TAMIL NADU SPINNING MILLS ASSOCIATION vs TAMIL NADU ELECTRICITY REGULATORY COMMISSION & Anr
- Court
- Appellate Tribunal For Electricity
Judgement in Appeal Nos. 356 of 2017
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL No. 356 OF 2017
th
Dated: 11 May, 2026
Present: Hon`ble Ms. Seema Gupta, Officiating Chairperson
Hon`ble Mr. Virender Bhat, Judicial Member
IN THE MATTER OF:
TAMIL NADU SPINNING MILLS ASSOCIATION,
# 2, Karur Road, Modern Nagar,
Dindigul – 624 001,
Tamilnadu. … Appellant(s)
VERSUS
1. TAMIL NADU ELECTRICITY REGULATORY COMMISSION
Rep. by its Secretary ,
No.19A, Rukmani Lakshmipathy Road,
Egmore, Chennai – 600 008,
Tamil Nadu.
2. TAMIL NADU GENERATION AND DISTRIBUTION,
Corporation Ltd (TANGEDCO)
144, Anna Salai,
Chennai – 600 002. …. Respondents
Counsel on record for the Appellant(s) : Mr. Kumar Mihir
Mr. Avinash Menon
for App. 1
Counsel on record for the Respondent(s) : Mr. Sethu Ramalingam
for Res. 1
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Judgement in Appeal Nos. 356 of 2017
Mr. Anusha Nagarajan
for Res. 2
JUDGEMENT
PER HON’BLE MRS. SEEMA GUPTA, OFFICIATING CHAIRPERSON
1. The captioned appeal No. 356 of 2017 has been filed by Tamil Nadu
Spinning Mills Association , challenging the order dated 11.08.2017 in T.P. No. 01
of 2017 (“Impugned Order” ) read with order dated 13.03.2018 passed in R.P
No 4 of 2017 passed by the Tamil Nadu Electricity Regulatory Commission.
2. The Appellant- Tamil Nadu Spinning Mills Association (hereinafter referred
as “Appellant /TSMA” ) is a Registered Association established on 29.08.1997,
in the State of Tamil Nadu. The Respondent No. 1- Tamil Nadu Electricity
Regulatory Commission is the Regulatory Commission for the State of Tamil
Nadu constituted under Section 82 of the Electricity Act 2003. The Respondent
No.2- Tamil Nadu Generation and Distribution Corporation Ltd ( herein refer as
TANGEDCO/Respondent No.2 ) is the distribution licensee in the State of Tamil
Nadu.
Factual matrix of the Case:
3. On 30.11.2016, the Respondent No.2 filed the Petition for truing up of FY
2011-12 to FY 2015-16, determination of Multi Year ARR for FY 2016-17 to FY
2018-19 and determination of Retail Tariff for FY 2017-18 before the State
Commission. Respondent No.2 also filed a Petition in M.P No. 31 of 2016 before
the Commission seeking time extension upto January 31, 2017 for the ARR of FY
2017-18, since the Government of Tamil Nadu (GoTN) has decided to join the
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Judgement in Appeal Nos. 356 of 2017
UDAY scheme, which will have direct impact on the profitability of Respondent
No.2. State Commission granted the time extension.
4. The MoU under UDAY scheme was entered into between the GoI, GoTN
and the Respondent No 2 – TANGEDCO on 09.01.2017 and considering the
consequent financial impact of the said MoU, the Respondent No.2 filed the
Petition before the State Commission on 27.01.2017. Same was admitted as T.P.
No.1 of 2017 in which State Commission passed the order on 11.08.2017.
5. The Respondent No.2, filed a Review Petition being R.P. No. 4 of 2017 to
review certain items of the Order dated 11.08.2017 in T.P. No. 1 of 2017, in which
State Commission passed the order on 13.03.2018, wherein it partly allowed the
relief sought.
6. Aggrieved by certain parts of the Impugned Order dated 11.08.2017 read
with review order dated 13.03.2018, the Appellant herein filed the instant appeal
on 15.05.2018.
DISCUSSION AND ANALYSIS
7. Heard Mr. Kumar Mihir, learned counsel on behalf of the Appellant, Mr
Sethu Ramalingam on behalf of the Respondent No 1-State Commission, and
Ms. Anusha Nagrajan, learned counsel for the Respondent No 2 – TANGEDCO,
perused the Impugned Order dated 11.08.2017 and Review Order dated
13.03.2018, along with the written submission filed by the parties, and other
documents. The Appellant, has made submission on following issues:
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Judgement in Appeal Nos. 356 of 2017
A. Relinquishment of Rs. 2500 Crore subsidy receivable from the Tamil
Nadu Government by the Respondent No 2-TANGEDCO.
B. Approving increase in line loss and Calculation losses to OA consumers
connected to different voltages.
C. Excess scheduling and system operation charges (SSOC)
D. Md integration time reduced to 15 minutes from 30 minutes - md charges
may increase to HT Services:
E. Cross subsidiary surcharge
Our consideration and views on each of these issues are deliberated in following
paragraphs:
ISSUE A: RELINQUISHMENT OF RS.2500 CRORE SUBSIDY TO BE
RECEIVABLE FROM THE TAMIL NADU GOVERNMENT BY THE TANGEDCO
for FY 2017-18.
SUBMISSIONS URGED ON BEHALF OF APPELLANT
8. It is submitted that the proposal of Respondent No.2 to forgo subsidy
amounting to Rs. 2500 Crore was objected to by the stakeholders, who
specifically contended that the said amount ought to be utilized for the purpose
of reducing the tariff. The State Commission, accepted the proposal for reducing
the subsidy portion of energy charges for the domestic category of consumers
and it failed to appreciate that since Respondent No.2 is already reeling under a
severe financial crisis, the relinquishment of Rs. 2500 Crore would be ultimately
shifted to the shoulders of the consumers and other stakeholders at a later stage,
in a different form, by way of increased tariff, particularly when Respondent No.2
was already burdened with a cumulative loss of Rs. 1,02,400 Crore as on
31.03.2016.
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9. A bare perusal of the Section 65 of the Electricity Act, 2003 clearly
establishes that it mandates the State Government to provide the subsidy in
advance. However, on earlier occasions, such subsidy had been paid belatedly
by the State Government upon quantification by the State Commission. In the
present case, both the request of Respondent No.2 to forego the subsidy and the
approval granted by the State Commission without the benefits under the UDAY
Scheme being received are contrary to the mandate of Section 65 of the Act.
Section 65 further makes it abundantly clear that the State Government is
obligated to pay the subsidy notwithstanding any direction that may be issued
under Section 108, thereby reflecting one of the strictest statutory mandates
under the Act to ensure that the Government discharges its obligation of payment
of subsidy.
10. The State Commission has placed contradictory statements in different
portions of its counter while justifying the approval granted for the relinquishment
of subsidy payable by the Government of Tamil Nadu.
“It may be seen from para-5.3.5 of the impugned order that the present
relinquishment has been allowed in view of the stand-alone revenue surplus
of Rs.2231.59 crores for FY 2017-18 and the necessity to take next logical
step to provide relief to the consumers.”
…………………………………………………………………………
“Therefore, the Commission is accepting TANGEDCO’s proposal to
reduce the subsidy portion of energy charges applicable to domestic
consumers, as a one-time measure. however, there will be no reduction in
effective tariff payable by the domestic consumers.
11. Thus, while at one place the State Commission has sought to justify the
relinquishment of subsidy on the ground that it would reduce the tariff burden on
consumers, at another place it has categorically stated that there would be no
reduction in the effective tariff payable by the consumers.
