PUNJAB STATE ELECTRICITY REGULATORY ...pserc.gov.in/pages/Petition-14-of-2012-order.pdfPunjab...

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PUNJAB STATE ELECTRICITY REGULATORY COMMISSION SCO NO.220-221, SECTOR 34-A, CHANDIGARH

Petition No. 14 of 2012, 15 of 2012, 16 of 2012, 17 of 2012, 19 of 2012, 20 of 2012, 21

of 2012, 22 of 2012, 24 of 2012, 25 of 2012 & 27 of 2012

Date of Order: 03-10-2012

Present: Smt.Romila Dubey, Chairperson

Shri Virinder Singh, Member

Shri Gurinderjit Singh, Member

Petition No. 14 of 2012

In the matter of : Petition under Section 142 of the Electricity Act, 2003 for setting aside

memo No.2905 dated 21.3.2012 issued by the respondent in flagrant

disregard to Electricity Act, 2003, as well as rules and Regulations

framed time to time by the Commission.

AND

In the matter of Siel Chemical Complex, a Unit of Mawana Sugars Ltd. through its

authorized representative Shri Surinder Nath Karnail, Village Khadoli,

Rajpura, District Patiala (Punjab)

Versus

Punjab State Power Corporation Limited, Patiala


In the matter of Mandi Gobindgarh Induction Furnace Association, C/O Gain Castings

Ltd., New Grain Market, Mandi Gobindgarh through Shri Amar Singh,

authorized representative.

Versus



In the matter of HANSCO Iron & Steel (P) Limited, Jalalpur Chowk, Amloh Road,

Mandi Gobindgarh through Shri Subhash Bansal, Director

Versus



In the matter of Induction Furnace Association of North India, Room No.204, Savitri

Complex, G.T.Road, Dholewal, Ludhiana through Shri D.K.Mehta,

authorized signatory

Versus


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In the matter of Khanna Paper Mills Limited, Fatehgarh Road, Amritsar-143001

through its authorized representative Shri Sanjay Jain.

Versus



In the matter of Lalru Industries & Association (Regd.), Secretariat, Rainbow Denim

Limited, Village Chaundheri, P.O. Dappar, 3 KM Inside Chandigarh –

Ambala Highway, District Mohali through its Secretary Shri Vinod

Kumar Sharma

Versus



In the matter of 1. Max India Limited, SCO 86-87, Sector 8-C, Chandigarh through Shri

Dalbir Singh, authorized representative

2. DCM Engineering Limited, Village Asron, District Nawanshehar, Punjab through Shri J.K.Menon, authorized representative

3. Ranbaxy Laboratories Limited, A-41, Industrial Area Phase 8A, Sector 74, Mohali-160071, Punjab through Shri S.K.Bahl, authorized representative

4. DSM Anti Infactives India Limited, Village Toansa, District Nawanshehar, Punjab through Shri Rajesh Salwan, authorized representative.

Versus



In the matter of Hoshiarpur Large and Medium Industries Association, GNA Mehtiana

Complex, Phagwara Road, Hoshiarpur-146001 Punjab through Shri

P.S.Nanda, authorized representative

Versus



In the matter of Steel Strips Wheels Ltd., Head Office: SCO No.49-50, Sector 26,

Madhya Marg, Chandigarh through Shri Pardeep Bhandari, Joint

General Manager (Maintenance), authorized signatory.

Versus


3


In the matter of Indian Acrylics Limited, Head Office: SCO No.49-50, Sector 26,

Madhya Marg, Chandigarh through Shri Alok Goyal, Chief General

Manager (Works), authorized signatory.

Versus



In the matter of Ultratech Cement Limited, Bathinda Cement Works Unit, Behind

GHTP, Village Lehramohabbat (Punjab). Pin Code 151111 through its

authorized representative Shri Manish Baury, Asstt.Vice President (T),

Grinding Unit Head.

Versus


Date of hearings: 25.4.2012, 15.5.2012, 30.05.2012, 29.6.2012, 6.8.2012, 4.9.2012

For Petitioners: Shri Praveen Kumar Advocate (for Petition No.14, 19, 21, 22 & 27)

Shri Aalok Jagga Advocate (for Petition No.16)

Shri Tajender K.Joshi, Advocate (for Petition No.17)

Capt. Arun Sharma, Advocate (for Petition No.20, 24 & 25)

Shri Surinder Nath Karnail(for Petition No.14)

Shri Amar Singh (for Petition No.15)

Shri Gurmit Singh (for Petition No.19)

Shri I.D. Verma (for Petition No.21)

For Respondent: Shri Vinod S.Bhardwaj Advocate

Shri O.P.Garg, Dy. CE/Sales-1

Shri Ravinder Gautam, Dy. CE/TR-II

Shri Rakesh Gupta, Dy. CE/PP&R

Shri S.K.Sarwal, Addl. SE/PP&R

Shri Arun Kumar, Addl. SE/SR

ORDER

1. These petitions have been filed before Punjab State Electricity Regulatory

Commission (Commission) by eleven number Petitioners representing most of the

consumers in Punjab who have connected load in excess of 1 MW for setting aside the

notices issued by Punjab State Power Corporation Limited (PSPCL) during the month of

March 2012 in view of letter no. 23/1/2008-R&R(Vol-IV) dated 30-11-2011 issued by the

Ministry of Power (MoP), Govt. of India based on the interpretation of provisions of Sections

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42,45,49,62 and 86 of the Electricity Act 2003 (Act) by the Ministry of Law and Justice

regarding operationalisation of open access in power sector. The PSPCL notice states that

in view of the instructions of MOP, all one MW and above consumers shall be deemed to be

open access consumers and in view of the same, the Distribution Licensee (PSPCL) will

have no universal obligation to compulsorily supply power to such consumers. If such

consumers want power from the PSPCL, then the same would only be possible if the

petitioner confirms it in writing at least one month in advance about the quantum (hourly

kVA) along with daily/monthly requirement of power and would have to enter into a mutual

agreement. Further, in absence of any bilateral agreement, any drawl of power from the

PSPCL w.e.f. 1.5.2012 by such consumers would be considered as unauthorized use of

electricity. The PSPCL notice further states that the consumers who want to receive power

from any other source by use of PSPCL net work for open access shall have to intimate

about the same as per instructions and shall bear all the charges as per PSERC Open

Access Regulations. The operationalisation of this notice of PSPCL has been extended from

time to time and now the date of operationalisation has been fixed as December 1, 2012.

