TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED versus M/S RAIN CALCINING LIMITED & OTHERS on 29 November 2019

1. IN RE: COMPETENCE OF APERC TO DETERMINEWHEELING CHARGES

1.1 Section 11 of the Reforms Act, 1998 deals with the A

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Afunctions of the Commission. Under Section 11(1)(a), theCommission shall aid and advise in matters concerningelectricity generation, transmission, distribution and supply inthe State. Section 11(1)(b) empowers the Commission toregulate the working of the licensees and to promote theirworking in an efficient, economical, and equitable manner. TheBCommission under Section 11(1)(c) has the power to issuelicences in accordance with the provisions of the Act. Section11(1)(d) also empowers the Commission to promote efficiency,economy, and safety in the use of the electricity. Under Section11(1)(e), the Commission has the power to regulate the purchase,Cdistribution, supply, and utilization of electricity, the quality ofservice, the tariff, and charges payable. The wheeling chargesare part of tariff, and the provisions of Section 11 are inclusiveand primarily dealing with the generation, transmission, anddistribution. These three processes suggest that Section 11does include in its ken the power to fix the wheeling chargesDrelating to the generation, transmission, distribution, supply, andutilization of electricity. The licensee is required to submit acalculation of annual expected aggregate revenue, and theCommission has the power to fix the tariff for the licensees thatwould include the licence for transmission also. TheECommission, while fixing the wheeling charges, has to act uponthe settled principles as specified in the order and in consonancewith the provisions contained in Sections 11, 15, and 26. [Paras34, 35, 36] [509-F-H; 501-A-D-E]

Ashok Soap Factory v. Municipal Corporation of DelhiF(1993) 2 SCC 37 : [1993] 1 SCR 124 ; Pawan Alloys& Casting Pvt. Ltd., Meerut v. U.P. State ElectricityBoard (1997) 7 SCC 251 : [1997] 3 Suppl. SCR 266; Oil and Natural Gas Commission v. Association ofNatural Gas Consuming Industries of Gujarat, (1990)Supp. SCC 397 : [1990] SCR 157 ; Rohtas IndustriesGLtd. v. Chairman, Bihar State Electricity Board (1984)Supp. SCC 161 : [1984] SCR 59 – relied on.

1.2 The Andhra Pradesh Electricity RegulatoryCommission (Business Rules of the Commission), Regulations,1999 were framed in exercise of powers conferred by SectionH9, Sub-Section 2 and Section 54, Sub-Section (2)(a) of the

Reforms Act, 1998 and they were amended by Regulations of2000. The Regulations reflect a broad spectrum of powers andvarious functions relating to fixation of the tariff. As perRegulation 45-A of the Regulations, 2000, inserted byamendments to Chapter IV-A of the Conduct of BusinessRegulations, it is open to the Commission to fix a tariff. Underregulations, various agreements have also been amended, andthere is plenary power under the regulations to prescribe thetariff and charges concerning Transmission and Bulk Supply orDistribution and Retail Supply as provided in Regulation 45-A(2).Under Regulation 45-A(8), it is clear that upon hearing thelicensee and such other parties as the Commission considersappropriate and upon making such other inquiry, theCommission shall make an order and notify the licensee of itsdecision on the revenue calculations and tariff proposals, asprovided in section 26(5) of the Reforms Act, 1998. Thecommission can exercise the power of fixation of such charges,which power is legislative. The statutory contracts have beensuperseded by the regulations which have been made. Noestoppel is created. It was not the subject matter of policyreserved for the Government under section 12 of the ReformsAct, 1998. As per section 26(5), the exercise of fixation ofcharges can be done. There is no violation of principles ofnatural justice as the objections were invited, and the licenseeswere heard. There is no question of attracting the equitableprinciples of promissory estoppel, as there was no unequivocalpromise in this case, and statutory provision can make inroadand supersede the contracts. [Paras 39, 45-47, 54] [502-D-E;509-E-F; 512-D-H; 513-A; 516-A-B]

PTC India Limited v. Central Electricity RegulatoryCommission, (2010) 4 SCC 603 : [2010] 3 SCR 609– relied on.

Indian Aluminium Company v. Kerala State ElectricityBoard, (1975) 2 SCC 414 : [1976] 1 SCR 70 ; GujaratState Financial Corporation v. Lotus Hotels Pvt. Ltd.,(1983) 3 SCC 379 ; Motilal Padampat Sugar Mills Co.Ltd. v. State of Uttar Pradesh & Ors., (1979) 2 SCC409 : [1979] 2 SCR 641 ; Pawan Alloys & CastingPvt. Ltd., Meerut v. U.P. State Electricity Board & Ors., AB

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478SUPREME COURT REPORTS

A(1997) 7 SCC 251 : [1997] 3 Suppl. SCR 266 ;Andhra Pradesh Electricity Regulatory Commission v.R.V.K. Energy Private Limited & Anr., (2008) 17 SCC769 : [2008] 9 SCR 579 ; Binani Zinc Limited v.Kerala State Electricity Board & Ors., (2009) 11 SCC244 : [2009] 4 SCR 636 ; Adani Power (Mundra) Ltd.Bv. Gujarat Electricity Regulatory Commission & Ors.AIR 2019 SC 3397 – held inapplicable.

Karnataka Power Transmission Corporation Ltd. v.Amalgamated Electricity Co. Ltd., (2001) 1 SCC 586 :[2000] 5 Suppl. SCR 695 – Distinguished.

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1.3 The High Court could not have interfered with thefindings on merits taken by the experts without entering intothe various aspects considered by the Commission. The HighCourt has not gone into various reasons, and the detailsconsidered by the Commission and once the expert body hasDdetermined specific tariffs, it is not for the courts to interfereordinarily in such matters. The determination is proper and doesnot suffer from any infirmity or illegality. The Commission hasmade an elaborate discussion for arriving at the figure. Therecovery network charges, tariff structure, and the question ofEwheeling charges in cash or kind have also been considered.[Para 61] [519-B-D]

1.4 The use of the system cannot be isolated from lossesin the system as they form an integral part of the system. Allpersons using the system should bear the system losses,Fwhether technical or non-technical. Incidentally, the terms of alicence issued by APTRANSCO and DISCOMS specificallyrefer to deliver such electricity, adjust losses of electricity to adesignated point. Technical losses in the system to be takeninto account as these are also an integral part of the system. Itis an integrated system where the electricity is supplied onGdisplacement basis rather than direct conveyance of theparticular electricity which is generated, the technical losses upto the voltage level at which the electricity is delivered alongcannot be measured. The technical losses of the total systemneed to be taken into account as it is impossible to determineHfrom which source electricity is being supplied to which particular customer. The electricity from all sources getscombined in the system and loses its identity. As investment inthe system has also been made, it was evident that requisitecharges have to be paid. [Para 62] [519-E-G]

2. IN RE : GRID SUPPORT CHARGES

Grid Code is the basis for levy of the Grid SupportCharges, which came to be approved by the Commission on26.5.2001. The same is also reflected in the impugned order.Thus, in case of installation of another CPP, that would be anadditional load on the grid, and there is no embargo for settingup additional grid CPP in the form of expansion as grid acts ascushioning. Under section 11 read with section 26 of theReforms Act, 1998, all fixed charges under the distribution andGrid Support Charges are leviable only at the instance of adistribution company, and the Commission has the powers todetermine it. In the agreements also there is a power where theBoard could have fixed the Grid Support Charge unilaterally, butbecause of Reforms Act, 1998 came to be enacted, the applicationwas filed in the Commission. After that, the Commission haspassed the order in accordance with the law. There is no faultin the same. Thus, the order of the Commission concerning theGrid Support Charges is upheld. [Para 64] [520-C-F]

3. IN RE : INCENTIVES TO NON-CONVENTIONALENERGY

3.1 The Government Order dated 18.11.1997, encouragesrenewable energy/non-conventional energy sources. TheGovernment decided to provide specific incentives. TheGovernment issued another GO MS No.112 dated 22.12.1998,making precise clarification that the benefits shall be availableonly to the power projects where fuel used is from non-conventional energy sources, which are of the nature ofrenewable sources of energy. The Scheme shall be watched forthree years. After that, the State Electricity Board shall comeup with suitable proposals for the continuance of incentives inthe present form or modified form. [Paras 66-67] [521-B-H; 522-A]

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A3.2 The Commission had passed the tariff orders dated22.3.2005 and 23.3.2006 for the years 2004-05, 2005-06, and2006-09. The APTEL was not correct in allowing the appealsand holding that effect of the policy decisions dated 18.11.1997and 22.12.1998, which had a statutory flavor, had not been takenBaway by the provisions contained in the Electricity Act, 2003 andthat the Doctrine of Promissory Estoppel is attracted, thoughthe Commission has the power to regulate wheeling charges.To consider the applicability of Promissory Estoppel, it has tobe seen whether these Government Orders contained an unequivocal commitment to extend benefits. On the contrary,Cthe benefit was confined only to three years. The Commissionunder the provisions of the Reforms Act, 1998 extended it fromtime to time and the last such extension came to an end on28.7.2001.The Commission decided not to extend the benefitby the impugned order determining the tariff. [Paras 68, 69]D[522-B-F]

3.3 This Court in Transmission Corporation of AndhraPradesh Limited case considered G.O. MS dated 18.11.1997 and22.12.1998, in which APERC undertook the review of tariffapplicable to the producers of electricity from non-conventionalEenergy resources. In the year 2003, the Commission undertooka further review of the tariff. The Commission by order dated20.3.2004, reduced the amount of tariffs. The RegulatoryCommission had power of reviewing the tariff and incentives.There was no unequivocal commitment to the respondent/purchasers/ generators/ developers to bind the State for all timesFto come. There was no definite, unambiguous representation,hence plea of estoppel was not attracted. [Para 70] [522-G-H;523-C-D]

3.4 Section 65 of the Electricity Act, 2003, provides thatif State Government requires grant of any subsidy to anyGconsumer in the tariff determined by the State Commission underSection 62, the State Government shall, notwithstanding, anydirection which may be given under Section 108, pay, in advanceand in such manner as may be specified, the amount tocompensate the person affected by the grant of subsidy in theHmanner the State Commission may direct. Subsidy/incentive is TRANSMISSION CORP. OF ANDHRA PRADESH LTD. v.M/S RAIN CALCINING LTD. & OTHERS

governed by Section 65, and the Government has not issued anysuch direction to continue the incentives in the form of subsidy.It was open to the Government to do so because of the orderpassed by the Commission, but it has not extended such benefit.No command can be given to State to grant subsidy. Thus, theorder of APTEL based on the Doctrine of Promissory Estoppelfor continuing the benefit of Government Orders dated18.11.1997 and 22.12.1998, cannot be said to be in accordancewith the law. [Paras 71, 72] [526-B-E]

Transmission Corporation of Andhra Pradesh Limited& another v. Sai Renewable Power Private Limited &others, (2011) 11 SCC 34 : [ 2010] 8 SCR 636 – relied on

K. Ramanathan v. State of Tamil Nadu, AIR 1985 SC660 : (1985) 2 SCC 116 : [1985] 2 SCR 1028 ; V.S.Rice and Oil Mills v. State of Andhra Pradesh AIR1964 SC 1781 : [ 1964] SCR 456 ; Deepak Theatre,Dhuri v. State of Punjab, AIR 1992 SC 1519 ; D.K.Trivedi & Sons v. State of Gujarat, AIR 1986 SC1323 : 1986 SCR 479 – referred to A

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4569of 2003.

From the Judgment and Order dated 18.04.2003 of the HighCourt of Judicature, Andhra Pradesh at Hyderabad in C.M.A. No. 1025Cof 2002.

