Central Electricity Supply Company of Orissa Ltd. (CESCO, for short) 18, Forest Park, Bhubaneswar, the holder of licence for carrying on the business of Distribution & Retail Supply of electricity in its licensed area of supply namely Electrical Circles of Bhubaneswar, Cuttack, Dhenkanal and Paradeep, submitted an application on 30.09.99 u/s 26 of the Orissa Electricity Reform Act, 1995 (Reform Act, 1995, for short) in respect of tariff for retail supply of electricity to different categories of consumers.

2.0

The application of CESCO is in two volumes (Vol.1 containing the main text & annexures and Vol. 2 containing evidential documents). The Commission’s staff, after preliminary scrutiny of the application, raised a number of comments/queries thereon. The Commission forwarded the comments/queries to CESCO and asked for additional information from CESCO in order to enable the Commission to decide whether the filing would be treated as complete for the purpose of proceeding u/s 26 of the Reform Act, 1995.

2.1

CESCO provided clarifications to the comments/queries in a bound volume on 5^th October, 1999. In the light of the clarifications to the comments/queries and additional information received from it, the filing appeared to be generally in order. Accordingly the filing was treated as complete and by Order No.2 dt.06.10.99, the application in question was admitted and issue of public notice inviting objections to CESCO’s application was ordered.

2.1.1

Notice was published, as approved by the Commission, in several local newspapers on two consecutive days in terms of Clause 39 r/w sub-clause (1) of Clause-126 of the Orissa Electricity Regulatory Commission (Conduct of Business) Regulations, 1996 (Regulations, 1996, for short) outlining the broad features of the Distribution & Retail Supply Licensee’s proposed tariff and the rates & charges in a Schedule appended to the notice and inviting objections from interested persons. The public notice required the interested persons to file their objections and such documents as they seek to rely upon, supported by an affidavit, in six copies and to indicate also if they would like to be heard in person by the Commission in terms of Clause 43 of the Regulations, 1996. The notice further required the interested persons to serve a copy of the reply/objection alongwith the documents relied upon on the petitioner/applicant and to file proof of such service before the Commission at the time of filing of the reply/objection in terms of Clause 44 of the Regulations, 1996.

2.1.2

The above public notice also called upon the interested persons/objectors to inspect/peruse CESCO’s application and take note thereof during office hours within 15 days of the publication of the notice. The public notice also permitted the interested persons to obtain the salient features of the application on payment of Rs.20/- towards photocopying charges from the Managing Director, CESCO, Bhubaneswar and all Executive Engineers in charge of Distribution Divisions such as Bhubaneswar City Distribution Division, Bhubaneswar, Bhubaneswar Electrical Division, Bhubaneswar, Cuttack City Distribution Division, Cuttack, Cuttack Electrical Division, Cuttack, Puri Electrical Division, Puri, Khurda Electrical Division, Khurda, Nayagarh Electrical Division, Nayagarh, Kendrapara Electrical Division No.I, Kendrapara, Kendrapara Electrical Division No.-II, Marsaghai, Jagatsinghpur Electrical Division, Jagatsinghpur, Athagarh Electrical Division, Athagarh, Salipur Electrical Division, Salipur, Talcher Electrical Division, Chainpal, Dhenkanal Electrial Division, Dhenkanal and Angul Electrical Division, Angul. They were also permitted to obtain a full set of the application together with supporting materials on payment of Rs.100/- towards photocopying charges.

2.1.3

The last date of filing of objection complying with the terms & conditions of the public notice was initially fixed as 31.10.99. The date fixed for filing of objection was extended to 15.11.99 because of the super cyclone which hit Orissa on 29^th and 30^th October, 1999. A notice in print media such as "Samaya" (dt.05.11.99) and "New Indian Express" (dt.3.11.99) was published extending the date of filing of objection with regard to the Retail Supply Tariff (RST) applications of the Distribution and Retail Supply Licensees for the information of the general public and interested persons. The notice regarding extension of the date of filing of the objection was also displayed on the office Notice Board.

