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CASE NO.: Appeal (civil)  2104 of 2006

PETITIONER: Central Power Distribution Co.& Ors

RESPONDENT: Central Electricity Regulatory Commission &  Anr

DATE OF JUDGMENT: 17/08/2007

BENCH: H.K. SEMA & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T

H.K.SEMA,J.    

                (1)             This appeal is directed against the judgment and  order dated 3.1.2006 passed by the Appellate Tribunal for  Electricity (Appellate Jurisdiction) in Appeal No.152 of 2005  whereby the Appellate Tribunal dismissed the appeal filed by  the appellants.           (2)             The appellants challenged the order of the Central  Electricity Regulatory Commission (CERC) dated 4.7.2005  passed in petition No.67/2003 (suo moto), whereby the CERC  inter alia ordered the application of Availability Based Tariff  (ABT) to Simhadri SPTS thermal station of the National  Thermal Power Corporation (NTPC) with effect from December  1, 2005. (3)             This appeal was admitted on 1.5.2006 to be heard  on the following questions of law: (A)     Whether the application of  Availability Based Tariff (ABT) in  relation to Unscheduled Interchange  (UI) charges, which otherwise is not  a component of tariff in terms of  Regulation 15 of the Central  Electricity Regulatory Commission  (Terms and Conditions of Tariff)  Regulations, 2004 and they are  liable to be held as beyond the  jurisdiction of the Central Electricity  Regulatory Commission (CERC)?

(B)     As such the impugned order passed  by the Appellate Tribunal for  Electricity has completely ignored  the fact that the CERC order, which  was passed suo moto and ex parte, is    non est and without jurisdiction?

(C)     Can the Availability Based Tariff as  established and provided in the  order of the CERC by its order dated  4.1.2000 be implemented under the  provisions of Electricity Act, 2003,  particularly when there is no  provision under the statute that  allows the CERC to levy  Unscheduled Interchange Charges?

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and  

(G) whether in the present facts and  circumstances as regards the  Simhadri SPTS thermal station of the  National Thermal Power Corporation  (NTPC) which admittedly supplies  power to the State Grid and has no  connection with the management of  the National Grid, can the CERC in  such circumstances exercise,  particularly when matters relating to  the State Grid falls within the role  and function of the State Electricity  Regulatory Commission?

FACTUAL BACKGROUND:

(4)             This appeal has a chequered history leading to the  passing of the 4th July, 2005 order by CERC.  Avoiding  prolixity, we may recite few facts.

WHAT IS ABT (5)             Before we proceed further, we may at this stage,  highlight what is ABT and the purpose of introduction of  ABT.  ABT was introduced in regard to number of generating  stations of NTPC and other Central Sector generating  stations under the orders of the CERC.  Prior to the  introduction of ABT, the fixed charges were payable by the  purchasers based on the units of electricity actually drawn  by them.  The scheme of recovery of fixed charges based on  drawl of electricity was not considered appropriate and  rationale particularly from the point of view of Grid safety  and security.  The scheme of fixed charges liability based on  drawls allowed the purchasers of electricity to draw electricity  from the Grid at their pleasure with no control.  This led to  the Grid Frequency to vasilate from 48.5 Hz to 51.5 Hz,  whereas Grid Frequency was required to be maintained  ideally at 50 Hz and at the most, it should be within  optimum variations.  The frequency exceeding the optimum  variation was causing grid collapse and blackouts in the  entire region besides affecting the equipments of all  generations, other electricity utilities and also the  consumers.  This has been a serious prejudice to public  interest. (6)             Before the introduction of ABT scheme it was  deliberated at different levels namely, by (a) consultants  appointed by the Government of India to inquire into and  make recommendations; (b) National Task Force (NTF)  appointed by the Government of India; (c) Regional Task  Forces again appointed by the Government of India; and (d)  Central Electricity Authority. (7)             After the constitution of Central Commission  under the Electricity Regulatory Commissions Act, 1998 (in  short \023the Act\024), the Government of India referred the matter  of introduction of ABT to the Central Commission.  The State  Electricity Boards including Andhra Pradesh State Electricity  Board (the predecessor of the appellants herein) were part of  the Regional and National Task Forces constituted by the  Government of India and also participated in the deliberation  before the Central Commission.  (8)             At the 7th meeting of the National Task Force (NTF)  held on 8.11.1996 it was unanimously decided that  availability based generation tariff will be adopted and will be