2. As the impugned notices are identical and petitions are similar in nature, these have

been clubbed together and are being decided through this common Order.

3. Background

i) The Ministry of Power in its letter no. 23/1/2008-R&R(Vol.IV) dated 30.11.2011

addressed to State Electricity Regulatory Commissions and several others has indicated that

the concept of open access, introduced in the Act, was with a view to promote competition

and consumer choice and is perceived as a critical feature for development of power market.

Thereafter, the Ministry of Power based on the views of the Ministry of Law and Justice,

which have been crystallized in consultation with the learned Attorney General, inter alia,

states as follows:

“The provisions of Section 42 need to be analyzed in relation to the duties of

the distribution licensees and open access. While sub-section (2) requires the

State Commission to introduce open access within one year of the appointed

date the fifth proviso makes it mandatory for the State Commission to provide

open access to all consumers who require supply of electricity where the

maximum power to be made available at any time exceeds 1MW. The fifth

proviso was introduced by Act 57 of 2003 with effect from 27th January, 2004.

The first issue is if open access is made obligatory whether the distribution

licensees will continue to have the responsibility of universal service obligations

with regard to consumers whose requirements are in excess of 1MW. An analysis

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of the various provisions (particularly Section 49 of the Act) shows that if certain

consumers want to have the benefit of the option to buy power from competing

sources, then it is logical that DISCOMS do not have an obligation to

compulsorily supply power to such consumers. If such consumers want power

from the DISCOM then the terms and conditions of the supply would be

determined in terms of Section 49 of the Electricity Act, 2003. Such an

interpretation is logical and is in conformity with the Statement of Objects and

Reasons of the Electricity Act, which encourages open access. Para 3 of the

Statement of Objects and Reasons states that the Act recognizes the need to

provide newer concepts like power trading and open access.”

After recording the aforesaid views of the Ministry of Law and Justice, the Ministry

of Power in paragraph 6 of the opinion states as under:

“6. In view of the above stated opinion of M/o Law & Justice in consultation with

Ld. Attorney General of India, all concerned may note that all 1 MW and above

consumers are deemed to be open access consumers and that the regulator has

no jurisdiction over fixing the energy charges for them. It is requested that

necessary steps for immediately implementing the provisions relating to open

access in the Electricity Act, 2003, may be taken in the light of the above

opinion.”

ii) As a follow up to the aforesaid letter dated 30.11.2011 from Ministry of Power,

PSPCL issued notices during the month of March, 2012 through its Chief

Engineers/Distribution of the five zones to all LS consumers having load of 1MW

and above on the following lines:

a) All one MW and above consumers shall be deemed as Open Access

consumers.

b) State Commission has no jurisdiction to determine their tariff but will continue

to fix only the wheeling charges and surcharge under the provisions of the

Electricity Act, 2003.

c) Distribution licensee will have no universal obligation to compulsorily supply

power to such consumers.

d) If such consumers want power from distribution licensee then terms and

conditions (including tariff) are subject to mutual agreement under section 49 of

the Electricity Act, 2003.

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e) Such open access consumers will only intimate licensee about their intention

to use distribution licensee‟s network and need not seek permission.

f) In view of the instructions issued by Ministry of Power, GOI, PSPCL shall

have no universal obligation to supply power w.e.f . Ist May, 2012.

g) In case supply from PSPCL is required then confirmation in writing, at least

one month in advance along with daily/monthly requirement of power w.e.f.

1.5.2012 is required and shall have to execute a bilateral agreement with the

PSPCL.

h) In the absence of bilateral agreement, any drawal of PSPCL power after Ist

May, 2012 will be considered as unauthorised use of electricity and dealt with

accordingly as per regulation 36 of PSERC (Electricity Supply Code and Related

Matters) Regulations, 2007.

4. Prayer and Pleadings of the Petitioners:

The Petitioners have prayed to set aside the notices issued as these are contrary to

the Act and various rules and regulations framed thereunder, and issued without prior

approval of the Commission.

The summary of the pleadings made by the petitioners in their

petitions/rejoinders/written arguments in the aforesaid eleven number Petitions is as under:

a) The clarification issued by MOP, GoI in its letter has not added any new

concept but it intends only to make open access free from prior permissions.

b) The said opinion has been misconstrued to the disadvantage of the

Petitioners in order to dissuade them from availing open access.

c) The well established jurisdiction of the Commission to oversee the

implementation of the provisions of Act is being sought to be bypassed.

d) Sections 43 and 44 clearly lay down the universal obligation of the Licensee

to supply power and while exemptions i.e. cyclones, floods and storms etc.,

where it can be denied are included but it does not include the open access

and through this PSPCL is trying to deny a right of universal obligation

granted by the Parliament.

e) The Act defines Consumer which can be an open access consumer, a

consumer of Licensee or even be a generator. Merely by availing Open

access, it cannot be denied the status of Consumer of the Licensee. There is

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no provision in the Act denying him to be an open access consumer, a

consumer of licensee and a generator at the same time.

f) Commission has never determined the tariff for purchase of power under

open access by a consumer and only wheeling charges are determined for

open access.

g) All 1 MW and above consumers have signed valid agreements with PSPCL

and such valid and legal agreements cannot be terminated unilaterally and

summarily through a letter by the PSPCL.

h) The PSPCL is not feeling comfortable with more and more consumers opting

for open access and through these notices it wants to dilute the trend by

excluding the jurisdiction of the Commission to fix tariff and want to enjoy the

sole supplier status which it had earlier as with implementation of the said

notices, no consumer can avail the open access route for sourcing power.

i) The conditions stated in the impugned notices for availing open access are

so onerous and discouraging that it will be a sin to go out of the ambit of the

PSPCL.

j) The notices are against the objects stated in Preamble of the Act as it

restricts the competition rather than promoting it.