2.2

The Commission received 33 objections against CESCO’s application out of which twelve were rejected for non-compliance of the terms & conditions as laid down in the public notice while 21 objections were admitted according permission to the objectors for participating in the hearing. The objectors whose objections were admitted for hearing are (1) M/s Shakti Sugars Cane Growers Rural Development & Water Users Society, At Haripur, P.O. Korian, Dist. Dhenkanal. (2) M/s Shakti Sugars Cane Growers Rural Development & Water Users Society, At/P.O. Baramba, Dist. Cuttack. (3) M/s Nava Bharat Ferro Alloys Ltd., At/P.O. Khadgaprasad (Near Meramundali Rly. Station), Dist. Dhenkanal. (4) M/s Utkal Chamber of Commerce & Industry Ltd., Barabati Stadium, Cuttack. (5) M/s IPISTEEL Ltd., At/P.O. Buxi Bazar, Dist. Cuttack. (6) General Secretary, Orissa Young Entrepreneurs Association, Industrial Estate, Cuttack. (7) Shri P.N. Agarwal, Director, M/s Globe Aluminium Industries (P) Ltd., New Industrial Estate, Jagatpur, Dist. Cuttack. (8) M/s Shakti Rural Development & Water Users Society, 1412, Aurobindo Nagar, Madhupatana, Cuttack. (9) Shri K.N. Jena, General Secretary, Orissa Consumers’ Association, Biswanath lane, Cuttack. (10) Shri K. Acharya, President, Orissa Grahak Mohasangha, B-4, Pallaspali, Bhubaneswar. (11) Jt. Secretary, Federation of Consumer Organisation, Orissa, Plot No.39, Budha Nagar, Bhubaneswar (12) Shri Ramachandra Mohapatra, 550, Rameswarpatana, Bhubaneswar. (13) Shri N. Jena, Secretary, Nayapalli Community Care Association, N-2/100, IRC Village, BBSR. (14) Shri J. Mohapatra, M.D., M/s Ananda Industrial Gases Ltd., 239, Kharabela Nagar, Bhubaneswar (15) Dr. S.K. Tamotia, President, Aditya Aluminium, 9^th Floor, IDCO Towers, Bhubaneswar. (16) M/s Senior Consultant and Advisor Group, N-2/95, Nayapalli, Bhubaneswar. (17) M/s NALCO, P/1, Nayapalli, Bhubaneswar. (18) Shri R.C. Padhi, Retd. Chief Engineer, MIG A/24, Brit Colony, Nayapalli, Bhubaneswar. (19) Executive Officer, Bhubaneswar Municipal Corporation, Bhubaneswar. (20) Shri S.K. Nanda, Convenor, Energy Panel, Confederation of Indian Industry, Eastern Region, 8, Forest Park, Bhubaneswar. (21) Shri Dhaneswar Dhal, A-39, Sahid Nagar, Bhubaneswar.

2.3

After receipt of the objections and scrutiny thereof, the Commission published a notice in two Oriya dailies and one English daily on 17^th & 18^th November’99 whereunder the list of valid objections with regard to CESCO’s application and the date of hearing (30.11.99 and if required, on the day following) were notified for the information of the general public.

2.3.1

In terms of Clause-45 of the Regulations, 1996, the Commission permitted the applicant to file a rejoinder to all the objections/reply filed by the objectors.

2.4

As notified, the hearing of the RST application commenced on 30.11.99. None of the parties present made any prayer to adduce oral or documentary evidence in course of the proceedings except those that were filed supported by affidavit, in response to the public notice.

2.5

Apart from the substantive objections, the following legal objections were raised by different objectors as preliminary objections on the maintainability of the tariff proceeding. The Commission heard the views of CESCO on such objections. While one of the preliminary objections was disposed of by Order dt.30.11.99, it was decided with the consent of the respective objectors that all other preliminary objections would be dealt with by the Commission in the final order.

2.5.1

The preliminary objections are as follows :-

2.5.1.1

Miscellaneous Appeal No.41 of 99 has been filed in the Hon’ble High Court of Orissa being aggrieved with the decision of the Commission in Case Nos.18/98 (BST) and 19/98 (RST) and therefore the present RST application should be rejected by the Commission as an appeal is pending against the RST determined by the Commission in its Order dt.21.11.98.