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applied to all including future IPPs. (9)             Pursuant to the aforesaid consensus reached, the  Central Commission considered the matter extensively in its  order dated 4.1.2000 inter alia which are as under:                 \0233. DISTINCTIVE FEATURES OF ABT 3.1 We shall now discuss the distinctive  features of the proposed ABT system. In order  to understand the need and rationale behind  the system, it is necessary to narrate the  present problems in grid operation.  Some of  these as set out by Central Transmission  Utility (CTU) in its presentation before the  Commission are:  

\023(i) Low frequency during peak load hours,  with frequency going down to 48.0 \026 48.5 Hz  for many hours every day.   (ii) High frequency during off peak hours, with  frequency going up to 50.5 to 51 Hz for many  hours every day.   (iii) Rapid and wide changes in frequency \026 1  Hz change in 5 to 10 minutes, for many hours  every day.  

(iv) Very frequent grid disturbances, causing  tripping of generating stations, interruption of  supply to large blocks of consumers, and  disintegration of the regional grids.\024  

These wide frequency fluctuations tend to cause  serious damages both at the generation and  load ends, which are not perceived, and have  never been quantified or evaluated.  Experts  consider these fluctuations unacceptable all  over the world.  In India though the problems  have been identified, no progress has been  made in bringing them under control. One  important reason for this has been the absence  of direct incentives or penalties for the  individual utilities responsible for the problems.   There has also been a general reluctance among  all concerned to introduce financial incentives  or disincentives.  

The CTU has stated that the resolution of  these problems requires:

i)      Maximisation of generation during peak  load hours and load curtailment equal to  the deficit in generation.  

ii)     Backing down of generation to match the  system load reduction during off peak  hours, keeping the merit order of  generation in view.\024

WHAT IS UI (UNSCHEDULED INTERCHANGE)

(10)            In addition to two charges, a third charge  contemplated in the ABT scheme is for the unscheduled  interchange of power (UI charges).  The UI charges are  payable depending upon what is deviated from the schedule  and also subject to the grid conditions at that point of time.  

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This element was introduced to bring about the effective  discipline in the system. Under this system UI charges will be  payable, if: i)      a generator generates more than the  schedule, thereby increasing the  frequency;

ii)     a generator generates less than the  schedule, thereby decreasing the  frequency;

iii)    a beneficiary overdraws power, thereby  decreasing the frequency;

iv)     a beneficiary underdraws power, thereby  increasing the frequency.\024       

(11)            It is thus clear from the above that UI charges are  a commercial mechanism to maintain grid discipline.  The UI  charges penalises whosoever caused grid indiscipline,  whether generator (NTPC) or distributor, is subject to  payment of UI charges who are not following the schedule.   The UI charges are not payable if the appellants maintain  their drawl of electricity consistent with the schedule given  by themselves.  Therefore, there is no merit in the contention  of the appellants that the UI charges are by way of penalty.     (12)            The order dated 4.1.2000 passed by the CERC is  intended to achieve the following:- (a)     ABT is necessary for Grid discipline.  (b)     ABT is being introduced qua generating  stations but is a method to control all  players, namely, generator, transmitter,  distributors and users.  (c)     The concept of ABT was accepted by all  concerned including the predecessor of the  Appellants herein without any reservation  or conditions.   

(d)     The concept of ABT is not restricted in its  application only to generating stations  supplying electricity to more than one  State.  It is applicable equally to a  generating stations supplying electricity to  one State only.

(e)     The Order dated 4.1.2000 does not make  any specific exclusion of the generating  stations supplying electricity to one State.   There is no such observation in the Order  dated 4.1.2000.  The operative part of the  order dated 4.1.2000 which speaks about  introduction of ABT in a phased manner for  Multiple State beneficiaries generating  stations in different region cannot be  inferred from the above that the Central  Commission had rejected the concept of  ABT for single State beneficiary generation  stations.  