(k) Commission has jurisdiction over fixing the energy charges for open access

consumers under section 86 of the Act.

(l) No direction has been issued under section 108 of the Act, therefore the

PSPCL is under no obligation to follow the letter dated 30.11.2011.

(m) PSPCL was under no obligation to issue the impugned notices in view of

letter dated 30.11.2011 and the only obligation that the PSPCL has is the

universal obligation to supply power to the petitioners as mandated by the

Act.

(n) The PSPCL is under regulation of the Commission and any compliance to

any mandatory provision of the Act has to be done through the Commission.

The petitioners are however not aggrieved by the compliance of the Act of

2003 rather they are aggrieved by the impugned notices based on the

erroneous interpretation of the Act.

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(o) PSPCL has universal obligation to supply power to the Petitioners and no

agreement is required to be executed since open access is an “option” and

not a “compulsion”.

(p) The impugned notices are in violation to Section 2 (15), 2 (17), 16, 42, 43, 44,

45, 46, 47, 49, 50, 57, 62, 86 of the Electricity Act, 2003 as also Open Access

Regulations, Tariff Order, Terms and Conditions of License, Supply Code,

Standards of Performance, as none of these make any discrimination

amongst consumers on the basis of quantum of demand. In view of the

aforesaid provisions the impugned notices are illegal and unsustainable.

(q) PSPCL continues to be under universal obligation to supply power under

section 43 of the Act, to consumers having demand of more than 1 MW even

after open access is allowed to such customers. PSPCL cannot determine

tariff on bilateral basis as tariff determination falls exclusively within the

jurisdiction of the Commission. In order to have better appreciation of the

issue at hand it would be relevant to have a cursory glance through provisions

of the Act and the following submissions:

(i) In power sector reforms, one of the basic features introduced was the

distancing from the Government in matters regarding tariff.

(ii) The basic fallacy underlying the impugned notices is that once a

consumer becomes an „open access consumer‟, he ceases to be a

„consumer‟. As per Act & regulations, consumer has a choice to either

avail supply from the licensee of the area or from other source. A

person as a consumer of Discom would be governed by one set of

rules and regulations and as open access consumer by different set of

rules and regulations and simply because a consumer becomes an

open access consumer does not mean that his rights as consumer get

wiped off;

(iii) There could hardly be any negotiation between the mighty Discoms

and the petty open access consumers, as effective negotiation is

possible only when parties have matching strength. Any negotiation

between them would lead to dotted line agreement where the weaker

party has no option but to sign the agreement and in such a situation

intervention by the Regulator is required for protecting interest of

consumers;

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(iv) If interpretation of open access adopted by the PSPCL is accepted,

the open access would be the worst sufferer whereas the larger

national interest demands that open access be promoted and needs

to be hassle free;

(v) The Commission has prescribed formats for open access agreements

which protect the consumers from the arbitrariness of the PSPCL, in

forcing one sided agreements upon the consumers. But the impugned

notices negate these directions of the Commission on one hand while

PSPCL will have usurping unlimited powers to prescribe any tariff

provisions for open access consumers on the other;

(vi) One of the essential features of tariff to be charged by the distribution

licensee is that there should not be any discrimination or undue

preference and this has been specifically provided under section 62(3)

of the Act;

(vii) Licensee has universal obligation to supply power in respect of

consumers in its area and there cannot be a distinction between the

consumers having a demand upto 1 MW and the consumers having

demand of more than 1 MW. When the Parliament intended to release

the distribution licensee from duty to supply, the same has been

specifically provided as given in section 43(2) and section 44 of the

Act but there is no such exemption from duty to supply in respect of

consumers becoming entitled or being allowed open access. There is

no restriction, reservation or exclusion provided in section 43 of the

Act as the same being applicable for those whose demand or load is

within 1 MW;

(r) In respect of applicability of section 42 of the Act, the duty cast on the

licensee to supply power does not make any distinction between consumer

having or becoming entitled to open access and others. Sub-section 2 of

section 42 of the Act deals with open access on the distribution system of the

licensee and payment of surcharge and wheeling charges apply only to such

consumers who avail open access and not for other consumers. It gives an

option to consumer to avail open access and the same is not a compulsion.

The mandate is on the licensee to provide open access sought by a

consumer and the contra (i.e. mandate on consumer to seek open access)

does not apply;

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(s) Sub-sections 2 and 3 of section 42 of the Act, which relate to supply by

persons other than area distribution licensee, should be read together. The

joint reading of the said two sub-sections indicates that open access is on the

distribution system of the licensee wherein supply of electricity would be

provided by a person other than area distribution licensee. The distribution

licensee cannot by itself become a supplier of electricity through open access

of its own system;

(t) From the definition of consumer given in section 2(15) of the Act read with

duty cast on licensee under section 43 to supply electricity on request, it is

obvious that such duty lies on the licensee in respect of each and every

consumer of its area irrespective of demand or requirement. In other words,

persons in the area of licensee requiring more than 1 MW of power, continue

to be the consumers of licensees even after open access is allowed and are

entitled to seek and get supply from licensee at par with other consumers.

There is no distinction amongst consumers based on quantum of power

required.

(u) Section 42(2) of the Act visualizes introduction of open access in phases. The

definition of open access in section 2(47) of the Act makes it abundantly clear

that it has to be in accordance with the regulations specified by the

Appropriate Commission. All the consumers having demand exceeding 1 MW

stand mandated to get open access by January, 2009 in the light of fifth

proviso of section 42(2) of the Act.

