Full Judgment Text
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CASE NO.:
Appeal (civil) 2104 of 2006
PETITIONER:
Central Power Distribution Co.& Ors
RESPONDENT:
Central Electricity Regulatory Commission & Anr
DATE OF JUDGMENT: 17/08/2007
BENCH:
H.K. SEMA & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
H.K.SEMA,J.
(1) This appeal is directed against the judgment and
order dated 3.1.2006 passed by the Appellate Tribunal for
Electricity (Appellate Jurisdiction) in Appeal No.152 of 2005
whereby the Appellate Tribunal dismissed the appeal filed by
the appellants.
(2) The appellants challenged the order of the Central
Electricity Regulatory Commission (CERC) dated 4.7.2005
passed in petition No.67/2003 (suo moto), whereby the CERC
inter alia ordered the application of Availability Based Tariff
(ABT) to Simhadri SPTS thermal station of the National
Thermal Power Corporation (NTPC) with effect from December
1, 2005.
(3) This appeal was admitted on 1.5.2006 to be heard
on the following questions of law:
(A) Whether the application of
Availability Based Tariff (ABT) in
relation to Unscheduled Interchange
(UI) charges, which otherwise is not
a component of tariff in terms of
Regulation 15 of the Central
Electricity Regulatory Commission
(Terms and Conditions of Tariff)
Regulations, 2004 and they are
liable to be held as beyond the
jurisdiction of the Central Electricity
Regulatory Commission (CERC)?
(B) As such the impugned order passed
by the Appellate Tribunal for
Electricity has completely ignored
the fact that the CERC order, which
was passed suo moto and ex parte, is
non est and without jurisdiction?
(C) Can the Availability Based Tariff as
established and provided in the
order of the CERC by its order dated
4.1.2000 be implemented under the
provisions of Electricity Act, 2003,
particularly when there is no
provision under the statute that
allows the CERC to levy
Unscheduled Interchange Charges?
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and
(G) whether in the present facts and
circumstances as regards the
Simhadri SPTS thermal station of the
National Thermal Power Corporation
(NTPC) which admittedly supplies
power to the State Grid and has no
connection with the management of
the National Grid, can the CERC in
such circumstances exercise,
particularly when matters relating to
the State Grid falls within the role
and function of the State Electricity
Regulatory Commission?
FACTUAL BACKGROUND:
(4) This appeal has a chequered history leading to the
passing of the 4th July, 2005 order by CERC. Avoiding
prolixity, we may recite few facts.
WHAT IS ABT
(5) Before we proceed further, we may at this stage,
highlight what is ABT and the purpose of introduction of
ABT. ABT was introduced in regard to number of generating
stations of NTPC and other Central Sector generating
stations under the orders of the CERC. Prior to the
introduction of ABT, the fixed charges were payable by the
purchasers based on the units of electricity actually drawn
by them. The scheme of recovery of fixed charges based on
drawl of electricity was not considered appropriate and
rationale particularly from the point of view of Grid safety
and security. The scheme of fixed charges liability based on
drawls allowed the purchasers of electricity to draw electricity
from the Grid at their pleasure with no control. This led to
the Grid Frequency to vasilate from 48.5 Hz to 51.5 Hz,
whereas Grid Frequency was required to be maintained
ideally at 50 Hz and at the most, it should be within
optimum variations. The frequency exceeding the optimum
variation was causing grid collapse and blackouts in the
entire region besides affecting the equipments of all
generations, other electricity utilities and also the
consumers. This has been a serious prejudice to public
interest.
(6) Before the introduction of ABT scheme it was
deliberated at different levels namely, by (a) consultants
appointed by the Government of India to inquire into and
make recommendations; (b) National Task Force (NTF)
appointed by the Government of India; (c) Regional Task
Forces again appointed by the Government of India; and (d)
Central Electricity Authority.
(7) After the constitution of Central Commission
under the Electricity Regulatory Commissions Act, 1998 (in
short \023the Act\024), the Government of India referred the matter
of introduction of ABT to the Central Commission. The State
Electricity Boards including Andhra Pradesh State Electricity
Board (the predecessor of the appellants herein) were part of
the Regional and National Task Forces constituted by the
Government of India and also participated in the deliberation
before the Central Commission.