(13)             However, the Commission in view of the request  of Powergrid/CTU to stagger the implementation of ABT so  that they would be able to make satisfactory arrangements  before implementation, the following schedule for

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implementation of ABT was issued:                       Southern Region \026  1-4-2000                 Eastern Region \026    1-6-2000                 Northern Region \026  1-8-2000                 Western Region \026   1-10-2000  

(14)            The Commission has also decided that all other  generating stations owned by the Central Power Sector  Utilities which are supplying power to only one beneficiary of  the State be brought under the purview of ABT.  Simhadri  SPTS (2 x 500 MW) was also brought under ABT scheme  w.e.f.  1.12.2005.  This would show that the ABT scheme was  implemented at the request of Powergrid/CTU so that they  would be able to make satisfactory arrangement before the  implementation.  It is clear that the ABT scheme was  implemented in a phased manner.  The ABT scheme in  respect of Simhadri SPTS was made applicable w.e.f.  1.12.2005.  It is therefore not correct to say that Simhadri  SPTS was kept out of the purview of the ABT scheme. (15)            The principal contention of the counsel for the  appellants is founded on two grounds, (1) that the CERC did  not have the jurisdiction to introduce ABT for generating  stations supplying power within the State of Andhra Pradesh  and (2) the CERC has failed to provide an opportunity of  hearing to the appellants whose interests have been  adversely affected by the impugned order.           (16)            It is submitted that the order dated 4.7.2005  passed by the Commission in discharge of its power under  Section 79(1)(a) of the Electricity Act, 2003 cannot be  justified.   It is further argued under Section 79(1)(c) the  Central Commission can only regulate inter-State  transmission of electricity.  It is argued that Section 86(1)(c)  of the Act confers the power of jurisdiction of facilitating  intra-State transmission upon the State Regulatory  Commission.  It is also argued that the UI charges in respect  of Simhadri could have only been imposed by the State  Regulatory Commission, after due consultation with all other  generators in the State and the transmission utility who has  the responsibility to maintain the grid.  (17)            In our view, the aforesaid contention is thoroughly  misconceived.   Simadhri Station is owned and controlled by  the NTPC which is a Government of India undertaking.   Section 79(1)(a) of the Act contemplates that the Central  Commission has jurisdiction over generating companies  owned or controlled by the Central Government.  In view  thereof, the provisions under Section 86 cannot be applied  for NTPC station.   The various sections under the Electricity  Act would clearly show beyond any doubt the powers of  Central Commission and jurisdiction in regard to the grid,  the scheduling and despatch.  Under Section 79(1)(h) the  Central Commission has the power to specify Grid Code.  It  also provides that the function of the State Commission to  specify State Grid Code under Section 86(1)(f) should be  consistent with the Grid Code specified by the Central  Commission and therefore the power of the State  Commission is subservient to the power of the Central  Commission.  Section 2 (32) defines Grid as inter connected  transmission lines.  The expression used inter connected has  a significant meaning.  Sub-section (1) of Section 28 deals  with the function of RLDC (Regional Load Despatch Centre)  to ensure integrated operation of the power system in the  concerned region.  The term power system is of wide import.   It is not confined to inter State Transmission Lines but  extends to even supply lines, distribution, main service lines

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etc.  However, sub-section (3) of Section 28 deals with duties  of RLDC using the expression \023within the region\024 or \023in the  region\024.  Obviously it includes both \021Inter State and \021Intra  State\022 lines and is not restricted to inter State lines.  Section  29 of the Act empowers the RLDC to give directions and  exercise such supervision and control to any person for  ensuring stability of grid operation.  It also provides that the  State Load Desptach Centre shall duly enforce such  directions.  Sub-section (3) of Section 33 of the Act provides  that the State Load Desptach Centre shall comply with the  directions of the Regional Load Desptach Centre. (18)            A fascicule reading of the above provisions would  clearly show that the scheme of the Electricity Act is that  RLDC is required to follow the principles, guidelines and  methodologies specified by the Central Commission and all  persons including the distribution licensees like the  appellants herein are required to follow the directions of  RLDC.  RLDC can enforce such directions through SLDC.  In  turn SLDC is required to follow the directions of RLDC.          (19)            Having regard the aforesaid mentioned provisions  of law the contention that the Central Commission has no  jurisdiction to deal with grid discipline in regard to single  State beneficiary station, in our view, has no merit.  As  already noticed ABT is to ensure discipline in the integrated  system.  Further ABT is being introduced stationwise and it  is the Central Commission alone who has the jurisdiction  particularly, in regard to generating stations of NTPC, which  is a Central Government, owned and controlled generating  company.       ALLEGATION OF VIOLATION OF NATURAL JUSTICE (20)            Counsel for the appellants alleged that the order  dated 4.7.2005 has been passed by the Central Commission  (suo moto) without hearing the parties concerned, thereby  the interests of the appellants have been adversely affected,  by the impugned order.  In our view, this contention is wholly  misconceived.  As mentioned earlier, the Commission after  consultation with various agents and after threadbare  discussion, a decision was taken by the Commission on  4.1.2000 to introduce ABT scheme.  The order dated  4.1.2000 was passed after hearing all parties concerned  including the predecessor (State of Andhra Pradesh) of the  appellants herein.  The appellants step into the shoes of the  State of Andhra Pradesh.   A policy decision for the  introduction of the ABT Scheme was taken on 4.1.2000 after  consultation and threadbare discussion and after considering  all pros and cons of the scheme.  The so called suo moto  order passed by the Central Commission by order dated  4.7.2005 is only the implementation of the ABT in regard to  all generating stations of Central Public Sector supplying  electricity to one State which was only the implementation of  the decision taken by order dated 4.1.2000.   No grievance  has been raised by any generating stations including that of  State of Andhra Pradesh, the predecessor of the appellants  herein to the decision taken on 4.1.2000.  Having accepted  the policy decision taken on 4.1.2000, without any demur,  they are not now permitted to say that the implementation of  the scheme without hearing them is in violation of principles  of natural justice.   (21)            For the reasons aforestated, we answer all the  questions raised in this appeal in the negative as hereunder:-  Question (A)  (22)            The application of Availability Based Tariff and  imposition of Unscheduled Interchange (UI) charges are  essential part of the Functions of the Central Commission  under Section 79(1)(h) of the Electricity Act, 2003 which

