Before
the
MAHARASHTRA
ELECTRICITY REGULATORY COMMISSION
World Trade Centre,
Centre No.1, 13th floor, Cuffe Parade, Mumbai 400 005.
CASE No. 7 of 2003
In the matter of Petition filed by (i) M/s Ispat Industries Ltd. and (ii) M/s Ispat Metallics (India) Ltd.in the
matter of completion of the scheme of power supply by MSEB and related
matters, including compensation and other reliefs.
Shri
Jayant Deo, Member
Dr Pramod Deo, Member
O
R D E R
Dated: July 25, 2003 |
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In their Petition filed on 25.2.2003, with Maharashtra State Electricity
Board (MSEB) as Respondent, and citing Sec 22(1)(d), 22(2)(e), 22(2)(n)
and 29(d), amongst others, of the Electricity Regulatory Commissions
(ERC) Act, 1998, M/s Ispat Industries Ltd. and M/s Ispat Metallics (India)
Ltd. have sought that MSEB be directed:
(a)
to submit the time schedule for speedy completion of the pending
work on the scheme of power supply.
(b)
to execute the scheme within the time schedule and fix penalties
for default, if any.
(c)
to ensure continuous power supply at 3300 MVA fault level with the
voltage and frequency variation as specified in the legislation.
(d)
to compensate the Applicants to the tune of Rs 160.10 Crs. due to
power failure, etc.
(e)
to proportionately charge the demand charges for the period of such
power failures, interruptions, etc.
(f)
to pay for the damages as and when the power supply and its quality
is not as per the agreed terms. The Petition was heard for admission
on 11.6.2003. 2. In their Petition, further written submissions
and oral arguments through Counsel, the Petitioners have stated that
they are MSEB's largest consumer of electricity, having undertaken a
3.0 MTPA integrated steel project plant at Dolvi (Tal. Pen, Dist. Raigad). Half of this capacity has been commissioned
and the remaining phase is at an advanced stage of completion. The Petitioners have invested more than Rs
8,000 crores in setting up this state-of-the-art plant. Before doing so, they sought and received assurances
from MSEB regarding both the quantum and quality of power to meet their
special requirements. The plant
requires 275 MW with a fault level of 3300 MVA, and constant power supply
at rated voltage and frequency. A
lower fault level, voltage and frequency de-rates the capacity of the
plant, reduces output and increases the cost of production.
To meet these requirements, MSEB agreed to supply the power and
planned for an elaborate scheme involving setting up of 400 / 220 KV
sub-stations and transmission lines under their letter dated 12.5.1993. The supply would be given at 220 KV and the
Petitioners would have to make necessary arrangements for receiving
and using it at that level. MSEB
also sought from the Petitioners the cost involved for providing this
facility, as well as a higher tariff and a long-term interest-free deposit. On their directions, the Petitioners also installed equipments to
maintain the total harmonics generated at certain level and provide
for static VAR system to avoid voltage flicker. 3. The Petitioners have submitted that their
load was sanctioned by MSEB under letter dated 4.3.1998 after a series
of meetings. At that time, MSEB
stated that, with the arrangements then existing, a lower short circuit
of 1900 MVA would be available, and that the desired level of 3300 MVA
would be met after commissioning of a 400/220 KV Nagothane sub-station
with Padge-Nagothane 400 KV DC line LILO on 220
KV Apta-Mahad circuit. Besides other conditions, MSEB stated that
the supply would be governed by their conditions of supply and the provisions
of the Indian Electricity Act and Rules.
However, inspite of continuous follow up by the Petitioners,
MSEB have not yet implemented the scheme envisaged to meet their power
requirements. 4. According to the Petitioners, instead of
that scheme, they are being supplied power through one double circuit
line from the 220 KV IPCL sub-station,
which gets power from Pedamba and Apta sub-station.
This arrangements ensures a fault level of only 1900 MVA. Moreover, both sources being unreliable, the
fault level drops to 600 MVA in case of failure on the Apta feeder. At such times, the plant has to restrict its
load to 50 MW, which results in large financial loss and serious damage
to the extensive electronic and other equipment.
