Sai Wardha Power Generation … vs The Tata Power Company Limited … on 3 April, 2020


Supreme Court of India

Sai Wardha Power Generation … vs The Tata Power Company Limited … on 3 April, 2020

Author: L. Nageswara Rao

Bench: L. Nageswara Rao, Deepak Gupta

                                                                         Non-Reportable

                            IN THE SUPREME COURT OF INDIA
                             CIVIL APPELLATE JURISDICTION

                                     Civil Appeal No.2228/2020
                                    (@ Diary No.24669 of 2019)
                  SAI WARDHA POWER GENERATION LIMITED.
                                                                       .... Appellant(s)

                                                   Versus

                  THE TATA POWER COMPANY LIMITED DISTRIBUTION & ORS.

                                                                    …. Respondent (s)
                                               WITH

                                   Civil Appeal No.5049 of 2019

                                          JUDGMENT

L. NAGESWARA RAO, J.

1. The question that arises for our consideration in these

Appeals is whether Tata Power Company Limited-

Distribution (hereinafter, ‘TPC-D’) is entitled to levy

wheeling charges for the power supplied to Hindustan

Petroleum Corporation Limited (hereinafter, ‘ HPCL’) and

wheeling charges for the power sourced from Sai Wardha

Power Generation Limited (hereinafter, ‘SWPGL’) through

open access. The Maharashtra Electricity Regulation
Signature Not Verified

Digitally signed by

Commission (hereinafter, ‘the Commission’) allowed the
ASHA SUNDRIYAL
Date: 2020.04.03
15:27:05 IST
Reason:

petition filed by HPCL and held that TPC-D is not entitled to

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levy wheeling charges. Consequently, the Commission

directed TPC-D to refund the amounts collected from HPCL,

in the form of wheeling charges. The Appellate Tribunal for

Electricity allowed the appeal filed by TPC-D and set aside

the order of the Commission. Aggrieved thereby, the

SWPGL and HPCL have filed the above Appeals.

2. Tata Power Company Limited (TPC) was granted an

integrated licence for supply of electricity under the

provisions of the Indian Electricity Act, 1910. HPCL has

been receiving electricity from TPC on its 22 kV distribution

network since 1955. In 2005, HPCL augmented its oil

refining facility by installing additional units. HPCL

requested TPC to supply additional power to feed its load

requirement of 70 MW on 100 per cent redundancy basis.

The supply was required to be enhanced to extra high

voltage (EHV) level. A power supply agreement was

executed between TPC and HPCL on 20th October, 2005 for

providing power supply of 110 kV to HPCL’s expansion

project at Chembur. The actual supply of 70 MW power

started in the year 2008 after the construction of 2×110 kV

facility and the requisite regulatory approvals.

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3. In the meanwhile, as per the directions of the

Commission, TPC trifurcated its assets and segregated

them into different entities for generation, transmission

and distribution for the purpose of accounting and tariff

determination in the year 2006. The Commission

determined separate tariffs for Tata Power Company

Limited-Generation, Tata Power Company Limited-

Transmission and Tata Power Company Limited-Distribution

businesses for the first time on 03.10.2006. Thereafter,

separate tariffs were determined by the Commission for

Tata Power Company Limited-Generation, Tata Power

Company Limited-Transmission and Tata Power Company

Limited-Distribution. While approving the request for

construction of 2×110 kV lines for power supply of 70 MW

to HPCL on 16.10.2007, the Commission directed TPC that

the other consumers in the vicinity may also be supplied

power from the 2×110 kV distribution lines. By the tariff

order dated 04.06.2008, the Commission permitted the

capitalization of the 2×110 kV distribution lines in the

books of accounts of TPC-D. Undisputedly, HPCL has been

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paying wheeling charges i.e. charges for the right to use of

the distribution network since 2008.

4. In the year 2014, TPC filed applications before the

Commission for grant of transmission licence and

distribution licence under the Electricity Act, 2003. On

17.04.2014, a representation was made by TPC classifying

2×110 kV lines as part of the transmission system and 33

kV and lower lines as part of the distribution system. The

Commission granted Transmission Licence No. 1 of 2014 to

Tata Power Company-Transmission (TPC-T) on 14.08.2014.

HPCL applied to TPC-D on 04.11.2015 for availing 21.02

MW short term open access for getting power as a group

active user from SWPGL which was approved by TPC-D.

HPCL executed a power purchase agreement with SWPGL

on 08.07.2016 with partial supply of electricity on open

access. HPCL sought approval of TPC-D for the use of its

distribution network.

