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The above rates of Company are tentative which will be studied and revised after six months by an independent authority to be nominated by State Government and mutually acceptable to NPCL and Supplier for this purpose. If during the period of these six months this Body fixes more/less charges on the basis of the above, it will be adjusted accordingly.

3. An un-certainty about the rate of tariff payable to NPCL by UPPCL was left in the agreement at the very inception of the business of NPCL. The agreement was thus pregnant with the possibility of conflict between the two parties over the rate to be applied for power purchase. Since the parties could not arrive at any mutually acceptable rates, the Govt. appointed first a Committee known as a Nair Committee and then another known s Beg Committee. The report given by Beg Committee was challenged by the NPCL before the High Court of Allahabad in Writ Petition No.1048/2000. In the meantime, UP Electricity Reforms Act 1999 had also come into being and UPERC was constituted vide gazette notification dated 10.09.1998. The UPERC had the responsibility of determining the tariff for retail as well as bulk supply of electricity. The High Court passed an interim order on 31.03.2000 directing UPERC to fix the power purchase price for NPCL within ten days. The UPERC vide an order dated 05.02.2001 fixed rates for the period 1993-94 to 1999-2000. NPCL also paid certain amounts as per this determination under the order of the High Court. The High court heard the parties before accepting the report of the Commission. The Commission, for determining the tariff payable by NPCL, had applied the principles of VIth Schedule of The Electricity (Supply) 1948. Since the retail tariff at which NPCL supplied electricity to its consumers was fixed (NPCL being made to supply electricity at the same rate at which all other consumers of the State were entitled to electricity) the principles of VIth Schedule could be applied in reverse only. Shri Shanti Bhushan, Sr. Advocate then appearing for NPCL vehemently supported application on VIth Schedule by reverse process. The application of VIth Schedule ensured reasonable return to the distributing companies. It was submitted on behalf of NPCL that following the principles laid down in the VIth Schedule, the UPSEB would get a reasonable price towards the cost of supply and NPCL would also get reasonable return by making the determination on taking into account various heads under VIth Schedule, which would balance the equity between the two namely Board and NPCL and none would remain in loss. The High Court observed that the VIth Schedule may not be applicable in literal form but the NPCL was entitled to retain reasonable return or otherwise it will not be possible for NPCL to survive. The High Court approved the application of VIth Schedule by reverse application and accepted the report of the Commission vide judgment dated 10th November, 2005. The Agreement between NPCL and UPPCL was for a period of 4 1/2 years which would have ended in 1998. It was however extended from time to time till 10th November, 2005. However, the tariff determined by the UPERC and approved by the High Court was for the period 1993-94 to 1999-2000. The tariffs for the subsequent period also have been fixed by reverse application of the VIth Schedule. The Tribunal is informed that with the latest tariff order for the current year 2006-07 (the period in which controversy has arisen), the bulk supply tariff payable by NPCL to UPPCL has again been fixed by reverse application of the VI Schedule.

The Commission then sets the following task before itself:

a) Compensation of additional power procurement by UPPCL on marginal cost

b) Balancing the commercial interest of both NPCL and UPPCL

c) To ensure that the consumers of both UPPCL and NPCL area get a fair deal and accordingly burden of the dispute should be spread thin and uniform, as far as possible.

i) The concluding part of the order is captioned 'Upshot'. The order recalls that bulk supply tariff for NPCL, by reverse application of the VIth Schedule (i.e. by deducting total prudent cost element of NPCL from total revenue of NPCL) had been determined at Rs.2.9361 for 2004-05. The bulk supply tariff continued to be so for the subsequent years namely for 2005-06 and also for the ensuing years 2006-07 which is in question. The Commission observes that the bulk supply cost was Rs.1.897 per unit as per UPPCL tariff order for 2004-05 whereas bulk supply tariff paid by NPCL was Rs.2.9361 and in this manner NPCL was transferring its "efficiency gains" to the tune of Rs.1.03 per unit to UPPCL for the existing supply of 45 MW. The Commission feels constrained to work out the tariff for 2006-07 in order to dissolve dispute between the parties. It came out with a solution that the NPCL should compensate the UPPCL for the entire 60 MW of power and thus while for the additional 10 MW the payment would be made at the marginal rate, for the original 45 MW payment would be made at the rate of Rs.1.897 per unit. To this extent it amended the bulk supply tariff of NPCL, against 45 MW demand, for the disputed period and allowed the UPPCL to charge for the 10 MW at a marginal cost at which power was procured by NPCL.

