Electricity distribution is a composite supply with other activities

Case Covered:

Torrent Power Ltd

Versus

Gujarat Electricity Regulatory

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Facts of the case:

The Appellant, Torrent Power Limited (TPL) is a company formed under the provisions of the Companies Act, 1956. The Appellant is the distribution licensee for Ahmedabad/ Gandhinagar and Surat license area.

The Respondent No. 1 is the Gujarat Electricity Regulatory Commission (GERC), established under the provisions of the Electricity Regulatory Judgment of Appeal No.246 of 247 of 2017 Commission Act, 1998 presently repealed and so continued in office, by virtue of Section 82 of the Electricity Act, 2003.

The Respondent Nos.2 &3 are the consumers of the Appellant who preferred the said Review Proceedings seeking review of the Order dated 31.03.2016 in Petition Nos. 1552 & 1553 of 2015.

The Respondent Nos. 4 to 12 were added as party Respondents pursuant to the order dated 30.04.2016 passed by Respondent No.1/Commission in the review proceedings.

 The Respondent No.1 has passed the impugned order in respect of the petitions filed seeking review of Tariff orders passed by the Respondent Commission for Ahmedabad/ Gandhinagar and Surat license area.

The Appellant has challenged the impugned order of the Respondent Commission to the extent the Respondent Commission has erroneously held the Carrying Cost in abeyance in Review proceedings after having initially allowed the same in the Original Tariff Proceedings.

Observations of the court:

 We note that the issue of carrying cost was dealt with by the Commission in its original Tariff Order dated 31.03.2016. While dealing with the objections related to carrying cost, the Commission has approved the carrying cost as claimed by the Appellant by stating that carrying cost is allowed on an uncovered gap as per this Tribunal’s decisions. It is the settled position of law that Review Petition cannot be an appeal in disguise. The Hon’ble Apex Court in a catena of judgments has held that a party is not entitled to seek review of the judgment merely for the purpose of rehearing and the fresh decision of the case. Therefore, we are of the view that the impugned order holding Review as maintainable on the issue of Carrying Cost is contrary to the nature and scope of the Review Proceedings as detailed in Regulation 72 of the GERC Conduct of Business Regulations read with Section 94 of the Act.

Upon perusal of the judgment of this Tribunal in Appeal Nos.190 of 2011 and 162 & 163 of 2012, it is observed that after deliberating the applicable judgments of this Tribunal and principles laid down in those judgments, this Tribunal has come to the conclusion that carrying cost is to be allowed to the Appellant on the revenue gap as a result of legitimate expenditure in true-up. It is to be noted that the Commission has verified all the expenses during true-up exercise and approved the same. The Judgment of Appeal No.246 of 247 of 2017 resultant gap is arrived at after this truing up exercise. Thus, it is admitted fact that the recovery of the Appellant is delayed until the Commission allows recovery of this revenue gap. As per well-settled financial principle in a catena of judgments, carrying cost is to be allowed to compensate the utility for such delayed recovery. From the perusal of referred judgment, we agree that rather this Tribunal has categorized the carrying cost on the revenue gap arrived after true-up exercise under 83(d)(iv) and allowed the recovery of the same. Therefore, we are unable to agree with the Commission that this Tribunal has required the Commission to further verify the carrying cost in the referred judgment of this Tribunal.

In the impugned order, the Commission has also referred to the judgment of this Tribunal dated 28.05.2009 in Appeal No. 111 of 2008 and stated that this Tribunal has held the carrying cost as legitimate expenditure and same can be allowed only on financial principles once such expenditure is proven by the licensee and extracted para 7 of the judgment. However, as pointed out by the Learned Counsel for the Appellant, the perusal of judgment reveals that the referred para relied upon is with reference to the issue of computation of gains/ (losses) for Interest on Working Capital as provided for in the MERC (MYT) Regulations and not with reference to the carrying cost as stated by the State Commission. Therefore, the Commission has erred in relying on para 7 of this judgment with reference Judgment of Appeal No.246 of 247 of 2017 to the issue of carrying cost as it is on unrelated issues and Regulations. The Learned Counsel of the Commission has also argued that judgment in Appeal No. 111 of 2008 and judgment in Appeal No. 190 of 2011 & Appeal No. 162 & 163 of 2012 are of coordinate benches and are binding upon the parties. However, we are of the view when the decision relied upon is on an unrelated issue, the question of its applicability does not arise in the present case.

The Learned Counsel for the Commission also referred to the judgment of this Tribunal in Kerala State Electricity Board Vs. Kerala State Electricity Regulatory Commission – 2012 SCC Online APTEL 151 and submitted that the issue of carrying cost is subject to prudence check is no longer res Integra. The perusal of this order reveals that the issue, in that case, was with reference to the denial of power purchase cost by the State Commission and in turn, this Tribunal directed the State Commission to allow the power purchase cost, which was denied earlier, along with carrying cost. This judgment does not deal with the present issue i.e. whether carrying cost claimed on the approved revenue gap, arrived at after true-up exercise, as per the methodology adopted by the Commission for implementing the judgment of this Tribunal allowing carrying cost is further required to be substantiated by the utility. Accordingly, we find that the Commission has not only deviated from its Judgment of Appeal No.246 of 247 of 2017 own methodology but also not followed the order and judgment of this Tribunal in true spirit.

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