2.5.1.2

The RST application is neither a new tariff nor an amendment to the existing tariff. It is only a revision of the existing tariff. Therefore it is not permitted under law.

2.5.1.3

The RST determined by the Commission by its Order dt.21.11.98 in Case No.19/98 which has come into force from 01.12.98 cannot be revised or amended within a period of 3 years as envisaged u/s 57-A (1)(e) of the Electricity (Supply) Act, 1948 (the Act, 1948, for short) and therefore the present application for RST is not maintainable and liable to be rejected outright.

2.5.1.4

The RST determined by the Commission (in Case No.19/98) cannot be amended within one financial year unless warranted for adjustment of Fuel Surcharge.

2.5.1.5

OERC has not framed any regulation by notification in official gazette for determination of tariff u/s 29 of the Electricity Regulatory Commission Act, 1998 (the Commission Act, 1998, for short) and sub-section (2) of Section 26 of the Reform Act, 1995 and as such it lacks authority and power to consider the application of the licensee, be it for determining a new tariff or revising or amending the existing one.

(O.C.A. Para-2&4)

2.5.1.6

OERC has not yet specified the methodology and procedure for calculating expected revenue from the charges and therefore, it cannot consider the application of the licensee which is based on imaginary, vague, and manipulated statement of facts and accounts in the absence of statutory audit reports for the years 1997-98 and 1998-99.

(O.C.A. Para-5,6,&7)

2.5.1.7

Licensee has failed to comply with the conditions of the Licence to improve its efficiency, standard of service and reduce its losses and as such, it should not be allowed to make good the losses attributable to mal-administration, inefficiency, corruption, mismanagement, and unwarranted expenses by way of penalising the consumers in the form of a tariff hike.

(O.C.A. Para-8&13)

2.5.1.8

Since the application for RST has not been filed prior to the commencement of the FY 1999-00 and has been filed in the middle of the aforesaid FY, it cannot be entertained for setting a tariff for the balance or remaining part of the FY.

2.5.1.9

As the OERC has not consulted Commission Advisory Committee (CAC, for short) prior to the admission of the tariff application and issue of public notice, it would not be legal and proper to proceed with the case.

2.5.1.10

As the Commission, at present, is only a two member Commission instead of three and the member of the Commission who shall be an electrical engineer having experience of generation, transmission & distribution or supply of electricity in terms of Section- 5 (1)(a) of the Reform Act, 1995 having not been appointed as yet, the Commission now comprising two members lacks quorum to undertake and dispose of the tariff proceeding because of the bar created u/s 9(4) of the Reform Act, 1995.

2.6

We now deal with the first objection raised by Orissa Grahak Mohasangha. Though M.A. No.41/99 has been filed in the Hon’ble High Court of Orissa against the final order in BST (Case No.18/98) and RST (Case No.19/98), it is not the case of the objector that the orders of the Commission in those two cases have been stayed by the Hon’ble Court. As the final orders in Case No.18/98 and 19/98 have not been stayed by the Hon’ble Court, the plea of the objector that the present application for RST should be rejected out of hand because of the pendency of the M.A. bearing No.41/99 cannot be considered as a valid objection.

2.7

Regarding the second objection raised by Orissa Grahak Mohasangha, it may be mentioned that nowhere in the RST application, the applicant has sought for revision. On the other hand, the applicant has described the RST application as one for amendment of Distribution & Retail Supply Tariff u/s 26 of the Reform Act, 1995. Similarly, in para-B at page 5 of the RST application, it has been described as an application u/s 26 of the Reform Act, 1995 r/w Condition 21.3 of the Orissa Distribution & Retail Supply Licence for amendment of the Retail Supply Tariff approved by the Commission vide its Order dtd. November 21, 1998 in Case No.19/98.