21. On behalf of the NPCL it is submitted that it was a long term contract and it was so treated as by UPERC in the impugned order. On behalf of UPPCL it is vehemently submitted that this contract could not have been a long term contract as neither party could ever be believed to have purchased or sold at marginal cost on long term basis. It is submitted that marginal cost agreements are meant for meeting short term emergency situations whereas for long term situations the cost of power could depend upon the average cost of production and supply or on tariff fixed by the Commission. On behalf of NPCL, it is submitted that NPCL's demand was being pressed for a long time and hence it could not but have purchased the power of additional 10 MW on a short term basis. The NPCL has drawn attention of this Court to a letter by NPCL to UPPCL in the years of 2004-05 and the application made by NPCL to the Commission asking for open access so that it could January, 2007 i.e. for nearly nine months. The agreement itself does not specify the period for which the 10 MW would be purchased at such marginal cost. In fact NPCL itself must have treated the purchase as a short term purchase as NPCL itself did not proceed to take the approval of the Commission for this purchase price. In the NPCL's counter affidavit it said "Since, by that time due to full onset of the summer season the consumer unrest had grown to huge proportions and the Respondent No.1 at that stage was left with no option but to concur under duress for marginal cost." So it is clear that NPCL entered into the contract of additional 10 MW to meet the emergent need for the summer season. meet the requirements for power by purchase from other sources. It is true that the demand for power was long term. This does not necessarily mean that the arrangement for the additional supply of 10 MW was a long term arrangement. In fact the arrangement of this 10 MW of power continued only till 31st

55. So far as bulk tariff for the original 45 MW of power supply is concerned, NPCL has been paying more than other distributing companies. NPCL had not approached the Commission for setting aside the bulk tariff rate. In fact, NPCL all along accepted the bulk tariff fixed by the Commission. Whether such tariff was violative of the Article 14 of the Constitution was not a subject for decision before the Commission when it considered the Petition 414 of 2006 in which the impugned order was passed. The rate was fixed by the Commission itself by application of accepted principles for tariff fixation vis-à-vis NPCL. Since the NPCL itself did not challenge it the Commission could not have gone into the question while determining the amount to be paid by NPCL for the additional 10 MW of power. The question of violation of Article 14 was not at all an issue before the Commission. If NPCL wants to challenge the tariff payable by it on ground of discrimination, it may take appropriate steps to do so. The issue in any case was totally foreign for the purpose of disposal of petition before the Commission. So far as the marginal cost is concerned, I have already said that the NPCL has failed to show that there was any discrimination. A copy of the 'Additional Submissions" of NPCL before the Commission in the matter which the impugned order is passed has been filed by NPCL as Annexure A-11 to its appeal petition. After the introductory paragraph, the NPCL says in its petition that in order to growing demand it approached the respondent, i.e. UPPCL, for additional power supply over and above the 45 MVA that it had been supplying to the NPCL, that on November 08, 2005 the respondent agreed that once a new 400/132 kV Pali sub station was commissioned the supply of 15 MVA would be made available to the petitioner, that in the meeting in Lucknow the petitioner was offered an additional power at marginal cost and keeping in view the acute shortage in Greater Noida, the petitioner was left with no option but to agree to the "unreasonable proposal" of the respondent keeping in mind the supreme interest of the consumers. It then proceeds to say that on May 10, 2006, the UPPCL advised DGM, Paschimanchal Vidyut Vitran Nigam Ltd., Noida to supply 10 MVA power as against 15 MVA agreed to the petitioner, after the Pali sub station was commissioned. The petitioner then narrates that the petitioner NPCL asked the respondent UPPCL vide its letter dated September 26, 2006 and September 29, 2006 for the calculation of the cost of the additional power and on receiving no response the petitioner attempted to work out the cost of additional power based on the letter of the respondent and was shocked to find that such cost was abnormally higher at 10.73 per unit as against the average side rate of 3.56. The NPCL then proceeds to narrate the correspondence related to the bills. It then alleges that if rates offered to be imposed by the respondent were actually applied, it would create serious imbalance and hardship on the petitioner's financial position as the petitioner's average rate of sale was 3.56 per unit as against abnormally high rates claimed by respondent. In the penultimate paragraphs, the NPCL alleged that it perceived a genuine threat that the UPPCL may stop trading the additional power which will jeopardize all economic and domestic activities and cost irreparable damage to the consumers in Greater Noida which would be against the objectives of Uttar Pradesh Electricity Reforms Act 1999 and Electricity Act 2003. The NPCL made the following prayer in the petition: