Case: Tata Power Company Limited Vs. Reliance Energy Limited &amp; Others

1921 licences. Although, Mr. Venugopal tried to convince us that the changes effected in clause 6 of the 1907 licence and clause 5 of the remaining three licences held by TPC was only to compensate TPC for giving up its rights to supply in favour of the Maharashtra State Electricity Board and to help it to utilise its surplus generation of power, we are unable to accept Mr. Venugopals contentions, since from the materials on record it stands amply proved that Tata Power had all along been supplying electrical energy directly even to retail customers whose maximum demand was less than 1000 KVA and no objection thereof was raised by either BSES or REL till the year 1998 when Tata Power submitted its proposal for domestic tariff for approval to the Board. It was only thereafter that REL raised its objection in the form of its petition to MERC under Section 22(2)(e) and (n) of the ERC Act 1998. The list of consumers to whom retail supply was being effected by TPC in the island city of Bombay and its suburbs, discloses that at least 51 such consumers were within RELs area of supply. In fact, Mr. Venugopal by way of an alternative submission also indicated that Tata Power under the terms and conditions of the licences held by it, could supply energy to any consumer whose demand was above 1000 KVA within the area of supply covered by the said licences.74. We are also unable to accept Mr. Venugopals interpretation of clause 6 of the 1907 licences and clause 5 of the other licences to the effect that Sub-clause (II) thereof would be rendered tautologous, if the same was read independently of Sub-clause (I). His submission that if Sub-clause (II) is to be read in a manner which allowed Tata Power to supply energy for general purposes to all consumers, no restrictions would have been placed on the supply of power to factories and the Railways, appears to us to be without substance.Clause 5 of the 1919, 1921 and 1953 Licences held by Tata Power indicates the purpose of supply and is divided into two parts - (i) for power and(ii) for lighting and general purposes, other than power. Simply stated, Sub-clause (I) deals with supply to licensees for their own purposes and in bulk. The restriction indicated by Mr. Venugopal is in respect of such bulk supply where the consumer required less than 5,00,000 units per annum which was also stipulated to be the bona fide average computed annual consumption of a Factory or Railway. On the other hand, Sub-clause (II) provides for supply of electricity for lighting and general purposes, other than power, including the supply of energy in bulk to other licensees for distribution by them. Sub-clause (II) is followed by an Explanation to both Sub-clause (I) and Sub-clause (II) of Clause 5. It has been clarified that the energy supply to any consumer for power, that is under Sub-clause (I), could be used by such consumer for lighting his premises to a maximum amount of 20% of the total energy supplied to such consumer, and it has also been stipulated that Tata Power would not supply energy for lighting purposes referred to in Sub-clause (II) except by agreement with Bombay Electric Supply and Tramways Company Limited.75. Regarding Mr. Venugopals other submission relating to Section 42 of the 2003 Act, we are unable to appreciate how the same is relevant for interpreting the provisions of the licences held by TPC. It is no doubt true that Section 42 empowers the State Commission to introduce a system of open access within one year of the appointed date fixed by it and in specifying the extent of open access in successive phases and in determining the charges for wheeling having due regard to the relevant factors, but the introduction of the very concept of wheeling is against Mr. Venugopals submission that not having a distribution line in place, disentitles T.P.C. to supply electricity in retail directly to consumers even if their maximum demand was below 1000 KVA. The concept of wheeling has been introduced in the 2003 Act to enable distribution licensees who are yet to instal their distribution line to supply electricity directly to retail consumers, subject to payment of surcharge in addition to the charges for wheeling as the State Commission may determine. We, therefore, see no substance in the said submissions advanced by Mr. Venugopal.76. Mr. Venugopals last submission relating to market domination has to be considered by the appropriate Commission separately in terms of Section 60 of the 2003 Act and cannot be pressed into service for interpreting the terms and conditions of the licences held by TPC. On the other hand, in our view, the provisions of both the 1903 and 1910 Electricity Acts encourage competition in the electricity trade and the same is also incorporated in the licences issued in favour of the distribution licensees, which also include licencees generating power for supply. The element of competition has been included in the Preamble to the 2003 Act and permeates the same in its various provisions. As submitted by Mr. Chagla, the Act is meant to be consumer-friendly and one of the objectives it sets out to achieve is to give the consumer an option to choose the distribution licensee from whom it wishes to receive supply of electrical energy. The intervention of MIDC, Marol Industries Association and the appeals filed by it, has obviously been made in that context.77. Having regard to the above and the terms and conditions of the licences held by Tata Power, we have no hesitation in holding that the Appellate Tribunal for Electricity erred in coming to a finding that under its licences Tata Power was entitled to supply energy only in bulk and not for general purposes and in retail to all consumers, irrespective of their demand, except for those consumers indicated in Sub-clause (I) of clause 5 of the several licenses held by Tata Power.