With

Civil Appeal Nos. 5085, 5084, 5052, 5083, 5079, 5057, 5053, 5066,5064, 5068, 5054, 5071, 5056, 5077, 5063, 5055, 5080, 5062, 5073, 5069,5081, 5076, 5059, 5065, 5067, 5075, 5058, 5082, 5061, 5072, 5070, 5074,D5060, 5078, 7093, 7103, 7085, 7086, 7080, 7090, 7079, 7084, 7088, 7104,7091, 7089, 7041, 7083, 7092, 7087, 7042, 7102, 7043-7078, 8969, 8970,8971, 8974, 8978, 8972, 8976, 8975, 8977, 10125-10132 of 2003, 1945,1946-1947 of 2004, 7029-7062 of 2008.

V. Giri, B. Adhinarayana Rao, Parag Tripathi, C. S. Vaidyanathan,EC. R. Sridharan, Sr. Advs., Nishant Sharma, Rakesh K. Sharma,Matrugupta Mishra, Ms. Pratiksha Chaturvedi, Ms. Sharmila Upadhyay,Y. Raja Gopala Rao, C. Gunaranjan, Sourjya Das, VRN Prasanth,Sridhar Potaraju, Ms. Shiwani Tushir, Ms. Shweta Parihar, Ms. G. UshaSri, Lalltaksh Joshi, Manu Nair, Kuber Dewan, Ms. Suvarna Kashyap,S. S. Shroff, Ms. Jayati Parashar, Ishan Narain, Rajan Narain, GopalFChoudhary, Ms. Liz Mathew, Ms. Sonali Jain, Navnee R. (for M/s.MCLM & Co.), K. V. Mohan, K. V. Balakrishnan, Rahul KumarSharma, Matrugupta Mishra, Ms. Pratiksha Chaturvedi, Mrs. SarlaChandra, Ms. Bina Madhavan (for M/s. Lawyer’s Knit & Co.),Vishwajit Singh, Mahesh Agarwal, Ankur Saigal, Rishi Agrawal, RajeshKumar, E. C. Agrawala, G. Ramakrishna Prasad, A. V. Rangam, BuddyGRanganadhan, Ms. Stuti K., V. G. Pragasam, Mrs. D. Bharathi Reddy,Nikhil Swami, Ms. Divya Swami, Mrs. Prabha Swami, Vikas Mehta,Venkateswara Rao Anumolu, Tushar Jain, Alok Shankar, PukhrambamRamesh Kumar, Umesh Kumar Khaitan, Ms. K. Mamatha Choudary,Hitendra Kumar Rath, Ramakrishna Nookala, Pallav Mongia, Abhinav,HAdvs. for the appearing parties.

The Judgment of the Court was delivered by ARUN MISHRA, J.

1. There are three batches of appeals; most of the questions arecommon, which arise for consideration. In the first batch of appeals,the question arises for consideration concerning the levy of wheelingcharges by the appellant – Transmission Corporation of Andhra PradeshLimited (APTRANSCO). In the second batch of appeals, the questionarises for consideration regarding the competence of the APTRANSCOto levy the grid support charges. Admittedly, the outcome of the thirdbatch of appeals depends on the outcome of the first batch of appeals.In the third batch of appeals, the question arises for consideration asto continuance of incentives in respect of wheeling charges granted asper Government Order issued during the year 1997-1998, had to becontinued, and whether Commission had the power to review them.

2. After independence, the electricity generation, distribution andtransmission, and other related activities were undertaken by the AndhraPradesh State Electricity Board (APSEB). After the amendment in 1991in Electricity (Supply) Act, 1948 (Act of 1948), when liberalization wasmade in the electricity sector, then APSEB entered into agreementswith Private Generators.

3. The Andhra Pradesh State Legislature enacted AndhraPradesh Electricity Reforms Act, 1998 (the Reforms Act, 1998). TheGovernor reserved the same for the assent of the President under Article254 of the Constitution. The Andhra Pradesh Electricity RegulatoryCommission (APERC) was constituted under the Reforms Act, 1998on 31.3.1999, which started functioning with effect from 3.4.1999.

4. Under the provisions of the said Act, the transmission anddistribution and generation were separated, and APTRANSCO cameto be established. The Act received the Presidential assent on21.10.1998 and was published in the Official Gazette on 29.10.1998.On 1.2.1999, the Reforms Act, 1998, was brought into force, andAPTRANSCO succeeded APSEB in regards to transmission,distribution, and supply of electricity.

5. The APERC granted License No.1/2000 to APTRANSCO on31.1.2000, to deal with transmission and bulk supply of electricity.License No.2/2000 was given to APDISCOMS for carrying outdistribution function in terms of Section 15 of the Reforms Act, 1998.

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AThe licenses granted were subject to the terms and conditions, whichrequired the Licensees to file ARR Proposals to be submitted everyyear before 31[st] December, based on the expected revenue calculationand tariffs. Subsequently, four DISCOMS were created on 31.3.2000,which were enjoined with the function of the distribution of electricity.The transmission of electricity is carried out over long distances at extra-Bhigh voltage levels from generating stations to urban load centres, whilethe distribution of electricity is carried out at below 33 KV, 11 KV level.6. The infrastructure, i.e., transmission lines, State grid,equipment, systems of APSEB, came to be held by APTRANSCO.The higher voltage systems were vested in the APTRANSCO and theClower voltage of APDISCOMs.

7. The APTRANSCO filed Aggregate Revenue Requirement(ARR) for the year 2001-2002, before the Commission set up underthe Reforms Act, 1998. On 30.12.2000, each of the DistributionCompanies (DISCOMs), along with APTRANSCO, filed theirDrespective joint ARR applications. On 17.1.2001, the APTRANSCOfiled Tariff Proposal for the year 2001-02, for its transmission and bulksupply business and jointly with each DISCOM proposal for distributionand rental supply business. The Tariff Proposal also contained aproposal for levy of wheeling charges on persons using the electricityEsystem of licensee in the State. The APTRANSCO proposed awheeling charge of Rs.1 per Kwh for energy it transmitted through itsnetwork. On 24.3.2001, the Commission decided to consider the issuerelating to determination of wheeling charges and directedAPTRANSCO to file necessary applications and information in thisregard. On 24.3.2002, the Commission determined that the wheelingFcharges for the year 2002-2003 effective from 1.4.2002 would be Paise50 per Kwh for energy it transmitted through its network. Besides,wheeling charges of 28.4 percent of energy input by the projectdeveloper into the licensee’s grid being the system loss was also to befactored. The order of the Commission was questioned before the HighGCourt and the High Court by the impugned judgment and order dated18.4.2003, allowed the appeal, setting aside the order dated 24.3.2002of the Commission. Hence, the APTRANSCO and APERC are inappeals.

8. In the case set up by APTRANSCO, it is stated that theHreason for carrying out bulk transmission of power at extra high voltages, is for reduction of the Technical Losses (T&D Losses or AggregateTechnical Losses) in the transmission system, which are inevitable,which means that at lower voltage (in distribution), the AT Losses aremore for the same quantum of power transmitted. The TechnicalLosses depend on the distance/length of the transmission lines, i.e.,directly proportional to the distance of transmission. Apart from that,there are commercial losses in low tension or distribution network sidedue to pilferage/theft of power inter alia by direct tapping, metertampering, which also contribute to financial losses to DISCOMs. Thus,total losses are designated as AT&C Losses.

9. It is also the case set up by the APTRANSCO that HT (HighTension or High Voltage) consumers are industrial consumers connectedto the grid at various high voltage level and avail the power drawn fromthe utility as well as from other sources by way of wheeling, now calledas Open Access.

10. Before Reforms Act, 1998, the wheeling charges weregoverned by the respective Government Orders, for example, the G.O.MS No.93 dated 18.11.1997 as amended by G.O. MS No.112 dated22.12.1998, dealt with wheeling charges for non-conventional energysources, such as Biomass, Bagasse, Mini-Hydel, Wind, Solar. The G.O.MS No.116 dated 5.8.1995 as amended by G.O. MS No.152 dated29.11.1995, dealt with wheeling charges applicable for Mini-PowerPlants set up by private sector and under Memorandum ofUnderstandings signed with AP Gas Power Corporation (APGPCL) forwheeling of power to its captive consumers it specified the wheelingcharges to them for the applied voltage level, i.e., 132 KV, 33 KV, 11KV, etc., and also the distance of transmission.

11. The incentive/concessional wheeling charges allowed inGovernment Orders mentioned above were to be reviewed by the StateGovernment in the year 2000, but by the time the APERC wasconstituted, which was vested with the function of tariff determinationin terms of Section 26 of the Reforms Act, 1998.

12. In the second batch of appeals, the question involves as togrid support charges, which are levied on the HT consumers, who haverated Contracted Maximum Demand (CMD) and Captive Power Plant(CPP) capacity to meet their demands. When private Generators cameinto existence, these consumers derated CMD from the APTRANSCOnetwork and obtained the remaining demand from private Generators A

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A(these Generators are respondents in wheeling charges batches). Aftersuch deration, the service of grid support became a component forwhich APTRANSCO was required to be compensated as CPPs runningin parallel obtains benefits to keep the system and grid up and running,it is important to invest and maintain the system periodically and thegrid support cannot be given free to a nexus of third party privateBGenerators and HT consumer. The significant benefit which a CPPgets is in case ofoutage of CPP generator power is drawn from thegrid, and in case of tripping, the entire load is transferred on to the grid.Such disturbance is catered by way of grid support and equipmentinstalled by the APTRANSCO/DISCOM and involves investmentCthrough public exchequer.

13. The grid support charges are not governed by any GovernmentOrder or Incentive Scheme of the Government prior to Reforms Act,1998, or after that. The grid code is the basis for the levy of the gridsupport charges, which came to be approved by APERC on 26.5.2001.DBy way of levy of grid support charges, there is no restrictionwhatsoever on the installation of additional CPPs. The additional CPPsput an additional load on the grid, and corresponding charges are paidtowards grid support. There is no embargo for setting up additionalnew CPPs. In case of expansion of industry, additional duty forEadditional units have to be paid as additional CPPs tantamount toadditional burden on grid and which further obtains additional servicefrom the grid, thus grid support charge is levied after taking into accountall sorts of supply agreements from DISCOMs/Third Party Generators.The grid acts as a cushion/big buffer when the generation from CPPis idled due to sudden outage in the load, thereby mitigating the forcedFtripping of the CPP, and this support is known as grid support and CPPsrunning in parallel are known as running with Parallel Grid Support.

14. The Commission vide order dated 8.2.2002, held that gridsupport charges would be payable at the rate of 50 percent of prevailingdemand charges on the differential of CPP capacity and CMD. TheGagreement entered into by the State Electricity Board provided inclauses 9 and 10 that the Board could have fixed the grid supportcharges unilaterally as agreed by these HT consumers. However, whenthe Reforms Act, 1998 came into existence, APTRANSCO in theinterest of consumers applied to the Commission, and after hearing theHobjections, the Commission has passed the order on 8.2.2002. The High Court has set aside the order passed by the Commission. Hence, theappeals have been preferred by the APTRANSCO and APERC.

15. The third batch of appeals is concerned with the tariff orderspassed in the years 2004-05, 2005-06, and 2006-09, which have beenchallenged by Non-Conventional Energy Developers and Gas BasedDevelopers. The APTRANSCO held the bulk supply license until 2005,and after that, APDISCOMs became the bulk suppliers. The APERCpassed the orders mentioned above in exercise of powers conferredunder Section 62 of the Electricity Act, 2003, and the appeals werepreferred before the APTEL under Section 111 of the Electricity Act,2003. The issue is limited whether incentive as per the GovernmentOrders of 18.11.1997 and 22.12.1998 to be continued in perpetuity, orthe Commission could have reviewed them.

