Chattisgarh High Court
S K S Ispat And Power Ltd vs Chhattisgarh State Electricity ... on 15 December, 2022
1
AFR
HIGH COURT OF CHHATTISGARH, BILASPUR
WPC No. 36 of 2017
SKS Ispat & Power Ltd., A Company Incorporated Under the Authorized
Signatory, Shir Gopal Garg, having its Office at 501b, elegant business park,
Andheri Kurla Road, J.B. Nagar, Andheri (E), Mumbai - 400059 and factory
at siltara, industrial growth centre, Phase-II, 18 th Milestone, Bilaspur Road,
Raipur, Chhattisgarh.
---- Petitioner
Versus
1. Chhattisgarh State Electricity Regulatory Commission, through its
Secretary, having its Regd. Office at Civil Lines, G.E. Road, Raipur,
Chhattisgarh 492001.
2. State of Chhattisgarh, through the Secretary,Department of Energy,
Mantralaya, Naya Raipur, Chhattisgarh.
3. Chhattisgarh State Power Distribution Company Ltd.,Through the
Managing Director, 4th Floor, Vidyut Sewa Bhawan, Daganiya Raipur,
Chhattisgarh - 492013.
4. Chhattisgarh State Power Transmission Company Ltd. Through its
Managing Director, Vidyut Sewa Bhawan, Daganiya, Raipur,
Chhattisgarh.
5. Power Grid Corporation of India Ltd. Through its Director B-9, Qutab
Institutional Area, Katwaria Sarai, New Delhi - 110016.
---- Respondents
(Cause-title taken from Case Information System)
For Petitioner : Mr. Ankit Singhal, Advocate.
For Respondents No.1 : Mr. Anand K. Ganeshan along with
Mr. Anumeh Shrivastava, Advocate.
For Respondent No. 2 : Ms. Astha Shukla, Government Advocate.
For Respondents No. 3 & 4 : Mr. K.R. Nair and Dr. Veena Nair,
Advocates.
Dates of hearing : 18.11.2022, 22.11.2022 and 17.12.2022.
Date of Order : 15.12.2022.
Hon'ble Shri Arup Kumar Goswami, Chief Justice
Hon'ble Shri Sajay Agrawal, Judge
C A V Judgment
By this petition, the petitioner challenges the vires of Regulation 4.4.6
of the Chhattisgarh State Electricity Grid Code, 2011 (for short, 'State Grid
Code') issued by the Chhattisgarh State Electricity Regulatory Commission
(for short, 'State Regulatory Commission') under Section 86(1)(h) of the
Electricity Act, 2003, for short, the Electricity Act, on the ground that the
same is contrary to the Electricity Act. Prayer is also made to set aside the
order dated 30.04.2016 passed by the State Regulatory Commission in
Suo-Motu Petition No. 56/2015 (M) levying "Parallel Operational Charges"
on Captive Power Plants (CPPs) and for a direction that the Chhattisgarh
State Power Distribution Company Limited (CSPDCL) i.e. respondent No.3,
does not have authority and power to levy and collect Parallel Operational
Charges from CPPs under Regulation of 4.4.6 of the State Grid Code.
2. The petitioner is a company which manufactures steel and iron in the
State of Chhattisgarh. For the purpose of meeting the requirements of
electricity, it had established a 85 MW CPP. The CPP of the petitioner is
connected to the State Transmission Utility (STU), which is the respondent
No. 4.
3. Mr. Ankit Singhal, learned counsel for the petitioner submits that the
impugned regulation is inconsistent with the Grid Code specified by the
Central Electricity Regulatory Commission, for short, 'Central Regulatory
Commission', under Section 79(1)(h) of the Electricity Act as the concept of
"Parallel Operation Charges" as finding place in Regulation 4.4.6 is not
mentioned in the Indian Electricity Grid Code, 2010, for short, 'Central Grid
Code', as notified by the Central Regulatory Commission.
4. It is further submitted that the exercise of power under Section 181(zp)
of the Electricity Act is also a violation of express provision of Section 62(5)
read with Section 181(zf) of the Electricity Act as by exercising the general
power under Section 181(zp), the State Commission cannot over-ride the
express provision of Section 62(5) and Section 181(zf) of the Electricity Act. It
is further submitted that levy of Parallel Operation Charges only on CPP is
discriminatory and unjust as Independent Power Plants (IPPs) had not been
subjected to levy of Parallel Operation Charges.
