T. Nandakumar Singh, J.@mdashHeard Dr. A.K. Saraf, learned senior counsel assisted by Mr. K. Paul and Ms. M. Ghosh, learned counsel for the petitioners, Mr. N.D. Chullai, learned Sr. GA assisted by Mr. S. Sen Gupta, learned GA appearing for the respondents No. 1 and 2 and Mr. K.S. Kynjing, learned senior counsel assisted by Mr. S.M. Suna, Mr. L. Shongwan and Ms. I.L. Mawphlang, learned counsel for the respondent No. 3.
2. The challenge in the present writ petition is to the provisions of the Meghalaya State Electricity Regulatory Commission (Terms and Conditions of Open Access) Regulations, 2012 (for short ''MSERC, Regulations, 2012'') in particular to Regulations 23 and 24 of the MSERC, Regulations, 2012 dealing with wheeling charges and cross-subsidy surcharge. For easy reference, the relevant portion of the MSERC, Regulations, 2012 are quoted hereunder:-
"MEGHALAYA STATE ELECTRICITY REGULATORY
COMMISSION SHILLONG
27th April, 2012
NOTIFICATION
No. MSERC/MESC-2012/77/03: In exercise of powers conferred by sub-section (2) of section 181 read with clauses (2) (d) of section 39 and clauses (2), (3), and (4) of section 42 of the Electricity Act, 2003 and all other powers enabling it in this behalf, the Meghalaya State Electricity Regulatory Commission hereby makes the following regulations, the same having been previously published in the Meghalaya Gazette namely, the Meghalaya State Electricity Regulatory Commission (Terms and Condition of Open Access) Regulation, 2012.
J.B. Poon
Secretary
Meghalaya State Electricity Regulatory Commission
THE MEGHALAYA STATE ELECTRICITY
REGULATORY COMMISSION (TERMS AND
CONDITIONS OF OPEN ACCESS)
REGULATIONS, 2012.
(02 of 2012)
1. Short Title, Extent and Commencement
(1) These regulations may be called the Meghalaya State Electricity Regulatory Commission (Terms and Conditions of Open Access) Regulations, 2012.
(2) These regulations shall come into force on the date of Notification published in the Meghalaya Gazette.
2. Scope
These regulations shall apply to open access for use of intra-State transmission system and distribution systems in the State, including when such system is used in conjunction with inter-State transmission system.
****
****
9. Eligibility for Open Access and conditions to be satisfied
(1) Subject to the provisions of these regulations, the licensees, generating companies, captive generating plants and consumers shall be eligible for open access to the intra-State transmission system of the State Transmission Utility or any transmission licensee on payment of transmission and other charges as may be determined by the Commission in accordance with these regulations.
(2) Subject to the provisions of these regulations and technical constraints, the licensees, generating stations, captive generating plants and consumers shall be eligible for open access to distribution system of a distribution licensee on payment of the wheeling and other charges as may be determined by the Commission in accordance with these regulations.
(3) Subject to the provisions of these regulations, open access shall be permissible to the consumers having load of 1 MW and above connected through independent feeder.
(4) A person having been declared insolvent or bankrupt or having outstanding dues/arrears against him for more than two months billing of distribution/transmission licensee at the time of application shall not be eligible for open access.
10. Criteria for granting long-term access or medium-term open access or short term open access
(1) Before awarding long-term access, the State Transmission Utility shall have due regard to the augmentation required for the intra-State transmission system.
(2) Medium-term open access or short-term open access shall be granted if the resultant power flow can be accommodated in the existing transmission system or the transmission system under execution: Provided that no augmentation shall be carried out to the transmission system for the sole purpose of granting medium-term open access or short-term open access:
Provided further that construction of a dedicated transmission line shall not be construed as augmentation of the transmission system for the purpose of this regulation.
Application Procedure and Approval for Open Access to Consumer
11. Categories of Open Access Consumers
The application procedure, application fee and the time frame of processing request by eligible consumers seeking Open Access shall be based on the following criteria.
(1) System to which connected
(a) Intra-State transmission system
(b) Distribution system
(2) Inter-se location of drawal and injection points
(a) Both within the same distribution system
(b) within the State but in different distribution systems
(c) in different States.
(3) Duration of Open Access
(a) Long term access
(b) Medium-term open access
(c) Short-term open access
12. Application procedure for Open Access
(1) All applications for open access shall be made in the prescribed Form and submitted to the Nodal agency in accordance with these regulations.
(2) All applicants seeking open access shall submit an undertaking of not having entered into Power purchase agreement (PPA) or any other bi-lateral agreement with more than one person for the capacity (quantum of power) for which open access is sought.
(3) Subject to the provisions of these regulations, the Nodal agency, Application fee, Documents to accompany the application and time frame for disposal of application shall be as specified in the following Tables:
****
****
23. Wheeling Charges:
Wheeling charges payable to distribution licensee, by an open access customer for usage of its system and associated facilities shall be as determined as under:
Wheeling Charges = (ARR - PPC - TC)/(ALSD X365) (in Rs./MW-Day)
Where,
ARR= Annual Revenue Requirement of the distribution licensee in the concerned year PPC= Total Power Purchase Cost of distribution licensee in the concerned year
TC = Total transmission charges paid by distribution licensee for State and associated facilities and Inter-State transmission system for the concerned year
ALSD= Total average load projected to be served by the concerned distribution system in the concerned year
Provided that Wheeling charges shall be payable on the basis of contracted Capacity/Scheduled Load or actual power flow whichever is higher.
Provided further that where a dedicated distribution system used for open access has been constructed for exclusive use of an open access customer, the wheeling charges for such dedicated system shall be worked out by distribution licensee for their respective systems and got approved by the Commission and shall be borne entirely by such open access customer till such time the surplus capacity is allotted and used for by other persons or purposes;
24. Cross subsidy surcharge
(1) Cross-Subsidy Surcharge
In addition to transmission charges and wheeling charges, a consumer availing open access to the transmission system/distribution system shall pay a Cross-Subsidy Surcharge on per unit basis for actual energy drawn through open access.
The Open access users, except those availing open access facility to transfer power from their captive generating plants to the destination of their own use, shall pay the (cross-subsidy) surcharge to the distribution licensee of their area, as determined by the Commission from time to time. The amount of surcharge shall be so calculated as to meet the current level of cross subsidy from that category of consumers and shall be paid to the distribution licensee of area of supply where the consumer is located.
****"
3. Under Section 3 of the Electricity Act, 2003 (for short ''the said Act of 2003''), the Central Govt. shall, from time to time, prepare the National Electricity Policy and tariff policy, in consultation with the State Govt. and the Authority for development of the power system based on optimal utilization of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy. Section 3 of the Electricity Act, 2003 reads as follows:-
"PART II
NATIONAL ELECTRICITY POLICY AND PLAN
3. National Electricity Policy and Plan.- (1) the Central Government shall, from time to time, prepare the National Electricity Policy and tariff policy, in consultation with the State Government and the Authority for development of the power system based on optimal utilization of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy.
(2) The Central Government shall publish the National Electricity Policy and tariff policy from time to time.
(3) The Central Government may, from time to time in consultation with the State Government and the Authority review or revise the National Electricity Policy and tariff policy referred to in sub-section (1).
(4) The Authority shall prepare a National Electricity Plan in accordance with the National Electricity Policy and notify such plan once in five years.
Provided that the Authority while preparing the National Electricity Plan shall publish the draft National Electricity Plan and invite suggestions and objections thereon from licensees, generating companies and the public within such time as may be prescribed:
Provided further that the Authority shall-
(a) notify the plan after obtaining the approval of the Central Government;
(b) revise the plan incorporating therein the directions, if any, given by the Central Government while granting approval under clause (a).
(5) The Authority may review or revise the National Electricity Plan in accordance with the National Electricity Policy."
4. The Central Govt. in compliance with Section 3 of the said Act of 2003 prepared and notified the national tariff in continuation of the National Electricity Policy (NEP) notified on 12.02.2005 vide Gazette of India Extraordinary Part-I-Section I published by the Ministry of Power, New Delhi dated 06.01.2006. The relevant portions of the National Tariff Policy are quoted hereunder:-
"The Gazette of India
EXTRAORDINARY
PART-1-Section I
PUBLISHED BY AUTHORITY
Ministry of Power
New Delhi,
Dated the 6th January, 2006
RESOLUTION
No. 23/2/2005-R&R (Vol. III)
TARIFF POLICY
1.0 INTRODUCTION
1.1. In compliance with Section 3 of the Electricity Act 2003 the Central Government hereby notifies the Tariff Policy in continuation of the National Electricity Policy (NEP) notified on 12th February, 2005.
1.2. The National Electricity Policy has set the goal of adding new generation capacity of more than one lakh MW during the 10th and 11th Plan periods to have per capita availability of over 1000 units of electricity per year and to not only eliminate energy and peaking shortages but to also have a spinning reserve of 5% in the system. Development of the power sector has also to meet the challenge of providing access for electricity to all households in next five years.
1.3. It is therefore essential to attract adequate investments in the power sector by providing appropriate return on investment as budgetary resources of the Central and State Governments are incapable of providing the requisite funds. It is equally necessary to ensure availability of electricity to different categories of consumers at reasonable rates for achieving the objectives of rapid economic development of the country and improvement in the living standards of the people.
1.4. Balancing the requirement of attracting adequate investments to the sector and that of ensuring reasonability of user charges for the consumers is the critical challenge for the regulatory process. Accelerated development of the power sector and its ability to attract necessary investments calls for, inter alia, consistent regulatory approach across the country. Consistency in approach becomes all the more necessary considering the large number of States and the diversities involved.
2.0. LEGAL POSITION
2.1. Section 3(1) of the Electricity Act 2003 empowers the Central Government to formulate the tariff policy. Section 3(3) of the Act enables the Central Government to review or revise the tariff policy from time to time.
2.2. The Act also requires that the Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs) shall be guided by the tariff policy in discharging their functions including framing the regulations under Section 61 of the Act.
2.3. Section 61 of the Act provides that Regulatory Commissions shall be guided by the principles and methodologies specified by the Central Commission for determination of tariff applicable to generating companies and transmission licensees.
2.4. The Forum of Regulators has been constituted by the Central Government under the provisions of the Act which would, inter alia, facilitate consistency in approach specially in the area of distribution.
3.0. EVOLUTION OF THE POLICY
The tariff policy has been evolved in consultation with the State Governments and the Central Electricity Authority (CEA) and keeping in view of the advice of the Central Electricity Regulatory Commission and suggestions of various
stakeholders.
4.0. OBJECTIVES 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.
****
****
8.5. Cross-subsidy surcharge and additional surcharge for open access
8.5.1 National Electricity Policy lays down that the amount of cross-subsidy surcharge and additional surcharge to be levied from consumers who are permitted open access should not be onerous that it eliminates competition which is intended to be fostered in generation and supply of power directly to the consumers through open access.