5. On 10.10.2016, TPC-T filed an application before the

Commission for amendment of the transmission licence

No.1 of 2014. TPC-T stated in the said application that

inclusion of the 2×110 kV lines in its network is an

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inadvertent error as the lines were always part of the

distribution system. Thereafter, HPCL filed a petition on

13.04.2017 before the Commission for a declaration that

TPC-D was not entitled to levy and collect wheeling charges

and wheeling losses on the supply of electricity through

open access on the 110 kV Trombay – HPCL lines 1 and 2

including the feeder lines. The Commission passed an

order on 12.03.2018 allowing the petition filed by HPCL

holding that TPC-D is not entitled to levy wheeling charges.

The said order was set aside by the Tribunal on 22.03.2018.

In the meanwhile, the Commission disallowed the

application filed by the TPC Transmission for modification of

Transmission Licence No. 1 of 2014 by an order dated

01.08.2018. The Appellate Tribunal set aside the order of

the Commission dated 01.08.2018, disallowing the

application for modification of the transmission license, and

remanded the matter back for fresh consideration.

6. The petition filed by HPCL was allowed by the

Commission by holding that 2×110 kV Trombay – HPCL lines

are part of the transmission system of TPC-T as per the

transmission licence issued on 14 th August, 2014. As long

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as the lines remained part of the transmission licence, the

TPC-D cannot claim wheeling charges as a distribution

licensee. The submission on behalf of the TPC-D that

2×110 kV lines should be considered as its distribution

assets was rejected by the Commission on the ground that

extra high voltage network of 66 kV and above have to be

treated as part of the transmission network. The

Commission held that the wheeling charges of TPC-D was

determined only for 11/22/33 kV lines. On the basis of the

principle of segregation between HT and EHT levels in

Maharashtra, the Commission held that EHV feeders

emanating from the Trombay generating station squarely

fall within the definition of transmission lines under Section

2 (72) of the Electricity Act, 2003. The Commission relied

upon the Central Electricity Authority (Technical Standards

for Construction of Electrical Plants and Electric Lines)

Regulations, 2010 (hereafter referred to as the ‘CEA

Regulations, 2010’) which demarcate distribution and

transmission boundaries on the basis of voltage levels. As

per the CEA Regulations 2010, voltage levels from 0.415 kV

to 33 kV are included under the distribution head and 66

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kV to 765 kV AC and 500 kV DC voltage levels are included

under transmission head. On the basis of the above

findings, the Commission allowed the petition filed by HPCL

and directed TPC-D to refund the amounts collected from

HPCL on the said count.

7. The Appellate Tribunal framed two principal issues for

consideration which are as follows:

“Issue No.1: Whether the 110 kV HPCL feeders

are part of the Distribution system of TPC-D or can

qualify as transmission lines in terms of the

statutory framework and in the facts of the

present case?

Issue No.2: Whether the erroneous

submission of TPC-T regarding 110 kV HPCL

feeders in the transmission licence No.1 exempt

HPCL from payment of wheeling charges?”

8. By placing reliance on an earlier judgment of the

Tribunal dated 14.12.2012 in Orissa Power Transmission

Corporation Limited vs. Orissa Electricity Regulatory

Commission in Appeal No.30 of 2012, the Tribunal held that

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the 110 kV HPCL feeders from Trombay Generation Station

Bus-Bar to HPCL installation at its premises for use of

electricity are an essential part of the TPC Distribution

system. The Tribunal observed that these feeders from

their inception were being used for supplying electricity to

HPCL. The Tribunal was also of the view that an

arrangement for stepping down electricity at consumers

installation cannot be treated as a ‘sub-station’ as defined

in Section 2 (69) of the Electricity Act. Following the

judgment in OPTCL, the Tribunal observed that there is no

embargo that the distribution network of a distribution

licensee cannot include a line of 110 kV voltage level.

Issue No.2 was also answered in favour of TPC-D. The

Tribunal declared that 110 kV feeders are integral part of

the distribution network of TPC-D and that on the basis of

voltage defined in the CEA Regulations 2010, the status of

the licence cannot be changed from distribution to

transmission. The Tribunal directed the Commission to re-

determine the wheeling charges at EHT level 110 kV by

accepting the submission of HPCL that it was made to pay

higher wheeling charges.

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9. We have heard Mr. Anand K. Ganesan, learned

counsel for SWPGL, Mr. Varun Pathak, learned counsel for

HPCL and Mr. Maninder Singh, learned Senior Counsel for

TPC-D.