5. Abiding by the stand taken in the reply filed, Mr. Anand K. Ganeshan
along with Mr. Anumeh Shrivastava, learned counsel, appearing for
respondent No. 1 submits that the issue is squarely covered by a judgment of
the Hon'ble Supreme Court in the case of Transmission Corporation of
Andhra Pradesh Limited v. M/s. Rain Calcining Ltd. and other, reported in
2019 SCC Online SC 1537. It is submitted that even prior to the impugned
regulation, the State Regulatory Commission had passed orders determining
Parallel Operation Charges, which had also been subjected to appeal before
the Appellate Tribunal for Electricity, established under Section 111 of the
Electricity Act, wherein the orders had been upheld and sustained. It is
submitted that the State Regulatory Commission had relied on a detailed
report on evaluation of Parallel Operation Charges by financial and technical
consultant. It is submitted that absence of a provision in the Central Grid
Code does not mean that existence of a provision in the State Grid Code
would amount to any inconsistency. Section 79 of the Central Commission
does not relate to consumption of electricity and all that is required under
Section 86(1)(h) is that the State Grid Code should be consistent with the
Central Grid Code. Section 62(5) of the Electricity Act has no relation
whatsoever with the exercise of power under Section 181(zp) and that
Section 62(5) read with Section 181(zf) only provide that a licensee or
generating company will be required to comply with the procedure specified
for calculating the revenue from tariff and charges which the licensee or
generating company is permitted to recover. He has submitted that the State
Regulatory Commission had published a Draft Regulation on 27.11.2011 on
its website as well as in newspapers inviting comments to be given within a
period of 22 days in response to which five stakeholders submitted their
comments. A public hearing had taken place on 21.12.2011 and thereafter
only, taking into account the view points and comments, the regulation was
notified on 31.12.2011. It is submitted that only because CPP is connected to
the STU does not mean that levy of Parallel Operation Charges is to be by
the Transmission Company. It is the respondent No. 3 i.e. CSPDCL, which
has given the contract load and therefore, the Distribution Company is
entitled to levy and collect the Parallel Operation Charges. It is also submitted
that amounts, which are levied and collected by the Distribution Company,
are duly taken note of by the State Regulatory Commission in the annual tariff
fixation exercise.
6. At this juncture, it is to be noted that in the writ petition as was originally
filed, no plea was taken that levy of Parallel Operation Charges only on CPP
is discriminatory as the same was not levied on IPPs. Such a plea was
brought in by way of an amendment, which was allowed on 26.08.2022.
7. After the amendment was allowed, the respondents No. 3 and 4 had
filed a reply seeking to justify as to why no Parallel Operation Charges are
levied or recovered from the IPPs.
8. Mr. K.R. Nair, learned counsel, appearing for respondents No. 3 and 4
submits that the respondents No. 3 and 4 had adopted the reply filed by the
respondent No. 1 and he seeks to adopt the submissions of Mr. Ganeshan.
In addition, he submits that there is no factual foundation to mount a
challenge on the ground of discrimination qua IPPs. He has submitted that
CPP is set up in compliance of conditions prescribed in Rule 3 of the
Electricity Rules, 2005, and the same does not apply to IPPs. While CPPs
generate electricity primarily for it is own use, IPPs generate electricity not for
its own use but for bulk sale to a distribution licensee as per power purchase
agreement. IPPs do not use the grid for generation of electricity but use the
grid for export. IPPs have to pay transmission / wheeling charges, which
CPPs do not have to pay. It is also submitted that transmission / wheeling
charges are much more than Parallel Operation Charges.
9. We have considered the submissions of the learned counsel for the
parties and have perused the materials on record.
10. At the outset, it will be appropriate to take note of some definitions.
Section 2 (8) defines "Captive generating plant" to mean a power plant set up
by any person to generate electricity primarily for his own use and includes a
power plant set up by any co-operative society or association of persons for
generating electricity primarily for use of members of such co-operative
society or association. Section 2 (32) defines "grid" to mean the high voltage
backbone system of inter-connected transmission lines, sub-station and
generating plants. Section 2 (33) defines "Grid Code" to mean the Grid Code
specified by the Central Commission under clause (h) of the section 79 (1).
Section 2 (64) defines "State Commission" to mean the State Electricity
Regulatory Commission constituted under section 82 (1) and includes a Joint
Commission constituted under section 83 (1). Section 2 (67) defines "State
Transmission Utility" to mean the Board or the Government company
specified as such by the State Government under Section 39 (1). Section 2
(76) defines "wheeling" to mean the operation whereby the distribution
system and associated facilities of a transmission licensee or distribution
licensee, as the case may be, are used by another person for the conveyance
of electricity on payment of charges to be determined under Section 62.
