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"5.4.7.....With a view to provide benefits of competition to all section of consumers, the second and subsequent licensee for distribution in the same area shall have obligation to supply to all consumers in accordance with provisions of section 43 of the Electricity Act, 2003. The SERCs are required to regulate the tariff including connection charges to be recovered by a distribution licensee under the provisions of the Act. This will ensure that second distribution licensee does not resort to cherry picking by demanding unreasonable connection charges from consumers".

27. The reading of the above clause would make it clear that the Applicant for the second license should not be allowed to resort to cherry picking few areas in the beginning at the cost of existing licensee and it shall have the obligation of supply to all consumers in accordance with the provisions of Section 43 of the 2003 Act.

Judgment in Appeal No 7 of 2010

28. Let us now refer to the relevant Regulations framed by the State Commission stipulating that the period within which the Distribution network needs to be developed. The following are the relevant extracts:

(c) It is important to note that a multiple licensee in the same area of operations is an enabling provision of the 2003 Act for promoting competition in the distribution. Therefore, wherever possible, the second licence system, should be introduced in accordance with the spirit of the Act. The requirement of a minimum area Judgment in Appeal No 7 of 2010 for grant of distribution license is not specifically provided under 6th proviso of Section 14, it merely uses the term only "within the same area". The requirement of minimum area for grant of distribution licence finds mention only in the explanation of Rule 3 (2) given in the Rule 2005. Since under the provisions of the Electricity Amendment Act, 2003, scope of application of prudency has been restricted only to defining additional requirements of capital adequacy, credit worthiness and code of conduct. Therefore, the requirement of "Minimum Area" as specified under Rules 2005 apparently runs contrary to the spirit of the main Act. The National Electricity Policy also only provided that the competition must be permitted while preventing the second licence from cherry picking in the distribution licensee's area. Since the Applicant which has been managing entire Western Region of the State of UP, is seeking the distribution licence for the entire NPCL Judgment in Appeal No 7 of 2010 area, the question of cherry picking by the Applicant does not arise.

54. Thus, this Clause provides for the provision of minimum area supply, is to ensure that the parallel/second distribution licensee would not resort to cherry picking.

55. Let us now refer to the findings given by the State Commission on this issue:-

"The requirement of minimum area for grant of distribution license finds mention only under the explanation given in the Rules, 2005. Since under the provisions of the Electricity (Amendment) Act, 2003 the scope of application of proviso has been restricted only to defining the additional requirement of capital adequacy, credit worthiness and code of conduct, the requirement of minimum area as specified under the Rules, 2005, apparently runs contrary to the spirit of the Act, 03"