(8) At the 7th meeting of the National Task Force (NTF)
held on 8.11.1996 it was unanimously decided that
availability based generation tariff will be adopted and will be
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applied to all including future IPPs.
(9) Pursuant to the aforesaid consensus reached, the
Central Commission considered the matter extensively in its
order dated 4.1.2000 inter alia which are as under:
\0233. DISTINCTIVE FEATURES OF ABT
3.1 We shall now discuss the distinctive
features of the proposed ABT system. In order
to understand the need and rationale behind
the system, it is necessary to narrate the
present problems in grid operation. Some of
these as set out by Central Transmission
Utility (CTU) in its presentation before the
Commission are:
\023(i) Low frequency during peak load hours,
with frequency going down to 48.0 \026 48.5 Hz
for many hours every day.
(ii) High frequency during off peak hours, with
frequency going up to 50.5 to 51 Hz for many
hours every day.
(iii) Rapid and wide changes in frequency \026 1
Hz change in 5 to 10 minutes, for many hours
every day.
(iv) Very frequent grid disturbances, causing
tripping of generating stations, interruption of
supply to large blocks of consumers, and
disintegration of the regional grids.\024
These wide frequency fluctuations tend to cause
serious damages both at the generation and
load ends, which are not perceived, and have
never been quantified or evaluated. Experts
consider these fluctuations unacceptable all
over the world. In India though the problems
have been identified, no progress has been
made in bringing them under control. One
important reason for this has been the absence
of direct incentives or penalties for the
individual utilities responsible for the problems.
There has also been a general reluctance among
all concerned to introduce financial incentives
or disincentives.
The CTU has stated that the resolution of
these problems requires:
i) Maximisation of generation during peak
load hours and load curtailment equal to
the deficit in generation.
ii) Backing down of generation to match the
system load reduction during off peak
hours, keeping the merit order of
generation in view.\024
WHAT IS UI (UNSCHEDULED INTERCHANGE)
(10) In addition to two charges, a third charge
contemplated in the ABT scheme is for the unscheduled
interchange of power (UI charges). The UI charges are
payable depending upon what is deviated from the schedule
and also subject to the grid conditions at that point of time.
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This element was introduced to bring about the effective
discipline in the system. Under this system UI charges will be
payable, if:
i) a generator generates more than the
schedule, thereby increasing the
frequency;
ii) a generator generates less than the
schedule, thereby decreasing the
frequency;
iii) a beneficiary overdraws power, thereby
decreasing the frequency;
iv) a beneficiary underdraws power, thereby
increasing the frequency.\024
(11) It is thus clear from the above that UI charges are
a commercial mechanism to maintain grid discipline. The UI
charges penalises whosoever caused grid indiscipline,
whether generator (NTPC) or distributor, is subject to
payment of UI charges who are not following the schedule.
The UI charges are not payable if the appellants maintain
their drawl of electricity consistent with the schedule given
by themselves. Therefore, there is no merit in the contention
of the appellants that the UI charges are by way of penalty.
(12) The order dated 4.1.2000 passed by the CERC is
intended to achieve the following:-
(a) ABT is necessary for Grid discipline.
(b) ABT is being introduced qua generating
stations but is a method to control all
players, namely, generator, transmitter,
distributors and users.
(c) The concept of ABT was accepted by all
concerned including the predecessor of the
Appellants herein without any reservation
or conditions.
(d) The concept of ABT is not restricted in its
application only to generating stations
supplying electricity to more than one
State. It is applicable equally to a
generating stations supplying electricity to
one State only.
(e) The Order dated 4.1.2000 does not make
any specific exclusion of the generating
stations supplying electricity to one State.
There is no such observation in the Order
dated 4.1.2000. The operative part of the
order dated 4.1.2000 which speaks about
introduction of ABT in a phased manner for
Multiple State beneficiaries generating
stations in different region cannot be
inferred from the above that the Central
Commission had rejected the concept of
ABT for single State beneficiary generation
stations.