(v) Similarly, the proviso of section 86(1)(a) of the Act referred to by PSPCL

which lays down that only „wheeling charges‟ and „surcharge‟ are to be

determined by the Commission for open access category also needs to

looked into from the angle that „surcharge‟ cannot be determined if there is

no tariff determination for a consumer category, as the formula for

computation of surcharge as given in Tariff Policy includes tariff of the

relevant consumer category as a key parameter in determining surcharge.

(w) The „cross-subsidy‟ surcharge is to compensate the distribution licensee from

the loss of cross-subsidy which is in-built in tariff structure and once a

consumer migrates from licensee‟s supply portfolio, whether fully or in part,

there would be loss to the licensee. However, if the consumer continues to

avail supply from the licensee, the question of any loss doesn‟t arise. The

licensee would be able to recover such surcharge in both the situations i.e. if

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tariff is determined by the Commission or even if it has to be bilaterally

agreed. Determination of surcharge by the Commission thus doesn‟t serve

any purpose in case of purchase of electricity from licensee of the area.

(x) The Hon‟ble Appellate Tribunal for Electricity has already settled the issue

with respect to universal supply obligation by holding that a consumer doesn‟t

cease to be consumer of licensee once open access is allowed and it can

continue its relationship with area licensee as a consumer of the licensee and

the Commission continues to determine tariff even if open access is allowed.

The following judgements have been referred to by the Petitioners in this

regard:

(i) Bhushan Limited Kolkata Vs West Bengal Electricity Board & Ors,

2007 APTEL 600

(ii) Indian Aluminum Company Ltd. Vs West Bengal Electricity Regulatory

Commission & Ors, 2007 APTEL 791

(iii) Hindalco Industries Ltd. Vs West Bengal Electricity Regulatory

Commission & Ors. (appeal No. 3 of 2007, 01.11.2010)

5. Submissions of the Respondent (PSPCL)

PSPCL, the Respondent in this case, made the following submissions:

(a) A perusal of the provisions contained in section(s) 86, 39, 47, 42, 43 & 49 of

the Act and upon conjoint reading and harmonious construction of the said

provisions, it is clear that the open access has to be made available to all the

consumers of the category so determined by the respective State

Commission. It has further been cast upon the concerned Electricity

Regulatory Commission under section 42 of the Act that it shall introduce

open access within one year of the date appointed by it and the proviso

specifically makes it obligatory on the part of the State Commission that the

concerned State Commission shall not later than five years of the

commencement of Electricity (Amendment) Act, 2003 (57 of 2003) provide

such open access to all consumers who require an electricity supply where

the maximum power to be made available exceeds 1 MW.

(b) If certain consumers want to have the benefit of option of competing power

supply sources, then the distribution companies do not have an obligation to

compulsorily supply the power to such consumers. The Ministry of Power also

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opined that if the consumer intends to use the distribution network of the

distribution licensee, it has to give notice and/or submit an application

whereupon a non-discriminatory open access is to be provided by the

distribution licensee. Thus, the notices issued by PSPCL – the answering

Respondent is not a precondition for implementation of open access rather it

is only to communicate the open access consumers intention to use the

network of PSPCL as a period of more than 5 years has already elapsed

since the commencement of the aforesaid amendment of the Act, all 1 MW

and above consumers are deemed to be open access consumers and the

Regulator has no jurisdiction over fixing the energy charges for them under

Section 86 of the Act.

(c) One day workshop under the Chairmanship of the Secretary (Power),

Government of India was held on 29.2.2012 wherein it was concluded that the

opinion on the subject of open access circulated by the Ministry of Power,

Government of India vide its letter dated 30.11.2011 is final and that, State

Government is responsible for the implementation of law and the State

Government should also take necessary steps immediately. PSPCL detailing

the events informed Government of Punjab through letter dated 2.3.2012 that

under effects of the letter dated 30.11.2011 and one day workshop, it is not

stalling and is proceeding ahead with the implementation of the opinion

received from the Government of India.

(d) The Ministry of Power, Government of India vide letter

No.23/1/2008/R&R/Vol.IV dated 23.4.2012 addressed to the Chairman of

Central Electricity Regulatory Commission sought to issue a direction under

section 107 of the Act in order to remove any ambiguity. The Ministry of

Power thus issued directions to the Central Commission under section 107 of

the Act, to take all such steps including framing of appropriate regulations to

implement the provisions of open access in exercise of power under section

107 of the Act.

(e) PSPCL was under an obligation to issue notices to all 1 MW and above

consumers under its jurisdiction informing that it shall have no universal

obligation to supply power to them and in case such consumers wanted to

take power supply from the PSPCL then they were required to confirm in

writing at least one month in advance about quantum (hourly kVA) along with

daily/monthly requirement of power w.e.f. 1.5.2012 and in case the consumer

wanted power from any other source, such consumer was required to intimate

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PSPCL for use of the network of PSPCL for open access and was also to

execute a bi-lateral agreement.

(f) Once the Ministry has issued the directive under section 107 of the Act,

PSPCL does not have much option but to implement the same. PSPCL is

willing and wanting to make every effort and endeavour to implement the

open access. Since the Ministry of Power has taken tariff determination of 1

MW and above consumers out of the scope of the State Commission,

accordingly, PSPCL feels that it is not necessary to take the prior approval of

the Commission for implementing the directives of the Ministry of Power.

(g) PSPCL has sought confirmation from the said consumers of 1 MW and above

as to whether they would like to avail the power from PSPCL and if so, the

necessary agreements be executed since the said consumer shall not be

covered by the tariff regulations of the Commission. Consequently, there is no

illegality in the action of PSPCL.

(h) PSPCL considers the Ministry of Power as the custodian of the Act and does

not have even an iota of suspicion in the interpretation given by the Ministry of

Power. Thus, it has decided to implement and comply with the directives of

the Ministry of Power, Government of India.