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12. The State Commission has justified the approval granted for
reduction/relinquishment of subsidy payable by the GoTN on the ground that the
Government had taken over certain loans of Respondent No.2 under the UDAY
scheme. However, once the Government of Tamil Nadu had entered into the
UDAY Scheme, the obligation to assume such loans rested with the Government
itself. The State Commission has further stated that the reduction in subsidy was
intended to lessen the financial burden on the State Government and thereby
assist it in maintaining fiscal discipline. Such considerations, however, find no
mandate under the Electricity Act, 2003. It is widely reported that Respondent
No.2 continues to incur substantial and persistent financial losses, and therefore
there exists no justification for permitting the utility to forgo such subsidy at a time
when its financial condition remains severely strained.
SUBMISSIONS URGED ON BEHALF OF RESPONDENT NO.2 –TANGEDCO
13. The GoTN has entered into a tripartite Memorandum of Understanding with
Respondent No.2 and the Government of India on 09.01.2017 for participation in
the UDAY, aimed at achieving financial turnaround of State distribution utilities
through debt restructuring, operational efficiency improvements, and tariff
stability. Under the scheme, the total debt of Respondent No.2 as on 30.09.2015
amounting to Rs 30,420 Crore was proposed to be restructured, out of which 75%
(Rs 22,815 Crore) was taken over by GoTN and converted into 15-year State
Government bonds with a 5-year moratorium, while the remaining 25% (Rs 7,605
Crore) was converted into bonds by Respondent No.2 with State Government
guarantee. As a consequence of such restructuring, Respondent No.2 was
projected to achieve net cash-flow savings of approximately Rs. 3,082 Crore per
annum, along with revenue expenditure savings of Rs. 3,514 Crore, translating
into a reduction of about 42 paise per unit in cost, which was proposed to be
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Judgement in Appeal Nos. 356 of 2017
passed on to consumers. Additionally, a cash-flow relief of Rs 2,282 Crore was
expected to significantly reduce dependence on short-term working capital
borrowings, thereby yielding further interest cost savings. On the basis of the
aforesaid financial benefits, it was proposed to retain the existing tariff without
imposing any additional burden on consumers, and it was categorically stated
that, in the absence of such debt takeover under UDAY, Respondent No.2 would
have been compelled to revise tariffs upwards to offset a cash-flow burden of
approximately Rs 5,164 Crore per annum.
14. It is further submitted that, in order to balance the financial burden upon the
GoTN, the benefits that had accrued to Respondent No.2- TANGEDCO and the
consumers, a reduction in subsidy borne by the GoTN was proposed, with the
objective of avoiding any future tariff shock to consumers, as stated in para 3 of
the Counter Affidavit. The said decision was taken pursuant to, and in strict
compliance with, the policy decision of the Government of Tamil Nadu as
reflected in G.O.(Ms) No. 4, Energy (C2) Department dated 18.01.2017, issued
with the approval of the Governor of Tamil Nadu, after due consideration of the
financial implications of the UDAY, the fiscal constraints of the State Government
under the FRBM framework, and the necessity of creating fiscal space to absorb
Respondent No.2’s debt taken over by the State. Accordingly, the Government
permitted Respondent No.2 to approach the State Commission for appropriate
tariff modification by reducing the subsidy burden to the extent of Rs 2,500 Crore
without increasing the tariff burden on consumers. It is further submitted that the
grant of subsidy under Section 65 of the Electricity Act, 2003 is neither mandatory
nor a matter of right, as the provision does not impose any statutory obligation
upon the State Government to grant or continue subsidy at any particular level,
nor does it confer any enforceable right upon consumers or associations to claim
such subsidy in perpetuity. It is also pertinent that the said Government Order
has not been challenged by the Appellant or any other party.
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15. The State Commission, at paras 5.6.16 and 5.6.17, determined the
cumulative revenue gap of Rs 30,884.15 Crore for the period from FY 2011–12
to FY 2015–16, against which the debt takeover of Rs 22,815 Crore under UDAY
was duly adjusted at the end of FY 2016–17, and the carrying cost was computed
only on the remaining balance amount in strict conformity with the terms of the
UDAY MoU and the applicable interest rates.
16. It is further submitted that the Appellant is not a “person aggrieved”,
inasmuch as the tariff applicable to HT consumers—under which category the
members of the Appellant fall—has not undergone any increase, and even in the
present Appeal, Appellant has merely expressed an apprehension rather than
demonstrating any actual prejudice; thus, its contention that reduction in subsidy
would ultimately be passed on to consumers is wholly speculative and contrary
to the record. It is further submitted that such objections were duly considered by
the State Commission, which, after detailed examination, accepted the proposal
of Respondent No.2 as a one-time measure, while specifically recording that the
subsidy provided by the Government of Tamil Nadu is partial in nature,
particularly for domestic consumers, that such domestic consumers account for
more than 50% of the total subsidy outgo, and that there would be no change in
the effective tariff payable by domestic consumers as a consequence of such
subsidy rationalisation. In any event, the decision of the State Government to
grant, modify, or withdraw subsidy is a matter of policy falling within its exclusive
domain, and such policy decisions cannot be assailed before the State
Commission under the Electricity Act, 2003, as the jurisdiction of the Commission
is confined to tariff determination and sectoral regulation and does not extend to
adjudicating upon the validity or desirability of Government subsidy policy;
accordingly, any challenge to the grant, reduction, or withdrawal of subsidy is
misconceived and liable to be rejected.
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Judgement in Appeal Nos. 356 of 2017
CONSIDERATION AND OUR VIEWS
17. Elaborate submission have been made on behalf of Appellant &
Respondent No 2– TANGEDCO. For the purpose of adjudicating the present
issue, it is relevant to refer to the principle of tariff determination by State
Commission and rational for subsidy extended by State Govt. Under Section 61
of the Electricity Act, 2003, the State Commission is mandated to determine tariffs
in a manner that reflects the cost of supply, safeguards consumer interests, and
ensures the financial viability of the distribution licensee.
18. The Appellant has referred to section 65 of the Electricity Act, to contend
that to forego the subsidy by Respondent No. 2 and that too without the benefits
under the UDAY Scheme being received are contrary to the mandate of the said
provision. It is the case of the Appellant that, in terms of Section 65, the State
Government is obligated to pay the subsidy notwithstanding any direction that
may be issued under Section 108 of the Act. In this context, it is apposite to
extract the provisions of Section 65 of Electricity Act, 2003.
“65. Provision of subsidy by State Government - If the State
Government requires the grant of any subsidy to any consumer or class
of consumers in the tariff determined by the State Commission under
section 62, the State Government shall, notwithstanding any direction
which may be given under section 108, pay, in advance and in such
manner as may be specified, the amount to compensate the person
affected by the grant of subsidy in the manner the State Commission
may direct, as a condition for the licence or any other person concerned
to implement the subsidy provided for by the State Government:
Provided that no such direction of the State Government shall be
operative if the payment is not made in accordance with the provisions
contained in this section and the tariff fixed by the State Commission
shall be applicable from the date of issue of orders by the Commission
in this regard”.
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19. The Section 65 provides that if the State Government desires to subsidize
any category of consumers, it shall pay the amount of subsidy in advance to the
licensee, enabling the Commission to determine and maintain a cost-reflective
tariffs. The rationale behind State Government subsidies in electricity tariffs is to
balance affordability for vulnerable sections of consumers (like farmers and low-
income households) along with the financial viability of utilities, and ensuring
tariffs remain cost-reflective and aligned with statutory principles. In practice,
subsidies allow State Commissions to determine tariffs based on actual cost of
supply, while governments directly compensate utilities for the difference,
protecting consumer interests without distorting regulatory integrity. The proviso
to section 65 clearly specify, that in case subsidy is not provided in terms as
specified i.e. in advance, then tariff as determined by the Commission shall be
applicable meaning thereby that there shall be no subsidization of tariff. In nut
shell, the subsidies are a policy instrument, and it allows State Governments to
pursue social equity while leaving tariff determination to independent
Commissions . This dual structure preserves regulatory discipline, ensures
consumer protection, and sustains the financial health of the electricity sector.
