Maharashtra State Electricity Distribution Co. Ltd. vs M/s. JSW Steel Limited & Ors.

CIVIL APPEAL NOS. 5074-5075 OF 2019

Maharashtra State Electricity Distribution Co. Ltd. ...Appellant(s)

Versus

M/s. JSW Steel Limited & Ors. ...Respondent(s)

JUDGMENT

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment

and order passed by the Appellate Tribunal for Electricity, Delhi in Appeal

Nos. 311 and 315 of 2018 whereby the Appellate Tribunal has allowed

the said appeals preferred by the respondents herein – the ‘captive

consumers’ and has set aside the order passed by the Maharashtra

Electricity Regulatory Commission (hereinafter referred to as the “State

Commission”) in Petition No.195 of 2017 by which the State Commission

has held that the group of ‘captive consumers’ are liable to pay

additional surcharge, Maharashtra State Electricity Distribution Company Signature Not Verified

Limited (hereinafter referred to as the “distribution licensee”), has Digitally signed by R Natarajan Date: 2021.12.10 16:00:38 IST Reason:

preferred the present appeals.

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2. That the appellant as distribution licensee filed a petition before the

State Commission for MYT approval for FY 2014-2015, provisional truing

up of ARR for FY 2015-2016 and Multi Year Tariff for 3 rd Control Period

FY 2016-2017 to FY 2019-2020. The said petition was numbered as

Case No.48 of 2016. The State Commission held that the additional

surcharge leviable under Section 42(4) of the Electricity Act, 2003

(hereinafter referred to as the “Act, 2003”) is not applicable to captive

users to the extent of their self-consumption from such plants. The State

Commission also held that the additional surcharge shall be applicable

to all consumers who have availed open access to receive supply from

sources other than the distribution licensee to which they are connected.

3. The appellant – distribution licensee submitted its revised Review

Petition being Case No.195 of 2017, for approval of final true up of ARR

for FY 2015-2016 and 2016-2017, provisional true up of ARR for FY

2017-2018 and approval for revised forecast of ARR for FY 2018-2019

and 2019-2020, inter alia, including the prayer “to approve additional

surcharge for all open access consumers including those sourcing power

from CPPS as proposed for FY 2018-2019 to FY 2019-2020”. The

Captive Power Producers Association filed their objections including the

objections with respect to levy of additional surcharge on such captive

users. That by order dated 12.09.2018, the State Commission passed

2 the order holding that additional surcharge is leviable under Section

42(4) of the Act, 2003 on the captive consumers/captive users.

4. Feeling aggrieved and dissatisfied with the order passed by the

State Commission allowing the levy of additional surcharge from the

captive consumers/captive users, the respondents herein – captive

users/captive consumers approached the Appellate Tribunal. By

impugned order dated 27.03.2019, the Appellate Tribunal has allowed

the said appeals and has set aside the order passed by the State

Commission ordering/permitting to levy the additional surcharge leviable

under Section 42(4) of the Act, 2003 and has held that the group of

captive consumers are not liable to pay additional surcharge to the

distribution licensee.

5. Feeling aggrieved and dissatisfied with the impugned order passed

by the Appellate Tribunal holding that the group of captive

consumers/captive users are not liable to pay the additional surcharge

leviable under section 42(4) of the Act, 2003, appellant – distribution

licensee.

6. We have heard the learned counsel appearing for the appellant –

distribution licensee as well as learned counsel appearing on behalf of

the respective respondents – intervenors – the captive

consumers/captive users at length.

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7. The short question which is posed for the consideration of this

Court is :

“Whether the captive consumers/captive users are liable to pay the

additional surcharge leviable under Section 42(4) of the Electricity

Act, 2003?

8. While deciding the aforesaid issue/question, the relevant

provisions of Electricity Act, 2003 namely Sections 9 and 42 are required

to be noted/visited, which reads as under:-

“9. Captive generation.- (1) Notwithstanding anything contained in this Act, a person may construct, maintain or operate a captive generating plant and dedicated transmission lines:

Provided that the supply of electricity from the captive generating plant through the grid shall be regulated in the same manner as the generating station of a generating company:

Provided further that no licence shall be required under this Act for supply of electricity generated from a captive generating plant to any licencee in accordance with the provisions of this Act and the rules and regulations made thereunder and to any consumer subject to the regulations made under sub-section (2) of section 42.

(2) Every person, who has constructed a captive generating plant and maintains and operates such plant, shall have the right to open access for the purposes of carrying electricity from his captive generating plant to the destination of his use:

4 Provided that such open access shall be subject to availability of adequate transmission facility and such availability of transmission facility shall be determined by the Central Transmission Utility or the State Transmission Utility, as the case may be:

Provided further that any dispute regarding the availability of transmission facility shall be adjudicated upon by the Appropriate Commission.

