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SUPREME COURT OF INDIA
S. ABDUL NAZEER, KRISHNA MURARI, JJ.
BSES Rajdhani Power Ltd. – Appellant
Versus
Delhi Electricity Regulatory Commission – Respondent
Civil Appeal No. 4324 of 2015
With
Bses Yamuna Power Ltd. – Appellant
Versus
Delhi Electricity Regulatory Commission – Respondent
Civil Appeal No. 4323 of 2015
Decided On : 18-10-2022
ELECTRICITY - Distribution Licensees - Tariff determination - Substantial questions of law - Change in methodology in computation of Aggregate Technical and Commercial (AT&C) losses - Change in methodology for computation of Depreciation - Disallowance of salary for Fundamental Rules and Supplementary Rules (FR/SR) structure - Disallowance of interest accrued on Consumer Security Deposit retained by Delhi Power Corporation Limited (DPCL) - Disallowance of Fringe Benefit Tax - Reduction in Million Units (MUs) in relation to Enforcement sale for the purpose of calculation of AT&C Loss - True up exercise - Permissibility - DERC's power to amend tariff order - MYT Regulations - Prudence check - Legality - Interpretation of relevant provisions of the Electricity Act, 2003 and the Regulations framed thereunder.
Fact of the Case:
The appellants, BSES Rajdhani Power Ltd. and BSES Yamuna Power Ltd., challenged certain findings of the Appellate Tribunal for Electricity, New Delhi (APTEL) in the common judgment and order dated 28.11.2014 (Impugned Order) passed in Appeal Nos.61 and 62 of 2012 (Tariff Appeals). The Tariff Appeals were filed by the appellants before the APTEL challenging certain findings of the Delhi Electricity Regulatory Commission (DERC) in the Tariff Order dated 26.08.2012 for Truing Up of financials for FY 2008-09 and FY 2009-10 and Aggregate Revenue Requirement (ARR) for FY 2011-12. DERC also filed appeals challenging certain findings in the common impugned order.
Finding of the Court:
1. It is not permissible to amend the tariff order made under Section 64 of the Electricity Act, 2003 during the ‘truing up’ exercise. 2. DERC cannot reopen the basis of determination of tariff at the stage of ‘truing up’. 3. Revision or redetermination of the tariff already determined by the DERC on the pretext of prudence check and truing up would amount to amendment of tariff order, which is not permissible in law. 4. Truing up stage is not an opportunity for DERC to rethink de novo the basic principles, premises and issues involved in the initial projection of the revenue requirements of the licensee. 5. The appellants are entitled to recover interest on Consumers Security Deposit as held by the DPCL. 6. The assessed energy has to be considered as supply by the appellants in enforcement cases.
Issues: 1. Whether the impugned findings on Issue No.1 are contrary to the mandate of Sections 3, 61(b), (c), (d) and (e), 62, 64 (read with the Tariff Policy) and 86(3) of the 2003 Act in terms of which: (i) Tariff must ensure recovery of all costs of undertaking distribution of electricity with reasonable return, rewarding efficiency in performance? (ii) Regulator cannot “change the rules of the game after it has begun” in the ‘truing up exercise’? 2. Whether the impugned findings on Issue No.2 are contrary to the mandate of Sections 3, 61(b), (c), (d) and (e), 62, 64 (read with the Tariff Policy) and 86(3) of the 2003 Act in terms of which: (i) Tariff must ensure recovery of all costs of undertaking distribution of electricity with reasonable return, rewarding efficiency in performance? (ii) Regulator cannot “change the rules of the game after it has begun” in the ‘truing up exercise’? 3. Whether the impugned Findings on Issue No.3 are contrary to the mandate of Sections 3, 61(b), (c), (d) and (e), 62, 64 (read with the Tariff Policy) and 86(3) of the 2003 Act in terms of which: (i) Tariff must ensure recovery of all costs of undertaking distribution of electricity with reasonable return, rewarding efficiency in performance? (ii) Regulator cannot “change the rules of the game after it has begun” in the ‘truing up exercise’? 4. Whether the impugned findings on Issue No.4 are contrary to the mandate of Sections 3, 61(b), (c), (d) and (e), 62, 64 (read with the Tariff Policy) and 86(3) of the 2003 Act in terms of which tariff must ensure recovery of all costs of undertaking distribution of electricity with reasonable return, rewarding efficiency in performance? 5. Whether the impugned Findings on Issue No.5 are contrary to the mandate of Sections 3, 61(b), (c), (d) and (e), 62, 64 (read with the Tariff Policy) and 86(3) of the 2003 Act in terms of which: (i) Tariff must ensure recovery of all costs of undertaking distribution of electricity with reasonable return, rewarding efficiency in performance? (ii) Regulator cannot “change the rules of the game after it has begun” in the ‘truing up exercise’? 6. Whether the impugned Findings on Issue No.6 are contrary to the mandate of Sections 3, 61(b), (c), (d) and (e), 62, 64 (read with the Tariff Policy) and 86(3) of the 2003 Act in terms of which Tariff must ensure recovery of all costs of undertaking distribution of electricity with reasonable return, rewarding efficiency in performance?
