IMPORTANT POINT
Captive Power Plant Policy is in domain of the State Government although section 22(2) of the Electricity Regulatory Act, 1998 empowers MERC to advise the Government on the subject.

JUDGMENT

Arun Mishra, J.

1. The appeal has been preferred by Maharashtra State Electricity Distribution Company Limited (for short, ‘the MSEDCL’) against the order dated 30.5.2007, passed by Appellate Tribunal for Electricity (for short, ‘the APTEL’), dismissing the appeal against the order dated 21.5.2004 passed by Maharashtra State Electricity Regulatory Commission (for short, ‘the MERC’), quashing Circular No.602 dated 23.7.1998, Circular No.619 dated 25.5.1999, Circular No.627 dated 2.9.1999, Circular No.651 dated 19.9.2000 and Circular No.663 dated 5.10.2001, insofar as they purport to impose “take or pay” obligation and minimum off­take requirement as also of any additional tariff for captive power plant holders on the ground that there was no approval of the MERC constituted in terms of the provisions of the Electricity Regulatory Act, 1998 (for short, ‘the Act of 1998’). The aforesaid circulars dealt with Captive Power Plant Policy (for short, ‘the CPP Policy’). The appellant­MSEDCL has been directed to make refund to respondent nos.3 to 7. The financial liability has been imposed upon the appellant­MSEDCL. The MERC was constituted on 5.8.1999. The appellant­MSEDCL had submitted all its circulars to MERC for approval and the MERC after four years has quashed the circulars with retrospective effect. The financial condition of the appellant­ MSEDCL is not sound enough to sustain such kind of liability for refund. It was unable to pay a sum of Rs.504 crores as against liability to other parties.

2. Respondent no.3­M/s. NRC Ltd. initially had its two units on Plot No.E 23. Unit Nos.1 and 2 had a contract demand of 3500 KVA and 1800 KVA respectively. In 1995, an independent connection was sought by respondent no.3 for its Unit No.2. Representation was made that two units were separate units and on that basis, two independent connections were given. After that, respondent no.3 filed an application dated 5.4.1997 to set up a CPP of 7MW capacity. In respect of contract demand, it was proposed to retain total contract demand for 8­12 months after the CPP was fully operational and to surrender around 50% of the contract demand after that. Prayer was also made to provide stand­by power.

3. The Government of Maharashtra issued a notification dated 20.12.1997, whereby it empowered Maharashtra State Electricity Board (for short, ‘the MSEB’) to finalise the technical and commercial arrangements between captive power purchasers and their party purchasers. No objection certificate dated 7.1.1998 was issued by appellant­MSEDCL subject to the Condition No.4, which permitted respondent no.3 to decide the level of contract demand after the commissioning of the set and any changes for interconnection would be governed as per the Board’s Condition of Supply framed from time to time and its policies as no rules were framed.

4. Circular No.602 dated 23.7.1998 was issued vesting power with the Board to permit the CPP holder for sale of their CPP power to any third party through the Board's grid, grant of permission to those persons to use their CPP power for self use only and to charge wheeling and transmission loss charges.

5. The Act of 1998 was enacted on 25.4.1998. Before that, field of electricity was regulated by Electricity Supply Act, 1948 (for short, 'the Act of 1948'). Section 49 of the Act of 1948 empowered the respective Electricity Boards to come up with their tariffs, which could have differential. Section 79(j) of the Act empowered the Board to make regulations pertaining to supply of electricity to the licensees under Section 49. Section 44 further provided that for establishing the CPP unit, prior consent of the Board was mandatory. MSEB was regulating the field of CPP as per notifications issued by the Government and the provisions contained in the Act of 1948.

6. On 23.9.1998, respondent no.3 sought clubbing of the contract demand and subsequent reduction to 3000 KVA for both the units. The clubbing of two units would increase the t