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]While MERC answered the said question in favour of Tata Power upon holding that there was nothing in the licences granted to Tata Power to prevent it from doing so and that it could effect supply of electricity to any consumer, it also held that the terms and conditions in the said licences gave it an advantage over BSES in regard to fixation and charge of tariff which necessitated the establishment of a level playing field in order to encourage competition. Apparently, while dealing with the grievances projected by BSES, MERC lost sight of the reliefs prayed for BSES which was based on the contention that according to the terms and conditions of the licences granted to it Tata Power was not entitled to supply energy in retail to domestic customers, at least not to consumers whose demand was less than a maximum demand of 1000 KVA. Having once held on the principal issue that Tata Power was entitled to supply electrical energy to all consumers under the licences granted to it, MERC should have restrained itself from unilaterally making out a third case regarding the establishment of a level playing field when such a case had neither been made out nor any relief in that regard had been prayed for by BSES.72. MERC also appears to have lost sight of the fact that the first three licences had been granted to Tata Power long before a separate licence was granted in favour of BSES. There is sufficient material on record to establish that Tata Power had been supplying energy to domestic consumers on retail basis within areas which subsequently came to be included in BSES (and subsequently RELs) area of supply and no objection was raised in that regard till TPC submitted its proposed tariff for domestic retail consumers for approval in September, 1998. MERC appears to have confused the two issues while dealing with BSES petition under section 22(2)(e) and (n) of the Electricity Regulatory Commissions Act, 1998. In fact, it appears that based on the third case made out by it, MERC restrained Tata Power from supplying electrical energy to consumers whose demand was less than 1000 KVA (maximum demand) despite holding that under the licences granted to it Tata Power was entitled to do so.73. In dealing with the appeals filed both by REL and Tata Power, the Appellate Tribunal for Electricity misinterpreted the provisions of the licences granted to TPC for supply and distribution of electrical energy. The arguments advanced on behalf of REL before the learned Tribunal, which were also advanced before us by Mr. Venugopal, found favour with the Tribunal which arrived at the conclusion that the terms and conditions of the licences granted to TPC did not entitle it to supply electrical energy directly to consumers whose demand was below 1000 KVA (maximum). In reaching such conclusion the Tribunal not only ignored the situation prior to 1926 when BSES was granted its licence, but also the subsequent amendments to the licences held by TPC whereby clause 5 of the 1919 and 1921 licences were altered to permit Tata Power to supply electrical energy for lighting and general purposes, other than power and including the supply of energy in bulk to other licensees for distribution by them. The Appellate Tribunal also overlooked the order passed by the Industries Energy and Labour Department of the Government of Maharashtra on 7.12.1978, whereby from 1.7.1980 Tata Power was required to transfer to the Maharashtra State Electricity Board its distribution rights under the 1907 licence and assets pertaining thereto as set out in part 2 of the Annexure to the said licence. The Tribunal also overlooked the fact that by virtue of the aforesaid arrangements, clause 6 of the 1907 licence relating to "purpose of supply" was also amended to bring it in parity with the amendments to the First Annexure to the 1919 and 1921 licences. Although, Mr. Venugopal tried to convince us that the changes effected in clause 6 of the 1907 licence and clause 5 of the remaining three licences held by TPC was only to compensate TPC for giving up its rights to supply in favour of the Maharashtra State Electricity Board and to help it to utilise its surplus generation of power, we are unable to accept Mr. Venugopals contentions, since from the materials on record it stands amply proved that Tata Power had all along been supplying electrical energy