JSA represented BSES Rajdhani Power Ltd. (“BRPL”) and BSES Yamuna Power Ltd. (“BYPL”) (collectively “BSES Discoms”) in Civil Appeal Nos. 4323 and 4324 of 2015 filed before Hon’ble Supreme Court of India challenging findings of the Appellate Tribunal for Electricity (“APTEL”) in the common Judgment dated 28.11.2014 (“Impugned Judgment”) passed in Appeal Nos. 61 and 62 of 2012 (“Tariff Appeals”), respectively filed by BRPL and BYPL.
In the Tariff Appeals, BSES Discoms had challenged disallowances in their respective Tariff Orders dated 26.08.2011 passed by Delhi Electricity Regulatory Commission (“DERC”) for (a) determination of Aggregate Revenue Requirements (“ARR”) and Tariff for FY 2011-12 and (b) truing up of financials for FY 2008-09 and FY 2009-10.
Hon’ble Supreme Court, while allowing the Civil Appeals, has laid down tests for determination of substantial questions of law under Section 125 of Electricity Act, 2003 and held that Electricity Regulatory Commissions cannot re-open Tariff Orders during ‘true-up’ exercise to change the methodology / principles of original tariff determination.
Salient findings of Hon’ble Supreme Court in Judgment dated 18.10.2022 are as under:-
- For determining whether a case involves substantial question of law:
- Test is not merely importance of the question, but its importance to the case itself necessitating decision of the question.
- Appropriate test for determining whether question of law raised in a case is substantial would be to see whether it directly and substantially affects rights of the parties.
- If it is established that the decision is contrary to law or decision has failed to determine some material issue of law or if there is substantial error or defect in the decision of the case on merits, the court can interfere with the conclusion of the lower Court or Tribunal.
- Stakes involved in a case are immaterial as long as impact or effect of the question of law has a bearing on the lis between the parties.
- DERC performs a quasi-judicial function while determining tariff which is governed inter alia by Section 61 of Electricity Act requiring safeguarding of all consumers’ interest and at the same time recovering the cost of electricity in a reasonable manner, such that ‘distribution and supply of electricity are conducted on commercial principles’ which encourage and reward competition, efficiency, economic use of resources, good performance and optimum investments.
- Since tariff and ARR are regulated, Discoms cannot recover anything more from its consumers than what is allowed by DERC.
- Tariff Order is quasi-judicial in nature which becomes final and binding on the parties unless it is amended or revoked under Section 64(6) or set aside by the Appellate Authority.
- At the stage of ‘truing up’, the DERC cannot change the rules / methodology used in the initial tariff determination by changing the basic principles, premises and issues involved in initial projection of ARR. Truing up exercise cannot be done to retrospectively change methodology / principles of tariff determination and re-open the original tariff determination order thereby setting tariff determination process to a naught at ‘true-up’ stage.
- DERC cannot amend the Tariff Order in the guise of ‘true-up’ after the relevant financial year is over and same is replaced by a subsequent Tariff Order. This would amount to a retrospective revision of tariff when relevant period for such Tariff Order is already over. It is not permissible to amend Tariff Order made under Section 64 of Electricity Act during the ‘truing up’ exercise.
The findings and observations of the Judgment have industry-wide implications since it not only bolsters and justifies the assertions of BSES Discoms that they are victims of unwarranted regulatory interdict, but will also help other Discoms as it clearly lays down the principles of tariff determination and truing up by State Electricity Regulatory Commissions.
JSA Disputes Team Lead Partner & Joint Managing Partner – Amit Kapur, Partner – Anupam Varma, Partner – Rahul Kinra, Senior Associate – Aditya Gupta, Associate – Aditya Ajay, and Associate – Manu Tiwari.