Chattisgarh High Court
S K S Ispat And Power Ltd vs Chhattisgarh State Electricity ... on 15 December, 2022
Bench: Arup Kumar Goswami, Sajay Agrawal
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
2
(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 3 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 4 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 5 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. 6
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 :-7
(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 8 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 9 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;10
(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 11 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 12 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. 13
(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 14 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. 15 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) 16 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 17 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 18 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