A consumer who is permitted open access will have to make payment to the generator, the transmission licensee whose transmission systems are used, distribution utility for the wheeling charges and, in addition, the cross subsidy surcharge. The computation of cross subsidy surcharge, therefore, needs to be done in a manner that while it compensates the distribution licensee, it does not constraint introduction of competition through open access. A consumer would avail of open access only if the payment of all the charges leads to a benefit to him. While the interest of distribution licensee needs to be protected it would be essential that this provision of the Act, which requires the open access to be introduced in a time-bound manner, is used to bring about competition in the larger interest of consumers.
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% 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]
S is the surcharge;
T is the tariff payable by the relevant category of consumers;
C is the weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power;
D is the wheeling charge;
and L is the system losses for the applicable voltage level, expressed as a percentage.
The cross-subsidy surcharge should be brought down progressively and, as far as possible, at a linear rate to a maximum of 20% of its opening level by the year 2010-11.
8.5.2 No surcharge would be required to be paid in terms of sub-section (2) of Section 42 of the Act on the electricity being sold by the generating companies with consent of the competent government under Section 43(A)(1)(c) of the Electricity Act, 1948 (now repealed) and on the electricity being supplied by the distribution licensee on the authorization by the State Government under Section 27 of the Indian Electricity Act, 1910 (now repealed), till the current validity of such consent or authorizations.
8.5.3 The surcharge may be collected either by the distribution licensee, the transmission licensee, the STU or the CTU, depending on whose facilities are used by the consumer for availing electricity supplies. In all cases the amounts collected from a particular consumer should be given to the distribution licensee in whose area the consumer is located. In case of two licensees supplying in the same area the licensee from whom the consumer was availing supply shall be paid the amounts collected.
8.5.4 The additional surcharge for obligation to supply as per section 42(4) of the Act should become applicable only if it is conclusively demonstrated that the obligation of a licensee, in terms of existing power purchase commitments, has been and continues to be stranded, or there is an unavoidable obligation and incidence to bear fixed costs consequent to such a contract. The fixed costs related to network assets would be recovered through wheeling charges.
8.5.5 Wheeling charges should be determined on the basis of same principles as laid down for intra-state transmission charges and in addition would include average loss compensation of the relevant voltage level.
8.5.6 In case of outages of generator supplying to a consumer on open access, standby arrangements should be provided by the licensee on the payment of tariff for temporary connection to that consumer category as specified by the Appropriate Commission.
****
**** "
5. The Apex Court in
"Questions of law
2. The crucial points that arise for determination are:
(i) Whether the Appellate Tribunal constituted under the Electricity Act, 2003 (the 2003 Act) has jurisdiction under Section 111 to examine the validity of the Central Electricity Regulatory Commission (Fixation of Trading Margin) Regulations, 2006 framed in exercise of power conferred under Section 178 of the 2003 Act?
(ii) Whether Parliament has conferred power of judicial review on the Appellate Tribunal for Electricity under Section 121 of the 2003 Act?
(iii) Whether capping of trading margins could be done by CERC (the Central Commission) by making a regulation in that regard under Section 178 of the 2003 Act?
Summary of our Findings
92. (i) In the hierarchy of regulatory powers and functions under the 2003 Act, Section 178 which deals with making of regulations by the Central Commission, under the authority of subordinate legislation, is wider than Section 79(1) of the 2003 Act, which enumerates the regulatory functions of the Central Commission, in specified areas, to be discharged by orders (decisions).
(ii) A regulation under Section 178, as a part of regulatory framework, intervenes and even overrides the existing contracts between the regulated entities inasmuch as it casts a statutory obligation on the regulated entities to align their existing and future contracts with the said regulation.
(iii) A regulation under Section 178 is made under the authority of delegated legislation and consequently its validity can be tested only in judicial review proceedings before the courts and not by way of appeal before the Appellate Tribunal for Electricity under Section 111 of the said Act.
(iv) Section 121 of the 2003 Act does not confer power of judicial review on the Appellate Tribunal. The words "orders", "instructions" or "directions" in Section 121 do not confer power of judicial review in the Appellate Tribunal for Electricity. In this judgment, we do not wish to analyse the English authorities as we find from those authorities that in certain cases in England the power of judicial review is expressly conferred on the tribunals constituted under the Act. In the present 2003 Act, the power of judicial review of the validity of the regulations made under Section 178 is not conferred on the Appellate Tribunal for Electricity.
(v) If a dispute arises in adjudication on interpretation of a regulation made under Section 178, an appeal would certainly lie before the Appellate Tribunal under Section 111, however, no appeal to the Appellate Tribunal shall lie on the validity of a regulation made under Section 178.
(vi) Applying the principle of "generality versus enumeration", it would be open to the Central Commission to make a regulation on any residuary item under Section 178(1) read with Section 178(2)(ze). Accordingly, we hold that CERC was empowered to cap the trading margin under the authority of delegated legislation under Section 178 vide the impugned Notification dated 23-1-2006.
(vii) Section 121, as amended by the Electricity (Amendment) Act 57 of 2003, came into force with effect from 27-1-2004. Consequently, there is no merit in the contention advanced that the said section has not yet been brought into force.
Conclusion
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."
6. The petitioner No. 1 is a society registered under the Meghalaya Societies Registration Act, 1983 having its registered office at Byrnihat, Ri Bhoi District, Meghalaya and the petitioner No. 2 is the President of the Association. The industrial units located in Meghalaya under open access regulation had had set up major industrial plants in the area with an understanding that the respondents shall provide the electricity/power to such industrial units on payment of requisite charges. With the above understanding and assurance from the respondents, the petitioner association opened industrial plants in Meghalaya. However, when the plant was established, the respondents failed to honour the understanding and expressed its inability to supply electricity/power in the plant. As such, having no alternative, the petitioner association has to meet the shortage of electricity through open access system. The petitioner association had to fulfill shortage of power through open access system at the instances of the respondent authorities as they failed to supply the same. However, the respondent authorities in blatant abuse of power had directed the petitioner association to also meet the state charges in the form of cross subsidy surcharge besides the regular charges that the petitioner association pays for usage of power through open access system. The respondent No. 3 Meghalaya Energy Corporation Limited (MeECL) is the holding company of electricity generation, transmission and Distribution Company in the State of Meghalaya. The State Commission was constituted under the provisions of the Electricity Act, 2003 to act as the Electricity Regulatory Commission for the State of Meghalaya, the State Commission framed the Meghalaya State Electricity Regulatory Commission (Terms and Conditions of Open Access) Regulations, 2012 under Section 181(2) read with Sections 39(2) and (3) and 42(4) of the Electricity Act, 2003, which was notified on 27.04.2012 in the Gazette of Meghalaya.
7. The first enactment to govern electricity supply in India was passed in the year 1910 viz. the Electricity Act, 1910. This Act envisaged growth of electricity industry through private licences. It created the legal framework for laying down of wires and other works relating to the supply of electricity. Thereafter, the Electricity (Supply) Act, 1948 mandated the creation of a State Electricity Board. The Board assigned the responsibility of arranging the supply of electricity in the State. It was experienced that over a period of time the performance of the State Electricity Boards had deteriorated on account of various factors. The main failure on the part of these Electricity Boards was to take decision on tariffs in independent manner and cross-subsidies had reached untenable levels. To address this issue and also to distance governance from determination of tariffs, the Electricity Regulation Commission Act was enacted in the year 1998. This Act created regulatory mechanism. Within few years, it was felt that the three Acts of 1910, 1948 and 1998 which were operating in the field needed to be brought in a new self-contained comprehensive legislation with the policy of encouraging private sector participation in generation, transmission and distribution and also the objectives of distancing the regulatory responsibilities from the Government and giving it to the Regulatory Commissions. With these objectives in mind the Electricity Act, 2003 has been enacted. Significant addition is the provisions for newer concepts like power trading and open access. Various features of the 2003 Act are outlined in the Statement of Objects and Reasons to this Act. Notably, generation is being delicensed and captive generation is being freely permitted. The Act makes provision for private transmission licensees. It now provides open access in transmission from the outset. [Ref:
8. The 2003 Act mandates that it shall be duty of the transmission utility/licensee to provide non-discriminatory open access to its transmission system to every licensee and generating company. Open access in transmission thus enables the licensees (distribution licensees and traders) and generating companies the right to use the transmission systems without any discrimination. This would facilitate sale of electricity directly to the distribution companies. This would generate competition amongst the sellers and help reduce, gradually, the cost of generation/procurement. While open access in transmission implies freedom to the licensee to procure power from any source of his choice, open access in distribution here, means freedom to the consumer to get supply from any source of his choice. The provision of open access to consumers, ensures right of the consumer to get supply from a person other than the distribution licensee of his area of supply by using the distribution system of such distribution licensee. Unlike in transmission, open access in distribution has not been allowed from the outset primarily because of considerations of cross-subsidies. The law provides that open access in distribution would be allowed by the State Commissions in phases. For this purpose, the State Commissions are required to specify the phases and conditions of introduction of open access. However open access can be allowed on payment of a surcharge, to be determined by the State Commission, to take care of the requirements of current level of cross-subsidy and the fixed cost arising out of the licensee''s obligation to supply. Consequent to the enactment of the Electricity (Amendment) Act, 2003, it has been mandated that the State Commission shall within five years necessarily allow open access to consumers having demand exceeding one megawatt. [Ref: SESA Sterlite Limited case (Supra)].
9. The concept of open access was introduced as an option to power starved consumers to take supply by using the transmission and distribution network available in the State. In order to compensate for usage of the network, the open access charges have been stipulated. The terms of "distribution licensee", "distribution system", "inter-State transmission system", "open access", "State transmission utility", "transmission lines", "transmission licensee" and "wheeling" are defined under Section 2 of the said Act of 2003. The relevant portion of Section 2 of the said Act of 2003 read as follows:-
"2. Definitions.- In this Act, unless the context otherwise requires.-
****
****
"Distribution licensee" means a licensee authorized to operate and maintain a distribution system for supplying electricity to the consumers in his area of supply.
"Distribution system" means the system of wires and associated facilities between the delivery points on the transmission lines or the generating station connection and the point of connection to the installation of the consumers.
"Inter-State transmission system" includes-
(i) any system for the conveyance of electricity by means of main transmission line from the territory of one State to another State;
(ii) the conveyance of electricity across the territory of an intervening State as well as conveyance within the State which is incidental to such inter-State transmission of electricity;
(iii) the transmission of electricity within the territory of a State on a system built, owned, operated, maintained or controlled by a Central Transmission Utility.
"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.
"State transmission utility" means the Board or the Government Company specified as such by the State Government under sub-section (1) of Section 39.
"Transmission lines" means all high pressure cables and overhead lines (not being an essential part of the distribution system of a licensee) transmitting electricity from a generating station to another generating station or a sub-station, together with any step-up and step-down transformers, switch-gear and other works necessary to and used for the control of such cables or overhead lines, and such buildings or part thereof as may be required to accommodate such transformers, switch-gear and other works.