2.7.1

Apparently there is some misunderstanding about Section 26 of the Reform Act, 1995 which is relevant to the determination of tariff by the Commission. We would like to clarify that in this section of the Reform Act, 1995, the procedure for determination of a fresh tariff or amendment of tariff is the same. There is no vaccum or even interregnum in operation of a tariff which has been defined as a schedule of standard prices or charges. This has been amply made clear in Clause 116 of Regulation, 1996. Depending on the gap between estimated revenue requirement and the aggregate revenue which a licensee is permitted to recover by the tariff in operation, the Commission may approve modification to the tariff or any part of tariff. Whether the resultant determination is called a tariff or an amendment of tariff is not of any consequence. The Commission cannot refuse to entertain an application if the Commission finds that the licensee’s filing of revenue requirement and expected revenue from charges is reasonably complete. It has to process it and take a decision within ninety days of the complete filing. Sub-sec. (6) of Section 26 of the Reform Act, 1995 lays down that except in terms of fuel surcharge formula, no tariff or part of tariff can be amended more than once in any financial year. The natural corollary is that tariff or part of any tariff can be legitimately amended once in a financial year. The current RST was set in November’98 within the financial year 1998-99. Therefore an amendment to RST during financial year 1999-00, if found justified, cannot be termed as illegal.

2.8

The third objection raised by Orissa Consumers’ Association in paras 1 & 28 of its written objection is that when the provisions of Sec.57-A of the Act, 1948 r/w the provisions of the Reform Act, 1995 contemplate that charges for the supply of electricity, once fixed, shall be in operation for three years, revision of tariff within one year would be without the authority of law.

2.8.1

The objection is purportedly based on Section 57-A of the Act, 1948. We have considered the provision of Section 57-A of the Act, 1948 and particularly sub-clauses (c) and (e) of sub-section (1) of Section 57-A quoted by Shri Jena. We find that these provisions are applicable to charges for electricity recommended by a Rating Committee and approved by the State Govt. and stipulate that such charges recommended by a Rating Committee for supply of electricity shall be in operation for such period not exceeding three years as the State Govt. may specify in the order. Sub-section (7) of Section 26 of the Reform Act, 1995 repeals the constitution of a Rating Committee making the provisions of the Act, 1948 quoted by Shri Jena inapplicable in this case. We hold that the preliminary objection by the learned counsel citing the provisions of Section 57-A of the Act, 1948 is without merit as the said provision is inapplicable in tariff proceeding under Section 26 of the Reform Act, 1995.

2.9

The fourth objection that the RST determined in Commission’s Order dated 21.11.98 (in Case No.19/98) cannot be amended within one financial year unless warranted for adjustment of fuel surcharge is already dealt with by us in para 8 above.

2.10

The fifth objection of the Orissa Consumers’ Association relates to lack of authority and power of the Commission to consider the present application of the Licensee, be it for fixing a new tariff or revising or amending an existing one on the ground that the Commission has not framed any regulation for fixation of tariff u/s 29 of the Commission Act, 1998 and under sub-sec. (2) of Sec. 26 of the Reform Act, 1995, by notification in the official gazette.

2.10.1

In fact, this objection of the Orissa Consumers’ Association has two parts. The first part of the objection is that OERC has not framed any regulation for determination of tariff u/s 29 of the Commission Act, 1998 and as such, it lacks authority and power to consider the application of the licensee. In view of the above objection, the point for consideration is if Sec. 29 of the Commission Act, 1998 is applicable to determination of tariff in the State of Orissa.

2.10.2

We understand that Shri K.N. Jena, General Secretary of the Orissa Consumers’ Association has, in OJC No.6999/99, challenged the procedure adopted by the State Govt. for appointment of a member of the Commission which has fallen vacant on the ground that the State Govt. has not followed procedure provided under the Commission Act, 1998 for such purpose. The aforesaid writ application is yet to be disposed of laying down the law on the issues involved.