20. As per the intent of Section 65, Subsidy is not a statutory right of the
consumer but a policy concession granted by the State Government. We take
note from the order of GoTN dated 18.01.2017 that with the participation in the
UDAY scheme, State Government is to undertake 75 % of loan of Respondent
No. 2 ( i.e Rs 22,815 Crore) by issue of 15 year Bond with 5 year moratorium,
through conversion of debt into grant in 5 year period and which shall lead to
additional financial burden of Rs 6,388 Crore annually for the first five years and
Rs 4,107 Crore annually from sixth year onwards till the repayment of bonds. The
said order further read that considering the ability of State Government to absorb
and service the TANGEDCO loan and to maintain fiscal deficit of 3% of the
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Judgement in Appeal Nos. 356 of 2017
GSDP, it was necessary to create the fiscal space up to Rs 2500 to Rs 3500
Crore for State Government to absorb this debt takeover. In this context, it was
decided that TANGEDCO shall seek suitable modifications of tariff by reducing
subsidy from GoTN to an extent of Rs 2500 Crore without affecting consumers.
Thus, the withdrawal /surrender of subsidy to the extent of Rs.2500 Crore was
undertaken in the context of creating fiscal space for assuming greater liability by
GoTN by way of debt take over of TANGEDCO, under UDAY Scheme.
21. It is to note from the Impugned Order that takeover of Rs 22,815 Crore of
debt of TANGEDCO by GoTN, will result in saving of interest to the tune of Rs
2,882 Crore, however, since same is not considered while approving interest on
loan, the immediate benefit of UDAY is not considered. As such the interest on
such loan is not accounted for tariff calculation purposes and is accordingly not
passed on to the consumers. However, it is to note that such a debt takeover
under UDAY scheme has been adjusted against the revenue gap at the end of
FY 2016-17 and carrying cost only on the balance revenue gap / regulatory
assets has been accounted for. The relevant extract of the Impugned Order is
reproduce hereunder:
“T able 5.12 : Asset at the end of FY 2016-17 as approved by the Commission
(Rs. Crore)
Sl. Particulars Legend FY 2016-17
1. Opening balance A 30,884.15
2. Addition during the year B 2,864.47
3. Gap of FY 2010-11 amortized under
C (1,216.21)
FRP
4. Closing balance D = A +B+C 32,532.41
5. UDAY debt take over E 22,815.00
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6. Remaining balance after deducting debt
F= D-E 9,717.41
taken over
7. 25% of remaining debt after UDAY
G 7,605.00
takeover
8. Balance amount H+F-G 2,112.41
9. Interest rate for computing carrying cost
O 6.35%
on Rs.7605 Crore (Bank Rate = 0.1%)
10. Interest rate for computing carrying cost
J 11.00%
on balance amount
11. Carrying Cost K = (G*J) +
715.28
(H*
12. Regulatory Asset L+F+K 10,432.70
22. Further, in the Impugned Order, methodology for recovery of regulatory
assets of Rs 10432.70 crore is not considered, and the said regulatory assets
continue to remain in the books of TANGEDCO and it has been advised to strive
towards reducing a part of regulatory assets by way of improved financial
performance under the UDAY MoU. It is further observed from the para 5.3.10,
that approved changes will lead to some revenue loss, which need to be made
good by the GoTN so that tariff payable by domestic consumers remains
unaffected. Relevant paragraph is reproduced below:
“5.3.10 The Commission has further observed certain anomaly in the
Tariff Proposal submitted by TANGEDCO, which was also pointed out
during the SAC Meeting. As per the TANGEDCO's proposal, the per unit
rate of consumption for consumers in lower consumption slab is higher as
compared to the per unit rate of consumption for consumers in higher
consumption slab. This proposal of TANGEDCO is not in line with the
philosophy of telescopic tariff. Hence, the Commission has modified some
of the slab-wise rates for domestic category, while the Tariff for all other
categories has been retained at existing levels. As a result of this change
in the slab-wise rates proposed by TANGEDCO and approved by the
Commission, as well as rejection of the proposal to reduce the Fixed
Charges, the reduction in subsidy payable by GoTN has undergone a
change. GoTN has to make good this revenue loss also, in order to ensure
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Judgement in Appeal Nos. 356 of 2017
that the tariff payable by the domestic category consumers remains
unaffected, after the tariff revision.”
23. It is also contended by the Appellant that the surrender of subsidy by the
Distribution Licensee may result, in an increase in tariff, the burden of which
would ultimately be shifted upon the consumers. However, such contention rests
merely on apprehension and conjecture, without any demonstrable evidence of
actual impact. It is settled principle that regulatory adjudication cannot proceed
on speculative assumptions; it requires a clear causal nexus between the
impugned action and the alleged consequence. In the present case, no material
has been placed on record to establish that surrender of subsidy has led to any
upward revision of tariff.
24. On the contrary, the material on record indicates that the Government of
Tamil Nadu has undertaken a debt takeover, which has been used to reduce the
quantum of regulatory assets of TANGEDCO, which in turn, lowered the carrying
cost, a benefit that will ultimately accrue to the consumers, when the liquidation
of regulatory assets by way of tariff is undertaken. In the present case, no
increase in tariff of domestic consumer is effected rather the surrender of subsidy
to aid in creating space for debt takeover by GoTN under UDAY, has alleviated
the financial burden on the utility, which may ultimately lead to reduced costs to
be recovered from consumers.
25. In view of the above deliberations, we are unable to accept the Appellant’s
contention. The apprehension of tariff escalation is unfounded, and the surrender
of subsidy has not led to any upward revision in tariff. We, therefore, find no error
apparent in the Impugned Order on the issue under consideration. The findings
of the Commission on this aspect are upheld.
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Judgement in Appeal Nos. 356 of 2017
ISSUE B. APPROVING INCREASE IN LINE LOSS AND CALCULATION OF
LOSSES TO OA CONSUMERS CONNECTED TO DIFFERENT VOLTAGE
LEVEL
SUBMISSIONS URGED ON BEHALF OF APPELLANT
26. It is submitted that the State Commission has arbitrarily and
disproportionately increased the T&D losses without undertaking any scientific
study, which is contrary to its own earlier orders and inconsistent with the spirit of
the National Electricity Policy and the Tariff Policy. In fact, the TANGEDCO itself
opposed the computation of T&D losses and subsequently filed a Review Petition
challenging the same and in the Review Order, the State Commission amended
the applicable losses for open access transactions, depending upon the injection
voltage and the drawal voltage.
27. With regard to technical and commercial losses, Clause 5.4.6 of the
National Electricity Policy mandates that a time-bound programme should be
formulated by State Electricity Regulatory Commissions for segregation of
technical and commercial losses through energy audits and that energy
accounting and declaration of results for each defined unit should be made
mandatory, not later than March 2007, along with formulation of an action plan
for reduction of losses through adequate investments and governance
improvements. In the State of Tamil Nadu, there are approximately 21 lakh
agricultural connections and 11 lakh hut connections which remain unmetered
and are estimated to consume nearly 20% of the total grid consumption. Despite
this, Respondent No.2 have failed to properly measure and account for this
substantial portion of consumption. Furthermore, not only do approximately 32
lakh consumers remain unmetered, but even distribution transformers have not
been metered in the State, thereby undermining proper energy accounting and
accurate determination of T&D losses.
