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SUPREME COURT OF INDIA
SURINDER SINGH NIJJAR, A.K. SIKRI, JJ.
M/s. Sesa Sterlite Ltd. – Appellant
Versus
Orissa Electricity Regulatory Comm. & Others – Respondents
Civil Appeal No. 5479 of 2013
Decided On : 25-04-2014
(b) Electricity Laws – Cross Subsidy Surcharge (CSS) – Charge payable by a consumer opting to avail power supply through open access from someone other than the Distribution licensee in whose area it is situated – CSS meant to compensate such Distribution licensee from the loss of cross subsidy to such Distribution licensee – Payable by ‘consumer’ to the Distribution licensee – Thus appellant, though drawing power from Sterlite would normally be liable to pay CSS to WESCO. (Para 28, 29, 30)
(c) Electricity Act, 2003 – Section 2(10), 2(19), 2(72) r/w Regulation 27, OERC (Conditions of Supply Code) Regulation 2004 and Rule 4 of the Electricity Rule, 2005 – Transmission line – WESCO maintains the dedicated transmission line – Having distribution system including service lines – Entitled to CSS. (Para 31 to 35)
(d) Special Economic Zones Act, 2005 – Section 49 r/w section 14, Electricity Act, 2003 – Consumer or deemed Distribution licensee – Developer authorized u/s 49 to operate and maintain a distribution system as a deemed licensee – Entire power purchased by appellant used for own consumption and not for distribution and supply to consumers – Cannot be treated as ‘deemed Distribution Licensee’ u/s 14 – Notification dated 03.03.2010 not applicable to appellant. (Para 43, 44)
Facts of the case:
The question arising in this case is whether a “Deemed Distribution Licensee” is liable to pay Cross Subsidy Surcharge (CSS) to the Distribution Licensee for the area in question.
The appellant has its unit in Special Economic Zone (SEZ) and it is a Developer in the said SEZ area. It is not drawing or utilizing any electricity from the Distribution Licensee viz. WESCO for its unit namely VALE-SEZ. In fact, the Appellant had entered into a Power Purchase Agreement (PPA) dated 18th August, 2011 with M/s. Sterlite Energy Ltd. The Appellant had filed application for getting approval of the said PPA. However the Odisha State Commission, instead of granting the approval, rejected the said PPA and directed the Appellant to pay CSS to WESCO holding the Appellant to be a ‘Consumer’.
As per the Appellant, as it is a deemed distribution licensee for the purpose of Electricity Act by virtue of it being a ‘Developer’ because of the reason that its unit is in SEZ area and such a recognition is given to the Appellant statutorily under the provisions of Special Economic Zone Act, 2005 (hereinafter referred to as SEZ Act). Therefore, the question of payment of CSS to the Distribution Licensee does not arise. It is also the case of the Appellant that, in any case, since no electricity is being drawn from the open access network of WESCO, there is no question of making payment of cross subsidy surcharge.
Order of the Commission has been affirmed by the Appellate Tribunal.
The Court is required to decide:
“Whether a developer of a notified Special Economic Zone, who has been deemed by law to be a licensee for distribution of electricity, is required to, once again, apply to Electricity Regulatory Commission under the Electricity Act for grant of a licence or the deeming fiction carved out in Section 14 of the Electricity Act automatically dispenses with this requirement and ipso facto makes such SEZ developer a distribution licensee.”
Finding of the Court:
It is not possible for the Appellant to avoid payment of CSS to WESCO.
Result: Appeal dismissed.
An open access consumer is a person or entity that has the right to procure electricity from a source other than the designated distribution licensee of their area, using the distribution system of that licensee. The legal framework allows consumers to choose their electricity supplier through open access, provided they pay the applicable surcharge, known as cross subsidy surcharge (CSS), which compensates the distribution licensee for the loss of cross-subsidy revenue.
In the context of the provided document, a key point is that the CSS is payable by consumers who opt to take supply through open access from a supplier other than the distribution licensee of their area (!) (!) . The legal definition of "consumer" includes entities that use electricity for their own use, regardless of whether they are connected directly to the distribution licensee or are procuring power via open access (!) (!) .