(i) In response to the directive of the Commission to PSPCL in its Order dated

8.8.2012 to specify the provision of the Act or of Regulations of the

Commission under which the notices have been issued and how the letter

dated 30.11.2011 issued by the Ministry of Power, Govt. of India is binding on

the Commission and the Utility, PSPCL submitted that letter dated 30.11.2011

issued by the Ministry of Power has no binding effect on the Commission but

the same does have persuasive value for PSPCL.

6. Framing of Issues

In the light of the arguments of the Petitioners and response of the PSPCL, following

issues arise before the Commission for consideration and decision:

(1) Whether the opinion from Ministry of Law and Justice in consultation with

learned Attorney General of India, circulated by Ministry of Power vide letter

no. 23/1/2008-R&R(Vol.IV) dated 30.11.2011, is as per relevant provisions of

the Electricity Act, 2003?

(2) Whether the Commission has jurisdiction over fixing the tariff for consumers

having load exceeding 1 MW under the prevailing law?

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(3) Whether the Commission is not enjoined upon to interpret law independently

as it stands in Electricity Act, 2003?

(4) Whether PSPCL continues to be under universal obligation to supply power in

the area of supply to consumers having demand exceeding 1 MW even after

open access is allowed to such consumers?

7. Findings & Decisions of the Commission

Issue No.1:

A. In order to answer this issue, one has to look at the scheme of Section 42, 43,

45 and 49 of the Act. All the said sections relate to distribution of electricity.

Section 42 deals with duties of a distribution licensee, which includes the

ability to grant open access in accordance with the time lines and conditions

as may be imposed by the State Commission. The said section further

provides as follows:

“42. Duties of Distribution Licensee and Open Access

(1) It shall be the duty of a distribution licensee to develop and maintain an

efficient, co-ordinated and economical distribution system in his area of

supply and to supply electricity in accordance with the provisions contained in

this Act.

(2) The State Commission shall introduce open access in such phases and

subject to such conditions, (including the cross subsidies, and other

operational constraints) as may be specified within one year of the appointed

date by it and in specifying the extent of open access in successive phases

and in determining the charges for wheeling, it shall have due regard to all

relevant factors including such cross subsidies, and other operational

constraints:

Provided that 1 [such open access shall be allowed on payment of a

surcharge] in addition to the charges for wheeling as may be determined by

the State Commission:

…

3) Where any person, whose premises are situated within the area of supply

of a distribution licensee, (not being a local authority engaged in the business

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of distribution of electricity before the appointed date) requires a supply of

electricity from a generating company or any licensee other than such

distribution licensee, such person may, by notice, require the distribution

licensee for wheeling such electricity in accordance with regulations made by

the State Commission and the duties of the distribution licensee with respect

to such supply shall be of a common carrier providing non-discriminatory

open access.” (Emphasis Supplied)

B. From a combined reading of section 42(1), 42(2), first proviso of 42(2) and

42(3), it stands established that the duties of the distribution licensee

envisaged under Section 42 relates to the physical assets that are required to

be developed and maintained for purposes of efficient, coordinated and

economical distribution of electricity. Typically, the duties covered under

section 42 relate to the “wires function / business” of a distribution licensee. It

is in this context that the distribution licensee is vested with an obligation to

firstly develop and maintain the system and then, to provide open access to

the distribution system and the associated facilities. This is further clarified in

section 42(3). Clearly, the duties of a distribution licensee under section 42 do

not relate to “supply of electricity”. It only relates to developing and

maintaining the distribution system in an efficient, coordinated and

economical manner and in doing so, to make available the system for use

under open access, subject of course to introduction of the same by the State

Commission and upon conditions that may be imposed. The same theme is

seen across the width of section 42 (1), (2), (3) and (4).

Section 2(47) defines “open access” to mean as follows:

“2. Definitions:

In this Act, unless the context otherwise requires,

... ... ... ...

(47) „open access‟ means the non-discriminatory provision for the use

of transmission lines or distribution system or associated facilities with

such lines or system by any licensee or consumer or a person

engaged in generation in accordance with the regulations specified by

the Appropriate Commission;”

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C. From a combined reading of the section 42(1), 42(2), 42(3) and section 2(47),

one can conclude as follows:

(a) While providing the duties of a distribution licensee in developing and

maintaining an efficient, coordinated and economical distribution system, it is

also the duty of the distribution company to provide non-discriminatory open

access as shall be introduced by the State Commission in phases and subject

to such conditions as may be specified.

(b) Therefore, while under section 42(2), the State Commission has a

mandatory obligation to introduce open access in phases and subject to

conditions as may be specified in one year of the appointed date, the

distribution licensee shall allow use of distribution system or associated

facilities on a non-discrimination principle.

(c) The first proviso of section 42(2) provides that open access shall be

allowed on payment of a surcharge in addition to charges for wheeling as

may be determined by the State Commission. Therefore, it is abundantly

clear that the distribution licensee under section 42(2) has the obligation to

allow open access on payment of wheeling charges, surcharge etc. This is

further clarified in section 42(3) which enables a person situated in the area of

a distribution licensee to “require” the distribution licensee to wheel power.

The role of the distribution licensee then is that of a “common carrier”.

(d) The provisions clearly deal with the duties of a distribution licensee and

the ability of a “consumer”, “licensee” or “generating company” to seek open

access (section 2 (47)). Therefore, open access is not a special concession

granted only to a consumer. It is equally available to licensee (trading) and

generators.

(e) The Appropriate Commission has an obligation to frame regulations, and

also determine wheeling charges and surcharges, on the basis of which open

access can be granted.

D. Section 43 of the Act records the duty of the distribution licensee to “supply

electricity” on request. This duty is commonly called the universal obligation to

supply power. The duty to supply on request is independent of the duties

covered under section 42, which section (as stated above) does not at all

concern itself with the supply function.