(13) However, the Commission in view of the request
of Powergrid/CTU to stagger the implementation of ABT so
that they would be able to make satisfactory arrangements
before implementation, the following schedule for
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implementation of ABT was issued:
Southern Region \026 1-4-2000
Eastern Region \026 1-6-2000
Northern Region \026 1-8-2000
Western Region \026 1-10-2000
(14) The Commission has also decided that all other
generating stations owned by the Central Power Sector
Utilities which are supplying power to only one beneficiary of
the State be brought under the purview of ABT. Simhadri
SPTS (2 x 500 MW) was also brought under ABT scheme
w.e.f. 1.12.2005. This would show that the ABT scheme was
implemented at the request of Powergrid/CTU so that they
would be able to make satisfactory arrangement before the
implementation. It is clear that the ABT scheme was
implemented in a phased manner. The ABT scheme in
respect of Simhadri SPTS was made applicable w.e.f.
1.12.2005. It is therefore not correct to say that Simhadri
SPTS was kept out of the purview of the ABT scheme.
(15) The principal contention of the counsel for the
appellants is founded on two grounds, (1) that the CERC did
not have the jurisdiction to introduce ABT for generating
stations supplying power within the State of Andhra Pradesh
and (2) the CERC has failed to provide an opportunity of
hearing to the appellants whose interests have been
adversely affected by the impugned order.
(16) It is submitted that the order dated 4.7.2005
passed by the Commission in discharge of its power under
Section 79(1)(a) of the Electricity Act, 2003 cannot be
justified. It is further argued under Section 79(1)(c) the
Central Commission can only regulate inter-State
transmission of electricity. It is argued that Section 86(1)(c)
of the Act confers the power of jurisdiction of facilitating
intra-State transmission upon the State Regulatory
Commission. It is also argued that the UI charges in respect
of Simhadri could have only been imposed by the State
Regulatory Commission, after due consultation with all other
generators in the State and the transmission utility who has
the responsibility to maintain the grid.
(17) In our view, the aforesaid contention is thoroughly
misconceived. Simadhri Station is owned and controlled by
the NTPC which is a Government of India undertaking.
Section 79(1)(a) of the Act contemplates that the Central
Commission has jurisdiction over generating companies
owned or controlled by the Central Government. In view
thereof, the provisions under Section 86 cannot be applied
for NTPC station. The various sections under the Electricity
Act would clearly show beyond any doubt the powers of
Central Commission and jurisdiction in regard to the grid,
the scheduling and despatch. Under Section 79(1)(h) the
Central Commission has the power to specify Grid Code. It
also provides that the function of the State Commission to
specify State Grid Code under Section 86(1)(f) should be
consistent with the Grid Code specified by the Central
Commission and therefore the power of the State
Commission is subservient to the power of the Central
Commission. Section 2 (32) defines Grid as inter connected
transmission lines. The expression used inter connected has
a significant meaning. Sub-section (1) of Section 28 deals
with the function of RLDC (Regional Load Despatch Centre)
to ensure integrated operation of the power system in the
concerned region. The term power system is of wide import.
It is not confined to inter State Transmission Lines but
extends to even supply lines, distribution, main service lines
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etc. However, sub-section (3) of Section 28 deals with duties
of RLDC using the expression \023within the region\024 or \023in the
region\024. Obviously it includes both \021Inter State and \021Intra
State\022 lines and is not restricted to inter State lines. Section
29 of the Act empowers the RLDC to give directions and
exercise such supervision and control to any person for
ensuring stability of grid operation. It also provides that the
State Load Desptach Centre shall duly enforce such
directions. Sub-section (3) of Section 33 of the Act provides
that the State Load Desptach Centre shall comply with the
directions of the Regional Load Desptach Centre.
(18) A fascicule reading of the above provisions would
clearly show that the scheme of the Electricity Act is that
RLDC is required to follow the principles, guidelines and
methodologies specified by the Central Commission and all
persons including the distribution licensees like the
appellants herein are required to follow the directions of
RLDC. RLDC can enforce such directions through SLDC. In
turn SLDC is required to follow the directions of RLDC.
(19) Having regard the aforesaid mentioned provisions
of law the contention that the Central Commission has no
jurisdiction to deal with grid discipline in regard to single
State beneficiary station, in our view, has no merit. As
already noticed ABT is to ensure discipline in the integrated
system. Further ABT is being introduced stationwise and it
is the Central Commission alone who has the jurisdiction
particularly, in regard to generating stations of NTPC, which
is a Central Government, owned and controlled generating
company.