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28. It is submitted that even in the case of metered consumers, energy audit
meters have been installed only at the HT feeder breaker level, and no meters
have been installed at the Distribution Transformer level. Consequently, the
losses occurring in the HT segment and the LT segment cannot be measured
separately and distinctly. As determined by the State Commission in the
Impugned Tariff Order, the losses in the HT and LT segments (except 33 kV line
losses) constitute approximately 90% of the total distribution losses. This implies
that nearly 90% of the distribution losses have neither been measured nor
scientifically determined, but have merely been assumed by the State
Commission. Such determination of losses on the basis of assumptions, without
proper measurement or scientific analysis, is arbitrary in nature. It is further
submitted that this Tribunal, in its judgment dated 28.08.2011 in Appeal Nos. 192
and 206 of 2010, had issued specific directions to the Commission concerning
the proper measurement of T&D losses and that despite the lapse of so many
years from the date of the aforesaid order, neither Respondent No.2 nor
Respondent No.1- State Commission has completed the task of achieving 100%
metering. The situation continues to remain unchanged. It is further submitted
that, till date, the State Commission has neither approved any definite timeframe
for installation of consumer meters nor directed the licensee to ensure installation
of such meters.
29. In the Tariff Order of 2014, the State Commission had approved T&D losses
for the respective years as: 17.20% for 2011–12, 16.80% for 2012–13, 16.40%
for 2013–14, 16.00% for 2014–15, 15.60% for 2015–16 and 15.20% for 2016–
17. However, without complying with the directions issued by this Tribunal, the
State Commission has arbitrarily allowed and approved an increase of 3% in T&D
losses. A comparison of the year-wise approved losses as determined by the
State Commission vis-à-vis those directed by this Tribunal demonstrates a
significant deviation, wherein the Commission approved losses of 18.14%,
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Judgement in Appeal Nos. 356 of 2017
17.74% and 17.34% for FY 2016–17, 2017–18 and 2018–19 respectively,
whereas the losses in terms of the directions of this Tribunal should be 15.20%,
14.80% and 14.40% for the corresponding years. Therefore, the arbitrary
increase in line losses by 3%, based merely on assumptions and without any
scientific basis, is wholly unjustified and contrary to the directions of this Tribunal,
and the Impugned Order deserves to be set aside on this issue.
30. It is further submitted that in the Impugned Order, the State Commission has
arbitrarily increased the 110 kV transmission losses from 1.90% to 3.21% without
providing any cogent rationale or justification. The so-called “Study Report” stated
to have been submitted by Respondent No.2 does not even cover the 110 kV
level and such increase at higher voltage levels is inconsistent with the objective
of reducing losses.
31. The State Commission has repeatedly committed errors in the
determination of line losses applicable to open access consumers. The
stakeholders had earlier pointed out such errors in the Impugned Order, following
which the Commission issued a Correction Order dated 13.03.2018 in R.P. No.
4 of 2017, revising the loss levels applicable to open access consumers.
However, even in the revised order, the State Commission has assumed the
existence of a transformation arrangement between 33 kV and 22 kV, whereas
no such transformation exists anywhere in the transmission and distribution
network of Tamil Nadu. On the basis of this incorrect assumption, the State
Commission has added 50% of the 33 kV losses to 22 kV consumers and thereby
computed the losses at 4.24%, whereas the correct loss level ought to have been
3.52% (2.34% + 50% of 2.35%). Similarly, the transformation from 33 kV to 11
kV has been assumed, whereas in the Tamil Nadu distribution network such
transformation constitutes only about 20–30%, with the majority of
transformations being 110/11 kV. Consequently, the Commission ought to have
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Judgement in Appeal Nos. 356 of 2017
fixed the line loss for 11 kV consumers at 3.57%, instead of 4.29% as determined
in the table. If the Commission intended to specifically account for 33/11 kV
transformation, it ought to have introduced a separate row in the table and
distinctly specified the applicable line loss for 33/11 kV consumers. In view of the
above errors, it is respectfully submitted that the Impugned Order, to the extent it
relates to the increase in line losses, deserves to be set aside.
32. The purported “Study Report” stated to have been submitted by
Respondent No.2 pertains only to unmetered service connections and does not
address the arbitrary determination of nearly 90% of the HT and LT losses. Line
loss being one of the most crucial parameters for ARR approval and tariff
determination, the same ought to have been determined on a transparent and
scientifically verifiable basis. Section 86 of the Electricity Act, 2003 mandates that
the State Commission shall ensure transparency while exercising its powers and
discharging its functions. However, the said “Study Report” was not hosted in the
public domain for inviting comments and opinions from stakeholders, despite the
fact that the determination of line losses directly impacts tariff fixation. The failure
of the State Commission to publish the report for public scrutiny has rendered the
tariff determination process opaque and effectively confined it to an internal
exercise between the State Commission and the utilities, thereby violating the
principle of transparency. Regarding the contention of State Commission that
the “Study Report” was based on the methodology recommended by the REC
and hence it was accepted, it is submitted that REC is only a financial institution
which provides loans to the power sector entities and they are not the authority
for approving the technical standards. As per the Electricity Act 2003, only the
CEA can specify the technical standards. Further, it is also not known whether
the study is conducted by any third party as directed by the Commission or
conducted by Respondent No.2 itself.
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33. The aforesaid shortcomings clearly demonstrate that the “Study Report”
has not been prepared on any sound or scientific basis and, therefore, the fixation
of losses by the State Commission on the basis of such report is wholly arbitrary
and unsustainable. In these circumstances, the Appellant prays that this Tribunal
may be pleased to direct the Commission, to provide a copy of the said “Study
Report” to all stakeholders so as to enable the Appellant and other affected
parties to place their meaningful and informed submissions thereon. Until the
“Study Report” is made available for scrutiny and comments by stakeholders, the
revised and modified T&D loss percentages ought not to be permitted to be
implemented, since the entire exercise undertaken for fixation of line losses lacks
scientific methodology.
SUBMISSIONS URGED ON BEHALF OF RESPONDENT NO 2- TANGEDCO
34. The allegation of the Appellant that the State Commission has
‘disproportionately increased’ or ‘arbitrarily allowed’ line losses in the Impugned
Order is wholly misconceived. The Energy Balance approved for the MYT Control
Period FY 2016-17 to FY 2018-19 clearly demonstrates a consistent declining
trajectory in both Distribution Losses (14.13% → 13.83% → 13.53%) and
Transmission Losses (4.01% → 3.91% → 3.81%). The State Commission has,
relied upon the REC methodology-based study submitted by Respondent No.2
only for determining the loss trajectory for the aforesaid control period and for the
period FY 2011-12 to FY 2015-16, the State Commission declined to revise the
loss levels on the ground that the study was furnished only at the stage of true-
up, and accordingly disallowed excess power purchase on account of higher
losses at marginal cost, thereby safeguarding consumer interest. The sole
grievance raised by the Appellant, namely that the loss levels were approved on
the basis of a study and that actual losses cannot be ascertained in the absence
of 100% metering at the distribution transformer and consumer levels, is
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Judgement in Appeal Nos. 356 of 2017
untenable and fallacious. If accepted, such contention would imply that in the
absence of complete metering, no loss levels could ever be approved by the State
Commission.
35. Despite the Impugned Order clearly setting out the basis for determination
of the loss levels, the Appellant has neither in the Appeal nor in its Written
Submissions raised any specific objection to either the methodology adopted or
the outcome thereof. A perusal of the study report demonstrates that the loss
levels arrived at are reasonable, particularly as the assumptions and
methodology were duly tested against samples of actual data across select
circles and the results were corroborated, and further, the approved loss levels
are in consonance with the targets envisaged under the UDAY scheme. In these
circumstances, the objections now sought to be raised to the loss levels are
wholly devoid of merit and substance, especially when the Appellant has neither
identified any infirmity in the results nor suggested any alternate methodology for
determination of losses. It is further submitted that in the true-up exercise for the
relevant control period in question (Order dated 09.09.2022), the loss levels
approved by the Commission have already been trued up and remain
unchallenged. Additionally, it is noteworthy that for the first time during the course
of hearing, nearly nine years after the filing of the Appeal, the Appellant alleged
that the T&D loss study report had not been made available to it, despite no such
ground having been raised in the Appeal; rather, the Appellant has expressly
relied upon and referred to the findings of the said study both in the Appeal
(Grounds E & F) and in its Written Submissions dated 31.07.2024, thereby
rendering such contention an afterthought and liable to be rejected.