16. The APERC was constituted under the Reforms Act, 1998,and came to be treated as State Regulatory Commission under theproviso to Section 82 of the Electricity Act, 2003. The functions ofthe State Commission are provided in Section 86 of the Electricity Act,2003. One of them is to facilitate the intra-State transmission andwheeling of electricity read with Section 62 of the Act, which interalia provides that the Appropriate Commission shall determine the tariffin accordance with the provisions of the Act for transmission of theelectricity under Section 62(1)(b) and wheeling of electricity underSection 62(1)(c).

17. In the first batch of appeals, it has been pointed by theAPTRANSCO that there are six categories of Generators.

(a) In the first category, eight Generators have pre-existingagreements entered into before the Reforms Act, 1998as APERC was not in existence, and, in theseagreements, there was no clause providing tariff fixationby APERC.

(b) Categories 2 to 5 are of those Generators who haveagreements either post Reforms Act, 1998, or theiragreements have been amended and restated in termsof Reforms Act, 1998. Thus, they are indisputablygoverned by the Reforms Act, 1998, and tariff fixationis in accordance therewith.

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(c) The last category is the ones who do not have anyagreement of wheeling charges with APSEB becausethey are scheduled consumers of Generators/Developers,each of them having an HT supply agreement withAPSEB. The Generators/Developers are either GasBased, Coke Based, Mini Hydel Power Plants, Non-Conventional Plants.

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18. The Government Order MS No.116 dated 5.8.1995, dealt withfixation of wheeling charges. The permission was granted by the saidGovernment Order to set up a mini-power plant. Clause 4 providedthat the pricing arrangement is subject to fixation of tariff by theCRegulatory Commission ultimately. Clause 5 provided that any dutiesor taxes that may be imposed by the Government or by the StateElectricity Board, shall automatically apply to the Scheme. As per clause8, the Scheme shall operate within the framework of the Electricity(Supply) Act, 1948, and the Rules made thereunder. The saidDGovernment Order dated 5.8.1995 was amended vide GovernmentOrder MS No.152 dated 29.11.1995. Para 4 of the Government Orderdated 29.11.1995 provided that wheeling charges may be collected fromthe developers in kind and as a percentage of the energy delivered atthe interconnection point. The proposed rates of wheeling charges werealso specified.

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19. The Government Order MS No.93 dated 18.11.1997, dealtwith wheeling charges for non-conventional energy sources. TheGovernment allowed uniform incentives to all projects based on therenewal source of energy viz. Wind, Biomass, Co-generation, MunicipalWaste, and Mini Hydel.

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20. On 22.12.1998, the Government amended Order MS No.93dated 18.11.1997. It was decided that the incentives scheme shall bewatched for 3 years, and after that State Electricity Board shall comeup with suitable proposals concerning the continuance of the incentives.

G21. The Commission, while determining the wheeling charges,considered the assessment of the network charges and transmissionloss and various other factors included in the agreement in the postReforms Act, 1998 and pre-Reforms Act, 1998 scenario. The HighCourt has held that the State Commission constituted under the ReformsAct, 1998, has no power to levy charges for wheeling the energyHgenerated by the Generating Companies to their consumers. It has also TRANSMISSION CORP. OF ANDHRA PRADESH LTD. v.M/S RAIN CALCINING LTD. & OTHERS [ARUN MISHRA, J.]

been held that under the Reforms Act, 1998, the powers of theCommission under the Reforms Act, 1998 are more like judicial functionexercisable by a Civil Court, but not legislative. The High Court hasalso held that wheeling charges are irrational, illogical, and suffers fromserious infirmities. It has also been held that after the expiry of theterm of the agreement, the Government alone is competent to fixwheeling charges since it is in the realm of the policy direction. Theagreements entered into by the State Electricity Board are statutoryagreements, and they are binding. The Commission has no power torevise the wheeling charges under the guise of fixing tariff under Section26 of the Reforms Act, 1998. The wheeling charges is a matter ofpolicy and not for the Commission to fix. The wheeling charges donot fall under Section 26 of the Reforms Act, 1998. It is not proper torevise the wheeling charges like a tariff for the sale of energy. TheState Government, as well as the State Electricity Board, are boundby the principles of promissory estoppel. The joint application filed byAPTRANSCO and DISCOMs was not maintainable. Any alterationor modification can be made after due opportunity of hearing to theaffected persons. Since Government Companies were giving subsidyto farmers of the State, it was not proper to impose wheeling charges.

IN RE: COMPETENCE OF APERC TO DETERMINEWHEELING CHARGES

22. The first question for consideration is the competency of theAPERC to levy wheeling charges under the Reforms Act, 1998.

23. The Reforms Act, 1998 has been enacted with a view toprovide for the constitution of an Electricity Regulatory Commission,restructuring of the electricity industry, rationalization of generation,transmission, distribution and supply of the electricity avenues forparticipation of private sector, taking measures conducive to thedevelopment and management of the electricity industry in an efficient,economic and competitive manner and for matters connected therewithand incidental thereto. Section 2(a) defines “area of transmission” thus:

“2.(a) “area of transmission” means the area within whichthe holder of a transmission licence is for the time being authorisedby licence to transmit energy in accordance with the conditionsprescribed;”

“Transmission licence” has been defined under Section 2(o).“Licence,” as defined in Section 2(d), means a licence granted under AB

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ASection 15. The definition of “transmit” has been given under Section2(p). Sections 2(d) and 2(p) are extracted hereunder:

“2.(d) “licence” means a licence granted under section 15 ofthis Act;”

2. (p) “transmit” in relation to electricity, means theBtransportation or transmission of electricity by means of a systemoperated or controlled by a licensee which consists, wholly ormainly, of extra high voltage and extra high tension lines andelectrical plant and is used for transforming and for conveyingand/or transferring electricity from a generating station to a sub-Cstation, from one generating station to another or from one sub-station to another or otherwise from one place to another;”

The APERC is constituted under Section 3. Section 5 deals withthe conditions of appointment as a member of the Commission. Asper Section 5(3)(a), persons who are considered for appointment asDmembers must have experience of generation, transmission, distributionor supply of electricity, manufacture, sale or supply of any fuel for thegeneration of electricity and other matters specified therein. Theproceedings, powers, and functions of the Commission are dealt within Part-III of the Act. Section 10 deals with the powers of theECommission for the inquiry. The Commission has the power vested inCivil Court under CPC while trying a suit in respect of matters asspecified in Section 10(1) and other provisions of Section 10. Section11 deals with the functions of the Commission. The provisions ofSection 11(1) are inclusive, and certain functions have been specifiedin clauses (a) to (l) of sub-Section 1 of Section 11, which are as under:F

“11. (1) Subject to the provisions of this Act, the Commissionshall be responsible to discharge amongst others, the followingfunctions, namely:- (a)to aid and advise, in matters concerning electricityGgeneration, transmission, distribution and supply in theState; (b)to regulate the working of the licensees and to promotetheir working in an efficient, economical and equitablemanner including laying down standards of performancefor the licensees in regard to services to consumers; H

(c) to issue licences in accordance with the provisions ofthis Act and determine the conditions to be included inthe licences; A

(d) to promote efficiency, economy, and safety in the useof the electricity in the State including and in particularin regard to quality, continuity, and reliability of serviceBand enable to meet all such reasonable demands forelectricity; (e)to regulate the purchase, distribution, supply andutilisation of electricity, the quality of service, the tariffand charges payable keeping in view both the interestof the consumer as well as the consideration that thesupply and distribution cannot be maintained unless thecharges for the electricity supplied are adequately leviedand duly collected; C

(f) to promote competitiveness and progressively involvethe participation of private sector, while ensuring fairdeal to the customers; D

(g) to collect data and forecast on the demand and use ofelectricity and to require the licensees to collect suchdata and forecast; E

(h) to require licensees to formulate perspective plans andschemes in co-ordination with others for the promotionof generation, transmission, distribution, and supply ofelectricity; F

(i) to regulate the assets, properties, and interest inproperties concerning or related to the electricityindustry in the State; (j) to lay down a uniform system of accounts among thelicensees; G

(k) to regulate the working of licensees and promote theirworking in an efficient economical and equitable manner;and

(l) to undertake all incidental or ancillary things.”

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24. Section 12 of the Reform Act, 1998 deals with the generalpowers of the State Government regarding power to issue policydirections on matters concerning electricity of the State, including overallplanning and coordination. Section 12 is extracted hereunder:

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“12. (1) The State Government shall have the power to issuepolicy directions on matters concerning electricity in the Stateincluding the overall planning and co-ordination. All policydirections shall be issued by the State Government consistent withthe objects sought to be achieved by this Act and accordinglyshall not adversely affect or interfere with the functions andpowers of the Commission including but not limited todetermination of the structure of tariffs for supply of electricityto various classes of consumers:

(2) If any dispute arises between the Commission and the StateGovernment as to whether or not a question is a matter of policyor whether a policy direction issued by the State Governmentadversely affects or interferes with the exercise of the functionsof the Commission, the same shall be referred by the StateGovernment to a retired judge of the Supreme Court inconsultation with the Chief Justice of the Supreme Court whosedecision thereon shall be final and binding.

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(3) The State Government shall be entitled to issue policydirections concerning the subsidies to be allowed for supply ofelectricity to any class or classes of persons or in respect of anyarea in addition to the subsidies permitted by the CommissionFwhile regulating and approving the tariff structure provided thatthe State Government shall contribute the amount to compensatesuch concerned body or unit affected by the grant of thesubsidies by the State Government to the extent of the subsidiesgranted. The Commission shall determine the amounts and theGterms and conditions and time frame on which such amounts areto be paid by the State Government.

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(4) The State Government shall consult the Commission in relationto any proposed legislation or rules concerning any policydirection and shall duly take into account the recommendationby the Commission on all such matters.”

25. The Constitution and functions of APTRANSCO are providedin Section 13. It is the primary function of APTRANSCO to determinethe electricity requirements. APTRANSCO shall own the extra highvoltage transmission system. The licence is required for transmissionand supply as per Section 14. Grant of licences by Commission is dealtwith in Section 15. Licensee can transmit electricity in a specified areaof transmission and supply the electricity in a specified area of supply,including bulk supply to licensees or any person. Section 15(1) of theReforms Act, 1998 is extracted hereunder:

“15. (1) The Commission may on an application made in suchform and on payment of such fee, as may be prescribed, granta licence authorising any person to,- (a) transmit electricity in a specified area of transmission;or (b) supply electricity in a specified area of supply includingbulk supply to licensees or any person.”

26. Reorganization of State Electricity Board is dealt with in Part-VII of the Reforms Act, 1998. Section 26 deals with the licensee’srevenues and tariffs. Section 26(1) provides that each licence underthe Act has to observe methodologies and procedures specified by theCommission from time to time in calculating the expected revenue fromcharges which it is permitted to recover according to the terms of itslicence and in designing tariffs to collect those revenues. As per Section26(2)(a), the Commission shall be bound by the parameters providedin the Sixth Schedule to the Electricity (Supply) Act, 1948 read withSections 57 and 57-A of the said Act and consider various factors asenumerated in sub-Section 26(2)(b) and as provided in Section 26(2)(c)the interest of the consumers. In case it departs from the specifiedparameters in the Sixth Schedule to the Electricity (Supply) Act, 1948,while determining the licensees’ revenue and tariffs, it shall record thereasons thereof in writing. Section 26 is extracted hereunder:

“26. (1) The holder of each licence granted under this Act shallobserve the methodologies and procedures specified by theCommission from time to time in calculating the expected revenuefrom charges which it is permitted to recover pursuant to theterms of its licence and in designing tariffs to collect thoserevenues.

