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12.
At this stage we may note that a
notice was issued to the Government of India since the Commission
felt the
necessity to provide it an opportunity of hearing.
Although no one appeared before the Commission on behalf of the
Govt. of India, it has clarified vide its letter No.2/3/Powergrid/Tariff/99
dated the 14th December, 1999 that the tariff notifications for
four regions of Powergrid Transmission System were issued during the
period from 20.7.1998 to 4.12.1998 in pursuance to the main notification
containing the general principles and norms for fixation of transmission
tariff issued during December, 1997. These notifications have provision
for payment of incentive for Availability of the system beyond 95 percent.
On the question of notification dated 4.2.1999, regarding
“Certification of Availability by REB” it is clarified that similar
provision exists in case of NHPC and NTPC generation tariff notifications
also, which has been accepted by the beneficiaries.
13.
The Commission also obtained the opinion of the learned Attorney
General of India who has opined that the Commission has jurisdiction and
authority to adjudicate upon the issues relating to fixation of tariff,
and other incidental matters for the period prior to 15.5.1999.
It has been further advised by the learned Attorney General that
until fresh regulations are published, the Commission may adjudicate
issues in the light of guidelines notified by the Central Government in
the matter of fixation of tariff from time to time and prior to 15.5.1999.
The copy of the opinion of the learned Attorney General was
circulated amongst the parties present for hearing on 8.2.2000 for their
reaction to the views recorded by him.
None of the parties during the hearing disputed the correctness of
the views recorded by the learned Attorney General though in their
original pleadings some of them expressed the opposite views.
14.
The petitioner and some of the respondents (MPEB in petition No.
13/99, APTRANSCO and TNEB in petition No. 14/99 and UPPCL and PSEB in
petition No. 16/99) have filed their written submissions on the
preliminary legal issues.
We have heard Shri P.Tripathi, Senior Counsel on behalf of the
petitioner and the representatives of the respondents at
great length.
We proceed to record our findings on the preliminary legal issues
framed by us.
Issue
No. (a)
Validity
of he transmission tariff notified by the Central Government after
establishment of the Commission.
15.
As we have already noted, the general principles and norms for
fixation of tariff of the transmission system were notified by the Central
Government on 16.12.1997.
The respondents have not questioned the validity of this
notification.
We are of the opinion that the said notification dated 16.12.1997
cannot be faulted with.
Accordingly, this notification is held to be valid and intra
vires of the Central Government.
16.
The real dispute relates to the validity of the tariff
notifications issued by the Central Government after the establishment of
the Commission.
The Commission was constituted in terms of notification of the
Central Government dated 24.7.1998.
The function to regulate the inter-state transmission of energy,
including tariff of the transmission utilities has been assigned to the
Commission in terms of Section 13(c) of the Regulatory Commissions Act.
The amended Section 41 of the Supply Act, which came into effect
w.e.f. 31.12.1998, makes it further explicit that after its establishment,
the Central Commission is conferred the exclusive jurisdiction to
determine the charges payable to the Central Transmission Utility in case
of the inter-state transmission system.
Shri P.Tripathi, the learned Senior Counsel appearing for the
petitioner sought to justify the notifications issued by the Central
Government after establishment of the Commission, by invoking Section 43A
(2) of the Supply Act.
According to the learned Counsel, the petitioner is a “Generating
Company” within the meaning of the term defined under section 2(4A) of
the Supply Act, since it has amongst its objects the establishment,
operation and maintenance of generating stations.
As a generating company, one of the duties assigned to the
petitioner under section 18A of the Supply Act, is to establish, operate,
maintain the generating stations and its lines, sub-stations and main
transmission lines connected therewith.
Therefore, it was contended that the tariff of the transmission
system owned and controlled by the petitioner had to be fixed in terms of
section 43A(2) of the Supply Act.
This section has been omitted by the Central Government w.e.f.
15.5.1999.
The learned counsel for the petitioner has argued that the Central
Government had jurisdiction and power to determine tariff of the
transmission system owned by the petitioner before omission of Section 43A
(2) of the Supply Act as sale can be through transmission which is
fundamental
and an aspect of generation.
17.
Before we proceed to
examine the contention raised on behalf of the petitioner, we consider it
appropriate to have a look at
section 43 A(2) of the Supply Act as it stood prior to its omission
and is, therefore, reproduced below:-
43.A.
