Appellate Tribunal For Electricity
Ntpc Ltd. vs West Bengal State Electricity Board And ... on 22 January, 2007
Equivalent citations: 2007ELR(APTEL)65
JUDGMENT A.A. Khan, Member (T)
1. All the abovementioned 18 appeals have been preferred by the Appellant, National Thermal Power Corporation Ltd. (hereinafter referred to as the "NTPC") against the Orders passed on different dates by the Central Electricity Regulatory Commission (hereinafter called the "Central Commission") in different petitions, whereby the Central Commission has determined the tariff for the period from 1st April, 2001 to 31st March, 2004 for generation and sale of electricity by the various Thermal Power Plants of the "NTPC". The Appellant has submitted that the aforesaid 18 appeals listed hereunder involved common issues and can be clubbed together for decision by a common Order.
LIST OF THE CASES S. No. Appeal No. Name Against Order dated/Petition No. Against Order dated/Review Petition No. Grounds 1 81 of 2005 Talcher STPS Stage--I 24th August, 2004/35 of 2001
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 & 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher 2 82 of 2005 Dadri GPS 24th October, 2003/44 of 2001 01st July, 2004/ 104 of 2003
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 & 56 of 2006 (ii) Computation of Interest on loan--normative or actual whichever is higher (iii) O&M Expenses 3 83 of 2005 Singrauli STPS 23rd July, 2003/ 39 of 2001 8 March 2004/ 59 of 2003
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of Interest on Loan--normative or actual, whichever is less (iii) O&M Expenses (iv) Cost of spares in working capital 4 84 of 2005 Feroge Gandhi Unchahar TPS Stage -II 18th June, 2004/1 of 2000
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 5 85 of 2005 Auraiya GPS 04th March, 2004 & 19th November, 2004 46 of 2001 31st August, 2004/ 42 of 2004
(i) Implications of decision on norms In Appeal Nos. 53, 54, 55 and 56 of 2006
(ii) Computation of interest on loan--normative or actual whichever is higher, (iii) O&M Expenses (iv) Cost of spares in working capital 6 86 of 2005 Farrakka TPS 19th July, 2004/ 36 of 2001
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher, (iii) O&M Expenses (iv) Cost of spares in working capital 7 87 of 2005 Kayamkulam 05th March, 2004/ 22 of 1999 subsequently amended by Order dated 18th May, 2004
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan --normative or actual whichever is higher.
889 of 2005 Dadri TPS 20th July, 2004/ 81 of 2002
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher, (iii) O&M Expenses (iv) Cost of spares in working capital 9 90 of 2005 Faridabad GPS 30th June, 2003/ 81 of 2002
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher.
1091 of 2005 Feroze Gandhi Unchahar TPS Stage-I 24th October, 2003/41 of 2001 01st July, 2004/103 of 2003
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006
(ii) Computation of interest on loan--normative or actual whichever is higher. (ii) O&M Expenses (iii) Cost of spares in working capital 11 92 of 2005 Anta GPS 30th April, 2004/45 of 2001
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher. (iii) O&M Expenses 12 93 of 2005 Gandhar GPS- II 01st April, 2005/ 33 of 2001
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher. (iii) O&M Expenses 13 95 of 20054 Kawas GPS-II 07th April, 2005/ 31 of 2001
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher. (iii) O&M Expenses 14 98 of 2005 Ramagundam 06th August, 2003/ 34 of 2001 subsequently amended by Order dated 24th August, 20204 & 21st December, 2004 08th March, 2004/ 74 of 2003
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 ii) Computation of interest on loan--normative or actual whichever is higher. (iii) O&M Expenses (iv) Cost of spares in working capital 15 99 of 2005 06th August, 2003/ 30 of 2001 08th March, 2004/ 68 of 2003
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 16 100 of 2005 Vindhyachal --STPS-II 01st August, 2003/ 20 of 299 & 77 of 2002 08th March, 2004 / 69 of 2003
(ii) Computation of interest on loan--normative or actual whichever is higher, (iii) O&M Expenses (iv) Cost of spares in working capital (i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher.
17101 of 20054 Vindhyachal STPS-I 06th November, 2003/ 3 of 2004 19th March, 2004/ 3 of 2004
(i) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (ii) Computation of interest on loan--normative or actual whichever is higher, (iii) O&M Expenses (iv) Cost of spares in working capital 18 153 of 2005 Kahalgaon STPS 04th August, 2005/ 37 of 2001
(v) Implications of decision on norms in Appeal Nos. 53, 54, 55 and 56 of 2006 (vi) Computation of interest on loan--normative or actual whichever is higher, (vii) O&M Expenses (viii) Cost of spares in working capital The Appellant has submitted that even though issues are of common nature separate appeals have been filed by it as the Central Commission has passed separate Tariff Orders which are similar in nature for different generation stations.
