WP/34974/2014 of M/s Sagar Power Limited, Vs The Government of Andhra Pradesh, on 31 December 2014

COMMON JUDGMENT:

Prelude:

In the aftermath of the division of the State of AndhraPradesh, transmission and distribution of electricity generatedby private entrepreneurs across the two resulting States hasbecome a serious, nay, a complex issue. All these WritPetitions raised this issue. The form of the prayers in theseWrit Petitions may vary, but the subject matter of the dispute iscommon.

The background facts:

All the petitioners are independent generators generatingelectricity through different sources. Barring the petitioner inW.P.No.30602 of 2014, all the generating plants are situated inthe residuary State of Andhra Pradesh. The electricitygenerated by them is being utilized for captive purpose of theirindustrial units situated in the erstwhile Telangana region,presently the Telangana State. The surplus power is beingsupplied to third party consumers who are described as schedule consumers under the Power Wheeling and PowerPurchase Agreements (PW&PPAs) entered into betweenerstwhile the A.P.State Electricity Board or its successor, theA.P. Transmission Corporation, as the case may be, and theprivate generators. If any surplus remains under suchagreements, the same is being sold to the respectiveDistribution Companies (DISCOMs) under the agreements. Inall these cases, the industrial units utilizing the power forcaptive purpose and the schedule consumers are situated inthe State of Telangana. Converse is the case inW.P.No.30602 of 2014 where the generating plant is situated inthe State of Telangana and the supply is being made to theconsumers in the residuary State of Andhra Pradesh.

The Andhra Pradesh Reorganisation Act 2014 (for short“the Reorganisation Act”) came into force w.e.f., 2-6-2014, onwhich date the new Telangana State and the residuary State ofAndhra Pradesh were formed. Thereafter, for two monthspower was wheeled without any hassles by the respectiveDISCOMs. The Executive Director, HRD & Planning, A.P.TRANSCO, Vidyut Soudha, Hyderabad, addressed letterNo.ED/HRD&Plg/DE-Comml/ADE-1/F-OAusers/D.No.228/14,dated 2-8-2014 to the Chief General Manager (Commercialand RAC), A.P. Eastern Power Distribution Company Limited(APEPDCL), Visakhapatnam, Chief General Manager (P&MM&IPC), A.P.Southern Power Distribution CorporationLimited (APSPDCL), Tirupathi and the Chief General Manager(Commercial&RAC), Telangana State Southern Power Distribution Company Limited (TSSPDCL), Hyderabad, which reads as under :

“Consequent to the bifurcation of Andhra Pradesh andTelangana states and as per the note approved byCMD/APTRANSCO on 30-7-2014, the OA Users wereinformed the following :

(a) To change the exit points within the State so that thetransactions will become inter-state. In this case theexisting agreements will remain valid till their expiry. The concerned STU will give necessary approval. Necessary LTOA agreements will be concluded bythe respective STU & exit point Discom.transactions will become inter-state. In this case theexisting agreements will remain valid till their expiry. The concerned STU will give necessary approval. Necessary LTOA agreements will be concluded bythe respective STU & exit point Discom.

(b) If OA user have no provision to change to exit pointsto fall within the same State as that of the generator tomake it become inter-state transaction then to followthe CERC Open Access regulations as the transfer ofpower shall be treated as inter-state power.to fall within the same State as that of the generator tomake it become inter-state transaction then to followthe CERC Open Access regulations as the transfer ofpower shall be treated as inter-state power.

(c) Apply for Short term or Medium term inter-state openaccess or Long Term inter-state open access toPGCIL after obtaining concurrences or NOCs fromboth SLDCs/from both TRANSCOs depending uponthe time period. access or Long Term inter-state open access toPGCIL after obtaining concurrences or NOCs fromboth SLDCs/from both TRANSCOs depending uponthe time period.

(d) For approvals of SRLDC/PGCIL concurrences orNOCs by SLDCs and Transcos will be issuedimmediately without seeking any fresh feasibility fromthe DISCOMs as these are existing open accesstransactions. NOCs by SLDCs and Transcos will be issuedimmediately without seeking any fresh feasibility fromthe DISCOMs as these are existing open accesstransactions.

(e) Obtain proper approvals from SRLDC/CTUdepending upon the type of transactions before31.08.2014 and to enter fresh MTOA/LTOAagreement with CTU duly canceling the existing LTOAagreements for that no penalty for premature closureof LTOA agreements.depending upon the type of transactions before31.08.2014 and to enter fresh MTOA/LTOAagreement with CTU duly canceling the existing LTOAagreements for that no penalty for premature closureof LTOA agreements.(f)Long term Open Access will be allowed upto31.08.2014 only and from 1-9-2014 onwards OAtransactions will not be allowed under anycircumstances.31.08.2014 only and from 1-9-2014 onwards OAtransactions will not be allowed under anycircumstances.