The sources of power from Apta and Pedamba and the sub-stations
and transmission lines are in poor condition.
There are frequent voltage dips, low frequency, break-downs and
lower fault levels, which are seriously affecting the Petitioners. 5. The Petitioners have pointed out that Rules
54, 55 and 58 of the Indian Electricity Rules, 1956, which statutorily
fix the variations in the declared voltage at the time of commencement
of supply, the variation in voltage of EHV and in frequency have not
been met by MSEB, adversely affecting them.
They have been informing MSEB in each case of failure in power
supply or voltage dip or other occurrences affecting the quality of
power to them, along with estimates of loss that they have incurred
on each occasion. This voluminous correspondence has been listed
in Exhibit-D to the Petition. These
occurrences also result in failure of the extensive sophisticated electronic
equipments and cards which the Petitioners have installed at a large
cost. 6. The Petitioners have submitted that that
they had agreed to take power as per the present arrangement as an interim
measure, since MSEB could not immediately establish the 400/220 KV Nagothane
sub-station and connect the required number of 220 feeders and make
the system suitable for drawal of 275 MVA of power at 3300 MVA fault
level. The Petitioners had agreed to draw power from
the IPCL sub-station as an interim measure, but MSEB had assured them
that continuous power would be supplied with mandated voltage and frequency
variation as would be seen from the minutes of the meeting held between
the parties on 9.10.1995 (Exhibit E).
7. The Petitioners have now undertaken Phase
2 of their integrated steel project to raise the capacity from 1.5 to
3 MTPA. According to them, the
present system of power supply cannot cater to the additional load of
this 2nd Phase and it is necessary that MSEB complete the
400 KV system and its linkages. Although
MSEB have been providing the status of various activities, and the Petitioner
are not making any allegations regarding their intentions, it is essential
that MSEB give a time schedule for completion of the scheme originally
envisaged, and for penalties to be imposed in case of lapse.
The Petitioners have submitted that MSEB had indicated various
alternatives for providing a direct link between Nagothane and Wadkhal
sub-stations as far back as in 2001.
However, no further progress has taken place. 8. The Petitioners have submitted that, in
all the correspondence between 1993 and 1998, including the minutes
of the meeting held on 31.5.1995, MSEB have always maintained that,
in order to provide a fault level in excess of 3300 MVA, they would
have to set up a 400 KV grid sub-station linking it with the 220 KV
sub-station at the steel complex. The minutes acknowledge the kind of network
that needs to be set up. MSEB
had also conducted studies on the basis of the Petitioners future power
requirements, and confirmed that voltage and frequency variation would
be maintained within the limits prescribed under the Indian Electricity
Rules. In the minutes, MSEB have also confirmed that
the power supply would be available within two years. Both in 1995 and 1998, MSEB gave details of
orders placed for executing the work of the sub-stations, procurement,
etc. Notwithstanding this, they have not completed linking of the 220
KV Karavi sub-station with the 400 KV Nagothane sub-station. Between 1993 and 1998, estimates were provided for the amount payable
by the Petitioners, which has mostly been paid keeping in view the extent
of power supply. The special
requirements of the Petitioners and the need to closely monitor the
availability of quality and stable power supply to the project was acknowledged
by MSEB setting up a task force. At
the last task force meeting held on 4.9.2002, MSEB had explained that,
in the existing situation, with non-availability of 400 KV sub-station,
the fault level could not be achieved.
There have been a number of other deficiencies such as lack of
routine maintenance of transmission lines and sub-station equipment,
inadequate personnel at the Wadkhal sub-station, etc. 9. It is submitted by the Petitioners that
the various acts of omission and commission by MSEB with regard to power
supply to their plant has resulted
in a direct loss of Rs 160 crores, quite apart from losses due
to low frequency. Therefore, they have urged the Commission to
direct MSEB to compensate them with interest, and to make good their
losses in future also. 10. The Petitioners have submitted that their
agreement for supply of power clearly states that the statutory provisions
shall apply, including the variation parameters regarding voltage and
frequency. By not maintaining
these, MSEB have breached the statute and the agreement. Moreover, with regard to the treatment of interruptions in supply
in the agreement, MSEB have deviated from the model conditions of supply
under Rule 27 to add the break-down of plant and machinery as one of
the circumstances in which they would be exempted from liability. Most of the failures are related to break down
of plant and machinery of MSEB, which can be directly linked to poor
maintenance and non-provision of interconnection from the 400 KV sub-station
to the Petitioners' sub-station. Thus,
the losses incurred by the Petitioners are directly related to acts
which are in MSEB's control. As
such, they are liable to pay for the resulting damages.
