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Issues: (i) Whether a developer of a notified Special Economic Zone, treated as a deemed distribution licensee under the Electricity Act, 2003, is still required to obtain a separate licence from the State Commission; (ii) Whether such a developer, purchasing electricity for its own consumption through open access, is liable to pay cross subsidy surcharge to the area distribution licensee.
Issue (i): Whether a developer of a notified Special Economic Zone, treated as a deemed distribution licensee under the Electricity Act, 2003, is still required to obtain a separate licence from the State Commission?
Analysis: The deeming provision inserted in Section 14(b) of the Electricity Act, 2003 by the notification under the Special Economic Zones Act, 2005 was construed harmoniously with the scheme of the Electricity Act. The Court held that the deeming fiction relieves the developer from making a separate application for a distribution licence, but it does not dispense with the statutory requirements that attach to distribution activity. A deemed licensee status is meaningful only where the developer actually operates a distribution system and supplies electricity to consumers; the fiction cannot be extended to an entity that uses electricity only for its own captive consumption and has no consumers to supply.
Conclusion: The developer was not required to apply for a separate licence merely to the extent of the deeming provision, but the deemed status did not make it a full distribution licensee for all purposes.
Issue (ii): Whether such a developer, purchasing electricity for its own consumption through open access, is liable to pay cross subsidy surcharge to the area distribution licensee?
Analysis: Cross subsidy surcharge was held to be a compensatory charge payable when a consumer in the area of supply procures electricity from a source other than the area distribution licensee through open access. The Court found that the appellant was a consumer for its own use within the meaning of the Act, and the SEZ notification did not displace the open access regime or the liability to surcharge. The statutory scheme of open access and surcharge, read with the definitions of consumer, distribution licensee, supply, and distribution system, showed that the surcharge remains payable even where electricity is procured through a line that is not shown to exclude the area distribution system in law.
Conclusion: The appellant was liable to pay cross subsidy surcharge to WESCO.
Final Conclusion: The appeal failed because the SEZ status and deemed licence fiction did not eliminate the appellant's liability under the electricity law regime governing open access and cross subsidy surcharge.
Ratio Decidendi: A Special Economic Zone developer deemed to be a distribution licensee is exempt only from the formal requirement of applying for a licence, and the deeming fiction does not extend to exempting it from cross subsidy surcharge when it procures electricity for its own consumption as a consumer in the area of supply.
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