Following the said letter, the respective DISCOMs have addressed letters to the petitioners. As the correspondence ismore or less similar, except to the extent of variation in dates, itwill suffice if the correspondence in one Writ Petition is narratedas illustrative.

In W.P.No.30327 of 2014, the Chief General Manager,Commercial&RAC, APEPDCL, Visakhapatnam, has addressedletter No.CGM/Comml&RAC/EPDCL/VSP/GM/PP/F./D.No.2296,dated 28-8-2014 to the petitioner therein. The said letter reads asunder:

“The copy of the letter received from theED/HRD&Planning/APTransco under reference cited isherewith enclosed.

In pursuant to the guidelines of theED/HRD&Planning/APTransco, I am directed to informthat, all the existing interstate wheeling transactions willbe allowed upto 31.08.2014 only and from 01.09.2014onwards interstate wheeling transactions will not beallowed under any circumstances.

Hence, you are requested to change the exitpoints within the state for wheeled energy to avoidinterstate open access charges. If interstate wheeling iscontinued, you have to follow CERC open accessregulations.

In reply to the said letter, the petitioner has sent its reply dated30-8-2014 wherein it has protested the proposedchange requiring it to either change the Exit Point to make thetransmission and distribution Intra-State or to follow the CentralElectricity Regulatory Commission Open Access Regulations. The petitioner has relied upon the provisions of the modifiedpower wheeling and power purchase agreement and asserted that under the said agreement, it has a right to supply power toits schedule consumers and that any change in thearrangement would seriously jeopardize its interests. As therewas no change in the stand of respondent Nos.4 and 5, thepetitioner has filed W.P.No.25561 of 2014 for continuing theexisting arrangement of power wheeling. By interim orderdated 9-9-2014, this Court has directed to maintain status quo.

On 22-9-2014, the Chief General Manager (Commercialand RAC), of the Transmission Corporation of TelanganaLimited-respondent No.2, has informed the petitioner that fortransfer of power from one State to another State, Inter-StateRegulations are applicable; that necessary “CTU Transmission and RLDC charges” and also losses in kindshall be applicable addition to both the State “STUTransmission and SLDC charges” and also losses in kind asper the respective States Electricity Regulatory CommissionOpen Access Regulations; and that in view of the same thepetitioner has to obey CERC Open Access Regulations inaddition to both States’ ERC Regulations from 2-6-2014onwards and it has to follow the SLDC directions for obtainingprior clearances from the authorities concerned, like SRLDCand CTU, or else the petitioner may change the Exit Points tofall within the same State as that of the generator so that itstransmission becomes Intra-State transmission. For the monthof September 2014, respondent No.3 has issued Bill dated 26-9-2014 in which the electricity generated by the petitioner andfed into the Grid in the State of Andhra Pradesh and supplied to Rain Cements Limited was not included. Questioning thisaction, the petitioner filed W.P.No.30327 of 2014.

The stand of the respondents:

Similar Writ Petitions have been filed questioning theinsistence of the Transmission Corporations and DISCOMs ofboth the States and the generators either to change the ExitPoints or obtain Open Access licences and also to include theunits generated and fed into the Grid of the respective Statesby them.

The Chief General Manager (RAP and Projects-3),APEPDCL, Visakhapatnam, filed a counter affidavit inW.P.No.27241 of 2014. Mr. P. Anand Seshu, learned StandingCounsel appearing for the APEPDCL has submitted that as thestand taken in the counter affidavit is common in all the cases,the same may be permitted to be adopted by the APEPDCL forall the cases.

Mr. O. Manohar Reddy, learned Standing Counsel for theTransmission Corporation of Telangana Limited and SouthernPower Distribution Company of Telangana Limited, addressedhis submissions based on instructions without filing a formalcounter affidavit.

In his counter affidavit, the Chief General Manager,APEPDCL averred that Schedule 12-C(2) of theReorganisation Act deals with only the power purchaseagreements but not power wheeling agreements-cum-powerpurchase agreements under which power wheeling is done inrespect of the power generated by the petitioners and supplied to the consumers and that therefore these agreements do notfall under the said clause. Alternatively, it is averred that thepower wheeling-cum-power purchase agreements wereentered into prior to coming into force of the Electricity Act 2003(for short “the 2003 Act”) and the Reorganisation Act; thatunder the changed legal regime, Inter-State transmissionrequires Open Access licences as per the provisions of the2003 Act and CERC Regulations made thereunder and that ifthe power wheeling agreements are not in conformity with theprovisions of the 2003 Act, the same are not saved underSection 185 of the 2003 Act. The counter affidavit relied uponthe Judgment of the Apex Court in P.T.C. India Limited Vs.