Terms, conditions and tariff for sale of electricity by Generating
Company:
(1)
…………………………………….
(2)
The tariff for the sale of electricity by a Generating Company to
the Board shall be determined in accordance with the norms regarding
operation and the Plant Load Factor as may be laid down by the Authority
and in accordance with the rates of depreciation and reasonable return and
such other factors as may be determined, from time to time, by the Central
Government, by notification in the Official Gazette:
Provided
that the terms, conditions and tariff for such sale shall, in respect of a
Generating Company, wholly or partly owned by the Central Government, be
such as may be determined by the Central Government and in respect of a
Generating Company wholly or party owned by one or more State Governments
be such as may be determined, from time to time, by the government or
governments concerned.
18.
A mere look at Section 43A(2) of the Supply Act shows that it
authorises the Central Government
to determine the terms, conditions and tariff for “sale of
electricity” in respect of a generating company, owned by it.
The petitioner is engaged in the business of “transmission of
electricity.”
The “transmission of electricity” by the petitioner, in our
opinion, cannot be equated with “sale of electricity”.
According to
Black’s Law Dictionary, “sale” means
“a
contract between two parties called respectively, the “seller” (or
vendor) and the “buyer” (or purchaser) by which the former, in
consideration of the payment or promise of payment of certain price in
money, transfers to the latter the title and the possession of property or
a contract whereby property is transferred from one person to another for
a consideration of value, implying the passing of the general and absolute
title, as distinguished from a special interest falling short of complete
ownership.
An
agreement by which one gives a thing for a price in current money and
other gives the price in order to have the thing itself.”
Therefore,
in order to constitute “sale” it must involve transfer of title from
the “seller” to the “buyer”.
The petitioner does not have the title to electricity being
transmitted or transferred by it.
The title to electricity vests either in the generator of
electricity or the beneficiary.
The role of petitioner in the process of transmission of
electricity is akin to that of a carrier.
As we have noticed earlier, the region-wise tariff notifications
were issued by the Central Government under Section 41 of the Supply Act
and not under Section 43A(2) thereof.
It would further show that at the time of issue of region-wise
tariff notifications the Central Govt. itself had never contemplated
that these were being issued under Section 43A (2) of the Supply Act.
We may also note that the reliance placed by the learned Counsel
for the petitioner on Section 18A of the Supply Act does not take him
too far for the reason that it was inserted in 1976 whereas Section 43A
was introduced
in 1991 when transmission and generation came to be recognised as
separate activities.
19.
In the light of the above
discussion, we hold that the Central Government was divested of its
jurisdiction to determine tariff of inter-state transmission utilities
after establishment of the Central Commission.
It was only the Central Commission that was vested with power and
jurisdiction to regulate tariff of the transmission utilities involved in
inter-state transmission of electricity.
Therefore, we hold that the notifications issued by the Central
Government after the establishment of the Central Commission are liable to
be held as
invalid and ultra vires the Electricity Regulatory Commissions Act
1998 and Electricity (Supply) Act 1948.
However, in terms
of its regulatory powers, the Commission is competent to lay down
its own norms and principles for tariff determination which it has yet to
do. Therefore,
in the interest of continuity
and to avoid a situation of vacuum, we consider it expedient to
adopt the norms laid down by the Central Government for the purpose of
these petitions.
Issue
No. (b):
Whether
the notification of incentive is a matter of procedure or that of
substantive law and as such can be taken up by the Commission even for
the period prior to vesting of jurisdiction in it under the ERC Act.
20.
According to the learned counsel for the petitioner,
incentive/disincentive is an integral component of the transmission tariff
payable in accordance with the principles and the formula given in the
notifications.
It has been contended that in the circumstances, the notification
of incentive is simply a matter of procedure involving determination of
the exact value and does not involve any substantive law.
21.
MPEB in its reply has stated that by virtue of agreement dated
31.3.1999, incentive can be notified by the Central Government for the
period prior to the vesting of jurisdiction in the Commission.
TNEB has averred that the Commission does not have jurisdiction to
notify incentive for the period prior to its establishment in July, 1998.
On the other hand, according to UPPCL and PSEB, the jurisdiction to
decide issue regarding tariff for any period lies with the Commission,
since incentive is a component of tariff.
22.
Consequent to the establishment of the Commission and vesting in
the power for determination of tariff by law, the Central Government gets
divested of jurisdiction to determine the incentive payable.