FACTS OF THE CASE:
1. The Appellant, NTPC, in all its abovementioned 18 appeals while challenging the respective Orders passed by the Central Commission in respect of different generating stations have raised issues which are primarily, related to the following:
(a) Issue No. 1: NTPC in appeal Nos. 53, 54, 55 and 56 of 2006 has challenged the Orders of the Central Commission dated 4th January, 2000, 15th December, 2000 and 21st December, 2000, which basically lay down the norms for determination of Tariff on the ground of "discrimination and absence of level playing field".
(b) Issue No. 2: The methodology adopted by the Central Commission for computation of interest on loan.
(c) Issue No. 3: Operation and Maintenance expenses with specific grievance of:
(i) Inadequate provisions of employees costs as part of the O&M expenses due to revision of salary and wages.
(ii) Non-inclusion of incentives and ex-gratia payment to employees
(d) Issue No. 4: Costs of spares for calculation of interest on working capital.
Discussion and Analysis of Issues
2. Issue No. 1:
(a) Issue No. 1 pertains to the Orders passed by the Central Commission in regard to the norms to be followed while determining the Tariff. Not only in the instant appeals but in Appeal Nos. 53, 54, 55 and 56 of 2006 as well the NTPC had challenged the said Orders passed by the Central Commission before this Tribunal. The Orders which were challenged laid down the norms of operational and financial parameters to be considered while determing the tariffs. The aforesaid Orders were precursors to the CERC (Terms and conditions of Tariff) Regulations, 2001 (for short "Regulations, 2001") which were notified on 26th March, 2001. On hearing the aforesaid appeals (Appeal Nos. 53, 54, 55 and 56 of 2006), this Tribunal by an Order passed on 6th December, 2006 dismissed them on the ground that this Tribunal has no jurisdiction to enquire into the validity of the regulations framed by the Central Commission. It may be pointed out that the Tribunal in its Full Bench judgment, rendered in Appeal Nos. 114 and 115 of 2005 between Nayveli Lignite Corporation Ltd v. Tamil Nadu Electricity Board and Ors. has held, that it has no power to deal with challenge to the Regulations.
we have no hesitation in holding that the Regulations framed under Sections 61 and 178 of the Electricity Act, 2003, are in the nature of subordinate legislation and we have no jurisdiction to examine the validity of the Regulations in exercise of our appellate jurisdiction under Section 111 of the Act of 2003. Even, under Section 121, which confers on the Tribunal supervisory jurisdiction over the Commission, we cannot examine the validity of the Regulations framed by the Commission, as we can only issue orders, instructions or directions to the Commission for the performance of its statutory functions under the Act.
(b) In view of the above decisions hold that the Regulations framed under the Act, are in the nature of subordinate legislation and the challenge to their validity falls outside the preview of the Tribunal.
3. Issue No. 2:
(a) This issue relates to the methodology adopted by the Central Commission for computation of interest on loan on the actual repayment basis or normative repayment whichever is higher. This Tribunal in its decision dated 14th November, 2006 in Appeal Nos. 94 and 96 of 2005 preferred by the Appellant, NTPC, against the Orders of the Central Commission has set aside the methodology adopted by the Central Commission of computation of interest on loan and held, that the computation should be only on normative loan repayment basis.
(b) In view of the above, the appeals which relate to this issue stand decided in light of the Order dated 14th November, 2006 passed by this Tribunal.
4. Issue No. 3 (Operation and Maintenance Expenses)
(a) Inadequate provision of employee costs as part of O&M Expenses, due to revision in salary and wages.
(i) In the appeals before this Tribunal, the Appellant has submitted that the Central Commission has calculated the employee cost for determining allowable O&M expenses based on the average of the actual employee cost taken for the period from 1995-96 to 1999-2000 and thereafter escalating this base employee costs of 1997-98 by applying the escalation factor. It has been observed that employee costs were revised in FY 2000-01 with retrospective effect from 1st January, 1997. The Commission took average of employee cost for the period 1995-96 and 1996-97 based on pre-revised scale and 1997-98, 1998-99 and 1999-2000 based on revised scale. The Appellant has suggested that the Commission ought to have taken the actual salary prevalent during the period 2000-01 and not average salary for the period 1995-96 to 1999-2000 as the salary of 2000-01 correctly represents the employee cost estimation for the subsequent period 2001-02 to 2003-04.
(ii) By adopting the above methodology the Commission has followed the Regulations, 2001 in force for the relevant time. The scheme of recovery of cost pertaining to O&M provides for recovery of costs based on the average of actual costs incurred during the period 1995-96 to 1999-2000. The Regulations provide for exclusion of abnormal O&M expenses, if any, during this period of five years. Such average O&M expenditure, in the base year 1997-98, is then escalated twice by 10 per cent. This escalated figure becomes the base of 1999-2000 and further escalated by 6 per cent every year to arrive at the permissible O&M expenses for the relevant year. It is observed that the Commission has not deviated from the Regulations 2001, which provide a pre-defined methodology to arrive at the admissible amount of O&M expenses. We do not find any ambiguity in so far as adherence to the specified Regulations is concerned.
