotex dated 12 th May, 2008 in Appeal No. 135 of 2007 was not applicable 

to the present Appellant. The Tribunal by order dated 13 th November, 2009 disposed 

of that petition directing the Appellant to approach the Commission. Then, the 

Appellant submitted a petition being No. 92 of 2009 on 24 th December, 2009 

under Section 92 of the MERC (Conduct of Business) Regulations, 2004 seeking 

inter alia clarification on the benchmark consumption for charging ASC in case 

of the consumers whose sanctioned load/contract demand had been duly increased 

after the billing month of December 2005 before the Commission. The Commission 

by its impugned order dated 3 rd August, 2010 in Case No. 92 of 2009 disposed of 

the application of the Appellant holding that there was no illegality in the claim 

raised by MSEDCL. Hence, the Appeal. 

21. The MSEDCL, Respondent No. 1 herein in its counter-affidavit provided in 

detail all such facts as were narrated so long in preceding paragraphs, as such, no 

repetition of the same is necessary. It is contended that this Tribunal has already 

taken a view in the matter and cannot sit in appeal over its own judgment and it is 

not open to the Appellant to challenge the Tribunal’s order dated 12 th May, 2009 

before the same Tribunal. That apart, contract demand of the Appellant was enhanced 

from 205 MVA to 300.77 MVA with effect from April 2006; as such the reference 

period for charging ASC was determined as per the Original Clause No. 7.4(g) of 

the Tariff order. Accordingly, the MSEDCL issued the energy bills to the Appellant 

from May 2007 considering the reference period consumption at 158.79 million 

units which is based on energy units consumption in April, 2006. Clarificatory 

orders were made effective from energy bills of September 2007 considering the fact 

that the Appellant’s contract demand was enhanced in April, 2006 and the reference 

period was determined as consumption in the energy bill of June 2006 i.e. 164.85 million 

units which was the third occasion of utilisation of at least 75 per cent of the 

increased contract demand. The clarifications were made applicable with retrospective 

effect from 1 st May, 2007 and hence, the bills for the period from May 2007 to 

August 2007 were revised as per the order and credit due to revision of bills 

amounting to Rs. 2.45 crore was given in the monthly bills from November 2007. 

Following the judgment of this Tribunal dated 12 th May, 2008, the MERC in its 

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orders in Case No. 21 of 2008 dated 5 th August, 2008 and in Case No. 30 of 2008 

dated 29 th September, 2008 held as under: 

Since ATE has modified the relevant paragraph of the impugned clarificatory 

order MSEDCL has to revise the bills of all similarly placed consumers and 

accordingly refund/adjust the amount of energy charges of ASC with effect 

from 1 st May, 2007. 

Accordingly, the criteria modified by the Tribunal was made applicable to all the 

eligible consumers of the MSEDCL who have increased the sanctioned load/contract 

demand after the billing month of December 2005. In case of the Appellant, the 

reference period for charging of ASC units was considered as the consumption of 

October 2006 energy bill i.e. the consumption after six months of the increase of the 

contract demand, and therefore, the energy bills for the period from May 2007 to 

June 2008 were revised and the recovery amount of Rs. 14.38 crore was charged in 

September, 2009. The MSEDCL has given credit of amount of ASC refund of 

Rs. 18.72 crore and has raised the debit bills on account of ASC refund to the extent 

of Rs. 39.78 crore in view of the fact that Tribunal’s judgment has been made applicable 

to all the consumers who are similarly placed as the Eurotex. Out of a sum of 

Rs. 39.78 crore of the debit bills, a sum of Rs. 14.38 crore is payable by the Appellant 

and all the credits had been passed on and since the recovery was being made with 

retrospective effect the Appellant had been permitted to pay in installments. 

22. The Respondent No. 2, Maharashtra Electricity Regulatory Commission did not 

file any counter. The issues that arise for consideration are as follows: 

(a) Whether the issues relating benchmark consumption period for calculation 

of additional supply charge can be re-opened without affording any opportunity 

to the Appellant of being heard? 

(b) Whether the order dated 12 th May, 2008 passed by this Tribunal in the case 

of Eurotex. Is prospective or retrospective? 

(c) Whether the additional supply charge determined by the Commission in 

its order dated 18 th May, 2007 with all its amendments and with modification 

of this Tribunal in its order dated 12 th May, 2008 can be made applicable to the 

Appellant? 

23. A broad discussion presented herein below covers all the three issues. 

Mr. G. Umapathy, learned Counsel for the Appellant submits that the applicability 

of the order dated 12 th May, 2008 of this Tribunal rendered in Appeal No. 135 

of 2007 filed by Eurotex against the Commission’s order dated 19 th September, 2007 

rejecting the Review Petition filed by the Eurotex to the present Appellant is a question 

and requires answer by the Tribunal in view of the present Appellant not having 

found any chance or scope to be a party to the series of proceedings on the question 

of determination of additional supply charge before the Commission or before the 

Tribunal. The disposal of the Appeal No. 135 of 2007 by this Tribunal whereby, 

modification was made of the reference period no doubt fortifies the stand of the 

Commission and is binding on the MSEDCL so far as the Appellant is concerned. 

The benchmark consumption charges were levied and paid by the Appellant in 

accordance with the prevalent Tariff order. With the Appellant having paid the 

charges as were levied in accordance with the prevalent Tariff order the issue cannot 

be revived again to put the Appellant in double jeopardy and it is against the 

cannons of rules that the matter once disposed of cannot be revived once again to 

the determent of lawful interest of a party when its account books were closed and 

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who conducted its economic affairs in accordance with rules that were prevalent at 

that time. Again, applicability of Commission’s order since modified by the Tribunal 

to the present Appellant is subject to the question whether the law permits opening 

of the matter in relation to a party who was not a party to the protracted litigation 

on the issue of additional supply charge. Mr. Umapathy in this connection, refers a 

decision of the Supreme Court in Polychem Ltd. and Anr. v. State of Maharashtra and 

Ors. 1 reported (1998) 6 SCC 196 where upward revision of supervision charges and 

making demand of the differential amount of supervision charges with retrospective 

effect on account of such retrospective revision of salary is beyond the powers of the 

Government. Mr. Umapathy’s submission is, therefore, three fold namely 

(a) Non-applicability of the order of the Commission since modified by the 

Tribunal’s order is on the ground of the Appellant not being made party to the 

litigation 

(b) Applicability of the Commission’s order or for that matter the order of this 

Tribunal as aforesaid with retrospective operation. 

(c) The issue relating to benchmark of the reference period for calculation of 

ASC has already been acted upon and cannot be reopened. 

24. According to Mr. Umapathy, the Tribunal’s judgment as aforesaid was confined 

to Eurotex in relation to the facts and circumstances of the case. Mr. G. Umapathy 

argues that this Tribunal’s judgment cannot be made applicable to the Appellant 

thereby unsettling the settled issue regarding the benchmark consumption and the 

reference period unless the party was afforded an opportunity of hearing whereby 

the issue was sought to be reopened. It is submitted that as the matter relates to 

amendment of the Tariff order affecting the people at large it could have been remanded 

to the Commission but it is against the cannon of justice and fair play that the 

Commission’s order since modified by the Tribunal should be made applicable to 

the Appellant. Neither the Tribunal who heard the Appeal considered it proper to 

issue a public notice to all the concerned consumers nor the Commission did rise 

from its slumber. Way back in the year 2006, the Appellant Company achieved the 

consumption of 70 per cent of the contract demand in June 2006 and units consumed 

in the month of June 2006 was Rs. 16.48 crore; and now by implementation of 

Tribunal’s order dated 12 th May, 2008 in the matter of Eurotex, the benchmark 

consumption is sought to be reduced, and consequently demand was made which 

is against the interest of the Appellant and the consequent additional burden of 

Rs. 14.38 crore has been saddled upon it unjustly. The Tribunal’s order directing 

the MSEDCL to refund the amount of energy charges and other incidental charges 

on the basis of the benchmark fixed as per the Tariff order dated 18 th May, 2007 

cannot be made applicable to other consumers without any notice and that too with 

retrospective effect against the law laid down by the Supreme Court in several cases 

which is to the effect that any order involving commercial implications cannot be 

levied with retrospective effect. The goods manufactured by the Appellant during 

the relevant period have been sold to the consumers, and accounts in respect of the 

relevant financial year have also been closed. The electricity charges are a major 

component of the production and it affects all the commercial and financial position 

and viability of the manufacturing units. Hence, the demand is legally unsustainable. 

1 Ed.: MANU/SC/0472/1998: 1998 V AD (SC) 556: AIR 1998 SC 2546: 1998 (4) ALLMR (SC) 

320: JT 1998 (5) SC 311: 1998 (4) SCALE 356: (1998) 3 SCR 972 

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25. The Respondent No. 1 begins its delivery of oral submissions with the question 

of jurisdiction of this Tribunal because of it having now become functus officio following 

the dismissal of the special leave petition by the Supreme Court that was preferred 

against this Tribunal’s order passed in Review Petition No. 5 of 2008 that arose out 

of the judgment and order in Appeal No. 135 of 2007. With respect to retrospectivity 

of operation of this Tribunal’s judgment in Appeal No. 135 of 2007, reference has 

been made by the Respondent No. 1 to Para 22 of the judgment whereby, direction 

has been made to the 1 st Respondent to refund and adjust the amount of energy 

charges and other incidental charges against future bills. It has been explained that 

the word “refund” used in Para 22 of the judgment of the Tribunal makes it explicit 

that the judgment was intended to be retrospective in operation; moreso, the Tariff 

orders under which ASC falls can have retrospective operation in respect of the 

relevant Tariff period. 

26. Thirdly, the question of applicability of the Tribunal’s judgment that modified 

the Commission’s order has been answered by the first Respondent with reference 

to the order of this Tribunal in the Review Petition which we shall presently see. 

The Appellant cannot be allowed to challenge this Tribunal’s order dated 

12 th May, 2008 before this Tribunal itself instead of seeking redressal of all its 

grievances before the Supreme Court. 

27. Fourthly, the Tribunal’s order dated 12 th May, 2008 was passed within the Tariff 

period of FY 2007-08. The Tariff order of the subsequent period i.e. 2008-09 was 

issued on 20 th June, 2008 and was effective from 1 st June, 2008. Therefore, the Tariff 

period having been very much in operation when the order modifying the Tariff 

order was issued, the Appellant is precluded from taking the defence that the modified 

Tariff order could not be enforced against it. Further, estoppel against the judgment 

of the Tribunal is not legally permissible. 

28. Lastly, it is brought to the notice of the Tribunal that the Appellant has acquiesced 

to the revision of the Tariff order and has paid the revised charges. Subsequent to 

the first clarification issued by the Commission on 24 th August, 2007, the first 

Respondent raised a bill claiming additional amount from the Appellant who without 

demur paid the bill for. 

29. There has been no contribution from the Commission in this matter as none 

appeared for the Commission. 

30. Whatever we have in our minds on the legal points raised by the Appellant, we 

do not think that we have had much to say in the matter. As indicated in the 

preceding paragraph of the judgment, the concept of introduction of additional 

supply charge rests on the premise that the industry getting power during load 

shedding is to pay such additional charge because costly power is procured to 

mitigate its load shedding. Attack is not made against the theoretical premise but is 

against the working out of the modalities for implementation of the theory. 

To recapitulate: 

(a) History of evolution of determination of the benchmark of the consumption 

vis-à-vis the reference period for the purpose of working out the quantum of 

additional supply charge traced out to the first order dated 18 th May, 2007 

which as contained in Para 7.4 is retention of the provision of benchmarking 

the current consumption levels against the monthly average of consumption 

during January 2005 to December 2005 while billing the additional supply 

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charge to the consumers. Clause (g) of the Para 7.4 which is relevant for the 

purpose of disposal of appeal is: 

Clause (g) in case of consumers whose sanctioned load/contract demand 

had been duly increased after the billing month of December 2005, the 

reference period may be taken as the billing period after six months of 

the increase in the sanctioned load/Contract Demand or the billing period 

of the month in which the consumer has utilised at least 75 per cent of 

the increased sanctioned load/Contract Demand, whichever is earlier. 

The other clauses of this para are not of so much relevance for the purpose of 

disposal of the appeal. However, the order dated 18 th May, 2007 continued to 

say, in essence, that the ASC will be levied on the share of costly power 

consumption so specified in the order subject to the comparison of monthly 

consumption with the consumption in the reference period. 

(a) The first amendment of the order dated 18 th May, 2007 which is called 

otherwise a clarificatory order dated 24 th August, 2007 as it relates to 

Clause (g) of Para 7.4 of the order dated 18 th May, 2007 is as follows: 

The Commission is further of the opinion that increase in Contract 

Demand will be sought only when there is a significant increase in 

scale of operations, and hence, clarifies that Clause (g) of the order 

reproduced above, will be applicable only in cases, where the increase 

in Contract Demand is equivalent to 25 per cent or more of the Contract 

Demand during the reference period from January 2005 to December 2005. 

in case of change in contract Demand during the above reference period, 

then the Contract Demand during December 2005 will be considered 

as the reference Contract Demand, for operationalistion of this 

clarification. The Commission further clarifies that in case the Contract 

Demand is reduced subsequent to increase of Contract Demand, such 

that the revised Contract Demand is less than 25 per cent higher than 

the original Contract Demand, during the reference period, then this 

clause will not be operative for such consumers, and the reference 

consumption during January to December 2005 will be applicable 

(e.g. CD during January to December 2005 = 100 kVA; CD increased 

during May 2006 = 200 kVA; Current CD=120 kVA; reference period 

is average monthly consumption during January to December 2005. 

(b) The Second clarificatory order dated 11 th September, 2007 again clarifies 

by reiteration of the Clause (g) (ibid) is thus: 

Clause (g) of the Order reproduced above will be applicable only in 

cases, where the increase in Contract Demand is equivalent to 

25 per cent or more of the Contract Demand during the reference 

period from January 2005 to December 2005... 

Thereafter, the Commission made certain clarifications what we have 

noted at Pages 8 to 11 of the judgment. 

(c) The Third clarificatory order provides that the abovementioned 

clarifications are applicable for determination of reference period in cases 

where contract demand has increased during the period from January 2005 

to December 2005 vis-à-vis contract demand in January, 2005. 

31. Consequent upon dismissal of the application of M/s. Eurotex, the Clause (g) at 

it originally stood and as it came to be clarified from time to time got its seal of 

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approval by this Tribunal in connection with Eurotex’s being Appeal No. 135 of 2007 

by modification that in the case of consumers whose sanctioned load/contract demand 

increased after December 2005, the reference period has to be reckoned as the billing 

period six months after such increase and the sanctioned load/contract demand or 

the billing period would be six month after the consumer utilised atleast the same 

ratio of energy consumption as percentage of increase of contract demand which 

was recorded prior to the increase in sanctioned load/contract demand. 

32. Noticeably, there is direction of the Tribunal to the MSEDCL to refund and 

adjust the amount against future billings on the basis of benchmark units fixed in 

June 2006. It is true that the Appellant was not a party nor it could be heard in any 

of the cases namely 26 of 2007, 65 of 2006, 28 of 2007 and Appeal No. 135 of 2007 

but the fact remains that the order dated 18 th May, 2007 passed in Case No. 65 

of 2006 whereby, ARR and MYT of the MSEDCL was disposed of came to be effective 

in the manner as laid down in the succeeding three clarificatory orders with 

retrospective effect. The modifications made by this Tribunal is, as the order itself 

shows retrospective. This Tribunal’s judgment does not reveal that modification of 

the original Clause 7.4. (g) is only confined to M/s. Eurotex and this position was 

made further clear when Maharashtra State Electricity Distribution Co., Respondent 1 

herein filed a review petition under Review Petition No. 5 of 2008 where this Tribunal 

by order dated 30 th April, 2009 held as follows: 

With reference to the Points (c) and (d) above, it is to be emphasised that since 

the criterion for determining the Reference Period has to apply uniformly to all 

industries with distinctive business, it is bound to be broad-based taking into 

account the requirements of all sectors. The Commission has decided the 

Reference Period considering the requirements of various industries in its order 

dated 18 th May, 2007 and its first clarificatory order, inter alia, for Seasonal 

Industries; Units under lock out/strike; Consumers availing captive generation 

facilities; Wind generation and New Industries. We are of the view that that 

the aforesaid decisions were reached as a result of Prudence Check/due-diligence 

process undertaken by the Commission. The formulation of 7.4 (g) in the instant 

case and modifying it by clarificatory orders is evident enough for the produce 

check undertaken by the Commission. Thus, in the instant case finalising the 

Reference Period being the billing period six-months after the increase in contract 

demand has resulted due to prudence check by the Commission. 

33. This Tribunal was clearly of the view that criterion for determination of reference 

period has to apply uniformly to all the industries. This view having been taken 

already by this Tribunal, it is not permissible for us to re-open the points raised by 

Mr. Umapathy; howsoever, force he may have in his arguments and the appropriate 

remedy for the Appellant would have been to move to the Hon’ble Supreme Court. 

Read between lines of memorandum of Appeal as also the written submission filed 

in connection therewith it appears that the Appellant virtually has to attack before 

us against what has been said by this Tribunal earlier. Retrospectivity is germane 

in all the Commission’s order and is also so in this Tribunal’s order as aforesaid; 

and sans retrospectivity such orders would be rendered inherently meaningless. 

34. Accordingly, we hold the appeal as being not maintainable. 

The Appeal is dismissed without cost. 

0821 


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0822 


2011 ELR (APTEL) 0822* 



Punjab State Electricity Board, Patiala 

v. 

Punjab State Electricity Regulatory Commission, Chandigarh 


DECIDED ON: 04.03.2011 

Coram 




Whether State Commission was right in disallowing balance 54 MUs as metered 

sales for deciding the energy balance on truing up for the earlier Tariff period 2005-2006? 

Held, in the metered sales, the Appellant included 116 MUs of energy on account of 

theft. The revenue on this account had been depicted at Rs. 22.17 crores but this figure 

was not compatible with the average energy realisation from the sale of energy from 

the concerned categories. State Commission has worked out the equivalent sale of 

energy on this account as 62 MU and has accordingly, amended figures relating to 

the metered sales on proportionate basis. This calculation cannot said to be unjustified 

as the Appellant has not been able to furnish any details to justify its claim. 

Whether State Commission was right in changing the basis of computation of coal 

consumption? 

Held, in the State Commission’s Tariff Regulations notified on 21 st November, 2005, 

it was decided to follow the norms as per Central Commission’s Regulations. According 

to the Regulation 22 of Central Commission Regulations the quantum of fuel is to be 

calculated on the Gross Calorific Value (GCV) of fuel “as fired” and not the Net 

Calorific Value (NCV). State Commission has correctly used the GCV of Coal “as 

fired” and gross station heat rate norms as per the Central Commission to calculate 

the consumption of coal. 

Whether State Commission was right in not allowing relaxation in heat rate to 

2666.67 Kcal/kWh as claimed by the Appellant in respect of Guru Govind Singh Super 

Thermal Power Station (GGSSTP) due to higher heat rate of 2 out of 6 units without 

valid reasons? 

Held, State Commission has approved station heat rate at 2,500 kcal/kWh for GGSTPS 

and GHTP in accordance with Central Commission norms. We also find that adequate 

justification for relaxation of heat rate norms in case of two units of GGSTPS has 

been given by the Appellant. Even though the Central Commission has not specified 

any norms for the units installed at GNDTP, the State Commission allowed station 

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PSEB, Patiala v. Punjab State Electricity Regulatory Commission, Chandigarh 


heat rate at 3,000 kcal/kWh i.e at par with Tanda Thermal Station of NTPC. State 

Commission allowed higher norms for GNDTP as allowed earlier by the Central 

Commission for Tanda for 2007-08. So, this fixation of station heat rate is 

perfectly valid. 

Whether State Commission was right in determining the transmission and distribution 

losses at 19.5 per cent as against 22 per cent as claimed by the Appellant for the year 

2007-08? 

Held, State Commission has accepted that there can only be a gradual reduction of 

such losses after substantial investments to improve the transmission and distribution 

system in addition to comprehensively drawing up base line data, introduction of 

energy audit at all levels and enforcing accountability where loss exceeds the 

prescribed limits. Appellant failed to take steps to initiate series of measures that 

would bring down the technical and commercial losses. State Commission was 

justified in retaining the loss level at 19.50 per cent as earlier prescribed. 

Whether the State Commission was right in allowing a sum of Rs. 1,661.41 crores as 

employees cost? 

Held, State Commission had referred to the Tribunal orders and applied the principles 

contained in the Tribunal’s order for fixing the employees cost. State Commission 

found that no worthwhile measures were adopted by the Board to reduce the 

employees cost during the year in question. Even the voluntary retirement scheme 

which has been suggested by the Tribunal was not adopted. Relying on IEL v. Punjab 

State Electricity Commission), State Commission has approved Rs. 1,661.41 crores as 

employees cost for the year 2007-08. There is nothing wrong in this finding. 

Whether State Commission was right in not allowing incentives for generation above 

the target Plant Load Factor/Availability? 

Held, State Commission had considered the Plant Load Factor of the generation and 

has come to the conclusion that the average generation of all generators has been 

lower than the average of the target Plant Load Factor and hence the incentive was 

not awarded. Finding of State Commission upheld. 

Whether State Commission was right in not allowing prior period expenses relating 

to Financial Year 2005-2006? 

Held, State Commission had explained for the disallowance of the prior period 

expenses of Rs. 8.66 crores on the ground that prior period expenses relating to the 

period for which it remained capped cannot be allowed. 

0823 


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SIEL v. Punjab State Electricity Commission MANU/ET/0024/2006: 2007 ELR (APTEL) 

931 (Affirmed) [p. 0828, para 31 c] 


Electricity Act, 2003, Section 62 [p. 0824, para 4 e] 


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Punjab State Electricity Regulatory Commission (Terms and Condition for 

Determination of Tariff) Regulations, 2005, Regulation 22 [p. 0827, para 24 b] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Swapna Seshadri and 

Anand K. Ganeshan, Advs. 

For Respondent(s)/Defendant: Sakesh Kumar, Adv. 

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JUDGMENT 


1. Punjab State Electricity Board is the Appellant herein. The Punjab State Electricity 

Regulatory Commission is the Respondent. 

2. The Appellant has filed this Appeal challenging the order dated 17 th September, 2007 

passed by the State Commission determining the Annual Revenue Requirement 

and the Tariff for the Financial Year 2007-08 and their truing up for the FY 2005-06 

and review for the Financial Year 2006-2007. The facts are as follows: 

3. The Appellant, Punjab State Electricity Board is a deemed licensee for the electricity 

transmission and distribution in the State of Punjab. The Appellant also undertakes 

generation of electricity besides these activities. 

4. In terms of Section 62 of the Electricity Act, 2003, the State Commission determines 

the Tariff for various activities of the Appellant. By the order dated 14 th June, 2005, 

the State Commission decided on the revenue requirement and Tariff for the Tariff 

period 2005-2006. Subsequently, by the order dated 10 th May, 2006, the State 

Commission passed another order for the Tariff period 2006-2007. 

5. On 21 st November, 2005, the State Commission framed the Punjab State Electricity 

Regulatory Commission (Terms and Condition for Determination of Tariff) 

Regulations, 2005. In terms of the above Tariff regulations, the Appellant was required 

to file the Petition for the determination of the revenue requirement and Tariff for 

the Financial Year 2007-2008 by 30 th November, 2006. The Appellant sought extension 

of time to file the said petition. However, the State Commission refused to extend 

the time and directed the Appellant to furnish the details relating to revenue 

requirement of the Appellant. 

6. Accordingly, the Appellant filed the details for the various activities of the 

Appellant for the period from 1 st April, 2007 to 31 st March, 2008 and also for the 

true up/revision exercise to be undertaken for the previous year 2005-2006 and 

2006-2007. Based on these details, the State Commission assessed the revenue 

requirement of the Appellant for the Tariff period 2007-2008. Then the State 

Commission invited suggestions from the public for deciding revenue requirement 

for the Tariff year 2007-2008. 

7. Accordingly, by the order dated 17 th September, 2007, the State Commission decided 

the revenue requirement and Tariff for the year 2007-2008 and determined the Tariff 

in respect of its activities namely the transmission, distribution and retail supply of 

electricity. Through the said order, the State Commission has also undertaken the 

truing-up/revision exercise of the finances of the Appellant for the previous years 

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2005-06 and 2006-2007. Aggrieved by the said order dated 17 th September, 2007, the 

Appellant has filed this Appeal. 

8. The Learned Counsel for the Appellant has raised the following issues: 

(a) Metered Energy Sales for the earlier Tariff period 2005-2006. 

(b) Computation of coal consumption. 

(c) Station Heat Rate for two units of 210 MW each at Guru Gobind Singh 

Super Thermal Power Station. 

(d) Transmission and distribution losses. 

(e) Employees cost. 

(f) Non-allowance of incentives for generation above the target Plant Load 

Factor/Availability. 

(g) Disallowance of prior period expenses relating to Financial Year 2005-2006. 

9. In respect of the first issue relating to metered energy sales, it is submitted by the 

Appellant that they detected theft of electricity during 2005-06 and included metered 

energy sales on this account for 116 MUs and also revenue from such sale of 

Rs. 22.17 crores. However, the State Commission considered only the quantum of 

62 MUs in the quantum of metered sales in the true up for FY 2005-06 even though 

the Appellant made full disclosures regarding the actual theft detected and the 

actual realisation. The State Commission, on the other hand, accounted for revenue 

of Rs. 22.17 crores in the true up. Therefore, the State Commission ought not to have 

disallowed the balance 54 MUs as metered sales for deciding the energy balance on 

truing up. 

10. The next issue is computation of coal consumption. 

11. The Learned Counsel for the Appellant submitted that the State Commission in 

the process of truing up for the Financial Year 2006-2007 changed the basis of 

computation of coal consumption and cost thereof from the Net Calorific Value 

allowed by the State Commission in the Tariff order for the Financial Year 2006-2007 

to Gross Calorific Value in the review. For Tariff period 2007-08 also Gross Calorific 

Value has been used for computing coal consumption. The State Commission has 

changed their computation of coal consumption from Net Calorific Value to Gross 

Calorific Value only on the basis that the same is followed by the Central Commission. 

12. Next issue is State Heat Rate. 

13. According to the Appellant, the State Commission had not allowed the Station 

Heat rate as claimed by the Appellant at 2,666.67 Kcal/kwh considering the status 

of two units at Guru Govind Singh Super Thermal Power Station (GGSSTP) which 

are more than 22 years old and the State Commission has mechanically followed 

the norms laid down by the Central Commission without considering the fact that 

the power stations are very old. Therefore, the State Commission ought to have 

allowed relaxation of operating parameters. 

14. Next issue relates to the Transmission and Distribution losses. It is contended 

by the Appellant that the State Commission has determined the transmission and 

distribution losses of the Appellant at the level of 19.5 per cent as against 22 per cent 

claimed by the Appellant for the Financial Year 2007-08 and while considering the 

past record of the Appellant inconsistently reduced the transmission and distribution 

losses over the years. The State Commission ought to have allowed the entire 

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transmission and distribution loss at the level of 22 per cent as claimed by the 

Appellant. 

15. The next issue is employees cost. 

16. According to the Appellant, the Appellant has claimed Rs. 1973 crores as 

employees cost and the State Commission has merely allowed the employees cost 

for a sum of Rs. 1661.41 crores on the ground that the Appellant is not entitled to 

any increase in the employees cost unless the productivity is increased. This was 

done without considering the fact that the increase in the employees cost was due 

to the factors not within the control of the Appellant. Therefore, the employees cost 

which is in the nature of a standard cost can not be disallowed. 

17. Next issue is non allowance of incentive for generation over the target Plant 

Load Factor/Availability. The Appellant has submitted that the State Commission, 

after applying the operating norms and parameters for the generating stations has 

however failed to provide any incentive over and above the target value for recovery 

of the full fixed cost for any generation over and above the target Plant Load 

Factor/Availability. It is well accepted and universally followed practice to allow 

for incentive on generation above target availability. Absence of any incentive would 

result in the generating station not requiring or having any gain in generating any 

electricity over the target availability where the full fixed cost is recovered. Therefore, 

the incentive beyond the target Plant Load Factor/Availability, being a component 

of Tariff under the Central Regulation, ought to have been allowed. 

18. The next issue is disallowance of prior period expenses relating to Financial 

Year 2005-2006. According to the Appellant, the State Commission has disallowed 

prior period charges relating to the employees cost of Rs. 8.66 crores to the Appellant 

in the truing-up for the year 2005-2006 on the ground that the Appellant failed to 

provide the period to which such employees cost related to without considering the 

audited accounts produced by the Appellant relating to prior period accounts. 

19. In reply to the above submissions, the learned Counsel for the State Commission 

would justify the impugned order by pointing out various reasons given in the 

impugned order on those issues. 

20. On these issues, we have heard the Learned Counsel for the parties and carefully 

considered the same. 

21. The first issue is relating to metered energy sales. The grievances of the Appellant 

is that the State Commission allowed in respect to the quantum of 62 MUs and not 

the quantum of 116 MUs which were computed on account of detection of theft. 

22. In the metered sales, the Appellant included 116 MUs of energy on account of 

theft. The revenue on this account had been depicted at Rs. 22.17 crores but this 

figure was not compatible with the average energy realisation from the sale of energy 

from the concerned categories. Under those circumstances, the State Commission 

has worked out the equivalent sale of energy on this account as 62 MU and has 

accordingly amended figures relating to the metered sales on proportionate basis. 

This calculation cannot said to be unjustified as the Appellant has not been able to 

furnish any details to justify its claim. 

23. The next issue is of computation of coal consumption. The grievance of the 

Appellant is that the State Commission in the process of review for the Financial 

Year 2006-2007 and in determining Tariff for FY 2007-08, changed the basis of 

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computation of coal consumption from the Net Calorific Value to Gross Calorific 

Value (GCV). 

24. In the State Commission’s Tariff Regulations notified on 21 st November, 2005, it 

was decided to follow the norms as per Central Commission’s Regulations. 

As contended by the learned Counsel for the Commission, the base of this decision 

in this regard is Regulation 22 of the Central Commission Regulations. According 

to the said Regulation, the quantum of fuel is to be calculated on the Gross Calorific 

Value (GCV) of fuel “as fired” and not the Net Calorific Value (NCV) and such 

being the case, the State Commission which has to be guided by the Central 

Commission Regulations, has correctly decided the issue. The State Commission 

has correctly used the GCV of Coal “as fired” and gross station heat rate norms as 

per the Central Commission to calculate the consumption of coal. This point is 

answered accordingly. 

25. The next issue is regarding Station Heat Rate. In respect of issue, the Appellant’s 

contention is that the State Commission did not allow relaxation in heat rate to 

2,666.67 Kcal/kWh as claimed by the Appellant in respect of Guru Govind Singh 

Super Thermal Power Station (GGSSTP) due to higher heat rate of 2 out of 6 units 

without valid reasons. 

26. It is noticed that the Central Commission laid down norms of gross station heat 

rate for coal based thermal power generating station as given in table No. 4.15 of 

the impugned order. On the above basis, the State Commission has approved station 

heat rate at 2,500 kcal/kWh for GGSTPS and GHTP in accordance with Central 

Commission norms. We also find that adequate justification for relaxation of heat 

rate norms in case of two units of GGSTPS has been given by the Appellant. Even 

though the Central Commission has not specified any norms for the units installed 

at GNDTP, the State Commission allowed station heat rate at 3000 kcal/kWh i.e at 

par with Tanda Thermal Station of NTPC. Considering the above scenario, the State 

Commission allowed higher norms for GNDTP as allowed earlier by the Central 

Commission for Tanda for 2007-08. So, this fixation of station heat rate is 

perfectly valid. 

27. The next issue is Transmission and Distribution Losses. According to the 

Appellant, the State Commission determined the transmission and distribution losses 

at 19.5 per cent as against 22 per cent as claimed by the Appellant for the year 

2007-08. 

28. This issue has been considered by the State Commission in its previous orders. 

Having determined the losses to be 27.52 per cent in the year 2001-02 the State 

Commission had laid down programme of phased reduction for the next six years 

down to 19.5 per cent in the year 2007-08. However, the Appellant has been unable 

to meet this target and losses for the year 2006-07 stood at 23.91 per cent which is 

now proposed to be reduced to 22 per cent by the Appellant. It is noticed that the 

Commission has accepted that there can only be a gradual reduction of such losses 

after substantial investments to improve the transmission and distribution system 

in addition to comprehensively drawing up base line data, introduction of energy 

audit at all levels and enforcing accountability where loss exceeds the prescribed 

limits. However, the Appellant on each occasion in the past assured to initiate 

series of measures that would bring down the technical and commercial losses but 

no such steps have been taken and the position remains the same level even as 

now. However, in view of the same, State Commission had no choice but to retain 

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the loss level at 19.50 per cent as earlier prescribed. Therefore, this finding also had 

been validly given by the State Commission. 

29. The next issue is Employees Cost. 

30. It is contended by the Appellant that though it has claimed Rs. 1973 crores as 

employees cost, the State Commission has allowed for only a sum of Rs. 1,661.41 crores. 

31. It is noticed that the State Commission has allowed reasonable cost in the Tariff 

order as fixed in the previous order after following the relevant regulation in this 

regard. As a matter of fact, the State Commission has referred to the Tribunal orders 

and applied the principles contained in the Tribunal’s order for fixing the employees 

cost. As a matter of fact, the Commission went by the materials placed by the Appellant 

before the State Commission and found that no worthwhile measures were adopted 

by the Board to reduce the employees cost during the year in question. Even the 

voluntary retirement scheme which has been suggested by the Tribunal was not 

adopted. In the above background that too on the basis of the principles laid down 

by this Tribunal in 2007 APTEL, 931 (SIEL v. Punjab State Electricity Commission), 1 

State Commission has approved Rs. 1,661.41 crores as employees cost for the year 

2007-08. There is nothing wrong in this finding. 

32. The next issue is non-allowance of incentive for generation over the Target Plant 

Load Factor/Availability Factor. 

33. According to Appellant, the State Commission has failed to provide any incentive 

over and above the target availability/Plant Load Factor fixed for recovery of full 

fixed cost for any generation over and above the target availability/PLF. 

34. In the present case, the State Commission has considered the Plant Load Factor 

of the generation and has come to the conclusion that the average generation of all 

generators has been lower than the average of the target Plant Load Factor and 

hence, the incentive was not awarded. The Appellant has also not furnished any 

material regarding its claim for incentive. 

35. On this issue, the State Commission has found that the average generation of all 

the generators has been lower than the average target Plant Load Factor and for that 

reason, the State Commission held that the Appellant is not entitled to any incentive. 

This finding is on the valid reason. 

36. The next issue is disallowance of prior period expenses. 

37. It is contended by the Appellant that the State Commission has disallowed the 

prior period expenses relating to employees cost of Rs. 8.66 crores in the truing up 

of 2005-06. On going through the impugned order it appears that the State Commission 

has explained for the disallowance of the prior period expenses of Rs. 8.66 crores 

on the ground that prior period expenses relating to the period for which it remained 

capped cannot be allowed. This finding also, in our view, is perfectly justified. 

38. Summary of our Findings 

(i) With reference to the metered energy sales, the revenue on this account 

have been depicted at Rs. 22.17 Crores but this figure was not compatible with 

the average energy realisation from the sale of energy in these categories. Under 

those circumstances, the State Commission has worked out the equivalent sale 

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of energy on this account as 62 MU and has accordingly, amended figures 

relating to metered sales on proportionate basis. This calculation is perfectly 

justified. 

(ii) With regard to the fact that the State Commission in the process of truing 

up has changed the basis of computation of coal consumption from the net 

Calorific Value to Gross Calorific Value the State Commission has followed 

the Regulation 22 of the Central Commission. According to the Commission, 

for determining the terms and conditions of Electricity Tariff, the quantum of 

fuel is to be calculated on the Gross Calorific Value of coal “as fired” and not 

the Net Calorific Value. The State Commission which has adopted the norms 

of the Central Commission in its Regulations has correctly decided the issue. 

The State Commission has correctly calculated the coal consumption considering 

the GCV of coal “as fired” and Gross Heat Rate of the station as per the 

Regulations. 

(iii) With respect to the issue relating to the Station Heat Rate, the Central 

Commission has laid down the norms of gross station heat rate for the coal-based 

thermal power generation station. On the above basis, the State Commission 

approved the rates in accordance with the Central Commission norms. Even 

though the Central Commission has not specified any norms for the capacity 

of units installed at GNDTP, the State Commission allowed station heat rate 

at par with Tanda Thermal Station of NTPC as decided in the Central 

Commission’s norms. So this fixation of heat rate is valid. 

(iv) With regard to the issue relating to Transmission and Distribution Losses, 

it is noticed that the Station Commission found that the Transmission and 

Distribution Losses for the year 2001-02 was as high as 27.52 per cent. 

Accordingly, the State Commission had laid down a programme of the phased 

reduction for the next six years, which if the Board had adhered to could have 

brought down the losses to 19.5 per cent in the year 2007-08. However, the 

Board had not taken enough steps to reduce the losses. Therefore, the State 

Commission retained the Transmission and Distribution loss level at 

19.5 per cent. 

(v) The State Commission has allowed employees cost for Rs. 1,661.41 crores 

taking into consideration the principle laid down by this Tribunal. The State 

Commission went by the materials placed by the Appellant before it and found 

that no worthwhile measures were adopted by the Board to reduce the employees 

cost during the year in question. Even the voluntary retirement scheme which 

was suggested by the Tribunal was not adopted. Therefore, on the basis of the 

principle laid down by this Tribunal, the State Commission has approved 

Rs. 1,661.41 crores as employees cost for the year 2007-08. This finding is 

perfectly correct. 

(vi) With regard to non-allowance of incentive for generation over the target 

Plant Load Factor/Target Availability, the State Commission has considered 

the Plant Load Factor of the generation and has come to the conclusion that 

the average generation of all generators has been lower than the average of the 

target Plant Load Factor for this reason no incentive was awarded. The Appellant 

has also not furnished any material regarding its claim for incentive. This 

finding is, therefore, correct. 

(vii) With regard to prior period expenses, the State Commission has disallowed 

the prior period expenses relating to cost of Rs. 8.66 crores in the truing up of 

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the 2005-06. Valid reasons have been given by the State Commission by stating 

that the prior period expenses relating to the period for which it remained 

capped can not be allowed. 

39. In view of our above findings, we conclude that there is no merit in the Appeal. 

Accordingly, the Appeal is dismissed. However, there is no order as to cost. 

2011 ELR (APTEL) 0830* 



Madhya Pradesh Power Generation Company, Jabalpur 

v. 

Madhya Pradesh State Electricity Regulatory Commission and Ors. 


DECIDED ON: 21.04.2011 

Coram 



Whether the State Commission was justified in changing the methodology of calculation 

of coal consumption and cost of coal at the time of truing-up of the finances as 

compared with methodology adopted at the time of initial Tariff order? 

Held, the State Commission correctly worked out the cost of coal taking into account 

the Station Heat Rate and Gross Calorific Value of coal according to the Tariff 

regulations. In the main Tariff order, the State Commission had adopted Net Calorific 

Value contrary to the Regulations while adopting the Station Heat Rate according 

to the Regulations without even indicating that it was deviating from the Regulations 

and without giving any justification for deviation from the Regulations. In the true 

up order, the State Commission corrected the error committed in the main order. 

Incorrect application of the Regulation in main order cannot be perpetuated in the 

true up order. 

Whether the State Commission was justified in not allowing the employees cost for 

the common expenditure on employees incurred by the State Electricity Board to the 

share of the Appellant? 

Held, the State Commission has already passed orders with respect to common 

expenses including the employees cost in the main Tariff order dated 7 th March, 2006. 

This order has not been challenged and has attained finality and cannot be interfered 

with in this Appeal which is confined to the impugned order dated 17 th June, 2009. 

Whether the State Commission was justified in not revising the normative interest on 

working capital pursuant to the revision in various elements of Tariff occasioned on 

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by the truing-up of the finances of the Appellant for the Tariff year 2006-07 on account 

of the coal cost and common expenses ? 

Held, question related to interest on working capital due to increase in cost of fuel 

and common expenses of the Electricity Board, in view of findings on the cost of fuel 

and common expenses of the Electricity Board, the Appellant was held to be not 

entitled to any increase in the interest on working capital. 


Madhya Pradesh Power Generation Company, Jabalpur v. MPSERC and Ors. 



North Delhi Power Ltd. v. DERC and Ors. MANU/ET/0022/2007: 2007 ELR (APTEL) 

193 (Mentioned) [p. 0837, para 23 f] 


Madhya Pradesh Electricity Regulatory Commission (Conduct of Business 

Regulations), 2004 [p. 0836, para 18 d] 

Madhya Pradesh State Electricity Regulatory Commission (Terms and Conditions 

for determination and generation of Tariff) Regulations, 2005 

Regulation 13 [p. 0837, para 22 b] 

Regulation 36 [p. 0836, para 20 f] 

Regulation 42 [p. 036, para 19 e] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Sneha Venkataramani, 

Ranjitha Ramachandran and Swapna Seshadri, Advs. 

For Respondent(s)/Defendant: S. Ravi Shankar, Yamunah Nachair, Surbhi Sharma, 

Ashok Upadhyay, Garima Goswami, Anurag Sharma, A.Dvivedi, Praveen Jain, 

Gajendra Tiwari, Sanjay Sen, Sikha Ohri, Subhalakshmi and Gunjan Gupta, Advs. 


“The State Commission has correctly worked out the cost of coal taking into account 

the Station Heat Rate and Gross Calorific Value of coal according to the Tariff 

regulations.” 

JUDGMENT 


1. Madhya Pradesh Power Generation Company Ltd. is the Appellant. Madhya 

Pradesh State Electricity Regulatory Commission (State Commission) is the first 

Respondent. Other Respondents are Trading Company, Transmission Company 

and Distribution Companies. 

2. Having aggrieved over the impugned order dated 17 th June, 2008 passed by the 

Madhya Pradesh State Electricity Commission, truing-up the finances of the Appellant 

for the Tariff year 2006-07, the Appellant has filed the present Appeal. The relevant 

facts are as follows: 

(i) The Appellant is a generating Company. The Appellant, in addition to 

generation operates and manages some capacity which belongs to some other 

States. The Respondent No. 2 M.P. Power Trading Co. Ltd. is engaged in the 

business of bulk purchase and bulk sale of electricity. Respondent No. 3, 4 

0831 


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and 5 are the Distribution Licensees. The Appellant and Respondents No. 2 to 

6 are all entities, which have succeeded to the function of State Electricity 

Board, pursuant to the reorganisation of the said Board. 

(ii) The State Commission in the year 2005, framed Tariff regulations namely 

“MP State Electricity Regulatory Commission (Terms and Conditions for 

determination and generation of Tariff) Regulations, 2005” in regard to Tariff 

determination of the generating Companies like the Appellant. 

(iii) In accordance with the said Regulations, the Appellant filed a Petition 

being No. 149 of 2005 before the State Commission on 23 rd January, 2006 for 

determination of multi-year generation Tariff for the control period 2006-07 to 

2008-09. In the said petition, the State Commission by the order dated 

7 th March, 2006, issued a multi year Tariff order for the above control period. 

(iv) After the closure of the financial year 2006-07 and after the accounts of the 

Appellant have been audited, the Appellant filed a Petition being No. 56 of 

2008 on 31 st July, 2008 for truing-up of the generation Tariff for the financial 

year 2006-07. The State Commission after observing the formalities, passed the 

impugned order dated 17 th June, 2009, deciding the said Petition. In the said 

order, the State Commission did not allow truing-up of the financials in respect 

of some of the claims. Hence, the Appellant filed a review Petition RP No. 40/2009 

on 13 th August, 2009 before the State Commission. However, the State 

Commission dismissed the said petition by the order dated 10 th November, 2009 

holding that there are no valid grounds for review. 

(v) Aggrieved by the main impugned order dated 17 th June, 2009, the Appellant 

has now filed this present Appeal. 

3. The learned Counsel for the Appellant has raised the following grounds as against 

the impugned order: 

(i) The main MYT Tariff order was passed on 7 th March, 2006. In that order, the 

State Commission proceeded on the basis of the Net Calorific Value for the Tariff 

determination and adjustments of variable charges. But strangely, in the truingup 

of the order dated 17 th June, 2009, the State Commission proceeded on the 

basis of the Gross Calorific Value. This change of methodology is utterly wrong. 

(ii) The expenses on account of common service payable to State Electricity 

Board amounting to Rs. 13.81 crores have been disallowed. 

(iii) Normative interest on working capital on account of above disallowance 

of coal cost and common expenses payable to the Electricity Board towards 

the employees cost has also been disallowed. 

4. In reply to the above, the learned Counsel for the State Commission argued in 

detail contending that disallowance on these claims by the State Commission is 

perfectly justified. 

5. In the light of the rival contentions, the following questions of law may arise for 

consideration in the present Appeal: 

(i) Whether the State Commission is justified in changing the methodology of 

calculation of coal consumption and cost of coal at the time of truing-up of the 

finances as compared with methodology adopted at the time of initial Tariff order? 

(ii) Whether the State Commission is justified in not allowing the employees 

cost for the common expenditure on employees incurred by the State Electricity 

Board to the share of the Appellant? 

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(iii) Whether the State Commission is justified in not revising the normative 

interest on working capital pursuant to the revision in various elements of 

Tariff occasioned on by the truing-up of the finances of the Appellant for the 

Tariff year 2006-07 on account of the coal cost and common expenses ? 

6. Let us now deal with these questions one by one. 

7. The first question relates to the change of methodology adopted by the State 

Commission at the time of truing up. According to the Appellant, the State Commission 

has changed the methodology for deciding on the coal quantum from the Net Calorific 

Value as adopted in the main Tariff order to Gross Calorific Value in the truing-up 

order, without any justification or without making corresponding adjustments in 

the Station Heat Rate, which is not permissible as per settled law. 

8. According to the State Commission, the Net Calorific Value is only approximation 

and since the Central Commission and other State Commissions, have been allowing 

coal cost on the basis of the Gross Calorific Value, the same stand had been adopted 

by the State Commission while allowing the coal cost in the truing-up order which 

is not wrong. 

9. Let us now look into the factual background for proper appreciation on this 

issue. The Electricity Boards had been following the determination of the variable 

cost/fuel cost on the Net Calorific Value basis. The variable cost including the 

variable cost adjustments for the Electricity board was being done by the State 

Commission on Net Calorific basis. 

10. In the above formula/methodology, as approved by the State Commission, the 

Heat Rate considered was based upon the Net Calorific Value. The above methodology 

was continued to be applied even after unbundling of the Electricity board and 

vesting of generation functions with the Appellant w.e.f 1 st June, 2005. 

11. The difference between Net Calorific Value and Gross Calorific Value is that the 

Net Calorific Value takes into account the latent heat used for converting latent 

moisture present in coal into vapor and is less than the Gross Calorific Value. 

The quantum of the coal required when calculated based upon Net Calorific Value 

is different from the quantum of the coal required when calculated based upon the 

Gross Calorific Value, in order to maintain the same Station Heat Rate. The Heat 

Rate can be described as the quantity of heat required to generate one unit of electrical 

energy and represented as Kilo Calories/Kilo Watt Hours. The Heat Rate, according 

to the practice followed by the State Commission is monitored by consumption 

method and calculated on the following basis: 

0833 

h 

Heat Rate 

 

⎡ 

⎢ 

⎣ 

(CV of coal quantity consumed) 

(CV of fuel oil quantity consumed) 

units generated 

⎤ 

⎥ 

⎦ 

i 

12. The coal used inherently contains some amount of physical moisture as well as 

the latent moisture which contribute in reducing the rate of heat generated upon 

firing the coal used in the plant as opposed to the amount of heat generated upon 

firing the said coal in laboratory conditions. The Gross Calorific Value corrected 

with total moisture of the coal takes into consideration the physical moisture as 

present in the coal. On the other hand, the Net Calorific Value takes into consideration 


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the latent moisture present in the coal, which is determined in specific laboratory 

only. Therefore, a difference of approximately 180-200 kCal/Kg in Calorific Value 

exists between the Gross Calorific Value and Net Calorific Value. 

13. Admittedly, the State Commission in the main Tariff order dated 7 th March, 2006 

had considered the Net Calorific Value for calculation of the coal cost. In that order, 

the State Commission has dealt with the determination of the energy charges for the 

thermal power stations. The State Commission in the said order after considering 

the transit loss decided to apply the Net Calorific Value instead of Gross Calorific 

Value. The relevant observations made vide the Tariff order dated 7 th March, 2006 

are as under: 

3.16 The Commission instead of GCV of coal considers NCV for computation 

of coal cost. NCV accounts for the loss of heat content on account of reasons 

mentioned by the Petitioner. 

14. According to the Appellant, the decision to base determination on Net Colorific 

Value basis for computation of coal cost was a conscious decision by the State 

Commission. In other words, the decision to base determination for computation of 

coal cost which was a conscious decision taken by the State Commission taking 

into consideration that no additional losses of heat content on account of stacking 

losses can be allowed. However, in the impugned order which is a truing up order, 

the State Commission has varied basis of the calculation of the coal cost from Net 

Calorific Value to Gross Calorific Value without taking into consideration adjustments 

of the heat rate. As a result, the quantum of coal allowed in the truing-up is lesser 

than the actual quantum of coal allowed and used in corresponding Tariff order. 

Correspondingly, the amount of coal cost allowed is lesser than the amount as 

allowed as per the Tariff order. According to the Appellant, this has resulted in a 

huge financial loss to the Appellant. 

15. In this context, the decision of the State Commission in the impugned order 

dated 17 th June, 2009 with regard to adoption of Gross Calorific Value for undertaking 

truing-up needs to be considered. The relevant observations in the impugned order 

is as follows: 

The Petitioner vide its Letter No. 07-12/CP-MPPGCL/MPERC/TU-FY07/107 

dated 9 th February, 2009 and in the subsequent meeting held with its Officers 

on 24 th February, 2009 at the Commission’s office, submitted that the details of 

calorific value of coal as mentioned in the true-up Petition are based on the 

existing method of determination of Calorific Value. MPPGCL further informed 

that the calorific value of coal mentioned in the true-up Petition for FY 2006-07 

for the Thermal Power Stations is GCV corrected to total moisture. MPPGCL 

has estimated the NCV from the above data as per empirical method provided 

in INDIAN STANDARD 1350 (Part II) – 1970 (1 st revision). MPPGCL has 

submitted the month wise/power house-wise summary of figures to the 

Commission. MPPCGL has also submitted the source data received from 

respective sites, in respect of daily coal analysis for the three power stations. 

In MYT generation regulation, Clause 3.13 indicates that the energy (variable) 

charges shall cover fuel cost and shall be computed on the basis of gross 

station heat rate and gross calorific value of primary fuel. 

2.27 Hence, the Commission concludes that the Calorific Value filed by the 

Petitioner in the Petition is Gross Calorific Value of Coal on as fired basis in 

Kcal/kg. The Commission has considered the same value in this true up exercise. 

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16. The learned Counsel for the State Commission during the course of hearing, has 

stated that the Regulations provided for calculation of the coal cost only on the 

basis of Gross Calorific Value but the State Commission by mistake had adopted the 

Net Calorific Value in the main Tariff order which has been rectified in the impugned 

order. Admittedly, the impugned order dated 17 th June, 2009 does not refer to this 

reason for rectification. 

17. As pointed out by the Learned Counsel for the Appellant it is only in the review 

order dated 10 th November, 2009 that the State Commission has stated that it had 

committed an error in the impugned order. The relevant extracts from the review 

order dated 10 th November, 2009 are as under: 

(a) The Commission has observed from the correspondence made with the Petitioner 

and also during the discussions held with the Petitioner that the Petitioner, in 

its true up petition, had mentioned only calorific value of the coal without 

specifying whether Gross Calorific Value (GCV) or Net Calorific Value (NCV). 

(b) The Commission while processing the true-up petition asked the Petitioner 

to clarify the issue. A meeting was also convened in the office of the Commission 

on 24 th February, 2009 with the senior officers of the Petitioner to find out 

correct information. The Petitioner during the course of the meeting had 

informed the office of the Commission that the calorific value of coal as mentioned 

in the true-up petition for FY 2006-07 is GCV corrected to total moisture. 

(c) It is further noted by the Commission that the Petitioner has neither claimed 

the NCV of coal in the true-up petition nor mentioned anywhere at anytime in 

its reply and discussions held on this issue right from the filing of the petition 

till the issue of the said true-up order. 

(d) The Commission has further drawn the attention of the Petitioner to the 

fact that the Commission’s Tariff order may be corrected in light of audited 

annual accounts and the provisions under the Regulations while truing up of 

that order. The provisions of the Regulations can be changed only through 

notification of its amendments or revision only after adopting a procedure 

specified by the Commission. 

(e) The Commission has also observed during the course of the motion hearing 

that the Petitioner had never challenged the provisions of MYT Regulations 

notified by the Commission for the control period FY 2007-08 to FY 2009-10. 

Even the Petitioner had not represented anything regarding the provisions of 

GCV of coal while issuing MYT Regulations for the new control period. 

18. Let us now examine the relevant Regulation 42 which is reproduced below: 

42. Energy Charges 

xxx xxx xxx 

(i) Rate of Energy Charges (REC) shall be the sum of the cost of normative 

quantities of primary and secondary fuel for delivering ex-bus one kWh of 

electricity in Rs/kWh and shall be computed as under: 

100 P 

p 

(Q 

p 

) 

n 

Ps 

(Q 

s 

) 

n REC 

(Rs./kWh) 

(100 (AUX ) 

Where, P p 

= Price of primary fuel namely coal or lignite or gas or liquid fuel in 

Rs./Kg or Rs./cum or Rs./litre, as the case may be. (Q p 

) n 

= Quantity of primary 

n 

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fuel required for generation of one kWh of electricity at generator terminals in 

Kg. or litre or cum, as the case may be, and shall be computed on the basis of 

normative Gross Station Heat Rate (less heat contributed by secondary fuel oil 

for coal/lignite based generating stations) and gross calorific value of coal/lignite 

or gas or liquid fuel as fired. 

P s 

= Price of Secondary fuel oil in Rs./ml, 

(Q s 

) n 

= Normative Quantity of Secondary fuel oil in ml/kWh as per clause 

36, as the case may be, and 

AUX n 

= Normative Auxiliary Energy Consumption as per cent of gross 

generation as per Clause 36, as the case may be. 

(ii) Adjustment of Rate of Energy Charge (REC) on account of variation in 

price or heat value of fuels 

Initially, Gross Calorific Value of coal/lignite or gas or liquid fuel shall be 

taken as per actuals of the preceding three months. Any variation shall be 

adjusted on month to month basis on the basis of average Gross Calorific 

Value of coal/lignite or gas or liquid fuel in stock, received and burnt and 

weighted average landed cost incurred by the generating company for 

procurement of coal/lignite, oil, or gas or liquid fuel, as the case may be for a 

power station. In its bills, generating company shall indicate rate of energy 

charges at base price of primary and secondary fuel specified by the commission 

and the fuel price adjustment to it separately. No separate petition needs to be 

filed with the Commission for fuel price adjustment. In case of any dispute, an 

appropriate application in accordance with Madhya Pradesh Electricity 

Regulatory Commission (Conduct of Business Regulations), 2004, shall be made 

before the Commission. 

19. It is clear from the Regulation 42 that quantity of coal has to be determined on the 

basis of Gross Station Heat Rate and Gross Calorific Value of coal. The Clause ii of 

the Regulation regarding adjustment of rate of energy charges on account of variation 

in price or heat value of fuel also clearly indicates that Gross Calorific Value of coal 

only has to be used for working out variation in price and heat value of fuel. 

20. The Regulation 36 also indicate Gross Station Heat rate for the power stations of 

the Appellant for the MYT control period from FY 2006-07 to 2008-09 as under: 

Gross Station Heat Rate (Kcal/kWh) 

Station FY 2007 FY 2008 FY 2009 

ATPS, Chachai-Complex 3573 3573 3573 

STPS, Sarni-Complex 2960 2926 2873 

SGTPS, Birshinghpur-Complex 2825 2800 2757 

The Regulations 2005 also define “Gross Calorific Value” and “Net 

Calorific Value” is not defined or mentioned anywhere in the Regulation. 

Thus, the Regulations provide for only Gross Calorific Value and the 

Gross Station Heat Rate corresponding to Gross Calorific Value. 

21. Strangely in the main order dated 7 th March, 2006 while the State Commission 

adopted the Station Heat Rate as per the Regulations as tabulated above, it considered 

Net Calorific Value of coal instead of Gross Calorific Value for determining the 

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quantity of coal and variable charges of coal. In this order, the State Commission 

also did not give any indication that it was deviating from the Regulations or gave 

any justification for deviating from the Regulations in adopting NCV instead of 

GCV. Therefore, in main Tariff order the State Commission did not apply the 

regulations correctly. However, the main Tariff order is not under challenge in the 

present Appeal. Other than recording that the State Commission has not been careful 

while deciding the main Tariff order, we cannot go into the matter any further, as 

far as the main Tariff order is concerned. 

22. Learned Counsel for the Appellant has referred to Regulation 13 regarding fuel 

cost adjustment indicating application of formula for VCA charges as per its order 

dated 29 th November, 2002. The formula specified in its order dated 29 th November, 2002 

is for recovery of additional charges for adjustment of Tariff on account of fuel 

related cost of electricity generation, differential power purchase cost, change on 

account of unpredicted and unforeseen cost not envisaged at the time of Tariff 

fixation. The approved formula is also subject to review from time to time as the 

State Commission may deem it fit. We notice that this formula was given in the 

order dated 29 th November, 2002 for adjusting the Tariff of the Electricity Board in 

its integrated functions. However, the order did not specify any station heat rate 

corresponding to Net Calorific Value. It also did not specifically state that Net Calorific 

Value is to be used in place of Gross Calorific Value. Therefore, the relevant regulations 

here are Regulation 42 giving clearly formula for determination of energy charges 

and adjustment of rate of energy charges on account of variation in price or heat 

value of fuel and Regulation 36 specifying the Gross Station Heat Rate. The Regulation 

only define Gross Calorific Value and Net Calorific Value is not indicated or defined. 

In our view the State Commission has correctly determined the quantity of coal and 

cost of fuel according to the Regulations taking both Gross Calorific Value of coal 

and Gross Station Heat Rate as per the Regulations. In our view if in the main order 

an error has been committed by the State Commission by not following the Regulations 

without assigning any reasons, the same error cannot be perpetuated and is required 

to be corrected in the true up. 

23. The learned Counsel for the Appellant cited judgment of this Tribunal in Appeal 

No. 100 of 2007 dated 4 th December, 2007 ELR (APTEL) 193 North Delhi Power Ltd. v. 

DERC and Ors. 1 In our view, this judgment is of no use to the Appellant as in the 

present order the State Commission has correctly done the true up as per the 

Regulations. Accordingly, we hold that the true up order is correct and according to 

the Regulations. Thus, this point is answered against the Appellant. 

24. According to the Appellant, in spite of the fact that employees cost which relates 

to the expenses of the Electricity Board were paid by the Appellant as per the Statutory 

notification of the State Government dated 31 st May, 2005 and 3 rd June, 2006, the 

State Commission disallowed the share of the Appellant which is not correct. 

According the to Respondent Commission, Clause 38 of the Madhya Pradesh 

Electricity Regulation Commission (Terms and Conditions for Determination of 

Generation Tariff) Regulations, 2005, provides the normative operation and 

maintenance expenses as per normative Basis and accordingly the State Commission 

has allowed the operation maintenance expenses as per the said regulations in the 

main Tariff order passed on 7 th March, 2006 which was never challenged by the 

Appellant and therefore, the findings on this aspect by the State Commission cannot 

be found fault with. 

1 Ed.: MANU/ET/0022/2007 

0837 


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25. As correctly pointed out by the learned Counsel for the State Commission, the 

MYT order dated 7 th March, 2006 contains detailed reasons for not allowing the common 

employees expenses separately by the State Commission. Admittedly, the Appellant 

has neither filed review petition before the State Commission nor preferred any Appeal 

before this Tribunal as against the disallowance of said common expenses as such it 

has attained finality. In the true-up order dated 17 th June, 2009, the State Commission 

allowed the actual operation and maintenance expenses which is said to be more 

than the normative operation maintenance expenses. The particulars are given below: 

Normative O&M expenses as per Regulation = Rs. 299 Cr. 

Actual O&M expenses allowed in true-up order = Rs. 315 Cr. 

Additional O&M expenses allowed in true-up order = Rs. 16 Cr. 

26. The reasons for not allowing the electricity board common expenses have been 

described in Para 3.20 (g) of the impugned order which is as follows: 

Para 3.20: The common expenses by MPSEB amounting to Rs. 13.81 crores are 

not allowed. The Commission had not been allowing these expenses to the 

Distribution Companies also since the erstwhile MPSEB had already been 

disintegrated into successor Companies and one of them has been entrusted 

with the responsibility of a Trading Company i.e. MP Power Trading Company 

27. In view of the above, we do not find any merit in this contention. Accordingly, 

this point is answered against the Appellant. 

28. The next question relates to interest on working capital due to increase in cost of 

fuel and common expenses of the Electricity Board. In view of our findings on the 

cost of fuel and common expenses of the Electricity Board, the Appellant is not 

entitled to any increase in interest on working capital. 

29. Accordingly, this point is answered against the Appellant. 

30. Summary of our Findings 

(i) The State Commission has correctly worked out the cost of coal taking into 

account the Station Heat Rate and Gross Calorific Value of coal according to 

the Tariff regulations. In the main Tariff order, the State Commission had 

adopted Net Calorific Value contrary to the Regulations while adopting the 

Station Heat Rate according to the Regulations without even indicating that it 

was deviating from the Regulations and without giving any justification for 

deviation from the Regulations. In the true up order the State Commission has 

corrected the error committed in the main order. Incorrect application of the 

Regulation in main order cannot be perpetuated in the true up order. 

Accordingly, this issue is decided against the Appellant. 

(ii) Regarding the common expenses including the employees cost, already 

orders have been passed by the State Commission in the main Tariff order 

dated 7 th March, 2006 which has not been challenged and as such the same 

has attained finality. This cannot be interfered with in this Appeal which is 

confined to the impugned order dated 17 th June, 2009 as above. 

(iii) In view of our above conclusion, the Appellant is not entitled to any 

increase in the interest on working capital. 

31. In the light of our above findings, the Appeal is dismissed. No order as to cost. 

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0839 

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2011 ELR (APTEL) 0839* 



BSES Rajdahani Power Limited., New Delhi 

v. 

Delhi Electricity Regulatory Commission and Santosh Gargya, New Delhi 


DECIDED ON: 19.04.2011 

Coram 



Whether it was mandatory upon the State Commission to issue and serve a 

Show Cause Notice on the person concerned with specific allegations while initiating 

the proceedings under Section 142 of Electricity Act, 2003 to enable him to give reply 

to those allegations? 

Held, a Show Cause Notice is the foundation on which the charge has to be built-up. 

Such Show Cause Notice should contain specific allegations. Failure in issuing 

Show Cause Notice in the penalty proceedings which is the mandatory procedure 

and the failure to give opportunity to the person concerned to meet those allegations 

would amount to the failure to follow the principles of natural justice. 

Whether the State Commission could find the Appellant guilty for the charge which 

is different from the charges framed by the State Commission? 

Held, the State Commission ought not to have found the Appellant guilty for the 

charge not framed without allowing the appellant to present its defence for the 

charge. The failure to follow this procedure is a serious violation of Principles of 

Natural Justice. The State Commission should have confined itself to the charges 

framed by the Commission and should not have travelled beyond the pleadings 

and the charges in question. 



Commissioner of Central Exercise v. Brindavan Beverages (P) Ltd. MANU/SC/2645/ 

2007: (2007) 5 SCC 388: 2007 (119) ECC 87: 2007 ECR 87 (SC): 2007 (213) ELT 487 

(SC): 2007 (8) SCALE 549: (2007) 7 SCR 1033 (Mentioned) [p. 0844, para 20 g] 

Karnataka Rare Earth and Anr. v. Senior Geologist, Department of Mines and Geology and 

Anr. MANU/SC/0057/2004: (2004) 2 SCC 783: (2004 (2) JCR 112 (SC): JT 2004 (2) 

SC 472: 2005 (1) KarLJ 168: 2004 (2) SCALE 1: (2004) 1 SCR 965 (Mentioned) 

[p. 0845, para 21 a] 

Uma Nath Pandey v. State of U.P. MANU/SC/0401/2009: AIR 2009 SC 2375: 2009 

(237) ELT 241 (SC): JT 2009 (4) SC 121: 2009 (1) OLR875: 2009 (1) OLR (SC) 872: 

i 

* MANU/ET/0052/2011 


97

0840 


2009 (4) SCALE 347: (2009) 12 SCC 40: (2009) 5 SCR 374: 2009 (3) UJ 1434 (SC) 

(Mentioned) [p. 0844, para 19 d] 

a 


Electricity Act, 2003, Section 142 [p. 0840, para 1 e] 


Commission’s Supply Code and Performance Standards Regulations, 2007, 

Regulations 52(viii) [p. 0840, para 3 f] 

Counsel 

For Appellant/Petitioner/Plaintiff: Harshvardhan, K. Datta, Manish Srivastava and 

Diggaj Pathak, Advs. 

For Respondent(s)/Defendant: Gayatri Verma, Sachin Datta, Anish Garg, Jt. Director 

and Mohan S. Gupta, Advs. 

b 

c 

JUDGMENT 


1. What is the Procedure to be followed by the Appropriate Commissions in the 

penalty proceedings under Section 142 of the Electricity Act, 2003? This question is 

dealt with in this judgment. 

2. BSES Rajdhani Power Limited is the Appellant. Delhi Electricity Regulatory 

Commission is the First Respondent. Smt. Santosh Gargya, the Complainant, is the 

Second Respondent. 

3. The State Commission, the first Respondent by the order dated 22 nd July, 2010, 

imposed penalty of Rs. 1,00,000 on the Appellant under Section 142 of the Electricity 

Act, 2003 for the violation of the Regulations 52(viii) of the Delhi Electricity 

Supply Code. Aggrieved by the same, the Appellant has filed this Appeal. 

4. The short facts are these: 

(i) The Appellant is a Distribution Company engaged in the business of 

distribution and retail supply of electricity in the South and South West area 

of National Capital Territory Region of Delhi. 

(ii) Smt. Santosh Gargya, the second Respondent is the consumer of the Appellant. 

She was using the electricity connection with sanctioned load of 10 KW for 

non domestic purpose as well as the sanctioned load of 0.5 KW for domestic 

purpose. 

(iii) The Appellant carried out an inspection on both the electricity connections 

on 5 th January, 2008. During the inspection, it was found out that the Respondent 

No. 2 was indulging in theft of electricity and the Report was sent to the 

Appellant. On the basis of the report of the inspection team, the Appellant 

issued “Show Cause Notice” to the second Respondent. Accordingly, Second 

Respondent appeared and submitted her response to “Show Cause Notice” 

After considering the submissions of the parties and evaluating the evidence 

available on record, the Assessing Officer came to the conclusion that the 

Respondent No. 2 was indulging in dishonest abstraction of electricity. Hence, the 

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BSES Rajdahani Power Ltd. v. DERC and Santosh Gargya, New Delhi 


bills of Rs. 2,20,184 and Rs. 1,03,987 were issued against the Second Respondent 

in terms of the Electricity Act, 2003. The Respondent No. 2 paid up and settled 

the bill relating to the domestic connection. 

(iv) There upon, the Second Respondent, the consumer, filed a Petition 

(Complaint) in April, 2008, under Section 142 of the Electricity Act before the 

State Commission praying for the reassessment of the bill and for further 

directions. 

(v) Upon receipt of the Petition filed under Section 142 of the Electricity Act, 

the State Commission issued a notice to the Appellant on 21 st May, 2008 directing 

the Appellant to file its reply to the said complaint within 15 days. Accordingly, 

the Appellant filed its reply to the Petition denying the factual allegations 

made by the Respondent against the Appellant. Again, another notice was 

issued by the State Commission on 27 th October, 2009, directing the Appellant 

to appear before the State Commission for hearing on 17 th November, 2009. 

Accordingly, the Appellant filed his second reply and appeared before the 

Commission. On that day, two issues were framed by the State Commission 

for adjudication of dispute between the parties. They are as follows: 

(a) Whether the inspection report had been delivered to the consumer 

through the post as the consumer had not signed in the inspection report? 

(b) Why assessment bill has been raised on sanctioned load i.e. 10 KW 

and not on connected load i.e. 0.5 KW? 

5. After hearing the parties on these issues, the State Commission passed the impugned 

order finding the Appellant guilty for violation of Regulation 52(viii) of the Supply 

Code Regulations, 2007 and imposed penalty of Rs. 1,00,000. Hence, this Appeal. 

6. The learned Counsel for the Appellant submitted that failure to issue Show Cause 

Notice while initiating the proceedings under Section 142 of the Act and finding the 

Appellant guilty for the charge which had not been framed in the proceedings 

would vitiate the order impugned. 

7. On the other hand, the learned Counsel for the State Commission (R-1) argued in 

justification of the impugned order. Though notice was served in this appeal on the 

Second Respondent, nobody has entered appearance on behalf of the second 

Respondent. 

8. In the light of the submissions made by the parties, we deem it fit to frame two 

questions that may arise for consideration in this Appeal. Those questions are as 

follows: 

(a) Whether it was mandatory upon the State Commission to issue and serve 

a Show Cause Notice on the person concerned with specific allegations while 

initiating the proceedings under Section 142 to enable him to give reply to 

those allegations? 

(b) Whether the State Commission could find the Appellant guilty for the charge 

which is different from the charges framed by the State Commission? 

9. Let us deal with the First question. 

10. According to the Appellant, the State Commission did not issue the Show Cause 

Notice containing the specific allegations and the failure to issue the same would 

vitiate the impugned order. The Petition under Section 142 of the Act, 2003, was 

0841 


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filed in May, 2008 by the Second Respondent before the State Commission as against 

the Appellant. On 21 st May, 2008, the State Commission issued notice to the Appellant 

directing him to file the reply to the said petition within 15 days. Accordingly, the 

Appellant filed the reply denying the factual allegations mentioned in the petition. 

Thereafter, the State Commission issued the second notice to the Appellant on 

27 th October, 2009 asking the Appellant to appear on 17 th November, 2009 before the 

State Commission for hearing. The Appellant filed the second reply and appeared 

before the State Commission. On that day, two issues were framed. On these two 

issues, the Appellant as well as the consumer were heard. 

11. Ultimately, the State Commission passed the impugned order on 22 nd July, 2010 

finding the Appellant guilty and imposing penalty under Section 142 of the Act. 

12. In the light of the above, we have to find out as to whether these notices are 

Show Cause Notices containing the specific allegations. 

13. Let us now quote the 1 st notice dated 21 st May, 2008: 

DELHI ELECTRICITY REGULATORY COMMISSION 

Viniyamak Bhawan, C-Block, Shivalik Malviya Nagar, New Delhi-110017 

Ref. No. F 7(25)/2008-09/DERC/(xxxx) 21 st May, 2008 

In the matter of:Complaint under Section 142 of the Electricity Act, 2003 

Smt Santosh Gargya 

H.No. 39, Village Ziya Sarai, 

New Delhi 

….Complainant 

versus 

BSES Rajdhani Power Limited …..Respondent 

To, 

BSES Rajdhani Power Limited 

Through its: CEO 

BSES Bhawan, 

Nehru Place, Delhi-110019 

NOTICE 

Whereas the Complainant above named has filed a complaint before the 

Commission on the abovementioned subject. Copy enclosed. 

The Respondent is directed to file their replies within 15 days from the 

date of issue of this notice and serve a copy of the same on the Complainant. 

Take notice that in case, the Respondent fails to file the reply within the 

time and manner prescribed above, it shall be presumed that they have 

nothing to say and the matter shall be proceeded in absence of such replies. 

Sd/- 

(Ajay Kr. Arora) 

Bench Officer 

Encl: As above. 

14. The reading of the wordings containing in this notice would reveal that this is 

the general notice issued by the State Commission in pursuant to the Petition under 

Section 142 of the Act 2003 filed by the Consumer, the Second Respondent to the 

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Appellant directing to file the reply for the complainant within 15 days. Admittedly, 

there is no reference calling upon the Appellant to show cause as to why the 

proceedings under Section 142 should not be proceeded as against him. Similarly, 

there are no specific allegations of violations of provisions or direction referred to in 

the said notice so as to enable the Appellant to know as to what sort of allegations 

he has to meet. Therefore, this cannot be construed to be the Show Cause Notice. 

15. Let us now quote second notice dated 27 th October, 2009: 

DELHI ELECTRICITY REGULATORY COMMISSION 

Viniyamak Bhawan, C-Block, Shivalik Malviya Nagar, New Delhi-110017 

Ref. No. F 11(465)/2008-09/DERC/3030 

October, 27, 2009 

Petition No. 62/2008 

In the matter of: Complaint under Section 142 of the Electricity Act, 2003 

And 

In the matter of: 

Smt Santosh Gargya 

H.No. 39, Village Ziya Sarai, 

New Delhi 

….Complainant 

versus 

BSES Rajdhani Power Limited 

Through its: CEO 

BSES Bhawan, 

Nehru Place, 

Delhi-110019 

…..Respondent 

NOTICE FOR HEARING 

Whereas, the Petitioner above named has filed a petition before the 

Commission regarding abovementioned subject. 

The Commission has decided to hold a hearing on dated 17 th November, 

2009 at 3.00 P.M at the Commission’s Office and the parties are directed 

to appear before the Commission on aforesaid date and time. 

Take notice that in case, the parties fails to appear before the Commission 

on the aforesaid date and time, the matter shall be decided in absence of 

such parties as per the provisions of law. 

Sd/- 

(M.S. Gupta) 

Dy. Director (Law)/Bench Officer 

Copy to: 

Shri Manish Kumar Choudhary, Advocate, 

E-5/1, 3 rd Floor, 

Malviya Nagar, New Delhi-110 017 

16. This notice also does not show either the reference to the Show Cause Notice 

asking for the explanation or the nature of allegations leveled against the Appellant. 

It simply directs the Appellant to appear on 17 th November, 2009 for hearing. So this 

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is also not a Show Cause Notice. These things would make it clear that enquiry was 

conducted and concluded under Section 142 of the Act without issuance of Show 

Cause Notice giving the details of allegations. 

17. It cannot be debated that Section 142 proceedings are penalty proceedings. Let 

us now see whether issuance of Show Cause Notice is a condition precedent in the 

142 penalty proceedings. While dealing with this question, it would be appropriate 

to refer to the settled law on this issue. 

18. With reference to the importance regarding the issuance of Show Cause Notice 

and necessity to follow the principles of natural justice in the penalty proceedings, 

the Hon’ble Supreme Court has specifically held that unless the mandatory procedure 

of issuance of Show Cause Notice containing the specific allegations and of failure 

to give opportunity to meet the said allegations is followed in the penalty proceedings, 

it would tantamount to violation of principles of natural justice which will vitiate 

the entire proceedings. Those decisions are as follows. 

19. In the AIR 2009 SC 2375 Uma Nath Pandey v. State of U.P. 1 , the Hon’ble Court has 

held as follows: 

Natural justice is another name for commonsense justice. Natural justice is the 

administration of justice in commonsense liberal way. Justice is based on natural 

ideals and human values. Natural justice relieves legal justice from unnecessary 

technicality, grammatical pedantry or logical prevarication. The adherence to 

principles of natural justice is of supreme importance than quasi-judicial body 

embarks on determining disputes between the parties. The first and foremost 

principle is what is commonly known as audi alteram partem rule. It says that 

no one should be condemned unheard. Notice is the first limb of this principle. 

It must be precise and unambiguous. It should appraise the party determinatively 

the case he has to meet. Time given for the purpose should be adequate so as 

to enable him to make his representation. In the absence of a notice of the kind 

and such reasonable opportunity, the order passed becomes wholly vitiated. 

Thus, it is but essential that a party should be put on notice of the case before 

any adverse order is passed against him. This is one of the most important 

principles of natural justice. Justice should not only be done but should manifestly 

be seem to be done. 


20. In the 2007 (5) SCC 388 Commissioner of Central Exercise v. Brindavan Beverages 

(P) Ltd. 2 , the Hon’ble Court has held as follows: 

A Show Cause Notice is the foundation on which the Department has to build 

up its case. If the allegations in the Show Cause Notice are not specific and are 

on the contrary vague, lack details and/or unintelligible that is sufficient to 

hold that the notice was not given proper opportunity to meet the allegations 

indicated in the Show Cause Notice. 


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1 Ed.: MANU/SC/0401/2009: 2009 (237) ELT 241 (SC): JT 2009 (4) SC 121: 2009 (1) OLR875: 

2009 (1) OLR (SC) 872: 2009 (4) SCALE 347: (2009) 12 SCC 40: (2009) 5 SCR 374: 2009 (3) 

UJ 1434 (SC) 

2 Ed.: MANU/SC/2645/2007: 2007 (119) ECC 87: 2007 ECR 87 (SC): 2007 (213) ELT 487 

(SC): 2007 (8) SCALE 549: (2007) 7 SCR 1033 

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21. In the 2004 (2) SC 783 Karnataka Rare Earth and Anr. v. Senior Geologist, Department 

of Mines and Geology and Anr. 3 the Hon’ble Court held as under: 

An order imposing penalty for failure to carry out the statutory obligation is 

the result of a quasi-criminal proceeding and penalty will not ordinarily be 

imposed unless the party obliged has either acted deliberately in defiance of 

law or was guilty of contumacious or dishonest conduct or acted in conscious 

disregard of its obligation. 

22. The Hon’ble Supreme Court in these decisions has culled out the following 

mandatory requirements to be satisfied especially in the penalty proceedings: 

(i) It is quite essential that a party facing the penalty proceedings should be 

put on notice of the case before any adverse order is passed against him. This 

is one of the most important principles of the natural justice. 

(ii) A Show Cause Notice is the foundation on which the Department has to 

built-up its case. Therefore, a Show Cause Notice shall contain the allegations. 

If the allegations in the Show Cause Notice are not specific, or vague or 

unintelligible, then that can be taken as a ground to hold that the said notice 

was not legally valid as it had not given adequate opportunity to the person 

concerned to meet the allegations indicated in the Show Cause Notice. 

(iii) The first and foremost principle is what is known as audi alteram partem 

rule. The notice is the first limb of this principle. It must be precise and 

unambiguous. It should apprise the party determinatively the case he has to 

meet. Adequate time has to be given to the person concerned so as to enable 

him to make his representation to meet the allegations contained in the notice. 

In the absence of the notice of the kind and such reasonable opportunity, the 

final order passed becomes wholly vitiated. 

(iv) The principles of natural justice are those which have been laid down by 

the Courts as being the minimum protection of the rights of the individual 

against the arbitrary procedure that may be adopted by a judicial, quasi-judicial 

and administrative Authority while making an order affecting those rights. 

These rules are intended to prevent such Authority from doing injustice. 

23. In the light of the above principles, we shall consider the issue relating to the 

Show Cause Notice in the proceeding under Section 142 of the Act, 2003. 

24. Let us quote Section 142 of the Electricity Act, 2003: 

In case any complaint is filed before the Appropriate Commission by any 

person or if that Commission is satisfied that any person has contravened any 

of the provisions of this Act or the rules or regulations made thereunder, or 

any direction issued by the Commission, the Appropriate Commission may 

after giving such person an opportunity of being heard in the matter, by order 

in writing, direct that, without prejudice to any other penalty to which he may 

be liable under this Act, such person shall pay, by way of penalty, which shall 

not exceed 1 lac rupees for each contravention and in case of continuing failure 

with an additional penalty which may extend to 6,000 rupees for every day 

during which the failure continues after contravention of the first such direction. 


0845 

3 Ed.: MANU/SC/0057/2004: (2004 (2) JCR 112 (SC): JT 2004 (2) SC 472: 2005 (1) KarLJ 168: 

2004 (2) SCALE 1: (2004) 1 SCR 965 


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25. The perusal of this section would reveal that the State Commission should 

follow the following procedure before finding the person guilty of violation of 

provisions or directions and imposing the penalty as contemplated under Section 142 

of the act: 

(i) When a complaint or a Petition is filed by a person before the Appropriate 

Commission against a person for taking action under Section 142 of the Act or 

when an information is received, the Appropriate Commission has to first 

find out as to whether there are prima facie allegations in the petition or complaint 

or information received, that the person has contravened the relevant provisions 

or violated the directions issued by the Appropriate Commission. In other 

words, the Appropriate Commission, before entertaining the petition or complaint 

for taking action under Section 142 of the Act, at the outset has to satisfy itself 

by applying its mind as to whether the allegations contained in the said Petition 

or complaint or information would constitute contravention or violation of 

any of the provisions of the Act or rules or regulations made thereunder or 

directions issued by the Appropriate Commission which necessitates the 

issuance of Show Cause Notice to conduct inquiry under Section 142 of the 

Act. Thus, the satisfaction to entertain the complaint is first and foremost 

requirement. 

(ii) After arriving at such a satisfaction, the Appropriate Commission shall 

entertain the petition and issue notice to the person concerned intimating that 

the Appropriate Commission is satisfied with the particulars of the specific 

allegations that the person concerned has violated the provisions or directions 

and calling upon him to show cause as to why that person be not proceeded 

with under Section 142 of the Act and why the penalty be not imposed upon 

him for such allegation of the contravention or a violation thereby, the 

Appropriate Commission is mandated to give opportunity to the said person 

to offer his explanation through his reply to the charge leveled against him 

referred in the Show Cause Notice by giving sufficient time. 

(iii) On receipt of the said explanation offered by the person concerned, the 

Appropriate Commission has to scrutinise and find out as to whether his 

explanation is satisfactory or not. If it is satisfied, it may drop the proceedings 

under Section 142 of the Act. On the other hand, if the Appropriate Commission 

feels that the explanation is not satisfactory, the Appropriate Commission can 

summon him to appear before the Commission and frame the specific charges 

in his presence and intimate him that the Appropriate Commission propose to 

conduct inquiry with regard to those charges and give opportunity to the 

person concerned of hearing to offer his further explanation and to produce 

materials to disapprove those charges. 

(iv) After considering the reply and evidence available on record and after 

hearing the parties, the Appropriate Commission then has to find out as to 

whether those charges framed against him have been proved or not in the 

light of the submission and the evidence produced by the person concerned. If 

the Appropriate Commission is of the opinion that the charges framed are not 

proved, the proceedings at that stage can be dropped. On the contrary, if the 

Appropriate Commission is satisfied that those charges have been proved, it 

may find him guilty and impose penalty. 

26. The above procedure in penalty proceedings would clearly indicate that the 

State Commission shall first find out the prima facie satisfaction and then issue 

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Show Cause Notice to the person concerned who has to file reply and thereafter, the 

State Commission has to frame charges and give further opportunity to the person 

concerned to place materials to disprove the charges and then decide the case on 

the basis of the evidence available on record. 

27. From the above, it is clear that the State Commission has to arrive at prima facie 

satisfaction, that it is a fit case for initiation of Section 142 of the proceedings and 

then it has to record its satisfaction in the Show Cause Notice in respect of the 

specific allegations and send it to the person for the purpose of giving an opportunity 

to such a person to defend or rebut such specific allegation. These procedures are 

contemplated to follow the principle of natural justice by giving full opportunity to 

the Appellant to defend the allegation. 

28. Thus, there are two phases. (i) One is to arrive at a satisfaction to issue Show 

Cause Notice while initiating penalty proceedings and (ii) Next is, after issuance of 

the Show Cause Notice, the person must be heard to arrive at a satisfaction whether 

such contravention has actually been committed or not. Only then, the State 

Commission can come to the conclusion whether to find him guilty or not under 

Section 142 of the Act. Thus, it became evident that the Show Cause Notice should 

contain–(i) specific allegations of violation, (ii) prima facie satisfaction over the said 

allegations, (iii) issuance of Show Cause Notice in respect of specific allegations by 

way of giving an opportunity to the concerned person to rebut those allegations. 

All these three ingredients must find place in the notice which is a Show Cause 

Notice. 

29. A bare perusal of Section 142 of the Act, 2003 reveals that a specific notice under 

Section 142 is a mandatory requirement to be issued by the Commission to the 

licensee specifying the alleged particulars of the violations. Admittedly, in the present 

case, only general notices were issued merely asking the person to file reply and to 

make appearance. They are not the Show Cause Notices, as the three requirements 

referred to above are absent in those notices. The State Commission ought to have 

issued mandatory Show Cause Notice under Section 142 stipulating its intention of 

initiating proceedings against the Appellant and then framed the charges relating 

to the alleged violations of Regulations or directions to enable the Appellant to 

rebut the same and support its defence. Admittedly, the allegations relating to violation 

of Regulations along with the expression of its intention to proceed under Section 142, 

was never intimated by the State Commission to the Appellant in the present case. 

30. (a) In the absence of any such allegations in the notices, could the Appellant 

rebut the allegations of violations? 

(b) When those notices dated 21 st May, 2008 and dated 27 th October, 2009 do not 

contain the specific allegations, how could they be treated as Show Cause Notices 

in respect of the violations? 

(c) When those notices cannot be construed to be the Show Cause Notices, would it 

not mean that there is a failure to follow the principles of natural justice? 

31. In the instant case, as indicated above, the said mandatory procedure had not 

been followed and on the other hand general notice dated 25 th July, 2005 and 

27 th July, 2009 were sent to the Appellant. Admittedly, no prima facie satisfaction 

was recorded by the State Commission in the notices nor specific charges were 

incorporated nor about the same to intimated by the Appellant through the said 

notices. Thus, it is clear that final decision has been taken under Section 142 of the 

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Act, 2003 by the State Commission without issuing Show Cause Notice contemplated 

under Section 142 of the Act and without giving opportunity to reply which is a 

mandatory procedure. 

32. Therefore, it has to be held that the impugned order finding that there is a 

violation of the provisions itself is in violation of the Principles of natural justice as 

such it is illegal in the light of the absence of the issuance of the Show Cause 

Notice. This first point is answered accordingly. 

33. The next question is this: Whether the State Commission could find the Appellant 

guilty for the charge which is different from the charges framed by the State Commission? 

34. As indicated above, the State Commission issued a first notice on 21 st May, 2008 

along with a copy of the complaint. After receipt of the reply from the Appellant, the 

second notice was issued on 27 th October, 2009 by the State Commission calling 

upon the Appellant to appear before the State Commission for hearing on 

17 th November, 2009. In both the notices, as we held above all the three ingredients 

referred to in the earlier paragraphs were absent. 

35. We will now come to the next phase. On receipt of the 2 nd notice, the Appellant 

filed its second reply and appeared on the 17 th November, 2009. On that day the 

State Commission, after considering the Petition and reply, framed these two issues: 

(a) Whether the inspection report had been delivered to the consumers through 

the post as the inspection report had not been signed by the consumer? 

(b) Why assessment bill has been raised on sanctioned load i.e. 10 KW and 

not on connected load i.e. 0.5 KW? 

36. It is evident that in this case the Appellant was not found guilty of the above 

charges framed but he was found guilty only for the violation of Regulations 52(viii) 

of Regulations 2005. This violation has neither been mentioned in the Petition or 

referred to in the notices on 21 st May, 2008 and 27 th October, 2009 nor in the charges 

which have been framed on 17 th November, 2009. 

37. As mentioned above, the State Commission issued general notices on two dates 

i.e. first notice on 21 st May, 2008 and the second notice on 27 th October, 2009. In both 

the notices, no particulars regarding the violations have been furnished. But when 

the Appellant appeared on 17 th November, 2009, two charges were framed as under: 

(a) Whether the inspection report had been delivered through the post as 

inspection report had not been signed by the consumer? 

(b) Why assessment bill has been raised on sanctioned load, i.e. 10 KW and 

not on connected load, i.e. 0.5 KW? 

38. These two charges only relate to the absence of the delivery of the inspection 

report and the issuance of the assessment of bill with reference to the sanctioned 

load instead of connected load. Strangely, the Appellant was not found guilty for 

these charges which were framed but found guilty of the violation of the 

Regulation 52(viii) of the Supply code which was not framed. Curiously, the State 

Commission had not dealt with in respect of the alleged two violations which were 

framed nor given any finding. On the contrary, the State Commission held that the 

meter was segregated and it was not sent to the NABL accredited laboratory which 

is the violation of the Regulation 52(viii) of the Supply Code. This finding on this 

charge was given by the State Commission without framing this charge and without 

giving opportunity to the Appellant to meet the said charge. 

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39. It is not disputed by the State Commission that the Appellant was never called 

upon or put on notice to rebut this charge. In the light of the admitted fact situation 

as pointed out by the Appellant, the State Commission ought not to have found the 

Appellant guilty of this charge without framing the said charge and without allowing 

the Appellant to present its defence for this charge. The failure to follow this procedure 

in our view, is a serious violation of Principles of Natural Justice. The State Commission 

should have confined itself to the charges framed by the Commission and should 

not have travelled beyond the pleadings and the charges in question. 

40. One more thing which has been brought to our notice by the Appellant to hold 

that the finding is wrong is to be referred to. The Regulations 52(viii) of the Supply Code 

mandates that the licensee shall send the meter after inspection to NABL accredited 

laboratory for testing. According to the State Commission, in this case the Appellant 

did not send it to the NABL accredited laboratory and the failure to send it to the 

NABL accredited laboratory is a violation of Regulation 52(viii) of the Supply Code 

and therefore, he was found guilty of the said case by the State Commission. Let us 

quote the findings of the State Commission on this charge: 

Regulation 52(viii) of the Commission’s Supply Code and Performance Standards 

Regulations, 2007 clearly prescribe the procedure in such cases, which reads 

as under: 

In case of suspected theft, the Authorised Officer shall remove the old 

meter under a seizure memo and seal it in the presence of the consumer/ 

his representative. The Licensee shall continue the supply to the consumer 

with a new meter. The old meter shall be tested in a NABL accredited 

laboratory and the laboratory shall give a test report, in writing, which 

along with photographs/video graphs shall constitute evidence thereof. 

The list of NABL accredited laboratory shall be notified by the Commission. 

The authorised Officer shall record reasons to suspect theft in the premises 

in his report 

The meter was not sealed nor tested in NABL accredited laboratory as required 

under the above Regulations, but was segregated at site during inspection, 

which is in violation of the Commission’s Regulation for which a penalty for 

Rs. 1 lac is imposed upon Respondent Discom, under Section 142 of the Act 

41. These findings relating to the failure on the part of the Appellant to send the 

meter to NABL accredited laboratory is utterly wrong for the following reason. 

42. Admittedly, in the present case, the inspection was carried out on 5 th January, 2008 

and till then, no NABL accredited laboratory for testing the meter for tampering had 

been notified by the State Commission. As a matter of fact, NABL accredited 

laboratories was notified only in June, 2008 long subsequent to the inspection. In 

the absence of the said notification, the Appellant could not have sent it to the 

NABL accredited laboratory. If the State Commission had given opportunity to the 

Appellant to give explanation to this charge after framing the same, the Appellant 

would have brought it to the notice of the State Commission that the said violation 

cannot be attributed to the Appellant for not sending the meter to the notified NABL 

accredited laboratory in terms of Regulations 52(viii) as it could not be complied 

with for the reasons mentioned above. In that event, the State Commission could not 

have found the Appellant guilty for this violation. 

43. In view of the above, Appellant cannot be found guilty for the failure to send the 

meter after inspection to the State Commission’s approved NABL accredited Laboratory 

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which was not in existence. Therefore, the findings by the State Commission on this 

charge is wrong on this ground as well. 

44. Summary of Our Findings 

(i) A Show Cause Notice is the foundation on which the charge has to be 

built-up. Such Show Cause Notice should contain specific allegations. If there 

is no Show Cause Notice containing the specific allegations, it is tantamount 

to not giving the opportunity to the person concerned to meet those specific 

allegations. Therefore, the failure in issuing Show Cause Notice in the penalty 

proceedings which is the mandatory procedure and the failure to give 

opportunity to the person concerned to meet those allegations would amount 

to the failure to follow the principles of natural justice. This failure in the 

instant case would make the impugned order vitiated. 

(ii) In the present case, two charges were framed on 17 th November, 2009 which 

relate to the absence of the delivery of the inspection report and issuance of the 

assessment bill with reference to the sanctioned load instead of connected load. 

The State Commission instead of giving findings on these charges has found 

the Appellant guilty of the charge regarding the violation of Regulations 52(viii) 

of Supply Code. Admittedly, this charge had not been framed and opportunity 

had not been given to the Appellant to meet this charge. Therefore, the State 

Commission could not find the Appellant guilty for the charge not framed and 

as such the impugned order finding the Appellant guilty for the charge not 

framed without giving the opportunity cannot legally be sustained. 

45. In view of our above findings, we think it fit to set-aside the impugned order. 

Accordingly, the same is set aside. The Appeal is allowed. There is no order as to 

costs. 

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2011 ELR (APTEL) 0850* 



f 


DECIDED ON: 19.04.2011 

NTPC Ltd. 

v. 

C.E.R.C and Ors. 

g 

Coram 



Whether exclusion of part of capital expenditure validly incurred but pending actual 

disbursement/payment from the capital cost for the purposes of Tariff was proper? 

Held, the question of additional capitalisation under Regulation 18 would refer to 

the capital expenditure actually incurred after the date of commercial operation in 

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* MANU/ET/0053/2011 

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(M. Karpaga Vinayagam, J. (Chairperson) and V.J. Talwar, Member (Technical)) 

respect of deferred liabilities and in respect of the works deferred for execution. But 

Regulation 17 would refer to the actual expenditure incurred before the date of 

commercial operation of the generating station after completion of the project that 

too in respect of the liabilities served and incurred. The entire value of the capital 

asset, as soon as the same is put into operation is recoverable by way of capital cost 

under Regulation 17 itself, not withstanding the fact that the part of the payment for 

the capital asset has been retained. Issue is covered in Appeal Nos. 133, 135 of 2008 

NTPC v. CERC and Ors. dated 16 th March, 2009 and Appeal Nos. 151 and 152 of 

2007 NTPC v. CERC and Ors. dated 10 th December, 2008 and decided accordingly in 

favour of Appellant. 

Whether treating the depreciation as the deemed repayment of loans wherever 

depreciation is higher than the normative repayment of loan was proper? 

Held, depreciation has to be considered as a mere expense. It should not be considered 

to be an item allowed for repayment of loan. It includes depletion of resources 

during the process of use. It is ordinarily not a source of funds under commercial 

accounting. It enables a utility to work out the charges to be recovered from consumers 

for supply of electricity. Since the charge is recoverable from the consumer, depreciation 

is a source of funding for replacement of cost. Thus, treating depreciation as a 

deemed repayment of loan is not correct. Issue is covered by Appeal Nos. 133, 135 

etc. of 2008 NTPC v. CERC and Ors., dated 16 th March, 2009 and Appeal Nos. 139, 

140 etc. of 2006 dated 13 th June, 2007 and decided accordingly in favor of Appellant. 

Whether disallowance of cost of maintenance spares was proper? 

Held, cost of maintenance spares needs to be calculated on the total capital cost inclusive 

of additional capitalisation. Cost of maintenance spares has to be included into capital 

cost. Issue covered in Appeal Nos. 139, 140 etc. of 2006, dated 13 th June, 2007 and 

Appeal No. 54 of 2009 NTPC v. CERC and Ors. dated 21 st August, 2009 and decided 

accordingly in favour of Appellant. 

What is the Impact of de-capitalisation of assets on cumulative repayment of loan 

Held, when asset is not in use it is only logical that the capital base for the purpose 

of tariff is also proportionately reduced. Appellant will not earn any depreciation, 

return on equity and O&M charges. Despite the decapitalisation, the Appellant was 

required to pay interest on the loan. The cumulative repayment of the loan 

proportionate to those assets decapitalised required to be reduced. Ratio in Appeal 

Nos. 139, 140 etc. of 2006, dated 13 th June, 2007 applied. 

Determination of consequences of refinancing of loan? 

Held, the difference between the 2004 Regulations and the previous Regulations 

regarding refinancing of loans is that as per the new Regulations refinancing is 

permitted at the cost of beneficiaries as long as it benefits them, whereas as per the 

previous Regulations refinancing of loan was permitted at the cost of the generator 

and the resulting benefit or loss was to their account. The Tariff Regulations, 2004 

have to be applied to the refinancing done after these regulations came into force 

and cannot be applied to the prior period when the refinancing had already been 

done by the Appellant and costs associated with refinancing have been borne by 

the Appellant. Regulation in question will apply where loans have been swapped 

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and costs associated with refinancing have been borne by the beneficiaries. It will 

not be fair to the Appellant if the Respondent beneficiaries take advantage of the 

refinancing without taking all associated obligations allowed to such refinancing. 

Ratio in Appeal Nos. 139, 140 etc. of 2006, dated 13 th June, 2007 applied. 

Whether depreciation up to 90 per would be admissible? 

In view of the decision already taken by this Tribunal in Appeal Nos. 139, 140 etc. 

of 2006, dated 13 th June, 2007 this matter was decided accordingly in favour of 

Appellant. 



NTPC v. CERC and Ors. MANU/ET/0071/2008: 2008 ELR (APTEL) 916 (Mentioned) 

[p. 0852, para 20 h] 


[p. 0852, para 20 h] 


[p. 0853, para 20 b] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Anand K. Ganesan and 

Sneha Venkataramanim, Advs. 


“The entire value of the capital asset, as soon as the same is put into operation is 

recoverable by way of capital cost under Regulation 17 itself, not withstanding the 

fact that the part of the payment for the capital asset has been retained.” 

JUDGMENT 


1. The following issues have been raised by the Appellant in this Appeal: 

(a) Exclusion of part of the capital expenditure validly incurred but pending 

actual disbursement/payment from the capital cost for the purposes of Tariff. 

(b) Equating depreciation with normative loan repayment. 

(c) Disallowance of cost of maintenance spares; 

(d) Impact of de-capitalisation of assets on cumulative repayment of loan. 

(e) Consequences of refinancing of loan; and 

(f) Admissibility of depreciation up to 90 per cent 

2. It is submitted by the learned Counsel for the Appellant that Issue No. 1 is covered 

and decided in favour of the Appellant by judgment of this Court in Appeal Nos. 133, 

135 etc. of 2008 (NTPC v. CERC and Ors. 1 2009 ELR (APTEL) 337), dated 

16 th March, 2009 and Appeal Nos. 151 and 152 of 2007 (NTPC v. CERC and Ors. 1 

2008 ELR (APTEL) 916 dated 10 th December, 2008. 

3. With regard to Issue No. 2, the same is covered and decided in favour of the 

Appellant by judgment of this Court in Appeal Nos. 133, 135 etc. of 2008 

1 Ed.: MANU/ET/0020/2009 

2 Ed.: MANU/ET/0071/2008 

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110 


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M/s. Tata Power Company Ltd. v. M/s. Reliance Energy Limited., Mumbai and Ors. 


(NTPC v. CERC and Ors. 2 2009 ELR (APTEL) 337), dated 16 th March, 2009 and Appeal 

Nos. 139, 140 etc. of 2006 dated 13 th June, 2007. 


Appellant by Judgment of this Court in Appeal Nos. 139, 140 etc. of 2006, dated 

13 th June, 2007 and Appeal No. 54 of 2009 NTPC v. CERC and Ors. 3 2009 ELR (APTEL) 

705, dated 21 st August, 2009. 


Appellant by judgment of this Court in Appeal Nos. 139, 140 etc. of 2006, dated 

13 th March, 2007. 


Appellant by judgment of this Court in Appeal Nos. 139, 140 etc. of 2006, dated 

13 th June, 2007. 


Appellant by judgment of this Court in Appeal Nos. 139, 140 etc. of 2006 dated 

13 th June, 2007. 

8. We have heard the learned Counsel for the Appellant. 

9. Nobody has entered appearance on behalf of the Respondent. 

10. In view of the decision already taken by this Tribunal on these issues, this 

Appeal is allowed in terms of the judgments referred to above by the learned Counsel 

for the Appellant. 

2011 ELR (APTEL) 0853* 




DECIDED ON: 24.05.2011 

M/s. Tata Power Company Limited., Mumbai 

v. 

M/s. Reliance Energy Limited., Mumbai and Ors. 

Coram 


V.J. Talwar, Member (Technical) 


Whether order of State Commission fixing the Tariff which Tata Power Company 

had to charge from its various consumers including the Reliance Energy as a Distribution 

Licensee for the FY 2003-04 and 2004-05 was right? 

0853 

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3 Ed.: MANU/ET/0077/2009 

* MANU/ET/0079/2011 


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Held, the impugned order dated 11 th June, 2004 passed by the State Commission was 

based upon the earlier order dated 31 st May, 2004, passed by the State Commission 

which had already been set aside. Analysing the validity of the impugned order 

would amount to review of earlier judgment rendered by this Tribunal which is not 

permissible under the law. Impugned order had given effect to the order dated 

31 st May, 2004 by following a particular methodology for fixing a particular Tariff 

which has been recovered by the Tata power Company as well as the Reliance Energy 

Company Limited from their consumers for several years. If that methodology is disturbed 

at this stage, without getting the result of the final adjudication of the Hon’ble Supreme 

Court , it would result in a totally unworkable situation. It was held as improper to 

decide the issue afresh till these issues are decided by the Hon’ble Supreme Court. 

Appeal disposed of 

Counsel 

For Appellant/Petitioner/Plaintiff: Iqbal Chagla, Darius Khambatta and Janak 

Dwarkadas, Sr. Advs., Ramji Shrinivasan, P.A. Kabadi, Srikant Doijode, Parag Kabadi, 

Ruchira Gupta, Laxmi, Lakshmi Ramachandran, Ruby Singh Ahuja, Jatin Mongia, 

Pragya Singh Baghel, P. Tripathy, Bomi Shroff and Guntur Prabhakar, Advs. 

For Respondent(s)/Defendant: J.J. Bhatt, A.M. Simnghvi, Chetan Sharma, Soli J. Sorabjee 

and Shyam Divan, Sr. Advs., Anjali Chandurkar, Akhil Sibal, Arijit Maitra, Hassan 

Murtuza, Anusha Nagarajan, Sanjay Ghosh, Mayuri Raghuvanshi, Anusha 

Nagarajan, Anuj Agrawal, Shilpy Chaturvedi, Smieetaa Inna, Rajiv Nanda, Nishant 

Gupta, Saurabh Mishsra, D.J. Kakalia, Anand Mishra, A. Prasad, Gargi Hazarika, 

Syed Naqvi, Mukesh Tyagi, Pheroze Palkivala, G. Ramakrishna, Venkat 

Subramanyam, B. Suyodhan, Anjali Chandurkar, Alpana Dhake, Jawahar Raja 

and Junaira Rehman, Advs. 

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JUDGMENT 


1. M/s Tata Power Company Limited is the Appellant. M/s. Reliance Energy Limited 

is the First Respondent. Maharashtra State Electricity Board is the Second Respondent. 

Maharashtra State Government is the Third Respondent. Maharashtra State 

Commission is the Fourth Respondent. 

2. M/s. Tata Power Company, the Appellant has filed this Appeal No. 56/2005 

challenging the impugned order dated 11 th June, 2004 passed by the Maharashtra 

State Commission which relates to the determination of Annual Revenue 

Requirements and Tariff applicable to various categories of consumers of Tata 

Power Company Limited for the Financial Year 2003-04 and 2004-05. The short 

facts are as follows: 

(i) Prior to 1998, the entire requirements of Reliance Energy Limited as a 

Distribution Licensee was being procured by M/s. Reliance Energy from 

M/s. Tata Power Company Limited. The Tariff in respect thereof was being 

fixed by Tata Power under the statutory provisions existing at that time. Tata 

Power was required to pay standby charges to the Maharashtra State Electricity 

Board pursuant to the arrangements made earlier. Tata Power was factoring 

in the entire standby charges in its Tariff which it charged to its various consumers 

including Reliance Energy Limited. 

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(ii) Originally, a dispute with reference to standby charges to be paid by 

M/s. Reliance Energy Limited to Tata Power Company Limited was raised 

before the Bombay High Court. As against the decision of the Bombay High Court, 

the parties went to Hon’ble Supreme Court. By the order dated 17 th October, 2003, 

the Hon’ble Supreme Court remanded the issue to the State Commission to 

determine the liability of the standby charges to be paid by the Reliance Energy 

Limited to Tata Power Company. 

(iii) In pursuant to the said remand order, the State Commission by the order 

dated 31 st May, 2004, determined the amount of standby charges required to 

be paid by the Reliance Energy Limited to Tata Power Company Limited. 

(iv) Immediately, thereafter, the State Commission passed an order dated 

11 th June, 2004, fixed the Tariff which Tata Power Company had to charge 

from its various consumers including the Reliance Energy as a Distribution 

Licensee for the FY 2003-04 and 2004-05. Similarly, the State Commission 

passed another order dated 18 th June, 2004 determining the retail Tariff which 

M/S. Reliance Energy Limited was to charge from its consumers. 

(v) While passing these Tariff orders, the State Commission gave effect to its 

earlier order dated 31 st May, 2004. 

3. Being aggrieved by the order dated 31 st May, 2004 fixing the liability of standby 

charges to be paid by Reliance Energy Limited to Tata Power Company Limited, the 

Tata Power Company as well as M/S. Reliance Energy Limited filed separate Appeals 

in Appeal No. 202 of 2005 and 29 of 2005 before this Tribunal. 