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(2) The Commission shall subject to the provisions of sub-section(3) be entitled to prescribe the terms and conditions for thedetermination of the licensee’s revenue and tariffs by regulationsduly published in the Official Gazette and in such other manneras the Commission considers appropriate:

Provided that in doing so the Commission shall be bound by thefollowing parameters:—

(a) the financial principles and their applications providedin the Sixth Schedule to the Electricity (Supply) Act,1948 read with sections 57 and 57-A of the said Act; (b) the factors which would encourage efficiency, economicuse of the resources, good performance, optimuminvestments performance of licence conditions and othermatters which the Commission considers appropriatekeeping in view the salient objects and purposes of theprovisions of this Act; and

(c) the interest of the consumers.

(3) Where the Commission, departs from factors specified in theSixth Schedule of the Electricity (Supply) Act, 1948 whiledetermining the licensees’ revenues and tariffs, it shall record thereasons therefor in writing:

(4) Any methodology or procedure specified by the Commissionunder sub-section (1), (2), and (3) above shall be to ensure thatthe objectives and purposes of the Act are duly achieved.

(5) Every licensee shall provide to the Commission in a formatas specified by the Commission at least 3 months before theensuing financial year full details of its calculation for thatfinancial year of the expected aggregate revenue from chargeswhich it believes it is permitted to recover pursuant to the termsof its licence and thereafter it shall furnish such furtherinformation as the Commission may reasonably require to assessthe licensee’s calculation. Within 90 days of the date on whichthe licensee has furnished all the information that the Commissionrequires, the Commission shall notify the licensee either—

(a) that it accepts the licensee’s tariff proposals andrevenue calculations; or (b) that it does not consider the licensee’s tariff proposalsand revenue calculations to be in accordance with themethodology or procedure in its licence and such noticeto the licensee shall,—

(i) specify fully the reasons why the Commissionconsiders that the licensee’s calculation does notcomply with the methodology or proceduresspecified in its licence or is in any way incorrect,and

(ii) propose a modification or an alternative calculationof the expected revenue from charges, which thelicensee shall accept.

(6) Each holder of a supply licence shall publish in the dailynewspaper having circulation in the area of supply and makeavailable to the public on request the tariff or tariffs for the supplyof electricity within its licensed area and such tariff or tariffs shalltake effect only after seven days from the date of suchpublication.

(7) Any tariff implemented under this section, - (a) shall not show undue preference to any consumer ofelectricity, but may differentiate according to theconsumer’s load factor or power factor, the consumer’stotal consumption of energy during any specified period,or the time at which supply is required; or payingcapacity of category of consumers and need for cross-subsidisation; (b) shall be just and reasonable and be such as to promoteeconomic efficiency in the supply and consumption ofelectricity; and

(c) shall satisfy all other relevant provisions of this Act andthe conditions of the relevant licence.

(8) The Commission also shall endeavour to fix tariff in such amanner that, as far as possible, similarly placed consumers indifferent areas pay similar tariff.

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ordinarily except in respect of any changes expressly permittedunder the terms of any fuel surcharge formula prescribed byregulations. At least three months before the proposed date forimplementation of any tariff or an amendment to a tariff thelicensee shall provide details of the proposed tariff or amendmentto a tariff to the Commission, together with such furtherinformation as the Commission may require to determine whetherthe tariff or amended tariff would satisfy the provisions of sub-section (7). If the Commission considers that the proposed tariffor amended tariff of a licensee does not satisfy any of theprovisions of sub-section (7), it shall, within 60 days of receiptof all the information which it required, and after consultation withthe Commission Advisory Committee and the licensee, notify thelicensee that the proposed tariff or amended tariff is unacceptableto the Commission, and it shall provide to the licensee analternative tariff or amended tariff which shall be implementedby the licensee. The licensee shall not amend any tariff unlessthe amendment has been approved by the Commission.

(10) Notwithstanding anything contained in sections 57-A and 57-B of the Electricity (Supply) Act, 1948, no Rating Committee shallbe constituted after the date of this enactment and theCommission shall secure that licensees comply with the provisionsof their licences regarding their charges for the sale of electricity(both wholesale and retail) and for the connection to and use oftheir assets or systems in accordance with the provisions of thisAct.

Explanation:-

In this section,-

(a) “the expected revenue from charges” means the total revenuewhich a licensee is expected to recover from charges for the-level of forecast supply used in the determination under subsection (5) above in any financial year in respect of goods orservices supplied to customers pursuant to a licensed activity;and (b) “tariff” means a schedule of standard prices or charges forspecified services which are applicable to all such specifiedservices provided to the type or types of customers specified inthe tariff notification.”

Explanation attached to Section 26 makes it clear that tariff meansa schedule of standard prices or charges for specified services that areapplicable to all such specified services provided to the type or typesof customers specified in the tariff notification.

27. It is submitted on behalf of the appellants – APTRANSCO,Commission that transmission is regulated under the Reforms Act, 1998.The decision of the High Court is contrary to the provisions containedin Sections 11 and 13 and other provisions of Reforms Act, 1998. TheCommission has the power to determine the tariff. Under the ReformsAct, 1998, certain powers are a combination of adjudicatory andinquisitorial, and some are legislative.

28. The tariff fixation is generally a legislative function as heldin Ashok Soap Factory v. Municipal Corporation of Delhi, (1993)2 SCC 37 thus:

“29. Apart from that the fixation of tariff is a legislative functionand the only challenge to the fixation of such levy can be on theground of unreasonableness or arbitrariness and not ondemonstrative grounds in the sense that the reasons for the levyof charge must be disclosed in the order imposing the levy ordisclosed to the court, so long as it is based on objective criteria.”

With respect to tariff fixation as legislative function referencehas also been made to decisions of this Court, in Pawan Alloys &Casting Pvt. Ltd., Meerut v. U.P. State Electricity Board, (1997) 7SCC 251, Oil and Natural Gas Commission v. Association of NaturalGas Consuming Industries of Gujarat, (1990) Supp. SCC 397,Rohtas Industries Ltd. v. Chairman, Bihar State Electricity Board,(1984) Supp. SCC 161.

29. The Commission exercises the powers of a regulator. ThisCourt has considered the concept of regulatory power in variousdecisions, namely, K. Ramanathan v. State of Tamil Nadu, AIR 1985SC 660 = (1985) 2 SCC 116; V.S. Rice and Oil Mills v. State ofAndhra Pradesh, AIR 1964 SC 1781; Deepak Theatre, Dhuri v. Stateof Punjab, AIR 1992 SC 1519; and D.K. Trivedi & Sons v. State ofGujarat, AIR 1986 SC 1323. This Court has also held in the decisionsmentioned above that regulatory powers are extensive, and they includewhatever needs to be done for achieving the objects and purposes ofthe Act.

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A30. It is further submitted on behalf of APTRANSCO that costis involved in the maintenance, operation, upgradation, and transmissionof electricity through the transmission and distribution system andnetwork, for which infrastructure has to be created. Losses take placeduring transmission, which has to be accounted for, and transition lossis the loss of the system and has to be borne by the respondents.B

31. Whereas, respondents submitted that in the case of drawl ofthe contract before 1998, APERC could not have gone into as it didnot have jurisdiction in those cases. Even otherwise, where theagreements have been amended or entered after the Reforms Act, 1998,the Commission has no power to fix the wheeling charges as that isCnot explicitly provided under the provisions of the Reforms Act, 1998.

32. It was submitted on behalf of the licensees that proviso toSection 82(1) of the Electricity Act, 2003 provides for State Commissionthus:

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“82. Constitution of State Commission.- (1) Every StateGovernment shall, within six months from the appointed date, bynotification, constitute for the purposes of this Act, a Commissionfor the State to be known as the (name of the State) ElectricityRegulatory Commission:

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Provided that the State Electricity Regulatory Commission,established by a State Government under section 17 of theElectricity Regulatory Commissions Act, 1998 (14 of 1998) andthe enactments specified in the Schedule, and functioning as suchimmediately before the appointed date shall be the StateCommission for the purposes of this Act and the Chairperson,Members, Secretary, and officers and other employees thereofshall continue to hold office, on the same terms and conditionson which they were appointed under those Acts:

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Provided further that the Chairperson and other Members of theState Commission appointed, before the commencement of thisAct, under the Electricity Regulatory Commissions Act, 1998 (14of 1998) or under the enactments specified in the Schedule, may,on the recommendations of the Selection Committee constitutedunder sub-section (1) of section 85, be allowed to opt for theterms and conditions under this Act by the concerned StateGovernment.”

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On the strength of the provisions mentioned above, it wassubmitted that actions of the State Commission, as notified under theElectricity Regulatory Commission Act, 1998 (for short, “the CentralAct”), would be saved to the extent they are not inconsistent with theprovisions of the Electricity Act, 2003. Since APERC is the not StateCommission under the Central Act, it cannot be held to possess thejurisdiction to levy wheeling charges. It is the State Commission whichhas the relevant authority under the Electricity Act, 2003. Section22(1)(b) of the Central Act, specifically provide that State Commissionis required to determine the tariff payable for the use of the transmissionfacilities in the manner provided in Section 29. Section 29(2) requiresthat the State Commission shall determine by regulation the terms andconditions for the fixation of the tariff. Thus, the emphasis has beenlaid on the aspect that APERC’s order is not at par with a regulationwhich is necessary as per the Central Act. The APERC did not possessjurisdiction to levy wheeling charges and in any event, not by way ofpassing an order in the absence of regulation. The APERC has erredin saddling the generators with the costs of distribution since thegenerators supplying electricity to scheduled consumers do not utilizethe distribution networks. Therefore, without prejudice to the submissionthat the wheeling charges under the agreement could not be disturbed,the determination of wheeling charges qua electricity wheeled bygenerators of electricity for transmission to their scheduled consumersshould only be based on the transmission charges. Transmission lossis also amounted to 8 percent out of 28.4 percent system losses, therest being the distribution losses. In Section 11(e) of the Reforms Act,1998 the words “generation” and “transmission” are conspicuouslymissing. Whereas Section 22(1)(b) of the Electricity RegulatoryCommissions Act, 1998, speaks explicitly of the determination of tariffpayable for the use of transmission facilities by the State Commissionto be constituted under the Central Act. There is no such provision inthe Reforms Act, 1998.

33. According to licensees under the Central Act, the StateCommission is vested with the power to determine the tariff payablefor the use of transmission facilities. Reliance has been placed on PTCIndia Limited v. Central Electricity Regulatory Commission, (2010)4 SCC 603, wherein this Court has laid down in the context ofdetermination of tariff under the Electricity Act, 2003, that onlyRegulations made under the said Act could override the existing AB

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Acontractual relationship, which cannot be done only on the basis of anorder of the Commission. It is contended that till date no regulationsas required under Section 54(k) of the Reforms Act, 1998 have beenframed, though Schedule V provided parameters of fixation of thewheeling charges under Section 43 of the Act of 1948, this Section hadbeen rendered inapplicable as per Section 56(iii)(vi) of the Reforms Act,B1998. The guiding principles of a general or special order are absentin the Reforms Act, 1998. Under Section 15(4)(a) read with Section15(5) of the Reforms Act, 1998, the tariff would have to be determinedby mutual agreement, not by way of tariff order. The concludedagreements cannot be covered by the expression “enter into” used inCSection 24(4) of the Reforms Act, 1998.