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reads \023to specify Grid Code having regard to the Grid  Standards\024, and Sub-section (2) of Section 28 read with  Section 178(2)(g) dealing with the Central Commission\022s  powers to frame Grid Code.  The maintenance of Grid  discipline envisaged under the Grid Code is regulated by the  mechanism of ABT and UI charges.  There is no basis for the  appellant to contend that unless something is a part of Tariff  the Central Commission cannot exercise powers and  functions.  The ABT and UI charges are commercial  mechanism to control the utilities in scheduling, dispatch  and drawl and the UI charges are tariff or charges payable for  deviations.  In the facts and circumstances mentioned above  the legal position is clear and there is no ambiguity in respect  of the jurisdiction of the Central Commission.   Question (B)     (23)            The circumstances under which the order of the  Central Commission was made, the previous orders passed by  the Central Commission and the fact that the order challenged  by the Appellant was only an order fixing a prospective date  for implementation of ABT in the case of generating station  supplying to single state and not an order deciding the right or  obligations.  It is therefore not correct for the appellants to say  that the Order was passed ex-parte or suo moto in violation of  any principles of natural justice or otherwise the order is bad  or non est.  As mentioned above after the order of the Central  Commission was passed, the second respondent and the State  Load Dispatch Centre (SLDC) in the State of Andhra Pradesh  had deliberated on the steps to be taken for implementation.  The SLDC was acting on behalf of the appellants.  The  appellants and SLDC did not raise any objection or otherwise  plead any difficulty in the implementation of the ABT and UI  mechanism at the relevant time.  Even now, except for  pleading hyper-technicalities, the appellants have not shown  any legal prejudice they suffer on account of the  implementation of ABT for the Simhadri generating station of  NTPC.  The question of law has been raised mechanically  without any factual bearing or implication. Question (C)  (24)            As already noticed, the Central Commission has the  power and function to evolve commercial mechanism such as  imposition of UI charges to regulate and discipline.  It is well  settled that a power to regulate includes within it the power to  enforce.  See Indu Bhusan   vs.  Rama Sunderi, AIR 1970 SC  228, K. Ramanathan  vs.  State of Tamil Nadu (1985) 2  SCC 116, V.S. Rice and Oil Mills    vs.  State of Andhra  Pradesh, AIR 1964 SC 1781, Deepak Theatre, Dhuri   vs.   State of Punjab, 1992 Supp.(1) SCC 684. Question (G) (25)            In the facts and circumstances as alluded, and as  per the Scheme of the Electricity Act, 2003 mentioned above,  the Central Commission has the plenary power to regulate  the Grid, particularly in the context of the Grid being  integrated and connected across the region comprising of  more than one State.  The State Grid cannot be isolated and  can be seen as independent from the region. (26)            In the view that we have taken there is no merit in  this appeal and it is accordingly dismissed.  No costs.