17

Section 43, inter alia, provides as follows:

“43. Duty to supply on request:

(1) 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.

Provided further that in case of a village or hamlet or area wherein no

provision for supply of electricity exists, the Appropriate Commission may

extend the said period as it may consider necessary for electrification of such

village or hamlet or area.

(2) It shall be the duty of every distribution licensee to provide, if required,

electric plant or electric line for giving electric supply to the premises specified

in sub-section (1):

Provided that no person shall be entitled to demand, or to continue to receive,

from a licensee a supply of electricity for any premises having a separate

supply unless he has agreed with the licensee to pay to him such price as

determined by the Appropriate Commission.

(3) If a distribution licensee fails to supply the electricity within the period

specified in sub-section (1), he shall be liable to a penalty which may extend

to one thousand rupees for each day of default.” (Emphasis Supplied)

E. If one is to analyse Section 43 carefully, it will reveal that the “duty to supply

electricity” by a distribution licensee arises on an application by the “owner or

occupier of any premises”. Therefore, the person who demands supply at the

relevant point of time is not necessarily a consumer. At this stage, it may be

relevant to set out the meaning of the word “consumer” under Section 2(15),

which provides as follows:

18

“2. Definitions:

In this Act, unless the context otherwise requires,

... ... ... ...

(15) „consumer‟ means any person who is supplied with electricity for

his own use by a licensee or the Government or by any other person

engaged in the business of supplying electricity to the public under

this Act or any other law for the time being in force and includes any

person whose premises are for the time being connected for the

purpose of receiving electricity with the works of a licensee, the

Government or such other person, as the case may be;” (Emphasis

Supplied)

F. From the above it is quite clear, that a “consumer” is a person who is supplied

with electricity for his own use by a licensee or the government or any other

person authorised to supply electricity and includes any person “whose

premises are for the time being connected for the purposes of receiving

electricity with the works of a licensee, the government or such other person”.

Therefore, the ability to make a demand for supply of electricity under section

43 can arise even before the relationship of a “consumer” is established. The

language of section 43 is deliberately kept wide, to accommodate the right of

citizens based on his location, within the distribution licensee‟s area. Once a

person for purposes of receiving supply is connected to the works of a

distribution licensee, he becomes a consumer. Then, in terms of the definition

of open access, such consumer may require use of the distribution system,

subject to conditions specified in section 42(2). Therefore, from the very

reading of the sections it is clear that universal obligation to supply power is

not dependent on the status of a person being a “consumer”, who along with

licensee and generator can seek open access. The right under section 43

relates to a right of a person / citizen (or an occupier of a premise) within the

distribution area to demand supply of power. In order to give effect to that

right, the relationship of consumer gets established by operation of law, which

is then regulated by the statute and the contract.

Therefore, in light of the above findings, the Commission

concludes that the opinion of the Ministry of Law and Justice, circulated

by Ministry of Power vide letter no. 23/1/2008-R&R(Vol.IV) dated

19

30.11.2011, is not as per the provisions of the Act as it is linking the

universal obligation of a distribution licensee to supply power under

section 43 with the rights of a consumer, licensees or generators under

section 42. These are mutually exclusive provisions and operate in their

own sphere. Once the status of a consumer is established in terms of

section 2(15) of the Act, the consumer can opt for open access in terms

as envisaged under section 2(47) subject to the provisions contained in

section 42(2) and 42(3).

Issue No.2:

As regards tariff to be applied for a consumer requiring power exceeding 1

MW and seeking supply from the licensee, the PSPCL has advanced the

argument that all consumers having load exceeding 1 MW are deemed to be

open access consumers and the Commission has no jurisdiction over fixing

the energy charges for them under section 86 of the Act. It has been further

said that for such category only wheeling charges and surcharge thereon are

to be determined by the Commission.

Commission doesn’t find the said arguments of PSPCL acceptable in

view of the following:

(i) Section 49 of the Electricity Act, 2003, provides as follows:

“49. Agreements with respect to supply or purchase of electricity.

Where the Appropriate Commission has allowed open access to

certain consumers under section 42, such consumers notwithstanding

the provisions contained in clause (d) of sub-section (1) of section 62,

may enter into an agreement with any person for supply or purchase

of electricity on such terms and conditions (including tariff) as may be

agreed upon by them.”

(ii) From the text of section 49 it is quite clear that section 49 is only an enabling

clause, which allows consumers who are eligible for open access under

section 42 to enter into an agreement with any person for supply or purchase

of electricity on such terms and conditions (including tariff) as may be agreed

upon by them. It is important to note the word “may” in section 49, which

gives a choice or a right to a consumer eligible for open access to enter into

an agreement with any person for supply or purchase of electricity on

mutually agreed terms. This section does not in any manner affect the

jurisdiction of the Commission to determine tariff for consumers in accordance

with the provisions of the Electricity Act, 2003. The power to determine tariff is

20

in Part VII of the Electricity Act, 2003. The Commission has the obligation to

specify through regulations the terms and conditions for determination of tariff

and in doing so it is required to be guided by the provisions contained in

section 61(a) to (i) of the Electricity Act, 2003. Under section 62 (1)(d) the

Appropriate Commission shall determine tariff in accordance with the

provisions of the Electricity Act, 2003 for retail supply of electricity. The

Commission under section 62(3) of the Electricity Act, 2003, while

determining tariff shall not show undue preference to any consumer of

electricity but may differentiate according to consumers load factor, power

factor, voltage, total consumption of energy during any specified period, etc.

At no stage, does the law provide that the Commission will not determine tariff

for any particular Consumer or consumer category, as has been argued by

PSPCL.

(iii) It is necessary to appreciate that section 49 is only relevant when a consumer

chooses to enter into an agreement with any person for supply or purchase of

electricity on such terms and conditions including tariff as may be agreed

upon by them. In such a case, the Commission will not determine tariff for

such consumer. Therefore, reference to section 62(1)(d) in section 49 is of

limited application and has to be read only in the context of a consumer who

has opted for open access, to purchase power from any person other than the

distribution licensee. Surely there is no provision to force a person to

mandatorily avail power through open access.