"Transmission licensee" means a licensee authorized to establish or operate transmission lines.
"Wheeling" means the operation whereby the distribution system and associated facilities of a transmission licensee or distribution licensee, as the case may be, are used by another person for the conveyance of electricity on payment of charges to be determined under Section 62".
10. The National Electricity Policy and National Tariff Policy also promote this concept of open access. The National Electricity Policy provides that open access in transmission will promote competition and in turn lead to availability of cheaper power. The policies emphasizes that the Regulatory Commissions need to provide facilitative framework for non-discriminatory open access at the earliest including technological up-gradation of the State Load Dispatch Centres by June, 2006 to ensure data acquisition capability on a real time basis. Open access to distribution networks initially for bulk consumers, would increase the availability of cheaper and reliable power supply. It has also been envisaged that the amount of cross-subsidy surcharge and additional surcharge to be levied from consumers who are permitted open access should not become so onerous that it eliminates competition.
11. In notifying the impugned MSERC Regulations, 2012, the State Commission had not appreciated and followed the provisions of the said Act of 2003, the National Electricity Policy and National Tariff Policy notified by the Central Govt. under Section 3 of the said Act of 2003 and the Statutory Regulations notified by the Central Electricity Regulatory Commission in terms of Section 61 of the said Act of 2003. Regulation 23 of the MSERC Regulations, 2012 has lost sight of:
"(a) The Annual Revenue Requirements of concerned electricity utilities form the basis of the transmission and wheeling charges to be levied on the open access customers and should be equitable, just and proportionate of the usage of the relevant system;
(b) Further the wheeling charges will leviable only on the number of units actually transmitted or wheeled irrespective of the open access sought for and taken and the charges should be levied on the basis of utilization of capacity of the line in MU terms and not on MW terms;
(c) In case of inter-State transmission, the wheeling charge is to be determined as per the Regulations notified by the Central Commission."
It is the further case of the petitioner association that without following these parameters, the objective of open access as provided under the said Act of 2003 could not be achieved. The State Commission without following the Regulations notified by the Central Commission and without following all these parameters has prescribed the methodology for calculating the wheeling charges under the impugned MSERC Regulations, 2012.
12. It is the further case of the petitioner association that Regulation 24 of the MSERC Regulations, 2012 has also lost sight of:
"(a) The cross subsidy surcharges needs to be approved or determined as per the provisions of the said Act of 2003 and the methodology to decide on the cost of supply specified in the National Tariff Policy.
(b) The National Tariff Policy provides as under:
"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% 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
T is the Tariff payable by the relevant category of consumers;
C is the weighted average cost of power purchase of top 5% 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.
The cross-subsidy surcharge should be brought down progressively and, as far as possible, at a linear rate to a maximum of 20% of its opening level by the year 2010-11."
(c) Considering the nature and purpose of the said Act of 2003 and the National Tariff Policy, the formula specified in the National Tariff Policy is required to be followed by the State Commission for determination of the cross subsidy surcharges."
It is the further case of the petitioner association that the Full Bench of the Appellate Tribunal for Electricity (the Appellate body constituted under Section 100 of the said Act of 2003 to hear appeals against the orders of the Central and State Commissions) in the case of RVK Energy Private Limited v. Central Power Distribution Co. of Andhra Pradesh Ltd: 2007 ELR (APTEL) 1222, has held as under:
"29. The formula detailed in the policy shows the path for calculating cross subsidy surcharge from the consumers, who are permitted, open access. The idea is that it should not be so hefty that consumers are discouraged from utilizing the source of power of their choice otherwise competition will be eliminated, which will go against the very grain of the Electricity Act.
30. The policy has been issued under Section 3 of the Act. It has a statutory flavor. The Regulatory Commission is required to abide by the National Electricity Policy and Tariff Policy issued by the Central Government as long as they are in consonance with the Act. The National Electricity Policy and Tariff Policy are prepared by the Central Government in consultation with the Authority for development of the power system based on optimal utilization of its resources such as coal, natural gas, nuclear substances and hydro and renewal resources of energy. Optimal utilization of resources will take place only when generator is assured of the use of the wires for transmitting electricity to the licensees and consumers. In this context open access assumes importance. In case open access is made available for transmitting electricity to the end-user at a cost which is higher than the cost at which the distribution licensee of the area supplies energy to the consumers, the concept of open access becomes meaningless. In case, cost to use open access is high, there cannot be optimal use of capacities and resources. The optimal use of capacities and resources is the mandate of Section 3 of the Act. Besides the emphasis placed on competition in electricity sector by the preamble to the Act would be reduced to a platitude. Such a situation would be contrary to the preamble of the Act and the very spirit of Section 3. The submission of the learned counsel for the distribution companies that the Central Government did not have jurisdiction to lay down the method and manner for calculating the surcharge cannot be countenanced in law. The submission is accordingly rejected."
13. It is the further case of the petitioner association that it is not open to any person to decide on the cross subsidy surcharge contrary to the scheme provided for and the methodology for its determination contained in the National Tariff Policy. The methodology provided under the National Tariff Policy is a statutory mandate and it should be followed by every State Commission. The State Commission in the impugned Open Access Regulations and in the impugned order dated 21.08.2012, had not followed the formula specified in the National Tariff Policy which is required to be followed. Further there is no reasoning whatsoever given by the State Commission for not following the National Tariff Policy. On the other hand, in the impugned order dated 21.08.2012, the State Commission has specifically observed that the cross subsidy surcharges is being determined and levied in terms of the National Tariff Policy. But actually not followed the provisions, in particular the formula specified in the National Tariff Policy in determining the cross-subsidy surcharges. The State Commission had blindly accepted the figures proposed by the respondent No. 3 with regard to loss levels. The State Commission had fixed the loss level at Extra High Tension Voltage (132 KV) at 4% whereas there were no figures to support the above given by the respondent No. 3 and the petitioner association contended that the actual losses at 132 KV is only 1%. The State Commission had fixed the loss level at High Tension Voltage (32 KV) as 6% and 9% giving reasons that this is the national average and proper figures have not been given by the respondent No. 3. This fixation is absurd and expressly against the rationale laid down by the Appellate Tribunal for Electricity in another judgment, namely Tata Steel Limited v. Orissa Electricity Regulatory Commission: 2011 ELR (APTEL) 1022 wherein, it has been held as under:
"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.
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 1/4th of 11 KV feeders have been metered and very small numbers of transformers have been provided with meters. Only 68% 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 distributions 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."
14. It is the further case of the petitioner association that the State Commission had determined the wheeling charges on MW basis instead of per unit basis. The petitioner association had categorically stated that the determination should be on per unit basis in the context of the inability of the respondent No. 3 to provide continuous supply of power to the industries and the industries being driven to seek open access both on account of power non-availability from the respondent No. 3 and also on account of exorbitant tariff of respondent No. 3 for giving supply of power. The State Commission by following the wrong approach fixed the excessive and prohibitive wheeling charges as Rs. 23008/MW/day. This means that if any consumer has to take open access of 5 MW per day, irrespective of whether the respondent No. 3 allows the consumer to draw the 5 MW or even if the consumer takes only 2 MW of open access, he will be forced to pay above Rs. 1,00,000/- per day which is unimaginable and in fact a design not to promote but prohibit open access. The petitioner association further states that even in the neighbouring State of Assam, the open access charges including wheeling, transmission and cross subsidy surcharge is much lower. The wheeling charges at 33 KV had been fixed at 27 paise per KWH. The cross subsidy surcharge had been calculated as per the formula in the National Tariff Policy and comes to 23 paise per KWH. However, the figures presented by the respondent No. 3 and fixed by the State Commission are inordinately high. It is also the further case of the petitioner association that the MSERC Regulations, 2012 notified by the State Commission is bad in law and contrary to the settled principles of law and the impugned order dated 21.08.2012 passed by the State Commission following the impugned MSERC Regulations, 2012 is liable to be set aside on the following amongst other grounds:-
"(i) Because the State Commission has failed to appreciate the object of open access as provided under the said Act of 2003. This concept of open access was introduced in the said Act of 2003 with an objective to promote competition and to provide a means to the consumers to get supply power from a source of their choice in a cheaper rate. The State Commission without considering the interest of the consumers, which is the prime objective of open access, passed the Open Access Regulation, 2012.
(ii) Because the present Open Access Regulation, 2012 [impugned MSERC Regulations, 2012] is not in accordance with the scheme, objective and provisions of the said Act of 2003, the National Tariff Policy and not in consistent with the objective of promoting non-discriminatory open access in the larger public interest. It is settled principle of law that the Regulations notified by the Central Commission and National Tariff Policy notified by the Central Govt. should be followed by the State Commissions when regulating open access.
(iii) Because Sections 178 and 181 of the said Act of 2003 provides for the Regulations notified by the Central Commission or the State Commissions should be consistent with the provisions of the Act, which includes Section 3, empowering the Central Govt. to publish policies.
(iv) Because the said Act of 2003, under Section 3 had empowered the Central Govt. to publish National Electricity Policy and National Tariff Policy in consultation with the State Commissions. The State Commissions are bound by such policies published by the Central Govt. as long as they are in consonance with the said Act of 2003. It is open to the State Commissions to deviate from such policies when framing any Regulation. The State Commission has not followed the National Tariff Policy while framing the Open Access Regulation, 2012 [impugned MSERC Regulations, 2012].
(v) Because the State Commission has in the Open Access Regulation, 2012 [impugned MSERC Regulations, 2012] as well as in the subsequent order dated 21.08.2012, not followed the methodology specified in the National Tariff Policy for determination of cross subsidy surcharge. It is submitted that the determination of the cross subsidy surcharges by the State Commission in order dated 21.08.2012 is contrary to the provisions of the said Act of 2003 and the National Tariff Policy.
(vi) Because as per provisions of the said Act of 2003, the State Commission is to abide by the policies framed by the Central Govt. under Section 3 of the said Act of 2003. The State Commission has failed to appreciate that the policy had specifically provided the methodology for calculation of the cross subsidy surcharges and as per law, the State Commission has to follow the methodology while calculating the surcharge including the example given.
(vii) Because the State Commission failed to follow the judgment of the Appellate Tribunal in RVK Energy Private Ltd. v. Central Power Distribution Co. of Andhra Pradesh Ltd.: 2007 ELR (APTEL) 1222 and deviated from the directives given by the Appellate Tribunal, which is otherwise binding on the State Commission. In this judgment, the Appellate Tribunal held as under:-
"The policy has been issued under Section 3 of the Act. It has a statutory flavor. The Regulatory Commission is required to abide by the National Electricity Policy and Tariff Policy issued by the Central Govt. as long as they are in consonance with the Act. The National Electricity Policy and Tariff Policy are prepared by the Central Govt. in consultation with the Authority for development of the power system based on optimal utilization of its resources such as coal, natural gas, nuclear substances and hydro and renewal resources of energy."