The Petitioners have argued that such additional terms in the
agreement constitutes 'unconscionability', a situation in which one
party (the Petitioners) has to agree to such terms and conditions since
he has no other meaningful choice even though they are unreasonably
favourable to the other party (MSEB). 11. The Petitioners have pointed out that, apart
from service line charges, MSEB have taken a refundable deposit and
levied an additional 10 paise per unit for the plant's consumption. Correspondingly, the Petitioners are entitled
to a proportionate reduction in the demand charges for the period in
which power supply was disrupted or full power could not be provided
as per the agreement. 12. Counsel for the Petitioner submitted that
the Petition is maintainable under Section 22(1)(d) and 22(2)(e) of
the ERC Act, which mandates the Commission "to promote competition,
efficiency and economy in the activities of the electricity industry",
and to regulate and promote the working of the utility in an efficient,
economic and equitable manner. With
regard to their various prayers, Counsel also cited the mandate of the
Commission under Sections 28 and 29 and Regulations 76 and 74(h), which
refer to the need for healthy growth of the industry and drawing up
of incentives for better performance of utilities.
He submitted that the question is not merely one of an agreement
between two parties for undertaking a particular scheme, but also concerns
the wider issue of MSEB's efficiency and the proper conduct of its business,
failing which the Petitioners (who are also their largest consumers)
have been seriously affected. The
Petitioners have approached the Commission only after all efforts with
MSEB for completion of the scheme that was envisaged to meet their special
power requirements had failed, and after a series of meetings and voluminous
correspondence. 13. Counsel submitted that the Petitioners are
suffering from a continuous and
long-standing lapse in efficient conduct on the part of MSEB. To an observation by the Commission, he contended
that the matter was substantially not tariff related. In any event, they would be entitled to approach
the Commission through a separate Petition even if they knew about the
tariff revision proceedings and had, in fact, participated in them,
in the circumstances of their case.
He argued that since, under the Regulations, the Commission is
entitled to go into such matters concerning the general working of MSEB
even suo moto, then certainly on a particular set of circumstances being
brought to its notice, particularly by a major industry and MSEB's largest
consumer, the Commission must act upon it. If MSEB are not functioning in an efficient
manner and there is a serious economic consequence on the Petitioners,
the Commission has powers under the Act.
He submitted that, although the Petition is not on behalf of
a certain class of consumers, what the Commission would rectify would
be of general application. The
issues involved need to be dealt with by a specialized technical forum
such as the Commission rather than a consumer court.
In any case, the Commission would have to deal with such cases
under the new Electricity Act. Nevertheless,
Counsel submitted that, if necessary, the Petitioners could pursue the
matter of damages and compensation in some other forum, but the immediate
issue of concern to them is regarding MSEB's inefficient functioning
which is severely affecting the Petitioners and needs to be rectified
by the Commission. 14. In their written reply opposing admission
and in oral arguments through Counsel, MSEB have drawn attention to
Condition No. 5 of their letter dated 12.5.1993, which made it clear
that the execution of works may involve laying of lines in forest and
private lands and would be subject to availability of right of way and/or
permission from the concerned authorities.
The cost of creating special facilities was required to be paid
by the Petitioners, and it was stated that the work would be executed
within 3 ½ years after full payment is made.
In fact, right of way problems and litigation were encountered.
