Before the
MAHARASHTRA
ELECTRICITY REGULATORY COMMISSION
13th
floor, Centre No.1, World Trade Centre, Cuffe Parade, Mumbai 400 005.
Tel.
22163964 / 22163965, Fax No. 22163976
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mercindia@mercindia.com
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CASE No. 28, 29 and 30 of 2002
In
the matter of
Waiver of demand charges, compensation for
losses incurred, etc., on account of failure to power supply by Maharashtra
State Electricity Board (MSEB) and related matters.
Shri P. Subrahmanyam, Chairman
Shri
Jayant Deo, Member
Dr
Pramod Deo, Member
ORDER
Dated:
August 1, 2003
In
their Petitions, applications and / or interventions, the Shiroli Manufacturers
Association, (SMA), Kolhapur (on 19.7.2002), the Gokul Shirgaon Manufacturers’
Association (GSMA), Kolhapur (on 23.10.2003), the Maharashtra Rajya Veej Grahak
Sanghatana, (MRVGS), Ichalkaranji (on 3.10.2002), and the Krishna Valley
Chamber of Industries and Commerce, (KVCIC), Kupwad (on 15.11.2002) have
referred to the disruptions in power supply that took place in certain areas of
the State in May-June 2002 and have sought directions to the Maharashtra State
Electricity Board (MSEB) with regard to the following:
(i)
Waiver of Demand Charges for the relevant
period, and general guidelines for future cases,
(ii)
Compensation for losses / damages suffered by
the parties, and general guidelines.
(iii)
Simplification of procedures and timely
permission to continuous process industries for installing DG sets.
Citing these,
M/s Primlaks Waffles Pvt Ltd. (PW), with their unit at village Ambervet, Taluka
Mulshi, District Pune have referred to the power supply at low voltage (below
360 volts) to them and other units in the Pirangut area virtually throughout
November, 2002, as a result of which heavy costs had to be incurred by them on
account of operating DG sets, and which were likely to continue. They have also sought waiver of demand
charges for that period, and guidelines for the future.
2. Given the nature and issues involved in
these Petitions and applications, they were clubbed together for hearing before
admission on 13th January 2003.
Thereafter, the Central Electricity Authority (CEA) Report regarding
collapse of towers on the Parli-Chandrapur line, which was ostensibly one of
the causes of disruption in power supply in May, 2002, was circulated to the
parties, particularly with regard to the facts and role of MSEB in this regard,
and some have submitted their comments.
3. The parties present elaborated on the
short submissions and reliefs prayed for in their Petitions/applications in
oral submissions at the time of hearing.
On behalf of M/s Shiroli Manufacturers Association (SMA), Shri Pratap
Hogade submitted that the industrial consumers around Shiroli in Kolhapur
District comprise mainly steel and foundry units which are power intensive and
require continuous power. For a period
of 13 days from 18th to 30th May 2002 there was a
sustained disruption of power, which continued even upto 10th June
2003 through load shedding. This
resulted in heavy losses in terms of outright production, inferior quality of
finished goods, delay in supply of finished products, etc. The power cut for a part of this period was
notified and, therefore, MSEB were approached to give relief in the demand
charges claimed for the May, 2002.
However, instead of reducing these charges, MSEB only allowed the
payment of the May bill in two instalments.
Since that decision was conveyed only on 20.6.2002, i.e. after the due
date for payment, MSEB levied delayed payment charges and interest on those who
did not pay within due date. Thus, in
addition to production and related losses, the affected consumers were further
burdened with demand, delayed payment and interest charges. Therefore, the Association seeks a
reduction of the demand charges proportionate to failure to supply power and
partly offset the increase in the cost of production.
4. On behalf of the Association, reference
was made to SC judgement [AIR 1976 SC 1100] in the case of M/s Northern India
Iron and Steel Co. VS. the State of Haryana in which the Court has ruled that
upon the “inability of the Board to supply energy due to power cut,
proportionate reduction will have to be made” in the monthly demand
charge. The Court took account of the
following definitions:
“Demand Charge - shall mean the amount
chargeable per month in respect of Board’s readiness to serve the consumer
irrespective of whether he consumes any energy or not, and is based upon the
connected load, the maximum demand or the contract demand, as the case may be
and as prescribed in the relevant schedule of tariff”.