4. According to Tata Power Company in its Appeal, the State Commission had fixed 

the liability of Reliance Energy for the payment of standby charges at a lower figure. 

Conversely, M/s. Reliance Energy Limited claimed in its Appeal contending that 

the State Commission fixed the liability of M/s. Reliance Energy for payment of 

standby charges at a figure higher than what Reliance Energy Limited was liable 

to pay. 

5. Both the Appeals No. 202/2005 and 29/2005 challenging the order dated 

31 st May, 2004 were taken up for final disposal. Ultimately, the Division Bench of 

this Tribunal by the order dated 20 th December, 2006 rejected the prayer of the Tata 

Power Company and further reduced the quantum of liability to the payment of 

standby charges payable by M/s. Reliance Energy Limited to Tata Power Company 

Limited as per the State Commission’s order dated 31 st May, 2004. 

6. Even during the pendency of the above Appeals in 202/2005 and 29/2005 before 

this Tribunal challenging the order dated 31 st May, 2004, passed by the State 

Commission fixing the liability to pay standby charges, the Tata Power Company 

Limited, challenging the Tariff order passed by the State Commission dated 

11 th June, 2004 has filed this present Appeal in 56/2005. 

7. Aggrieved over the judgment of this Tribunal in the Appeals dated 20 th December, 2006, 

reducing the quantum of standby charges both Tata Power and Reliance filed the 

Appeals in the Hon’ble Supreme Court. While admitting the Appeal field by the Tata 

Power Company as against to the decision taken by this Tribunal reducing the 

standby charges, the Hon’ble Supreme Court granted conditional stay of the judgment 

of this Tribunal dated 20 th December, 2006 in favour of the Appellant Tata Power 

Company directing the Appellant to furnish a bank guarantee of a sum of Rs. 227 crores 

and, in addition, shall deposit a sum of Rs. 227 crores and allowing the Reliance to 

0855 


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withdraw the said amount after giving an undertaking that in the event of the 

Appeal being decided against the Reliance, the amount withdrawn would be refunded 

to the Appellant with interest. 

8. At that stage this Appeal No. 56/2005 was taken up for final disposal by this 

Tribunal. But periodically, both the parties have asked for adjournments before this 

Tribunal requesting that the Appeals in the Supreme Court as against the order 

dated 20 th December, 2006 passed by this Tribunal are pending and since most of 

the issues in this Appeal had already been decided by this Tribunal in Appeals 

No. 202/2005 and 29/2005 and the same is the subject matter of the Appeals filed 

by the both the parties pending before the Hon’ble Supreme Court, this Appeal 

No. 56/2005 may not be taken for final disposal till the decision is arrived at by the 

Supreme Court with reference to the order passed by the Commission on 31 st May, 2004. 

Accordingly, the matter was periodically adjourned expecting that Appeals filed 

before the Hon’ble Supreme Court would be disposed of early. We have waited for 

too long. However, on noticing that both the parties have not taken steps to request 

the Hon’ble Supreme Court to take-up the Appeals for final decision at an early 

date and in the light of the fact that there is no stay granted in respect of the 

proceedings in this Appeal No. 56/2005 and also for the reason that this Appeal is 

spending for more than five years, we have decided to hear the matter and to dispose 

of this Appeal at an early date. Accordingly, we have intimated to both the parties 

about our decision to take up the matter for final hearing and have given sufficient 

time to both the parties to be ready for final disposal. 

9. Accordingly, on the date fixed, the matter was taken up for final disposal. We have 

heard both the learned Senior Counsel for the parties on a number of days. On hearing 

the elaborate submissions made by the learned Senior Counsel for both the parties 

and also on considering the fact that the order impugned dated 11 th June, 2004 was 

based upon the earlier order passed by the Commission on 31 st May, 2004 which 

had been set-aside by the Tribunal by judgment dated 20 th December, 2006 and the 

said judgment has been appealed in the Appeals which are pending in the Hon’ble 

Supreme Court, we feel that it is not desirable to go into the merits of the issues 

raised in this Appeal against the impugned order dated 11 th June, 2004. Hence, we 

deem it appropriate to dispose the Appeal with following observations and consequent 

directions to the State Commission. Some of the important events which have to be 

borne in mind are as follows: 

(i) By the order dated 31 st May, 2004, in Case No. 07 of 2004, the State Commission 

passed an order determining the quantum of standby charges required to be 

paid by the Reliance Energy Limited to the Tata Power Company Limited. 

(ii) Immediately, thereafter, the State Commission passed an order on 11 th June, 2004 

fixing the Tariff which Tata Power Company could charge from its various 

customers including the Reliance Energy Limited as a “distribution Licensee”. 

Similarly, on 18 th June, 2004, the State Commission passed an order determining 

the retail Tariff which M/S. Reliance Energy Limited was to charge from its 

customers in various categories. Admittedly, while passing the said two Tariff 

orders, the State Commission gave effect to its earlier order dated 31 st May, 2004. 

(iii) Being aggrieved by the order dated 31 st May, 2004, fixing the liability of 

standby charges, both the Tata Power Company Limited and M/s. Reliance 

Energy Limited filed the Appeals before this Tribunal in Appeal No. 202 and 

29 of 2005. Both the parties challenged the said order mainly with reference to 

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the quantum of payment of standby charges. While these Appeals were pending, 

M/s. Tata Power Company Limited field this present Appeal No. 56/2005 as 

against the order dated 11 th June, 2004 which had given effect to the order 

dated 31 st May, 2004 to the extent that it relates to fixation of Tariff of the 

standby facility being provided by the Tata Power Company Ltd. to 

M/s. Reliance Energy Limited from the period 1998. 

(iv) As mentioned above, the Division Bench of this Tribunal by the order 

dated 20 th December, 2006 rejected the prayer of the Tata Power Company and 

further reduced the quantum of the standby charges. Admittedly, this judgment 

dated 20 th December, 2006 which set aside the order dated 31 st May, 2004 by 

the State Commission has been challenged in the Hon’ble Supreme Court which 

granted conditional stay of the operation of the judgment of this Tribunal. The 

said Appeal is still pending. 

10. The perusal of the grounds raised in the present Appeal show that most of these 

grounds had been raised by Tata Power Company Limited in the earlier Appeals as 

against the order dated 31 st May, 2004 and the said grounds had been dealt with and 

decision had been rendered in the judgment of this Tribunal dated 20 th December, 2006. 

As indicated above, those issues decided by the Tribunal are pending consideration 

before the Hon’ble Supreme Court. Therefore, we are not inclined to deal with those 

grounds which have already been decided by this Tribunal. 

11. The specific prayer made in this Appeal is to quash and set aside the impugned 

order dated 11 th June, 2004 only to the extent of fixation of Tariff of the standby 

facilities and consequently, the Tata Power Company Limited may be permitted to 

recover the Tariff for standby facility at the same rate at which the Tata Power 

Company has paid to the State Electricity Board. From the reading of this prayer, it 

is clear that this Tribunal has been requested by the Appellant in this Appeal to go 

into the grounds which have been already decided by this Tribunal and which are 

to be decided by the Hon’ble Supreme Court. In other words, the issue in respect of 

liability to pay standby charges which has been considered and decided by this 

Tribunal is sought to be considered again by re-opening the entire issue. 

12. Admittedly, the impugned order dated 11 th June, 2004 passed by the State 

Commission was based upon the earlier order dated 31 st May, 2004, passed by the 

State Commission which had already been set aside. Such being the case, if we go 

into the validity of the impugned order, it would amount to review the earlier judgment 

rendered by this Tribunal dated 20 th December, 2006 setting aside the order dated 

31 st May, 2004 which is not permissible under the law. 

13. Further, impugned order dated 11 th June, 2004 which is a Tariff order had given 

effect to the order dated 31 st May, 2004 by following a particular methodology. 

That methodology has resulted in State Commission fixing a particular Tariff which 

has been recovered by the Tata power Company as well as the Reliance Energy Company 

Limited from their consumers for several years in question. If that methodology is 

disturbed at this stage, without getting the result of the final adjudication of the 

Hon’ble Supreme Court in regard to the order dated 31 st May, 2004 passed by the 

State Commission, we feel that it would result in a totally unworkable situation. 

14. Therefore, we do not want to go into the merits of these issues now in this 

Appeal as we are yet to know the outcome of the very same issue in the pending 

Appeals before the Hon’ble Supreme Court. 

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15. There are two possibilities arising out of the outcome of the Hon’ble Supreme 

Court judgment: 

(i) If the Tribunal judgment dated 20 th December, 2006 is upheld by the 

Hon’ble Supreme Court, the State Commission has to restore the standby charges 

payable by the Reliance for the Financial Year 1998-99 to 2003-04 on the basis 

of the judgment of this Tribunal dated 20 th December, 2006. The State Commission 

order dated 11 th June, 2004 to that extent would have to be modified by the 

State Commission. 

(ii) In case the Tribunal judgment dated 20 th December, 2006 is set-aside by the 

Hon’ble Supreme Court, there are two possibilities: 

(a) If the Tribunal judgment is set aside and if the State Commission’s 

order in entirety is upheld, then the question of the adjustment of the 

amount payable by the Tata Power Company to the Reliance Energy 

against Tata Power Company’s contingency reserve would have to be 

decided. 

(b) If both the Tribunal’s judgment dated 20 th December, 2006 as well as 

the State Commission’s order dated 31 st May, 2004 are set aside by the 

Hon’ble Supreme Court and the matter is remanded back to the State 

Commission by giving some guidelines for determining the liabilities of 

both the parties arising out of standby charges, the State Commission 

will have to decide the matter de novo. 

16. Thus viewed from any angle we feel that it is not proper to decide the issue 

afresh till these issues are decided by the Hon’ble Supreme Court. Therefore, we 

deem it appropriate to dispose of this Appeal with a direction to the State Commission 

to take up the matter afresh and to pass appropriate orders in accordance with the 

Hon’ble Supreme Court final judgment as and when it is pronounced. 

17. Accordingly ordered. With these observations, this Appeal is disposed of. No order 

as to cost. 

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b 

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d 

e 

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2011 ELR (APTEL) 0858* 



g 

U.P. Power Corporation Limited, Lucknow through its Executive Engineer 

v. 


APPEAL NOS. 100, 103 OF 2009 AND 146, 151 OF 2010 

DECIDED ON: 24.05.2011 

h 

Coram 


i 

* MANU/ET/0080/2011 

116 


a 

b 

c 

d 

e 

f 

g 

h 

U.P. Power Corporation Ltd. v. Central Electricity Regulatory Commission and Ors. 

(Rakesh Nath, Member (Tehnical)) 


Whether the claim for higher O&M expenses is barred by constructive res judicata as 

the same point was not raised in the appeal filed by Respondent No. 2 before the 

Tribunal challenging the Tariff order for the gas power stations for the period 2004-09? 

Has the Tariff order passed by the Central Commission merged in the Appellate order 

which could not be changed by the Central Commission on an application moved by 

the Respondent? Whether after passing the Tariff order disposing of the main petition 

of the Respondent No. 2, the Central Commission has become functus officio and 

could not have entertained the application filed by the Respondent No. 2 regarding 

enhancement of O&M expenses? 

Held, present case was different where the Central Commission had reserved its 

decision on the petition of the Respondent No. 2/NTPC to revise O&M expenses. 

The Central Commission had also sought additional information from the Respondent 

No. 2/NTPC which was furnished through the IA. All the issues decided against 


Whether the Central Commission could have allowed the O&M expenses without 

warranty spares to Anta, Auriya, Dadri and Kawas Gas Power Stations when these 

stations had a provision for warranty spares for first 10 years of operation? 

Held, the warranty period for supply of free spare has already expired. On the 

expiry of warranty period, the generating station should be governed by the norms 

applicable to the generating stations without warranty spares. The O&M norms as 

applicable to the gas-based generating stations without warranty spares shall apply. 

The Central Commission has given a reasoned and correct order for deciding O&M 

norms as applicable to the gas based stations without warranty spares for the four 

gas stations where the ten years warranty period has already expired. 

Whether a single component of Tariff be revised by the Central Commission without 

considering that 14 per cent ROE is not available to Respondent No. 2 and without 

asking the Respondent No. 2 to submit its annual revenue requirements? 

Held, each element of the Tariff has to be determined on the norms following commercial 

principles, encouraging competition and safeguarding the consumer interest and at 

the same time ensure recovery of the cost of electricity in a reasonable manner. 

Central has decided to allow O&M expenses to the four gas stations of NTPC as 

applicable to Gas power stations without warranty spares. The Central Commission 

has recorded in the impugned order that it is yet to frame the regulations under the 

Section 62(5) and without the regulations being in place, NTPC could not be directed 

to file its ARR. The existing regulations of the Central Commission provide for a 

normative Tariff and there is no provision to file ARR. Thus the filing of ARR was 

not according to the scheme of things as existing in the Tariff Regulations. 

0859 

Appeal dismissed 

i 


Bhupinder Kumar v. Angrej Singh MANU/SC/1581/2009: (2009) 8 SCC 766: 2010 2 

AWC (Supp) 1378 SC: 2010 (2) MhLJ 1 (SC): (2009) 8 MLJ 417 (SC): 2009 (12) 

SCALE 4: (2009) 13 SCR 978: 2009 (9) UJ 4113 (SC) (Mentioned) 

[p. 0867, para 8 g] 


117

0860 


Divya Manufacturing Co. Ltd. v. Union Bank of India and Ors. MANU/SC/0427/2000: 

(2000) 6 SCC 69: AIR 2000 SC 2346: I (2006) BC 428 (SC): (2000) 102 CompCas 66 

(SC): JT 2000 (7) SC 524: 2001-1-LW92: (2000) 126 PLR 369: 2000 (5) SCALE 138: 

(2000) Supp 1 SCR 474 (Mentioned) [p. 0867, para 8 g] 

Edukanti Kistamma through L.Rs. and Ors. v. S. Venkatareddy through L.Rs. and Ors. 

MANU/SC/1839/2009: (2010) 1 SCC 756: AIR 2010 SC 787: 2010 10 AWC (Supp) 

2132 SC: 2009 (57) BLJR 3174: (2009 (123) FLR 1041): JT 2009 (14) SC 451: (2010) 

1 MLJ 828 (SC): 2009 (14) SCALE 139: (2009) 15 SCR 1133: 2009 (10) UJ 4804 (SC): 

2010 (1) WLN 73 (Mentioned) [p. 0865, para 8 h] 

Indian Bank v. Blue Jaggers Estates Ltd. and Ors. MANU/SC/0570/2010: (2010) 8 SCC 

129: AIR 2010 SC 2980: 2010 6 AWC 5663 SC: III (2010) BC 694: (2010) 158 

CompCas 357 (SC): JT 2010 (8) SC 395: (2011) 1 MLJ 132 (SC) (Mentioned) 

[p. 0865, para 8 h] 

Shri Raghavendra Rao and Ors. v. State of Karnataka and Ors. MANU/SC/0183/2009: 

(2009) 4 SCC 635: 2009 (3) ALD 121 (SC): JT 2009 (2) SC 520: (2009) 2 SCR 223 

(Mentioned) [p. 0865, para 8 g] 

UPPCL v. NTPC Ltd. MANU/SC/0346/2009: (2009) 6 SCC 235: 2009 (3) ALD 139 

(SC): 2009 ELR (SC) 13: JT 2009 (3) SC 462: 2009 (3) SCALE 620: (2009) 4 SCR 

1060: 2009 (2) UJ 966 (SC) (Mentioned) [p. 0867, para 8 g] 


Code of Civil Procedure, 1908 

Rule 2, Order 14 [p. 0867, para 8 a] 

Rule 3, Order 20 [p. 0866, para 8 f] 


Central Commission’s Tariff Regulations, 2004, Regulation 13 [p. 0864, para 8 g] 

Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999 

[p. 0867, para 8 b] 

Counsel 

For Appellant/Petitioner/Plaintiff: Pradeep Misra, Suraj Singh, Manoj Kr. Sharma, 

Shashank Pandit, Advs. in Appeal Nos. 100/09 and 146, 151 of 2010, Goswami, 

S. Ravi Shankar, Advs. in Appeal No. 103 of 2009 

For Respondent(s)/Defendant: M.G. Ramachandran, Anand K. Ganesan, Swapna 

Seshdari, Sneha Venkataramani and Ranjitha Ramachandran, Advs. for NTPC 

JUDGMENT 

Rakesh Nath, Member (Tehnical) 

1. Appeal Nos. 100 of 2009, 146 of 2010 and 151 of 2010 have been filed by Uttar 

Pradesh Power Corporation Ltd. against the order dated 3 rd February, 2009 of Central 

Commission revising Operation and Maintenance norms for gas-based power stations 

at Anta, Dadri and Auriya, respectively of NTPC. The Central Commission is the 

Respondent No. 1. NTPC, the Central Sector generating company is the Respondent 

No. 2. The other Respondents are also the beneficiaries from these power stations 

like the Appellant. 

2. Appeal No. 146 of 2010 has been filed by M.P. Power Trading Co. Ltd. against the 

same order dated 3 rd February, 2009 in respect of Kawas Gas Based Station of NTPC. 

The Central Commission is the Respondent No. 1. The Respondent No. 2 is NTPC. 

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The other Respondents are the beneficiaries of Kawas Gas-based Power station of 

NTPC like the Appellant. 

3. Since the impugned order being challenged in these appeals is one and the same, 

a common judgment is being rendered. 

4. The brief facts of the cases are as under: 

4.1 Appeal No. 100 of 2009 

(i) On 26 th March, 2004, the Central Commission notified the 2004 Tariff 

Regulations for the period from 1 st April, 2004 to 31 st March, 2009. The 

Respondent No. 2 on 28 th October, 2004 filed Petition No. 160 of 2004 for 

determination of Tariff for Anta Gas Power Station for the period 2004-09. 

(ii) On 9 th May, 2006, the Central Commission determined the Tariff in 

respect of Anta Gas Power Station for the period from 1 st April, 2004 to 

31 st March, 2009 in Petition No. 160 of 2004. 

(iii) The Appellant filed Appeal No. 139 of 2006 before this Tribunal against 

the Central Commission’s order dated 9 th May, 2006. On 13 th June, 2007 the 

Tribunal decided the appeal. 

(iv) During the pendency of the above appeal, the Respondent No. 2/NTPC 

filed IA No. 52/2006 in Tariff Petition No. 160 of 2004 relating to Anta 

Gas Power Station wherein a prayer was made to award O&M cost on 

the basis of five years’ actual O&M expenses of the gas station. 

(v) The Central Commission vide its order dated 3 rd February, 2009 allowed 

IA No. 52 of 2006 filed by the Respondent No. 2. Aggrieved by this order 

the Appellant has filed this appeal. 

4.2 Appeal No. 103 of 2009 

(i) The Central Commission passed order dated 16 th November, 2006 in 

Petition No. 79 of 2005 of the Respondent No. 2 determining Tariff in 

respect of Kawas Gas Power Station for the period from 1 st April, 2004 to 

31 st March, 2009. In this order, the O&M expenses of the Power Station 

were determined as per the Tariff Regulations, 2004. 

(ii) On 4 th January, 2007, the Respondent No. 2/NTPC filed Review Petition 

No. 4/2007 in Petition No. 79 of 2005 requesting for allowing higher 

Operation and Maintenance cost. NTPC by IA no. 24 of 2008 in Petition 

No. 79/2005 filed information pertaining to O&M expenses for Kawas GPS. 

(iii) At the same time, an appeal being No. 11 of 2007, was filed by the 

Respondent No. 2 before this Tribunal challenging the Tariff order dated 

16 th November, 2006, including the issue of inadequacy of O&M expenses. 

However, in the Appeal No. 11 of 2007, NTPC submitted that the issue of 

inadequacy of O&M charges for gas power station is covered in a separate 

proceeding before the Central Commission and, therefore, did not press 

the issue. The Tribunal gave its judgment in Appeal No. 11 of 2007 on 

13 th June, 2007. 

(iv) On 29 th June, 2007, the Central Commission passed an order disposing 

off review Petition No. 4/2007. However, the Central Commission decided 

that the issue of revision of O&M expenses will be taken up separately. 

(v) The Central Commission by its order dated 3 rd February, 2009 (impugned 

order) allowed IA No. 24 of 2008 allowing revision in O&M norms as 

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applicable to gas based stations without warranty spares. Aggrieved by 

this order, the Appellant has filed the appeal. 

4.3 Appeal No. 146 of 2010 

(i) The Central Commission vide its order dated 9 th May, 2006 determined 

the Tariff in respect of Dadri Gas Power station for the period from 

1 st April, 2004 to 31 st March, 2009 according to its Regulations of 2004 in 

Petition No. 155/04. 

(ii) The Respondent No. 2/NTPC filed a review petition before the Central 

Commission against this order. Simultaneously, it also filed an appeal 

before this Tribunal, being Appeal No. 154 of 2006. 

(iii) During the pendency of the above appeal, the Respondent No. 2/NTPC 

filed an IA No. 53 in Tariff Petition No. 155/04 relating to Dadri gas 

based station wherein a prayer was made to award O&M cost on the 

basis of five years’ actual O&M expenses of the gas station. 

(iv) The Central Commission vide its order dated 3 rd February, 2009 allowed 

IA No. 53 of 2006, permitting higher O&M expenses to the Respondent 

No. 2/NTPC. Aggrieved by this order the Appellant has filed this appeal. 

4.4 Appeal No. 151 of 2010 

(i) The Central Commission vide its order dated 9 th May, 2006 determined 

the Tariff in respect of Auriya Gas Power station for the period 1 st April, 2004 

to 31 st March, 2009 in Petition No. 164/04. 

(ii) NTPC filed a review petition against the above order before the Central 

Commission. Simultaneously, it also filed an appeal against the order 

before this Tribunal being Appeal No. 153 of 2006. NTPC did not raise 

the issue about O&M expenses in this appeal. The said appeal was 

disposed of by the Tribunal vide its judgment dated 13 th June, 2007. 

(iii) During the pendency of the appeal, the Respondent No. 2 filed 

IA No. 51 of 2006 in Tariff Petition No. 164 of 2004 relating to Auriya 

GPS, wherein a prayer was made to award O&M cost on the basis of five 

years’ actual O&M expenses of the gas station. 

(iv) The Central Commission vide its order dated 3 rd February, 2009 

(impugned order) allowed IA No. 51 of 2006, in Petition No. 164 of 2004. 

This order is being challenged by the Appellant in the present appeal. 

5. The Appellants have raised the following issues: 

5.1 In its order dated 29 th March, 2004 regarding the 2004 Regulations, the 

Central Commission had laid down two sets of Operation and Maintenance 

norms, one for Gas Power Stations with warranty spares and the other for Gas 

Power Stations without warranty spares. However, in respect of Faridabad 

and Kayamkulam Gas Power Stations, liberty was granted to the Respondent 

No. 2/NTPC to approach the Commission in case of abnormal O&M expenses 

on account of spares. 

5.2 The Respondent No. 2/NTPC did not raise the issue regarding O&M expenses 

in its appeal before the Tribunal against the Tariff orders. Thus, the claim for 

spares under O&M is barred by constructive resjudicata as the same point 

was not raised in the appeal against the Tariff orders by Respondent No. 2. 

5.3 The order passed by CERC has merged in Appellate order and thereafter 

the same could not have been changed either suo motu or on application 

moved by the Respondent No. 2/NTPC. 

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5.4 After passing the Tariff order thereby disposing of the main petition, the 

State Commission has become functus officio and could not have entertained 

the application filed by NTPC. 

5.5 The Central Commission could not have applied the norms regarding power 

station without warranty spares when warranty spares were available in the 

present case. Also, a single component of Tariff could not have been revised without 

recording the finding that 14 per cent Return on Equity is not available to NTPC. 

5.6. The Central Commission could have asked the Respondent No. 2/NTPC 

to submit its revenue requirement even if the regulations were not made under 

Section 62(5) of the Act. 

6. Respondent No. 2/NTPC has submitted as under: 

6.1 Anta, Auriya, Dadri and Kawas Gas Power Stations were established with 

warranty period of 10 years during which there was free supply of warranty 

spares from the original equipment manufacturer and after a period of 10 years 

there was no free supply. The period of 10 years from date of commercial 

operation during which free warranty spares were available has expired and 

power stations no longer get free spares from the original equipment 

manufacturer. In the impugned order, the Central Commission after considering 

all the relevant aspects and the material placed by NTPC in justification of the 

higher O&M expenses has correctly decided that such gas power stations 

where 10 year warranty period is over are to be treated at par with Gas Power 

Stations where there is no warranty period. On the other hand, no material 

was placed by the Appellants/beneficiaries to show how the higher O&M 

expenses claimed by NTPC were not justifiable on merits. 

6.2 The only factual aspect to be considered is whether the embedded cost in 

the plant purchased by inclusion of warranty spares for 10 years is giving 

benefit to NTPC in the form of Return on Equity (ROE) and depreciation to an 

extent that it would amount to giving double benefit to NTPC if higher O&M 

expenses are allowed after 10 years. NTPC placed the relevant materials before 

the Central Commission to show that NTPC did not get such double benefit. 

6.3 The Central Commission’s Tariff Regulations provide for the power to 

relax. The power to relax gives the Central Commission discretion which is of 

the nature of judicial discretion to be exercised based on the facts and 

circumstances of the case. 

6.4 In proceeding in Petition No. 160 of 2004 for Anta and 164 of 2004 for 

Auriya, the Central Commission directed NTPC to furnish details for considering 

O&M expenses in deviation of the norms given in the Regulations, 2004. 

Thereafter, in the order dated 9 th May, 2006, the Central Commission decided 

to consider the issue of O&M expenses for Gas Power Stations in a separate 

proceeding. Thus the issue of O&M expenses was pending for consideration 

before the Central Commission, which was decided by the impugned order. 

6.5 The issue of O&M expenses was pending before the Central Commission, 

therefore, the Respondent No. 2 had no occasion to challenge the aspect of 

O&M expenses in the appeals filed before the Tribunal against the Tariff orders 

of the State Commission for the gas power stations for the period 2004-09. 

NTPC had only challenged the issue of O&M expenses in Appeal No. 11 of 2007 

before the Tribunal in respect of Kawas GPS. However, when the 

Central Commission later decided to consider the issue, NTPC did not press the 

matter with liberty to raise the issue, if required. 

0863 


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6.6 The contention of the Appellant that no relaxation ought to be given to 

NTPC in O&M expenses since NTPC is getting 14 per cent ROE is not supported 

by the provisions of the Act. 

6.7 Section 62(5) has no application in the present case. NTPC gets a normative 

Tariff and, therefore, adjustment on account of Section 62(5) of the 2003 Act 

can not arise in the present case. 

7. After considering the contentions of the parties, we frame the following questions 

for consideration: 

(i) Is the claim for higher O&M expenses is barred by constructive resjudicata 

as the same point was not raised in the appeal filed by Respondent No. 2 

before the Tribunal challenging the Tariff order for the gas power stations for 

the period 2004-09? 

(ii) Has the Tariff order passed by the Central Commission merged in the 

Appellate order which could not be changed by the Central Commission on 

an application moved by the Respondent? 

(iii) Whether after passing the Tariff order disposing of the main petition of 

the Respondent No. 2, the Central Commission has become functus officio 

and could not have entertained the application filed by the Respondent No. 2 

regarding enhancement of O&M expenses? 

(iv) Whether the Central Commission could have allowed the O&M expenses 

without warranty spares to Anta, Auriya, Dadri and Kawas Gas Power Stations 

when these stations had a provision for warranty spares for first 10 years of 

operation? 

(v) Whether a single component of Tariff be revised by the Central Commission 

without considering that 14 per cent ROE is not available to Respondent No. 2 

and without asking the Respondent No. 2 to submit its annual revenue 

requirements? 

8. The first three questions are interwoven and therefore, we deal with them together. 

Before answering these questions, we would first like to examine the background of 

the case and findings of the Central Commission. 

8.1 In petition filed by the Respondent No. 2/NTPC for determination of Tariff 

for gas based station for the period from 1 st April, 2004 to 31 st March, 2009, it 

submitted the details on the inadequacy of O&M expenses and sought relaxation 

under Regulation 13, viz. power to relax. 

8.2 In the order dated 9 th May, 2006 regarding Tariff determination for Anta 

GPS, the Central Commission has recorded the following on the aspect of 

O&M expenses: 

50. The Petitioner has stated that the normative O&M expenses specified 

in the 2004 regulations are highly inadequate in case of gas-based 

generating stations. The Petitioner has, therefore, submitted that O&M 

expenses should be based on actual figures for it to be more realistic. 

51. The Petitioner has submitted that the 10 year warranty period has 

expired in November 1998 and O&M charges claimed by them are higher 

than the normative O&M expenses due to the following reasons: 

(i) Higher repair and maintenance (R&M) expenses due to aging, 

higher replacement cost of spares, equipment failure etc. and 

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(ii) Inclusion of cost of spares consumed at actuals after the warranty 

period and inclusion of additional capitalisation disallowed. 

52. The Commission vide order dated 16 th February, 2006 had directed 

the Petitioner to place on record the following information before a view 

on the revision of O&M expenses for the five gas-based stations was taken: 

(a) Details of actual O&M expenses from the date of commercial operation 

of first GT of each of the generating stations to 2004-05; 

(b) O&M expenses recovered in Tariff from the date of commercial operation 

of first GT to 2004-05; 

(c) Whether or not the capital spares issued at zero cost already included 

in the capital cost for the purpose of Tariff; and 

(d) Basis of estimation of embedded cost of spares in respect of each of 

the above named gas-based generating stations. 

53. The issue of revision of O&M expenses as claimed by the Petitioner 

shall be considered on merits after filing of the above information by the 

Petitioner, after a comprehensive examination of the issue for all the five 

gas based generating stations of the Petitioner. In the meanwhile, Tariff 

is being awarded with O&M based, the 2004 regulations. 

Thus, the Central Commission directed the NTPC to file the information required 

to review the O&M expenses which would be considered on merits. However, in 

the meantime the Tariff was determined with O&M based on the 2004 Regulations. 

8.3 NTPC filed appeals against the Tariff order for the gas based stations for the 

period 2004-09 on some issues except O&M expenses, due to the reasons that 

the review of the O&M expenses was still under consideration of the Central 

Commission and the same had not been concluded. In the appeal against Tariff 

order for Kawas GPS issue regarding inadequate O&M expenses was included 

but NTPC did not press for it as the Central Commission was considering the 

same, reserving its right to agitate the issue in future. Thus, there was no occasion 

for the Respondent No. 2/NTPC to challenge O&M expenses. The judgments of 

the Tribunal on the appeals filed by the Respondent No. 2/NTPC against the 

Tariff orders did not deal with the issue of O&M expenses. 

8.4 Subsequently, the NTPC filed IAs with the Central Commission giving 

information regarding claim for higher O&M expenses which was accepted in 

the impugned order. 

8.5 Shri Pradeep Misra has cited 2009 (4) SCC 635 Shri Raghavendra Rao and 

Ors. v. State of Karnataka and Ors. 1 to press the point regarding constructive 

resjudicata and 2010 (1) SCC 756 in Edukanti Kistamma through L.Rs. and Ors. 

v. S. Venkatareddy through L.Rs. and Ors. 2 to press the point that the final order 

can not be reconsidered in any subsequent proceedings. He also cited 2010 (8) 

SCC 129 in Indian Bank v. Blue Jaggers Estates Ltd. and Ors. 3 that the order 

0865 

i 

1 Ed.: MANU/SC/0183/2009: 2009 (3) ALD 121 (SC): JT 2009 (2) SC 520: (2009) 2 SCR 223 

2 Ed.: MANU/SC/1839/2009: AIR 2010 SC 787: 2010 10 AWC (Supp) 2132 SC: 2009 (57) 

BLJR 3174: (2009 (123) FLR 1041): JT 2009 (14) SC 451: (2010) 1 MLJ 828 (SC): 2009 (14) 

SCALE 139: (2009) 15 SCR 1133: 2009 (10) UJ 4804 (SC): 2010 (1) WLN 73 

3 Ed.: MANU/SC/0570/2010: AIR 2010 SC 2980: 2010 6 AWC 5663 SC: III (2010) BC 694: 

(2010) 158 CompCas 357 (SC): JT 2010 (8) SC 395: (2011) 1 MLJ 132 (SC) 


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0866 


challenged and upheld in Special Leave Petition can not be challenged indirectly 

in Special Leave Petition filed by other party. 

8.6. Let us now examine the findings of the Central Commission in the impugned 

order regarding maintainability of IA filed by the NTPC regarding O&M expenses. 

14. We, in the first instance, consider the preliminary objection relating to 

maintainability of the IA. There is no denying the fact that IA is normally 

not maintainable after the final disposal of the main petition, except for 

rectification of clerical errors. This is intended to obviate the possibility of 

reopening the judgment or order on merits for which the remedy of appeal 

is available. The position is different in the present case. In the case on 

hand, the Commission had taken note of the submissions of the Petitioner 

that O&M expenses calculated on normative basis were inadequate to 

meet the actual expenses in respect of the gas-based generating stations 

and directed the Petitioner to file the required information for taking a 

view in the matter and till that time, O&M expenses were determined on 

basis of the norms. In other words, even though the main petition has been 

disposed of the prayer of the Petitioner with regard to O&M expenses has 

not been finally disposed by the Commission and has been kept open for 

consideration. The information has been filed in compliance with directions 

of the Commission in the said order. Moreover, the information has been 

called for by the Commission to take a view in the matter. Therefore, filing 

of the IAs for submission of the required information in compliance with 

the directions of the Commission cannot be treated as synonymous with 

any other application made for the modification of the order. The legal 

point regarding the maintainability of the IA after disposal of the main 

petition decided by the Commission in its order dated 20 th February, 2008 

in IA No. 49/2008 in Petition No. 154/2007 is not applicable in this case. 

Similarly, Rule 3 Order 20 of Code of Civil Procedure does not stand as a 

bar to the maintainability of the IA in the instant case. The question of 

O&M expenses recoverable by the Petitioner was not finally settled in the 

order dated 9 th May, 2006 and was left open to be considered by the 

Commission after submission of the details called for. 

8.7 A generic agreement with what the Commission has observed in the later 

part of Paragraph No. 14 of the impugned order will be more in the nature of 

unsettling the legal position which stood settled for a long time. The appeal 

presents a dis-quietening feature which one trained in judicial discipline would 

find difficult to reconcile with, the question of merit of the case being a different 

proposition. The Petition No. 160 of 2004 relating to Anta gas-based power 

station was disposed of on 9 th May, 2006 leading to preferring Appeal No. 139 

of 2006 and while appeal was pending the Commission entertained interlocutory 

application being I.A. No. 52 of 2006 concerning disposal of O&M issue and 

passed an order on 3 rd February, 2009. Similarly, in respect of Kawas gas-based 

power station, the Commission entertained interlocutory application being 

I.A. No. 24 of 2008 after disposal of the main Petition No. 79 of 2005. Similar 

things happened with respect to Petition No. 155 of 2004 relating to Dadri 

Gas Power Station and Petition No. 164 of 2004 relating to Auriya gas-based 

power station. It is common knowledge that depreciation, return on equity, 

interest on loan, O&M charges, interest on working capital and advance against 

depreciation are essential elements of Annual Revenue Requirements of a 

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generation and transmission Company. The matters relating to O&M charges 

are essentially and absolutely questions of fact. Order 14, Rule 2 of the Code of 

Civil Procedure clearly mandates that except when a case hinges absolutely 

on the question of law, all issues particularly of facts have to be decided 

together. If we have studied the Central Electricity Regulatory Commission 

(Conduct of Business) Regulations, 1999 properly we will herein find a nice 

blending in spirit of the essential procedures for adjudication of a dispute as 

laid down in the Civil Procedure Code. The unusual feature is that the 

Commission disposes of Tariff petitions while keeping one issue alive and 

they entertained interlocutory applications while appeals are pending against 

those orders. Entertaining of interlocutory applications after disposal of a matter 

from which appeal is preferred is definitely a procedure quite unusual and 

this leads us to hear a somewhat embarrassing submission of Mr. Pradeep 

Misra that the Commission is not following a uniform procedure, for in one 

matter they say that they are powerless to do anything being functus officio, 

while in others they entertain application attempting to make a distinction 

between the two situations. What we want to emphasize is that the procedure 

must be uniform and uniformly applied leading no scope for anybody to assail 

that one is discriminated against the other. The position would have been 

definitely otherwise if the question of res judicata as has been raised by 

Mr. Pradeep Misra upon proper examination had been found to be applicable 

and secondly submission was made before this Tribunal that they were not 

pressing the issue on O & M expenses as the Commission was in seisin of the 

same. Be that as it may, what is called a final order is an order finally adjudicating 

upon all the issues of facts and law and there cannot be a final order separately 

to be passed on each of the issues that may confront the Commission. Since 

the decisions referred to by learned Counsel for the Appellant do not fit in the 

peculiar facts of the case, we feel it unable to dismiss the appeal summarily 

but we hope and trust that the Commission will not depart from the normal 

judicial procedure in deciding cases. 

8.8 Shri M.G. Ramachandran, learned Counsel for Respondent No. 2 has argued 

that the present case is different as the issue of O&M expenses was reserved 

by the Central Commission and, therefore, there was no occasion for the 

Respondent No. 2 to challenge the same. He also cited (2009) 6 SCC 235 UPPCL 

v. NTPC Ltd. 4 (2000) 6 SCC 69 Divya Manufacturing Co. Ltd. v. Union Bank of 

India and Ors. 5 (2009) 8 SCC 766 Bhupinder Kumar v. Angrej Singh, 6 to counter 

the arguments of the Appellant on the issues of Constructive res judicata, functus 

officio and merger of Central Commission’s order with the Tribunal’s judgment. 

8.9 After considering the contentions of the learned Counsel for both the parties 

we come to the conclusion that the present case was different where the Central 

Commission had reserved its decision on the petition of the Respondent No. 2/NTPC 

to revise O&M expenses. The Central Commission had also sought additional 

0867 

i 

4 Ed.: MANU/SC/0346/2009: 2009 (3) ALD 139 (SC): 2009 ELR (SC) 13: JT 2009 (3) SC 462: 

2009 (3) SCALE 620: (2009) 4 SCR 1060: 2009 (2) UJ 966 (SC) 

5 Ed.: MANU/SC/0427/2000: AIR 2000 SC 2346: I (2006) BC 428 (SC): (2000) 102 CompCas 

66 (SC): JT 2000 (7) SC 524: 2001-1-LW92: (2000) 126 PLR 369: 2000 (5) SCALE 138: (2000) 

Supp 1 SCR 474 

6 Ed.: MANU/SC/1581/2009: 2010 2 AWC (Supp) 1378 SC: 2010 (2) MhLJ 1 (SC): (2009) 8 

MLJ 417 (SC): 2009 (12) SCALE 4: (2009) 13 SCR 978: 2009 (9) UJ 4113 (SC) 


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0868 


information from the Respondent No. 2/NTPC which was furnished through the 

IA. In view of this, we decide the first three issues against the Appellant. 

9. The next issue is application of O&M norms without warranty spares. 

9.1 First of all, we will examine the Central Commission’s findings in the impugned 

order in this regard. The Central Commission has given a reasoned order while 

reviewing the O&M expenses. In Para 22, the Central Commission has deliberated 

on the spares cost estimated to be embedded in the capital cost of the respective 

station and in Para 23 compared the actual O&M expenses of the four Gas-based 

stations vis-à-vis the O&M expenses recovered upto 2004-05 to find the shortfall in 

O&M recovery. In Paras 25 and 26, it has then estimated the difference in Repair 

& Maintenance expenses, a component of O&M expenses, before and after warranty 

period as in the year 2004-05. The Central Commission has worked out weighted 

average difference in R&M expenses of the four stations before and after the expiry 

of warranty period as Rs. 2.23 lac/MW. It has also checked that difference between 

Base R&M and actual R&M for FY 2004-05 for Faridabad and Kayamkulam which 

do not have any warranty spares in Para 27 of the order and find the actual R&M 

almost equal to the normalised R&M expenses for 2004-05. Thereafter, the Central 

Commission has recorded as under in the impugned order: 

29. On analysis of the above, it appears to us that there is merit in the 

Petitioner’s contention and there is a case for having a second look at 

O&M norms to be allowed to the Petitioner since it has been worked out 

that there is an increase of Rs. 2.23 lac/MW under the sub-head of R&M 

expenses after the expiry of warranty period. We have analysed the data 

furnished by the Petitioner in Tariff petitions for the period 2001-04 and 

have found that cost of spares indicated by the Petitioner and relied upon 

by the Commission in its orders were the notional values arrived at in the 

respective year of consumption after accounting for escalation and custom 

duty at 60 per cent freight and handling charges etc. The customs duty, 

freight and handling charges are generally paid in addition to the contract 

prices. As such, notional cost of these spares as worked out by the Petitioner 

based on foreign exchange rate as on dates of commercial operation of the 

respective unit or generating station appears to be reasonable. Thus, there 

is no denying that existing O&M norms applied to the generating stations 

with initial warranty spares in the Tariff order are much lower than the 

actuals for the period 1995-96 to 1999-2000 when warranty period was 

applicable and as such those expenses do not reflect the actual consumption 

pattern of spares and R&M expenditure. 

30. We would not like to dragged into the debate on the question of cost 

of spares embedded in the project cost yet again. Any estimation of 

embedded cost would always be debatable. Even if for sake of argument, 

it is accepted that there is embedded cost on account of warranty spares 

in the capital cost of the generating station, in our view, such a provision 

was kept by the Petitioner in its bidding condition in over all interest of 

the beneficiaries and in good faith and the beneficiaries were benefited 

during the warranty period with less O&M cost. 

31. The warranty period for supply of free spare has already expired as 

noted above. We feel that with the expiry of warranty period, the generating 

station should be governed by the norms applicable to the generating 

stations without warranty spares. Accordingly, we direct that the O&M 

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norms as applicable to the gas-based generating stations without warranty 

spares as given hereunder shall apply. 

9.2 Thus, the Central Commission has given a reasoned and correct order for 

deciding O&M norms as applicable to the gas based stations without warranty 

spares for the four gas stations where the 10 years warranty period has already 

expired. 

Accordingly, we reject the contentions of the Appellant in this regard. 

10. The next issue is regarding revision of single component of Tariff without 

considering ROE of the Respondent No. 2/NTPC. 

10.1 The Central Commission in its Regulations has determined norms for the 

various components of the Tariff. Thus, the regulations provide for a normative 

Tariff. 

10.2 The relevant provisions of the Section 61 of the 2003 Act are reproduced 

below: 

Section 61. Tariff Regulations - The Appropriate Commission shall, subject 

to the provisions of this Act, specify the terms and conditions for the 

determination of Tariff, and in doing so, shall be guided by the following, 

namely: 

(a) xxx xxx xxx 

(b) the generation, transmission, distribution and supply of electricity 

are conducted on commercial principles; 

(c) the factors which would encourage competition, efficiency, 

economical use of the resources, good performance and optimum 

investments; 

(d) safeguarding of consumers’ interest and at the same time, recovery 

of the cost of electricity in a reasonable manner; 

(e) the principles rewarding efficiency in performance. 

Thus, each element of the Tariff has to be determined on the norms following 

commercial principles, encouraging competition and safeguarding the consumer 

interest and at the same time ensure recovery of the cost of electricity in a 

reasonable manner. Accordingly, the Central Commission by a reasoned order 

has decided to allow O&M expenses to the four gas stations of NTPC as applicable 

to Gas power stations without warranty spares. It is expected that if NTPC 

performs better than the operational norms, it will be rewarded for efficiency 

and if it performs at lower than normative parameters, it will have to bear the 

consequential loss. Thus, there is no force in the argument of the Appellant that 

before allowing the enhanced O&M expenses, the Central Commission shall 

check whether the actual ROE is less than the normative ROE and then only 

allow the enhanced O&M expenses. This is not as per the scheme of the 

Regulations. Accordingly, this issue is also decided against the Appellant. 

11. The last issue is regarding filing of Annual Revenue Requirement (ARR) by the 

Respondent No. 2 before the Central Commission under Section 62(5) of the 2003 Act. 

11.1 Section 62(5) is reproduced below: 

62. Determination of Tariff 

(5) The Commission may require a licensee or a generating company to 

comply with such procedures as may be specified for calculating the expected 

revenues from the Tariff and charges which he or it is permitted to recover. 

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11.2 The Central Commission has recorded in the impugned order that it is yet 

to frame the regulations under that Sub-section and without the regulations 

being in place, NTPC could not be directed to file its ARR. 

11.3 The existing regulations of the Central Commission provide for a normative 

Tariff and there is no provision to file ARR as suggested by the Appellants. 

Thus, the filing of ARR is not according to the scheme of things as existing in 

the Tariff Regulations. Accordingly, this issue is also decided against the Appellant. 

12. In view of above findings, we find no substance in the appeal. The Appeal is 

dismissed. No order as to costs. 

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2011 ELR (APTEL) 0870* 



Union of India, South Central Railways and Ors. 

v. 

A.P.E.R.C. and Ors. 

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DFR NO. 1986 OF 2010 

DECIDED ON: 23.05.2011 

Coram 



Whether permission can be granted to withdraw the petition? 

Held, in view of the fact that the South Central Railway decided not to pursue 

further with the appeal in view of the competitive Tariff offered by the Andhra State 

Commission for the year 2011-12, permission to withdraw the petition granted. 

e 

f 

Petition and Appeal are dismissed 

Counsel 

For Appellant/Petitioner/Plaintiff: V.S. R. Krishna, Sr. Adv. and Abhishek Yadav, Adv. 

ORDER 


1. The learned Counsel for the Appellant has filed a Memo seeking for the permission 

to withdraw this Petition as well as the Appeal in view of the fact that the South 

Central Railway decided not to pursue further with the Appeal in view of the 

competitive Tariff offered by the Andhra State Commission for the year 2011-12. 

2. Permission is granted. Accordingly, the Petition and the Appeal are dismissed as 

withdrawn. 

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* MANU/ET/0081/2011 

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2011 ELR (APTEL) 0871* 



Maharashtra State Power Generation Co. Ltd., Mumbai 

v. 

Maharashtra Electricity Regulatory Commission, Mumbai and Ors. 


DECIDED ON: 24.05.2011 

Coram 



Whether the State Commission was right in attributing the entire delay in 

commissioning of the Unit to the Appellant and disallowing entire time overrun 

related cost to the Appellant without considering the delays and shortcomings on the 

part of the supplier, viz. M/s BHEL? 

Held, the capital cost had to be determined on the basis of actual expenditure incurred 

on completion of the project subject to prudence check by the State Commission. The 

State Commission had not examined the reasons for delay in commissioning of the 

project and attributed the entire time overrun-related cost with respect to the 

contractual schedule agreed with BHEL to the Appellant. This accordingly is not a 

prudence check. 

The delay in execution of a generating project could occur due to - (i) factors entirely 

attributable to the generating Company; (ii) factors beyond the control of the generating 

company and (iii) situation not covered by (i) and (ii); 

In the first case, the entire cost due to time overrun had to be borne by the generating 

company. However, the Liquidated Damages (LDs) and insurance proceeds on account 

of delay, if any, received by the generating company could be retained by the generating 

company. In the second case, the generating company could be given benefit of the 

additional cost incurred due to time overrun. However, the consumers should get 

full benefit of the LDs recovered from the contractors/suppliers of the generating 

company and the insurance proceeds, if any, to reduce the capital cost. In the third 

case, the additional cost due to time overrun including the LDs and insurance 

proceeds could be shared between the generating company and the consumer. It would 

also be prudent to consider the delay with respect to some benchmarks rather than 

depending on the provisions of the contract between the generating company and 

its contractors/suppliers. If the time schedule is taken as per the terms of the contract, 

this may result in imprudent time schedule not in accordance with good 

industry practices. 

The agreement with the BHEL provided for a reasonable time schedule for completion 

of the project as also a reasonable clause for Liquidity damages. Thus, there seems 

* MANU/ET/0082/2011 


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to be no imprudence on the part of the Appellant in selecting the main equipment 

supplier, which happens to be a major state owned equipment-manufacturing 

company and in the terms and conditions of the agreement. 

Based on facts and documents submitted, though it is evident that there was delay 

on the part of BHEL in supply and commissioning of the main plant, though it was 

not established beyond doubt that the entire delay was due to the reasons beyond 

the control of the Appellant. 

Whether the State Commission had erred in rejecting part of capital cost due to IDC, 

overheads, cost of initial spares and loan subsidy, etc.? 

Held, there are no specific regulations for determining the overhead cost. It would 

not be correct to determine norms of overhead cost from CEA approved cost. Apart 

from the overhead cost on account of delay in commissioning of the project might 

have to be disallowed. State Commission was directed to determine the overhead 

cost for the time overrun from the scheduled date of commissioning of the project on 

pro rata basis with respect to actual time taken in completion of the project. 50 per cent 

of the excess overheads due to time overrun calculated thus may be disallowed. 

Infusion of debt and equity has to be more or less on pari passu basis as per normative 

debt equity ratio. The State Commission is directed to redetermine the IDC for the 

actual period of commissioning of the project and then work out the excess IDC for 

the period of time overrun on a pro rata basis and limit the disallowance to 50 per cent 

of the same on account of excess IDC. The principle laid down for IDC and overheads 

will also be applicable to the amount of AG&SP loan subsidy. 

State Commission has powers to relax the provisions of the Tariff Regulations, 2005. 

Whether the State Commission was right in considering Advance Against Depreciation 

Company-wise instead of Station-wise? 

Held, issue was dealt with in details by the Tribunal in its judgment dated 27 th April, 2011 

in Appeal No. 191 of 2009 in the matter of Maharashtra State Power Generation Co. Ltd. v. 

Maharashtra Electricity Regulatory Commission and Ors. State Commission accordingly 

directed to re-determine station-wise AAD as per its Regulations by following the judgment 

of this Tribunal referred to above. Each Tariff proceeding is a separate and distinct 

cause of action. Failure of the Appellant to challenge an issue in earlier Tariff order does 

not bar the Appellant to challenge that issue in a subsequent Tariff order. Actual repayment 

of allocated loans can be apportioned power station-wise. State Commission directed to 

determine station-wise AAD. 

Whether the State Commission was correct in deferring the Additional Capitalisation 

claimed by the Appellant? 

Held, Tariff Regulation 30.2 provides for additional capitalisation for inclusion in 

the original cost of project, subject to prudence check. Additional capitalisation 

should be considered expeditiously by the State Commission as the delay would 

only add IDC or carrying cost besides delaying return on equity to the Appellant. 

Appellant is directed to submit the desired information to the State Commission 

and the State Commission would consider it at the earliest. 

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Maharashtra State Power Generation Co. Ltd. v. MERC, Mumbai and Ors. 

(Rakesh Nath, Member (Technical)) 


Maharashtra State Power Generation Co. Ltd. v. Maharashtra Electricity Regulatory 

Commission and Ors. MANU/ET/0059/2011: Appeal No. 72 of 2010 (Mentioned) 

[p. 0875, para 7 g] 

Maharashtra State Power Generation Co. Ltd. v. Maharashtra Electricity Regulatory 

Commission and Ors. MANU/ET/0060/2011: Appeal No. 191 of 2009 (Affirmed) 

[p. 0876, para 9 h] 


Electricity (Supply) Act, 1948, Section 61(d) [p. 0877, para 7 h] 


Tariff Regulations, 2005 

Regulation 30.1 [p. 0874, para 4 g] 

Regulation 30.2 [p. 0881, para 10 f] 

Regulation 32.3 [p. 0874, para 4 h] 

Counsel 

For Appellant/Petitioner/Plaintiff: Deepa Chavan, Kiran Gandhi and Taruna 

A. Prasad, Advs. 

For Respondent(s)/Defendant: Buddy A. Ranganadhan, Adv. for Respondent No. 1 

0873 

JUDGMENT 

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Rakesh Nath, Member (Technical) 

1. This Appeal has been filed by Maharashtra State Power Generation Company 

Limited against the order of the Maharashtra Electricity Regulatory Commission (State 

Commission) dated 15 th December, 2009 determining the Tariff of Unit No. 3 at Paras 

Thermal Power Station for the years 2008-09 and 2009-10. The State Commission is 

the Respondent No. 1. The Respondent Nos. 2 to 6 are Consumer’s Associations/ 

NGOs. Maharashtra State Distribution Company is the Respondent No. 7. 

2. The brief facts of the case are as under: 

2.1. The Appellant is a generating company engaged in the business of generation 

of electricity in the State of Maharashtra. 

2.2. On 29 th March, 1997, the erstwhile Maharashtra State Electricity Board, 

the predecessor of the Appellant, approved the proposal for development of 

the 250 MW Paras Unit No. 3. On 13 th June, 2003, the Central Electricity Authority 

accorded the Techno Economic Clearance to this project under the relevant 

provisions of the Electricity (Supply) Act, 1948. On 25 th May, 2004, the project 

implementation commenced with placement of order for main plant equipment 

on M/s Bharat Heavy Electricals Ltd. (BHEL). On 17 th December, 2004, Agreement 

for design, engineering, manufacture, supply, etc. for the main plant equipment 

was signed between the Appellant and M/s BHEL. 

2.3. On 31 st March, 2008, Paras Unit No. 3 was commissioned after a delay of 

about 14 months with respect to the contractual date of commissioning. 

According to the Appellant, the delay was solely attributable to M/s BHEL for 

which the Appellant imposed liquidity damages on M/s BHEL. 

2.4. Subsequently, the Appellant filed a petition for determination of Tariff for 

Paras Unit No. 3 for the years 2008-09 and 2009-10 before the State Commission. 


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On 15 th December, 2009, the State Commission passed the impugned order 

disallowing some of the claims of the Appellant. Aggrieved by the order dated 

15 th December, 2009, the Appellant has filed this Appeal. 

3. The Appellant is aggrieved by the following issues: 

(i) Non-consideration of reasons for delay in commissioning of Paras Unit 

No. 3 and consequential disallowance of the capital cost 

(ii) Disallowance of actual capital cost incurred 

(iii) Disapproval of Advance Against Depreciation (AAD) 

(iv) Deferment of Additional Capitalisation. 

4. On the above issues the Appellant has made the following submissions: 

(i) Reasons for delay in commissioning of Para Unit 3: 

BHEL was the sole bidder for the Project. The delay was solely on account 

of BHEL who had to complete the project by January 2007, as per the 

Agreement. The Appellant took all necessary measures to follow up with 

BHEL and had even stationed an officer at the manufacturing unit of 

BHEL to expedite supplies of equipment. However, due to heavy order 

book and inadequate manufacturing capacity of BHEL there were delays 

in implementation of the project which were beyond the control of the 

Appellant. There was no delay on the part of the Appellant to provide 

necessary inputs in the scope of the Appellant to match the erection 

activities of BHEL to achieve contractual schedule. The State Commission 

has wrongly attributed the entire delay to the Appellant and disallowed 

the costs on account of delay in commissioning of the unit to the Appellant. 

However, the State Commission has not ruled that any delay was on 

account of actions or inactions of the Appellant. 

(ii) Disallowance of actual Capital Cost: 

This issue is to a large extent related to the first issue and is a consequence 

of attributing the entire delay in commissioning of the project to the Appellant. 

Against the claim of capital cost (excluding IDC) of Rs. 1248.91 crores by 

the Appellant, the State Commission has allowed a sum of Rs. 1122.62 crores, 

thus disallowing a cost of Rs. 126.29 crores. IDC has also not been allowed 

fully. This is not in consonance with the Regulation 30.1 of the Tariff 

Regulations, 2005 of the State Commission. The costs disallowed partially 

are Interest During Construction (IDC), overhead cost, cost of initial spares, 

refund of interest subsidy under Accelerated Generation & Supply 

Programme Scheme (AG&SP) and interest on loans due to pro rata reduction 

in debt component as per debt equity ratio. 

(iii) Disapproval of Advance Against Depreciation 

The State Commission has disapproved the Advance Against Depreciation 

(AAD) for Paras Unit No. 3 contrary to the Regulation 32.3, even though 

the loan payment exceeded the amount of depreciation. The State 

Commission has wrongly disallowed AAD on the ground that the 

depreciation of the company as a whole is more than loan repayment of 

the company. The State Commission should have approved AAD on the 

project based position and not considered company as a whole for 

allowance of AAD. 

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(iv) Deferment of Additional Capitalisation: 

The State Commission has deferred consideration of capitalisation of 

certain expenditure post commissioning of the Unit on the ground that 

some details were not provided by the Appellant. The State Commission 

should have sought the information from the Appellant instead of deferring 

the Additional Capitalisation. 

5. Mr. Buddy A. Ranganadhan, learned Counsel for the Respondent No. 1/State 

Commission has argued extensively supporting the findings of the State Commission 

in the impugned order. He argued that the project suffered from time and cost 

overrun. As per the contract with BHEL, the date of completion of supply and trial 

operation was January 2007 but the Unit was commissioned in March 2008, i.e. 

after a delay of about 14 months. Also as against capital cost of Rs. 923 crores 

approved by CEA in the year 2003 and approval of the Board for Rs. 1,022.53 crores 

in February, 2004, the actual cost incurred by the Appellant excluding IDC and 

Financing cost was Rs. 1,327.21 crores. The Appellant cannot absolve itself of the 

responsibility of timely commissioning of the unit and pass on the blame on its 

Contractor, M/s. BHEL. The State Commission has analysed and explained the 

disallowed portion of the claim of capital cost due to delay in commissioning of the 

project attributable to the Appellant, cost of some common facilities between Unit 3 

and 4, spare parts, etc. 

6. After examining the contentions of the parties, we have framed the following 

questions for consideration: 

(i) Was the State Commission right in attributing the entire delay in 

commissioning of the Unit to the Appellant and disallowing entire time overrun 

related cost to the Appellant without considering the delays and shortcomings 

on the part of the supplier, viz. M/s BHEL? 

(ii) Has the State Commission erred in rejecting part of capital cost due to IDC, 

overheads, cost of initial spares and loan subsidy, etc.? 

(iii) Was the State Commission right in considering Advance Against 

Depreciation Company-wise instead of Station-wise? 

(iv) Was the State Commission correct in deferring the Additional Capitalisation 

claimed by the Appellant? 

We find that all the above issues have been covered in the judgment of this Tribunal 

dated 27 th April, 2011 in Appeal No. 72 of 2010 in the matter of Maharashtra Power 

Generation Co. Ltd. v. MERC and Ors. 1 In light of findings of the Tribunal’s judgment 

dated 27 th April, 2011, we will answer the above questions. 

7. The first issue is regarding delay in commissioning of the Unit. 

7.1 According to the Appellant, the delay was solely on account of BHEL. On the 

other hand, the State Commission’s contention is that the Appellant cannot absolve 

itself of responsibility of project management and simply pass on the blame on its 

contractor. The cost overrun due to delay in execution of the project cannot be 

passed on the consumers. 

7.2 Let us first examine the relevant Regulation for capital cost. Regulation 30.1 of 

the Tariff Regulations, 2005 is reproduced below: 

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Subject to prudence check by the Commission, the actual expenditure incurred 

on completion of the project shall form the basis for determination of the original 

cost of project. The original cost of project shall be determined based on the 

approved capital expenditure actually incurred up to the date of commissioning 

of the generating station and shall include capitalised initial spares subject to 

following ceiling norms as a percentage of the cost as on the cut-off date.... 

Thus, the capital cost shall be on the basis of actual expenditure incurred on 

completion of the project, subject to prudence check by the State Commission. 

There is no dispute on the capital cost incurred by the Appellant. What is 

disputed is the cost which has been disallowed mainly due to time overrun. 

7.3 Let us examine the findings of the State Commission regarding delay in 

commissioning of the unit in the impugned order. The relevant extracts are reproduced 

below: 

(95) As regards, the impact of time overrun on account of delay in the project 

commissioning, MSPGCL has considered the entire IDC incurred till actual 

COD of the Project and has proposed to reduce the same by the Liquidated 

Damages levied on the Contractors for delay in project. The commission agrees 

with the views of some of the stakeholders raised during the hearing that the 

burden of increase in IDC due to delay in Project should not be loaded to the 

consumer. The Commission has therefore, re-computed the IDC considering 

original schedule and original phasing of expenditure. 

(100) MSPGCL submitted that the total amount received and refunded to PFC 

under AG&SP amounts to Rs. 18.47 Crore. The Commission observes that had 

the Project been commissioned on time, this amount of Rs. 18.47 Crore received 

as subsidy under AG&SP would have reduced the project cost by that amount. 

The amount refunded by MSPGCL under AG&SP cannot be passed on to 

consumers as the consumers in Maharashtra have already suffered in terms of 

load shedding as well as higher purchase costs from the costlier sources due 

to delay in the Project. Therefore, the Commission has not considered the refund 

of Rs. 18.47 Crore under AG&SP as pass through to the consumers and has 

considered the benefit of interest subsidy while computing the Tariff. 

7.4 The State Commission has not gone into the reasons for the delay in commissioning 

of the project and has attributed the entire delay to the Appellant and accordingly, 

disallowed the cost incurred due to the delay on the Appellant. 

7.5 On the other hand, the Appellant in its petition before the State Commission, 

copy of which was enclosed with this Appeal, has annexed a copy of letter dated 

17 th September, 2008 from General Manager, MAHAGEN Co. indicating the delay 

in the various activities due to delay in supply of material/equipment by BHEL and 

inadequate manpower. 

7.6 This issue has been dealt with in this Tribunal’s judgment dated 27 th April, 2011 in 

Maharashtra State Power Generation Co. Ltd. v. MERC and Ors. in Appeal No. 72 of 2010. 

The relevant extracts of the judgment are reproduced below: 

(7.2) The prudence check of the capital cost has to be looked into considering 

whether the Appellant has been careful in its judgments and decisions while 

executing the project or has been careful and vigilant in executing the project. 

(7.3) The Tariff Regulations of the State Commission do not specify any 

benchmark norms for prudence check of the capital cost.... The Central 

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Commission has also not laid down any benchmark norms for prudence check, 

but its Regulations only indicate the area of prudence check including cost 

overrun and time overrun. The State Commission has not examined the reasons 

for delay in commissioning of the project and attributed the entire time overrun 

related cost with respect to the contractual schedule agreed with BHEL to the 

Appellant. In our view, this is not prudence check. In the absence of specific 

regulations, we will now find answer to the question raised by us relating 

prudence check of time overrun related costs. 

(7.4) The delay in execution of a generating project could occur due to following 

reasons: 

(i) due to factors entirely attributable to the generating company, e.g. 

imprudence in selecting the contractors/suppliers and in executing 

contractual agreements including terms and conditions of the contracts, 

delay in award of contracts, delay in providing inputs like making land 

available to the contractors, delay in payments to contractors/suppliers 

as per the terms of contract, mismanagement of finances, slackness in 

project management like improper co-ordination between the various 

contractors, etc. 

(ii) due to factors beyond the control of the generating company e.g. delay 

caused due to force majeure like natural calamity or any other reasons 

which clearly establish, beyond any doubt, that there has been no 

imprudence on the part of the generating company in executing the project. 

(iii) situation not covered by (i) and(ii) above. 

In our opinion in the first case, the entire cost due to time overrun has to be 

borne by the generating company. However, the Liquidated Damages (LDs) 

and insurance proceeds on account of delay, if any, received by the generating 

company could be retained by the generating company. In the second case, the 

generating company could be given benefit of the additional cost incurred due 

to time overrun. However, the consumers should get full benefit of the LDs 

recovered from the contractors/suppliers of the generating company and the 

insurance proceeds, if any, to reduce the capital cost. In the third case the 

additional cost due to time overrun including the LDs and insurance proceeds 

could be shared between the generating company and the consumer. It would 

also be prudent to consider the delay with respect to some benchmarks rather 

than depending on the provisions of the contract between the generating company 

and its contractors/suppliers. If the time schedule is taken as per the terms of 

the contract, this may result in imprudent time schedule not in accordance 

with good industry practices. 

(7.5) In our opinion, the above principles will be in consonance with the 

provisions of Section 61(d) of the Act, safeguarding the consumers interest 

and at the same time, ensuring recovery of cost of electricity in a reasonable 

manner. 

(7.6) xxx xxx xxx 

(7.7) Admittedly, there is no dispute regarding capital cost incurred by the 

Appellant. We have noticed that the State Commission has not gone into the 

reasons for delay in commissioning of the project and has proceeded with 

attributing the entire delay and cost of such delay on the Appellant, except 

allowing the Appellant to retain the Liquidated Damages. The State Commission 

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has also not considered the reasons for delay as submitted by the Appellant in 

its petition. 

(7.8) Let us now examine the matter in light of the principles laid down by us 

in Para 7.4 above. It has been indicated by the Appellant that against the 

Notice Inviting Tender for the main plant only one bid was received, viz. from 

BHEL. Thus, there was no alternative available to the Appellant in so far as 

placement of order for main plant is concerned presumably due to lack of 

competition in manufacturing of main plant equipment at that point of time. 

The agreement with the BHEL provided for a reasonable time schedule for 

completion of the project as also a reasonable clause for Liquidity damages. 

Thus, there seems to be no imprudence on the part of the Appellant in selecting 

the main equipment supplier, which happens to be a major state owned 

equipment manufacturing company and in the terms & conditions of the 

agreement. 

(7.9) xxx xxx xxx 

(7.10) It is also argued by the Appellant that BHEL being the only major supplier 

of the equipment in the country at that time could not cope up with the targetted 

schedules due to heavy orders. Delays were experienced not only at Parli 

Unit 6 but also at other projects. In our opinion, this appears to be the case of 

sudden spurt in execution of the Power Projects in the country and consequential 

increase in demand of equipments and the gestation period required by the 

industry in enhancing the manufacturing capacity. 

(7.11) Considering all these facts and documents submitted before this Tribunal, 

though it is evident that there was delay on the part of BHEL in supply and 

commissioning of the main plant, it is not established beyond doubt that the 

entire delay was due to the reasons beyond the control of the Appellant. 

(7.12) In view of above, we feel that this case falls under category (iii) described 

in Para 7.4. 

Accordingly, following the principles of prudence check laid down by us, 

the cost of time overrun has to be shared equally between the generating 

company and the consumers. Admittedly, there is no enhancement in cost 

of the contract price of the equipment as no price variation escalation was 

permissible to BHEL beyond the schedule date of completion of the Project 

according to the terms of the agreement. The impact of time overrun beyond 

the contractual schedule is only on IDC and overhead costs. Accordingly, 

the same have to be shared between the generating company and the 

consumers. Excess IDC and overhead costs for time overrun from scheduled 

date of commissioning to actual date of commissioning has to be worked 

out on prorate basis with respect to total actual time taken in commissioning 

of the unit. 50 Per cent of the excess IDC and overhead costs will have to 

be disallowed. Deduction on account of 50 per cent of the Liquidity Damages 

received by the Appellant from its suppliers/contractors has also to be 

allowed from the capital cost, to give due credit for LDs to the consumers. 

This issue is answered accordingly. 

7.7. In our opinion, the facts of the present case are similar to that in the 

Appeal No. 72 of 2010. In this case also, against the Notice Inviting Tender (NIT) 

only one bid was received, viz. from BHEL. There seems to be no imprudence 

on the part of the Appellant in selecting the main equipment supplier. There 

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were delays in supply of material and execution of the main plant and equipment 

by BHEL. However, there is delay in stabilisation of the generating unit. There 

has also been collapse of ESP field, hoppers, flue gas duct which were being 

executed under the overall supervision of the Appellant. There is also no mention 

about commissioning of the Balance of Plants which constitutes a major part 

of the Project. Though it is evident that there was delay on the part of BHEL in 

supply and commissioning of the main plant, it is not established beyond 

doubt that the entire delay in commissioning of the Project was due to the 

reasons beyond the control of the Appellant. Accordingly, this issue is decided 

as per Para 7.12 of the Tribunal’s judgment dated 27 th April, 2011 in Appeal 

No. 72 of 2010 reproduced above. 

8. The next issue is regarding overheads, interest during Construction, cost of initial 

spares, loan subsidy and interest on loan. We will take up these issues one by one. 

8.1. The issue of overhead costs has been decided in the judgment of this Tribunal 

dated 27 th April, 2011 in Appeal No. 72 of 2010 as under: 

(8.2) The State Commission has observed that the overheads according to Techno 

Economic Clearance (TEC) of CEA is Rs. 76.49 crores against the total approved 

cost of Rs. 946 crores, i.e. 8.09 per cent of total cost excluding Interest During 

Construction (IDC) and Financing Charges (FC). Accordingly, the State 

Commission has allowed the overheads @ 8.09 per cent of total cost of the 

project of Rs. 1249.92 crores. 

(8.3) We find that there are no specific regulations for determining the overhead 

cost. Overhead of 8.09 per cent of total project cost was not a CEA norm but a 

derived figures from the elements of capital cost approved by the CEA in its 

Techno-economic clearance. The State Commission has not determined the 

project cost based on CEA’s approval and has taken the order placement cost 

as the base cost. Thus, it would not be correct to determine norms of overhead 

cost from CEA approved cost. 

(8.4) There is no dispute that the total overhead cost as claimed by the Appellant 

has been incurred. As pointed out by the Appellant a part of total Operation 

and Maintenance (O&M) cost are booked to the upcoming projects and the 

same is excluded from the O&M expenses of the existing power plants. Thus, if 

the expenses booked to the upcoming project are not allowed in O&M cost of 

existing plants, the same has to be allowed in the capital cost of upcoming 

projects. However, a part of this overhead cost is on account of time overrun of 

the project. Therefore, a part of the overhead cost on account of delay in 

commissioning of the project may have to be disallowed on the principles as 

decided in the first question. Accordingly, the State Commission is directed to 

determine the overhead cost for the time overrun from the scheduled date of 

commissioning of the project on pro rata basis with respect to actual time taken 

in completion of the project. 50 Per cent of the excess overheads due to time 

overrun calculated thus may be disallowed. 

The overheads may be re-determined by the State Commission accordingly. 

8.2 The relevant extract of the judgment dated 27 th April, 2011 on interest during 

construction are reproduced below: 

We agree with the State Commission that the infusion of debt and equity has 

to be more or less on pari passu basis as per normative debt equity ratio. 

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However, the increase in IDC due to time overrun has to be allowed only 

according to the principles laid down in Para 7.4 above. Accordingly, the 

State Commission is directed to re-determine the IDC for the actual period of 

commissioning of the project and then work out the excess IDC for the period 

of time overrun on a pro rata basis and limit the disallowance to 50 per cent of 

the same on account of excess IDC. This question is answered accordingly. 

The State Commission is directed to determine the IDC accordingly. The principle 

laid down by us for IDC and overheads will also be applicable to the amount of 

AG&SP loan subsidy. 

8.3 The relevant extracts of judgment dated 27 th April, 2001 on initial spares are 

reproduced below: 

8.8. We find substance in the arguments of the Appellant. It is true that the 

Tariff has been determined according to the 2005 Regulations. However, the 

State Commission has powers to relax under the provisions of the Regulations. 

When the Appellant placed the orders, there were no regulations and it could 

be guided only by the CEA’s TEC which allowed capital spares @ 3 per cent of 

capital cost. Admittedly the Appellant has incurred the cost of capital spares. 

Looking into the circumstances of the case, it is fit case where the State 

Commission may exercise its power to relax the norms. Accordingly, we direct 

the State Commission to consider the actual cost of initial spares subject to 

maximum of 3 per cent of the approved capital cost. 

We accordingly direct the State Commission to determine cost of spares in light of 

the above finding. 

8.4. As regards disallowance of interest on loan, we have directed the State Commission 

to re-determine the capital cost according to our findings on cost of spares, overheads, 

etc. Accordingly, the amount of debt and interest on debt will have to be re-determined. 

9. The next issue is advance against depreciation. The relevant extracts of our judgment 

dated 27 th April, 2011 are reproduced below. 

9.1. This issue has been dealt with in details by this Tribunal in judgment dated 

27 th April, 2011 in Appeal No. 191 of 2009 in the matter of Maharashtra State Power 

Generation Co. Ltd. v. Maharashtra Electricity Regulatory Commission and Ors. 2 The relevant 

extracts are as under: 

12.5. Let us now examine, the above contentions of the Respondent No. 1 in 

seriatim. 

(i) In the entire Tariff exercise, the Tariff is being determined station-wise. 

All the components of Tariff are determined for each station. The availability 

at which a generating station recovers its full fixed cost is also determined 

station-wise. Regulation 32.3 also provides for AAD specific to a generating 

station. Therefore, it is logical that AAD is also allowed station-wise and 

not company as a whole. AAD results in front loading of the Tariff but 

the balance depreciation after repayment of loan is appropriately adjusted 

for AAD so that the total depreciation allowed to a generating station 

remains the same. If the Regulations provide for AAD for a generating 

station, it should not be denied on some other grounds which do not 

form part of the Regulation. 

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(ii) The second contention of the Respondent No. 1 is that the State 

Commission adopted similar approach for AAD in earlier Tariff order. 

In our opinion each Tariff proceeding is a separate and distinct 

cause of action. Failure of the Appellant to challenge an issue in 

earlier Tariff order does not bar the Appellant to challenge that 

issue in a subsequent Tariff order. 

(iii) According to the Appellant same generic loans were taken by the 

erstwhile Maharashtra State Electricity Board prior to its re-organisation 

which have been allocated station-wise. In our opinion the Appellant’s 

contention of allocating such loans station- wise is the correct approach. 

The station-wise interest on loan and Tariff of the generating stations of 

the Appellant is also being determined on the basis of such allocated 

loans and specific loans taken for a generating station. Thus actual 

repayment of such allocated loans can also be apportioned power 

station-wise. 

In view of above we decide this issue in favour of the Appellant and direct the State 

Commission to determine station-wise AAD. 

In view of above, we decide this issue in favour of the Appellant. 

10. The next issue is additional capitalisation. The relevant portion of the judgment 

dated 27 th April, 2011 are reproduced below: 

10.1. According to Ms. Deepa Chavan, learned Counsel for the Appellant, 

even though data sought by the Respondent No. 1/State Commission had 

been provided it deferred the consideration of additional capitalisation on 

certain expenditure till the final truing up which is contrary to the principles 

of Section 61 of the 2003 Act and National Tariff Policy. On the other hand the 

learned Counsel for the State Commission has maintained the position that 

the Appellant did not submit detailed scope of work along with estimates and 

the claim of Additional Capitalisation would be considered at the time of final 

true-up. 

10.2. Tariff Regulation 30.2 provides for additional capitalisation for inclusion 

in the original cost of project, subject to prudence check. In our opinion, the 

Additional capitalisation should be considered expeditiously by the State 

Commission as the delay would only add IDC or carrying cost besides delaying 

return on equity to the Appellant. Accordingly, the Appellant is directed to 

submit the desired information to the State Commission and the State Commission 

would consider it at the earliest. This issue is answered accordingly. 

Accordingly, we direct the Appellant to submit the details to the State Commission 

and the State Commission would consider the same. 

Summary of our findings 

11. The first issue is regarding attributing entire delay in commissioning of the project 

to the Appellant and disallowing time overrun related costs to the Appellant. In the 

absence of the norms for prudence check, we have laid down the principles of prudence 

check of time overrun related costs in our judgment dated 27 th April, 2011 and the 

same is described in Para 7.6 above. After detailed examination, we have come to 

conclusion that though it is evident that there was delay on part of the BHEL in 

supply and execution of main plant, it is not established beyond doubt that the entire 

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delay was for reasons beyond the control of the Appellant. Accordingly, it is held that 

the 50 per cent of the excessive cost incurred due to time overrun has to be disallowed 

to the generating company. 

11.1 The second issue is regarding rejection on part of overheads, IDC, initial spares 

and interest on loan. 

(i) There is no dispute that the entire overhead cost as claimed by the Appellant 

has been incurred. A part of the overhead cost is on account of delay in execution 

of the project, 50 per cent of which may have to be disallowed according to the 

principles laid down by us. Accordingly, the State Commission is directed to 

determine the excessive overheads cost for the period of delay on pro rata basis 

with respect to actual time taken in completion of the Project. 50 per cent of the 

overheads due to time overrun thus calculated may be disallowed out of the 

total overhead cost incurred. 

(ii) As regards IDC, we agree with the State Commission that infusion of equity 

and debt has to be more or less on pari passu basis as per normative debt 

equity ratio. However, increase in IDC due to time overrun has to be allowed 

only according to the principles laid down by us in Para 7.4 of the judgment 

of this Tribunal dated 27 th April, 2011 in Appeal No. 72 of 2010. Accordingly, 

the State Commission is directed to re-determine the IDC for the actual period 

of commissioning of the project on the principles of pari passu deployment of 

equity and debt and then work out the excess IDC for the period of time overrun 

on a pro rata basis with respect to actual time taken in completion of the 

project and limit disallowance to 50 per cent of the same from the total IDC. 

The principles laid down by us for IDC will also be applicable to the amount 

of AG&SP loan subsidy. 

(iii) As regards, cost of initial spares, we notice that the order for initial spares 

was placed before the formation of the Regulations and the Appellant could 

be guided by the TEC accorded by CEA which provided for initial spares 

@ 3 per cent of cost as against 2.5 per cent specified in the State Commission’s 

Regulations notified subsequently. Accordingly, we direct the State Commission 

to consider the actual cost of initial spares subject to maximum of 3 per cent of 

the approved capital cost. 

(iv) As regards, disallowance of interest on debt, we have already directed the 

State Commission to re-determine the capital cost according to our findings. 

Accordingly, the debt and interest on debt will also have to be re-determined. 

This question is answered accordingly. 

11.2 The next issue is advance against depreciation. This issue has already been 

decided by this Tribunal in its judgment dated 27 th April, 2011 in Appeal No. 191 

of 2009 in the matter of Maharashtra State Power Generation Co. Ltd. v. Maharashtra 

Electricity Regulatory Commission and Ors. which would apply to the present facts 

of this case. Accordingly, the State Commission is directed to re-determine station-wise 

AAD as per its Regulations by following the judgment of this Tribunal referred to 

above. 

11.3 The next issue is deferment of Additional Capitalisation. In our opinion, the 

Additional capitalisation should be considered expeditiously by the State Commission. 

Accordingly, the Appellant is directed to submit the desired informations to the 

State Commission and the State Commission would consider it at the earliest. 

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M/s. Utkal Chamber and Commerce and Industry v. OERC, Bhubaneswar Orissa 


Conclusion 

12. In view of above, the Appeal is partly allowed and the impugned order is set 

aside to the extent indicated above. The State Commission is directed to give effect 

to the findings in this judgment at the earliest. No order as to cost. 

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M/s. Utkal Chamber and Commerce and Industry, Bhubaneswar Orissa 

v. 


[Appeal No. 73 of 2007 and IA No. 93 of 2007, 

Appeal Nos. 127 of 2007 and 48 of 2010] 

APPEAL NOS. 62 OF 2007 

DECIDED ON: 24.05.2011 

Coram 


P.S Datta, J. Member (Judicial) 


Whether the procedure followed by the State Commission in cross-subsiding the 

burden of Low Tension (LT) Consumers to Extra High Tension (EHT) Consumers/High 

Tension (HT) Consumers was proper when the constant endeavour should be to reduce 

the element of the cross-subsidy? 

Held, in the impugned order the State Commission has not determined the cost of 

supply and cross-subsidy by the subsidising category of the subsidised category to 

show whether the objective of the Act and Tariff policy to gradually reduce the 

cross-subsidy has been met or not. The State Commission should have clearly 

determined the cost of supply and cross-subsidy for each category of consumer in 

the impugned order. State Commission directed to determine the cost of supply and 

cross-subsidy for each category of consumers in future Tariff orders and ensure that 

the objective of the Act and the Policy to gradually reduce the cross-subsidy is met. 

Whether the State Commission was right in reducing the incentives to the extent as 

stated when the Distribution Licensees, in their Application for determination of 

Tariff in ARR had sought no changes in the incentive Tariff for HT/EHT consumers? 

Held, the impact of reduction of incentive on EHT/HT consumer’s Tariff is 5 per cent 

to 6 per cent. The Distribution Licensees have prayed for a combination of increase 

in Retail Supply Tariff, Reduction in Bulk Supply Tariff, Government Subsidy etc. 

The Distribution Companies envisaged the continuance or reduction of the then 

prevailing Bulk Supply Tariff for the year 2007-08 and for the Government Subsidy 

while submitting the Retail Supply Tariff application for the year 2007-08. There was 

* MANU/ET/0083/2011 


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an agreement between the Distribution Licensees and the HT Consumers for the 

Supply of Electricity in which the Appellants have consented for the change of 

Tariff by the State Commission from time to time. The Appellant having agreed to 

pay the energy charges as determined by the State Commission, cannot turn around 

now and question the order of the Commission for revising the Tariff. The State 

Commission has given various reasons while revising the incentives to a particular 

extent in HT and EHT category. The State Commission is to be guided by Section 61(d) 

of the Electricity Act. As per this Section, the State Commission shall have to take 

into consideration the consumer’s interest and at the same time, the State Commission 

should ensure the recovery of the cost of the Electricity in a reasonable manner. In 

the impugned Tariff order, the incentive Tariff has not been fully withdrawn. On the 

other hand, the incentive Tariff component is revised considering the cost of the 

power as per Section 61(d) of the Act. The State Commission has reduced the rate of 

incentive for HT and EHT Consumers for higher level of consumption without 

changing the basic Tariff. The State Commission has specifically observed that the 

consumers who have not reduced the contract demand for a period of three years 

w.e.f. 1 st April, 2005 were entitled to get the incentive Tariff. Thus, the State Commission 


level of consumption. The State Commission has given suitable and valid reasonings 

while reducing the rate of incentives in the HT and EHT category. 

Whether the impugned order had taken into consideration, the policy directives of the 

State Government issued under Section 108 of the Act in public interest which has 

categorically directed that there should be no Tariff hike till the year 2009 and it is 

the responsibility of the Distribution Companies to bring down the distribution losses 

and AT&C losses as per the State Commission’s Business Plans failing which, the 

Distribution Companies should meet the non-achievable targets by means of their 

own financial arrangements? 

Held, as per Section 12 of the Orissa Electricity Reform Act, 1985, the directions 

issued by the State Government shall be consistent with the object of the Act. As per 

Section 108 of the Electricity Act, the State Government can issue policy directions 

to the State Commission involving public interest. The State Commission is also 

entitled to issue policy directives considering the subsidies to be allowed for the 

supply of electricity to any class or any classes of consumers. If the State Government 

has to provide the subsidy or any Tariff concession to the class of consumers, the 

same has to be mentioned and subsidy has to be provided up-front. In the letter 

dated 1 st February, 2007, nothing of this sort has been mentioned. Therefore, this 

cannot be treated as a direction under Section 108 of the Act. That apart, the power 

of the Tariff fixation of the State Commission cannot be vested with any other Authority 

of the State Government to issue any directions in the name of Policy directives. 



Electricity Act, 2003 

Section 61(d) [p. 0887, para 15 g] 


Section 65 [p. 0888, para 18 a] 

Section 108 [p. 0886, para 5 e] 

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Orissa Electricity Reform Act, 1995, Section 12 [p. 0888, para 18 b] 


OERC Distribution (Conditions of Supply) Code, 2004 [p. 0893, para 36 c] 

Orissa Electricity Regulatory Commission (Terms and Conditions for Determination 

of Tariff) Regulations, 2004 [p. 0886, para 5 b] 

Tariff Regulation, 2004, Regulation 5(1)(C) [p. 0891, para 29 i] 

Counsel 

For Appellant/Petitioner/Plaintiff: Ashok Kumar Parija, Anoop Choudhary, Sr. Advs., 

Ghanshyam Yadav, Suresh Tripathy, N.K. Sahoo, M.V. Rao, R.P. Mohapatra, Advs. 

in Appeal No. 62 of 2007, Suvendu S. Dash, Ashok Panigrahi, Shiv Kangungo, 

Sylpy Chaturvedi, Advs. in Appeal No. 73 of 2007 and IA No. 93 of 2007, Milan 

Kanungo, Ashok Panigrahi, S.S. Dash, Advs. in Appeal No. 127 of 2007, Shiv 

Kaungo, Ashok Panigrahi and S.S. Dash, Advs. in Appeal No. 48 of 2010 

For Respondents/Defendant: Hassan Murtaza, Adv. for R.2 to 4, R.K. Mehta, 

Antaryami Upadhyay, S. Laci Singh, Advs. for R-5, Rutwik Panda, Adv. for OERC, 

Shiv Suri, Smieetaa Inna, Suman Kukrety, Syed Naqvi, K.V. Balakrishnan, Advs. 

for OERC in Appeal No. 62 of 2007, Hassan Murtaza for R.2, Shiv Kaungo, Rutwik 

Panda, Advs. for OERC, Shiv Suri, Buddy A. Ranganadhan, R.K. Mehta, Antaryami 

Upadhyay, Laci Singh, Smieetaa Inna, Adv. in Appeal No. 73 of 2007 and IA No. 

93 of 2007, R.K. Mehta, Jitendra Mohapatra, Amit Singh, Rutwik Panda, Suman 

Kikrety, Gaurav Srivastava, Antaryami Upadyay, Laci Singh, Sangita Pradhan, 

Hasan Murtaza, Advs. in Appeal No. 127 of 2007, Rutwik Panda, R.K. Mehta, 

Antaryami Upadhyay and S. Laci, Advs. in Appeal No. 48 of 2010 

JUDGMENT 


1. These Appeals have been filed by the Appellants aggrieved by the Tariff order 

dated 23 rd March, 2007 passed by the State Commission determining the Retail 

Supply Tariff for the year 2007-08. Since, the issues are the same, common judgment 

is being rendered in all these Appeals. The short facts are as under. 

2. The Appellants are High Tension (HT) and Extra High Tension (EHT) Consumers. 

The Distribution Licensee, the Respondent filed the Annual Revenue Requirement 

Petition before the State Commission. They had sought for some changes in retail 

supply Tariff for the HT Consumers for the reason that there was a rise in the bulk 

supply Tariff. In addition to that, the Distribution Licensee had sought for Government 

subsidies to prevent any increase in retail supply Tariff. 

3. The State Commission called for the objections and suggestions from the members 

of the public and the persons concerned. Accordingly, same were filed by the parties 

before the State Commission. Ultimately, the State Commission passed the impugned 

order dated 23 rd March, 2007 reducing the Tariff incentives to the Appellants and 

similarly placed consumers. 

4. Aggrieved over this, these Appeals have been filed by various HT and EHT 

consumers, the Appellants herein. 

5. The learned Counsel for the Appellants would make the following submissions 

contending that the impugned order would suffer from various infirmities. Those 

submissions in brief are as follows: 

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(i) The impugned order of the State Commission is wrong in withdrawing the 

incentives even when there was no such prayer by the Distribution Licensee 

with regard to the revision of the incentive Tariff. 

(ii) The Distribution Licensee in its ARR proposal had not sought for any 

change in the Tariff for the HT Consumers and on the contrary, the Distribution 

Licensee had merely sought for Government subsidy so as to prevent any 

change or increase in retail supply Tariff. 

(iii) The impugned order is in utter violation of the Orissa Electricity Regulatory 

Commission (Terms and Conditions for Determination of Tariff) Regulations, 2004, 

wherein determination of ARR is statutory obligation of the Commission. These 

Regulations provide for carving out a road map for continued development of 

the electricity sector by balancing the conflicting interests of various stake holders. 

(iv) The impugned order had not taken into account the guiding principles 

enshrined in National Electricity Policy and National Tariff Policy. 

(v) The procedure followed by the Commission in cross subsidizing the burden 

of Low Tension consumers to the High Tension Consumers is not tenable as 

the law provides that there must be a constant endeavour to reduce the element 

of cross subsidization. 

(vi) The State Government issued a clear direction to the State Commission 

that there should be no Tariff hike till 2009. But this was not obeyed by the 

State Commission which is an utter violation of the Section 108 of the Act. 

(vii) The decision of the Commission revising the Tariff for HT/EHT Consumers 

has been taken by the Commission without hearing the parties concerned in 

violation of the principles of natural justice. 

6. On these grounds, elaborate arguments were advanced assailing the impugned 

order by the Learned Counsel for the Appellants. On the other hand, the learned 

Counsel for the Respondents made a detailed reply in justification of the order 

impugned and pointed out various reasons given in the impugned order. 

7. Now, the main questions that may arise for consideration are as follows: 

(i) Whether the procedure followed by the State Commission in cross subsiding 

the burden of Low Tension (LT) Consumers to Extra High Tension (EHT) 

Consumers/High Tension (HT) Consumers was proper when the constant 

endeavour should be to reduce the element of the cross-subsidy? 

(ii) Whether the State Commission was right in reducing the incentives to the 

extent as stated when the Distribution Licensees, in their Application for 

determination of Tariff in ARR had sought no changes in the incentive Tariff 

for HT/EHT consumers? 

(iii) Whether the impugned order has taken into consideration, the policy 

directives of the State Government issued Under Section 108 of the Act in 

public interest which has categorically directed that there should be no Tariff 

hike till the year 2009 and it is the responsibility of the Distribution Companies 

to bring down the distribution losses and AT&C losses as per the State 

Commission’s Business Plans failing which, the Distribution Companies should 

meet the non achievable targets by means of their own financial arrangements? 

8. We have heard the Learned Counsel for the parties on these questions and have 

given our thoughtful considerations to the questions framed in this case. 

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9. These Appeals have been filed to set aside the retail supply Tariff for the year 

2007-08 in so far as the withdrawal of the incentives drawn by the HT/EHT 

Consumers is concerned. 

10. Admittedly, there was an agreement between the Distribution Licensee and the 

Appellants for the supply of electricity in which the Appellants have consented for 

revision of Tariff according to the Tariff notified by the State Commission from time 

to time. 

11. As per Clause 6 of the said agreement, the Appellant had expressly agreed to 

pay for the power supply under minimum monthly charges, demand charges and 

energy charges in accordance with the provision of the Distribution (Conditions of 

Supply) Code, 2004 and as notified in the Tariff notification from time to time. The 

Appellant having agreed to pay the energy charges as determined by the State 

Commission cannot turn around now and question the order of the Commission for 

revising the Tariff. 

12. The retail supply Tariff for any year is determined by the State Commission based 

on the bulk supply price, transmission charges and distribution cost of the Company. 

13. The State Commission has given various reasonings while reducing the incentive 

for the HT and EHT category. The State Commission took cognizance of the fact that 

the cost of bulk purchase of electricity has increased by 41.90 Paise per unit on an 

average with respect for FY 2005-06 to the Distribution Companies. The State 

Commission also noted that the sale of power @ 150/180 paise per unit at EHT and 

170/200 paise per unit at HT would amount to a subsidy from other consumers to 

these consumers. In earlier years, when incentive was given to the consumers who 

would not reduce their contract demand during the next three years, there was 

lower utilisation of NTPC Power Stations, inadequate evacuation facility and need 

to encourage lesser use of captive power. The situation has since changed with 

strengthening of evacuation facility and demand for harnessing captive power. There 

has been growth in individual demand requiring higher quantum of power purchase 

from costly sources. 

14. In the Tariff application, the Distribution Licensee has prayed for bridging the 

revenue gap through combination of increase in retail supply Tariff, reduction in 

bulk supply Tariff and Government subsidy, etc. 

15. The Commission is to be guided by Section 61(d) of the Electricity Act. According 

to this, the State Commission shall have to take into consideration the consumer 

interest and at the same time, recovery of the cost of the electricity in a reasonable 

manner while determining the Tariff. By doing so, the State Commission took note 

of the fact of increase of bulk supply Tariff by 31 per cent and consequently determined 

the retail supply Tariff. 

16. The Tariff is to be determined on annual basis. Accordingly, the State Commission 

has determined the Tariff for the year 2007-08 as per the Regulation. 

17. In the impugned Tariff order 2007-08, the incentive Tariff has not been withdrawn. 


the power as per Section 61(d) of the Act. The Appellant who was an objector in the 

public hearing was also aware about the prayer of the Distribution Licensees to 

bridge the revenue gap in the then prevailing retail supply Tariff and bulk supply 

Tariff. As the Appellant was heard by the State Commission over this aspect, it 

cannot be contended that there is a violation of principles of natural justice. 

0887 


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18. According to the Appellant, the State Government issued a letter dated 

1 st February, 2007 for continuance of Tariff without any hike till 2009 and this direction 

has not been obeyed. The Electricity Act provides that the State Government can 

give directions in regard to the Tariff only as per the Section 65 of the Act. 

As per Section 108 of the Act, the State Government can issue policy directions 

involving public interest. As per Section 12 of the Orissa Electricity Reform Act, 1995, 

the direction of the State Government shall be consistent with the object of the Act. 

Section 65 of the Act provides that in spite of the directions under Section 108 to 

grant subsidy to any class of consumers, the State Government has to provide the 

upfront subsidy to the class of consumers. 

19. In this context, we quote Section 65 of the Electricity Act 2003. Section 65 of the 

Electricity Act, 2003 which provides as under: 

65. Provision of Subsidy by State Government 

If the State Government requires the grant of any subsidy to any consumer or 

class of consumers in the Tariff determined by the State Commission under 

Section 62, the State Government shall, notwithstanding any direction which 

may be given under Section 108, pay, in advance and in such manner as may 

be specified, the amount to compensate the person affected by the grant of 

subsidy in the manner the State Commission may direct, as a condition for the 

licensee or any other person concerned to implement the subsidy provided for 

by the State Government: 

provided that no such direction of the State Government shall be operative 

if the payment is not made in accordance with the provisions contained 

in this section and the Tariff fixed by the State Commission shall be 

applicable from the date of issue of orders by the Commission in this 

regard. 

20. As per Section 108 of the Electricity Act, 2003, the State Government can issue 

policy directions to the State Commission involving public interest. The State 

Government is also entitled to issue policy directives considering the subsidies to 

be allowed for the supply of electricity to any class or any classes of consumers or 

in respect of the directions of the State Government under Section 108. If the State 

Government has to provide the subsidy or any Tariff concession to the class of 

consumers, the same has to be mentioned and the subsidy has to be provided upfront. 

21. In view of the above, the said letter dated 1 st February, 2007 cannot be treated as 

a direction under Section 108 of the Act. In other words, the power of Tariff fixation 

of the State Commission has not been vested with any Authority of the State 

Government to issue any direction in the name of policy directives. 

22. The State Commission has adopted the loss level mentioned in the Business 

Plan in line with the letter dated 1 st February, 2007 of the State Government. In fact, 

the State Government under the Regulations, 2004 has to make estimation of the 

Distribution Loss based on several aspects. The Regulations are statutory in character. 

The procedure prescribed therein has to be followed by the Commission instead of 

confining to the Business Plan targets. 

23. As held by this Tribunal earlier, the targets set-up by the State Commission for 

the Financial Year 2007-08 were unrealistic and distribution Companies were starved 

of finances as the Tariffs approved by the State Commission did not cover the approved 

costs. Even though Bulk supply Tariff has been increasing, there is no corresponding 

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increase in retail supply since 2001-2002. In the Financial Year 2007-08, the approved 

reduction in the distribution losses with respect of the previous year was 11.5 per cent 

for WESCO, 6.8 per cent for NESCO and 13 per cent for SOUTHCO. 

24. As per the clause of special agreement the Tariff and conditions to supply shall 

be subject to any revision that may be made by the State Commission from time to 

time. Therefore, the Appellant is bound by the Tariff of the conditions and mandated 

by the State Commission from time-to-time. The Regulation further provided that 

the Tariff order shall have continued to be in force for such a period till it is mandated 

or revoked by the Commission. 

25. The retail supply Tariff for any year is determined by the State Commission 

based on the bulk supply prices, transmission charges and distribution cost of the 

Company. The Commission has increased the bulk supply price in the impugned 

order dated 23 rd March, 2007, which on composite basis including the transmission 

Tariff has increased by 35 per cent incase of Distribution Companies over the 

applicable bulk supply Tariff paid by the Distribution Companies in the year 2005-06. 

26. The reduction of the incentives in Tariff for HT/EHT consumers is less then the 

effect of the inflation as clearly elaborated by the Commission in para 5.36 of the 

impugned order. According to the Appellant, the increase in the retail supply Tariff 

is 10 per cent to 13 per cent. This increase is only over the energy charges for the 

proportion of incentive Tariff for the consumption above 50 per cent consumption 

ratio. The overall increase in rate of electricity has not been above 5.3 per cent and 

5.6 per cent for HT and EHT categories respectively as indicated by the State 

Commission in the impugned order. 

27. The State Commission as indicated above has given sufficient reasonings while 

revising the incentives in the HT and EHT category contained in Para 5.35 of the 

impugned order. The same is reproduced as below: 

Para 5.35 Incentive for higher consumption to HT and EHT Group of consumers: 

(i) The existing provision of incentive Tariff for HT and EHT consumers 

was examined. 

(ii) The Commission also analysed the expected load growth for HT and 

EHT consumers for the ensuing Financial year 2007-08. It is observed 

that there will be substantial rise in HT and EHT consumption over the 

period 2006-07 and certainly much higher figure than the actual figures 

of 2005-06. 

(iii) The Commission took cognizance of the input cost of power 

procurement from GRIDCO by the distribution companies through 

payment of bulk supply price. 

(iv) The Commission had also directed that the incentive shall be available 

to those of the consumers who will not reduce their contract demand 

during the next three financial years starting from financial year 2005-06. 

(v) The overall bulk supply price for the FY 2005-06 by GRIDCO to DISTOC 

Os was 120.85 paise per unit which included a transmission charges of 

25 paise per unit. Essentially, the energy price per unit for sale of power 

by GRIDCO to DISTC Os for that year works out to 95.85 paise per unit. 

For the ensuing year 2007-08, the overall power purchase price of DISTC 

Os is 135.66 paise excluding the transmission charges payable over and 

above this. A comparison of bulk power purchase cost between 2005-06 

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and 2007-08 indicates that there has been a price rise to the tune of 

(135.66-95.85) = 39.81 paise per unti) for DISTCOs. Applying a transmission 

loss of 5 per cent for EHT transmission the difference in purchase price 

is 41.90 paise per unit which is in excess over and above the purchase 

price of 2005-06. 

(vi) We have rationalised Tariff structure for the Financial year 2007-08 

with the objective of resource realisation from the consumers who are 

being supplied power at a reasonably low price. Due to higher sale at 

HT and EHT consumers sale of power @ 150/180 paise per unit at EHT, 

170/200 paise per unit at HT would amount to a subsidy from the general 

pull of consumers to these consumers as they continue to pay at a lower 

rate for the proportionate energy they are billed at that rate because the 

purchase price has gone up by 42 paise per unit from the time this rate 

was fixed in the Financial Year 2005-06. Continuance of this rate would 

not only mean subsidies for these group but also loss of revenue which 

has to be mopped up by distributing it among other classes. 

(vii) Ordinarily, power to this group should have been supplied @ 290 paise 

per unit (EHT)/300 paise per unit (HT) apart from demand charges. 

By allowing this incentive they have been supplied power at a lower rate 

on several grounds discussed in the appropriate Tariff order. At that 

point of time lower capacity utilisation of NTPC power station and absence 

of evacuation facility needed supply of power at a lower cost to encourage 

lesser use of costly captive power. 

(viii) Today, the situation is different. Evacuation facility is strengthened. 

With intra-state and interstate tie up there is demand for harnessing the 

captive generation. 

(ix) There has been a growth of industrial activity in the state requiring 

higher quantum of purchase from costly generating sources both inside 

and outside to meet the needs of the industrial consumers raising the 

weighted average price per unit of supply. We have also seen that the 

industries with captive generating plant have contracted with GRIDCO 

supply of power @ 202 paise per unit. At least such of the industries 

should not purchase power at the present applicable rate causing a loss 

to the supplier. 

(x) Keeping all these factors in view, the commission directs that the HT 

and EHT consumers shall pay the energy charges effective from 

1 st April, 2007 at the rates indicated in the table below: 

Table 19 

HT 

EHT 

Consumption up to 50 per cent 300 p/u 290 p/u 

> 50 per cent 60 per cent 225 p/u 202 p/u 

> 60 per cent 220 p/u 202 p/u 

5.36 We are also conscious that even with the change in the slab rate, the 

overall Tariff for such consumers remain well within the inflationary trend of 

around 5.5 per cent over the Financial Year 2006-07 for the consumers availing 

power at 80 per cent Consumption Ratio. In the incentive scheme at present, 

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Tariff they pay around 279 paise per unit inclusive of demand charges. Applying 

an inflation of 5.5 per cent for Financial year 2006-07 this requires additional 

rise of around 16 paise per unit. While designing the above slab, we have kept 

in mind so that consumers availing incentive Tariff pay not more than 15 to 

16 paise per unit. An illustrative example is given below: 

Table 20 - At HT 

Total Rate Tariff Total Rate Rise P/U Rise (%) 

at revised at existing Tariff 

Consumption Per KWH Per KWH 

Ratio (%) 

80 308.68 293.05 15.63 5.3 % 

75 314.59 301.26 13.33 4.4 % 

70 321.34 310.63 10.71 3.4 % 

65 329.14 321.45 7.69 2.4 % 

60 338.24 334.07 4.17 1.2 % 

55 348.53 346.26 2.27 0.7 % 

50 360.88 360.88 0.00 0.0 % 

0891 

Table 20 - At EHT 

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Total Rate Tariff Total Rate Rise P/U Rise (%) 

at revised at existing Tariff 

Consumption Per KWH Per KWH 

Ratio (%) 

80 295.05 279.302 15.75 5.6 

75 301.26 287.922 13.33 4.6 

70 308.34 297.773 10.57 3.6 

65 316.53 309.141 7.38 2.4 

60 326.07 322.402 3.67 1.1 

55 337.35 335.348 2.00 0.6 

50 350.88 350.883 0.00 0.0 

We would like to conclude that even the rate so arrived at are far lower than the 

normal Tariff applicable to the consumer who operate up to 50 per cent. 

28. From the above reasonings given by the State Commission in the impugned 

order, it is clear that the State Commission took cognizance of the fact that the cost 

of the electricity has increased by 41.90 paise on an average to the DISCOMS and 

balanced the Tariff for the HT and EHT consumers by reducing the incentive Tariff 

for higher consumption. However, the energy rates at load factor of 50 per cent and 

below were not changed. 

29. The Tariff is to be determined by the State Commission on annual basis as per 

Regulation 5(1)(C) of Tariff Regulation, 2004. The Tariff order shall continue to be 

in force for such period till it is amended or revoked by the Commission. 


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30. According to the Appellants, in view of the incentive Tariff, various industries 

in HT Categories set up industries with a precondition of not reducing the 

Contract Demand (CD) during the nextthree years starting from 1 st March, 2005, so 

as to entitle them to avail a load factor based incentive at different slabs. However, 

it is to be stated that in the impugned order, the incentive Tariff has not been actually 

withdrawn but it is simply revised considering the cost of the power following the 

provisions of Section 61(d) of the Electricity Act, 2003. 

31. In the Tariff order for the Financial year 2007-08, the State Commission has 

reduced the rate of incentives for HT and EHT consumers for higher level of 

consumption without changing the basic Tariff. It is to be observed that the revised 

energy rates arrived at are far lower then the normal Tariff applicable to the HT and 

EHT consumers w.e.f. 1 st April, 2007. The table is as follows: 

Load Factor (%) HT BHT 

Consumption up to 50 % 300 p/u 290 p/u 

> 50 % 60 % 225 p/u 202 p/u 

> 60 % 220 p/u 202 p/u 

32. The above rates of incentive Tariff have been continued up to 2009-10 without 

any modification. 

33. Therefore, contention raised by the Appellant that there has been withdrawal of 

incentive is not correct. The State Commission has observed that the consumers 

who have not reduced the contract demand for a period of three years w.e.f 

1 st April, 2005 were entitled to get the incentive Tariff. Thus, the State Commission 


level of consumption. As a matter of fact, the revised rates arrived at, are far lower 

then the normal Tariff applicable to the HT and EHT consumers. 

34. It is contended by the Appellant that the withdrawal of the incentives and 

increase of Tariff will adversely affect the cost of the product in a highly competitive 

market. This contention is also untenable. In fact, this aspect has been taken note of 

by the State Commission and the contention of the Appellants relating to this aspect 

has been rejected by the State Commission by giving its valid reasonings as contained 

in Para 5.48.1 of the Tariff order. 

35. According to the Appellant, the concession in favour of the power intensive 

industries having special agreement with North Eastern Electricity Company of Orissa 

Ltd. (NESCO), which had been granted by the OERC in the RST Order for the Financial 

Year 2005-06 and continued in the RST Order for the Financial year 2006-07 has been 

altered in the RST order for the Financial Year 2007-08 dated 23 rd March, 2007. 