(iii) The Regulations, 2001 cover various heads of expenditure including employee cost as components of O&M expenses, and give identical treatment to all heads of expenditure. It is quite likely that due to adoption of average O&M expenditure during 1995-96 to 1999-2000 which is escalated twice by 10 per cent there might be an under-recovery of actual expenditure under certain heads; while under some other heads there might be an over-recovery (more than the actuals). The Regulations also provide that during the Tariff period, the deviation of the escalation factor of 6 per cent within the range of ± to 20 per cent is to be absorbed by the generators/beneficiaries. Adopting a different treatment in respect of one constituent head of expenditure in the O&M expenses as submitted by the Appellant will be violative of the said Regulations.
(iv) The fact that salaries and wages for the employees were due for/ under revision was known to the Central Commission during the formulation process of the Regulations, 2001. It will not be wrong to assume that the Commission, therefore, would have considered the likely impact of the said revision and, thus the mechanism proposed in the Regulations, 2001 is expected to have addressed the legitimate concerns of the issue.
(v) The learned Counsel for the NTPC while relying on the decision of the Supreme Court in the case of WBERC v. CESC Ltd. submitted that the Commission ought to have taken actual employees' cost incurred by the NTPC for determining Tariff. The decision in the case of WBERC v. CESC Ltd. related to determination of Tariff in respect of the year 2000-01, for which the WBERC did not issue any specific Regulations to arrive at the amount of admissible employee costs. In that case, the WBERC had to determine the Tariff in accordance with the Electricity Regulatory Commission Act, 1998 and the Electricity (Supply) Act, 1948. The Schedule VI of Electricity Supply Act of 1948 contained a detailed scheme about the admissibility of various heads of expenditure. The instant case is different from the West Bengal case as the CERC has laid down a specific methodology to arrive at the admissible amount of O&M expenses. Here, the CERC has followed the Regulations laid down in this regard and did not take recourse to ad-hocism.
(vi) The Appellant has submitted that increase in employee cost has not been on account of any increase in manpower and that during the period man/MW ratio has decreased. We find it to be of no relevance if the Regulations are to be adhered to.
(b) Non-inclusion of incentives and ex-gratia payment to employees.
(i) The Commission in its Order dated 23rd July, 2003 has stated that the Commission's policy in this regard is to allow only the obligatory minimum bonus payable under the Payment of Bonus Act and as such, part of employee cost pertaining to incentive and ex-gratia was not considered for the purpose of tariff. We agree with the approach of the Commission. The payment of incentive or ex-gratia with a view to achieve higher productivity brings in additional benefits to the Appellant in the form of higher sale of energy as also incentive as provided under the Regulations. The incentive earned through Tariff by the NTPC from the beneficiaries on account of improved performance and higher productivity is much higher than the incentives and ex-gratia payment made to employees and, thus, expenditure on latter should be financed by the earning form the former. The beneficiary states are under obligations to pay incentive at applicable rates, if the Appellant achieves availability beyond a specified level. As far as the beneficiaries are concerned, such provision has been made in the Regulations, 2001 to give them the benefit of increased productivity on the part of the Appellant. There is no justification to recover the cost of incentives and ex-gratia payment to employees through Tariff again, when the Tariff, already allows incentives for higher performance and productivity to the Appellant.
(ii) The Appellant's submission that the total manpower cost including incentives and ex-gratia payments to the employees constitute a very low percentage of the average per Unit Tariff is not of any relevance here. Similarly the submission that Appellant's percentage of manpower cost is significantly lower than the manpower costs incurred in the generating stations of the Respondent, is not sustainable as historically both have been operating and continue to do so under different environment and regime of Rules and Regulations.
(iii) In view of the above, we find no reason to differ with the observations of the Commission on the aforesaid aspect of the matter.
5. Issue No. 4 (Cost of spares for calculation of working capital)
(i) It has been observed that the Commission had followed the mechanism provided in the Regulations to arrive at the cost of spares for inclusion in the working capital amount. In view of the Appellant, the Commission ought to have adopted the same basis as adopted in the Commission's Order dated 21st December, 2000, which came before the Regulations dated 26th March, 2001. After the Regulations, issued on 26th March, 2001 came into force, earlier Notifications/Orders have lost their force and relevance. The Regulations issued on 26th March, 2001 are in the nature of delegated legislation and are to be followed during the period they are applicable.
(ii) As regards information sought as part of Form No. 14 (provided vide Order dated 14th September, 2001 in Petition No. 29/2001 by the Commission), if there appears to be any contradiction between the main Regulations and forms attached thereto, the spirit contained in the Regulations needs to be followed. As the Regulations provide for restricting the amount of spares to be included in the working capital requirement to 1 per cent capital cost, the requirements of Form 14 being contrary to the provisions of Regulations would not override the Regulations.
(iii) In this view of the matter, we agree with the views of the Commission on the aforesaid issue.
6. Having regard to the aforesaid discussion, we dispose of appeal Nos. 81, 82, 83, 84, 85, 86, 87, 89, 90, 91, 92, 93, 95, 98, 99, 100, 101 and 153 of 2005 in terms of the decisions on various issues and direct the Central Commission to modify its Impugned Orders in accordance with this judgment and provide relief wherever applicable.