2.10.3

Meanwhile, we are of the opinion that the Reform Act, 1995 holds good in all matters provided therein for OERC including determination of tariff by the Commission in view of the special provision relating to the Orissa Electricity Reform Act, 1995 and Haryana Electricity Reform Act, 1997 contemplated u/s 41 of the Commission Act, 1998. Sec. 41 of the Commission Act, 1998 clearly provides that the provisions of the said Act, in so far they relate to the State Commissions, shall not apply to the Commissions established under the Orissa Electricity Reform Act, 1995 or the Haryana State Electricity Reform Act, 1997.

2.10.4

The subject "electricity" is in the Concurrent List of the Constitution of India. Therefore, the State of Orissa has a right to enact law on electricity as it did in the Reform Act, 1995. The Reform Act, 1995 has been assented to by the President of India on the 3^rd January, 1996. Further, Sec.41 of the Commission Act, 1998 is in the nature of a built-in provision to safeguard the State Acts enacted earlier from the overriding effect of a Central Act enacted later than the State Acts on the same subject of "Electricity" and in the same field of establishing Electricity Regulatory Commission. To sum up, we hold that the Commission Act, 1998 in so far as it relates to State Commissions is not applicable to OERC.

2.10.5

The second part of the objection is that the OERC has not framed any Regulation by notification in the official gazette for determination of tariff under sub-section (2) of Sec.26 of the Reform Act, 1995 and therefore it has no authority or power to consider the application of the Licensee whether it is for a new tariff or revision or amendment of the existing one. Before we deal with the factual aspect of this objection, we may point out that while Shri Jena has stated in the first part of his objection that tariff should be determined by OERC in accordance with the provisions of Sec. 29 of the Commission Act, 1998, he has also contended in the second part of his objection that OERC has not framed regulations for fixation of tariff u/s 26(2) of the Reform Act, 1995 and, therefore, OERC has no authority or power to consider the said application of the Licensee. It appears to us that Shri Jena is challenging the Reform Act, 1995 in so far as it relates to the OERC and at the same time relying on the same Reform Act, 1995 to challenge the alleged omission on the part of OERC.

2.10.6

The plea taken by Shri Jena that OERC has not framed any regulation to determine tariff u/s 26(2) of the Reform Act, 1995 has no basis in fact. Chapter-V of the Regulations, 1996 deals with regulations on tariff as envisaged in Chapter-VIII of the Reform Act, 1995. The provisions contained in Chapter-V of the Regulations, 1996 has conferred upon the Commission a measure of discretion in the matter of evolving its working procedure so long as these procedures conform to the principles of natural justice. Accordingly, we are of the opinion that there is no merit in this objection.

2.11

With regard to the sixth objection of the Orissa Consumers’ Association, it may be pointed out that upon filing of the application for RST by CESCO on September 30, 1999, the Commission in its letter No.2532 dt.01.10.99 pointed out certain omissions to be supplied by the applicant and raised certain queries for clarification. The applicant supplied the omissions and filed clarification to the queries on 5.10.99. After scrutiny of all the filings including a large number of documentary evidence, the Commission treated the filings to be generally in order and the tariff application in question was treated as complete.

2.11.1

It may be stated here that regulatory proceeding cannot be treated at par with proceedings before common law courts. The Commission is empowered under Clause-111 (Chapter-V) of the Regulations, 1996 to lay down methodologies and procedures for calculating the expected revenue from charges and for determining the tariffs from time to time with the further enabling provisions to add, amend, alter, revise, substitute or otherwise change such methodologies and procedures at any time the Commission desires. Clause 113 of the said Regulation further provides that the Commission may issue orders from time to time giving details of the manner in which licensee’s revenue and tariff will be determined consistent with the provisions of the Act and Regulations framed for the purpose. Even, where no Regulation has been framed to deal with any matter or exercise any power under this Act, the Commission is free to deal with such matters, powers and functions in the manner it thinks fit.

2.11.2

We would also like to emphasise that in accordance with Section 10(5) of the Reform Act, 1995, this Commission, in discharge of its function, shall be entitled to and may consult to the extent it considers appropriate from time to time such persons or group of persons who may be affected or likely to be affected by the decisions of the Commission. This provision read with Sec. 26 of the Reform Act makes it clear that the Commission has wide discretion to evolve its own methodology, procedures and mechanism, subject, however, to the fact that they are just and reasonable and to carry on its activities in cases where there is no provision in the Reform Act, 1995 or Regulations framed thereunder.

