BEFORE THE

MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

World Trade Centre, Centre No.1, 13^th Floor, Cuffe Parade, Mumbai-400 005

Case No.14 of 2002

IN THE MATTER

OF

INTERPRETATION OF LICENCES ISSUED TO THE TATA POWER COMPANY

Mr. P. Subrahmanyam, Chairman

Mr. Jayant Deo, Member

Dr. Pramod Deo, Member

Date of Order: July 03, 2003

O R D E R

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11. It is submitted for BSES that, in contrast, the corresponding Clause in BSES’ license reads as follows:

“Purpose of Supply

6. Subject to the provisions of this License and the Act and to the Rules thereunder, the Licensees shall be entitled during the continuance of this License to supply energy for all purposes within the area of supply.”

In this context, Counsel submitted that any licensee who supplies electricity in bulk is a bulk licensee. Cl. 2 (iii) of TPC’s license defines “licensee” to mean TPC. In Cl. 2 (vi), “other licensees” means any party (other than the licensees) authorized by a license to supply energy to the public within the licensee’s area of supply. The TPC license contemplates TPC as the bulk licensee who can supply other licensees authorized to effect retail supply of energy to members of the general public. Thus, the license itself draws a distinction between the bulk licensee (TPC) and other licensees as above.

12. BSES Counsel submitted that since, under their licenses, TPC can supply electricity to other licenses for distribution by them, they obviously cannot supply electricity to ‘retail consumers’. The latter are to be catered to by the licensees to whom TPC supplies energy. The construction of Cl. 5 shows that that it is only intended to operate on supplies being made to other licensees (i.e. in bulk). He argued that the word ‘consumer’ refers to a consumer of the licensees to whom the supply is to be made by TPC, while the limits fixed for supply only refer to a demand to be made by the other licensees upon TPC. He submitted that even the provision for arbitration in Cl. 5 refers only to disputes between TPC and other licensees. The import of the license is a permission, authorization or mandate to do a certain thing. Merely because it does not prohibit the doing of other things, the licensee has no license to do them. Therefore, under their license terms, TPC can only supply electricity to other licensees for distribution by them, as explained earlier.

13. Moreover, under S. 3 (2) (f) of the IE Act and Cl. 15 of TPC’s licenses, the provisions of Clauses IV, V, VII, VIII and XII of the Schedule to the Act as well as Cl. VI (with some exceptions) are expressly made inapplicable to licensees such as TPC. The thrust of the Act is to impose certain responsibilities and liabilities on all licensees through Clauses IV to VIII and XII of the Schedule unless they are expressly modified by the State Government. Counsel pointed out that there are no such express terms in TPC’s licenses. These Clauses would not apply if the bulk licensee is to supply to other licensees for distribution only. If, however, as contended by TPC, their licenses are for both purposes, then the exemptions in Cl. 15 would also apply to their rights to retail distribution. This is obviously against the letter and spirit of the law, and would render the provisions of sec. 3 (2) (f) absurd.

14. Pursuing these contentions, Counsel for BSES submitted that these Clauses of the Schedule to the IE Act cast various obligations and duties upon licensees who supply directly to a consumer (not being some “other licensees”). Clearly, exemptions have been given only because TPC are neither obliged nor permitted to supply to any consumer other than “other licensees”. In fact, since the inception of the Act, exemptions were granted from the provisions of these Clauses of the Schedule to licensees who supply electricity to other licensees for distribution, but not to retail consumers, as will be seen from Cl. IX. Since Cl. 15 of TPC’s licenses is a blanket exemption, it can only be construed that they have no right to supply to retail consumers.

15. Without prejudice to BSES’ central contention that TPC are only licensed to offer electricity to other licensees, Counsel for BSES submitted that any assumed entitlement to supply on a retail basis is circumscribed, particularly by Clauses 5 and 15 of the TPC licenses. TPC are entitled to supply energy for all purposes (i.e. lighting, heating, motive power etc) “and in bulk”, including to other licensees. However, TPC are not obliged to supply energy to “other licensees” to enable them to supply to consumers with a requirement exceeding 1,000 KVA (in the case of BSES) and 250 KVA (in the case of any other licensees). These limitations can be amended by GoM when circumstances so warrant. Moreover, that the method for reckoning the maximum demand is only stipulated for factories is also significant, and has to be read with Cl. 5 (II) relating to restricting of supply to consumers with lighting consumption not exceeding 20% of the total. Cl. 5(III) provides for resolution of disputes between TPC and other licensees. This can only refer to disputes arising out of TPC effecting supply to a consumer in derogation of the limitation prescribed under Cl. 5 as perceived by other licensees such as BSES.