34. In our opinion, the Commission constituted under the ReformsAct, 1998, has the power to determine the wheeling charges. We arenot at all impressed by the submission raised by learned Senior Counselappearing on behalf of respondents-Companies. The State CommissionDconstituted under the Reforms Act, 1998 has the power to deal withthe transmission. The expression “area of transmission” is definedunder Section 2(a). Grant of transmission licenses by the Commissionis dealt with in Section 15. The “licensee” or “licence holder” is aperson holding a licence under Section 14 to transmit or supply energy,including APTRANSCO, as defined under Section 2(e). “TransmissionElicence” means a licence granted under Section 15(1)(a), and “transmit”has also been defined in Section 2(p). The Commission has extensiveand pervasive power to deal with the transmission.

35. Section 11 of the Reforms Act, 1998 deals with the functionsof the Commission. Under Section 11(1)(a), the Commission shall aidFand advise in matters concerning electricity generation, transmission,distribution and supply in the State. Section 11(1)(b) empowers theCommission to regulate the working of the licensees and to promotetheir working in an efficient, economical, and equitable manner. Thus,it has to act as a Regulator in the matter of working on the licensees.The Commission under Section 11(1)(c) has the power to issue licencesGin accordance with the provisions of the Act. Section 11(1)(d) alsoempowers the Commission to promote efficiency, economy, and safetyin the use of the electricity. Under Section 11(1)(e), the Commissionhas the power to regulate the purchase, distribution, supply, and utilizationof electricity, the quality of service, the tariff, and charges payable. TheHwheeling charges are part of tariff, and the provisions of Section 11

are inclusive and primarily dealing with the generation, transmission, anddistribution. These three processes suggest that Section 11 does includein its ken the power to fix the wheeling charges relating to thegeneration, transmission, distribution, supply, and utilization of electricity.The distribution is not possible without transmission. Section 13 dealswith APTRANSCO and the works connected with it. Licensing oftransmission and supply are dealt with in Section 14 for transmittingelectricity and supply of electricity. It provides that license is necessaryunless exemption is granted under the Electricity Act, 1948.

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36. Section 26 of the Reforms Act, 1998, provides that eachlicensee holding license, granted under the Act, shall observe themethodologies and procedures specified by the Commission from timeto time in calculating the expected revenue. The Commission shallsubject to the provisions of Section 26(3), be entitled to prescribe theterms and conditions for the determination of the licensee’s revenueand the tariffs and for that it may also frame the regulation and theCommission shall be bound by the parameters of financial principlesand their applications provided in the Sixth Schedule to the ElectricityAct, 1948 read with Sections 57 and 57-A. Thus, the licensee isrequired to submit a calculation of annual expected aggregate revenue,and the Commission has the power to fix the tariff for the licenseesthat would include the licence for transmission also. The Commission,while fixing the wheeling charges, has to act upon the settled principlesas specified in the order and in consonance with the provisions containedin Sections 11, 15, and 26.

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37. The ‘tariff’ means the amount that the licensee is permittedto recover from its tariff in any financial year, as determined by theCommission in accordance with the provisions of section 26. In theterms of licence, ‘tariff’ has been dealt with in Clause 22.3 asunder: - F

“a) The amount that the Licensee is permitted to recoverfrom its tariffs in any financial year is the amount thatthe Commission determines in accordance with theprovisions of section 26 of the Act.

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b) The Licensee shall establish a tariff as approved by theCommission, for the Licensee’s Transmission and BulkSupply Business and shall calculate its charges inaccordance with this Licence, the Regulations, theH

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Aorders of the Commission and other requirementsprescribed by the Commission from time to time.

c) Save as otherwise directed by the Commission, theLicensee may publish a combined tariff for itsTransmission and Bulk Supply Business reflecting theBtariff charges and the other terms and conditionscontained in the approved tariffs referred to inParagraph 22.3(b).”

38. As to the question of fixing of wheeling charges, the HighCourt has erred in holding that the Commission has no power to fixCthe wheeling charges. It is the regulator for transmission, andconsidering the various provisions mentioned above, it is apparent thatthe Commission had the power to fix the wheeling charges.

39. The Andhra Pradesh Electricity Regulatory CommissionD(Business Rules of the Commission), Regulations, 1999 (for short, “the1999 Regulations”), have been framed in exercise of powers conferredby Section 9, Sub-Section 2 and Section 54, Sub-Section (2)(a) of theReforms Act, 1998 and they have been amended by Regulations of2000. The Regulations reflect a broad spectrum of powers and variousfunctions relating to fixation of the tariff. Regulation 45-A deals withEexpected revenue from charges and tariff proposals. Regulation 45-Bdeals with the fuel surcharge adjustment formula. The submission raisedon behalf of respondents that the Commission could not fix wheelingcharges when there was no regulation in vogue. Be that as it may.The section itself provides the guidelines apart from the fact thatFregulation also exists.

40. Concerning the concluded contract, it has been submitted onbehalf of APTRANSCO that Clause 15 of the Contract dealt withsubsequent Governmental actions. Wheeling of energy has been dealtwith under Clause 2 of the Modified Power Wheeling and PurchaseGAgreement entered into between Andhra Pradesh State ElectricityBoard and licensee before 1998. As per Clause 2.4, compensation forthe provisions of Firm Wheeling Service, the Board shall be entitled todeduct from the wheeled energy, the applicable wheeling charges, andthe charges shall be 15 percent to 20 percent of the wheeled energy.HFollowing is the Clause 2.4:

“2.4 As compensation for the provisions of Firm WheelingService, the Board shall be entitled to deduct from the wheeledEnergy the applicable wheeling charge, which charges shall befifteen percent (15%) of the wheeled energy for scheduledconsumers receiving power at a voltage of 132 KV and above,seventeen and one half percent (17.55) of the Wheeled Energyfor scheduled Consumers receiving power at a voltage of lessthan 132 KV and greater than 1 KV and twenty percent (20%)of the Wheeled Energy for scheduled consumers receiving powerat a voltage of 11 KV. The wheeling charges payable under thisparagraph 2.4 shall be the sole and exclusive considerationpayable to the Board for the provisions of Firm WheelingService.”

Modified Power Wheeling and Purchase Agreement had beenentered into by the Board and the licensee in the exercise of statutorypower, and the Commission has the power to fix the tariff and charges.

41. A Constitution Bench of this Court in PTC India Ltd. v.Central Electricity Regulatory Commission (supra), has held thattariff fixation under the Electricity Act, 2003, is a legislative function inits character. Section 178 of the said Act deals with the making ofRegulation by the Central Commission under the authority of subordinatelegislation. The same is broader than section 79 (1), which enumeratedthe regulatory function of the Central Commission in specified areas.A regulation under section 178, as a part of the regulatory framework,intervenes and even overrides the existing contracts between theregulated entities since it casts a statutory obligation on the regulatedentities to align their existing and future contracts with the saidregulation.

This court further observed that in the absence of regulation, theCommission has the power of fixation of the tariff. It is not dependentupon the framing of the regulation. This Court has laid down thus:

“25. The 2003 Act contains separate provisions for theperformance of dual functions by the Commission. Section 61 isthe enabling provision for framing of regulations by the CentralCommission; the determination of terms and conditions of thetariff has been left to the domain of the Regulatory Commissionsunder Section 61 of the Act whereas actual tariff determinationby the Regulatory Commissions is covered by Section 62 of the A

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Act. This aspect is very important for deciding the present case.Specifying the terms and conditions for determination of tariff isan exercise which is different and distinct from actual tariffdetermination in accordance with the provisions of the Act forthe supply of electricity by a generating company to a distributionlicensee or transmission of electricity or wheeling of electricityor retail sale of electricity.

26. The term “tariff” is not defined in the 2003 Act. The term“tariff” includes within its ambit not only the fixation of rates butalso the rules and regulations relating to it.If one reads Section61 with Section 62 of the 2003 Act, it becomes clear that theAppropriate Commission shall determine the actual tarifffollowing the provisions of the Act, including the terms andconditions which may be specified by the appropriate Commissionunder Section 61 of the said Act. Under the 2003 Act, if onereads Section 62 with Section 64, it becomes clear that althoughtariff fixation like price fixation is legislative in character, the sameunder the Act is made appealable vide Section 111. Theseprovisions, namely, Sections 61, 62, and 64, indicate the dualnature of functions performed by the Regulatory Commissionsviz. decision-making and specifying terms and conditions for tariffdetermination.

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55. To regulate is an exercise which is different from making ofthe regulations. However, making of a regulation under Section178 is not a precondition to the Central Commission taking anysteps/measures under Section 79(1). As stated, if there is aregulation, then the measure under Section 79(1) has to be inconformity with such regulation under Section 178. This principleflows from various judgments of this Court, which we havediscussed hereinafter. For example, under Section 79(1)(g), theCentral Commission is required to levy fees for the purpose ofthe 2003 Act. An order imposing regulatory fees could be passedeven in the absence of a regulation under Section 178. If thelevy is unreasonable, it could be the subject-matter of challengebefore the appellate authority under Section 111 as the levy isimposed by an order/decision-making process. Making of aregulation under Section 178 is not a precondition to passing of an order levying a regulatory fee under Section 79(1)(g).However, if there is a regulation under Section 178 in that regardthen the order levying fees under Section 79(1)(g) has to be inconsonance with such regulation.

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57. One must keep in mind the dichotomy between the powerto make a regulation under Section 178 on the one hand and thevarious enumerated areas in Section 79(1) in which the CentralCommission is mandated to take such measures as it deems fitto fulfil the objects of the 2003 Act. Applying this test to thepresent controversy, it becomes clear that one such areaenumerated in Section 79(1) refers to fixation of trading margin.Making of a regulation in that regard is not a precondition to theCentral Commission exercising its powers to fix a trading marginunder Section 79(1)(j), however, if the Central Commission inan appropriate case, as is the case herein, makes a regulationfixing a cap on the trading margin under Section 178 thenwhatever measures the Central Commission takes under Section79(1)(j) have to be in conformity with Section 178.

58. One must understand the reason why a regulation has beenmade in the matter of capping the trading margin under Section178 of the Act. Instead of fixing a trading margin (includingcapping) on a case-to-case basis, the Central Commission thoughtit fit to make a regulation which has a general application to theentire trading activity which has been recognised, for the firsttime, under the 2003 Act. Further, it is important to bear in mindthat making of a regulation under Section 178 became necessarybecause a regulation made under Section 178 has the effect ofinterfering and overriding the existing contractual relationshipbetween the regulated entities. A regulation under Section 178is in the nature of a subordinate legislation. Such subordinatelegislation can even override the existing contracts includingpower purchase agreements which have got to be aligned withthe regulations under Section 178 and which could not have beendone across the board by an order of the Central Commissionunder Section 79(1)(j).

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66. While deciding the nature of an order (decision) vis-à-vis aregulation under the Act, one needs to apply the test of generalapplication. On the making of the impugned 2006 Regulations,even the existing power purchase agreements (PPA) had to bemodified and aligned with the said Regulations. In other words,the impugned Regulations make an inroad into even the existingcontracts. This itself indicates the width of the power conferredon CERC under Section 178 of the 2003 Act. All contractscoming into existence after making of the impugned 2006Regulations have also to factor in the capping of the tradingmargin. This itself indicates that the impugned Regulations arein the nature of subordinate legislation. Such regulatoryintervention into the existing contracts across the board couldhave been done only by making regulations under Section 178and not bypassing an order under Section 79(1)(j) of the 2003Act. Therefore, in our view, if we keep the above discussion inmind, it becomes clear that the word “order” in Section 111 ofthe 2003 Act cannot include the impugned 2006 Regulations madeunder Section 178 of the 2003 Act.