directly even to retail customers whose maximum demand was less than 1000 KVA and no objection thereof was raised by either BSES or REL till the year 1998 when Tata Power submitted its proposal for domestic tariff for approval to the Board. It was only thereafter that REL raised its objection in the form of its petition to MERC under Section 22(2)(e) and (n) of the ERC Act 1998. The list of consumers to whom retail supply was being effected by TPC in the island city of Bombay and its suburbs, discloses that at least 51 such consumers were within RELs area of supply. In fact, Mr. Venugopal by way of an alternative submission also indicated that Tata Power under the terms and conditions of the licences held by it, could supply energy to any consumer whose demand was above 1000 KVA within the area of supply covered by the said licences.74. We are also unable to accept Mr. Venugopals interpretation of clause 6 of the 1907 licences and clause 5 of the other licences to the effect that(II) thereof would be rendered tautologous, if the same was read independently of(I). His submission that if(II) is to be read in a manner which allowed Tata Power to supply energy for general purposes to all consumers, no restrictions would have been placed on the supply of power to factories and the Railways, appears to us to be without substance.Clause 5 of the 1919, 1921 and 1953 Licences held by Tata Power indicates the purpose of supply and is divided into twofor power and(ii) for lighting and general purposes, other than power. Simply stated,(I) deals with supply to licensees for their own purposes and in bulk. The restriction indicated by Mr. Venugopal is in respect of such bulk supply where the consumer required less than 5,00,000 units per annum which was also stipulated to be the bona fide average computed annual consumption of a Factory or Railway. On the other hand,(II) provides for supply of electricity for lighting and general purposes, other than power, including the supply of energy in bulk to other licensees for distribution by them.(II) is followed by an Explanation to bothuse (II) of Clause 5. It has been clarified that the energy supply to any consumer for power, that is under(I), could be used by such consumer for lighting his premises to a maximum amount of 20% of the total energy supplied to such consumer, and it has also been stipulated that Tata Power would not supply energy for lighting purposes referred to in(II) except by agreement with Bombay Electric Supply and Tramways Company Limited.75. Regarding Mr. Venugopals other submission relating to Section 42 of the 2003 Act, we are unable to appreciate how the same is relevant for interpreting the provisions of the licences held by TPC. It is no doubt true that Section 42 empowers the State Commission to introduce a system of open access within one year of the appointed date fixed by it and in specifying the extent of open access in successive phases and in determining the charges for wheeling having due regard to the relevant factors, but the introduction of the very concept of wheeling is against Mr. Venugopals submission that not having a distribution line in place, disentitles T.P.C. to supply electricity in retail directly to consumers even if their maximum demand was below 1000 KVA. The concept of wheeling has been introduced in the 2003 Act to enable distribution licensees who are yet to instal their distribution line to supply electricity directly to retail consumers, subject to payment of surcharge in addition to the charges for wheeling as the State Commission may determine. We, therefore, see no substance in the said submissions advanced by Mr. Venugopal.76. Mr. Venugopals last submission relating to market domination has to be considered by the appropriate Commission separately in terms of Section 60 of the 2003 Act and cannot be pressed into service for interpreting the terms and conditions of the licences held by TPC. On the other hand, in our view, the provisions of both the 1903 and 1910 Electricity Acts encourage competition in the electricity trade and the same is also incorporated in the licences issued in favour of the distribution licensees, which also include licencees generating power for supply. The element of competition has been included in the Preamble to the 2003 Act and permeates the same in its various provisions. As submitted by Mr. Chagla, the Act is meant to beand one of the objectives it sets out to achieve is to give the consumer an option to choose the distribution licensee from whom it wishes to receive supply of electrical energy. The intervention of MIDC, Marol Industries Association and the appeals filed by it, has obviously been made in that context.77. Having regard to the above and the terms and conditions of the licences held by Tata Power, we have no hesitation in holding that the Appellate Tribunal for Electricity erred in coming to a finding that under its licences Tata Power was entitled to supply energy only in bulk and not for general purposes and in retail to all consumers, irrespective of their demand, except for those consumers indicated in(I) of clause 5 of the several licenses held by Tata Power.