CERC[[1]]in support of the plea that a Regulation made underSection 178 of the 2003 Act by the Central ElectricityRegulatory Commission (CERC) as a part of regulatoryframework intervenes and overrides the existing contractsbetween the regulated entities while asserting that thepetitioners need to obtain Open Access if they are not willing tochange their Exit Points. It was also suggested alternativelythat option is left to the petitioners to sell the power to theAPEPDCL as per the rate fixed under the power wheeling andpower purchase agreements if the petitioners are not willing toobtain Open Access.

The submissions and consideration :

I have heard Mr. S. Ravi, learned Senior Counsel, Mr.Challa Gunaranjan and Mr. Sri Charan Telaprolu, learnedCounsel appearing for the respective writ petitioners, Mr. O.

Manohar Reddy, learned Standing Counsel for theTransmission Corporation of Telangana State and theSouthern Distribution Company Limited of the Telangana Stateand Mr. P. Anand Seshu, learned Standing Counsel forAPEPDCL.

The principal contention of the learned Counselappearing for the petitioners is that the power wheeling-cum-power purchase agreements are saved by the provisions ofClause C(2) of the Twelfth Schedule of the Reorganisation Act. They have also relied upon the proceedingsNo.APERC/SECY/113(A)/2014, dated 13-6-2014 of theAPERC whereunder the Commission has granted permissionto the APEPDCL and TSSPDCL to avail power supply throughInter-State distribution lines between APEPDCL and TSSPDCLfor importing/exporting power through the existing Inter-Statedistribution lines between the said companies and submittedthat a similar arrangement could be made in the matter oftransmission and distribution of power being generated by thepetitioners and supplied to their schedule consumers.

Mr.O. Manohar Reddy, learned Standing Counsel,submitted that the predominant purpose of power wheelingagreements is to enable the private power generators toconsume power for their captive purposes and also supply thesame to their own consumers who are called scheduleconsumers and that only in the event of their consumers notavailing the power, the same will be purchased by theDISCOMs. He has further submitted that Clause C(2) of the Twelfth Schedule of the Reorganisation Act deals with onlypower purchase agreements which necessarily mean thepower purchase agreements entered into by private generatorswith the respective Distribution and Supply licensees underwhich they have agreed to sell the power generated by them tothe latter. He has further submitted that even in the absence ofapplication of Clause C(2) of the Twelfth Schedule, theTransmission Corporation of Telangana Limited and theDISCOMs functioning in the State of Telangana have nointention of refusing to transmit and wheel the power generatedby the petitioners to their schedule consumers; that the onlyconstraint in this regard is that due to the division of the State,the nature of transmission has become Inter-State, requiringOpen Access licence and that they have no objection to wheelthe power according to the existing wheeling agreements ifOpen Access licenses are secured by the petitioners. Thelearned Standing Counsel has taken this Court through therelevant provisions of the 2013 Act, the Regulations framed bythe CERC and those framed by the APERC.

The learned Standing Counsel for APEPDCL, whilereiterating the averments contained in the counter affidavit ofthe Chief General Manager referred to above, further submittedthat the power injected by the petitioners whose generatingstations are situated within the area of operation of theAPEPDCL, is deemed to have been banked and that an optionis left to the petitioners either to sell the power as per Clause3.12 of Article 3 of the Revised Power wheeling and power Purchase Agreements or to obtain Open Access and utilize thebanked energy thereafter.

I have carefully considered submissions of the respectivecounsel and perused the record.

Legal Environment: Prior to 1998, the activities of generation,transmission, distribution and supply of electricity weregoverned by the provisions of the Indian Electricity Act, 1910(for short “the 1910 Act”) and the Electricity Supply Act, 1948(for short “the Supply Act”). The first step towards reforms inelectricity field was initiated through the amendment to theSupply Act by introducing Section 43-A to the said Act underAct 50 of 1991 which came into force w.e.f., 15-10-1991. Priorto the said amendment, the activity of generation of electricitywas not made available to private sector. By the saidAmendment Act, the definition of “generating company” underSection 4-A was amended throwing the gates open to theprivate sector. Section 43-A was introduced by the saidAmendment Act under which the generating companyregistered under the Companies Act 1956 is permitted to sellelectricity generated by it to the Electricity Boards or any of theStates in which the generating station is located and to anyother person with the consent of the competent Government orGovernments.