“Energy Charge
- shall mean the charge for energy actually taken by the consumer and is
applicable to the units consumed by him in any month.”
In this background, it had been pleaded that “since the Board
was not ready to serve the consumer and the consumer was ready to consume
maximum electric energy the former was not entitled to ask for any demand
charge.” To this the Supreme Court took the view that “… the inability
of the Board to supply electric energy due to power cut or any other
circumstance beyond its control as per the demand of the consumer according to
the contract will be reflected in and considered as a circumstance beyond the
control of the consumer which prevented it from consuming electricity as per
the contract and to the extent it wanted to consume. The monthly demand charge for a particular month will have to be assessed
in accordance with sub-clause (b) of clause 4 of the tariff and there from a proportionate
reduction will have to be made as per sub-clause (f).” Shri Hogade submitted that, accordingly, the
Commission should not only consider reduced demand charges for the month of
May, 2002 as notified, but also for the subsequent periods
5. Shri Hogade also referred to Sections 14
and 20 of the Consumer Protection Act, in which the term “deficiency” is
defined, and which provide for compensation for such deficiency in
“service”. Moreover, a token penalty
should also be imposed on the officials of MSEB on the analogy of MSEB being
entitled to charge penalties (such as for low power factor, penalty, Contract
Demand penalty, interest on delayed payment, etc.) from the consumer. The
Commission must consider a complementary penal provision on the utility for
deficiency in providing its service.
This would improve the overall efficiency of the system and minimize
untimely and unwarranted power cuts.
6. It was further pointed out on behalf of
the Association that, given the nature of the industry around Shiroli to whom
power was a critical element, the installation of DG sets was essential to deal
with such contingencies. However, the
procedure and unjustifiably long time taken by MSEB for granting such permission
was highly unreasonable and sought directions to simplify the procedure and
allow such applications with in a reasonable
time.
7. The Maharashtra Rajya Veej Grahak
Sanghatana, again through Shri Hogade, its President, reiterating the
contentions in their Petition which are substantially in support of the
Petition filed by SMA, urged that MSEB be directed to reduce the demand charges
on a pro-rata basis during the period of the power cut. It was submitted on their behalf that the
load shedding that was resorted to far exceeded the notified duration. Since sub-station-wise data of actual load
shedding is available with MSEB, they should have no difficulty in determining
the extent of proportionate reduction which was required in the demand charges. The analogy of the existing provision in
MSEB’s terms and conditions of supply relating to a new consumer in whose case
levy of demand charges was permitted for 15 days was also available.
8. Shri M.M. Damle of Primlaks Waffles Pvt
Ltd. submitted that, on account of the persistent low voltage and power
failures in the Pirangut area, particularly between 2nd November and
31st December 2002, their unit along with hundreds of others has
suffered heavy production and other losses. They have also incurred heavy costs
on account of being forced to run the units on generators. The HT consumers
have to spend double their monthly electricity bills for running generators
because the connected load and generator capacity often do not match, resulting
in higher fuel consumption. When the
matter was taken up with MSEB officials, a reply was given after a long time
and they took two months to repair the burnt booster. When MSEB were asked to replace the booster, the CE (Pune Rural)
stated that the company that had fitted the booster has asked for advance
payment before sending their representatives for repairs and, since MSEB do not
make such advance payments, action was delayed. Thus, owing to internal
policies and procedures of MSEB, there was a long delay in rectifying the
problem. Consequently the consumers had to suffer financially while paying the
Board ostensibly for delivering reliable supply. He drew attention to the
newspaper report dated 20.11.2002 entitled
“Low voltage cripples Pirangut firms’ annexed to their Petition. He
submitted that since there is no effort on part of MSEB to correct things
within a reasonable time frame, they should not levy demand charges for
November and December 2002.