36. The perusal of the retail supply order for the Financial year 2005-06 and 2006-07 

will show that the proposal to allow special Tariff in respect of the industries having 

special agreements was granted pursuant to the proposal of the NESCO which had 

entered into Special Agreement with some Ferro Alloy industries. The said order 

also shows that the benefit of the discount of 25 per cent on the Energy Charges up 

to 50 per cent Load Factor was granted only in respect of the Industries covered 

under Special Agreements. The said order further provides that in order to avail the 

benefit, the industries covered under the Agreement shall execute with the licensee 

for drawal of power for a period of three years with a monthly minimum guaranteed 

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off take at a load factor of 80 per cent. However, the Respondent CESU of Orissa did 

not have any special agreement with any consumer under power incentive, HT or 

EHT categories. The change the State Commission has made for the Ferro Alloys 

Industries drawing power from NESCO under special arrangement is replacement 

of load factor by “consumption ratio”. However, this change has been made for 

other HT/EHT industries also and reasoning for the same has been given in 

Para 5.32.3 of the impugned order. The relevant extracts of Para 5.32.23 are reproduced 

below: 

The reasons for adoption of this formula is that consumers are found to be 

defaulter achieving higher level of consumption and yet become eligible for 

Concessional Tariff by keeping the maximum demand sufficiently low (in the 

denominator) of the ratio defined for “load factor” in Para (2) (y) of the OERC 

Distribution (Condition Supply Code), 2004. This would defeat the purpose of 

providing for Concessional Tariff, viz. achieving higher level of consumption. 

37. In view of the above reasonings we do not find any infirmity in the finding of 


38. In the impugned order as against the claim of the CESU for an Annual Revenue 

Requirement of Rs. 2,020.54 Crore, the State Commission has only allowed 

Rs. 1,206.58 crores. While doing so, the State Commission has balanced the interest 

of all the stake holders. Therefore, any interference sought for by the Appellants in 

the impugned order will upset the balance of revenue requirement and revenue 

realization making it impossible for the Respondent to meet its revenue requirement. 

39. M/s. Rawmet Ferrous Industries Pvt. Limited, one of the Appellants has challenged 

the retail supply Tariff order dated 23 rd March, 2007 for the Financial year 2007-08 

mainly on the following grounds: 

(i) The Appellant could not avail the incentive Tariff under the RST order for 

the year 2005-06 by entering into a Special Agreement since it could not avail 

the power supply on account of the delay in development of infra-structure of 

the OPTCL. As a matter of fact, the Appellant was ready to avail power for 

furnance, briquette plant and other auxiliaries prior to March, 2006. 

(ii) The Appellant could not challenge the supply Tariff order for 2006-07 

since the Commercial production had not commenced. 

(iii) Although, the incentive Tariff allowed in respect of HT and EHT consumers 

has been withdrawn by the RST order for the year 2007-08, the Special Tariff 

has been continued in the case of four Export-oriented Ferro Alloys Units 

under the area of NESCO. 

40. It is not disputed that the Appellant had entered into the Agreement with the 

Central Electricity Supply Utility of Orissa for supply of power for the first time 

only on 19 th October, 2006. Therefore, the Appellant could not avail the incentive 

Tariff allowed under the RST order for 2005-06 and 2006-07. The contention of the 

Appellant that any HT and EHT industries could avail the incentive Tariff for 

3 years by entering into an agreement at any time during 2005-06 and 2006-07 is 

misconceived. The said benefit specifically confines only to such industries which 

entered to an agreement not to reduce their Contract Demand w.e.f. Financial Year 

2005-06. This was also clarified in the RST order for the Financial Year 2006-07. 

41. Assuming that the Respondent was in a position to avail power supply in 

March, 2006, the RST order for 2005-06 granted the benefit of incentive Tariff only 

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in respect of HT/EHT industries which entered into an agreement for 03 years from 

1 st April, 2005. Therefore, the Appellant in any case, could not avail of the incentive 

Tariff as per the RST order for 2005-06. 

42. The contention of the Appellant claiming parity with the four Export-oriented 

Ferro Alloys industries which have been allowed special Tariff, is not tenable for 

the reason that this Tribunal in Appeal No. 232 of 2006 by the judgment dated 

12 th November, 2007 upheld the said special Tariff in respect of Four Export-oriented 

Ferro Alloys industries. In the said judgment, this Tribunal specifically held that 

these four Export-oriented Ferro Alloys Industries constituted a separate and distinct 

class and the grant of Special Tariff in respect of such industries would not amount 

to discrimination. 

43. Under these circumstances, the claim of the Appellant with regard to the disparity 

cannot be accepted. 

44. As indicated above, the Tariff and condition of supply can be revised by the 

State Commission from time-to-time and the same has been provided both in the 

Special Agreement as well in the relevant Regulations. Let us quote the reference 

mentioned in the Special Agreement: 

(5) The Tariff and Conditions of Supply mentioned in this Agreement shall be 

subject to any revision that may be made by the OERC from time-to-time. 

45. The above clause would make it clear that the HT consumer, the Appellant is 

bound by the Tariff and Conditions as amended by the State Commission from 

time-to-time. As indicated above, this is provided in the Regulations also. 

Regulations 5(1)(c) of the Regulation, 2004 provides as under: 

5(1)(c) A Tariff order shall continue to be in force for such period as may be 

indicated in the said order unless amended or revoked from the earlier. 

46. Thus, the Tariff revision for the HT and EHT Consumers has been clearly provided 

in the agreement as well as the Regulation. 

47. Normally, the Retail Supply Tariff (RST) for any year is determined by the State 

Commission based on the Bulk supply Price, Transmission Charges and Distribution 

cost of the Company. If the Bulk supply price and the transmission cost in the input 

cost have increased, the State Commission has to increase the retail supply of the 

Tariff also. In the impugned order dated 23 rd March, 2007, the bulk supply price on 

a composite basis, including the Transmission Tariff, has increased by 35 per cent 

in case of DISCOMS without corresponding increase in the retail supply Tariff. 

Thus, the overall increase in Retail Supply Tariff is only 2 per cent over the 

pervious period. 

48. Therefore, it is clear from the reasoning given by the State Commission, it took 

note of the fact that the cost of electricity has increased by 41.90 paise on an average 

to the DISCOMs and the incentive is to be made available to those of the EHT/HT 

consumers who would not reduce their contract demand during the next three 

Financial years starting from Financial Year 2005-06. However, the incentive in the 

form of energy charges above 50 per cent load factor was reduced considering increase 

in power procurement cost. 

49. It is pointed out by the Respondent that this Tribunal in the Appeal filed by 

M/s. Tata Steel Limited in Appeal No. 232 of 2006, held that the in case one or more 

of the EOUs units subsequently, cease to be 100 per cent EOU units, it is open for 

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the NESCO and State Commission to deal with such unit or units according to law. 

The relevant portion of the judgment of this Tribunal is as follows: 

(33) We are presently concerned with the FY 2005-06. It is not disputed that 

the special agreements were entered into between NESCO and EOUs they 

were exporting nearly, 100 per cent of their product. In case one or more of 

them subsequently, cease to be 100 per cent EOU, it is for NESCO and OERC 

to deal with such unit or units according to law. This cannot give the Joda 

Unit an additional ground for equality for reduced Tariff. The Supreme Court 

has dealt with the question of negative quality in various judgments.... 

50. According to the Appellant the increase in the RST is 10 to 13 per cent. This 

increase is only over the energy charges for portion of incentive Tariff for the 

consumption over 50 per cent consumption ratio. The Tariff up to 50 per cent 

consumption ration and fixed charges remaining unchanged. Comparing the average 

cost to the consumer as per the new Tariff order, the increase is only 5 per cent to 

6 per cent which is far below then the increase in BSP (31 per cent), the DISCOMS 

has to bear in cost. 

51. One of the issues raised by the Appellants is cross-subsidy by EHT/HT consumers. 

In the impugned order the State Commission has not determined the cost of supply 

and cross-subsidy by the subsidizing category of the subsidized category to show 

whether the objective of the Act and Tariff policy to gradually reduce the crosssubsidy 

has been met or not. However, the Respondent Distribution Company 

(WESCO) has, in its Written Submissions, provided the following position of average 

billing per unit for the LT, HT and EHT categories: 

0895 

Rs. Per Unit 

FY 2006-07 FY 2007-08 

LT 2.33 2.26 

HT 3.41 3.42 

EHT 2.76 2.79 

52. The above data, though not of much use for determining the cross-subsidy by 

various subsidising categories, only indicates very small increase in average billing 

rate of HT and EHT categories. In our opinion, the State Commission should have 

clearly determined the cost of supply and cross-subsidy for each category of consumer 

in the impugned order. However, at this juncture after more than four years of date 

of the impugned Tariff order, we do not want to remit the matter back to the State 

Commission considering the fact that the increase in Tariff for EHT and HT consumers 

has been smaller compared to increase in cost of Bulk Supply Tariff. However, we 

direct the State Commission to determine the cost of supply and cross-subsidy for 

each category of consumers in future Tariff orders and ensure that the objective of 

the Act and the Policy to gradually reduce the cross-subsidy is met. 

53. It is submitted by the Appellant that in view of the incentives, various industries 

in HT category set-up industries with a pre-condition of not reducing the contract 

demand during the next three years so as to enable them to avail a load factor based 

incentive on different slabs. It would be stated that in the impugned order for 2007-08, 

the incentive Tariff has not been withdrawn. On the other hand, as pointed out the 

by Respondent, the incentive Tariff component is revised considering the cost of 

power following the provision of Section 61(d) of the Electricity Act. 


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54. As a matter of fact, the Appellant M/s. Utkal Chamber of Commerce was one of 

the objectors in the public hearing held by the State Commission. It also submitted 

its suggestions before the State Commission. The Appellant was aware about the 

prayer of the Distribution Company to bridge the revenue gap in the then prevailing 

retail supply Tariff and Bulk Supply Tariff through the combination of increase in 

retail supply Tariff and reduction bulk supply Tariff and Government subsidy, etc. 

On these aspects, during the public hearing, the persons concerned were heard. 

Consequently, the incentive Tariff is reduced for the class of consumers and not for 

any individual consumer. 

55. The Appellant has raised the grounds with regard to Distribution loss reduction. 

This aspect has been dealt by this Tribunal in the judgment in Appeal No. 77 to 

79 of 2006. The relevant para is as follows: 

Para 27. Here again in our view, it is for the Regulatory Commission to take a 

re-look of the entire matter, while undertaking truing up exercise. We hasten 

to add that the Commission need not stick to its earlier view, but it shall have 

a re-look in this respect by taking a practical view of the ground realities 

instead of proceeding on assumption and surmises. We are sure that Commission 

will take a re-look of the matter and grant the benefits to the DISCOMS. 

56. The State Commission in the impugned order has adopted the loss level mentioned 

in the Business Plan in line with the letter dated 1 st February, 2007. 

57. The losses approved for 2006-07, the estimation for 2006-07 and the projected 

loss approved for the year 2007-08 by the Commission is as follows: 

WESCO NESCO SOUTHCO 

Approved Dist Loss 2006-07 33.75 % 33.00 % 31.51 % 

Losses 2006-07 (Estimated 36.50 % 32.80 % 43.40 % 

Approved Dist. Loss for 2007-08 25.00 % 26.00 % 30.40 % 

58. distribution loss target set up by the State Commission for the year 2007-08 is 

already too steep and difficult to achieve. 

59. As pointed out by the Distribution Companies, the Distribution Companies are 

likely to incur loss of Rs. 73.54 crores due to fixation of Distribution Loss targets as 

per the Business Plan order. Therefore, there is no substance in the prayer of the 

Appellant that the shortfall in revenue on account of increase in Bulk Supply rate 

may be made good by reducing the Transmission and distribution loss target further. 


60. (i) The impact of reduction of incentive on EHT/HT consumer’s Tariff is 5 per cent 

to 6 per cent as elaborated by the State Commission in the impugned order. 

(ii) The Distribution Licensees have prayed for a combination of increase in Retail 

Supply Tariff, Reduction in Bulk Supply Tariff, Government Subsidy etc. The 

Distribution Companies envisaged the continuance or reduction of the then prevailing 

Bulk Supply Tariff for the year 2007-08 and for the Government Subsidy while 

submitting the Retail Supply Tariff application for the year 2007-08. 

(iii) There is an agreement between the Distribution Licensees and the HT Consumers 

for the Supply of Electricity in which the Appellants have consented for the change 

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of Tariff by the State Commission from time to time. The Appellant having agreed to 

pay the energy charges as determined by the State Commission cannot turn around 

now and question the order of the Commission for revising the Tariff. The State 

Commission has given various reasons while revising the incentives to a particular 

extent in HT and EHT category. 

(iv) The State Commission is to be guided by Section 61(d) of the Electricity Act. 

As per this Section, the State Commission shall have to take into consideration the 

consumer’s interest and at the same time, the State Commission should ensure the 

recovery of the cost of the Electricity in a reasonable manner. 

(v) In the impugned Tariff order, the incentive Tariff has not been fully withdrawn. 


the power as per Section 61(d) of the Act. 

(vi) In the impugned Tariff order, the State Commission has reduced the rate of 

incentive for HT and EHT Consumers for higher level of consumption without 

changing the basic Tariff. 

(vii) The State Commission has specifically observed that the consumers who have 

not reduced the contract demand for a period of three years w.e.f. 1 st April, 2005 

were entitled to get the incentive Tariff. Thus, the State Commission has only reduced 

the rate of incentive for the HT and EHT consumers for the higher level of consumption. 

(viii) The State Commission has given suitable and valid reasonings while reducing 

the rate of incentives in the HT and EHT category in Para 5.35 of the impugned 

order. These reasonings are perfectly justified. 

(ix) According to the Appellant, the State Government issued a letter dated 

1 st February, 2007 for continuance of the Tariff without any hike till 2009 and these 

directions have not been obeyed. This is not correct. As per Section 12 of the Orissa 

Electricity Reform Act, 1985, the directions issued by the State Government shall be 

consistent with the object of the Act. 

(x) As per Section 108 of the Electricity Act, the State Government can issue policy 

directions to the State Commission involving public interest. The State Commission 

is also entitled to issue policy directives considering the subsidies to be allowed for 

the supply of electricity to any class or any classes of consumers. If the State Government 

has to provide the subsidy or any Tariff concession to the class of consumers, the 

same has to be mentioned and subsidy has to be provided upfront. In the letter 

dated 1 st February, 2007, nothing of this sort has been mentioned. Therefore, this 

cannot be treated as a direction under Section 108 of the Act. That apart, the power 

of the Tariff fixation of the State Commission cannot be vested with any other Authority 

of the State Government to issue any directions in the name of Policy directives. 

61. In view of our above findings, we have to conclude that these Appeals have no 

merits and the same are liable to be dismissed. Accordingly, these are dismissed 

with specific directions to the State Commission to be followed for future as given 

in Para 52 above. No order as to cost. 

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2011 ELR (APTEL) 0898* 



Chhatisgarh State Power Transmission Co. Ltd., Chhattisgarh 

v. 

M/s R.R. Energy Ltd. and 

Chhatisgarh State Electricity Regulatory Commission, Raipur 

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DECIDED ON: 24.05.2011 

Coram 



Whether Respondent No. 1 had committed any wrong by approaching the State 

Government for approval under Section 68 of the Electricity Act, 2003 pending Appellant 

Board’s approval for construction of his line? 

Held, to comply with the provision for installation of any overhead line, the 

Respondent No. 1 was required to switch over from 33 KV to 132 KV and was 

required to lay a independent/dedicated line at 132 KV connected to Appellant’s 

EHV substation. Accordingly, the Respondent No. 1 approached the Appellant 

Board to carry out the entire work related to erection of 132 KV line and associated 

terminal line bay at 132 KV Raigarh substation of Appellant. Appellant Board 

agreed to undertake the works subjected to payment of full costs of works including 

15 per cent supervision charges. The Respondent No. 1 could as well have entrusted 

the works related to construction of line to any Class-1 Electrical Inspector as 

per provisions of Indian Electricity Rules, 1956. Thus, the role of Appellant Board 

was restricted to that of a Class-1 Electrical Contractor. Getting prior approval 

of the State Government for any overhead line is mandatory, irrespective of who 

constructs the line. This approval was also necessarily required even if the line 

was constructed by the licensee, i.e. Appellant Board. The requirement of prior 

approval under Section 68 of the Act cannot be replaced by mere sanction of a 

licensee to undertake the works as a contractor. Respondent No. 1 has correctly 

met with requirements of the Act and had not done anything wrong by obtaining 

the State Government’s approval under Section 68 of the Act. 

Whether a generating company could also be termed as a consumer merely because 

he would be drawing “startup power” from grid occasionally? 

Held, requirement of startup power is essential for every generating station and 

is very limited both in quantum (MW) and duration terms. Respondent No. 1 

have applied for startup power under Section 43. A “startup power” consumer 

can have a contract demand up to maximum of 10 per cent of highest generating 

capacity unit of generating station. Further, his total drawal from the grid during 

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* MANU/ET/0084/2011 

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Chhatisgarh State Power Transmission Co. Ltd. v. M/s R.R. Energy Ltd. and Anr. 

(V.J. Talwar, Member (Technical)) 

the month is also restricted to 10 per cent load factor. In other words at full 

contracted demand, he can draw power from grid for less than three hours in a 

day (720 × 0.1/30 hours per day). Further, his operational time is also restricted 

to one shift operation. With such restrictions, supply given to a generator as 

“startup power” cannot be termed in pursuance to Section 43 of the Electricity 

Act, 2003. Consumer as defined in the Act is a person who is supplied with 

electricity for his own use. Here, startup power is supplied to Respondent No. 1 

to startup its generating unit. Once generating unit is synchronised with the 

grid, the power so generated is supplied to Appellant. Without startup power, 

generators cannot start and produce power. Thus, in way, startup power is 

supplied for the benefit of Appellant only. From this point of view, a generator 

taking startup power from distribution licensee and supply power to same licensee 

on startup, cannot be termed as a consumer. 

Whether line in question was a dedicated transmission line of generating 

company for evacuation of power from its generating station or is a “service 

line” for meeting the requirements of a consumer? 

Held, Section 10 of the Act requires any generating company to establish, operate 

and maintain dedicated transmission line. Dedicated transmission line requires 

prior approval of the State Government which had been obtained by the generator. 

Sub-section (3) of Section 68 of the Act empowers the State Government to 

impose conditions, including ownership and operation of the line while granting 

such approval. State Government has according impose 19 conditions on the 

generator while granting approval under Section 68(1). The 18 th Condition in 

the said approval provides that operation and maintenance of the line shall be 

under taken necessarily by the Respondent No. 1 company. Thus, the line in 

question is a dedicated transmission line of a generating company and have to 

be operated and maintained by the generating company. Respondent No. 1 

generating units were operating and power was being sold to Appellant Board 

at 33 KV. It was because of Clause 4.1.2 of State Commission’s grid Code notified 

on 30 th December, 2006, Respondent No. 1 had to upgrade evacuation system to 

132 KV. This upgradation from 33 KV to 132 KV was because of its generating 

capacity was more than 9 MW. Its startup power requirement was only 

11 KVA for which existing 33 KV line was adequate. On this ground also 132 KV 

line in question is a “dedicated transmission line” to evacuate power from 

generating station of Respondent No. 1 and not a “service line” to meet startup 

power requirement. 

Whether the Appellant was entitled for supervision charges for supervision of 

proper synchronisation of generator with the grid through its own technical experts 

to avoid mishaps during synchronisation as far as possible? 

Held, levy of 15 per cent supervision charges are justified in cases where an 

asset is established by consumer and is handed over to licensee for operation 

and maintenance. The rationale for such view is that since the asset is to be 

maintained by licensee for whole of its life. Licensee has to replace any part of 

the asset which got defective during life time at his costs. He is entitled to claim 

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supervision charges. Thus, no reason forced to interfere with the findings of the 

State Commission. 

a 



Electricity Act, 1910 [p. 0909, para 44 h] 

Electricity (Supply) Act, 1948 [p. 0909, para 44 h] 

Electricity Regulatory Commission Act, 1998 [p. 0909, para 44 h] 

Electricity Act, 2003 [p. 0909, para 44 h] 



Section 10 [p. 0903, para 15 i] 

Section 10(1) [p. 0903, para 12 b] 

Section 43 [p. 0904, para 16 b] 


Section 46 [p. 0904, para 16 f] 

Section 50 [p. 0909, para 40 c] 


Section 68(1) [p. 0911, para 52 c] 




CSERC Grid Code, 2007, Clause 4.1.2 [p. 0912, para 57 g] 

CSERC Grid (Amendment) Code, 2008 [p. 0907, para 31 d] 

Indian Electricity Rules, 1956 [p. 0902, para 9 b] 

Electricity Supply Code, 2005 [p. 0902, para 9 c] 

Section 4.6 [p. 0907, para 31 d] 

Section 4.8 [p. 0907, para 31 d] 

Section 6.43 [p. 0907, para 31 e] 

Section 6.45 [p. 0907, para 31 e] 

Clause 4.10 [p. 0908, para 36 e] 

Counsel 

For Appellant/Petitioner/Plaintiff: Suparana Srivastva, Adv. 

For Respondents/Defendant: R.C. Sood, Adv. for R 1 and M.G. Ramachandran, 

Adv. for R 2 

JUDGMENT 


1. Chattisgarh State Transmission Company Limited is the Appellant. Chhatisgarh 

State Electricity Board is the predecessor of the Appellant. 

2. M/s R.R. Energy Limited is the first Respondent. Chhatisgarh State Electricity 

Regulatory Commission (State Commission) is the Second Respondent. 

3. M/s R.R. Energy Limited (R-1) is a generating company having rice husk (biomass) 

based power plant of 14 MW capacity in state of Chhatisgarh. Respondent No. 1 

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has constructed 132 KV line to evacuate power from its power plant. Appellant had 

charged 15 per cent of the cost of the line as supervision charges from the Respondent 

No. 1 before providing connectivity to its system. State Commission vide its order 

dated 29 th October, 2009 directed the Appellant to refund the supervision charges to 

Respondent No. 1. 

4. Aggrieved by this impugned order of State Commission, the Appellant has filed 

this appeal. 

5. Brief facts of the case are as under. 

6. M/s. R.R. Energy Limited, the Respondent No. 1 is a generating company which 

has a rice husk-based (biomass) power plant of 14MW capacity at village Garhumaria 

in District Raigarh, Chhattsigarh. Power generated by this power plant was being 

evacuated at 33 KV and sold to Chhatisgarh State Electricity Board (the Board), the 

predecessor the Appellant. State Commission notified the State Grid Code on 

23 rd October, 2006. In terms the State Grid Code, power from all generating plants in 

the state having capacity of more than 10 MW would have to be evacuated at 

132 KV. Accordingly, M/s R.R. Energy (Respondent No. 1) was required to switch 

over from 33 KV to 132 KV. For this purpose M/s R.R. Energy was required to have 

independent/dedicated 132 KV transmission line from its power plant to the 

Appellant’s EHV sub-station at Raigarh for evacuation of power. 

7. M/s R.R. Energy (Respondent No. 1) requested the Chhattisgarh State Electricity 

Board (the predecessor of the Appellant) to construct 132 KV line from its power 

station to Appellant’s nearest sub-station and 132 KV bay on payment of requisite 

charges as per Appellant’s rules. Appellant Board approved the construction of 

132 KV line from First Respondent’s power plant to Raigarh substation along with 

132 KV bay at Raigarh on payment of cost of the said works as per Board’s rules. 

Accordingly, the Appellant Board carried out a detailed route survey for the line. 

However, Respondent No. 1 decided to construct the aforesaid transmission line by 

itself and informed the same to the Appellant on 17 th August, 2007. Appellant agreed 

for construction of 132 KV independent line by Respondent No. 1 from its power 

plant to the 132 KV sub-station at Raigarh subject to the following conditions: 

(i) Respondent No. 1 would have to pay in advance to the Board supervision 

charges @ 15 per cent of estimated cost of line amounting to Rs. 67,60,853 

(ii) The construction to be carried out through “A” class contractor strictly 

under the supervision of the Appellant as per the relevant drawing and design 

approved by the Appellant 

(iii) The completed line in all respects would be handed over to the Appellant 

after commissioning of the line for further necessary action regarding 

maintenance, etc. 

(iv) The construction of 132 KV bay at 132 KV sub-station will be carried out 

by the Appellant on payment of Rs. 1,29,31,500 towards cost of the line bay by 


8. Accordingly, M/s R.R. Energy (Respondent No. 1) agreed to pay supervision charges 

@ 15 per cent of estimated cost of line and also cost of 132 KV bay at Raigarh sub-station 

for termination of the said line. In the mean time M/s R.R. Energy also approached 

State Government for mandatory prior approval for construction of 132 KV overhead 

line under Section 68 of the Electricity Act, 2003. On 9 th October, 2007, the State 

Government accorded approval for the construction of the aforesaid 132 KV line 

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subject to certain conditions. Upon receipt of the State Government’s approval, 

Respondent No. 1 informed the Appellant Board about its carrying out the construction 

work of the line. It also requested the Board to supply drawings and design of tower 

foundations and structure along with survey report. The Appellant Board agreed to 

supply these on payment of costs incurred by it which was duly paid by the 


9. Thereafter, Respondent No. 1 carried out the construction work of the said line. 

Upon completion of the line, the Chief Electrical Inspector carried out mandatory 

inspection of the installations of the Respondent No. 1 under Indian Electricity 

Rules, 1956. After being satisfied with installation work, Chief Electrical Inspector 

granted permission to Respondent No. 1 for charging its line. However, Appellant 

did not allow connectivity with its system on the ground of non-payment of supervision 

charges by the Respondent No. 1 in terms of the Supply Code. Hence, Respondent 

No. 1 deposited the 15 supervision charges “under protest” to avail connectivity for 

evacuation of power from its plant, claiming that it has laid the line as per the approval 

of the State Government according to which the ownership of line would lie with 

Respondent No. 1 only. 

10. Thereupon, the Respondent No. 1 filed a Petition No. 46 of 2009(M) before the 

Respondent No. 2 State Commission, praying for refund of the amount of 

15 supervision charges already deposited under protest with the Appellant. 

Accordingly, the State Commission vide its order dated 29 th October, 2009 held that 

Respondent No. 1 is not liable to pay supervision charges to the Appellant and 

directed for the refund. 

11. Being aggrieved by the this order of the State Commission, the Appellant filed a 

Review Petition No. 01 of 2010(M) before the State Commission on 5 th January, 2010 

pleading, inter alia, that: 

(i) Connectivity of the generator with the grid not only involves supervision of 

the erection of the line for its technical soundness but also involves estimation 

of line work for execution together with supervision of proper synchronisation 

of generator with the grid through its own technical experts to avoid mishaps 

during synchronisation as far as possible. Therefore, the levy of such charge is 

neither unreasonable nor without any purpose; 

(ii) Respondent No. 1 had also availed 1,100 KVA startup power connection 

from the Board through the same line and so the entire arrangement would be 

liable to be regulated as per the provisions of the Supply Code; 

(iii) the State Government’s approval under Section 68 of the 2003 Act has 

only conferred Authority for erection of the line. The State Government has no 

jurisdiction to prescribe any charge recoverable by the licensee or to prescribe 

any terms and conditions for availing the connectivity with the grid. Therefore, 

the said approval does not absolve Respondent No. 1 from payment of charges 

to the Appellant; 

(iv) the Appellant has checked the line before allowing its connectivity with 

the grid which is the basic intention behind the levy of supervision charges 

together with estimation of work and supervision of synchronisation with 

the grid. 

12. Vide the impugned order passed in the above Review Petition on 10 th March, 2010, 

the State Commission again held that Respondent No. 1 is not liable to pay 15 per cent 

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supervision charges as demanded by the Appellant for the reason that supply code 

clearly specified that levy of 15 per cent supervision charges would be applicable 

only where the asset is created by the consumer (i.e. the consumer incurs the cost on 

material and labour) and hand over the such asset to the Board. Thus, in such cases 

the ownership of such asset would remain with the Board and the responsibility of 

operation and maintenance of the line would also be that of the Board. State 

Commission further observed that in the instant case the asset, i.e. the line is created 

by M/s R.R. Energy and they intend to own and maintain the line by themselves in 

accordance with the provision of Section 10(1) of the Act, according to which the 

duties of a generating company shall be to establish, operate and maintain the 

dedicated transmission lines connected to the generating stations and the transmission 

system. Accordingly, State Commission held that in the instant case M/s R.R. Energy 

shall not be liable to pay 15 per cent supervision charges on cost of work. 

13. Aggrieved by the impugned order of the State Commission, the Appellant has 

filed this Appeal before this Tribunal. 

14. Learned Counsel for the Appellant has urged the following contentions in support 

of its claim: 

(I) While getting the approval of the State Government under Section 68 of the 

Electricity Act, 2003, the Respondent No. 1 had kept the Appellant in the dark. 

Similarly, he had also not informed the State Government about approval of 

the Board for construction of the same line by the Board. 

(II) State Government had accorded approval to construct the line only. State 

Government has no Authority to specify any charges to be recovered by the 

Appellant Board from Respondent. Only State Commission has such Authority 

and State Commission has specified the applicable charges in its Supply Code. 

(III) Respondent No. 1 is also getting startup power from the Appellant and as 

such he is also a consumer of the Board. Therefore, the provisions of Supply 

Code would be applicable to the Respondent No. 1 also, being the consumer 

of the Appellant Board. 

(IV) The line in question is also a service line meant to meet Respondent No. 1’s 

startup power requirement. According to provisions of Supply Code, the 

Respondent No. 1 is liable not only for payment of supervision charges to the 

Appellant Board but is also bound to hand over the above line to the Appellant 

after Commissioning. 

(V) Connectivity of the generator with the grid not only involves supervision 

of the erection of the line for its technical soundness but also involves estimation 

of line work for execution together with supervision of proper synchronisation 

of generator with the grid through its own technical experts to avoid mishaps 

during synchronisation as far as possible. Therefore, the levy of such charge is 

neither unreasonable nor without any purpose. 

(VI) Respondent No. 1 prevented the Appellant from carrying out the supervision 

of the line during construction by not intimating the progress during various 

stages of construction of the line. 

15. Sh. Sood, representative of Respondent No. 1 (M/s. R.R. Energy) countered the 

said arguments advanced by the Appellant and submitted the following: 

(I) Section 10 of the Electricity Act, 2003 mandates a generating company to 

establish, operate and maintain “dedicated transmission line”. 

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(II) Section 68 requires prior approval of the Appropriate Government for 

establishment of any over head line. Accordingly, it was the duty of Respondent 

No. 1 to take prior approval of the State Government in terms of Section 68 of 

the Electricity Act, 2003 irrespective who actually constructed the line either 

by Appellant Board or Respondent No. 1 itself. 

(III) The approval of State Government is subject to certain conditions prescribed 

by the Government under Sub-section (3) of Section 68 of the Act. One of such 

conditions is that the line would be operated and maintained by M/s R.R. Energy 

(Respondent No. 1). In view of the condition laid down in the approval of the 

State Government, line cannot be handed over to the Appellant. 

(IV) Despite being well aware of the fact that line was being erected by 

Respondent No. 1, the Appellant had not carried out any supervision during 

the construction of line. The Appellant had just inspected the line only after 

its completion and, therefore, it is not entitled for any supervision charges. 

(V) As per Electricity (Removal of Difficulty) Fifth Order, 2005, Respondent 

No. 1, being a generating company would not be required to obtain a transmission 

license under the act to operate and maintain “dedicated transmission line”. 

As per provisions of this order, it has to comply with, inter alia, the Grid Code 

and Grid connectivity Standards. Supply Code, which is meant for consumers 

of the distribution licensee, has not application in his case. 

16. Learned Counsel for State Commission (R-2) reiterated the findings of the State 

Commission given in the impugned order and submitted as below: 

(I) The line in question is a dedicated transmission line meant for evacuation 

of power from generating station of the Respondent No. 1. 

(II) Respondent No. 1 cannot be considered to be the consumer of the distribution 

licensee in terms of Section 43 of the Act merely on the ground that he draws 

startup power from the grid. 

(III) Section 46 of the Act also has no application to the instant case as it deals 

with expenditure reasonably incurred by distribution licensee in providing 

supply line used for the purpose giving supply under Section 43 of the Act. 

(IV) The activities of the Respondent No. 1 are to be governed by Grid Code of 

State Commission and not by the Supply Code. Both Grid Code and Supply 

Code have exclusive operational fields and cannot be applied simultaneously 

to set of circumstance as in the present case. 

17. We have heard the learned Counsel for the parties and carefully considered the 

submissions made by the rival parties. 

18. In the light of the rival contentions referred to above urged by the learned Counsel 

for parties, following questions would arise for consideration: 

(I) Whether Respondent No. 1 has committed any wrong by approaching the 

State Government for approval under Section 68 of the Electricity Act, 2003 

pending Appellant Board’s approval for construction of his line. 

(II) Whether a generating company can also be termed as a consumer merely 

because he would be drawing “startup power” from grid occasionally. 

(III) Whether line in question is a “dedicated transmission line” of generating 

company for evacuation of power from its generating station or is a “service 

line” for meeting the requirements of a consumer. 

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(IV) Whether the Appellant is entitled for supervision charges for supervision 

of proper synchronisation of generator with the grid through its own technical 

experts to avoid mishaps during synchronisation as far as possible. 

19. We shall now deal with each question one by one. 

20. First question for our consideration is Whether Respondent No. 1 has committed 

any wrong by approaching the State Government for approval under Section 68 of 

the Electricity Act, 2003 pending Appellant Board’s approval for construction of 

his line. 

21. To answer this question, we have to examine the relevant provisions of the 

Electricity Act, 2003 and State Commission’s Regulations framed thereunder. 

22. Section 10 of the Electricity Act, 2003 deals with duties of generating company 

to establish, operate and maintain a dedicated transmission line. Section 10 of the 

Act is reproduced as under: 

Section 10. Duties of generating companies.-(1) Subject to the provisions of 

this Act, the duties of a generating company shall be to establish, operate and 

maintain generating stations, tie-lines, sub-stations and dedicated transmission 

lines connected therewith in accordance with the provisions of this Act or the 

rules or regulations made thereunder... 

23. “Dedicated transmission line” has been defined in Section 2(16) of the Act 

as under: 

(16) “dedicated transmission lines” means any electric supply-line for point 

to point transmission which are required for the purpose of connecting electric 

lines or electric plants of a captive generating plant referred to in Section 9 or 

generating station referred to in Section 10 to any transmission lines or 

sub-stations or generating stations, or the load centre, as the case may be 

24. Section 68 of Electricity Act, 2003 requires prior approval of the Appropriate 

Government for installation of any overhead line. Relevant portion of Section 68 is 


68. Overhead lines.- (1) An overhead line shall, with prior approval of the 

Appropriate Government, be installed or kept installed above ground in 

accordance with the provisions of Sub-section (2). 

(2) The provisions contained in Sub-section (1) shall not apply: 

(a) in relation to an electric line which has a nominal voltage not 

exceeding 11 kilovolts and is used or intended to be used for 

supplying to a single consumer 

(3) The Appropriate Government shall, while granting approval under 

Sub-section (1), impose such conditions (including conditions as to the 

ownership and operation of the line) as appear to it to be necessary. 

25. Admittedly, Respondent No. 1 is a generating company having a Biomass based 

generating station of 14 MW. Power generated from generating station was being 

evacuated through a 33 KV line. On 30 th December, 2006, the State Commission 

notified Grid Code, 2007. As per Clause 4.1.2 of this code, all existing generators 

having capacity more than 9 MW were required to have grid connectivity through 

dedicated feeder at 132 KV for evacuation of power and availing startup power 

from the grid. The said clause is quoted below: 

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Clause 4.1.2... Existing generator whose installed capacity is 10 MVA/9 MW 

and above will also have to have connectivity through independent/dedicated 

132 KV feeder with EHV sub-station for availing startup power and evacuation 

of power within one year from the date of coming this code in force. CSEB 

shall examine all such cases and issue notices to them to have connectivity 

with EHV substation through independent/dedicated EHV feeder and shall 

issue demand note/advice to them within three months and the generator 

shall complete the formalities for having connectivity with the EHV substation 

including payment within two months. 

26. To comply with the above provision of the Grid Code, the Respondent No. 1 was 

required to switch over from 33 KV to 132 KV and was required to lay a 

independent/dedicated line at 132 KV connected to Appellant’s EHV substation. 

Accordingly, the Respondent No. 1 approached the Appellant Board to carry out 

the entire work related to erection of 132 KV line and associated terminal line bay at 

132 KV Raigarh substation of Appellant. Appellant Board agreed to undertake the 

works subjected to payment of full costs of works including 15 per cent supervision 

charges. 

27. Various provisions of the Act and Grid Code do not require that works were to 

be carried out only by the Appellant Board. The Respondent No. 1 could as well 

have entrusted the works related to construction of line to any Class-1 Electrical 

Inspector as per provisions of Indian Electricity Rules, 1956. Thus, the role of 

Appellant Board was restricted to that of a Class-1 Electrical Contractor. Getting 

prior approval of the State Government for any overhead line is mandatory, 

irrespective of who constructs the line. This approval was also necessarily required 

even if the line was constructed by the licensee, i.e. Appellant Board. 

28. We would like to clarify here that the prior approval of the Appropriate 

Government under Section 68 of the Act is mandatory even if the works are carried 

out by a licensee. To remove any doubt about this requirement, we would also like 

mention that prior approval under Section 68 is being obtained by POWERGRID, a 

Central Transmission Utility, who have been authorized to exercise the powers of 

Telegraph Authority under Section 164 of the Act. The requirement of prior approval 

under Section 68 of the Act cannot be replaced by mere sanction of a licensee to 

undertake the works as a contractor. 

29. Thus, the Respondent No. 1 has correctly met with requirements of the Act and 

had not done anything wrong by obtaining the State Government’s approval under 

Section 68 of the Act. We answer this question accordingly. 

30. Next Question for our consideration is to whether a generating company can 

also be termed as a consumer merely because he would be drawing “startup power” 

from grid occasionally. 

31. The State Commission has carried out in depth examination of this issue in the 

impugned order dated 10 th March, 2010. The relevant portion of findings of the 

State Commission are as under: 

(5) The contention of Petitioner that since the generator M/s R.R. Energy has 

also availed 1100 KVA start-up power from CSEB through the same line and 

so the entire arrangement is liable to be regulated as per provision of Supply 

Code, is not convincing. The State grid code deals with the matters related to 

technical standards, metering, operation, protection, safety co-ordination of 

the transmission system in the State and shall have to be complied with by all 

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entities and open access customers connected to the State transmission system.... 

Thus, the customer also includes consumer and the State Grid Code will also 

be applicable to the consumer connected with transmission system of the State 

so far technical standard, metering, operation, protection safety of grid are 

concerned. However, Supply Code shall be applicable for such consumers in 

dealing with Distribution Company in relation with meter reading, billing etc. 

as a consumer. Since, the start-up power by the generator is optional it cannot 

be concluded that in case the generator avails facility of start-up power the 

Supply Code shall be applicable for the entire arrangement, and only in case 

it does not avail start-up power the Grid Code will be applicable, though the 

connectivity in both the cases with system remains the same. Thus, we do not 

agree with this pleading of the Petitioner on this point. The Petitioner further 

stated that Section 4.6, 4.8, 6.43 and 6.45 of the effective Supply Code are the 

relevant provisions in this case.... We have gone through the clause wise details 

and observed that the Clause 4.6 of the Supply Code is related with the extension 

of distribution mains/service connection for releasing supply to a consumer 

by the licensee and this line is to be maintained by the licensee and shall also 

have the right to use the service connection/extension for supply of electricity 

to the other consumers. Since, the instant case is basically of a generator which 

is connected by dedicated line with the grid as per provision in modified 

Clause 4.1.2 of the amended Grid Code, 2008, therefore, the Clause 4.6 of the 

Supply Code will not be applicable here. The Clause 4.8 of the Supply Code 

referred by the Petitioner is related with the service line from the distribution 

mains to the point of supply of the consumer which should not normally be 

more than 30 meters, hence this clause is also not applicable in the present 

case. The Clause 6.43 and 6.45 of the Supply Code referred by the Petitioner is 

related with operation of a generator in consumer’s installation to run in parallel 

with the licensee’s system only with the due written consent of the licensee 

and with proper protection system. This point is not related with the payment 

of 15 per cent supervision charges.... 

32. Sh M.G. Ramachandran, learned Counsel for the State Commission reiterated 

the findings of the State Commission as given above and has raised a very important 

point during discussions. He stated that every generator, except DG set, requires 

startup power. Even large generating companies like NTPC require startup to start 

their generators during black start, i.e. just after complete grid failure. If a generator 

is also termed as a consumer merely because he avails startup power from the grid, 

it will cause serious repercussions and unsettle the already settled issues relating 

to providing startup power to these stations. He further urged that such arrangements 

do not qualify the requirements of Section 43 of the Act. He also pointed out that 

even if it is accepted that the Respondent No. 1 is also a consumer, since the metering 

is done at 132 KV substation of Appellant, point of supply being outgoing terminals 

of the meter, the responsibility of Appellant Board ends there itself. 

33. Ms. Suparana Srivastva, learned Counsel for the Appellant, countered the 

contentions of the Respondent No. 1. She placed on record an agreement entered 

between the Appellant Board and the Respondent No. 1 for availing 1,100 KVA 

startup power from the licensee. She stated that this agreement had been entered 

upon in pursuance of application by the Respondent No. 1 for startup power. As 

regards metering arrangement, she clarified that undoubtedly metering for export of 

power is being done at 132 KV Raigarh substation, but metering for import of power 

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(startup power) is done at generating station itself. In support of her arguments, 

Clause 7 (a) of the said agreement was brought to our notice which states that “For 

the purpose of registering the electrical energy taken by the Consumer under this 

agreement there shall be provided one volt metering arrangement (hereinafter, referred 

as main meter) on the feeder of the consumer which shall be the property of and be 

kept in repair and Calibrated by the Board.” She also drew our attention towards 

relevant portion of State Commission’s Retail Supply Tariff Order for the year 2006-07, 

wherein the State Commission has classified “startup power” as separate category 

and has specified Tariff for this category of consumers. 

34. Learned representative of the Respondent No. 1 did not counter the contentions 

of the Appellant in regard to Agreement and metering arrangement at his premises. 

He, however, urged that drawal of “startup power” from grid is only occasional 

and is in fraction of export of power. The Respondent No. 1 is undoubtedly a 

generator and there is no term such as generator-cum-consumer in the Act. One has 

to be either generator or a consumer. The Respondent No. 1, being a generator, is 

governed only by the provisions of Grid Code and not by Supply Code. 

35. Though, at this stage, we are of the view that the findings of the State Commission 

are well reasoned and there is no reason to interfere with the same, however, as 

brought out above, the issue under discussion is of great importance and could 

have large ramification, we would like to carry out de novo examination of various 

sections of the Act dealing with distribution of electricity, the Supply Code and 

relevant provisions of State Commission’s Tariff order in detail to arrive at final 

conclusion. 

36. The Appellant’s case revolves around provisions of Sections 43, 45, 46 and 50 of 

the Act. The Appellant has also placed great reliance on Clause 4.10 of Supply 

Code. Let us examine each of these one by one and analyse the validity of the 

Appellant’s claim. Section 43 casts Universal Obligation of Supply on the distribution 

licensee. Section 43 is reproduced below: 

Section 43. Duty to supply on request.- (1) Save as otherwise provided in this 

Act, every distribution licensee, shall, on an application by the owner or occupier 

of any premises, give supply of electricity to such premises, within one month 

after receipt of the application requiring such supply: 

Provided that where such supply requires extension of distribution mains, 

or commissioning of new sub-stations, the distribution licensee shall supply 

the electricity to such premises immediately after such extension or 

commissioning or within such period as may be specified by the 

Appropriate Commission.... 

37. According to the Appellant, existence of agreement between him and the 

Respondent No. 1 for startup power is a proof that supply had been provided by 

him to the Respondent No. 1 in pursuance of Section 43. Section 45 deals with 

powers of Distribution Licensee to recover charges for supply of electricity by him 

in accordance with the Tariff fixed by the State Commission. Relevant portion of 

Section 45 of the Electricity Act, 2003 is reproduced below: 

Section 45. Power to recover charges.- (1) Subject to the provisions of this 

section, the prices to be charged by a distribution licensee for the supply of 

electricity by him in pursuance of Section 43 shall be in accordance with such 

Tariffs fixed from time-to-time and conditions of his licence.... 

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38. According to the Appellant, State Commission has classified startup power as 

separate category and has given Tariff for this category of consumers in Tariff orders 

year after year. Therefore, requirements of this section are also met with. 

39. Section 46 authorizes the distribution licensee to recover expenses reasonably 

incurred in providing electric line for the purpose of giving supply in accordance 

with regulations specified by the State Commission. Provisions of Section 46 are 

important and are reproduced below: 

Section 46. Power to recover expenditure.- The State Commission may, by 

regulations, authorise a distribution licensee to charge from a person requiring 

a supply of electricity in pursuance of Section 43 any expenses reasonably 

incurred in providing any electric line or electrical plant used for the purpose 

of giving that supply. 

40. According to Appellant, the State Commission has authorized him to recover 

Supervision Charges in case service line is laid by consumer himself under Clause 4.10 

of the Supply Code specified by the State Commission under Section 50 of the act. 

41. Clause 4.10 of Supply Code is reproduced below: 

4.10 The consumer can get the work of drawing of service line from the licensee’s 

distribution mains up to his premises as per the estimates and layout approved 

by the licensee through a “C” or higher-class licensed electrical contractor, 

and the work of extension of EHT and HT line, distribution or HT substation 

and LT line through an “A” class contractor as per the estimates and layout 

approved by the licensee. In such case, the consumer himself shall procure the 

materials. The material should, conform to relevant BIS specification or its 

equivalent and should bear ISI mark wherever applicable. The licensee may 

ask for documentary evidence to verify the quality of materials used. The 

consumer shall be required to pay the supervision charges as approved by the 

Commission in the Schedule of Miscellaneous Charges on the cost of works as 

per the estimates approved by the licensee. 


42. After going through various provisions referred above, prima facie, it appears 

that the claim of the Appellant could be justified. However, considering the importance 

of the case and its likely impact of the power sector, it requires further examination. 

43. Before proceeding, further let us understand what startup power is and for what 

purpose it is required. 

44. Startup Power has not been defined in the Electricity Act, 2003 or in the Rules 

and Regulations framed thereunder. It has also not been defined in the repealed 

Acts viz. Indian Electricity Act, 1910, Electricity (Supply) Act, 1948 and Electricity 

Regulatory Commission Act, 1998. Thus, we have to go by its general meaning. 

In general parlance, word “Startup” means to start any machine or motor. In terms 

of electricity, Startup Power is power required to start any machine. Thus, Startup 

Power is power required to start a generator. Next question is, why it is required. 

Thermal generating units (to some extent large hydro generating units also) have 

many auxiliaries, such as water feed pump, coal milling units, draft pumps, etc. 

These auxiliaries operate on electrical power and are essentially required to run 

before generating unit starts producing power of its own. These auxiliaries would 

draw power from grid till unit start producing power and is synchronised with the 

grid. Once unit is synchronised, requirement of “startup power” vanishes. 

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Thus, “startup power” is required only when all the generating units in a generating 

station are under shutdown and first unit is required to startup. Once any one unit 

in a generating station is synchronised, power generated by the running unit is 

used to startup other units. Period of requirement of startup would vary from few 

minutes to few hours depending upon the size of unit. 

45. Above discussion shows that requirement of startup power is essential for every 

generating station and is very limited both in quantum (MW) and duration terms. 

46. It is admitted that the Respondent No. 1 have applied for startup power under 

Section 43. But can we say that existence of an agreement for startup power meets the 

requirements of Section 43? Let us now examine this aspect. Under Section 43 of the 

Electricity Act, 2003, it is the duty of licensee to supply power to any person on 

demand. The whole Act does not put any restriction on consumer in regard to quantum 

of power or duration of drawal. A consumer may demand any quantum of power. He 

can consume power at any load factor ranging from zero to 100 per cent during any 

time of the day. In the light of the above, Can we say that a startup consumer as 

categorized by the State Commission in its Tariff orders enjoys all or any of these 

privileges? Let us refer to the relevant observations in Retail Tariff order. 

Start-up power required by generators including plants based on biomass, 

captive power plants, small hydel plants etc. shall now be billed as per this 

Tariff from the effective date of this order. However, the condition that working 

has to be on single shift and the provision of TOD meter will not be applicable 

for start-up power connections. Similarly, start-up power consumers will be 

exempted from payment of a monthly minimum charge of units equivalent to 

any load factor on the contract demand, but will be required to pay only 

demand charge every month on the contract demand or recorded MD, whichever 

is higher. However, to be eligible to avail this Tariff, the generating unit has to 

have a contract demand which does not exceed 10 per cent capacity of the 

highest generating capacity of generating station and restricts the drawal of 

power within 10 per cent load factor every month. In case the load factor in a 

month goes beyond 10 per cent, the generating unit will be required to pay 

twice the demand charge 


47. From the above observations, it is clear that a “startup power” consumer can 

have a contract demand up to maximum of 10 per cent of highest generating capacity 

unit of generating station. Further, his total drawal from the grid during the month 

is also restricted to 10 per cent load factor. In other words at full contracted demand, 

he can draw power from grid for less than three hours in a day (720 x 0.1/30 hours 

per day). Further, his operational time is also restricted to one shift operation. With 

such restrictions, supply given to a generator as “startup power” cannot be termed 

in pursuance to Section 43 of the Electricity Act, 2003. 

48. Further, consumer as defined in the Act is a person who is supplied with electricity 

for his own use. Here startup power is supplied to Respondent No. 1 to startup its 

generating unit. Once generating unit is synchronised with the grid, the power so 

generated is supplied to Appellant. Without startup power, generators cannot start 

and produce power. Thus, in way, startup power is supplied for the benefit of 

Appellant only. From this point of view, a generator taking startup power from 

distribution licensee and supply power to same licensee on startup, cannot be termed 

as a consumer. 

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49. In light of above discussions a generator requiring “startup power” from the 

grid cannot be termed as a consumer. 

50. Next Question before us for consideration is the status of line in question, i.e. 

whether line in it is a “dedicated transmission line” of generating company for 

evacuation of power from its generating station or is a “service line” for meeting the 

requirements of a consumer. 

51. An offshoot of this question would be who would operate and maintain this 

line licensee or generator. Thus, we feel it necessary to answer it to settle the issue 

once for all. 

52. As already discussed above, Section 10 of the Act requires any generating company 

to establish, operate and maintain dedicated transmission line. Dedicated transmission 

line has been defined in Section 2(16) of the Act. Section 68(1) requires prior approval 

of the State Government which had been obtained by the generator. Sub-section (3) 

of Section 68 of the Act empowers the State Government to impose conditions, 

including ownership and operation of the line while granting such approval. State 

Government has according impose 19 conditions on the generator while granting 

approval under Section 68(1). 18 th Condition in the said approval provides that 

operation and maintenance of the line shall be under taken necessarily by the 

Respondent No. 1-company. Above provisions leave no doubt about status of the 

line and who would operate and maintain it. The line in question is a dedicated 

transmission line of a generating company and have to be operated and maintained 

by the generating company. 

53. The Appellant has placed reliance on certain provisions of supply code and 

also on Clause 3 of the Agreement between him and the Respondent No. 1 for 

startup power. According to these provisions the ownership of the line would rest 

with the Appellant Board and will be maintained by the Appellant Board at its cost. 

Leaned Counsel of the Appellant argued that the Supply Code has power of law 

and its provisions would have to be applied in totality. We fail to appreciate the 

arguments of the Appellant. Supply Code is a subordinate legislation created under 

the Electricity Act, 2003. Thus, its provisions cannot overrule the explicit provisions 

of the Act. 

54. It would be pertinent to mention that Respondent No. 1 generating units were 

operating and power was being sold to Appellant Board at 33 KV. It was because of 

Clause 4.1.2 of State Commission’s grid Code notified on 30 th December, 2006, 

Respondent No. 1 had to upgrade evacuation system to 132 KV. This upgradation 

from 33 KV to 132 KV was because of its generating capacity was more than 9 MW. 

Its startup power requirement was only 11 KVA for which existing 33 KV line was 

adequate. On this ground also 132 KV line in question is a “dedicated transmission 

line” to evacuate power from generating station of Respondent No. 1 and not a 

“service line” to meet startup power requirement. 

55. Thus, the line in dispute is a “dedicated transmission line” in terms of Section 10 

of the Electricity Act, 2003. Accordingly, it has to operated and maintained by the 


56. Next question for consideration is to whether the Appellant is entitled for 

supervision charges for supervision of proper synchronisation of generator with 

the grid through its own technical experts to avoid mishaps during synchronisation 

as far as possible. 

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57. The issue had been dealt with in detail by the State Commission in its impugned 

order dated 29 th October, 2009. The findings of the State Commission are as under: 

(4) The argument of the Petitioner was heard in length. In the matter of contention 

of Petitioner that as per Clause 6.9 of Commission order dated 10 th August, 2007, 

15 per cent supervision charge is payable in both cases either the extension 

work is done by the CSEB or by generator, we refer Clause 6.9 of our order 

dated 10 th August, 2007 passed in Petition No. 40 of 2006 (M) in the matter of 

approval of miscellaneous and general charges under Sections 43, 45 and 46 

of the Electricity Act, 2003 which is shown as follows: 

The Commission’s views in respect of levy of 15 per cent supervision 

charges have been dealt with Para 6.7. Here the asset is created by the 

consumer and handed over to the Board. The consumer incurs the cost 

of material and labour. Thus, there appears justification in charging of 

supervision charge of 15 per cent on cost of material and labour. This 

practice is also being followed for many years in the Board. The 

Commission approves supervision charges at 15 per cent on the cost of 

estimate of work approved by the Board including cost of material, 

labour etc. 

Here, it is clearly specified that levy of 15 per cent supervision charges is 

applicable where the asset is created by the consumer, i.e. the consumer 

incurs the cost on material and labour and hands over the Board. Thus, in 

such case the ownership of the line remains with the Board and the 

responsibility of operation and maintenance of the line also remains with 

the Board. Here, in instant case the asset, i.e. the line is created by M/s R.R. 

Energy and they intend to own and maintain the line by themselves in 

accordance with the provision of Section 10(1) of the Act, as per which the 

duties of a generating company shall be to establish, operate and maintain 

the dedicated transmission lines connected to the generating stations and 

the transmission system. The Para 6.9 of our order dated 10 th August, 2007 

clearly state that payment of 15 per cent supervision charges will be applicable 

where asset is created by consumer and handed over to the Board. Therefore 

in the instant case M/s R.R. Energy shall not be liable to pay 15 per cent 

supervision charges on cost of work. Further, it is not specified in Clause 6.9 

of the order dated 10 th August, 2007 that 15 supervision charge also includes 

the estimation, general consumer consultancy and supervision towards 

synchronisation of generating plant to the grid. The provision of levy of fee 

as decided by the CSERC exists in Clause 4.2.1 of the CSERC Grid Code, 2007 

for providing the grid connectivity by CSEB (now CSPTCL) from generators/ 

CGP/Discom/open access customer etc. which may cover such services, but 

CSEB/CSPTCL have not submitted any proposal to the Commission to decide 

such fee. The Clause 4.2.1 of CSERC Grid Code, 2007 read as any generator/ 

CGP/Discom/open access customer seeking to establish new or modified 

arrangement for connection to and/or use of the transmission system shall 

submit an application to the STU/Transmission licensee and deposit the 

prescribed fee as decided by CSERC. 


58. We find that the above observations of the State Commission are well reasoned. 

Levy of 15 per cent supervision charges are justified in cases where an asset is 

established by consumer and is handed over to licensee for operation and 

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maintenance. The rationale for such view is that since the asset is to be maintained 

by licensee for whole of its life. Licensee has to replace any part of the asset which 

got defective during life time at his costs; he is entitled to claim supervision charges. 

Thus, we do not find any reason to interfere with the findings of the State Commission. 


59. (I) Question No. 1: Whether Respondent No. 1 (R.R. Energy) has committed 

any wrong by approaching the State Government for approval under Section 68 of 

the Electricity Act, 2003 pending Appellant Board’s approval for construction of 

its line? 

Our answer is this: The Respondent No. 1 (R.R. Energy) has correctly met with 

requirements of the Act and had not done any wrong by obtaining the State 

Government’s approval under Section 68 of the Act. 

(II) Question No. 2: Whether a generating company can also be termed as a consumer 

only because it would be drawing “startup power” from grid occasionally? 

Our answer is this: A generator requiring “startup power” from the grid occasionally 

cannot be termed as a consumer. 

(III). Question No. 3: Whether line in question is a ‘dedicated transmission line’ of 

generating company for evacuation of power from its generating station or is a 

“service line” for meeting the requirements of a consumer? 

Our answer of this question is this: The line in dispute is a “dedicated transmission 

line” in terms of Section 10 of the Electricity Act, 2003. Accordingly, the line has to 

be operated and maintained by the Respondent No. 1 (R.R. Energy). 

(IV) Question No. 4. Whether the Appellant is entitled for supervision charges for 

supervision of proper synchronisation of generator with the grid through its own 

technical experts to avoid mishaps during synchronisation as far as possible? 

Our answer is this: The levy of 15 per cent supervision charges are justified in cases 

where an asset is established by consumer and is handed over to licensee for operation 

and maintenance. In such cases the asset is to be maintained by licensee for whole 

of its life including replacement any defective part of the asset during life time at his 

costs. In the present case line is to be operated and maintained by the Respondent 

No. 1. There is no justification for supervision charges. 

60. In view of our above findings, we do not find any ground to interfere with the 

impugned order passed by Chhatisgarh State Commission dated 29 th October, 2009. 

61. Hence, this Appeal being devoid of merit is dismissed. 

However, there is no order as to cost. 

0913 

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2011 ELR (APTEL) 0914* 



Ratnagiri Gas and Power Private Ltd., Uttar Pradesh 

v. 

Central Electricity Regulatory Commission, New Delhi and 

Maharashtra State Electricity Distribution Co. Ltd., Mumbai 

a 

b 


DECIDED ON: 27.05.2011 

Coram 

Rakesh Nath, Member (Technical) and P.S. Datta, Member (Judicial) 


Whether the State Commission was correct in disallowing servicing of the capital 

cost of LNG terminal in view of the peculiar circumstances of the case? 

Held, the very same issue had been dealt with in Tribunal’s order dated 25 th March, 2011. 

According to Regulation 17 of 2004 Regulations of the Central Commission, subject to 

prudence check by the Commission, the actual expenditure incurred on completion of 

the project shall form the basis for determination of final Tariff. The LNG terminal has 

not been commissioned so far. Therefore, its capital cost cannot be admitted and 

serviced through the electricity Tariff. There is no merit in this contention urged by the 

Appellant. Therefore, contention of the Appellant in regard to the servicing of cost of 

LNG terminal rejected. 

Whether the State Commission was correct in not allowing the Tariff for the entire 

life time of the project as submitted by the Appellant? 

Held, the issue has been decided in Appeal No. 191 of 2010 challenging the order of 

the Central Commission for not allowing the Tariff which was agreed between the 

Appellant and Respondent No. 2, the major beneficiary of the project. The Central 

Commission is not expected to mechanically accept the Tariff as per the agreements 

or understanding reached between the Project stakeholders. There is also no provision 

of Regulatory Assets in the Regulations. The annual fixed charges claimed by the 

Petitioner for a period up to 31 st March, 2032 are in deviation of the norms specified 

in the 2009 Regulations. Regulation 38 of the 2009 Regulations provides for 

determination of generation Tariff in deviation of the norms specified in the 2009 

Regulations subject to the condition that the levelised Tariff over the useful life of 

the project on the basis of norms in deviation does not exceed the levelised Tariff 

calculated on the basis of norms specified in these regulations. The Petitioner, in its 

petition, has not demonstrated the existence of the above condition warranting the 

consideration of levelised Tariff over the useful life of the generating station by the 

Commission. Hence, the Tariff for the generating station is determined for a period 

of five years from 1 st April, 2009 to 31 st March, 2014, based on the norms specified 

by the Commission in the 2009 regulations. 

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* MANU/ET/0086/2011 

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Whether the Central Commission erred in rejecting the claim of the Appellant for 

servicing of the regulatory asset as per the agreement reached between the Appellant 

and Respondent No. 2? 

Held, this issue has also been dealt with in the judgment of this Tribunal in Appeal 

No. 191 of 2010. Accordingly, this issue is decided against the Appellant. 

Whether the Central Commission should have considered the cost of maintenance of 

liquid fuel in determining the working capital requirements and also determined the 

heat rate on Naptha as an alternative fuel? 

Held, though RGPPL started first of the power blocks using Liquid fuels (Naphtha 

and HSD), these were never envisaged for commercial operation due to prohibitive 

cost, reduced hot gas path component life and higher Heat Rate etc. Gas/LNG 

prices are market driven and even if the domestic gas serves as the fuel for the 

power block, LNG terminal is expected to make financial contribution to the revenue 

stream thereby, justifying the cost incurred in the long run. As domestic gas has 

been allocated for the power project, use of LNG facility is being planned to be 

utilised for LNG tolling. Thus, issue was accordingly decided against the Appellant. 


Ratnagiri Gas and Power Private Ltd. v. CERC, New Delhi and Anr. 



Tariff Regulations, 2009 


Regulation 38 [p. 0918, para 8 c] 

Tariff Regulations, 2004, Regulation 17 [p. 0917, para 6 f] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Anand K. Ganesan and 

Swapna Seshdari, Advs. 

For Respondents/Defendant: Nikhil Nayyar and Swapnil Verma, Adv. for R 1 

0915 

ORDER 

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1. This appeal has been filed by Ratnagiri Gas and Power Private Limited, a generating 

company, against the order of the Central Electricity Regulatory Commission (Central 

Commission) dated 18 th August, 2010 determining the generation Tariff of the Appellant 

for the period from 1 st April, 2009 to 31 st March, 2014. 

2. The Central Commission is the Respondent No. 1. Maharashtra State Electricity 

Distribution Company Ltd., Distribution licensee in the State of Maharashtra and a 

major beneficiary of the Appellant’s power station, is the Respondent No. 2. 


3.1. In the year, 1993, the Dabhol Power Co. Ltd. and Enron Group entered 

into a power purchase agreement with the Maharashtra State Electricity Board 

for the establishment and sale of power from the gas based generating station 

at Ratnagiri, Maharashtra. 

3.2. In the year 1999 Block-I of the Project was set up. However, Dabhol and 

Enron Group ran into financial and other difficulties and they could not 


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continue to operate the Project. Dabhol Power Co. Ltd. and Maharashtra State 

Electricity Board went into litigation. Subsequently, in May 2001, the Ratnagiri 

Project was closed down and its assets were placed under the control of a 

Receiver appointed by the High Court of Bombay. 

3.3. Following the efforts of the Government of India and the Government of 

Maharashtra for reviving the Dabhol Power Project the Appellant’s company 

was incorporated in July 2005 and in October 2005 all the assets of the Ratnagiri 

Power Project as well as the integrated LNG Terminal and associated 

infrastructure facilities were taken over by the Appellant. 

3.4. On 1 st September, 2007, Block II was declared commercial after revival. 

Subsequently, on 21 st November, 2007, Block-III was declared commercial. From 

January 2008 onwards the gas turbines of Block-II and Block-III experienced 

failures resulting in forced outages of the generating units. In May 2009, Block-I 

was declared under commercial operation after repair. 

3.5. The Central Commission determined Tariff of the Ratnagiri Power Project 

for the period 2007-08 and 2008-09 by its order dated 4 th June, 2009. This order 

was challenged by the Appellant in Appeal No. 130 of 2009. On 25 th March, 2011 

this Tribunal allowed the appeal partly and disallowing some of the issues 

raised by the Appellant. 

3.6. On 12 th November, 2009, the Appellant filed Petition No. 283 of 2009 

before the Central Commission for approval of Tariff for the period 2009-10 to 

2031-32. The Central Commission by its order dated 18 th August, 2010 decided 

the petition. Aggrieved by this order dated 18 th August, 2010 of the Central 

Commission, the Appellant has filed this appeal. 

4. The Appellant has raised the following issues in the appeal: 

(i) Servicing of cost of LNG Terminal: The Central Commission has not 

allowed servicing of cost of LNG terminal as the same has not been 

commissioned. According to the Appellant, servicing of loan on LNG terminal 

is mandatory as per the scheme for revival and the financial package 

approved by the Government of India. This will have an impact on the 

cash flow of the Appellant. 

(ii) Determination of the Tariff for the entire life time of the Project up to 2031-32: 

The Central Commission has rejected the Appellant’s claim for fixing of 

Tariff for the period 2009-2010 to 2031-32 on the basis that the Appellant 

had not demonstrated that the levelised Tariff over the useful life of the 

project on the basis of norms in deviation does not exceed levelised Tariff 

calculated on the basis of norms specified in the Tariff Regulations, 2009. 

In case the Central Commission had allowed the servicing of capital cost 

of LNG Terminal, the levelised Tariff for the period 2009-10 to 2031-32 

would have worked out to be less than the levelised Tariff calculated in 

terms of Tariff Regulations, 2009. 

(iii) The Central Commission has not allowed interim capacity charge of 

Rs. 420 crores out of Tariff periods 2007-08 and 2008-09 to be treated as regulatory 

asset as proposed under financial restructuring package and agreed to by the 

purchaser of power, Respondent No. 2 herein. 

(iv) Consideration of Naphtha Stock for interest on Working capital and station 

heat rate on Naphtha: 

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Ratnagiri Gas and Power Private Ltd. v. CERC, New Delhi and Anr. 


The Central Commission has wrongly rejected fixation of separate station 

heat rate for Naphtha and failed to consider the cost incurred by the 

Appellant on maintaining 15 days cost for Naphtha for determining the 

interest on working capital. 

5. On the basis of the contentions of the parties, we would frame the following 


(i) Was the State Commission correct in disallowing servicing of the capital 

cost of LNG terminal in view of the peculiar circumstances of the case? 

(ii) Whether the State Commission was correct in not allowing the Tariff for 

the entire life time of the project as submitted by the Appellant? 

(iii) Has the Central Commission erred in rejecting the claim of the Appellant 

for servicing of the regulatory asset as per the agreement reached between the 

Appellant and Respondent No. 2? 

(iv) Whether the Central Commission should have considered the cost of 

maintenance of liquid fuel in determining the working capital requirements 

and also determined the heat rate on Naptha as an alternative fuel? 

The above issues have been dealt with in this Tribunal’s judgment dated 25 th March, 2011 

in Appeal No. 130 of 2009. In light of the findings in Tribunal’s judgment dated 

25 th March, 2011, we will give answers to the questions framed above. 

6. The first issue is regarding servicing of cost of LNG Terminal. The very same 

issue has been dealt with in Tribunal’s order dated 25 th March, 2011, the relevant 

extracts of the judgment are reproduced as under: 

15.3. We have noticed that the Appellant in its petition before the Central 

Commission had claimed the apportioned cost of LNG terminal on Block II 

and III as 1415.51 crores in the total cost of 7,121.97 crores. According to 

Regulation 17 of 2004 Regulations of the Central Commission, subject to prudence 

check by the Commission, the actual expenditure incurred on completion of 

the project shall form the basis for determination of final Tariff. The LNG 

terminal has not been commissioned so far. Therefore, its capital cost cannot 

be admitted and serviced through the electricity Tariff. If its cost is serviced 

through electricity Tariff it would result in undue burden on the consumer for 

a facility which has so far not been put to use. Thus, there is no merit in this 

contention urged by the Appellant. Therefore, this issue is decided against the 

Appellant. 

Accordingly, we reject the contention of the Appellant in regard to the servicing of 

cost of LNG terminal. 

7. The second issue is regarding determination of the Tariff for the entire life time of 

the Project. Similar issue was raised in Appeal No. 191 of 2010 challenging the 

order of the Central Commission for not allowing the Tariff which was agreed 

between the Appellant and Respondent No. 2, the major beneficiary of the project. 

The relevant extracts of the judgment are as under: 

17.4. We find that the Central Commission has determined the Tariff as per the 

2004 Regulations, rightly so, as the Central Commission can only determine 

the Tariff as per its Regulations and not in any other way. The Central 

Commission is not expected to mechanically accept the Tariff as per the 

agreements or understanding reached between the Project stakeholders. There 

0917 


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0918 


is also no provision of Regulatory Assets in the Regulations. Thus, we find 

that there is no substance in the ground urged by the Appellant. Accordingly, 

we decide this issue against the Appellant. 

8. In the petition before the State Commission, the Appellant claimed the annual 

fixed charges for the period from 1 st April, 2009 to 31 st March, 2032 (i.e. up to the 

useful life of the generating station) based on levelised calculations after considering 

a discount factor of 10.19 per cent. Regulation 2 of the 2009 regulations provides 

that the regulations specified by the Commission shall be in force for a period of 

5 years from 1 st April, 2009. The annual fixed charges claimed by the Petitioner for 

a period up to 31 st March, 2032 are in deviation of the norms specified in the 2009 

Regulations. Regulation 38 of the 2009 Regulations provides for determination of 

generation Tariff in deviation of the norms specified in the 2009 Regulations subject 

to the condition that the levelised Tariff over the useful life of the project on the 

basis of norms in deviation does not exceed the levelised Tariff calculated on the 

basis of norms specified in these regulations. The Petitioner, in its petition, has not 

demonstrated the existence of the above condition warranting the consideration of 

levelised Tariff over the useful life of the generating station by the Commission. 

Hence, the Tariff for the generating station is determined for a period of five years 

from 1 st April, 2009 to 31 st March, 2014, based on the norms specified by the 

Commission in the 2009 regulations. The Appellant has contended that if the cost 

of LNG terminal is allowed then the condition under Regulation 38 would be met. 

When the servicing of the LNG terminal before its commissioning has not been 

disallowed then this argument will not hold good. 

9. We do not find any infirmity in the order of the State Commission and accordingly 

confirm the same. 

10. The third issue is regarding the creation of regulatory asset. This issue has also 

been dealt with in the judgment of this Tribunal in Appeal No. 191 of 2010. The 

relevant extracts of the judgment (Paragraph 17.4) has already been reproduced 

above in Paragraph 7. Accordingly, this issue is decided against the Appellant. 

11. The fourth issue is regarding consideration of Naphtha stock for interest on 

working capital and station heat rate on Naphtha. This issue has been decided in 

this Tribunal’s judgment dated 25 th March, 2011 in Appeal No. 130 of 2009. The 

relevant extracts of the judgment are as under: 

16.3. We have examined the affidavit of the Appellant dated 14 th January, 2009 

submitted before the Central Commission. The relevant extracts from para 12(iii) 

and 12(v)(d) is reproduced below: 

(iii)...Though RGPPL started first of the power blocks using Liquid fuels 

(Naphtha and HSD), these were never envisaged for commercial operation 

due to prohibitive cost, reduced hot gas path component life and higher 

Heat Rate etc. In order to partially tide over the crises, GOI/E GoM decided 

a contingency arrangement by advancing construction of Dahej-Dabhol 

pipeline of GAIL and supply of R-LNG from Petronet LNG Limited, Dahej. 

The arrangement is for 1.5 MMTPA LNG up to September 2009. The 

quantity is sufficient for about two power blocks of RGPPL. 

(v) xxx xxx xxx 

(d) Gas/LNG prices are market driven and even if the domestic gas serves 

as the fuel for the power block, LNG terminal is expected to make financial 

contribution to the revenue stream thereby justifying the cost incurred in 

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Himachal Pradesh State Elec. Bd. v. Himachal Pradesh Elec. Regu. Comm., Shimla and Ors. 


the long run. It is also submitted that as domestic gas has been allocated 

for the power project, use of LNG facility is being planned to be utilised 

for LNG tolling. 

16.4. The Central Commission has allowed fuel cost for one month 

taking into account operation of the plant only on LNG. Therefore, 

we do not find any infirmity in the finding of the Central Commission 

in this regard. 

16.5. Learned Counsel had also raised a related issue that the Central 

Commission had not considered heat rate of 2,000 Kcal/kWh for 

generation of a Naphtha. In view of the above findings about operation 

of the power station only on LNG, this issue does not survive. 

12. In view of above, this issue is also decided against the Appellant. 

13. In the above facts and circumstances of the case, we do not find any substance 

in the appeal and the same is dismissed. No order as to cost. 

0919 

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2011 ELR (APTEL) 0919* 



Himachal Pradesh State Electricity Board Vidyut Bhawan, Shimla 

v. 

Himachal Pradesh Electricity Regulatory Commission, Shimla and Ors. 

REVIEW PETITION NO. 13 OF 2010 IN APPEAL NOS. 56 OF 2008 AND 192 OF 2009 

DECIDED ON: 27.05.2011 

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Coram 

Rakesh Nath, Member (Technical) and P.S. Datta, Member (Judicial) 


Whether disallowance of employees cost related to Larji and Khauli Projects right? 

Held, this issue had been decided by the Tribunal by judgment dated 6 th July, 2006. 

State Commission directed to implement the directions issued by the Tribunal in its 

judgment dated 6 th July, 2006 relating to employees cost of Largi and Khauli Projects. 

Whether disallowance of costs of various projects was proper? 

Held, this issue has already been decided by the Tribunal in its judgment dated 

6 th July, 2006 in Appeal No. 113 of 2006. There is no justification or reason to disallow 

cost of various projects based on bench mark. State Commission directed to implement 

the directions of the Tribunal given in the judgment dated 6 th July, 2006. 

Whether disallowance of Power Purchase Cost of Rs. 24.56 Cr. in True up for 

FY 2005-06 was justified? 

Held, the State Commission has allowed power purchase cost of Rs. 1,057.74 crores 

as against the audited amount of Rs. 1,082.30 crores in the true up for FY 2005-06. 

* MANU/ET/0087/2011 


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0920 


However, the State Commission has not given any reason for disallowance of power 

purchase cost. Accordingly, State Commission directed to consider the submissions 

of the Petitioner/Appellant and pass a reasoned order. 

Whether the decision of the State Commission to limit provisional capital cost of 

Larji Project at Rs. 960 crores, pending the decision of the State Commission on the 

completed cost was justified? 

Held, review Petitioner wants that this issue may be disposed of without prejudice 

to the final capital cost determination of the project by the State Commission. 

Accordingly, this issue disposed of without prejudice to the final determination of 

the capital cost by the State Commission. 

Whether allowance of employees cost except for an amount of Rs. 3.75 Crores on 

account of deviation from the Punjab State Electricity Board pay scales was justified? 

Held, the Tribunal in its impugned judgment has given a clear finding in Paragraph 17. 

There is no error on the face of the records on this issue. Accordingly, the plea of the 

review Petitioner on the issue of employee cost is rejected. 

Whether order of State Commission not allowing the interest on additional power 

purchase cost contrary to the directions of the Tribunal was correct? 

Held, the Tribunal has considered all the pleadings of the Appellant including the 

Tribunal’s judgment in earlier appeal and there was no error on the face of the 

records. Reconsideration of issue afresh at the review stage is not permissible. 

Accordingly, the issue is rejected. 

Whether order of State Commission disallowing a sum of Rs. 13.62 Crores incurred 

by the review Petitioner/Appellant on interest on General Provident Fund was justified? 

Held, the Tribunal had given a clear finding on this issue in Paras 13 and 14 of the 

impugned judgment. Petitioner/Appellant has raised the same issues as raised in 

the main appeal and also made new submissions which are not permissible in the 

review. Court did not find that there is any error apparent on the face of the record 

in this matter. Accordingly, rejected the claim of the review Petitioner on the issue of 

General Provident Fund. 

Petition Partly Allowed 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Anand K. Ganesan, Swapna 

Seshadri and Ranjitha Ramachandran, Advs. 

For Respondents/Defendant: Sanjay Sen, Sunil Sharma, Shikha Ohri and Surbhi 

Sharma, Advs. 

ORDER 


1. This review petition has been filed by Himachal Pradesh State Electricity Board 

against the judgment of this Tribunal dated 31 st May, 2010 in Appeal Nos. 56 of 2008 

and 182 of 2009, filed by the review Petitioner/Appellant against the orders of the 

Himachal Pradesh Electricity Regulatory Commission. Appeal No. 56 of 2008 was 

against the order dated 16 th April, 2007 passed by the State Commission approving 

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the Annual Revenue Requirement (ARR) and Tariff of the review Petitioner/Appellant 

for FY 2007-08 and true up of the FY 2004-05 and 2005-06. Appeal No. 182 of 2009 

was against the State Commission’s order dated 11 th August, 2009 for true up of 

financials for FY 2007-08. These appeals were partly allowed. 

2. In the review petition the Petitioner/Appellant has raised the following issues: 

2.1. Employees cost related to Larji and Khauli Projects: 

The review Petitioner/Appellant had in the earlier Appeal No. 113 of 2006 

challenged the State Commission’s order regarding disallowance of 

employees costs related to Larji and Khauli Projects for FY 2005-06. The 

Tribunal by judgment dated 6 th July, 2006 had allowed the appeal. 

However, the State Commission did not allow the employees cost in the 

impugned order. The above issue raised by the review Petitioner/Appellant 

in Appeal No. 56 of 2008 has not been adjudicated upon in the judgment 

dated 31 st May, 2010. 

2.2. Disallowance of costs of various projects: 

This Tribunal in its judgment dated 6 th July, 2006 in earlier Appeal No. 113 

of 2006 had allowed the claim of the review Petitioner/Appellant relating 

to cost of various projects. The direction of the Tribunal in this regard 

was not implemented by the State Commission. This issue was also raised 

in Appeal No. 56 of 2008 but was not dealt with by the Tribunal in the 

judgment dated 31 st May, 2010. 

2.3. Disallowance of Power Purchase Cost of Rs. 24.56 Cr. in True up for 

FY 2005-06: 

The State Commission in its order dated 16 th April, 2007 while truing up 

the financials of review Petitioner/Appellant did not allow power purchase 

cost to the tune of Rs. 24.56 crores for FY 2005-06. This issue raised in 

Appeal No. 56 of 2008 had not been dealt with in the judgment dated 

31 st May, 2010. 

2.4. Determination of provisional Tariff for Larji Project: 

The review Petitioner/Appellant had challenged the decision of the State 

Commission to limit provisional capital cost of Larji Project at Rs. 960 crores, 

pending the decision of the State Commission on the completed cost. The 

petition of the review Petitioner for final capital cost for Larji Project is pending 

before the State Commission. The review Petitioner/Appellant had challenged 

the State Commission’s order to limit the provisional capital cost of Larji 

at Rs. 960 crores and sought allowance of interest on long term loans of 

Rs. 1,060 crores taken for Larji to meet its loan payment liability, on 

provisional basis, pending determination of final capital cost by the State 

Commission. However, the Tribunal in its judgment dated 31 st May, 2010 

held that the provisional cost of Larji was allowed in State Commission’s 

order dated 30 th May, 2008 which was not challenged by the review 

Petitioner/Appellant, as such this issue could not be raised in the appeal. 

The Tribunal had proceeded on the basis of the submissions of the State 

Commission that order dated 30 th May, 2008 passed by the State 

Commission was not challenged. This is factually incorrect as the 

Appellant had challenged order dated 30 th May, 2008 of the State 

Commission for the Multi Year Tariff in Appeal No. 12 of 2009. 

Subsequently, by the time Appeal No. 12 of 2009 was heard by the Tribunal, 

0921 


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the petition for final determination of capital cost of the Project was filed 

before the State Commission. Therefore, this issue was not pressed by the 

Appellant in Appeal No. 12 of 2009. 

2.5. Employees Cost: 

The State Commission had allowed employees cost except for an amount 

of Rs. 3.75 Crores on account of deviation from the Punjab State Electricity 

Board pay scales. This was challenged in the appeal before the Tribunal. 

The Tribunal relying on its earlier judgment dated 8 th December, 2008 

passed in Appeal No. 209 of 2006, rejected the claim of the review 

Petitioner/Appellant. However, in its judgment dated 8 th December, 2008 

the Tribunal dismissed the contention of the Appellant on the ground 

that there was no specific challenge by the Appellant. Thus, there was 

no finding by the Tribunal on this issue. 

2.6. Interest on Loan: 

The Tribunal in its judgment dated 8 th December, 2008 passed in Appeal 

No. 209 of 2006 had allowed carrying cost on the trued up amount of 

power purchase cost for the FY 2006-07. However, the State Commission 

in its order dated 11 th August, 2009 did not allow the interest on additional 

power purchase cost contrary to the directions of the Tribunal. In the 

appeal before the Tribunal, the review Petitioner/Appellant had challenged 

the decision of the State Commission. In the impugned order dated 

31 st May, 2010, the Tribunal has rejected the challenge of the Appellant. 

2.7. Interest on General Provident Fund: 

The State Commission had disallowed a sum of Rs. 13.62 Crores incurred 

by the review Petitioner/Appellant on interest on General Provident Fund 

which was challenged in the appeal before the Tribunal. The Tribunal 

confirmed the findings of the State Commission in the matter. The review 

Petitioner/Appellant has explained in details that the said expenditure 

was beyond its control. 

3. We have examined the submissions made by the parties and heard the contentions 

of the learned Counsel for the review Petitioner and the State Commission. We will 

now examine the issues raised in this review petition. 

4. The first issue is regarding employees costs related to Larji and Khauli Projects. 

We notice that this issue has been raised by the Appellant in the grounds of appeal 

under item I (c) in Appeal No. 56 of 2008. However, it has not been dealt with in the 

judgment dated 31 st May, 2010. 

5. We find that this issue has been decided by the Tribunal by judgment dated 

6 th July, 2006. The relevant extracts of the judgment are reproduced below: 

18. Taking up the fifth point on a consideration of the reasons assigned by the 

Board, we hold the disallowance of the employees cost related to two projects 

is not justified. The reasons which prevailed with us in examining the second 

point squarely applies in answering fifth point as well. Hence, we set aside 

the direction and allow the claims made under this head. 

Accordingly, we direct the State Commission to implement the above directions of 

the Tribunal in its judgment dated 6 th July, 2006 relating to employees cost of Largi 

and Khauli Projects. 

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6. The second issue is disallowance of costs of projects. This issue was raised by the 

Appellant in Appeal No. 56 of 2008 in grounds of appeal under Item I (b), but has 

not been dealt with in the Tribunal’s order dated 31 st May, 2010. 

7. This issue has already been decided by the Tribunal in its judgment dated 

6 th July, 2006 in Appeal No. 113 of 2006. The relevant extracts of the judgment are 


On the third point, we may straightaway hold that there is no justification or 

reason to disallow cost of various projects based on bench mark. If the view of 

the Commission is to be taken as a scale or justification, then no projects will 

come up nor there is a possibility of meeting the ever increasing demand of 

power in the State and escalation of cost is a matter of fact. The view of the 

Commission, in our view cannot be held to be fallacious but at the same time, 

there is no justification to disallow it for the year without advance notice or 

warning. The Board is directed to carry out the directions of the Commission 

in this respect, avoid delay and cost overrun. For this Financial Year, we 

allow the claim under this head as a one time measure while giving liberty for 

the future to the Commission to decide, if its directions are not implemented or 

there is a deliberate failure to complete the project. 

Accordingly, we direct the State Commission to implement the above directions of 

the Tribunal given in the judgment dated 6 th July, 2006. 

8. The third issue is regarding disallowance of Power Purchase Cost for FY 2005-06 

in the truing process. According to the learned Counsel for the Appellant, this issue 

was raised by the Appellant in Appeal No. 56 of 2008 but has not been dealt with 

in the impugned judgment by the Tribunal. 

9. We have gone through the Appeal No. 56 of 2008 and find that the above issue 

has not been raised in the grounds of appeal. However, this issue was raised during 

the course of arguments and also in written submissions by the Petitioner/Appellant. 

The State Commission has allowed power purchase cost of Rs. 1,057.74 crores as 

against the audited amount of Rs. 1,082.30 crores in the true up for FY 2005-06. 

However, the State Commission has not given any reason for disallowance of power 

purchase cost. Accordingly, we direct the State Commission to consider the 

submissions of the Petitioner/Appellant and pass a reasoned order. 

10. The fourth issue is determination of provisional Tariff for Larji Project. The review 

Petitioner now wants that this issue may be disposed of without prejudice to the 

final capital cost determination of the project by the State Commission. Accordingly, 

we dispose of this issue without prejudice to the final determination of the capital 

cost by the State Commission. 

11. The fifth issue is the employees cost. According to the learned Counsel for the 

review Petitioner the Tribunal has relied on its earlier judgment dated 8 th December, 2008 

passed in Appeal No. 209 of 2006 where it was rejected on the ground that there was 

no specific challenge by the Appellant. 

12. We do not accept the contentions of the learned Counsel for the review Petitioner. 

The Tribunal in its impugned judgment has given a clear finding in Paragraph 17. 

We do not find any error on the face of the records on this issue. Accordingly, the 

plea of the review Petitioner on the issue of employee cost is rejected. 

13. The sixth issue is interest on loan. We find that the Tribunal has given a clear 

finding on the issue in Paragraph 19 of the judgment. The Tribunal has considered 

0923 


181

0924 


all the pleadings of the Appellant including the Tribunal’s judgment in earlier 

appeal and we do not find any error on the face of the records. The review Petitioner 

wants us to reconsider the issue afresh and in support of the same has made lengthy 

submissions for our consideration which is not permissible in the review. We do 

not think we can go through the issue afresh at the review stage. Accordingly, we 

reject the same. 

14. The seventh issue is interest on General Provident Fund. The Tribunal has given 

a clear finding on this issue in Paras 13 and 14 of the impugned judgment. The 

learned Counsel for the review Petitioner/Appellant has raised the same issues as 

raised in the main appeal and also made new submissions which are not permissible 

in the review. We do not find that there is any error apparent on the face of the 

record in this matter. Accordingly, we reject the claim of the review Petitioner on the 

issue of General Provident Fund. 

15. To summarise, we allow the petition in respect of employees cost related to Larji 

and Khauli Projects and cost of various Projects and direct the State Commission to 

implement the directions given in earlier judgment of this Tribunal dated 6 th July, 2006 

in Appeal No. 113 of 2006. 

16. In view of above, we allow the petition partly to the extent indicated above and 

direct the State Commission to give effect to our findings. No order as to cost. 

a 

b 

c 

d 

2011 ELR (APTEL) 0924* 




DECIDED ON: 31.05.2011 

National Thermal Power Corporation Ltd., New Delhi 

v. 

Central Electricity Regulatory Commission, and Ors. 

Coram 



Whether Central Commission was justified in disallowing the capitalisation of 

undischarged liability expenditure holding that the actual expenditure incurred cannot 

be included as part of capital expenditure where the actual cash payment is made 

subsequently? 

Held, the Central Commission by mistake disallowed the undischarged liabilities of 

Rs. 43.45 lacs. This is purely a mistake and needs to be corrected by the Central 

Commission. The issue was allowed in favour of the Appellant. Accordingly, the 

Central Commission is required to pass a consequential order on this issue. 

e 

f 

g 

h 

i 

* MANU/ET/0088/2011 

182 


a 

b 

c 

d 

e 

f 

g 

h 

i 

National Thermal Power Corporation Ltd. v. CERC and Ors. 


Whether equating depreciation to normative loan repayment was justified? 

Held, issue has already been covered in favour of the Appellant in the following 

judgments of this Tribunal: 




These decisions have been rendered as the strength of the judgment of Hon’ble 

Supreme Court in Delhi Electricity Regulatory Commission v. BSES Yamuna Power Limited 

and Ors. 

Mere pendency of the appeal against the judgment of this Tribunal in the Hon’ble 

Supreme Court and mere undertaking given by the NTPC as not to implement the 

order of the Tribunal pending decision in the Second Appeal does not dilute the 

ratio of the decision of this Tribunal which is binding on the Central Commission. 

Therefore, the issue is also decided in terms of the decision rendered by this Tribunal. 

Accordingly, this issue is decided in favour of the Appellant. 

Whether disallowance of cost of maintenance spares was right? 

Held, this issue has been covered in favour of the Appellant in the following judgments: 


(b) judgment dated 21 st August, 2009 in Appeals No. 54 and 74 of 2009 NTPC v. 

CERC and Ors 

Despite the ratio decided by this Tribunal, the Central Commission has not followed 

the principle decided on 13 th June, 2007. Mere pendency of the Appeal against the 

judgment of this Tribunal will not dilute the ratio of this Tribunal so long it is not 

set aside. The issue was accordingly allowed in terms of the said decision. 

What are the consequences of Refinancing of Loans? 

Held, this issue has been covered in favour of the Appellant in the judgment dated 

13 th June, 2007 in Appeals No. 139, 140, etc. of 2007. In this decision, it has been 

specifically held that the Tariff Regulation 2004 have to be applied to the refinancing 

done by the Appellant after these Regulation came into force and it cannot be applied 

to the prior period, i.e. when refinancing had already been done by the Appellant 

and costs associated with refinancing have been borne by the Appellant. So this 

decision is binding on the Commission. Accordingly, issue was decided in favour 

of the Appellant. 

What is the impact of decapitalisation of assets on cumulative repayment of loan? 

Held, this issue was covered in favour of the NTPC by the judgment dated 

13 th June, 2007 in Appeal No. 130 and 140 of 2007. In this decision, it has been held 

that when the asset is not in use, the capital base for the purpose of Tariff is also 

proportionately reduced. However, despite the decapitalisation, interest on loan is 

required to be paid. Whereas, 10 per cent salvage value of the depreciated asset 

should be non-tariff revenue, the interest on loan has to be borne by the beneficiary. 

If the salvage value is more than 10 per cent, the amount realised above 10 per cent 

should be counted as additional revenue. If salvage value is less than 10 per cent, it 

0925 


183

0926 


will be counted as loss in the revenue. Therefore, cumulative repayment of the loan 

proportionate to the assets decapitalised required to be reduced. But the Central 

Commission has not followed this ratio passed by this Tribunal. Therefore, this 

point is also answered in favour of the Appellant. 

Whether non-consideration of normative transit loss for coal received through Railway 

system was correct? 

Held, this issue has been covered by this Tribunal in favour of the Appellant in the 

judgment dated 13 th June, 2007 in Appeal No. 139 and 140 of 2007. In this case, the 

Tribunal has specifically directed to allow the transit loss of 0.8 per cent on the 

requirement of coal between 62.8 per cent and up to 80 per cent of the Plant Load 

Factor. But the Central Commission in the impugned order has failed to consider 

this claim at all. Though, the Central Commission has filed second appeal against 

the judgment dated 13 th June, 2007, the Hon’ble Supreme Court has specifically 

directed the Central Commission to proceed to determine the other issues i.e. issues 

not challenged by the Central Commission. Hence, the Commission ought to have 

allowed the claim of NTPC with regard to normative transit loss of coal which has 

not even been challenged before the Supreme Court. Therefore, this issue also decided 

in favour of the Appellant. 


Delhi Electricity Regulatory Commission v. BSES Yamuna Power Limited and Ors. MANU/ 

SC/7117/2007: (2007) 3 SCC 33: JT 2007 (8) SC 409: 2007 (3) SCALE 289: (2007) 

2 SCR 747 (Mentioned) [p. 0928, para 9 b] 


[p. 0927, para 4 d] 


[p. 0927, para 4 d] 


[p. 0928, para 12 f] 


Tariff Regulation, 2004 [p. 0928, para 15 h] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Swapna Seshhadri, Anand 

K. Ganesan 

For Respondents/Defendant: Nikhil Nayyar, Swapnil Verma, Daleep Kumar Dhyani, 

Manoj Dubey and Pradeep Misra, Advs. 

JUDGMENT 


1. NTPC Limited is the Appellant herein. 

2. The present Appeal has been filed as against the impugned order dated 15 th June, 2010 

passed by the Central Electricity Regulatory Commission (Central Commission) 

whereby, the Central Commission has determined the Tariff consequent upon the 

additional capitalisation incurred by the Appellant-NTPC Limited for Kahalgaon 

Super Thermal Power Station Stage-I during the period 2006-07, 2007-08 and 2008-09. 

a 

b 

c 

d 

e 

f 

g 

h 

i 

184 


a 

b 

c 

d 

e 

f 

g 

h 

i 

The Appellant is aggrieved by the following aspects decided by the Central 

Commission: 

(a) Undischarged liability 

(b) Equating depreciation to normative loan repayment 

(c) Cost of Maintenance Spares 

(d) Consequences of Refinancing of Loans 

(e) Impact of decapitalisation of assets on cumultative repayment of loan 

(f) Non-consideration of normative transit loss for coal received through Railway 

system. 

3. We have heard the learned Counsel for the Appellant as well as the Respondent. 

4. With regard to the first issue namely undischarged liability, it is submitted that 

the Central Commission disallowed the capitalisation of undischarged liability 

expenditure holding that the actual expenditure incurred can not be included as 

part of capital expenditure where the actual cash payment is made subsequently. 

This issue of undischarged liability has been decided in favour of the Appellant by 

this Tribunal in various decisions rendered earlier. Those decisions are referred as 

below: 

(a) judgment dated 16 th March, 2009 in Appeal No. 133 and 135 etc. of 2008, 

NTPC v. CERC and Ors. 1 2009 ELR (APTEL) 337. 

(b) judgment dated 10 th December, 2008 in Appeals No. 151 & 152 of 2007 


5. It is pointed out that in the impugned order, that though the Central Commission 

has taken to consideration the above judgments of this Tribunal and allowed the 

undischarged liability, the Central Commission has made a wrong calculations 

thereby, there was a wrong disallowance of the said claim. 

6. We have perused the relevant observation of the impugned order and also the 

table which has been given in the impugned order. 

7. As correctly pointed out by the learned Counsel for the Appellant, it is clear from 

the third and last row in the table which reads “Less: Undischarged Liabilities 

included above – 43.45 lacs in 2008-09”. The Central Commission by mistake 

disallowed the undischarged liabilities of Rs. 43.45 lacs. 

8. We have heard the learned Counsel for the Central Commission on this aspect. 

As mentioned above this is purely a mistake and this needs to be corrected by the 

Central Commission. Therefore, the issue is allowed in favour of the Appellant. 

Accordingly, the Central Commission is required to pass a consequential order on 

this issue. 

9. The Second Issue is relating to equating depreciation to normative loan repayment. 

It is submitted by the Appellant that the Central Commission continued to adjust 

depreciation against the normative loan repayment despite the fact that is settled by 

accounting treatment and Judicial decisions that the purpose of depreciation is to 

allocate the cost of an asset over its useful life of the asset so as to exhibit a true and 

1 Ed.: MANU/ET/0020/2009 

2 Ed.: MANU/ET/0071/2008 



0927 


185

0928 


faire view of the financial statements of the enterprise. As pointed out by the learned 

Counsel for the Appellant, this issue has already been covered in favour of the 

Appellant in the following judgments of this Tribunal: 


NTPC v. CERC and Ors. 2009 ELR (APTEL) 337 


(c) These decisions have been rendered as the strength of the judgment of 

Hon’ble Supreme Court reported in 2007 3 SCC 33 Delhi Electricity Regulatory 

Commission v. BSES Yamuna Power Limited and Ors. 3 

10. It is pointed out by the learned Counsel for the Respondent that because judgment 

of this Tribunal has been challenged in the Hon’ble Supreme Court and in that 

Proceedings, NTPC has given undertaking that it will not press for some of the 

issues including this issue before the Central Commission and therefore, the issue 

cannot be pressed in this Tribunal. But as pointed out by the learned Counsel for 

the Appellant that mere pendency of the Appeal against the judgment of this Tribunal 

in the Hon’ble Supreme Court and mere undertaking given by the NPTC as to not to 

implement the order of the Tribunal pending decision in the Second Appeal does 

not dilute the ratio of the decision of this Tribunal which is binding on the Central 

Commission. 

11. Therefore, the issue is also decided in terms of the decision rendered by this 

Tribunal as referred to above. Accordingly, this issue is decided in favour of the 

Appellant. 

12. The third issue is the cost of maintenance spares. According to the Appellant, 

the Central Commission disallowed the cost of maintenance spares without 

considering the impact of additional capitalisation on the maintenance spares to be 

considered for determination of working capital. This issue has also been decided 

in favour of the Appellant in the following judgments: 


(b) judgment dated 21 st August, 2009 in Appeals No. 54 and 74 of 2009 NTPC 

v. CERC and Ors. 4 2009 ELR (APTEL) 705. 

13. Despite the ratio decided by this Tribunal, the Central Commission has not 

followed the principle decided on 13 th June, 2007 and the similar arguments were 

advanced by the Respondent for the Counsel regarding the pendency of the Appeal 

before the Supreme Court. 

14. As indicated above, the mere pendency of the Appeal against the judgment of 

this Tribunal will not dilute the ratio of this Tribunal so long it is not set aside. 

Therefore, the issue is also allowed in terms of the said decision. 

15. The next issue is consequences of refinancing of loans. According to the Appellant, 

the Central Commission has wrongly applied the provisions of Tariff Regulation, 

2004 to the refinancing of Government of India Loans by NTPC even though the 

loans were refinanced in the earlier period of 2001-04. This issue also stands covered 

in favour of the Appellant in the judgment dated 13 th June, 2007 in Appeals No. 139, 

140, etc. of 2007. 

3 Ed.: MANU/SC/7117/2007: JT 2007 (8) SC 409: 2007 (3) SCALE 289: (2007) 2 SCR 747 

4 Ed.: MANU/ET/0077/2009 

a 

b 

c 

d 

e 

f 

g 

h 

i 

186 


a 

b 

c 

d 

e 

f 

g 

h 

i 



16. In this decision, it has been specifically held that the Tariff Regulation 2004 

have to be applied to the refinancing done by the Appellant after these Regulation 

came into force and it can not be applied to the prior period, i.e. when refinancing 

had already been done by the Appellant and costs associated with refinancing 

have been borne by the Appellant. So this decision is binding on the Commission. 

Accordingly, this issue is also decided in favour of the Appellant. 

17. The next issue is impact of decapitalisation of assets on the cumulative repayment 

of loan. On this issue, it is submitted that the Central Commission has not considered 

the impact of decapitalisation of assets on cumulative repayment of loan. As pointed 

out by the learned Counsel for the Appellant this issue also stands covered in 

favour of the NTPC by the judgment dated 13 th June, 2007 in Appeal No. 130 and 

140 of 2007. In this decision, it has been held that when the asset is not in use, the 

capital base for the purpose of Tariff is also proportionately reduced. However, 

despite the decapitalisation, interest on loan is required to be paid. Whereas, 

10 per cent salvage value of the depreciated asset should be non-tariff revenue, the 

interest on loan has to be borne by the beneficiary. If the salvage value is more than 

10 per cent, the amount realised above 10 per cent should be counted as additional 

revenue. If salvage value is less than 10 per cent, it will be counted as loss in the 

revenue. Therefore, cumulative repayment of the loan proportionate to the assets 

decapitalised required to be reduced. But the Central Commission has not followed 

this ratio passed by this Tribunal. Therefore, this point is also answered in favour 

of the Appellant. 

18. The next issue is non consideration of normative transit loss for coal received 

through Railway system. The impugned order does not specifically deal with the 

claim of the Appellant. According to the Appellant the Central Commission has not 

considered the coal transit loss of 0.8 per cent for requirement of coal between 

62.8 per cent and up to 80 per cent Plant Load. This issue has been decided by this 

Tribunal in favour of the Appellant in the judgment dated 13 th June, 2007 in Appeal 

No. 139 and 140 of 2007. 

19. In this case, the Tribunal has specifically directed to allow the transit loss of 

0.8 per cent on the requirement of coal between 62.8 per cent and up to 80 per cent 

of the Plant Load Factor. 

20. But the Central Commission in the impugned order has failed to consider this 

claim at all. Though, the Central Commission has filed second appeal against the 

judgment dated 13 th June, 2007, the Hon’ble Supreme Court has specifically directed 

the Central Commission to proceed to determine the other issues, i.e. issues not 

challenged by the Central Commission. Hence, the Commission ought to have allowed 

the claim of NTPC with regard to normative transit loss of coal which has not even 

been challenged before the Supreme Court. Therefore, this issue also decided in 

favour of the Appellant. 

21. Accordingly, all these issues are answered in favour of the Appellant. The Central 

Commission is directed to implement the findings and directions on these issues in 

terms of this judgment as well as the other judgments rendered by this Tribunal. 

With these observations, this Appeal is allowed. However, there is no order as 

to costs. 

0929 


187

0930 


2011 ELR (APTEL) 0930* 




v. 

Central Electricity Regulatory Commission, New Delhi and 

Uttar Pradesh Power Corporation Ltd., Lucknow 

a 

b 


DECIDED ON: 31.05.2011 

Coram 



Whether Appellant was entitled to undischarged liability? 

Held, the issue has already been covered in favour of the Appellant in the following 

judgments: 



(b) judgment dated 10 th December, 2008 in Appeals No. 151 & 152 of 2007, 


In view of these judgments, the Appellant is entitled to claim over this issue. 



Whether disallowance of interested during construction incurred on renovation and 

modernisation in excess of the normative 30 per cent equity was justified? 

Held, this issue is covered in favour of the Appellant in the judgments referred to as 

below: 



(b) judgment dated 10 th December, 2008 in Appeals No. 151 and 152 of 2007 


IDC claimed is on the amount incurred on renovation and modernisation in excess 

of 30 per cent normative equity. In view of the ratio decided earlier by this Tribunal, 

this issue is answered in favour of the Appellant. 

Whether disallowance of expenditure incurred as capital expenditure but, booked in 

the books as revenue expenditure was justified? 

Held, this issue had been rejected by the judgments rendered by this Tribunal 

as against the Appellant. The said judgment is in Appeal No. 82 of 2009 

NTPC v. CERC and Ors. dated 27 th July, 2010. Accordingly, the ground of this issue 

is rejected as against the Appellant. 

c 

d 

e 

f 

g 

h 

i 

* MANU/ET/0089/2011 

188 


a 

b 

National Thermal Power Corporation Ltd. v. CERC, New Delhi and UPPCL, Lucknow 


What is effect of wrong calculation of opening capital cost as on 31 st March, 2004? 

Held, on this issue, the Tribunal earlier delivered judgment dated 26 th March, 2009 

in Appeal No. 103 of 2008: 2009 ELR (APTEL) 397 setting aside the reduction in the 

capital cost by the Central Commission by Rs. 32 crores and restored the capital cost 

at 607 crores and remanded the matter to the Central Commission. Therefore, this 

issue was also decided in terms of the said judgment in favour of the Appellant. The 

Central Commission is directed to implement the findings given in this judgment. 

0931 

Appeal partly allowed 

c 

d 

e 



[p. 0931, para 2 i] 


[p. 0931, para 2 a] 


[p. 932, para 7 e] 

N.T.P.C. Ltd. v. Central Electricity Regulatory Commission and Uttar Pradesh Power 

Corporation Ltd. MANU/ET/0032/2009: 2009 ELR (APTEL) 397 (Mentioned) 

[p. 932, para 8 f] 

Counsel 


Anand K. Ganesan 

For Respondents/Defendant: S. Ravi Shankar, Sr. Adv., Pradeep Mishra, Daleep 

Kumar Dhyani, Nikhil Verma, Swapnil Verma and Nakhil Nayyar, Advs. 

JUDGMENT 

f 

g 

h 

i 


1. NTPC Limited is the Appellant herein. It has presented this Appeal as against 

the impugned order dated 23 rd January, 2009 passed by the Central Commission 

determining the Tariff consequent upon the additional capitalisation incurred by 

the Appellant-NTPC Limited for Tanda Thermal Power Station. The Appellant has 

raised the following issues: 


(b) Disallowance of interest during construction incurred on renovation and 

modernisation in excess of the normative 30 per cent equity. 

(c) Disallowance of expenditure incurred as capital expenditure but, booked 

in the books as revenue expenditure 

(d) Wrong calculation of opening capital cost as on 31 st March, 2004. 

2. With reference to the First Issue, namely undischarged liability, the issue has 

already been covered in favour of the Appellant in the following judgments: 



1 Ed.: MANU/ET/0020/2009 


189

0932 


(b) judgment dated 10 th December, 2008 in Appeals No. 151 and 152 of 2007, 


3. In view of these judgments, the Appellant is entitled to claim over this issue. 



4. The next issue is disallowance of interest during construction incurred on renovation 

and modernisation in excess of the normative 30 per cent equity. This issue is also 

covered in favour of the Appellant in the judgments referred to as below: 




NTPC v. CERC and Ors. 2008 ELR (APTEL) 916. 

5. Regarding this issue, it is submitted by the learned Counsel for the Respondent 

that Tanda Thermal Power Station was taken over by NTPC in 2000 under working 

condition and hence the question of interest during construction does not arise. 

We are unable to accept this contention as IDC claimed is on the amount incurred 

on renovation and modernisation in excess of 30 per cent normative equity. 

6. In view of the ratio decided earlier by this Tribunal, this issue is answered in 


7. The next issue is Disallowance of expenditure incurred as capital expenditure 

but, booked in the books as revenue expenditure. On this issue, as admitted by the 

Learned Counsel for the Appellant, the judgments rendered by this Tribunal rejecting 

this ground as against the Appellant. The said judgment is in Appeal No. 82 of 

2009 NTPC v. CERC and Ors. 3 ELR (APTEL) 871 dated 27 th July, 2010. Accordingly, 

the ground of this issue is rejected as against the Appellant. 

8. The next issue is wrong calculation of opening capital cost as on 31 st March, 2004. 

On this issue, the Tribunal earlier gave judgment dated 26 th March, 2009 in Appeal 

No. 103 of 2008: 2009 ELR (APTEL) 397 4 setting aside the reduction in the capital 

cost by the Central Commission by Rs. 32 crores and restored the capital cost at 

607 crores and remanded the matter to the Central Commission. Therefore, this issue 

is also decided in terms of the said judgment in favour of the Appellant. 

9. Accordingly, the Central Commission is directed to implement the findings given 

in this judgment. The Appeal is partly allowed and the impugned order in respect 

of the issue decided in favour of Appellant alone is set aside. There is no order as to 

cost. 

a 

b 

c 

d 

e 

f 

g 

h 

2 Ed.: MANU/ET/0071/2008 

3 Ed.: MANU/ET/0053/2010 

4 Ed.: N.T.P.C. Ltd. v. Central Electricity Regulatory Commission and Uttar Pradesh Power Corporation 

Ltd. MANU/ET/0032/2009 

i 

190 


0933 

a 

b 

c 

d 

e 

f 

g 

h 

i 

2011 ELR (APTEL) 0933* 




v. 

Central Electricity Regulatory Commission, New Delhi and Ors. 


DECIDED ON: 31.05.2011 

Coram 



Whether disallowance of Undischarged liability was justified? 

Held, in respect of the issue of undischarged liability, this Tribunal in the following 

decisions decided the same in favour of the Appellant: 





The Central Commission is agreeable that the matter be remanded to the Central 

Commission for implementing the judgment of this Tribunal in respect of the 

Generating Station in question. Accordingly, the same is remanded to the Central 

Commission to pass the appropriate order. 

Whether equating depreciation to normative loan payment was justified? 

Held, on this issue, the Tribunal in Appeal No. 133 and 135 of 2008 dated 16 th March, 2009 

and Appeal No. 34 and 74 of 2009 dated 21 st August, 2009 has passed the judgment 

in favour of the Appellant but the Central Commission has not chosen to follow the 

ratio decided by this Tribunal on the ground that the decisions were challenged 

before the Hon’ble Supreme Court and the same is pending. Mere pendency of the 

appeal against the judgment in the Hon’ble Supreme Court and mere undertaking 


pending decision would not dilute the ratio of the decision of this Tribunal. It does 

not in any manner empower the Central Commission to hold that the claim of the 

Appellant based on the principles laid down by this Tribunal cannot to be considered 

in the light of the undertaking given by the Appellant. Thus, Appellant is entitled to 

claim in terms of the judgments rendered by this Tribunal. Accordingly, the issues 

are answered in favour of Appellant. 

Whether the disallowance of Cost of Maintenance Spares was justified? 

Held, on this issue, the Tribunal in Appeal No. 133 and 135 of 2008 dated 

16 th March, 2009 and Appeal No. 34 and 74 of 2009 dated 21 st August, 2009 has 

* MANU/ET/0090/2011 


191

0934 


passed the judgment in favour of the Appellant but the Central Commission has not 

chosen to follow the ratio decided by this Tribunal on the ground that the decisions 

were challenged before the Hon’ble Supreme Court and the same is pending. Mere 

pendency of the appeal against the judgment in the Hon’ble Supreme Court and 

mere undertaking given by the Appellant that it would not implement the Tribunal 

judgment order pending decision would not dilute the ratio of the decision of this 

Tribunal. Thus, Appellant is entitled to claim in terms of the judgments rendered by 

this Tribunal. Accordingly, the issues are answered in favour of Appellant. 

Whether disallowance of expenditure incurred towards RLA studies was justified? 

Held, this issue has been decided against the Appellant in judgment dated 

16 th March, 2009 in Appeals No. 133 and 135 of 2008 NTPC v. CERC and Ors. and 

judgment dated 21 st August, 2009 in Appeal No. 74 of 2009 NTPC v. CERC and Ors. 

Accordingly, the ground on this issue raised by the Appellant is rejected. 

Whether disallowance of Cost of Electrolyser Rectifier was justified? 

Held, existing Rectifier is old and there is a non-availability of the spares due to the 

closure of the original equipment manufacturer and as such there are chances of 

failure and in case of such failure, the immediate replacement is difficult to arrange 

which would cause threat to entire generation capacity. Therefore, the Central 

Commission is directed to allow the said claim. Accordingly, the finding on this 

issue is set aside and the matter is remanded back to the Central Commission to 

pass consequential orders on this issue. 

Appeal Partly Allowed 



[p. 0935, para 2 b] 


[p. 0935, para 2 b] 


[p. 936, para 9 b] 

Counsel 


Anand K. Ganesan, Advs. 

For Respondents/Defendant: Jaideep Gupta, Sr. Adv., Pradeep Mishra, Daleep Dhyani, 

Nikhil Nayyar and Swapnil Verma, Advs. 

JUDGMENT 


1. NTPC Limited is the Appellant herein. It has filed this Appeal challenging the 

impugned order dated 20 th November, 2008 passed by the Central Electricity 

Regulatory Commission (Central Commission) determining the Tariff consequent 

upon the additional capitalization incurred by the Appellant-NTPC Limited for the 

Korba Super Thermal Power Station in the years 2004-05 to 2005-06. The Appellant 

has raised the following issues: 

a 

b 

c 

d 

e 

f 

g 

h 

i 

192 


a 

b 

c 

d 

e 

f 

g 

h 

i 

National Thermal Power Corporation Ltd. v. CERC, New Delhi and Ors. 


(a) Undischarged liability; 

(b) Equating depreciation to normative loan payment; 

(c) Cost of Maintenance Spares; 

(d) Disallowance of expenditure incurred towards RLA studies; 

(e) Disallownce of Cost of Electrolyser Rectifier 

2. In respect of the issue of undischarged liability, this Tribunal in earlier decisions 

decided the same in favour of the Appellant. Those decisions are as follows: 





3. In the impugned order the Central Commission has not allowed the un-discharged 

liability. The learned Counsel for the Central Commission submits that the impugned 

order was passed on 20 th November, 2008 whereas the judgment of the Tribunal 

was rendered on 10 th December, 2008 and therefore, the decision of this Tribunal 

has not been given effect to in the impugned order. However, the Central Commission 

is agreeable that the matter be remanded to the Central Commission for implementing 

the judgment of this Tribunal in respect of the Generating Station in question. 

Accordingly, the same is remanded to the Central Commission to pass the appropriate 

order. 

4. The second issue is equating depreciation to normative loan repayment and the 

third issue is cost of maintenance spares. On both the issues, this Tribunal vide 

judgment dated 13 th June, 2007 has decided in Appeals No. 139 and 140 of 2006 in 

favour of the Appellant. On these issues, the Tribunal in Appeal No. 133 and 135 of 

2008 dated 16 th March, 2009 and Appeal No. 34 and 74 of 2009 dated 21 st August, 2009 

has passed the judgment in favour of the Appellant but, the Central Commission 

has not chosen to follow the ratio decided by this Tribunal on the ground that the 

decisions were challenged before the Hon’ble Supreme Court and the same is pending. 

5. The Central Commission has argued that since the Appellant has given an 

undertaking before the Hon’ble Supreme Court that it will not press for the five 

issues including this issue pending disposal of the Appeal before the Hon’ble Supreme 

Court, the Central Commission thought that it can continue to follow its own principles 

notwithstanding the directions given and the principles laid down in the judgment 

of this Tribunal dated 13 th June, 2007. 

6. The learned Counsel for the Appellant has correctly pointed out that mere pendency 



pending decision would not dilute the ratio of the decision of this Tribunal. 

7. The Second appeal filed by the Central Commission is relating to the Tariff 

determination for the period 2004-09. It does not in any manner empower the Central 

Commission to hold that the claim of the Appellant based on the principles laid 

down by this Tribunal cannot to be considered in the light of the undertaking given 

by the Appellant. 

1 Ed.: MANU/ET/0020/2009 

2 Ed.: MANU/ET/0071/2008 

0935 


193

0936 


8. As mentioned above, the undertaking given by the Appellant does not render the 

judgment of this Tribunal non est or non effective. It is settled law that this decision 

would continue to operate as a binding precedent till the decision of the Tribunal is 

set aside. Therefore, with reference to the second and third issue we hold that the 

Appellant is entitled to claim in terms of the judgments rendered by this Tribunal. 

Accordingly, the issues are answered in favour of Appellant. 

9. The next issue is relating to disallowances of expenditure incurred towards RLA 

studies. As admitted by the learned Counsel for the Appellant, this issue has been 

decided against the Appellant in judgment dated 16 th March, 2009 in Appeals No. 

133 and 135 of 2008 NTPC v. CERC and Ors. ELR (APTEL) 337 and judgment dated 

21 st August, 2009 in Appeal No. 74 of 2009 NTPC v. CERC and Ors. ELR (APTEL) 

710. Accordingly, the ground on this issue raised by the Appellant is rejected. 

10. The next issue is disallowance of cost of Electrolyser Rectifier. This is a new 

issue to be considered in this Appeal. The Central Commission has disallowed the 

capital cost of the Electrolyser Rectifier incurred by the NTPC. 

11. According to the Appellant, the Central Commission wrongly disallowed the 

capital cost of the Electrolyser Rectifier procured by the Appellant for Hydrogen 

Generation Plant at Korba Station without considering the following features: 

(a) the Electrolyser Rectifier procured by NTPC for the Hydrogen Geneation 

Plant at Korba Station, which is used for cooling the generators of the Station; 

(b) the Hydrogen Plant is an essential requirement of the power generating 

station and the entire generation activity will necessarily have to be suspended 

in case of its failure due to non availability of Hydrogen as cooling agent in 

generators; 

(c) the company which originally supplied the rectifier had ceased operations; 

(d) the Electrolyser Rectifier installed was having a single stream of operation 

and was unable to meet the intended quality and quantity required for the 

Korba Station generating units; 

(e) as the existing rectifier is old and there is non-availability of spares due to 

the closure of the original equipment manufacturer, there are chances of it 

failing; 

(f) In case of such failure, a replacement is difficult to arrange at immediate 

notice, which would cause threat to the availability of the entire generation 

capacity. 

12. On these reasonings, the Central Electricity Authority had approved the 

procurement of the Electrolyser Rectifier for the Hydrogen Plant at Korba Station on 

the basis of which the Appellant had made the procurement. 

13. According to the learned Counsel for the Commission, the Electrolyser Rectifier 

is not a replacement for the existing Rectifier but, is an additional or standby one 

and as such this claim can not be allowed. 

14. We are unable to accept this reasons especially in the light of the fact that the 

existing Rectifier is old and there is a non-availability of the spares due to the 

closure of the original equipment manufacturer and as such there are chances of 

failure and in case of such failure, the immediate replacement is difficult to arrange 

which would cause threat to entire generation capacity. 

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15. Therefore, the Central Commission is directed to allow the said claim. Accordingly, 

the findings on this issue is set aside and the matter is remanded back to the Central 

Commission to pass consequential orders on this issue. 

16. Thus, we hold all the issues in favour of the Appellant except the issue of 

disallowance of expenses towards RLA studies. The Appeal is partly allowed. 

No order as to costs. 

2011 ELR (APTEL) 0937* 




v. 



DECIDED ON: 31.05.2011 

Coram 



Whether allowance of undischarged liability was justified? 

Held, on this issue, the Tribunal had decided the same in favour of the Appellant in 

the following decisions: 





The words “actual expenditure incurred” contained in Regulation 17 would refer to the 

liabilities incurred and the same would not refer to the actual cash outflow. During the 

hearing, the learned Counsel for the Commission stated that the impugned order had 

actually allowed the claim of Appellant with regard to undischarged liability but, there 

is a mistake in the table which would be corrected. This point is decided in favour of the 

Appellant and the matter is remanded for correcting mistakes in the table. 

Whether disallowance of interest during construction (IDC) was justified? 

Held, this issue had been also decided in favour of the Appellant in following 

judgment: 



(b) judgment dated 10 th December, 2008 in Appeals No. 151 & 152 of 2007 


0937 

* MANU/ET/0091/2011 


195

0938 


The issue before this Tribunal is treatment of the internal resources/equity of Appellant 

which is in addition to equity contribution. This Tribunal had held that Appellant 

is entitled to claim deemed interest on such loans during construction. Therefore, 

the question of reducing the said amount from the capital cost does not arise. On this 

point, the issue is decided in favour of the Appellant. 

Whether equating depreciation to normative loan payment was right? 

Held, this issue is covered in favour of the Appellant in the following judgments: 

(a) judgment dated 16 th March, 2009 in Appeal Nos. 133 and 135 of 2008, 



The Hon’ble Supreme Court had also on the same issue of depreciation has decided 

in the Delhi Electricity Commission v. BSES Yamuna Power Limited. Therefore, this 

issue is also decided in favour of the Appellant in line with the judgments referred 

to above. 

Whether disallowance Cost of Maintenance Spares was correct? 

Held, this issue was also covered in favour of the Appellant in following judgments: 


(b) judgment dated 21 st August, 2009 in Appeal Nos. 54 and 74 of 2009 


The cost of maintenance cost needs to be calculated on the total capital cost inclusive 

of the additional capitalisation. Thus, Appellant is entitled to claim the cost of the 

maintenance spares by adding into the maintenance cost. Thus, this point is also 

answered in favour of the Appellant. 



Delhi Electricity Commission v. BSES Yamuna Power Limited (2007) 4 SCC 33 (Mentioned) 

[p. 0940, para 8 d] 


[p. 0940, para 9 f] 


[p. 0939, para 2 e] 


[p. 0939, para 2 e] 


CERC Tariff Regulations, 2004 



Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran and Swapna Seshadri, Advs. 

For Respondents/Defendant: Pradeep Mishra, Daleep Dhyani, Nikhil Nayyar and 

Swapnil Verma, Advs. 

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JUDGMENT 


1. NTPC Limited is the Appellant herein. It has filed this Appeal challenging the 

impugned order dated 10 th December, 2009 passed by the Central Commission 

determining the Tariff for the period from 20 th June, 2008 to 31 st March, 2009 and 

determining the impact of additional capitalisation incurred by the Appellant-NPTC 

Limited for Sipat Super Thermal Power Station Stage-II during the period from 

1 st January, 2009 to 31 st March, 2009. In this Appeal the Appellant has raised the 

following four issues: 


(b) Disallowance of Interest During Construction (IDC): 

(c) Equating depreciation to normative loan payment 

(d) Cost of Maintenance Spares 

2. According to the Appellant, all these issues stand covered by the various judgments 

of this Tribunal. In regard to the issue of undischarged liability it has been submitted 

by the Appellant that the Central Commission has disallowed the capitalisation of 

undischarged liability, i.e. exclusion of part of the capital expenditure validly incurred 

but, pending actual disbursement/payment from the capital cost for the purposes 

of Tariff. On this issue, the Tribunal has decided the same in favour of the Appellant 

in the following decisions: 





3. In these decisions, it has been held that the words “actual expenditure incurred” 

contained in Regulation 17 would refer to the liabilities incurred and the same 

would not refer to the actual cash outflow. On the said reasonsings, the Appeals 

referred to above were allowed in favour of the Appellant. During the hearing, the 

learned Counsel for the Commission stated that the impugned order has actually 

allowed the claim of Appellant with regard to undischarged liability but, there is a 

mistake in the table which would be corrected. Under those Circumstances, this 

point is decided in favour of the Appellant and the matter is remanded for correcting 

mistakes in the table. 

4. The next issue is Disallowance of Interest During Construction (IDC). This issue 

has also been decided in favour of the Appellant in following judgment: 





5. However, in the impugned order, there is no reference about the judgments of this 

Tribunal and subsequently, rejected the claim of the Appellant with regard to interest 

during construction. 

1 Ed.: MANU/ET/0020/2009 

2 Ed.: MANU/ET/0071/2008 

0939 


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0940 


6. The learned Counsel for the Uttar Pradesh Power Corporation Limited submitted 

that the amount of interest during construction repaid by the beneficiaries has to be 

deducted from capital cost for the purposes of Tariff. This submission would not 

apply to the present case. The issue before this Tribunal is treatment of the internal 

resources/equity of Appellant which is in addition to equity contribution. This 

Tribunal has held that Appellant is entitled to claim deemed interest on such loans 

during construction. Therefore, the question of reducing the said amount from the 

capital cost does not arise. On this point, the issue is decided in favour of the 

Appellant. 

7. The next issue is “Equating depreciation to normative loan payment”. According 

to the Appellant, the Central Commission has continued to adjust depreciation 

against the normative loan repayment despite the judgment of this Tribunal as well 

as the Hon’ble Supreme Court. As a matter of fact, this issue is covered in favour of 

the Appellant in the following judgments: 

(a) judgment dated 16 th March, 2009 in Appeal Nos. 133 and 135 of 2008, 



8. That apart, the Hon’ble Supreme Court has also on the same issue of depreciation 

has decided in the Delhi Electricity Commission v. BSES Yamuna Power Limited (2007) 

4 SCC 33. Therefore, this issue is also decided in favour of the Appellant in line 

with the judgments referred to above. 

9. The last issue is of “Cost of Maintenance Spares”. According to the Appellant, the 

Central Commission has not considered escalation at 6 per cent per annum on the 

maintenance spares to be considered for determination of working capital from the date 

of the commercial operation as per Regulation 21 of the CERC Tariff Regulations, 2004. 

This issue is also covered in favour of the Appellant in following judgments: 


(b) judgment dated 21 st August, 2009 in Appeal Nos. 54 and 74 of 2009 NTPC 

v. CERC and Ors. 3 2009 ELR (APTEL) 710. 

10. In these decisions, it has been held that the cost of the maintenance of spares 

needs to be calculated on the total capital cost inclusive of additional capitalisation. 

Further, it has been held that the cost of spares has to be decided on the basis of the 

additional capitalisation undertaken from the date of commercial operation as 

allowable under the Tariff Regulations, 2004. 

11. Thus, it is clear that the cost of maintenance cost needs to be calculated on the 

total capital cost inclusive of the additional capitalisation. Under those Circumstances, 

we hold that the Appellant is entitled to claim the cost of the maintenance spares by 

adding into the maintenance cost. 

12. Thus, this point is also answered in favour of the Appellant. The Central Electricity 

Commission is directed to pass consequential orders in terms of the judgments 

rendered in this Appeal. 

13. The Appeal is allowed. The impugned order is set aside. However, there is no 

order as to costs. 

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0941 

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2011 ELR (APTEL) 0941* 



Rama Shankar Awasthi and Ors. 

v. 

Uttar Pradesh Electricity Regulatory Commission, through its Chairman, 

Uttar Pradesh and Ors. 

IA NO. 83 OF 2011 IN APPEAL NO. 121 OF 2010 

DECIDED ON: 27.05.2011 

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Coram 



Whether amendment of the Tariff order dated 31 st March, 2010 passed by the 

Commission is not maintainable? 

Held, regulator has power to amend the Tariff or any part of the Tariff but not 

frequently more than once except in respect of any changes expressly permitted 

under the terms of any fuel surcharge formula as may be specified in the regulations. 

When Tariff or part of Tariff is to be amended, the provisions in relation to 

determination of Tariff have to be complied with. It is against the principle of judicial 

ethics that a statutory Authority that passed an order under the law ventures to 

interfere with their order by amendment thereof when the appeal is pending before 

this Tribunal. It is not clear to us as to whether the present Appellants are likely to 

be affected by the proposed amendment of the Tariff order. If the proposed amendment 

of the Tariff order is totally unconcerned with the Appellants then we are to say 

that we may not stand in the way. The carriers of the appeal must not be 

inconvenienced and prejudiced to suffer an amendment of Tariff order which itself 

has been challenged by the Appellants and that too during the pendency of the 

appeal. Application disposed of with direction that it is only if the proposed 

amendment proceedings do not affect the present Appellants and are totally 

unconcerned with them that the Respondents may proceed with the intended 

proceedings for the amendment of the Tariff order. 

Application dispose of 







Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Sneha Vnkataramani and 

Anand K Ganesan, Advs. 

* MANU/ET/0092/2011 


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0942 


For Respondents/Defendant: Kunal Verma, Ashok Kumar Singh, Manoj Kumar 

Sharma, Pradeep Mishra, Prag Tripathi, Daleep Dhayani, Shashank Pandit and 

Sanjay Singh, Advs. 

a 

ORDER 


1. This disposes of the application being IA No. 83 of 2011 filed in connection with 

Appeal No. 121 of 2010 by the Appellants praying for interim direction as follows: 

(a) To pass an order of stay of any proceedings for amending the order dated 

31 st March, 2010 which order is subject matter of appeal before the Tribunal. 

(b) To restrain the State Commission from entertaining or proceeding with any 

proceedings for amendment of the existing Tariff order dated 31 st March, 2010 

and the Tariff determined thereunder; 

(c) To pass such further order or orders as this Tribunal may deem just and 

proper in the circumstances of the case. 

2. The appeal in connection with which the instant IA No. 83 of 2011 has been 

moved was filed by four Appellants who are consumers in the State of Uttar Pradesh, 

challenging the Tariff order dated 31 st March, 2010 passed by the Uttar Pradesh 

Electricity Regulatory Commission relatable to Respondent No. 2 to 8, six of which 

are the distribution utilities and the eighth is transmission utility in the State. 

3. The main focus of the appeal centres round the following points: 

(a) The State Commission has issued the impugned Tariff order in violation of 

the procedures set out in the Electricity Act, 2003 and the Regulations framed 

thereunder, and has erred in not considering the objections of the Appellant 

No. 1, contrary to the directions of the Hon’ble Allahabad High Court. 

(b) The State Commission has continued to determine the Tariff applicable to 

consumers of Respondent No. 2 to 8 in the absence of statutorily required 

information, including audited accounts of the transmission and distribution 

licensees. 

(c) The State Commission has wrongly considered the commitment made by 

the State Government for providing subsidy in order to determine the Tariff. 

This is clearly in violation of the provisions of the concerned legislations which 

requires the subsidy to be paid in advance. 

(d) The State Commission has determined the Tariff after the year was over 

without considering any of the actual data for the year and without even 

ascertaining the actual subsidy received by the Government. 

4. The appeal is being contested by the Respondents, and while the hearing was in 

progress, the Appellants came out with this interlocutory application with the 

information that the State Commission has initiated a proceeding for amendment of 

the impugned Tariff order dated 31 st March, 2010 and for re-categorising the 

consumers and substantially increasing the Tariff. Respondent No. 2 has on 

11 th March, 2011 issued a public notice stating that Respondent No. 3 to 7 had filed 

a petition before the Commission for creation of a new category namely, HV-5 for 

Arc/induction furnace, rolling mills and mini steel plants. The notice also proposes 

a steep hike in the demand charges applicable to the consumers in the HV-5 category. 

According to the Appellants, the impugned Tariff order which was passed on 

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Rama Shankar Awasthi and Ors. v. Uttar Pradesh Elec. Regulatory Comm. and Ors. 

(Rakesh Nath, Member (Technical) and P.S. Datta, J., Member (Judicial)) 

31 st March, 2010 has taken effect from 15 th April, 2010, and no Tariff petition has 

been filed with the licensees and no proceeding for determination of Tariff for the 

subsequent year is pending before the Commission. The notice published necessarily 

relates to the amendment of the Tariff order dated 31 st March, 2010 which is the 

subject matter of the present appeal before this Tribunal. Instead of filing any Tariff 

petition for the subsequent year or otherwise complying with the statutory provisions, 

the licensees are only attempting to have amendment of the existing Tariff which 

cannot be done in view of the order determining such Tariff is under appeal before 

this Tribunal. It is further contended by the Appellants that the amendment of the 

Tariff would frustrate the appellate proceedings before this Tribunal where legality, 

propriety and correctness of the impugned order dated 31 st March, 2010 is in issue. 

Such an action is impermissible considering judicial propriety, apart from being 

contrary to the provisions of the Electricity Act, 2003. 

5. We have on record no written objection to the interlocutory application of the 

Appellants. Learned Sr. Counsel assisted by Mr. Pradeep Mishra, learned Advocate 

on behalf of the Respondents No. 2 to 8 submits that opposition to amendment of 

the Tariff order dated 31 st March, 2010 passed by the Commission is not maintainable 

in view of the fact that amendment of Tariff is permissible under Section 62(4) of the 

Act and the said provision is independent of the provision of Section 61 or 62(1) 

and other related provisions of the Act. According to the learned Sr. Counsel, 

Section 62(4) is an independent provision enabling a Regulator to amend a Tariff or 

a part of a Tariff and the Tribunal must not stand in the way, notwithstanding the 

fact that the impugned Tariff order is under challenge before this Tribunal at the 

instance of the four Appellants. Mr. Pradeep Mishra makes an addition that the 

proposed amendment will only be applicable with effect from the year 2011-2012 

and this is a separate Tariff proceeding. Further, it is submitted on behalf of the 

Respondents that the Appellants have right of representation in connection with 

the proceedings in relation to the amendment of the Tariff order. Mr. Anand K Ganesan, 

learned Advocate for the Appellants contradicts the submissions of Mr. Mishra to 

say that proceedings initiated is not at all the proceedings intended for the next 

financial years but a proceeding in connection with the amendment of the Tariff 

which is in force and the public notice was issued as far back as 11 th March, 2011. 

Annexure “A” to the interlocutory application is the copy of the public notice 

issued by the Respondent No. 2 in connection with prayer made before the 

Commission to create a new Tariff category namely HV-5 for industrial connections 

with process-Arc/induction furnace, rolling mills and mini steel plants which are 

now part of HV-2 category of present Tariff order. By this public notice all consumers, 

institutions, licensees etc. have been invited to send their representations to the 

Commission. Prima facie, it appears that this public notice does not relate to any 

proceeding for determination of Tariff for the next financial year. Within HV-2 category 

a separate category for the entities as aforesaid under the name and style of HV-5 

with the proposed Tariff is sought to be created. No doubt, regulator has power to 

amend the Tariff or any part of the Tariff but not frequently more than once except 

in respect of any changes expressly permitted under the terms of any fuel surcharge 

formula as may be specified in the regulations. It is only when fuel surcharge formula 

is applied for the whole exercise of the provision of Section 64 and other related 

provisions falling under Part VII of the Act may not be repeated. But when Tariff or 

part of Tariff is to be amended, to our understanding, the provisions in relation to 

determination of Tariff have to be complied with. 

0943 


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0944 


6. We are not comfortable to hear that the order under challenge before us and in 

relation to which hearing has commenced is proposed to be amended by the 

Commission at the behest of the Respondent No. 2 when it is known to the 

Commission that their order dated 31 st March, 2010 has been appealed against and 

the matter is sub-judice. It is against the principle of judicial ethics that a statutory 

Authority that passed an order under the law ventures to interfere with their order 

by amendment thereof when the appeal is pending before this Tribunal. Therefore, 

we cannot be agreeable to a situation that to the prejudice of the Appellants the 

Respondents can be permitted to proceed with the proceedings for amendment of 

Tariff order under challenge before us. 

7. While saying so, it is not clear to us as to whether the present Appellants are 

likely to be affected by the proposed amendment of the Tariff order. If the proposed 

amendment of the Tariff order is totally unconcerned with the Appellants then we 

are to say we may not stand in the way. But, law is very clear that the carriers of the 

appeal must not be inconvenienced and prejudiced to suffer an amendment of Tariff 

order which itself has been challenged by the Appellants and that too during the 

pendency of the appeal. 

8. We therefore, dispose of the application being 83 of 2011 with the words that it is 

only if the proposed amendment proceedings do not affect the present Appellants 

and are totally unconcerned with them that the Respondents may proceed with the 

intended proceedings for the amendment of the Tariff order. 

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d 

2011 ELR (APTEL) 0944* 



New Delhi Power Limited, Delhi 

v. 

Delhi Electricity Regulatory Commission, New Delhi and Ors. 

e 

f 


DECIDED ON: 31.05.2011 

Coram 


Issues and Findings 

Whether sale of electricity was wrongly treated as controllable, contrary to the MYT 

Regulations? 

Held, the State Commission has to act in accordance with the MYT Regulations in 

determination of Tariff. On perusal of the relevant MYT Regulations, it is evident 

that supply margin is a function of sale and the sale has been specified as an 

“Uncontrollable” parameter. The Appellant cannot be disincentives for the lower 

sales on account of sale of power when no incentive is provided for reduction in the 

net Power Purchase Cost, charged to the consumers. Under Section 43 of the Electricity 

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New Delhi Power Limited, Delhi v. Delhi Electricity Regulatory Commission and Ors. 


Act, 2003, the Appellant is under universal supply obligation. On 21 st October, 2009, 

the State Commission issued directions to the Distribution Companies to maintain 

uninterrupted power supply and to ensure that the electricity that could not be 

served shall not exceed 1 per cent of the total energy supplied in units in any 

particular month. Therefore, the finding of the State Commission on this issue besides 

being contrary to the Regulations, is also not keeping in view the reality since it 

does not take into account the demand and availability situation, operation of under 

frequency relays, etc. and the implication of Section 43 of the Electricity Act, 2003. 

In fact, Regulation 4.16 of Multi Year Tariff Regulations, 2007 provides that for any 

uncontrollable cost the truing up shall be done annually while for controlled cost 

the truing up shall be done only at the end of the Control Period which is also 

limited to only depreciation and return on capital employed. This Regulation has 

not been taken note of by the State Commission. Therefore, the finding on this issue 

rendered by the State Commission is set aside. 

Whether determination of inflation factor was incorrect and contrary to the MYT 

Regulations leading to the denial of employee and Administrative & General expenses? 

Held, the Consumer Price Index and the Whole-sale Price Index numbers are declared 

by the Government on a weekly basis. They are available on the official website of 

the Government. The State Commission did not think it fit to use the data available 

for immediately preceding five years in the indexation of inflation for the FY 2007-08, 

which is contrary to the Regulation 5.4 of Multi Year Tariff Regulations, 2007. State 

Commission is directed to recompute the inflation factor and consequently, the O&M 

expenses for each year of the control period in accordance with Regulation 5.4 and 

to allow for the expenses for the Control Period after including the Consumer Price 

Index/Whole-sale Price Index during the FY 2006-07 along with the carrying cost. 

Whether computation of Advance Against Depreciation was erroneous? 

Held, as per Clause 5.18 of Regulations, the Distribution Licensee shall be entitled 

to Advance Against Depreciation in addition to allowable depreciation. Accordingly, 

the State Commission considered both Opening Balance Sheet and the entries relating 

to the equity capital secured loans and the security deposits. It is noticed that the 

Appellant has claimed to accept the liability of Rs. 10 crore as per Opening Balance 

Sheet and not the entire amount of security deposits. Hence, the Delhi Commission 

has correctly considered only the total depreciation figure approved and considered 

during the Control Period. This finding is correct and the same is confirmed. 

Whether interest allowed on notional loan for the FY 2006-07 was lower and a deviation 

from the past practice (8.55 p.a. v. 9.20 per cent p.a.)? 

Held, the rate of 8.5 per cent considered by the Delhi Commission was based on the 

loan taken by the Appellant in the FY 2004-05. The interest rates have subsequently 

increased. As such, the Delhi Commission has not considered the cost of refinanced 

Delhi Power Company Loan for allowing interest on notional loan. The Delhi 

Commission has also ignored the fact that the capital interest rate is to be applied 

for the period 2006-07. Therefore, the Delhi Commission is directed to allow the 

interest on notional loan for a particular year based on the market related interest 

rate prevailing in that year. The said claim has to be considered by the State 

Commission along with the carrying cost. 

0945 


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0946 


Whether interest rate considered on new loans for working capital/capital expenditure 

for MYT period (9.50 per cent p.a. v. 11.25 per cent p.a.) was lower? 

Held, the Delhi Commission, though has stipulated interest rate @ 9.5 per cent per annum 

for all loans, has stated in the impugned order that it may true-up the interest rate for 

new loans to be taken for capital investment and for working capital requirement, if 

there is a deviation in the Prime Lending Rate of the scheduled commercial banks by 

more than 1 per cent on either side. It is also pointed out by the State Commission that 

the issue is already covered by the judgment of this Tribunal dated 6 th October, 2009 

in Appeal No. 36 of 2008. Therefore, the Delhi Commission may consider the issue 

relating to the interest rate for new loans in the true-up exercise. Accordingly, this 

issue is answered in line with the observations made by the Delhi Commission. 

Whether equity component for margin of working capital requirement was not 

considered by the Delhi Commission? 

Held, the State Commission has considered the entire Working Capital requirement 

by way of loan contrary to the norms of debt and equity ratio of 70:30. The State 

Commission relies on Regulation 5.10 but, this Regulation would not support the 

contention of the State Commission. The MYT Regulations stipulate that Weighted 

Average Cost of capital, as computed in the Regulation 5.10, needs to be applied on 

Regulated Rate Base which includes the working capital. This apart, Regulation 5.8 

and Regulation 5.9 provide for the formula for calculating the Regulated Rate Base 

for a particular year and for computing the return on capital employed by multiplying 

the Weighted Average Cost of capital with Regulated Rate Base. Under those 

Circumstances, the Delhi Commission is directed to re-compute the Weighted Average 

Cost of capital for each year of the Control Period, along with the carrying cost. 

Whether retrospective revision of means of finance for the FY 2002-03 to FY 2006-07 

due to allowance of depreciation @ 6.69 per cent for the same period, resulting in 

lower return on equity was justified? 

Held, according to the State Commission, if means of financing was retrospectively 

amended then it would result in unlawful gain of Rs. 257 crore whereas, the 

Distribution Company is entitled to only 16 per cent return on equity and a free 

reserve deployed in fixed assets. The State Commission has trued up the financials 

for the period from FY 2003 to FY 2007 taking into account the additional amount of 

depreciation and the carrying cost allowed. There was no infirmity in the Order of 

the State Commission except that if the Appellant had to arrange debt at interest 

rate higher than 9 per cent during the period in question then the Appellant may be 

compensated for the difference in interest rate on debt and the carrying cost allowed 

for that period. This issue is answered accordingly. 

Whether MYT Regulations with respect to allowance of establishment cost were 

inappropriate? 

Held, according to the State Commission, it has approved the Establishment Expenses 

based on the methodology described in the MYT Regulations, 2007. Therefore, the 

finding on this issue rendered by the State Commission is correct. 

Whether computation of efficiency factor was erroneous? 

Held, the Appellant had not proposed any Efficiency Factor in its MYT Petition in 

accordance with the MYT Regulations. The State Commission has compared the 

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O&M expenses of the Appellant with similar urban distribution companies in other 

states and found the expenses of the Appellant on higher side. Accordingly, the 

State Commission has decided to introduce efficiency factor of 2 per cent, 3 per cent 

and 4 per cent for FY 2009, FY 2010 and FY 2011, respectively. Therefore, the State 

Commission finding on this issue is justified. 

Appeal disposed of 


NEEPCO v. Tripura State Electricity Corporation Limited MANU/ET/0053/2006: 2007 

ELR (APTEL) 291 (Mentioned) [p. 0950, para 9 a] 

BSES Rajdhani Power Limited v. Delhi Electricity Regulatory Commission MANU/ET/ 

0095/2009: 2009 ELR (APTEL) 880 (Mentioned) [p. 0954, para 24 e] 

BSES Rajdhani v. DERC 2009 ELR (APTEL) 990 (Mentioned) [p. 0958, para 37 b] 

Delhi Transco Ltd. v. DERC and Ors. MANU/ET/0067/2010 (Mentioned) 

[p. 0964, para 66 h] 



2 SCR 747 (Mentioned) [p. 0954, para 24 e] 

North Delhi Power Ltd. v. Delhi Electricity Regulatory Commission, through its Secretary 

and Ors. MANU/ET/0022/2007: 2007 ELR (APTEL) 193 (Mentioned) 

[p. 0960, para 47 e] 

National Hydroelectric Power Corpn. Ltd. v. Commissioner of Income Tax MANU/SC/ 

0002/2010: (2010) 3 SCC 396: (2010) 228 CTR (SC) 492: (2010) 321 ITR 374 (SC): 

JT 2010 (1) SC 21: 2010 (1) SCALE 5: (2010) 1 SCR 16: (2010) 187 TAXMAN 193 

(SC): 2010 (1) UJ 288 (SC) (Mentioned) [p. 0954, para 24 e] 


Delhi Electricity Reforms Act, 2000 [p. 0948, para 2 e] 


Section 43 [p. 0951, para 14 g] 

Section 61(e) [p. 0956, para 31 e] 


Multi Year Tariff Regulations, 2007 

Regulation 4.2(f) [p. 0950, para 10 b] 

Regulation 4.7 [p. 0953, para 19 c] 

Regulation 4.10 [p. 0950, para 10 b] 



Regulation 4.16(b) [p. 0953, para 19 c] 

Regulation 4.20 [p. 0955, para 30 i] 




Regulation 5.6 [p. 0959, para 41 c] 

Regulation 5.7 [p. 0959, para 42 e] 



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Regulation 5.10 [p. 0958, para 40 i] 








Counsel 

For Appellant/Petitioner/Plaintiff: Amit Kapur and Poonam Verma, Advs. 

For Respondents/Defendant: A.N. Haksar, Sr. Adv., Purnima Sapra, Udyan Jain 

and P. Singh, Advs. for DERC 

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JUDGMENT 


1. New Delhi Power Limited is the Appellant herein. The Respondent No. 1 is the 

Delhi Electricity Regulatory Commission (State Commission.) The Respondents No. 2 

to 56 are objectors/consumers who participated in the Proceedings before the State 

Commission in the MYT Petition leading to the issue of the impugned MYT Order. 

2. The Appellant is engaged in the business of distribution and retail supply of 

electricity in the North and North-west circle of National Capital Territory of Delhi. 

It is a successor in interest of erstwhile Delhi Vidyut Board. Its business is governed 

by the provisions of the Electricity Act, 2003, read with Delhi Electricity Reforms 

Act, 2000. 

3. On 30 th May, 2007, MYT Regulations were notified by the Delhi State Commission. 

As per the Regulations, the Appellant on 29 th September, 2007 filed its petition for 

approval of Annual Revenue Requirements and determination of Tariff for the MYT 

control period between FY 2007-08 and FY 2010-11 before the Delhi State Commission. 

This petition was admitted by the State Commission on 26 th October, 2007. Public 

notices were issued inviting objections and comments. After having received the 

comments from various persons, public hearing was held. Ultimately, on 

23 rd February, 2008, the State Commission passed the MYT order impugned. Challenging 

the same, the Appellant has filed this Appeal. 

4. The Appellant has raised totally 18 issues in this Appeal. However, in view of 

the fact that the Commission agreed to re-work its calculations in respect of some 

issues and some of the other issues have been resolved by the subsequent order 

passed by the State Commission, the learned Counsel for the Appellant has confined 

himself to focus only on the remaining nine issues. Those are as follows: 

(i) Sale of electricity wrongly treated as controllable, contrary to the MYT 

Regulations; 

(ii) Incorrect determination of inflation factor, contrary to the MYT Regulations 

leading to the denial of employee and Administrative & General expenses; 

(iii) Erroneous computation of Advance Against Depreciation; 

(iv) Lower interest allowed than the actual on notional loan for the FY 2006-07, 

deviation from the past practice (@ 8.55 p.a. v. 9.20 per cent p.a.) 

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(v) Lower interest rate considered on new loans for working capital/capital 

expenditure for MYT period (@ 9.50 per cent p.a. v. 11.25 per cent p.a.) 

(vi) Equity component for margin of working capital requirement not considered 

by the Delhi Commission; 

(vii) Retrospective revision of means of finance for the FY 2002-03 to FY 2006-07 

due to allowance of depreciation @ 6.69 per cent for the same period, resulting 

in lower return on equity; 

(viii) Inappropriateness of MYT Regulations with respect to allowance of 

establishment cost; and 

(ix) Erroneous computation of efficiency factor. 

5. The first issue is relating to the sale of electricity classified as “controllable factor”. 

According to the Appellant, the decision on this issue by the Delhi State Commission 

treating the sale as controllable factor instead of treating the same as “uncontrollable” 

as per the MYT Regulations is wrong. On the other hand, it is submitted by the State 

Commission that it has considered the energy sales and supply margins in accordance 

with MYT Regulations and in order to curb the load shedding, the Commission 

decided that there should be a disincentive for lower sale because of load shedding 

by the Distribution Companies and as such, the Distribution Companies have to 

bear the loss for lower revenue for supply margin in case the energy sales are lower 

than the approved sales and that as per the MYT Regulations there is no bar to treat 

supply margin as controllable. 

6. We have carefully considered the submissions made on this issue. We have also 

perused the finding over this issue in the impugned order. 

7. The fundamental principle of determination of Tariff under the MYT Regulation 

is segregation of each element of cost and the Revenue Requirement in the controllable 

and uncontrollable based upon the ability of the licensee to control them. In other 

words, the regulatory treatment for the two classes of parameters are different and 

distinct. These two classes of parameters are given below: 

(a) Operation and Maintenance Expenses (comprising of Employees costs, 

Administration & General Expenses and Repair & Maintenance Expenses) 

have been defined in the MYT Regulation as “Controllable Parameters”. Except 

for specific annual adjustments explicitly provided for in such factors, any 

loss or gain on account of change in controllable cost are not adjusted or trued 

up annually in the Aggregate Revenue Requirement of the licensee during the 

Control Period. 

(b) Certain parameters, including “Sales”, “Power Purchase Cost’, capital 

expenditure and its consequential impact on allowance of depreciation and 

Return on Capital Employed (ROCE) are classified as “Uncontrollable” 

parameters. Any variance in actuals vis-à-vis initially approved budgeted 

expenses/revenue on such items would be trued up, i.e. adjusted in the ARR 

of the licensee annually and/or at the end of the Control Period. 

8. In the light of the above parameters, we have to consider whether the finding of 

the Commission on this issue is correct or not. 

9. It cannot be debated that it is a settled principle of law that the Commission 

cannot act in violation of the MYT Regulations in determination of Tariff. In other 

words, the Commission has neither the Authority nor the jurisdiction to erase the 

statutory rules and notifications even though it is a rule making Authority to fix the 

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Tariff. This has been held by this Tribunal in 2007 ELR (APTEL) 291 (NEEPCO v. 

Tripura State Electricity Corporation Limited 1 ) 

10. On perusal of the relevant MYT Regulations, it is evident that supply margin is 

a function of sales and the sales has been specified in the Regulation as uncontrollable 

parameter. The applicable Regulation relevant to the energy sale and supply margin 

is contained in Regulation 4.2(f), 4.10, 4.11, 4.16, 5.28, 5.38, 5.39, 5.41 and 5.42. The 

relevant Tariff Regulations are reproduced below: 

4.2 The Multi Year Tariff frame work shall be based on the following: 


(f) Variation in revenue/cost on account of uncontrollable factors like 

sales and power purchase shall be trued up. 

Sales Forecast 

4.10 The Commission based on the licensee’s filing, shall examine the forecast 

for reasonableness and consistency, and shall approve the sales forecast for 

each year of the control period. 

4.11 sales shall be treated as uncontrollable. The open access transactions 

shall not form part of sales 

True up 

4.16. The true-up across various controllable and uncontrollable parameters 

shall be conducted as per principle stated below: 

(a) variation in revenue/expenditure on account of uncontrollable sales 

and power purchase shall be trued up every year. 

ARR for Retail Supply Business 

5.28 The Aggregate Revenue Requirement for the Retail Supply Business of 

Distribution Licensee for each year of the control period shall contain the 

following items: 

(a) Cost of power procurement; 

(b) Transmission and cost dispatch charges; 

(c) Supply margin and; 

(d) Correction for “uncontrollable factors”. 

5.38 The Commission shall specify a retail supply margin for the Retail Supply 

Business in MYT order based on the Allocation Statement provided by the 

Distribution Licensee. The costs allocated to Retail Supply Business as per 

Allocation Statement shall be considered while determining supply margin. 

5.39 The Commission shall specify the retail supply margin in such manner 

that the return from the Wheeling Business and Retail Supply Business shall 

not exceed 16 per cent of equity. 

5.41 These Regulations do not provide for any truing up for controllable items. 

5.42 Variations on account of uncontrollable items like energy sales and power 

purchase cost shall be trued up. Truing up shall be carried out for each year 

based on the actual/audited information and prudence check by the 

Commission: 

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Provided that if such variations are large, and it is not feasible to recover 

in one year alone, the Commission may take a view to create a regulatory 

asset, as per the guidelines provided in Clause 8.2.2 of the National 

Tariff Policy. 

The above Regulations clearly indicate energy sales as uncontrollable item to be 

trued up each year on the basis of actual/audited accounts and prudence check by 


11. The State Commission has made an attempt in the impugned order to convert 

the entire supply margin cost of Rs. 153.96 crores as controllable, and therefore held 

that it is not recoverable to the extent the State Commission approved units sales 

not being achieved. This treatment is contrary to the Regulation and inequitable 

since the Delhi Commission has passed on the entire benefit of sale of energy outside 

the state to the existing consumers by way of lower power purchase cost built into 

Tariff but, even than it has penalised the Appellant by enforcing the under recovery 

of even the actual cost incurred. The Appellant cannot be disincentivised for the 

lower sales on account of sale of power when no incentive is provided for reduction 

in the net power purchase cost charged to consumers due to additional margin 

obtained from sale of power. 

12. The load shedding is carried out at the direction of State Load Dispatch Centre 

due to fall in frequency of the Grid. In its letter dated 11 th September, 2008, the 

Delhi Transco Limited sent to the North Delhi Distribution Company intimating the 

under frequency relays operation in Delhi occurred when Delhi was over drawing 

and also under drawing from the grid. 

13. There are times when generating plants are not able to generate the contracted 

power despite being in demand. This shortage of supply in the Grid compared to 

demand leads to under-frequency. Even when generating stations generate to their 

full commitment, there can be excess drawl through uncontracted demand as several 

States in the Northern Region overdraw frequently beyond their sanctioned entitlement. 

If at the same time other States draw their full entitlement, the excess drawl of 

power leads to under-frequency in the Northern and Western Regional Transmission 

Grids. This, in turn, leads to forced load shedding to protect the Grid from totally 

collapsing. 

14. Under Section 43 of the Electricity Act, 2003, the Appellant is under a universal 

supply obligation. As such, for such supply, the treatment in MYT Regulations is 

prudent since it factors in supervening factors outside DISCOM’s control like under 

frequency relays, consumer mix, connected load, demand etc. As a matter of fact, it 

is noticed that on 21 st October, 2009, the State Commission issued directions to the 

DISCOMS to maintain an uninterrupted power supply and the DISCOMS shall 

ensure that the electricity that could not be served shall not exceed 1 per cent of the 

total energy supplied in units in any particular month. In case, the disruption in 

power supply exceeds the limit of 1 per cent for any particular month, the DISCOM 

shall be liable to a penalty up to Rs. 5 lac for every 2 lac kwh units unserved. 

Therefore, the finding of the State Commission on sale of electricity is contrary to 

the reality since it does not take into account the load situation, load mix, demand, 

under-frequency relay, etc. and the implication of Section 43 of the Electricity Act, 2003. 

15. According to the Appellant, even assuming that the Delhi Commission has a 

right to designate the sale as controllable for the purpose of recovery of supply 

margin, in the event of Delhi Commission approved billing units not being achieved, 

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due to unintentional load shedding by the Appellant, the recovery of only the 

return/profit margin component of the total supply margin can be impaired after 

allowing the total cost. Regulation 4.16 provides that for uncontrollable cost, the 

truing up shall be done annually while for controlled cost the truing up shall be 

done only at the end of the Control Period which is also limited to only depreciation 

and return on capital employed. This Regulation has not been taken note of by the 

State Commission in deciding this issue. 

16. Further, as pointed out by the Appellant, the Appellant sells power outside its 

licensed area only during the period when there is surplus power at its disposal. 

The Appellant does not retain any additional margin obtained from the sale of such 

surplus power. The entire sale proceeds from such surplus power are being adjusted 

with the power purchase cost for that year. During the hearing, the learned Counsel 

for the Delhi Commission has clarified that the entire supply margin is not at risk 

but, only the 2 per cent additional return allowed is at risk that too pro rate to units 

not sold vis-à-vis approved units sold. So in view of this clarification also, it is 

appropriate to set aside the findings of the State Commission in Paras 4.271 and 

4.272 of the impugned MYT order. Accordingly, the same is set aside and the State 

Commission is directed to treat the variation in actual sales with respect to approved 

sales according to the Tariff Regulations. This point is answered accordingly in 


17. The second issue is relating to the incorrect determination of inflation factor for 

allowing employee and Administrative & General Expenses for MYT period. According 

to the Appellant, the MYT Regulations had established a mechanism for annual 

correction of the operation and maintenance expenses for inflation by using an indexation 

from the whole-sale and consumer price indices of the Government of India. Since the 

State Commission considered the inflation factor for FY 2001-02 to FY 2005-06 instead 

of FY 2002-03 to FY 2006-07, it has resulted in unjust denial of expenses in the 

Annual Revenue Requirement to the extent of several crores of rupees for the FY 2007-08 

to FY 2010-11. It is also submitted by the Appellant that Delhi Commission has wrongly 

calculated immediately preceding five years from FY 2001-02 to FY 2005-06. 

18. Relying upon Regulations 5.2, 5.3 and 5.4 the State Commission submitted that 

it has arrived at inflation factor by using the Consumer Price Index and Whole-sale 

Price Index for preceding five years from FY 2001-01 to FY 2005-06. It has also been 

submitted that it has deviated from using the Consumer Price Index and Whole-sale 

Price Index for immediately preceding five years as it did not deem it fit to use the 

same for any future years. 

19. The relevant Regulations are reproduced below: 

5.2 Operation and Maintenance (O&M) expenses shall include: 

(a) Salaries, wages, pension contribution and other employee cost; 

(b) Administrative and General expenses; 

(c) Repairs and Maintenance; and 

(d) Other miscellaneous expenses, statutory levies and taxes (except 

corporate income tax). 

5.3 The Licensee shall submit the O&M expenses for the Control Period as 

prescribed in multiyear Tariff filing procedure. The O&M expenses for the 

Base Year shall be approved by the Commission taking into account the latest 

available audited accounts, business plan filed by the Licensees, estimates of 

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the actuals for the Base year, prudency check and any other factor considered 

appropriate by the Commission. 

5.4 O&M expense permissible towards ARR for each year of the Control Period 

shall be determined using the formula detailed below. The R&M expenses are 

linked to the Gross Fixed Assets while the employee expenses and A&G expenses 

are linked to an Inflation Index, as shown below: 

xxx xxx xxx 

(c) INDXn – Inflation Factor to be used for indexing can be taken as a 

combination of the Consumer Price Index (CPI) and the Wholesale Price 

Index (WPI) for immediately preceding five years. 

The Regulations stipulate that O&M Expenses for each year of the control period 

shall be determined using the specified formula. The inflation factor to be used for 

the indexing shall be combination of CPI and WPI for immediately proceeding five 

years. According to the Regulation 4.7 the Operation and Maintenance Expenses 

are controllable. According to Regulation 4.16(b) O&M expenses shall not be trued up. 

20. We have considered the rival submissions on this issue. According to the Appellant, 

while computing the inflation factor for the MYT period starting from FY 2007-08, 

the Delhi Commission has erred on following two counts: 

(i) The Commission has considered the inflation factors for Consumer Price 

Index and Whole-sale Price Index for the FY 2001-02 to FY 2005-06 instead of 

FY 2002-03 to FY 2006-07; and 

(ii) Contrary to MYT Regulations, the Delhi Commission has erroneously applied 

the inflation factor for the entire control period based on the annual basis for 

the FY 2001-02 to FY 2005-06. Due to this wrong calculation, it has resulted in 

unjust denial of expenses in the ARR to the extent of several crores of rupees 

for the FY 2007-08 to FY 2010-11. For the year in issue, i.e. FY 2007-08, the 

State Commission has wrongly calculated the immediately preceding five years 

from FY 2001-02 to FY 2005-06. The words “immediately preceding five years” 

appearing in 5.4(c) of the Regulations imply immediately preceding five years 

for which the final figures are available. This means immediately preceding 

five years would be FY 2002-03 to FY 2006-07. 

The State Commission has made an attempt to justify the same by stating that 

the Consumer Price Index and Whole-sale Price Index for FY 2006-07 were not 

considered as the official numbers for FY 2006-07 were not a vailable till the 

impugned order was passed. 

21. We are unable to accept this explanation. The Consumer Price Index and 

Whole-sale Price Index number are declared by the Government on a weekly basis. 

They are available on the official website of the Government. The Petition for MYT 

Tariff was filed on 29 th September, 2007 and the impugned order was passed on 

23 rd February, 2008. Therefore, it is difficult to accept that the CPI and WPI number 

for FY 2006-07 were not available. 

22. While we agree with the contention of the Appellant that for determining the 

O&M expenses for the FY 2007-08, the indexation factor shall be based on CPI and 

WPI figures for the period 2002-03 to 2006-07, we are not convinced that the State 

Commission shall have determined the inflation factor for each year of the control 

period on rolling basis. At the time of deciding the MYT Tariff, the inflation factor 

for the control years will not be available, therefore, indexation factor worked for 

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the first year of the control period on the basis of preceding five years has to be used 

for all years during the control period as there is no provision for true-up of O&M 

expenses in the Regulations and for determination of indexation factors on rolling 

basis. However, the indexation factor based on actual WPI and CPI indices for the 

control years of the present MYT Tariff will be used while deciding the indexation 

factor for the next MYT Tariff and, therefore, no prejudice will be caused either to 

the distribution company or the consumers. We also observe that in the Central 

Commission’s Regulations also the O&M expenses for generating station and 

transmission system are escalated at a fixed escalation factor during the control period. 

23. Accordingly, this issue is only partly decided in favour of the Appellant to the 

extent that the indexation factor has to be determined on the basis of actual WPI 

and CPI for the immediately preceding five years period from FY 2002-03 to FY 2006-07 

and not FY 2001-02 to FY 2005-06 as worked out by the State Commission. The State 

Commission is directed to accordingly allow the O&M Expenses for the control 

period after including CPI/WPI during FY 2006-07 along with the carrying cost. 

24. The next issue is with reference to incorrect computation of Advance Against 

Depreciation. According to the Appellant, the Delhi Commission in the past had 

approved the means of financing for the capital expenditure using debt and equity 

ratio of 70:30 but, the depreciation rate which has been allowed by the Delhi 

Commission in the impugned order is only 3.75 per cent p.a. whereas, the depreciation 

rate required to meet the repayment would be around 7 per cent p.a. and this is in 

contravention of the law laid down by the Hon’ble Supreme Court in 2007 (3) SCC 33 2 

and in 2010 (3) SCC 396 3 . Refuting this claim, the learned Senior Counsel on behalf 

of the State Commission, submitted that this issue has been covered by the judgment 

of this Tribunal in Appeal No. 36/08 (BSES Rajdhani Power Limited v. Delhi Electricity 

Regulatory Commission 4 ) reported in 2009 ELR (APTEL) 880, wherein this Tribunal 

disallowed the similar contention of the Appellant. Therefore, this issue cannot be 

re-agitated before this Bench. 

25. We have carefully considered these submissions on this issue. The learned Counsel 

for the Appellant in support of his contention cited two judgments of the Hon’ble 

Supreme Court. The State Commission, while distinguishing those judgments, has 

cited judgment rendered by this Tribunal dated 6 th October, 2009 reported in 2009 ELR 

(APTEL) 880 and stated that this issue had already been settled and as such the 

same cannot be re-agitated. 

26. We have gone through both the judgments of the Hon’ble Supreme Court. The 

perusal of the above judgments would make it clear, as pointed out by the earned 

Senior Counsel for the Commission, that they do not deal with the issue raised by the 

Appellant. The judgment reported in 2007 (3) SCC 33 deals with the rate of depreciation 

which has been given effect to by the State Commission and the same is alien to the 

issue under consideration. Similarly, the judgment reported in 2010 (3) SCC 396 would 

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2 Ed.: Delhi Electricity Regulatory Commission v. BSES Yamuna Power Limited and Ors. MANU/ 

SC/7117/2007: JT 2007 (8) SC 409: 2007 (3) SCALE 289: (2007) 2 SCR 747 

3 Ed.: National Hydroelectric Power Corpn. Ltd. v. Commissioner of Income Tax MANU/SC/0002/ 

2010: (2010) 228 CTR (SC) 492: (2010) 321 ITR 374 (SC): JT 2010 (1) SC 21: 2010 (1) SCALE 

5: (2010) 1 SCR 16: (2010) 187 TAXMAN 193 (SC): 2010 (1) UJ 288 (SC) 

4 Ed.: MANU/ET/0095/2009 

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not also be of any help to the Appellant since the Hon’ble Supreme Court has defined 

the subject of Advance Against Depreciation by stating that the Advance Against 

Depreciation is nothing but, an adjustment by reducing the normal depreciation 

inducible in future years in such a manner that at the end of useful life of the plant 

the same shall be reduced to nil. Therefore, these judgments are not dealing with 

the issue which has been decided by this Tribunal in Appeal No. 36 of 2008 (2009 ELR 

(APTEL) 880) 

27. It is pointed out by the learned Senior Counsel for the State Commission that in 

arriving at the figure for Advance Against Depreciation, the Delhi Commission has 

worked out in strict adherence to the provisions of the MYT Regulations, 2007. 

As per Clause 5.18 of the Regulations, the Distribution Licensee shall be entitled to 

advance against depreciation in addition to the allowable depreciation. Accordingly, 

the State Commission has considered both opening Balance Sheet and the entries 

relating to the equity capital, as well as the secured loans paid to the holding 

company and the security deposits. It is noticed that the Appellant has claimed to 

accept the liability of Rs. 10 crores only as per opening Balance Sheet and not the 

entire amount of security deposits. Hence, the Delhi Commission has correctly 

considered only the total depreciation figure approved and considered during the 

Control Period excluding Rs. 401.66 crores. Therefore, this issue is answered against 


28. The next issue is with reference to the lower interest rate allowed on notional 

loan. According to the Appellant, the State Commission has allowed the interest 

rate on notional loan for financing of capital expenditure for FY 2006-07 only 

@ 8.5 per cent p.a. instead of 9.2 per cent p.a. It is further contended by the Appellant 

that the interest rate of notional loan works out to 9.2 per cent p.a. for the FY 2006-07 

and the same should be used for calculation of rate of debt on the notional loan for 

MYT period. 

29. According to the State Commission, the Commission has allowed the actual 

interest rate of loan taken by the Appellant towards re-financing of the Delhi Power 

Company Limited in 2007. It is further contended by the State Commission that the 

Commission has allowed the interest on notional loan in 2007 @ 8.5 per cent which 

was in addition to the interest allowed on Delhi Power Company Limited re-financed 

loan and since the Appellant has not taken any loan in 2007 the interest allowed 

@ 8.5 per cent was assumed as a notional loan. The relevant extracts of the impugned 

order in effect disallowing appropriate interest is as follows: 

3.80. For 2007, the Commission has approved the total debt financing of 

Rs. 125.62 Cr. For Capital expenditure as per the means of finance approved 

for 2007. The Petitioner has not taken any debt in 2007. The Commission 

approves normative loan of Rs. 125.62 Cr. The Commission approves interest 

rate of 8.5 per cent on the normative loan with moratorium period of one year 

repayment period of 10 years. 

30. The investments referred to by the Delhi Commission to support the lower rate 

are investments relating to contingency reserves and not the surplus funds available 

with North Delhi Power Limited contingency reserve invested in Government securities 

and RBI bonds as per the Regulation 4.20. Such securities are risk free securities 

and carry lower interest rate than other investment instruments such as Mutual 

Funds, Equity etc. Therefore, the State Commission’s comparison with the Government 

securities is misconceived. 

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31. Further, this issue is governed by the principle settled by this Tribunal in its 

judgment dated 30 th July, 2010 in Appeal No. 153/09 in which it has been held that: 

(47) The State Commission instead of applying the principle of allowing the 

prevailing market rate for debt for the carrying cost, has allowed the rate of 9 per cent 

on the strength of the Tribunal judgment even though the present interest rate has 

increased significantly. As pointed out by the Counsel for the Appellant, the State 

Commission in the earlier case had decided Tariff on 9 th June, 2004 and that on 

commercial borrowings on interest rate of 9 per cent had been applied considering 

the then prevalent prime lending rates. Therefore, the State Commission before 

fixing the rate of carrying cost has to find out the actual interest rates per the 

prevailing lending rates. Admittedly, this has not been done. 

(50) The working capital is being allowed by the State Commission on normative 

basis in line with the MYT Regulations. These Regulations would imply that 

it is controllable parameters which is not to be trued up. Any loss/saving in 

interest on working capital is to the account of the distribution company. 

When there is some savings on this account, the State Commission cannot 

deny the benefit of the same to the distribution company to enable it to utilise 

the same to meet the other requirements. As a matter of fact, the Appellant 

claim is in line with the State Commission view that the carrying cost is to be 

allowed in the ratio of 70:30. 

(51) It cannot be disputed that the State Commission shall be guided by the 

principles that reward efficiency in performance as provided under Section 61(e) 

of the Electricity Act, 2003. Similarly, the said section provide that State 

Commission shall be guided by the National Electricity Policy and Tariff Policy. 

Therefore, the State Commission should have allowed the carrying cost at he 

prevailing market lending rate for the carrying cost so that the efficiency of the 

distribution company is not affected. The State Commission is required to take 

the truing up exercise to fill up the gap between the actual expenses at the end 

of the year and anticipated expenses in the beginning of the year. The Tribunal 

in various judgments rendered by it held in Appeal No. 36 of 2008 in the 

judgment dated 6 th October, 2009 reported in 2009 ELR (APTEL) 880 has held 

that “the true-up exercise is to be done to mitigate the difference between the 

projection and actuals, and true-up mechanism should not be used as a shelter 

to deter the recovery of legitimate expenses/revenue gap by over-projecting 

revenue for the next Tariff”. Therefore, the fixation of 9 per cent carrying cost, 

in our view, is not appropriate. Therefore, the State Commission is hereby 

directed to reconsider the rate of carrying cost at the prevailing market rate 

and the carrying cost also to be allowed. 

32. The above observation would reveal that the Delhi Commission has approved 

the interest rate of 8.5 per cent for notional loan for 2007 since the Appellant has 

not taken any new loan for capital expenditure for the said year. The only loan 

taken by the Appellant for the FY 2007 was for re-financing of old Delhi Power 

Company Limited loan. It is pointed out that in the previous Tariff orders for 2002-03, 

2003-04, 2004-05 and 2005-07, the Delhi Commission had adopted the principle 

that while computing the rate of interest on notional loan, the Commission is to be 

guided by the interest rate on actual loan availed during the year or the prevailing 

interest rate if no new loan is contracted during the year. 

33. It is not debated that the rate of 8.5 per cent considered by the Delhi Commission 

was based on the loan taken by the Appellant in the FY 2004-05. It is noticed that 

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the interest rates have subsequently increased which is evident from the movement 

in the prime lending rate fixed by the State Bank of India. The Delhi Commission 

has not considered the cost of re-financed Delhi Power Company Limited loan for 

allowing interest on notional loan. The purpose of allowing interest rate on notional 

loan with that of interest rates of loans actually drawn is to ensure that the costs 

allowed are in line with the actual cost of loans available in the market. 

34. The State Commission has ignored the re-financing of Rs. 552 crores of loan. The 

case of the Appellant before the Delhi Commission that the interest rate to be worked 

out on a loan must be raised on the prevalent market rates. The Delhi Commission 

has ignored the fact that the capital interest rate to be applied is for the period 

2006-07. The total impact of such lower allowance is 0.44 Crores for the FY 2006-07 

and Rs. 0.99 crores from the FY 2007-08 onwards. 

35. Under those Circumstances, the Delhi Commission is directed to allow interest 

on notional loan for this particular year based on the market related interest rate 

prevailing in that year, i.e. either the interest rate approved in FY 2004-05 duly 

adjusted for change in the State Bank of India prime lending rate or 9.2 per cent 

per annum based on the loan obtained by the Appellant. The said claim may be 

considered by the State Commission along with carrying cost. Accordingly, this 

issue is answered in favour of the Appellant. 

36. The next issue is relating to the lower interest rate allowed for new loans/ 

working capital loans in MYT period. According to the Appellant, the Delhi 

Commission has allowed interest on working capital loan @ 9.5 per cent p.a. observing 

that the Appellant would be able to raise the funds @ 2.75 per cent below the SBI 

prime lending rate, whereas the same was 1 per cent below the SBI prime lending 

rate from SBI. It is further contended by the Appellant that the Appellant has not 

availed any long-term loan where the rate is SBI prime lending rate less 2.5 per cent 

to 3 per cent and as such by ignoring the ground reality and based on its incorrect 

assumption, the State Commission has allowed interest on term loan as part of 

return on capital employed @ 9.5 per cent p.a. for the MYT period. On the other 

hand, the Delhi Commission has stated that it has relied on the terms and conditions 

of the loan taken by the Appellant in 2007 and noticed that the Appellant has 

procured the funds in the range of 2.5 per cent to 3 per cent p.a. below the prime 

lending rate. Though the Delhi Commission has stipulated interest rate @ 9.5 per cent p.a. 

for all loans that the Appellant may raise, it is stated in the impugned order that it 

may true-up interest rate for new loans to be taken for capital investment and for 

working capital requirement, if there is a deviation in the prime lending rate of the 

scheduled commercial banks by more than 1 per cent on either side. We will quote 

the relevant findings on this issue, as follows: 

4.236. For outstanding loan as on 1 st April, 2007, the Commission has considered 

the repayment schedule and interest rate as discussed in the truing up section 

above for DPCL loan (refinanced through IDBI), repayment schedule and interest 

rate has been considered as per loan agreement submitted by the Petitioner. 

The Commission has also analysed the terms & conditions of the loans taken 

by the Petitioner in FY-07. The Commission has noticed that the Petitioner has 

managed to procure funds in the range of 2.5 per cent to 3 per cent below PLR. 

Thus, for the Control Period the Commission has considered that the Petitioner 

would be able to raise funds at 2.75 per cent below SBI PLR (currently 

12.25 per cent). 

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4.238. The Common shall true-up the means of finance for the Control Period 

as the asset capitalisation is subjected to true-up. The Commission may true-up 

the interest rates considered for new loans to be taken for capital investment 

and for working capital investment, if there is a deviation in the PLR of the 

scheduled commercial banks by more than 1 per cent on either side. 

37. According to the Delhi State Commission, this issue is already covered by the 

judgment dated 6 th October, 2009 in Appeal No. 36 of 2008 reported in 2009 ELR 

(APTEL) 990 in BSES Rajdhani v. DERC. The Tribunal, while disallowing the similar 

contention of the Appellant has held as under: 

(114) The Commission has not approved the rate of 9.5 per cent without reference 

to reality. The rate is neither fanciful nor unrealistic. It is only a projection for 

the future. In the absence of any given formula, the Commission will have to 

be allowed some discretion in the matter. It appears to us that the discretion 

has been used keeping in view the available data. We as an Appellate Authority 

will not interfere with the discretion of the Commission unless the same has 

been exercised with arbitrariness. The exercise of executing discretion has to 

be transparent, just, fair and non-arbitrary. The impugned order to the extent 

of approval of interest cannot be said to suffer from any defect. 

(115) Further, the Commission has at the very outset said that it shall true-up 

the interest rate for the new loans to be taken for capital investment and for 

working capital requirement if there is a deviation in the PLR of the scheduled 

commercial banks by more than 1 per cent on either side. Thus, there is sufficient 

safeguard for the Appellant and sufficient room to procure loans at the given 

market rate of interest. We are not inclined to interfere with the Commission’s 

decision on the approval of interest rate. 

38. In this judgment, we have observed that as Appellate Authority we will not 

interfere with the discretion of the Commission unless the same has been exercised 

with arbitrariness. It is also mentioned in the said judgment that the Commission 

shall true-up the interest rate for the new loans to be taken for capital investment 

and for working capital requirement if there is a deviation in the prime lending rate 

of scheduled commercial banks more than 1 per cent on either side. 

39. While distinguishing this judgment the Appellant has stated that in the abovesaid 

judgment no sufficient information was placed on record by the Appellant in the 

said case but, in the present case, the Appellant placed sufficient materials to 

substantiate its claim to show that the Delhi Commission has erred in allowing 

lower interest rate to the Appellant. We are unable to accept this contention because 

we find that, sufficient safeguard has been given in the impugned order also 

(Para 4.238). Therefore, this issue is covered already by the judgment of this Tribunal, 

as referred to above. Accordingly, the Delhi Commission may consider the issue 

relating to interest rates for new loans in the true-up exercise. This point is also 

answered accordingly. 

40. The next issue is with reference to the equity component for margin on working 

capital requirement. According to the Appellant, the Delhi Commission has considered 

the entire working capital requirement by way of loan and has allowed the interest 

rate @ 9.5 per cent on the same and this is contrary to the norms of debt and equity 

ratio of 70:30 of the power sector and also as per Regulation 5.10. According to the 

State Commission, the Regulation 5.10 allows 30 per cent of equity funding only in 

case of capital expenditure and it nowhere mentions that the Commission will 

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allow 30 per cent equity for working capital also. The relevant finding on this issue 

is as follows: 

4.236. For outstanding loan as on 1 st April, 2007, the Commission has considered 

the repayment schedule and interest rate as discussed in the truing up section 

above for DPCL loan (refinanced through IDBI), repayment schedule and interest 

rate has been considered as per loan agreement submitted by the Petitioner. The 

Commission has also analysed the Terms & Conditions of the loans taken by the 

Petitioner in FY-07. The Commission has noticed that the Petitioner has managed 

to procure funds in the range of 2.5 per cent to 3 per cent below PLR. Thus, for the 

Control Period the Commission has considered that the Petitioner would be able 

to raise funds at 2.75 per cent below SBI PLR (currently 12.25 per cent). 

41. The State Commission relies on Regulation 5.10 but, conjoint reading of 

Regulations 5.6 to 5.10 would not support the contention of the State Commission. 

The MYT Regulations stipulate that the Weighted Average Cost of Capital as computed 

under Regulation 5.10 needs to be applied on Regulated Rate Base which includes 

working capital. Thus, the MYT Regulations do not stipulate that there shall be two 

different Weighted Average Cost of Capital, one for Capital Expenditure and the 

other for Working Capital Expenditure. 

42. Regulation 5.6 lays down that the items which must be excluded from the 

computation of Regulated Rate Base and working capital is not covered by the 

exclusions. On the other hand Regulation 5.6 specifically stipulate that the Regulated 

Rate Base used to calculate the total capital employed shall include the original 

cost of assets and Working Capital. Similarly, Regulation 5.7 states that the regulated 

rate base shall be based on approved capital investment plan including normative 

working capital. 

43. Regulation 5.8 provides formula for calculating the regulated rate base for a 

particular year wherein working capital is clearly one of the elements so much so 

that any change in the normative working capital has to be included. 

44. Regulation 5.9 sets out the formula for computing the Return on capital employed 

by multiplying the weighted average cost of capital with the Regulated Rate Base. 

As mentioned above, Regulation 5.10 stipulates formula to compute the weighted 

cost of capital which precedes on a clear belief that the debt equity ratio of 70 per cent 

and 30 per cent has to be accounted for. 

45. The learned Counsel for the Appellant, while refuting the submission of the 

State Commission that the approach adopted by the State Commission was on the 

basis of the normal industry practice by referring to the Tariff Orders of the four 

State Commissions. The Appellant has cited Tariff orders of Karnataka State 

Commission, Himachal Pradesh State Commission, Jharkhand State Commission 

and the Gujarat State Commission. It is noticed from the regulations of these State 

Commissions have different Regulations for the interest on Working Capital and 

have treated Working Capital separate from the regulated rate base and do not have 

the concept of Return on Capital Employed as provided in the Delhi Commission’s 

Regulations. Under these Circumstances, the Delhi Commission is directed to recompute 

the Weighted Average Cost of Capital for each year of the Control Period 

along with the carrying cost and apply on the respective years Regulated Rate Base 

for allowance of return on capital employed according to its Regulations. This issue 

is answered in favour of the Appellant. 

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46. The next issue is with reference to the retrospective revision of means of finance 

for past years. According to the Appellant, the Delhi Commission has wrongly 

allowed the previously denied depreciation (6.69 per cent minus 3.95 per cent) in 

the impugned order along with the carrying cost. It is contended by the Appellant 

that while the Delhi Commission has allowed carrying cost on the denied depreciation 

amount, it has illegally assumed that the allowance for carrying cost has resulted 

in the amount allowed for depreciation being available for financing relevant years 

to which amount would pertain. According to the Delhi Commission, it has allowed 

carrying cost @ 9 per cent on additional depreciation allowed as the additional 

depreciation was available with the Appellant in respective years for which such 

additional depreciation was being allowed. The relevant finding on this issue is 

contained in Paras 3.50 and 3.68. The relevant extracts are as follows: 

Para 3.50 In view of the Orders issued by the Supreme Court and the ATE, the 

Commission has allowed depreciation on the opening GFA for the year which 

includes assets created from APDRP grants @ 6.69 per cent for the Policy 

Direction Period along with carrying cost @ 9 per cent. 

Para 3.68 As the Commission is allowing carrying cost @ 9 per cent per annum 

for additional depreciation allowed, the Commission is of the view that 

additional depreciation was available with the Petitioner in the respective 

years for which additional depreciation is being allowed. 

47. In terms of the Para 3.68 of the impugned order, the Delhi Commission has 

allowed carrying cost of the denied depreciation amounts in accordance with the 

Tribunal’s judgment reported in 2007 ELR (APTEL) 193 5 which was confirmed by 

the Hon’ble Supreme Court. However, by the impugned order, the Delhi Commission 

assumed that the allowance of carrying cost has resulted in the amounts now allowed 

(FY 2008-09) was available for financing in FY 2002 to 2007 to which this amount 

pertain. Consequently, the Delhi Commission has reopened and revised the approved 

and committed means of financing right from inception, i.e. from FY 2002-03 onwards. 

It is not disputed by the Delhi Commission that through the letter dated 

14 th February, 2008, the Appellant had specifically opposed retrospective reopening 

of the approved and committed financing. As a matter of fact, the Appellant has 

quoted the Hon’ble Supreme Court judgment that the financing should not be re-stated 

on the reason that the carrying cost is being allowed for past periods. However, the 

Delhi Commission allowed the carrying cost @ 9 per cent p.a. on the equity portion 

now being retrospectively replaced by additional depreciation, thereby the Delhi 

Commission has reduced the Return on Equity based on its own approved financing 

plans to 9 per cent from 16 per cent per annum. 

48. The State Commission’s contention that it has followed the principle of allowing 

carrying cost at 9 per cent p.a. on additional depreciation and accordingly re-casted 

the means of financing and the same was based on the proposal of two other 

distribution companies BSES Rajdhani Power Limited and BSES Yamuna Power 

Limited is not tenable. Merely because two out of the 3 distribution companies 

sought recasting of means of finance in lieu of 9 per cent carrying cost, the State 

Commission cannot automatically adjust the same for being applicable to the 

Appellant also. Any action relating to the Appellant needs to be based only on 

sound financial principle which should be just and equitable to all. 

5 Ed.: North Delhi Power Ltd. v. Delhi Electricity Regulatory Commission, through its Secretary and 

Ors. MANU/ET/0022/2007 

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49. As a matter of fact, the Appellant suggested to the Delhi Commission that instead 

of recasting the already approved and financed structure retrospectively, the additional 

depreciation allowed for pursuant to the Tribunal’s Order be utilised for financing 

prospective capital expenditure or reduce the loan outstanding as on 1 st April, 2007. 

According to the State Commission, if the means of financing was not retrospectively 

amended, then it would result in unlawful gain of Rs. 257 crore whereas, the 

distribution company is entitled only to 16 per cent return on Equity and free reserve 

deployed in fixed assets. 

50. The Appellant in the grounds of Appeal has suggested that in view of the fact 

that the State Commission has allowed the carrying cost of 9 per cent, it must then 

replace or substitute only that source of financing in the approved and committed 

financing plans whose cost is up to 9 per cent, i.e. loan funds. 

51. We notice from the impugned order that the State Commission had a practice of 

prescribing the priority order for means of finance in the previous orders which 

was - (a) consumer contribution, (b) APDRP Grant/Loan, (c) Unutilised Depreciation 

including available unutilised depreciation of the previous year, (d) Balance Funds 

requirement assumed to be met through a mix of debt and equity by applying a 

normative debt equity ratio of 70:30. For utilisation of depreciation also the priority 

was - (a) Loan repayment, (b) Working capital requirement and (c) Capital Investment. 

52. With the granting of additional amount of depreciation with carrying cost, the 

unutilised depreciation available for capital investment for the past years will also 

change and so will be requirement of balance funds to be met from debt and equity. 

With the approval of additional depreciation amount granted with the carrying 

cost, the State Commission has correctly trued up the finances of the FY 2003 to 

FY 2007. We do not find any infirmity in the Order of the State Commission except 

that if the Appellant had to arrange debt at interest rate higher than 9 per cent, i.e. 

interest rate of carrying cost allowed, during the period in question then the Appellant 

may be compensated for the difference in interest rate in the carrying cost for that 

period. This issue is answered accordingly. 

53. The next issue is relating to the inappropriateness of the MYT Regulations with 

respect to the allowance of establishment cost. According to the Appellant, despite 

providing detailed justification for projections and estimations for each element of 

employees cost, which are based on ground realities and actual data, the State 

Commission ignored the same and merely observed that it has determined the 

employees expenses of the Appellant for the Control Period using the methodology 

outlined in MYT Regulations, 2007. It is strenuously contended by the Appellant 

that the employees expenses ought to have been allowed on the basis of the detailed 

estimations provided in the appeal rather than adjusting solely for inflation factor. 

54. In reply to this contention, the Delhi Commission has stated that the Commission 

has approved the establishment expenses based on the methodology described in 

the MYT Regulations, 2007 and those Regulations cannot be the subject matter of 

challenge in the appeal before this Tribunal. The relevant finding of the State 

Commission on this issue is as follows: 

4.115 During the privatisation process, part of the employees of the erstwhile 

DVB were transferred to NDPL. As per the Transfer Scheme, the terms and 

conditions of service applicable to the erstwhile Board employees in the 

Transferee Company shall in no way be less favourable than or inferior to that 

applicable to them immediately before the Transfer. Further, their services shall 

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be continued to be governed by various rules and laws applicable to them 

prior to privatisation. Thus, the salary/compensation and promotion of the 

erstwhile DVB employees in NDPL are still governed by the rules and pay 

scales as specified by the GoNCTD, 

4.119 Based on this, the Commission has calculated the revised employee costs 

for FY-06 and FY-07 (by adjusting the likely effect of the recommendations of the 

6th Pay Commission) only on the employee expenses of the erstwhile DVB 

employees and the arrears arising out of it. Since the arrears on account of revision 

of employee expenses are expected to be paid only in FY09, the Commission has 

considered the payment of arrears in the employees expenses of FY 09. 

55. The Appellant in its MYT petition pointed out that allowance of year to year 

increase in establishment cost based in inflation factor is totally inadequate and 

increase in salaries cannot be merely pegged to annual inflation indices as factors 

such as demand/supply of specific skilled manpower, growth in economy, 

industry/market expectations etc. play an important role in determining the average 

increase in salary. It is also contended by the Appellant that MYT Regulations with 

regard to indexation of salaries to Consumer Price Index and Whole-sale Price Index 

was not realistic and hence should not be adhered to while projecting yearly estimates 

for the Control Period of four years. 

56. The learned Counsel for the Appellant has cited the judgment of this Tribunal 

dated 23 rd May, 2007 reported as 2007 ELR (APTEL) 193 in which it is held that the 

Commission has to give reasons for not accepting the estimation of the utility. It is 

noticed that the Appellant submitted that as per MYT Regulations, i.e. Regulation 13.3 

and Regulation 13.4, the State Commission has the power to remove the difficulties 

and to relax the provisions of the Regulations. However, the Delhi Commission has 

chosen to ignore the same and instead of responding on the merits, it has taken 

shelter under the plea that the MYT Regulations are binding. In this context, we have 

to refer to the relevant observations made by this Tribunal in the decision 2009 ELR 

(APTEL) 880. The relevant observations in para 31 of the judgment are as follows: 

(31)... The MYT Regulations are binding on the Commission as well as on the 

Appellant. What the Commission has done is within the scope of the MYT 

Regulations. The Appellant can have grievance only if the target set by the 

Commission were not within the parameters of the MYT Regulations. 

57. Further, because new initiatives proposed to be undertaken by the Appellant, 

the Tribunal has made the following observations in the said judgment: 

(100) The Appellant further alleged that it has to incur additional responsibilities 

on account of power purchase obligations, new consumer initiatives and 

increased consumer base. The Commission explains that these issues were 

not raised in the MYT petition and therefore not a part of the impugned order. 

The Commission mentions the grievances of the consumers ventilated during 

the public hearing before the impugned order was passed. The Commission 

contends that the Appellant would be free to take any new initiative during 

the MYT period provided the Appellant is justified in new initiatives by the 

cost benefit analysis. We do not have to say anything more on this aspect. 

58. In the light of this, the Appellant’s contention that the Commission has not 

provided any reasoning for departing from its past practice cannot be accepted 

since the departing from the past practice is manifestly clear in view of the continuation 

of the MYT Regulations which govern the Control Period, i.e. MYT period. 

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59. Further, the true-up order dated May 2009 reflects that new initiatives have been 

permitted on a cost benefit analysis. Therefore, we are unable to accept the contention 

of the Appellant. Accordingly, this point is answered as against the Appellant. 

60. The last issue is erroneous computation of efficiency factor. According to the 

Appellant, the State Commission, while fixing the Appellant’s Operation & 

Maintenance cost, has not taken into account the important factors such as increase 

in number of consumers (approximately 8 per cent), number of units handled 

(approximately 6 per cent), stringent performance standards, etc. which have a direct 

impact on the cost to be incurred. It is also submitted that the Appellant cannot be 

compared with those of other utilities giving the valuation Delhi Distribution Company 

business, based on capacity to pay principal and that the Appellant has already 

taken steps such as Voluntary Retirement Scheme, wherein it has reduced 

establishment cost and the benefit has been passed on to the consumers. 

61. On the other hand, it has been submitted by the State Commission that the State 

Commission has not made any error while computing the efficiency facture and in 

fact, it has strictly adhered to MYT Regulations 5.2, 5.3 and 5.4 and the Appellant 

had not proposed any efficiency factors in its MYT Petition. Let us refer to the 

relevant extract of the impugned order on this issue. 

4.155 The Commission is of the view that O&M expenses trajectory for the 

Control period shall be decided considering on expected annual efficiency 

improvement factor. The Commission has observed that the O&M cost of NDPL 

is on the higher side as compared to similar urban distribution companies in 

other states, thus, representing the inefficiencies in the system. 

4.158 The summary of total O&M Expenses approved by the Commission for 

the Control Period is provided in the table below: 

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Table 89: Approved O & M Expenses for the Control Period (Rs. Cr.) 

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Particulars FY-08 FY-09 FY-10 FY-11 

Exployee Expenses 131.14 153.54 147.52 152.52 

R&M Expenses 57.48 72.15 83.45 89.80 

A&G Expenses 30.92 32.21 33.5 34.94 

Total O&M Expenses 219.55 257.91 264.51 277.26 

Efficiency Improvement 0% 2% 3% 4% 

Net O&M Expenses 219.55 252.75 256.57 266.17 

Net O&M Expenses – Wheeling 132.79 153.53 154.65 160.38 

Net O&M Expenses – Retail Supply 86.76 99.22 101.92 105.79 

62. As pointed out by the learned Senior Counsel for the Commission, the Appellant 

had not proposed any efficiency factor in its MYT Petition in accordance with MYT 

Regulations. The Commission after hearing the arguments of the Appellant on the 

above issue passed an order dated 26 th October, 2007 giving the following directions 

to the Appellant: 

(a) All the calculations regarding AT&C loss level, O&M Expenses, RoCE, etc. 

shall be worked out in accordance with the provisions given in the MYT 

Regulations, 2007. 


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Based on above directions, the Appellant submitted the information and explanation 

for increased O&M expenses but, did not propose any efficiency factor. 

63. As the Commission did not have any response from the Appellant on determination 

of the efficiency factor, it compared Appellant’s expenses with the other utilities with 

reference to the O&M expenses. The directions regarding efficiency factor have been 

given by the Commission aimed at better efficiency and best utilization of the resources. 

64. Since O&M expenses of the Appellant were compared with the similar urban 

distribution companies in other States, the Commission found the expenses of the 

Appellant were on the higher side and therefore, MYT Regulations were framed to 

bring the requisite efficiency in the system. According to the Commission, the 

Commission is of the opinion that O &M expenses trajectory for the Control Period 

shall be decided on the basis of annual efficiency improvement factor and as such 

O&M cost of the Appellant is on the higher side. The relevant observations made by 

the Commission in the impugned order are as follows: 

Efficiency Factor 

4.155. The Commission is of the view that O&M expenses trajectory for the 

Control Period shall be decided considering an expected annual efficiency 

improvement factor. The Commission has observed that the O&M cost of NDPL 

is on the higher side as compared to similar urban distribution companies in 

other states, thus, representing the inefficiencies in the system. The summary 

of the relative comparison of O&M cost of NDPL with respect of other utilities 

is shown below. 

4.156 Thus, in consideration of the above, the Commission is of the view that 

Petitioner should try to bring efficiency into the system, thereby, reducing the 

burden of inefficiencies on to the consumers of Delhi. The Commission also 

direct the Petitioner carry out a proper cost benefit analysis before taking up 

any new initiatives and submit the same for the approval to the Commission. 

4.157 The Commission expects the Petitioner to improve its performance considering 

the repetitive nature of O&M works and introduction of new technologies. Hence, 

the Commission has determined the efficiency improvement factor as 2 per cent, 

3 per cent and 4 per cent for FY-09, FY-10 and FY-11, respectively. 

65. In view of the above reasonings, the State Commission was constrained from 

allowing them to continue to operate in such a manner and pass on the higher costs 

to the consumers. The increase in the O&M cost is supplemented by the increase in 

the efficiency level and cost of saving/cost of reductions/other economies being 

available to the Appellant. Therefore, there is no merit in this contention raised by 


66. The learned Counsel for the Appellant has relied on the findings of the Tribunal 

in its judgment dated 29 th September, 2010 in Appeal No. 28 of 2008 in the matter of 

Delhi Transco Ltd. v. DERC and Ors. 6 wherein, in Paragraph 25 of the judgment the 

Tribunal set aside the Order of the State Commission in respect of efficiency factor 

for Delhi Transco decided by the State Commission on ad-hoc basis without any 

benchmarking or any analysis and identification of area of efficiency. However, in 

the present case the State Commission has compared the O&M expenses of the 

Appellant with other utilities and given a reasoned Order. Thus, the findings of the 

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Tribunal in Appeal No. 28 of 2008 will not apply to the present case. Accordingly, 

this issue is answered as against the Appellant. 


67. (i) The first issue is relating to the sale of electricity classified as “Controllable 

Factor”. The State Commission has to act in accordance with the MYT Regulations 

in determination of Tariff. On perusal of the relevant MYT Regulations, it is evident 

that supply margin is a function of sale and the sale has been specified as an 

“Uncontrollable” parameter. The Appellant cannot be dis-incentivised for the lower 

sales on account of sale of power when no incentive is provided for reduction in 

the net Power Purchase Cost, charged to the consumers. Under Section 43 of 

the Electricity Act, 2003, the Appellant is under universal supply obligation. 

On 21 st October, 2009, the State Commission issued directions to the Distribution 

Companies to maintain uninterrupted power supply and to ensure that the electricity 

that could not be served shall not exceed 1 per cent of the total energy supplied in 

units in any particular month. Therefore, the finding of the State Commission on 

this issue besides being contrary to the Regulations, is also not keeping in view 

the reality since it does not take into account the demand and availability situation, 

operation of under frequency relays, etc. and the implication of Section 43 of the 

Electricity Act, 2003. In fact, Regulation 4.16 provides that for any uncontrollable 

cost the truing up shall be done annually while for controlled cost the truing up 

shall be done only at the end of the Control Period which is also limited to only 

depreciation and return on capital employed. This Regulation has not been taken 

note of by the State Commission. Therefore, the finding on this issue rendered by 

the State Commission is set aside. 

(ii) The next issue is relating to the incorrect determination of inflation factor contrary 

to the MYT Regulations leading to the denial of employees and Administrative and 

General expenses. On behalf of the State Commission, it was submitted that Consumer 

Price Index and Whole-sale Price Index for the year 2006-07 were not considered as 

the official numbers for FY-2006-07 were not available till the impugned order was 

passed. This submission cannot be accepted. The Consumer Price Index and the 

Whole-sale Price Index numbers are declared by the Government on a weekly basis. 

They are available on the official website of the Government. The State Commission 

did not think it fit to use the data available for immediately preceding five years in 

the indexation of inflation for the FY 2007-08, which is contrary to the Regulation 5.4. 

However, we are not convinced that the inflation factor for each year of the control 

period has to be determined on rolling basis of the reason given in Paragraph 22 

above. Therefore, the State Commission is directed to re-compute the inflation factor 

and consequently the O&M expenses for each year of the control period in accordance 

with Regulation 5.4 and to allow for the expenses for the Control Period after including 

the Consumer Price Index/Whole-sale Price Index during the FY 2006-07 along 

with the carrying cost. 

(iii) The next issue is with reference to the erroneous computation of advance against 

depreciation. On this issue, on behalf of the State Commission it has been submitted 

that in arriving at the figure of Advance Against Depreciation, the Delhi State 

Commission has worked out in strict adherence to the MYT Regulations, 2007. 

As per Clause 5.18 of Regulations, the distribution licensee shall be entitled to advance 

against depreciation in addition to allowable depreciation. Accordingly, the State 

Commission considered both opening balance sheet and the entries relating to the 

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equity capital secured loans and the security deposits. It is noticed that the Appellant 

has claimed to accept the liability of Rs. 10 crore as per opening balance sheet and 

not the entire amount of security deposits. Hence, the Delhi Commission has correctly 

considered only the total depreciation figure approved and considered during the 

Control Period. This finding is correct and the same is confirmed. 

(iv) The next issue is with reference to the lower interest rate allowed on notional 

loans. The rate of 8.5 per cent considered by the Delhi Commission was based on 

the loan taken by the Appellant in the FY 2004-05. The interest rates have subsequently 

increased which is evident from the moment in the Prime Lending Rate fixed by the 

State Bank of India. As such, the Delhi Commission has not considered the cost of 

re-financed Delhi Power Company Loan for allowing interest on notional loan. The 

Delhi Commission has also ignored the fact that the capital interest rate is to be 

applied for the period 2006-07. Therefore, the Delhi Commission is directed to allow 

the interest on notional loan for a particular year based on the market related interest 

rate prevailing in that year. The said claim has to be considered by the State 

Commission along with the carrying cost. 

(v) The next issue is relating to the lower interest rate allowed for new loans/ 

Working Capital Loans during the MYT period. The Delhi Commission, though has 

stipulated interest rate @ 9.5 per cent p.a. for all loans, has stated in the impugned 

order that it may true-up the interest rate for new loans to be taken for capital 

investment and for working capital requirement, if there is a deviation in the prime 

lending rate of the scheduled commercial banks by more than 1 per cent on either 

side. It is also pointed out by the State Commission that the issue is already covered 

by the judgment of this Tribunal dated 6 th October, 2009 in Appeal No. 36 of 2008. 

Therefore, the Delhi Commission may consider the issue relating to the interest rate 

for new loans in the true-up exercise. Accordingly, this issue is answered in line 

with the observations made by the Delhi Commission. 

(vi) The next issue is with reference to the equity component for margin on working 

capital requirement. The State Commission has considered the entire Working Capital 

requirement by way of loan contrary to the norms of debt and equity ratio of 70:30. 

The State Commission relies on Regulation 5.10 but, this Regulation would not 

support the contention of the State Commission. The MYT Regulations stipulate 

that Weighted Average cost of capital, as computed in the Regulation 5.10, needs to 

be applied on Regulated Rate Base which includes the working capital. This apart, 

Regulation 5.8 and Regulation 5.9 provide for the formula for calculating the regulated 

rate base for a particular year and for computing the return on capital employed by 

multiplying the weighted average cost of capital with regulated rate base. Under 

those Circumstances, the Delhi Commission is directed to re-compute the weighted 

average cost of capital for each year of the Control Period, along with the carrying cost. 

(vii) The next issue is with reference to the retrospective revision of means of finance 

for the past years. According to the State Commission, if means of financing was 

retrospectively amended then it would result in unlawful gain of Rs. 257 crore 

whereas the Distribution Company is entitled to only 16 per cent return on equity 

and a free reserve deployed in fixed assets. The Appellant in the grounds of appeal 

has suggested that in view of allowance of the carrying cost of 9 per cent on the 

additional amount of depreciation allowed, the State Commission may replace or 

substitute only that source of financing in the approved financing plans whose cost 

is up to 9 per cent, i.e. loan funds. We notice that the State Commission has trued 

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Maharashtra State Elec. Distribution Co. Ltd. v. Maharashtra Elec. Regu. Comm.and Ors. 

(M. Karpaga Vinayagam, J. (Chairperson) and V.J. Talawar, Member (Technical)) 

up the financials for the period from FY-03 to FY-07 taking into account the additional 

amount of depreciation and the carrying cost allowed. We do not find any infirmity 

in the order of the State Commission except that if the Appellant had to arrange 

debt at interest rate higher than 9 per cent during the period in question then the 

Appellant may be compensated for the difference in interest rate on debt and the 

carrying cost allowed for that period. This issue is answered accordingly. 

(viii) The next issue is relating to inappropriateness of the MYT Regulations with 

respect to allowance of establishment cost. According to the State Commission, it 

has approved the Establishment Expenses based on the methodology described in 

the MYT Regulations, 2007. According to the Appellant, Regulation 13.4 provides 

that the State Commission has got the power to relax the provisions of those MYT 

Regulations. This contention of the Appellant cannot be accepted since there is no 

valid reasons for departing from the past practice, in view of the continuation of the 

MYT Regulations which govern the Control Period. Therefore, the finding on this 

issue rendered by the State Commission is correct. 

(ix) The last issue is erroneous computation of the Efficiency Factor. Admittedly, the 

Appellant had not proposed any Efficiency Factor in its MYT Petition in accordance 

with the MYT Regulations. The State Commission has compared the O&M expenses 

of the Appellant with similar urban distribution companies in other states and 

found the expenses of the Appellant on higher side. Accordingly, the State 

Commission has decided to introduce efficiency factor of 2 per cent, 3 per cent and 

4 per cent for FY 2009, FY 2010 and FY 2011, respectively. Therefore, we do not find 

any merit in the contention raised by the Appellant. Therefore, the State Commission 

finding on this issue is justified. 

68. In view of our findings, referred to above, the Appeal is partly allowed, only to 

the extent as indicated above. Consequently, the State Commission is directed to 

implement the findings rendered by us on various issues mentioned in the above 

paragraphs, as expeditiously as possible. 

69. With these observations, this Appeal is disposed of. However, there is no order 

as to costs. 

0967 

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2011 ELR (APTEL) 0967* 



Maharashtra State Electricity Distribution Company Ltd. 

v. 

Maharashtra Electricity Regulatory Commission and Ors. 

IA NO. 93 OF 2011 IN DFR NO. 372/2011 

DECIDED ON: 31.05.2011 

Coram 

M. Karpaga Vinayagam, J. (Chairperson) and V.J. Talawar, Member (Technical) 

* MANU/ET/0094/2011 


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Whether an application to condoned the delay of 1,329 days was maintainable? 

Held, on perusal of the affidavit praying for the condonation of long delay, there 

was no sufficient cause shown to condone the huge delay of 1,329 days in filing the 

Application. The impugned order was passed as early as on 18 th May, 2007. There 

is no diligence on the part of the Applicant/Appellant to approach the Commission 

to ensure that separate process is undertaken by the Commission by producing the 

relevant materials. There is no sufficient cause shown by the Applicant/Appellant 

to condone the enormous and abnormal delay of 1,329 days which has not been 

satisfactorily explained. Therefore, this Petition is dismissed. 

Petition dismissed 

Counsel 

For Appellant/Petitioner/Plaintiff: Ramji Srinivasan, Sr. Adv., Vikas Singh, Sr. Adv., 

Samir Malik and Abhishek Mitra, Advs. 

For Respondents/Defendant: Buddy A. Ranganadhan and Rakshpal Abrol, Advs. 

ORDER 

M. Karpaga Vinayagam, J. (Chairperson) and V.J. Talawar, Member (Technical) 

1. This is an application to condone the delay of 1,329 days in filing the Application. 

2. We have heard the learned Senior Counsel appearing for the Appellant/Applicant 

as well as the learned Counsel for the Commission and the other Respondents. 

3. According to the Applicant/Appellant, while passing the impugned Multi Year 

Tariff order the State Commission observed that it would undertake to conduct a 

study to determine the norm for allowance of Operation and Maintenance Expenses, 

pending which, it would determine the same on the basis of ad hoc arrangement 

and in the light of the above observations. 

4. The Applicant/Appellant was under a reasonable expectation that the State 

Commission would initiate the requisite programme/study to determine the norm 

for allowance of O&M Expenses and since the State Commission did not take any 

step for initiating a study to be conducted for a long time the Applicant/Appellant 

has not filed this Application challenging the Multi Year Tariff Order and that was 

how the delay caused. 

5. This Application is stoutly opposed by both the learned Counsel for the 

Commission (R1) as well as the seventh Respondent namely, Bharatiya Udhami 

Avam Upbhokta Sangh. 

6. We have carefully considered the submission made by the learned Counsel for 

the parties. 

7. On perusal of the Affidavit praying for the condonation of long delay, we feel 

that there is no sufficient cause shown to condone the huge delay of 1,329 days in 

filing the Application. 

8. The impugned order was passed as early as on 18 th May, 2007. It is now brought 

to the notice by the learned Counsel for the State Commission that subsequent to the 

impugned order, the Annual Performance Review orders had been passed in respect 

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Oil and Natural Gas Corporation Ltd. v. Gujarat Electricity Regulatory Commission 


of the three following years and the said order is being challenged in the different 

Appeals pending before this Tribunal. 

9. According to the Lt. Senior Counsel for the Applicant/Appellant, under a 

reasonable expectation that the State Commission would initiate the requisite 

programme, they waited and hence there was delay. We are unable to accept this 

explanation as admittedly no steps were taken by the Appellant/Applicant to produce 

the materials before the Commission requesting for undertaking a thorough study 

for the operation and maintenance expenses based on the past performance and the 

cost drivers of the same. 

10. Therefore, it is evident that there is no diligence on the part of the Applicant/ 

Appellant to approach the Commission to ensure that separate process is undertaken 

by the Commission by producing the relevant materials. 

11. The learned Counsel for the State Commission submitted that it is not fair on the 

part of the Appellant/Applicant to approach to this Tribunal after a long and 

abnormal delay to challenge the Multi Year Tariff Order dated 18 th May, 2007 without 

approaching the Commission in time by producing the relevant material to enable 

the Commission to initiate the requisite said programme. We find sufficient force in 

this objection. 

12. Hence, we feel that there is no sufficient cause shown by the Applicant/Appellant 

to condone the enormous and abnormal delay of 1,329 days which has not been 

satisfactorily explained. 

13. Therefore, this Petition is dismissed. However, there is no order as to costs. 

0969 

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2011 ELR (APTEL) 0969* 



Oil and Natural Gas Corporation Ltd. (ONGC), Ahmedabad 

v. 

Gujarat Electricity Regulatory Commission, Ahmedabad 


DECIDED ON: 08.03.2011 

Coram 




Whether there was any provision for restriction up to two locations per Wind Energy 

Generator in State Government Wind Policy 2007 and on this ground GECTO (R-2) 

delayed entering into wheeling agreement with ONGC? 

Held, specific restriction of up to two captive locations per Wind Energy Generator 

as provided in 2002 Policy was dropped in 2007 Policy of State Government. In fact, 

* MANU/ET/0070/2011 


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the words “up to two locations” in 2002 Policy were replaced by word “locations” 

in 2007 Policy. The change cannot be assumed to have occurred inadvertently. There 

was no restriction on number of captive locations per Wind Energy Generator in 

Government of Gujarat’s Wind Power Policy 2007. GETCO (R-2) had delayed the 

signing of wheeling agreement to wheel power from Appellant’s Wind Energy 

Generators to desired locations. 

Whether all 34 Wind Energy Generators of ONGC were commissioned and connected 

to grid prior to 7 th January, 2009? 

Held, from commissioning certificates issued by GEDA and assertion of GETCO 

(R-2), it is clear that the Wind Energy Generators were in fact commissioned and 

connected to grid prior to 7 th January, 2009. The State Commission ought to have 

ascertained these facts regarding commissioning and grid connectivity from full 

dump of memory contents of energy meters installed at Wind Energy Generator site. 

However, this was admittedly not done. Under these circumstances, all Wind Energy 

Generators were commissioned and connected to grid prior to 7 th January, 2009 and 

then same should have been dealt with accordingly. 

Whether ONGC could raise the issue of wheeling charges when it had agreed to pay 

the same as per provisions of amended policy? 

Held, in view of intentional delay by GETCO to wheeling agreement, Appellant has 

right to raise the issue despite his conditional acceptance vide letter dated 

12 th March, 2009. 

Whether State Commission was right in holding that issue cannot be raised on the 

ground that commissioning of 24 Wind Energy Generators were not brought to its 

notice during proceedings and Appellant had agreed to be covered by amended policy? 

Held, GETCO (R-2) had not allowed ONGC, the Appellant wrongly to wheel power 

from its Wind Energy generators to more than two captive location despite the 

clarification issued by Government of Gujarat in this regard. Hence, GETCO (R-2) 

cannot be allowed to take advantage of its own wrong. The State Commission should 

have decided the case on its own merits and not on the basis of observations made 

above and ought to have ascertained the fact about commissioning of Wind Energy 

Generators from full dump of meters provided at Wind Energy Generators and 

passed the order accordingly. 

Whether Government of Gujarat’s amendment to 2007 Policy date 7 th January, 2009 

fixing wheeling charges for captive Wind Energy Generators was legally tenable in 

terms of Electricity Act, 2003. 

Held, after enactment of Electricity Act, 2003, State Commission is sole Authority to 

specify wheeling charges. Government of Gujarat had no power to change the wheeling 

charges specified by State Commission vide its Order No. 2 of 2006 dated 10 th August, 2006. 

Enhancement of wheeling charges in amendment to 2007 Policy vide Government 

Resolution dated 7 th January, 2009 is void abnitio. 


Authority referred to 

Broom’s Legal Maxims, 10 th Edition [p. 0982, para 51.5 d] 

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K.C. Deo Bhanj v. Raghunath Misra MANU/SC/0153/1959: AIR 1959 SC 586: (1959) 

Supp (2) SCR 71 (Discussed) [p. 0979, para 26 a] 

Union of India v. Major General Madan Lal Yadav MANU/SC/0355/1996: (1996) 4 

SCC 127: AIR 1996 SC 1340: 1996 (1) ALD (Cri) 270: 1996 (3) SCALE 72: (1996) 3 

SCR 785 (Discussed) [p. 0982, para 1 e] 






Counsel 

For Appellant/Petitioner/Plaintiff: P.B. Suresh and Vipin Nair, Advs. 

For Respondent(s)/Defendant: M.G. Ramachandran, Adv. for R 2 and Sneha 

Venkatramni, Adv. for R 2 

JUDGMENT 


1. Oil and Natural Gas Corporation (ONGC) is the Appellant. 

2. Gujarat Electricity Regulatory Commission (State Commission) is the first Respondent 

Gujarat Electricity Transmission Corporation (GECTO) is the second Respondent. 

Third, Fourth and Fifth Respondents are distribution licensees in the State of Gujarat. 

3. Aggrieved by the impugned order of State Commission dated 23 rd September, 2009 

in respect of wheeling charges for wheeling power from Captive Wind Energy 

Generators setup by the Appellant in the State of Gujarat through Transmission 

system of GECTO (R-2) to various locations for its own use, ONGC, the Appellant 

has filed this Appeal. 

4. Material facts of this case are given below. 

5. State Commission (R-1) notified Regulations for Procurement of Power from 

Renewable Sources on 29 th September, 2005. Government of Gujarat (State Government) 

issued Wind Power Policy, 2007 on 13 th June, 2007 to encourage generation of electricity 

from Renewable Sources of Energy in the State. State Commission issued Tariff 

Order for wind energy on 11 th August, 2006. 

6. Appellant (ONGC) decided to setup 34 Wind Energy Generators each of 1,500 kW 

in Kutch district of Gujarat for captive use at various locations in Gujarat in terms 

of State Commission’s Regulations and State Government’s Policy 2007. Three Wind 

Energy Generators were commissioned on 31 st March, 2008. The wheeling agreement 

was signed between ONGC (Appellant) and GECTO (R-2) on 27 th May, 2008. Another 

set of seven Wind Energy Generators were commissioned on 31 st May, 2008. However, 

GECTO (R-2) did not allow wheeling of energy to Appellant’s various facilities 

(at more than two captive locations). 

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7. Hence, the Appellant approached State Commission (R-1) vide Petition No. 954 

of 2008 filed on 10 th September, 2008 with the following prayers: 

(i) Seeking permission for wheeling of energy provided by 31 Nos. of Wind 

Energy Generators installed in Kutch District. 

(ii) Seeking permission to sign wheeling agreements with GECTO (R-2)/DISCOMS 

concerned for wheeling of power from these Wind Energy Generators to the 

places of consumption 

(iii) For payment of surplus energy at the rate of Rs 3.37 per unit determined in 

the Tariff order dated 11 th August, 2006. 

8. While the said petition was pending, remaining 24 Wind Energy Generators 

were also commissioned on 29 th September, 2008. On 20 th December, 2008 GECTO 

(R-2) entered in to wheeling agreement for wheeling of power from 7 Wind Energy 

Generators commissioned earlier on 31 st May, 2008. GECTO (R-2), however, refused 

to enter in to wheeling agreement for balance 24 Wind Energy Generators 

commissioned on 29 th September, 2008 on the ground that as per State Government 

Wind Power Policy, 2007, wheeling of power is restricted to two captive locations 

per Wind Energy Generator and that ONGC would wheel power from these 24 Wind 

Energy Generators to more than two locations, which is not permitted under State 

Government Policy, 2007. 

9. The State Government amended its 2007 Policy which provided for Wheeling of 

power from a Wind Energy Generator to more than two locations of consumption 

subject to certain conditions. This amendment to 2007 Policy came in to effect from 

date of notification i.e. 7 th January, 2009. 

10. GECTO (R-2) informed ONGC, the Appellant on 5 th March, 2009 that wheeling 

agreement between GECTO (R-2) and ONGC could be signed in accordance with the 

amendment to State Government policy 2007 vide notification dated 7 th January, 2009. 

ONGC replied to the above letter on 12 th March, 2009 stating that since State 

Government issued an amendment in the wind power policy 2007 on 7 th January, 2009, 

they had no objection in revising the agreement as advised by the GECTO (R-2) vide 

its letter dated 5 th March, 2009. ONGC, the Appellant, however, added in their letter 

that it might be ensured that this comes in to effect from the date of notification i.e. 

7 th January, 2009. The date of commissioning of their Wind Energy Generators being 

much earlier, ONGC requested that applicability of the wheeling charges and levy 

of 5 paise per unit may be incorporated in the agreements from the date of notification 

of Amendment to 2007 policy. ONGC further added that matter was already pending 

before State Commission and its decision shall be final. 

11. State Commission issued Tariff order on 17 th January, 2009 on GECTO’s (R-2) 

ARR petition for FY 2009-10 fixing transmission charges at Rs. 2,410/MW/day. 

Accordingly, GECTO (R-2) started recovery of transmission charges from all Wind 

Energy Generators wheeling power through GECTO (R-2) network. 

12. Thereupon State Commission passed Order in ONGC’s Petition No. 954 of 2008 

on 6 th May, 2009. In the said order, State Commission observed that it is in the 

process of reviewing its existing regulations and order on renewable energy and as 

a part of this process, the State Commission would take a view separately, on the 

amendments to the wind power policy announced by State Government in 

January 2009. The State Commission in this order, directed GECTO (R-2) to immediately 

allow ONGC, the Appellant to wheel power to all the locations as proposed by 

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ONGC with a condition that ONGC will pay transmission and wheeling charges 

and excess power purchase as per amendment to Wind Power Policy, 2007 dated 

7 th January, 2009. 

13. The said order also directed both parties (ONGC and GECTO) to enter into a 

wheeling agreement with a provision that the Transmission charges for wheeling of 

power and payment for surplus energy in respect of Wind Energy Generators connected 

to grid prior to 7 th January, 2009 should be in accordance with the prevailing 

regulations/orders of the Commission and for others, the transmission charges for 

wheeling power and payment of surplus energy will be as per the arrangement 

agreed to by both parties, i.e. GECTO (R-2) and ONGC, the Appellant. 

14. GECTO (R-2) raised the bill for transmission charges for all the 34 Wind Energy 

Generators in accordance with amendment to State Government Wind Power Policy 

dated 7 th January, 2009. ONGC, the Appellant was of the view that since all his 

Wind Energy Generators have been commissioned and connected to grid prior to 

7 th January, 2009, it should have been charged in accordance with the then prevailing 

regulations/orders i.e. as per State Government Policy 2007 and State Commission’s 

wind energy Tariff Order dated 11 th August, 2006 and not under the amendment to 

State Government Wind Power Policy, 2007 notified on 7 th January, 2009. 

15. Having aggrieved over GECTO’s (R-2) action of raising the bill under the amended 

policy, ONGC filed a Petition No 971 of 2009 before State Commission, praying for 

the compliance of State Commission’s Order dated 6 th May, 2009 to the effect that 

amendment to State Government Wind Power Policy notified on 7 th January, 2009 

should not be made applicable to 24 No. of Wind Energy Generators commissioned 

earlier. 

16. After hearing the parties, State Commission passed impugned order dated 

23 rd September, 2009 in the Petition No. 971/2009. The State Commission in Para 5 

of impugned order has observed that: 

The Petitioner has in Para 3 of the earlier Petition No. 954/2008 Stated that 3 No. 

Wind Energy Generators out of 34 Nos. were commissioned on 31 st March, 2008 

and wheeling agreement had been signed. Seven more No. of Wind Energy 

Generators were commissioned in May 2008 and wheeling agreement was under 

execution. Remaining 24 No. of Wind Energy Generators were ready for 

commissioning in June 2008 had not been connected to the grid in spite of Petitioner’s 

requests. Thus, the Petitioner has accepted that on 9 th September, 2008 when petition 

was filed, only 10 Nos. of the WEGs were commissioned and remaining 24 Nos. 

of WEGs were not connected with the grid. The aforesaid matter was disposed of 

by the Commission on 6 th May, 2008. Till that day, no other fact contrary to the 

above was brought to the notice of the Commission by the Petitioner. Even during 

the proceedings of Petition No. 954/2008 the Petitioner did not submit that 24 Nos. 

of WEGs were commissioned and connected with the grid. 

17. State Commission in Para 5.4 of the impugned order dated 23 rd September, 2009 

has recorded that: 

Para 5.4 Hence, GECTO (R-2) ought to have sent invoice/bill for transmission 

charges as per Wind Power Policy, 2007 and Order No. 2 of 2006 dated 

11 th August, 2006 for 10 Nos. of Wind Energy Generators and not as per Policy 

dated 7 th January, 2009. In case of remaining 24 Nos. of Wind Energy Generators, 

GECTO (R-2) is entitled to raise invoice/bills as per amendment made in the 

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Wind Power Policy, 2007, which was agreed to by the Petitioner during the 

proceedings in Petition No. 954/2008. Both ONGC and GECTO (R-2) are directed 

to implement the Commission’s Order dated 6 th May, 2009 in Petition 

No. 954/2008 accordingly. GECTO (R-2) is directed to withdraw invoices/bills 

issued on 25 th May, 2009 and 18 th June, 2009 and revise the same as per the 

direction given in earlier para of this order. It is clarified that amendments to 

State Government Policy, 2007 notified on 7 th January, 2009 will not be applicable 

to the 10 Nos. of Wind Energy Generators which were commissioned and 

connected to the grid prior to 6 th May, 2009. Through the Amendment to State 

Government Policy, 2007 notified on 7 th January, 2009 is to be applied by 

GECTO (R-2) to the remaining 24 Nos. of Wind Energy Generators as a special 

case. Both Petitioner and Respondents are directed to implement this order 

immediately. 

18. Aggrieved by this order dated 23 rd September, 2009, the Appellant, ONGC has 

filed this present appeal. 

19. Learned Counsel for the Appellant would raise the contentions as follows: 

(i) There was no restriction on number of locations for Wind Energy Generator 

as per the State Government Wind Power Policy, 2007. GECTO (R-2) had delayed 

wheeling agreement without any reason. 

(ii) Appellant’s Wind Energy Generators were commissioned and connected 

to grid much before amendment to State Government Wind Power Policy 2007, 

which came in to force on 7 th January, 2009 

(iii) State Commission in its order dated 6 th May, 2009 had observed that it 

was in the process of reviewing its existing regulations and Order on renewable 

energy and as a part of this process, the State Commission would separately 

take a view on the amendments to the wind power policy announced by State 

Government in January 2009. Thus the earlier order dated 6 th May, 2009 was a 

pro tem order until the State Commission finalised consideration of State 

Government’s amendment dated 7 th January, 2009. Since then, State Commission 

has come out with a number of orders by which it is made clear that for Wind 

Energy Generators commissioned prior to 11 th August, 2009, the unamended 

policy would alone apply and as such there is no basis for increased Tariff 

under the amended policy. 

(iv) It is not open to State Commission to materially amend its earlier order 

dated 6 th May, 2009. In case, the State Commission is of the view that they had 

been misled, they should have examined the matter dispassionately on the 

merits after recalling the earlier order as being based on a misrepresentation. 

(v) The categorical assertion in the operative part of the earlier order is that in 

respect of Wind Energy Generators connected to the Grid prior to January 

2009, the unamended policy would prevail. Admittedly, in this case, 34 Wind 

Energy Generators were connected to the Grid prior to 7 th January, 2009 

(vi) The impugned order itself recognises that for 10 WTGs connected prior to 

7 th January, 2009, the earlier policy is applicable. Therefore, on a parity of reasoning, 

the balance 24 WTGs also should be governed by the earlier policy only. 

20. The learned Counsel for Respondent submitted in reply as follows: 

(i) Appellant had been misinterpreting the order dated 6 th May, 2009, which 

refers to Wind Turbine Generators connected to the Grid prior to 7 th January, 2009 

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in the sense of supply of the electricity to the Grid. The Appellant is confusing 

it with the testing of the units and making it ready for commercial operation. 

(ii) The correct factual position is that unlike the first 10 wind turbine units, 

the 24 wind turbine units were connected to the grid after 7 th January, 2009 for 

wheeling and therefore would be governed by the Wheeling charges as specified 

in the Amended Policy effective from 7 th January, 2009. 

(iii) The reading of the order dated 6 th May, 2009 clearly establishes that the 

Appellant claimed commissioning of 24 units was prior to 7 th January, 2009 

and the Respondent No. 2 objecting to the claim for wheeling of electricity to 

more than two locations. The differing stand taken by both parties had invited 

the decision of the State Commission (by settling the matter) that the connection 

to the grid for wheeling be considered with effect from 4 th March, 2009 and 

that the Appellant would pay wheeling charges for the 24 Wind Turbine units 

as per Amended Policy dated 7 th January, 2009. 

(iv) Appellant had settled the matter with the Respondent No. 2 vide his the 

letter dated 12 th March, 2009, wherein the Appellant dealing specifically with 

the 24 Wind Turbine units in issue Stated clearly that the Appellant agrees to 

the payment of wheeling charges as per Amendment dated 7 th January, 2009. 

The same was reiterated in the Rejoinder filed before the State Commission on 

25 th March, 2009. The order dated 6 th May, 2009 was made pursuant thereto. 

It is not open to the Appellant to take a contrary stand subsequently and claim 

that the wheeling from 24 units shall be governed by the un-amended 2007 policy. 

(v) The Appellant signed wheeling agreements with the Respondent No. 2 for 

wheeling of electricity from the 24 units set up after the Amended Policy of the 

Government of Gujarat dated 7 th January, 2009. Pursuant to and in terms of 

the wheeling Agreements executed, the Appellant was permitted to wheel 

electricity from the place of generation to its different locations. 

21. In view of rival contentions referred to above urged by the learned Counsel for 

parties, following questions would arise for consideration: 

(i) Whether there was any provision for restriction up to two locations per 

Wind Energy Generator in State Government Wind Policy 2007 and on this 

ground GECTO (R-2) delayed entering into wheeling agreement with ONGC? 

(ii) Whether all 34 Wind Energy Generators of ONGC were commissioned and 

connected to grid prior to 7 th January, 2009? 

(iii) Whether ONGC can raise the issue of wheeling charges when it has agreed 

to pay the same as per provisions of amended policy? 

(iv) Whether State Commission was right in holding that issue cannot be raised 

on the ground that commissioning of 24 Wind Energy Generators were not 

brought to its notice during proceedings and Appellant had agreed to be covered 

by amended policy? 

(v) Whether Government of Gujarat’s amendment to 2007 Policy date 

7 th January, 2009 fixing wheeling charges for captive Wind Energy Generators 

is legally tenable in terms of Electricity Act 2003. 

22. We shall now deal with each question one by one. 

23. First question to be decided as to whether there was any restriction in regard to 

number of locations per Wind Energy Generator in State Government Wind Power 

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Policy, 2007. For the purpose of finding out the answer for this, we will have to 

examine the contents of State Government’s Wind Power Policy, 2002 and Wind 

Power Policy 2007. 

24. The Wind Power Policy of the Government of Gujarat, notified in 2002. inter alia, 

provided for wheeling of electricity by Industrial Undertakings for their use as under: 

(3) Eligibility 

...such industrial units may be allowed to wheel power to their own 

manufacturing units (maximum up to two units) within the State at 

wheeling price to be paid by them 


(8) Wheeling of Electricity 

The industrial undertakings setting up wind energy generators while 

opting for wheeling the electricity to their manufacturing units may be 

allowed to do so at a wheeling charge of 4 per cent. 

The Wind Power Policy of 2002 was superseded by notification of the Wind 

Power Policy, 2007 providing for various terms and conditions applicable to 

the generators setting up wind energy projects in the State of Gujarat. 

The Policy of 2007, inter alia, provided as under: 

2. Operative period 

This policy will come into force with effect from 20 th June, 2007 and shall 

remain in operation up to 30 th June, 2012, which will be the operative period 

of the scheme. Wind Turbine Generators (WTGs) installed and commissioned 

during the operative period shall become eligible for the incentives declared 

under this policy, for a period of 20 years from the date of commissioning or 

for the life span of the WTGs, whichever is earlier. 

3. Eligible Unit 

Any company or body corporate or association or body of individuals, 

whether incorporated or not, or artificial judicial person, will be eligible 

for setting up of WTGs, either for captive use and/or selling the energy, in 

accordance with the Electricity Act, 2003, as amended from time to time. 

Explanation: The use of electricity for own consumption at his end use 

location/s by the owner of WTGs shall be considered as captive use. 

5. Wheeling of Electricity 

The wheeling of electricity generated from the WTGs, to the desired 

location/s within the State, shall be allowed at a wheeling charge of 

4 per cent of the energy fed to the grid, as per Gujarat Electricity Regulatory 

Commission (State Commission) order, as amended from time to time. 


25. From perusal of the two policies i.e. 2002 Policy and 2007 Policy, it can be noticed 

that the 2002 policy explicitly provided restriction of two location per Wind Energy 

Generator, where as the 2007 policy did not specifically provide for the number of 

locations to which wheeling shall be allowed. In fact, the use of word location/s in 

explanation to Clause 3 and Clause 5 of the Wind Power Policy 2007 clearly indicate 

that end use could be at more than one location. GETCO (R-2) assumed that in the 

absence of specific provision, earlier provision would continue and thus, did not 

allow ONGC to wheel power to more than two locations per Wind Energy Generator. 

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26. It is well-established principle of law that, when an alteration is made to existing 

provision, the alteration must be considered to have been made deliberately. Hon’ble 

Supreme Court in K.C. Deo Bhanj v. Raghunath Misra 1 AIR 1959 SC 586 observed that 

In the marginal note, however, the word “reduce” was not substituted by the 

word “modify”, apparently through inadvertence. If the word “modify” is to 

be read as “reduce”, then there could be no point in provincial legislature 

substituting the word “reduce” by the word “modify”. This change must have 

been made with some purpose and the purpose could only have been to use 

the expression of wider connotation so to include not only reduction but also 

other kinds of alteration... In our opinion the dropping of the word “reduce” 

and introduction of the word “modify” in the body of Section 60 of the Act 

under consideration clearly indicate an intention on part of legislature to widen 

the scope of this section. 

27. In the present case, specific restriction of up to two captive locations per Wind 

Energy Generator as provided in 2002 Policy was dropped in 2007 Policy of State 

Government. In fact, the words “up to two locations” in 2002 Policy were replaced 

by word “locations” in 2007 Policy. The change cannot be assumed to have occurred 

inadvertently. 

28. Further, through its letter dated 6 th November, 2008 from Deputy Secretary, Energy 

and Petrochemical Department State Government addressed to Managing Director, 

GECTO (R-2) clarified the issue beyond doubt. The relevant portion of said letter is 


With reference to the letter dated 21 st May 2008 from the Vice Chairman, M/s India 

Wind Energy Association, Ahmadabad regarding interpretation of certain 

provisions of Wind Power Policy along with earlier Wind Power Policy, 2002 

for wheeling of wind power to more than two Captive locations. 

In this regard, I am directed to clarify that the wheeling of Wind Power to 

more than two captive locations is allowed under existing Wind Power 

Policy 2007, I am therefore, to request you to kindly take note of this for favour 

of further necessary action at your end accordingly. 


29. The above letter dated 6 th November, 2008 from Deputy Secretary, State Government 

had cleared any doubt in respect of number of captive locations and GECTO (R-2) 

should have entered into wheeling agreement with ONGC without further delay. 

However, GECTO (R-2) further waited till the State Government amended its Wind 

Power Policy 2007 on 7 th January, 2009 wherein, wheeling charges had increased 

substantially. Only then GETCO (R-2) invited Appellant ONGC to enter in to wheeling 

agreement on revised terms and conditions as per amended policy. 

30. From the above discussions, it is to be concluded that there was no restriction 

on number of captive locations in Wind Power Policy, 2007 and GECTO (R-2) had 

therefore, delayed the wheeling agreement to the disadvantage of the Appellant. 

31. Next question for consideration is as to whether Wind Energy Generators of 

ONGC were commissioned and connected to grid prior to 7 th January, 2009? 

32. ONGC, the Appellant in its Petition No. 954 of 2008 dated 10 th September, 2008 

filed before the State Commission, had Stated that three number Wind Energy 

0977 

1 Ed.: MANU/SC/0153/1959: (1959) Supp (2) SCR 71 


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Generators had already been commissioned and connected to grid for wheeling of 

power and Wheeling agreement had been entered into by GETCO (R-2). Seven number 

Wind Energy Generators were also commissioned and connected to grid but GETCO 

(R-2) was not entering in to wheeling agreement with Appellant. 

33. Another set of 24 numbers of Wind Energy Generators were ready for 

commissioning. Hence, Appellant requested State Commission to direct GECTO 

(R-2) to enter into wheeling agreement. ONGC has claimed that 24 Wind Energy 

Generators were also commissioned on 29 th September, 2008 and has put on record 

a certificate from Gujarat Energy Development Agency (GEDA) in support of this 

claim. Certificate from GEDA dated 23 rd October, 2008 clearly shows that 24 Wind 

Energy Generators were commissioned on 29 th September, 2008. These Wind Energy 

Generators had produced power and injected it into GETCO (R-2) grid. The certificate 

mentions that: 

This wind farm is connected by 33 kV grid line to 33/220 kV, 300 MVA capacity 

Moti Sindholi site substation at Moti Sindholi. The Moti Sindholi site substation 

is connected to GECTO (R-2) Nani Khakhar Substation. 

34. GECTO (R-2) on the other hand contested the above and submitted that the 

certificate by GEDA was only for testing purposes and making them ready for 

commercial operation. We have closely examined the copy of certificate issued by 

GEDA. Relevant portion of certificate issued by GEDA dated 23 rd October, 2008 is 


CERTIFICATE OF COMMISSIONING 

This is to certify that M/s Oil and Natural Gas Corporation Ltd. have 

commissioned 36 MW capacity wind farm consisting of 24 (twenty four) numbers 

of new wind turbine generators as per the WTG ID No. and date of 

Commissioning given below.... 

This wind farm is connected by 33 kV grid line to 33/220 kV, 300 MVA capacity 

Moti Sindholi site substation at Moti Sindholi. The Moti Sindholi site substation 

is connected to GETCO Nani Khakher Substation... 

35. The above certificate issued by GEDA cannot be taken as a mere certificate for 

testing and making them ready for commercial operation. In fact the title of certificate 

itself is “Certificate of Commissioning”. This certificate has also given details of 

generation report for the purpose of commissioning of wind farm showing some 

amount of generation by wind farm and fed into the grid. 

36. GETCO (R-2) has in its written submission in Para 8 also accepted that Wind 

Energy Generators were commissioned and connected to grid as indicated below: 

Thus, the wheeling of electricity from the 24 units of the Appellant was 

only commenced after the date of coming into force of the Amended Policy 

of the Government of Gujarat dated 7 th January, 2009. Prior to the Agreement, 

there was no wheeling and the Appellant did not get any adjustment for 

the Energy Units, if any, injected into the grid by the Appellant by reason 

of connectivity to the system. All such units were taken as unscheduled 

injection of Energy into the Grid. Thus, notwithstanding any connectivity 

to the Grid, there was no wheeling and there was no agreement or 

arrangement where under the Appellant could be said to have commenced 

wheeling of electricity. 

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37. Respondent No. 2 has, thus by admitting that prior to the agreement, there was 

no wheeling and Appellant did not get any adjustment for the Energy units, if any, 

injected into the grid by Appellant by reason of connectivity to the system, has 

virtually accepted that the Wind Energy Generators were commissioned and connected 

to grid before signing of wheeling agreement. There is no denial of the fact that 

wheeling would commence only from the date of the wheeling agreement. The real 

Question is as to whether Wind Energy Generators of ONGC were commissioned 

and connected to grid prior to 7 th January, 2009 i.e. the date from which Amendment 

to Government of Gujarat’s Wind Power Policy 2007 came in to effect. 

38. From commissioning certificates issued by GEDA and assertion of GETCO (R-2), 

it is clear that the Wind Energy Generators were in fact commissioned and connected 

to grid prior to 7 th January, 2009. The State Commission ought to have ascertained 

these facts regarding commissioning and grid connectivity from full dump of memory 

contents of energy meters installed at Wind Energy Generator site. However, this 

was admittedly not done. 

39. Under these circumstances, we are of the opinion that all Wind Energy Generators 

were commissioned and connected to grid prior to 7 th January, 2009 and then same 

should have been dealt with accordingly. 

40. Next question under consideration is as to whether ONGC, the Appellant can 

be permitted to withdraw from a stand taken vide its letter dated 12 th March, 2009 

that there was no objection in revising the agreement in terms of amendment to 

2007 Policy and now claim that his Wind Energy Generators were commissioned 

and connected to grid prior to 7 th January, 2009 and therefore it is not liable to be 

subjected to provisions of amendment to Wind Power Policy 2007? 

41. For getting answer to this question it would be proper to refer to the contents of 

ONGC’s letter dated 12 th March, 2009. Letter is reproduced below: 

Please refer your Letter No. GETC0/EE-C/2108 dated 5 th March, 2009 regarding 

subject cited above, since Government of Gujarat has issued an amendment in 

the Wind Power Policy, 2007 on 7 th January, 2009 we have no objection to revise 

the agreement Clause No. 3.2 and 3.6 as advised vide your above referred letter. 

However, this may please be ensured that this comes into effect from the date 

of G.R. (this is w.e.f 7 th January, 2009). The date of commissioning of our WTGs 

being much earlier, it is requested that applicability of the wheeling charges 

and levy of 5 paise per unit under Clauses 3.2 and 3.6 respectively may be 

incorporated in the agreements from the date of notification of amendment to 

policy. 

It is not out of order to mention that the hearing of our petition before Hon’ble 

GERC is scheduled to be held on 17 th March, 2009 and the decision of Hon’ble 

commission shall be final 


42. In the first paragraph of the said letter, the Appellant has Stated that since the 

Policy of 2007 had been amended by Government of Gujarat on 7 th January, 2009, 

they have no objection in revising the relevant agreement clauses accordingly. 

In second paragraph, the Appellant has clearly mentioned that date of commissioning 

of their Wind Energy Generators being much earlier to 7 th January, 2009, applicability 

of amended wheeling charges and other conditions to be incorporated in the agreement 

would be from the date of notification of amendment to the policy. 

0979 


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43. The relevant portion of Government of Gujarat Government Resolution dated 

7 th January 2009 amending Government of Gujarat’s Wind Power Policy 2007 is 


(1) Title 

This Policy Shall be known as Wind Power Policy (First Amendment) 2007 

(2) Amendment of Clause No. 5 - Wheeling of Electricity 

The clause shall be substituted by the following: 

(a) Wheeling of power to consumption site at 66 kV voltage level and 

above: 

The wheeling of electricity generated from the Wind Turbine 

Generators (WTGs) to the desired location(s) within the State, shall 

be allowed on the payment of transmission charges and transmission 

losses otherwise applicable to normal Open Access Customers. 

xxx xxx xxx 

Wind farm owner desiring to wheel electricity to more than two 

locations shall pay 5 paise per unit on energy fed in the grid to 

concerned Distribution Company in whose area, power is consumed 

in addition to abovementioned transmission charges and losses, as 

applicable 

xxx xxx xxx 

This will come in to effect from the date of Government Resolution. 


44. According to the Appellant, the date of abovementioned Government Resolution 

was 7 th January, 2009 and therefore, all Wind Energy Generators commissioned 

prior to that date would be covered under earlier 2007 policy and Wind Energy 

Generators commissioned on or after 7 th January, 2009 would be covered under 

amendment to 2007 Policy. 

45. Let us now examine the chronological events in this context. First set of 3 Wind 

Energy Generators were commissioned and connected to grid on 31 st March, 2008 

and Wheeling agreement was signed on 27 th May, 2008. Another set of 7 Wind 

Energy Generators were commissioned and connected to grid 31 st May, 2008 and 

wheeling agreement was signed on 21 st December, 2008. Balance 24 Wind Energy 

Generators were ready for commissioning during June 2008 but wheeling agreement 

could not be signed due to GETCO’s (R-2) refusal to allow wheeling to more than 

two captive locations. 

46. On 10 th September, 2008 ONGC, the Appellant filed petition before State 

Commission, seeking for the direction to GETCO (R-2) to enter in to wheeling 

agreement. The matter was pending before State Commission for long. In the meantime 

all the 24 Wind Energy Generators were commissioned and connected to grid on 

29 th September, 2008. State Government also issued clarification on 6 th November, 2008 

that there was no restriction on number of locations to wheel wind power. 

On 7 th January, 2009, the State Government issued amendment to Wind Power Policy, 

2007 enhancing wheeling charges substantially. GETCO (R-2) informed ONGC about 

change in 2007 Policy on 5 th March, 2009. 

47. During this period, Appellant’s Wind Energy Generators were commissioned 

injecting wind power in to the grid but could not get desired benefit. Under the said 

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circumstances, Appellant had no option but to accept the offer made by GETCO 

(R-2) for wheeling. While accepting the offer, Appellant was careful enough to add 

that its Wind Energy Generators were commissioned much before the date of said 

Government Resolution and provisions of amendment to 2007 Policy would be 

applicable from date of Government Resolution. In other words, the Appellant had 

Stated that since its units were commissioned much before the date of Government 

Resolution and since the provisions of said Government Resolution are to be applied 

prospectively, it would not have any impact on it. The Appellant further added that 

the matter was pending before State Commission and its decision shall be final. 

Thus Appellant’s acceptance vide said letter dated 12 th March, 2009 cannot be termed 

as absolute acceptance but at the best it can be considered a conditional acceptance. 

48. In view of above, in our opinion Appellant is not estopped from raising the 

issue before the Commission and in this Tribunal. 

49. Next issue for our consideration is as to whether State Commission was right in 

holding that issue cannot be raised on the ground that commissioning of 24 Wind 

Energy Generators were not brought to its notice during proceedings and Appellant 

had agreed to be covered by amended policy? 

50. State Commission’s findings in this regard in the impugned order are as given below: 

(i) During the proceedings, the Petitioner did not submit that 24 number of 

Wind Energy Generators were commissioned and connected to the Grid. The 

Petitioner has, for the first time, come with the evidence in the form of certificate 

issued by GEDA that 24 numbers of Wind Energy Generators were commissioned 

on 29 th September, 2008. This is a new evidence and plea which was never 

brought to the notice of the Commission. There was nothing on record that 

remaining 24 numbers of Wind Energy Generators had also been commissioned 

on 29 th September, 2008. 

(ii) The letter dated 6 th November, 2008 of Deputy Secretary, Energy and 

Petrochemical Department in which it is stated that wheeling of wind power 

to more than two locations is allowed under the existing Wind Power Policy, 

2007, is also new evidence and plea advanced by the Petitioners. 

(iii) Moreover, Petitioner had admitted before the Commission categorically 

and specifically that they are ready to pay transmission and wheeling charges 

as per Amendment made in Wind Power Policy, 2007. 

51. Before proceeding further, we would consider the merits of the observation made 

above. 

51.1 As regards the observation made at (i) above, it is to be noted that Appellant had 

approached State Commission vide Petition No. 954 of 2008 dated 10 th September, 2008 

with a prayer to direct GETCO to enter into wheeling agreement with the Appellant 

for wheeling power from its Wind Energy Generators and the State Commission in 

Para 2.4 of its order dated 6 th May, 2009, has Stated those facts as per petition filed 

by the Appellant, which are given below: 

Para 2.4 Three Wind Energy Generators out of the 34 Nos. installed were 

commissioned on 31 st March, 2008 and wheeling agreement has been signed. 

Seven more Wind Energy Generators were commissioned in May, 2008, wheeling 

agreement for which is under execution. The remaining 24 Nos. of Wind Energy 

Generators which were also commissioned but not connected to the grid in 

spite of Petitioner’s requests. 

0981 


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In Para 7.7 of the said order dated 10 th September, 2008, the State Commission took 

cognizance of Appellant’s letter to GETCO dated 12 th March, 2008 wherein, Appellant 

had Stated that its Wind Energy Generators were commissioned much earlier than 

the date of Government Resolution i.e. 7 th January, 2009. In view of the above, it 

cannot be held that Appellant had not informed the Commission about commissioning 

of 24 Wind Energy Generators during the proceedings in Petition No. 954 of 2008 

and the same had been informed only during proceedings related to the impugned order. 

51.2. As regards, the second observation made by the State Commission, it is to be 

Stated that the letter dated 6 th November, 2008 from Deputy Secretary, Government 

of Gujarat was a new material and the said letter was also addressed to MD, GETCO 

(R-2). In this letter, Government of Gujarat had clarified that there was no restriction 

on number of captive locations per Wind Energy Generator in Wind Power Policy 

2007. Immediately upon receipt of this letter, GETCO (R-2) should have entered into 

Wheeling Agreement with Appellant and allowed him to wheel power to desired 

locations without any further delay. However, GETCO delayed the signing of wheeling 

agreement and waited for Amendment to 2007 policy enhancing wheeling charges 

substantially. State Commission should not have allowed GETCO to get benefit of 

higher wheeling charges for its intentional delay. It is well-settled principle that no 

person can take advantage of its own wrong. The well known maxim is - “Nulls 

commode capere potest de injuria sua propria” (No one take advantage of his own 

wrong). Broom’s Legal Maxims, 10 Edition explains the maxim, inter alia as under: 

It is a maxim of law, recognised and established, that no man shall take 

advantage of his own wrong and this maxim, which is based on elementary 

principles, is fully recognised in Courts of law and of equity, and, indeed, 

admits of illustration from every branch of legal procedure. 

This maxim has been followed by the Hon’ble Supreme Court. In the decision of 

Union of India v. Major General Madan Lal Yadav 2 reported in 1996 (4) SCC 127. 

In the present case before us, GETCO (R-2) had not allowed ONGC, the Appellant 

wrongly to wheel power from its Wind Energy generators to more than two captive 

location despite the clarification issued by Government of Gujarat in this regard. 

Hence, GETCO (R-2) cannot be allowed to take advantage of its own wrong. 

52. In the light of above discussions, we are of the view that the State Commission 

should have decided the case on its own merits and not on the basis of observations 

made above. As indicated above, the State Commission ought to have ascertained 

the fact about commissioning of Wind Energy Generators from full dump of meters 

provided at Wind Energy Generators and passed the order accordingly. 

53. Now, next important question before us to consider is as to whether the amendment 

to 2007 Policy on 7 th January, 2009 enhancing wheeling charges as determined by 

the State Commission for captive Wind Energy Generators is legally tenable. 

54. A new concept of Open Access has been introduced with enactment of Electricity 

Act, 2003. Statutes in force prior to the enactment of 2003 Act did not have the 

provisions regarding wheeling of power and wheeling charges for third party use 

of distribution system of distribution licensee or SEB. Government of Gujarat with a 

view to harness vast potential of wind power in the State issued Wind Power 

Generation Policy, 2002. Relevant portion of this policy is given below: 

2 Ed.: MANU/SC/0355/1996: AIR 1996 SC 1340: 1996 (1) ALD (Cri) 270: 1996 (3) SCALE 

72: (1996) 3 SCR 785 

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Resolution 

Gujarat has largest coast line in the country and the potential for wind energy 

in the State is around 5,000 MW on the coast line of Saurastra and Kutch. The 

Gujarat Energy Development Agency in collaboration with the Indian Institute 

of Meteorology, Bangalore has identified several excellent sites for wind power 

generation in the State. The Government of India has also announced guild 

lines for Wind Energy. The formulation of a sustainable wind power generation 

policy was therefore, under the active consideration of State Government. After 

due consideration, the State Government has decided to declare Wind Power 

Policy, 2002. 

3. Eligibility 

Under this policy no cash incentives of Sales Tax incentives are available 

primarily due to constraints of resources. It is therefore, proposed to widen the 

eligibility criteria for setting up such wind energy generators. The beneficiaries 

are classed in two parts as under: 

(i) Any registered industrial undertaking engaged in manufacture or 

production of goods within the State. 

Such Industrial units may be allowed to wheel power to their own 

manufacturing units (maximum up to two units) within the State at a 

wheeling pace to be paid by them. This would encourage the industrial 

undertakings to set up such wind generators since they would be availing 

the benefits of relatively cheaper electricity. Such wind energy generating 

units may also be allowed at their option to sell electricity to the Gujarat 

Electricity Board at a fixed price to be paid per unit. It should be made 

obligatory for them to give the option and the option once exercised should 

not be changed. 

8. Wheeling of Electricity: 

The industrial undertakings setting up wind energy generators while 

opting for wheeling the electricity to their manufacturing units may 

be allowed to do so at a wheeling charge of 4 per cent. 

55. Since the statutes in force prior to year 2003 had no provision for determination 

of wheeling charges, provision contained in Government of Gujarat’s 2002 Policy 

had force of law. 

56. After enactment of Electricity Act, 2003 power to determine Tariff including 

wheeling charges did not remain with State Governments. State Commissions had 

been entrusted with determination of Tariff including wheeling charges under 

Electricity Act, 2003. Section 86 of this Act providing the functions of State Commission 

is reproduced below: 

86. Functions of State Commission (1) The State Commission shall discharge 

the following functions namely: 



State: 

Provided that where open access has been permitted to a category 

of consumers under Section 42, the State Commission shall determine 

only the wheeling charges and surcharge thereon, if any, for the 

said category of consumers. 

0983 


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57. In terms of Section 86 of 2003 Act, State Commission vide its Order No. 2 of 2006 

dated 11 th August, 2006 determined Transmission and Wheeling Charges as under: 

20 Transmission and Wheeling Charges 

The Commission clarifies that the procurement of power by distribution 

licensee/GUVNL from wind energy source shall be undertaken on “Ex-Bus” basis.... 

However, in case the owner of a Wind Energy Generator opts for wheeling 

power for own use, the GETCO/Distribution Licensee shall transmit the power 

to the point of use. The transmitting this power to the point of use, only GETCO 

will be entitled to charge 4 per cent of energy injected (in kind) as all inclusive 

Transmission/wheeling charges. 

58. Thus, State Commission adopted wheeling charges as specified under Wind 

Power Policy, 2002. These charges specified under State Commission’s Order No. 2 

of 2006 would remain unchanged until State Commission by another Order or 

Regulations modifies them. State Government has no power to disturb Tariff or 

transmission charges or wheeling charges defined by State Commission. 

59. Government of Gujarat replaced Wind Power Policy, 2002 by Wind Power 

Policy, 2007 on 13 th June, 2007. New Policy of 2007 also has provision of wheeling 

charges as under 

5. Wheeling of Electricity 

The wheeling of electricity generated from the WTGs, to the desired location/s 

within the State, shall be allowed at a wheeling charge of 4 per cent of the 

energy fed to the grid, as per Gujarat Electricity Regulatory Commission (GERC) 

order, as amended from time to time. 

60. Thus, Government of Gujarat, in its Policy of 2007, recognised the power of State 

Commission to specify the wheeling charges by stating “shall be allowed at a wheeling 

charge of 4 per cent of the energy fed to the grid, as per Gujarat Electricity Regulatory 

Commission Order.” Government of Gujarat, however, while amending the 2007 

Policy in January 2009, made changes in wheeling charges enhancing them 

substantially. The modified clause of amendment to 2007 Policy read as under: 

(2) Amendment of Clause No. 5- Wheeling of Electricity 

The clause shall be substituted by the following: 

(b) Wheeling of power to consumption site at 66 kV voltage level and 

above: 

The wheeling of electricity generated from the Wind Turbine 

Generators (WTGs) to the desired location(s) within the State shall 

be allowed on the payment of transmission charges and transmission 

losses otherwise applicable to normal Open Access Customers. 

xxx xxx xxx 

Wind farm owner desiring to wheel electricity to more than two 

locations shall pay 5 paise per unit on energy fed in the grid to 

concerned 

Distribution Company in whose area, power is consumed in addition 

to abovementioned transmission charges and losses, as applicable. 

61. Since the above modification in wheeling charges were made without the approval 

of the State Commission which is the sole Authority to specify wheeling charges in 

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terms of 2003 Act. The State Commission had taken up the issue with the Gujarat 

Urja Vikas Nigam through their Letter No. GERC/SE/2009 dated 23 rd January 2009, 

in which, the State Commission emphasized that as per Electricity Act, 2003, only 

State Commission has got powers to determine Tariff including Transmission and 

wheeling charges. Relevant portions of the said letter dated 23 rd January, 2009 have 

been reproduced below: 

The Commission is considering/reviewing the policy declared by the Govt. on 

7 th January, 2009. Under the Electricity Act, 2003, determination of Tariff including 

transmission Tariff/charges and wheeling charges, etc. are to be decided by 

the Commission. In the last para of your letter States that you are issuing 

instructions to GETCO and DISCOMS to start wheeling charges from wind 

turbine generators for wheeling of electricity-(a) to consumption at 66 kV and 

above, (b) to consumption site below 66 kV level according to the Government 

Policy. This is not in accordance with the order of the Commission as of date. 

All orders and regulations issued by the Commission are required to be followed 

by the utilities/licensees till they are revised by the Commission 

62. Further, the State Commission in Para 7.9 of its order dated 6 th May, 2009 have 

observed that: 

...it may be noted that Commission is in the process of reviewing its existing 

regulations and order on renewable energy. As part of this process, the 

Commission will take a view on the amendments to the Wind Power Policy 

announced by the Government in January 2009. 

63. From the above, it is clear that so far levy of wheeling charges are concerned, the 

amendment to Wind Power Policy, 2007 issued by Government of Gujarat in 

January 2009 was without Authority and were ultra vires. In fact, Government of 

Gujarat had also recognised the powers of State Commission in Government 

Resolution dated 7 th January, 2009 as given below: 

Notwithstanding anything contained in this resolution, the provisions of the 

Electricity Act, 2003 and the GERC regulations, as issued from time to time, 

shall prevail, for the purpose of the implementation of this policy. 

Thus, the arrangement of wheeling power from Appellant’s Wind Energy Generators 

as per amendment to 2007 Policy and Commission’s order dated 6 th May, 2009 were 

protem till Commission takes final decision in the Matter. 

64. Thereupon, the State Commission had notified its new Regulation on Renewable 

Energy vide its Order No. 1 of 2010 dated 30 th January, 2010. In Para 6.1 of this 

order Commission has dealt with Transmission and Wheeling charges. Relevant 

portion of the Commission’s order dated 31 st January, 2010 is reproduced below: 

6.1 Transmission and Wheeling charges 

xxx xxx xxx 

Commission’s Ruling: 

The Commission had, in the draft Order, proposed lower transmission/wheeling 

charges in case of the wind energy generators opting for wheeling of power 

for own use, considering the lower power plant load factor of the wind energy 

projects. But, as suggested by GETCO, cost of transmission/distribution asserts 

created for such projects is required to be recovered through Tariff. The proposed 

charges do not recover fully the cost of transmission and distribution assets. 

0985 


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After considering the suggestions of the objectors and Government of Gujarat 

Amended Wind Power Policy dated 13 th January, 2009, the Commission decides 

the transmission and wheeling charges applicable to the captive consumers 

as under: 

(a) Wheeling of power to consumption site at 66 kV voltage level and 

above. 

The wheeling of electricity generated from the Wind Power Generators, 

to the desired location(s) within the State, shall be allowed on payment 

of transmission charges and transmission losses applicable to normal 

Open Access Consumer. 

(b) Wheeling of power to consumption site below 66 kV Voltage level. 

(i) The wheeling of electricity generated from the Wind Power Generators, 

to the desired location(s) within the State, shall be allowed on payment 

of transmission charges, applicable to normal open Access Consumer 

and transmission and wheeling losses @ 10 per cent of the energy fed to 

the grid. The above loss is to be shared between the transmission and 

distribution licensee in the ratio of 4:6. This provision shall be applicable 

to the Wind Energy Generators who are having more than one Wind 

Energy Generators. 

(ii) The wheeling of electricity generated by smaller investors, having 

one Wind Energy Generator in the State, to the desired location(s), shall 

be allowed on payment of transmission charges, applicable to normal 

open access consumer, and transmission and wheeling losses @ 7 per cent 

of the energy fed to the grid. The above losses are to be shared between 

the transmission and distribution licensee in the ratio of 4:3. 

65. From perusal of the above new Regulations, it becomes clear that State Commission 

had adopted the provisions of amendment to 2007 Policy with slight modification 

in relation to sharing of losses between transmission and distribution licensees. 

These Regulations came into force 11 th August, 2009. Para 9 of the Regulations 

dealing with applicability is reproduced below: 

9. Applicability of the Order 

As already clarified in Para 2.2 above, this order shall come into force from 

11 th August, 2009. The Tariff fixed in the order shall be applicable to all the 

wind energy generators commissioned on or after 11 th August, 2009. The existing 

contracts and agreements between the wind energy generators (Wind Energy 

Generators) and distribution licensees signed up to 10 th August will continue 

to remain in force as per the PPA signed by the parties. 


66. As per above, only existing PPAs signed between energy generators and distribution 

licensees would continue to remain in force. Wheeling charges as determined in 

this order would be applicable on Wind Energy Generators commissioned only 

after 11 th August, 2010. Wind Energy Generators commissioned and connected to 

grid prior to this date shall be governed by Government of Gujarat’s Wind Power 

Policy, 2007 and State Commission’s existing Regulations on Renewable Sources, 

2006. Undoubtedly, Wind Energy Generators of Appellant were commissioned and 

connected to grid prior to 11 th August, 2009. These were to be covered under State 

Government’s Wind Policy 2007 and State Commission’s earlier regulations and 

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Enercon (India) Ltd. and Anr. v. Rajasthan Electricity Regulatory Comm., Jaipur and Ors. 

(P.S. Datta, Member (Judicial)) 

accordingly Appellant is liable to pay wheeling charges at 4 per cent of energy 

injected (in kind) as all inclusive Transmission and wheeling charges. 


67. (I) There was no restriction on number of captive locations per Wind Energy 

Generator in Government of Gujarat’s Wind Power Policy, 2007. GETCO (R-2) had 

delayed the signing of wheeling agreement to wheel power from Appellant’s Wind 

Energy Generators to desired locations. 

(II) Appellant’s Wind Energy Generator’s were commissioned and connected to 

grid prior to 7 th January, 2009. 

(III) In view of intentional delay by GETCO to wheeling agreement, Appellant has 

right to raise the issue despite his conditional acceptance vide letter dated 

12 th March, 2009. 

(IV) State Commission ought to have taken into account the Government of Gujarat’s 

letter dated 6 th November, 2008 clarifying the number of captive locations and decided 

the case accordingly. 

(V) After enactment of Electricity Act, 2003, State Commission is sole Authority to 

specify wheeling charges. Government of Gujarat had no power to change the wheeling 

charges specified by State Commission vide its Order No. 2 of 2006 dated 

10 th August, 2006. Enhancement of wheeling charges in amendment to 2007 Policy 

vide Government Resolution dated 7 th January, 2009 is void abnitio. 

68. The matter is disposed of accordingly. Appeal is allowed with no orders as to costs. 

0987 

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2011 ELR (APTEL) 0987* 



M/s. Enercon (India) Limited and 

Indian Wind Power Association (Rajasthan State Council), Jaipur 

v. 

Rajasthan Electricity Regulatory Commission, Jaipur and Ors. 


DECIDED ON: 30.05.2011 

Coram 


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Whether the Commission did not follow the provisions of the Tariff Regulations for 

calculation of the repayment of loan amount, which according to the Appellants is 

equivalent to the depreciation allowable annually? 

Held, the Commission did not follow the provisions of the Tariff Regulation for 

calculation of the repayment of loan amount, which would be equal to the amount 

* MANU/ET/0095/2011 


245

0988 


of depreciation allowable annually and the same has to be corrected by the 

Commission. The Commission followed the provisions of the Tariff Regulations, 2009 

by the principle of harmonious construction of the different provisions thereof. 

Whether the Commission did not apply the correct rate of MAT including surcharge 

for the purpose of grossing up the rate of return on equity. 

Held, the Commission applied the correct rate of MAT for the purpose of grossing 

up the rate of return on equity. 

As apparent vide order dated 16 th July 2009, the order dated 31 st March, 2010 was a 

levelised Tariff determination order based on the base Tariff order dated 16 th July, 2009. 

Within the control period during FY 2009-10 to 2013-14 all Tariff determination 

orders that would be passed subsequent to the base Tariff order for 2009-10 will 

have uniformity amongst themselves as also with the base Tariff order dated 

16 th July, 2009. Whatever components allowed in the base Tariff order were necessarily 

been followed and will be followed in the subsequent Tariff orders except the variation 

in the cost of cement, coal and lending rate of SBI that relate to capital cost of a wind 

power project. Surcharge on MAT was not considered from 2 nd to 20 th year alike in 

the base Tariff order. If surcharge on MAT had to be allowed for 2 nd to 20 th Year in 

the case of the Appellant then the project developers who Commissioned wind 

power plants in FY 2009-10 would be discriminated against. Since the levelised 

Tariff is not subject to true up and the amount of surcharge varies from year to year, 

it would not be possible for the Commission to consider surcharge of MAT from 

2 nd to 20 th year. 

Whether the Commission was justified in not allowing escalation of other aspects 

such as O&M expenses in terms of the Tariff Regulations for determination of Tariff? 

Held, the Commission had duly considered the escalation in O&M expenses as 

per the Regulations. The Commission had followed Regulation 25(4) to provide 

escalation @ 5.72 per cent per annum. The levelised generic Tariff is not subject to 

true-up and in the case of wind power projects this provision cannot be made 

applicable. In any case, in the levelised base Tariff for FY 2009-10 escalation of 

O&M cost at 5.72 per cent per annum has been provided and therefore the O&M 

escalation as provided in the base Tariff also gets passed on to the Tariff for the 

projects to be Commissioned during FY 2010-11. 

Whether the Commission failed to implement the various provisions of the Tariff 

Regulations, 2009 by the principle of harmonious construction of the different provisions 

thereof. 

Held, Part-III of the Regulations, 2009 was taken note of for determination of Tariff 

for the projects to be commissioned during FY 2010-11. It was held that no 

consideration arises in the instant case in respect of Regulation 134 which the 

Commission has already applied in the order dated 6 th August, 2010 for rectification 

of the mistake occurred in the order dated 31 st March, 2010 and the same was not 

challenged in the appeal. For the purpose of determination of Tariff for any subsequent 

year within the control period the base Tariff order dated 16 th July, 2009 has to be 

made applicable read with indexation mechanism as provided in Regulation 85 

and while doing so the misconception that the provisions of Part-III of the regulations 

are not considered is misplaced. The indexation formula was accordingly devised 

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to incorporate such changes as were considered necessary in determination of Tariff 

for subsequent years. 


D. Sanjeevayya v. Election Tribunal (1967) 2 SCR 489 (Mentioned) [p. 1009, para 18 f] 

Kailash Chandra and Anr. v. Mukund Lal and Anr. MANU/SC/0049/2002: (2002) 2 

SCC 678: AIR 2002 SC 829: 2002 2 AWC (Supp) 912 SC: JT 2003 (2) SC 9: 2002 (1) 

SCALE 425: (2002) 1 SCR 605 (Mentioned) [p. 1009, para 18 f] 

Maharaja Moheshur Singh v. The Bengal Government (1850) 7 M.I.A 283 (Mentioned) 

[p. 1012, para 21 e] 

S. Satnam Singh and Ors. v. Surender Kaur Anr. 2009 (15) SCALE 626 (Mentioned) 

[p. 1010, para 18 d] 

Satyadhyan Ghosal and Ors. v. Smt. Deorajin Debi and Anr. MANU/SC/0295/1960: 

AIR 1960 SC 941: (1960) 3 SCR 590 (Mentioned) [p. 1012, para 18 e] 

Tilak Raj v. Baikunthi Devi MANU/SC/0224/2009: AIR 2009 SC 2136: 2009 (3) ALD 

23 (SC): 2009 4 AWC (Supp) 3551 SC: 2009 (4) BomCR 570: JT 2009 (2) SC 629: 

2009 (3) SCALE 741: (2010) 12 SCC 585: (2009) 3 SCR 452 (Mentioned) 

[p. 1010, para 18 d] 



Section 86(1)(e) [p. 1008, para 17 b] 


Finance Act, 2008 [p. 0997, para 14 h] 

Income Tax Act, 1961 [p. 1008, para 17 a] 


Rajasthan Electricity Regulatory Commission (Terms and Conditions for Determination 

of Tariff) Regulations, 2009 

Regulation 10 [p. 1000, para 14 h] 

Regulations 17-34 [p. 1013, para 22 a] 


Regulation 21(4) [p. 0993, para 9 e] 

Regulation 22(3) [p. 0993, para 9 b] 

Regulation 23 [p. 1003, para 14 d] 


Regulation 25(4) [p. 1003, para 18 d] 






Regulation 83(6) [p. 0992, para 8 b] 

Regulation 84 [p. 1004, para 14 g] 



Rajasthan Electricity Regulatory Commission (Transaction of Business) Regulations, 2005 

[p. 0999, para 14 c] 

CERC Regulations, 2009 [p. 1015, para 25 a] 

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Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Anand K. Ganeshan and 

Swapna Seshadri, Advs. 

For Respondents/Defendant: K.L. Dhayani, K.L. Nandwani, Advs. for R 2 to 4, R.K. Mehta, 

Antaryami Upadhyay and Laci Singh, Advs. 

JUDGMENT 

P.S. Datta, Member (Judicial) 

1. How is Tariff for the Wind Energy Projects to be Commissioned during the 

FY 2010-11 in the State of Rajasthan to be determined? Whether Regulation 85 of 

the Rajasthan Electricity Regulatory Commission (Terms and Conditions for 

Determination of Tariff) Regulations, 2009 (for short, “the Regulations, 2009”) which 

provides an indexation formula shall be the sole determining factor for determination 

of Tariff for the Wind Energy Projects to be Commissioned during the FY 2010-11? 

Whether Part III of the Regulations, 2009 will have no relevance for determination 

of Tariff for the projects to be Commissioned during FY 2010-11? Whether the doctrine 

of harmonious construction of different provisions of the Regulations should be 

invoked for the purpose of determination of Tariff for the FY 2010-11 in the case of 

renewable energy projects? Whether harmonious construction of the different 

provisions of the Regulations is capable of providing complete relief to the case of 

the Appellant? Whether the Appellant really seeks for amendment of the 

Regulations, 2009 in the present appeal? Whether the Commission has misconstrued 

the relevant provisions of the Regulations in determining the Tariff through indexation 

mechanism as per Regulation 85? What is the scope and purpose of removal of 

difficulty clause as we find in Regulation 134 of the Regulations? These and these 

questions come up in roundabout way as we proceed to hear the appeal. 

2. This appeal is preferred by the two Appellants, the first being M/s. Enercon 

(India) Ltd., a Company engaged in the business of establishing and operating 

wind based power generation projects, and the second, namely, Indian Wind Power 

Association (Rajasthan State Council), an association of wind energy developers 

operating as a federal organization, against the order dated 6 th August, 2010 passed 

by the Rajasthan Electricity Regulatory Commission, the Respondent No. 1 herein 

whereby, the said Commission revised and determined the Tariff applicable to wind 

energy projects during the Tariff year 2010-11. The Respondent No. 2, 3 and 4 are 

the distribution companies, while the Respondent No. 5 is a State owned corporation 

established for the purpose of promoting non-conventional and renewable energy 

generation in the State of Rajasthan. 

3. On 23 rd January, 2009, the Rajasthan Electricity Regulatory Commission in its 

legislative jurisdiction enacted and notified the aforesaid Regulations, 2009. The said 

Regulations, 2009 are intended for determination of Tariff in all cases covered under 

the said regulations for a period of five financial years commencing from FY 2009-10 

and ending with FY 2013-14. These regulations cover also determination of Tariff 

for new renewable energy generating stations to be Commissioned during the control 

period as said above. In terms of the said Regulations, 2009 the Commission passed 

an order dated 16 th July, 2009 determining the Tariff for wind and biomass based 

power plants to be Commissioned during the FY 2009-10. Thus, the said order 

which is Annexure “B” to the Memo of Appeal is a Tariff determination order for 

the projects to come up during FY 2009-10. In due course of the treatment of the 

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appeal, we will have on record certain relevant observations of the Commission in 

respect of the said order dated 16 th July, 2009. 

4. Then the Commission passed suo motu another order, a very short one, being 

order dated 31 st March, 2010 dealing with determination of Tariff for sale of electricity 

from Wind Power Plants in the State of Rajasthan to Distribution Licensees during 

FY 2010-11 of the control period 2009-14. In this order the Commission refers to its 

earlier order dated 16 th July, 2009 whereby the generic Tariff for sale of electricity 

from Wind Power Plants for the first year of the control period, i.e. FY 2009-10 was 

determined at Rs. 4.28/kwh for Jaisalmer, Barmer and Jodhpur districts and 

Rs. 4.50 Kwh for the other districts of the State of Rajasthan. In the order dated 

31 st March, 2010, the Commission observes that the Tariff for FY 2009-10 is linked to 

the indexation mechanism specified under Regulation 85 of the said Regulations, 2009 

and accordingly the Tariff for the Wind Energy Projects for the FY 2010-11 shall be 

Rs. 3.83 kwh for Jaiselmer, Barmer and Jodhpur districts and Rs. 4.03 kwh for other 

districts of the State. How the two figures were arrived at through the indexation 

formula in terms of Regulation 85 is to be seen in the Annexure-I to this order dated 

31 st March, 2010 

5. According to the Appellants, the order dated 16 th July, 2009 did not specify the 

financial norms as applicable or the calculation sheet for the Tariff determination 

dealing with rate of depreciation, rate of income tax etc. and thus, one of the members 

upon application obtained from the Commission the calculation sheet for the 

calculation of the Tariff by the Commission in the order dated 16 th July, 2009. According 

to the Appellants, the order dated 31 st March, 2010 did not apply the principles 

enshrined in Part III of the Tariff Regulations particularly with regard to the calculation 

on the return on equity by applying the applicable tax rate, the calculation of repayment 

of loan equal to the applicable rate of depreciation in terms of the Tariff Regulations 

and also the operating and maintenance expenditure by applying the escalation 

factor as provided in the Tariff Regulations. 

6. For the purpose of appreciation of the appeal the Appellants placed reliance on 

Regulation 21 (Return on Equity), Regulation 22(Interest and Finance Charges on 

loan capital), Regulation 25 (Operation & Maintenance Expenses), Regulation 27 

(Applicability rate on return on equity after grossing up the applicable rate of income 

tax), Regulation 80 (Applicability), Regulation 83 (Tariff Determination for new 

renewable energy generating stations), and Regulation 85 (Tariff Indexing Mechanism 

for Wind Energy Projects) which we shall discuss at the appropriate place of the 

judgment. 

7. On 29 th April, 2010, the two Appellants filed two petitions being number 220 and 

221 of 2010 before the State Commission for revision and modification of the Tariff 

determined by the earlier order dated 31 st March, 2010 by applying the relevant 

provisions of the Tariff Regulations. 

8. Upon receipt of the aforesaid two petitions, the Commission passed an order 

which is dated 6 th July, 2010. The said order reflects the submissions of the Appellants 

as are found in this memo of appeal and we desist from repeating the same but, one 

of the submissions of the Appellants was that this was a fit case where the Commission 

might be pleased to clarify, amend and modify the Tariff Regulations, 2009 insofar 

as it is applicable to the wind power plants particularly on the aspects mentioned 

in those two petitions and as a consequence thereof to amend the order dated 

31 st March, 2010 by incorporating the revised levelised Tariff applicable to the wind 

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power projects. We reproduce the relevant paragraphs of the order dated 6 th July, 2010 

which can be said to be an order admitting the petitions for hearing on a limited point. 

(11) We have heard the learned Counsels and carefully looked at the referred 

regulations and also perused both the citations referred by the Counsel. 

The Commission observes that Regulation 83(6) amply clarifies that the financial 

parameters as stipulated in Part III of the Regulations and other normative 

parameters are applicable for determination of generic Tariff for the base year 

FY 2009-10 of MYT control period and Regulation 85 provides that the base 

year generic Tariff shall be automatically revised for subsequent years of the 

control period by the indexing mechanism. In the indexing mechanism revision 

of capital cost of wind power plants is envisaged based on its main constituents 

viz. steel and cement and the impact of change in interest rate. Capital cost is 

the main cost ingredient of a wind energy project and Tariff is strongly related 

to capital cost and interest cost of loan. The indexation formula has been 

devised to capture these two major parameters of Tariff. 

(12) The indexation formula clearly visualises that the base rate Tariff would 

have to be adjusted for subsequent years in accordance with the formula 

irrespective of changes in individual parameters of Tariff. As mentioned earlier, 

the formula has been devised to take into account the changes in two major 

parameters, i.e. capital cost and interest on loan. Considering the clear stipulation 

in the Regulation as regards indexation, the Commission is of the considered 

view that there is no case for removal of difficulty as far as the capital cost, 

depreciation or O&M escalation is concerned for the Tariff determined for this 

year (FY 10-11) 

(13) However, the Commission agrees that a material conflict has emerged in 

the current year’s Tariff on account of change in taxation rate in what is 

envisaged to be admissible return under Regulation 21 vis-à-vis the position 

that emerges by applying indexation formula of Regulation 85. The problem 

has arisen because indexation formula doesn’t factor in changes in tax rate, 

which could make material difference in a project’s viability. Changes in tax/duty 

rates are of statutory nature and are beyond the control of developers. Such a 

change could impact the Tariff and returns either way. In case the tax rate 

goes down the indexation formula would result in undue higher benefit and 

converse would be true when the tax rate goes up. This would make a material 

difference either way and therefore, needs to be appropriately addressed for 

ensuring harmony between Regulation 21 and Regulation 85. It may be 

mentioned that Regulation 21 stipulates that a project developers would be 

entitled to get 16 per cent returns on equity, which has to be computed by 

grossing up with the rate equivalent to MAT rate. 

(14) Since indexing formula is neutral to tax rate, the implication of determining 

Tariff based on indexation formula would be that net ROE would be different 

than 16 per cent specified in Regulation 21 in case of changes in MAT rate. 

There is an obvious conflict, which may have material difference on project 

viability and margin. If a proper treatment in Tariff determination is not given 

to tax incidence in accordance with the statutory changes, a project developer 

may get penalised or rewarded as the case may be for no act of his own. 

Therefore, both Regulation No. 21 and 85 need to be considered pari passu. 

9. Then came the impugned order dated 6 th August, 2010 disposing of the aforesaid 

two petitions finally. This order also reflects the submissions of the Appellants. 

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One individual Mr. G.L. Sharma represented before the Commission in this order 

that the order dated 31 st March, 2010 did not require any change while on behalf of 

the Indian Wind Power Association one Mr. V.K. Gupta and another Mr. D.S. Agarwal 

on behalf of Rudraksh Energy submitted that indexation formula under Regulation 85 

should be changed so as to bring return on equity in conformity with what is 

stipulated in Regulation 21 of Regulations, 2009 and also Regulation 22(3) of the 

said Tariff Regulation. Upon hearing, the Commission made some observations 

and passed an order on 6 th August, 2010, the relevant paragraphs of which require 

reproduction which we do. 

(23) As regards the points raised by the Petitioners regarding capital cost, 

depreciation or O&M escalation, the Commission has come to the conclusion 

that keeping in view the Regulation 85 regarding indexation; it is not a fit case 

to invoke the provision of removal of difficulty in respect of the said parameters. 

The Regulations under reference were notified by the Commission on 

23 rd January, 2009 and thereafter, Tariff for the financial year 2009-10 was 

finalised in the month of July 2009, which has attained finality. The parameters 

discussed in this paragraph stand settled since the last year’s Tariff has attained 

finality and cannot be re-opened at this stage under removal of difficulty 

provision and same holds good for other issues raised by Petitioners like interest 

rate and accelerated depreciation. 

(24) However, the position is different as regards the issue of change in MAT 

rate is concerned on account of the following reasons: 

(i) The Regulation 21(4) clearly stipulates the rate of return on equity 

shall be computed by grossing up with tax rate equivalent to MAT; 

(ii) The MAT rate has changed in the current year from what was the 

level which the Tariff was determined for the base year FY 9-10 and this 

is a new extraneous factor beyond control of a developer; 

(iii) Application of indexation formula of Regulation 85 in case of change 

in MAT rate from that of base year FY 9-10 would impact ROE and result 

in a different ROE than what is clearly stipulated in the Regulation 21. 

(25) The Commission is of the considered view that both Regulations No. 21 

and 85 need to be given due weightage. It is a settled law that the provisions 

of a statute need to be interpreted in a manner so as to give full effect to all its 

provisions and not to make any particular provision redundant or non 

applicable. Every provision in a statute needs to be harmoniously construed 

with the other provisions and in the manner so as to remove any inconsistencies. 

(26) The Commission, therefore, reiterates its earlier view discussed in Paras 7 

and 8 of this order. A material conflict has emerged in the current year’s Tariff 

on account of change in taxation rate in what is envisaged to be admissible 

return under Regulation 21 vis-à-vis the position that emerges by applying 

indexation formula of Regulation 85. Changes in tax/duty rates are of statutory 

nature and are beyond the control of developers. The issue needs to be 

appropriately addressed for ensuring harmony between Regulation 21 and 

Regulation 85. 

(27) The Electricity Act, 2003 casts a clear responsibility on the State Regulatory 

Commissions to promote growth of renewable energy and the State Commission 

in cognizance of this responsibility and also for energy security as well as 

ecological security has issued various orders to support and promote Renewable 

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Energy growth in the State. Considering this and the difficulty as has arisen 

in the light of afore discussed situation, the Commission is of the considered 

view that difficulty on account of changes in taxation rate need to be removed. 

(28) There is a clear provision in the Regulation 134 of Tariff Regulations, 

2009 for removal of difficulty, which reads as under, and therefore, invoking 

of this provision would not be violative of Regulations: 

If any difficulty arises in giving effect to the provisions of these Regulations, 

the Commission may, by general or specific order, make such provisions 

not inconsistent with the provisions of the Act, as may appear to be 

necessary for removing the difficulty. 

(29) Now, therefore, in exercise of the powers conferred under Regulation 134 

of Tariff Regulations, 2009 for removal of difficulty, the Commission reviews 

the Tariff determined Vide order dated 31 st March, 2010 for the wind energy 

generating plants Commissioned/to be Commissioned during FY 2010-11 

incorporating the changes due to variation in the rate of MAT and accordingly, 

the Revised Tariff for Wind Energy Projects for the plants Commissioned in 

FY 2010-11 shall be as under: 

Particulars Jaisalmer, Barmer and Other Districts 

Jodhpur Districts 

Levelised Tariff as determined 

earlier vide Commissions order 

dated 31.3.2010 Rs. 3.83/kWh Rs. 4.03/kWh 

Revised Levelised Tariff Rs. 3.87/kWh Rs. 4.08/kWh 

The detailed calculations in this regard are shown at Annexure. 

(30) Considering that similar difficulty may arise in future also as and when 

MAT/tax rate gets changed and therefore, Commission is also of the view that 

necessary changes in the Regulation may be made to obviate the necessity of 

invoking powers of Regulation 134 for removal of difficulty in every such 

situation. 

10. The State Commission by the order dated 6 th August, 2010 thus, partly accepted 

the petition and the findings over which the Appellants came to be aggrieved against 

the order of the Commission have been challenged in this appeal. The grounds of 

appeal are as follows: 

(a) The Commission has not applied the financial norms and correctly calculated 

the Tariff for the projects to be established in the year 2010-11 particularly 

with regard to the rate of income tax for the calculation of the return on equity, 

the calculation with regard to loan repayment equivalent to the rate of 

depreciation and the applicability of the O&M expenses escalation. 

(b) The Commission has failed to apply the correct rate of income tax by not 

calculating the applicable rate of return on equity after taking into account the 

surcharge on the income tax. 

(c) The Commission has committed error in not fully giving effect to the principle 

laid down of grossing up of the return on equity by not taking into account: 

(i) the surcharge on MAT for the 2 nd to 10 th year as reflected by effective 

rate of MAT at 19.931 per cent for first year, and 18.54 per cent for the 

2 nd to 10 th year, 

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(ii) the surcharge on income/corporate tax at 30.9 per cent for 11 th year to 

20 th year, 

(iii) the impact of effective rate of corporate tax calculating accelerated 

depreciation benefit with surcharge and cess from 1 st year to 20 th year and 

(iv) the impact of effective rate of MAT and corporate tax rates on interest 

on working capital as the same is to be determined on 1.5 months receivable 

(which includes return on equity grossed up considering effective rate of 

MAT/corporate tax). 

(d) The Commission committed error in not determining the repayment of loan for 

every year equivalent to the depreciation allowed for the year as per Regulation 22. 

The Commission has considered the debt repayment for every year at Rs. 37.75 lacs 

per annum while allowing the depreciation every year at Rs. 27.72 lac which is 

said to be contrary to Regulation 22(3) of the Tariff Regulations. 

(e) The Commission failed to appreciate that Regulation 25 also provides for 

escalation of O&M expenses for the first year to be escalated @ 5.72 per cent 

from the base O&M expenses of 2009-10 and to provide an annual escalation 

year or year linked to the Wholesale Price Index subject to true up. 

(f) The State Commission ignored the well-settled principle of law that every 

provision in a statute needs to be harmoniously construed with the other 

provisions, as such the provisions of Part III and Part VII of the Regulation 

need to be given full effect to in their respective areas of operation. While 

Regulation 85 deals with the normative capital cost adjustment on account of 

changes in certain input costs, Regulations 21, 22 and 25 as also other regulations 

of Part III of the Tariff Regulations dealing with return on equity, interest on 

finance charges and operation and maintenance expenses need to be given 

full effect to in relation to the respective aspects. 

(g) The Commission failed to appreciate that Regulation 85 of the Tariff 

Regulations, 2009 that provides for Tariff Indexation Mechanism for wind 

energy projects is only related to automatic Tariff revision through the 

mechanism provided therein. 

11. Respondent No. 2 to 4 in their joint counter-affidavit contend as follows: 

(a) The appeal is not maintainable for the reason that the two Petitions Nos. 220 

of 2010 and 221 of 2010 were filed by the Appellants before the Respondent 

No. 1 for removal of difficulties in terms of the Tariff Regulations so as to 

rectify the order dated 31 st March, 2010. By the order dated 6 th July, 2010, the 

Commission discarded all other pleas of the Appellants save one and the said 

order dated 6 th July, 2010 has not been challenged. 

(b) The impugned order dated 6 th August, 2010 reveals that the Commission 

discussed only taxes and duties and the issues now raised in this appeal 

were raised in the course of arguments before the Commission following which 

the impugned order dated 6 th August, 2010 was passed. The main three issues 

as outlined above have been dealt with by the Commission in the impugned 

order as also the base Tariff order dated 16 th July, 2009. The order dated 

31 st March, 2010 was suo motu passed by the Commission by way of revision 

under Regulation 85 which does not permit taking into consideration of any 

other head. 

(c) The Commission by the impugned order considered applicable rate of income 

tax and for surcharge and correctly observed that any rate higher than what 

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has been worked out in this order would lead to undue additional burden on 

the consumer and would not be appropriate in the larger interest of the parties. 

The Commission followed cost plus approach in working out Tariff and return 

on equity has been increased from 14 per cent to 16 per cent and that too 

would be pre-tax and grossed up to tax rate. The Tariff worked out even after 

accounting for accelerated depreciation amounts to an increase of 15 per cent 

over the last Tariff and thus, would jump by unreasonably higher level of 

around 34 per cent without such accounting. Any increase in the feed in Tariff 

over and above 15 per cent would be highly unreasonable. 

(d) As regards, repayment of loan the rate has been specified at par with the 

conventional generation projects. 

(e) As regards, the escalation charges of O&M parameters for Tariff determination 

for wind energy have been specified under Regulation 83(6) and the provision 

towards contingency reserve as claimed by the Appellants has not been 

envisaged in the case of wind energy projects. 

12. The Respondent No. 1, the State Commission contends in its separate counter-affidavit 

as follows: 

(a) While determining the Tariff for the wind energy projects, the Commission 

considered the financial parameters as stipulated in Part III of the Regulations. 

The Tariff for the year 2009-10 is the base Tariff which is to be indexed as per 

the formula contained in Regulation 85 for the purpose of determining Tariff 

for wind power plants to be Commissioned in the subsequent period of the 

control period. The indexation formula does not provide for inclusion of any 

changes in other parameters like escalation in O&M expenses, interest on 

long-term loan etc. 

(b) With regard to not applying escalation in O&M expenses and not calculating 

the repayment of loan equivalent to depreciation the Commission clearly stated 

in the impugned order dated 6 th August, 2010 that these parameters stood 

settled since the Tariff for the base year 2009-10 received finality and could 

not be reopened. The determination of Tariff for the subsequent period of the 

control period is only through indexation as per formula prescribed in the 

Tariff Regulations, and the indexation formula clearly visualizes that the base 

rate Tariff would have to be adjusted for the subsequent years in accordance 

with the formula which was devised to incorporate changes as might be 

considered necessary. 

(c) The impugned order was passed in terms of the Tariff Regulations, 2009 

framed by the Commission, which cannot be challenged in this Tribunal. 

(d) Since the indexation formula does not take into account the changes in the 

tax rate, it could make a material difference in the viability of the project and if 

appropriate treatment for tax incidence was not given in the Tariff determination, 

the project developer may get penalised in the event of increase in tax rate or 

benefited if the rate goes down. The Commission appreciated that the indexation 

formula neutral to tax rate would lead to return on equity being different from 

16 per cent as prescribed in the regulations, whereas the Regulation 21(4) 

clearly stipulates that return on equity shall be computed by grossing up the 

base rate with tax rate equivalent to MAT for the first ten years from the date 

of commercial operation. The Commission accordingly in view of emergence 

of conflict in the regulations as a result of change in the MAT rate exercised its 

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inherent power under Regulation 134 and incorporated the impact of change 

in the MAT rate in the year 2010-11 and revised the Tariff for the wind energy 

projects to be Commissioned in the year 2010-11. 

(e) As regards, surcharge on MAT from 2 nd to 20 th year, the MAT along with 

surcharge was considered for the first year as per the prevailing rates and surcharge 

was not considered from 2 nd year onwards. The Government of India has taken 

a move to phase out surcharge on direct taxes and reduced the surcharge from 

10 per cent in the year 2009-10 to 7.5 per cent in the year 2010-11. 

13. Upon the pleadings of the parties as aforesaid the following issues arise for 

consideration: 

(a) Whether the appeal is maintainable? 

(b) Whether the Commission did not follow the provisions of the Tariff 

Regulations for calculation of the repayment of loan amount which according 

to the Appellants is equivalent to the depreciation allowable annually? 

(c) Whether the Commission did not apply the correct rate of MAT including 

surcharge for the purpose of grossing up the rate of return on equity. 

(d) Whether the Commission was justified in not allowing escalation of other 

aspects such as O&M expenses in terms of the Tariff Regulations for 

determination of Tariff? 

(e) Whether the Commission failed to implement the various provisions of the 

Tariff Regulations, 2009 by the principle of harmonious construction of the 

different provisions thereof. 

14. Since the appeal relates to interpretation of certain provisions of the Regulations, 

2009, it is proper that we place on record the provisions thereof as would be applicable 

for purpose of the disposal of the appeal. 

(21) Return on Equity 

(1) Return on equity shall be computed in rupee terms, on the equity base 

determined in accordance with Regulation 17. 

(2) Return on equity shall be computed on pre-tax basis at the base rate of 

15.5 per cent for conventional generating stations and transmission licensee, 

and 16 per cent for distribution licensee and renewable energy generating 

stations, to be grossed up as per Sub-regulation (3) of this regulation. 

(3) The rate of return on equity shall be computed by grossing up the 

base rate with the normal tax rate for the year 2008-09 applicable to the 

concerned conventional generating station, transmission licensee, 

distribution licensee, as the case may be: 

Provided that return on equity with respect to the actual tax rate 

applicable to the concerned conventional generating station, 

transmission licensee, distribution licensee, as the case may be, in 

line with the provisions of the relevant Finance Acts of the respective 

year during the Tariff period shall be trued up for each year of the 

Control period during the Annual Performance Review. 

(4) In case of renewable energy generating stations, the rate of return on 

equity shall be computed by grossing up the base rate with the tax rate 

equivalent to Minimum Alternative Tax (MAT) for first 10 years from 

COD and normal tax rate for remaining years of project life. 

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(5) Rate of return on equity shall be rounded off to three decimal points 

and be computed as per the formula given below: 

Rate of pre - tax return on equity 

Base rate 

 

1 t 

Where t is the applicable tax rate in accordance with Clause (3) of 

this regulation. 

Illustration 

(i) In case of the generating company or the transmission licensee 

paying Minimum Alternate Tax (MAT) @ 11.33 per cent including 

surcharge and cess: 

Rate of return on equity 

 

15.50 

 

1 0.1133 

17.481 per cent 

(ii) In case of generating company or the transmission licensee paying 

normal corporate tax @ 33.99 per cent including surcharge and 

cess: 

a 

b 

c 

d 

Rate of return on equity 

15.50 

 

1 0.3399 

 

23.481 per cent 

(22) Interest and finance charges on loan capital 

(1) The loans arrived at in the manner indicated in Regulation 17 shall 

be considered as gross normative loan for calculation of interest on loan. 

(2) The normative loan outstanding as on 1 st April, 2009 shall be worked 

out by deducting the cumulative repayment as admitted by the Commission 

up to 31 st March, 2009 from the gross normative loan. 

(3) The repayment for each year of the Control period shall be deemed to 

be equal to the depreciation allowed for that year: 

(4) Notwithstanding any moratorium period availed by the generating 

company or the transmission licensee or by the distribution licensee, as 

the case may be the repayment of loan shall be considered from the first 

year of commercial operation of the project and shall be equal to the 

annual depreciation allowed. 

(5) The rate of interest shall be the weighted average rate of interest 

calculated on the basis of the actual loan portfolio at the beginning of 

each year applicable to the project: 

Provided that if there is no actual loan for a particular year but, 

normative loan is still outstanding, the last available weighted 

average rate of interest shall be considered: 

Provided further that if the generating station or the transmission 

system or the distribution system, as the case may be, does not have 

actual loan, then the weighted average rate of interest of the generating 

company or the transmission licensee or the distribution licensee 

as a whole shall be considered. 

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(6) The interest on loan shall be calculated on the normative average 

loan of the year by applying the weighted average rate of interest. 

(7) The generating company or the transmission licensee or the distribution 

licensee, as the case may be, shall make every effort to re-finance the loan 

as long as it results in net savings on interest and in that event the costs 

associated with such re-financing shall be borne by the beneficiaries and 

the net savings on interest shall be shared between the beneficiaries and 

the generating company or the transmission licensee or the distribution 

licensee, as the case may be, in the ratio of 2:1 

(8) The changes to the terms and conditions of the loans shall be reflected 

from the date of such re-financing. 

(9) In case of dispute, any of the parties may make an application in 

accordance with the Rajasthan Electricity Regulatory Commission 

(Transaction of Business) Regulations, 2005, as amended from time to 

time, including statutory re-enactment thereof for settlement of the dispute: 

Provided that the beneficiary or the transmission and distribution 

customers shall not withhold any payment, on account of the interest 

claimed by the generating company or the transmission licensee or 

distribution licensee, during the pendency of any dispute arising 

out of re-financing of loan. 

(23) Depreciation 

(1) The value base for the purpose of depreciation shall be the capital 

cost of the asset admitted by the Commission. 

(2) The salvage value of the asset shall be considered as 10 per cent 

and depreciation shall be allowed up to maximum of 90 per cent of 

the capital cost of the asset: 

Provided that in case of hydro generating stations, the salvage 

value shall be as provided in the agreement signed by the 

developers with the State Government for creation of the site: 

Provided further that the capital cost of the assets of the hydro 

generating station for the purpose of computation of depreciable 

value shall correspond to the percentage of sale of electricity 

under long-term power purchase agreement at regulated Tariff. 

(3) Land other than the land held under lease and the land for 

reservoir in case of hydro generating station shall not be a depreciable 

asset and its cost shall be excluded from the capital cost while 

computing depreciable value of the asset. 

(4) Depreciation shall be calculated annually based on Straight Line 

Method (SLM) and at rates specified in Appendix-I to these 

regulations for the assets of the generating station, transmission 

system and distribution system: 

Provided that, the remaining depreciable value as on 31 st March of 

the year closing after a period of 12 years from date of 

commercial operation shall be spread over the balance useful 

life of the assets. 

(5) In case of the existing projects, the balance depreciable value as 

on 1 st April, 2009 shall be worked out by deducting the cumulative 

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01000 


depreciation as admitted by the Commission up to 31 st March, 2009 

from the gross depreciable value of the assets. 

(6) Depreciation shall be chargeable from the first year of commercial 

operation. In case of commercial operation of the asset for part of 

the year, depreciation shall be charged on pro rata basis. 

(7) Depreciation against assets relating to environmental protection 

shall be allowed on case to case basis at the time of fixation of 

Tariff subject to the condition that the environmental standards as 

prescribed have been complied with during the previous Tariff period. 

(25) Operation & Maintenance expenses 

(1) “Operation and Maintenance or O&M expenses” shall mean repair 

and maintenance (R&M), establishment, and administrative and general 

expenses. 

(2) Operation and maintenance expenses shall be determined for the Tariff 

period based on normative O&M expenses specified by the Commission 

subsequently, in these Regulations for the base year, that is, the year 

immediately preceding the Tariff period. 

(3) O&M expenses of assets taken on lease and those created out of 

consumer’s contributions shall be considered, if the transmission or 

distribution licensee or the generating company has the responsibility 

for its O&M and bears O&M expenses. 

(4) Normative O&M expenses allowed at the commencement of the Control 

Period (i.e. FY 2009-10) under these Regulations shall be escalated at the 

rate of 5.72 per cent per annum. Further, the same shall be subject to 

revision on account of annual escalation linked to WPI in the subsequent 

years for the purpose of true-up. 

(5) In case of considerable variance between the normative expenses and 

the actual expenses in the base year, the Commission may allow the 

transmission or distribution licensee or the generating company to achieve 

the normative level over a period of time. 

(6) Annual O&M expenses for gross fixed assets added during the year 

shall be considered from the date of Commissioning. 

(7) Increase in O&M charges on account of war, insurgency, change in 

laws, or like eventualities may be considered by the Commission for a 

specified period. 

(8) Any saving achieved by generating company or a transmission or 

distribution licensee in any year shall be shared with the distribution licensee 

or user, as applicable, in the ratio specified in Regulation 10. The loss to 

the generating company or the transmission or distribution licensee if he 

exceeds the targeted O&M expenses for that year be shared with the 

distribution licensee or user, as applicable, in the ratio in Regulation 10. 

(80) Applicability 

Part VII 

Tariff for Renewable Energy Generating Stations 

(1) The Regulations specified in this Part VII shall apply for 

determining the Tariff for procurement of power by distribution 

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licensees within Rajasthan from Renewable Energy (RE) based 

Generating Stations located within Rajasthan. 

(2) The Commission shall be guided by the terms and conditions 

contained in this Part in determining the Tariff for supply of electricity 

by a Renewable Energy based Generating Company to a Distribution 

Licensee in the following cases: 

(a) where such Tariff is pursuant to a power purchase 

agreement or arrangement entered into subsequent to the date 

of notification of these Regulations; or 

(b) where such Tariff is pursuant to a power purchase 

agreement or arrangement entered into prior to the date of 

notification of these Regulations and the Commission has not 

previously approved such agreement/arrangement or adopted 

the Tariff contained therein; or 

(c) where such Tariff is pursuant to a power purchase 

agreement or arrangement which is the subject of a review by 

the Commission: 

Provided that the Commission may deviate from the norms 

contained in this Part or specify alternative norms for 

particular cases, where it so deems appropriate, having 

regard to the Circumstances of the case: 

Provided that the reasons for such deviation(s) shall be 

recorded in writing. 

(81) Petition for Tariff determination for Renewable Energy Generating Station(s) 

The provisions of Part II shall apply mutatis mutandis, to a petition for 

Tariff determination for Renewable Energy (RE) Generating Stations. 

Further, the Commission may initiate process for determination of Generic 

Tariff for Renewable Energy generating stations on suo motu basis or on 

the basis of Petition filed by Nodal Agency. 

(83) Tariff determination for New renewable energy generating stations to be 

Commissioned during Control Period under these Regulations 

Generic Tariff determination for Wind Energy Projects and Biomass Power Projects 

(1) The preferential feed-in Tariff for all wind power plants and biomass 

power plants, whose Tariff is not fixed by the competitive bidding and are 

Commissioned after 31 st March, 2009, shall be determined by the Commission 

with the performance parameters specified in Sub-regulation (6) and (7) 

below for each Tariff period, and Tariff so fixed shall be applicable for the 

power plants Commissioned during this Control Period “Project Specific” 

Tariff determination for Wind Energy Projects 

(2) A wind energy generating company shall file Petition for determination 

of “Project Specific” Tariff for a particular wind energy project of Project 

size more than 50 MW. The Commission shall determine “Project Specific” 

Tariff in such cases, provided generating company proposes a “Specific 

Wind Farm Scheme” (say, under IPP mode), which represents optimal 

utilisation of Wind resource at a specified Site location. 

Provided that the norms specified for determining the generic feedin 

Tariff, except the norms for interest rate, capacity utilisation factor, 

01001 


259

01002 


energy losses, and new turbine technology shall be the ceiling 

parameters while determining the parameters for project specific 

Tariff. 

Generic Tariff determination for Solar Power Projects 

(3) In case of solar power plants to be established in the State, not covered 

under generation based incentive scheme of Government of India, the 

Commission shall specify the normative cost parameters and determine 

generic Tariff as may be necessary, through a separate order. 

(4) Once the solar generation capacity of 10 MW envisaged under the 

MNRE Policy and as per RERC Solar Tariff order dated 2 nd April, 2008 

comes up in the State of Rajasthan, and operational data becomes available, 

the Commission revisit the Tariff applicable for solar generation projects 

on the basis of such operational data, capital cost data obtained by solar 

manufacturers and expert opinion. Accordingly, the Commission may 

determine generic Tariff, as may be necessary, through separate order. 

Project Specific Tariff determination for Solar Power Projects 

(5) The Solar Energy generator or investor would have the option to adopt 

either “Generic Tariff” or “Project Specific route” for determination of 

applicable Tariff for Solar Power Project. In case of “Project Specific” 

Tariff determination, the Commission shall take into consideration the 

manufacturer’s recommendations and shall invite expert opinion. The 

developers/investors have to submit “detailed project report” for the 

proposed project scheme along with the Application for Tariff 

determination. The Commission shall scrutinise case specific parameters 

for prudent check before determining Tariff through regulatory process 

Norms for Generic Tariff determination for Wind Energy Projects 

(6) The performance parameters for Tariff determination of wind power plants 

for the base year of MYT Control Period FY 2009-10 shall be as under: 

(a) For the purpose of Tariff determination for Wind Energy projects 

under Control Period, the financial principles as stipulated under 

Part III of these Regulations, such as norms for debt:equity, interest 

on loan capital, return on equity capital and escalation factors for 

O&M expenses etc. shall be applicable 

(b) Other normative parameters for generic Tariff determination of 

wind energy projects under Control Period shall be as under: 

(i) Base Capital Cost - Base Capital cost at the beginning of 

Control Period (i.e. as on 1 st April, 2009) shall be Rs. 525 lac/MW 

towards power plant, of which Rs. 2 lac per MW is for 

connectivity charges payable to Rajasthan Rajya Vidyut Prasaran 

Nigam Ltd. Base Capital Cost shall include Rs 15 lac/MW 

towards cost of wind energy evacuation up to and including 

pooling station and Rs 2 lac/MW payable to RVPN for 

interconnection. Wind Energy Developer shall be responsible 

for development of evacuation and dedicated transmission 

arrangement up to pooling station. RVPN/transmission licensee 

be responsible for development of evacuation system beyond 

pooling stations till the nearest Grid sub-station. Alternatively 

if Wind Energy Developer wants to develop the evacuation 

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b 

c 

d 

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system beyond Pooling Station up to Grid Substation, the 

Commission separately determine the transmission Tariff for 

the same on case-to-case basis. Indexation formula as outlined 

under Regulation 85 shall be applicable for determining Tariff 

for the plants Commissioned in each subsequent year during 

the Control Period. 

(ii) CUF - 21 per cent (for Jaisalmer, Jodhpur and Barmer 

districts) and; 20 per cent for other districts 

(iii) Deration in CUF - Deration in plant load factor/capacity 

utilisation factor shall be 1.25 per cent of CUF from 6 th , 10 th , 

14 th and 18 th year 

(iv) O&M Expenses - For Power Plant, 1.25 per cent of Base 

Capital Cost For transmission lines: 3 per cent of cost of 

transmission line 

(v) Project Life - As defined under Useful Life 

(vi) Depreciation - As per Regulation 23 and Appendix-1 

(vii) Working Capital: 

(a)Operation & Maintenance expense for one month, 

(b) Receivables equivalent to 1½ (one and a half) months 

of fixed and variable charges for sale of electricity calculated 

on the target CUF. 

(c) Maintenance spare @ 15 per cent of operation and 

maintenance expenses specified in Regulation 83(6)(iv). 

Further, Interest on Working Capital shall be at interest rate 

equivalent to State Bank of India short term PLR prevalent as 

on 31 st January, 2009. 

(viii) Interest on long-term loan - 100 basis points higher than 

State Bank of India long-term PLR prevalent as on 31 st January, 2009. 

Note: 

(i) For metering at the premises of licensee, following line losses 

be considered: 

• 1 per cent for metering at 33 kV system. 

• 4 per cent for metering at 132 kV or 220 kV system. 

(ii) On the basis of above parameters, the Tariff corresponding 

to the levellised Tariff for twenty years shall be determined. 

Such levellised Tariff shall be effective for the wind power 

projects Commissioned during First year of the Control Period, 

i.e. FY 2009-10. 

(i) During stabilisation, 60 per cent 

(ii) During the first year after stabilisation and 70 per cent 

(iii) From Year-2 onwards 75 per cent 

Norms for Generic Tariff determination for Biomass Power Projects 

(7) The performance parameters for Tariff determination of biomass power 

plants for the base year of MYT Control Period FY 2010-11 shall be as 

under, the fixed charges of which be the same for FY 2009-10: 

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(a) For the purpose of Tariff determination for Biomass Power projects 

under Control Period, the financial principles as stipulated under 

Part III of these Regulations, such as norms for debt: equity, interest 

on loan capital, return on equity capital and escalation factors for 

O&M expenses etc. shall be applicable with the stabilisation period 

of six (6) months. 

(b) Other normative parameters for generic Tariff determination of 

biomass power projects based on Water Cooled Condenser and Air 

Cooled Condenser under Control Period shall be as under: 

Sr. Parameters Water Cooled Air Cooled 

No. Condenser Condenser 

(i) Base Capital Cost* Rs 540 Lac Rs 585 Lac 

per MW 

per MW 

(ii) Station Heat Rate 4300 kCal/kWh 4540 kCal/kWh 

(during stabilisation) (during stabilisation) 

4200 kCal/kWh 4440 kCal/kWh 

(after stabilisation) (after stabilisation) 

(iii) Auxiliary 10.5 per cent 12.5 per cent 

Consumption Factor (during stabilisation) (during stabilisation) 

10 per cent 12 per cent 

(after stabilisation) (after stabilisation) 

(*) Note: Normative Capital Cost at Sr. No. (i) is the average cost 

during calendar year 2008 (1 st January, 2008 to 31 st December, 2008) 

applicable for determining Fixed charges for the base year 2010-11 and 

the same includes: 

• Exclusive transmission system cost of Rs. 13 Lac/MW and; 

• Connectivity charges of Rs 2 Lac/MW. 

(iv) Plant Load Factor (PLF) - Threshold Plant Load Factor for determining 

fixed charge shall be; 

(v) Biomass Fuel Price: Biomass Fuel Price shall be Rs. 1216/MT for 

FY 2009-10 as base and linked to index formula as outlined under 

Regulation 84 for subsequent year of control period alternatively with 

normative escalation of 5 per cent per annum at the option of producer. 

(vi) Gross Calorific Value (GCV) - Gross Calorific Value for the biomass 

fuel shall be considered as 3,400 kCal/kg 

(vii)O&M Expenses 

For Biomass Power Plant - 6.50 per cent of Base Capital Cost 

For transmission lines - 3 per cent of cost of transmission lines 

(viii) Project Life - As defined under “Useful Life”. 

(ix) Depreciation - As per Regulation 23 and Appendix-1 

(x) Working Capital: 

(a) Fuel costs for four months equivalent to threshold PLF 

(b)Operation & Maintenance expense for one month, 

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(c) Receivables equivalent to 1½ (one and a half) months of fixed and 

variable charges for sale of electricity calculated on the target CUF. 

(d) Maintenance spare @ 20 per cent of operation and maintenance 

expenses specified in Regulation 83(7)(vii). 

Further, Interest on Working Capital shall be at interest rate 

equivalent to average State Bank of India short-term PLR prevalent 

for the period 1 st January, 2008 to 31 st December, 2008. 

(xi) Interest on Long-term Loan: Interest rate for long-term loan shall be 

equivalent to 100 basis points higher than average State Bank of India long-term 

PLR prevalent for the period 1 st January, 2008 to 31 st December, 2008. 

Note: 

(i) The Tariff for biomass based power plants comprise of fixed charges 

and variable charges. 

(ii) Fixed cost of Tariff so worked out shall be levellised for 20 years 

corresponding to which levellised Tariff shall be determined. Such levellised 

fixed component of Tariff shall be effective for the biomass power projects 

Commissioned during First year of the Control Period, i.e. FY 2009-10. 

(iii) For metering of energy at the premises of distribution licensee at 

33 kV 1 per cent line loss be considered iv. Above norms shall be applicable 

for biomass power projects based on rankine cycle technology. Further, 

Tariff so determined shall also be applicable for biomass gassifier based 

power projects until separate norms and separate Tariff for such biomass 

gassifier based projects is notified. 

85. Tariff Indexing Mechanism for Wind Energy Projects: 

(1) Under Generic Tariff determination mechanism, automatic Tariff 

revision through Tariff Indexation Mechanism as outlined below, shall 

be allowed by the Commission for wind energy projects to be Commissioned 

during the Control Period. The parameters for indexation shall be 

“normative capital cost” and long-term PLR of State Bank of India. Under 

these Regulations, the Commission has specified normative capital cost 

for the base year of Control Period and corresponding Tariff to be applicable 

for the projects to be Commissioned in Base Year of Control Period. The 

“Tariff” for wind Projects for Commissioning during each subsequent 

year of control period shall be indexed as per formula outlined under 

these Regulations. In case of Wind Energy projects, the following Indexing 

Mechanism for adjustment of Tariff with the change in Wholesale Price 

Index for Cement and Steel, and change in Long-Term Prime Lending 

Rate (LTPLR) be applicable as under: 

Tn 

T 

1 

 

1 

 

0.08(LTPLR 

LTPLR ) 

d n 

1 

0 

01005 

i 

d n 

 

⎡ 

⎢ 

⎢⎣ 

a 

⎛ 

⎜ 

⎝ 

SI 

n 

SI 

0 

1 

1 

⎞ 

⎟ 

⎠ 

 

b 

a 

b 

⎛ 

⎜ 

⎝ 

CI 

n1 

CI 

01 

⎞⎤ 

⎟ 

⎥ 

⎠⎥⎦ 


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Where, 

T 1 

= Base levellised Tariff determined for the WEG projects 

Commissioned in first year of the Control Period (i.e. FY 2009-10) 

(in Rs/kWh). 

T n 

= Levellised Tariff to be applicable for WEG projects Commissioned 

during the financial year (n) of the Control Period (in Rs/kWh). 

d n 

= Capital cost escalation factor applicable for year (n) of the 

Control Period. 

a = Constant to be determined by Commission from time to time (in 

default it is 0.70) for weightage to Steel Index 

SI n-1 

= Average WPI Steel index prevalent for calendar year (n-1) of 

the Control Period 

SI 0 

=Average WPI Steel Index prevalent for Calendar year (0), i.e. 

January 2008 to December 2008 

b = Constant to be determined by Commission, (in default it is 0.30) 

for weightage to Cement Index 

CI n-1 

= Average WPI Cement Index prevalent for fiscal year (n-1) of 

the Control Period 

CI 0 

= Average WPI Cement Index prevalent for Calendar year (0) i.e. 

January 2008 to December 2008. 

LTPLR(n) = long-term prime lending rate (in per cent) of State Bank 

of India as prevalent as on 31 st January of each calender year prior 

to nth year of the Control Period. 

LTPLR(0) = Long-term prime lending rate (in per cent) of State Bank 

of India as prevalent as on 31 st January, 2009. 

Note: 

(a) Since there will be a lag of one year within which the power 

plant can be Commissioned, prices for the calendar year “n-1” 

is relevant and may be applied to the Tariff of year “n”. Thus, 

for projects Commissioned after FY 2009-10 the applicable Tariff 

be indexed on the price information available for the period 

1 st January, 2008 to 31 st December, 2008 as base with indexing 

mechanism considering FY 2010-11 as Year n and corresponding 

calendar year n-1 shall be 1 st January, 2009 to 31 st December, 2009 

for pricing. 

(b) The indexation linked to interest rate is 8 paise/kWh per 

percentage point change in long-term prime lending rate of 

State Bank of India. 

15. Before appreciating the merit of the case of the Appellant, it comes to us as of 

first impression on reading the aforesaid provisions of the Tariff Regulations, 2009 

that the basis for providing return on equity is that pre-tax rate of return of 16 per cent 

for renewable energy generating stations should be grossed up with the base rate of 

the applicable rate of Minimum Alternate Tax (MAT) for the first 10 years from the 

date of commercial operation and thereafter, at the normal tax rate for the remaining 

years of the life of the project. In terms of Regulation 22, the repayment of loan to be 

computed for the purpose of Tariff determination shall be deemed to be equal to that 

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01007 

of depreciation for each period. In the case of O & M Expenses, Regulation 25 

conceives of an escalation for subsequent years after FY 2009-10 at 5.72 per cent per 

annum and that the same shall be subject to revision on account of annual escalation 

linked to wholesale price index. The Commission laid down the parameters for 

applicability of the operational norms as contained in Part (vii) that deals with 

non-conventional/renewable sources of energy including wind power projects. 

Regulation 81 which occurs in Part (vii) specifies that the provisions of Part (ii) that 

deals with Tariff determination process would apply to the determination of Tariff 

for renewable energy generating station. Regulations 83 and 85 that fall under Part (vii) 

relate to determination of Tariff for wind power plans. Regulation 85 provides for 

an automatic Tariff adjustments formula that takes into account certain aspects 

affecting the capital cost of the project, namely, steel and cement price and lending 

rate of SBI that constitute a part of the capital project. As per the formula prescribed 

in Regulation 85, the changes in the price of cement and steel and the lending rate 

during the previous calendar year shall form the basis for adjustment in the 

subsequent year. 

16. According to the Appellant, there is no prohibition in the Tariff regulations from 

considering some other factors that may also affect the capital cost of the generating 

station or such other norms or parameters having implications on the Tariff 

determination for the generating stations. It is the case of the Appellant that the 

only implication would be that for other aspects forming part of the Tariff regulations 

and not covered in the automatic indexation formula specified in Regulation 85, 

there will be a requirement to file a petition or initiate a Proceeding before the State 

Commission. 

17. Prior to the impugned order dated 6 th August, 2010, two orders were passed 

earlier by the Commission which require mention. As already indicated, the order 

dated 16 th July, 2009 was passed by the Commission determining the Tariff for 

wind energy projects in the State of Rajasthan which were to be established and 

Commissioned for commercial operation during the year 2009-10, while the other 

order is dated 31 st March, 2010 whereby the Commission determined the Tariff for 

the wind energy projects to be declared for commercial operation in the year 2010-11. 

On the issue of interest on loan term and loan repayment, the Commission observed 

in the order dated 16 th July, 2009 that in the earlier Tariff regulation, there was a 

provision to allow difference between repayment of term loan and admissible 

depreciation by way of advance against depreciation, but, since the advance against 

depreciation has now been dispensed with and the depreciation rates has been 

suitably modified, the Regulations 2009 is very specific on this point that no advance 

against depreciation can be considered. The Commission observed that the 

depreciation rate for renewable projects has been specified at par with the depreciation 

rate for conventional generation projects and further the depreciation norm as specified 

by the Commission is based on the depreciation norms specified by the Central 

Electricity Regulatory Commission (Terms and Conditions for determination of Tariff, 

Regulations With regard to O&M expenses the order dated 16 th July, 2009 specifies 

that parameters for Tariff determination for wind energy projects have been specified 

under Regulation 83(6) and no provision is there towards contingency reserve as 

claimed by the objectors. The Commission observed that it has been following cost 

plus approach in working out Tariff and in these all costs get duly considered and 

reasonable returns constitute part of norms and parameters worked out by the 

Commission in determination of Tariff. The Commission increased the rate of return 


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on equity from 14 per cent to 16 per cent and the applicable rate would be pre-tax or 

net of tax. The return on equity for the first time was worked out after grossing up to 

ensure post-tax return of 16 per cent. The Commission after considering the parameters 

specified in the Tariff Regulations, 2009 and the amendments to the Income Tax Act 

announced in the Union Budget 2009-10 fixed the Tariff for Wind Power Plans to be 

Commissioned during the FY 2009-10 at Rs. 4.28/kwh in respect of the districts of 

Jaisalmer, Barmer and Jodhpur and Rs. 4.50/kwh for other districts. The Commission 

observed that the preferential Tariff determined for Wind Power Projects would be 

applicable for procurement of power by distribution licensees towards fulfilment of 

their Renewable Purchase Obligation (RPO) as per Section 86(1)(e) of the Electricity 

Act, 2003. The Commission was of the view that it was fully convinced that any 

increase in “Feed-in-Tariff” over and above around 15 per cent being allowed in the 

said order dated 16 th July, 2009 would be unreasonable. Then came the order dated 

31 st March, 2010. This order refers to the earlier order dated 16 th July, 2009 and 

observes that the Tariff so fixed in that order is linked to the indexation mechanism 

specified under Regulation 85 of the Tariff Regulation, 2009, as such the levelised 

Tariff for the Wind Energy Project, for the FY 2010-11 will be Rs. 3.83/kwh for 

Jaiselmer, Barmer and the district of Jodhpur and Rs. 4.03/kwh for other districts. 

Annexure–I to this order is the detailed computations of indexation mechanism 

and determination of Tariff for FY 2010-11. Under the indexation formula, the average 

wholesale price index for cement and steel for the years 2008-09 have been taken 

into consideration as parameters together with capital cost escalation factor for 

FY 2010-11. 

18. Mr. M.G. Ramachandran, learned Advocate appearing for the Appellants while 

assailing the impugned order dated 6 th August, 2010 argued as follows: 

(a) There is no prohibition in the Tariff Regulations from considering other 

factors as enumerated therein that may affect the capital cost of the generating 

station or such other norms and parameters having implications on the Tariff 

determined. 

(b) In terms of the Regulations, 2009 the norms and parameters for determination 

of Tariff for the sale of electricity by the Wind Energy Project to the Distribution 

Licensee would cover Part III and Part VII. 

(c) In the order dated 16 th July, 2009 the Commission did not provide the 

details of the calculation of the Tariff so determined or the norms applied for 

in such determination. 

(d) The order dated 16 th July, 2009 cannot be applicable mutatis mutandis in the 

matter of determination of Tariff for the Wind Energy Projects to be Commissioned 

during the FY 2010-11. A full-fledged order has to be passed for determination 

of Tariff for the projects to come up FY 2010-11 in the manner as was done in 

order dated 16 th July, 2009 and strictly in terms of the Regulations, 2009. 

(e) The order dated 31 st March, 2010 which has been reviewed by the order 

dated 6 th August, 2010 did not apply the principle enshrined in Part III of the 

Tariff Regulations, particularly with regard to return on equity by applying 

the applicable tax rate, repayment of loan equal to applicable rate of depreciation 

in terms of the Tariff Regulation and also the operating and maintenance 

expenditure by applying the escalation factor. 

(f) The indexation formula specified in Regulation 85 takes into account steel 

and cement indices and the interest rate applicable and the Tariff is indexed 

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accordingly, but, the said Regulation 85 does not deal with any other element 

of Tariff which are dealt with separately in other parts of the Tariff Regulations. 

(g) The State Commission could not deny that the Regulations dealing with 

the return on equity, namely Regulation 21(4) falling under Part III of the 

Tariff Regulation has not been given effect to. 

(h) Non-challenge to the order dated 16 th July, 2009 and 6 th July, 2010 which is 

the main focus of the reply of Respondents is immaterial in view of the fact 

that what is being challenged is the order dated 6 th August, 2010 which came 

by way of review of the order dated 31 st March, 2010. The order dated 

6 th August, 2010 merged in the order dated 31 st March, 2010 whereby, Tariff for 

the projects to come up during FY 2010-11 was fixed and the said order is 

challenged and the Appellants are not required to challenge the order dated 

16 th July, 2009 which relates to the determination of Tariff for the projects to 

come up by FY 2009-10. Non-challenge to the order dated 6 th July, 2010 is 

again of no consequence in view of the said order having partaken the character 

of an interlocutory order or admission order whereby the two petitions as 

aforesaid were admitted for hearing though not on all points but, on a single 

element. But the Tribunal is required to examine whether the order dated 

31 st March, 2010 or for that matter the order dated 6 th August, 2010 satisfies all 

the requirements of law as laid down in the Tariff Regulations, 2009 and 

whether the Commission construed harmoniously all the provisions of the 

Regulations to the exclusion of no one and whether the view of the Commission 

that for determination of Tariff for the succeeding financial years within the 

control period of 2009 to 2014, it is the mere indexation formula laid down in 

Regulation 85 is in consonance with the spirit of the law. In this connection 

reference has been made to the decision Satyadhyan Ghosal and Ors. v. Smt. Deorajin 

Debi and Anr. 1 reported in AIR 1960 SC 941. 

(i) It is argued that no provision of the statute can be read in isolation to the 

other provisions of the same statute and the decisions of the Hon’ble Supreme 

Court in Kailash Chandra and Anr. v. Mukund Lal and Anr. 2 (2002) 2 SCC 678 

and D. Sanjeevayya v. Election Tribunal (1967) 2 SCR 489 have been cited in this 

regard. 

(j) The order dated 16 th July, 2009 may be taken as a reference but, the said 

order is restricted to the FY 2009-10, not to be extended for FY 2010-11 and 

cannot be applied as res judicata. 

(k) The contention of the Commission if accepted would lead to the result that 

even a project developer who sets up a generating station, say, in FY 2012-13 

would have no remedy since he has not challenged the order dated 16 th July, 2009. 

(l) The questions being questions of law, the Tribunal which is to examine both 

the questions of fact and law are to ensure that the Tariff determination for 

wind projects to come up during FY 2010-11 satisfies the requirements of law. 

(m) On the question of return on equity, the Commission has not taken the 

correct rate of income tax as applicable for the FY 2010-11. The issue is more 

01009 

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1 Ed.: MANU/SC/0295/1960: (1960) 3 SCR 590 

2 Ed.: MANU/SC/0049/2002: AIR 2002 SC 829: 2002 2 AWC (Supp) 912 SC: JT 2003 (2) SC 

9: 2002 (1) SCALE 425: (2002) 1 SCR 605 


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in the nature of arithmetical calculation to be done and taking the correct rate 

of tax as applicable from year to year. The Appellants have provided for the 

relevant changes required in the consequent calculations on account of the 

income tax rate applicable. 

(n) On the question of consideration of the quantum of repayment of loan and 

depreciation, the Commission has not corrected the mistake in the base Tariff 

while computing the Tariff applicable for the projects to be de-commissioned 

during the FY 2010-11. Regulation 22(3) mandates that the repayment for each 

year shall be deemed to be equal to the depreciation allowed for that year. The 

Commission also made arithmetical mistake in the calculation of repayment 

of loan and depreciation rate. The depreciation was considered by the 

Commission at Rs. 27.72 lacs per annum, while calculating the repayment of 

loan, the amount has been taken at Rs. 36.75 lacs per annum. This error does 

not only affect the projects Commissioned in the year 2009-10 which the order 

dated 16 th July, 2009 relates to but, also affect the base considered by the 

Commission in the order dated 31 st March, 2010. No party ought to suffer on 

account of any act or error on the part of the Court and reliance has been 

placed on the decision in Tilak Raj v. Baikunthi Devi 3 AIR 2009 SC 2136 and 

S. Satnam Singh and Ors. v. Surender Kaur Anr. reported in 2009 (15) SCALE 626. 

(o) As regards, the escalation factor for operation and maintenance expenses, 

Regulation 25(4) provides for escalation at two stages. Escalation @ 5.2 per cent 

is to be applied over the base operation and maintenance expenses and the 

same is also subject to revision on account of wholesale price index for 

subsequent years at the stage of true-up. 