36. The Appellant has placed reliance on Order dated 28.08.2011 passed by
this Tribunal in Appeal Nos. 192 & 206 of 2010; however, the said reliance is
misplaced. In the said judgment, while the Tribunal observed that the projected
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Judgement in Appeal Nos. 356 of 2017
T&D loss of 18% was not correctly assessed, it did not interfere with the approved
loss reduction trajectory as the same was broadly in line with accepted industry
practice. The Tribunal merely directed the State Commission to expedite a
scientific study for assessment of unmetered consumption and to ensure
progress in metering, including installation of consumer meters and energy
accounting and audit meters, without in any manner prohibiting the approval of
normative losses; this position stood reaffirmed in the context of the 2013 Tariff
Order, wherein in Appeal Nos. 196 & 199 of 2013 (judgment dated 27.10.2014),
this Tribunal noted that the State Commission had not accepted Respondent
No.2’s claimed actual losses but had instead determined ARR and retail tariff on
the basis of normative and progressively stringent T&D loss trajectories of 16.4%,
16.0% and 15.6% for FY 2013-14 to FY 2015-16, thereby upholding the adoption
of normative loss levels rather than actual losses.
37. Since no loss assessment study report was furnished by Respondent No.2
for the true-up period, the learned State Commission has not revised the T&D
loss levels approved in earlier Tariff Orders, which already stand upheld by this
Tribunal. Accordingly, there is no violation of any directions issued by this
Tribunal, as alleged by the Appellant, nor has the Appellant demonstrated any
unjustified increase in T&D losses; on the contrary, the loss levels approved for
the present Control Period continue to reflect a progressively declining trajectory
consistent with the earlier approved trend.
CONSIDERATION AND OUR VIEWS
38. We heard the elaborate submissions made by the Appellant and
Respondent No 2. The main grievance of Appellant is that line losses have been
arbitrarily increased without any scientific study, and the study conducted by the
Respondent No. 2 and considered by State Commission was not shared with the
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Judgement in Appeal Nos. 356 of 2017
stakeholders, and the approved losses is in violation of earlier orders by this
Tribunal. In the Impugned Order following distribution and Transmission losses
has been considered for the control period FY 2016-17 to FY 2018-19:
Distribution Losses: FY 2016-17; 14.13%, FY 2017-18; 13.83%, FY 2018-19 ;
13.53%
Transmission Losses : FY 2016-17 ; 4.01 %, FY 2017-18; 3.91, FY 2018-19 ;
3.81%.
Total Loss: FY 2016-17 ; 18.14 %, FY 2017-18; 17.74, FY 2018-19 ; 17.43%.
39. We note from this Tribunal order dated 28.08.2011 in Appeal No 192 & 206
of 2010 (Tamil Nadu Electricity Consumers’ Association v. Tamil Nadu
Electricity Board ), reliance on which placed by the Appellant, that though it was
observed that assumption of base level 18 % T&D loss is not based on scientific
study but the trajectory fixed for the control period appears to be following good
industry practice and this Tribunal did not interfere with the losses so approved
by the Commission. However, the State Commission was directed to monitor the
study conducted for assessment of unmetered consumption and also to monitor
to review the progress of installation of consumer meters and ensure 100%
metering well within the approved time frame.
40. We note from the Impugned Order that T&D losses approved for earlier
years have not been interfered and as approved vide earlier orders have been
retained, though actual losses were higher than that approved. The same as
such does not form the subject matter of the present Appeal. The grievance of
the Appellant is confined to the approval of approximately 3% higher T&D losses
approved for FY 2016-17 to FY 2018-19 in comparison to levels approved for the
previous years.
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Judgement in Appeal Nos. 356 of 2017
41. It is an admitted position that Respondent No. 2 had submitted to the State
Commission a study report prepared on the basis of the REC methodology for
assessment of distribution losses, which was analysed by the Commission for the
purpose of fixation of T&D losses for the financial years 2016-17 to 2018-19. The
State Commission, in its affidavit dated 19.11.2025, has candidly acknowledged
that the said study report was neither furnished to the Appellant nor hosted on its
website. The Commission has further explained that such omission was not
deliberate or actuated by mala fides, but was occasioned due to inadvertence.
42. It is pertinent to note that while the Appellant has, in its appeal, challenged
the increase in T&D losses, however, no specific ground was taken therein with
respect to the non-availability/ non-sharing of the study report. The pleadings in
the appeal were completed long back, and it was only during the course of
hearing that the issue of non-sharing of the study report was raised for the first
time. In these circumstances, it would not be just or equitable to set aside the
findings in the impugned order solely on this ground, particularly when the study
report has been specifically referred to in the impugned order for arriving at the
revised T&D figures, and the Appellant, even in its written submissions, has also
not raised any specific objection to the methodology adopted therein or
suggested any alternate methodology.
43. The settled principle of law is that a party cannot be permitted to raise new
grounds belatedly during the course of hearing, especially when such grounds
were not pleaded in the appeal and no prejudice is demonstrated to have been
caused by the alleged omission. In the present case, the Appellant has not shown
that the non-disclosure of the study report has resulted in any miscarriage of
justice or has impaired its ability to contest the methodology or the outcome. On
the contrary, the absence of any substantive challenge to the methodology or the
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Judgement in Appeal Nos. 356 of 2017
findings in the study report reinforces the conclusion that no prejudice has been
occasioned to the Appellant.
44. In view of the above, we hold that the inadvertent non-sharing of the study
report, though an irregularity, does not vitiate the impugned order on this account.
The contention of the Appellant on this score is devoid of merit and is accordingly
rejected.
45. The State Commission had analysed the loss assessment report and found
that T&D loss of 14.43 % for FY 2015–16, as derived on the basis of the REC
methodology is comparable with AT&C loss of 14.58 % committed in UDAY
scheme, and accordingly reset the Distribution Loss for FY 2016-17 to FY 2018-
19, considering 0.3 % reduction in distribution losses from 14.43 % (FY 2015-16)
for FY 2016-17 to FY 2018-19 without disturbing previous years approved T&D
losses. Though it may appear that there is about 3% increase in T&D losses as
compared to previous years, however, such a decision has been arrived based
on the loss assessment report which reflects higher losses and it has been
observed that Respondent No 2 cannot be subjected to continuous disallowance
of certain power purchase expenses on account of actual distribution losses to
be higher than the targeted losses and therefore in our view such an allowance
cannot be termed arbitrary.
46. The Appellant is also aggrieved by the working of applicable losses for open
access transactions as approved in the review order dated 13.03.2018,
contending that since no transformation exist between 33 kV and 22kV levels, 50
% losses attributable of 33 kV should not have been added to 22 kV, likewise
transformation from 33 kV to 11 KV is only limited to 20% to 30%, losses for 11
kV should have been worked out accordingly. In a meshed synchronous network,
various voltage level transmission system exists and there may or may not be
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Judgement in Appeal Nos. 356 of 2017
direct transformation between two voltage levels, however the entire system
operates in an integrated synchronous manner. In such a situation effect of one
voltage transmission system cannot be isolated from other voltage level system,
even if not directly connected. The referred table 5.29 depicts the applicable
losses when Injection voltage is 230 kV/110 kV / 33 kV/22 kV and 11 kV and
drawl voltage is 230 kV/110 kV / 33 kV/22 kV and 11 kV. There may not be direct
transformation between two injection and drawal voltage level, however losses of
intervening voltage level system shall have bearing on the injection and drawl
voltage. In view of the aforesaid, we find no error apparent in the approach
adopted by the State Commission in determining the applicable losses,
warranting interference on this issue.