11. The functions of the Central Regulatory Commission under Section
79(1) read as follows:
"79. Functions of Central Commission.- (1) The
Central Commission shall discharge the following
functions, namely :-
(a) to regulate the tariff of generating companies
owned or controlled by the Central Government;
(b) to regulate the tariff of gene rating companies other
than those owned or controlled by the Central
Government specified in clause (a), if such generating
companies enter into or otherwise have a composite
scheme for generation and sale of electricity in more
than one State;
(c) to regulate the inter-State transmission of
electricity;
(d) to determine tariff for inter-State transmission of
electricity;
(e) to issue licenses to persons to function as
transmission licensee and electricity trader with
respect to their inter-State operations;
(f) to adjudicate upon disputes involving generating
companies or transmission licensee in regard to
matters connected with clauses (a) to (d) above and to
refer any dispute for arbitration;
(g) to levy fees for the purposes of this Act;
(h) to specify Grid Code having regard to Grid
Standards;The Electricity Act, 2003;
(i) to specify and enforce the standards with respect to
quality, continuity and reliability of service by
licensees;
(j) to fix the trading margin in the inter-State trading of
electricity, if considered, necessary;
(k) to discharge such other functions as may be
assigned under this Act."
12. Functions of the State Regulatory Commission are delineated in
Section 86 and the same read as follows:
"86. Functions of State Commission.- (1) The State
Commission shall discharge the following functions,
namely:-
(a) determine the tariff for gene ration, supply,
transmission and wheeling of electricity, wholesale, bulk
or retail, as the case may be, within the State:
Provided that where open access has been
permitted to a category of consumers under section
42, the State Commission shall determine only the
wheeling charges and surcharge thereon, if any, for
the said category of consumers;
(b) regulate electricity purchase and procurement
process of distribution licensees including the price at
which electricity shall be procured from the generating
companies or licensees or from other sources through
agreements for purchase of power for distribution and
supply within the State;
(c) facilitate intra-State transmission and wheeling of
electricity;
(d) issue licences to persons seeking to act as
transmission licensees, distribution licensees and
electricity traders with respect to their operations within
the State;
(e) promote co-generation and generation of electricity
from renewable sources of energy by providing suitable
measures for connectivity with the grid and sale of
electricity to any person, and also specify, for purchase
of electricity from such sources, a percentage of the
total consumption of electricity in the area of a
distribution licensee;
(f) adjudicate upon the disputes between the licensees,
and generating companies and to refer any dispute for
arbitration;
(g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with the Grid
Code specified under clause (h) of sub-section (1) of
section 79; (i) specify or enforce standards with respect
to quality, continuity and reliability of service by
licensees;
(j) fix the trading margin in the intra-State trading of
electricity, if considered, necessary; and
(k) discharge such other functions as may be assigned
to it under this Act".
13. A perusal of functions of State Regulatory Commission and Central
Regulatory Commission would go to show that both the Commissions are
assigned different functions. However, both the Commissions are to specify
the Grid Code.
14. Section 62(5) provides that the Commission may require a licensee or a
generating company to comply with such procedure as may be specified for
calculating the expected revenues from the tariff and charges which it is
permitted to recover.
15. Section 181 deals with power of State Regulatory Commission to make
regulations. Section 181 (zf) enables the Commission to regulate the
methodologies and procedures for calculating the expected revenue from
tariff and charges under Section 62(5). Section 181(zp) enables the State
Commission to frame regulations for any other matter which is to be, or may
be specified.
16. The State Regulatory Commission had framed the State Grid Code
under Section 86(1)(h) of the Electricity Act read with Section 181(zp). It is
not understood how framing of the State Grid Code under the aforesaid two
provisions violate Section 62(5) and Section 181(zf). No specific power under
Section 181 is conferred on the State Regulatory Commission to make
regulations relating to State Grid Code and therefore, general power under
Section 181(zp) was referred to.
17. Clause 4.4 of the State Grid Code is on the subject of General
Principles and Conditions for Grid Connectivity.
18. Clause 4.4.6 reads as follows:
"Captive generators if having connectivity with STU system
may have to pay parallel operation charges to the
concerned licensee, as may be decided by the
Commission from time to time. "
19. It is not disputed by Mr. Ganeshan that in the Central Grid Code, there
is no mention of Parallel Operation Charges.