19. The learned Advocate for the Respondent Nos. 2-4, Mr. K.L. Nandwani submitted 

as follows: 

(a) The present appeal is not maintainable because in the two petitions being 

Nos. 220-221 of 2010, the Appellants prayed for invocation of removal of 

difficulties clause in the Tariff regulations in the matter of review of the order 

dated 31 st March, 2010 and by the order dated 6 th July, 2010 the Commission 

discarded all the pleas except the one on taxes/duties. 

(b) The order dated 6 th July, 2010 has not been challenged in any forum. 

(c) All the three issues regarding the rate of income tax and surcharge in the 

calculation on return on equity, repayment of loan equivalent to depreciation 

allowable as per regulation and alleged non-application of the escalation factor 

in connection with O & M expenditure have all been dealt with in detail by 

the Commission in its order dated 16 th July, 2009 which has become final. 

(d) Since Regulation 85 does not permit taking into consideration any other 

head, the same was not considered by the Respondent No. 1 and all other 

factors were considered for a period of 20 years. 

(e) The Commission has already passed the order dated 6 th August, 2010 

considering the applicable rate of income tax and for surcharge and the 

Commission after evaluating the various aspects of the issue has come to clear 

conclusion that any rate higher than what has been worked out would lead to 

3 Ed.: MANU/SC/0224/2009: 2009 (3) ALD 23 (SC): 2009 4 AWC (Supp) 3551 SC: 2009 (4) 

BomCR 570: JT 2009 (2) SC 629: 2009 (3) SCALE 741: (2010) 12 SCC 585: (2009) 3 SCR 452 

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undue additional burden on the consumer and would be appropriate in the 

larger interest of the parties and the consumers. The Commission followed 

cost plus approach in working out Tariff and return on equity has recently 

been increased from 14 per cent to 16 per cent and that too would be pre-taxed 

as against tax liability. This coupled with the incentives built in parameters 

and norms of regulation would lead to substantial enhancement in incentive 

for wind energy developers. The Tariff worked out even after accounting for 

accelerated depreciation amounts to an increase of around 15 per cent over 

the last Tariff and thus, would jump by unreasonably higher level of around 

34 per cent without such accounting. As a feed in Tariff would be applicable 

for 20 years, any increase in the feed in Tariff over and above 15 per cent being 

allowed in this order would be highly unreasonable. The Tariff higher than 

feed in Tariff would lead to undue additional burden on the consumer. 

(f) With respect to repayment of loan equivalent to depreciation, rate has been 

specified at par with the conventional generation projects in Tariff Regulations, 2009. 

(g) With respect to escalation charges, the parameters have been specified in 

Regulation 83(6) and provision towards contingency reserve as claimed by 

the objector has not been envisaged in case of Wind Energy Projects. 

20. Mr. R.K. Mehta, learned Counsel for the Commission made the following 

submissions: 

(a) The Commission by the order dated 31 st March, 2010 reviewed the Tariff for 

the projects to come up during 2010-11 incorporating the changes due to 

variation in the rate of Minimum Alternate Tax and revised the Tariff accordingly, 

and therefore, nothing survives further in the appeal. 

(b) The generic Tariff for wind power plants to be Commissioned in the 

FY 2009-10 was determined by the Commission in the order dated 16 th July, 2009 

and the financial parameters as stipulated Part-III of the Regulations were 

duly considered by the Commission and the Tariff for the year 2009-10 is the 

base Tariff which is to be indexed as per formula contained in Regulation 85 

for the purpose of determining Tariff for wind power plants to be Commissioned 

in subsequent years of the control period. The indexation formula does not 

provide for any changes like escalation in O&M expenses, interest on long-term 

loan etc. 

(c) The issues relating to escalation in O&M expenditure and repayment of 

loan equivalent to depreciation could not be re-opened since they stood settled 

in the order dated 16 th July, 2009 whereby, Tariff was determined for the power 

plants to be Commissioned during FY 2009-10. 

(d) The Appellant cannot challenge the Regulations before this Tribunal. The 

Commission in exercise of inherent powers under Tariff Regulations, 2009 

incorporated the impact of change in the MAT rate in the year 2010-11. 

(e) As regards non-consideration of surcharge on MAT, it was considered for 

the first year and discontinued from the second year onwards because the 

levelised Tariff would remain valid for a period of 20 years. 

(f) The plea of clerical error is a new plea not raised in the applications filed 

before the Commission. 

(g) The order dated 6 th July, 2010 which was passed under Section 111 of the 

Electricity Act was not challenged. 


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(h) Regulation 83(6) clearly provides that for the base year of the MYT control 

period, the financial principles as stipulated under Part-III of the Regulations 

shall be applicable and Regulation 85 provides for automatic Tariff revision 

for the projects to be Commissioned during the control period. Therefore, there 

is no scope for once again applying the financial principles in Part-III at that 

stage. 

(i) With regard to O&M expenses, escalation has been provided for @ 5.72 per cent. 

21. Having heard the submissions of the learned Counsel for the parties, it is necessary 

to dispose of technical points raised by the Respondents. The first point that the 

order dated 16 th July, 2009 whereby, the Tariff for the base year during the control 

period 2009-14was passed has attained finality and is beyond challenge, even if 

there be any clerical mistake therein is not impressive and is unsustainable because 

a wind power project developer Commissioning a project within the control period 

subsequent to the FY 2009-10 will not be in a position to know the deficiencies and 

mistakes occurring in the Tariff determination order dated 16 th July, 2009 and the 

door cannot be shut upon him when he raises any mistakes or deficiencies in the 

base Tariff order. It has rightly been submitted by Mr. Ramachandran that the 

arguments of the Respondents would lead to an absurd situation when a developer 

sets up his generating station in the year 2012-12 or 2013-14. As to non-challenge to 

the order dated 6 th July, 2010 whereby the two Petitions No. 220 and 221 of 2010 

were admitted for hearing only on one point while discarding the other points, the 

law is very clear in this respect. The order dated 6 th July, 2010, it has to be remembered, 

is not the final order disposing of the aforesaid two petitions. It is infact an admission 

order for hearing on a issue to the exclusion of the others. The decision in Satyadhan 

Ghosal and Ors. v. Sm. Deorajin Debi and Anr. (ibid) is very eloquent in this respect. 

Their Lordships of the Supreme Court refers to the decision of the Privy Council in 

Maharaja Moheshur Singh v. The Bengal Government (1850) 7 M.I.A 283 wherein, the 

Privy Council observed as follows: 

We are of opinion that this objection cannot be sustained. We are not aware of 

any law or regulation prevailing in India which renders it imperative upon the 

suitor to appeal from every interlocutory order by which he may conceive himself 

aggrieved, under the penalty, if he does not so do, of forfeiting for ever the 

benefit of the consideration of the Appellate Court. No Authority or precedent 

has been cited in support of such a proposition, and we cannot conceive that 

anything would be more detrimental to the expeditious administration of justice 

than the establishment of a rule which would impose upon the suitor the necessity 

of so appealing; whereby on the one hand he might be harassed with endless 

expense and delay, and on the other inflict upon his opponent similar calamities. 

We believe there have been very many cases before this Tribunal in which their 

Lordships have deemed it to be their duty to correct erroneous interlocutory 

orders, though not brought under their consideration until the whole cause had 

been decided, and brought hither by appeal for adjudication. 

Therefore, even if there has been any clerical mistake or mistake by oversight or 

inadvertence in the base Tariff order dated 16 th July, 2009 or in the order dated 

31 st March, 2010 or in the order dated 6 th July, 2010, all are liable to be corrected 

through appeal against the impugned order dated 6 th August, 2010 in view of the 

fact that the pivotal point for consideration is whether Tariff determination for the 

wind power plants to be Commissioned in any financial year subsequent to the 

FY 2009-10 has been correctly determined in terms of the Regulations, 2009. 

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22. Part-III of the Tariff Regulations, 2009 contains Regulations 17-34 of which 

Regulations 21, 22, 23 and 25 have been pressed into service by the learned Counsel 

for the Appellant. Part-VII of the Tariff Regulation, 2009 deals with Tariff for renewable 

energy generating stations and regulations 80, 81, 82, 83 and 85 are relevant for 

consideration vis-à-vis the ones referred to in Part-III. An apparent misgiving should 

be steered cleared of. The Regulations 21, 22, 23 and 25 that occur in Part-III of the 

Regulations and which we have read above are supposed to have been taken 

cognizance of while determining the Tariff for the wind power project to be 

Commissioned during the FY 2009-10. Irrespective of whether any particular provision 

of the aforesaid regulations in Part-III have been omitted or not in the base year 

Tariff order dated 16 th July, 2009, the relevant regulations in Part III are equally 

applicable for Tariff determination in respect of the wind power plants due to be 

Commissioned in the subsequent years within the control period. Therefore, it is not 

that the financial principles in Part III are reserved only for the wind power plants 

to be Commissioned during the FY 2009-10. Therefore, if a certain provision of the 

financial Regulations is found to have not been applied for in the Tariff order 2009-10 

then there is no point saying that the Tariff order for the subsequent years based 

on the base Tariff order must endure the sufferance; and this seems to be the 

argument of the learned Counsel for the Respondent No. 1. It is one thing to say 

that since the base Tariff order dated 16th July, 2009 on which the Tariff order 

dated 31 st March, 2010 for the projects to come up by 2010-11, since reviewed by 

the order dated 6 th August, 2010 is based on the financial norms duly applied for 

in the base Tariff order need not be repeated in the subsequent Tariff order within 

the control period, while it is another thing to say that the Commission or for that 

matter the Tribunal need not be conscious of the applicability of the financial 

principles in the matter of determination of Tariff for any subsequent financial 

year within the control period. It cannot be the position of law that regulations in 

Part III are totally irrelevant in respect of the Tariff order to be passed for the 

subsequent financial years in respect of the wind power plants. When the question 

arises as to the meaning of a certain provision in a statute, it is not only legitimate 

but, proper to read that provision in its context which means the statute as a 

whole. Every clause of the statute should be construed with reference to the context 

and other clauses of the Act so as to make a consistent meaning of the whole 

statute. In the instant case, we do not find any apparent irreconcilability among 

the different provisions of the Regulations. What is required is harmonious 

construction of the Regulations as a whole and when we do so we are to observe 

that the Regulations are applicable for any Tariff order in respect of any wind 

power project to be Commissioned within the MYT control period. 

23. Regulation 1(2) makes the said regulations applicable for determination of Tariff 

in all cases covered under these regulations for MYT control period FY 2009-10 to 

the FY 2013-14. Regulation 83(6) lays down the performance parameters for Tariff 

determination of wind power plants of the MYT control period FY 2009-10 and all 

the parameters falling under Part III have been laid down for applications in the 

matter of determination for the base year of the MYT control period 2009-10. Included 

under Regulation 83(6) are base capital cost, CUF, O&M expenses, depreciation, 

working capital and interest on long-term loan. With regard to depreciation, it is 

said to be as per Regulation 23 and Appendix 1. Appendix 1 is a depreciation 

schedule. In respect of O&M expenses, it is 1.25 per cent of the base capital cost and 

in terms of Regulation 25(4) normative O&M expenses allowed at the commencement 

of control period, i.e. FY 2009-10 is liable to be escalated @ 5.72 per cent per annum. 


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With regard to return on equity we have earlier noted that it will be through grossing 

up the base rate with the tax rate equivalent to MAT for first ten years. With regard 

to repayment of loan, such repayment shall be deemed to be equal to depreciation 

allowed for a particular year. 

24. Now, let us see how the Tariff has been determined for the base year in the order 

dated 16 th July, 2009. The Commission is found to be conscious of the position that 

the principles for Tariff determination for wind power plants as also bio-mass power 

plants to be Commissioned during the control period of FY 2009-10 to 2013-14 have 

been outlined in the Part VII of the Regulations. At Paragraph 19 of the order, the 

Commission observed that any rate higher than what has been worked out in the 

said order would lead to undue additional burden on the consumer. Paragraph 20 

is relevant and we quote below: 

Paragraph 20. The reasons, which have led to the said conclusion have been 

discussed in detail under heading “Applicable Tariff: Wind Energy Projects”. 

Some of the main points worth consideration are as under: 

(i) The Commission has been following cost plus approach in working out 

Tariff and the return on equity has been recently increased from 14 per 

cent to 16 per cent and that too would be pre-tax as against the tax liability 

earlier accruing on the investor. This coupled with other incentive built in 

the parameters and norms of Regulations dated 23 rd January, 2009 would 

lead to substantial enhancement in incentive for wind energy developers 

than was the position obtaining during earlier Tariff determination. 

(ii) The Tariff worked out even after accounting for accelerated depreciation 

amounts to an increase of around 15 per cent over the last Tariff and this 

would jump up by unreasonably higher level of around 34 per cent without 

such accounting. What ultimately matters is the rate of sale of energy 

and increase in rate of around 15 per cent is quite reasonable and adequate 

in facilitating investment. Commission is of the considered opinion that 

the distribution licensee should not be obligated to buy power at a rate 

higher than this on account of adverse implication on consumers. 

(iii) The Tariff worked out in this order even after adjustment for Low 

Capacity Utilisation Factor in Rajasthan is comparable and amongst the 

best in the country including rate allowed by the State, which have attracted 

considerable investment in recent past. 

(iv) As a “feed in Tariff” would be applicable for 20 years and the rate 

worked out for the current year would not be subject to review through 

truing up on annual basis, as is the case in respect of conventional power 

and therefore, ignoring implication of material gain currently available 

would be unfair. 

(v) Even independent of adjustment in calculation the Commission fully 

convinced that any increase in “feed in Tariff” over and above of around 

15 per cent being allowed in this order would be highly unreasonable, 

as already mentioned earlier. 

25. With regard to repayment of term loan, the Commission observed that in the 

earlier Tariff regulation there was a provision to allow difference between repayment 

of term loan and admissible depreciation by way of advance against depreciation 

which have been dispensed with. The Commission further observed that the 

depreciation rate for renewable projects have been specified at par with the depreciation 

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01015 

rate for conventional generation project and further the depreciation norm as specified 

by the regulations is based on CERC Regulations, 2009. 

26. With respect to O&M expenses, the Commission observed that the Tariff 

determination for the wind energy projects have been specified under Regulation 86 

and no provision towards contingencies reserve is allowable. 

27. Regulation 85 clearly provides that under generic Tariff determination mechanism 

automatic Tariff revision through Tariff Indexation Mechanism as outlined in the 

said Regulation 85 shall be allowed by the Commission for wind energy projects 

to be Commissioned during the control period and the parameters for indexation 

shall be normative capital cost and long-term prime lending rate of the State Bank 

of India. Accordingly, treating the Tariff order dated 16 th July, 2009 to be the base 

Tariff order the Commission applied the indexation formula to come to the levelised 

Tariff at Rs. 3.83/kwh for the districts of Jaisalmer, Barmar and Jodhpur and 

Rs. 4.03 for other districts. The calculation sheet is Annexure D which is said to 

have been obtained by the Appellant by making an application dated 28 th April, 2010. 

The order dated 31 st March, 2010 is the Tariff order for FY 2010-11 of the control 

period 2009-14 and it is based on the base Tariff order dated 16 th July, 2009. 

Apparently, the financial principles of Part III of the Regulations 2009 appear to 

have been taken note of while determining the Tariff order for FY 2010-2011 on 

the basis of indexation formula. It has been rightly said by the learned Counsel for 

the Commission that application of financial principles in Part III for the second 

time does not arise. The submissions of Mr. Ramachandran that the other elements 

of Tariff which have been dealt with separately elsewhere in the Tariff Regulations 

are required to be considered are difficult to accept because the indexation 

mechanism for Tariff determination for the subsequent years is intrinsically linked 

to the base Tariff order dated 16 th July, 2009 which followed all the relevant provisions 

of the Regulations 2009. 

28. It is the submission of the Appellant that the State Commission while determining 

the Tariff has not taken the correct rate of income tax as applicable for the year 

2010-11 and the issue is in the nature of arithmetical calculations to be done and 

the Tariff is to be adjusted taking into account the applicable rate of tax from year to 

year. The Commission in exercise of power to remove difficulty in Regulation 134 

modified its order dated 31 st March, 2010 with regard to variation in the rate of 

MAT and revised the order dated 31 st March, 2010 in terms of the Regulations, 2009 

which we have reproduced in Paragraph 9 of this Judgment and we do not repeat 

the same once again. 

29. Now, what remained with the Appellant to agitate is that the Commission has 

committed error in not taking into account the surcharge on MAT for 2 nd to 10th year, 

on income tax for eleventh to 20th year, the impact of effective rate of corporate tax 

on calculating accelerated depreciation benefit where it is to be considered with 

surcharge and Cess from first year to twentieth year and lastly the impact of effective 

rate of MAT and corporate tax on interest on working capital. This point was raised 

before the Commission but, has not been decided. According to Mr. Mehta, the 

Commission did not consider the surcharge on MAT from 2 nd to 20 th year because 

the MAT alongwith surcharge was considered for the first year as per prevailing 

rate and it was expected at that time that the levelised Tariff would remain valid for 

a period of 20 years and the surcharge may not continue during such period. On 

critical examination of the Regulations, 2009 vis-à-vis the order dated 16 th July, 2009 


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it appears that the order dated 31 st March, 2010 is a levelised Tariff determination 

order based on the base Tariff order dated 16 th July, 2009. Within the control period 

during FY 2009-10 to 2013-14 all Tariff determination orders that would be passed 

subsequent to the base Tariff order for 2009-10 will have uniformity amongst themselves 

as also with the base Tariff order dated 16 th July, 2009. Whatever components have 

been allowed in the base Tariff order have necessarily been followed and will be 

followed in the subsequent Tariff orders except the variation in the cost of cement, 

coal and lending rate of SBI that relate to capital cost of a wind power project. 

Surcharge on MAT was not considered from 2 nd to 20 th year alike in the base Tariff 

order. If surcharge on MAT is to be allowed for 2 nd to 20 th Year in the case of the 

Appellant then the project developers who Commissioned wind power plants in FY 

2009-10 will be discriminated against. Since the levelised Tariff is not subject to true 

up and the amount of surcharge varies from year to year, noticeably by decrease, it 

is not possible for the Commission to consider surcharge of MAT from 2 nd to 20 th 

year. Mr. Mehta, learned Advocate for the Commission argued not unjustifiably that 

the Government proposes through Direct Tax Code elimination of surcharge and 

surcharge for the FY 2009-10 has been reduced to for the FY 2010-11. 

30. It is brought to our notice that the depreciation was considered by the Commission 

at Rs. 27.72 lac the said quantum was required to be considered as a repayment of 

loan in terms Regulation 22(3) of the Tariff Regulations but, the calculation sheet 

shows that quantum has been taken at Rs. 36.75 lac. (vide Page 120 read with 126 

of the appeal paper book which are calculation sheets attached to the order dated 

16 th July, 2009). This anomaly has to be eradicated so as to make the order truly in 

spirit with the Regulations. These mistakes must be corrected and the decision of 

Tilak Raj and that of S. Satnam Singh (ibid) are pointers to this. 

31. With regard to O&M expenses, the Commission followed Regulation 25(4) to 

provide escalation @ 5.72 per cent per annum. The grievance of the Appellant is 

that the further provision that the same shall be subject to revision on account of 

annual escalation linked to WPI in the subsequent years for the purpose of true up 

has not been followed. The levelised generic Tariff is not subject to true-up and in 

the case of wind power projects this provision cannot be made applicable. In any 

case, in the levelised base Tariff for FY 2009-10 escalation of O&M cost at 5.72 per cent 

per annum has been provided and therefore the O&M escalation as provided in the 

base Tariff also gets passed on to the Tariff for the projects to be Commissioned 

during FY 2010-11. Therefore, the Appellants contention is not tenable. 

32. So far we have considered all the issues raised in this appeal and to summarise 

our findings we hold as follows: 

(a) The Commission did not follow the provisions of the Tariff Regulation for 

calculation of the repayment of loan amount which would be equal to the 

amount of depreciation allowable annually and the same has to be corrected 

by the Commission and we direct accordingly. 

(b) Save what is stated in (a) the Commission followed the provisions of the 

Tariff Regulations, 2009 by the principle of harmonious construction of the 

different provisions thereof. 

(c) Commission applied the correct rate of MAT for the purpose of grossing up 

the rate of return on equity. 

(d) Commission duly considered the escalation in O&M expenses as per the 

Regulations. 

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National Thermal Power Corporation Ltd., New Delhi v. CERC, New Delhi and Ors. 


01017 

(e) Part-III of the Regulations, 2009 have been taken note of for determination 

of Tariff for the projects to be Commissioned during FY 2010-11. No consideration 

does arise in the instant case in respect of regulation 134 which the Commission 

has already applied in the order dated 6 th August, 2010 for rectification of the 

mistake occurred in the order dated 31 st March, 2010 and the same has not 

been challenged in the appeal. 

(f) For the purpose of determination of Tariff for any subsequent year within 

the control period the base Tariff order dated 16 th July, 2009 has to be made 

applicable read with indexation mechanism as provided in Regulation 85 

and while doing so the misconception that the provisions of Part-III of the 

regulations are not considered is misplaced. 

(g) The indexation formula was accordingly devised to incorporate such changes 

as were considered necessary in determination of Tariff for subsequent years. 

33. In the result, the appeal succeeds in part on the point indicated in Paragraph 30 

of this order and as crystallised in Sub-paragraph (a) of Paragraph 32 and we direct 

the Commission to rectify the mistake. No cost. 

d 

e 

2011 ELR (APTEL) 1017* 




v. 



DECIDED ON: 31.05.2011 

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Whether allowance undischarged liability was justified? 

Held, the issue already stands decided and covered in favour of the NTPC by the 

judgments namely (a) judgment dated 16 th March, 2009 in Appeal No. 133 and 135 

etc. of 2008, NTPC v. CERC and Ors. 2009 ELR (APTEL) 337 and (b) Judgment dated 

10 th December, 2008 in Appeals No. 151 & 152 of 2007, NTPC v. CERC and Ors. 2008 

ELR (APTEL) 916, wherein it was held that since the words “actual expenditure 

incurred” contained in Regulation 17 of the Regulations of 2004 only rational 

interpretation would be that the Appellant would be required to recover the actual 

capital expenditure incurred without the reference to the actual cash flow. Even 

though the Central Commission has followed this ratio and allowed the undischarged 

liability, it has made wrong calculations thereby it disallowed the undischarged 

liability in respect of the amount of Rs. 15,591.00 and 26,821.00 lacs. The Central 

* MANU/ET/0096/2011 


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Commission accordingly directed to correct the mistake and make a correct calculation 

and to pass consequential orders accordingly. 

Whether disallowance of interest during construction (IDC) was justified? 

Held, as held in the judgments namely, (a) Judgment dated 16 th February, 2009 in 

Appeal Nos. 133 and 135 of 2008 NTPC v. CERC and Ors. 2009 ELR (APTEL) 337 

and (b) Judgment dated 10 th December, 2008 in Appeals No. 151 and 152 of 2007 

NTPC v. CERC and Ors. 2008 ELR (APTEL) 916, the“First-in First-Out” method cannot 

be adopted but the NTPC is entitled to claim deemed interest on such a loan which 

is repaid during the construction from internal accruels over and above equity 

contribution. The Central Commission in the impugned order disallowed the same 

by making wrong calculations and accordingly, the, Central Commission to correct 

the calculations and pass the appropriate order. 

Whether equating depreciation to normative loan payment was justified? 

Held, according to the Appellant, the Central Commission continued to adjust 

depreciation against normative loan repayment despite the judgment by this Tribunal 

in favour of the Appellant in Appeal No. 133, 135 etc. of 2008 dated 16 th March, 2009 

and in Appeal No. 139/140 of 2006 dated 13 th June, 2007, which were in line with 

the judgment of Hon’ble Supreme Court in Delhi Electricity Regulatory Commission 

v. BSES Yamuna Power Limited and Ors. The Central Commission accordingly to consider 

the decisions of the Tribunal and to accordingly pass the consequential order. 

Whether recovery of Depreciation up to 90 per cent was justified? 

Held, this issue held to be covered in favour of the Appellant by the judgment dated 

13 th June, 2007 in Appeal No. 139/140 of 2006, wherein it was decided that it will 

be only fair to allow the unpaid portion of the depreciation after plant has lived its 

designated useful life. Despite the directions of the Tribunal in the above issues, the 

Central Commission continued to adjust depreciation against the normative loan 

repayment and has not dealt with the issue of depreciation up to 90 per cent. As the 

mere pendency of the Appeal against the judgment of this Tribunal in the Hon’ble 

Supreme Court cannot be taken as a ground for not following the ratio decided by 

this Tribunal which has not yet been set aside by the Hon’ble Supreme Court that 

apart, the impugned order does not deal with the claim of the Appellant with regard 

to the issue dealing with depreciation. The approach was held to be wrong. The 

ratio which has been decided in the earlier decision by the Tribunal is binding 

precedent to the Central Commission to follow the same till the said decision is set 

aside. Accordingly, the said issues c & d are answered in favour of the Appellant. 

Whether exclusion of cost of initial spares for determination of maintenance spares 

for computing interest on working capital was justified? 

Held, even though the Regulation 51(e) refers to the Regulation 21(v)(a)(iv), the 

same had not been taken into consideration by the Central Commission to give the 

finding on this issue. The Central Commission has not followed this Regulation 

quoted which states the value of the maintenance spares should be taken at 1 per cent 

of the historical cost escalated at 6 per cent per annum from the date of commercial 

operation. The Central Commission excluded the cost of initial spares from the 

historical capital cost on which the working capital is calculated even though such 

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276 


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01019 

cost of initial spares duly formed part of capital cost as per the Regulation 21(v)(a)(iv) 

of the Tariff Regulation. Therefore, the findings on this issue in the impugned order 

is set aside. The Central Commission is directed to pass a consequential order in the 

light of the Regulations referred to above. Accordingly, this issue is decided. 

Appeal allowed 

b 

c 

d 

e 



[p. 1020, para 3 a] 


[p. 1020, para 3 a] 



2 SCR 747 (Mentioned) [p. 1020, para 7 d] 


Tariff Regulation 


Regulation 21(v)(a)(iv) [p. 1021, para 13 g] 

Regulation 51(e) [p. 1021, para 14 h] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Swapna Seshhadri and 

Anand K. Ganesan, Advs. 

For Respondents/Defendant: Nikhil Nayyar, Swapnil Verma, Daleep Kumar Dhyani, 

Manoj Dubey and Pradeep Misra, Advs. 

JUDGMENT 

f 

g 

h 

i 


1. NTPC Limited is the Appellant herein. It and the present Appeal has been filed 

as against the impugned order dated 5 th July, 2010 passed by the Central Electricity 

Regulatory Commission (Central Commission) determining the Tariff for Unit I for 

the period 1 st August, 2008 to 29 th December, 2008 and Units I and II (Combined) for 

the period 31 st December, 2008 to 31 st March, 2009 of Kahalgaon Super Thermal 

Power Station Stage-II. 

2. Aggrieved over the some of the aspects decided by the Central Commission 

disallowing the claim of the Appellant, this Appeal has been filed raising the following 

issues: 


(b) Disallowance of interest during construction (IDC): 

(c) Equating depreciation to normative loan payment 

(d) Recovery of Depreciation up to 90 per cent 

(e) Exclusion of cost of initial spares for determination of maintenance spares 

for computing interest on working capital. 

3. According to the Appellant, the First Issue with regard to undischarged liability 

has already been decided and covered in favour of the NTPC by the following judgments: 


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01020 


(a) Judgment dated 16 th March, 2009 in Appeal No. 133 and 135 etc of 2008, 


(b) Judgment dated 10 th December, 2008 in Appeals No. 151 & 152 of 2007, 


4. In these decisions, it has been held by this Tribunal that since the words “actual 

expenditure incurred” contained in Regulation 17 of the Regulations of 2004 only 

rational interpretation would be that the Appellant would be required to recover the 

actual capital expenditure incurred without the reference to the actual cash flow. 

Even though the Central Commission has followed this ratio and allowed the 

undischarged liability, it has made wrong calculations thereby, it has disallowed 

the undischarged liability in respect of the amount of Rs. 15,591.00 and 26,821.00 lacs. 

Therefore, the Central Commission is directed to correct the mistake and make a 

correct calculation and pass consequential orders accordingly. 

5. The next issue is disallowance of interest during construction. According to the 

Appellant, the Central Commission has disallowed the interest during construction 

on account of repayment of loan during construction over and above equity due to 

the following of average method of loan repayment by the Appellant instead of 

giving a logical adjustment to the same. This also has been covered in the following 

judgments: 

(a) Judgment dated 16 th February, 2009 in Appeal Nos. 133 and 135 of 2008 


(b) Judgment dated 10 th December, 2008 in Appeals No. 151 and 152 of 2007 


6. In these decisions, it has been held that the “First-in First-Out” method cannot be 

adopted but the NTPC is entitled to claim deemed interest on such a loan which is 

repaid during the construction from internal accruels over and above equity 

contribution. Even though this ratio has been followed, the Central Commission in 

the impugned order has disallowed the same by making wrong calculations. Therefore, 

Central Commission is directed to correct the mistakes by making correct calculations 

and pass the appropriate order. 

7. The next issue is Equating Depreciation Against normative loan repayment. 

According to the Appellant, the Central Commission has continued to adjust 

depreciation against normative loan repayment despite the judgment by this Tribunal 

in favour of the Appellant in Appeal No. 133, 135 etc. of 2008 dated 16 th March, 2009 

and in Appeal No. 139/140 of 2006 dated 13 th June, 2007. These decisions were in 

line with the judgment of Hon’ble Supreme Court in 2007 (3) SCC 33. 3 Therefore, the 

Central Commission will consider the ratio decided by this Tribunal and pass the 

consequential order. 

8. The next issue is recovery of depreciation up to 90 per cent. This issue has been 

covered in favour of the Appellant by the judgment dated 13 th June, 2007 in Appeal 

No. 139/140 of 2006. In this decision, it has been specifically held as under: 

a 

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c 

d 

e 

f 

g 

h 

1 Ed.: MANU/ET/0020/2009 

2 Ed.: MANU/ET/0071/2008 

3 Ed.: Delhi Electricity Regulatory Commission v. BSES Yamuna Power Limited and Ors. MANU/ 

SC/7117/2007: JT 2007 (8) SC 409: 2007 (3) SCALE 289: (2007) 2 SCR 747 

i 

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01021 

However, the same cannot be denied forever, and therefore, it will be only fair to 

allow the unpaid portion of the depreciation after plant has lived its designated 

useful life. 

9. Despite the directions of the Tribunal in the above issues, the Central Commission 

has continued to adjust depreciation against the normative loan repayment and 

has not dealt with the issue of depreciation up to 90 per cent. It is contended by the 

Learned Counsel for the Respondent that this judgment of the Tribunal dated 

13 th June, 2007 has been challenged in the Appeal before the Hon’ble Supreme Court 

and the same is pending. As the mere pendency of the Appeal against the judgment 

of this Tribunal in the Hon’ble Supreme Court can not be taken as a ground for not 

following the ratio decided by this Tribunal which has not yet been set aside by the 

Hon’ble Supreme Court that apart, the impugned order doe not deal with the claim 

of the Appellant with regard to this issue dealing with depreciation. This approach 

is wrong. The ratio which has been decided in the earlier decision by the Tribunal 

is binding precedent to the Central Commission to follow the same till the said 

decision is set aside. Accordingly, the said issues c & d are answered in favour of 


10. The next issue is exclusion of cost of initial spares for determination of maintenance 

spares for computing interest on working capital. This issue is a new issue which 

needs to be decided. 

11. According to the Appellant, the Central Commission has wrongly excluded the 

cost of initial spares from the historical capital cost on which working capital is 

calculated when such cost of initial spares duly form part of the capital cost within 

the scope of the Regulations. 

12. According to the Respondent, the cost of initial spares have to be deducted from 

the capital cost for considering the grant of maintenance spares. 

13. Let us quote the relevant portion of the findings in the impugned order: 

(51) Working capital has been calculated considering the following elements: 

(a) Fuel Cost…. 

(b) Secondary Fuel Oil…. 

(c) O&M Expenses…. 

(d) Spares: As per Regulation 21(v)(a)(iv) maintenance spares @ 1 per cent 

of the historical cost escalated @ 6 per cent per annum, from the date of 

commercial operation is permissible. Accordingly, the spare requirement 

has been worked out on admissible capital cost as on the date of 

commercial operation after deduction of the cost of initial spares on the 

particular date. 

(e) Receivables…. 

(f) Rate of interest on working capital 

14. Even though the Regulation 51(e) refers to the Regulation 21(v)(a)(iv) the same 

has not been taken into consideration by the Central Commission to give the finding 

on this issue. Let us now cite the Regulation 21(v)(a)(iv) of the Tariff Regulation 

which reads as under: 

(v) Interest on Working Capital 

(a) Working Capital shall cover Coal based/Lignite fired generating stations 


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01022 


(i) xxx xxx xxx 

(ii) x x x x x x x x x 

(iii) x x x x x x x x x 

(iv) Maintenance spares @ 1 per cent of the historical cost escalated 

@ 6 per cent per annum from the date of commercial operation; and 

(v) xxx xxx xxx 

15. Admittedly, the Central Commission has not followed this Regulation quoted 

above which states the value of the maintenance spares should be taken at 1 per cent 

of the historical cost escalated at 6 per cent per annum from the date of commercial 

operation. This would make it clear that the Central Commission excluded the cost 

of initial spares from the historical capital cost on which the working capital is 

calculated even though such cost of initial spares duly formed part of capital cost 

as per the Regulation 21(v)(a)(iv) of the Tariff Regulation. 

16. Therefore, the findings on this issue in the impugned order is set aside. The 

Central Commission is directed to pass a consequential order in the light of the 

Regulations referred to above. Accordingly, this issue is decided. 

17. In view of the reasonings given in the above paragraphs, the order impugned is 

set aside and the Central Commission is directed to implement the findings given 

by us in this judgment. 

18. The Appeal is allowed and the impugned order is set aside. However, there is 

no order as to costs. 

a 

b 

c 

d 

e 

2011 ELR (APTEL) 1022* 




Resident Executive 

v. 

Orissa Electricity Regulatory Commission and North Eastern Electricity Supply 

Company, of Orissa Limited, Bhubaneswar 

[Alongwith Appeal No. 103 of 2010 and IA Nos. 137 and 138 of 2010 and 

Appeal No. 112 of 2010 and IA Nos. 150 and 151 of 2010] 

f 

g 

APPEAL NO. 102 OF 2010 AND IA NO. 136 OF 2010 

DECIDED ON: 30.05.2011 

Coram 

Rakesh Nath, Member (Technical) and P.S. Datta, J. Member (Judicial) 


Whether the State Commission has erred in not determining the Tariff of the Appellants 

based on the actual cost of supply according to the provisions of the Act, the Policy 

and the Regulations? 

h 

i 

* MANU/ET/0097/2011 

280 


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c 

d 

e 

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i 

Tata Steel Limited, Mumbai v. Orissa Electricity Regu. Comm. and Anr., Bhubaneswar 


01023 

Held, if the cross-subsidy calculated on the basis of cost of supply to the consumer 

category is not increased but, reduced gradually, the Tariff of consumer categories 

is within ±20 per cent of the average cost of supply except the consumers below 

the poverty line. Tariffs of different categories of consumers are differentiated only 

according to the factors given in Section 62(3) and there is no Tariff shock to any 

category of consumer, no prejudice would have been caused to any category of 

consumers with regard to the issues of cross-subsidy and cost of supply raised in 

this appeal. The State Commission has expressed difficulties in determining cost 

of supply in view of non-availability of metering data and segregation of the network 

costs. There was no need to make distinction between the distribution charges of 

identical consumers connected at different nodes in the distribution network. It 

would be adequate to determine the voltage-wise cost of supply taking into account 

the major cost element, which would be applicable to all the categories of consumers 

connected to the same voltage level at different locations in the distribution system. 

The State Commission accordingly directed to determine cross-subsidy for different 

categories of consumers within next six months from FY 2010-11 onwards and 

ensure that in future orders for ARR and Tariff of the distribution licensees, crosssubsidies 

for different consumer categories are determined according to the directions 

given in this judgment and that the cross-subsidies are reduced gradually as per 

the provisions of the Act. 

Whether the Tariff of the Appellant being Extra High Voltage (EHV) consumer getting 

supply directly through the transmission system of the transmission licensee should 

include the elements of fixed charges relating to the distribution network of the 

distribution licensee and the distribution system losses? 

Held, according to the Tariff Policy, the Tariff of all categories of consumers except 

those below poverty line have to be within ± 20 per cent of the total average cost of 

supply. The variation of Tariffs of different category with respect to average cost of 

supply held to be as not correctly determined by the State Commission. The State 

Commission erred in clubbing different consumer categories having different Tariff 

in one category based on voltage of supply. Also for the Appellants’ category average 

Tariff per unit has been incorrectly determined at assumed load factor of 80 per cent. 

The State Commission was directed to determine the average Tariff for Appellant’s 

another category according to the directions given in Paragraphs 39 and 40. 

Accordingly, the matter was remanded to the State Commission to re-determine the 

variation of average Tariff for different consumer categories with respect to average 

cost of supply and provide consequential relief to Appellant’s consumer category in 

terms of the Tariff policy, if any, after hearing all concerned. 


Kashi Vishwanath Steel Limited v. Uttaranchal Electricity Regulatory Commission and 

Ors. (Mentioned) [p. 1034, para 27 h] 

Multiplex Association of India v. Maharashtra Electricity Regulatory Commission and 

Anr. (Mentioned) [p. 1034, para 27 h] 

SIEL Limited, New Delhi v. PSERC and Ors. MANU/ET/0024/2006: 2007 ELR (APTEL) 

931 (Mentioned) [p. 1034, para 27 g] 

Spencer’s Retail Limited v. Maharashtra Electricity Regulatory Commission and Ors. 2007 

ELR 9 (APTEL 1592) (Mentioned) [p. 1034, para 27 g] 


281

01024 



Electricity Regulatory Commissions Act, 1998 [p. 1026, para 9 i] 


Section 3(2) [p. 1027, para 12 h] 

Section 28(2) [p. 1035, para 28 a] 




Section 42(2) [p. 1028, para 13 f] 




Section 61(c) [p. 1031, para 24 h] 

Section 61(e) [p. 1031, para 24 h] 

Section 61(g) [p. 1025, para 4 g] 

Section 61(i) [p. 1032, para 24 c] 

Section 62 [p. 1031, para 24 h] 

Section 62(2) [p. 1030, para 18 f] 

Section 62(3) [p. 1031, para 22 e] 

Section 86(4) [p. 1027, para 12 h] 


Orissa Electricity Regulatory Commission (Terms and Conditions for Determination 

of Tariff) Regulations, 2004, Regulation 7(c)(iii) [p. 1030, para 21 i] 

Counsel 

For Appellant/Petitioner/Plaintiff: Ashok Parija, Sr. Adv., M.G. Ramachandran, 

Swapna Seshdari, R.M. Patnaik and P.P. Mohanty, Advs. 

For Respondents/Defendant: Suresh Tripathy, Adv. for R 2 and Rutwik Panda, 

Adv. for OERC 

a 

b 

c 

d 

e 

f 

JUDGMENT 


1. Appeal Nos. 102, 103 and 112 of 2010 have been filed by M/s. Tata Steel Ltd., 

M/s. Ferro Alloys Corporation Ltd. and M/s. Balasore Alloys Limited respectively 

against the Order dated 20 th March, 2010 of Orissa Electricity Regulatory Commission 

determining the Annual Revenue Requirements and Retail Supply Tariff for the Financial 

Year 2010-11 of the North Eastern Electricity Supply Company Limited, the distribution 

licensee. The State Commission is the Respondent No. 1. The distribution licensee 

which supplies electricity to the Appellants is the Respondent No. 2. 


2.1. The Appellants are operating Ferro Alloy plants and are Extra High Voltage 

(EHT) consumers of Respondent No. 2/distribution licensee. Even though the 

Appellants are the consumers of the distribution licensee, their premises are 

connected to the transmission lines and network of the Orissa Power 

Transmission Corporation Limited, the transmission licensee and the electricity 

is transmitted to the Appellants through the network of the transmission licensee. 

g 

h 

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d 

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01025 

2.2. The Appellants earlier had agreements with the distribution licensee for 

power supply at special rate up to 9 th December, 2004. The State Commission 

by order dated 22 nd March, 2005 allowed the special Tariff to these industries 

for a period of three years. Thereafter, by order dated 20 th March, 2008, the 

State Commission withdrew the special Tariff. 

2.3. Aggrieved by the above Order dated 20 th March, 2008, the Appellants filed 

a writ petition, being WP No. 6625 of 2008 before the High Court of Orissa. 

The High Court in its judgment dated 16 th March, 2010 refused to interfere 

with the State Commission’s order relating to the special Tariff but, directed 

the State Commission to strictly comply with the requirement of Sections 61 

and 62 of the 2003 Act and the Regulations of the State Commission while 

fixing the Tariff for the FY 2010-11. The State Commission was also directed to 

fix the cost of supply at various voltage levels and also indicate the cost for 

each category and indicate the extent of cross-subsidy existing and the plan of 

action to reduce it over a period of time as envisaged in the 2003 Act and the 

Regulations. 

2.4. In the meantime, on 30 th November, 2009, the distribution licensee filed 

petition, being Petition No. 142 of 2009 for determination of its ARR and Tariff 

before the State Commission for the FY 2010-11. In response to the above petition, 

the Appellants filed objections and reiterated the need to give concessional 

Tariff to Ferro Alloy units, determination of category wise and voltage wise 

cost of supply and reducing the cross-subsidy. 

2.5. The State Commission by its order dated 20 th March, 2010 decided the 

ARR and retail supply Tariff of the distribution licensee for the FY 2010-11. 

In this Tariff order, the State Commission did not determine the voltage-wise 

or category-wise cost of supply and has determined the cross-subsidy for Extra 

High Voltage (EHV), High Voltage (HV) and Low Voltage (LV) consumers 

with respect to average cost of supply for the state as a whole. The State 

Commission also increased the cross-subsidy for the Appellant’s category with 

respect to the previous year. Aggrieved by this order, the Appellants have filed 

these appeals. 

3. As the impugned order and the issues raised in the appeals are common, a 

common judgment is being rendered. 

4. The Appellants have made the following submissions: 

4.1 Section 61(g) of the 2003 Act mandates that the State Commission while 

determining the Tariff shall be guided by the objective that the Tariff 

progressively reflects the cost of supply of electricity and also the cross-subsidies 

are reduced. However, without regard to the mandate that the Tariff should 

progressively reflect the cost of supply, the State Commission has not determined 

the cost of supplying electricity to the Appellants at 132 KV by use of the 

transmission system alone, which would not involve any cost to the distribution 

licensee except negligible expense of raising the bills and recovery of charges. 

4.2 Thus, the Appellants could not be loaded of the costs and expenses of the 

distribution licensee except the limited cost of the raising of bills and recovery 

of amount, interest on working capital and the proportionate rate of return on 

equity. The State Commission has wrongly loaded the Appellants with the 

distribution system losses with which the Appellants have no relation 

whatsoever. 


283

01026 


4.3 The State Commission has erred in not determining the voltage-wise cost 

of supply in the case of Appellants on the ground that in the absence of 

metering of all consumers, the Commission has to base its Tariff design on 

average cost of supply. The State Commission instead of following mandate of 

the Electricity Act to reduce the cross-subsidy gradually has determined the 

Tariff in the manner so as to increase the cross-subsidy level. 

5. The learned Counsel for the State Commission argued in support of the findings 

of the State Commission and stated that the State Commission had balanced the 

interest of various stakeholders while determining the Tariff and dealing with the 

issue of cross-subsidisation. The learned Counsel for the Respondent No. 2 has also 

argued in support of the impugned order. He also urged that Appellants were 

earlier getting concessional Tariff due to their status as export-oriented units. These 

industries with the passage of time have lost their status as export oriented unit 

and, therefore, not entitled to the concessional Tariff. Even otherwise, the concessional 

Tariff was applicable up to March, 2008 by the order of the State Commission. 

6. After considering the contentions of the parties, we have framed the following 


(i) Whether the State Commission has erred in not determining the Tariff of the 

Appellants based on the actual cost of supply according to the provisions of 

the Act, the Policy and the Regulations? 

(ii) Whether the Tariff of the Appellant being Extra High Voltage (EHV) consumer 

getting supply directly through the transmission system of the transmission 

licensee should include the elements of fixed charges relating to the distribution 

network of the distribution licensee and the distribution system losses? 

7. Both the questions are interwoven and therefore, we have to take them up together. 

8. According to the learned Counsel for the Appellant, the State Commission has 

not considered the actual cost of supply for the category of consumers contrary to 

the provisions of the Act, Regulations and the directions given by the High Court of 

Orissa in the judgment dated 16 th March, 2010. The State Commission is not right in 

holding that it is not possible to determine category-wise cost of supply in case of 

Appellant’s category of consumers due to lack of data. On the contrary, the distribution 

licensee itself in its filing had duly given the category wise cost of supply to the 

State Commission. Further, the Appellants’ category of consumers are being supplied 

electricity from the transmission network of the transmission licensee without any 

intervention or use of the system of the distribution licensee, therefore, it is not 

difficult for the State Commission to determine cost of supply in their case. 

9. We will first examine the provisions of the Act, the Policy and the Regulations 

relating to cost of supply and cross-subsidy. The relevant extracts from the Statement 

of Objects and Reasons of the 2003 Act are reproduced as under: 

1.3. Over a period of time, however, the performance of SEBs has deteriorated 

substantially on account of various factors. For instance, though power to fix 

Tariffs vests with the State Electricity Boards, they have generally been unable 

to take decisions on Tariffs in a professional and independent manner and 

Tariff determination in practice has been done by the State Governments. 

Cross-subsidies have reached unsustainable levels. To address this issue and 

to provide for distancing of government from determination of Tariffs, the 

Electricity Regulatory Commissions Act was enacted in 1998”. 

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01027 

4. The main features of the Bill are as follows: 

(vi) The State Electricity Regulatory Commissions may permit open access 

in distribution in phases with surcharge for 

(a) current level of cross-subsidy to be gradually phased out along with 

cross-subsidies. 

10. The relevant provisions of the Electricity Act, 2003 are reproduced as under: 

61. Tariff Regulations—The Appropriate Commission shall, subject to the 

provisions of this Act, specify the terms and conditions for the determination 

of Tariff, and in doing so, shall be guided by the following, namely: 


(b) the generation, transmission, distribution and supply of electricity are 

conducted on commercial principles; 

(c) xxx xxx xxx 

(d) safeguarding of consumers’ interest and at the same time, recovery of the 

cost of electricity in a reasonable manner; 

(e) xxx xxx xxx 

(f) xxx xxx xxx 

(g) that the Tariff progressively reflects the cost of supply of electricity, and 

also, reduces cross-subsidies within the period to be specified by the Appropriate 

Commission; 

(h) xxx xxx xxx 

(i) the National Electricity Policy and Tariff policy. 

Thus, one of the factors guiding the determination of Tariff will be that it 

progressively reflects the cost of supply. Also the cross-subsidies have to be reduced 

progressively. 

11. Section 62(3) of the 2003 Act stipulates as under: 

(3) The Appropriate Commission shall not, while determining the Tariff under 

this Act, show undue preference to any consumer of electricity but, may 

differentiate according to the consumer’s load factor, power factor, voltage, 

total consumption of electricity during any specified period or the time at 

which the supply is required or the geographical position of any area, the 

nature of supply and the purpose for which the supply is required. 

Thus, one of the factors on which the Tariffs for different categories of consumers 

could be differentiated is voltage. 

12. Section 86(4) of the Electricity Act is reproduced as under: 

(4) In discharge of its functions the State Commission shall be guided by the 

National Electricity Policy, National Electricity Plan and Tariff policy published 

under Sub-section (2) of Section 3. 

13. The Tariff Policy provides as under: 

8.3 Tariff design: Linkage of Tariffs to cost of service. 

It has been widely recognised that rational and economic pricing of electricity 

can be one of the major tools for energy conservation and sustainable use of 

ground water resources. 


285

01028 


In terms of the Section 61(g) of the Act, the Appropriate Commission shall be 

guided by the objective that the Tariff progressively reflects the efficient and 

prudent cost of supply of electricity. 

xxx xxx xxx 

Accordingly, the following principles would be adopted: 

(1) In accordance with the National Electricity Policy, consumers 

below poverty line who consume below a specified level, say 30 units 

per month, may receive a special support through cross-subsidy. 

Tariffs for such designated group of consumers will be at least 50 

per cent of the average cost of supply. This provision will be 

re-examined after five years. 

(2) For achieving the objective that the Tariff progressively reflects 

the cost of supply of electricity, the SERC would notify roadmap 

within six months with a target that latest by the end of year 2010-2011 

Tariffs are within ±20 per cent of the average cost of supply. The 

road map would also have intermediate milestones, based on the 

approach of a gradual reduction in cross-subsidy. 

For example, if the average cost of service is Rs. 3 per unit, at the end of 

year 2010-2011 the Tariff for the cross-subsidised categories excluding 

those referred to in Para 1 above should not be lower than Rs. 2.40 per unit 

and that for any of the cross-subsidising categories should not go beyond 

Rs. 3.60 per unit. 

Thus, the Tariff Policy envisages that the Tariff should progressively reflect 

the efficient and prudent cost of supply of electricity and latest by 2010-11 the 

Tariffs for all categories of consumers except the consumers below poverty 

line should be within ±20 per cent of the average cost of supply. 

The Tariff Policy indicates determination of cross-subsidy in the context of 

determination of cross-subsidy surcharge for open access under Para 8.5. The 

relevant extract is reproduced below: 

Accordingly, when open access is allowed the surcharge for the purpose 

of Sections 38, 39, 40 and Sub-Section 2 of Section 42 would be computed 

as the difference between (i) the Tariff applicable to the relevant category 

of consumers and (ii) the cost of the distribution licensee to supply electricity 

to the consumers of the applicable class. In case of a consumer opting for 

open access, the distribution licensee could be in a position to discontinue 

purchase of power at the margin in the merit Order. Accordingly, the 

cost of supply to the consumer for this purpose may be computed as the 

aggregate of (a) the weighted average of power purchase costs (inclusive 

of fixed and variable charges) of top 5 per cent power at the margin, 

excluding liquid fuel based generation, in the merit Order approved by 

the SERC adjusted for average loss compensation of the relevant voltage 

level and (b) the distribution charges determined on the principles as 

laid down for intra-state transmission charges. 

Surcharge formula: 

S = T – [C(1+L/100) + D] 

Where 

S is the surcharge 

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01029 

T is the Tariff payable by the relevant category of consumers; 

C is the Weighted average cost of power purchase of top 5 per cent at the 

margin excluding liquid fuel based generation and renewable power 

D is the Wheeling charge 

L is the system Losses for the applicable voltage level, expressed as a 

percentage. 

Thus, the cross-subsidy surcharge according to Tariff Policy for open access consumer 

has to be the difference between the applicable Tariff and the cost of the distribution 

licensee to supply electricity for the applicable class of consumer. The distribution 

system losses applied in the surcharge formula are also the system losses for the 

applicable voltage level. 

14. The National Electricity Policy notified by the Central Government provides as 

under: 

5.5.1 There is an urgent need for ensuring recovery of cost of service from 

consumers to make the power sector sustainable. 

5.5.3 Over the last few decades cross-subsidies have increased to unsustainable 

levels. Cross-subsidies hide inefficiencies and losses in operations. There is 

urgent need to correct this imbalance without giving Tariff shock to consumers. 

The existing cross-subsidies for other categories of consumers would need to 

be reduced progressively and gradually. 

Thus, the policy provides for progressive and gradual reduction of the cross-subsidies 

of the subsidising consumers, without giving Tariff shock to the subsidised consumers. 

15. The State Commission’s Tariff Regulations of 2004 refer to computation of 

cross-subsidy with reference to determination of surcharge. The relevant section is 


(7) Tariff Principles 


(b) xxx xxx xxx 

(c) Surcharge 

(i) Surcharge to be levied on wheeling consumers shall be determined 

by the Commission keeping in view the loss of cross-subsidy from 

the consumers or category of consumers who have opted for open 

access to take supply from a person other than the incumbent 

distribution licensee. 

(ii) The Commission may adopt requisite principle for computing 

surcharge, which shall compensate for the entire loss of cross-subsidy 

for any given consumer category for which supply is given, as the 

Act clearly states that such surcharges shall be utilised to meet the 

requirements of current level of cross-subsidy. The entire amount of 

cross-subsidy lost by the incumbent licensee needs to be compensated. 

(iii) For the purpose of computing cross-subsidy, the difference 

between cost-to-serve of that category and average Tariff realisation 

of that category shall be considered. 

Thus, according to the Regulations of the State Commission, the open 

access consumer has to compensate for the entire loss of cross-subsidy 


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for the given consumer category. The cross-subsidy will be computed as 

the difference between cost to serve the concerned category of consumers 

and average Tariff realisation of that category of consumers. 

16. In view of above provisions of the Act, National Electricity Policy, Tariff Policy 

and the Regulations, we have to find answer to the question whether the Tariff of 

the Appellants should be based on average cost of supply or actual cost of supply 

to the Appellant’s consumer category, which we shall do in the following paragraphs. 

17. Section 61(g) of the 2003 Act stipulates that the Tariff should progressively 

reflect the cost of supply and cross-subsidies should be reduced within the time 

period specified by the State Commission. The Tariff Policy stipulates the target for 

achieving this objective latest by the end of year 2010-11, such that the Tariffs are 

within ± 20 per cent of the average cost of supply. In this connection, it would be 

worthwhile to examine the original provision of the Section 61(g). The original 

provision of Section 61(g) “the Tariff progressively reflects the cost of supply of 

electricity and also, reduces and eliminates cross-subsidies within the period to be 

specified by the Appropriate Commission” was replaced by “the Tariff progressively 

reflects the cost of supply of electricity and also reduces cross-subsidies in the manner 

specified by the Appropriate Commission” by an amendment under Electricity 

(Amendment) Act, 2007 w.e.f. 15 th June, 2007. Thus, the intention of the Parliament 

in amending the above provisions of the Act by removing provision for elimination 

of cross-subsidies appears to be that the cross-subsidies may be reduced but, may 

not have to be eliminated. The Tariff should progressively reflect the cost of supply 

but, at the same time the cross-subsidy, though may be reduced, may not be eliminated. 

If strict commercial principles are followed, then the Tariffs have to be based on the 

cost to supply a consumer category. However, it is not the intent of the Act after the 

amendment in the year 2007 (Act 26 of 2007) that the Tariff should be the mirror 

image of the cost of supply of electricity to a category of consumer. 

18. Section 62(2) provides for the factors on which the Tariffs of the various consumers 

can be differentiated. Some of these factors like load factor, power factor, voltage, 

total electricity consumption during any specified period or time or geographical 

position also affects the cost of supply to the consumer. Due weightage can be given 

in the Tariffs to these factor to differentiate the Tariffs. 

19. The National Electricity Policy provides for reducing the cross-subsidies 

progressively and gradually. The gradual reduction is envisaged to avoid Tariff shock 

to the subsidised categories of consumers. It also provides for subsidised Tariff for 

consumers below poverty line for minimum level of support. Cross subsidy for such 

categories of consumers has to be necessarily provided by the subsidising consumers. 

20. The Tariff Policy clearly stipulates that for achieving the objective that the Tariff 

progressively reflects the cost of supply of electricity, latest by the end of the 

year 2010-11, the Tariffs should be within ±20 per cent of the average cost of supply, 

for which the State Commission would notify a road-map. The road map would 

also have intermediate milestones for reduction of cross-subsidy. 

21. According to the Tariff Regulation 7(c)(iii) of the State Commission the 

cross-subsidy has to be computed as difference between cost-to-serve a category of 

consumer and average Tariff realisation of that category. 

22. After cogent reading of all the above provisions of the Act, the Policy and the 

Regulations we infer the following: 

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(i) The cross-subsidy for a consumer category is the difference between cost to 

serve that category of consumers and average Tariff realisation of that category 

of consumers. While the cross-subsidies have to be reduced progressively and 

gradually to avoid Tariff shock to the subsidised categories, the cross-subsidies 

may not be eliminated. 

(ii) The Tariff for different categories of consumer may progressively reflect the 

cost of electricity to the consumer category but, may not be a mirror image of 

cost to supply to the respective consumer categories. 

(iii) Tariff for consumers below the poverty line will be at least 50 per cent of 

the average cost of supply. 

(iv) The Tariffs should be within ±20 per cent of the average cost of supply by 

the end of 2010-11 to achieve the objective that the Tariff progressively reflects 

the cost of supply of electricity. 

(v) The cross-subsidies may gradually be reduced but, should not be increased 

for a category of subsidising consumer. 

(vi) The Tariffs can be differentiated according to the consumer’s load factor, 

power factor, voltage, total consumption of electricity during specified period 

or the time or the geographical location, the nature of supply and the purpose 

for which electricity is required. 

Thus, if the cross-subsidy calculated on the basis of cost of supply to the consumer 

category is not increased but, reduced gradually, the Tariff of consumer categories 

is within ±20 per cent of the average cost of supply except the consumers below the 

poverty line, Tariffs of different categories of consumers are differentiated only 

according to the factors given in Section 62(3) and there is no Tariff shock to any 

category of consumer, no prejudice would have been caused to any category of 

consumers with regard to the issues of cross-subsidy and cost of supply raised in 

this appeal. 

23. On these principles, we will examine if any prejudice has been caused to the 

Appellants in determining their Tariff in the impugned order. 

24. First, we will examine the relevant findings of the State Commission in the 

impugned order which are reproduced as under: 

(373) Thus, as per the Order of the Hon’ble High Court, the Commission is 

required to indicate the cost of supply for each category and extent of crosssubsidy 

existing and plan of action to reduce it to over a period of time as 

envisaged in Section 61(g) of the Electricity Act, 2003 and Regulation 7(c)(iii) 

of OERC (Terms and Conditions for Determination of Tariff) Regulations, 2004. 

(374) With regard to fixation of cost of supply it may be stated that as per 

Section 62 of the Electricity Act, 2003, the Commission is required to determine 

the Retail Tariff to be charged by Distribution Licensees from its consumers. 

The Commission while determining the Tariff is required to give consideration 

to the factors (load factor, power factor, voltage etc.) listed in Section 62(3), 

61(c) and 61(e) of the Electricity Act, 2003 which are essentially cost determinants. 

Economically efficient Tariff should consider the cost impact of these factors 

only without providing for any cross-subsidies. The Electricity Act, 2003 

recognises the fact that Tariff of some consumer categories are presently below 

the cost of supply and being cross-subsidised by other categories. Therefore, it 

is desirable that a Tariff shock due to abrupt elimination of cross-subsidy for 


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such consumers should be avoided. Hence, it provides for progressive reduction 

of cross-subsidy and does not provide for elimination of cross-subsidy. 

It terms of Section 61(g) of electricity Act, 2003, the appropriate Commission 

shall be guided by the objective that the Tariff progressively reflects the efficient 

and prudent cost of supply of electricity and also reduces cross-subsidies in 

the manner specified by the Commission. Para 8.3.2 of Tariff Policy enjoins 

that for achieving the objective that Tariff progressively reflects the cost of 

supply of electricity, the SERC would notify road map within 6 months with a 

target that latest by the end of year 2010-11 Tariffs are within ±20 per cent of 

the “average cost of supply”. 

(376) Section 62 of the Electricity Act, 2003 empowers OERC to determine 

Tariff for retail sale of electricity. While doing so, the Commission is to be 

guided by National Electricity Policy and Tariff Policy under the provision of 

Section 61(i) of the said Act. We have already discussed the provisions regarding 

the reduction of cross-subsidy in the above two Policies of the Central Govt. 

The terms cross-subsidy has not been defined in the Electricity Act, 2003, the 

National Electricity and Tariff Policy. None of them also provide for methodology 

for computing cross-subsidy. The amount of cross-subsidy received/contributed 

by various consumer categories is dependent on the way the cost of supply is 

calculated. Such calculation may be: 

• Average cost of supply 

• Cost of supply voltage wise 

• Cost of supply to various consumer categories. 

Depending upon the mode of calculation adopted, the cross-subsidy differs. 

However, the Clause 8.3 of the Tariff Policy requires Tariff to be within 

± 20 per cent of the average cost of supply by 2010-11. Again as per para 5.5.2 

of the National Electricity Policy, the Tariff for consumers of BPL category 

should be at least 50 per cent of the average (overall) cost of supply. From 

conjoint reading of the above provisions of National Tariff Policy and Electricity 

Policy, the cost of supply can be construed to mean the average cost of supply 

by the Licensee at different voltage taken together. 

(377) Some consumer groups argue in favour of determination of cost of supply 

by consumer category-wise. But voltage-wise cost determination is the first step in 

determining the consumer-wise cost of supply. For voltage-wise cost determination, 

it is important that the accounting system of the Licensee are oriented towards 

capturing costs voltage-wise at the point of origin as and when these are incurred. 

The Commission has also emphasised the requirement for segregation of network 

cost in terms of voltage level (LT, HT and EHT). This has not been possible due to 

various reasons – such as determination of voltage-wise and consumer categorywise 

technical and non-technical losses, essential for determining cost of supply. 

In the absence of 100 per cent working meters at the level of consumers and 

distribution transformer, it is quite impossible to determine the exact percentage 

of loss both at technical and commercial level. The distribution network of Orissa 

is such that it is technically not possible to segregate the common cost between 

different voltage levels. The accounting system of the DISCOMs may also be required 

to establish a basis for allocating common costs to all the voltage level which they 

have not been able to do till date. The submission of DISCOMs regarding cost 

allocation during Tariff filing does not have technical or commercial data support. 

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01033 

There will be a conjectural element in the determination of cost of supply in spite 

of all scientific rigours, especially because the distribution and transmission network 

are unsegregated. Because of such conjectural element estimates of cost of supply 

would differ from one stakeholder to another. Therefore, it would be prudent to 

accept the average overall cost of supply for the whole State as envisioned in 

Tariff Policy and National Electricity Policy for computation of cross-subsidy. 

The State Commission has expressed difficulties in determining the voltage-wise 

cost of supply in the absence of 100 per cent metering at the level of consumers and 

distribution transformers. The State Commission has also held that the submissions 

of distribution companies regarding cost allocation in the Tariff filing do not have 

technical and commercial data support. The State Commission has also concluded 

that from the conjoint reading of the Tariff Policy and National Electricity Policy, 

the cost of supply can be construed to mean the average cost of supply. Therefore, 

the State Commission has considered it prudent to accept the average overall cost of 

supply for computation of cross-subsidy. 

25. Further, the State Commission by the impugned order (Para 379) has categorised the 

consumers into three categories on voltage basis, viz. Extra High Tension (EHT), High 

Tension (HT) and Low Tension (except the sub-categories of Kutir Jyoti, Domestic Irrigation 

Pumping, Allied Agricultural Activities, Allied Agro Industrial Activities and General 

Purpose), each category being given uniform retail Tariff for the entire state, irrespective 

of the distribution licensee supplying electricity to the consumer. Cross-subsidy has 

been provided to all the above sub-categories except the general purpose. The crosssubsidy 

is provided by general purpose LT consumers, HT consumers and EHT consumers. 

26. The State Commission has further discussed the computation of cross-subsidy 

in Para 381 to 383 of the impugned order, the relevant portion of which are reproduced 

below: 

As already pointed out above, for retail Tariff the “average cost of supply” is 

worked out on the basis of pooled power purchase cost of GRIDCO for the 

whole State following principles laid down in Tariff Policy and National 

Electricity Policy, and the cost of distribution for the whole State is added 

thereto. Cross-subsidy is derived from the excess/deficit of this State-wide 

retail Tariff so calculated above/below the said average cost of supply. The 

State-wide retail Tariff here is the Tariff for each of the three categories of 

consumers namely EHT, HT and LT. This complies with Regulation 7(c)(iii) of 

the OERC (Terms and Conditions for Determination of Tariff), Regulations, 2004, 

enacted earlier than the Tariff Policy. The provisions state: 

For the purpose of computing cross-subsidy the difference between 

cost-to-serve that category and the average Tariff realisation of that category 

shall be considered. 

In the context of the present rationalised Tariff the word “category” in 

the above provision denotes EHT, HT and LT but, “cost-to-serve that 

category” as per the aforesaid method of calculation from pooled power 

purchase cost, would turn out to be the same figure for each such category. 

It is noteworthy that the above provision is not region-specific, i.e. costto-serve 

is not to be calculated region-wise for distribution areas of NESCO, 

WESCO, SOUTHCO and CESU. 

383. Regarding the extent of cross-subsidy existing at various voltage 

levels, let us examine how far the Commission have kept cross-subsidy 


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within ± 20 per cent of the average cost of supply as mandated in Para 8.3.2 

of Tariff Policy. 

Table 42 

Year Level of Average cost Tariff Cross- Percentage 

Voltage of supply for (P/U) Subsidy of Crossthe 

State as (P/U) subsidy 

a whole (P/U) or cost above/ 

of supply below 

(1) (2) (3) (4) 5=(4)-(3) (6) 

2009-10 EHT 263 295.05 32.05 (+) 12.18 

HT 308.68 45.68 (+) 17.36 

LT 179.99 (–) 83.01 (-) 31.56 

2010-11 EHT 327.37 379.93 52.00 (+) 15.88 

HT 383.68 56.31 (+) 17.20 

LT 219.21 (-)108.16 (-) 33.03 

Thus, the State Commission has held that the cross-subsidy has to be worked out as 

difference between Tariff for the category of consumer and average cost of supply 

for the state as a whole. The average Tariff of HT and EHT consumers, has been 

worked out with energy consumption at assumed load factor of 80 per cent instead 

of average Tariff realisation of the respective categories according to the ARR. With 

the above calculations, the State Commission established that the Tariffs are within 

± 20 per cent of average cost of supply in consonance with the Tariff Policy. 

27. We do not agree with the findings of the State Commission that the cost to 

supply a consumer category is the same as average cost of supply for the distribution 

system as a whole and average cost of supply can be used in calculation of crosssubsidy 

instead of cost to supply. This is contrary to Regulation 7(c)(iii) of the State 

Commission. Learned Counsel for the Appellants has argued that the Appellants 

being EHT consumers get power supply directly through the transmission system 

without the use of the distribution system of the licensee and therefore, the distribution 

losses should not be loaded on their Tariff. He also relied on decision of this Tribunal 

on the principle of reducing cross-subsidy in the following judgments: 

SIEL limited, New Delhi v. Punjab Electricity Regulatory Commission and Ors. 1 2007 

APTEL 931; Spencer’s Retail Limited v. Maharashtra Electricity Regulatory Commission 

and Ors. 2007 ELR 9 (APTEL 1592); Spencer’s Retail Limited v. Maharashtra Electricity 

and Ors. 2007 (Order dated 18 th February, 2008); Kashi Vishwanath Steel Limited v. 

Uttaranchal Electricity Regulatory Commission and Ors. (order dated 2 nd June, 2006); 

Spencer’s Retail Limited v. Maharashtra Electricity and Ors. (order dated 

27 th January, 2009); Multiplex Association of India v. Maharashtra Electricity Regulatory 

Commission and Anr. (Order dated 19 th January, 2009) and Spencer’s Retail Ltd. v. 

Maharashtra Electricity Regulatory Commission and Anr. (order dated 1 st July, 2009). 

28. of the above judgments of this Tribunal, 2007 APTEL 931 Siel Limited v. PSERC 

and Ors. has a clear finding on the cost of supply. The relevant extracts of the 

judgment are reproduced below: 

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(109) According to Section 61(g) of the Act of 2003, the Commission is required 

to specify the period within which cross-subsidy would be reduced and eliminated 

so that the Tariff progressively reflects the cost of supply of electricity. Under 

Section 28(2) of the Act of 1998, the Commission while prescribing the terms 

and conditions of Tariff was required to safeguard the interests of the consumers 

and at the same time, it was to ensure that the consumers paid for the use of 

the electricity in a manner based on average cost of supply. The word “Average” 

preceding the words “cost of supply” is absent in Section 61(g) of the Act of 

2003. The omission of the word “Average” is significant. It indicates that the 

cost of supply means the actual cost of supply, but, it is not the intent of the 

legislation that the Commission should determine the Tariff based on cost of 

supply from the date of the enforcement of the Act of 2003. Section 61(g) of the 

Act of 2003 envisages a gradual transition from the Tariff loaded with 

cross-subsidies to a Tariff reflective of cost of supply to various class and 

categories of consumers. Till the Commission progressively reaches that stage, 

in the interregnum, the roadmap for achieving the objective must be notified 

by the Commission within six months from 6 th January, 2006, when the Tariff 

Policy was notified by the Government of India, i.e. by 6 th July, 2006. In consonance 

with the Tariff Policy, by the end of the year 2010-11, Tariffs are required to be 

fixed within ±20 per cent of the average cost of supply (pooled cost of supply 

of energy received from different sources). But the policy has reached only up 

to average cost of supply. As per the Act, Tariff must be gradually fine tuned 

to the cost of supply of electricity and the Commission should be able to reach 

the target within a reasonable period of time to be specified by it. Therefore, for 

the present, the approach adopted by the Commission in determining the average 

cost of supply cannot be faulted. We, however, hasten to add that we disapprove 

the view of the Commission that the words “Cost of Supply” means “Average 

Cost of Supply. 

(110) Keeping in view the provisions of Section 61(g), which requires Tariff to 

ultimately reflect the cost of supply of electricity and the National Tariff Policy, 

which requires Tariff to be within ± 20 per cent of the average cost of supply, 

it seems to us that the Commission must determine the cost of supply, as that 

is the goal set by the Act. It should also determine the average cost of supply. 

Once the figures are known, they must be juxtaposed, with the actual Tariff 

fixed by the Commission. This will transparently show the extent of crosssubsidy 

added to the Tariff, which will be the difference between the Tariff per 

unit and the actual cost of supply. 

This Tribunal in the above judgment has held that the cost of supply as indicated in 

Section 61(g) is not the average cost of supply but, the actual cost of supply and the 

cross-subsidy is the difference between the Tariff fixed by the State Commission and 

the actual cost of supply. 

29. The State Commission has indicated in the impugned order that the voltage-wise 

cost determination is the first step in determining the consumer-wise cost of supply 

but, has expressed difficulties in determination of voltage-wise cost of supply due 

to non-segregation of costs incurred by the licensee related to different voltage levels 

and determination of technical and commercial losses at different voltage levels due 

to non-availability of meters. The State Commission has also noted that the data 

submitted by the distribution licensee does not have technical or commercial data 

support. 


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30. It is regretted that even after six years of formation of the Regulations, the State 

Commission has not been able to establish data for the distribution losses. The 

position of metering in the distribution system of Respondent No. 2 is pathetic. 

Only about 1 st /4 th of 11 KV feeders have been metered and very small numbers of 

transformers have been provided with meters. Only 68 per cent of the consumer 

meters are functional in the distribution system as indicated in Table 37 of the 

impugned order. It is also noticed that a large number of meters are old electro 

mechanical meter which are not functioning. This is in contravention to Section 55 

of the Act. Section 55(1) specifies that no licensee shall supply electricity after the 

expiry of two years from the appointed data, except through installation of a correct 

meter in accordance with the Regulations of the Central Electricity Authority. 

According to Section 55(2) meters have to be provided for the purpose of accounting 

and audit. According to Section 8.2.1 (2) of the Tariff Policy, the State Commission 

has to undertake independent assessment of baseline data for various parameters 

for every distribution circle of the licensee and this exercise should be completed by 

March, 2007. In our opinion the State Commission cannot be a silent spectator to 

the violation of the provisions of the Act. In view of large scale installation of meters, 

the State Commission should immediately direct the distribution licensee to submit 

a capital scheme for installation of consumer and energy audit meters including 

replacement of defective energy meters with the correct meters within a reasonable 

time schedule to be decided by the State Commission. The State Commission may 

ensure that the meters are installed by the distribution licensee according to the 

approved metering scheme and the specified schedule. In the meantime, the State 

Commission should institute system studies for the distribution system with the 

available load data to assess the technical distribution losses at different voltage levels. 

31. We appreciate that the determination of cost of supply to different categories of 

consumers is a difficult exercise in view of non-availability of metering data and 

segregation of the network costs. However, it will not be prudent to wait indefinitely 

for availability of the entire data and it would be advisable to initiate a simple 

formulation which could take into account the major cost element to a great extent 

reflect the cost of supply. There is no need to make distinction between the distribution 

charges of identical consumers connected at different nodes in the distribution network. 

It would be adequate to determine the voltage-wise cost of supply taking into account 

the major cost element which would be applicable to all the categories of consumers 

connected to the same voltage level at different locations in the distribution system. 

Since the State Commission has expressed difficulties in determining voltage wise 

cost of supply, we would like to give necessary directions in this regard. 

32. Ideally, the network costs can be split into the partial costs of the different 

voltage level and the cost of supply at a particular voltage level is the cost at that 

voltage level and upstream network. However, in the absence of segregated network 

costs, it would be prudent to work out the voltage-wise cost of supply taking into 

account the distribution losses at different voltage levels as a first major step in the 

right direction. As power purchase cost is a major component of the Tariff, 

apportioning the power purchase cost at different voltage levels taking into account 

the distribution losses at the relevant voltage level and the upstream system will 

facilitate determination of voltage wise cost of supply, though not very accurate, 

but, a simple and practical method to reflect the actual cost of supply. 

33. The technical distribution system losses in the distribution network can be assessed 

by carrying out system studies based on the available load data. Some difficulty 

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might be faced in reflecting the entire distribution system at 11 KV and 0.4 KV due 

to vastness of data. This could be simplified by carrying out field studies with 

representative feeders of the various consumer mix prevailing in the distribution 

system. However, the actual distribution losses allowed in the ARR which include 

the commercial losses will be more than the technical losses determined by the 

system studies. Therefore, the difference between the losses allowed in the ARR and 

that determined by the system studies may have to be apportioned to different voltage 

levels in proportion to the annual gross energy consumption at the respective voltage 

level. The annual gross energy consumption at a voltage level will be the sum of 

energy consumption of all consumer categories connected at that voltage plus the 

technical distribution losses corresponding to that voltage level as worked out by 

system studies. In this manner, the total losses allowed in the ARR can be apportioned 

to different voltage levels including the EHT consumers directly connected to the 

transmission system of GRIDCO. The cost of supply of the Appellant’s category 

who are connected to the 220/132 KV voltage may have zero technical losses but, 

will have a component of apportioned distribution losses due to difference between 

the loss level allowed in ARR (which includes commercial losses) and the technical 

losses determined by the system studies, which they have to bear as consumers of 

the distribution licensee. 

34. Thus, Power Purchase Cost which is the major component of Tariff can be 

segregated for different voltage levels taking into account the transmission and 

distribution losses, both commercial and technical, for the relevant voltage level 

and upstream system. As segregated network costs are not available, all the other 

costs such as Return on Equity, Interest on Loan, depreciation, interest on working 

capital and O&M costs can be pooled and apportioned equitably, on pro-rata basis, 

to all the voltage levels including the Appellant’s category to determine the cost of 

supply. Segregating Power Purchase cost taking into account voltage-wise 

transmission and distribution losses will be a major step in the right direction for 

determining the actual cost of supply to various consumer categories. All consumer 

categories connected to the same voltage will have the same cost of supply. Further, 

refinements in formulation for cost of supply can be done gradually when more 

data is available. 

35. We have also noticed that the State Commission has wrongly determined the 

average Tariff realisation for the Appellants’ consumer category at an assumed 

load factor of 80 per cent. According to Regulation 7(c)(iii) cross-subsidy has to be 

computed as the difference between cost to serve that category and the average 

Tariff realisation of that category. Thus, the method used by the State Commission 

in calculating average Tariff for the Appellant’s category is incorrect and needs to 

be corrected as per formula given below: 

h 

Average Tariff realisation 

for a category 

 

Total expected revenue realised 

from that category as per ARR 

Total anticipated sale to 

that category as per ARR 

i 

It is also noticed that the State Commission has clubbed different categories of 

consumers having different Tariff on the basis of voltage of supply for computing 

average Tariff for the purpose of determining cross-subsidy. This is not the correct 


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and transparent method of determining cross-subsidy. Cross subsidy has to be 

determined for each category of consumer having different Tariff to have 

transparency in actual cross-subsidy being given by the subsidising consumer 

and that received by the subsidised consumers. 

36. The learned Counsel for the Appellants has argued that it would not be 

difficult to determine cost to supply for them as they draw electricity directly 

from the transmission system of the State Transmission Licensee. We feel that 

even if it is not difficult for the State Commission to determine the cost of supply 

for the Appellants, unless the cost of supply is determined for all the consumer 

categories connected to different voltage levels, it will not serve any purpose. 

We also do not accept the argument of the learned Counsel for the Appellant 

that the distribution losses and network costs in respect of the Appellant consumer 

category will be nil. As stated above, the commercial losses of the distribution 

system have to be borne by all the consumers of the distribution licensee. However, 

as the distribution losses reduce gradually, the cost of supply for the Appellants’ 

category will also reduce. We also cannot grant any relief to the Appellants on 

account of fixed charges for the distribution system assets and O&M expenses, 

etc. due to complexities involved in determining the segregated cost of service 

and in light of amendment of 2007 of the Act removing the provision for elimination 

of subsidies. 

37. We however, direct the State Commission to determine the cross-subsidy for 

each consumer category after working out the voltage-wise cost of supply based 

on the directions given in the preceding paragraphs. The cross-subsidy will be 

calculated as the difference between the average Tariff realisation for that category 

as per the Annual Revenue Requirement and the cost of supply for the consumer 

category based on voltage-based cost of supply. 

38. We would now examine if the Tariffs are within ± 20 per cent of the average 

cost of supply in consonance with the Tariff Policy. 

39. The State Commission in the impugned order has made three categories viz. 

EHT, HT and LT based on voltage level and determined the average Tariff for 

each voltage level in Table 42 of the impugned order. However, it is noticed that 

each voltage category has consumer sub-categories which have different Tariffs. 

The Tariff for each category which has different Tariff has to be compared with 

average cost of supply to check if all the Tariffs are within ±20 per cent of the 

average cost of supply. For example, consumers under LT General Purpose have 

energy Tariff varying from 420 to 590 p/kWh whereas, the LT agriculture has 

energy Tariff of 110 p/kWh. Thus, both these categories of consumers cannot be 

clubbed together for the purpose of ensuring that the Tariff for each consumer 

category is within ±20 per cent of average cost of supply and also for determining 

cross-subsidy and, therefore, have to be shown separately. In our opinion, Table 42 

of the impugned order which shows that EHT and HT categories are within 

±20 per cent of the average cost of supply and LT categories about 33 per cent above 

the average cost of supply is an incorrect representation. As far as the Appellants’ 

consumer category is concerned, even though their average Tariffs in the impugned 

order has been shown as within +20 per cent of the cost of supply, the average 

Tariff has been calculated at 80 per cent load factor and not on average Tariff 

realisation of the consumer category as per the ARR which is incorrect and 

contrary to the Regulation. However, the LT consumer’s Tariff even when different 

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01039 

consumer categories are clubbed together is beyond (-) 20 per cent which is not 

in consonance with the Tariff Policy. The State Commission is directed to correctly 

determine the variation in Tariff of each consumer category/sub-category with 

respect to average cost of supply in accordance with the directions given in this 

judgment to see whether the mandate of the Tariff Policy of having Tariff within 

±20 per cent of the average cost of supply has been met or not in respect of the 

Appellants’ category and other categories. 

40. We are also unable to establish if the cross-subsidy as determined with respect 

to cost to supply has reduced, with respect to the previous year(s) for the 

Appellants’ category, as per the mandate of the Act, or not as the State Commission 

has not determined the cross-subsidy with respect to cost of supply according to 

the Regulations. We are also not in a position to establish if the Tariff for different 

categories of consumers including the Appellant’s category is within ±20 per 

cent of average cost of supply as per the mandate of the Tariff Policy due to 

incorrect representation in the impugned order. Determination of cost of supply 

as per our directions will involve carrying out system studies which is time 

consuming and can be implemented only in the future Tariff Orders. However, 

whether the Tariff of the Appellant’s category is within 20 per cent of the average 

cost of supply can be determined. Accordingly, the State Commission is directed 

to determine the average Tariff realisation per unit of the Appellant’s category 

which will be the expected revenue realised from the Appellants’ consumer category 

divided by the expected energy sale to the Appellants’ consumer category 

according to the ARR, and check if the Tariff applicable to Appellants’ consumer 

category is within 20 per cent of average cost of supply and provide consequential 

benefit to the Appellants, if any after hearing all concerned. 


41. After considering the provisions of the Act, the National Electricity Policy, 

Tariff Policy and the Regulations of the State Commission, we have come to the 

conclusion that if the cross-subsidy calculated on the basis of cost of supply to 

the consumer category is not increased but, reduced gradually, the Tariff of 

consumer categories is within ±20 per cent of the average cost of supply except 

the consumers below the poverty line, Tariffs of different categories of consumers 

are differentiated only according to the factors given in Section 62(3) and there 

is no Tariff shock to any category of consumer, no prejudice would have been 

caused to any category of consumers with regard to the issues of cross-subsidy 

and cost of supply raised in this appeal. 

41.1 We do not agree with the findings of the State Commission that cost to supply 

a consumer category is the same as average cost of supply for the distribution 

system as a whole and average cost of supply can be used in calculation of 

cross-subsidy instead of actual cost of supply. This is contrary to Regulation 7(c)(iii) 

of the State Commission and findings of this Tribunal in the judgment reported in 

2007 (APTEL) 931 SIEL Limited, New Delhi v. PSERC and Ors. 

41.2 The State Commission has expressed difficulties in determining cost of supply 

in view of non-availability of metering data and segregation of the network costs. 

In our opinion, it will not be prudent to wait indefinitely for availability of the 

entire data and it would be advisable to initiate a simple formulation which 

could take into account the major cost elements. There is no need to make 

distinction between the distribution charges of identical consumers connected 


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at different nodes in the distribution network. It would be adequate to determine, 

the voltage-wise cost of supply taking into account the major cost element which 

would be applicable to all the categories of consumers connected to the same 

voltage level at different locations in the distribution system. We have given a 

practical formulation to determine voltage wise cost of supply to all category of 

consumers connected at the same voltage level in Paragraphs 31 to 35 above. 

Accordingly, the State Commission is directed to determine cross-subsidy for 

different categories of consumers within next six months from FY 2010-11 

onwards and ensure that in future Orders for ARR and Tariff of the distribution 

licensees, cross-subsidies for different consumer categories are determined 

according to the directions given in this judgment and that the cross-subsidies 

are reduced gradually as per the provisions of the Act. 

41.3 In view of pathetic condition of consumers and distribution feeder and 

transformer metering, we direct the State Commission to take immediate action 

for preparation of a metering scheme as a project by the distribution company 

and its approval and implementation as per a time bound schedule to be decided 

by the State Commission. 

41.4 According to the Tariff Policy, the Tariff of all categories of consumers 

except those below poverty line have to be within ±20 per cent of the total average 

cost of supply. The variation of Tariffs of different category with respect to average 

cost of supply has not been correctly determined by the State Commission. The 

State Commission has erred in clubbing different consumer categories having 

different Tariff in one category based on voltage of supply. Also for the Appellants’ 

category average Tariff per unit has been incorrectly determined at assumed 

load factor of 80 per cent. The State Commission is directed to determine the 

average Tariff for Appellant’s another category according to the directions given 

in Paragraphs 39 and 40. Accordingly, we remand the matter to the State 

Commission to redetermine the variation of average Tariff for different consumer 

categories with respect to average cost of supply and provide consequential 

relief to Appellant’s consumer category in terms of the Tariff policy, if any, after 

hearing all concerned. 

Conclusion 

42. In view of above, we remand the matter to the State Commission to correctly 

determine the variation of Tariff of the Appellant’s category with respect to average 

cost of supply and provide consequential relief to the Appellants in terms of the 

Tariff Policy, if any. The State Commission is also directed to take action on 

consumer and audit metering and determination of cross-subsidy based on actual 

cost of supply in accordance with the directions given in this judgment. No 

order as to cost. 

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01041 

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2011 ELR (APTEL) 1041* 



Madhya Pradesh Power Generation Company Ltd, Madhya Pradesh 

v. 

Madhya Pradesh Electricity Regulatory Commission, Madhya Pradesh and Ors. 


DECIDED ON: 06.05.2011 

Coram 



Whether the Tribunal has jurisdiction to enter into the question of validity of the 

Regulations? Whether the norms set up by the Commission are reasonable in the 

light of facts and circumstances of the case and whether the order of the Commission 

suffers from lack of reasonableness? 

The appeal was held to be as not maintainable in its present form. To direct the 

Commission to effect an amendment of the regulation would entail encroaching 

upon the power of Judicial Review, which cannot be directed because such power 

or jurisdiction is not vested. The impugned order of the Commission dated 

26 th May, 2010 cannot be the subject matter of challenge in an appeal under Section 111 

of the Electricity Act. The Regulation 57 dealing with power to remove difficulties is 

inappropriate and cannot be taken as resort to for downgrading the benchmarks. 

Regulation 56 as it is there in the regulation does not entitle the Commission to 

come down from the norms and it is only when Regulation 58 is exercised to amend 

Regulation 56 that the Commission may in its wisdom lower down the norms and 

benchmarks. Further, Regulations 59.2 and 59.3 of Regulation 59 are exercisable in 

adjudicatory process, not in legislative jurisdiction. 

The Commission’s impugned order accordingly does not suffer from lack of reason 

and objectivity of facts. 

The Commission can always undertake any study of norms even after the rejection 

of the prayer for amendment so as to consider the feasibility or otherwise of bringing 

out an amendment of the Regulations in course of the determination of the Tariff 

application. Within the present Parameters of Regulation 56 the Commission can 

deviate from the norms if it so wishes and deems fit. The Commission is at liberty if 

it would deem proper to amend Regulation 56 on the strength of Regulation 58 so 

as to widen its power to deviate. It, in the course of determination of Tariff may 

exercise any of the powers as is available to it in a suitable situation in their respective 

jurisdiction. Since the prayer for amendment was refused by a reasoned order, no 

interference was held to be called for. 


* MANU/ET/0064/2011 


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Authorities referred to 

Bennion Statutory Interpretation, 5th Edn., Indian Reprint [p. 1054, para 15 d] 

De Smith’s, Judicial Review of Administrative Action, 4 th Edn. [p. 1054, para 15 d] 

Foulkes, Administrative Law, 8th Edn. [p. 1054, para 15 a] 

Hiltaire Barnett, Constitutional Administrative Law, First Indian reprint, 1996 

[p. 1054, para 15 d] 

M.P. Jain, Indian Administrative Law, 1994 Edn. [p. 1054, para 15 d] 


BSES Rajdhani Power Ltd. v. Delhi Electricity Regulatory Commission MANU/ET/0095/ 

2009: (2009) ELR APTEL 880 (Distinguished) [p. 1054, para 15 c] 

Cellular Operators Association of India and Ors. v. Union of India and Ors. MANU/SC/ 

1368/2002: (2003) 3 SCC 186: (2002) SUPP 5 SCR 222 (Dissented) 

[p. 1054, para 15 b] 

Dhulabhai v. State of M.P. MANU/SC/0157/1968: AIR 1969 SC 78: 1969 MPLJ 1 

(SC): (1968) 3 SCR 662: (1968) 22 STC 416 (SC) (Relied on) [p. 1075, para 49 c] 

Gujarat State Electricity Corporation Ltd. v. Gujarat Electricity Regulatory Commission 

and Ors. Appeal No. 129 of 2006 MANU/ET/0060/2006: 2007 ELR (APTEL) 1066 

(Dissented) [p. 1053, para 15 g] 

Hindustan Paper Corporation Ltd. v. Government of Kerala MANU/SC/0081/1986: (1986) 

3 SCC 398: AIR 1986 SC 1541: (1986) 2 CompLJ 238 (SC): 1986 (1) SCALE 870: 

(1986) 2 SCR 581: 1986 (2) UJ 551 (SC) (Dissented) [p. 1053, para 15 g] 

Hindusthan Steels Ltd. v. A.K. Roy MANU/SC/0315/1969: (1969) 3 SCC 513: AIR 

1970 SC 1401: (1970 (20) FLR 234): 1970 LabIC 1166: (1970) I LLJ 228 SC: (1970) 3 

SCR 343 (Distinguished) [p. 1073, para 44 h] 

Hotel and Restaurant Association v. Star India Pvt. Ltd. (2006) 13 SCC 753 (Dissented) 

[p. 1071, para 39 e] 

K.S Venkataraman and Co. Pvt. Ltd. v. State of Madras MANU/SC/0293/1965: AIR 

1966 SC 1089: (1966) 60 ITR 112 (SC): (1966) 2 SCR 229: (1966) 17 STC 418 (SC) 

(Mentioned) [p. 1051, para 12 f] 

M.S. M.M. v. Meyyappa Chettiar v. ITO II MANU/TN/0135/1965: (1964) 54 ITR 151 

(Mad): AIR 1965 Mad 68: (1964) ILR 1 Mad 954 (Mentioned) [p. 1078, para 57 e] 

M.U. Sinai v. Union of India and Ors (1972) 2 SCR 640 (Affirmed) 

[p. 1051, para 12 f] 

Maharashtra State Power Generation Co. Ltd. v. Maharashtra Electricity Regulator Commission 

and Ors. MANU/ET/0027/2008: 2010 ELR (APTEL) 0189 (Dissented) 

[p. 1054, para 15 b] 

Manohar Lal Chopra v. Seth Hira Lal MANU/SC/0056/1961: AIR 1962 SC 527: (1962) 

Supp 1 SCR 450 (Relied on) [p. 1080, para 62 h] 

Naeyveli Lignite Corporation Ltd. v. Tamil Nadu Electricity Board and Ors. MANU/ET/ 

0002/2005: 2005 ELR (APTEL) 1134 (Affirmed) [p. 1084, para 71 a] 

Nain Singh v. Koonwarjee MANU/SC/0426/1970: (1970) 1 SCC 732: AIR 1970 SC 

997: 1970 MhLJ 611 (SC): (1971) 1 SCR 207 : MANU/SC/0378/1970: (1970) 1 

SCC 735: AIR 1970 SC 1407: (1970 (20) FLR 399): (1970) II LLJ 266 SC: (1971) 1 

SCR 177 (Affirmed) [p. 1051, para 12 f] 

Narinder Chand Hemraj v. Lt. Governor- Administrator of the Union Territory of Himachal 

Pradesh MANU/SC/0620/1971: (1972) 1 SCR 940: AIR 1971 SC 2399: (1971) 2 

SCC 747: (1972) 29 STC 169 (SC) (Affirmed) [p. 1051, para 12 f] 

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g 

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Madhya Pradesh Power Generation Co. Ltd. v. Madhya Pradesh Elec. Regu. Comm. and Ors. 


01043 

NTPC Ltd. S. Madhya Pradesh State Electricity Board case MANU/ET/0003/2007: 2007 

ELR (APTEL) 7 (Dissented) [p. 1054, para 53 ] 

Padam Sen v. State of U.P. MANU/SC/0065/1960: AIR 1961 SC 218: 1961 CriLJ 322: 

1961 RD 246: (1961) 1 SCR 884 (Affirmed) [p. 1051, para 12 f] 

Premium Granites and Anr. v. State of Tamil Nadu and Ors. MANU/SC/0466/1994: (1994) 

2 SCC 691: AIR 1994 SC 2233: JT 1994 (1) SC 376: 1994-2-LW205: 1994 (1) SCALE 

393: (1994) 1 SCR 579: 1994 (2) UJ 145 (SC) (Distinguished) [p. 1053, para 15 g] 

PTC India Ltd. v. CERC MANU/SC/0164/2010: (2010) 4 SCC 603: AIR 2010 SC 

1338: 2010 3 AWC (Supp) 2709 SC: 2010 (5) BomCR 762: 2010 ELR (SC) 269: JT 

2010 (3) SC 1: 2010 (3) SCALE 55: (2010) 3 SCR 609: 2010 (3) UJ 1203 (SC) (Discussed) 

[p. 1051, para 12 f] 

Raleigh Investment Co. Ltd. v. Governor General in Council ILR (1944) 1 Cal 34 (Mentioned) 

[p. 1078, para 57 d] 

S.N. Mukhrjee v. Union of India MANU/SC/0346/1990: (1990) 4 SCC 594: AIR 1990 

SC 1984: 1990 CriLJ 2148a: JT 1990 (3) SC 630: (1990) Supp 1 SCR 44: 1991 (1) SLJ 

1 (SC): (1990) 3 UPLBEC 2093 (Mentioned) [p. 1054, para 15 a] 

State of Karnatka and Anr. v. V.R. Vivekanand Swamy and Anr. case MANU/SC/7440/ 

2008: (2008) 5 SCC 328: AIR 2008 SC 2080: (2008 (117) FLR 1044): JT 2008 (4) SC 

553: 2008 (4) KarLJ 477: (2008) 5 MLJ 414 (SC): 2008 (6) SCALE 261(Mentioned) 

[p. 1054, para 15 a] 

Supreme Court Employees Welfare Association v. Union of India and Anr. MANU/SC/ 

0582/1989: (1989) 4 SCC 187: AIR 1990 SC 334: JT 1989 (3) SC 188: (1989) II LLJ 

506 SC: 1989 (2) SCALE 107: (1989) 3 SCR 488: 1990 (1) UJ 40 (SC): (1990) 3 

UPLBEC 1604 (Affirmed) [p. 1051, para 12 f] 

United Motors (India) Ltd. v. State of Bombay MANU/MH/0024/1952: (1953) 55 BomLR 

246 (Discussed) [p. 1078, para 57 d] 

Uttar Pradesh Power Corporation Limited v. National Thermal Power Corporation Ltd. 

and Ors. MANU/SC/0346/2009: (2009) 6 SCC 235: 2009 (3) ALD 139 (SC): 2009 

ELR (SC) 13: JT 2009 (3) SC 462: 2009 (3) SCALE 620: (2009) 4 SCR 1060: 2009 (2) 

UJ 966 (SC) (Discussed) [p. 1053, para 15 g] 

Uttar Pradesh Rajya Vidut Utpadan Nigam Ltd. v. Uttar Pradesh Electricity Regulatory 

Commission and Ors. Appeal No. 96 of 2008 (Distinguished) [p. 1054, para 53 c] 

Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited v. Uttar Pradesh Electricity Regulatory 

Commission and Ors. Appeal No. 129 of 2006 (Mentioned) [p. 1049, para 8 g] 

Vinod Seth v. Devinder Bajaj and Anr. MANU/SC/0424/2010: (2010) 8 SCC 1: 2010 5 

AWC (Supp) 4548 SC: JT 2010 (8) SC 66: 2010 (2) OLR848: 2010 (II) OLR (SC) 848: 

2010 (7) UJ 3489 (SC) (Affirmed) [p. 1051, para 12 f] 

W.B. Electricity Regulatory Commission v. CERC MANU/SC/0859/2002: (2002) 8 SCC 

715: AIR 2002 SC 3588: (2003 (1) JCR 194 (SC)): JT 2002 (7) SC 578: 2002 (7) 

SCALE 217 (Discussed) [p. 1051, para 12 e] 


Code of Civil Procedure, 1908 



Constitution of India, 1950, Article 226 [p. 1059, para 25 g] 

Electricity (Supply) Act, 1948 [p. 1068, para 36 c] 


Section 2(28) [p. 1045, para 1 c] 


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01044 


Section 5.3(f) [p. 1049, para 8 c] 

Section 5(h)(ii) [p. 1049, para 8 e] 





Section 79(1) [p. 1057, para 22 i] 










Electricity Regulatory Commission Act, 1998 

Section 27 [p. 1075, para 49 a] 


General Clauses Act, 1897, Section 21 [p. 1079, para 60 g] 

Kerala Forest Produce (Fixation of Selling Price) Act, 1976, Section 6 

[p. 1073, para 42 d] 

Securities and Exchange Board of India Act, 1992 [p. 1059, para 25 h] 

Telecom Regulatory Authority of India Act, 1997 [p. 1059, para 26 i] 


Central Electricity Regulatory Commission Terms and Conditions of Tariff Regulations, 

2004, Regulation 13 [p. 1076, para 53 f] 

Madhya Pradesh Electricity Regulatory Commission (Terms and Conditions for 

determination of Generating Tariff) Regulations, 2009 

Regulation 16(a)(b)(c)(i) [p. 1078, para 57 h] 








Madhya Pradesh Electricity Regulatory Commission (Terms and Conditions for 

Determination of Generation Tariff) Regulations, 2009 [p. 1045, para 1 c] 

Mineral Concessional Rule, 1960, Rule 39 [p. 1072, para 41 g] 

Counsel 

For Appellant/Petitioner/Plaintiff: M.G. Ramachandran, Sneha Venketaramani, 

Swapna Seshadri and Ranjitha Ramachandran, Advs. 

For Respondent(s)/Defendant: Sanjay Sen, Shikha Ohri, Surbhi Sharma and Ashok 

Upadhyay, Advs. 

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ORDER 

01045 

1. The appeal presents a pure question of law: whether the Tribunal can give directions 

to the Madhya Pradesh Electricity Regulatory Commission to amend, modify or 

relax any of the provision of the Madhya Pradesh Electricity Regulatory Commission 

(Terms and Conditions for determination of Generating Tariff) Regulations, 2009 on 

the alleged ground that it has been found impossible for the Appellant, a generating 

company within the meaning of Section 2(28) of the Electricity Act, 2003 to reach 

the benchmarks or the yardstick fixed by the Commission in its said Regulations, 2009, 

by virtue of the provisions contained in the said Regulations conferring power to 

the Commission to amend the Regulations. 

2. Madhya Pradesh State Electricity Board, following the reforms in the power 

sector was bifurcated and restructured as a result of which the function of power 

generation has been vested with the Appellant. The function of retail distribution 

of power has been vested with the Respondent Nos. 3, 4 and 5, while the function 

of transmission of power rests with the Respondent No. 6 and Respondent No. 2 

has been vested with business of bulk purchase and bulk sale of electricity in the 

State of Madhya Pradesh. 

3. Respondent No. 8, Rajasthan Rajya Vidyut Prasaran Nigam Limited, owns 

40 per cent share in the Power House-1 of the Satpura Thermal Power Station at 

Sarni and 50 per cent share in the Gandhi Sagar Hydro Station operated by the 

Appellant. The Appellant has 50 per cent share in the Rana Pratap Sagar Hydro 

Station and Jawahar Sagar Hydro Station operated by the Respondent No. 8. The 

Respondent No. 9, Uttar Pradesh Power Corporation Limited has 50 per cent share 

in Rajghat Hydro Power Station and the Respondent No. 10 MSEB (Holding Co) 

and Maharashtra State Transmission Company Limited has 33 per cent share in 

the Pench Hydro Station, both operated by the Appellant. 

4. To show the details of the generating stations and the age of each of the stations, 

the Appellant has presented the following Table: 

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Sl. Generating Stations Date of Age 

No. 

Commission 

1 Amarkantak Thermal Power Station, Unit 1: 1.02.1965 45 years 

(ATPS) Power House-1 Unit 2: 08.02.1965 (retired on 

1 st April, 2009) 

2 Amarkantak Thermal Power Station, Unit 3: 11.09.1977 33 years 

(ATPS) Power House-I1 Unit 4: 31.03.1978 

3 Amarkantak hermal Power Station, Unit 5: 10.09.2009 01 year 

(ATPS) Power House-I1I 

4 Satpura Thermal Power Station (STPS) Unit 1: 06.10.1967 42 years 

Power House-1 Unit 2: 21.03.1968 

Unit 3: 14.05.1968 

Unit 4: 10.07.1968 

Unit 5: 21.03.1970 


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Power House-II Unit 7: 20.09.1980 


Power House-III Unit 9: 27.02.1984 

7 Sanjay Gandhi Thermal Power Station Unit 1 26.03.1993 17 years 

(SGTPS), Birsinghpur, Power House-I Unit 2: 27.03.1994 

8 Sanjay Gandhi Thermal Power Station Unit 3: 28.02.1999 11 years 

(SGTPS), Birsinghpur, Power House-II Unit 4: 23.11.2008 

9 Sanjay Gandhi Thermal Power Station Unit 5: 28.08.2008 02 years 

(SGTPS), Birsinghpur, Power House-III 

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5. The Commission which is Respondent No. 1 herein notified the generation Tariff 

Regulations, 2009 as aforesaid on 30 th April, 2009 setting out norms relating to 

various components of Tariff determination including normative annual plant 

availability factor, gross station heat rate, specific fuel oil consumption, auxiliary 

energy consumption, operation and maintenance expenses and transit and handling 

losses for coal in the case of Thermal Power Generation. Prior to the publication of 

the notification as aforesaid, the Appellant submitted its comments on the revised 

Draft Regulations expressing its difficulties on the norms proposed for the generating 

stations on the ground that they were old and had outlived normal life expectancy. 

The Appellant was allegedly told by the Commission to file Tariff petition as per 

the norms approved by the State Commission in the Tariff Regulations and then 

incorporate the difficulties faced by the Appellant in meeting the norms. Then, the 

Appellant filed a Tariff petition being No. 54 of 2009 for determination of multi-year 

generation Tariff for the control period 2009-2010 to 2011-12. In the said petition, 

the Appellant submitted on the following aspects: 

(a) Tariff based on the bench marks as approved by the Commission as per 

Regulations 2009. 

(b) Proposed revision of the Appellant concerning benchmarks along with 

justification 

(c) Tariff based on the proposed revised benchmarks. 

(d) Gap analysis of the two sets of Tariff elaborated above. 

6. In the course of public hearing the Appellant reiterated its plea that the norms set 

out in the Regulations, 2009 were impossible to be met with; as such the Commission 

should relax the norms by virtue of the power under Regulation 58 of the Tariff 

Regulations, 2009. The Commission then is said to had observed that as regards the 

relaxation of the norms sought for by the Appellant, it could be considered in a 

separate petition which is why the Appellant filed a petition being No. 8 of 2010 

seeking relaxation of the operating norms like the ones as mentioned in the preceding 

Paragraph. In that petition the Appellant provided detailed explanation along with 

supporting data to demonstrate the requirement for relaxation of the operating norms. 

It was contended that all the units of the Appellant except the Sanjay Gandhi Thermal 

Power Station at Birsingpur had outlived their design life of 25 years and unless 

major renovation and modernisation works were undertaken there could be no 

improvement in the performance of these units. The station-wise status of the 

renovation and modernisation activities and the constraints faced by the Appellant 

with respect to each of the stations was also explained. 

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01047 

7. The Commission disposed of the Petition No. 8 of 2010 which was filed by the 

Appellant proposing for the relaxation of the norms by an order dated 26 th May, 2010 

which is impugned herein. By the said order which we shall discuss in the sequel, 

the commission rejected the petition. 

8. The aforesaid order of the Commission is assailed on the following grounds: 

(i) The order is a non-speaking one without dealing with specific aspects. 

(ii) The order proceeded on the wrong footing that the performance of the 

thermal power station of the Appellant was deteriorating from the previous 

years and no efforts were made for improvement of the performance by the 

Appellant. 

(iii) The Commission failed to consider the reasons given by the Appellant 

which included that the generating stations were old and most of them had 

outlived their lives and there could not be any improvement except through 

extensive renovation and modernisation. 

(iv) The Commission proceeded on the wrong footing that the Appellant was 

seeking inferior norms during the control period than the ones which were 

there in the earlier years. 

(v) The Commission proceeded on the wrong footing that the Appellant was 

not showing any commitment for improvement in the coming years. 

(vi) The Commission erred in misconstruing the details given and reaching 

the conclusion that the Appellant was seeking relaxation even in regard to 

Sanjay Gandhi Thermal Power Station which is not quite old. The State 

Commission has failed to appreciate the peculiar problem faced by the Appellant 

in the above station because of non-completion of some of the facilities of the 

new plant and the Appellant was seeking relaxation only for the financial 

year 2009-10. The Sanjay Gandhi Thermal Power Station Unit No. 5 for which 

relaxation was sought was the first 500 MW plant installed by the Appellant 

and there was a need for the Appellant’s technical personnel to understand 

and gain experience for operating such capacity. The Appellant had not sought 

any relaxation in respect of the above unit for the financial year 2010-2011 

onwards. The conclusion reached by the State Commission in regard to the 

said generating unit is, therefore, without consideration of the relevant facts 

pleaded by the Appellant. 