10. TPC-D raised a preliminary objection relating to the

maintainability of the appeal filed by SWPGL on the ground

that it lacks locus standi. According to TPC-D, the dispute

essentially is between HPCL and TPC-D. SWPGL which has

stopped supplying power to HPCL on 30.09.2017 cannot be

permitted to challenge the order passed by the

Commission. HPCL has filed an appeal against the

judgment of the Tribunal which has to be adjudicated on

merits. Therefore, we have heard the learned counsel for

SWPGL as well.

11. It was contended on behalf of HPCL that 110 kV HPCL

line is a transmission line. The metering for HPCL is done

at TPC-D sub-station which is admittedly a transmission

asset. As a matter of fact, the sale of electricity is

completed at the TPC-D sub-station. It was argued that on

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behalf of HPCL that a consumer can be connected directly

to a transmission network. HPCL submitted that the

judgment of the Tribunal in OPTCL is erroneous. Inclusion of

2×110 kV lines in the transmission assets by TPC-D is a

factor that cannot be ignored while deciding the

entitlement of TPC-D to impose wheeling charges by

treating the 2×110 kV lines as part of the distribution

system.

12. It was submitted on behalf of the SWPGL that there is

no prohibition or bar in the Electricity Act preventing a

consumer from being directly connected to the network of

a transmission licensee. Undisputedly, 2×110 kV Trombay –

HPCL lines have been declared to be part of transmission

assets by TPC-T. The plea of inadvertence taken by TPC-D

has to be rejected in view of availability of abundant

material. SWPGL referred to the roll out plan of the

distribution network made by TPC which deals only with

lines upto 33 kV. According to SWPGL, the capital

investment plans of distribution network also include only

11 kV and 33 kV voltage level lines. The learned counsel

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appearing for SWPGL submitted that the order of the APTEL

is liable to be set aside.

13. On behalf of the TPC-D, it was argued that trifurcation

took place in the year 2005 and since then, tariff was being

determined separately for transmission and distribution.

HPCL has been paying wheeling charges till 2018. There is

no doubt that HPCL was receiving electricity from TPC-D’s

distribution network since 1955. Reliance was placed on

the tariff order dated 04.06.2008, wherein the Commission

permitted capitalization of 2×110 kV distribution lines in

books of accounts of TPC-D. It was argued on behalf of

TPC-D that no transmission charges have ever been

demanded or recovered for 110 kV assets. It was

contended that the application filed for amendment of the

transmission licence ought to have been decided by the

Commission before taking up the instant dispute. A

detailed submission was made on the network roll out plan

to submit that the plan was qua a broad basis of

consumers who are connected at 11kV/22kV/33kV and

lower voltage levels. It was submitted that the network

rolls out plan was only towards development of network

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backbone which is generally at levels below 33 kV. It was

further urged on behalf of the TPC-D that the 110 kV lines

were always treated as a distribution asset and it was only

due to inadvertence that they were included in the

transmission license in 2014.

14. The basis for the order of the Commission dated

12.03.2018, allowing the petition filed by the HPCL is two-

fold. Firstly, the Commission held that transmission

licence was granted to TPC-T on 14.08.2014, in which the

two110 kV Trombay – HPCL lines were shown as a part of

TPC-T. The Commission observed that as long as the lines

remained part of the transmission licence, TPC-D cannot

claim wheeling charges. The Commission further observed

that HPCL is directly connected to 110 kV transmission

system in terms of TPC-T’s transmission licence and not to

the distribution network of TPC-D. The Commission

remarked that mere filing of a petition by TPC-T for

amendment of its transmission licence does not entitle

TPC-D to levy wheeling charges. The Commission further

referred to the submission of TPC-D in case No.47 of 2016

that the assets of TPC-D do not include any part of TPC’s

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transmission network. The submission of TPC-D relating

to the inadvertent error in showing 2×110 kV lines in the

transmission network was rejected.

15. Secondly, the Commission relied upon an E-mail of

the Maharashtra State Load Despatch Centre (MSLDC)

dated 11.12.2015 addressed to SWPGL in which it was

stated that no wheeling charges can be levied on HPCL as

it was connected at 110 kV level. The Commission referred

to the CEA Regulations, 2010 and Central Electricity

Authority’s Manual on Transmission Planning Criteria) 2013

and Maharashtra Electricity Regulatory Commission

(Transmission Open Access) Regulations, 2016 to hold that

all lines up to 33 kV shall be part of the distribution system

and those above 33 kV form part of transmission lines.

