KERALA STATE ELECTRICITY REGULATORY COMMISSION THIRUVANANTHAPURAM PRESENT

Transcription

1 KERALA STATE ELECTRICITY REGULATORY COMMISSION THIRUVANANTHAPURAM PRESENT Shri. K.J.Mathew, Chairman Shri. C.Abdulla, Member Shri. M.P.Aiyappan, Member May 25, 2010 In the matter of Tariff applicable to M/s Kanan Devan Hills Plantations Company Private Ltd, Munnar from Petition No. TP- 69/ Kerala State Electricity Board Vs Kanan Devan Hills Plantations Company Private Ltd (KDHPCPL), Munnar Petitioner Respondent 1.0 Background. 1.1 In the ARR for FY , the Board has projected the revenue requirement of Rs Crore and a total revenue of Rs Crore from sale of power and from non tariff income leaving a revenue gap of Rs Crore. The Commission admitted the petition on as TP- 23/2006. The Commission approved a net Aggregate Revenue Requirement of Rs Crore and total expected revenue of Rs Crore giving a surplus of Rs Crore. The surplus arrived was adjusted against truing up for and which would result in a revenue gap of Rs Crores. Considering this revenue gap the Commission in its letter No KSERC/TP-23/ARR&ERC 07-08/2006/192 dated instructed 1

2 KSEB to submit proposals for bridging the revenue gap. However KSEB did not submit the tariff proposal. Considering the urgency the Commission decided to issue a draft tariff schedule to be made effective from and invited comments from stakeholders and public to reach the commission on or before On in response to Commissions draft schedule of tariff, KSEB filed their proposals. Since the proposal of the Board contained major changes in tariff and categorization, the Commission decided to treat the proposal of KSEB as tariff revision proposal and directed the Board to follow the provisions under KSERC (Tariff) Regulations, Board filed necessary details vide letter No KSEB/TRAC/Tariff-Rev-07-08/P/271 dated as required under KSERC (tariff) Regulations, The commission admitted the petition as TP-30/2007 on and directed KSEB to publish the same as provided in KSERC (Tariff) Regulations, 2003 vide letter dated KSEB published the details in two Malayalam dailies and one English daily inviting comments from the public and other stake holders. 1.2 Notification dated contained proposal of tariff for Licensees with self consumption more than 50% of total purchase from KSEB. The Commission conducted public hearings at three places Palghat, Aluva and Thiruvananthapuram on , and respectively. Taking into account the comments raised by various stake holders the tariff order dated was published by the Commission for all categories of consumers and also licensee (Bulk Supply). 1.3 M/s KDHPCPL challenged the revision before Hon High Court vide W.P. 4963/2008 on the plea that in the Public Notice issued contained proposal of tariff for Licensees with self consumption more than 50% of total purchase from KSEB only but order was issued for tariff for all licencees in common including M/s KDHPCPL whose self consumption is below 50%. The Hon High Court ordered that without prejudice to the right of the Regulatory Commission or KSEB to do so, Ext P4, in so far as it affects petitioner as a licensee, in exercise of what 2

3 is stated in Ext P6, is quashed leaving the parties with liberty to proceed further, having regard to what is stated in the judgement. As a consequence Ext P17 and P 16 would stand quashed without prejudice to what is stated above. Hon High Court in W.P.(C) 4963/2008 has further ordered that Even if terms of Ext P4 are to be made as part of the tariff order to ultimately generate from Ext P6 notification, there has to be an amended notification published incorporating such terms which do not find a place in Ext P6 so that public have the effective opportunity to make suggestions and objections as provided in Sec 64 (3) of the Act. The petitioner as a licensee would also be entitled to object to that. 1.4 The Commission vide letter No KSERC/III/KDHPCPL/Tariff/2008/509 dated informed KSEB that the single bench of Kerala High Court quashed the Bulk Supply Tariff of KSEB effective from in the case of M/s Kannan Devan Hills Plantation Company OP No W.P 4963/2008 vide Judgment dated The Court has directed the Commission to hear M/s KDHPCPL and decide the tariff again. KSEB was further directed to forward a proposal for Bulk Supply Tariff for KDHPCPL for supplying power from KSEB at 11 kv with supporting data for arriving at that tariff so that once the tariff is approved by the Commission, KSEB can enter into PPA with M/s KDHPCPL. The Commission approached the Division Bench of the High Court wide W.A No 1158/ for setting aside the single bench decision. The Division bench as per their order dated had upheld the decision of single bench 1.5 KSEB submitted petition to apply 2007 Bulk Supply Tariff to KDHPCPL vide letter No. KSEB/TRAC/KDHPCPL/Tariff/2009/668 dated Commission ordered an admissibility hearing of the petition on at the Commissions Office. 2.0 Prayer 3

