TaxTMI 
TaxTMI 
2003 (10) TMI 636
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.... Electricity Board (for short 'MSEB') and TPC in or about March, 1985, whereby TPC was provided 300 MVA standby facility from MSEB and it was further agreed that in view of the growing requirement of the city of Bombay, the said standby facility would stand enhanced by a quantum of 50 MVA per year. This standby facility increased to 550 MVA by the year 1990 and payment for the same was to be made irrespective of the fact whether electricity was drawn or not and if electricity was drawn, actual payment for the same was to be made over and above the standby charges. In the year 1990, it was agreed that the annual increase in the standby facility would no longer be operational and henceforth TPC would be entitled to avail of and pay for the standby facility of only 550 MVA. This agreement was reduced in writing by way of letter dated 6.7.1990 addressed by MSEB to TPC. 3. The Bombay Suburban Electric Supply Company (for short 'BSES') had been granted a distribution licence in the year 1926 which was amended in the year 1976 to enable it to become a generator of electricity in order to take care of enhanced demand in the city of Bombay. The licence was further amended o....
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....lays down that licensee shall not enhance the charges for the supply of electricity until after the expiry of a notice in writing of not less than sixty clear days of its intention to so enhance the charges. On account of the notice given by TPC for increasing charges of standby supply of 275 MVA, a dispute arose and a meeting was convened on 4.3.1999, wherein the Deputy Chief Minister, Government of Maharashtra and representatives of both the sides were present. The Deputy Chief Minister though advised both the parties to settle the issue amicably between themselves without referring to the Government but at the same time issued certain directions, namely, BSES should share Rs. 9 crores out of Rs. 22 crores additional standby charges levied by MSEB upon TPC for the period 1.12.1998 to 31.3.1999 and the issue regarding sharing of standby charges for the period 1.4.1999 onwards be referred to a Committee to be constituted by the State Government. The Government of Maharashtra thereafter constituted a Committee on 27.5.1999 to study certain issues including that of standby charges to be paid by BSES to TPC and to submit a report. Shortly, thereafter a notification was issued on 5.8.1....
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.... 7.12.2001. The main part of the order was written by two Members of the Commission who directed as under: 1. BSES shall make payment of Rs. 77.06 crores together with interest thereon at the rate then applicable with effect from 1.4,2000 to TPC within four weeks from the date of the order for the year 1999-2000. While making, payments due credit shall be made for the amounts paid by them. 2. The TPC shall, in turn, pay the balance amount remaining out of Rs. 363 crores due as standby charges together with interest due thereon at the rate then, applicable to MSEB for the year 1999-2000 within a week thereafter and close the matter so far as the year 1999-2000 is concerned. 3. Based on the principles outlined in the order, calculations for the year 2000-2001 should also be made and payments effected suitably by BSES and TPC so that the dues to the MSEB in respect of standby charges are settled for the past period within three months from the date of the order. 4. For the current financial year 2001-2002 such calculation will not be possible till the close of the year, whereafter only the cost and other relevant accounting details will become available. In terms of the minutes of....
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....acility to BSES by TPC is not an issue of tariff, but is a dispute relating to sharing or apportionment of the charges being paid by TPC to MSEB for providing the former with a standby facility of 550 MVA and, therefore, it does not come within the purview of the Commission under Sub-section (1) of Section 22 of the Act. It has been urged that under the terms of the licence granted by the Government to BSES and as amended in 1992, the Government continues to have the jurisdiction to decide any kind of dispute. The Maharashtra Government had decided the dispute vide order dated 22.3.2000 and when the powers under Section 22(2)(n) of the Act were conferred upon the Commission on 27.10.2000, there was no existing dispute between the parties regarding the share of the parties as the same had already been decided and consequently, the Commission had no jurisdiction to entertain the petition filed by BSES. It has further been contended that the standby facility is essential for every generator of electricity and since TPC was providing standby facility of 275 MVA to BSES out of the standby facility of 550 MVA being provided by MSEB to TPC, then logically BSES should pay half of the said ....
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....rganized two Conferences of Chief Ministers to discuss the whole gamut of issues in the power sector and the outcome of these meetings was the adoption of the Common Minimum National Action Plan for Power. Under this action plan it was considered necessary to create a Regulatory Commission as a step to arrest deteriorating condition of the State Electricity Boards and to make plans for the future developments. The Administrative Staff College, Hyderabad to whom the Ministry of Power assigned the task of studying the restructuring needs of the system, strongly recommended the creation of independent Electricity Commissions, both at the center and the States to give effect to the aforesaid recommendations. The Electricity Regulatory Commissions Bill was thereafter introduced in the Parliament. The Objects and Reasons of the Act show that the main function of the State Electricity Regulatory Commission shall be (i) to determine the tariff for electricity, wholesale, bulk, grid and retail; (a) to determine the tariff payable for use of the transmission facilities; and (iii) to regulate power purchase and procurement process of the transmission utilities, etc. The changed scenario may g....
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....ommission shall determine by regulations the terms and conditions for the fixation to tariff, and in doing so, shall be guided by the following, namely:- (a) the principles and their applications provided in sections 46, 57 and 57A of the Electricity (Supply) Act 1948 (54 of 1948) and the Sixth Schedule thereto; (b) in the case of the Board or its successor entities, the principles under Section 59 of the Electricity (Supply) Act, 1948 (54 of 1948); (c) that the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency; (d) the factors which would encourage efficiency:, economical use of the resources, good performance, optimum investments, and other matters which the State Commission considers appropriate for the purpose of this Act; (e) the interests of the consumers are safeguarded and at the same time, the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy; (f) the electricity generation, transmission, distribution and supply are conducted on commercial principles; (g) national power plans formulated by the Central Government. 13. Sub-section (2) of Section ....