9. Shri Damle submitted that, in its Order
dated 5th May 2000, the Commission had dwelt on the quality of power
supplied by MSEB, but even after two years there has been no significant
improvement in the quality and quantity of power supply. While agreeing with
the submissions of Shri Hogade, he urged the Commission to direct MSEB to waive
and refund the demand charges, and also to set out guidelines for the future.
10. On behalf of the Vidarbha Industries
Association, consumer representative under Section 26 of the ERC Act, Shri R.B.
Goenka pointed out that in the review Petition on the tariff Order dated
10.1.2002 regarding which MSEB have filed an Appeal in the High Court, one of
the points concerned load shedding and demand charges. While supporting the present Petitions, he
drew attention to Section 29(2) (e) of the ERC Act, which enjoins that “interest
of the consumers are safeguarded and at the same time, the consumers pay for
the use of electricity in a reasonable manner based on the average cost of
supply”. While emphasizing the
expression “use of electricity”, he pointed out that the average cost of supply
consists of the fixed cost (related to demand charges) and variable costs
(related to energy charges), and submitted that, thus, when electricity is not
supplied, MSEB cannot be allowed to charge for it. He submitted further that the demand charges levied, which are
based on meeting unrestricted demand, are higher than would have been payable
according to the principles set out under Section 46(5) of the Electricity
(Supply) Act read with Section 29(2) of the ERC Act. In this connection he referred to SC judgment in Civil Appeal
No.156-164 of 1989 dated 17.1.1989 (AIR 1989 – SC 1030). Although MSEB are expected to function on
commercial principles, they are being compensated for fixed expenses even if
they do not supply any electricity to a
consumer in violation of these principles. That is also inconsistent with the
provisions of Section 22(2)(e) and 29(2)(f) of the ERC Act. Therefore, the Board should not be entitled
to recover demand charges if there is load shedding.
11. Referring to the Commission’s observations
on reliability charges in its tariff Order dated 10.1.2002, Shri Goenka
submitted that reliable supply goes beyond mere availability of power, and
encompasses the quality of supply stipulated under the Indian Electricity
Rules. Thus, it is the duty of MSEB to
supply quality, uninterrupted power to consumers. Shri Goenka submitted that compensation and damages are provided
for under Section 19 of the Indian Electricity Act. He supported reduction in demand charges in proportion to actual
supply. He also urged the Commission to
impose a token penalty on MSEB to send a signal to them that they cannot be
absolved of the failure to provide uninterrupted and quality power.
12. In
their written replies with regard to the disruptions in May-June, 2002, MSEB
have submitted that, due to the failure of transformer at HVDC sub-station,
Chandrapur on 13/05/2002, followed by failure of 400 kV Chandrapur – Parli Line
due to cyclone on 17.5.2002, MSEB had resorted to additional load shedding to
the extent of 1000 MW, and consumers in the districts of Pune, Satara, Sangli,
Solapur, Kolhapur, Nanded, Parbhani, and Hingoli were affected. Due to the
cyclone, which was beyond the control of the Board, 10 towers of 400 kV
Chandrapur – Parli lines had collapsed and it was, therefore, not possible for MSEB
to make immediate alternate arrangements for power supply. In view of
this situation, the State Government, under Notification dated 30.5.2002 under
Section 6-A(1)(a) and (b) of the Bombay
Electricity (Special Powers) Act, 1946, had directed that “no industrial
consumer within the areas of the limits of above mentioned districts should be
permitted to use power (a) for purpose of iron and steel manufacturing 24 hours
every day and (b) for any other industrial purposes between 08.00 a.m. and
12.00 midnight, every day”. These were
with immediate effect i.e. w.e.f. 30.5.2002 and were valid upto 3.06.2002. On
their own, MSEB permitted industrial consumers in the affected Districts to pay
the energy bills for May 2002 in two equal instalments. These consumers had
also requested for waiver of Demand Charges on a pro-rata basis, but MSEB did
not agree since the demand charges payable by a consumer represent the fixed
cost incurred by MSEB in making power supply available. MSEB have pointed out
that the Commission, in its Tariff Order dated 05.05.2000, has mandated
recovery of fixed costs through fixed charges, and that all consumers should be
subject to a two-part tariff regime.
