Important Point
The Ideal situation is essentially contemplation of the future; it cannot be applied to determine present issues.

Judgment

Dr. Arijit Pasayat, J. —

1.Challenge in these appeals is to the Judgment of the Division Bench of the Punjab and Haryana High Court allowing the statutory appeals filed by the respondents in these appeals questioning the Order of the Punjab State Electricity Regulatory Commission (in short the ‘Commission’). The determination of tariff by the Commission was the subject matter of challenge.

2.The High Court held that the Commission had not addressed itself to the relevant parameters and, therefore, the Order suffers from infirmities. The matter was remitted to the Commission to decide the issues afresh keeping in view the observations made and after eliciting the appropriate information from the appellant-Punjab State Electricity Board (in short the ‘Board’) wherever it has been found the deficient on the part of the Board. Stress in these appeals, essentially is focused on various conclusions on specific issues.

3.The dispute relates to the period from 1.8.2002 to 31.7.2003. The annual cost requirement as per the Board was Rs.7,437.78 crores while the Commission allowed Rs.6,341.14 crores. The challenge was essentially by industrial consumers before the High Court. The dispute as noted above relate to (i) estimation of agricultural consumption and transmission and distribution loss (in short ‘T&D Loss’), (ii) energy input and coal transportation, (iii) manpower requirement, (iv) investment and rate of return.

4.So far as the last head is concerned, the rate claimed is 3% of net fixed assets and 14% of equity.

5.The basic premises on which the Commission proceeds is to find out whether existing tariff generates surplus revenue or not. If it is more, then there is scope for reduction in tariff and if it is less it leads to increase in tariff. One of the basic issues relates to cross subsidization. In other words, industrial consumers pay more than actual average cost of supply and subsidize the consumers in the agricultural and domestic sectors.

6.According to learned counsel for the appellant-Board cross subsidization is a tariff design issue. The Government has no role to play in cross subsidy. It is not an element of cost and essentially is redesigning of tariff. Hypothetically, High Court is not correct in saying it is a loss of revenue measure.

7.Learned counsel for the respondents submitted that the High Court has rightly stressed on certain aspects like cross subsidy, inadequacy of materials produced, and rational and down to earth approach has been adopted. The Government has really no role to play. It is a legacy of the past and principally aims at progressively reducing the element of cross subsidy. The cost of supply is different to different classes of consumers. The average cost of supply can be categorized into (i) the average cost to every consumer and (ii) the average cost to a class of consumers. It is pointed out and in fact there is no dispute that cost of supply varies depending upon the consumption i.e. in case of lower voltage relatable to domestic consumers, the cost of supply is higher vis-à-vis the cost and at higher voltage by industrial consumers it is less. The technical and commercial losses are lower because of high oltage and it becomes higher if it is a case of low voltage. Till now, there appears to be no authoritative determination on a particular class of consumers. Thus, one of the methods can be by adoption of average cost principle. The basic issues which the High Court tried to address related to cross subsidy. But it introduced a concept of ideal situation which in our opinion is not the correct approach. Subsidy in essence is a privilege which can either be given or not to be given.

8.The Commission which has been appointed under the Electricity Regulatory Commissions Act, 1998 (in short the ‘1998 Act’) or the Electricity Regulatory Commissions Act, 2003 (in short the ‘2003 Act’) exercises the statutory powers for determination of tariff. The guidelines and parameters have been provided u