47. With regard to 100% metering, though a fixed time line was not indicated in
the Tribunal judgement, it was to be completed in an approved time line. We note
from the Impugned Order that Respondent No. 2 has indicated that 100% feeder
metering, DT metering and smart metering arrangements to the consumers
above 200 units per month will be carried out in phased manner. We feel that
since considerable time has lapsed when the Impugned Order was passed in the
year 2017/2018, 100 % metering would have been completed. In case, the same
is still not completed, we direct the State Commission to prescribe a definite time
line for completion of such work and to monitor the same for strict compliance.
In view of above deliberations, the Impugned Order is upheld on this issue.
ISSUE C: EXCESS SCHEDULING AND SYSTEM OPERATION CHARGES
(SSOC)
SUBMISSION URGED ON BEHALF OF APPELALNT
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Judgement in Appeal Nos. 356 of 2017
48. It is submitted that in the Impugned Order, SSOC has been computed on
the basis of the SLDC ARR filing in T.P. No. 3 of 2017, in which vide order dated
11.08.2017, Scheduling Charges were fixed at Rs. 160 per day and System
Operation Charges at Rs. 33.74 per MW per day for LTOA/MTOA and Rs. 1.41
per MW per hour for STOA. In prior tariff determination process, stakeholders
had consistently urged the State Commission to determine SSOC based on
SLDC ARR; however, the recovery of charges at the rate of Rs. 2000/MW/day
was permitted, while now it has been determined the SSOC as Rs.
193.74/MW/day, which is less than one-tenth of the charges hitherto levied upon
the Open Access consumers, thereby clearly evidencing that the earlier levy
resulted in substantial and undue enrichment of the SLDC/Respondent NO.2.
Notwithstanding the aforesaid, the State Commission, while passing the
impugned order in T.P. No. 1 of 2017 for determination of distribution tariff, has
failed to issue any direction to the Respondent No.2 for refund or adjustment of
the excess SSOC collected earlier, thereby denying the Appellant and other
stakeholders the benefit arising out of the order dated 11.08.2017 passed in T.P.
No. 3 of 2017, which omission renders the impugned order legally untenable.
49. The contention of State Commission that the benefit of reduction in SSOC,
based on the ARR of Respondent No.2 has been passed on to stakeholders
through reduced transmission charges, is incorrect and untenable. Despite the
issuance of a specific order reducing SSOC, the transmission charges continued
at the same level without any corresponding reduction. In these circumstances,
it is just and necessary that all OA consumers, who have paid such excessive
charges be granted appropriate refund or adjustment. State Commission may
be directed to look in to this aspect specifically and be further directed to allow
repayment of the excessively collected Scheduling and System Operation
Charges for the past periods,
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Judgement in Appeal Nos. 356 of 2017
SUBMISSIONS URGED ON BEHALF OF RESPONDENT NO. 2
50. It is submitted that the Appellant, for the purpose of seeking refund of
alleged excess Scheduling and System Operation Charges, has placed reliance
on the Order dated 11.08.2017 passed by the State Commission in TP No. 3 of
2017, wherein such charges were determined in the tariff petition pertaining to
the SLDC; however, the said Order has admittedly not been challenged by the
Appellant (TASMA) , and instead, TASMA has erroneously sought such relief by
impugning the distribution tariff order applicable to the distribution licensee, which
bears no nexus to the determination, levy, or refund of Scheduling and System
Operation Charges. It is submitted that Scheduling and System Operation
Charges form part of the Intra-State Transmission Tariff and allied charges,
payable to the SLDC / Respondent No.2 for discharge of grid operation,
scheduling, and system operation functions, and are determined in separate tariff
proceedings. The State Commission, vide Order No. 2 of 2012 dated 30.03.2012
(effective from 01.04.2012), determined a composite charge of Rs 2,000 per day
applicable to both Long-Term and Short-Term Open Access users, which was
continued in subsequent orders, including the Tariff Order dated 28.03.2013 and
SMT Order No. 8 of 2014 dated 11.12.2014. The levy of such charges was also
challenged by the Tamil Nadu Power Producers Association in Appeal No. 197
of 2013 before this Tribunal, which challenge was dismissed vide Order dated
18.10.2014, thereby affirming the validity of the said charges.
51. Subsequently, the State Commission, vide Order dated 11.08.2017 passed
in TP No. 3 of 2017 titled “Determination of Aggregate Revenue Requirement
(ARR) for FY 2017-18 and FY 2018-19 and SLDC Charges for FY 2017-18”, re-
determined the Scheduling and System Operation Charges by bifurcating the
same into separate components, namely Scheduling Charges of Rs 161 per day
and System Operation Charges of Rs 33.74 per MW per day; however, the said
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Judgement in Appeal Nos. 356 of 2017
Order is not under challenge in the present Appeal. The Appellant’s plea seeking
refund of alleged excess Scheduling and System Operation Charges, computed
as the difference between Rs 2000 per MW per day and Rs 193 per MW per day,
is wholly misconceived, as it effectively seeks to reopen and challenge the Tariff
Order No. 2 of 2012, which is not impugned in the present proceedings; it is a
settled position that amounts recovered in accordance with a duly notified tariff
order attain finality for the period of its operation and cannot be reopened or
unsettled on the basis of a subsequent tariff order applicable to a different period.
CONSIDERATION AND OUR VIEW
52. Admittedly, the State Commission vide its order dated 30.03.2012, has
determined the composite Scheduling and system operation charges of Rs 2000
per day applicable to long term and short term open access customers and same
was considered in previous tariff orders. State Commission in the its order in
T.P.No. 3 of 2017 dated 11.08.2017 has computed separate scheduling charges
and system operation charges for FY 2017-18, as noted below and said order is
effective from 11.08.2017.
Particulars FY 2017-18
Scheduling Charges Rs. 160 per day
System Operation
Rs.33.74 pe MW per day for LTOA & MTOA
Charges
Rs.1.41 per MW per Hour for STOA
53. It is not in dispute that SLDC charges so determined in above referred order
has been considered in the Impugned Order and the Appellant is only aggrieved
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Judgement in Appeal Nos. 356 of 2017
by the refund not accorded for previous years SLDC charges, which were
certainly higher than charges now determined by order dated 11.08.2017.
54. Upon due consideration, we find no merit in the submissions advanced by
the Appellant. The levy of composite charges of Rs 2000 per day was in
pursuance of the State Commission’s Order dated 30.03.2012. The said order,
which constituted the basis for imposition of the said charges for previous years,
has not been assailed in the present proceedings. The Appellant’s challenge is
confined to the refund of charges already levied, without questioning the validity
of the foundational order itself.
55. It is a well-settled principle that unless the underlying order authorising the
levy is specifically impugned and set aside, the consequential charges imposed
thereunder cannot be held to be illegal or refundable. The Appellant, cannot now
seek to indirectly nullify its effect by claiming refund when the commission’s Order
dated 30.03.2012 holds the field for previous years. We are of the considered
view that the Impugned Order does not warrant any interference on this issue.
ISSUE D: MD INTEGRATION TIME REDUCED TO 15 MINUTES FROM 30
MINUTES - MD CHARGES MAY INCREASE TO HT SERVICES
SUBMISSIONS URGED ON BEHALF OF APPELLANT
56. In the impugned order, energy meter integration time has been reduced
from 30 minutes to 15 minutes, which is likely to increase MW deviations and
impose an additional financial burden on industrial consumers. While the State
Commission has observed that such reduction would not materially affect
industries without spikes or dips in load patterns, it has failed to appreciate that
no industry operates on a constant load and variations are inevitable.
Consequently, industries such as those represented by the Appellant
Association, which experience fluctuations in load, would be significantly and
Page 28 of 38
Judgement in Appeal Nos. 356 of 2017
adversely impacted. Further, without any classification or differentiation based on
load patterns, the State Commission has mechanically approved the reduction to
a 15-minute integration period. Notably, for industries already having fluctuating
loads, a 15-minute integration mechanism is already in practice, and therefore,
there was no justification for extending the same universally. The standard
practice across most States continues to be a 30-minute integration period for
consumer metering, and the State Commission has provided no cogent reason
for deviating from such established norms, rendering the impugned decision
arbitrary and unsustainable.