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.... 79. All petitions for approval of tariff (generation, transmission, distribution and supply) and terms and conditions of supply shall be made strictly in accordance with regulations and procedures as may be prescribed by the Commission and shall also be in conformity with the requirements relating to petitions as prescribed in Chapter II of these Regulations. 80. The Commission may approve the proposed tariff on such stipulations as may be considered appropriate and as may be specified in the Order. 82. The utilities concerned shall publish the tariff as approved by the Commission in the manner as may be prescribed. The tariff so published shall be in force from the date specified in the said publication not being earlier than the date of such publication and shall be in force until any amendment is approved by the Commission and published. 83. Any utility found to be charging a tariff different from the one approved by the Commission shall be deemed to have not complied with the directions of the Commission and shall be liable to penalties under Section 45 of the Act, without prejudice to any other penalty to which if may be liable under any other Act Any excess charge of tari....
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....ectricity Boards which being an instrumentality of the State and functioning under the control of the State Government were not likely to enhance the tariff in an exorbitant or arbitrary manner. In fact, Electricity Boards of many States in the country were running on huge losses. The Electricity Regulatory Commissions Act, 1998 has been enacted to enhance the generation of electricity and improve efficiency by bringing in private operators. If a licensee (who may be private operator) after getting the licence for supply of electricity in a particular area increases the tariff arbitrarily, the consumers will have no option but to pay the same. In order to guard against such an eventuality, provision has been made that while granting a licence conditions may be imposed and further no tariff can be implemented unless the same has been approved by the Commission. 18. Electricity is not a commodity which may be stored or kept in reserve. It has to be continuously generated and it is so continuously generated electricity which is made available to consumers. Any generator of electricity has to have some alternate arrangement to fall back upon in the event of its generating machinery co....
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....city Regulatory Commission was formed on 5.8.1999. Therefore, it is not possible to accept the contention of Shri Nariman that the State Government had the authority or jurisdiction on 22.3.2000 to determine or quantify the charges which BSES had to pay to TPC under the terms of the license granted to the former as this was subsequent to the formation of the Maharashtra Electricity Regulatory Commission. 19. Shri Nariman has submitted that TPC gave a notice on 30.9.1998 of their intention to enhance the charges of standby facility provided to BSES from Rs. 3.5 crores to Rs. 15.125 crores per month and this notice having been given under Sixth Schedule (paragraph 1, 3rd proviso) of the Electricity (Supply) Act, 1948, the enhanced charges became effective and operative after expiry of 60 days of notice i.e. with effect from 1.2.1998. The submission is that by operation of law the charges for standby facility stood revised and enhanced with effect from 1.12.1998. In our opinion, the contention raised has no substance. The legal position has undergone a complete change with the enforcement of the Electricity Regulatory Commissions Act, 1998. In view of Section 29 of the Act, the tarif....
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....ovided that they should interlink with the system of TPC and ultimately their systems were interlinked on 14.2.1998 in pursuance of the order passed by the Government of Maharashtra on 19.1.1998. The question of payment of standby charges by BSES to TPC has, therefore, arisen for the first time in 1998 which is almost 13 years after TPC started paying standby charges to MSEB. In substance, the dispute is what should be paid by BSES to TPC for the standby facility provided by it. The strict and narrow interpretation sought to be placed by the learned counsel so as to oust the jurisdiction of the Commission cannot be accepted us it will defeat the very object of enacting the Electricity Regulatory Commissions Act. 21. It may be mentioned here that both TPC and MSEB always treated the charges for standby facility as a matter relating to tariff. TPC gave a notice to Government of Maharashtra and MSEB on 30.7.1996 for revision of tariff where they themselves described the enhancement of demand charges made by MSEB for standby facility as "revision of tariff". The charges for standby facility given by them to BSES were also described as "tariff". MSEB gave a notice to TPC on 31.8.1998 w....
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....er dated 5.12.2000 was that the earlier order dated 22.3.2000 would no longer be operative and the decision of the Commission would govern the situation. Even otherwise as discussed earlier, after the enforcement of the Act it is the Commission which has the jurisdiction to decide the controversy and not the State Government. 23. Several reasons have been given by the High Court for remitting the matter to the Commission for a de novo consideration. The Commission devised a formula for determination of the charges for standby facility which was to be paid by BSES to TPC. Both the sides complained before the High Court that before adopting the formula they were not given an opportunity to place their point or view before the commission for arriving at a just formula and they were not informed about the exact nature of the formula which was being adopted. The order of the Commission shows that for working out the formula it had appointed consultants. Two members of the Commission had several meetings with the consultants and thereafter the formula was worked out. But the Chairman of the Commission was not present in these meetings. In his dissenting order the Chairman has recorded a....
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.... He has also submitted that TPC sells 35 per cent of the power generated by it to BSES and consequently a portion of this burden of Rs. 24,75 crores which TPC is liable to pay to MSEB is passed on by it to the consumers of BSES. Therefore, BSES cannot be saddled with liability to pay half of the amount only on the ground that it has been provided with a standby facility of 275 MVA which is half of the standby facility provided by MSEB to TPC. Learned counsel has also submitted that at best there can be some kind of a sharing on the amount which TPC has to pay to MSEB over and above Rs. 24.75 crores but up to the extent of the aforesaid amount the liability of BSES cannot exceed Rs. 3.5 crores. Shri Sibal has also assailed the order of the High Court on the ground that while making the interim arrangement for equal sharing of standby charges, reliance has been placed on the order of the State Government dated 22.3.2000, though the High Court itself has, in the earlier part of the judgment, held the said order to be without jurisdiction. Shri Chidambaram, learned senior counsel appearing for TPC, has, on the other hand, submitted that the order passed by the State Government on 19.1.....