71. This judgment in Jagdamba Paper Industries (P) Ltd. v.Haryana SEB, (1983) 4 SCC 508, is important from anotherangle also. It indicates that regulations under Section 79 of the1948 Act were to be in the nature of subordinate legislation,therefore, all contracts had to be in terms of such regulations.In the present case also, if one examines the terms and conditionsof the licences, power to fix trading margin is expresslycontemplated by such terms. The said judgment further held thatthe Board is a statutory authority and has to act within theframework of the 1948 Act. If the act of the Board is not inconsonance or in breach of some statutory provisions of law, rule,or regulation, it is always open to challenge in a petition underArticle 226 of the Constitution.

79. Applying the above judgments to the present case, it is clearthat fixation of the trading margin in the inter-State trading ofelectricity can be done by making of regulations under Section178 of the 2003 Act. Power to fix the trading margin underSection 178 is, therefore, a legislative power and the notificationissued under that section amounts to a piece of subordinatelegislation, which has a general application in the sense that even existing contracts are required to be modified in terms of theimpugned Regulations. These Regulations make an inroad intocontractual relationships between the parties. Such is the scopeand effect of the impugned Regulations, which could not havetaken place by an order fixing the trading margin under Section79(1)(j).Consequently, the impugned Regulations cannot fallwithin the ambit of the word “order” in Section 111 of the 2003Act.

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92. (i) In the hierarchy of regulatory powers and functions underthe 2003 Act, Section 178, which deals with making of regulationsby the Central Commission, under the authority of subordinatelegislation, is wider than Section 79(1) of the 2003 Act, whichenumerates the regulatory functions of the Central Commission,in specified areas, to be discharged by orders (decisions).

(ii) A regulation under Section 178, as a part of regulatoryframework, intervenes and even overrides the existing contractsbetween the regulated entities inasmuch as it casts a statutoryobligation on the regulated entities to align their existing and futurecontracts with the said regulation.”

42. The regulations which came up for consideration in the caseof PTC India Ltd. (supra) are extracted hereunder:

“CENTRAL ELECTRICITY REGULATORY COMMISSION

NOTIFICATION

New Delhi, 23-1-2006

No. L-7/25(5)/2003-CERC.—Whereas the Central ElectricityRegulatory Commission is of the opinion that it is necessary tofix trading margin for inter-State trading of electricity.

Now, therefore, in exercise of powers conferred under Section178 of the Electricity Act, 2003 (36 of 2003), and all other powersenabling it in this behalf, and after previous publication, the CentralElectricity Regulatory Commission hereby makes the followingRegulations, namely—

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A

1. Short title and commencement.—(1) These Regulations maybe called the Central Electricity Regulatory Commission (Fixationof Trading Margin) Regulations, 2006.

(2) These Regulations shall come into force from the date of theirpublication in the Official Gazette.

B

2. Trading Margin.—The licensee shall not charge the tradingmargin exceeding four (4.0) paise/kWh on the electricity traded,including all charges, except the charges for scheduled energy,open access, and transmission losses.

Explanation.—The charges for the open-access include thetransmission charge, operating charge, and the application fee.

C

A.K. Sachan, Secy.”

43. Under Regulation 42 of the 1999 Regulations, the Commissionhas the power to frame model conditions for the supply of power to beDadopted by the licensee. Regulation 42 of the 1999 Regulations isextracted hereunder:- “42. Model conditions of supply of power

1). (i) The Commission may check, from time to time, the modelconditions of supply to be adopted by the licensee, with suchEvariations as the Commission may direct, and the licensee shallfurnish to the Commission the finalised conditions of supply forapproval.

(ii) The licensee shall always keep in his office an adequatenumber of printed copies of the sanctioned conditions of supplyFand shall, on demand, sell such copies to any applicant at a pricenot exceeding normal photocopying charges.

2). (i) The Commission may pass such orders as it thinks fit inaccordance with section 28 to 31 of the Act for the contraventionor the likely contravention of the licence terms or conditions bythe licensee.

G

(ii) Subject to the provisions of Section 28 to 31 of the Act andthe procedure prescribed therein, the Commission may follow asfar as possible the general procedure prescribed in Chapter IIof these Regulations in dealing with a proceeding arising out ofHa contravention or likely contravention by a licensee.”

44. The Commission also has the power to amend licensesgranted under Regulation 45 of the 1999 Regulations. Regulation 45 isextracted hereunder:

“45. Amendment of the licence granted

(1) Application by the licensee or the local authorityconcerned for alteration or amendment to the terms andconditions of the licence granted in terms of Section 19of the Act shall be made in such form as may bedirected for the purpose by the Commission. Theapplication shall be supported by affidavit as providedin Chapter II of the Regulations.

(2) Unless otherwise specified in writing by the Commission,each application for amendment or alteration in thelicence shall be accompanied by a receipt of such feeas the Commission may require, paid in the mannerdirected by the Commission.

(3) Unless otherwise specified in writing by the Commission,the procedure prescribed in these Regulations for grantof licence, in so far it can be applied, shall be followedwhile dealing with an application for amendment oralteration of the licence.”

45. The Regulations of 1999 have been amended in the year 2000by the first amendment Regulations, 2000. As per Regulation 45-A ofthe Regulations, 2000, inserted by amendments to Chapter IV-A of theConduct of Business Regulations, it is open to the Commission to fix atariff. The same is extracted hereunder:

45-A. Expected revenue from charges and tariff proposals:

(1) Subject to the provisions of the Act, each year, at the timerequired by the licence or otherwise as may be directed by theCommission, each licensee (Transmission and Bulk Supply orDistribution and Retail Supply, as the case may be) shall file withthe Commission, in the format as may be specified by theCommission, statements containing calculation for the ensuingfinancial year the expected aggregate revenue from chargesunder its currently approved tariff and the expected cost ofproviding services.

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(2) If a Licensee carries on more than one business, namely,Transmission and Bulk Supply or Distribution and Retail Supply,the statement referred to in clause (1) above shall be givenseparately for each of the separate businesses of the licenseeand in such manner in respect of each such business as theCommission may direct.

(3) The statements referred to in clause (1) above shall containthe following details:

(i) the licensee’s demand forecast by customer or consumercategory for the ensuing financial year and the basis ofthe forecast;

(ii) a calculation of expected aggregate revenue that wouldresult from the above demand during the same periodunder the currently approved tariff by customer orconsumer category;

(iii) a calculation of the licensee’s estimated costs ofproviding the service required by the level of demandindicated in sub-clause (i) above for each customer orconsumer category during the same period calculatedin accordance with the financial principles and theirapplications in the Sixth Schedule to the Electricity(Supply) Act, 1948 or such other principles theCommission may prescribe from time to time;

(iv) The licensee’s proposal to deal with the divergencebetween the expected aggregate revenue and theexpected cost of services including proposal, if any, forrevised tariff to be charged in the ensuing year, theproposed scheme for reduction in losses, changes in thetariff structure for any specific category of consumer;

(v) In case the Licensee carries on any business or servicesother than those licensed under the Act, the Licenseeshall give separate revenue and expense statementstogether with such details as the Commission may requirein respect of such business or services; and

(vi) Such other information as the Commission may directfrom time to time.

(4) The licensee shall furnish to the Commission such additionalinformation, particulars, and documents as the Commission mayrequire from time to time after such filing of revenue calculationsand tariff proposals.

(5) The Commission may, from time to time, issue guidelines forfiling statement of revenue calculations and tariff proposals, andunless waived by the Commission, the licensee shall follow suchguidelines issued by the Commission.

(6) Unless otherwise directed by the Commission, theCommission shall hold a proceeding on the revenue calculationsand tariff proposals given by the licensee and may hear suchpersons as the Commission may consider appropriate for makinga decision on such revenue calculations and tariff proposals.

(7) The procedure of hearing on the revenue calculations andtariff proposals of the licensee shall be in the manner as theCommission may decide from time to time.

(8) Upon hearing the licensee and such other parties as theCommission considers appropriate and upon making such otherinquiry, the Commission shall make an order and notify thelicensee of its decision on the revenue calculations and tariffproposals, as provided in subsection (5) of section 26 of the Act.

(9) While making an order under clause (8) above or at any timethereafter, the Commission may direct the publication of the tariffthat the licensee shall charge the different consumers orcustomers and categories thereof in the ensuing financial year.

(10) The licensee shall publish the tariff or tariffs approved bythe Commission in the newspapers having circulation in the areaof supply as the Commission may direct from time to time. Thepublication shall, besides such other things as the Commissionmay require, include a general description of the tariffamendment and its effect on the classes of the consumers.

(11) The tariffs so published under clause (10) above shallbecome the notified tariffs applicable in the area of supply andshall take effect only after such number of days as theCommission may direct, which shall not be less than seven days,from the date of first publication of the tariffs.

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A(12) The licensee shall raise bills for the energy supplied ortransmitted or services rendered to the consumers in accordancewith the notified tariff.

(13) No tariff determined and notified as above may be amendedmore frequently than once in any financial year except that tariffBrates shall be adjusted in accordance with any fuel surchargeadjustment formula incorporated in the tariff with the approvalof the Commission. Provided that the consequential orders whichthe Commission may issue to give effect to subsidy the StateGovernment may provide under Sections 12 (3) and/or 27 (1) ofthe Act shall not be construed as amendment of tariff notified.CThe Licensee shall, however, give appropriate adjustments in thebills to be raised on the consumers for the subsidy amount in themanner the Commission may direct.”

D46. Under regulations, various agreements have also beenamended, and there is plenary power under the regulations to prescribethe tariff and charges concerning Transmission and Bulk Supply orDistribution and Retail Supply as provided in Regulation 45-A(2).

47. Fuel Surcharge Adjustment Formula has been given inERegulation 45-B and Subsidies under Regulation 45-C. UnderRegulation 45-A(8), it is clear that upon hearing the licensee and suchother parties as the Commission considers appropriate and upon makingsuch other inquiry, the Commission shall make an order and notify thelicensee of its decision on the revenue calculations and tariff proposals,as provided in section 26(5) of the Reforms Act, 1998. Thus, on theFstrength of the decision in PTC India Ltd. (supra), it is clear that thecontracts which were entered into stand superseded under the ReformsAct, 1998, by the regulations framed in the year 1999 as amended inthe year 2000. Thus, the submission raised on behalf of the licenseesthat the concluded contracts are binding and estoppel was created andGconcerning the power of regulatory Commission to determine thewheeling charges is untenable. The commission can exercise the powerof fixation of such charges, which power is legislative. The statutorycontracts have been superseded by the regulations which have beenmade. No estoppel is created. It was not the subject matter of policyreserved for the Government under section 12 of the Reforms Act,H1998. As per section 26 (5), the exercise of fixation of charges can be done. There is no question of the applicability of promissory estoppel.There is no violation of principles of natural justice as the objectionswere invited, and the licensees were heard.