57. The introduction of the MD integration scheme based on 15-minute slots
would be meaningful and workable only upon the coming into force of the ABT
regime and the corresponding DSM Regulations. However, it is an admitted
position that the State of Tamil Nadu continues to operate under a non-ABT
regime, and even subsequent to the passing of the impugned order dated
11.08.2017, no substantial or tangible progress has been achieved at any level
towards migration to the ABT regime. In such circumstances, it is submitted that
the proposed MD integration mechanism, as introduced in the impugned Tariff
Order, ought to be enforced only upon the ABT regime being fully operational and
capable of effective implementation. The impugned order, however, seeks to give
effect to the said mechanism from 11.08.2017 itself, thereby introducing and
enforcing a framework which was not in existence at the time of passing of the
Tariff Order. Such anticipatory incorporation of a future regulatory mechanism,
without the requisite supporting infrastructure or regulatory framework being in
place, is premature and untenable.
58. This Tribunal may be pleased to set aside the said provision and direct that
its implementation be deferred until the State is fully transitioned to the ABT
regime. It is further pertinent that the High Court of Judicature at Madras has
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Judgement in Appeal Nos. 356 of 2017
already granted an interim stay on the DSM Regulations in W.P. No. 15433 of
2020 vide order dated 28.09.2021, which continues to remain in force.
SUBMISSIONS URGED ON BEHALF OF RESPONDENT No. 2
59. It is contended by the learned counsel that in the tariff petition, modification
of the integration period for determination of Maximum Demand (MD) by
extending the existing 15-minute integration period, which was earlier applicable
only to HT I-A industries, to all HT consumers, in view of evolving grid discipline
and operational requirements was proposed; this was based on the fact that grid
frequency monitoring, scheduling, deviation settlement, and energy accounting
are undertaken on a 15-minute time block basis, and that all generators are
already equipped with ABT-compliant meters operating on such intervals,
rendering the continuation of parallel 15-minute and 30-minute integration
systems operationally inefficient and impracticable. The State Commission, upon
consideration, found merit in the proposal and approved a uniform 15-minute
integration period for determination of Maximum Demand for all HT consumers,
further observing that even for industries without significant spikes or dips in load
profile, such adoption would not result in any material adverse impact as
compared to the earlier 30-minute integration period.
60. It is submitted that the Regional Load Despatch Centre (RLDC) maintains
energy accounts and undertakes deviation settlement strictly on a 15-minute time
block basis, with capacity despatch, deviation settlement, and associated
penalties also being computed on such intervals; therefore, given that the State
Grid is synchronised with the National Grid and is required to operate in
compliance with the Indian Electricity Grid Code (IEGC), alignment of Maximum
Demand integration with the 15-minute time block methodology is both necessary
and justified. This Tribunal in its judgement dated 29.05.2014 in Appeal No. 203
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Judgement in Appeal Nos. 356 of 2017
of 2013, “Shree Cement Limited v. Rajasthan Electricity Regulatory
Commission” , has already held that determination of Maximum Demand on a
15-minute time block is neither illegal nor discriminatory, and that the State
Commission is fully justified in permitting distribution licensees to adopt a 15-
minute integration period in place of a 30-minute period.
CONSIDERATION AND OUR VIEW
61. It is an admitted position that the integration period of 15 minutes for
determination of Maximum Demand (MD) was already applicable to HT I-A
industries, and by virtue of the impugned order, the same has now been extended
to all HT consumers. The relevant paragraphs of the impugned order have been
duly considered and are reproduced below:
“3) In case of deviation by Open Access Customer who is also a consumer
of distribution licensee, the difference between the applicable scheduled
open access load and actual drawl shall be accounted Block wise and shall
be settled in accordance with the following:
a. The energy consumption of such customer shall be recorded in 15
minutes time block.
b. Deviations between the schedule and the actual injection/drawal shall
come under the purview of the intra-state ABT, as notified by the
Commission and shall be settled based on the composite accounts for
imbalance transactions issued by SLDC on a weekly cycle in accordance
with the UI charges specified by the Commission. Billing, collection and
disbursement of any amounts under the above transactions shall be in
accordance with the Commission’s orders on Intra-state ABT, as may be
applicable from time to time. Till the implementation of Intra-State ABT, the
imbalance charge shall be regulated as below:
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Judgement in Appeal Nos. 356 of 2017
i. In case of actual energy/demand drawal is more than the scheduled
energy/demand but within the permitted energy/demand (based on
contracted load and energy or quota demand and energy as applicable),
customer shall be liable to pay for such over drawal at the applicable tariff
rates of that category of consumer as determined by the Commission from
time to time.
ii. In case of actual energy/demand drawal is more than the scheduled
energy/demand drawal and also more than the permitted energy/demand
(based on contracted load and energy or quota demand and energy as
applicable), payment for the capacity above the contract demand shall have
to be made at the excess demand/energy charges as specified by the
Commission for such categories of customers in the Regulations/Order”
62. We find merit in the contention advanced by the Respondent that grid
frequency monitoring, scheduling, deviation settlement, and energy accounting
are undertaken on a 15-minute time block basis, and that all generators are
already equipped with ABT-compliant meters operating on such intervals. The
adoption of a 15-minute integration period is thus consistent with evolving grid
discipline and operational requirements. The Appellant itself acknowledges that
certain categories of industries, particularly those with fluctuating load patterns,
are already subjected to such a 15-minute integration methodology. However, the
plea advanced by the Appellant seeking exemption for the industries represented
by it is devoid of any cogent rationale or intelligible differentia.
63. This Tribunal, in its judgment dated 29.04.2014 in Appeal No. 203 of 2013,
“ Shree Cement Limited v. Rajasthan Electricity Regulatory Commission” ,
has categorically held that determination of Maximum Demand for consumers
availing open access in a 15-minute time block, instead of a 30-minute time block,
on their drawal from distribution licensees is neither illegal nor discriminatory, and
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Judgement in Appeal Nos. 356 of 2017
does not violate Section 62(4) of the Electricity Act, 2003. The said judgment
clearly affirms that such a methodology is in consonance with the prevailing
regulatory framework and is a valid exercise of the Commission’s powers. The
relevant paragraphs are extracted hereunder:
“14. Summary of Findings
A. The learned State Commission has not committed any illegality by
allowing maximum demand determined for those consumers who avail
open access in a 15 minutes time block instead of 30 minutes time block
on their drawal from discoms and the same is not discriminatory and
violative of Section 62 (4) of the Electricity Act, 2003
…..
C. that the State Commission has, by the impugned order, legally and
correctly permitted the respondents/discoms to change the time block
for recording maximum demand for open access consumers to 15
minutes instead of 30 minutes in their tariff booklet.
D. that the State Commission is fully justified in passing the impugned
order in subjecting the consumers availing open access to determination
of maximum demand at 15 minutes time block on their drawal from
discoms and the same is not discriminatory.”
64. In view of the above deliberation and the binding judicial precedent, we hold
that the impugned order suffers from no infirmity on this issue. The extension of
the 15-minute integration period to all HT consumers is legally sustainable,
operationally justified, and consistent with the trajectory of grid discipline. The
contention of the Appellant is accordingly rejected, and the impugned order is
upheld on this aspect.
ISSUE E: CROSS SUBSIDY SURCHARGE
SUBMISSIONS URGED ON BEHALF OF APELLANT
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Judgement in Appeal Nos. 356 of 2017
65. The National Tariff Policy, 2016 mandates that the Cross Subsidy
Surcharge shall not exceed 20% of the relevant tariff, and State Commission,
also acknowledged the same while passing the impugned order, however, the
said stipulation has not been duly adhered to while actually computing and
determining the cross subsidy surcharge at Rs. 1.67 per unit, which is wholly
erroneous and contrary to the said mandate, particularly when the applicable tariff
for HT-IA industrial consumers, including the members of the association is Rs.
