1995 (4) TMI 286 - SC - Indian Laws

Supreme Court Upholds Validity of Electricity Supply Regulation Proviso

ORISSA STATE ELECTRICITY BOARD AND ANOTHER ETC. Versus M/s. IPI STEEL LTD. ETC.

The Supreme Court upheld the validity of the proviso to Regulation 46 of the Orissa State Electricity Board (General Conditions of Supply) Regulations, ... - Issues Involved:1. Validity of the proviso to Regulation 46 of the Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981.2. The reasonableness and legality of demand charges levied during periods of restricted electricity supply under Section 22-B of the Indian Electricity Act, 1910.Issue-wise Detailed Analysis:1. Validity of the Proviso to Regulation 46:The Orissa State Electricity Board challenged the High Court's judgment which declared the proviso to Regulation 46 as unreasonable, arbitrary, and illegal. The High Court had directed the Board to revise the bills issued to the respondent-writ petitioner based on proportionate reduction considering actual energy consumption. The proviso, as amended by Notification dated June 25, 1987, was central to this dispute. The proviso to Regulation 46 stated that during periods of restricted supply, if the restriction exceeded 150 hours in a month, the consumer would not be liable to pay minimum charges but would pay on the basis of actual energy consumption and the maximum demand as provided in the agreement.2. Reasonableness and Legality of Demand Charges During Restricted Supply:The respondent-writ petitioner argued that the Board was not in a position to supply the full quantity of energy stipulated in the agreement and that the demand charges during restricted supply periods were unjustified. The High Court agreed, stating that demand charges should not be levied when the Board could not meet the consumer's demand due to restrictions imposed under Section 22-B. The High Court found the proviso to Regulation 46 to be arbitrary and irrational, particularly highlighting a scenario where an industry might draw energy at full load on the first day of the month and none thereafter, yet still be liable for full demand charges.Supreme Court's Analysis and Judgment:Validity of the Proviso to Regulation 46:The Supreme Court examined the rationale behind the two-part tariff system, which includes demand charges and consumption charges. The Court explained that demand charges cover the Board's capital costs, while consumption charges cover running costs. The Court noted that even during restricted supply periods, the Board incurs capital costs and must maintain infrastructure and staff. The Court found that the proviso to Regulation 46 was designed to address situations where an order under Section 22-B was in force, relieving consumers from paying minimum charges but requiring them to pay based on actual energy consumption and maximum demand.Reasonableness and Legality of Demand Charges During Restricted Supply:The Supreme Court disagreed with the High Court's reasoning, stating that the demand charges are meant to cover the Board's investment and standing charges. The Court noted that the respondent could choose to draw energy at half the maximum demand level throughout the year or at full demand level for half the year, ensuring compliance with the fifty percent quota. The Court emphasized that the demand charges were justified as they reflected the Board's readiness to supply energy at the contracted level, even if the consumer did not fully utilize it.Conclusion:The Supreme Court allowed the appeal, setting aside the High Court's order. The Court upheld the validity and reasonableness of the proviso to Regulation 46, stating that it was neither arbitrary nor confiscatory. The Court acknowledged the difficulties faced by both consumers and the Board during restricted supply periods but found that the regulation appropriately balanced these challenges. The appeal was allowed without any order as to costs, and a related transfer petition was dismissed as unnecessary.