Date of the Judgment: April 03, 2020
Citation: Non-Reportable, Civil Appeal No. 2228/2020 (@ Diary No. 24669 of 2019)
Judges: L. Nageswara Rao, J., Deepak Gupta, J.
Can a power distribution company charge wheeling fees for electricity supplied through its network when the infrastructure is also claimed to be part of the transmission network? The Supreme Court of India recently addressed this complex issue in a dispute between Sai Wardha Power Generation Limited (SWPGL), Hindustan Petroleum Corporation Limited (HPCL), and Tata Power Company Limited-Distribution (TPC-D). The core issue revolved around whether TPC-D could levy wheeling charges on HPCL for power supplied through 110 kV lines, which were also claimed to be part of the transmission network. The bench comprised Justices L. Nageswara Rao and Deepak Gupta.
Case Background
Tata Power Company Limited (TPC) initially held an integrated license for electricity supply. Hindustan Petroleum Corporation Limited (HPCL) has been receiving power from TPC since 1955 on its 22 kV network. In 2005, HPCL expanded its facilities and required additional power, leading to a power supply agreement with TPC on October 20, 2005, for 70 MW at 110 kV. The actual supply began in 2008 after infrastructure upgrades and regulatory approvals.
In 2006, the Maharashtra Electricity Regulation Commission (the Commission) directed TPC to separate its assets into generation, transmission, and distribution entities for tariff determination. Separate tariffs were then set for each entity. The Commission, on October 16, 2007, approved the construction of 2×110 kV lines for HPCL but also directed that other consumers in the vicinity may also be supplied power from the same lines. By June 4, 2008, the Commission allowed the capitalization of these lines in the books of accounts of TPC-D. Since 2008, HPCL has been paying wheeling charges for using the distribution network.
Timeline
| Date | Event |
|---|---|
| 1955 | HPCL starts receiving electricity from TPC on its 22 kV distribution network. |
| 2005 | HPCL expands its facilities and requests additional power. |
| October 20, 2005 | Power supply agreement executed between TPC and HPCL for 70 MW at 110 kV. |
| 2006 | The Commission directs TPC to trifurcate its assets into generation, transmission, and distribution. |
| October 3, 2006 | Separate tariffs determined by the Commission for TPC-G, TPC-T and TPC-D. |
| October 16, 2007 | Commission approves 2×110 kV lines for HPCL, allowing other consumers to use them. |
| 2008 | Actual supply of 70 MW power to HPCL begins. |
| June 4, 2008 | Commission permits capitalization of 2×110 kV lines in TPC-D’s books. |
| 2008 | HPCL starts paying wheeling charges for using the distribution network. |
| 2014 | TPC applies for transmission and distribution licenses under the Electricity Act, 2003. |
| April 17, 2014 | TPC classifies 2×110 kV lines as part of the transmission system. |
| August 14, 2014 | Transmission Licence No. 1 of 2014 granted to TPC-T. |
| November 4, 2015 | HPCL applies for short-term open access to get power from SWPGL. |
| December 11, 2015 | Maharashtra State Load Despatch Centre (MSLDC) states no wheeling charges can be levied on HPCL as it was connected at 110 kV level. |
| July 8, 2016 | HPCL executes a power purchase agreement with SWPGL. |
| October 10, 2016 | TPC-T applies for amendment of its transmission license, stating the 2×110 kV lines were part of the distribution system. |
| April 13, 2017 | HPCL petitions the Commission, arguing TPC-D cannot levy wheeling charges. |
| September 30, 2017 | SWPGL stops supplying power to HPCL. |
| March 12, 2018 | Commission rules TPC-D cannot levy wheeling charges. |
| March 22, 2018 | The Appellate Tribunal for Electricity sets aside the order of the Commission. |
| August 1, 2018 | The Commission disallows TPC Transmission’s application for modification of Transmission Licence No. 1 of 2014. |
| April 03, 2020 | The Supreme Court remands the matter back to the Tribunal for fresh adjudication. |
Course of Proceedings
In 2014, TPC applied for transmission and distribution licenses. TPC classified the 2×110 kV lines as part of the transmission system. The Commission granted Transmission Licence No. 1 of 2014 to Tata Power Company-Transmission (TPC-T) on August 14, 2014. HPCL, on November 4, 2015, applied to TPC-D for open access to receive power from SWPGL, which TPC-D approved. HPCL then entered a power purchase agreement with SWPGL on July 8, 2016.
On October 10, 2016, TPC-T applied to amend its transmission license, stating the 2×110 kV lines were actually part of the distribution system. Following this, HPCL filed a petition on April 13, 2017, before the Commission, arguing that TPC-D could not levy wheeling charges for power supplied through open access on the 110 kV lines. The Commission sided with HPCL on March 12, 2018, but the Appellate Tribunal for Electricity overturned this decision on March 22, 2018. The Commission also disallowed TPC Transmission’s application for modification of the transmission license on August 1, 2018, which was later set aside by the Appellate Tribunal, remanding the matter back to the Commission.