Electricity reforms were further carried forward by theParliament in the year 1998 by enacting the ElectricityRegulatory Commissions Act 1998 (for short “the 1998 Act”). The said Act was enacted by the Parliament with a view to overcome the problems of power sector and to address thefundamental issues being faced by it, namely, lack of rationalretail tariffs, the high level of cross-subsidies, poor planningand operation, inadequate capacity, the neglect of theconsumer, the limited involvement of private sector skills andresources and the absence of an independent regulatoryauthority (Vide Statement of Objects and Reasons of theElectricity Regulatory Commissions Act 1998). The 1998 Actenvisaged constitution of Central Electricity RegulatoryCommission (CERC) at the Central level and State ElectricityRegulatory Commissions (SERCs) at the State levels. Whilethe CERC was entrusted with the functioning of regulation oftariff of generating companies owned or controlled by theCentral Government, to regulate the tariff of the generatingcompanies other than those controlled by the CentralGovernment, if such generating companies enter into orotherwise have a composite scheme for generation and sale ofelectricity in more than one State, to regulate Inter-Statetransmission of energy, including tariff of transmission utilities,to promote competition, efficiency and economy in the activitiesof electricity industry, and to aid and advise the CentralGovernment in the formulation of tariff policy (See : Section 13).This Act made constitution of SERCs optional at the Statelevel. The SERC is entrusted with the same regulatory powersas the CERC was conferred in respect of Intra-Statetransmission, distribution and supply of electricity. The 1998Act also provided for grant of licenses to any person for

transmission and supply of electricity in a specified area. Thetariffs proposed by the licensees are required to be approvedby the State Regulatory Commission. Certain provisions of the1910 Act and the Supply Act were exempted from applicationin the State of Andhra Pradesh. This Act has divested theState Electricity Boards of their power under the Supply Act tofix tariffs and conferred the power of fixation of tariff vested inthe State Electricity Boards on the Electricity RegulatoryCommissions, wherever the respective State Governmentshave chosen to constitute SERCs. However, the Supply Actwas not repealed and the same is allowed to occupy the fieldexcept to the extent of omission of sub-section (2) of Section43-A of the said Act. Section 52 of the 1998 Act has also givenoverriding effect of its provisions over any other enactment ifthey are inconsistent with its provisions, except to the extent ofthe provisions of the Consumer Protection Act, 1986 or theAtomic Energy Act 1962.

The State of Andhra Pradesh has thought it fit to enact aseparate legislation for introducing reforms in the field ofelectricity in the State. Accordingly, it has enacted the A.P.Electricity Reform Act 1998 (for short “the 1998 Reform Act),which has received the assent of the President on 21-10-1998. The main object of this Act was to unbundle theintegrated power sector, recognize generation, transmissionand distribution functions into compact commercially viableentities, providing operational, managerial and functionalautonomy to the successor entities. The Act proposed to constitute two corporations, one for generation and the otherfor transmission and distribution of electrical energy by creatingentities incorporated under the provisions of the CompaniesAct 1956. The Act has also proposed to constitute subsidiaryor associated transmission and supply companies orcorporations. It has also proposed to establish and incorporatean autonomous statutory Electricity Regularity Commission tobalance the interests of the stakeholders in the electricityindustry and to permit healthy growth of the power sector in theState. The Electricity Regulatory Commission of the State willbe vested with the regulatory functions while the StateGovernment shall have the power to issue policy directions inthe over-all planning and co-ordination and the mattersconcerning electricity in the State. The functions of theCommission under this Act are akin to the functions of theState Commissions envisaged under the central enactment.

Under this Act, the Electricity Board was initially dividedinto A.P. GENCO and A.P. TRANSCO for generation andtransmission of electricity, respectively. The properties andinterests of the State Electricity Board were divided betweenthe said two Corporations under a transfer Scheme framed bythe State Government titled ‘The A.P. Electricity Reform(Transfer Scheme) Rules 1999 (for short “the 1999 Rules). Contracts, agreements, interest and arrangements to theextent they are associated with or related to transmission anddistribution activities are included in ‘Miscellaneous’ Part-1(V)of Schedule B thereof. Accordingly, the assets and liabilities

were apportioned among the A.P. TRANSCO and A.P.GENCO. Later, four Distribution Companies were incorporatedfor distribution and supply of electricity in the State of AndhraPradesh. They are the A.P. Eastern Power DistributionCompany Limited, the A.P. Southern Power DistributionCompany Limited, the A.P. Northern Power DistributionCompany Limited and the A.P. Central Power DistributionCompany Limited. The function of distribution and supply ofelectricity which were hitherto being undertaken by the A.P.TRANSCO were entrusted to these Distribution Companieswithin their designated areas and a second transfer schemetitled ‘The Andhra Pradesh Electricity Reform (Transfer ofDistribution Undertakings from A.P. TRANSCO to DistributionCompanies) Order 2000’ has been enacted. Under the saidOrder, all the current contracts, agreements etc., are entrustedto the respective Distribution Companies within their area ofoperation. Under both the transfer schemes, contracts anddeeds were included in the definition ‘asset’.

