Power Distribution Co.& Ors Vs. Central Electricity Regulatory Commission
& Anr  Insc 831 (17 August 2007)
Sema & Lokeshwar Singh Panta H.K.Sema,J.
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
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.
This appeal was admitted on 1.5.2006 to be heard on the following questions of
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)?
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?
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? and
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?
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.
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.
Before the introduction of ABT scheme it was deliberated at different levels
appointed by the Government of India to inquire into and make recommendations;
National Task Force (NTF) appointed by the Government of India;
Regional Task Forces again appointed by the Government of India; and
Central Electricity Authority.
After the constitution of Central Commission under the Electricity Regulatory
Commissions Act, 1998 (in short the Act), 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.
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 applied to all including future IPPs.
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
DISTINCTIVE FEATURES OF ABT
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
Low frequency during peak load hours, with frequency going down to 48.0 48.5
Hz for many hours every day.
High frequency during off peak hours, with frequency going up to 50.5 to 51 Hz
for many hours every day.
Rapid and wide changes in frequency 1 Hz change in 5 to 10 minutes, for many
hours every day.
Very frequent grid disturbances, causing tripping of generating stations,
interruption of supply to large blocks of consumers, and disintegration of the
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.
has also been a general reluctance among all concerned to introduce financial
incentives or disincentives.
CTU has stated that the resolution of these problems requires:
of generation during peak load hours and load curtailment equal to the deficit
Backing down of generation to match the system load reduction during off peak
hours, keeping the merit order of generation in view. WHAT IS UI (UNSCHEDULED
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.
element was introduced to bring about the effective discipline in the system.
Under this system UI charges will be payable, if:
generator generates more than the schedule, thereby increasing the frequency;
generator generates less than the schedule, thereby decreasing the frequency;
beneficiary overdraws power, thereby decreasing the frequency;
beneficiary underdraws power, thereby increasing the frequency.
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.
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.
The order dated 4.1.2000 passed by the CERC is intended to achieve the
ABT is necessary for Grid discipline.
ABT is being introduced qua generating stations but is a method to control all
players, namely, generator, transmitter, distributors and users.
The concept of ABT was accepted by all concerned including the predecessor of
the Appellants herein without any reservation or conditions.
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.
The Order dated 4.1.2000 does not make any specific exclusion of the generating
stations supplying electricity to one State.
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.
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 implementation
of ABT was issued:
Region 1-4-2000 Eastern Region 1-6-2000 Northern Region 1-8-2000 Western
Region 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.
The principal contention of the counsel for the appellants is founded on two
the CERC did not have the jurisdiction to introduce ABT for generating stations
supplying power within the State of Andhra Pradesh and
CERC has failed to provide an opportunity of hearing to the appellants whose
interests have been adversely affected by the impugned order.
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.
In our view, the aforesaid contention is thoroughly misconceived. Simadhri
Station is owned and controlled by the NTPC which is a Government of India
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.
not confined to inter State Transmission Lines but extends to even supply
lines, distribution, main service lines etc. However, sub-section (3) of
Section 28 deals with duties of RLDC using the expression within the
region or in the region. Obviously it includes both Inter State and Intra State 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.
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.
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.
OF VIOLATION OF NATURAL JUSTICE
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.
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 reads to specify Grid
Code having regard to the Grid Standards, and Sub-section (2) of Section
28 read with Section 178(2)(g) dealing with the Central Commissions 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.
(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
deliberated on the steps to be taken for implementation.
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.
(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.
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
In the view that we have taken there is no merit in this appeal and it is
accordingly dismissed. No costs.