(iv) Apart from the mandate of section 61 and 62 of the Electricity Act, 2003, it is

necessary to appreciate that the Commission has framed regulations for

determination of tariff of consumers of the distribution licensee. The

arguments of PSPCL are contrary to the regulations framed by the

Commission. The regulations do not provide that tariff for consumers eligible

for open access will not be determined by the Commission. Therefore, the

argument of PSPCL is not only contrary to the provisions of the statute, it is

also contrary to the regulations framed by the Commission.

(v) Further, the Commission under section 86(1)(a) is required to determine tariff

for generation, supply, transmission and wheeling of electricity, wholesale,

bulk or retail as the case may be. The proviso of section 86(1)(a) requires the

Commission to determine wheeling charges and surcharge thereon for

consumers who have been permitted open access under section 42 of the

Electricity Act, 2003. Clearly, cross subsidy surcharge cannot be determined

if there is no tariff determination for the relevant consumer category. The

21

cross subsidy surcharge is to offset the consumers‟ contribution to the cross

subsidy pool of the distribution licensee. If consumer‟s tariff is not determined,

how can one determine the cross subsidy contribution of such consumer,

which contribution (in the event the consumer opts to avail power through

open access) has to be recovered through the surcharge route? The formula

for computation of surcharge provided in the Tariff Policy includes tariff of the

relevant consumer category as one of the key parameters for determining

surcharge. Therefore, the argument of PSPCL also goes against the

principles established in Section 86(1)(a) read with the provisions of the Tariff

Policy.

(vi) It is necessary to clarify that determination of wheeling charges and

surcharge for open access consumers has to be seen in light with the scheme

for open access provided under the Electricity Act, 2003. The fact that the

Commission is determining wheeling charges or surcharge thereon cannot

become the basis of any conclusion that the Commission cannot determine

tariff for the consumer category which has become eligible for open access,

and if such consumer opts for open access is required to pay wheeling

charges and surcharge. Such an interpretation would be against the scheme

of the Electricity Act, 2003 and also the interest of consumers. The word

“Consumer” as defined in section 2(15) of the Electricity Act, 2003 means any

person who is supplied with electricity for his own use by a licensee and

includes any person whose premises are connected for purposes of receiving

electricity with the works of such licensee. Therefore, a consumer by its very

definition under the Electricity Act, 2003, becomes eligible for supply of

electricity by a licensee. Once the consumer is eligible to receive supply of

electricity for his own use by a licensee, the Commission will certainly have

the power to determine tariff for such consumer.

In view of the aforesaid, the arguments of PSPCL are inconsistent with

the provisions of the Act and the Regulations.

Issue No.3:

(A) Regarding interpretation of law by the Commission, one has to keep in view

the role and functions assigned to the Commissions under the statute,

particularly the fact that the Commission is a quasi judicial body which has

been expressly delegated with the functions of a State i.e. to adjudicate upon

22

certain disputes. The Commission, while discharging its functions is vested

with the powers of a civil court. Its orders are also appealable.

(B) It may be relevant to refer to the following judgments of the Hon‟ble Supreme

Court of India:

Cellular Operators Association of India v. Union of India, (2003) 3

SCC 186, at page 212:

“33. The regulatory bodies exercise wide jurisdiction. They lay down the law.

They may prosecute. They may punish. Intrinsically, they act like an internal

audit. They may fix the price, they may fix the area of operation and so on

and so forth. While doing so, they may, as in the present case, interfere with

the existing rights of the licensees.” (Emphasis Supplied)

Associated Cement Companies Ltd. v. P.N. Sharma, (1965) 2 SCR

366

“9. Tribunals which fall within the purview of Article 136(1) occupy a special

position of their own under the scheme of our Constitution. Special matters

and questions are entrusted to them for their decision and in that sense, they

share with the courts one common characteristic; both the courts and the

tribunals are “constituted by the State and are invested with judicial as

distinguished from purely administrative or executive functions”, (vide Durga

Shankar Mehta v. Thakur Raghuraj Singh1). They are both adjudicating

bodies and they deal with and finally determine disputes between parties

which are entrusted to their jurisdiction. The procedure followed by the courts

is regularly prescribed and in discharging their functions and exercising their

powers, the courts have to conform to that procedure. The procedure which

the tribunals have to follow may not always be so strictly prescribed, but the

approach adopted by both the courts and the tribunals is substantially the

same, and there is no essential difference between the functions that they

discharge. As in the case of courts, so in the case of tribunals, it is the State's

inherent judicial power which has been transferred and by virtue of the said

power, it is the State's inherent judicial function which they discharge. Judicial

functions and judicial powers are one of the essential attributes of a sovereign

State, and on considerations of policy, the State transfers its judicial functions

and powers mainly to the courts established by the Constitution; but that does

not affect the competence of the State, by appropriate measures, to transfer a

23

part of its judicial powers and functions to tribunals by entrusting to them the

task of adjudicating upon special matters and disputes between parties. It is

really not possible or even expedient to attempt to describe exhaustively the

features which are common to the tribunals and the courts, and features

which are distinct and separate. The basic and the fundamental feature which

is common to both the courts and the tribunals is that they discharge judicial

functions and exercise judicial powers which inherently vest in a sovereign

State.