(viii) Because in view of the National Tariff Policy and judgment of the Appellate Tribunal in the RVK Energy Private Ltd. case (Supra) as well as other judgments referred hereinabove, it was not open to any person to decide on the cross subsidy surcharge contrary to the scheme provided for and the methodology provided in the National Tariff Policy. The methodology provided in the National Tariff Policy is a statutory mandate.
(ix) Because the Appellate Tribunal in RVK Energy Private Ltd. case (Supra) has already interpreted and had specifically held that the cross subsidy surcharges need to be determined as per the methodology provided under the tariff policy. This is a binding judicial precedent of the First Appellate Court on the State Commissions. It is therefore, not open to the State Commissions to deviate from the above methodology and apply any other methodology for determination of cross subsidy surcharge.
(x) Because the State Commission has not given any reasoning whatsoever for not following the National Tariff Policy. On the other hand, the State Commission had repeatedly and specifically observed that the cross subsidy surcharge is being determined and levied in terms of the National Tariff Policy, without actually doing so.
(xi) Because the Appellate Tribunal in a subsequent decision in M/s. Tata Steel Limited case (Supra) had also referred to and followed the formula for cross subsidy surcharges as provided in the National Tariff Policy. The State Commission without appreciating all these judicial precedent has deviated from the methodology prescribed under the National Tariff Policy.
(xii) Because the State Commission failed to appreciate that the respondent No. 3 could not adduce any sufficient data or reliable authentic information based on sound statistics to substantiate its claim of 40% transmission losses. Similarly, claim @15% for the industry feeder consumers at 33 KV is arbitrary and based upon mere conjectures and surmises without having any logical basis for the same. The State Commission failed to observe that the respondent No. 3 notwithstanding the direction by the State Commission to provide relevant data, failed to do the same. Therefore, the impugned order of the State Commission is bereft of any reason, which needs to be set aside so far as the observation with regard to the transmission losses is concerned.
(xiii) The State Commission has erroneously agreed upon the proposal of 4% losses in transmission system whereas, the respondent No. 3 has itself violated the direction of the State Commission in Tariff Order 2012-13 whereby, the State Commission had directed the respondent No. 3 to do energy audit by putting energy meters in each incoming and outgoing feeders and substation."
15. Sections 38, 39, 42, 43, 44, 61, 62, 178 and 181 of the said Act of 2003 read as follows:-
"38. Central Transmission Utility and functions.-(1) The Central Government may notify any Government company as the Central Transmission Utility:
Provided that the Central Transmission Utility shall not engage in the business of generating of electricity or trading in electricity:
Provided further that the Central Government may transfer, and vest any property, interest in property, rights and liabilities connected with, and personnel involved in transmission of electricity of such Central Transmission Utility, to a company or companies to be incorporated under the Companies Act, 1956 (1 of 1956) to function as a transmission licensee, through a transfer scheme to be effected in the manner specified under Part XIII and such company or companies shall be deemed to be transmission licensees under this Act.
(2) The functions of the Central Transmission Utility shall be -
(a) to undertake transmission of electricity through inter-State transmission system;
(b) to discharge all functions of planning and co-ordination relating to inter-state transmission system with -
(i) State Transmission Utilities;
(ii) Central Government;
(iii) State Governments;
(iv) generating companies;
(v) Regional Power Committees;
(vi) Authority;
(vii) licensees;
(viii) any other person notified by the Central Government in this behalf;
(c) to ensure development of an efficient, co-ordinated and economical system of inter-State transmission lines for smooth flow of electricity from generating stations to the load centres;
(d) to provide non-discriminatory open access to its transmission system for use by-
(i) any licensee or generating company on payment of the transmission charges; or
(ii) any consumer as and when such open access is provided by the State Commission under sub-section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be specified by the Central Commission:
Provided that such surcharge shall be utilised for the purpose of meeting the requirement of current level cross-subsidy:
Provided further that such surcharge and cross subsidies shall be progressively reduced [***] in the manner as may be specified by the Central Commission:
Provided also that the manner of payment and utilisation of the surcharge shall be specified by the Central Commission:
Provided also that such surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.
39. State Transmission Utility and functions.-(1) The State Government may notify the Board or a Government company as the State Transmission Utility:
Provided that the State Transmission Utility shall not engage in the business of trading in electricity:
Provided further that the State Government may transfer, and vest any property, interest in property, rights and liabilities connected with, and personnel involved in transmission of electricity, of such State Transmission Utility, to a company or companies to be incorporated under the Companies Act, 1956 (1 of 1956) to function as transmission licensee through a transfer scheme to be effected in the manner specified under Part XIII and such company or companies shall be deemed to be transmission licensees under this Act.
(2) The functions of the State Transmission Utility shall be -
(a) to undertake transmission of electricity through intra-State transmission system;
(b) to discharge all functions of planning and co-ordination relating to intra-state transmission system with -
(i) Central Transmission Utility;
(ii) State Governments;
(iii) generating companies;
(iv) Regional Power Committees;
(v) Authority;
(vi) licensees;
(vii) any other person notified by the State Government in this behalf;
(c) to ensure development of an efficient, co-ordinated and economical system of intra-State transmission lines for smooth flow of electricity from a generating station to the load centres;
(d) to provide non-discriminatory open access to its transmission system for use by-
(i) any licensee or generating company on payment of the transmission charges; or
(ii) any consumer as and when such open access is provided by the State Commission under sub-section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be specified by the State Commission:
Provided that such surcharge shall be utilised for the purpose of meeting the requirement of current level cross-subsidy:
Provided further that such surcharge and cross subsidies shall be progressively reduced [***] in the manner as may be specified by the State Commission:
Provided also that the manner of payment and utilisation of the surcharge shall be specified by the State Commission:
Provided also that such surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.
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 [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:
Provided further that such surcharge shall be utilised to meet the requirements of current level of cross subsidy within the area of supply of the distribution licensee:
Provided also that such surcharge and cross subsidies shall be progressively reduced [***] in the manner as may be specified by the State Commission:
Provided also that such surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use:
[Provided also that the State Commission shall, not later than five years from the date of commencement of the Electricity (Amendment) Act, 2003 (57 of 2003) by regulations, provide such open access to all consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one megawatt.]
(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 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.
(4) Where the State Commission permits a consumer or class of consumers to receive supply of electricity from a person other than the distribution licensee of his area of supply, such consumer shall be liable to pay an additional surcharge on the charges of wheeling, as may be specified by the State Commission, to meet the fixed cost of such distribution licensee arising out of his obligation to supply.
(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.
(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.
(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.
(8) The provisions of sub-sections (5),(6) and (7) shall be without prejudice to right which the consumer may have apart from the rights conferred upon him by those sub-sections.
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:
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.
[Explanation.- For the purposes of this sub-section, "application" means the application complete in all respects in the appropriate form, as required by the distribution licensee, along with documents showing payment of necessary charges and other compliances:]
(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.
44. Exceptions from duty to supply electricity. -Nothing contained in section 43 shall be taken as requiring a distribution licensee to give supply of electricity to any premises if he is prevented from so doing by cyclone, floods, storms or other occurrences beyond his control.
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;
(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;
(f) multiyear 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.
62. Determination of tariff. -(1) The Appropriate Commission shall determine the tariff in accordance with the 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.
(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.
178. Powers of Central Commission to make regulations. -
(1) The Central Commission may, by notification make regulations consistent with this Act and the rules generally to carry out the provisions of this Act.
(2) In particular and without prejudice to the generality of the power contained in sub-section (1), such regulations may provide for all or any of following matters, namely:-
(a) period to be specified under the first proviso to section 14;
(b) the form and the manner of the application under sub-section (1) of section 15;
(c) the manner and particulars of notice under sub-section (2) of section 15;
(d) the conditions of licence under section 16;
(e) the manner and particulars of notice under clause (a) of sub-section (2) of section 18;
(f) publication of alterations or amendments to be made in the licence under clause(c) of sub-section (2) of section 18;
(g) Grid Code under sub-section (2) of section 28;
(h) levy and collection of fees and charge from generating companies or transmission utilities or licensees under sub-section (4) of section 28;
(i) rates, charges and terms and conditions in respect of intervening transmission facilities under proviso to section 36;
(j) payment of the transmission charges and a surcharge under sub-clause (ii) of clause (d) of sub-section (2) of section 38;
(k) reduction [***] of surcharge and cross subsidies under second proviso to sub-clause (ii) of clause (d) of sub-section (2) of section 38;
(l) payment of transmission charges and a surcharge under sub-clause (ii) of clause(c) of section 40;
(m) reduction [***] of surcharge and cross subsidies under the second proviso to sub-clause (ii) of clause (c) of section 40;
(n) proportion of revenues from other business to be utilised for reducing the transmission and wheeling charges under proviso to section 41;
(o) duties of electricity trader under sub-section (2) of section 52;
(p) standards of performance of a licensee or class of licensees under sub-section (1) of section 57;
(q) the period within which information to be furnished by the licensee under sub-section (1) of section 59;
[(r) the manner for reduction of cross-subsidies under clause (g) of Section 61;]
(s) the terms and conditions for the determination of tariff under section 61;
(t) details to be furnished by licensee or generating company under sub-section (2) of section 62;
(u) the procedures for calculating the expected revenue from tariff and charges under sub-section (5) of section 62;
(v) the manner of making an application before the Central Commission and the fee payable therefor under sub-section (1) of section 64;
(w) the manner of publication of application under sub-section (2) of section 64;
(x) issue of tariff order with modifications or conditions under sub-section (3) of section 64;
(y) the manner by which development of market in power including trading specified under section 66;
(z) the powers and duties of the Secretary of the Central Commission under sub-section (1) of section 91;
(za) the terms and conditions of service of the Secretary, officers and other employees of Central Commission under sub-section (3) of section 91;
(zb) the rules of procedure for transaction of business under sub-section (1) of section 92;
(zc) minimum information to be maintained by a licensee or the generating company and the manner of such information to be maintained under sub-section (8) of section 128;
(zd) the manner of service and publication of notice under section 130;
(ze) any other matter which is to be, or may be, specified by regulations.
(3) All regulations made by the Central Commission under this Act shall be subject to the conditions of previous publication.
181. Powers of State Commissions to make regulations.-
(1) The State Commissions may, by notification, make regulations consistent with this Act and the rules generally to carry out the provisions of this Act.