48. In V.S. Rice and Oil Mills v. State of Andhra Pradesh,AIR 1964 SC 1781, this Court has dealt with the question of the validityof an agreement entered into for the supply of electricity under specifiedrates for ten years and exercise of regulatory powers to increase therate under the statute enacted after the agreement was upheld. Therelevant portion is extracted hereunder:

“21. That takes us to the next question as to whether theimpugned notified orders are invalid because they contravene theprovisions of Articles l9(l)(f) and (g) of the Constitution. Theimpugned orders have been notified by virtue of the powerconferred on the respondent by Section 3(l) and may, therefore,be treated as law for the purpose of Article 19. We may alsoassume in favour of the appellants that the right to receive thesupply of electricity at the rates specified in the agreements is aright which falls within Article 19(i)(f) or (g). Even so, can it besaid that the impugned notified orders are not reasonable and inthe interests of the general public? That is the question whichcalls for an answer in dealing with the present contention. It istrue that by issuing the impugned notified orders, the respondenthas successfully altered the rates agreed between the parties fortheir respective contracts and that, prima facie, does appear tobe unreasonable. But, on the other hand, the evidence shows thatthe tariff which was fixed several years ago had becomecompletely out of date and the reports made by the Accountant-General from time to time clearly indicate that the respondentwas supplying electricity to the appellants at the agreed rates eventhough it was incurring loss from year to year. Therefore, it cannotbe said that the impugned notified orders were not justified onthe merits. The prices of all commodities and labour chargeshaving very much increased; meanwhile, a case had certainlybeen made out for increasing the tariff for the supply of electricalenergy. But it would not be possible to hold that the restrictionimposed on the appellants’ right by the increase made in the ratesis reasonable and in the interests of the general public solelybecause the impugned orders have saved the recurring lossincurred by the respondent under the contracts. If such a broad A

B

CDEFGH

A

A

B

CDEFGH

A

Aand general argument were accepted, it may lead to unreasonableand even anomalous consequences in some cases. This question,however, has to be considered from the point of view of thecommunity at large; and thus considered, the point which appearsto support the validity of the impugned orders is that these orderswere passed solely for the purpose of assuring the supply ofBelectrical energy and that would clearly be for the good of thecommunity at large. Unless prices were increased, there was riskthat the supply of electrical energy may itself have come to anend. If the respondent thought that the agreements made withthe appellants were resulting in a heavy loss to the public treasuryCfrom year to year, it may have had to consider whether the supplyshould not be cut down or completely stopped. It may well bethat the respondent recognised its obligation to the public at largeand thought that supplying electrical energy to the consumers whowere using it for profit-making purposes, at a loss to the publicexchequer would not be reasonable and legitimate, and itDapprehended that the legislature may well question the proprietyor wisdom of such a course; and so, instead of terminating thecontracts, it decided to assure the supply of electrical energy ata fair price, and that is why the impugned notified orders wereissued. We ought to make it clear that there has been noEsuggestion before us that the prices fixed by the impugnednotified orders are, in any sense, unreasonable or excessive, andit is significant that even the revised tariff has to come intooperation prospectively and not retrospectively. Therefore, havingregard to all the circumstances, in this case, we are disposed tohold that the change made in the tariff by the notified orders mustFbe held to be reasonable and in the interests of the generalpublic.”

49. Licensees have relied upon Indian Aluminium Company v.Kerala State Electricity Board, (1975) 2 SCC 414, dealing with thepower of the State Electricity Board under section 49 (1) to fix theGtariff which did not enable the Board to nullify an agreement enteredinto by it as permitted under section 49 (3) thereof. In our opinion, thepower of fixation of tariff under section 49 (1) of the Electricity SupplyAct of 1948 and agreement entered into under section 49 (3) aredifferent connotations. The provisions of the Reforms Act, 1998,Hempower the Commission to fix tariffs and charges for transmission, distribution, and the like. The entire power is given to the Commission,and the Constitution Bench of this Court has held in PTC India Ltd.(supra) that once regulations have been framed, they make an inroadinto the concluded contract also. Thus, the decision is of no help. Section49 (3) of the Electricity Supply Act, 1948 authorises the Board to fixdifferent tariffs to supply electricity. The question in the present caseis different.

50. Reliance has been placed on the decision of this court inKarnataka Power Transmission Corporation Ltd. v. AmalgamatedElectricity Co. Ltd., (2001) 1 SCC 586, in which section 394 (2) ofthe Companies Act, 1956 relating to rights and entitlement, obligationsand commitments of the transferee company by virtue of scheme ofarrangements sanctioned by the Companies Court. It was held thatthe transferee company becomes legally bound and obliged to dischargeall commitments. The decision is distinguishable and is based upondifferent provisions dealing with a different situation.

51. The arguments raised by respondents that the policy decisionof the State Government has force of direction in terms of section 78(A) of the Electricity Supply Act, 1948, in order to promote and developsuch generation, in pursuance to the guidelines issued by the CentralGovernment in view of international treaties and conventions to whichIndia is a party. It was further urged that the Central Government hastaken a decision to invite private participation to augment energygeneration, and there is a thrust on the development of renewableenergy. The State Government had the power under section 12 of theReforms Act, 1998 also, and the policy decision binds the Commission.

52. The submission is stated to be rejected as policies are alwayssubject to legislative interventions, and once the State Government hasmade statutory provision, it has to prevail, and we find that no suchpolicy was contemplated to continue for all the times to come. Thepolicy has culminated into the Reforms Act, 1998 itself, and the sameindicates the obligations of the Government for reforms displayed inthe statutory form for establishment of Commission and separation ofdistribution and transmission. Reforms have been made only becauseof the policies, and once they found statutory expression, they are boundto be followed.

53. A submission was also raised concerning vested rights andconcluded contracts that have already taken care of by the decision ofPTC India Limited (supra) and discussion mentioned above.

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A54. There is no question of attracting the equitable principles ofpromissory estoppel for which reliance has been placed on GujaratState Financial Corporation v. Lotus Hotels Pvt. Ltd., (1983) 3 SCC379, Motilal Padampat Sugar Mills Co. Ltd. v. State of UttarPradesh & Ors., (1979) 2 SCC 409, Pawan Alloys & Casting Pvt.Ltd., Meerut v. U.P. State Electricity Board & Ors., 1997 (7) SCCB251, Andhra Pradesh Electricity Regulatory Commission v. R.V.K.Energy Private Limited & Anr., (2008) 17 SCC 769, where the lawlaid down, cannot be said to be applicable in this case. There was nounequivocal promise in this case, and statutory provision can makeinroad and supersede the contracts.

C

55. Submissions were raised concerning the repugnancy of theReforms Act, 1998. We find that once the Reforms Act, 1998 has beenenacted, it has to prevail, and vires of provisions have not beenquestioned. The submissions raised concerning the repugnancy, onmerits, have no legs to stand given the provisions contained in theDReforms Act, 1998. The question of repugnancy rightly had also notbeen raised before High Court and cannot be raised in this Court asan afterthought.

56. Reliance has also been placed on Binani Zinc Limited v.Kerala State Electricity Board & Ors., (2009) 11 SCC 244, on theEfollowing observations:

“31. The State Electricity Boards are entitled to frame tariff interms of the provisions contained in the 1948 Act. The tariff soframed is legislative in character. The Board, as a statutoryauthority, is bound to exercise its jurisdiction within the fourFcorners of the statute. It must act in all fields, including the fieldof framing tariff by adopting the provisions laid down in the 1948Act or the Rules and the Regulations framed thereunder.”

In Binani Zinc Limited (supra), the Court has dealt with thepower of the Electricity Board and observed that tariff has to be fixedGwithin the four corners of the statute. There is no dispute with theproposition mentioned above, but it does not help the respondents onthe merits of the case concerning powers and jurisdiction of theCommission under Reforms Act, 1998.

57. Concerning the interpretation of the agreement, reliance hasHbeen placed on Adani Power (Mundra) Ltd. vs. Gujarat Electricity

Regulatory Commission & Ors., AIR 2019 SC 3397, in which this Courthas observed that clauses in the agreement ought to be given a plain,literal, and grammatical meaning of the expression. There is no disputewith the proposition mentioned above, however, the provisions of theReforms Act, 1998 are clear, candid, and empowers the Commissionto determine the charges.

58. The High Court has also held that joint applications were notmaintainable. The APTRANSCO held Licence No.1/2000 fortransmission and bulk supply and as per clause 20 read with clause 22,it is incumbent upon the APTRANSCO to refer the table of tariffs oreven system charges/losses incurred under the system. Thus, a jointapplication is nothing, but an obligation under the licence, and noprejudice has been caused by submitting the joint application. Thus, thedecision of the High Court, to the contrary, is found to be meritless.The issue of maintainability of joint application has also been dealt withby the Commission elaborately.

59. The reason given for holding the joint application to bemaintainable is that there is an integrated transmission distributionsystem in the State. The system is entirely owned and controlled bythe APSEB initially, and after reforms, it has come into control ofAPTRANSCO till 31.3.2001. The present application is the first of itskind for the determination of applicable wheeling charges to thetransmission distribution system. The objection is technical, and in casejoint petitions are maintained, it has no adverse effect so long insubstance as the Commission has decided to proceed to determine theissue relating to transfer DISCOMS and representative units and hasdetermined tariffs which are fair to the consumers availing the wheelingservices. The approach of the Commission, thus, could not be faultedby the High Court. Therefore, the decision of the High Court in thisregard is also faulty and unsustainable.

60. Coming to merits of fixation of charges, while passing theorder, the Commission has fixed the wheeling charges thus:

9.12 The wheeling charge leviable from 01.04.2002 for the F.Y.2002-2003 is accordingly worked out as below.

Calculation of Wheeling Charges for 2002-03:

a) In cash :

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Particular of ExpenditureAmt. Rs.Crs.

b) In-kind:

In addition, wheeling charges in kind of 28.4 % of energy inputby the project developer into the Licensee’s grid being the systemloss are leviable.”

61. The High Court could not have interfered with the findingson merits taken by the experts without entering into the various aspectsconsidered by the Commission. Thus, the finding on merits as to thedetermination of charges being illegal and improper in any manner,cannot be said to be sustainable. The High Court has not gone intovarious reasons, and the details considered by the Commission and oncethe expert body has determined specific tariffs, it is not for the courtsto interfere ordinarily in such matters. We find the determination to beproper and do not suffer from any infirmity or illegality. The Commissionhas made an elaborate discussion for arriving at the figure mentionedabove. The recovery network charges, tariff structure, and the questionof wheeling charges in cash or kind have also been considered. Variousrelevant factors have been taken into consideration. The nature of thearrangement between APTRANCO and DISCOMS and inter seDISCOMS has been considered while deciding issue No.4.

62. The use of the system cannot be isolated from losses in thesystem as they form an integral part of the system. All persons usingthe system should bear the system losses, whether technical or non-technical. Incidentally, the terms of a licence issued by APTRANSCOand DISCOMS specifically refer to deliver such electricity, adjust lossesof electricity to a designated point. Technical losses in the system tobe taken into account as these are also an integral part of the system.It is an integrated system where the electricity is supplied ondisplacement basis rather than direct conveyance of the particularelectricity which is generated, the technical losses up to the voltage levelat which the electricity is delivered along cannot be measured. Thetechnical losses of the total system need to be taken into account as itis impossible to determine from which source electricity is being suppliedto which particular customer. The electricity from all sources getscombined in the system and loses its identity. As investment in thesystem has also been made, it was evident that requisite charges haveto be paid.

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AIN RE: GRID SUPPORT CHARGES

63. With respect to Grid Support Charges, it has been concededby the learned counsel for the parties that the decision in the aforesaidbatch of matters as to wheeling charges has to govern grid supportcharges as we have upheld the order of the Commission with respectBto wheeling charges, the order of the High Court has to be set aside.

