AVERAGE BILLING RATE COMPRISING DEMAND AND ENERGY CHARGES IS THE VALID BASIS FOR COMPUTING CROSS-SUBSIDY SURCHARGE CAPPING

The Appellant (TSMA) challenged the Tamil Nadu Electricity Regulatory Commission’s (TNERC) order dated 11.08.2017 and a subsequent review order dated 13.03.2018.

On 30.11.2016, Respondent No. 2 (TANGEDCO) filed for truing up and tariff determination. Concurrent with the UDAY scheme, the Government of Tamil Nadu (GoTN) took over 75% of TANGEDCO’s debt (₹22,815 Crore).

To create fiscal space for this takeover, TANGEDCO proposed relinquishing ₹2,500 Crore in subsidies from GoTN for FY 2017-18.

The Appellant contested this relinquishment, along with the Commission’s approval of increased T&D losses, revised scheduling charges, the reduction of Maximum Demand (MD) integration time from 30 to 15 minutes, and the calculation of Cross Subsidy Surcharge (CSS).

1. Whether TANGEDCO’s relinquishment of ₹2,500 Crore in subsidy from the State Government was contrary to Section 65 of the Electricity Act, 2003.

2. Whether the State Commission arbitrarily increased Transmission & Distribution (T&D) losses without a scientific study and failed to ensure 100% metering.

3. Whether the reduction of MD integration time from 30 to 15 minutes was discriminatory or premature.

4. Whether the Cross Subsidy Surcharge (CSS) was calculated in violation of the National Tariff Policy, 2016.

Section 65 of the Electricity Act, 2003, which governs the provision of subsidies by the State Government and mandates advance payment as a condition for implementation.

National Electricity Policy and National Tariff Policy 2016, which caps CSS at 20% of the relevant tariff.

The principle that Maximum Demand integration periods can be aligned with grid operational blocks (15 minutes), as upheld in Shree Cement Limited v. RERC regarding Section 62(4) of the Act.

Precedent from Byrnihat Industries Association v. MSERC stating that "Tariff (T)" in the CSS formula includes both demand and energy charges (Average Billing Rate).

Regarding the subsidy, the Tribunal reasoned that under Section 65, subsidy is a policy concession, not a consumer right; the "surrender" was a strategic trade-off to facilitate a massive debt takeover by GoTN under the UDAY scheme, which reduced TANGEDCO's regulatory assets and interest burden.

On T&D losses, the Tribunal found that the Commission relied on an REC-methodology study which, while not initially shared with stakeholders (an "irregularity"), followed a declining trajectory and was tested against actual data.

For MD integration, the Tribunal held that 15-minute blocks align with modern grid discipline and intra-state ABT regimes, dismissing the Appellant's claim of discrimination based on Shree Cement Limited.

Regarding CSS, the Tribunal affirmed that "T" represents the Average Billing Rate (ABR) inclusive of demand charges, thus the ₹1.67/unit rate was mathematically consistent with inclusive billing despite the Appellant's preference for energy-only calculations.

The Tribunal directed the Commission to: (a) prescribe a definite timeline for 100% metering; and (b) provide the Appellant with the detailed working sheets for ABR/CSS computations upon application to ensure transparency. The appeal was dismissed.