2.11.3

We have examined the objection that the filing should not have been admitted in the absence of audited accounts for 1998-99. It may be mentioned that the licensee has filed audited accounts for the year 1997-98 alongwith the application. The audited accounts for the year 1998-99 have not been filed. In the normal course, the revenue requirement for 1999-2000 alongwith request for amendment of tariff if any should have been filed in December, 1998. If the application would have been filed by the prescribed date, the licensee was in a position to file only the audited account for 1997-98. It appears that in view of the unsettling effects of transition involving formation of new distribution companies, disinvestment of government shares and issue of fresh license etc. the revenue requirements were not filed in December, 1998 which ought to have been the case. This was filed in August’99 when audited accounts for 1998-99 were not yet due.

2.12

Therefore, we are unable to agree with Shri Jena that the tariff application of the Distribution & Retail Supply Licensee is defective, incomplete and not maintainable.

2.13

The seventh preliminary objection raised by Shri Jena relates to debarring the licensee from revising the tariff until and unless it fulfilled the conditions of Distribution & Retail Supply Licence as amended from time to time and complied with the order of the Commission.

2.13.1

Non compliance or inadequate compliance of the licence conditions, if any, is a separate issue which cannot hold up the process of determination of tariff. The Commission is bound by law as in Section 26 (6) of the Reform Act, 1995 to determine the tariff within 90 days from the date the application was treated by the Commission as complete. Elaborate provisions exist in the Reform Act, 1995 to deal with non-compliance or violations of licence conditions. Filing of the revenue requirement and expected revenue from charges is a statutory duty of the licensee as provided in s/s (4) of Sec.26 of the Reform Act, 1995 and therefore this function must not be mixed up with other issues like non-compliance or inadequate compliance of the licence conditions. The Commission is, therefore, of the opinion that this objection has no merit and is accordingly overruled.

2.14

The eighth objection raised by Shri Jena for Orissa Consumers’ Association that the application cannot be entertained in the middle of the financial year 1999-00 has no basis in law. The Commission would have liked strict adherence to the due date of filing of the revenue requirement i.e. by 31^st December, 1998 but the Commission is persuaded to accept the delay caused due to the transitional problems. The Commission has also noted that there is no statutory time schedule for application for tariff and hence the Commission cannot refuse to consider the application if it is otherwise in order.

2.15

The ninth objection raised by Shri Jena, General Secretary of the Orissa Consumers’ Association is that the Commission Advisory Committee was not consulted by the Commission before admitting the application. Sub-section (6) of Sec.26 prescribes; "If the Commission considers that the proposed tariff or amended tariff of a licensee does not satisfy any of the provisions of sub-section (5), it shall, within 90 days of the date of receipt of all information which it required, and after consultation with the Commission Advisory Committee constituted u/s 32 and the licensee, notify the licensee the proposed tariff or amended tariff." It is clear from the language employed in sub-sec. (6) that the question of consultation arises only before the Commission actually seeks to notify the licensee the proposed tariff or amended tariff. Consultation with the Commission Advisory Committee, therefore, is not a pre-requisite for admission of the licensee’s application. It may be further mentioned that the Commission had already scheduled the meeting of the CAC by the time the public hearing was taken up.

2.16

In order to dispose of the last objection, we may point out that Sec.9(4) of the Reform Act, 1995 stipulates a quorum for review of any previous decision taken by the Commission. This stipulation for quorum is applicable only if there is an explicit prayer for review of any previous decision of the Commission. We have already stated while dealing with second objection that the present application is not a prayer for review of the RST. It is an application u/s 26(6) of the Act. We therefore hold that there is no bar to or infirmity in the Commission proceeding to determine the RST as prayed for by the applicant.

2.17

In the light of our observations in the above paragraphs, we have to hold that there is no validity in any of the preliminary objections, most of which were due to inadequate appreciation of regulatory procedure. We, therefore, proceed to examine CESCO’s proposal and give our findings on the same.