15. MSEB have stated that, in view of the changed
scenario and the difficulties faced in the execution of related works,
a fresh load sanction was offered by MSEB under its letter dated 4.3.1998,
which made it clear that the short circuit level of 3300 MVA was not
possible and that the plant would have to sustain with a lower short
circuit level and without consideration of any contingency, with in-feed
from Apta and Koyna together. It
had also been indicated that, in case either in-feed is out for some
reason, the short circuit level would be as low as 600 MVA.
MSEB had stated that they would make efforts to release supply
according to these arrangements in a phased manner, but that they would
not be liable if it was not possible to do so in the planned time-frame
for reasons beyond their control or for failure by the Petitioners.
In fact, although some payment concessions were given by allowing
instalments, there were certain failures on the part of the Petitioners
also in complying with their obligations.
MSEB have also outlined the status and the arrangements made
for power supply to the Petitioners so far, set out the difficulties
encountered in execution, and the alternatives that had been implemented
or are proposed. 16. Counsel for MSEB submitted that the Petition
concerns a scheme for power supply in which MSEB and the Petitioners
had come to some understanding arising out of their basic transaction,
and which cast certain obligations on both parties. While implying on the one hand that the scheme does not constitute
an agreement, on the other hand the Petitioners are seeking a direction
that the pending work be completed as per the scheme. The status, difficulties, alternatives and
further course of action have been communicated to the Petitioners. The conditionalities of the scheme and the
liabilities of MSEB in this regard were also well known to them, and
have been summarized in the written reply opposing admission. 17. Counsel for MSEB submitted that being the
largest consumer cannot put the Petitioners on a different footing from
any other. Certainly, there
has to be efficient working in accordance with the objectives of the
ERC Act, but the practical realities and constraints have to be taken
into account, including the reference made by the Commission to various
measures in its tariff Orders to promote better working, and the fact
that MSEB is not independent of what was happening in other parts of
the western grid. The scheme has not fully come into being, not because of any lapses
on the part of MSEB, but for other reasons. He submitted that the reliefs contemplated in terms of compensation
and other matters are within the purview of the Civil Court, which would
be the appropriate forum where all the correspondence and documents
can be examined to assess the facts.
He reiterated that the Petitioners are essentially contending
that there has been a breach of obligations.
On the other hand, they are claiming that there is no contract,
in which case there cannot be a breach or damages. In effect, the Petitioners
are trying to invoke the jurisdiction of the Commission in a matter
which is wholly contractual and within the purview of the Civil Courts. 18. From the written and oral arguments on behalf
of both parties which have been summarized above, it is clear that the
matter relates to the implementation of an agreed scheme that was envisaged
to meet the special power requirements of the Petitioners, containing
certain conditions and caveats. In
addition to the responsibility and liabilities arising out of non implementation
of the scheme for various reasons, and the plea for its enforcement
and other reliefs, the Petitioners have also referred to breaches not
only of the wider scheme, but also the statutory technical requirements
under the Indian Electricity Rules, and conditions of supply enshrined
in the agreement which are unfavourable to them inasmuch as they purport
to divest MSEB from liability in case of their own break-downs.
Clearly, this is a matter which relates to a contract of some
kind between the parties and which must, therefore, be resolved under
the provisions of the Indian Contract Act in the competent Court rather
than before the Commission. To claim that the scale on which the breach
of obligations or non-performance has affected the Petitioners justifies
invoking its wider mandate under Sections 22(1)(d) and 22(2)(e) (Regulations
74(h) and 76 having a bearing on the principles for the determination
of tariff) would be to ascribe to the Commission the powers to adjudicate
under the Indian Contract Act, which rests solely with the Courts. Moreover, there may also be certain ingredients
of the Petition which relate to deficiency in service that might attract
the provisions of the Consumer Protection Act, to which specific reference
has been made under Section 49 of the ERC Act, and which also covers
the supply of electricity as a service.
To the extent that certain tariff-related reliefs, such as reduction
in demand charges when there is failure in supply, are not presently
provided for, it is open for the Petitioners to agitate the matter for
the future in the course of the separate tariff revision proceedings
that have been initiated on a separate Petition by MSEB.
Thus, while not questioning the gravity of the impact of inadequate
power supply, for whatever reasons, in the case of the Petitioners,
the Commission rejects its admission with these observations. |
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