M J Antony: Electrifying tariff shocks

Fixation of rates in the power sector leads the regulators and bulk consumers to court.

Among the regulatory bodies set up in the past decade of liberalisation, those dealing with electricity and telecom seem to have doubts about their powers and jurisdiction. The same goes for the consuming industries. Appeals against the decisions of the tribunals are frequent in both sectors. In recent weeks, the Supreme Court delivered at least five judgments regarding the powers of the electricity commissions. In one case, the court referred the issues to a larger bench since it felt that one of its earlier decisions required re-examination.

The judgment in UP Power Corporation Ltd vs National Thermal Power Corporation Ltd dealt with the question of revision of tariff. Under the Electricity Regulation Commissions Act 1998, commissions were set up at central and state levels to regulate the tariff of generating companies in the interest of the consumers, to arbitrate upon disputes between generating companies and transmission undertakings. They make regulations and implement them. In this case, the court was concerned with the power of the central commission to make tariff and revise it at the instance of the generating company.

Both litigants in the case were public sector undertakings. NTPC implemented wage revision for its employees, thus incurring more expenditure. The question arose whether the wage arrears could be considered for revision of tariff. The commission was against it, but the appellate tribunal ruled that the arrears incurred by NTPC on account of employees’ cost could be absorbed in the new tariff. The UP Power Corporation was before the Supreme Court against this.

Several principles were laid down by the court, while allowing the appeal. It ruled that increase in salary with retrospective effect could not be taken into account for a tariff revision in another period. Framing of tariff is made in several stages. The generating companies get enough opportunity at each stage. It cannot re-agitate questions on tariff after the passage of each stage. Consumers change and it is unfair to burden the new ones with the cost incurred earlier.

Speaking about the powers of the tribunal, the court said: “The jurisdiction of the appellate tribunal is wide. It is also an expert tribunal and thus it can interfere with the findings of the central commission.” This view was in tune with another Supreme Court judgment in the context of telecom, Cellular Operators Association of India vs Union of India (2004). In that decision, the Supreme Court asserted that the jurisdiction of TDSAT, which is an expert body, was wide.

The second significant judgment was regarding the ruling of the electricity tribunal that it had no power to deal with matters relating to the Central Electricity Regulation Commission (Fixation of Trading Margin) Regulations 2006. The tribunal relied upon the 2002 decision of the Supreme Court in West Bengal Electricity Regulatory Commission vs CESC Ltd. It was held in that judgment that even the high court, sitting as an appellate body, had no power to go into the validity of the regulations.

The present batch of appeals, led by PTC India Ltd vs Central Electricity Regulatory Commission, questioned the correctness of that Supreme Court decision. The main contention was that fixation of tariff was “conceptually and contextually” different from fixation of trading margin and therefore the tribunal could go into the exercise of fixing trading margin. The commission opposed this view. In view of the strong views of both sides, the Supreme Court decided to refer the issue to a larger bench for its judgment.

A similar exercise was done by the court in the third judgment, Binani Zinc Ltd v Kerala State Electricity Board. Earlier, a two-judge bench had doubted the correctness of the judgment in BSES Ltd vs Tata Power Company Ltd, delivered in 2004. So it was reconsidered by a larger bench in the Binani Zinc case. The dispute was with regard to the power of revision of tariff in the transition period between the electricity board and establishment of the state regulatory commission.

The earlier electricity laws were substituted in 2003 by a comprehensive Electricity Act. It had protected the action of the boards taken before the setting up of the state commissions. The court harmonised the old legislations and the new law and ruled that the state electricity board had the power to revise tariff till such time as the commission was constituted under the Electricity Regulatory Commission Act 1998. Parliament could not have intended to bring about a situation where no authority would be empowered to determine the tariff during the interim period, said the Supreme Court. However, the court left several related questions open. Therefore, more sparks are bound to fly on the issue of tariff fixation.