4 2.1 Necessary procedures as prescribed by law may be taken to fix the tariff tariff with effect from by including M/s Kanan Devan Hill Plantation Company Private Ltd under Tariff for Bulk Supply to Licensees amending the Order in TP- 23/2006 and TP- 30/2007 dated to the extend to which orders were quashed by the Hon High Court in W.P.(C ) No 4963/ Tariff at Rs 270/kVA towards demand charges for Billing Demand and Energy Charges at Ps 285/ kwh may be approved as the tariff applicable to M/s KDHPCPL with effect from Hearing on the matter 3.1 In the admissibility hearing held on KSEB stated that there were other issues involved with Kannan Devan Hills Plantations Company Private Limited such as signing of PPA with KSEB by the new company and because of that tariff petition was not filed by KSEB. KSEB during the subsequent hearing on stated that the petitioner is creating a legal hurdle to prolong the litigation by pointing out that they are not aware of the fact that the petition filed by KSEB was admitted by the Commission after the conduct the admissibility hearing. The question of admissibility is the decision of the Commission. The Order issued by the Commission was quashed by the Single Bench and the Division Bench of the Hon High Court on the ground that KDHPCPL was not given an opportunity to comment on the proposal of KSEB based on which the Commission issued orders. The Commission has to look back into the issue. KSEB filed a tariff petition proposing tariff for Bulk Consumers. As directed by the Commission KSEB filed the petition with modifications as per KSERC (Conduct of Business) Regulations, Hearing was conducted on admissibility on After the hearing the Commission decided that the petition may be admitted. The Commission forwarded a copy of the petition to KDHPCPL for filing their comments. The Commission forwarded the gist of the proposal to KSEB for publication so that respondent can file objections to the proposal. The 4

5 same chance shall be given to KSEB also to comment on the responses of KDHPCPL. The accumulated arrears due from KDHPCPL due to the non applying of revised tariff to them is more than Rs 8 Crore. In the petition filed by KSEB for retail tariff they have shown the pre revised tariff as the tariff for purchase of power from KSEB for the year There should not be any discrimination between bulk supply consumers. All the licensees accepted the order issued by the Commission effective from KDHPCPL is free to purchase power from any source as per the regulations issued by the Commission. 3.2 In the hearing held on at Munnar, KDHPCPL pointed out that they were not aware that the Commission has admitted the petition after the admissibility hearing. During the admissibility hearing few questions were asked by the Commission and KDHPCPL wanted few clarifications from KSEB. KDHPCPL has come out with answers to the questions to be presented in a hearing on They pointed out that in the earlier hearing the issues considered were (a) whether the Commission can take up the issue of tariff suo moto (b) Consider the petition filed by KSEB to implement the tariff retrospectively. The question before KDHPCPL is the maintainability of the petition filed by KSEB. Since the direction of the Hon High Court of Kerala is that Commission can pass fresh order in compliance with the procedure. Can the present petition dated be considered as it is devoid of any justification for the proposed tariff. Admissibility hearing was conducted on But since the hearing was adjourned as KSEB and KDHPCPL were to file a few submissions KDHPCPL was not aware of whether the petition was accepted and any notification was issued. On the admission of the petition they pointed out that Regulation 4 of the Kerala State Electricity Regulatory Commission (Tariff) Regulations, 2003 has not been followed by KSEB while filing the tariff petition. As per regulation the generating company, the Board or licensee shall prepare and lodge with the Commission not later than four months before the intended date of implementation of tariff the petition for 5