42. Duties of distribution licensees and open access.-

(1) It shall be the duty of a distribution licensee to develop and maintain an efficient, co-ordinated and economical distribution system in his area of supply and to supply electricity in accordance with the provisions contained in this Act.

(2) The State Commission shall introduce open access in such phases and subject to such conditions, (including the cross subsidies, and other operational constraints) as may be specified within one year of the appointed date by it and in specifying the extent of open access in successive phases and in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies, and other operational constraints:

Provided that such open access shall be allowed on payment of a surcharge in addition to the charges for wheeling as may be determined by the State Commission:

Provided further that such surcharge shall be utilised to meet the requirements of current level of cross subsidy within the area of supply of the distribution licensee:

Provided also that such surcharge and cross subsidies shall be progressively reduced in the manner as may be specified by the State Commission:

Provided also that such surcharge shall not be leviable in case open access is provided to a person who

5 has established a captive generating plant for carrying the electricity to the destination of his own use:

Provided also that the State Commission shall, not later than five years from the date of commencement of the Electricity (Amendment) Act, 2003 (57 of 2003) by regulations, provide such open access to all consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one megawatt.

(3) Where any person, whose premises are situated within the area of supply of a distribution licensee, (not being a local authority engaged in the business of distribution of electricity before the appointed date) requires a supply of electricity from a generating company or any licensee other than such distribution licensee, such person may, by notice, require the distribution licensee for wheeling such electricity in accordance with regulations made by the State Commission and the duties of the distribution licensee with respect to such supply shall be of a common carrier providing non-discriminatory open access.

(4) Where the State Commission permits a consumer or class of consumers to receive supply of electricity from a person other than the distribution licensee of his area of supply, such consumer shall be liable to pay an additional surcharge on the charges of wheeling, as may be specified by the State Commission, to meet the fixed cost of such distribution licensee arising out of his obligation to supply.

(5) Every distribution licensee shall, within six months from the appointed date or date of grant of licence, whichever is earlier, establish a forum for redressal of grievances of the consumers in accordance with the guidelines as may be specified by the State Commission.

(6) Any consumer, who is aggrieved by non-

redressal of his grievances under sub-section (5), may make a representation for the redressal of his grievance

6 to an authority to be known as Ombudsman to be appointed or designated by the State Commission.

(7) The Ombudsman shall settle the grievance of the consumer within such time and in such manner as may be specified by the State Commission.

(8) The provisions of sub-sections (5), (6) and (7) shall be without prejudice to right which the consumer may have apart from the rights conferred upon him by those sub-sections.”

9. On a fair reading of Section 9, it can be seen that captive

generation is permitted under sub-section (1) of Section 9. As per sub-

section (2), every person, who has constructed a captive generating

plant and maintains and operates such plant, shall have the right to open

access for the purposes of carrying electricity from his captive

generating plant to the destination of his use, but of-course subject to

availability of adequate transmission facility determined by the Central

Transmission Utility or the State Transmission Utility, as the case may

be. So, the captive generation / captive use is statutorily provided /

available and for which a permission of the State Commission is not

required. The submission on behalf of the appellant that the captive

generation under Section 9 is subject to the regulations as per first

proviso to sub-section (1) of Section 9 and that even open access for the

purpose of carrying electricity from his captive generating plant to the

destination of his use shall be subject to availability of the adequate

transmission facility determined by the Central Transmission Utility or the

7 State Transmission Utility, as the case may be, sub-section (4) of

Section 42 shall be applicable and such captive users are liable to pay

the additional surcharge leviable under sub-section (4) of section 42,

has no substance and has to be rejected outright. Construction and/or

maintenance and operation of a captive generating plant and dedicated

transmission lines is not subjected to any permission by the State

Commission. As provided under Section 9 of the Act, 2003, any person

may construct, maintain or operate a captive generating plant and

dedicated transmission lines. Merely because the supply of electricity

from the captive generating plant through the grid shall be regulated in

the same manner as the generating station of a generating company or

the open access for the purpose of carrying electricity from the captive

generating plant to the destination of his use shall be subject to

availability of the adequate transmission facility determined by the

Central Transmission Utility or the State Transmission Utility, it cannot be

said that for captive generation plant, the State Commission’s

permission is required. Right to open access to transmit/carry electricity

to the captive user is granted by the Act, and is not subject to and does

not require the Sate Commission’s permission. The right is conditioned

by availability of transmission facility, which aspect can be determined by

the Central or State transmission utility. Only in case of dispute, the

State Commission may adjudicate.

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10. In light of the above observations and findings, the issue whether

such captive users are subject to levy of additional surcharge leviable

under sub-section (4) of Section 42 is required to be considered.

