IMPORTANT POINT
TPC and BSES/REL should pay the standby charges payable by TPC to MSEB in the ratio of 77:23.

JUDGMENT :

ARUN MISHRA, J.

1. The appellant – Tata Power Company (in short ‘the TPC’) is a distribution licensee supplying electricity to the entire city of Mumbai, whereas BSES/Reliance Energy Limited (in short ‘REL’) is a distribution licensee supplying electricity only in the suburbs of Mumbai. Prior to 1998, the TPC was the only generator of the electricity supplying electricity to BSES for further supply to BSES customers. The TPC had 108 customers in the entire city of Mumbai. The tariff payable by BSES to TPC included a component of standby charge. The entire standby charges paid by TPC to Maharashtra State Electricity Board (for short ‘the MSEB’) were being recovered by TPC from its customers through its tariff. Due to change in shareholding pattern, the BSES was changed to Reliance Energy Limited on 24.2.2004.

2. The brief facts indicate that TPC and MSEB met on 12.3.1985 to finalise the interconnection between representatives of TPC and MSEB with respect to demand charges. Following decision was arrived at:

“(A) Demand Charges:

Effective 1-2-84 a monthly firmed demand of 300 MVA would be billed by MSEB. This would increase by 50 MVA each year effective 1-4-1985 to take care of TEC’s own load growth annually. This is irrespective of TEC’s actual net off-take recorded at the 4 interconnecting points of supply and also irrespective of MSEB’s total off-take from TEC system”

3. Prior to 1985, the TPC was supplying entire electricity generated by it to the distributors of electricity in Mumbai. Since the quantity generated by TPC was not sufficient to meet the entire demand, TPC used to buy electricity from MSEB. BSES/REL was purchasing its entire requirement of electricity from TPC in bulk to supply to its customers in suburban Mumbai.

4. With effect from 1985, TPC wanted to increase its generating capacity thereby reducing its off-take of electricity from MSEB to zero thereby causing loss of revenue to MSEB. In order to compensate MSEB for loss of revenue caused as a result of stoppage of purchase of electricity by TPC from MSEB, the TPC and MSEB entered into aforesaid arrangement whereby TPC was required to pay to MSEB standby facility initially for 300 MVA to be increased by 50 MVA every year, charges to be paid at the rate fixed by MSEB. The quantum of standby increased from 300 MVA to 550 MVA by the year 1990, where after the MSEB and the TPC agreed not to increase the said standby beyond 550 MVA. The standby facility was meant to enable TPC to draw upon the energy generated by MSEB in the event there was outage/failure of power in TPC’s generation capacity of 1777 MW consisting of multiple units of different sizes i.e., 500 MW, 180 MW, 150 MW, 72 MW, 75 MW and 300 MW, which is supplied to BSES/REL along with its own consumers and BEST, another distribution licensee in Mumbai. The standby facilities charges paid by TPC to MSEB were factored into tariff charged by TPC from its customers including BSES/REL. The BSES/REL was a purchaser of electricity from TPC to the extent of TPC’s generation between 29% to 37% from 1998 to 2006, thus the standby charges to the extent of aforesaid varying percentages for the respective years were borne by BSES/REL which in turn were factored into tariff and charged by BSES/REL to its retail customers.

5. Initially, BSES was permitted to set up its generating plant at Dahanu to generate 500 MW (550 MVA approximately). There was a condition that it would achieve interconnection with the supply of TPC at a point known as Borivali Interconnection Point in case there was any outage of BSES generation. It could draw upon the power supplied by the TPC. The charges for such interconnections were to be determined. On 30.5.1992, a notification was issued amending the BSES license. A new clause 7B was introduced for providing aforesaid interconnectivity. Provisions of clause 13A were also amended to authorise the State Government in the event of a dispute to decide the same. On 29.6.1992, a meeting was h