64. Any Government Order or Incentive Scheme does not governthe Grid Support Charges. Grid Code is the basis for levy of the GridSupport Charges, which came to be approved by the Commission on26.5.2001. The same is also reflected in the impugned order. Thus, inCcase of installation of another CPP, that would be an additional load onthe grid, and there is no embargo for setting up additional grid CPP inthe form of expansion as grid acts as cushioning. The Grid SupportCharges can be levied, and the order dated 8.2.2002 of the Commissionis, thus on the parity of the reasonings, has to be upheld consideringthe provisions of Section 21 (3) of the Reforms Act, 1998. UnderDsection 11 read with section 26 of the Reforms Act, 1998, all fixedcharges under the distribution and Grid Support Charges are leviableonly at the instance of a distribution company, and because of thediscussion above, the Commission has the powers to determine it. Inthe agreements also there is a power where the Board could have fixedEthe Grid Support Charge unilaterally, but because of Reforms Act, 1998came to be enacted, the application was filed in the Commission. Afterthat, the Commission has passed the order in accordance with the law.We find no fault in the same. Thus, the order of the Commissionconcerning the Grid Support Charges has to be upheld. The judgmentand order of the High Court are liable to be set aside concerningFwheeling charges as well as Grid Support Charges.

IN RE: INCENTIVES TO NON-CONVENTIONALENERGY

65. The question involved in the third batch of appeals is whetherGincentives to be continued to the non-conventional energy. The tarifforders were passed in the years 2004-05, 2005-06, and 2006-09 by theAPERC in exercise of the power conferred under Section 62 of theElectricity Act, 2003. The appeals were preferred before the APTELunder Section 111 of the Electricity Act, 2003. The main question forconsideration was whether Government Orders issued on 18.11.1997Hand 22.12.1998, by the Andhra Pradesh Government, extending specific TRANSMISSION CORP. OF ANDHRA PRADESH LTD. v.M/S RAIN CALCINING LTD. & OTHERS [ARUN MISHRA, J.]

incentives to the producers of electricity from non-conventional energyresources, are binding and Doctrine of Promissory Estoppel against theGovernment and Commission was bound to give effect to them.

A

66. The Government Order dated 18.11.1997, encouragesrenewable energy/non-conventional energy sources. The Governmentdecided to provide specific incentives, thus:

B

“The Government, after careful examination of therecommendations and with a view to encourage generation ofelectricity from renewable sources of energy hereby allow thefollowing uniform incentives to all the projects based onrenewable sources of energy viz. Wind, Biomass, Co-generation,Municipal Waste, and Mini Hydel:

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Sl.No.DESCRIPTION

G

This order issues with the concurrence of Finance & Planning(Fin.) Department vide their U.O. No.46291/351/EBS-EFES&T/97, dated 18.11.1997.”

67. The Government issued another GO MS No.112 dated22.12.1998, making precise clarification that the benefits shall be H

Aavailable only to the power projects where fuel used is from non-conventional energy sources, which are of the nature of renewablesources of energy. The Scheme shall be watched for three years. Afterthat, the State Electricity Board shall come up with suitable proposalsfor the continuance of incentives in the present form or modified form.

B68. The Commission had passed the tariff orders dated 22.3.2005and 23.3.2006 for the years 2004-05, 2005-06, and 2006-09. TheAPTEL vide impugned judgment and order has allowed the appeals andhas held that effect of the policy decisions dated 18.11.1997 and22.12.1998, which had a statutory flavor, had not been taken away bythe provisions contained in the Electricity Act, 2003. The policy hasCcreated vested rights in favour of entrepreneurs, and these vested rightscould not have been taken away. The rights created by GOMS No.93dated 18.11.1997, would continue to operate until and unless they arewithdrawn in accordance with law. The Doctrine of PromissoryEstoppel is attracted, though the Commission has the power to regulateDwheeling charges. It needed to address the question. The Commissionhas lost sight of the spirit behind G.O. MS Nos.93 and 112, dated18.11.1997 and 22.12.1998, respectively. Aggrieved by the decision ofAPTEL, the APTRANSCO has preferred the appeals.

69. To consider the applicability of Promissory Estoppel, it hasEto be seen whether the aforementioned Government Orders containedan unequivocal commitment to extend benefits. On the contrary, thebenefit was confined only to three years. The Commission under theprovisions of the Reforms Act, 1998 extended it from time to time andthe last such extension came to an end on 28.7.2001. The Commissiondecided not to extend the benefit by the impugned order determiningFthe tariff.

70. This Court in Transmission Corporation of AndhraPradesh Limited & another v. Sai Renewable Power Private Limited& others, (2011) 11 SCC 34, has considered the abovementioned G.O.MS dated 18.11.1997 and 22.12.1998, in which APERC undertook theGreview of tariff applicable to the producers of electricity from non-conventional energy resources. In the year 2003, the Commissionundertook a further review of the tariff. Contrary to the expectationsof the producers of electricity from non-conventional energy resources,the Commission vide order dated 20.3.2004, has reduced the amountHof tariffs. The producers from non-conventional energy resources challenged this order before the APTEL, which vide order dated2.6.2006, declared the order dated 20.3.2004 of the Commission asvalid. One of the grounds raised before the Tribunal was that purchaseprice of 2.25 per unit was fixed based on the Central Government letterdated 7.9.1993 and Andhra Pradesh abovementioned G.O. MS.Therefore, the Commission could not back out from the promise madein these Government communications. The plea found favour with theTribunal. The Tribunal’s order dated 2.6.2006 was challenged in theappeals, which were decided by this Court. One of the issues beforethis Court was whether the Commission was estopped from passingan order, which would be contrary to the provisions of the Governmentcommunications dated 7.9.1993, 18.11.1997, and 22.12.1998. Theappeals were allowed by this Court, and this Court held that the Tribunalfell in error of law in concluding that Regulatory Commission had nopowers either in law or otherwise of reviewing the tariff and so-calledincentives. There was no unequivocal commitment to the respondent/purchasers/ generators/ developers to bind the State for all times tocome. There was no definite, unambiguous representation, hence pleaof estoppel was not attracted. This Court has observed:

“68. In addition to the statutory provisions and the judgmentsaforereferred, we must notice that all the PPAs entered into bythe generating companies with the appropriate body, as well asthe orders issued by the State in GOMs Nos. 93 and 112, in turn,had provided for review of tariff and the conditions. The Tribunalappears to have fallen in error of law in coming to the conclusionthat the Regulatory Commission had no powers either in law orotherwise of reviewing the tariff and so-called incentives. Everydocument on record refers to the power of the authority/Commission to take a review on all aspects including that of thetariff.

74. Again, vide GOMs No. 112 dated 22-12-1998, referring tothe extension of all these uniform incentives, certain amendmentswere carried out to GOMs No. 93 dated 18-11-1997. Clause 2of thisorder referred that the operation of the incentive schemeshall be watched for a period of three years and at the end ofthree years the Electricity Board shall come up with suitableproposals for review for further continuance of the incentives inthat form, or to be modified suitably. Keeping these guidelines inmind, the State of Andhra Pradesh vide GOMs No. 93 dated 18- AB

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11-1997, while referring to the guidelines issued by theGovernment of India for promotional and fiscal incentives, noticedthe various representations which were received from the non-conventional energy developers for extension of benefits as aforereferred in relation to all non-conventional energy resourcesuniformly.

80. On the basis of this factual matrix, the respondents claimedthat the State Government and the Regulatory Commission bothwere bound to continue the incentives as were provided to themin furtherance of the letters and orders of the Central as well asthe State Governments discussed above. They have a legitimateright to expect that these incentives were to be continuedindefinitely in the same manner, and the authorities concernedare estopped from altering the rates and/or imposing the conditionof no sale to third parties. We are unable to find any merit inthis contention. In our view, the Tribunal has erred in law intreating these inter se letters and guidelines between theGovernment of India, State Government and the Commission/theState Electricity Board as unequivocal commitments to therespondent/purchasers/generators/developers so as to bind theState for all times to come. For the principle of estoppel to beattracted, there has to be a definite and unambiguousrepresentation to a party which then should act thereupon andthen alone, the consequences in law can follow.

81. In the present case, the policy guidelines issued by the CentralGovernment were the proposals sent to the State Government,which the State Government accepted to consider, amend or alteras per their needs and conditions and then make efforts toachieve the objects of encouraging non-conventional energygenerators and purchasers to enter into this field. These are thematters, which will squarely fall within the competence of theRegulatory Commission/the State Electricity Board at the relevantpoints of time. Besides that, there was no definite and clearpromise made by the authorities to the developers that wouldinvoke the principle of promissory estoppel. Undoubtedly, toencourage participation in the field of generation of energy throughnon-conventional methods, some incentives were provided, butthese incentives under the guidelines, as well as under the PPAssigned between the parties from time to time, were subject to

review. In any case, the matter was completely put at rest bythe order of 20-6-2001 and the PPAs voluntarily signed by theparties at that time, which had also provided such stipulations. Ifsuch stipulations were not acceptable to the parties, they oughtto have raised objections at that time or at least within areasonable time thereafter. The agreements have not only beensigned by the parties, but they have been fully acted upon for asubstantial period. We have already referred to various statutoryprovisions where the Regulatory Commission is entitled todetermine the tariff. In this situation, we are unable to agree withthe view taken by the Tribunal that the Regulatory Commissionhad no jurisdiction and that fixation of tariff does not includepurchase price for buy-back of the generated power.

82. The principle of promissory estoppel, even if it was applicableas such, the Government can still show that equity lies in favourof the Government and can discharge the heavy burden placedon it. In such circumstances, the principle of promissory estoppelwould not be enforced against the Government as it is primarilya principle of equity. Once the ingredients of promissory estoppelare satisfied, then it could be enforced against the authorities,including the State, with very few extraordinary exceptions tosuch enforcement. In the United States, the doctrine ofpromissory estoppel displayed remarkable vigour and vitality, butit is still developing and expanding. In India, the law is more orless settled that where the Government makes a promise knowingor intending that it would be acted upon by the promisee and infact the promisee has acted in reliance of it, the Government maybe held to be bound by such promise.”

71. Concerning aforesaid Government Orders dated 18.11.1997and 22.12.1998, this Court already held that plea of promissory estoppelis not attracted, and there was no unequivocal promise. We are of theopinion that there was no material change in the facts and circumstancesof the case to attract the plea of promissory estoppel based onGovernment orders mentioned earlier. The Tribunal has passed an order,by which it had temporarily extended the period to 24.7.2001. In theimpugned order dated 24.3.2002, the objection raised of the non-conventional energy developers regarding wheeling charges was dealt ABC

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Awith and it was stated that non-conventional energy have to pay thewheeling charges without discrimination and it was also stated that ifGovernment wants to pay any subsidy, it may pass fresh order tocompensate the licensee. The Government has, after that, never givenany subsidy, for subsidy care is taken by the statutory provisioncontained in the Electricity Act, 2003. Section 65 of the Electricity Act,B2003, provides that if State Government requires grant of any subsidyto any consumer in the tariff determined by the State Commission underSection 62, the State Government shall, notwithstanding, any directionwhich may be given under Section 108, pay, in advance and in suchmanner as may be specified, the amount to compensate the personCaffected by the grant of subsidy in the manner the State Commissionmay direct. Subsidy/incentive is governed by Section 65, and theGovernment has not issued any such direction to continue the incentivesin the form of subsidy. It was open to the Government to do so becauseof the order passed by the Commission, but it has not extended suchbenefit. No command can be given to State to grant subsidy.D

72. Thus, we find that the order of APTEL based on the Doctrineof Promissory Estoppel for continuing the benefit of Government Ordersdated 18.11.1997 and 22.12.1998, cannot be said to be in accordancewith the law. The order of APTEL is liable to be set-aside, and thatpassed by the APERC has to be restored.E

73. Resultantly, we have to allow the appeals. The judgment andorder passed by the High Court relating to wheeling charges and gridsupport charges and that passed by the APTEL regarding continuanceof incentive as per G.O. MS dated 18.11.1997 and 22.12.1998, are setaside. The appeals are allowed, and the orders passed by APERC areFrestored. No costs.

Devika Gujral

Appeals allowed.

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