The Commission followed the same principle in its subsequent tariff
Order. MSEB have submitted that, in the
instant cases, even though the consumers in these Districts were not permitted
to use electricity for a specified period, MSEB had incurred fixed expenditure
on the infrastructure created for them.
These consumers cannot, therefore, be permitted any relief in the demand
charges on pro-rata basis.
13. Reiterating
that the interruption in power supply in certain Districts in May-June 2002 was
mainly due to natural calamity which resulted in the collapse of the towers on
the 400 kV Chandrapur-Parli line, MSEB have stated that it was unintentional
and beyond their control. On this
ground alone, they have submitted that the industries affected cannot demand
any compensation for the alleged losses. MSEB have drawn attention to the
provision in the Agreement of Power Supply [Clause 15 (a)] executed by the High
Tension consumers, namely “the supplier
shall take all reasonable precautions to ensure continuity of supply of power
to the consumer but shall not be responsible for or liable to the consumer for
any loss to him or damage to his plant and equipment due to interruptions in
supply due to damage to the Supplier’s plant and equipment for reasons
including but not limited to war, mutiny, riot, earth-quake, cyclone, tempest,
strike, civil commotion, lock out, lightening, fire, flood, accident or
breakdown of plant and machinery or causes beyond control of the Supplier.” In view of this provision, MSEB are not
liable for the payment of any compensation or penalty.
14. With reference to the SC judgment cited by
the SMA, Counsel for MSEB submitted that the matter was further considered by
the Mumbai High Court in the case of MSEB itself (Mukund Iron & Steel Works
v/s MSEB AIR 1982) which pointed out that the SC judgment relates to certain
specific provisions of the tariff in the absence of which the consumer is bound
to pay demand charges. He also referred
to SC judgment in the case of BSEB VS. Dhanawat Rice and Oil Mills (AIR 89
1030) and Orissa State EB (AIR SC 95 1553) and submitted that, in the absence
of any provision made in this regard in the tariff, no pro-rata reduction in
demand charges is possible. However,
although the demand charges cannot be reduced in this manner as a matter of
law, MSEB could and did offer concession in the payment terms by allowing
instalments. With regard to the
circumstances in which delayed payment charges were levied, Counsel for MSEB
drew attention to their instructions dated 4.1.2003 to the effect that “the
consumers who were affected by the power failure and who were permitted to pay
the May 2002 energy bill in instalments, have further been exempted from
payment of Delayed Payment Charges and Interest incidental to delay in payment
of May 2002 energy bill”, and the same still holds good.
15 With regard to the prayer for compensation
and imposition of a penalty, Counsel for MSEB submitted that such claims
relating to alleged deficiency in services are within the ambit of the Consumer
Protection Act, and should be argued in the fora under that Act. He submitted that Section 19 of the IE Act
has no relation to the present matter since it deals with damages relating to
the licencees power to lay lines, etc.
That provision cannot, therefore, be read with Section 22 or 29 of the
ERC Act for any claim of compensation due to load shedding or failure of
supply, which was, in any case, beyond MSEB’s control in the instances of
May-June 2002 that have been cited.
The matter of penalty can also be determined only if it is specifically
provided for in the tariff Order.
16 With regard to streamlining procedures and
the time taken for allowing the use of DG sets, Counsel for MSEB submitted that
certain procedural and statutory formalities have to be complied with, which
may be one of the causes of delay, if any.
He submitted, however, that such
applications would be disposed of as quickly as possible, and MSEB would be
willing to simplify the formalities. He
pointed out, however, that MSEB’s powers under Section 44 of the Electricity
(Supply) Act cannot be taken away.
17. With regard to the nature and circumstances
of the breakdown which occurred in May 2002, Counsel for MSEB submitted that
the CEA had investigated the power failure and there has been no indictment of
the Board. Hence, in any event, the
question of imposition of penalty for failure in providing services did not
arise.