The above discussed statutory provisions reveal that theA.P. TRANSCO and the Distribution Companies in the State ofAndhra Pradesh, have succeeded to the A.P. State ElectricityBoard along with its assets and liabilities which include powerpurchase as well as power wheeling agreements with the thirdparties. Accordingly, the rights acquired and the obligationsincurred under these agreements have been inherited by theA.P. TRANSCO and the Distribution Companies.

Electricity Act 2003: The electricity regime in the country has taken a decisive turn with the enactment of the Electricity Act2003 (for short “the 2003 Act”). With a view to usher in morereforms in the field of electricity, the 2003 Act has been made. The statement of objects and reasons of the said Act gives aproper insight into the evolution of electricity laws in thecountry. The reforms include delicensing of generation,unfettered freedom for captive generation, constitution of loaddispatch centers at National and Regional levels, provision ofOpen Access system, granting of licenses for trading to privatepersons etc. This Act has repealed the 1910 Act, the SupplyAct and the Electricity Regulatory Commission Act 1998 withcertain savings. Section 25 of the 2003 Act provided for Inter-State, regional and inter-regional transmission. Under thisprovision, the Central Government is empowered to makeregion-wise demarcations of the counting and freedom to makesuch modifications therein as it may consider it necessary forthe efficient, economical and integrated transmission andsupply of electricity, and in particular, to facilitate voluntaryinter-connections and co-ordination of facilities for the Inter-State, regional and inter-regional generation and transmissionof electricity. Under Section 26, the Central Government isvested with the power to establish a Centre at the Nationallevel to function as National Load Dispatch Center (NLDC) foroptimum scheduling of dispatch of electricity among theRegional Load Dispatch Centres (RLDCs). The CentralGovernment is also empowered to prescribe the constitutionand functions of the NLDC. Section 27 envisaged constitution

of RLDCs to be established by the Central Government foreach region with territorial jurisdiction as determined by theCentral Government. Section 28 enumerates the functions ofthe RLDC which include its responsibility for optimumscheduling and dispatch of electricity within the region inaccordance with the contracts entered into with the licenseesor the generating companies operating in the region, monitorgrid operations, keeping of accounts of quantity of electricitytransmitted through the regional grid, exercise of supervisionand control over the Inter-State transmission system and theresponsibility for carrying out real time operations for gridcontrol and dispatch of electricity within the region throughsecure and economic operation of the regional grid inaccordance with the Grid Standards and the Grid Code. TheRLDC is empowered to levy and collect such fees and chargesfrom the Generating companies or licensees engaged in Inter-State transmission of electricity as may be specified by theCentral Commission. Under Section 29, the RLDC isempowered to give directions to every licensee, generatingcompany, generating station, sub-station and any other personconnected with the operation of the power system which shallbe complied with by them. It is also conferred with the power toexercise such supervision and control as may be required forensuring stability of Grid operation and for achieving themaximum economy and efficiency in the operation of the powersystem in the region under its control.

Section 31 of the 2003 Act provides for constitution of State Load Dispatch Centres (SLDCs) for the respective StateGovernments. Section 32 prescribes functions of the SLDCswhich are identical to that of the RLDCs in respect of Intra-Statetransmission of electricity. The same powers which werevested in the RLDC in case of Inter-State transmission underSection 29 have been vested in the SLDCs in case of Intra-State power supply by Section 33 of the Act. Section 34 laiddown that every transmission licensee shall comply with suchtechnical standards of operation and maintenance oftransmission lines in accordance with the Grid standards, asmay be specified by the authority. Section 40 charged thetransmission licensees to build, maintain and operate anefficient, co-ordinated and economic Inter-State transmissionSystem or Intra-State transmission System as the case maybe; to comply with the directions of the RLDCs and the SLDCsas the case may be; and to provide non-discriminatory OpenAccess to its transmission System for use by any licensee orgenerating company on payment of the transmission charges,or any consumer as and when such Open Access is providedby the State Commission under sub-section (2) of Section 42,on payment of the transmission charges and a surchargethereon, as may be specified by the State Commission.Section 42 charged the distribution licensee to develop andmaintain an efficient co-ordinate and economical distributionsystem in his area of supply and to supply electricity inaccordance with the provisions of the Act. Under Sub-section(2) thereof, the State Commission shall introduce Open Access in such phases and subject to such conditions within one yearof the appointed day. However, such Open Access shall beallowed on payment of surcharge in addition to the charges ofwheeling as may be determined by the State Commission.