6 tariff proposal. Annexure II to the said regulation is the form for such application which shows statements, facts and figures to be furnished by KSEB. None of these has been included in the tariff petition filed by KSEB.The procedure for Tariff filing has been blatantly flouted by the Board by not providing any such detail. Hence the petition shall not be admitted. 3.3 The Commission allowed KDHPCPL to present their comments on the proposed tariff proposal notification. KDHPCPL stated that they are not aware of any notification and hence they cannot give any comment on merit of the case. Their present objection is on maintainability of the petition filed by KSEB and asked whether they can present their arguments for maintainability of the petition. During the admissibility hearing conducted, Commission enquired KDHPCPL why the Commission cannot decide suo moto, the tariff applicable to KDHPCPL. Commission has eliminated G1 and G2 and there is only a single tariff for Bulk Supply consumers. Commission has decided to admit the petition vide proceedings No KSERC/III/TP-69/2009 dated December 18, 2009 and a copy of the petition was forwarded to KDHPCPL for comments vide letter No KSERC/VII/KDHP/2009 dated December 24, KDHPCPL pointed out that if the petition is already admitted then they have to statutorily file a review petition for which a communication from Commission is necessary that the petition is admitted. Commission agreed that communication shall be sent to KDHPCPL that the petition of KSEB is admitted Kannan Devan Hills Plantations Company Private Limited pointed out that KSEB has filed the tariff application only on account of liberty given to follow procedures and prescribe tariff and not because of any change in the factual situation. Admittedly going by the stand of KSEB the revision of tariff was not necessitated in the case of KDHPCPL. KSEB came up with a tariff petition dated (TP No 66/2009) before Hon Commission to which KDHPCPL has filed objections. Even in this petition KSEB did not seek any change in the tariff of KDHPCPL with effect from 6

7 as has been presently done but arbitrarily proceeded on the erroneous assumption that KDHPCPL was paying the revised tariff. They have submitted that no such retrospective tariff revision with effect from was warranted or sustainable. And hence application filed by KSEB deserves to be rejected. 3.4 On the merit of the case, M/s KDHPCPL traces the origin of the case to the Tariff Revision Petition filed by KSEB for the year in which KSEB inter alia sought Tariff Revision only of Licensees with self consumption more than 50%. Therefore the Original Tariff petition and the abridged notification both specifically excluded KDHPCPL from proposed division. Despite the same the Commission while issuing final order made no distinction between licensees having consumption more or less than 50%. This tariff order dated effective from was challenged by the M/s KDHPCPL before the Hon High Court of Kerala leading to Judgement dated in WP (C ) No 4963/2008 quashing the said tariff order. The said Judgement was also affirmed by the Division Bench of the Hon High Court in WA No 1158/2008 dated Citing observations of the said Judgments KSEB has filed present petition. 3.5 The proposal of KSEB is to include KDHPCPL within the scope and ambit of a Tariff Notification issued by the Commission on with effect from generated out of a tariff petition filed by KSEB which specifically excluded the Licensee and therefore also had no facts and figures at all to justify any tariff revision of the licensee. The Tariff petition filed on contemplates in its prayer an amendment to the tariff order dated to include the licensee within the scope and ambit of the said order. It is basic and fundamental that a person cannot sought to be included and that too retrospectively within the scope and ambit of an earlier proceeding or an earlier order which arouse out of proceedings wherein the admitted facts and details are so framed that the said person was specifically excluded from it. In fact no further discussion 7

8 and analysis required on this point since admittedly even today no details whatsoever are available for KSEB even to suggest leave alone successfully seek to revise the tariff applicable to the Licensee retrospectively with effect from M/s KDHPCPL has stated that they shall await the advices of Hon Commission on further hearing of the matter KDHPCPL was informed of the hearing on vide letter No KSERC/III/KDHP/KDHP/TP 69/2010/399 dated KDHPCPL vide letter dated forwarded additional objections. These additional objections were filed on merit without prejudice to the contention of jurisdiction and error committed with respect to admissibility of the petition. KDHPCPL has stated that a perusal of the notification will indicate no change was proposed in the tariff of KDHPCPL. In the notification the existing tariff of energy charges for 11 kv licensee is shown as Rs 2.75/Unit which was existing tariff for licensees with self consumption more than 50% (G2). This was sought to be increased to Rs 3.00 ie an increase of 25 Ps/Unit. The Commission approved an increase to Rs 2.85/ Unit as per tariff order effective from The existing tariff for KDHPCPL for energy charges was only Rs 2.15/Unit and in that case the proposed increase would have been 85 Ps/Unit and approved increase 70 Ps/Unit which cannot be permitted. The additional revenue in the notification from 11 kv Licensees is expected at Rs 1.27 Crores. If the proposed increase was made applicable to KDHPCPL the additional; revenue from KDHPCPL alone would have been more than Rs 3 Crore. The percentage increase in tariff for KDHPCPL would have been more than 33% as against 8.32% increase proposed for 11 kv licensees in the notification. In form T2 of notification the proposal is for only one 11 kv licensee. The Contract Demand is shown as 12 MW against KDHPCPLs Contract Demand of 7 MW. Revenue at existing tariff is shown as Rs Crores as against revenue from KDHPCPL of about Crores. 8