Ratio Decidendi: 1. The DERC cannot amend the tariff order for the period 01.04.2008 to 31.03.2010 in the guise of ‘true-up’ after the relevant financial year is over and the same is replaced by a subsequent tariff Order. This would amount to a retrospective revision of tariff when the relevant period for such tariff order is already over. 2. ‘Truing up’ stage is not an opportunity for the DERC to rethink de novo on the basic principles, premises and issues involved in the initial projections of the revenue requirement of the licensee. ‘Truing up’ exercise cannot be done to retrospectively change the methodology/principles of tariff determination and reopening the original tariff determination order thereby setting the tariff determination process to a naught at ‘true-up’ stage. 3. The assessed energy has to be considered as supply by the appellants in enforcement cases.
Final Decision: The appeals are allowed and the order(s) of the DERC and the judgment of the APTEL impugned herein, to the extent mentioned above. are hereby set aside. Parties to bear their respective costs.
JUDGMENT :
S. Abdul Nazeer, J.
1. These two appeals have been filed by BSES Rajdhani Power Ltd. (C.A. No.4324 of 2015) and BSES Yamuna Power Ltd. (C.A. No.4323 of 2015) (hereinafter referred to as ‘Appellants’) challenging certain findings of the Appellate Tribunal for Electricity, New Delhi (‘APTEL’) in the common judgment and order dated 28.11.2014 (‘Impugned Order’) passed in Appeal Nos.61 and 62 of 2012 (‘Tariff Appeals’). The Tariff Appeals were filed by the appellants before the APTEL challenging certain findings of the Delhi Electricity Regulatory Commission (‘DERC’) in the Tariff Order dated 26.08.2012 for Truing Up of financials for FY 2008-09 and FY 2009-10 and Aggregate Revenue Requirement (‘ARR’) for FY 2011-12. DERC has also filed appeals (C.A. Nos.8660-61 of 2015) challenging certain findings in the common impugned order and the said appeals will be heard and decided separately.
2. The Appellants are Distribution Licensees (“Discoms”) in terms of Section 2(17) of the Electricity Act, 2003 (‘2003 Act’). The primary function of a Discom is to give supply to any premises upon an application being made by a consumer in compliance with the applicable laws, including paying requisite charges, except where prevented by force majeure conditions like cyclones or floods.
3. The Appellants purchase 90% to 95% of the power from Central and State Generating Companies. Tariff of Central Generating Stations is determined by the Central Electricity Regulatory Commission (‘CERC’) and, therefore, the Appellants have no control over the tariff to be paid to the Central Generating Stations. Simultaneously, the tariff for the State Generating Companies is determined by the State Regulator i.e. DERC.
4. It is the case of the Appellants that since privatization, the ARR determined by the DERC was not even sufficient to meet the actual power purchase cost which has led to creation of a huge revenue gap. It is also contended that the DERC in repeated disregard to its statutory regulations and its own statutory advice has refused to make periodic increase in the tariff rate. The actions of the DERC have resulted in a situation where the Appellants are deeply indebted and have been forced to borrow/take loans to fund their day-to-day operations which, in turn, have also dried up leaving the Appellants without adequate monies to pay their suppliers.
5. The Appellants have challenged the finding of the APTEL in the Impugned Order on the following issues:
A. Change in methodology in computation of Aggregate Technical and Commercial (AT&C) losses [Issue 14 in Impugned Order]
B. Change in methodology for computation of Depreciation [Issue 15 in Impugned Order]
C. Disallowance of salary for Fundamental Rules and Supplementary Rules (FR/SR) structure [Issue 23 in Impugned order]
D. Disallowance of interest accrued on Consumer Security Deposit retained by Delhi Power Corporation Limited (DPCL) [Issue 29 in Impugned Order]
E. Disallowance of Fringe Benefit Tax [Issue 34 in Impugned Order]
F. Reduction in Million Units (MUs) in relation to Enforcement sale for the purpose of calculation of AT&C Loss [Issue 14 in Impugned Order]
6. It is to be noticed that the above-mentioned Issue ‘C’ has been challenged only by BSES Rajdhani Power Ltd. in C.A. No.4324 of 2015 while the remaining issues have been challenged by both BSES Rajdhani Power Ltd. and BSES Yamuna Power Ltd. and are subject-matter of C.A. No.4324 of 2015 and C.A.No.4323 of 2015.
7. The Tariff Appeals were filed by the Appellants challenging the disallowances in their respective Tariff Orders dated 26.08.2012 passed by the DERC for:
(a) Determination of ARR and Tariff for FY 2011-12; and
(b) Truing up of financials for FY 2008-09 and FY 2009-10.
8. According to the appellants, the present Civil Appeals give rise to substantial questions of law under Section 125 of the 2003 Act on six issues. It is c
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