(2) In particular and without prejudice to the generality of the power contained in sub-section (1), such regulations may provide for all or any of the following matters, namely:-
(a) period to be specified under the first proviso of section 14;
(b) the form and the manner of application under sub-section (1) of section 15;
(c) the manner and particulars of application for licence to be published under sub-section (2) of section 15;
(d) the conditions of licence under section 16;
(e) the manner and particulars of notice under clause (a) of sub-section (2) of section 18;
(f) publication of the alterations or amendments to be made in the licence under clause (c) of sub-section (2) of section 18;
(g) levy and collection of fees and charges from generating companies or licensees under sub-section (3) of section 32;
(h) rates, charges and the terms and conditions in respect of intervening transmission facilities under proviso to section 36;
(i) payment of the transmission charges and a surcharge under sub-clause (ii) of clause (d) of sub-section (2) of section 39;
(j) reduction [***] of surcharge and cross subsidies under second proviso to sub-clause (ii) of clause (d) of sub-section (2) of section 39;
(k) manner and utilization of payment of surcharge under the fourth proviso to sub-clause (ii) of clause (d) of sub-section (2) of section 39;
(l) payment of the transmission charges and a surcharge under sub-clause(ii) of clause (c) of section 40;
(m) reduction [***] of surcharge and cross subsidies under second proviso to sub-clause (ii) of clause (c) of section 40;
(n) the manner of payment of surcharge under the fourth proviso to sub-clause (ii) of clause (c) of section 40;
(o) proportion of revenues from other business to be utilised for reducing the transmission and wheeling charges under proviso to section 41;
(p) reduction [***] of surcharge and cross-subsidies under the third proviso to sub-section (2) of section 42;
(q) payment of additional charges on charges of wheeling under sub-section (4) of section 42;
(r) guidelines under sub-section (5) of section 42;
(s) the time and manner for settlement of grievances under sub-section (7) of section 42;
(t) the period to be specified by the State Commission for the purposes specified under sub-section (1) of section 43;
(u) methods and principles by which charges for electricity shall be fixed under sub-section (2) of section 45;
(v) reasonable security payable to the distribution licensee under sub-section (1) of section 47;
(w) payment of interest on security under sub-section (4) of section 47;
(x) electricity supply code under section 50;
(y) the proportion of revenues from other business to be utilised for reducing wheeling charges under proviso to section 51;
(z) duties of electricity trader under sub-section (2) of section 52;
(za) standards of performance of a licensee or a class of licensees under sub-section (1) of section 57;
(zb) the period within which information to be furnished by the licensee under sub-section (1) of section 59;
(zc) the manner of reduction of cross-subsidies under clause (g) of section 61;
(zd) the terms and conditions for determination of tariff under section 61;
(ze) details to be furnished by licensee or generating company under sub-section (2) of section 62;
(zf) the methodologies and procedures for calculating the expected revenue from tariff and charges under sub-section (5) of section 62;
(zg) the manner of making an application before the State Commission and the fee payable therefor under sub-section (1) of section 64;
(zh) issue of tariff order with modifications or conditions under sub-section (3) of section 64;
(zi) the manner by which development of market in power including trading specified under section 66;
(zj) the powers and duties of the Secretary of the State Commission under sub-section (1) of section 91;
(zk) the terms and conditions of service of the secretary, officers and other employees of the State Commission under sub-section (2) of section 91;
(zl) rules of procedure for transaction of business under sub-section (1) of section 92;
(zm) minimum information to be maintained by a licensee or the generating company and the manner of such information to be maintained under sub-section (8) of section 128;
(zn) the manner of service and publication of notice under section 130;
(zo) the form of preferring the appeal and the manner in which such form shall be verified and the fee for preferring the appeal under sub-section (1) of section 127;
(zp) any other matter which is to be, or may be, specified.
(3) All regulations made by the State Commission under this Act shall be subject to the condition of previous publication."
16. During the pendency of this writ petition, the State Commission (respondent No. 2) has issued a draft Notification dated 03.03.2015 for amendment of the MSERC (Terms and Conditions of Open Access) Regulations, 2012. The State Commission also published the MePDCL- Tariff Order for Control Period FY 2015-16 to FY 2017-18. The relevant portion of the MePDCL - Tariff Order for Control Period FY 2015-16 to FY 2017-18 reads as follows:-
"Commission''s analysis
Commission has considered the submission of the parties and taken a view in this order. In this tariff order the Commission has fixed the ARR of MePDCL for FY 2015-16 and in the control period. The ARR petition of MePDCL for 2015-16 has been examined as per Regulations and taken as the base for determining the wheeling charges in accordance with MSERC (Terms and Conditions of Open Access) Regulations, 2012. The average demand for FY 2015-16 is assessed as 99 MW.
The Wheeling charges will be Rs. 36770/MW/Day.
The wheeling charges for all consumers is fixed at Rs. 1.24 per unit. However the charges from open access consumers shall be recovered as per the Commission''s regulation 23 of Open Access Regulations.
Cross Subsidy Surcharge:
Under the law and also the OA Regulations (regulation 24) an open access consumer shall, in addition to transmission and wheeling charges, also pay cross subsidy surcharges on per unit basis for actual energy through open access. The amount of surcharge so calculated to meet the current level of cross subsidy from that category of consumer and shall be paid to the distribution licensee. The intent of the EA 2003 is also that the licensee is compensated for the requirement of cross subsidy in its ARR. It is necessary to subsidize the other category of consumer of the distribution licensee as there is no other mean to do so. The State Government in its letter dated 31.03.2015 addressed to the Commission has made it clear that it does not contemplate to extent any tariff subsidy to any class of consumers. The control period in the ARR has overall surplus in availability of power due to new allotments of power stations from central as well as new generation projects within the State. In this scenario it is essential to charge open access consumers the cross subsidy so as to meet the current requirement of the cross subsidy for majority of consumers of the State i.e. domestic, lifeline, crematorium and agriculture. In past 2 years the consumption by industries has gone down substantially. In this situation there is a need to recover cross subsidy from open access consumers. In the past it has been experienced that the open access has facilitated open access consumers to get round the clock power supply. The Commission cannot ignore the present scenario where the major category is in the subsidized domestic category, BPL and the agriculture sector. In the event of no subsidy from the State Government as stated above in 2015-16, the need and interest of common man cannot be overlooked. Even at present IHT and IEHT consumers of the distribution licensee are subsidizing large number of consumers of the State by paying cross subsidy in their tariff. The Commission has given serious thought and is convinced that it is essential that cross subsidy is charged from open access consumers and if further required to levy additional surcharge too. At different occasions and in written submissions industry association demanded that cross subsidy surcharge should be decided as per NTP follow formula. Ideally the cost of supply should be determined at weighted average cost of power purchase instead top 5% most expensive power as the licensee has to meet its long term commitments as per PPA. However, the Commission is following NTP formula for FY2015-16.
The formula for assessing the cross subsidy surcharge as per the Tariff Policy issued by Government of India is given below:
S = T - [C (1+L/100) + D]
Where S is the cross subsidy surcharge;
T is the tariff payable by the relevant category of consumers;
C is the weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power;
D is the wheeling charge;
and L is the system losses for the applicable voltage level, expressed as a percentage.
By using this formula, the cross subsidy surcharge for EHT category of consumers shall be Rs. 1.51 per unit for EHT category and Rs. 1.41 per unit for HT category.
The losses for EHT category is allowed @ 4% and for HT category at @ 6% for 33 KV and @9% for 11 KV.
These rates shall be applied w.e.f. 1.4.2015. All conditions for open access shall be as per MSERC (terms and condition of open access) Regulations 2012 and its amendments. It is further directed the SLDC in association with MNREDA shall apply RPO compliances for meeting purchase of energy/REC from solar and non solar sources as per MSERC (Renewable purchase obligations and compliance) Regulations 2015."
17. The petitioner association also filed additional affidavit dated 29.05.2015 in support of their case in the writ petition that as the respondents had failed to supply the power and electricity for making industrial units of the petitioner association fully functional, the petitioner association was forced to meet the shortage of electricity through open access system and also the case of the respondents that the "Distribution Licensee is supplying sufficient power to its industrial consumers" is absolutely incorrect. As early as 30.07.2009, when one of the members of the petitioner-association was setting up their plant had made a request for release of power to MePDL and they were informed that the Distribution Licensee is not in a position to release 8.0 MVA power at 132 KV level as requested and vide letter dated 22.09.2010, Additional Chief Engineer (EL), MePDCL of MeECL informed that due to acute shortage of power in the State, transfer of load will not be possible. Similarly, another member of the petitioner-association i.e. Shyam Century Ferrous made a request to the Distribution Licensee on 21.03.2012 to accord sanction for additional power of 7.7 MW for expansion of the project. As the same was not been considered by the Distribution Licensee, the company concerned approached MeSERC for grant of open access for purchase of power on 06.08.2012. Thereafter, as directed by the State Commission, the said member applied for clearance certificate from MeECL and vide letter dated 12.09.2012 issued by the Chief Engineer (Distribution) stated that MePDCL has no objection to the drawal of power through open access.
18. The State Commission in its order dated 12.11.2013 in para 13 make a categorical observation that there are two main factors prompting IHT and IEHT consumers to opt for open access. One is the shortage of power from the grid of the local area of the distribution licensee and the other is that power is available at competitive rates from the Power Exchange or other outside stations. The relevant portions of the said order of the State Commission dated 12.11.2013 are quoted hereunder:-
"MEGHALAYA STATE ELECTRICITY REGULATORY COMMISSION
SHILLONG
In the matter of-
A petition for approval of Distribution Open Access Charges for 2013-14 under the MSERC (Terms and Conditions of Open Access) Regulations, 2012
AND
In the matter of-The Meghalaya Power Distribution Corporation Ltd. (MePDCL), Lumjingshai, Shillong-793001, Meghalaya.
.... Petitioner
Coram: Anand Kumar
ORDER
(12.11.2013)
Licensee Meghalaya Power Distribution Corporation Ltd. (MePDCL) on 30.04.2013 filed a petition seeking Commission''s approval of the charges it has proposed to levy an open access consumers for 2013-14. As per the information available with the Commission, there are at present three such open access consumers who buy power from outside the State and use licensee''s network for reaching the power to their destinations.
2. The Electricity Act, 2013 (Section 42) provides for open access. Regulations have also been framed by the Commission for determination of the wheeling charges, cross subsidy, additional charges and other matters connected with open access. The Regulations, that is, the Meghalaya State Electricity Regulatory Commission (Terms and Conditions of Open Access) Regulations, 2012 (the OA Regulations) came into force on 10.05.2012. It may be mentioned that the Regulations have been challenged by Byrnihat Industries Association (BIA) in the High Court of Meghalaya and the matter is pending. There is, however, no stay.
****
****
13. There are two main factors prompting IHT and IEHT consumers to opt for open access. One is the shortage of the power from the grid of the local area of the distribution licensee and the other is that the power is available at competitive rates from the Power Exchange or other outside stations. In 2012-13, because of the shortage in the State, the Commission has facilitated the process of open access by framing the OA Regulation and fixing the charges relevant at that point of time. The cross subsidy surcharges were fixed on the assumption that in the shortage scenario, the power saved would be distributed to other industries and would prevent shortfall in the revenue derivable from cross subsidy. In 2013-14, the situation of power availability has changed with the operation of OTPC Palatana Project and Leshka Hydro Electric Project. Due to this, in the recent months in 2013-14, MePDCL has been able to trade some of its power outside the State.