11. Sub-section (4) of Section 42 shall be applicable only in a case

where the State Commission permits a consumer or class of consumers

to receive supply of electricity from a person other than the distribution

licensee of his area of supply and only such consumer shall be liable to

pay additional surcharge on the charges of wheeling, as may be

specified by the State Commission. Captive user requires no such

permission, as he has statutory right. At this stage, it is required to be

noted that as per the Scheme of the Act, there can be two classes of

consumers, (i) the ordinary consumer or class of consumers who is

supplied with electricity for his own use by a distribution licensee /

licensee and; (ii) captive consumers, who are permitted to generate for

their own use as per Section 9 of the Act, 2003.

12. The term “consumer” is defined in Section 2(15), which reads as

under:-

“(15) "consumer" means any person who is supplied with electricity for his own use by a licensee or the Government or by any other person engaged in the business of supplying electricity to the public under this Act or any other law for the time being in force and includes any person whose premises are for the time being connected for the purpose of receiving electricity

9 with the works of a licensee, the Government or such other person, as the case may be;”

13. Ordinarily, a consumer or class of consumers has to receive supply

of electricity from the distribution licensee of his area of supply.

However, with the permission of the State Commission such a consumer

or class of consumers may receive supply of electricity from the person

other than the distribution licensee of his area of supply, however,

subject to payment of additional surcharge on the charges of wheeling

as may be specified by the State Commission to meet the fixed cost of

such distribution licensee arising out of his obligation to supply. There is

a logic behind the levy of additional surcharge on the charges of

wheeling in such a situation and/or eventuality, because the distribution

licensee has already incurred the expenditure, entered into purchase

agreements and has invested the money for supply of electricity to the

consumers or class of consumers of the area of his supply for which the

distribution license is issued. Therefore, if a consumer or class of

consumers want to receive the supply of electricity from a person other

than the distribution licensee of his area of supply, he has to compensate

for the fixed cost and expenses of such distribution licensee arising out

of his obligation to supply. Therefore, the levy of additional surcharge

under sub-section (4) of Section 42 can be said to be justified and can

be imposed and also can be said to be compensatory in nature.

10 However, as observed hereinabove, sub-section (4) of Section 42 shall

be applicable only in a case where the State Commission permits a

consumer or class of consumers to receive supply of electricity from a

person other than the person – distribution licensee of his area of supply.

So far as captive consumers/captive users are concerned, no such

permission of the State Commission is required and by operation of law

namely Section 9 captive generation and distribution to captive users is

permitted. Therefore, so far as the captive consumers / captive users

are concerned, they are not liable to pay the additional surcharge under

Section 42(4) of the Act, 2003. In the case of the captive

consumers/captive users, they have also to incur the expenditure and/or

invest the money for constructing, maintaining or operating a captive

generating plant and dedicated transmission lines. Therefore, as such

the Appellate Tribunal has rightly held that so far as the captive

consumers/captive users are concerned, the additional surcharge under

sub-section (4) of Section 42 of the Act, 2003 shall not be leviable.

14. Even otherwise, it is required to be noted that the consumers

defined under Section 2(15) and the captive consumers are different and

distinct and they form a separate class by themselves. So far as captive

consumers are concerned, they incur a huge expenditure/invest a huge

amount for the purpose of construction, maintenance or operation of a

captive generating plant and dedicated transmission lines. However, so

11 far as the consumers defined under Section 2(15) are concerned, they

as such are not to incur any expenditure and/or invest any amount at all.

Therefore, if the appellant is held to be right in submitting that even the

captive consumers, who are a separate class by themselves are

subjected to levy of additional surcharge under Section 42(4), in that

case, it will be discriminatory and it can be said that unequals are treated

equally. Therefore, it is to be held that such captive consumers/captive

users, who form a separate class other than the consumers defined

under Section 2(15) of the Act, 2003, shall not be subjected to and/or

liable to pay additional surcharge leviable under Section 42(4) of the Act,

2003.

15. In view of the above and for the reasons stated above, the present

appeals fail and deserve to be dismissed and are accordingly dismissed.

However, in the facts and circumstances of the case there shall be no

order as to costs.

16. It is reported that pursuant to the interim order passed by this

Court dated 01.07.2019, staying the operation and implementation of the

impugned order passed by the Appellate Tribunal, the appellant –

distribution licensee has recovered the additional surcharge. Therefore,

as such once it is held that the captive consumers/captive users are not

liable to pay the additional surcharge leviable under Section 42(4) of the

Act, 2003, the appellant – distribution licensee has to refund the same.

12 However, considering the fact that there shall be huge liability on the

appellant – distribution license if they have to now refund the amount of

additional surcharge recovered at a stretch, we direct that the additional

surcharge already recovered from the captive consumers/captive users

shall be adjusted in the future wheeling charges bills.

17. Present appeals are accordingly dismissed with the above

observations.

………………………………….J. [M.R. SHAH]

NEW DELHI; ………………………………….J. DECEMBER 10, 2021. [SANJIV KHANNA]

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