Under Section 79 of 2003 Act, the CERC has framedregulations called the Central Electricity RegulatoryCommission (Open Access in Inter-State Transmission)Regulations 2004 (for short “the 2004 Regulations”). Theseregulations provide for long term and short term Open Access. Under the regulations, applications for Open Access shall bemade to Nodal Agency, which in case of long termtransmission access, is the Central Transmission Utility, if itssystem is used and in other cases, it shall be transmissionlicensee in whose system the drawal point of electricity issituated. In case of short term Open Access, RLDC shall bethe Nodal Agency for the region where point of drawal ofelectricity is situated. Regulation 13 provides for procedure forshort term Open Access in respect of Inter-State transmission. The application shall contain information such as capacityneeded, point of injection, point of drawal, duration of availingopen access, peak load, average load and such otheradditional information that may be specified by the RLDC. Theregulations prescribed the charges under different categoriessuch as scheduled inter-change charges, reactive energycharges, charges for average energy losses in transmissionsystem besides the Open Access charges.

The APERC framed the Open Access Regulations governing the Intra-State transmission/wheeling of electricitywithin the State called the A.P. Electricity RegulatoryCommission (Terms and Conditions of Open Access)Regulation 2005 (for short “the 2005 Regulations”). Underthese regulations, the State Transmission Utility is the NodalAgency for long term Open Access and SLDC is the NodalAgency for short term Open Access transactions. However,the SLDC shall allow short term Open Access only afterconsulting the concerned transmission and/or distributionlicensee(s) whose network(s) would be used for suchtransactions. The Regulations envisaged criteria for OpenAccess, the charges payable for such Open Access etc. Regulation 13 provides for installation of energy metrescapable of measuring active energy, reactive energy, averagefrequency and demand integration in each 15-minute timeblock, with a built-in calendar and clock and conforming toBIS/CBIP Technical Report/IEC standards at all entry and exitpoints. Regulation 14 laid down the procedure for determiningthe available capacity of transmission and distribution (T&D)networks.

T h e A.P.State Reorganisation Act 2014:This Act haschanged the the nature and complexion of transmission anddistribution of electricity within the erstwhile State of AndhraPradesh. With the division of the State of Andhra Pradesh intotwo States, namely, the State of Telangana and the State ofAndhra Pradesh, the Intra-State transmission and distributionof electricity has become Inter-State transmission and

distribution where such transmission and distribution take placeacross the two regions. This Act has contained provisions fordistribution of assets and allocation of resources, such as,water, coal, oil, power generation, transmission and distributionetc. Part-X of the Reorganisation Act deals with infrastructureand special economic measures. Section 92, falling in thatPart ordained that the successor States shall follow theprinciples, guidelines, directions and orders to be issued by theCentral Government on or from the appointed day on mattersrelating to coal, oil and natural gas, and power generation,transmission and distribution as enumerated in the TwelfthSchedule. Clause-A(1) of the said Schedule provided the ratioof the total equity of Singareni Collieries Company Ltd.,between the Government of Telangana and the Government ofIndia as 51 and 49, respectively. It has also saved the existingcoal linkages of Singareni Collieries Ltd., without any change. Clause-B provided for allocation of oil and gas and Clause-Cdeals with power. Under sub-clause (1) of Clause-C, units ofA.P. GENCO shall be divided based on geographical locationof power plants. Under sub-clause (2), of Clause-C, theexisting power purchase agreements with respectiveDISCOMs shall continue for both on-going projects andprojects under construction. Under sub-clause (3), the existingAPERC shall function as a joint regulatory body for a period notexceeding six months, within which time separate SERCs shallbe formed in the successor States. Under sub-clause (4), theexisting SLDC shall function for both successor States for a period not exceeding two years within which time separateSLDC shall be set up for each successor State. During thisperiod, the existing SLDC shall function under the control ofSouthern RLDC at Bangaluru. Sub-clause (5) of Clause-C,which is pivotal for the present cases, reads as under :

“Transmission lines of APTRANSCO of 132 KV andhigher voltage cutting across the successor States shallbe deemed as Inter-State Transmission System (ISTS)lines. The transmission lines falling within the territory ofe a c h successor State shall be transferred to therespective State Transmission Utilities. Themaintenance of ISTS lines shall also be done bysuccessor States in their respective jurisdictions.”