****
****
21. In implementing this order, the Commission expects the MePDCL and MePTCL to give due importance to it and comply with the provisions of the MSERC (Terms and Conditions of Open Access) Regulations, 2012 while allowing open access to consumers including captive generating plants and recovering the charges as may be due from them.
(Anand Kumar)
Chairman"
19. Sections 38, 39 and 40 of the said Act of 2003 provide for the Transmission Utility (Central/State/transmission licensee) to provide non-discriminatory Open Access, cross-subsidy surcharge, which shall be progressively reduced. Section 42 provides for open access in the distribution system. Section 42(2) provides for open access to be provided, subject to surcharge and operational constraints. The present case is of distribution open access, which is under Section 42 of the said Act of 2003. The said Act of 2003 mandates that the cross-subsidy surcharge is reduced and cannot be increased. (Section 38 (2) - second proviso; Section 39(2) - Second Proviso; Section 40 - second proviso and Section 42(2)-third proviso). The proviso to Section 42(2) provides for payment of surcharge for cross-subsidy. The third proviso to Section 42(2) provides that the surcharge shall be progressively reduced. Section 61 provides for Tariff Regulations. Section 61(i) provides that the Appropriate Commission while framing Tariff Regulations shall be guided, inter alia, by the National Tariff Policy and National Electricity Policy. Section 86 provides for the functions of the State Commission. Section 86(4) provides that the State Commission shall be guided by the Tariff Policy, National Electricity Policy and the National Electricity Plan.
20. The State Commission itself had admitted in the latest Tariff Order dated 31.03.2015 that it has to calculate the cross-subsidy surcharge as per the National Tariff Policy. The relevant extracts from the order dated 31.03.2015 is as under:
"Cross Subsidy Surcharge:
Under the law and also the OA Regulations (regulation 24) an open access consumer shall, in addition to transmission and wheeling charges, also pay cross subsidy surcharges on per unit basis for actual energy through open access. The amount of surcharge so calculated to meet the current level of cross subsidy from that category of consumer and shall be paid to the distribution licensee. The intent of the EA 2003 is also that the licensee is compensated for the requirement of cross subsidy in its ARR. It is necessary to subsidize the other category of consumer of the distribution licensee as there is no other mean to do so. The State Government in its letter dated 31.03.2015 addressed to the Commission has made it clear that it does not contemplate to extent any tariff subsidy to any class of consumers. The control period in the ARR has overall surplus in availability of power due to new allotments of power stations from central as well as new generation projects within the State. In this scenario it is essential to charge open access consumers the cross subsidy so as to meet the current requirement of the cross subsidy for majority of consumers of the State i.e. domestic, lifeline, crematorium and agriculture. In past 2 years the consumption by industries has gone down substantially. In this situation there is a need to recover cross subsidy from open access consumers. In the past it has been experienced that the open access has facilitated open access consumers to get round the clock power supply. The Commission cannot ignore the present scenario where the major category is in the subsidized domestic category, BPL and the agriculture sector. In the event of no subsidy from the State Government as stated above in 2015-16, the need and interest of common man cannot be overlooked. Even at present IHT and IEHT consumers of the distribution licensee are subsidizing large number of consumers of the State by paying cross subsidy in their tariff. The Commission has given serious thought and is convinced that it is essential that cross subsidy is charged from open access consumers and if further required to levy additional surcharge too. At different occasions and in written submissions industry association demanded that cross subsidy surcharge should be decided as per NTP follow formula. Ideally the cost of supply should be determined at weighted average cost of power purchase instead top 5% most expensive power as the licensee has to meet its long term commitments as per PPA. However, the Commission is following NTP formula for FY2015-16.
The formula for assessing the cross subsidy surcharge as per the Tariff Policy issued by Government of India is given below:
S = T - [C (1+L/100) + D]
Where S is the cross subsidy surcharge;
T is the tariff payable by the relevant category of consumers;
C is the weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power;
D is the wheeling charge;
and L is the system losses for the applicable voltage level, expressed as a percentage.
By using this formula, the cross subsidy surcharge for EHT category of consumers shall be Rs. 1.51 per unit for EHT category and Rs. 1.41 per unit for HT category.
The losses for EHT category is allowed @ 4% and for HT category at @ 6% for 33 KV and @9% for 11 KV."
21. The State Commission has not followed the formula prescribed under the Tariff Policy. The Hon''ble Supreme Court (Constitution Bench) in
"18. Section 3 of the 2003 Act requires the Central Government, in consultation with the State Governments and the Authority, to prepare the National Electricity Policy as well as tariff policy for development of the power system based on optimum utilization of resources. The Central and the State Governments are also vested with rule-making powers under Sections 176 and 180 respectively, while the "Authority" has been defined under Section 2(6) as the regulation-making power under Section 177. On the other hand, the Regulatory Commissions are vested with the powers to frame policy, in the form of regulations, under various provisions of the 2003 Act. However, the Regulatory Commissions are empowered to frame policy, in the form of regulations, as guided by the general policy framed by the Central Government. They are to be guided by the National Electricity Policy, the tariff policy as well as the National Electricity Plan in terms of Sections 79(4) and 86(4) of the 2003 Act (see also Section 66).
19. In this connection, it may also be noted that the Central Government has also, in exercise of its power under Section 3 of the 2003 Act, notified the tariff policy with effect from 6-1-2006. One of the primary objectives of the tariff policy is to ensure availability of electricity to consumers at reasonable and competitive rates. The tariff policy tries to balance the interest of consumers and the need for investments while prescribing the rate of return. It also tries to promote trading in electricity for making the markets competitive. Under the tariff policy, there is a mandate given to the Regulatory Commissions, namely, to monitor the trading transactions continuously and ensure that the electricity traders do not indulge in profiteering in cases of market failure. The tariff policy directs the Regulatory Commissions to fix the trading margin in a manner which would reduce the costs of electricity to the consumers and, at the same time, they should endeavour to meet the requirement for investments."
Section 86(4) of the said Act of 2003 clearly provides that 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 of the said Act of 2003.
22. In the present case, the only issue is on the cross-subsidy surcharge under Section 42(2). The surcharge under Section 42(4) applies only when there is a stranded capacity to pay fixed charges, which is not in issue in the present case. Additional surcharge is provided in Regulation 25 of the Open Access Regulations, which is not the subject matter of challenge in the present case. The distinction between cross-subsidy surcharge and surcharge under Section 42(4) for fixed cost has also been reiterated by the Apex Court in
"27. The issue of open access surcharge is very crucial and implementation of the provision of open access depends on judicious determination of surcharge by the State Commissions. There are two aspects to the concept of surcharge - one, the cross-subsidy surcharge i.e. the surcharge meant to take care of the requirements of current levels of cross-subsidy, and the other, the additional surcharge to meet the fixed cost of the distribution licensee arising out of his obligation to supply. The presumption, normally is that generally the bulk consumers would avail of open access, who also pay at relatively higher rates. As such, their exit would necessarily have adverse effect on the finances of the existing licensee, primarily on two counts - one, on its ability to cross-subsidise the vulnerable sections of society and the other, in terms of recovery of the fixed cost such licensee might have incurred as part of his obligation to supply electricity to that consumer on demand (stranded costs). The mechanism of surcharge is meant to compensate the licensee for both these aspects."
In these circumstances, the purpose of cross-subsidy surcharge under Section 42(2) of the said Act of 2003 is different from the surcharge under Section 42(4) of the said Act of 2003. The Open Access Regulation in Regulations provides for cross-subsidy surcharge, which is subject matter of challenge in the present case.
23. It is also relevant to mention that the State Commission has, with regard to the surcharge under Section 42(4) of the said Act of 2003, to follow the provisions of the National Tariff Policy by treating the same to be binding. In this regard, the National Tariff Policy provides as under:
"8.5.4 The additional surcharge for obligation to supply as per Section 42(4) of the Act should become applicable only if it is conclusively demonstrated that the obligation of a licensee, in terms of existing power purchase commitments, has been and continues to be stranded, or there is an unavoidable obligation and incidence to bear fixed costs consequent to such a contract. The fixed costs related to network assets would be recovered through wheeling charges."
24. The mandate of the said Act of 2003 is to determine voltage wise cost of supply and not average cost of supply. In this regard, the Apex Court in the recent judgment in
"9. Cost of Supply and Cross Subsidy - The statement of objects and reasons for the enactment of the Act, extracted above, would indicate a legislative realisation that the power sector in the country was in dire straits. This was largely on account of implementation of policy decisions to provide free or highly subsidised power to certain classes of consumers. In a regime wherein tariff was a matter of governmental dictation and directives providing free or subsidised power to one section at the cost of another or others and a host of such related decisions divorced from commercial and prudent practices had plunged the power sector into uncertainty and darkness. To remedy the situation, the Act of 2003 was enacted which, inter-alia, vested the power of fixation of tariff in the Regulatory Commissions with the Legislature itself clearly enunciating the principles for such determination as are to be found in Section 61 details of which has already been noted. Section 61(g), as originally enacted, contemplated a progressive journey to reduce and ultimately eliminate cross-subsidise by identifying the cost of supply to the consumer. The vision of each consumer fully paying for the power drawn by such consumer was to be reached over a period of time. In fact in the tariff policy notified Under Section 3 of the Act it was visualised that by the end of the year 2010-2011 tariff should be within 20 percent of the average cost of supply (average cost). The aforesaid National Tariff Policy was published in the year 2006. Clause 2 thereof which deals with the above aspect of the matter is in the following terms:
"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% 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."
10. Section 61(g), as earlier noted, was amended by Act No. 26 of 2007. The amended Section omitted the word "eliminate" the effect whereof was that cross-subsidies were destined to remain for the present and the emphasis was on attainment of minimum levels of such subsidy. The determination of "cost of supply" and reduction/elimination of cross-subsidies is closely interlinked. The difference in the intent and purport of Section 61(g) before and after its amendment would not be very relevant. The reduction of cross subsidy was contemplated by the unamended section as the first step leading to elimination. The change of legislative intent to put on hold, if not to abandon, the elimination of cross subsidies occurred during the period of transition itself. This is so because of the close proximity of time between the original enactment and its amendment. Besides, the road map visualised by the National Tariff Policy itself contemplated the continuance of cross subsidy even in the year 2010-2011 whereas the amendment to Section 61(g) came about in the year 2007.