16. The order of the Commission was set aside by the

Tribunal. The Tribunal observed that 2×110 kV HPCL feeder

was being used for supplying electricity since inception and

hence it is an integral part of TPC-D system. By placing

reliance on a judgment in OPTCL, the Tribunal held that

HPCL cannot receive power supply directly from TPC-T.

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The Tribunal further held that there is no embargo on the

inclusion of the 2×110 kV lines in the distribution network

and distribution can be undertaken at high voltage levels

forming high voltage distribution system. While answering

the second point, the Tribunal held that a consumer can

directly be connected to the works of a transmission

licensee. However, in the instant case, HPCL was paying

wheeling charges from a long time to TPC-D. Hence, the

2×110 kV lines are part of the distribution system of TPC-D.

Further, the Technical Regulations framed by the CEA

defining level of voltage for distribution and transmission

heads were held to be generic in nature by the Tribunal.

17. Admittedly, separate licenses for transmission and

distribution to TPC-T and TPC-D respectively were granted

in 2014. There is no dispute that TPC-T included the 2×110

kV lines in its transmission assets. The network roll out

plan submitted by TPC-D included lines upto 33 kV in its

distribution network. An application was filed by TPC-T for

amendment of the licence which is pending before the

Commission, following the remand by the Tribunal. The

Tribunal did not advert to the application filed by TPC-T for

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amendment of the transmission licence. The Tribunal also

did not refer to its order by which it set aside the order of

the Commission disallowing the application for amendment

of the transmission license and remanded the matter back

to the Commission. The Tribunal committed an error in

ignoring the existing transmission licence of TPC-T before

coming to a conclusion that 2×110 kV lines are part of the

distribution network. The Tribunal ought to have directed

the Commission to adjudicate the application filed by TPC-T

for amendment of the transmission licence. Thereafter, the

Tribunal should have decided an appeal, if any, filed

against the decision of the Commission on the application

for amendment before taking up the appeal filed by TPC-T

against the order of Commission dated 12.03.2018. The

Tribunal stressed on the fact that HPCL was receiving

power from TPC-D from a very long time for which reason,

the 2×110 kV lines should form part of the distribution

system of the TPC-D. The Tribunal was wrong in not taking

note of the application filed by TPC-T for amendment of its

transmission licence in which the 2×110 kV lines were

included in the transmission network. Till the transmission

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licence of TPC-T is not modified, the 2×110 kV lines form

part of the transmission network of TPC-T. The Tribunal

could not have held that 2×110 kV lines should be included

in the distribution system of TPC-D.

18. The CEA Regulations 2010, the Maharashtra

Electricity Regulatory Commission (Transmission Open

Access) Regulations, 2016 and the Maharashtra Electricity

Regulatory Commission (Distribution Open Access)

Regulations, 2016 provide for demarcation between the

transmission and distribution boundaries on the basis of

voltage. The Tribunal erred in ignoring the said Regulations

while holding that 2×110 kV lines are part of the

distribution system.

19. We are of the opinion that the judgment of the

Tribunal is required to be set aside and that the matter

should be remanded back for fresh consideration.

Therefore, we are not expressing any opinion on the

findings recorded by the Tribunal on interpretation of the

provisions of the Electricity Act, 2003. As a matter of fact,

the transmission licence issued to TPC-T includes 2×110 kV

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lines as part of the transmission system. Therefore, it is not

open to TPC-T to contend that 2×110 kV line is a part of the

distribution system of TPC-D till the transmission licence is

modified. It is essential that the application filed by TPC-T

for amendment of its transmission licence is decided first.

If the application filed for amendment by TPC-T is allowed

and reaches finality, the 2×110 kV lines will not form part

of the transmission network. On the other hand, if the

application of TPC-T for amendment of its licence is

rejected, TPC-D cannot have a case for seeking inclusion of

2×110 kV lines in its distribution system for imposing

wheeling charges on HPCL.

20. Therefore, we direct the Commission to decide the

application filed by TPC-T for amendment of the

transmission licence issued in the year 2014 expeditiously

and not later than a period of two months from the date of

resumption of work after the lockdown due to Corona Virus

is lifted. The appeal, if any, filed by the aggrieved party

shall be decided by the Tribunal within a period of three

months from the date of filing. Thereafter, the Tribunal

shall take up Appeal No.84 of 2018.

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21. For the aforementioned reasons, we set aside the

judgment of the Tribunal and remit Appeal No.84 of 2018 to

the Tribunal for fresh adjudication.

…………………………..J.
[L. NAGESWARA RAO]

…………………………..J.

[DEEPAK GUPTA]

New Delhi,
April 03, 2020.

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