16. Counsel for BSES submitted that all the Clauses of the Schedule to the IE Act are a part and parcel of their license. Thus, BSES are mandated to supply energy to everyone, irrespective of the limits prescribed as between them and TPC. Therefore, it cannot be argued that, since TPC are only bound to supply to BSES upto a particular limit, beyond that limit consumers would be left without recourse if they are not allowed to take electricity directly from TPC. In fact, under the license terms, TPC are not barred from supplying power to BSES beyond the limit. The limits only restrict mandatory supply. BSES have to procure such power from any source to carry out their own obligations under the license. GoM also have the power to exempt from these limits. This is further highlighted by the contrast in the terms of the TPC and BSES licenses presented earlier. Significantly, BSES’ license has no ceiling or conditions on the loads to be supplied, and contains the words “for all purposes” without any qualification.

17. It is submitted on behalf of BSES that supply by TPC directly to retail consumers is contrary to the policy of GoM referred to in the Energy Department’s letter dated 23^rd March, 1998 (Exhibit “L” to the Petition). According to that letter, it has been GoM’s standing policy not to allow any change-over of suppliers since it would result in unnecessary duplication and inefficient use of the existing infrastructure leading to unnecessary expenditure and an extra burden on consumers.

18. BSES Counsel contended that, by their conduct, TPC have acquiesced in the above position and are, even otherwise, estopped from now seeking to directly supply to retail consumers, especially in BSES’ area, and that it was always understood that there should be no change-over of supplier. Based on this understanding, BSES have established their infrastructure and spent more than Rs.1200 crores, as set out at paras. 17 to 26, 33 to 35 and 60 of the Petition. That TPC knew well that such was the policy and understanding will be seen from the fact that, in the 71 years from 1926 to 1997, they never attempted to supply energy to any BSES consumers.

19. It is submitted on BSES’ behalf that the minutes of the meeting held on 27.1.1994 between BSES and TPC also bear out the fact that TPC always understood their limitation in effecting retail supply at least to consumers with maximum demand below 1000 KVA. The minutes state that,

“1. As per the license granted by GoM to TEC, TEC are under no obligation to give supply BSES for supplying to new consumers whose maximum demand exceeds 1000 KVA. It was decided that keeping in view rapid rise in sizes of loads over past few decades, this figure may be raised to 2,500 KVA. In cases where the requirement exceeds 2,500 KVA, BSES and TEC will consult each other and arrive at a mutually satisfactory arrangement for meeting the requirement of the consumer, the main consideration being the infrastructure facilities of BSES/TEC available in the area. TEC/BSES will give due consideration to the investment made by BSES, TEC in creating existing infrastructure so as to avoid infructuous expenditure in duplicating facilities. In general BSES/TEC should avoid any practice of weaning away consumers from one another.

2. Consumers being presently served by either BSES/TEC will continue to be supplied by BSES/Tec and no attempts will be made by either of the licensees to induce consumers to change over nor any request for change over entertained. In case of requests for additional load by the consumers in the same locality, the supply requirement will continue to be met by the respective licensee who has already created necessary infrastructure for distribution in the locality. However, if a consumer puts up a new factory at a different location where no such infrastructure has already been created by the licensee, requirement will be treated as though he is a new consumer.”

20. BSES Counsel pointed out that, uptil 1997, TPC had separate tariff rates only for two categories, namely for supply to distributing licensees, and to bulk consumers with energy consumption exceeding 5,00,000 units per annum. This also shows that TPC knew and accepted that retail distribution in BSES’ area would be effected only by BSES and that, at the very least, TPC would not supply in retail to LT consumers. It was only from 1^st January 1997 that a separate tariff was introduced for LT consumers. Moreover, TPC’s earlier infrastructure was designed to supply energy at 22/33 KV to BSES and to such factories with a maximum demand above 1000 KVA as fell en route. He contended that it is only since 1997 that TPC has been expanding this infrastructure even at lower voltage as will be seen from the map submitted by BSES. Besides, TPC introduced a retail tariff for residential consumers only from 1^st December 1998.

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