ALLEGATION OF VIOLATION OF NATURAL JUSTICE
(20) Counsel for the appellants alleged that the order
dated 4.7.2005 has been passed by the Central Commission
(suo moto) without hearing the parties concerned, thereby
the interests of the appellants have been adversely affected,
by the impugned order. In our view, this contention is wholly
misconceived. As mentioned earlier, the Commission after
consultation with various agents and after threadbare
discussion, a decision was taken by the Commission on
4.1.2000 to introduce ABT scheme. The order dated
4.1.2000 was passed after hearing all parties concerned
including the predecessor (State of Andhra Pradesh) of the
appellants herein. The appellants step into the shoes of the
State of Andhra Pradesh. A policy decision for the
introduction of the ABT Scheme was taken on 4.1.2000 after
consultation and threadbare discussion and after considering
all pros and cons of the scheme. The so called suo moto
order passed by the Central Commission by order dated
4.7.2005 is only the implementation of the ABT in regard to
all generating stations of Central Public Sector supplying
electricity to one State which was only the implementation of
the decision taken by order dated 4.1.2000. No grievance
has been raised by any generating stations including that of
State of Andhra Pradesh, the predecessor of the appellants
herein to the decision taken on 4.1.2000. Having accepted
the policy decision taken on 4.1.2000, without any demur,
they are not now permitted to say that the implementation of
the scheme without hearing them is in violation of principles
of natural justice.
(21) For the reasons aforestated, we answer all the
questions raised in this appeal in the negative as hereunder:-
Question (A)
(22) The application of Availability Based Tariff and
imposition of Unscheduled Interchange (UI) charges are
essential part of the Functions of the Central Commission
under Section 79(1)(h) of the Electricity Act, 2003 which
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reads \023to specify Grid Code having regard to the Grid
Standards\024, and Sub-section (2) of Section 28 read with
Section 178(2)(g) dealing with the Central Commission\022s
powers to frame Grid Code. The maintenance of Grid
discipline envisaged under the Grid Code is regulated by the
mechanism of ABT and UI charges. There is no basis for the
appellant to contend that unless something is a part of Tariff
the Central Commission cannot exercise powers and
functions. The ABT and UI charges are commercial
mechanism to control the utilities in scheduling, dispatch
and drawl and the UI charges are tariff or charges payable for
deviations. In the facts and circumstances mentioned above
the legal position is clear and there is no ambiguity in respect
of the jurisdiction of the Central Commission.
Question (B)
(23) The circumstances under which the order of the
Central Commission was made, the previous orders passed by
the Central Commission and the fact that the order challenged
by the Appellant was only an order fixing a prospective date
for implementation of ABT in the case of generating station
supplying to single state and not an order deciding the right or
obligations. It is therefore not correct for the appellants to say
that the Order was passed ex-parte or suo moto in violation of
any principles of natural justice or otherwise the order is bad
or non est. As mentioned above after the order of the Central
Commission was passed, the second respondent and the State
Load Dispatch Centre (SLDC) in the State of Andhra Pradesh
had deliberated on the steps to be taken for implementation.
The SLDC was acting on behalf of the appellants. The
appellants and SLDC did not raise any objection or otherwise
plead any difficulty in the implementation of the ABT and UI
mechanism at the relevant time. Even now, except for
pleading hyper-technicalities, the appellants have not shown
any legal prejudice they suffer on account of the
implementation of ABT for the Simhadri generating station of
NTPC. The question of law has been raised mechanically
without any factual bearing or implication.
Question (C)
(24) As already noticed, the Central Commission has the
power and function to evolve commercial mechanism such as
imposition of UI charges to regulate and discipline. It is well
settled that a power to regulate includes within it the power to
enforce. See Indu Bhusan vs. Rama Sunderi, AIR 1970 SC
228, K. Ramanathan vs. State of Tamil Nadu (1985) 2
SCC 116, V.S. Rice and Oil Mills vs. State of Andhra
Pradesh, AIR 1964 SC 1781, Deepak Theatre, Dhuri vs.
State of Punjab, 1992 Supp.(1) SCC 684.
Question (G)
(25) In the facts and circumstances as alluded, and as
per the Scheme of the Electricity Act, 2003 mentioned above,
the Central Commission has the plenary power to regulate
the Grid, particularly in the context of the Grid being
integrated and connected across the region comprising of
more than one State. The State Grid cannot be isolated and
can be seen as independent from the region.
(26) In the view that we have taken there is no merit in
this appeal and it is accordingly dismissed. No costs.