9 Here again additional expected revenue is shown as Rs 1.27 Crore and percentage of increase 8.32 % as against figures of KDHPCPL mentioned above. Hence they content that the proposal in the original notification dated was not intended for KDHPCPL. 3.6 In the tariff order effective from no increase was granted to HT-I Tariff. If the proposed change in 11 kv licensee is made applicable to KDHPCPL also then coupled with the energy charge of Rs 2.85/Unit, line loss of 14.5% and after providing the discount, the direct purchase cost of KDHPCPL would be Rs 3.17 /Unit. As against this there is no increase in the tariff of HT-I category which was retained at Rs 3.00 / Unit which category comprises 68% consumption under KDHPCPL. Effectively only 19% of the consumption under KDHPCPL would fall in a category who have tariff in excess of Rs 3.17/Unit. 3.7 KDHPCPL stated that if the present tariff revision with retrospective effect from is sanctioned additional cost will be Rs 6.65 Crores from to It is therefore evident that KDHPCPL cannot under any circumstances be brought retrospectively with effect from Commissions Findings 4.1 Admissibility hearing was conducted on and the petition was admitted on vide Proceedings No KSERC/III/TP-69/2009 dated Commission forwarded copy of petition to KDHPCPL vide letter No KSERC/VII/KDHP/2009dated for comments and also informing that the hearing will be conducted on at the office of the Commission. This hearing was postponed to at the request of KDHPCPL and then to and to at 12 hours, Panchayat Hall, Munnar. Final hearing was conducted on at the Commissions Office, Thiruvananthapuram. The Commission had forwarded the notification showing salient features of the proposal of KSEB for publication in English and Malayalam news papers having vide circulation in Munnar area vide letter KSERC/III/KDHP/2007/214 dated

10 The Notification was published on March 11, 2010 in the Local news papers. Copy of the Notification was forwarded to KDHPCPL along with copy of the letter dated forwarding original petition filed by KSEB for comments. 4.2 By following the above steps the public of Munnar Town who are the consumers of KDHPCPL and also KDHPCPL have been provided with effective opportunity to make suggestions and objections as provided in Sec 64 (3) of the Electricity Act, 2003 in line with the directions contained in the Judgment W.P.(C) No 4963 of 2008 dated The petition filed by KSEB is not a new petition filed to re determine the existing tariff but a petition for an amendment to a tariff order already issued to comply with the Judgment of the Hon High Court of Kerala. 4.3 The main contention of KDHPCPL before the Hon High Court against the Order effective from was that in the proposal of KSEB the increase in tariff for Bulk Consumers was only for GII consumers who consume more than 50% of the total sale under which KDHPCPL does not come. Hence they did not respond to the proposal and in the final order by the Commission all licensees were given a common tariff irrespective of whether they are GI or GII category of licensees. Hon High Court of Kerala quashed the Order to the extent applicable to KDHPCPL on the ground that KDHPCPL was not given effective opportunity to make suggestions and objections as provided in Sec 64(3) of Electricity Act, In the petition by the Technopark against the Grid Tariff Revision Order notified by the Board B.O.(CM) No 426/03/TRAC/TO-1/2002dated introducing two types of Licensees GI and GII Commission has decided as follows in DPI dated In determining the grid tariff revision notified on , the KSE Board has not conformed to the Government of Kerala decision of to fix the tariff in such a way that the additional income that may accrue to the licensee by tariff revision is transferred to the Board. The Commission holds that the categorization of the licensees for tariff purposes and the grid tariff revision by the Board are arbitrary and devoid of 10

