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Grid Corporation of Orissa (GRIDCO), a licensee for Transmission and Bulk supply of electricity in the State of Orissa, intends to sell its surplus power to State Electricity Boards/Power Utilities on short term basis through Power Trading entities having valid license from the Central Electricity Regulatory Commission (CERC).

24. Thus, it is clear that the whole object of GRIDCO was to sell its surplus power to State Electricity Boards/Power Utilities outside the state through trading entity, licensed by the CERC under Section 79(1) (e) of the Electricity Act, 2003. It is one of the functions of the Central Electricity Regulatory Commission to issue licenses to persons to function as transmission licensees and electricity traders with respect to their inter-State operations. Reference to power trading entity, having valid licence from the CERC, in the aforesaid opening para of the communication inviting offers for sale of surplus power by the GRIDCO, clearly reflects that electricity traders contemplated in the communication are the ones who are licensed to undertake interstate operations by the CERC. It cannot be and has not been disputed by the first respondent that the surplus power was meant to be exported outside the State and was not to be consumed within the State. This position is further pellucid from clause 26 of the Power Trading Agreement dated March 9, 2006 between the respondent and the PTC Ltd. Clause 26 reads as under-

26. On the basis of the aforesaid analysis, four undisputed facts emerge:

i. There was clear intention on the part of the respondent to export surplus energy from the state as is reflected by the communication dated March 10, 2005, whereby offers were invited by the GRIDCO for sale of surplus energy to State Electricity Boards/ power utilities located outside the state.
ii. Under the agreement dated March 9, 2006 between the GRIDCO and the PTC, the surplus energy was required to be transferred outside the state.

30. As is evident from the aforesaid observations, the following ingredients were held to constitute sale in the course of export:

a. There must be an intention on the part of the buyer and the seller to export;
b. There must be an obligation to export;
c. Sale and export are so integrated that the connection between the two cannot be voluntarily interrupted;
d. There must be an actual export.

31. In the instant case, all the four ingredients constituting sale in the course of export are satisfied. As already pointed out the letter inviting tenders issued by the GRIDCO clearly shows the intention to export surplus energy. Under the agreement dated March 9, 2006, there was an obligation to export the surplus energy. As a consequence thereof, actual export of electricity did take place. From the nature of the transaction between the GRIDCO and the PTC, sale was inextricably linked to evacuation of power outside the state and this nexus was not capable of being voluntarily interrupted. Thus, there was a clear connection between the sale of electricity and export outside the state. In fact neither the GRIDCO nor the PTC could voluntarily divert the energy to intra-state Transmission system as the GRIDCO did not have the permission of the State Electricity Regulatory Commission to sell the surplus energy inside the State nor the PTC, being the inter-state Trader, could sell the same inside the State. The whole transaction was based on the understanding that energy was for export, for which purpose open access was to be sought from the RLDC. In case open access was not provided, agreement would have been rendered otiose. Thus, on the touchstone of the principles laid down in the case of Ben Gorm Nilgiri Plantations Co., Coonoor and Ors., the transaction between the parties, on parity of reasoning, clearly falls in the category of 'inter-state trade'.

67. In case all the households are electrified in the State of Orissa, there will be no surplus power for export across its border. But in case electrification of the households is not undertaken, it will leave the GRIDCO and the like to sell electricity to inter state trader at exorbitant price. This will act as a disincentive to electrify the households. In reality, selling electricity at high rates outside the State is neither in the interests of the residents of the State nor in the interests of the consumers of the rest of the country. Mr. Mehta submitted that GRIDCO has sustained huge losses and therefore, no fault can be found with sale of surplus power to inter-state traders at a price of 460 paise/ Kwh. In case this argument is allowed to prevail, consumers of other states would be subsidizing the alleged losses of GRIDCO. This ought not to be permitted as it adversely affects the consumers of other states.