The letter dated 2-8-2014 addressed by the ExecutiveDirector, HRD& Planning, A.P. TRANSCO, and theconsequential letter dated 28-8-2014 addressed by the ChiefGeneral Manager, Commercial & RAC, APEPDCL,Visakhapatnam to the petitioner, require to be understood in the light of the provisions of the 2003 Act and the regulationsframed by the Central and the State Regulatory Commissionsand the provisions of the Reorganisation Act.Whether the Reorganisation Act saved the revisedWheeling and Power Purchase Agreements?

As could be culled out from the long title of theReorganisation Act, it was enacted for reorganization of theexisting State of Andhra Pradesh. While the division of theState of Andhra Pradesh by formation of Telangana State isthe principal aim of the Act, it has also attempted to address theallocation/distribution of expenditure and revenue (Part-V), apportionment of assets and liabilities (Part-VI), control andadministration of certain corporations (Part-VII), distribution ofemployees (Part-VIII) and infrastructure and special economicmeasures between the two States (Part-X) etc. Section 92falling under Part-X reads as under:

Successor States to follow principles, guidelines,etc., issued by Central Government :- The principles,guidelines, directions and orders issued by the CentralGovernment, on and from the appointed day, on mattersrelating to coal, oil and natural gas, and powergeneration, transmission and distribution as enumeratedin the Twelfth Schedule shall be implemented by thesuccessor States.

The Twelfth Schedule provided for apportionment of theresources of coal, oil and natural gas and power generation,transmission and distribution referred to in Section 92. On acareful analysis of these provisions, it is clear that they dealwith distribution, allocation or apportionment of the saidresources pertaining to different fields, one such resourcebeing ‘power’. Clause-C of the Twelfth Schedule, which dealswith this item, accordingly divided the generating units of theA.P.GENCO, the transmission lines of the A.P. TRANSCO andthe power generated by the central generating stationsbetween the two States. In the context in which the expression“Power Purchase Agreements” is used, it should beunderstood as the agreements entered into between theindependent generators and the DISCOMs for purchase ofpower by the latter from the former. With reference to suchagreements, sub-clause (2) of Clause-C has apportioned those agreements to the respective DISCOMs. For instance, inrespect of the agreements with APEPDCL, neither the otherDISCOMs in the State of Andhra Pradesh nor in the State ofTelangana can make a claim for purchasing the power. Thus,the sole intendment behind this Clause is to confer right on therespective DISCOMs to purchase power under the existingpower purchase agreements and not with a view to save anyagreement in order to protect the interests of generators orsuppliers. Therefore, it would be a fallacy if sub-clause (2) ofClause-C of the Twelfth Schedule is interpreted to mean that itis intended to serve any purpose other than allocating thepower purchase agreements among the DISCOMs.

As rightly pleaded by the respondents, the revised powerwheeling and power purchase agreements do not fall within thedefinition of the expression ‘Power Purchase Agreements”mentioned in Clause-C of the Twelfth Schedule. This isbecause, the predominant object of these agreements was toenable the generators to supply power either for their captiveneeds or for sale to third parties. It is only the residuary powerwhich remained unutilized or not supplied, as the case may be,that will be appropriated by the respective DISCOMs at theprice indicated in the agreement itself. At the most, that part ofthe agreement under which the DISCOMs have the right toutilize the residuary power may fall within the expression‘Power Purchase Agreement’ under sub-clause (2) of Clause-Cof the Twelfth Schedule.