…………………………………

But as we have already stated, the consideration about the presence of all or

some of the trappings of a court is really not decisive. The presence of some

of the trappings may assist the determination of the question as to whether

the power exercised by the authority which possesses the said trappings, is

the judicial power of the State or not. The main and the basic test however, is

whether the adjudicating power which a particular authority is empowered to

exercise, has been conferred on it by a statute and can be described as a

part of the State's inherent power exercised in discharging its judicial

function.” (Emphasis Supplied)

Commissioner of Income Tax, Shimla v. Greenworld Corporation,

Parwanoo, (2009) 7 SCC 69, at page 99:

“55. When a statute provides for different hierarchies providing for forums in

relation to passing of an order as also appellate or original order, by no

stretch of imagination a higher authority can interfere with the independence

which is the basic feature of any statutory scheme involving adjudicatory

process.” (Emphasis supplied)

From the aforesaid judgments, it is clear that the Commission,

which has been vested with judicial powers, has wide jurisdiction and

must perform its functions in terms of the statute. Interpreting law and

applying the same to the facts in hand is an intrinsic part of that

function of this Commission.

Issue No.4:

(A) On a broader view regarding universal obligation to supply power, it can be

said that sections 43 to 48 of the Act, is a complete code which regulates the

24

obligations of a distribution licensee to “supply power” and recover charges

and expenditures in relation to such “supply”. While section 43 in a

jurisprudential sense imposes a mandatory obligation to the distribution

licensee to supply power on demand (subject to other conditions contained in

section 43 (Provisos) to section 48), under section 42(2) and 42(3) of the Act

provides a choice or option to a consumer to opt for open access if it makes

more sense to the consumer. Open access has to be understood in relation to

the purpose for which it has been introduced, which is to bring in competition

in the power sector by giving consumers a choice. By suggesting that the

consumer eligible for open access will cease to have the rights of

universal supply under section 43 in effect vitiates the ability to make a

choice. In this context, reference may be made to the following

judgments of the Supreme Court of India and the Appellate Tribunal for

Electricity.”

PTC India Limited v. Central Electricity Regulatory Commission,

(2010) 4 SCC 603, at page 629:

“22. One of the most important features of the 2003 Act is the introduction of

open access under Section 42 of the Act. Under the open access regime,

distribution companies and eligible consumers have the freedom to buy

electricity directly from generating companies or trading licensees of their

choice and correspondingly the generating companies have the freedom to

sell.” (Emphasis Supplied)

In Appeal No. 1 of 2006 (Indian Aluminium Company Ltd. vs.

WBERC) the Hon‟ble APTEL held that:

“23. On a careful consideration of various provisions of The Electricity Act,

2003 we find that there is no provision in the Act which mandates that the

existing consumer, like the appellant, should cease to be a consumer of

electricity from the area distribution licensee or sever its connection as a

consumer with the said area distribution licensee merely because short term

open access is applied for and allowed for interstate transmission from its

CPP. The appellant has unequivocally made it clear that the appellant is

willing to pay the charges prescribed by the area distribution licensee

including demand charges, energy charges and other charges for the

connected load of 8.5 MW in the same manner as in the case of identically

25

placed industrial consumers in the area and the appellant is ready and willing

to remit the charges payable to the area distribution licensee.

24. There is no reason or rhyme to hold that the appellant on being granted

open access should sever its existing contractual relationship with the area

distribution licensee or shall cease to be a consumer of the area DISCOM/

Licensee. Section 49 of The Act provides for an agreement being entered into

when open access is allowed to consumers for supply or purchase of

electricity on such terms and conditions including tariff as may be agreed

upon. We do not find any justifiable reason for the direction issued by the

Regulatory Commission in this respect. The West Bengal Electricity

Regulatory Commission (Terms and Conditions for Open Access)

Regulations 2005 also do not impose such a condition. In fact, Regulation 12

of the said Regulations provides for entering into a commercial agreement

with a distribution licensee and abide by various conditions relevant thereto.

Regulation 13.4 also in no way provides for issue of such a direction.”

(Emphasis Supplied)

(B) The Hon‟ble Appellate Tribunal for Electricity, in Appeal No. 1 of 2006, Indian

Aluminium Company Ltd. vs. WBERC, framed following major issues for its

decisions:

(1) Whether the direction of the West Bengal State Electricity Regulatory

Commission that the appellant shall cease to be a consumer of CESC

limited as a condition for availing open access is sustainable?

Whether in terms of The Electricity Act, 2003 a consumer who applies

for open access should disassociate itself with the area DISCOM?

(2) Whether the applicant has to sever its existing consumer relationship

with CESC Limited, the area DISCOM for grant of open access?

(3) Whether the area DISCOM is obliged to supply standby energy to the

appellant and if so, under what conditions?

The Hon‟ble APTEL in this case held as follows:

“43. As a result of our discussions, we record our findings as hereunder:

(I) On point (1), we set aside the direction of WBSERC and hold that the

appellant should continue its contractual relationship as a consumer of CESC

and it need not cease its consumership status.

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(II) On point (2), we set aside the direction of WBSERC and hold that the

appellant is not called upon to sever its existing consumer relationship with

CESC.

(III) On point (3), we hold that so long as the appellant abides by the

subsisting terms and conditions as are applicable to identical industries, the

DISCOM is obliged to supply and the standby energy has to be supplied

subject to the terms to be agreed between CESC and the appellant.”

(Emphasis Supplied)

From a reading of the aforesaid along with paragraphs 23 and 24 of the

said judgement, it is quite clear that the views offered by the Ministry of Law & Justice

are not in line with the above decision of the Hon’ble Appellate Tribunal for Electricity.

In the hierarchy of Regulatory Institutions created under Electricity Act, Hon’ble

Appellate Tribunal 2003 is above the State Commission. The Commission is bound by

the judgement of Appellate Tribunal for Electricity and therefore holds that PSPCL

has universal obligation to supply power to all consumers in its area of supply

including those availing open access.

8. Conclusion

In view of the above, the Petitions are allowed, without costs, to the extent of

the decisions of the Commission in foregoing paras and the notices issued by PSPCL to the

Petitioners are set aside.

Sd/- Sd/- Sd/-

(Gurinderjit Singh) (Virinder Singh) (Romila Dubey) Member Member Chairperson

Chandigarh Dated: 03-10-2012

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