(vii) The State Commission erred in not considering the Plant Availability/ 

Load Factor achieved by the Appellant’s generating units in the past few 

years, the data of which was provided in details by the Appellant. The State 

Commission without considering the actual Plant Availability/Load Factor 

achieved in the past years has determined the norms to be achieved by the 

Appellant’s generating stations which is approximately 20 per cent higher 

than the Plant Availability/Load Factor presently achieved by these generating 

units. The State Commission has failed to appreciate that these generating 

units of the Appellant are extremely old and have since long outlived their 

design life. It was impossible for these units to achieve Plant Availability/ 

Load Factor at par with the new generating units unless substantial renovation 

and modernisation activities were undertaken 

(viii) The State Commission has failed to appreciate that the auxiliary energy 

consumption in a thermal power generating station is more like a fixed 

consumption. When the machines are running at lower load, the percentage 


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of auxiliary energy consumed becomes higher. Some auxiliaries are required 

to run even when the machines are shut down. Due to the ongoing renovation 

and modernisation activities, the higher consumption of secondary oil is 

inevitable and an improvement can be expected only after the renovation and 

modernisation activities are completed. 

(ix) The State Commission has failed to appreciate that some generating units 

of the Appellant are designed with dry bottom ash disposal system and due to 

this design constraint these units have higher specific oil consumption. For 

example, in the case of the Satpura Thermal Power Station Phase 1 (5 × 62.5 MW), 

the State Commission has approved the specific oil consumption of the order 

of 2.5 to 3 ml/kWh whereas, even in the year of best performance the specific 

oil consumption of the unit was 5.80 ml/kWh. Thus, even with the best possible 

efforts, it is not possible for the Appellant to achieve the target laid down by 

the State Commission. Thus, the State Commission has failed to appreciate the 

design peculiarities and the resulting specific oil consumption requirements 

of these generating units. 

(x) The State Commission has failed to appreciate that the Appellant is already 

applying a system of coal accounting in line with the system of coal accounting 

being adopted by other thermal power stations of both private and public 

sectors. In spite of making all possible efforts to minimise the losses, it is 

difficult for the Appellant to achieve the targets prescribed by the State 

Commission for reasons beyond its control 

(xi) The State Commission has failed to appreciate that losses during transit 

and handling of the coal occur due to factors which are beyond the control of 

the Appellant such as loss of coal quantity due to fine particles getting blown 

away due to wind or washed away during rainy season, spontaneous 

combustion causing accumulated heaps of coal to catch fire of their own, 

surface moisture getting evaporated due to larger travel distance and larger 

exposed surface area and pilferage. The Appellant has adopted the best possible 

methods to minimise these losses. It is, however, impossible to completely 

eliminate such losses, thereby reducing these losses to an extent compliant 

with the prescribed norms. A substantial amount of the handling and transit 

losses occur when the coal is under the control of the other agencies and the 

Appellant cannot have any role to reduce these losses without interfering 

with their working, which is just not possible. The State Commission has 

therefore, erred in not taking these factors into consideration for relaxing the 

stringent norms prescribed to reduce the transit and handling losses of coal 

(xii) The State Commission erred in observing that with regard to hydro generating 

stations, no exemption can be provided to the Appellant from the operating 

norms prescribed under the Tariff Regulations. The declared capacity of the 

generating unit may be zero, although the units are ready to run, due to factors 

beyond the Appellant’s control. The Appellant, therefore, is seeking a relaxation 

of their applicability to the Appellant’s generating units. The Appellant had 

also sought clarification from the State Commission regarding the consideration 

of these constraints while calculating Plant Availability Factor vide letter dated 

20 th January, 2010. The State Commission in its response dated 11 th March, 2010 

has not clarified the above specific issues sought by the Appellant, due to which 

the Appellant again wrote a letter dated 3 rd April, 2010 to which no response 

has been received from the State Commission till date. 

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(xiii) The State Commission wrongly proceeded on the basis that the Appellant 

is proposing revision of norms which are more relaxed than previous submission 

made on 27 th February, 2009 and particularly for FY 2009-10, and that more 

relaxation of norms were sought than the norms specified for FY 2008-09 in 

the earlier Regulations. The State Commission has further stated that average 

of operating parameters achieved since 2003-04 were proposed while there 

are instances when better operating parameters have been achieved, which 

have been ignored by MPPGCL. The State Commission has failed to appreciate 

that it has proposed operating norms for the control period on the basis of 

average of operating parameters achieved during the last five years i.e. up to 

FY 2007-08. However, when the Tariff Regulations for control period FY 2010-12 

were notified in April 2009 more recent data was available. 

(xiv) The State Commission has wrongly concluded that the vision of the 

Petitioner is quite contrary to the spirit laid down under Section 5.3(f) of Tariff 

Policy. The State Commission has failed to appreciate that the Central Commission 

has also considered average performance for fixing the target of Central 

Generating Stations and norms were fixed below the average to incentivise the 

generating units to achieve better operating parameters. Regarding relaxed 

norms for FY 2009-10, the Appellant has also considered the force majeure 

conditions regarding shortage of water in the Tawa lake of STPS, Sarni. Two 

sets of policies were prescribed under this section of Tariff Policy namely, one 

for plant which is performing at close or above the normative level and for the 

other stations which are referred to in Sections 5(h)(ii). The Section 5(h)(ii) is 

regarding the units where operations were much below the norms for many 

previous years. It was recommended that the initial starting point for 

determination of revenue requirement should be recognised at relaxed level 

and not at a desired level and suitable benchmarks study may be conducted to 

establish desired performance standard and further, separate studies may be 

required for each utility to assess the capital expenditure necessary to meet 

necessary service standards. The Appellant had given consent to proposal of 

the State Commission for carrying out the independent 3rd party study for 

formulation of O&M norms. The study had not been conducted so far. The 

Appellant has been regularly pursuing the State Commission for conducting 

such study to assess the capability of all plants operated by the Appellant for 

providing relaxation. 

(xv) The State Commission has failed to follow the well-settled principles laid 

down by this Tribunal in the case of BSES Rajdhani Power Limited v. Delhi 

Electricity Regulatory Commission (2009) ELR APTEL 880; Uttar Pradesh Rajya 

Vidyut Utpadan Nigam Limited v. Uttar Pradesh Electricity Regulatory Commission 

and Ors. (Appeal No. 129 of 2006) which deal with the relaxation of norms 

required to be done in the context of the old generating stations. 

(xvi) The State Commission has failed to appreciate that Section 5.3 (f) of the 

Tariff Policy provides that norms should be efficient related to past performance 

capable to achieve and also considering the latest technological advancement, 

fuel, vintage of equipment, nature of operation, level of service to be provided 

to the consumers. 

(xvii) The State Commission has not properly construed Section 6 of the National 

Tariff Policy. The Policy further clarifies the requirement under Section 6.2(2) 

as under: 

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Power Purchase Agreement should ensure adequate bankable payment 

security agreements to Generating Companies. In case of persisting default 

in spite of the available payment security mechanisms like letter of credit, 

escrow of cash flows etc. the generating companies may sell to other buyers 

Section 6.2(3) of the National Tariff Policy further states that: 

(3) In case of coal based generating stations, the cost of project will also 

include reasonable cost of setting up coal washeries, coal beneficiation 

system and dry ash handling and disposal system. 

There is inadequate supply of coal by Coal India Limited to the thermal 

power stations of the Appellant and quality of coal is also deteriorating 

year after year. The quality of coal supplied is inferior to the design 

requirements of the boiler equipments resulting in higher Heat Rate and 

inefficient operation 

(xviii) The State Commission has failed to appreciate that even the Central 

Electricity Regulatory Commission determines the applicable norms and 

parameters based on actual performance of the generating stations and not 

arbitrarily and unilaterally without regard to the actual performance in the 

previous years 

9. Accordingly, the prayers are following: 

(a) Allow the appeal and set aside the order dated 26 th May, 2010 passed by 

the Madhya Pradesh Electricity Regulatory Commission to the extent challenged 

in the present appeal. 

(b) Pass such other order(s) and this Tribunal may deem just and proper 

10. Petition No. 8 of 2010 filed by the Appellant which is about 388 Page petition 

contains facts and figures station-wise in support of the prayer for relaxation of 

norms. 

11. Of the ten Respondents, it is the State Commission, the Respondent No. 1 alone 

which has seriously contested the appeal although no counter-affidavit was filed. 

The Respondent No. 1, of course, filed a written note of submissions in response to 

the memorandum of appeal filed by the Appellant dealing with all the points 

canvassed in the memo of appeal. 

12. The contentions of the Respondent No. 1 in response to the memorandum of 

appeal are as follows: 

(a) Since the Regulations 2009 notified by the State Commission under Section 61 

read with Section 181 of the Electricity Act, 2003 has the force of law, the State 

Commission has to determine the Tariff in terms of the said Regulations and 

not on the basis of statements made by the Appellant in a petition proposing 

for amendment of such regulations. 

(b) The Commission’s order dated 26 th May, 2010 passed in Petition No. 8 

of 2010 declining the prayer of the Appellant for amendment of the MYT 

Regulations, 2009 cannot at all be the subject matter of challenge under 

Section 111 of the Act. 

(c) The Tribunal has no Authority or jurisdiction to sit on judgment on the on 

the legality of the MYT Regulations which have acquired the status of the law. 

(d) The Appellate Power of the Tribunal does not extend to the examination of 

vires/and or the impracticability or otherwise of the Regulations notified by 

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the Commission, under Section 111 of the Act. As such, the Tribunal does not 

require under the law to ask the Commission to amend its regulations in the 

same manner as was prayed for by the Appellant before the Commission. 

(e) The effect of allowing the present appeal would amount to holding that the 

MYT Regulations, 2009 as framed by the State Commission, which otherwise 

cannot be set aside by the Tribunal, shall be amended by the Commission 

meaning thereby, what cannot be directly done by the Tribunal is asked to be 

done indirectly. 

(f) Factually, in spite of repeated reminders to the Appellant issued by the 

Commission to come out with a detailed renovation and modernisation plan 

the Appellant failed to do so and it miserably failed in managing its affairs in 

accordance with the directions issued by the Commission from time to time 

and in such circumstance, the Appellant’s asking for amendment of the norms 

and guidelines by amending the Regulations to suit its convenience does not 

deserve commendation. 

(g) The Respondent No. 1 referred to certain decisions of the Hon’ble Supreme 

Court in support of its contentions that whatever is asked for by the Appellant 

in this appeal in whatever form it be, is not legally permissible for this Tribunal 

to do so because to do so would be usurping the jurisdiction of the power of 

judicial review which is available in ultimate analysis with the High Court. 

It is contended that the Appellate Jurisdiction of this Tribunal which is vested 

in Section 111 of the Act does not extend to the jurisdiction of questioning for 

legality of the Regulations so as to see whether the norms notified in the 

Regulations are possible to reach by the Appellant who has exhibited total 

failure in coming up to the mark or standard set up by the Commission. The 

decisions are–(a) West Bengal Electricity Regulatory Commission v. Calcutta Electricity 

Supply Company Ltd. reported in (2002) 8 SCC 715, (b) K.S Venkataraman and 

Co. Pvt. Ltd. v. State of Madras 1 reported in AIR 1966 SC 1089, (c) PTC India Ltd. 

v. CERC 2 reported in (2010) 4 SCC 603, (d) Narinder Chand Hemraj v. Lt. Governor 

of Union Territory of Himachal Pradesh 3 reported in (1971) 2 SCC 747, Supreme 

Court Employees Welfare Association v. Union of India and Anr. 4 reported in (1989) 

4 SCC 187, (e) M.U. Sinai v. Union of India and Ors (1972) 2 SCR 640, (f) Vinod 

Seth v. Devinder Bajaj and Anr. 5 reported in (2010) 8 SCC 1 (g) Padam Sen v. State 

of U.P. 6 AIR 1219 and (h) Nain Singh v. Koonwarjee 7 reported in (1970) 1 SCC 735. 

13. The pleadings of the parties bring us to the following issues: 

(a) Is the appeal maintainable in its present form and merit? 

01051 

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i 

1 Ed.: MANU/SC/0293/1965: (1966) 60 ITR 112 (SC): (1966) 2 SCR 229: (1966) 17 STC 418 (SC) 

2 Ed.: MANU/SC/0164/2010: AIR 2010 SC 1338: 2010 3 AWC (Supp) 2709 SC: 2010 (5) 

BomCR 762: 2010 ELR (SC) 269: JT 2010 (3) SC 1: 2010 (3) SCALE 55: (2010) 3 SCR 609: 

2010 (3) UJ 1203 (SC) 

3 Ed.: MANU/SC/0620/1971: AIR 1971 SC 2399: (1972) 1 SCR 940: (1972) 29 STC 169 (SC) 

4 Ed.: MANU/SC/0582/1989: AIR 1990 SC 334: JT 1989 (3) SC 188: (1989) II LLJ 506 SC: 

1989 (2) SCALE 107: (1989) 3 SCR 488: 1990 (1) UJ 40 (SC): (1990) 3 UPLBEC 1604 

5 Ed.: MANU/SC/0424/2010: 2010 5 AWC (Supp) 4548 SC: JT 2010 (8) SC 66: 2010 (2) 

OLR848: 2010 (II) OLR (SC) 848: 2010 (7) UJ 3489 (SC) 

6 Ed.: MANU/SC/0065/1960: 1961 CriLJ 322: 1961 RD 246: (1961) 1 SCR 884 

7 Ed.: MANU/SC/0378/1970: AIR 1970 SC 1407: (1970 (20) FLR 399): (1970) II LLJ 266 SC: 

(1971) 1 SCR 177 


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(b) Whether this Tribunal has jurisdiction to afford relief to the Appellant as was 

prayed before the Commission under Section 111 of the Electricity Act, 2003? 

(c) Is the impugned order of the Commission dated 26 th May, 2010 passed in 

Petition No. 8 of 2010 declining the prayer of the Appellant for amendment of 

MYT Regulations, 2009 can at all be a subject matter of challenge under 

Section 111 of the Electricity Act, 2003? 

(d) Whether the Appellate Power of the Tribunal can be extended to the exercise 

of setting aside MYT Regulations on the ground of norms set out therein being 

impossible to be achieved by the Appellant for its generating station(s)? 

(e) Whether the Appellate Power of the Tribunal under Section 111 of the Act 

enables it to direct the Commission to amend the MYT Regulations? 

(f) What is the scope and intent of the provisions of the said Regulations, 2009 

dealing with the “power to remove difficulties”(Regulation 57), “power to 

amend” (Regulation 58) and inherent power of Commission (Regulation 59) 

in the context of the exercise of regulatory power to determine the Tariff for the 

electricity utilities namely the generating companies? 

(g) Whether the exercise or non-exercise of powers by the State Commission 

under Regulations 57, 58 and 59 is justiceable under Section 111 of the Electricity 

Act, and if so, to what extent and in what manner? 

(h) Whether the State Commission in exercise or non-exercise of powers under 

Regulations 57, 58 or 59 is required to give a reasoned order in support of its 

decision? 

(i) Whether in the facts and circumstance of the case the Appellant has failed 

on its part to carry out the R&M activities in terms of the directions issued by 

the Commission so much so that such failure led the Appellant to come up 

before the Commission or before this Tribunal with prayer for amendment of 

the Regulations at a time when the Tariff application for determining the Tariff 

of the Appellant is pending for disposal before the Commission. 

14. Though we have framed a number of issues, the pith and substance of the legal 

issue is whether this Tribunal has jurisdiction to enter into the question of validity 

of the Regulations. Therefore, we undertake a comprehensive exercise towards legal 

examination of the point. The other issue is factual in this as to whether the norms 

set up by the Commission are reasonable in the light of facts and circumstances of 

the case and whether the order of the Commission suffers from lack of reasonableness. 

15. Mr. M.G. Ramachandran, learned Counsel for the Appellant relied on a good 

number of decisions of the Hon’ble Supreme Court to buttress the point that what is 

being asked for is not exactly the amendment of the Regulations by virtue of the 

legislative power of the Commission but relaxation of the norms by virtue of the 

power already vested in the Commission in Regulations 57, 58 and 59 of the MYT 

Regulations, 2009. Regulation 57 deals with power to remove difficulties, Regulation 58 

deals with power to amend and Regulation 59 deals with inherent power of the 

Commission. Mr. Ramachandran argues that each or either of the powers enumerated 

above is sufficient for the Commission to afford complete relief to the Appellant and 

the Commission having failed to do so, it is open to the Appellant to move this 

Appellate Tribunal under its appellate jurisdiction to exercise its Appellate Power 

under Section 111 of the Act for asking the Commission to exercise either of the 

three powers on the facts and circumstances of the case and in doing so, the Tribunal 

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01053 

will not be traveling beyond its jurisdiction and will not be traversing the area of 

the power of judicial review. Since the Tariff determination is an inquisitorial 

proceeding and not an adjudicatory proceeding, the Appellant did not commit 

illegality to move the Commission to exercise its power and the Commission having 

failed to do so, the Appellant is within its rights to approach the Tribunal to appeal 

against the decision of the Commission which is verily an appealable one under 

Section 111 of the Act. Section 61 of the Act in its 9 clauses with one proviso makes 

it clear that the generation of the electricity should be conducted on commercial 

principles so as to encourage the competition, efficiency, economical use of resources, 

good performance, optimum investments, safeguarding of consumers interest, recovery 

of cost of electricity in a reasonable manner. It is argued that the Tariff determination 

cannot be such as is de hors Section 61; or else it is liable to struck out. The 

Regulations, 2009 framed by the Commission is such that norms set out in 

Regulation 33 of the said Regulations are not achievable, yet the Commission declined 

to amend the norms. In a cost plus basis Tariff determination, the basic concept is 

that the generating company is entitled to all costs and expenses reasonably incurred 

i.e. incurred by it in a prudent manner plus a reasonable return on its investment. 

Thus, unless there is an imprudence or inefficiency or similar such factors attributable 

to its working, the generating companies should get the cost and expenses incurred 

and in addition thereto a reasonable return. In other words, the generating companies 

cannot be penalised or punished in the realisation through Tariff the cost, expense 

and return to it except to the extent that any imprudence or inefficiency is attributable 

to such generating company. It is contended that it is, however, well accepted that 

there cannot be any regulation providing for various terms and conditions in an 

absolute manner without the need to consider exemption, relaxation, deviation, 

removing difficulties etc. on an on-going basis. The regulations framed are for future. 

The role of the Commission in deciding the Tariff is not adjudicatory in nature, 

namely, after a dispute having arisen, the Commission has to decide the dispute on 

the basis of an existing rights and obligations of the parties. The Commission decides 

on the regulation as applicable during a future period and, therefore, proceeds on 

certain assumptions. It is not just possible to anticipate everything and frame 

regulations. There will always be circumstances which may not be envisaged. The 

norms and parameters for determination of Tariff by the State Commission are also 

terms and conditions which cannot be specified in an absolute manner. There is, 

therefore, always a need to exempt or relax or deviate from the terms and conditions. 

In this connection, Mr. Ramachandran refers to the decisions in 

(1) Uttar Pradesh Power Corporation Limited v. National Thermal Power Corporation 

Ltd. and Ors. 8 (2009) 6 SCC 235 

(2) PTC India Limited v. C.E.R.C. 2010 (4) SCC 603 

(3) Premium Granites and Anr. v. State of Tamil Nadu and Ors. 9 (1994) 2 SCC 691 

(4) Hindustan Paper Corporation Ltd. v. Government of Kerala 10 (1986) 3 SCC 398 

(5) Hindustan Steels Ltd. v. A.K. Roy (1969) 3 SCC 513 

i 

8 Ed.: MANU/SC/0346/2009: 2009 (3) ALD 139 (SC): 2009 ELR (SC) 13: JT 2009 (3) SC 462: 

2009 (3) SCALE 620: (2009) 4 SCR 1060: 2009 (2) UJ 966 (SC) 

9 Ed.: MANU/SC/0466/1994: AIR 1994 SC 2233: JT 1994 (1) SC 376: 1994-2-LW205: 1994 

(1) SCALE 393: (1994) 1 SCR 579: 1994 (2) UJ 145 (SC) 

10 Ed.: MANU/SC/0081/1986: AIR 1986 SC 1541: (1986) 2 CompLJ 238 (SC): 1986 (1) SCALE 

870: (1986) 2 SCR 581: 1986 (2) UJ 551 (SC) 


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(6) S.N. Mukhrjee v. Union of India 11 (1990) (4) SCC 594 

(7) State of Karnatka and Anr. v. V.R. Vivekanand Swamy and Anr. 12 case 2008 (5) 

SCC 328 

(8) Foulkes-Administrative Law, Eighth Edition, pg 217 

(9) Wet Bengal Electricity Regulatory Commission v. CESC Limited (2002) 8 SCC 715 

(10) Cellular Operators Assn of India v. Union of India 2003 (3) SCC 186 

(11) Maharashtra State Power Generation Co. Ltd. v. M.E.R.C. and Ors. 2010 ELR 

(APTEL) 0189 

(12) NTPC Ltd. v. Madhya Pradesh State Electricity Board 2007 ELR APTEL 7 

(13) BSES Rajdhani Power Ltd. v. Delhi Electricity Regulatory Commission 13 (2009) 

ELR APTEL 880 

(14) Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited v. Uttar Pradesh Electricity 

Regulatory Commission and Ors. Appeal No. 96 of 2008 

(15) Gujarat State Electricity Corporation Ltd. v. Gujarat Electricity Regulatory 

Commission and Ors. 14 Appeal No. 129 of 2006. 

Mr. M.G. Ramachandran also referred to treaties of the (a) Cases and Materials of 

Indian Administrative Law by M.P. Jain (1994 Edition Volume I page, 117, (b) de Smith’s- 

Judicial Review of Administrative Action, 4 th Edition, Page 285, (c) Bennion on Statutory 

Interpretation, fifth Edition, Indian reprint, Page 90, (d) Hiltaire Barnett-Constitutional 

and Administrative Law, First Indian reprint, 1996, Page 716 and (e) Bennion on 

Statutory Interpretation, Fifth edition, Indian reprint, Page 142. 

16. Factually, it is submitted that the State Commission has failed to consider the 

following aspects which have been pointed out by the Appellant herein in Petition 

No. 8 of 2010 in these words: 

3.25 In respect of the units of SGTPS Birsingpur, it is pertinent to mention that 

in FY 10 there has been acute shortage of coal. The units were required to be 

run on partial loading. Even the new units of 500 MW as also runs on partial 

load on this account. This has resulted in reduction of PLF of the station in 

FY 10. 

3.26 Both the units of PH 1 are also older than 15 years and have been included 

by CEA in comprehensive R&M works for implementation during 12 th plan. 

M/s. NTPC (Consultancy wing) have been approached for preparation of 

proposal for R&M scheme of the Unit 1&2 on the similar lines of STPS, Sarni. 

HP Heaters of these two units were not functioning properly. Towards an 

effort to improve the efficiency of the units, they have been procured and replaced 

in one unit in the AOH of 2009 and the work of other unit shall be taken up in 

AOH of 2010. 

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b 

c 

d 

e 

f 

g 

h 

11 Ed.: MANU/SC/0346/1990: AIR 1990 SC 1984: 1990 CriLJ 2148a: JT 1990 (3) SC 630: 

(1990) Supp 1 SCR 44: 1991 (1) SLJ 1 (SC): (1990) 3 UPLBEC 2093 

12 Ed.: MANU/SC/7440/2008: AIR 2008 SC 2080: (2008 (117) FLR 1044): JT 2008 (4) SC 553: 

2008 (4) KarLJ 477: (2008) 5 MLJ 414 (SC): 2008 (6) SCALE 261 

13 Ed.: MANU/ET/0095/2009 

14 Ed.: MANU/ET/0060/2006: 2007 ELR (APTEL) 1066 

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3.27 Design Probe- The ABL boilers and BHEL Turbine combination of units 

have design deficiency compared to BHEL Boiler/BHEL Turbine. MPPGCL is 

operating these units best of its ability. As per CEA performance review for 

FY 2003 to FY 2007, the performance of 210 MW Unit-1 & 2 of SGTPS is superior 

to all India average PUF of ABL Boiler/BHEL Turbine sets of 200/210 MW 

capacity, as shown in the table below: 

Year Plant Utilisation Factor (PUF) in (per cent) - ABL/BHEL make SGTPS 

Unit No. 1 SGTPS Unit No. 2 All India Average 

Year 

Plant Utilisation Factor (PUF) in (%)- ABL / BHEL make 

SGTPS Unit No. 1 SGTPS Unit No. 2 

Average 

All India 

2002-03 62.64% 62.57% 50.56% 

2003-04 62.55% 62.92% 61.50% 

2004-05 69.60% 63.22% 63.71% 

2005-06 *45.54% 61.77% 65.37% 

2006-07 72.20% 64.34% 63.45% 

* The Generator transformer of Unit # 1 failed during this period resulting in 

low PUF. The comparisons of PUF between BHEL/BHEL and ABL/BHEL 

make units as per CEA performance review for thermal power stations 2006-07 

are shown in the table below: 

Year 

Plant Utilisation Factor (PUF) 

BHEL / BHEL 

ABL / BHEL 

2004-05 80.18% 63.71% 

2005-06 79.35% 65.37% 

2006-07 83.58% 63.45% 

01055 

The State Commission has failed to consider the above design-deficiency of the 

Birsingpur unit and has held that as it is a new unit, there is no justification of the 

operating norms for the said unit. 

17. With respect to the hydro generating stations operated by the Appellant, the 

State Commission has failed to consider the following aspects with respect to the 

formula prescribed in the Tariff Regulations for calculating the availability of these 

stations, which have been pointed out by the Appellant in Petition No. 8 of 2010 in 

these words: 

(24) On the basis of the provisions in the Clause 38 of the Regulation 2009, the 

PAFM for preceding three months as certified by SLDC in respect of all the 

Hydel Power Stations is as detailed below: 

S. Hydro Power Monthly % MAY CUM. 

No. Station (w.e.f. June-July 08.05.09) Yearly (%) 

1 Gandhisagar 59.86 25.46 38.82 40.05 

2 Pench 29.17 56.75 92.46 61.99 


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3 Bargi 69.16 43.30 38.32 48.78 

4 Bansagar-1 96.46 66.03 80.92 80.05 

5 Banasagar-II 44.75 43.43 47.42 45.26 

6 Banasagar-III 72.36 49.20 60.97 60.03 

7 Banasagar-IV 0.00 0.00 0.00 0.00 

8 Birsingpur 87.50 96.67 100.00 95.29 

9 Rajghat 0.00 0.00 8.60 3.14 

10 Madhikheda 0.00 0.00 37.82 13.79 

(25) As the PAFM is linked with DC, we may achieve zero PAFM even if 

machine is ready for generation but could not be run due to any constraints, 

i.e. restriction on release of water for generation imposed by WRD or in case 

reservoir level drops below MDDL at which generation is not possible or nay 

other constraints imposed by local/administrative authorities in which units 

are not allowed to run due to local “Mela” or any other problems. This is 

evident from the above table that Banasagar-IV HPS Jhinna will get no fixed 

charges for the period up to July 2009 whereas Rajghat & Madhikheda HPS 

will get no fixed charges for the Month May 2009 and June 2009 because in 

these months PAFM of these Power House were zero due to zero DC (no 

generation was possible due to reservoir level below MDDL) 

(26) Further, the non-achievement of PAFM shall not be due to poor performance 

of plants but due to provisions in respect of determination of Tariff for Hydro 

Generating Stations. Despite availability of units/Plants for generation, due to 

constraints plants may not achieve normative PAFM and balance 50 per cent 

fixed cost shall be recoverable on achieving annual generation equal to annual 

design energy. As such despite availability of units/plants for generation 

including engagement/availability of staff and all input required, but due 

restriction imposed by other agencies on which MPPGCL has no control, 

generation from units shall not be possible and due to zero DC fixed cost shall 

not be received by the company 

18. The State Commission is said to have failed to consider the above aspects and 

has interpreted the above as a request by the Appellant to issue directions to the 

local authorities. 

19. Mr. Sanjay Sen, learned Counsel appearing for the Commission argued that 

what Mr. Ramachandran has argued has no legal sanction behind it, and the question 

would be whether the Tribunal has jurisdiction under Section 111 of the Act to 

assume the jurisdiction to direct the Commission for amendment of the Regulations, 

2009 setting up therein certain norms relating to the principal generating stations 

which according to the Appellant was not possible to reach but, which according to 

the Commission was verily possible. The alleged impossibility on the part of the 

Appellant arose due to its impossibility to carry out R& M activities which the 

Commission has been insisting on for a number of years by several meetings with 

the representatives of the Appellant company and through correspondence which 

have been set out in the written note of submissions. In the said scenario, it cannot 

be said that the Appellant was bona fide in moving the Commission and from the 

nature of the application being Petition No. 8 of 2010 it would appear that it was 

argued in unambiguous and clear words to amend its notified Regulations and 

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bring about the Regulations to suit its purpose which the Commission refused to do 

so holding by a reasoned order that it was not agreeable to amend the Regulations 

because the norms set out in the regulations were such as were not at all impossible 

to reach at all, and the Appellant In spite of having been directed to extensively 

carry out its renovation and modernisation works, it failed to do so. And, when the 

Appellant failed to do so it came of its own with a petition for amendment of the 

Regulations. Even the value of the performance parameters, are inferior to the norms 

specified in Regulation, 2009 for FY 2011-12. The Commission asked the Appellant 

to clarify certain issues which it failed to do so. Secondly, it is submitted that what 

is sought for from the Tribunal is really exercise of the doctrine of judicial review by 

asking a direction to the Commission to invoke its power under Regulation 57, 58 

and 59 of the MYT Regulations, 2009 when none of these regulations is at all 

applicable to mitigate the alleged hardship of the Appellant; and what is really 

required for the Appellant is amendment of the regulations which the Appellant in 

fact asked for in Petition No. 8 before the Commission and which it again asked for 

through this appeal before this Tribunal which cannot render any relief. Unless the 

doctrine of judicial review is exercised which is really non existent either under the 

statute or under the Constitution of India, the Appellant cannot have any relief. 

Therefore, it is submitted that the appeal is not maintainable under Section 111 of 

Electricity Act, 2003. 

20. Having thus recorded the sum total of the submissions of the learned Counsel 

for the parties that we proceed to have a critical appreciation of the issues which 

can be divided into two parts – legal and factual; for the present we will be dwelling 

upon the legal issues enumerated above which overlap each other so that we present 

herewith a common treatment covering all the legal issues. 

21. Ours is an Appellate Tribunal for Electricity set up under Section 110 of the 

Electricity Act, 2003 and power and functions of this Tribunal are dealt with under 

Section 111 which in essence provides that it is an appellate Authority to examine 

the orders passed by adjudicating Officer under the Act (Section 127) or the orders 

passed by the Appropriate Commission. The procedure and power of the Appellate 

Tribunal are dealt with in Section 120. The Central Commission and the State 

Commission pass order under Part VII of the Act, 2003 which are appealable under 

Section 111 of the Act. There is another power of the Tribunal located in Section 121 

according to which this Tribunal may after hearing the appropriate Commission or 

any other party, issue such orders and instructions or directions from time to time 

to any appropriate Commission for the performance of its statutory functions under 

the Act. In the present appeal, the Appellant has not admittedly asked the Tribunal 

to exercise this power. The original Section 121 had given the Chairperson of the 

Tribunal to examine general power of superintendence and control over the 

Commission but now by amendment the section has been the one which we read 

just now. 

22. The function of the State Commission will be found in Section 86 of the Act 

which we reproduce below: 

Section 86. (1) The State Commission shall discharge the following functions, 

namely: 



State: 


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Providing that where open access has been permitted to a category 

of consumers under Section 42, the State Commission shall determine 

only the wheeling charges and surcharge thereon, if any, for the 

said category of consumers; 

(b) regulate electricity purchase and procurement process of distribution 

licensees including the price at which electricity shall be procured from 

the generating companies or licensees or from other sources through 

agreements for purchase of power for distribution and supply within the 

State; 

(c) facilitate intra-state transmission and wheeling of electricity; 

(d) issue licences to persons seeking to act as transmission licensees, 

distribution licensees and electricity traders with respect to their operations 

within the State; 

(e) promote congenration and generation of electricity from renewable 

sources of energy by providing suitable measures for connectivity with 

the grid and sale of electricity to any person, and also specify, for purchase 

of electricity from such sources, a percentage of the total consumption of 

electricity in the area of a distribution licensee; 

(f) adjudicate upon the disputes between the licensees, and generating 

companies and to refer any dispute for arbitration; 

(g) levy fee for the purposes of this Act; 

(h) specify State Grid Code consistent with the Grid Code specified under 

Clause (h) of Sub-section (1) of Section 79; 

(i) specify or enforce standards with respect to quality, continuity and 

reliability of service by licensees; 

(j) fix the trading margin in the intra-State trading of electricity, if 

considered, necessary; and 

(k) discharge such other functions as may be assigned to it under this Act. 

(2) The State Commission shall advise the State Government on all or any of 

the following matters, namely: 

(i) promotion of competition, efficiency and economy in activities of the 

electricity industry; 

(ii) promotion of investment in electricity industry; 

(iii) re-organisation and restructuring of electricity industry in the State; 

(iv) matters concerning generation, transmission, distribution and trading 

of electricity or any other matter referred to the State Commission by that 

Government. 

(3) The State Commission shall ensure transparency while exercising its powers 

and discharging its functions. 

(4) In discharge of its functions the State Commission shall be guided by the 

National Electricity Policy, National Electricity Plan and Tariff policy published 

under Section 3. 

23. In this Connection, we will discuss the provisions of Part IV dealing with Licensing, 

Part VII dealing with Tariff and Part X dealing with power and functions of the 

Commission under this Act. 

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24. If we analyse different provisions of this Act, which are relatable to the appropriate 

Commission it would appear that the regulatory Commission is a peculiar statutory 

body having within in itself four functions, (a) Administrative, (b) Legislative and 

(c) Judicial and (d) Advisory. In its administrative jurisdiction, it controls and specifies 

the functions of the generating utilities, transmission utilities, distribution utilities and 

traders of Electricity. Normally, it does not have any concern with any individual consumer. 

Its legislative function extends to bringing about different types of Regulations pursuant 

to the provisions of the Act and to carry out the function of the Act and its Regulations 

include determination of terms and conditions of Tariff Regulations, Conduct of Business 

Regulation, MYT Frame Work Regulations, to name a few. It is on the basis of these 

Regulations that an appropriate Commission determines Tariff of transmission utilities 

or of distribution utilities and when it does so it does exercise quasi-legislative power. 

Under Section 178 of the Electricity Act, 2003, the Central Electricity Regulatory Commission 

is vested with the power to make regulations and regulations framed by them are 

required to be laid down before the Parliament under Section 179 which has Authority 

to make any modification. Similarly, the State Commission has been vested with the 

power to make regulations to carry our the purpose of the Act under Section 181 and all 

such regulations made by the State Commission are required to be laid before each 

House of the State Legislature, Unicamral or bicameral as the case may be. The Regulations 

framed by the State Commission or the Central Commission do partake the character of 

subordinate or delegate legislation under the law and all such subordinate legislations 

have the force of the statutory law. Therefore, the regulations framed by an appropriate 

Commission are deemed to be legislative enactments having the approval of Legislature 

when it is put to use by notification. 

25. So far as the Authority of this Tribunal is concerned, its power or its limitation 

has been laid down in the most recent decision of the Supreme Court namely PTC 

India Ltd. v. CERC reported in (2010) 4 SCC 603. This is a five-Judge Bench decision 

of the Supreme Court wherein, the question arose as to whether this Tribunal has 

jurisdiction under Sections 111 and 121 to examine the validity of the regulations. 

The Hon’ble Supreme Court held as follows: 

(93) For the aforesaid reasons, we answer the question raised in the reference 

as follows: 

The Appellate Tribunal for Electricity has no jurisdiction to decide the 

validity of the Regulations framed by the Central Electricity Regulatory 

Commission under Section 178 of the Electricity Act, 2003. The validity 

of the Regulations may, however, be challenged by seeking judicial review 

under Article 226 of the Constitution of India. 

(94) Our summary of findings and answer to the reference are with reference 

to the provisions of the Electricity Act, 2003. They shall not be construed as a 

general principle of law to be applied to Appellate Tribunals vis-à-vis Regulatory 

Commissions under other enactments. In particular, we make it clear that the 

decision may not be taken as expression of any view in regard to power of the 

Securities Appellate Tribunal vis-à-vis Securities and Exchange Board of India 

under the Securities and Exchange Board of India Act, 1992 or with reference 

to the Telecom Disputes Settlement and Appellate Tribunal vis-à-vis Telecom 

Regulatory Authority of India under the Telecom Regulatory Authority of India 

Act, 1997 

26. This decision has also dealt with certain issues which we are not concerned 

with. The ratio decidendi of this decision, so far as the power and functions of the 


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Tribunal is concerned, is very clear and have been laid down in Para 93 and 94 of 

the judgment. Therefore, we cannot legitimately do exercise which is not mandated 

in Section 111 or 121 of the Act. So far as the present appeal is concerned, we are 

faced with the submissions of the learned Counsel for the Appellant that when a 

Commission declines to exercise its power to remove difficulties, or power to relax 

or when Commission refuses to exercise its inherent power when exercise of any of 

such powers was really necessary, then it is within the domain of this Tribunal to 

exercise its power under 111 to direct the Commission to exercise its any of the 

powers as enumerated above so much so that the principles laid down in the National 

Tariff Policy, National Electricity Policy and provisions of the Section 61 of the Act 

are really honored or they are not honored in breaches. 

27. For better appreciation of the position of law, it is worthwhile to place on record 

certain factualities and events in chronological manner. 

28. The First Generation Tariff and Annual Revenue Requirements for the Financial 

Year 2005-06 based on the Tariff application by the Appellant and the Madhya 

Pradesh State Electricity Board was published on 25 th January, 2006. The multi-year 

Tariff framework order in respect of the Appellant for the FY 2006-07, 2007-08 and 

2008-09 was notified on 7 th March, 2006 on the strength of the petition of the Appellant 

being Petition No. 149 of 2005. In the Generation Tariff Order for FY 2006-07, the 

Commission gave the following directions: 

The Commission again directs the MPPGCL to carry out necessary R&M Works 

for improving the performance of its generating units. MPPGCL may consider 

phasing out these units if it feels that these units have outlived their economic 

life and investment in R&M Work may not yield the desired results. The 

Company is directed to submits its proposal in this regard to the Commission 

with a detailed cost benefit analysis within three months of this order. 

29. The Commission paid a visit to Satpura Thermal Power Station at Sarni and 

made a report which was forwarded to the Appellants. In the said report dated 

30 th May, 2007, the Commission inter alia made the following observations: 

The Commission directs that Company shall file a comprehensive proposal 

for R&M of the STPS as per the Commission’s guidelines for capital expenditure. 

The Commission has also noted that Power House–I has been performing 

quite satisfactorily even though it has completed more than 37 years of its 

operation. The Commission directs to prepare a need based action plan for 

renovation of this power house. The Commission has also taken stock of 

breakdown and failures in the power station. The Company should file a 

detailed analysis of various breakdowns and the remedial measures undertaken 

to bring down the avoidable number of incidence in future. The Commission 

directed MPPGCL to file a detailed report on the performance of the units 

before and after AOH/COH. 

30. Then, on 1 st September, 2007 the Commission wrote a letter to the Appellant 

stating inter alia that the compliance report of the Appellant was scrutinised and 

the Commission directs the Appellant to file a comprehensive compliance report on 

the directions of the Commission originally given along with views of the Commission 

on the status of the compliance report by 30 th September, 2007. The direction was 

that the proposal for R&M of the STPS would relate to capital expenditure. Then on 

11 th October, 2007 the Commission wrote a letter to the Appellant noting inter alia 

that the Company had not yet submitted any proposal for R&M of their own thermal 

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power stations for the appraisal of the Commission and the Commission’s view 

was that no R&M proposal had been submitted to the Commission for appraisal till 

date. On 30 th November, 2007 the Commission again wrote to the Appellant on this 

subject reiterating virtually what was repeated in the letter dated 11 th October, 2007. 

On 22 nd January, 2008, the Commission again wrote regarding the status of the 

compliance report of Satpura TPS informing that instructions were issued by the 

Commission to send the compliance report by 15 th January, 2008 but till date the 

same could not be received and compliance might be expedited. Then, on 

18 th March, 2008, the Commission wrote to the Appellant that direction-wise 

comprehensive impact analysis report should be submitted by 31 st March, 2008. 

Meanwhile, some NTPC Officers called on the Appellant at Jabalpur and visited the 

plant and submitted a detailed report comprising recommendations and the 

Commission directed the Appellant that the action plan on such recommendations 

should be submitted by 24 th March, 2008. Then on 16 th May, 2008, the Commission 

convened a meeting with the officers of the Appellant concerning renovation 

and modernisation of the thermal power stations at Satpura and Amarkantak. 

On 30 th May, 2008, the Commission wrote to the Appellant to say that a compliance 

report might be submitted towards implementation of the recommendations by 

M/s. A.F. Ferguson, Action Plan made by M/s. Deolittle Touche Tohmatsu India 

Pvt. Ltd., by 15 th July, 2008. On 3 rd August, 2009, the Commission wrote to the Appellant 

on Review of Consolidated Annual Regulatory Compliance Report of MPPGCL for 

FY 2008-09 and directed that since no further progress could be observed, the Appellant 

should submit a detailed report along with time bound programme for implementing 

the system. The Commission also lamented that the Appellant was not serious for 

developing data based management and management information system. 

On 3 rd September, 2008, the Commission wrote to the Appellant to say that true-up 

petition was filed, audited accounts were submitted, details of the R&M carried out 

during the preceding year but R&M scheme should be made a part of the plan of 

R&M in respect of the thermal power stations of MP. On 26 th February, 2009, the 

Commission on the subject of filing R&M proposal and energy audit report by the 

Company for thermal power stations of the Appellant stated that it was once again 

stressed the need for R&M works but the Appellant did not file any proposal under 

capital expenditure guidelines. Thus, the Commission drew up a suo motu proceedings 

being 07 of 2009 directing the Appellant to appear in person or through authorised 

representative in default whereof further action would be contemplated under the 

Act. Meanwhile, on 11 th November, 2008 the Commission published draft regulation 

for terms and conditions for determination of Generation Tariff for the FY 2009-10 

to FY 2011-12 on multi-year Tariff principle basis. On 3 rd December, 2008, the Appellant 

submitted its comments and suggestions on the draft regulations. On 11 th December, 2009 

the Commission published a revised draft of the Tariff regulations inviting further 

comments and suggestions and on 22 nd February, 2009 and 20 th March, 2009 the 

Appellant submitted its comments and suggestions on the revised draft regulations 

notified by the State Commission. On 4 th March, 2009 public hearing was conducted, 

the Appellant appeared and apprised the Commission about the present status. 

On 9 th March, 2009, the Commission sought for additional information which the 

Appellant is said to have complied with on 20 th March, 2009. At the other side, 

hearing on the suo motu petition being 07 of 2009 took place before the Commission 

on 25 th March, 2009 and the Commission passed an order on 15 th April, 2009 in the 

matter of filing of R&M proposal and directed that (a) R&M needs of thermal power 

stations must be identified within three months, (b) comprehensive project report 


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with detailed cost benefit analysis be prepared within six months, (c) the funding 

possibility for R&M projects should be explored, (d) necessary approvals from different 

agencies might be obtained, (e) specifications/draft NIT parallel for above activities 

be prepared, (f) approval as per regulations notified by the Commission should be 

obtained and (g) better O&M practices as prevailing in NTPC be adopted. On 

30 th April, 2009 the Commission notified the M P Electricity Regulatory Commission 

(Terms and Conditions for determination of Generation Tariff) Regulations, 2009. 

On 8 th May, 2009 the said Regulation was notified in the Government gazette after 

final approval. On 2 nd June, 2009, the Commission notified its order dated 19 th May, 2009 

concerning approval of capital expenditure towards R&M scheme for STPS Sarni. In 

this order, the Commission directed the Appellant to submit a report within a month 

on 9 points which were put in seriatim at Paragraph 10 of the said order. The 

questions were very specific and direct. On 3 rd August, 2009 the Commission reviewed 

the matter and gave certain directions to carry out R&M in thermal power stations. 

On 27 th August, 2009 a meeting was held between the Commission and the Appellant 

wherein the Appellant expressed its difficulty in submitting its Tariff petition in 

accordance with the norms prescribed in the notified regulations. But the Commission 

directed the Appellant to file the Tariff petition in accordance with the norms 

prescribed in the Tariff regulations. Accordingly, on 28 th August, 2009 the Appellant 

filed its Tariff petition being no. 54 of 2009 in accordance with the Tariff regulations 

for determination of multi year generating Tariff for the period FY 2009-10, 2010-11 

and 2011-12. On 5 th January, 2010 the State Commission held a public hearing in 

respect of the Petition No. 54 of 2009 wherein the Appellant requested for relaxation 

of the operating norms prescribed in the Tariff regulations. It is the case of the 

Appellant that the Commission suggested that a separate petition for relaxation of 

the norms might be filed and accordingly on 20 th January, 2010 the Appellant filed 

a petition requesting the Commission to clarify certain issues regarding fixed charges 

and calculation of plant availability factor in respect of hydro generating units. It is 

alleged that the Commission did not give any clarifications for which the Appellant 

again wrote a letter on 3 rd April, 2010 requesting for clarifications. However, on 

25 th January, 2010 the Appellant filed Petition No. 08 of 2010 seeking for relaxation 

of the operating norms as prescribed in the Tariff regulations. On 16 th February, 2010 

the Appellant filed a petition requesting the Commission to hear both the petitions, 

namely, 54 of 2009 and 08 of 2010 in a comprehensive manner but the Commission 

is alleged to have declined the request. Then came the impugned order dated 

26 th May, 2010. 

31. The above is a brief narration as to how the matter relating to R&M works and 

the correspondences between the parties on the subject went on. According to the 

Commission, despite directions from the Commission from time to time the Appellant 

was lethargic and did not carry out the scheme, while according to the Appellant, 

as is now canvassed before us, the generating stations were quite old ones and the 

Appellant faced difficulties in implementing the scheme. 

32. Let us now have a look as to what was actually prayed for before the Commission 

by filing the Petition No. 08 of 2010. It is a detailed petition, self-evident and prayers 

were as follows: 

(i) Consequent to the implementation of power sector reforms in the State 

whereunder amongst others, the activities of generation, transmission, 

distribution and retail supply of electricity carried out by MPSEB have been 

restructured and transferred to the six successor corporate entities, the function 

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of power generation has been vested with MPPGCL. The MP Tradeco has 

been vested with the responsibility of Power trading and MPPGCL is required 

to sell its entire generation to MP Tradeco at a rate determined by Hon’ble 

MPERC. 

(ii) In view of the above, the Petitioner respectfully prays that Hon’ble Commission 

may kindly: 

(a) Amend the norms specified in Regulations 2009 (RG- 26 (1) of 2009) 

and consider the same as proposed in the Para 1 to 36 above. 

(b) Condone any inadvertent omissions/errors/short comings and permit 

the Applicant to add/change/modify/alter this filing and make further 

submissions as may be required at later stages. 

(c) Pass such orders as Hon’ble MPERC may deem fit and proper and 

necessary in the facts and circumstances of the case to grant relief to 

Petitioner. 

33. To judge as to whether the Commission was justified in rejecting the petition of 

the Appellant praying for amendment of the notified Regulations it is most appropriate 

to quote the findings of the Commission which are as follows: 

13.0 Regarding the prayer made by the Petitioner for amendment of the norms 

specified in the regulation, the Commission is of the view that the regulations 

are issued exercising legislative functions of the Commission of the Commission 

given to it under the act and there is no provision for review. Even otherwise 

also the Petitioner could not satisfy the Commission on merit warranting further 

In view of the above, the Commission has observed the following: 

(i) The performance of the thermal power stations of MPPGCL have been 

deteriorating since past years and no sincere efforts seem to have been 

made to arrest such deterioration what to speak of improvement. 

(ii) The Petitioner has sought relaxation in norms for 2009-10 which are 

even inferior to the norms for FY 2008-09 prescribed by the Commission in 

the Regulations for the earlier control period i.e. FY 2007to FY 2009. It is 

strange to note that the Petitioner is seeking inferior norms than what he 

had in the earlier years. This request is not at all the spirit of the Electricity 

Act, 2003 and the Tariff Policy notified by the Government of India. 

(iii) The Petitioner has totally relied on its past trend rather than showing 

a commitment for improvement in the coming years. This contention of 

the Petitioner is not tenable since it would be against the reform process 

and will burden the consumers with the cost of the inefficiency at the 

generating end. 

(iv) The Petitioner has also sought relaxation in the operating norms for 

the new unit, i.e. SGTPS 500 MW Birsinghpur commissioned recently on 

28 th August, 2008. While the Petitioner has been citing lack of renovation 

and modernisation of old units as the main reason for poor performance, 

the Petitioner’s inability to operate a new unit at the desired and nationally 

acceptable level of performance shows that the problem is much deep 

and severe than what has been made out. Merely showing helplessness 

and seeking relaxation is not going to solve the deep rooted problem. 

(v) On going through the complete petition, it is observed that the Petitioner 

is seeking relaxation in norms, notified through a regulation that too far 


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for all the years of the years of the control period and for all the thermal 

and hydel generating units including the new capacities. The complete 

reading of the petition indicates that the petition is seeking amendment 

to the Regulation 2009 notified by the Commission on 8 th May, 2009. The 

Commission does not find any event or reason which justifies the prayer 

on merit of this case with adequate grounds based on occurrences a 

between the notification of the regulation and the filing of the petition for 

relaxation of operating norms action. 

14.0. In view of the above findings, the Commission is of the view that the 

petition in not maintainable hence, stands disposed of. 

34. The above order which is under appeal before us is said to be non-speaking one 

as being without any reason and in support of such contention as this, a decision of 

the Hon’ble Supreme Court has been referred to us which we shall place in our 

judgment to test the validity of the submission at the appropriate place. 

35. For the present, it is necessary for us to study the different provisions of the Tariff 

Regulations, 2009 in respect of which amendment is sought for. The Regulations, 2009 

consists of five chapters covering 59 regulations of which we quote some of them as 

could be seen hereunder for better appreciation of the case. Mr. Ramchandran submits 

that he is quite conscious that this Tribunal does not have the power of judicial 

review so that before us he is not challenging the Regulation, nor is he asking for 

amendment of the Regulations from the Tribunal; what he is asking for his client is 

a direction to the Commission in order that the Commission may relax the 

norms/modify the norms to suit the suitability of the Appellant in exercise of the 

power of the Commission to (i) relax, or (ii) remove difficulties, or (iii) apply inherent 

power. Before we examine the issue, we read the relevant provisions of the Tariff 

Regulations, 2009. 

1.3 These Regulations shall come in force with immediate effect from the date 

of their publication in the Official Gazette of the Government of Madhya Pradesh 

and unless reviewed earlier or extended by the Commission, shall remain in 

force for a period up to March 2012 from the date of commencement. 

Provided that where a Project, including a part thereof, has been declared 

under commercial operation before the date of commencement of these 

Regulations and whose Tariff has not been finally determined by the Commission 

till that date, Tariff in respect of such Project or such part thereof, as the case 

may be, for the period ending 31 st March, 2009 shall be determined in accordance 

with the Madhya Pradesh Electricity Regulatory Commission (Terms and 

Conditions for Determination of Generation Tariff) Regulations, 2005. 

2. Scope and extent of application 

2.1 These Regulations shall apply in all cases of determination of Generation 

Tariff under Section 62 of the Electricity Act, 2003 for supply of electricity to a 

Distribution Licensee, but shall not apply where Tariff has been determined 

through the transparent process of bidding in accordance with the guidelines 

issued by the Central Government as per the provisions of Section 63 of the 

Electricity Act, 2003. 

3. Norms of Operation to be threshold norms 

3.1 For removal of doubts, it is clarified that the norms of operation specified 

under these Regulations are the threshold norms and this shall not preclude 

the Generating Company and Beneficiaries from agreeing to improved norms 

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of operation and in such case the improved norms shall be applicable for 

determination of Tariff. 

6. Principles for Tariff determination 

6.1. The Commission, while specifying the terms and conditions for the 

determination of Tariff under these Regulations, is guided by the principles 

contained in Section 61 of the Act. 

6.2. These Regulations intend to encourage Generating Company to operate 

on sound commercial principles. The return on equity allowable to Generating 

Company shall depend upon its performance relative to the benchmark levels 

of the operating parameters fixed by the Commission. Only prudent capital 

expenditure shall be considered for inclusion in the asset base. 

6.3. The Multi-Year Tariff Principles adopted in these Regulations seek to promote 

competition, adoption of commercial principles, efficient working of the 

Generating Company and are based on the Central Electricity Regulatory 

Commission (CERC)’s principles. The operating and cost parameters for the 

Tariff period have been prescribed after duly considering the past performance, 

performance of similarly placed Units, fuel, vintage of equipments, nature of 

operation and capability of achievement in view of past performance for many 

years. The allowable Tariffs shall be determined in accordance with these 

norms. The Generating Company is allowed to retain most of the savings as a 

reward for performance better than those prescribed in these Regulations. This 

is expected to incentivise the Generating Company for efficient performance 

and economical use of resources. The Beneficiaries shall also benefit from the 

efficient performance and economical use of resources by the Generating 

Company through lowering of Tariffs and improvement in availability and 

Plant Load Factor of generating stations. 

6.4. Only those investments and capital expenditure that are in accordance 

with the guidelines framed by the Commission in this regard shall be allowed 

to be recovered through Tariff. 

This shall ensure prudent investments by the Generating Company. 

6.5. The terms and conditions prescribed in these Regulations are for conventional 

energy sources. 

16. CERC’s Principles 

16.1. The Commission, while framing these Regulations has been guided by 

the principles and methodologies specified by the Central Commission (CERC) 

in its Notification dated 19 th January, 2009 on terms and conditions of Tariff 

Regulation, 2009 effective from 1 st April, 2009. 

18. Renovation and Modernisation 

18.1. The Generating Company, for meeting the expenditure on Renovation 

and Modernisation (R&M) for the purpose of extension of life beyond the Useful 

life of the generating station or a Unit thereof, shall make an application before 

the Commission for approval of the proposal with a Detailed Project Report 

giving complete scope, justification, cost benefit analysis, estimated life extension 

from a reference date, financial package, phasing of expenditure, schedule of 

completion, reference price level, estimated completion cost including foreign 

exchange component, if any, consent of Beneficiaries and any other information 

considered to be relevant by the Generating Company: 

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18.2. Where the Generating Company makes an application for approval of 

R&M proposal, the approval shall be granted after due consideration of 

reasonableness of the cost estimates, financing plan, schedule of completion, 

interest during construction, use of efficient technology, cost-benefit analysis, 

and such other factors as may be considered relevant by the Commission. 

18.3. Any expenditure actually incurred or projected to be incurred as admitted 

by the Commission after prudent check based on the estimates of Renovation 

and Modernisation expenditure and life extension, and after writing off the 

original amount of the replaced assets and deducting the accumulated 

depreciation already recovered from the Original Project Cost, shall form the 

basis for determination of Tariff. 

18.4. The Generating Company in case of thermal generating station, may, in 

its discretion, avail of a special allowance either for a Unit or a group of Units 

as compensation for meeting the requirement of expenses including Renovation 

and Modernisation beyond the Useful life of the generating station or a Unit 

thereof, and in such an event revision of the capital cost shall not be considered 

and the applicable operational norms shall not be relaxed but the special 

allowance shall be included in the annual fixed cost: 

Provided further that the option once exercised shall be final and shall 

not be allowed to be changed. Provided also that such option shall not 

be available for a generating station for which Renovation and 

Modernisation has been undertaken and the expenditure has been admitted 

by the Commission before commencement of these Regulations, or for a 

generating station or Unit which is in a depleted condition or operating 

under relaxed operational and performance norms. An appropriate 

reduction in NAPAF (Normative Annual Plant Availability Factor) of 

such a generating Unit whose R&M proposal is approved by the 

Commission as per Regulation 18.1, shall be considered by the Commission 

for the Year in which R&M of Unit is undertaken. However, the operational 

norms for such generating Unit shall be reviewed by the Commission 

keeping in view the objectives of R&M works. The Generating Company 

shall file the expected improvement in norms in its DPR of R&M and the 

envisaged improvement in operational norms shall be applicable for that 

particular generating Unit after completion of R&M works. 

18.5. A Generating Company on opting for alternative option in Regulation 

18.4 of this Regulation shall be allowed special allowance @ Rs. 5 lac/MW/Year 

in 2009-10 and thereafter escalated @ 5.72 per cent every Year during the 

Tariff period in 2009-12, Unit-wise from the next financial Year from the respective 

date of the completion of Useful life with reference to the COD of respective 

Units of generating station. 

Provided that in respect of a Unit in commercial operation for more than 25 Years 

as on 1 st April, 2009, this allowance shall be admissible from the Year 2009-10. 

56. Deviation from norms. 

56.1. Tariff for sale of electricity by the Generating Company may also be 

determined in deviation of the norms specified in these Regulations subject to 

the conditions that: 

(a) The levelised Tariff over the Useful life of the Project, calculated based 

on the discounting factor as notified by the CERC from time to time for 

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the Projects under Section 63 of the Act, on the basis of the norms in 

deviation does not exceed the levelised Tariff calculated on the basis of 

the norms specified in these Regulations; and 

(b) Any deviation shall come into effect only after approval by the Commission, 

for which an application shall be made by the Generating Company. 

57. Power to remove difficulties 

57.1. If any difficulty arises in giving effect to any of the provisions of these 

Regulations, the Commission may, by general or special order, do or undertake 

or direct the Generating Company to do or undertake things, which in the 

opinion of the Commission are necessary or expedient for the purpose of 

removing the difficulties. 

58. Power to Amend 

58.1. The Commission may, at any time add, vary, alter, modify or amend any 

provisions of these Regulations. 

59. Repeal and Savings 

59.1. The Regulations namely “Madhya Pradesh Electricity Regulatory 

Commission (Terms and Conditions for determination of Generation Tariff), 

Regulations, 2005 (G-26 of 2005)” published vide Notification No. 2932/ 

MPERC/2005 in the Gazette dated 23 rd December, 2005 and read with all 

amendments thereto, as applicable to the subject matter of these Regulations is 

hereby superseded. 

59.2. Nothing in these Regulations shall be deemed to limit or otherwise affect 

the inherent powers of the Commission to make such orders as may be necessary 

for ends of justice to meet or to prevent abuses of the process of the Commission. 

59.3. Nothing in these Regulations shall bar the Commission from adopting, 

in conformity with the provisions of the Act, a procedure, which is at variance 

with any of the provisions of this Regulation, if the Commission, in view of 

the special circumstances of a matter or class of matters and for reasons to be 

recorded in writing, deems it necessary or expedient for dealing with such a 

matter or class of matters. 

59.4. Nothing in these Regulations shall, expressly or impliedly, bar the 

Commission dealing with any matter or exercising any power under the Act 

for which no Regulations have been framed, and the Commission may deal 

with such matters, powers and functions in a manner it thinks fit. 

36. Now, we quote some of the provisions of the Act dealing with Tariff in Part VII 

which will be relevant for our purpose. 

61. The Appropriate Commission shall, subject to the provisions of this Act, 

specify the terms and conditions for the determination of Tariff, and in doing 

so, shall be guided by the following, namely: 

(a) the principles and methodologies specified by the Central Commission 

for determination of the Tariff applicable to generating companies and 

transmission licensees; 



(c) the factors which would encourage competition, efficiency, economical 

use of the resources, good performance and optimum investments; 


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(d) safeguarding of consumers interest and at the same time, recovery of 

the cost of electricity in a reasonable manner; 

(e) the principles rewarding efficiency in performance; 

(f) multi year Tariff principles; 

(g) that the Tariff progressively reflects the cost of supply of electricity 

and also, reduces and eliminates cross-subsidies within the period to be 

specified by the Appropriate Commission; 

(h) the promotion of co-generation and generation of electricity from 

renewable sources of energy; 

(i) the National Electricity Policy and Tariff policy: 

Provided that the terms and conditions for determination of Tariff 

under the Electricity (Supply) Act, 1948, the Electricity Regulatory 

Commission Act, 1998 and the enactments specified in the Schedule 

as they stood immediately before the appointed date, shall continue 

to apply for a period of one year or until the terms and conditions 

for Tariff are specified under this section, whichever is earlier. 

Determination of Tariff. 

Determination of Tariff by bidding process 

62. (1) The Appropriate Commission shall determine the Tariff in accordance 

with provisions of this Act for: 

(a) supply of electricity by a generating company to a distribution licensee: 

Provided that the Appropriate Commission may, in case of shortage 

of supply of electricity, fix the minimum and maximum ceiling of 

Tariff for sale or purchase of electricity in pursuance of an agreement, 

entered into between a generating company and a licensee or between 

licensees, for a period not exceeding one year to ensure reasonable 

prices of electricity: 

(b) transmission of electricity ; 

(c) wheeling of electricity; 

(d) retail sale of electricity. 

Provided that in case of distribution of electricity in the same area 

by two or more distribution licensees, the Appropriate Commission 

may, for promoting competition among distribution licensees, fix 

only maximum ceiling of Tariff for retail sale of electricity. 

(2) The Appropriate Commission may require a licensee or a generating company 

to furnish separate details, as may be specified in respect of generation, 

transmission and distribution for determination of Tariff. 

(3) The Appropriate Commission shall not, while determining the Tariff under 

this Act, show undue preference to any consumer of electricity but may 

differentiate according to the consumer’s load factor, power factor, voltage, 

total consumption of electricity during any specified period or the time at 

which the supply is required or the geographical position of any area, the 

nature of supply and the purpose for which the supply is required. 

(4) No Tariff or part of any Tariff may ordinarily be amended more frequently 

than once in any financial year, except in respect of any changes expressly 

permitted under the terms of any fuel surcharge formula as may be specified. 

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(5) The Commission may require a licensee or a generating company to comply 

with such procedures as may be specified for calculating the expected revenues 

from the Tariff and charges which he or it is permitted to recover. 

(6) If any licensee or a generating company recovers a price or charge exceeding 

the Tariff determined under this section, the excess amount shall be recoverable 

by the person who has paid such price or charge along with interest equivalent 

to the bank rate without prejudice to any other liability incurred by the licensee. 

63. Notwithstanding anything contained in Section 62, the Appropriate 

Commission shall adopt the Tariff if such Tariff has been determined through 

transparent process of bidding in accordance with the guidelines issued by 

the Central Government. 

Procedure for Tariff order 

64. (1) An application for determination of Tariff under Section 62 shall be 

made by a generating company or licensee in such manner and accompanied 

by such fee, as may be determined by regulations. 

(2) Every Applicant shall publish the application, in such abridged form and 

manner, as may be specified by the Appropriate Commission. 

(3) The Appropriate Commission shall, within one hundred and twenty days 

from receipt of an application under Sub-section (1) and after considering all 

suggestions and objections received from the public: 

(a) issue a Tariff order accepting the application with such modifications 

or such conditions as may be specified in that order; 

(b) reject the application for reasons to be recorded in writing if such 

application is not in accordance with the provisions of this Act and the 

rules and regulations made thereunder or the provisions of any other 

law for the time being in force: 

Provided that an Applicant shall be given a reasonable opportunity 

of being heard before rejecting his application. 

(4) The Appropriate Commission shall, within seven days of making the order, 

send a copy of the order to the Appropriate Government, the Authority, and 

the concerned licensees and to the person concerned. 

(5) Notwithstanding anything contained in Part X, the Tariff for any inter- 

State supply, transmission or wheeling of electricity, as the case may be, involving 

the territories of two States may, upon application made to it by the parties 

intending to undertake such supply, transmission or wheeling, be determined 

under this section by the State Commission having jurisdiction in respect of 

the licensee who intends to distribute electricity and make payment therefor: 

(6) A Tariff order shall, unless amended or revoked, shall continue to be in 

force for such period as may be specified in the Tariff order. 

37. We have quoted some of the provisions of the Regulations of the State Commission 

and that of the Act. The Commission is a creature of the statute and apart from the 

provisions of the Act we have quoted, some other provisions of the Act are there 

which are located in Part–IV, Part-V and Part-VI of the Act. Part–IV deals with the 

licensing, Part–V deals with transmission and Part-VI deals with distribution of 

electricity. Generation, transmission, distribution and trading are the four components 

of the electrical system under the Act. If we look at Section 86 which occurs in 

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provisions of the Act so far as the State Commission is concerned is a conglomeration 

of administrative, legislative, judicial and advisory power of the State Commission. 

These four jurisdictions are vested with the Commission which exercises its powers 

under any of the jurisdictions in terms of the statute. Following the reforms in the 

electricity sector, there has been induction of the private sector in the electricity 

business and in terms of the Act, either the Central Government or the State 

Government can no longer be identified with any utilities. Section 108 is a provision 

giving power to the State Government to give any direction only in the matter of 

policy and that too involving public interest to the Commission, save which the 

Commission is statutorily an independent body vested with the aforesaid jurisdictions, 

and so far as the Tribunal is concerned it has jurisdiction to hear appeal against the 

order of the Commission that is passed primarily under Part VII of the Act. The 

Tribunal vis-à-vis the Commission has no legislative relation to perform. Basically, 

it exercises judicial function and that apart there is a provision in Section 121 that 

gives power to the Tribunal to issue such orders, instructions or directions to any 

appropriate Commission for the performance of its statutory functions under the 

Act. Be it noted here that this power is different from Appellate Power which is 

vested in Section 111. 

38. We could not be in agreement with Mr. Ramachandran that it is not a case of 

direction to the Commission to bring about an amendment of the notified regulations 

but it is simply a case asking the Commission by the Tribunal to relax the norms. It 

has to be made clear that it is not a case where we have been asked to adjudicate 

upon a Tariff determination order in respect of the generating stations of the Appellant 

for any particular financial year. So far no Tariff order has yet been passed by the 

Commission. The Tariff application is pending before the Commission for hearing 

and disposal, it being Application No. 54 of 2009. During the pendency of the Tariff 

determination application the Appellant filed Petition No. 08 of 2010 praying for 

amendment of the notified Regulations on the ground that the norms set out in the 

Regulations were on the part of the Appellant being impossible to reach and that 

petition has been disposed of by the Commission through a rejection order on the 

grounds which we have set out above. Therefore, before us there is no concrete case 

for adjudication in respect of Tariff for the Appellant; the Commission has notified 

its Regulations dealing with how to determine Tariff and a set of parameters has 

been laid down in respect of the generating stations of the Appellant and we are 

asked by the Appellant to examine whether the norms fixed by the Commission in 

the Tariff Regulations by virtue of the legislative power of the Commission were 

pragmatic or otherwise so that the Commission could be asked to modify the 

regulations in order that the norms may be relaxed to the advantage of the Appellant. 

We ask ourselves: what is meant when we say that the Commission should be 

asked only to modify the norms? The relaxation of norms or modification thereof to 

the advantage of the Appellant irrespective of the question whether such relaxation 

or modification would or would not be justified is possible only when the notified 

Regulation is again notified by bringing about an amendment thereof. Unquestionably, 

the Commission has power to amend, modify, rescind or repeal regulation in the 

same manner as the Central legislature or State legislature derives its Authority 

from the Constitution to enact a law, to modify or amend, or rescind or repeal; and 

any of these functions falls within the legislative jurisdiction of the Commission. 

Therefore, what we are really asked to do is to direct the Commission to bring out 

the amendment of the regulation. When we ask the Commission to amend its 

regulations it virtually implies that the regulations framed by it is deficient, short of 

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achieving its purpose and defeats the objectives of the Act, the national Tariff policy 

and the national electricity policy. We do not apprehend that when we say so 

nobody will say that we are not exercising the power of judicial review the very 

existence of which with the Tribunal has been negated by the decision of the Hon’ble 

Suprene Court in the PTC case which we have already noted and which really is 

not there in the Act or the Constitution. We cannot conceive of the source of the 

power of judicial review in the statute since the power is a constitutional power 

that enables a judicial Authority to examine the validity of a legislation or a 

delegated legislation. 

39. Be that as it may, let us examine as to which of the sources of power, namely, 

(a) power to remove difficulties, (b) power to relax norms, (c) exercise of inherent 

powers and d) power to amend the regulations apart from the power of Judicial 

Review will be of aid to the Appellant and in which particular circumstance. 

Mr. Ramachandran has taken us to a good number of decisions which we shall 

now consider. He has referred to Utter Pradesh Power Corporation Limited v. National 

Thermal Power Corporation of India Limited and Ors. reported in (2009) 6 SCC 235. One 

important observation made at Paragraph 56 of the judgment is that: 

It is now a well-settled principle of law that a subordinate legislation validly 

made becomes a part of the Act and should be read as such. 

It has been held that power to regulate may include the power to grant or refuse to 

grant a licence, a power to tax or exempt from taxation, a power to increase Tariff or 

a power to decrease the Tariff having relied on the decision in Hotel and Restaurant 

Association v. Star India Pvt. Ltd. (2006) 13 SCC 753, it was held the jurisdiction was 

not only to fix Tariff but also laying down terms and conditions for providing 

services. In this decision, it was held at Paragraph 66 that the jurisdiction of the 

Appellate Tribunal is wide, it being an expert Tribunal, and it can interfere with the 

finding of the Commission both on fact as also on law. If we have correctly understood 

the submission of Mr. Ramachandran, it would appear that he seeks to stretch to 

the point that because of being it an expert Tribunal having appellate jurisdiction it 

can direct the Commission to relax the norms, to amend the Regulations or make an 

order directing the Commission to remove the difficulties; and according to 

Mr. Ramachandran power to remove difficulties vested with the Government in a 

statute is not the same thing as power to remove difficulties vested in a Commission. 

To our reasoning, the Appellate Jurisdiction of the Tribunal is only exercisable in 

terms of the statute that created the Tribunal. Certainly as a first appellate forum it 

can examine facts as also the law. The exercise of the function of the Appellate 

Authority must be within the domain of the law which has been engrafted in Section 

111 of the Act. It is not deniable that the Commission has manifold powers, namely, 

administrative, supervisory, legislative and adjudicatory but each power, according 

to us, must be exercised at appropriate field; simply because a Commission has 

many powers, it cannot be said that while exercising one power it oversteps its 

limit in that power and assumes another jurisdiction. This was what has been 

exactly said in W.B. Electricity Regulatory Commission v. CERC 15 reported in (2002) 8 

SCC 715 which has also been relied on by Mr. Ramachandran. In this case, the 

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High Court while hearing appeal in its appellate jurisdiction vested in the statute, 

since repealed, exercised the writ jurisdictional power under Article 226 which was 

deprecated by the Hon’ble Supreme Court. What we want to emphasise is that this 

Tribunal would exercise power only to the extent as is conferred on it. There is no 

difference with Mr. Ramchandran’s submission that while determining the Tariff, 

the Commission has to bear in mind the principles laid down in Section 61 and that 

the Tariff has to be determined on cost plus basis so that a reasonable return on 

investment enures to the investors. In this connection Mr. Ramachandran argued 

that there cannot be any regulation providing for various terms and conditions in 

absolute manner without exercising discretion like exemption, relaxation, deviation, 

removing difficulties etc. Since the power to exercise all these things or any of them 

is there in the regulations itself, we are nobody to question the legitimacy of such 

provisions therein. 

40. Mr. Ramachandran took us to the recent judgment of the Hon’ble Supreme 

Court, namely, PTC India Ltd. v. CERC 16 reported in (2010) 4 SCC 603. We have 

earlier noted that one of the issues which the Hon’ble Supreme Court was invited to 

address to was whether Section 121 of the Electricity Act gives power to the Tribunal 

to examine validity of a regulation and the Hon’ble Court had said it can be examined 

by Judicial Review under Article 226 of the Constitution. Mr. Ramachandran does 

not dispute this proposition of law and does not ask us to exercise any such power 

which is really not there. Now, importantly from Paragraph 25 onwards of the 

judgment, the Hon’ble Supreme Court has observed that the Commission has many 

jurisdictions, legislative, advisory, quasi-judicial as vested in different provisions of 

the Act. At Paragraph 49 of the judgment, their Lordships have said that decision 

making and regulation making functions are both assigned to CERC and price 

fixation exercise is really legislative in character unless by the terms of a particular 

statute it is made quasi-judicial as in the case of Tariff fixation under Section 62 

which is appellable under Section 111 although Section 61 is an enabling provision 

for the framing of regulations by the Commission. At Para 52 of the judgment, their 

Lordships have observed that a distinction must be made between delegation of 

legislative function and investment of discretion to exercise a particular discretionary 

power by a statute. The ruling in this PTC case has been so far as the instant appeal 

is concerned is not purely a matter of academic interest but also decisive. 

41. Mr. Ramachandran then took us to the decision in Premium Granites and Anr. v. 

State of Tamil Nadu and Ors. (1994) 2 SCC 691, it was a case where the main question 

was whether Rule 39 of the Mineral Concessional Rules is legal and valid. It was 

struck down by the Madras High Court, while the Hon’ble Supreme Court upheld 

the vires of the rules saying that it does not offend the Act or the Constitution. This 

Rule 39 dealt with power of relaxation which has been a matter of concern for the 

client of Mr. Ramachandran. Their Lordships held at Paragraphs 48, 49, 50 and 51 

that power of relaxation as was there in Rule 39 has to be exercised for mineral 

development and in public interest after recording reasons therefore and such exercise 

of power must exhibit reasonableness of State action. It was further held that it is 

not the domain of the Court to embark upon uncharted ocean of public policy in an 

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exercise to consider whether the particular public policy is wise or a better policy 

can be achieved and such exercise must be left to the discretion of the executive and 

the legislative authorities as the case may be. (Emphasis supplied) According to 

Mr. Ramachandran, we must ask the Commission to exercise such power in its 

legislative jurisdiction because what was basically prayed before the Commission 

was to relax the norms by amendment of the regulations. There cannot be any second 

proposition to the proposition of law as laid down by the Hon’ble Supreme Court. 

The question whether we would have legitimacy to ask the Commission to amend the 

regulation is exactly the question before us. To our mind this decision does not help 

the Appellant. If the discretion to relax is not arbitrary, it cannot be read down. If the 

discretion is based on reason and objectivity while refusing to relax the norm yet 

keeping in mind the objectives of the Act and the National Tariff Policy then it is not 

for the Tribunal to interfere with the discretion and ask the Commission in exercise of 

academic pursuit without before us any order determining Tariff application and to 

substitute the Tribunal’s reason to be the reason of the Commission. This to our mind 

is not the ratio decidendi of the decision, on the contrary the Hon’ble Court held that 

the Court must not embark upon the public policy. 

42. Mr. Ramachandran then took us to the case of Hindustan Paper Corporation Limited 

v. Government of Kerala 1986 3 SCC 398. This was a case where the question was 

whether the power of exemption under Section 6 of Kerala Forest Produce (Fixation 

of Selling Price) Act, 1976 was ultra vires or not. The Kerala High Court held it was 

invalid, but the Hon’ble Supreme Court ruled in favour of validity. Here, it has been 

observed in Paragraph 9 of the decision that it is well-recognised and constitutionally 

accepted legislative practice to incorporate provision conferring the powers of 

exemption on the Government in such statutes and such exemption has to be in 

public interest. It is not a case before us as to whether the Commission can exercise 

any power of exemption nor we are called upon to examine whether such exemption 

was rightly granted or not. Be it noted here that the exemption talked of by the 

Hon’ble Supreme Court in the instant case or the relaxation talked of in the Premium 

Granite case is exemption or relaxation vested in the Government but here in the 

instant appeal before us such relaxation is asked for to be exercised by the Commission 

in its legislative jurisdiction. 

43. Now Mr. Ramachandran says that in the treatise of the learned author Mr. M.P. Jain 

in Cases and Materials on India Administrative Law – 1994 Edition volume 1, 

Page 117, there is a deliberation on removal of difficulty clause. This clause is better 

known as Henry VIII clause the necessity of which arises to remove the difficulties 

which were not foreseen at the time of passing the Act, and it is left to the executive 

to remove any such. Mr Ramchandran lays emphasis to the sentence where it has 

been observed that “At times, removal of difficulty clause may empower the 

Government to amend the parent Act or any other Act with a view to bring the 

parent Act into full operation.” It is hardly deniable that a Tariff regulations must 

contain power to remove the difficulties, to relax, to amend the regulations, to obviate 

from the norms and to exercise inherent power if the facts and circumstances justify 

exercise any such power. 

44. Next, we were shown the decision in Hindusthan Steels Ltd. v. A.K. Roy 17 (1969) 3 

SCC 513 which according to us is totally out context because whether an Industrial 

17 Ed.: MANU/SC/0315/1969: AIR 1970 SC 1401: (1970 (20) FLR 234): 1970 LabIC 1166: 

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Tribunal while dealing with a case of termination of an employee from an industrial 

concern has power to direct reinstatement or order for compensation, and the 

Hon’ble Supreme Court ruled that such discretion can be exercised by the Tribunal 

judicially. 

45. The principle governing the use of discretion was again considered in de Smith’ 

Judicial Review of Administrative Action, 4 th Edition, Page 285 where it has been 

observed that the Authority in which a discretion is vested can be compelled to 

exercise that discretion, but not to exercise it in any particular manner, and in 

general a discretion must be exercised only by the Authority to which it is committed. 

46. In support of the argument that the Commission while rejecting the petition for 

amendment of the Regulations so as to suit the convenience of the Appellant has not 

assigned any reason for such rejection Mr. Ramchandran has relied on the Authority in 

S.N. Mukherjee v. Union of India reported in (1990) 4 SCC 594 where it has been held that 

an administrative Authority while exercising quasi-judicial function must record reason 

for its decision so that it could be understood that the Authority has given due 

consideration to the points in controversy and that to show clarity and avoid arbitrariness. 

We must observe that whether in ultimate terms we accept the appeal or not, we cannot 

say that the order impugned is without any reason. Reasons have been given which are 

well understood and it can never be alleged that the order lacks transparency and 

objectivity, no matter whether one agrees to it or not. It is not the requirement of law, as 

this decision has held that as in a Court of law the reason should be elaborate. Therefore, 

this decision is of no avail to Mr. Ramachandra’s client. 

47. In State of Karnataka and Anr. v. R. Vivekanand Swamy and Anr. 2008 (5) SCC 328, 

the question was of relaxation by the Government of the medical reimbursement 

rules in contravention of which a Government employee got himself treated in a 

hospital of his own choice which the regulations did not permit but the Government 

relaxed the rule to mitigate the exigencies of circumstances. This decision is of no 

avail to any of the parties here. The rider was that such discretion to deviate from 

the rules must not be arbitrary. 

48. Mr. Ramchandran rightly submits that if an Authority which is vested with a 

discretion does not exercise the discretion, it would amount to fettering discretion 

or fettering jurisdiction in support of which he relies on Foulke’s – Administrative 

Law, Eighth Edition, Page 217 and Bennion on Statutory Interpretation, Fifth Edition, 

Indian reprint Page 90. The bottom-line is that if power of discretion is there, it may 

be exercised and such exercise must be judiciously done meaning thereby that power 

may not be refused when exercise of such power is warranted. 

49. While elaborating this above argument, Mr. Ramachandran refers to Section 115 

of the Civil Procedure Code, 1908 dealing with revision. We fail to understand how 

Section 115 which has drastically been amended does have any level playing field 

in the circumstances. It is the cardinal principle of law that if the Court refuses to 

exercise jurisdiction vested in it the Court having power of revision has to revise the 

order or when the Court exercises jurisdiction not vested in it, then also equally the 

power of revision lies. We are quite conscious of this position. Now in this connection 

Mr. Ramachandran takes us to WBERC v. CESC Ltd. (2002) 8 SCC 715 where at 

Paragraph 102 of the judgment it was observed that the Hon’ble Supreme Court felt 

the necessity of having an expert body to act like a Tribunal to examine the orders 

of the Commission since the matter is technical. This observation of the 

Hon’ble Supreme Court has inspired Mr. Ramachandran to say that the 

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Appellate Power under Section 111 is no less wider than the power of judicial 

review which is exercised under Article 226 of the Constitution. Respectfully to the 

learned Counsel, we are unable to concede to this position because in this case 

itself, the Supreme Court took exception to the manner in which the Calcutta High 

Court exercised the power of writ jurisdiction while hearing appeal under Section 

27 of the Electricity Regulatory Commission Act, 1998. It was observed that the 

Appellate Power and the power of judicial review are distinct. It is important to 

remember here that in this decision we have been reminded by the Supreme Court 

that there is weighty Authority for the proposition that a Tribunal which is a creature 

of a statute cannot question the vires of the provisions under which it functions 

and quoting the decision of Dhulabhai v. State of M.P. 18 AIR 1969 SC 78, it was held 

that challenge to the provisions of a particular act as ultra vires cannot be brought 

before the Tribunal constituted under that Act and even the High Court cannot go 

into that question on a revision or reference from the decision of the Tribunals. 

50. Mr. Ramachandran himself has cited Hilaire Barnett – Constitutional and 

Administrative Law, First Indian Reprint, 1996, Page 716 wherein, it was observed 

that judicial review is distinguishable from an appeal against a decision. An appeal 

is made both on the law and the facts, while judicial review by contrast is concerned 

with the manner in which the decision maker has applied the relevant rules. It has 

been observed in this book that judicial review derives from the Courts inherent 

powers to keep decision making bodies within the bounds of their powers, and to 

provide remedies for abuse of power, and its purpose is not to substitute a decision 

of the Court for the decision of the administrative body. 

51. Again, the learned Author Bennion in his treatise on Statutory Interpretation, 5 th 

Edition, Indian Reprint, Page 142 writes that the distinction between original and 

Appellate Jurisdiction is an important one, while in the former the enforcement 

agency gives a decision upon hearing the Counsel, while in the latter the body has 

to carefully consider the reasons and if it involves an improper exercise of discretion 

the appellate body may substitute its own view. In a word, appellate jurisdiction is 

a statutory jurisdiction which is competent to examine both fact and the law but 

which will not normally interfere with the exercise of the Judges discretion except, 

however, on the grounds of law. 

52. In Cellular Operators Association of India and Ors. v. Union of India and Ors. 19 

reported in (2003) 3 SCC 186, the scope and power of the Telecom Regulatory 

Authority of India was considered. Mr. Ramachandran interprets this judgment to 

say that the Appellate Tribunal for Electricity which is as expert body as the Appellate 

Tribunal under Telecom Regulatory Authority of India Act, 1997 can exercise so 

much of power to make any order while examining legality, propriety or correctness 

of a decision or order or direction of a Commission and in that way it surpasses the 

power of judicial review. This Tribunal is a creature of statute as other Tribunals 

are. Each functions in its own orbit as defined in the Act creating it. In the Telecom 

Regulatory Appellate Tribunal, there is Section 15 according to which power of that 

Appellate Tribunal has been found by the Hon’ble Supreme Court to be quite wide 

as has been indicated in the statute itself and the decisions of the Supreme Court 

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dealing with the power of Court exercising Appellate Power or original power will 

have no application for limiting the jurisdiction of the Appellate Tribunal under 

that Act. But one Hon’ble Judge writing separate opinion while concurring observed 

that when jurisdiction upon a Court or Tribunal is conferred by statute the same 

has to be construed in terms thereof and not otherwise, while the power of Judicial 

Review of the Supreme Court as also the High Court stand on a different footing. 

53. Now, Mr. Ramachandran refers to five decisions of this Tribunal, namely, 

Maharashtra State Power Generation Co. Ltd. v. Maharashtra Electricity Regulator Commission 

and Ors. 2010 ELR (APTEL) 0189, NTPC Ltd. S. Madhya Pradesh State Electricity Board 20 

case 2007 ELR APTEL 7, BSES Rajdhani Power Ltd. v. Delhi Electricity Regulatory 

Commission (2009) ELR APTEL 880, Uttar Pradesh Rajya Vidut Utpadan Nigam Ltd. v. 

Uttar Pradesh Electricity Regulatory Commission and Ors. Appeal No. 96 of 2008 and 

Gujarat State Electricity Corporation Ltd. v. Gujarat Electricity Regulatory Commission 

and Ors. Appeal No. 129 of 2006. In the Maharashtra case, the Appellant submitted 

its application for approval of ARR and Tariff petition for FY 2005-06 and 2006-07. 

The Commission passed an order determining the Tariff under the Tariff regulation 

and an appeal was preferred against that order. In course of hearing and disposal, 

this Tribunal felt the necessity of an independent study to consider the operating 

Parameters observing that the Commission has power to revise the Parameters by 

amending, the Tariff regulations. Nothing more was done in that case. The Tribunal 

did not make any order directing the Commission to amend the regulations. It simply 

directed an exercise of study to examine the feasibility of coming down from the 

norms. To our understanding, this decision does not lay down any proposition of 

law and the questions we are confronted with were not posed thereat, and here it is 

a case where we are not hearing any appeal against any order determining Tariff; 

we are called upon to hear an appeal against alleged insufficiency, incorrectness of 

the regulations themselves on the ground that the norms set down there should be 

amended. In the NTPC case, it was observed at Page 293 which is the ratio decidendi 

of the case that Regulation 13 of the CERC Terms and Conditions of Tariff Regulations, 

2004 empowers the Commission to vary the provisions of the regulations on its 

own motion or on an application made before it as power to relax is there with the 

Commission. Notably, in the two cases observations were made in course of hearing 

and disposal of the appeals that arose out of orders determining Tariff which is not 

the case with us. In BSES Rajdhani case, the Tribunal held that the Commission has 

right to reconsider the target that has been set and if necessary they may amend 

regulation. In Uttar Pradesh Rajya Vidyut Utpadan Ltd. case upon factual analysis 

direction was made to the Commission by this Tribunal to re-determine the Parameters 

for the year 2006-07 and 2007-08 and to undertake study for renovation and 

modernisation of older plants. In Gujrat State Electricity Regulation case, the Tribunal 

made certain directions to modify the generation Tariff on certain points set out in 

the body of the judgment. None of the decisions of this Tribunal which have been 

relied upon by the Appellant does render any real assistance to us because in each 

of the cases the Tribunal felt while hearing appeal on determination of Tariff, which 

we are not doing, that the Commission may in consideration of facts and circumstances 

of each particular case may go on re-determine Tariff after varying different Parameters 

by undertaking study. In none of the cases this Tribunal directed any of the Commissions 

to amend the regulations so as to suit the Parameters of the Generating Companies. 

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54. Having studied the decisions relied on by Mr. Ramachandran, we are to consider 

whether we should ask the Commission to exercise the power of removal of difficulties, 

or to relax or to amend the regulation or to exercise inherent powers of the Commission. 

At the cost of repetition it has to be observed that in the peculiar situation in which 

we are beset with if we ask the Commission to exercise the power of removal of 

difficulty, or to relax, or to exercise inherent power, we would be directing the 

Commission indirectly which we cannot do directly that it should amend its regulation. 

What we cannot ask the Commission to do directly, we cannot ask to do indirectly 

and it is the place now to see that as to under what circumstances and in which 

jurisdictions the power to remove difficulties or to power to relax or to exercise inherent 

jurisdiction can be exercised. The question is whether the power to remove difficulties 

can be exercisable in legislative jurisdiction or the power to relax or the power to 

exercise the inherent power to do justice can be exercised in the legislative jurisdiction. 

Importantly, what the Appellant desires is an order of the Tribunal so that the 

Commission in its legislative jurisdiction exercises legislative power to amend its 

regulations which power definitely is there with the Commission, of course. 

55. We fail to be in agreement with Mr. Ramachandran when he says that power to 

remove difficulties as is ordinarily available in statute enacted by Parliament is not 

the same power as the power to remove difficulties as is there in a regulation available 

to the Commission. But Mr. Ramachandran is right when he says that such power 

is vested in the Commission to remove anomalies and difficulties. To our 

understanding, the exercise to remove difficulties cannot have different connotation 

in different statutes or distinguishable between statute and regulation. If we closely 

read Regulation 57 of the MYT Regulations, 2009 we find that power to remove 

difficulties which is given to the Commission is basically an administrative power 

not a legislative power which the Commission may by general or special order do 

or undertake or direct a generating Company to do or undertake things which the 

Commission find necessary for the purpose of removing the difficulty. This power 

is exercisable only to ensure that the Act is implemented and it is in furtherance of 

the Act that the power to remove difficulties is conferred. It is only to give effect to 

the provisions of the regulations that this power is exercised. It has been rightly 

argued by Mr. Sanjay Sen, learned Advocate for the Commission that the power to 

remove difficulty does not contemplate removal of hardship that may arise as a 

result of giving effect to the regulation. The decision in M.U. Sinai v. Union of India 

(1975) 2 SCR 640 is pertinent. In this decision, it has been held that in order to 

obviate the necessity of approaching the legislature for removal of every difficulty 

encountered in the enforcement of statute, the legislature some times thinks it expedient 

to invest the executive with a very limited power to make minor adaptations and 

peripheral adjustments in the statute for making its implementation effective without 

touching its substance. It has been observed that: 

The existence or arising of a difficulty is the sine qua non for the exercise of 

power. If this condition precedent is not satisfied as an objective fact, the 

power under this clause cannot be invoked at all. Again, the “difficulty” 

contemplated by the clause must be a difficulty arising in giving effect to the 

provisions of the Act and not a difficulty arising aliunde, or an extraneous 

difficulty. Further, the Central Government can exercise the power under the 

clause only to the extent it is necessary for applying or giving effect to the Act, 

etc. and no further. It may slightly tinker with the Act to round off angularities, 

and smoothen the joints or remove minor obscurities to make it workable, but 


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it cannot change, disfigure or do violence to the basic structure and primary 

features of the Act. In no case, can it, under the guise of removing a difficulty 

change the scheme and essential provisions of the Act. 

56. lf it is a legislative function to remove difficulty like amending regulation, no 

direction can be passed by the Tribunal to the delegated Authority to exercise 

legislative power. Mr Sanjay Sen, learned Counsel for the Commission takes us to 

the words of Regulation 57.1 to submit that the power to remove difficulties which 

lies with the Commission is exercisable only to give effect to the provision of the 

Regulations. Now, to direct the generating company to do or undertake things or 

itself to do or undertake by general or special order implies that this power to 

remove difficulties is intended to be exercised from the administrative domain of 

the Commission instead of exercising the legislative jurisdiction. Mr. Sen relies on 

M.U. Sinai v. Union of India (1975) 2 SCR 640 which we have already discussed. It is 

submitted by Mr. Sen that before the Commission the Appellant did not rely on this 

power to remove difficulty clause, what was prayed for before the Commission was 

amendment of the Regulations. It is submitted that no direction can be passed by a 

Tribunal to the delegated Authority to exercise legislative power. 

57. Mr. Sen relied on the West Bengal Regulatory Commission v. CESC (ibid) to argue 

that the question of vires cannot be argued before the Tribunal. He refers to the 

decision of the Honb’le Supreme Court in Raleigh Investment Co. Ltd. v. Governor 

General in Council reported in ILR (1944) 1 Cal 34, United Motors (India) Ltd. v. State of 

Bombay 21 reported in (1953) 55, Bomb. LR 246, M.S. M.M. V. Meyyappa Chettiar v. 

ITO 22 reported in II (1964) 54 ITR I51 (Mad) & K.S. Venkatraman and Co. (P) Ltd. v. 

State of Madras (ibid) where it has been held that there is weighty Authority for the 

proposition that a Tribunal which is creature of a Statute cannot question the vires 

of the provisions under which it functions. Mr. Sen refers to one of our decisions in 

Navyeli Lignite Corporation Ltd. v. Tamil Nadu Electricity Board and Ors. Where we 

have observed as follows: 

(9) In view of the aforesaid decision of the Supreme Court, which is directly on 

the point, we have no hesitation in holding that the Regulations framed under 

Sections 61 and 178 of the Electricity Act, 2003, are in the nature of subordinate 

legislation and we have no jurisdiction to examine the validity of the Regulations 

in exercise of our Appellate Jurisdiction under Section 111 of the Act of 2003. 

Even, under Section 121, which confers on the Tribunal supervisory jurisdiction 

over the Commission, we cannot examine the validity of the Regulations framed 

by the Commission, as we can only issue orders, instructions or directions to 

the Commission for the performance of its statutory functions under the Act. It 

is not a case, where the Commission has failed to perform its statutory functions. 

At this stage, we may also refer to the submission of Mr. Reddy that 

Regulation 16(i)(c) of the Regulations applies to the Appellant alone and 

therefore, the same cannot be in the nature of subordinate legislation. It needs 

to be noted that Sub-clauses (a), (b) and (c) of Sub-regulation (i) of Regulation 

16 apply to various entities. Regulation 16(i)(c) undoubtedly applies to the 

Appellant alone but this is in view of the special nature of the generating unit 

established by the Appellant. It is well settled that a legislation can be framed 

21 Ed.: MANU/MH/0024/1952 

22 Ed.: MANU/TN/0135/1965: AIR 1965 Mad 68: (1964) ILR 1 Mad 954 

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for a single unit, entity or a person. The same principle would apply to the 

framing of subordinate legislation in respect of a single unit or entity or body, 

provided it can be distinguished from others on the basis of its peculiar or 

distinctive features. In any event, we are bound by the decision of the Supreme 

Court rendered in the West Bengal Electricity Board case (supra) as it directly 

deals with the nature of the Regulations notified by the Regulatory Commission 

in exercise of its power conferred by Section 58 of the Electricity Regulatory 

Commissions Act, 1998, a provision similar to Sections 68 and 178 of The 

Electricity Act, 2003. None of the other decisions cited at the bar deal with the 

Regulations framed under the provisions of the Act of 1998 or the Act of 2003. 

Accordingly, on the first point we hold that the Regulations framed under 

Electricity Act 2003, are in the nature of subordinate legislation and on second 

point we hold that the challenge to their validity falls outside the purview of 

the Tribunal. 

58. Thus, Mr. Sen submits that since the regulations have the force of a statute the 

Appellate Court cannot go into the validity of the regulations. In this connection, 

Mr. Sen also relied on the decision in PTC India Ltd. v. CERC (ibid) which we have 

discussed earlier. 

59. As regards, the Regulation 56 dealing with deviation from norms it is submitted 

by Mr. Sen that Regulations 56 and 56.1 of the MYT Regulations, 2009 permit deviation 

from norms only under certain specific circumstances which have been elaborated 

in the said provisions. We are in agreement with Mr. Sen that the deviation from the 

norms contemplated under the MYT Regulations, 2009 is only in relation to approval 

of Tariff under Section 63 of the Act and the MYT Regulations, 2009 does not conceive 

of deviation on any other ground apart from what have been expressly provided for 

in the said regulations. We are simply to observe that if in course of determination 

of Tariff pursuant to the application filed by the Appellant the Commission would 

think that the deviation from the norms was necessary within the Parameters as 

laid down in the regulations it can very well do so, but for us in course of the 

present appeal in its present form and prayer it is quite impossible that this 

Regulation 56 can at all be invoked. 

60. As regards, power to amend which is given in Regulation 58, it is not deniable 

that the Commission undoubtedly has that power. Section 21 of the General Clauses 

Act clearly provides that power to issue notification, orders, rules, bye-laws includes 

a power exercisable in the same manner to add or amend or vary or rescind. The 

question is whether we should direct the Commission to exercise that power. It is 

not that we are hearing and disposing of an application for determination of Tariff 

because such application is yet to be disposed of according to the Tariff Regulations. 

What we are asked to do is to direct the Commission to relax the norms in the MYT 

Regulations, 2009. It is not that we are asked to direct the Commission to relax a 

particular norms in exigencies of circumstances of a particular case because in that 

case the Commission has the power to deviate from the norms subject to the conditions 

stipulated in the Regulations. To direct the Commission to deviate the norms for 

particular generating station or stations of the Appellant we mean that such direction 

is possible so far as the Commission is concerned to implement only by amendment 

of the MYT Regulations. To repeat, it is not a case of prayer for deviation from 

norms in a particular situation while keeping the legislation in tact. Before, we are 

prepared to direct the Commission to deviate from the norms and that too by 


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amendment of the Regulations, we would be required to observe that the norms or 

Parameters set out in the Regulations are unjust or improper or illegal so much so 

that amendment is necessary, which means that we are travelling beyond our 

jurisdiction in asking the legislature to bring about a regulation with amendment so 

as to suit the need of the Appellant. We are constrained to hold that by going that 

path is none else the path of the judicial review because we are to hold first that the 

law is deficient, unjust or unlawful. In this connection, we may refer to the decision 

in Narinder Chand Hemraj v. Lt. Governor - Administrator of the Union Territory of 

Himachal Pradesh 23 reported in (1972) 1 SCR 940 wherein, it was observed as follows: 

What the Appellant really wants is a mandate e from the Court to the Competent 

Authority to delete the concerned entry from the schedule A and include the 

same in Schedule B. We shall not go into the question whether the Government 

of Himachal Pradesh on its own Authority was competent to make the alteration 

in question or not. We shall assume for our present purpose that it had such 

a power. The power to impose a tax is undoubtedly is a legislative power. 

That power can be exercised by the legislature directly or subject to certain 

conditions, the legislator may delegate that power to some other Authority. 

But the exercise of that power whether by the legislature or by its delegate is 

an exercise of legislative power. The fact that the power was delegated to the 

executive does not convert that power into an executive or administrative power. 

No Court can issue a mandate to a legislature to enact a particular law. Similarly, 

no Court can direct a sub-ordinate legislative body to enact or not to enact a 

law which it may be competent to enact. No Court can give a direction to 

Government to refrain from enforcing a provision of law. 

61. Similarly, in Supreme Court Employees Welfare Association and Ors. v. Union of 

India reported in (1989) 4 SCC 187, the same principle was reiterated in these words 

“There can be no doubt that no Court can direct a legislature to enact a particular 

law.” Similarly, when an executive Authority exercises a legislative power by way 

of subordinate legislation pursuant to the delegated Authority of a legislature, such 

executive Authority cannot be asked to enact a law which he has been empowered 

to do under the delegated legislative Authority. On the same principle, it is impossible 

for the Tribunal to direct the sub ordinate legislative body to amend a subordinate 

legislation under Section 111 of the Electricity Act. As we said earlier, what we 

could not do directly we could not do indirectly. 

62. With regard to exercise of inherent power which we have noticed in 

Regulation 59.2, it can fairly be stated that this inherent power which is akin to 

Section 151 of the Civil Procedure Code is exercisable only in adjudicatory jurisdiction, 

not in legislative jurisdiction. The law is very clear on the subject. In Vinod Seth v. 

Devinder Bajaj and Anr. (2010) 8 SCC 1, the Hon’ble Supreme Court refers to the 

decision in Padam Sen v. State of U.P. reported in AIR 1961 SC 218, Manohar Lal 

Chopra v. Seth Hira Lal 24 reported in AIR 1962 SC 527, Nain Singh v. Koonwarjee 25 

reported in (1970) 1 SC 732 and held that Section 151 is intended to apply where 

the Code does not cover any particular procedural aspect, and interest of justice 

requires the exercise of power to cover a particular situation. Section 151 is not a 

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25 Ed.: MANU/SC/0426/1970: AIR 1970 SC 997: 1970 MhLJ 611 (SC): (1971) 1 SCR 207 

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provision of law conferring power to grant any substantive relief. This power is 

exercisable not with reference to any matter duly covered by a statute, nor any such 

order under inherent jurisdiction can be passed contrary to the provision of the 

law. When the law is silent and adjudicatory process demands that a particular 

order is necessary to prevent the abuse of the Court then and then only Court’s 

inherent jurisdiction expressed in Section 151 can be invoked. This is the essence of 

the decisions quoted above and we find that Regulation 59.2 has been drafted exactly 

in line with Section 151 of the CPC. 

63. It is very well settled that a delegated legislation is open to the scrutiny of a 

Court on two grounds, namely (a) it violates the provisions of the Constitution and 

(b) it violates the provisions of the enabling Act. In the case of alleged violation of 

the enabling Act the ground may include not only the cases of violation of the 

substantive provision of the Act but also the cases of violation of the mandatory 

procedure prescribed. It is Mr. Ramachandran’s argument that the power of judicial 

review is not at all required in as much as what is prayed for is simply deviation 

from norms as contained in Chapter III, Regulation 33, 34, 35 and 36 of Madhya 

Pradesh Electricity Regulatory Commission(Terms and Conditions of generation 

Tariff) (Revision-I) Regulations, 2009 (RG-26 I) of 2009), and if the Tribunal find 

that having regard to the age of the generating units deviation from norm is required 

then it may direct the Commission to do so by amendment. Mr. Sen for the Respondent 

No. 1 seriously disputes the submission contending that it has far reaching 

consequences. Now, howsoever simplistic the argument of Mr. Ramachandran appears 

to be, it has cascading effect in this that in that case the Tribunal which is mandated 

to hear appeal only under Section 111 of the Act and in relation to a particular 

regulation either of the Central Commission or State Commission has to direct that 

since the regulation fails to achieve the objective of the Act amendment of the 

regulation is called and direction has to be given. In fact, Mr. Ramachandran 

commenced his argument with the submission that the aforesaid Regulation, 2009 

has not been framed and enacted in compliance with the provisions of the Act, 

particularly Section 61 thereof and accordingly it offends the Act. The learned Counsel 

for the Appellant brought to our notice a decision of this Tribunal in Appeal No. 36 

of 2008 wherein this Tribunal held as follows: 

There is however, no bar on the Commission reconsidering the target and 

amend the regulation, if necessary. The target for MYT period needs to be set 

on the basis of losses at the beginning of the MYT period and not on the basis 

of the loss level on the date of privatisation when the policy target period 

began. The consequences of failure or success in reaching the loss reduction 

target have already been borne by the licensee. Hence, reference to the initial 

level of loss at the time of privatisation is not necessary. The Commission may 

itself consider the plea of any amendment in the target set in this regard in 

case the Appellant makes out a case. There fore we direct that the Appellant 

may make an appropriate representation to the Commission in this regard 

within one month hereof and that if a representation is so made the Commission 

shall dispose it in two months 

64. This decision was not passed on an appeal wherein challenge was made to a 

regulation concerned. The Tribunal was appropriately hearing an appeal under 

Section 111 of the Act. The Tribunal did not give any direction to the Commission to 

consider an amendment in positive term. Liberty was given to the Appellant to 

make a representation and in that case the Commission was directed to dispose it 


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in two months. Here, an appeal has purportedly filed before us under Section 111 

but the substance is a challenge to the regulation on the ground that the norms set 

out in that regulation was such as would defeat the object of the Act and hence the 

Tribunal should direct the Commission to bring about an amendment. 

65. Thus, to summarise our reasoning, power to remove difficulties is a power given 

to the executive in order that the provisions of the Act may be given effect to. The 

Executive may exercise such power by executive order or in some cases they exercise 

legislative function to bring about minor adjustments so that implementation of the 

Act may be smoothened. Here in Regulation 57, it is an express language that the 

Commission may by general or special order itself do or undertake or direct a generating 

company to do or undertake things for the purpose of removing the difficulties. This 

provision in the context of an express provision in regulate in 58 giving the 

Commission power to amend is not attracted here. 

66. In view of the decisions cited in the preceding Paragraphs, we find that this 

appeal fails to be an appeal under Section 111 of the Act. The prayer in substance 

in this appeal has been one to give a command to the Commission to effect amendment 

of the regulation on the ground of alleged defects therein impairing the fulfilment of 

the object of the Act which we are unable to subscribe to in as much as to do so 

would entail in travelling beyond our jurisdiction. While saying so, we do not say 

that the Commission at no point of time can exercise the powers conferred on it 

under Regulation 56, 57, 58 and 59 in appropriate cases. 

67. So far as Regulation 56 is concerned, it appears that this regulation is not so 

wide and generic that the Commission can deviate from the norms as it would like 

to in any manner in appropriate case. Moreover this regulation can be exercised in 

course of determination of Tariff of a generating company without bringing about 

an amendment. 

68. Inherent jurisdiction as found in Regulation 59.2 and 59.3 cannot be exercised 

in legislative domain. We repeat to say that in course of determination of Tariff the 

Commission may exercise its inherent power in order to prevent the abuse of the 

process of the Commission and to give complete justice in any given matter. 

69. If we consider the factualities, we find that the Appellant has questioned the 

Commission’s wisdom in not considering the Paragraph No. 3.25, 3.26, 3.27, 24, 25 

and 26 of the Petition No. 8 of 2010 which we have reproduced from Pages 38 to 43. 

The essence of the contentions in the aforesaid Paragraphs of the Petition No. 8 

of 2010 is that (a) at SGTPS at Birsingpur FY 2009-10 there was partial load shedding 

and acute shortage of coal (b) the units of PH 1 are more than 15 years old and 

placed under comprehensive R&M works, (c) the ABL boilers and BHEL Turbine 

combination of units have design deficiency compared to BHEL boiler/BHEL Turbine 

and the performance of the two units of SGTTPS is superior to all India average 

PUF of ABL boiler/BHEL Turbine sets of 200/210 MW capacity, (d) as PAFM is 

linked to DC only zero result would be achieved because of restrictions on release 

of water for generation imposed by WRD, (e) non-achievement of PAFM was due to 

the provisions in respect of determination of Tariff for hydro generating stations. It 

is argued that the Commission has not dealt with this situation. 