Furthermore, even entities deemed to be licensees, such as those in special zones like SEZs, may still be considered consumers if they are using the electricity solely for their own consumption and not for distribution to others (!) . The legal provisions recognize that consumers have the right to choose their source of supply while being liable to pay the CSS, which is intended to balance the interests of existing licensees and promote competition.
In summary, an open access consumer is an entity that has the right to purchase electricity from a source other than the local distribution licensee, using the distribution system of that licensee, and is liable to pay the applicable CSS for such open access arrangements.
JUDGMENT
A.K. Sikri, J. –
1. Instant is a statutory Appeal which is filed by the Appellant under Section 125 of the Electricity Act, 2003 (hereinafter referred to as ‘the Act’). This Appeal arises out of the judgment and order dated 3rd May, 2013 passed by Appellate Tribunal for Electricity.
2. By the aforesaid judgment, the Appellate Tribunal has affirmed the orders of the Odisha Electricity Regulatory Commission (hereinafter referred to as the ‘State Commission’). The essence of these orders is that even when the Appellant is a “Deemed Distribution Licensee” for the purpose of Electricity Act, it is still liable to pay Cross Subsidy Surcharge (CSS) to the Respondent No.8 viz. WESCO which is a Distribution Licensee for the area in question.
3. To put it in nutshell, the case of the Appellant is that it has its unit in Special Economic Zone (SEZ) and it is a Developer in the said SEZ area. It is not drawing or utilizing any electricity from the Distribution Licensee viz. WESCO for its unit namely VALE-SEZ. In fact, the Appellant had entered into a Power Purchase Agreement (PPA) dated 18th August, 2011 with M/s. Sterlite Energy Ltd. The Appellant had filed application for getting approval of the said PPA. However the Odisha State Commission, instead of granting the approval, rejected the said PPA and directed the Appellant to pay CSS to WESCO holding the Appellant to be a ‘Consumer’.
4. As per the Appellant, as it is a deemed distribution licensee for the purpose of Electricity Act by virtue of it being a ‘Developer’ because of the reason that its unit is in SEZ area and such a recognition is given to the Appellant statutorily under the provisions of Special Economic Zone Act, 2005 (hereinafter referred to as SEZ Act). Therefore, the question of payment of CSS to the Distribution Licensee does not arise. It is also the case of the Appellant that, in any case, since no electricity is being drawn from the open access network of WESCO, there is no question of making payment of cross subsidy surcharge. This is the brief description of the dispute raised by the Appellant and in order to understand the gravamen of this dispute, we take a tour of the factual roadmap.
The Facts:
5. These facts are in narrow compass and have been narrated succinctly by the Appellate Tribunal in its order. As there is no dispute about the correctness of these facts, we intend to traverse the same therefrom. The Appellant is engaged in the business of production and export of aluminium. The Appellant has set up a 1.25 MTPA capacity aluminium smelter project in a sector specific Special Economic Zone. After getting all necessary approvals for the development of SEZ for manufacture of export of aluminium the appellant set up the aforesaid plant. These approvals include the approval with captive power plant as well. It is also a matter of record that on 27th February, 2009 the Ministry of Commerce and Industry, Government of India issued a notification declaring the unit of the Appellant to be SEZ. It was followed by Notification dated 3rd March, 2010 under Section 49(1) of the SEZ Act. By the said notification, the Central Government of promoting the objects of Special Economic Zone and in terms of powers delegated under the Special Economic Zone Act, introduced a proviso to the provisions of Section 14(b) of the Electricity Act, 2003. By the said introduction, a developer of a Special Economic Zone was declared as a deemed licensee authorized to distribute electricity within the Special Economic zone area. The effect of the aforesaid Notification under section 14(b) of the Electricity Act is that the Appellant became a deemed Distribution Licensee.
6. It would be pertinent to mention at this stage that the units of the Appellant are divided into two broad areas. One is Domestic Tariff Area (DTA) where it has established one of its unit. Other unit is VAL-SEZ which is in SEZ (hereinafter referred to as VAL-SEZ Unit). In so far as its unit in DTA is concerned, it d
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