11 any commercial principle. As the revision was effected after the constitution of the Commission and without its approval, the revision is violative of Subsection (1) of Section 22 of the Regulatory Commissions Act, 1998 which has been in force at the time of grid tariff revision. 4.2 The Commission seeks to keep in abeyance the classification of the licensees into two categories G I and G II by the Board, since these are based on mere presumptions on the character of the licensees supply systems and the type of consumers served by them. The Commission will take a decision on the categorization only after receipt of actual data regarding the details of power supply system and type of consumers in respect of each licensee. 4.3 In the absence of complete details regarding the revenue realization and expenditure from each licensee, the Commission is not in position to come to a conclusion as to whether the tariff increase is justified or not. The Commission, therefore, allows the Board to charge the licensees based on the grid tariff notified on , subject to the following adjustments 4.5 In the hearing of the petition filed by Technopark, Tata Tea Limited had stated that since the tariff revision was made without referring to the Commission it was issued without jurisdiction and did not have the sanction of law and therefore unenforceable. They had contended that while the Government Of Kerala Order (MS) No 26/02/PD dated which stated that Grid tariff shall be fixed by the Board in such a way that additional income that may accrue to the licensee may be transferred to KSEB the actual position was not so. In their case while the arrears demanded by KSEB along with the bill for the month of April, 2003 was Rs 1,14,62, the additional revenue realized by the Company from its consumers under the revised tariff was only 22,39, They therefore argued that the revision of Grid Tariff was arbitrary, illegal and unjustified. The tariff revision ordered unilaterally by the Board, after constitution of KSERC was illegal. They also stated that change of Grid Tariff category was not permissible in accordance with provisions of Sec 46 of Electricity (Supply) Act, 1948 and therefore it was illegal. While the Board claimed that only the additional 11

12 revenue collected by the licensees from their consumers was passed on to the Board, in their case the gap between revenue collection and remittance would account for an amount of Rs 6 Lakhs/Month. They therefore argued for appropriate reduction in Grid Tariff and pleaded for retaining them under G1 Category even if their own consumption exceeded 50% of energy drawal from the Board after implementation of the proposed up gradation of their system to 66 kv.they have increased the tariff for their consumers with effect from as per KSEB notification. 4.6 Hence the Commission has not approved GI and GII Classification of KSEB. In the tariff proposal submitted by the Board, revision of tariff for Bulk Supply was proposed by the Board only for GII category of consumers which was not approved, the Commission modified the proposal as per Sec 64 (3) (a) and issued order. (a) issue a tariff order accepting the application with such modifications or such conditions as may be specified in the order The contention of KDHPCPL that the petition is not admissible since KSEB has not filed the petition with details as required under Kerala State Electricity Regulatory Commission (Tariff) Regulations, 2003 is not sustainable since the petition filed by the Board is for inclusion of KDHPCPL in the tariff notification already published by the Board which was quashed by the Hon High Court with a direction to decide the matter after calling for objections as provided under statutes. All the details required for establishing the need for a tariff revision has already been provided by the Board vide letter No KSEB/TRAC/Tariff-Rev-07-08/P/271 dated as required under KSERC(tariff) Regulations, The commission admitted the petition as TP-30/2007 on and communicated to KSEB and directed them to publish the same as provided in KSERC (Tariff)Regulations, 2003 vide letter dated KSEB published the details in two Malayalam dailies and one English daily inviting comments from the public and other stake holders. Notification dated contained proposal of tariff for Licensees with self consumption more than 50% of total purchase from KSEB. Since Commission has not approved GI and GII classification the proposal of KSEB for increase in Tariff for GII alone was not acceptable to the Commission and 12