Therefore, it is futile to contend on behalf of the respondents
that the Commission cannot exercise its jurisdiction to notify tariff.
However, we are not persuaded to accept the contention of the
petitioner that notification of tariff by the Commission is only a matter
of procedure.
This would mean acceptance of previous norms which ipso
facto cannot be applied.
If law prescribes the terms and conditions, the mere change of
forum on same norms may be a mere procedure.
On the contrary, the Commission is to lay down the terms and
conditions of Tariff.
Thereafter the Tariff has to be determined by following due process
of hearings. The respondents, against whom the claim for incentive lies
have to be
afforded
an opportunity of hearing and their objections, if any, have to be
adjudicated upon. The Commission has to determine the admissibility and
propriety of the claim for incentive in the light of the laid down
principles.
We are of the firm opinion that the notification of incentive is
not merely a matter of procedure and as it involves adjudication of the
rights of the parties, it is matter of substantive law and as such the
Commission cannot mechanically determine the incentive.
Issue
No. (c):
Whether
the Commission has jurisdiction to exercise the same powers as were
exercisable by the Central Government regarding determination of
incentives for use of inter-state transmission system, before
establishment of the Central Commission.
Issue
No. (e):
Whether
the Commission can exercise jurisdiction for notifying
incentive for the period prior to its establishment
Issue
No. (g):
Whether
the Commission is to follow the criteria laid down by the notifications
of the Central Govt. regarding payment of incentive.
23.
According to the
petitioner, the Commission has jurisdiction to exercise the
same powers as were exercisable by the Central Government regarding
determination of incentive for use of the inter-state transmission system,
before its establishment and has jurisdiction to notify the incentive that
is part of tariff.
The respondents have expressed divergent views on these issues.
MPEB, in its written submissions has raised an objection to the
claim made by the petitioner.
According to MPEB, the Commission cannot exercise powers under the
notification issued by the Central Government.
According to the learned counsel for the petitioner, the Commission
has jurisdiction to notify the incentive that is a part of tariff.
On the other hand, the respondents have expressed divergent views
on the issue.
According to APTRANSCO and UPPCL, the Commission can exercise
jurisdiction for notifying the incentive amount payable to the petitioner
for the period prior to its establishment.
PSEB has contended the tariff determination by the Commission w.e.f.
1.4.1997 is pre-requisite to claim incentive.
24.
Under Section
28
of
the
Regulatory Commission Act, the Commission is
empowered
to determine by regulations the terms and conditions for fixation of
tariff. The
Commission is already in the process of finalising the tariff norms and
these will be notified in due course of time. It has been contended by the
respondents that the Commission, should in the first instance notify the
terms and conditions for tariff under section 28 of the Regulatory
Commissions Act and these terms and conditions may apply for the period
the incentive is claimed since the Commission has unfettered powers and
jurisdiction under the law.
The arguments advanced by the respondents do not really change the
extent of jurisdiction for the prior period but support the petitioner’s
case that the Commission can exercise jurisdiction with the rider that
these would be on the terms and conditions of the Commission.
This, however, is not the real issue.
Parties, therefore, do not disagree on jurisdiction per se.
However
as a matter of abundant caution, the Commission itself took up with
the Central Government to exercise its powers under Section 60 of ERC Act
to clarify by notification that the Commission’s jurisdiction extends to
all matters relating to past periods as well when the Commission was
established.
The clarification was not forthcoming from the Government. To be on
the safe side, the Commission called for an opinion from the learned
Attorney General of India in this regard. The learned Attorney General
has specifically stated that until regulations are published by the
Commission, the Commission may adjudicate these issues in the light of
guidelines notified by the Central Government in the matter of fixation of
tariff from time to time and prior to 15th May 1999.
We are guided by the opinion of the learned Attorney General (the
correctness of which remains undisputed) that until fresh regulations are
published by the Commission, it may adjudicate issues in the light of
guidelines notified by the Central Government since otherwise it may
create uncertainties in the mind of the parties.
The above conclusion draws support from the statutory provisions
contained in Regulation 79 of the CERC (Conduct of Business Regulations
framed by the Commission and the notification dated 12.5.1999 issued by
the Commission. The notification of 12.5.99 specifically provides that the
tariff of such generating companies, existing on 15.5.99, will continue to
be charged for the period for which it was approved or till any further
order in this regard is passed by the Commission, whichever is earlier.
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