70. It is important that we should give a look to what the Commission has said. The 

Commission’s order is dated 26 th May, 2010 impugned herein. At the outset, we are 

constrained to say that the argument that the order is not a speaking one has to 

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remain far from being established. The Commission has noted–(i) reasons for poor 

performance, (ii) status of R&M work in all three thermal power stations, (iii) 

difficulties experienced in respect of the thermal power stations by the Appellant in 

FY 2009-10 for the reasons recorded by the Appellant, (iv) the proposals of the 

Appellant (v) the picture of the operating norms prescribed for FY 2008-09 in earlier 

Regulation and the relaxation being sought by the Appellant for new control period 

at two different stages station-wise in respect of the items covering gross station 

heat rate, specific fuel oil consumption, auxiliary energy consumption, (vi) Appellant’s 

proposal for relaxation of norms also for transit and handling losses of hydro power 

stations on the grounds as mentioned in seriatim and then (vii)the Commission’s 

observations which can be seen at Para 33 of this judgment and we restrain from 

repeating the same once again. 

71. One may in his wisdom agree or disagree with the findings of the Commission, 

but it cannot be said that the Commission’s detailed order is without any reason. 

The Commission has assigned cogent reasons for not agreeing to the Appellant’s 

prayer for amendment of the regulations. We in this Appellate Forum are mandated 

to hear appeals under Section 111 of the Act and must not substitute our view, if 

any, for the view of the Commission even if we had jurisdiction to say that the 

Commission’s order for refusal to effect amendment was unjustified. The norms set 

out in Chapter III of the Regulations are not so impractical, imprudent, absurd, 

manifestly wrong and shockingly high and speculative that warrants interference 

even if it is considered that this appeal under Section 111 against an order of the 

Commission refusing to bring about an amendment is absolutely justified. Again, to 

ask the Commission to make amendment of the regulation would imply–(a) such 

direction is possible in law in this appeal presented in the present form, (b) the 

regulations are not in keeping with the provisions of the Act and (c) it is quite 

permissible for this Tribunal to make such order, which to our understanding is 

impermissible for the reasons we have set out hereinabove. While observing so, we 

do not observe at the moment that the Commission is powerless to do so. The 

Commission has power to relax or deviate from the norms, but for the purpose of 

deviating from the norms, they by virtue of Regulation 58 can amend the norms set 

out in Regulation 56 so that the norms are brought down at a level comfortable to 

the Appellant’s power plants. Mr. Ramachandran has submitted that the norms of 

operation as laid down in Regulation 33 are quite unusual inasmuch as they are 

specific power plants oriented and that is why the Appellant made an application 

for amendment of Regulation 33. Mr. Sen for the Commission has submitted that as 

the Appellant company is the Government Company vested with the function of 

generation of electricity and this company has number of power plants, the norms 

had to be made different according to the age of the power plant. The norms for the 

old generating stations have not been the same for the new ones and this is for the 

convenience of the Appellant and no exception or challenge can be made to Regulation 33 

of the Regulations, 2009 only because of certain norms having been made specific 

station-oriented. It has been submitted by Mr. Sen that the Central Electricity 

Regulatory Commission does not make uniform norms in the Regulations and they 

mention specifically the stations which are not as young as the other ones established 

in recent times. Having heard learned Counsels for the parties, we do not think that 

the Commission’s Regulation 33 can be taken exception to because of specification 

of norms station-wise. In this connection, our attention has again been invited by 

the learned Counsel for the Commission to the decision of this Tribunal in 


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Naeyveli Lignite Corporation Ltd. v. Tamil Nadu Electricity Board and Ors. 26 Appeal 

Nos. 114 and 115 of 2005. This Tribunal has held as follows: 

At this stage, we may also refer to the submission of Mr. Reddy that 

Regulation 16(i)(c) of the Regulations applies to the Appellant alone and 

therefore the same cannot be in the nature of subordinate legislation. It needs 

to be noted that Sub Clauses (a), (b) and (c) of Sub-Regulation (i) of Regulation 

16 apply to various entities. Regulation 16(i) (c) undoubtedly applies to the 

Appellant alone but this is in view of the special nature of the generating unit 

established by the Appellant. It is well settled that a legislation can be framed 

for a single unit, entity or a person. The same principle would apply to the 

framing of subordinate legislation in respect of a single unit or entity or body, 

provided it can be distinguished from others on the basis of its peculiar or 

distinctive features. In any event, we are bound by the decision of the Supreme 

Court rendered in the West Bengal Electricity Board case (supra) as it directly 

deals with the nature of the Regulations notified by the Regulatory Commission 

in exercise of its power conferred by Section 58 of the Electricity Regulatory 

Commissions Act, 1998, a provision similar to Sections 68 and 178 of 

The Electricity Act, 2003. None of the other decisions cited at the bar deal with 

the Regulations framed under the provisions of the Act of 1998 or the Act 

of 2003. Accordingly, on the first point we hold that the Regulations framed 

under Electricity Act 2003, are in the nature of subordinate legislation and on 

second point we hold that the challenge to their validity falls outside the 

purview of the Tribunal. Accordingly, the point raised by Mr. Ramachandran 

has been set at rest so far as this Tribunal is concerned. 

72. It has been submitted by Mr. Sen that it is incorrect to say that the Commission 

advised the Appellant to file Tariff petition incorporating the difficulties in meeting 

the norms set out by the Commission, on the contrary, the Appellant on its own filed 

the MYT petition. Our attention has been drawn to the letter dated 8 th September, 2009 

wherein, the Commission communicated to the Appellant as follows: 

MPPGCL submitted that the company is facing difficulties in complying with 

the operational norms notified in the MYT Regulation, 2009. MPPCL requested 

for a review of benchmark set by the Commission in MYT Regulation, looking 

to the conditions of machines. The Commission expressed its displeasure and 

observed that this reason for delay in filing MYPT petition was not convincing. 

Since the norms under Regulations are notified Tariff petition is to be filed 

accordingly. However, the norms fixed by the Commission are almost similar 

to the norms fixed by the CERC for the same vintage of power station. 


73. The Commission in its MYT order for FY 2009-10 to FY 2011-12 dated 3 rd March, 2010 

has observed that the Appellant in its petition sought for revision in the bench 

marks/norms specified in the Regulations, 2009 notified on 8 th Mary, 2009 and also 

filed a Tariff proposal based on the norms proposed by the Appellant. The Commission 

conveyed to the Appellant that since it was only in the recent past that after a 

prolonged public hearing norms were set out it was not possible to revise the norms. 

Then, the Appellant filed a petition being No. 8 of 2010 specifically praying for 

relaxation of norms and in the preceding Paragraphs we have found the reasons of 

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the Commission in rejecting the petition. It is commented by Mr. Sen that Appellant 

sought revision in norms which were more relaxed than its previous submission 

made on 27 th February, 2009 as comments to the draft regulation and further the 

Appellant was seeking more relaxed norms for FY 2009-10, than the norms specified 

for FY 2008-09 in the Regulation for the earlier control period based on which the 

MYT order for the control period 2006-07 to 2008-09 as also the true up orders for 

FY 2006-07 were issued. These submissions are borne by the record and could not 

be disputed. The commission’s impugned order testifies to this position. It has been 

submitted by Mr. Sen that the Appellant considered the average of the operating 

Parameters actually achieved since FY 2003-04 when there are instances of the 

Appellant achieving better operating Parameters in between the years and the approach 

of the Appellant was not in conformity with what the Tariff policy provides for in 

Section 5.3 which we quote below: 

Suitable performance norms of operations together with incentives and 

disincentives would need be evolved along with appropriate arrangement for 

sharing the gains of efficient operations with the consumers. Except for the 

cases referred to in Para 5.3(h)(2), the operating Parameters in Tariff should be 

at “Normative levels” only and not at Lower of normative and actual. 

The policy further runs thus: 

This is essential to encourage better operating performance. The norms should 

be efficient, relatable to past performance, capable of achievement and 

progressively reflecting increased efficiencies and may also take into 

consideration the latest technological advancements, fuel, vintage of equipments, 

nature of operations, level of service to the provided to consumers etc. 

74. It has further been submitted that the Appellant sought relaxation in operating 

norms even for the new capacity, i.e. SGTPS 500 MW Birsinhpur unit commissioned 

on 28 th August, 2008 although Mr. Ramachandran claims that such relaxation was 

not sought for the FY 2010-11 although relaxation was sought for so as to facilitate 

the Appellant technical personnel to understand and gain experience for operating 

such capacity. 

75. Our attention has been drawn to the table given by the Respondent No. 1 to 

show how the Appellant on 27 th February, 2009 proposed benchmarks for FY 2008-09 

and onwards in the Petition No. 08 of 2010 praying for relaxation of norms again 

downgraded the norms. This is why the Commission observed in Para 12 of the 

order that the Appellant sought relaxation in norm for FY 2009-10 which are even 

inferior to the norms for FY 2008-09 prescribed by the Commission in the Regulations 

for the earlier control period, i.e. FY 2007-09 and the Appellant was seeking inferior 

norms than what he had in the earlier years. In these circumstances, we are unable 

to say that factually also the Commission’s finding cannot said to be without reason 

and that reasons advanced by the Commission on objectivity of facts should not be 

substituted by our view, if any. 

76. Having thus found out the factual situation we are to observe that any amount 

of impression that the Commission was not realistic in its approach must be dispelled 

and that it had consistently insisted upon the Appellant to carry out renovation 

and modernisation activities which the Commission lamented that the Appellant 

did not seriously pursue for. 

77. We have so far covered all the issues in a comprehensive manner and summarise 

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(a) The appeal is not maintainable in its present form. 

(b) To direct the Commission to effect an amendment of the regulation would 

entail encroaching upon the power of Judicial Review which we do not have. 

(c) The impugned order of the Commission dated 26 th May, 2010 cannot be the 

subject-matter of challenge in an appeal under Section 111 of the Electricity Act. 

(d) Regulation 57 dealing with power to remove difficulties is inappropriate 

and cannot be taken as resort to for downgrading the benchmarks. 

(e) Regulation 56 as it is there in the regulation does not entitle the Commission 

to come down from the norms and it is only when Regulation 58 is exercised 

to amend Regulation 56 that the Commission may in its wisdom lower down 

the norms and benchmarks. 

(f) Regulations 59.2 and 59.3 of Regulation 59 are exercisable in adjudicatory 

process, not in legislative jurisdiction. 

(g) The Commission’s impugned order does not suffer from lack of reason and 

objectivity of facts. 

(h) While holding the above, we also hold that it is always open to the 

Commission, if they would like, to undertake any study of norms even after 

the rejection of the prayer for amendment so as to consider the feasibility or 

otherwise of bringing out an amendment of the Regulations in course of the 

determination of the Tariff application. We also hold that within the present 

Parameters of Regulation 56 the Commission can deviate from the norms if it 

so wishes and deems fit. We also hold that the Commission is at liberty if it 

would deem proper to amend Regulation 56 on the strength of Regulation 58 

so as to widen its power to deviate. We further hold that the Commission in 

course of determination of Tariff may exercise any of the powers as is available 

to it in a suitable situation in their respective jurisdiction. Since the prayer for 

amendment has been refused by a reasoned order, we are not in a position to 

say that we must intervene so as to compel the Commission to pass an amended 

notified Regulations. 

78. Subject to what we have held in penultimate Paragraph, the appeal fails and is 

dismissed but without costs. 

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2011 ELR (APTEL) 1086* 



South India Sugar Mills Association (Karnataka), Bangalore 

v. 

Karnataka Power Transmission Corporation Ltd., Bangalore and Ors. 

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DECIDED ON: 05.04.2011 

Coram 


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* MANU/ET/0067/2011 

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South India Sugar Mills Association (Karnataka), Bangalore v. KPTCL, Bangalore and Ors. 



01087 

Whether the appeal as framed is maintainable? 

Held, the association comprised of thirty members having sugar mills in Karnataka 

and the sugar factories with cogeneration units in Karnataka are 34 in numbers. In 

terms of the resolution of Committee, the Secretary of the Association was duly 

authorised to present this appeal. The appeal thus was preferred by a registered 

body in its representative capacity to urge therein common view points.. Hence, 

appeal was held to be as maintainable. 

Whether the determination of Tariff by the Commission is justifiable based on relevant 

material and evidence as alleged by the Appellant? Whether the determination of 

Tariff by the Commission corresponds to legal principles and the national Tariff 

policy? 

Held, the Commission over looked the evidence placed before it by the Appellant and 

without examining them arrived at a decision, which accordingly was held to be 

difficult to sustain. The appeal was accordingly allowed in part. The case was remanded 

back to the Commission for re-examination on the issue through re-hearing upon 

consideration of the relevant materials as would be placed before it by the Appellant. 

Appeal Allowed Partly 

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Section 61(a) [p. 1089, para 4 b] 

Section 61(b) [p. 1088, para 2 f] 

Section 61(c) [p. 1088, para 2 g] 



Section 86(1)(e) [p. 1096, para 27 g] 

Electricity Regulatory Commission Act, 1998 [p. 1096, para 26 c] 

Electricity Supply Act, 1948 [p. 1096, para 26 c] 

Karnataka Societies Registration Act, 1960 [p. 1088, para 1 b] 


Central Electricity Regulatory Commission (Terms and conditions for Tariff 

Determination for Renewable Energy Sources) Regulations, 2009 



Regulation 54 [p. 1101, para 31 i] 

Sugarcane (Control) Order, 1966 [p. 1090, para 8 i] 

Counsel 

For Appellant/Petitioner/Plaintiff: Basana Prabhu S. Patil, Prabhulinga K. Navadgi, 

Nishant Patil and Ajay Rudraiah, Advs. 

For Respondent(s)/Defendant: N. Sriranga, Vankat Subramania T.R. and Raghvendra 

S. Srivastava, Advs. 

ENERGY LAW REPORTS (JULY - AUG. 2011) 345

01088 


JUDGMENT 


1. What should have been the Tariff for co-generation units in the State of Karnataka 

and whether the Karnataka Electricity Regulatory Commission who is the Respondent 

No. 7 in this appeal has rightly determined the Tariff in respect of the units 

co-generating electricity in that State by its order dated 11 th December, 2009 are the 

questions posed before us in this appeal preferred by the South India Sugar Mills 

Association (Karnataka), a Society registered under the Societies Registration Act, 

1960 which is a conglomeration of 30 Co-generators. 

2. According to the Appellant, the total generation of electricity from co-generation 

is about 400 MWs. In the matter of fixing the price of non-firm power particularly 

from the non-conventional sources, the Central Electricity Regulatory Commission 

(CERC) framed CERC (Terms and Conditions for Tariff Determination from Renewable 

Energy Sources) Regulations, 2009 which came into effect from 16 th September, 2009. 

The State Commission, the Respondent No. 7 herein, undertook an exercise for 

determination of Tariff for various categories of renewable energy projects and the 

Appellant-Association submitted its proposal which is listed below: 

(a) The generation, transmission, distribution and supply of electricity should 

be conducted on commercial principle. 

(b) The generators because of their having invested large sums of money would 

like to have maximum profit out of co-generation. 

(c) Price in the market, issuance of about 45 trading licenses all over the country, 

establishment of two power exchanges through which power is sold on hourly 

basis, renewable power obligation under National Power Policy, use of 

environmental friendly fuel, localised availability of power generation and 

contribution of such power in reduction of transmission losses, promotion of 

co-generation as per the National Power Policy, open access, and the ability of 

the various State Governments to purchase power at the market price are the 

factors which have to be kept in mind along with what have been stated in 

and (b) above. 

(d) The principle behind the provision of Section 61(b) of the Electricity Act, 

2003 (for short “the Act”). 

(e) Fixation of Tariff at Rs. 2.80 during the last initiative was against the 

commercial principle and the market reality. 

(f) The principle enunciated in Section 61(c) of the Act. 

(g) The State Government was purchasing power from the sugar co-generation 

plants at Rs. 6.50 per/kwhr which was revised from Rs. 7.25 kwhr between 

the period from December 2008 and May 2009. 

(h) The State Government and the distribution companies have been purchasing 

power from outside the State at Rs. 8.00 per unit. 

(i) Project cost, plant load factor, cost of fuel, operation and maintenance on 

investment, auxiliary consumption, return on equity, working capital, maximum 

alternative tax on return on equity, term loan, interest on term loan and escalation 

factors. 

3. The State Commission fixed the Tariff at Rs. 3.59 per unit for the first year with 

allowable escalation at Rs. 4.14 at the end of 10 years. The Commission while fixing 

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01089 

the Tariff at Rs. 3.59 took into consideration–(i) Project Cost at Rs. 3.65 crores including 

transmission infrastructure per MW, (ii) plant load factor at 60 per cent, (iii) operation 

and maintenance expenses at 3 per cent of the capital cost including insurance 

with an annual escalation of 5 per cent, (iv) interest on working capital at 

13.25 per cent p.a, (v) auxiliary consumption at 8 per cent, (vi) fuel price at 1,025 per MT 

of bagasse, (vii) fuel cost escalation at 5 per cent per annum and (viii) fuel consumption 

at Rs. 1.6 kg per unit. According to the Appellant, adoption of the above parameters 

were not tenable and against the realities. 

4. The Appellant find the following faults with the Commission’s order: 

(j) The provision of Section 61(a) of the Act has been completely overlooked 

because the CERC Regulations which had come into being much earlier to the 

passing of the impugned order was thoroughly overlooked. 

(k) The Commission held that the figure of Rs. 4.14 would be applicable in 

respect of the factories which have already signed Power Purchase Agreement 

and which are 10 years old. The Commission was not right in holding that in 

the event of the units which have signed Power Purchase Agreements and 

would like to have the present Tariff for themselves would not be entitled to 

escalation. 

(l) The important fact is that the CERC while fixing Tariff for the State of 

Karnataka itself has arrived at the figure of Rs. 4.89 per KWH for the first year. 

Thus, the Tariff fixed by the State Commission must not be lower than that 

and the principles behind the provisions of Section 62 of the Act have not 

been taken into account. 

(m) The State Commission was absolutely unjustified by fixing project cost of 

a plant at Rs. 3.65 crores per MW. Tamil Nadu Electricity Regulatory 

Commission determined the cost at Rs. 4.67 crores per mega watt excluding 

the evacuation cost. The Andhra Pradesh Electricity Regulatory Commission 

determined the project cost at Rs. 3.25 crore per MW and the Kerala Electricity 

Regulatory Commission fixed Rs. 3.50 crores per MW as project cost. In fact, 

the State Commission attempted to take an average of the figures of the last 

aforesaid two Commissions ignoring the fact that the in the State of Karnataka 

itself a sample case was available to guide the Commission. 

(i) The Appellant submitted the case of Alagawadi Beerehwar plant to 

show that in that plant the project cost was much more than Rs. 5.38 crores 

per MW and this was not disputed by the Commission. 

(ii) It is the duty of the Commission to consider the actual cost incurred 

by various units of the recent years for the purpose of arriving at a figure. 

(iii) If project costs of other States were at all needed for the Commission 

then the neighbouring State of Tamil Nadu was sufficient enough to 

guide the State Commission. The Tamil Nadu State Electricity Regulatory 

Commission issued a comprehensive Tariff order for bagasse based 

co-generation plants upon deliberation of a study paper called “Power 

Procurement by Distribution Licensee from Bagasse based Co-Generation 

Plants and allied issues relating to Captive Use and Third Party Sale”. 

(iv) In the case of Chamundeswari Sugars Ltd., the cost per MW has come 

to Rs. 130.66 crores for installation of 26 MW power plant, and per MW 

the cost comes to Rs. 5 crores. 


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(v) For the GMR Industries which set up a 24 MW Co-Generation Plants 

in the State, the cost came to Rs. 4.62 crores per MW. 

(vi) In respect of Bannari Amman Sugars Ltd., which is bordering the State 

of Tamil Nadu and which has installed capacity of 28.80 MW, the cost 

per MW came to Rs. 4.57 crores and the cost of the power of evacuation 

is borne by the Tamil Nadu Electricity Board. 

(vii) The Central Commission while fixing the Tariff for the Co-Generation 

facility has taken Rs. 4.45 crores as a project cost excluding the cost of 

evacuation of power. 

5. In the context of the above, it was highly unreasonable for the State Commission 

to fix the project cost at Rs. 3.65 crores per MW, whereas the CERC fixed it at 

Rs. 4.45 crore per MW. The Kerala model was of no value because there has not 

been set up any co-generation plant in that State during the last 10 years. Again, the 

Andhara Pradesh figure cannot guide the Commission because its determination of 

cost at Rs. 3.25 crores per MW took place as early as in the year 2004. On the 

contrary, the Tamil Nadu figure appears to be closer to the reality. The IREDA while 

commenting on the consultative document from the Tamil Nadu Commission by a 

letter dated 9 th February, 2009 stated that co-generation projects were being set up 

generally with boiler configuration of 87 ata or 110 ata and the corresponding 

benchmark capital cost are in the range of Rs. 4.33 crores per MW to Rs. 5.00 crores 

per MW. Further, the Ministry of New and Renewable Energy, Government of India 

suggested that the investment cost may be linked to escalation indices for major 

inputs like steel and cement. M/s. Rajshri Sugars indicated that the capital cost of 

a project commissioned in January, 2009 is Rs. 5.00 crores per MW. Again, the 

South India Sugar Mills Association have stated that the capital cost of projects 

currently under implementation is in the range of Rs. 5.25 crores per MW. Also, the 

Maharashtra State Electricity Regulatory Commission made provisional fixation at 

Rs. 4.79 for every unit. The escalation considered by the State Commission for capital 

cost as parameter is an increase from Rs. 300 lac per MW (which was fixed in the 

year 2005) to Rs. 365 lac per MW in the present Tariff order and in terms of percentage 

it comes approximately to 4.33 per cent which is very low and far from the ground 

reality and has been oblivious of the current inflation rate. It is thus pleaded that 

the correct fixation should be at Rs. 5.25 crores per MW. 

6. With regard to plant load factor the State Commission assumed that the CERC 

has fixed it at 60 per cent which is not correct; the CERC has fixed the PLF at 

53 per cent being applicable to the State of Karnataka. There was no reason for the 

State Commission to depart from this. 

7. With respect to fuel price for bagasse the State Commission fixed Rs. 800 as the 

basic price but it was the price fixed in the year 2004 and then by increase of 

5 per cent escalation cost the Commission arrived at Rs. 1,025 per metric tonne 

which is totally unjustifiable. The fixation of the price at Rs. 800 per metric tonne 

was challenged before this Tribunal earlier and the Commission’s order was set 

aside though special leave petition was filed before the Hon’ble Supreme Court by 

the Karnataka Power Transmission Corporation Ltd. 

8. The Commission totally lost sight of the fact that the Sugarcane (Control) Order, 1966 

adopted the value of bagasse while fixing the price of sugarcane and under Para 3 

of that Control order, one of the parameters while fixing the sugarcane price is the 

realisation to be made from the producer by the bye-products like bagasse, molasses 

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01091 

or their imputed value. So far as Karnataka is concerned, the fair and remunerative 

price for the year 2009-10, has been fixed at Rs. 1,414 and the declared price which 

is actually paid by each of the sugar factories to the sugarcane farmer is between 

Rs. 2,000 to 2,100 per metric tonne in North Karnataka and Rs. 1,950 in South 

Karnataka. 

9. The Commission did not consider the formula prescribed in the report of TERI 

Committee. According to the formula, the price of coal being readily available by the 

statutory Authority has to be divided by the calorific value of the coal with that of 

bagasse. The notional price of bagasse could be easily arrived at Rs. 2,000 per 

metric tonne. 

10. The price escalation of bagasse is linked up with the escalation of price of sugarcane 

but the State Commission simply increasing by 5 per cent on the basis of the last year 

price fixed the Tariff at Rs. 1,025 per metric tonne which is not the reality. 

11. As regards fuel consumption, the figure of Rs. 1.60 per kg is not correct. In this 

connection, the Appellant Association got a technical expert report of M/s. Tecsol 

Engineers Pvt. Ltd., to evaluate the parameter of fuel consumption/specific heat 

rate in power generation. 

12. This Tribunal also made valuable observation in this connection in Appeal 

No. 20 of 2006 in the order dated 7 th September, 2006 (we shall consider the findings 

of the Tribunal at the appropriate place of this judgment). 

13. If the average calorific value of biomass is taken at 3,300 Kcal/Kg, the Station 

Heat Rate works out to 4,488 Kcal/Kwh. At the same rate, with the average calorific 

value of fuel (Bagasse with 50 per cent moisture content) in respect of co-generation 

plant the SHR comes to 2,250 Kcal/Kg. Then, at that rate, the specific fuel consumption 

would be Rs. 1.99 kg per KWh. The State Commission by its Tariff order has fixed 

the specific fuel consumption at 1.6 kgs/KWH based on sugar season operation 

which is similar to a biomass based power plant, as such the same operational 

parameter will hold good for the co-generation plants. The expert opinion rendered 

by Professor P.J. Paul, Chief Programme Executive, ABETS attached to Indian Institute 

of Science, Bangalore provided the same information both in respect of biomass as 

well as co-generation units. Some plants in the State of Karnataka have been installed 

with highly efficient equipments supplied by Indian and foreign manufacturers, 

like BHEL, Shin Nippon, Triveni, etc. 

14. Thus, taking into consideration all these factors the Tariff per unit comes to Rs. 5.64. 

15. Though all the Power Purchase Agreements provide for an opening of letter of 

credit by the distribution companies, the co-generation units have found that no 

letter of credit has been opened. Further, every sugar factory which has been supplying 

power to the State utility is suffering from delayed payment as a result of which 

they become defaulter to their financial institutions and they also delay in making 

payments to sugarcane farmers. 

16. Of the seven Respondents, the Respondent Nos. 1 to 6 who are the distribution 

licensees have come up with a joint counter-affidavit, the contents of which can be 

conveniently put as under: 

(i) The order impugned of the Commission suffers from no defects as it as 

taken cognizance of various provisions of the Electricity Act, namely, Sections 61, 

62 and 63, the National Electricity Policy and the Tariff Policy. 


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(ii) The present Appellant has no locus standi to present the appeal as the 

Appellant is not any individual co-generator and the memo of appeal does 

not specify as to how it came to be affected by the order impugned. 

(iii) The exercise made by the Commission is towards fixation of normative 

rates for generation of power by various non-conventional sources of energy 

that comprise a unit of co-generation. 

(iv) The fuel for generation of power is a bye-product of the main activity of a 

co-generator which is a business other than the function of co-generation. In 

case of sugar factories, bagasse derived from the process of extracting sugar is 

a bye-product having high calorific value and the same is used for generation 

of power. Thus, co-generation is ancillary to the main business of the generating 

company. 

(v) While fixing the capital cost, the Commission reasonably found that the 

capital cost proposed by the Appellant could not be relied upon as it is based 

on data concerning a single project and does not reflect the true cost. The 

Commission considered every aspect of the matter including those placed by 

the Appellant before the Commission. The Appellant failed to establish as to 

how the cost varied from Rs. 4.75 to 5.550 crores per MW. The Commission 

did not simply take into consideration the price fixed by the neighbouring 

State Commissions but also considered the annual inflation rate and the cost 

of power project per mega watt. 

(vi) As regards plant load factor, the Commission while fixing it at 60 per cent 

considered the proposal of various entities including the Appellant which 

itself proposed at 55 per cent after reducing from 75 per cent. It was the case of 

the Appellant that the seasonal period for generation would be 180 days and 

that for the off season would be 60 days. In the earlier order also, the Commission 

reckoned 60 per cent as PLF. 

(vii) With respect to fuel price, it is contended that sugar factories work as 

co-generator only in the season and during the off season there is no co-generation. 

Therefore, bagasse would be required during the off season and to make good 

shortage of fuel during the season. As the bagasse produced during the season 

is available free of cost, the same being a in-house bagasse, the fuel cost allowed 

by the Commission for such in-house bagasse during the season is only notional. 

(viii) As regards fuel consumption, it is the case of the Appellant that as the 

State Commission by way of the impugned order has fixed the specific fuel 

consumption at Rs. 1.60 kg. per KWH based on non-sugar operation which is 

similar to a biomass based power plant, the same parameters applicable to 

biomass plants would hold good for co-generation plants as well, but the 

same are incomparable as not only the raw materials are different but also the 

parameters for computation of costs involved are not comparable, as such 

both cannot be equated together. 

(ix) With respect to payment security mechanism it is the case of the Respondents 

that the State Commission in its standard approved draft has already dealt 

with the issue and no additional payment security mechanism is required. 

Further, the appeal relates to challenge of a Tariff order with which payment 

security mechanism bears no relevance. 

(x) In support of the case of the Appellant, no documentary evidence has been 

produced worth considering. The report of the technical expert was not available 

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01093 

before the Tariff fixation. No data, details and materials were furnished before 

the Commission by the Appellant. 

(xi) There is no legal question involved in the appeal. The Commission passed 

the impugned order in right perspective upon having consideration of the 

materials so far made available before it. The State Commission duly considered 

also the CERC Regulations while coming to the decision in question. The rates 

fixed by the CERC for the control period is generic levelised generation Tariff 

which cannot be applied ipso facto to the co- generators who are under the 

jurisdiction of the State Commission. 

(xii) The Commission considered the cost incurred by the generators throughout 

the year and the impugned order has duly taken care of the situation of the 

generators achieving a reasonable return out of the business. 

(xiii) Reference to different sugar factories, namely, Chamundeshwri Sugar, 

GMR Industries, Bannari Amman Sugars Ltd., Tamil Nadu State Commission’s 

Study Report and its order determining the Tariff for renewable source of 

energy are all beside the point. No order of the other Commissions is binding 

on the Karnataka State Commission and in fact the Commission has come to 

an independent view upon consideration of the relevant materials. 

(xiv) CERC recommended 60 per cent PLF in case of availability of the plant 

for 180 days in season and 60 days off season which the Appellant itself 

suggested before the Commission. 

17. Accordingly, the first six Respondents jointly contend that the Appeal is not of 

any substance. 

18. The seventh Respondent, the Karnataka State Regulatory Electricity Commission 

is not represented by any Counsel, nor has there been any counter by the Commission. 

In fact, the lengthy submissions of the Respondent Nos. 1 to 6 by their learned 

Advocate Mr. S. Sriranga are adoption of the reasonings of the State Commission in 

the impugned order. 

19. Upon the pleadings as aforesaid of the parties, the issues that arise for 

consideration are as follows: 

(a) Whether the appeal as framed is maintainable? 

(b) Whether the State Commission was justified in fixing the cost of biomass 

based cogeneration unit at Rs. 3.59 per unit when the existing power purchase 

agreement holders are getting Tariff between Rs. 4.15 to Rs. 4.64 per unit as 

alleged by the Appellant? 

(c) Whether the determination of Tariff by the Commission is justifiable based 

on relevant material and evidence as alleged by the Appellant? 

(d) Whether the determination of Tariff by the Commission corresponds to 

legal principles and the national Tariff policy? 

20. We propose to make a comprehensive analysis of the subject covering all the 

issues. When we ask, whether the provisions of law have been complied with or not 

we are to analyse and marshal the facts so as to see whether determination of the 

fact is in consonance with the position of law. Mr. Prabhuling K. Navadgi appearing 

with Mr. Nishant Patil learned Counsel for the Appellant has questioned the modality 

of working out of the project cost as made by the Commission saying that the modality 

in the nature of taking into account the fixation of cost by Andhra Pradesh Regulatory 

Commission and Kerala Regulatory Commission and thus putting an increase by a 


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certain percentage on the Tariff determination for renewable source of energy as 

was made in the year 2004 by the Commission is, so to speak, not a determination 

on the basis of materials and evidence a plethora of which was furnished before the 

Commission; as such determination thoroughly unreasoned and that too by careful 

overlooking of all such materials must not stand the scrutiny of the law. The learned 

Counsel has taken us to the annexure to the memorandum of appeal in relation to 

the issue of project cost in support of his submission that by no amount of reasoning 

project cost can be fixed in the manner as made by the State Commission. It is 

submitted that the plant load factor must be taken as 53 per cent in line with the 

Central Electricity Regulatory Commission Regulations, 2009 in so far as it is applicable 

to the State of Karnatka. As regards fuel price, it is submitted that the reasoning 

given by the Commission on this account is anything but the reason worth considering 

because the amount of Rs. 1,025 per MT has simply been arrived at by putting 

escalation at 5 per cent upon the basic price of Rs. 800 as was fixed in the year 

2004. It is submitted that unfortunately the Commission chose to ignore the materials 

which the Appellant provided. With respect to fuel consumption, exception has 

been taken to the manner in which it has been fixed on the ground that the calculation 

provided by the Appellant before the Commission showed clearly that specific fuel 

consumption for a co-generation plant must not be less than Rs. 1.82 kg/kwh which 

is in line with the recommendations of Central Electricity Authority Expert Committee. 

Again, the Commission has not structured the minimum alternate tax as a factor for 

Tariff fixation. As regards fuel cost escalation, escalation by 5 per cent is acceptable 

provided fuel price is objectively fixed. 

21. The Commission, arguments continue, would not have committed mistake blatantly 

if at least this Tribunal’s judgment and order dated 7 th September, 2006 passed in 

Appeal No. 20 of 2006 had been duly taken note of. It is submitted that the entire 

exercise undertaken by the Commission is without any foundation of facts and 

materials; accordingly the order impugned demands interference. 

22. The Respondents No. 1 to 6 through their Counsel Mr. Raghvendra S. Srivastava 

submitted that the Appellant forgot that the concept of cogeneration is that power 

generation is ancillary to the main business of the generating company and bagasee 

is the bye-product of sugarcane having high calorific value. Thus, fuel for power 

generation in case of renewable source of energy bagasee is not procured from 

outside unit, accordingly, cost of bagasee has to be one having notional value. 

Secondly, it is submitted that with regard to the project cost the cost of single project 

as was furnished by the Appellant was not sufficient. The Commission duly took 

note of the annual inflation rate and cost per mega watt. As regards plant load 

factor, the Commission fixed it at 60 per cent taking note of the fact that according 

to the Appellant seasonal period for generation would be 180 days and off season 

would be 60 days. 

23. Thirdly, the price of fuel was rightly fixed at Rs. 1,025 per MT and the basis for 

the same is that sugar factories work as cogeneration plant only in the season and 

during the off season there is no cogeneration. When bagasse produced during the 

season is available free of cost, the fuel cost for the in-house bagasse would be 

notional. As regards fuel consumption, the Commission has correctly fixed at Rs. 

1.60 kg/per unit. The aspect of payment security mechanism has no relevance with 

that of Tariff determination. The rates fixed by CERC for the controlled period is 

generic levelised generation Tariff and it is not applicable to the non-Central 

Government Companies. It is submitted that the Commission rightly held that the 

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Tariff so determined would be applicable with relevant escalated rate on the date of 

commercial operation. In view of the order of this Tribunal in Appeal No. 129 

of 2005 the present Tariff would be applicable with relevant escalated rate on the 

date of commercial operation, but where the project has completed the first ten 

years of Tariff period and PPA is valid for another 10 years, the Tariff applicable 

would be continued for the remaining period of the PPA without escalation because 

of the fact that the debt has already been serviced leaving scope of marginal increase 

in operation and maintenance expenses. 

24. The first objection of the Respondents No. 1 to 6 that the appeal is not maintainable 

on the ground of it not having been preferred by any individual and the association 

of sugar factories does not have locus standi to prefer the appeal against the order for 

determination of Tariff for the co-generation units attached to those factories is itself 

not maintainable in view of the fact that the Appellant undisputedly is a society 

registered under the Karnataka Societies Registration Act, and an incorporeal body 

having capacity to sue and be sued. As we find from Annexures B, C and D of the 

memorandum of appeal, the association has 30 members having sugar mills in 

Karnataka, and the sugar factories with cogeneration units in Karnataka are 34 in 

numbers. In terms of the resolution of Committee the Secretary of the Association 

has been duly authorised to present this appeal. The appeal has been preferred 

thus by a registered body in its representative capacity to urge therein common 

view points. It is not an unregistered body, not are the members obscure and uncertain. 

The objection is thus repelled. 

25. The National Tariff Policy framed by the Government of India in the Ministry of 

Power duly published on 6 th January, 2006 vide Resolution No. 23/2/2005-R&R 

(Vol. III) dated 6 th January, 2006 inter alia puts as follows: 

4.0 Objective of the Policy 

The objectives of this Tariff policy are to: 

(a) Ensure availability of electricity to consumers at reasonable and 

competitive rates; 

(b) Ensure financial viability of the sector and attract investments; 

(c) Promote transparency, consistency and predictability in regulatory 

approaches across jurisdictions and minimize perceptions of regulatory risks; 

(d) Promote competition, efficiency in operations and improvement in 

quality of supply. 

26. These objectives of the National Tariff Policy find its exact reflection in Section 61 

which is reproduced below: 

61. Tariff regulations.- The Appropriate Commission shall, subject to the 

provisions of this Act, specify the terms and conditions for the determination 

of Tariff, and in doing so, shall be guided by the following, namely: 

(a) the principles and methodologies specified by the Central Commission 

for determination of the Tariff applicable to generating companies and 

transmission licensees; 



(c) the factors which would encourage competition, efficiency, economical 

use of resources, good performance and optimum investments; 


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(d) safeguarding of consumes interest and at the same time, recovery of 

the cost of electricity in a reasonable manner; 

(e) the principles rewarding efficiency in performance; 

(f) multi-year Tariff principles; 

(g) that the Tariff progressively reflects the cost of supply of electricity 

and also reduces cross-subsidies in the manner specified by the 

Appropriate commission; 

(h) the promotion of co-generation and generation of electricity from 

renewable sources of energy; 

(i) the National Electricity Policy and Tariff policy: 

Provided that the terms and conditions for determination of Tariff 

under the Electricity (Supply Act, 1948 (54 of 1948), the Electricity 

Regulatory Commission Act, 1998 (14 of 1998) and the enactments 

specified in the Schedule as they stood immediately before the 

appointed date, shall continue to apply for a period of one year or 

until the terms and conditions for Tariff are specified under this 

section, whichever is earlier. 

27. In this connection, we have been taken to the relevant paragraph of the order of 

this Tribunal passed on 7 th September, 2005 in Appeal No. 20 of 2006 which we 

quote below: 

We have perused the CEA’s report on “Operations Norms for biomass based 

power plants” dated September 2005, prepared by a Technical Expert Committee 

with representatives from State utilities and Equipment manufacturers. The norms 

are based on actual operation data of plants for three years (from January 2002 

to December 2004) and site related conditions like ambient conditions, fuel quality, 

equipment and technology specific factors etc. It covered the plants located in 

Sates of Tamil Nadu, Karnataka, Andhra Pradesh, Rajashtan and Chhattisgarh. 

We find that the report has taken into account the guidelines issued by MNES 

to State Governments in 1994-95; considered the Andhra Pradesh Regulatory 

Commission’s (APERC) orders dated 20 th June, 2001 and 20 th March, 2004 on 

Non-conventional Energy Sources Projects; held discussions with manufacturers 

of plant-equipment (M/s Thermax; BHEL, Triveni); consultants (M/s Avant Grade), 

ASCI Hyderabad and Indian Renewable Energy Development Agency (IREDA), 

etc. and had made visits to the selected plants before recommending norms for 

biomass-based power plants. The approach adopted is fairly scientific and will 

promote generation of electricity from biomass. As already noted, it is the mandate 

of the Act of 2003 more particularly, Section 86(1)(e) of the Act of 2003 read with 

Section 61(h) thereof and Preamble thereto and the various policy guidelines to 

promote generation of electricity from renewable sources of energy including 

biomass. The appropriate Commission is bound to give effect to the statutory 

direction of the Act of 2003 to promote generation of electricity from renewable 

sources of energy. We find that this spirit of legislation is being defeated while 

regulating electricity purchase and procurement process of distribution licensees 

including the price at which the electricity is procured from the generating 

companies using renewable sources of energy, including biomass. Appropriate 

Commission is also directed to notify a set of Regulations specifying terms and 

conditions for the Tariff determination of Non-Conventional Sources in compliance 

to the Section 61 of Electricity Act, 2003. 

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01097 

Where the Power Purchase Agreements (PPAs) between the distribution licensees 

and generating companies utilising renewable sources of energy are in conformity 

with MNES guidelines or various policy guidelines as detailed above, the 

agreements are not required to be tinkered with but where the agreements are 

one sided and are not in consonance with the MNES guidelines or aforesaid 

policy guidelines and the terms thereof do not promote generation of electricity 

from renewable sources of energy, it is the bounden duty of the appropriate 

Commission to invoke the provisions of Section 86(1)(e) to issue appropriate 

directions with a view to promote generation of electricity from renewable 

sources of energy. This call for re-opening of the power purchase and wheeling 

agreements by the Commission for suitable amendments in keeping with the 

provisions of Section 86(1)(e) of Electricity Act, 2003. 

Keeping in view the principle that the generation of electricity from renewable 

sources of energy needs to be promoted, we accept these operational norms as 

recommended by the CEA’s report as basic norms and the Appropriate 

Commission to act upon them subject to minor adjustments relating to the 

local site conditions and further refinement after operational data of five years 

operation of biomass plants in the state aggregating to 100 MW is available. 

The following normative figures as recommended by CEA be adopted: 

(a) Capital cost at the rate of Rs. 4 crores/MW. 

(b) O&M expenses including insurance to be 7 per cent of the cost of 

capital with the annual escalation at the rate of 5 per cent. 

(c) Auxiliary power consumption to be taken as 10 per cent. 

(d) Normative Gross Heat Rate (Kcal/Kwh) 4,500. (Station Heat Rate to 

be taken based on the actual P.G. Test report of the projects). 

(e) Plant Load Factor (PLF) of 80 per cent for recovery of the full fixed cost. 

(f) Depreciation at the rate of 7.84 per cent p.a. until the debt is repaid. 

Beyond that 20 per cent is to be spread over the remaining life of the 

plants. (As permitted by the GOI notification relating to Depreciations 

norms for generating companies dated 29 th March, 1994). 

(g) Specific fuel consumption of 1.36 Kg/Kwh with average calorific value 

of fuel as 3,300 cal/Kg. 

28. The main grounds of appeal relate to–(a) Project Cost, (b) Plant Load Factor, (c) 

fuel price and (d) fuel consumption. With respect to fuel cost escalation the Appellant 

is agreeable to escalation by 5 per cent per annum provided the initial price of 

bagasse is determined on objective basis. With respect to the operation and 

maintenance expenses, interest on working capital and auxiliary consumption, the 

Appellant does not dispute with the determination made by the State Commission. 

Therefore, our main focus will be with respect to the first four points. 

29. Project cost is the principal issue. In support of the Appellant’s case that the 

project cost per mega watt should be Rs. 5.25 crores the Appellant has furnished 

evidence which are being discussed herein. 

(i) The Central Electricity Regulatory Commission through its regulations called 

CERC (Terms and Conditions for Tariff Determination from Renewable Energy 

Sources) Regulations, 2009 has arrived at the figure of Rs. 4.89 per KWh which 

means, commercial principles were duly recognised while determining the 

Tariff at Rs. 4.89 per KWh for the first year. It has rightly been argued by the 


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Appellant that where there is no regulation of the State Commission for 

determination of Tariff with respect to the renewable source of energy the 

principles and methodologies specified by the CERC shall be the guiding factor 

for the State Commission. It appears that the Central Electricity Regulatory 

Commission Regulations, 2009 had already been given effect to prior to the 

passing of the impugned order and it is not understood as to why the State 

Commission cannot get itself inspired by the determination of Tariff by the 

Central Commission. The Central Commission, as we find from its 

Regulations 2009, duly recognised the costs of biomass in determination of 

Tariff. According to the CERC Regulations, the normative capital cost for the 

biomass power projects shall be raised to Rs. 450 lac per MW for the year 

2009-10 during the first year of the control period, and shall be linked to 

indexation formula for adjustment in capital cost for the control period with 

the changes in wholesale price index for steel and electrical machinery. There 

is a detailed formula under the head “capital cost indexation mechanism”. 

The Central Commission has taken care to provide that while working out 

interest on working capital in respect of biomass power and non-fossil fuel 

cogeneration cost of fuel is one of the components. Therefore, the submissions 

of the Respondent that there has to be taken only the notional value of bagasse 

is not correct As against this, the State Commission has taken the capital cost 

for putting up a cogeneration plant at Rs. 3.65 crores per MW. 

(ii) The Appellant lays greater stress on the determination of the project cost 

for cogeneration in Tamil Nadu by the Tamil Nadu Commission at Rs. 4.67 

crores per MW which excludes the cost of evacuation of power. It is not in 

dispute that an expert committee was formed for non-conventional energy 

sources and particularly with respect to bagasse based cogeneration plant by 

Tamil Nadu State Commission. It could not be disputed that a consultative 

paper on “Power Procurement for Distribution Licensee from Bagasse Based 

Cogeneration Plant and allied open access issues relating to captive use any 

third party sale” was prepared and circulated at the behest of Tamil Nadu 

Electricity Regulatory Commission and after threadbare study and analysis 

capital cost was fixed at Rs. 4.67 crores per MW. 

(iii) Then, the Appellant produced the certificate of a Chartered Accountant of 

Sri Chamundeswari Sugar Ltd. which determined the capital cost per MW at 

Rs. 502.5 lacs. Reference has been made by both the parties to the fixation of 

capital cost by Andhra Pradesh Regulatory Commission and Kerala Regulatory 

Commission. Now the submission of the learned Counsel for the Appellant is 

that the cost fixed by Andhra Pradesh at Rs. 3.25 crores per MW was the cost 

determined in the year 2004 and it is unwise to borrow such figure which is 

not recent in origin. As regards the Kerala cost, it has been submitted that the 

Kerala figure is not even a recent past because during the last 10 years preceding 

the determination of Tariff fixation by the Karnataka State Commission there 

has not been any cogeneration units for generation through biomass in Kerala. 

It is true that Andhra Pradesh and Kerala have their figures at Rs. 3 crores 

plus but neither of these have calculated the cost with reference to the cost of 

the components with respect to any cogeneration plant set up recently in any 

of the said two states. As against the project cost of Andhra Pradesh and 

Kerala, evidence to the contrary is in abundance which equally cannot be 

ignored and it is not that the evidence that is produced here was not tendered 

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before the Commission at the time of hearing. It is not our purpose to say what 

exactly should be the project cost for the sugar factories generating electricity 

through biomass. We can only point out whether the project cost fixed by the 

Commission is a true reflection of the ground realities. Now, Sri Chamundeswari 

Sugar Ltd. which has 26 MW turbine generator was set up on 30 th September, 2008 

at the cost of Rs. 520.5 lacs per mega watt, while GMR Industries Ltd. which 

was set up in the year 2007 for 24 MW power shows the project cost at 

Rs. 4.62 crores per mega watt. Again, Bannari Amman Sugar Ltd. situated in 

Tamil Nadu has set up 28.80 MW power unit assessed their cost at Rs. 4.57 crores 

per MW excluding the cost of evacuation which is borne by Tamil Nadu 

Electricity Board. Again, the Appellant submitted the case of Alagawadi 

Beereshwar plant to show that there the project cost was more than Rs 5.38 crores 

per MW. If we look at the statement of object and reason of Central Electricity 

Regulatory Commission (Terms and conditions for Tariff Determination for 

Renewable Energy Sources) Regulations, 2009 we find that for the first year of 

the control period 2009-10 the normative capital cost for non-fossil fuel based 

cogeneration project has been specified at Rs. 4.45 crores which excludes the 

cost of power evacuation facility. Instead of considering these materials what 

seems to have prevailed with the Commission is the cost fixation of Andhra 

Pradesh and Kerala which is quite age old fixation. The argument of the learned 

Counsel for the Appellant that actual project cost must be taken into consideration 

instead of fixation by escalation percentage cannot be disputed. The matter of 

the fact is that the State Commission’s Tariff determination as was done in the 

year 2004 was almost similar to Andhra Pradesh which also did the same 

exercise in 2004 and the State Commission by percentile increase put the figure 

at Rs. 3.65 crores per MW. If we go between the lines of the Commission’s 

order we find that the Commission took note of its earlier project cost of 

Rs. 3.00 crores per MW and after having taken into account of the data of 

Kerala, Andhra Pradesh, Tamil Nadu and the claim of the stake holders the 

Commission preferred to put a percentile increase upon earlier project cost of 

Rs. 3.00 per MW so as to arrive at the figure of Rs. 3.65 crore per mega watt. 

We fail to understand why the Commission did not go into the details of the 

material and examine the same analytically as were available before it. The 

learned Counsel for the Appellant takes us to an order dated 11 th January, 2010 

passed by the Maharashtra Electricity Regulatory Commission in Case No. 123 

of 2008 wherein, the State Commission after taking into consideration the 

order passed by the CERC made provisional fixation of Tariff at Rs. 4.79 per unit. 

There a submission was made by the Cogeneration Association of India at 

Pune that project cost increased to Rs. 4.5 crore per MW or higher than that 

and wholesale price inflation index for fuel, power, light and lubricant, rose 

by 35 per cent from 239.20 in the financial year 2002-03 to 324.00 in the financial 

year 2006-07. This submission was taken duly note of by the Maharashtra 

State Electricity Regulatory Commission (MERC). Against this, the escalation 

of cost considered by the State Commission appears to be 4.33 per cent as 

compared to the original cost of Rs. 3.00 crore which was fixed in the year 2004. 

The legitimate question has arisen whether the said percentile increase 

corresponds to the reality which includes the correct inflation rate. According 

to the Appellant they have got the price index data from the office of the 

Economic Advisor, Ministry of Commerce and Industry, Government of India 

showing the average inflation for the commodities like ACSR conductor, switch 

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gear, material handling equipments, steel and cement at 65.74 per cent. We do 

not know whether this paper was shown to the State Commission at the time 

of hearing. However, investment cost has to be linked to escalation indices for 

major inputs such as steel and cement. A cogeneration plant set up by one 

M/s Rajsri Sugar, according to the Appellant, indicated that the capital cost of 

the project in January, 2009 is Rs. 5.00 crore per MW. Taking a total view of 

the matter it appears to us that the State Commission has not gone into the 

depth of the matter; and instead fixed project cost by percentile increase having 

due regard to its own determination for the year 2004-05 which was almost 

similar to Andhra Pradesh and Kerala. It is for the State Commission to again 

consider whether the said percentile increase was after taking into consideration 

of all the materials placed by the Appellant. Regulation 35 of the CERC 

Regulations, 2009 provides in detail capital cost indexation mechanism in the 

case of biomass power project for adjustment in capital cost over the control 

period with the changes in wholesale price index for steel and electrical 

machinery. The State Commission’s impugned order is too cryptic to give berth 

to all the materials and evidence as were produced before the Commission. 

The Commission opined that its fixation at Rs. 3.65 crores per mega watt is 

reasonable, but no reason has been assigned to show how its order on this 

count is, according to the Commission, reasonable. In the circumstances we 

are of the view that the matter needs a review, re-look and revisit with regard 

to such material and others as might be placed before the Commission once 

again when we remit the matter to it for such reconsideration. 

30. As regards, the Plant Load Factor the Commission found that at the initial stage 

the Appellant had estimated 270 day of operation and thus projected the PLF at 

75 per cent but subsequently, it revised its estimate on the ground that cogeneration 

plants cannot run beyond 240 days (180 days season and 60 days off season) since 

boilers are prone to frequent failure and need regular maintenance. Accordingly, the 

Appellant proposed PLF at 55 per cent. The Commission observed that the CERC has 

specified PLF at 60 per cent. The State Commission observed that in its earlier order it 

had approved PLF at 60 per cent. Our attention in this connection has been drawn to 

CERC Regulations, 2009, which was notified on 16 th September, 2009. According to 

the Regulations 2009 for biomass based power projects Plant Load Factor for 

determining fixed charge component of Tariff would be 60 per cent during stabilisation, 

70 per cent after stabilisation and 80 per cent from the second year onwards. Now, 

while determining the generic levellised generation Tariff under Regulation 8 of the 

Regulations, 2009 the CERC fixed PLF at 53 per cent considering 150 days (crushing) 

and 60 days (off season), whereas for Tamil Nadu and Maharashtra it is 60 per cent 

taking 240 days as operating days, and 45 per cent in the case of Uttar Pradesh and 

Andhra Pradesh considering 180 days as operating days. The CERC in its Regulations, 

2009, Clause 49 provided that for the purpose of determining fixed charge the Plant 

Load Factor for non-fossil fuel based generation projects shall be computed on the 

basis of plant availability for number of operating days considering operations during 

crushing season and load factor of 92 per cent. For Karnataka, the operating days 

have been fixed at 210 days. It appears that the State Commission has been retained 

its earlier determination of PLF at 60 per cent without any change on the basis of the 

representation of the Appellant that cogeneration plants can run up to 240 days. With 

operating days as 240, the PLF according to the formulations of the Central Commission 

would work out to be 60 per cent. We do not think that the Commission committed any 

material irregularity in the matter so as to call for interference on this count. 

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01101 

31. With respect to fuel price the Appellant is too much aggrieved. We have earlier 

overruled the submissions of the Respondent No. 1 to 6 that the value of baggasse 

should be notional on the ground that baggasse produced during the season is 

available free of cost. This submission goes against the determination of Tariff on 

cost plus principle. The contention that simply because the generation of power is 

made by cogeneration unit the fuel price is ignorable is against the principle that 

the determination of Tariff has to be on the commercial principle. Now, it has rightly 

been suggested that the value of bagasse is also taken into consideration for fixation 

of price of sugarcane. Our attention has been drawn to the Sugarcane (Control) 

Order, 1966, Paragraph 3 which duly takes cognizance of the value of the by-products 

of sugarcane like molasses and bagasse. Out attention has further been drawn to 

the copy of the bill of Shree Doodhganga Krishna co-operative Sugar Factory for the 

year 2009-10 which shows the price of cane per metric tonne at Rs. 2,025 during the 

period from 1 st January, 2010 to 15 th January, 2010. Bill of another concern, NSL 

Sugars Ltd. for the period from 18 th February, 2010 to 21 st February, 2010 shows the 

cane price at Rs. 1,950 per metric tonne and the billing price was at Rs. 1,795 per 

metric tonne. Further, CERC in their Tariff order for the period 2009-10 assessed the 

fuel price at Rs. 1163 per metric tonne for the State of Karnataka and others and the 

price is higher than Uttar Pradesh, Madhya Pradesh, Andhra Pradesh and 

Maharashtra. Definitely study was conducted by the CERC on the price of non-fossil 

based cogeneration projects in different states before arriving at the figure of Rs. 1163 

which is applicable to Karnataka. Now, our attention has been drawn to a letter 

dated 4 th May, 2009 issued by Shri Doodhganga Krishna Sahkari Sakkare Karkhane, 

Niyamit to a concern intimating the acceptance of the price of loose bagasse of 

2008-09 season at Rs. 2,700 per metric tonne (with moisture content less than 

50 per cent). The same concern accepted the price from another supplier at Rs. 2,600 per 

metric tonne at about the same time. On 6 th May, 2009 one Tara Industries supplied 

loose bagasse to the same Shri Doodhganga Krishna Sahkari Sakkare Karkhane, 

Niyamit at Rs. 2,000 per metric tonne. Alarmingly, one The Nandi Sahkari Sakkare 

Karkhane, Niyamit placed purchase order to a concern of Belgaum for supply of 

loose bagasse for the crushing season 2009-10 at Rs. 3,400 per metric tonne inclusive 

of bagasse material cost, all taxes and duties, loading and unloading and transportation 

up to the factory side. The Government of India in its Ministry of Consumer Affairs, 

Food and Public Distribution in its letter date 31 st October, 2009 to the Chief Secretaries 

of the Sugar Producing States intimated that the Government fixed the fair and 

remunerative price of sugarcane payable by sugar mills for 2009-10 sugar season at 

Rs. 129.84 per quintal linked to a basic recovery rate of 9.5 per cent. It appears that 

in the impugned order the State Commission put an escalation price at the rate of 

5 per cent upon Rs. 800 as basic price to arrive at the figure of Rs. 1,025 per metric 

tonne. The observation of the Commission that there is no expenditure actually 

incurred for in house bagasse from the accounting point of view because it is available 

during the season free of cost cannot be rejected outright. It is further submitted that 

the State Commission also did not consider the report of TERI Committee according 

to which the price of coal being readily made available by the statutory Authority, 

by dividing the calorific value of the coal with that of bagasse the notional price of 

bagasse come to Rs. 2000 per metric tonne. The Central Commission in the 

Regulation 2009 provided that the price of Bagasee shall be linked to index formula 

as given in Regulation 54 and alternatively for each subsequent year of the control 

period the normative escalation factor of 5 per cent per annum shall be applicable 

on the option of the project developer. Either the normative escalation factor of 


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5 per cent per annum is allowed or the price is linked to index formula as given by 

the Central Electricity Regulatory Commission there is hardly any scope and necessity 

for re-examination of the matter by the State Commission because State Commission 

put escalation of 5 per cent to put figure on Rs. 1,025 per MT which cannot be 

considered to be unreal and unjustified. 

32. As regards, fuel cost escalation nothing much has to be said except saying that 

subject to determination of the fuel cost truly reflecting the position in the market 

escalation at 5 per cent has not been objected to. 

33. With respect to fuel consumption which is equally assiduously canvassed by 

the learned Advocate for the Appellant, the Commission has fixed Rs. 1.60 per Kg. 

per unit. It appears that the Commission retained the same figure as it earlier fixed. 

It noted the fuel consumption approved by the Tamil Nadu Electricity Regulatory 

Commission and Andhra Pradesh Electricity Regulatory Commission at Rs. 1.67 

and Rs. 1.60, respectively. It also noted the station heat rate of 3,600 kCal/kWh 

approved by the CERC which works out at 1.60 kg/unit. According to the Appellant 

if the average calorific value is taken as 3,300 kCal/kg the station heat rate works 

out to 4,488 kCal/kWh and at the same rate the average calorific value of fuel 

(bagasse with 50 per cent moisture contents) for a cogeneration plant comes 

2,250 kCal/Kg and the specific fuel consumption accordingly comes to 1.99 kg/kWh 

which is arrived at by dividing the station heat rate by calorific value of fuel with 

50 per cent moisture content. According to the Appellant, the State Commission by 

its Tariff order has fixed the specific fuel consumption at 1.6 kg/kWh based on 

non-sugar operation (no process steam) which is similar to a biomass based power 

plant, as such the same operation parameter must hold good for cogeneration plant 

also. The figure of 1.99 kg./kWh as has been put forward by the Appellant is actually 

the report of a technical consultant named M/s. TESCOL Engineers Pvt. Ltd., Bangalore, 

dated 8 th February, 2010 in the form of a letter dated 8 th February, 2010 addressed by 

the Director of the said concern to the Appellant. According to this report, with 

average calorific value of fuel as 3,300 kCal/kg the fuel consumption is fixed at 

1.36 kg. which is multiplied by the biomass calorific value of 3,300 kCal/kg to 

arrive at the station heat rate at 4,488 kCal/unit which when divided by 2,250, i.e. 

the calorific value of bagasse with 50 per cent moisture we get a figure of 1.99 kg/kWh 

as specific fuel consumption for cogeneration plant. This report further refers to the 

expert opinion render by Prof. P.J. Paul. Chief Programme Executive, AVETS attached 

to Indian Institute of Science Bangalore, who provided the said TECSOL, the 

information both in respect of biomass as well as cogeneration unit. The TECSOL is 

finally of the opinion that for biomass/cogeneration plant having no supply of 

process steam and with bagasse with 50 per cent moisture as fuel the specific fuel 

consumption will be in the range of 1.82 to 2.0 kg./kWh. We do not think that the 

Commission has committed any material irregularities in fixing fuel consumption 

at Rs. 1.60 per kg per unit. The CERC gas specified station heat rate of 3,600 K.Cal/unit 

and colorific value of 2,250 K.Cal/Kg. Thus for the CERC, the fuel consumption per 

unit works out to 1.60 Kg/unit. The same has been the fixation of the State Commission. 

The assumption of the Appellant are too much off the mark, and we do not find any 

cogent reason to interfere with the fixation. 

34. In view of what we have said above it is but necessary for the Tribunal to remit 

the matter to the commission for whom it would be necessary to re-examine the 

following issue as is canvassed before us on the basis of the material as would be 

available before the Commission so that a reasoned analysis is rendered: 

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(Rajiv Sahai Endlaw, J.) 

01103 

(a) Project cost, 

We do not interfere with the findings of the Commission on: 

(b) Plant Load Factor 

(c) Fuel Price. 

(d) Fuel Consumption. 

We make it clear that we have not indicated as to what would be the exact figure in 

respect of each of the components; we only clearly say that the Commission has 

over looked all such evidence as were placed before it by the Appellant and without 

examining them it arrived at a decision which accordingly it is difficult to sustain. 

36. Therefore, the appeal is allowed in part and the impugned order to the extent 

indicated above is set aside. The case is remanded back to the Commission for 

re-examination on the issue as aforesaid through re-hearing upon consideration of 

the relevant materials as would be placed before it by the Appellant. No cost. 

2011 ELR (DELHI) 1103* 

d 

IN THE HIGH COURT OF DELHI 

Jingle Bell Amusement Park P. Ltd. 

v. 

North Delhi Power Ltd. 

e 

W.P. (C) 8647/2007 

DECIDED ON: 19.04.2011 

Judge 

Rajiv Sahai Endlaw, J. 

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Issues and findings 

Whether alternative remedy under Sections 42(5) or 42(6) of the Electricity Act, 2003 

being available, the petition was maintainable ? 

Held, if the sum demanded was not shown as due at any time earlier, there could be 

no question of the said amount being at in earlier point of time due from the consumer. 

Amount of short payments became due only after realisation of mistake and the 

assessment of the short-charged amount, and on raising the bill therefore. Though 

the electricity consumed by the Petitioner from 30 th November, 2002 to July, 2003 

was more; the bill was raised for a lesser consumption owing to the inadvertent 

application of a wrong multiplying factor. Thus, the entire electricity claimed to 

have been consumed by the Petitioner cannot be said to have been billed by the 

Respondent. In case the consumer is under-billed on account of clerical mistake 

such as where the multiplication factor had changed, but due to oversight the 

department issued bills with 500 as multiplication factor instead of 1,000, the bar of 

limitation cannot be raised by the consumer. Thus, petition is not maintainable 

owing to the alternative remedies available under Section 42(5) or 42(6) of the Act. 

Petition disposed of 

* MANU/DE/1339/2011 


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Bharat Barrel and Drum Manufacturing Company Pvt. Ltd. v. The Municipal Corporation 

of Greater Bombay MANU/MH/0057/1978: AIR 1978 Bom 369: (1978) 80 BomLR 

218 (Discussed) [p. 1106, para 9 b] 

H.D. Shourie v. Municipal Corporation of Delhi MANU/DE/0356/1987: 32 (1987) 

DLT 73: AIR 1987 Delhi 219: 1987 (13) DRJ 225: 1987 RLR 243 (Mentioned) 

[p. 1105, para 5 e] 

MCD (DESU) v. H.D. Shourie MANU/DE/0503/1993: 53 (1993) DLT 1: 1994 (28) 

DRJ 218: 1994 RLR 105 (Affirmed) [p. 1105, para 5 e] 

Ram Kishan v. NDPL 130 (2006) DLT 549 (Mentioned) [p. 1105, para 3 c] 

Rototex Polyester v. Administrator, Admn. of Dadra and Nagar Haveli Electricity Dept. 

MANU/MH/0760/2009 (Discussed) [p. 1106, para 12 d] 

Swastic Industries v. Maharashtra State Electricity Board MANU/SC/0254/1997: (1997) 

9 SCC 465: AIR 1997 SC 1101: JT 1997 (2) SC 328: 1997-2-LW813: 1997 (1) SCALE 

622: [1997] 1 SCR 532 (Discussed) [p. 1105, para 7 g] 

Tata Steel Ltd. v. Jharkhand State Electricity Board MANU/JH/0415/2007: AIR 2008 

Jhar 60: 2008 (56) BLJR 412: [2008 (1) JCR 580 (Jhr)] (Mentioned) 

[p. 1106, para 10 d] 




Section 42(5) and (6) [p. 1105, para 3 c] 


Counsel 

For Appellant/Petitioner/Plaintiff: V.K. Goel, Adv. 

For Respondents/Defendant: Vikram Nandrajog and Sushil Jaswal, Advs. 

JUDGMENT 


1. The writ petition was filed impugning the demand of ` 34,34,594.77 towards 

arrears of electricity and of late payment surcharge of ` 5,22,873.64 thereon. However, 

when the writ petition came up before this Court on 28 th November, 2007, the Counsel 

for the Respondent informed that erroneously double billing had been effected for 

the period of March 2004 to February 2005 and the amount due from the Petitioner 

was ` 21,98,207 only. Notice of the petition was issued and subject to the Petitioner 

depositing ` 10,00,000 with the Respondent and paying the current consumption 

charges, recovery of the balance amount claimed by the Respondent and disconnection 

of electric supply for non payment thereof was stayed. Pleadings have since been 

completed. The interim order was made absolute on 22 nd May, 2009. The Counsels 

for the parties have been heard. 

2. It is not in dispute that a non domestic electric connection of 80 KW bearing 

K No. 43100137786 was energised at the premises of the Petitioner on 

30 th November, 2002. It is the case of the Respondent that the multiplying factor of the 

said meter was to be of 12 but inadvertently the bills were raised with the multiplying 

factor of 1 only. The Counsel for the Respondent in this regard during the course of 

hearing has handed over a copy of the Meter Installation Protocol Sheet stated to be 

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01105 

bearing the signatures of the Petitioner and also showing the multiplying factor of the 

meter to be 12. The Counsel for the Petitioner of course controverted the same. It is 

also not in dispute that the Petitioner in February 2003 applied for additional load of 

60 KW taking the total load to 140 KW and the additional load was energised in 

March 2004. It is the case of the Respondent that only while sanctioning the enhanced 

load to the Petitioner, it came to light that the Petitioner was being billed with a 

multiplying factor of 1 instead of 12 and accordingly, the multiplying factor was 

changed to 12 with effect from August 2003 and the demand impugned in this petition 

was raised for escaped assessment owing to application of wrong multiplying factor 

for the period 30 th November, 2002 till July 2003. 

3. The Counsel for the Respondent has taken a preliminary objection to the 

maintainability of this petition. It is urged that the dispute raised is a billing dispute 

and as per the dicta of the Division Bench of this Court in Ram Kishan v. NDPL 130 

(2006) DLT 549 (DB), the alternative remedy under Sections 42(5) or 42(6) of the 

Electricity Act, 2003 being available, the writ petition is not maintainable. 

4. The Counsel for the Petitioner while not controverting that the dispute is a billing 

dispute has however justified the maintainability of this writ petition on the ground 

of the demand being barred by time. It is contended that electricity dues for the 

period 30 th November, 2002 to July, 2003 could not have been claimed after two 

years there from as has been done. Reliance is placed on Section 56(2) of the Act. 

5. The question as to when the electricity charges become first due is no longer 

res integra. The Single Judge of this Court in H.D. Shourie v. Municipal Corporation of 

Delhi 1 32 (1987) DLT 73 held that the electricity charges become due and the limitation 

for recovery thereof commences only when the bill therefore has been raised. The 

Division Bench in appeal reported as MCD (DESU) v. H.D. Shourie 2 53 (1993) DLT 1 

reiterated that liability to pay accrues when liability is quantified and bill is raised. 

6. The Counsel for the Petitioner has however contended that in the present case it 

is not as if the bill for the period 30 th November, 2002 to July 2003 had not been 

raised; that bills were raised and paid; that the claim now of the Respondent is that 

the bills raised were not for the amount due but was for something less. He contends 

that once the consumption for a particular period has been computed and the bill 

raised, the subsequent demand for the same period would be covered by Section 56(2) 

of the Act and is recoverable only within two years and not thereafter. 

7. The Counsel for the Respondent has met the aforesaid prima facie attractive argument 

of the Petitioner by contending that the present is a case of an “escaped demand” 

and by further contending that the matter is no longer res integra. Reliance is placed 

on Swastic Industries v. Maharashtra State Electricity Board 3 (1997) 9 SCC 465 upholding 

the order of the National Consumers Dispute Redressal Commission holding that 

even where the electricity distribution company had woken up after nine years to 

make the claim, the electricity dues have to be paid. 

8. Though the Supreme Court in the judgment aforesaid did use the expression 

“escaped billing” but a reading of the judgment does not show that in that case, for 

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1 Ed.: MANU/DE/0356/1987: AIR 1987 Delhi 219: 1987 (13) DRJ 225: 1987 RLR 243 

2 Ed.: MANU/DE/0503/1993: 1994 (28) DRJ 218: 1994 RLR 105 

3 Ed.: MANU/SC/0254/1997: AIR 1997 SC 1101: JT 1997 (2) SC 328: 1997-2-LW813: 1997 

(1) SCALE 622: [1997] 1 SCR 532 


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the period for which the billing had escaped attention, bills had been raised, as is 

the case here. The said judgment cannot thus be said to be a judgment on the 

distinction sought to be made by the Petitioner in the present case. 

9. The Counsel for the Respondent next invited attention to the judgment dated, 

24 th April, 2009 of the Division Bench of this Court in LPA No. 356/2007 titled 

NDPL v. Delhi Bottling Company Ltd. In this case, the challenge was to a supplementary 

bill for the period for which the bill had earlier been raised. The argument of NDPL 

before the Division Bench was that the principle of “escaped billing” had been 

approved by the Supreme Court in Swastic Industries (supra). The Division Bench 

relying upon Bharat Barrel and Drum Manufacturing Company Pvt. Ltd. v. The Municipal 

Corporation of Greater Bombay 4 AIR 1978 Bom 369 held that there is no limitation for 

making the demand by way of a supplementary bill and Section 24 of the Electricity 

Act, 1910 empowers issuance of such demand. It was held that the distribution 

company could not be said to have abandoned its right to recover the charges 

which were due to it and which had earlier been not claimed. It was further held 

that the principle of constructive res judicata also would not apply to a case of 

supplementary demand for misuse charges not claimed earlier. 

10. The Counsel for the Respondent has also invited attention to a detailed judgment 

of the High Court of Jharkhand in M/s Tata Steel Ltd. v. Jharkhand State Electricity 

Board 5 AIR 2008 Jhar 60 laying down that if the sum demanded was not shown as 

due at any time earlier, there could be no question of the said amount being at in 

earlier point of time due from the consumer. It was further held that the amount of 

short payments became due only after realisation of mistake and the assessment of 

the short-charged amount, and on raising the bill therefore. 

11. I am in respectful agreement with the view taken by the High Court of Jharkhand. 

The case here of the Respondent is that though the electricity consumed by the 

Petitioner from 30 th November, 2002 to July 2003 was more; that the bill was raised 

for a lesser consumption owing to the inadvertent application of a wrong multiplying 

factor. Thus, the entire electricity claimed to have been consumed by the Petitioner 

cannot be said to have been billed by the Respondent. To that part of the electricity 

consumed and for which no bill was raised, the dicta in H.D. Shourie (supra) will 

clearly apply. H.D. Shourie cannot be read in a restrictive way to hold that even if 

the units consumed are say 100 but bill is erroneously raised for 10 units only, the 

claim for the balance 90 units for which no bill has been raised would also stand 

barred by time. 

12. I find that the Division Bench of the Bombay High Court in Rototex Polyester v. 

Administrator, Admn. Of Dadra & Nagar Haveli Electricity Dept. MANU/MH/0760/2009 

in identical facts held that in case the consumer is under-billed on account of clerical 

mistake such as where the multiplication factor had changed, but due to oversight 

the department issued bills with 500 as multiplication factor instead of 1,000, the 

bar of limitation cannot be raised by the consumer. It was held that the revised bill 

amount would become due when the revised bill is raised and Section 56(2) of the 

Act would not come in the way of recovery of the amount under the revised bills. 

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4 Ed.: MANU/MH/0057/1978: (1978) 80 BomLR 218 

5 Ed.: MANU/JH/0415/2007: 2008 (56) BLJR 412: [2008 (1) JCR 580 (Jhr)] 

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(Indermeet Kaur, J.) 

01107 

13. Having held against the Petitioner on the aspect of limitation, this writ petition 

is not maintainable owing to the alternative remedies available under Section 42(5) 

or 42(6) of the Act. 

14. The petition is accordingly disposed of. However, since the petition remained 

pending in this Court for considerable time and interim relief was also granted to 

the Petitioner, it is further directed: 

(i) that subject to the Petitioner taking the alternative remedies under Section 42(5) 

or 42(6) as it may deem expedient within 30 days of today, the same shall be 

entertained without any plea of limitation. 

(ii) that the Petitioner shall be entitled to apply for interim relief before the 

alternative fora and till the decision by the said alternative fora on the application 

of the Petitioner for interim relief, the interim Order granted in this petition 

shall continue in force. However, thereafter it shall be as per the Order of the 

said alternative fora. 


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2011 ELR (DELHI) 1107* 


BSES Rajdhani Power Ltd. 

v. 

Rajwant Singh 

R.S.A. NO. 84/2007 AND CM NO. 4113/2007 

DECIDED ON: 05.05.2011 

Judge 

Indermeet Kaur, J. 


Whether in a case of fraudulent abstraction of electricity or in case of pilferage in 

terms of case reported in M.P. Electricity Board v. Harsh Wood Product, supply of 

electricity could be disconnected without giving any Show Cause Notice? 

Held, Rule 22(b)4 permits the Board to forthwith disconnect the electricity supply 

without notice if it is a case of Fraudulent Abstraction of Energy (FAE). When Board 

defects that any consumer had committed any malpractice with reference to his use 

of electrical energy including authorised alternations to installations, unauthorised 

extension and use of devices to commit theft of electrical energy, may, without prejudice 

to its other rights, disconnect the supply of electricity forthwith and may call upon 

the consumer to make payment for compensation of the unauthorised use of electricity 

which is now stated to be a theft of electricity. Respondent had laid no challenge to 

the demand raised upon him. Respondent is enjoying the electricity under the interim 

orders of this Court but admittedly he has not paid even the admitted user charges. 

Such a consumer deservers little sympathy. Impugned Judgment reversed. 

Appeal allowed 

* MANU/DE/1932/2011 


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Hyderabad Vanaspathi Ltd. v. Andhra Pradesh State Electricity Board and Ors. MANU/ 

SC/0260/1998: AIR 1998 SC 1715: 1998 IV AD (SC) 163: JT 1998 (3) SC 84: 1998 

(2) SCALE 603: (1998) 4 SCC 470: [1998] 2 SCR 620: 1998 (1) UJ 595 (SC) (Discussed) 

[p. 1109, para 8 f] 

Kuldeep Singh Dhingra v. Municipal Corporation of Delhi and Ors. MANU/DE/0036/ 

1992: AIR 1992 Delhi 228: 47 (1992) DLT 375: 1992 (22) DRJ 528: 1992 RLR 208 

(Affirmed) [p. 1111, para 18 f] 

M.P. Electricity Board, Jabalpur and Ors. v. Harsh Wood Products and Anr. MANU/SC/ 

0580/1996: AIR 1996 SC 2258: 1996 (2) BLJR 1487: 1996 () JLJ797 (SC): JT 1996 (5) 

SC 434: 1996 (4) KarLJ 802: (1996) 2 MLJ 113 (SC): (1996) 4 SCC 522: [1996] Supp 

1 SCR 574: 1996 (2) UJ 176 (SC) (Discussed) [p. 1109, para 8 f] 

Sukhbir Singh v. MCD MANU/DE/0622/1994: 55 (1994) DLT 701: (1994) 108 PLR 

75: 1994 RLR 450 (Discussed) [p. 1109, para 6 e] 


Constitution of India, 1950, Article 14 [p. 1109, para 8 g] 

Electricity (Supply) Act, 1948 




Indian Electricity Act, 1910, Section 24 [p. 1110, para 10 b] 

Counsel 

For Appellant/Petitioner/Plaintiff: Samrat Nigam, Adv. 

For Respondents/Defendant: Varun Hans, Adv. 


“Rule 22(b)4 permits the Board to forthwith disconnect the electricity supply without 

notice to him if it is a case of fraudulent abstraction of energy (FAE).” 

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JUDGMENT 

Indermeet Kaur, J. 

1. This appeal has impugned the judgment and decree dated 17 th January, 2006 

which had endorsed the findings of the Trial Judge dated 30 th November, 2004, 

whereby, the suit filed by Rajwant Singh seeking mandatory injunction directing 

the Defendant to restore the electricity supply, i.e. connection bearing No. K 1245516 

(hereinafter, referred to as the “subject connection”) installed in the name of the 

Plaintiff at D.16, Santgarh near Tilak Nagar, New Delhi (hereinafter, referred to as 

the “suit premises”) had been decreed in his favour. 

2. The case of the Plaintiff is that he is the sole proprietor of M/s Universal Enterprises 

the factory which he was running at the suit premises. He obtained a 10 HP connection 

in 1995. He had been using this sanction load for his commercial purposes. The 

Plaintiff in terms of the offer of the Defendant for additional load had applied for it 

and deposited a sum of ` 28,520 for an additional load of 30 HP; in spite of the 

Plaintiff having completed all formalities, the load was not enhanced. The last bill 

raised upon the Plaintiff was of ` 26,926 which was also paid; in fact all bills have 

been paid. On 11 th April, 1997 without any prior Show Cause Notice, the electricity 

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01109 

of the Plaintiff was suddenly disconnected; he had no option but to come to the 

Court. Suit was accordingly filed. 

3. In the written statement, it was stated that the suit is not maintainable. It was 

stated that the suit property had been inspected by the zonal staff of the Defendant; 

seals of the existing meters were found to be fictitious and tampered with; this was 

a Fraudulent Abstraction Of Energy (FAE); electricity supply of the Plaintiff was 

disconnected forthwith in these circumstances; personal hearing under the orders 

of the Court had also been granted to the Plaintiff on 3 rd February, 1997. 

4. From the pleadings of the parties, the following four issues were framed: 

(1) Whether DVB conducted illegal inspection on and raised illegal demand of 

` 4,25,491.25? OPP 

(2) Whether Plaintiff is entitled to decree of mandatory injunction? OPP 

(3) Whether Plaintiff has not approached the Court with clean hands? OPD 

(4) Relief. 

5. Thereafter, an additional issue was also framed. It reads as under: 

Whether the DVB conducted illegal inspection and raised illegal demand of 

` 4,25,491.25? OPP 

6. On the basis of oral and documentary evidence, the Trial Judge was of the view 

that the inspection conducted by the department on 11 th April, 1997 was in accordance 

with law; the demand raised was also not illegal. However relying upon a judgment 

of Delhi High Court reported in 55 (1994) DLT 701 Sukhbir Singh v. MCD 1 since 

Show Cause Notice had not been issued prior to disconnection of electricity, 

disconnection was held to be bad in the eye of law; direction was accordingly given 

to the department to restore the electricity connection of the Plaintiff. 

7. This judgment was endorsed in the first appeal. 

8. On behalf of the Appellant, it has been urged that the judgment of Sukhbir Singh 

had been misconstrued by the Court below; it has no application. Reliance has been 

placed upon AIR 1996 SC 2258 M.P. Electricity Board, Jabalpur and Ors. v. Harsh 

Wood Products and Anr. 2 as also another judgment of the Apex Court in AIR 1998 SC 

1715 M/s Hyderabad Vanaspathi Ltd. v. Andhra Pradesh State Electricity Board and Ors. 3 

to substantiate his submission that disconnection of supply by the officers of Board 

on suspicion or malpractice by the consumer without a Show Cause Notice is not 

violative of Article 14 of the Constitution; it is not an illegality; Show Cause Notice 

is not required. 

9. This is a second appeal. It has been admitted and on 19 th March, 2007, the following 

substantial question of law was formulated. It reads as under: 

Whether in a case of fraudulent abstraction of electricity or in case of pilferage 

in terms of case reported in M.P. Electricity Board v. Harsh Wood Product AIR 

1996 SC 2258, supply of electricity could be disconnected without giving any 

Show Cause Notice? 

1 Ed.: MANU/DE/0622/1994: (1994) 108 PLR 75: 1994 RLR 450 

2 Ed.: MANU/SC/0580/1996: 1996 (2) BLJR 1487: 1996 () JLJ797 (SC): JT 1996 (5) SC 434: 

1996 (4) KarLJ 802: (1996) 2 MLJ 113 (SC): (1996) 4 SCC 522: [1996] Supp 1 SCR 574: 1996 

(2) UJ 176 (SC) 

3 Ed.: MANU/SC/0260/1998: 1998 IV AD (SC) 163: JT 1998 (3) SC 84: 1998 (2) SCALE 603: 

(1998) 4 SCC 470: [1998] 2 SCR 620: 1998 (1) UJ 595 (SC) 


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10. Record has been perused. The case of the Plaintiff as is evident from the record 

is that this is a case of Fraudulent Abstraction Of Electricity (FAE), i.e. a case of 

pilferage. It is not in dispute that there are two cases of theft; one is of FAE and the 

second is a case of Direct Theft (DT). This case falls under the first category. In the 

judgment of M.P. Electricity Board (supra), the Supreme Court while dealing with 

the provisions of Section 24 of the Electricity Act, 1910 it had held as under: 

(8) The learned Counsel for the Respondent placed strong reliance on Section 24 

of the Indian Electricity Act, 1910 which contemplates seven days’ notice before 

disconnection. Section 24 does not apply to demand on detection of pilferage. 

It would apply to a case of regular supply made and prior demand for payment 

of electricity charges with a notice of seven days to be made and for failure to 

pay within the given time, after expiry of seven days; the Appellant as a licensee 

would get the right to disconnect the supply of electrical energy. It would thus 

be seen that disconnection will be in the course of regular supply of electricity 

for non-payment of the usual bills but not to any demand after detection of 

pilferage.” It had also examined the provisions of Section 49 read with Section 79 

of the Electricity (Supply) Act 1948. Section 31(3) was also adverted to and 

noted hereunder as: 

(7) A reading thereof clearly indicates that the Appellant-Board, when it 

defects that any consumer had committed any malpractice with reference 

to his use of electrical energy including authorised alternations to 

installations, unauthorized extension and use of devices to commit theft 

of electrical energy, may, without prejudice to its other rights, disconnect 

the supply of electricity forthwith and may call upon the consumer to 

make payment for compensation of the unauthorised use of electricity 

which is now stated to be a theft of electricity. 

11. In the judgment of M/s Hyderabad Vanaspathi Ltd. (supra), the Apex Court had 

again had the occasion to deal with the provisions of Section 49 of the Electricity 

(Supply) Act (54 of 1948). It had noted that the Terms and Conditions of Supply had 

been notified on 20 th October, 1975; these were pursuant to the powers of the Board 

under Section 49 of the said Act. In terms of Clause 39 which defines a “malpractice”; 

this Clause enables officers of the Electricity Board to disconnect the service of a 

consumer on a suspicion or malpractice; this Clause was neither violative of the 

Supply Act, 1948 and nor violative of Article 14 of the Constitution. 

12. The judgment of the Sukhbir Singh on which reliance has been placed by the two 

Courts below was in a different context. In this case, demand notice had been issued 

to the consumer on the basis of an inspection report; it was a case where additional 

load had been applied for; the application for additional load was pending; it had 

not actually been granted; the Court was of the view that before demand notices are 

issued, a detailed Show Cause Notice should have been given to the Petitioner as to 

the manner in which this demand had been arrived at. Ratio is inapplicable. 

13. Counsel for the Appellant has also placed reliance upon the guidelines of the 

DVB-Handbook of Procedures which have a guiding force. Rule 22B(1) deals with 

the detection of theft/pilferage of electricity. Rule 22B(4) contains the procedure of 

conducting raids and inspection. Sub-rule (iii) reads as: 

(iii) The inspecting team would prepare a joint inspection report giving the 

detailed observations of the connected load, sealing position, working of meter 

and probable cause/modus operandi for establishing theft of energy. The supply 

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01111 

in all cases of theft (except direct cases of theft) covered in the following para 

shall be disconnected forthwith after obtaining approval of GM(E). Under general 

conditions of application of the Tariff schedule wherever there are reasons to 

believe fraudulent use/theft of electricity the supply shall be disconnected 

forthwith without notice to the consumer/defaulter. This should be followed 

by lodging a FIR with the police. 

14. Learned Counsel for the Appellant has submitted that the approval of the GM (E) 

is always with the inspecting team when it goes to conduct an inspection; this 

submission has not been refuted by the Respondent. 

15. This Rule thus enables the inspecting team to disconnect the electricity forthwith 

without a notice to the consumer whether there are reasons to believe that there has 

been a fraudulent abstraction or a theft of electricity. 

16. The Defendant in his written statement had contended that on inspection of site, 

the meters had been found tampered. PW. 1 had also in his deposition admitted 

that the inspection of his premises had been conducted on 11 th April, 1997. The 

Trial Judge had while disposing of Issue No. 2 returned a positive finding that the 

inspection was legal and the demand raised upon the Plaintiff was also legal. This 

has also been endorsed in first appeal. This finding has not been challenged. It has 

since attained a finality. The suit of the Plaintiff had however been decreed only for 

the reason that a Show Cause Notice should have been given to him before his 

electricity supply was disconnected and for this proposition reliance has been placed 

upon the judgment of Sukhbir Singh (supra). 

17. As noted in the discussion hereinabove, the judgment of the Sukhbir Singh had 

no application. Rule 22B(4) permits the Board to forthwith disconnect the electricity 

supply without notice to him if it is a case of Fraudulent Abstraction Of Energy 

(FAE). This was one such case. The Apex Court in M.P. Electricity Board (supra) had 

endorsed this view; Show Cause Notice was not necessary. 

18. The judgment relied upon by learned Counsel for the Appellant reported in AIR 

1992 Delhi 228 Kuldeep Singh Dhingra v. Municipal Corporation of Delhi and Ors. 4 is 

inapplicable. In this case, the Court had examined the provision of Clause 36 of the 

Delhi Electric Supply Undertaking (Conditions of Supply), wherein it had held that 

it would be inconsistent with the scheme of Clause 36 to hold that before issuing a 

Show Cause Notice the undertaking must hold a hearing; authorities are not enjoined 

to consider the representations made by the aggrieved persons before issuance of 

the Show Cause Notice. This judgment has no application to the factual scenario. 

19. It is also relevant to state that the Plaintiff in this case had laid no challenge to 

the demand raised upon him; his only prayer in the plaint was for the restoration of 

the electricity which had been disconnected after the inspection of 11 th April, 1997. 

On the last date Counsel for the Plaintiff/Respondent had also made a statement 

that 50 per cent of the provisional bill of about ` 2 lac and odd has been deposited. 

Counsel for the Appellant had verified this position; it was categorically stated that 

not a single paisa has since been paid by the Respondent; to which the Respondent 

has no answer. The Respondent is enjoying the electricity under the interim Orders 

of this Court but admittedly, he has not paid even the admitted user charges. Such 

a consumer deservers little sympathy. Impugned judgment had even otherwise is 

perverse; it calls for an interference. 

4 Ed.: MANU/DE/0036/1992: 47 (1992) DLT 375: 1992 (22) DRJ 528: 1992 RLR 208 


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20. For all the aforestated reasons, the impugned judgment is liable to be reversed. 

Appeal is allowed. Suit of the Plaintiff is dismissed. 

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2011 ELR (DELHI) 1112* 


Rakesh Kumar Sharma and Sons 

v. 

BSES Rajdhani Power Ltd. and Anr. 

WP (C) NO. 5208/2010 AND CM NO. 10270/2010 (FOR INTERIM RELIEF) 

DECIDED ON: 01.06.2011 

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Issues and findings 

Whether Respondent No. 2 was liable to pay electricity charges due, while vacating 

the premises and the relief sought is in the face of Regulation 15 of the Delhi Electricity 

Supply Code and Performance Standards Regulations, 2007? 

Held, Regulation 15 imposes an obligation on a purchaser of existing property 

electricity connection wherein is lying disconnected. The present was not the case 

of sale-purchase of property. 

Regulation 46 of the Delhi Electricity Supply Code and Performance Standards 

Regulations, 2007 makes consumer of electricity liable to get a special reading done 

at the time of change of occupancy or on the premises falling vacant and to obtain 

No Dues Certificate from the Distribution Company such as the Respondent No. 1 

herein. The Respondent No. 1 is also obliged to arrange for such special reading 

and to deliver the final bill including all arrears till the date of billing at least three 

days before the vacation of the premises. The Respondent No. 1 especially after being 

warned cannot be negligent in complying with its obligations and non-compliance of 

which may be prejudice to the Petitioner. 

Respondent No. 1 accordingly directed to secure itself in the manner stated and 

otherwise, qua the dues, if any from the Respondent No. 2 and to ensure that all its 

claims against the electricity meter in the name of the Respondent No. 2 in concerned 

premises are paid before the stipulated date of vacation. If the Respondent No. 1 is 

found to be wanting in the same, it shall not be entitled to deny the electricity 

connection to the Petitioner or any subsequent transferee/occupant thereof for the 

reason of the said dues. 

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Petition disposed of 

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* MANU/DE/2237/2011 

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01113 


BSES Rajdhani Power Ltd. v. Saurashtra Color Tones Pvt. Ltd. MANU/DE/0867/2009: 

AIR 2010 Delhi 14: 161 (2009) DLT 28 (Mentioned) [p. 1113, para 1 g] 

Haryana State Electricity Board v. Hanuman Rice Mills MANU/SC/0626/2010: (2010) 

9 SCC 145: AIR 2010 SC 3835: JT 2010 (8) SC 619: (2011) 1 MLJ 177 (SC): RLW 

2011 (1) SC 275: [2010] 10 SCR 217 (Affrimed) [p. 1117, para 18 f] 

Madhu Garg v. North Delhi Power Ltd. MANU/DE/1115/2006: 129 (2006) DLT 213: 

2006 (88) DRJ 595 (Distinguished) [p. 1116, para 15 f] 

Paschimanchal Vidyut Vitran Nigam Limited v. DVS Steels and Alloys Private Limited 

MANU/SC/8234/2008: (2009) 1 SCC 210: AIR 2009 SC 647: 2008ELR (SC) 756: 

JT 2008 (12) SC 672: 2009 (1) KLT 253 (SC): 2009 (2) MhLJ 611 (SC): (2009) 2 MLJ 

755 (SC): 2009 (2) MPHT 385 (SC): 2009 MPLJ 61 (SC): 2009 (1) PLJR 141 (Mentioned) 

[p. 1114, para 7 h] 


Delhi Electricity Supply Code and Performance Standards Regulations, 2007 


Regulation 15(ii) [p. 1117, para 17 d] 


Regulation 46(i) [p. 1117, para 17 e] 

Regulation 46(ii) [p. 1117, para 17 e] 

Regulation 46(iii) [p. 1117, para 17 e] 

Regulation 46(iv) [p. 1117, para 17 e] 


Counsel 

For Appellant/Petitioner/Plaintiff: Laliet Kumar and Deepak Vohra, Advs. 

For Respondents/Defendant: Sunil Fernandes, Standing Counsel and Vipin Pillai, Adv. 

JUDGMENT 


1. The present writ petition is a sequel to the Full Bench judgment of this Court in 

BSES Rajdhani Power Ltd. v. Saurashtra Color Tones Pvt. Ltd. 1 AIR 2010 Delhi 14 and 

as per which, if a tenant leaves arrears of electricity charges, the landlord can be 

denied electricity in the premises if does not clear the said arrears. 

2. The Petitioner is the owner of the first floor of property bearing No. E-5, South 

Extension Part-II (Market), New Delhi. The said property has been let out to the 

Respondent No. 2 M/s Saraf Projects Pvt. Ltd. The Respondent No. 2 tenant has 

obtained an electricity connection in the said tenanted premises in its own name 

from the Respondent No. 1. Disputes and differences arose between the Petitioner 

and the Respondent No. 2 resulting in the filing of CS(OS) No. 842/2009 by the 

Petitioner in this Court for eviction of the Respondent No. 2. In the said suit, a 

settlement was arrived at between the Petitioner and the Respondent No. 2 and 

under which settlement, the Respondent No. 2 has, inter alia, agreed to vacate the 

premises on or before 7 th January, 2013. 

1 Ed.: MANU/DE/0867/2009: 161 (2009) DLT 28 


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3. The Petitioner has filed this writ petition averring that to the knowledge of the 

Petitioner, the Respondent No. 2 has outstanding arrears of over Rs. 55,00,000 to 

the Respondent No. 1 towards electricity charges and expressing apprehension 

that unless the Respondent No. 1 recovers the said amount from the Respondent No. 2 

immediately or disconnects electricity supply to the Respondent No. 2 in the tenanted 

premises immediately, so as to compel the Respondent No. 2 to make payment, the 

Petitioner may be saddled with the said liability upon the Respondent No. 2 vacating 

the premises. 

4. The Petitioner thus seeks a direction to the Respondent No. 1 to take appropriate 

steps to recover up to date dues with respect to the premises from the Respondent 

No. 2 only, to ensure that the Petitioner upon being put back into possession of the 

premises is not saddled with liability for dues of electricity consumed by the 


5. Considering the nature of the controversy, need was not felt to call for the counteraffidavit 

or to issue notice to the Respondent No. 2 tenant and the Counsel for the 

Petitioner and the Counsel for the Respondent No. 1 have been heard finally on the 

petition. 

6. The Counsel for the Respondent No. 1 has contended that the Petitioner has 

concealed from this Court that there is a dispute pending between the Respondent 

No. 2 tenant and the Respondent No. 1 with respect to the electricity dues aforesaid. 

It is stated that the Respondent No. 2 tenant had filed a complaint against the 

Respondent No. 1 before the State Consumer Disputes Redressal Forum and which 

was decided in favour of the Respondent No. 2 tenant on 16 th December, 2008; the 

Respondent No. 1 preferred an appeal to the National Consumer Disputes Redressal 

Commission which was decided in favour of the Respondent No. 1 on 7 th August, 2009; 

the Respondent No. 2 tenant has now preferred a Special Leave Petition No. 25343/2009 

which is pending consideration before the Supreme Court. It is contended that the 

relief sought in this writ petition of directing the Respondent No. 1 to recover the 

dues of over Rs. 55,00,000 from the Respondent No. 2 tenant is contrary to the 

aforesaid dispute which is pending. The Counsel for the Respondent No. 1; however, 

on enquiry informs that there is no stay by the Supreme Court of any action by the 

Respondent No. 1 to recover the dues from the Respondent No. 2 tenant. 

7. It is further the contention of the Counsel for the Respondent No. 1 that the relief 

sought by the Petitioner is contrary to Regulation 15 of the Delhi Electricity Supply 

Code and Performance Standards Regulations, 2007 where under the Respondent 

No. 1 is entitled to refuse electricity supply to the premises aforesaid after the 

Respondent No. 2 tenant has vacated the premises if any arrears of electricity dues 

remain. The Counsel for the Respondent No. 1 has also taken me through Paragraphs 

10 to 14 of the judgment in Paschimanchal Vidyut Vitran Nigam Limited v. DVS Steels 

and Alloys Private Limited 2 (2009) 1 SCC 210 in this regard. 

8. The Counsel for the Respondent No. 1 has further contended that as per paragraph 14 

of the judgment of the Full Bench in Saurashtra Color Tones Pvt. Ltd. (supra), the 

Petitioner ought to have incorporated in the Lease Deed, the obligation of the 

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2 Ed.: MANU/SC/8234/2008: AIR 2009 SC 647: 2008 ELR (SC) 756: JT 2008 (12) SC 672: 

2009 (1) KLT 253 (SC): 2009 (2) MhLJ 611 (SC): (2009) 2 MLJ 755 (SC): 2009 (2) MPHT 385 

(SC): 2009 MPLJ 61 (SC): 2009 (1) PLJR 141 

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Respondent No. 2 tenant to pay the electricity dues up to the date of vacation of the 

premises. It is urged that the Lease Deed has intentionally not been filed. 

9. The Counsel for the Petitioner states that the Petitioner is not a party to the 

proceedings between Respondent No. 1 and Respondent No. 2 and thus no question 

of concealment arises. It is further stated that the electricity charges are always the 

responsibility of tenant and more so when the connection itself is in the name of the 

tenant. It is further stated that Lease Deed if required, can be filed. 

10. The Full Bench of this Court in the judgment aforesaid has held that the question 

of mala fides does not arise in the enforcement of Regulation 15 aforesaid and the 

said Regulation is to be enforced even if the owner or subsequent transferee or 

purchaser of the property was unaware of the electricity dues and has no truck 

with the person leaving the arrears. 

11. The Petitioner, at least by way of the present petition has made the Respondent 

No. 1 aware of the last date when the Respondent No. 2 is to vacate the premises. 

The Counsel for the Petitioner also relies upon Regulation 49 where under the 

Respondent No. 1 is required to immediately disconnect the electricity supply for 

non-payment of the arrears. It is contended that notwithstanding there being no 

stay against the Respondent No. 1 from the Supreme Court, the Respondent No. 1 is 

not taking any steps for recovery of huge dues and which may ultimately fall on the 

Petitioner. Both Petitioner as well as Respondent No. 1 allege collusion of the 

Respondent No. 2 with other. 

12. The Counsel for the Respondent No. 1 states that the Respondent No. 1 as a 

matter of policy does not take coercive steps during the pendency of a litigation, 

even if there be no stay order. 

13. It has at the outset to be examined whether the relief sought is in the face of 

Regulation 15 supra. The same is as under: 

15. General -(i) The Licensee shall prominently display at all offices where 

application for new connection is accepted, the detailed procedure for new 

connection and the complete list of documents required to be furnished along 

with the application. No other document, which has not been listed, shall be 

asked to be submitted by the Applicant. Rate/amount of security and cost of 

service line to be deposited by the Applicant in accordance with the stipulation 

in the regulations shall also be displayed. 

(ii) Where Applicant has purchased existing property and connection is lying 

disconnected, it shall be the duty of the Applicant to verify that the previous 

owner has paid all dues to the Licensee and has obtained “no-dues certificate” 

from the Licensee. In case “no-dues certificate” is not obtained by the previous 

owner, the Applicant before purchase of property may approach the Business 

Manager of the Licensee for a “no-dues certificate”. The Business Manager shall 

acknowledge receipt of such request and shall either intimate in writing outstanding 

dues, if any, on the premises or issue “no-dues certificate” within one month from 

the date of application. In case the Licensee does not intimate outstanding dues or 

issues “no-dues certificate” within specified time, new connection on the premises 

shall not be denied on ground of outstanding dues of previous consumer. 

(iii) Where a property/premises has been sub-divided, the outstanding dues 

for the consumption of energy on such premises, if any, shall be divided on 

pro rata basis based on area of sub-division. 


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(iv) A new connection to such sub-divided premises shall be given only after 

the share of outstanding dues attributed to such sub-divided premises is duly 

paid by the Applicant. A Licensee shall not refuse connection to an Applicant 

only on the ground that dues on the other portion(s) of such premises have 

not been paid, nor shall the Licensee demand record of last paid bills of other 

portion(s) from such Applicants. 

(v) In case of complete demolition and reconstruction of the premises or the 

building, the existing installation shall be surrendered and agreement terminated. 

Meter and service line will be removed, and only fresh connection shall be 

arranged for the reconstructed premises or building, treating it as a new premises 

after clearing the old dues on the premises by the consumer(s). 

14. It would thus be seen that Regulation 15 imposes an obligation on a purchaser 

of existing property electricity connection wherein is lying disconnected. The present 

is not a case of sale-purchase of property. The Petitioner is the owner having inducted 

Respondent No. 2 as the tenant and the dues subject matter of this writ petition are 

the dues of electricity connection obtained by the Respondent No. 2 tenant himself 

in its own name in the premises. 

15. Both Saurashtra Color Tones Pvt. Ltd. and Paschimanchal Vidyut Vitran Nigam Limited 

also were concerned with sale-purchase of property and not with a case of tenancy 

as the present case is, though I must record that in the Order of reference to Full 

Bench in Saurashtra Color Tones Pvt. Ltd., there indeed is a reference to “previous 

tenant”. Saurashtra Color Tones Pvt. Ltd. however does not refer to Regulation 15 

(supra) but bases the entitlement to recover outstanding dues against the premises 

and/or disconnected connection on General Conditions of Supply of electricity which 

were held to be binding and statutory in nature. It was held since as a condition of 

supply in Delhi the consumer is bound to pay/deposit outstanding dues, the consumer 

could not be heard to contend otherwise. The Division Bench of this Court in 

Madhu Garg v. North Delhi Power Ltd. 3 129 (2006) DLT 213 approved by the Full Bench 

in Saurashtra Color Tones Pvt. Ltd. had also held that whenever a person purchases 

a property, it is his duty to find out whether there are outstanding electricity dues 

in relation to the premises and he cannot be allowed to say later that he was unaware 

that there were dues of the previous occupant. 

16. I may also notice that Regulation 46 makes a consumer of electricity liable to get 

a special reading done at the time of change of occupancy or on the premises falling 

vacant and to obtain No Dues Certificate from the Distribution Company such as 

the Respondent No. 1 herein is. The Respondent No. 1 is also obliged to arrange for 

such special reading and to deliver the final bill including all arrears till the date of 

billing at least three days before the vacation of the premises. Upon such final bill 

being raised, the Distribution Company as Respondent No. 1, is left with no right to 

recover any amounts other than those subject-matter of the bill and is also required 

to disconnect the supply on its vacancy. 

17. In my view, the right aforesaid of the Respondent No. 1 under General Conditions 

of Supply has to be harmonised with its obligations under Regulations 15, 49 and 

46 (supra). The Respondent No. 1 especially after being warned cannot be negligent 

in complying with its obligations and which non-compliance may be to the prejudice 

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of the Petitioner. Even if it be the policy of the Respondent No. 1 to not disconnect 

electricity supply during the pendency of legal proceedings, the Respondent No. 1 

can certainly in the said legal proceedings seek a direction for securing its claims. 

The Respondent No. 1 cannot afford to be complacent in the belief that its dues are 

secure and will be recovered if not from the Respondent No. 2 then in any case from 

the Petitioner. The provisions of Regulations 15, 46 and 49 have been made in 

public interest and the Respondent No. 1 cannot use it to the detriment of the 

public. If the Distribution Companies such as the Respondent No. 1 are permitted to 

so allow the arrears of electricity charges to accumulate and not take timely prompt 

action for recovery thereof from the person liable there for and then coerce the subsequent 

occupant to pay the same, it would be a serious clog on transferability of immovable 

properties. People would then hesitate in acquiring properties for the fear of the 

unknown liability of electricity dues. Cases are not unknown where the Distribution 

Companies have on enquiry disclosed a certain amount of dues and subsequently 

demanded manifold amounts. The Distribution Companies, when warned of the 

likely date of vacation of the property by the consumer liable for electricity dues, are 

obliged to ensure that the electricity charges do not accumulate and are recovered 

before the consumer vacates the property so that the electricity dues do not fall on 

the subsequent occupant. Just like under Conditions of Supply the Respondent 

No. 1 is entitled to recover the outstanding of previous occupant from the subsequent 

occupant, the Respondent No. 1 is also entitled to-(a) insist on the Respondent No. 2 

obtaining a No Dues Certificate from the Respondent No. 1 under Regulation 15(ii) 

as well as Regulation 46(i) before leaving the premises, (b) take a special reading 

under Regulation 46(ii) seven days in advance of the Respondent No. 2 vacating 

the premises, (c) deliver the final bill under Regulation 46(iii) to the Respondent 

No. 2 at least three days before it vacates the property and (d) under Regulation 

46(iv) disconnect the electricity supply immediately on the Respondent No. 2 vacating 

the premises. All this can be ensured by the Respondent No. 1 calling upon the 

Respondent No. 2 to furnish an affidavit or undertaking to comply with the aforesaid 

Regulations and if the Respondent No. 2 fails to furnish such affidavit/undertaking, 

to proceed to disconnect electricity supply forthwith. 

18. Mention may also be made of the recent dicta in Haryana State Electricity Board v. 

Hanuman Rice Mills 4 (2010) 9 SCC 145 laying down that electricity arrears do not 

constitute a charge over the property and because in general law a transferee of 

premises cannot be made liable for the dues of the previous owner/occupier and 

further holding that only where the statutory rules and terms and conditions of 

supply which are statutory in character, authorise the supplier of electricity to demand 

from the purchaser of a property claiming reconnection or fresh connection of electricity, 

the arrears due from the previous owner/occupier in regard to supply of electricity 

to such premises, can the supplier recover the arrears from the purchaser. I am of 

the opinion that the supplier of electricity is required to enforce all its rules and 

cannot be selective in the same and if found to be negligent in enforcement of rules 

against the previous occupant and to the detriment of the subsequent occupant, the 

subsequent occupant would be entitled to resist such claims of the supplier of electricity. 

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4 Ed.: MANU/SC/0626/2010: AIR 2010 SC 3835: JT 2010 (8) SC 619: (2011) 1 MLJ 177 (SC): 

RLW 2011 (1) SC 275: [2010] 10 SCR 217 


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19. The writ petition is, therefore, disposed of with the following directions: 

(i) the Petitioner shall immediately serve notice on the Respondent No. 1 of 

any change in terms with the Respondent No. 2 than as contained in the 

compromise/application in the suit, copy of which is annexed to the writ 

petition. The Petitioner to, in the event of learning of the intent of the Respondent 

No. 2 to vacate the premises prior to 7 th January, 2013, immediately serve the 

Respondent No. 1 with notice of the same. 

(ii) the Respondent No. 1 is directed to secure itself in the manner aforesaid 

and otherwise, qua the dues, if any from the Respondent No. 2 and to ensure 

that all its claims against the electricity meter in the name of the Respondent 

No. 2 in the premises aforesaid are paid before the stipulated date of vacation 

of the premises. If the Respondent No. 1 is found to be wanting in the same, it 

shall not be entitled to deny the electricity connection to the Petitioner or any 

subsequent transferee/occupant thereof for the reason of the said dues. 


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