While the legal position is what is discussed above,

While the legal position is what is discussed above, however, it needs to be observed that not much turns upon theinterpretation of Section 92 r/w. Clause 3(C) of the TwelfthSchedule, for, neither APEPDCL nor the TSSPDCL has beenrefusing to wheel the power being generated by the petitionersand fed into the respective Grids by disregarding theagreements, but they plead their inability for such wheeling dueto the various constraints under the provisions of the 2003 Act. It is their pleaded case that with the division of the erstwhileState of Andhra Pradesh, the Intra-State transmission systemhas become Inter-State transmission system between the twonewly created States. Wherever transmission of powerthrough Inter-State transmission lines is involved, both thelicensees and the consumers are bound to follow the CentralRegulations as well as the State Regulations. As discussedhereinbefore, as the Regulations provide for long term andshort term Open Access, consumers need to makeapplications to the respective Nodal Agencies for providingsuch Open Access. The RLDCs as well as the SLDCs arecharged with the responsibility of supervising and controlling ofthe Inter-State transmission system and the Intra-Statetransmission system, respectively. They must also ensuremaintenance of proper Grid standards according to Grid Codeas envisaged under Section 79 of the 2003 Act. Theconsumers have to install the energy meters capable ofmeasuring active energy, reactive energy, average frequencyand demand integration in each 15-minute time block with built-in calendar and clock etc. In the light of these strict statutory parameters laid down under the 2003 Act and the Regulations,the plea of the petitioners that under the existing powerwheeling and power purchase agreements the respectiveTRANSCOs and DISCOMs of both the States are under anobligation to wheel the power involving Inter-State transmissionand distribution without following the provisions of the 2003 Actand the Regulations, is wholly misplaced, besides beingunacceptable. If such a plea is accepted, it would not onlyrender the provisions of the 2003 Act and the Regulationsotiose, but also severely affect the transmission and distributionsystem. Unless Open Access licences are granted toconsumers after examining the Grid position in consultationwith the respective TRANSCOS and the DISCOMs, nolicensee can undertake transmission and distribution of powerunder the existing legal regime. Therefore, even if thelicensees have the best intention of serving the consumersunder the revised power wheeling and power purchaseagreements, they cannot render their services without theconsumers obtaining Open Access licenses. It is precisely forthis reason that the Executive Director, HRD, Vidyut Soudha,addressed letter dated 2-8-2014 and the Chief GeneralManager (Commercial & RAC), APEPDCL, Visakhapatnamaddressed letters dated 28-8-2014 to the petitioners. On acareful consideration of the facts and the legal position in theirentirety, this Court is of the opinion that the said letters refusingto take into consideration the power fed into the Grid by thepetitioners, except the petitioner in W.P.No.30602 of 2014, in the residuary State of Andhra Pradesh, and in raising the billswithout considering the power fed into the Grid by them and theaction of APEPDCL in raising the bill without taking intoconsideration the power fed into the Grid by the petitioners inW.P.No.30602 of 2014 in the State of Telangana, reflect thetrue and correct position in law and no exception can be takento the same.

In the light of these facts, the issue whether the existingagreements are saved by the provisions of the RegularisationAct has become purely academic, for, even if theseagreements are saved, they cannot override the provisions ofthe 2003 Act and the Regulations made thereunder. UnderSection 174 of the 2003 Act, the provisions override any otherlaw except the provisions of the Consumer Protection Act andthe Atomic Energy Act 1962 and the Railways Act 1989 or anyinstrument having the effect by virtue of any law other than theprovisions of the 2003 Act to the extent they are inconsistentwith the said Act.

In PTC India Limited (supra), a Constitution Bench ofthe Supreme Court held that a Regulation made under Section178 of the 2003 Act as a part of the regulatory frameworkintervenes and even overrides the existing contracts betweenthe regulated entities, inasmuch as it casts a statutoryobligation on the regulated entities to align their existing andfuture contracts with the said Regulation.

Therefore, even if the respective TRANSCOS and theDISCOMs are under obligation to wheel the power, such wheeling shall not be inconsistent with the provisions of the2003 Act and the Regulations made thereunder. As the 2003Act and the Regulations made thereunder mandate obtainingof Open Access for Inter-State transmission, the petitionerscannot insist on continuing the arrangement which existed priorto the division of the erstwhile State of Andhra Pradesh.

How to treat the power fed into the Grid by the petitioners?: The APEPDCL has fairly admitted that the petitioners whohold power wheeling and power purchase agreements havebeen feeding the power into its Grid and that due to legalconstraints, they could not send the power across to the Stateof Telangana. As noted above, the learned Standing Counselfor APEPDCL has fairly submitted that the power which hasbeen fed into the Grid but billed by the TSSPDCL may betreated as having been banked. The learned counsel for thepetitioners have stated that their clients are not willing toexercise the option of sale of power to APEPDCL. Similarly,the learned counsel for the petitioner in W.P.No.30602 of 2014has stated that his client is not willing to sell the power toTSSPDCL. In this peculiar fact situation, I feel that it isappropriate if the power which is fed by the petitioners into theGrid in the area of operation of the respective DISCOMs shallbe treated as having been banked which may be wheeled andsupplied by them either for captive purposes or to thescheduled consumers of the petitioners as per the respectivewheeling agreements, if and when Open Access licences areobtained by them. The petitioners are allowed a period of three months from the date of receipt of this Judgment for thispurpose. If the petitioners fail to obtain Open Access licenceswithin this period, the respective DISCOMs are entitled to treatthe same as having been appropriated and the cost of thepower as provided under the existing agreements shall be paidto the petitioners.

The Writ Petitions stand disposed of accordingly.

As a sequel to the disposal of the Writ Petitions, theMiscellaneous Applications filed in the respective Writ Petitionsare disposed of as infructuous.

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Justice C.V. Nagarjuna Reddy

Date : 31-12-2014 L.R. copiesAM

[1]2010(4) SCC 603