11. The Commission while considering the fixation of tariffs for the years 2004-2005 and 2005-2006 based its determination on the average cost of supply which plainly is to be worked out by taking into account the total volume of electricity produced and the total cost incurred in such production. The industrial consumers in the appeal before the Tribunal contended that the cost of supply should be the voltage cost of supply, namely, the cost at which the consumer receives electricity at a particular voltage as a higher voltage would mean a lower price on account of lesser amount of distribution losses. As the industrial consumer receives supply of electricity at a high voltage, the average cost of supply, according to the industrial consumers, were to their detriment and was thus not contemplated under the Act. The Appellate Tribunal on an interpretation of Section 61(g) and 62(3) particularly in the absence of any prefix to the expression "cost of supply" in Section 61(g) took the view that it is more reasonable to advance towards a regime of voltage cost of supply which would provide a more actual/realistic basis for dealing with the issue of cross subsidies. However, as the progress to a regime of voltage cost of supply by reduction/elimination of cross-subsidies is to be gradual, the learned Appellate Tribunal held that no fault can be found with the determination of the average cost of supply made by the Commission for the financial years in question. However, keeping in view what the Tribunal understood to be the ultimate object of the Act it had directed that the relevant data with regard to voltage cost should be laid before the Commission and for the future the Commission would gradually proceed to determine the voltage cost of supply.
12. We have considered the perspective adopted by the learned Appellate Tribunal in seeking an answer to the issue of cost of supply/cross subsidies that had arisen for decision by it. The provisions of the Act and the National Tariff Policy requires determination of tariff to reflect efficient cost of supply based upon factors which would encourage competition, promote efficiency, economical use of resources, good performance and optimum investments. Though the practice adopted by many State Commissions and utilities is to consider the average cost of supply it can hardly be doubted that actual costs of supply for each category of consumer would be a more accurate basis for determination of the extent of cross-subsidies that are prevailing so as to reduce the same keeping in mind the provisions of the Act and also the requirement of fairness to each category of consumers. In fact, we will not be wrong in saying that in many a State the departure from average cost of supply to voltage cost has not only commenced but has reached a fairly advanced stage. Moreover, the determination of voltage cost of supply will not run counter to the legislative intent to continue cross subsidies. Such subsidies, consistent with executive policy, can always be reflected in the tariff except that determination of cost of supply on voltage basis would provide a more accurate barometer for identification of the extent of cross subsidies, continuance of which but reduction of the quantum thereof is the avowed legislative policy, at least for the present. Viewed from the aforesaid perspective, we do not find any basic infirmity with the directions issued by the Appellate Tribunal requiring the Commission to gradually move away from the principle of average cost of supply to a determination of voltage cost of supply."
25. The Distribution Licensee under Section 43 of the said Act of 2003 is under an universal supply obligation to supply electricity to any consumer on request irrespective of the fact that the consumer is an industrial consumer or domestic consumer or an agricultural consumer. In the present case, the distribution licensee was admittedly already under deficit and was not in a position to supply reliable power thus violating its duties under Section 43 of the said Act of 2003. Therefore, the petitioner association were forced to procure power through open access. In such circumstances, the question of levy of cross-subsidy surcharge itself does not arise as discussed hereinabove. This is also the view of the Appellate Tribunal for Electricity in M/s. Steel Furnace Association of India v. Punjab State Electricity Regulatory Commission and Anr.: Appeal No. 38 of 2013. The relevant portion of the judgment of the Appellate Tribunal for Electricity in M/s. Steel Furnace Association of India case (Supra) reads as follows:-
"Appellate Tribunal for Electricity
(Appellate Jurisdiction)
Dated: 01st August, 2014
Present:
Hon''ble Mr. Justice M. Karpaga Vinayagam, Chairperson
Hon''ble Mr. Rakesh Nath, Technical Member
Appeal No. 38 of 2013
M/s. Steel Furnace Association of India Dhandari Industrial Focal Point Ludhiana-141 010
....Appellant
Versus
1. Punjab State Electricity Regulatory Commission SCO No. 220-221, Sector 34-A, Chandigarh
2. Punjab State Power Corporation Ltd. The Mall, Patiala-147001
....Respondent
Counsel for the Appellant (s):
Mr. Sanjay Sen, Sr. Adv.
Mr. Hemant Singh
Ms. Sikha Ohri
Ms. Ruth Elwin
Ms. Surbhi Sharma
Mr. Anurag Sharma
Mr. Sunil Sharma
Counsel for the Respondent (s):
Mr. Sakesh Kumar for R-1
Mr. Anand K. Ganesan
Ms. Swapna Seshadri for R-2
JUDGMENT
Per Hon''ble Mr. Justice M. Karpaga Vinayagam, Chairperson
"Whether a Consumer is liable to pay Cross Subsidy Surcharge to the Distribution Licensee for availing power supply under Open Access even during the period when the Distribution Licensee was unable to supply power to the said Consumer and had imposed power cuts on the consumer"?
1. This is the question posed in this Appeal.
2. M/s. Steel Furnance Association of India is the Appellant herein.
3. The Appellant filed a Petition before the Punjab State Commission praying for the direction that Cross Subsidy Surcharge should not be levied by the State Power Corporation on the Appellant when it purchased power under Open Access from outside when the Power Corporation was not able to supply power to the Appellant due to the power cuts imposed by the Power Corporation.
****
****
7. The learned Senior Counsel appearing for the Appellant, has made the following submissions assailing the Impugned Order:
(a) The interpretation which has been given by the State Commission in respect of Section 42(2) and Regulation 26 of the Intra-State Open Access, Regulations, 2011, is not valid. Section 42(2) of the Electricity Act, 2003 has to be read with overall purpose of electricity reforms legislation under which the Open Access regime was introduced. The pedantic and mechanical interpretation of the provisions of the Electricity Act, 2003 and Regulations by the State Commission have resulted in absurdity.
(b) The law certainly did not envisage a situation where the licensee is unable to supply power, in breach of its universal supply obligation. In the present case, the Distribution Licensee, the Respondent is trying to seek a benefit of its own default. If the interpretation given in the Impugned order is accepted, then the Distribution Licensee would make money by not supplying power at all, on the basis of the revenue that comes on account of cross subsidy surcharge. It is settled position of law that no authority can be allowed to take advantage of its own wrong.
(c) The Distribution Licensee''s duty to supply power on request is sacrosanct. U/s 42(1) and Section 43(1) the Distribution Licensee has been cast with an obligation to supply electricity to any premises, upon an application by the owner or occupier of such premises. Without fulfilment of this duty, no corresponding benefits can be claimed by the Distribution Licensee. Therefore, a purposive interpretation has to be given to the provisions of the statute to remove any manifest absurdity and to prevent unjust results.
(d) A schematic reading of Section 42(1) and 42(2) makes it abundantly clear that a Distribution Licensee can benefit from the levy of cross subsidy surcharge only if it fulfils the corresponding obligation of supplying power. Any other interpretation sought to be given by the State commission would not only defeat the object and purpose of the Act but also would lead to a manifestly unjust result.
8. On the strength of these grounds, it has been argued by the Appellant that the rejection of the claim made by the Appellant before the State Commission was on the wrong interpretation of the provisions of the Act as well as the Regulations and therefore, the Impugned Order is called for interference.
9. In reply to the above grounds, the learned Counsel appearing for the State Commission (R-1) as well as the State Power Corporation (R-2) have made the following submissions:
(a) In exercise of its statutory powers, the State Commission has framed and notified the Punjab State Electricity Regulatory Commission (Terms and Conditions for Intra-State Open Access) Regulations, 2011. Under Regulation 26, the Cross Subsidy Surcharge is leviable on every subsidising consumer taking electricity through Open Access. Section 42(2), first proviso also provides for Open Access on payment of Cross Subsidy Surcharge. The only circumstance in which the payment of Cross Subsidy Surcharge is not levied, is in the case of captive consumption of electricity. Therefore, so long as the consumer takes electricity through Open Access from 3rd party, the cross subsidy surcharge is payable by the Open Access consumers to the Distribution Licensee.
(b) The cross subsidy surcharge is triggered once a consumer takes electricity through open access and the same has no co-relation to the actual supply made by the Distribution Licensee or any power cuts imposed by the Distribution Licensee on the consumer. Even in cases where a consumer does not take any part of the electricity from the Distribution Licensee, the cross subsidy surcharge is payable.
(c) The Distribution Licensee u/s 43 of the act is under universal supply obligation to supply electricity to any consumer on request irrespective of the fact that the consumer is an industrial consumer or domestic consumer or an agricultural consumer. To compensate the Distribution Licensee for having the universal supply obligation and having to cater to consumers who pay below the cost of supply, the compensatory charges are levied on the industrial consumers taking electricity supply from the 3rd parties. This concept of cross subsidy surcharge is well settled under the provision of the Electricity Act, 2003 and the Regulations framed therein.
10. On the strength of these submissions, the learned Counsel for the R-1 and R-2 argued in detail in justification of the Impugned Order.
11. In the light of the rival submissions, the only question which arises in this Appeal as quoted above is this: "Whether a Consumer is liable to pay Cross Subsidy Surcharge to the Distribution Licensee for availing power under Open Access even when the Distribution Licensee was not in a position to supply power and had imposed power cuts on the consumer during the period when Open Access was obtained?"
12. Before dealing with this question, let us refer to the findings rendered by the State Commission in the Impugned Order:
"10. The law regarding the Open Access is enunciated in Section 42(2) of the Electricity Act 2003 as under:-
"42. Duties of Distribution Licensees and open access -
(1) ----
(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 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:
Provided further that such surcharge shall be utilized to meet the requirements of current level of cross subsidy within the area of supply of the Distribution Licensee:
Provided also that such surcharge and cross subsidies shall be progressively reduced in the manner as may be specified by the State Commission:
Provided also that such surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use:
Provided also that the State Commission shall, not later than five years from the date of commencement of the Electricity (Amendment) Act, 2003 (57 of 2003) by regulations, provide such open access to all consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one megawatt.
Further regarding cross subsidy surcharge, Regulation 26 of Punjab State Electricity Regulatory Commission (Terms and Conditions for Intra-state Open Access) Regulations, 2011 specifies:
"26. Cross subsidy surcharge
1). If open access facility is availed of by a subsidising consumer of a Distribution Licensee of the State, then such consumer, in addition to transmission and/or wheeling charge, shall pay cross subsidy surcharge determined by the Commission. Cross subsidy surcharge determined on Per Unit basis shall be payable, on monthly basis, by the open access. Consumers based on the actual energy drawn during the month through open access.
Provided that such surcharge shall not be leviable to a person who has established a captive generating plant for carrying the electricity to the destination of his own use."
The bare perusal of the above provisions of Law and Regulations clearly shows that except in the case of a person who has established a captive generating plant carrying the electricity to the destination of his own use, cross subsidy surcharge is payable by all other open access consumers based on the actual energy drawn during the month through open access. There is no provision in the Electricity Act 2003 or Regulations which indicates in any manner that open access power imported during period of power cut is exempt from the levy of cross subsidy surcharge.
11. In view of express and unambiguous provisions under Section 42(2) of the Electricity Act 2003 and Regulation 26 (1) of Punjab State Electricity Regulatory Commission (Terms and Conditions for Intra-state Open Access) Regulations, 2011, the Commission is not inclined to allow the prayer of the petitioner to add, vary, alter, modify or amend the Regulations by invoking Regulation 46 of the ibid Regulations. The request of the petitioner not to levy cross subsidy surcharge to open access consumers during mandatory power cut period is not acceded to.