6.35 per unit. Even upon a liberal computation whether by taking 20% of Rs. 6.35
per unit, or Rs. 6.57 per unit (being the weighted average considering peak hour
surcharge and night rebate), or even Rs. 6.90 per unit (being the maximum tariff
inclusive of demand charges under a two-part tariff structure) the CSS cannot
exceed Rs. 1.38 per unit.
66. The State Commission should be directed to provide the working sheet as
how it has calculated the ABR values and how the Cross Subsidy Surcharge was
pegged with Rs. 1.67 / Unit considering the 20% cap and Impugned Order fixing
the Cross Subsidy Surcharge at the rate of Rs. 1.67 / Unit to the industrial
consumers needs to be set aside.
SUBMISSIONS URGED ON BEHALF OF RESPONDENT NO.2 –TANGEDCO
67. The contention of Appellant that the Cross Subsidy Surcharge (CSS)
determined by the Commission for FY 2017–18 in respect of HT-IA (HT Industry)
consumers, amounting to INR 1.67/kWh, is excessive and contrary to the Tariff
Policy, 2016, is contrary to the express provisions of the Tariff Policy, 2016, which
prescribes the applicable framework and formula for determination of CSS, is
devoid of merit
68. The Tariff Policy does not draw any distinction between demand charges
and energy charges while defining “T”; rather, it expressly provides that “T” is the
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Judgement in Appeal Nos. 356 of 2017
tariff payable by the relevant category of consumers, which necessarily
encompasses both demand (fixed) and energy (variable) charges. Consistent
with this position, the State Commission, while determining CSS for FY 2017–18,
recorded that the tariff payable by consumers comprises these two components
and accordingly held that the appropriate representation of “T” under the Tariff
Policy is the Average Billing Rate (ABR) / Average Realisation Rate, capturing
the combined effect of both demand and energy charges, and further observed
that had the Tariff Policy intended exclusion of demand charges, it would have
expressly so provided.
69. Further, the issue raised by the Appellant is no longer res integra. This
Tribunal, in Appeal Nos. 196 & 199 of 2013 (Order dated 27.10.2014), while
adjudicating a challenge to the inclusion of demand charges in the computation
of CSS, has categorically rejected the contention that demand charges ought to
be excluded from the formula and from the calculation of the Average Billing Rate.
70. It is further submitted that this Tribunal in its judgement dated 20.05.2016
in Appeal No. 181 of 2015, “Byrnihat Industries Association v. Meghalaya
State Electricity Regulatory Commission”, has upheld the adoption of the
Average Billing Rate (ABR) as “T” under the Tariff Policy, categorically observing
that the tariff payable by a consumer constitutes an effective composite of
fixed/demand and energy charges, and accordingly, ABR represents the
appropriate parameter for computation of Cross Subsidy Surcharge (CSS).
CONSIDERATION AND OUR VIEW
71. The State Commission in the impugned order has worked out the category
wise Average Bill Rate (ABR) and on that basis calculated the cross subsidy
surcharge is indicated in the Table 5.31 of the Impugned Order, as reproduced
below: -
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Judgement in Appeal Nos. 356 of 2017
Table 5-31: Approved CSS for FY 2017-18
Particulars ABR C C/
(1-L%)
D R (CSS)
Rs/kWh Rs/kWh Rs/kWh Rs/kWh Rs/kWh Rs/kWh
HT Sales
HT IA: HT-Industry 8.37 4.09 4.32 0.43 - 1.67
HT IB : Railway
Taction
7.71 4.09 4.32 0.43 - 1.54
HT IIB: Govt.
educational institute
7.58 4.09 4.32 0.43 - 1.52
HT IIB: Pvt.
educational institute
8.05 4.09 4.32 0.43 - 1.61
HT III – HT
commercial
9.91 4.09 4.32 0.43 - 1.98
HT IV – Lift Irrigation
societies
6.35 4.09 4.32 0.43 - 1.27
HT V- Temporary
Supply
11.30 4.09 4.32 0.43 - 2.26
Note: The above-determined CSS for each category shall remain the same, irrespective of the
drawal and injection voltage, on account on capping of the CSS at 20% of the Tariff as per
Tariff Policy formula’
72. It is noted from the Impugned Order that Commission has considered the
Tariff as Average Billing Rate (ABR)/ Average Realization rate, which comprises
the Demand charge as well as the Energy charges, and same shall be used for
calculating Cross Subsidy Surcharge (CSS). This Tribunal in its judgment in
Appeal No.181 of 2015 ( Byrnihat Industries Association vs. Meghalaya State
Electricity Regulatory Commission ) dated 26.05.2016, has held that the
average billing rate used in the formula T is a combination of fixed/demand and
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Judgement in Appeal Nos. 356 of 2017
energy charges and, therefore, ABR is the correct parameter for CSS
computation. The relevant paragraph of judgment is reproduced below:-
“19. In the National Tariff Policy formula, “T” is the Tariff payable by
relevant category of consumers. The Tariff has two components viz. Fixed/
Demand charge and Energy charge and hence, for the purpose of
calculating cross- subsidy surcharge, the State Commission has
considered Average Billing Rate in Rs/ KWh for the respective category as
“T” as it reflects the effective combination of fixed/demand and energy
charges payable by that category of consumers. We are in agreement with
the formulation of the State Commission for using Average Billing Rate for
a consumer category to be used while determining Cross Subsidy
Surcharge.”
73. The Appellant has contended that the Cross Subsidy Surcharge (CSS),
when computed per unit inclusive of demand charges, ought not to exceed ₹1.38
per unit. In contrast, the State Commission, in the impugned order, has
determined the CSS at ₹1.67/kWh, premised upon an Average Billing Rate (ABR)
of ₹8.37/kWh. It is further urged by the Appellant that the impugned order does
not disclose the detailed methodology or data relied upon by the Commission in
arriving at the said ABR figure.
74. Upon careful consideration of the submissions and the judicial
pronouncements placed before us, we find no infirmity in the principle adopted by
the State Commission insofar as the inclusion of demand charges in the
computation of ABR is concerned. The settled jurisprudence on the subject
consistently affirms that demand charges form an integral component of the tariff
structure and, therefore, must necessarily be factored into the calculation of the
average billing rate for each consumer category. Consequently, the CSS derived
on such basis cannot be faulted on principle.
75. However, while the methodology stands upheld, we are of the considered
view that transparency in regulatory determination is indispensable. Regulatory
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Judgement in Appeal Nos. 356 of 2017
orders, particularly those affecting tariff and surcharge liabilities, must be
accompanied by sufficient particulars to enable stakeholders to comprehend the
basis of computation and to exercise their statutory right of scrutiny.
76. Accordingly, while affirming the principle adopted by the State Commission
in the impugned order with respect to the calculation of CSS, we direct that the
State Commission shall, upon an application being filed by the Appellant, furnish
the detailed workings and data considered in arriving at the ABR for the consumer
category represented by the Appellant. Such disclosure shall ensure adherence
to the principles of natural justice, transparency, and accountability in regulatory
decision-making.
CONCLUSION
In view of above deliberations, we do not find any error in the Impugned
Orders passed by TNERC, necessitating our interference and accordingly
Impugned Order & Review order dated 11.08.2017 & 13.03.2018 is upheld. State
Commission to comply with our directions as contained in the paragraph 47 and
76.
The Captioned appeal and pending IAs if any are disposed of in above
terms.
th
PRONOUNCED IN THE OPEN COURT ON THIS 11 DAY OF May, 2026.
(Virender Bhat)
Judicial Member
(Seema Gupta)
Officiating Chairperson
REPORTABLE / NON-REPORTABLE
Pr/dk/ag/ak
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