13 hence the proposal of KSEB was modified to the extent of a single tariff ( eliminating GI and GII). A common tariff was ordered for all Licensees. 4.7 KSEB sought retrospective effect for Tariff from To a question raised with regard to competence of the Electricity Board to determine tariff with retrospective effect, ( In Kanoria Chemicals and Industries Ltd&Anr Vs State of UP & Ors(1992) 2 SCC124)the Supreme Court was of view that retrospective effect to the revision of tariff was clearly envisaged in law. A retrospective effect to the revision also seems to be clearly envisaged by the section. One can easily conceive a weighty decision for saying so. If the section were interpreted as conferring a power of revision only prospectively, a consumer affected can easily frustrate the effect of provision by initiating proceedings seeking an injunction restraining the Board and State from revising the rates, on one ground or other, and thus getting the revision deferred indefinitely. Or, again, the revision of rates, even if effected promptly by Board and State, may prove infructuous for one reason or another. Indeed even in the present case Board and State were fairly prompt in taking steps. Even in January 1984, they warned the appellant that they were proposing to revise the rates and they did this too as early as in For reasons for which they cannot be blamed this proved ineffective. They revised the rates again in March 1988 and August 1991 and, till today, the validity of their action is under challenge. In this state of affairs, it would be a very impractical interpretation of the section to say that the revision of rates can only be prospective With the support of same ruling Hon APTEL has upheld the decision of Punjab State Electricity Regulatory Commission on retrospective effect of tariff revision from in an order dated (Appeal Nos 4,13,14, 23,25,26, 35,36, 54 and 55 of 2005 dated ) 82. Section 62, which provides for determination of tariff by the Commission, does not suggest that the tariff cannot be determined with retrospective effect. In the instant case, the whole exercise was undertaken by the PSERC to determine tariff and annual 13

14 revenue requirement of the PSEB for the period April 1, 2005 to March 31, 2006, therefore logically tariff should be applicable from April 1, According to sub-section (6) of Section 64 of the Act of 2003, a tariff order unless amended or revoked continues to be in force for such period as may be specified in the tariff order. Thus the Commission is vested with the power to specify the period for which the tariff order will remain in force. The Commission deriving power from Section 64 (6) has specified that the order shall come into force from April 1, No fault can be found with such a retrospective specification of the Commission. From the above rulings it is clear that the Commission has the jurisdiction to pass tariff order with retrospective effect 4.8 Along with the BST the retail supply tariff of KDHPCPL was also quashed. If BST revision was allowed as suggested by KSEB, retail supply tariff may have to be revised to the level that KDHPCPL would earn allowed return. It is not practicable to give effect for increase in tariff retrospectively for consumers of KDHPCPL for more than two years. 4.9 In the tariff order dated , effective from the Commission had estimated the additional revenue from BST as Crores as against 5.18 crore proposed by KSEB for a full year The Commissions estimate of revenue included all licensees including KDHPCPL. Hence KSEB may suffer a short fall in revenue if 2007 Tariff is not applied. BST revision proposed by KSEB could be possible (considering the practical limitation of revising retail rates of KDHPCPL) only if KDHPCPL has surplus revenue for the years , and beyond. This can be ascertained only after truing up of of ARR/ERC of KDHPCPL for the years and The tariff revision for retail sale of 2007 made no major changes except changes in KSEB tariff for HT IV commercial and LT VII (a) and LT VII (b). Hence the impact in revenue loss is not likely to be substantial. KDHPCPL has not signed any PPA with KSEB so far for the purchase of power. KSEB in consonance with the cost plus regime is entitled to recover all costs prudently incurred for providing service to consumers. Hence KSEB published the tariff for Bulk Supply and this has been accepted by all Licensees except 14

15 KDHPCPL. KSEB cannot reduce tariff for KDHPCPL since it will amount to discrimination as per Section 45 (4) of Electricity Act, KDHPCPL will enter in to PPA with KSEB at Bulk supply tariff approved by the Commission and if this is not agreeable they are free to procure power from other sources, as provided in the regulations. 5.0 Commission s Decision. Bulk Supply Tariff for 11 kv as per Schedule of Tariff and Terms and Conditions for Bulk Supply to Licensees by KSEB (Order No TP-23 of 2006 and TP-30 of 2007 dated ) shall be made applicable to KDHPCPL effective from and KDHPCPL shall file petition proposing revised retail supply tariff effective from The petition is disposed off accordingly Sd/- Sd/- Sd/- M.P.Aiyappan C.Abdulla K.J.Mathew Member Member Chairman Approved for issue Secretary 15