20. The State Regulatory Commission, in terms of Section 86(1)(h), is to
specify the State Grid Code which is consistent with the Central Grid Code
specified under Section 79(1)(h). It is not necessary that the State Grid Code
has to replicate what is there in the Central Grid Code specified under
Section 79(1)(h). Absence of such a provision in the Central Grid Code under
Section 79(1)(h) does not mean that existence of such a provision in the
State Grid Code framed would amount to inconsistency. Inconsistency would
arise when the provisions as enacted in the State Grid Code cannot co-exist
with the Central Grid Code framed under Section 79(1)(h). No material has
been placed before this Court by the petitioner to show how Regulation 4.4.6
is inconsistent with Central Grid Code framed under Section 79(1)(h) save
and except stating that concept of Parallel Operation Charges is not finding
place in the Central Grid Code.
21. The Full Bench of the Appellate Tribunal in the case of Chhattisgarh
State Power Distribution Co. Limited v. Godawari Power & Ispat Ltd
dated 08.02.2011, while upholding the levy of Parallel Operation Charges,
had observed as follows:
" 17. The parallel operation is a facility in the nature of a
Grid support to the Captive Power Plant. The Captive
Power Plant gets the following advantages owing to the
parallel operation with the Grid:
(i) The fluctuations in the load of CPP are absorbed
by the utility grid in the parallel operation mode. This
will reduce the stresses on the captive generator
and equipments. The CPP can operate his
generating units at constant power generation mode
irrespective of his load cycle.
(ii) Absorption of harmonics.
(iii) Negative phase sequence current is generated
by unbalance loads. The magnitude of negative
phase sequence current is much higher at the point
of common coupling than at generator output
terminal. This unbalance current normally creates
problem of overheating of the generators and other
equipments of CPP, if not running in parallel with
grid. When they are connected to the grid, the
negative phase sequence current flows into the grid
and reduces stress on the captive generator.
(iv) Captive Power Plants have higher fault level
support when they are running in parallel with the
grid supply. Because of the higher fault level, the
voltage drop at load terminal is less when connected
with the grid.
(v) The grid provides stability to the load of Captive
Power Plant to start heavy loads like HT motors.
(vi) The variation in the voltage and frequency at the
time of starting large motors and heavy loads, is
minimized in the industry, as the grid supply acts as
an infinite bus. The active and reactive power
demand due to sudden and fluctuating load is not
recorded in the meter.
(vii) The impact created by sudden load throw off
and consequent tripping of CPP generator on over
speeding is avoided with the grid taking care of the
impact.
(viii) The transient surges reduce the life of
equipment of the CPP. In some cases, the
equipment fails if transient is beyond a limit. If the
system is connected to the grid, it absorbs the
transient surges. Hence, grid enhances the life of
CPP equipments.
18. In short, the gain to the Captive Power Plant is quite
substantial in case there is grid support. Owing to the above
said substantial gains to the Captive Power Plant by
operating in parallel with the grid, the parallel operation
charges are levied from the Captive Power Plant."
22. Parallel Operation Charges is akin to grid support connectivity and that
it is a facility in the nature of grid support of CPP. The rationale behind
Parallel Operation Charges, as submitted, is that, it enables the industries to
export surplus electricity and the same is a source of imported power in
emergency.
23. Under Rule 3 of the Electricity Rules, 2005 framed in exercise of
powers conferred under Section 176 of the Electricity Act, it is provided,
amongst others, that no power plant shall qualify as a "Captive Generating
Plant" under Section 9 read with Section 2(8) of the Electricity Act unless in
case of power plant not less than 26 percent of the ownership is held by the
captive users and not less than 51 percent of the aggregate electricity
generated in such plant determining on an annual basis, is consumed for
captive use.
24. An order was passed by the State Regulatory Commission on
06.02.2006 in Review Petition No. 17/2005, reviewing Parallel Operation
Charges. Another Review Petition seeking review of the said order dated
06.02.2006 was rejected by an order dated 04.05.2006 as against which
some appeals were preferred before the Tribunal. While not interfering with
the order of the State Regulatory Commission, the Tribunal had remanded
back the matter to the Commission with a direction that the Parallel Operation
Charges may be fixed on the basis of data, materials and scientific input.
Accordingly, the State Regulatory Commission had taken up the task of
determination of Parallel Operation Charges and had registered Suo Motu
Petition No. 39 of 2006 (M). M/s Electrical Research and Development
Association (ERDA) was assigned the task to collect various data or
parameters of some representative CGPs in the State and to suggest the rate
of Parallel Operation Charges.