18. These Petitions and applications
essentially concern the issues of whether, in the instances and circumstances
cited, the affected consumers are entitled to directions from the Commission to
MSEB to reduce demand charges, and to compensate them for losses suffered, and
to impose penalty on account of failure to supply power as expected or
contracted for; the general guidelines to be followed by MSEB in such cases;
and the procedure and time frame for disposing of applications for installation
of DG sets, particularly for industries which are heavily dependent on quality power. Another set of issues is subsequent to these, viz. the principles
that should govern the nature and extent of relief and compensation, whether
such relief and/or compensation can be mandated even in circumstances outside
the utility’s control and/or mandated by notifications under a statute such as
the Bombay Electricity (Special Powers) Act.
19. As far as the
specific instances cited and the reliefs and compensation claimed on this
account by the parties are concerned, it is necessary to consider Section 49
read with Section 52 of the ERC Act, which provides that nothing contained in
the Act or Regulations shall have effect in so far as it is inconsistent with
the provisions of the Consumer Protection
(CP) Act. Section 3 of the CP
Act states that its provisions are in addition to and not in derogation of any other law. In other words, the two Acts operate concurrently. However, it is an established principle that
where a statute specifically provides for certain matters, its provisions have
primacy over other laws with more general application to that particular
matter. Section 2 (o) of the C.P. Act
defines the provision of supply of electrical energy as a service which is
within its ambit. The CP Act also
provides for compensation, refund and other specified reliefs where deficiency
in service can be shown, for the determination for which competent fora have
been set up. Some of the matters in
the Petitions are also related to contractual obligations, for which also the
fora of the Civil Courts is available.
Thus, the Commission is not the appropriate forum under the ERC Act for
such specific reliefs and compensation in particular instances. Indeed, SMA’s Petition itself refers to the
provisions of the CP Act.
20. As far as the prayer
for general guidelines for the future with regard to relief in payment of
demand charges in such instances of failure to supply is concerned, this is a
tariff-related matter. Such guidelines can be considered in the course of
consideration of MSEB’s tariff proposal.
As it happens, subsequent to the present Petitions, MSEB have approached
the Commission for approval of their annual revenue requirements and tariff for
the year 2003-04. Moreover, to the
extent to which changes in the Conditions of Supply are involved, certain
directions have been given by the Commission in Case Nos 10 and 11 of 2000.
MSEB’s challenge to these directions in the High Court having failed, and no
Appeal having been filed within the period granted by that Court, the
Commission has directed MSEB on 30.5.2003 to comply with its earlier Order and
submit the Conditions of Supply for approval within a period of three months.
21 These proceedings
have been initiated and conducted under the provisions of the ERC Act. Apart from the observations made above, the
new Electricity Act, 2003, which has now come into force, has several
provisions which would help resolve the kind of grievances raised by the
Petitioners. As far as the installation
of DG sets is concerned, no permission is now required under the new
Electricity Act 2003, as was the case earlier when MSEB consent was necessary
under Section 44 of the Electricity (Supply) Act.
22. The Commission had
circulated, in connection with these proceedings, a copy of the report of the
CEA Committee of experts appointed to investigate the failure of towers on the
400 KV transmission line, which is relevant to the nature and circumstances of
one element of the disruption in May-June 2002. However, another report of a
CEA Committee on the wider grid disturbances that occurred on 18, 23, and 29
May 2002, partly arising from a representation from Shri Prakash Jawdekar, was
also received by the Commission and had been forwarded to the State Government
for informing the Commission as to the action taken and/or proposed. The Commission would pursue separately the
remedial measures taken wherever required in the context of these reports, as
well as the situation pertaining in the Pirangut area, with MSEB and the State Government
as the case may be.
The Commission disposes
of the matter of admission in these cases with the above observations.
| Sd/- | Sd/- | Sd/- | |
| (Jayant Deo) | (Dr Pramod Deo) | (P. Subrahmanyam) |
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| Member | Member | Chairman, MERC |
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Sd/- |
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| (A.M. Khan) | |||
| Secretary, MERC | |||
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