****
****
17. We also find that the Distribution Licensees have frequently been resorting to the power restrictions/power cuts on the Appellant''s members. According to the Appellant, the are furnace steel industrial units need power in the range of 20- 30 MW and it is not feasible to generate own power through a captive power plant. In these circumstances, these consumers have no other option but to procure power from short term market through open access if they want to maintain production and carry out their business. In other words, the consumers have been forced to procure power through open access as a result of the restrictions/power cuts imposed by the Distribution Licensee due to inadequate power sourced by them to meet the full demand of the consumers.
18. In the present case, the consumers have not procured power through open access for economic reasons i.e. for the reason that the power procured through open access worked out to be cheaper than the tariff of the Distribution Licensee but because of the compulsion due to failure of the Distribution Licensee to arrange adequate power to meet its obligation to supply power to these industrial consumers.
19. Let us examine the related provisions of the Electricity Act, 2003. The relevant portions of Section 42 and 43 are reproduced below:
"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 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:
Provided further that such surcharge shall be utilised to meet the requirements of current level of cross subsidy within the area of supply of the Distribution Licensee:
Provided also that such surcharge and cross subsidies shall be progressively reduced in the manner as may be specified by the State Commission:
Provided also that such surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use:
Provided also that the State Commission shall, not later than five years from the date of commencement of the Electricity (Amendment) Act, 2003 (57 of 2003) by regulations, provide such open access to all consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one megawatt.
(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 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.
(4) Where the State Commission permits a consumer or class of consumers to receive supply of electricity from a person other than the Distribution Licensee of his area of supply, such consumer shall be liable to pay an additional surcharge on the charges of wheeling, as may be specified by the State Commission, to meet the fixed cost of such Distribution Licensee arising out of his obligation to supply."
....
"43.(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."
....
"(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.
44. Exceptions from duty to supply electricity.- Nothing contained in section 43 shall be taken as requiring a Distribution Licensee to give supply of electricity to any premises if he is prevented from doing so by cyclone, floods, storms or other occurrences beyond his control."
20. According to the above provisions of the Act, the Distribution Licensee has an obligation to supply electricity to the consumer in his area except when it is prevented from supplying electricity due to cyclone, floods, storms or other occurrences beyond his control, provided the consumer makes due payment for the supply of the electricity. Section 42(2) provides for introduction of open access by the State Commission and such open access has to be allowed on payment of a surcharge in addition to charges for wheeling as determined by the State Commission. However, such surcharge is not leviable in case open access is provided to a person who has established captive generating plant for carrying electricity to the destination of his own use. Such surcharge has to be utilized to meet the requirement of current level of cross subsidy within the area of supply of the Distribution Licensee. Thus, the Electricity Act, 2003 provides an option to a consumer to avail power from sources other than the Distribution Licensee of its area. The situation where a consumer is compelled to procure power through Open Access due to power cuts imposed by the area Distribution Licensee on the consumer due to its inability to meet its obligation to supply is not stipulated and therefore, the provisions have to be interpreted for such a situation from the scheme of the Act.
****
****
31. In the present case, the consumers have not opted for open access voluntarily but have been forced to procure power through open access from the short term market as a result of failure of the Distribution Licensee to meet its obligation to supply and due to imposition of restrictions/power cuts on them. When the Distribution Licensee has failed to procure adequate power to meet its obligation to supply to the consumers who in turn have been forced to procure power through open access, there cannot be any question of any loss to the Distribution Licensee and levy of cross subsidy surcharge for the same. This is because when the power cut is imposed on a subsidising consumer, the Distribution Licensee is not expected to receive revenue for electricity from such consumers as during that period, there is no supply of power.
****
****
33. Another important aspect to be noticed is that when the members of the Appellant are able to procure power from the short term market, it indicates the situation where power is available in the market for meeting the demand of these consumers. The same power can be procured by the Distribution Licensee from short term market to meet its obligation to supply to these consumers and thus avoiding imposition of power restrictions/cuts on the consumers. However, the Distribution Licensee has chosen not to procure the power from short term market presumably because such power is available at higher rates or because of its financial constraints.
34. If the consumers who have procured power in open access from short term market are asked to pay cross subsidy surcharge on such drawal of power, it would result in rewarding the Distribution Licensee for not meeting its obligation to supply power to its consumers and penalising the consumers for no fault of theirs. In other words, it will be beneficial for the Distribution Licensee to impose power cuts on the consumers and recover cross subsidy surcharge instead of carrying out its duty assigned under the Electricity Act for making arrangements to procure adequate power to meet the full demand of its consumer. If the consumers can arrange power from the short term market, Distribution Licensee also can procure the same power and meet its obligation to supply and claim the power purchase cost in the ARR. Imposition of Cross Subsidy under the conditions of power cuts will discourage the consumers to procure power in Open Access when the cost of power in short term power market is high and will result in loss of production. This will be against the consumer''s interest and will defeat the objective of introducing Open Access in the Act.
****
****
36. Section 42(2) of the Electricity Act providing for open access and cross subsidy surcharge is preceded by Section 42(1) which provides that it shall be duty of a Distribution Licensee to supply electricity in accordance with the provisions contained in the Act. Law gave a choice to the consumer to avail power form alternate sources other than the area Distribution Licensee for encouraging competition.
****
****
38. Let us now refer to Open Access Regulation. Regulation 26 of the Open Access Regulations, 2011 specifies:
"26. Cross subsidy surcharge
1) If open access facility is availed of by a subsidising consumer of a Distribution Licensee of the State then such consumer, in addition to transmission and/or wheeling charge shall pay cross subsidy surcharge determined by the Commission. Cross subsidy surcharge determined on Per Unit basis shall be payable, on monthly basis, by the open access consumers based on the actual energy drawn during the month through open access.
Provided that such surcharge shall not be leviable to a person who has established a captive generating plant for carrying the electricity to the destination of his own use."
39. Thus, as per the Regulations, subsidizing consumers of the Distribution Licensee availing open access have to pay cross subsidy surcharge determined by the State Commission. However, when power cuts are imposed on subsidizing consumers, for the period of power cuts, they cease to be the subsidizing consumers as they are not permitted to take power from the Distribution Licensee and as such, there is no recovery of charges by the Distribution Licensee for supply of electricity during that period. Therefore, there is no valid reason to recover cross subsidy surcharge on the quantum of power to the extent of power restriction/cut which the consumer was forced to procure from open market through open access.
****
****
44. Summary of our findings:
i) This Tribunal in a number of judgments has held that cross subsidy surcharge is a compensatory charge and the logic behind the provision for cross subsidy is that but for the open access, the consumer would have taken electric supply from the Distribution Licensee and in the result the consumer would have paid tariff applicable for such supply which would include an element of cross subsidy for certain other categories of consumers, which are subsidized.
(ii) Hon''ble Supreme Court in the matter of Sesa Sterlite Ltd. has held that Cross Subsidy Surcharge ("CSS") is payable by the consumer when it decides not to take supply from the Distribution Licensee but takes from other sources. CSS is a compensation to the Distribution Licensee in view of the fact that but for the Open Access the consumer would pay tariff applicable for supply which would include an element of cross subsidy. Such cross subsidy surcharge has to be paid as determined by the State Commission even if the line of the Distribution Licensee is not used by the open access consumer.
(iii) In the present case the members of the Appellant Association have not opted for open access voluntarily but have been forced to procure power through open access from the short term market as a result of failure of the Distribution Licensee to meet its obligation to supply and due to imposition of restriction/power cuts on them. When the Distribution Licensee has failed to procure adequate power to meet its obligation and the consumers have been forced to procure power on their own through open access there cannot be the question of any loss to the Distribution Licensee and levy of cross subsidy surcharge for the same.
(iv) If the consumers do not procure power from the market through open access under conditions of power cuts and shut down their plants, no energy will be consumed by them and no charges will be collected by the Distribution Licensee for the period of power cut and hence no cross subsidy would be available from the charges of such subsidising consumers to the subsidized consumers. Therefore, if during the period of power restriction/power cuts, the consumer procures power from the market to continue its production instead of closing it down, no financial loss will be caused to the Distribution Licensee. Hence no compensation in the form of cross subsidy surcharge is leviable.
(v) When the members of the Appellant are able to procure power form short term market it indicates a situation where the power is available in the market for meeting the demand of these consumers. The same power could have been procured by the Distribution Licensee from the short term market to meet its obligation to supply to the consumers and avoiding imposition of power restriction/power cuts on them. If the consumers who have procured power in open access from short term market are asked to pay cross subsidy surcharge on such drawal of power to the Distribution Licensee, it would result in rewarding Distribution Licensee for failure to meet its obligation to supply power to its consumers and penalizing consumers for no fault of theirs. In other words it will be beneficial for the Distribution Licensee to impose power cuts on the consumers and recover the Cross Subsidy charge without carrying its duty assigned under Electricity Act to meet the full demand of the consumers by making arrangements to procure adequate power.
(vi) Imposition of cross subsidy surcharge when the consumers have been forced to procure power through open access due to power restrictions/cuts imposed by the Distribution Licensee is in contravention to objectives and the provisions of the Act, National Electricity Policy and Tariff Policy and the dictum laid down by this Tribunal and Hon''ble Supreme Court which provides that the Cross Subsidy Surcharge is a compensatory charge. It strikes at the basic objective of the Electricity Act to encourage open access to promote competition.
(vii) Accordingly, we direct the State Commission to pass consequential order that no cross subsidy charge would be levied on power available with consumers through open access to the extent of restrictions/power cuts imposed by the Distribution Licensee. This finding given in this judgment has to be construed as judgment in rem and this will be applicable to all open access consumers."
26. For the foregoing discussions, this Court is of the considered view that the members/industrial units of the petitioner association are not liable to pay cross-subsidy surcharge in the given case and also that Regulations 23 and 24 of the impugned MSERC (Terms and Conditions of Open Access) Regulations, 2012 and the impugned subsequent tariff order dated 21.08.2012 are liable to be quashed and set aside. Thus, Regulations 23 and 24 of the MSERC (Terms and Conditions of Open Access) Regulations, 2012 and the subsequent tariff order dated 21.08.2012 are hereby quashed and set aside. For the ends of justice, cross-subsidy surcharge paid under the MSERC (Terms and Conditions of Open Access) Regulations, 2012 and the said tariff order dated 21.08.2012 by the members of the petitioner association from the date of filing of this writ petition i.e. December, 2012 be refunded to the members of the petitioner association by the respondents within a period of six months from the date of receipt of a certified copy of this judgment and order or the amount of cross-subsidy surcharge collected from the members of the petitioner association from the date of filing of this writ petition which are to be refunded under this judgment and order may be adjusted to the future tariff i.e. electricity tariff to be paid by the members of the petitioner association in installment.
27. In the result, writ petition is allowed.
28. Parties are to bear their own costs.