25. Ultimately, two options were available for determining the
methodologies for dealing with Parallel Operation Charges. The State
Regulatory Commission, at paragraph 18 of the order dated 30.04.2016
observed as follows:
"18. After analyzing the comments / suggestions above,
the Commission is of view that formula in Option #2 is
more appropriate for computation of POC. The total
generation in KVA deducted by KVA consumed in
auxiliaries and exported shall give use the exact KVA
consumed by industrial load of the CGP. Formula for
bulling of parallel operation charges shall be as follows;
POC = *Max differences in KVA in a 15 min time
block in a month x Rate of POC (Rs./KVA)
*Maximum difference = Max Σ (Average Gross
generation in KVA in 15 min time block - Aux
consumption in KVA in the same 15 min time
block - Average Power exported to grid in KVA in
the same 15 min time block)
Present Rate of POC is Rs. 21/KVA."
26. In the order dated 30.04.2016 passed by the State Regulatory
Commission, it is noted that on 15.06.2005, the Commission had fixed
Parallel Operation Charges for availing grid support.
27. In the Transmission Corporation of Andhra Pradesh Limited
(supra), one of the questions considered was regarding grid support charges,
which are levied on the HT consumers, who have rated contracted maximum
demand (CMD) and CPP capacity to meet their demands. It was observed
that the significant benefit which a CPP gets is in case of outage of CPP
generator, power is drawn from the grid and in case of tripping, the entire
load is transferred on to the grid. Such disturbance is catered by way of grid
support and equipment installed by the Distribution Companies and
investment through public exchequer. It is observed that the grid acts as a
cushion / big buffer when the generation from CPP is idled due to sudden
outage in the load, thereby mitigating the forced tripping of the CPP and this
support is known as grid support and CPPs running in parallel are known as
running with Parallel Grid Support. In the said case, the State Regulatory
Commission had held that the grid support charges would be payable at the
rate of 50% of prevailing demand charges on the differential CPP capacity
and CMD. The aforesaid decision was set aside by the High Court. In respect
of grid support charges, the Hon'ble Supreme Court observed as follows:
"IN RE:GRID SUPPORT CHARGES
71. With respect to Grid Support Charges, it has been
conceded by the learned counsel for the parties that the
decision in the aforesaid batch of matters as to wheeling
charges has to govern grid support charges as we have
upheld that order of the Commission with respect to
wheeling charges, the order of the High Court has to be set
aside.
72. Any Government Order or Incentive Scheme does
not govern the Grid Support Charges. Grid Code is the
basis for levy of the Grid Support Charges, which came to
be approved by the Commission on 26.05.2001. The same
is also reflected in the impugned order. Thus, in case of
installation of another CPP, that would be an additional load
on the grid, and there is no embargo for setting up
additional grid CPP in the form of expansion as grid acts as
cushioning. The Grid Support Charges can be levied, and
the order dated 8.2.2002 of the Commission is, thus on the
parity of the reasonings, has to be upheld considering the
provisions of Section 21(3) of the Reforms Act, 1998. Under
Section 11 read with Section 26 of the Reform Act, 1988, all
fixed charges under the distribution and Grid Support
Charges are leviable only at the instance of a distribution
company, and because of the discussion above, the
Commission has the powers to determine it. In the
agreements also there is a power where the Board could
have fixed the Grid Support Charge unilaterally, but
because of Reforms Act, 1998 came to be enacted, the
application was filed in the Commission. After that, the
Commission has passed the order in accordance with the
law. We find no fault in the same. Thus, the order of the
Commission concerning the Grid Support Charges has to
be upheld. The judgment and order of the High Court are
liable to be set aside concerning wheeling charges as well
as Grid Support Charges."
28. A perusal of the above would go to show that it was held by the Hon'ble
Supreme Court that grid support charges can be levied and that the same is
leviable at the instance of the Distribution Company. Although, the order of
the Commission was prior to coming into force of the Electricity Act, we are of
the considered opinion that the principles laid down by the Hon'ble Supreme
Court will also apply in the instant case.
29. We are inclined to accept the submission of Mr. Nair that except for
making a statement, that too, at a very belated stage after almost 5½ years
of filing of the writ petition, plea of discrimination vis-a-vis IPPs was taken
without stating how the CPPs and the IPPs are similarly or identically
situated. Question of discrimination will arise only when two entities similarly
or identically situated are differently treated.
30. In view of the above discussion, we find no merit in this petition and
accordingly, the same is dismissed.
Sd/- Sd/-
(Arup Kumar Goswami) (Sanjay Agrawal)
(Chief Justice) (Judge)
Hem