Legal Framework
The core legal issue revolves around the interpretation of the Electricity Act, 2003, specifically concerning the definitions of transmission and distribution lines. Section 2(72) of the Electricity Act, 2003 defines transmission lines as:
“‘transmission lines’ means all high voltage lines including extra high voltage lines and associated sub-station equipment and includes overhead lines, underground cables and other similar works, by which electricity is conveyed and made available for delivery at various points”
The Central Electricity Authority (Technical Standards for Construction of Electrical Plants and Electric Lines) Regulations, 2010, further demarcate distribution and transmission boundaries based on voltage levels. According to these regulations, voltage levels from 0.415 kV to 33 kV are considered distribution, while 66 kV to 765 kV AC and 500 kV DC are considered transmission.
The Maharashtra Electricity Regulatory Commission (Transmission Open Access) Regulations, 2016, and the Maharashtra Electricity Regulatory Commission (Distribution Open Access) Regulations, 2016, also provide for demarcation between transmission and distribution based on voltage.
Arguments
Arguments by HPCL
- HPCL contended that the 110 kV HPCL line is a transmission line.
- The metering for HPCL is done at TPC-D sub-station, which is a transmission asset.
- The sale of electricity is completed at the TPC-D sub-station.
- A consumer can be directly connected to a transmission network.
- The judgment of the Tribunal in OPTCL is erroneous.
- The inclusion of 2×110 kV lines in the transmission assets by TPC-D cannot be ignored while deciding the entitlement of TPC-D to impose wheeling charges.
Arguments by SWPGL
- There is no prohibition in the Electricity Act preventing a consumer from being directly connected to the network of a transmission licensee.
- 2×110 kV Trombay – HPCL lines have been declared to be part of transmission assets by TPC-T.
- The plea of inadvertence taken by TPC-D has to be rejected.
- The roll out plan of the distribution network made by TPC deals only with lines upto 33 kV.
- The capital investment plans of distribution network also include only 11 kV and 33 kV voltage level lines.
Arguments by TPC-D
- Trifurcation took place in 2005, and since then, tariffs were determined separately for transmission and distribution.
- HPCL has been paying wheeling charges till 2018.
- HPCL was receiving electricity from TPC-D’s distribution network since 1955.
- The tariff order dated 04.06.2008 permitted capitalization of 2×110 kV distribution lines in the books of accounts of TPC-D.
- No transmission charges have ever been demanded or recovered for 110 kV assets.
- The application for amendment of the transmission license should have been decided by the Commission before taking up the instant dispute.
- The network roll out plan was only towards development of network backbone which is generally at levels below 33 kV.
- The 110 kV lines were always treated as a distribution asset and it was only due to inadvertence that they were included in the transmission license in 2014.
| Main Submission | Sub-Submission (HPCL) | Sub-Submission (SWPGL) | Sub-Submission (TPC-D) |
|---|---|---|---|
| Nature of 110 kV Lines | 110 kV lines are transmission lines; metering at TPC-D sub-station (transmission asset); sale completed at sub-station. | No legal bar for direct connection to transmission network; TPC-T declared 2×110 kV lines as transmission assets; TPC’s distribution network plan includes only lines up to 33 kV. | Trifurcation since 2005; HPCL paid wheeling charges till 2018; HPCL received power from TPC-D since 1955; 2×110 kV lines capitalized in TPC-D books; no transmission charges demanded for 110 kV assets; 110 kV lines always treated as distribution asset. |
| Validity of Wheeling Charges | TPC-D cannot levy wheeling charges; Tribunal’s OPTCL judgment is erroneous; inclusion of 2×110 kV lines in transmission assets cannot be ignored. | TPC-D’s plea of inadvertence is not valid; capital investment plans include only 11 kV and 33 kV lines. | Amendment application should have been decided first; network roll out plan for consumers at 11kV/22kV/33kV and lower voltage levels; inclusion in transmission license was inadvertent. |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the core issue can be summarized as:
- Whether the 110 kV HPCL feeders are part of the Distribution system of TPC-D or can qualify as transmission lines in terms of the statutory framework and in the facts of the present case?
- Whether the erroneous submission of TPC-T regarding 110 kV HPCL feeders in the transmission licence No.1 exempt HPCL from payment of wheeling charges?
Treatment of the Issue by the Court
| Issue | How the Court Dealt with It |
|---|---|
| Whether the 110 kV HPCL feeders are part of the Distribution system of TPC-D or can qualify as transmission lines? | The Court held that the Tribunal erred in ignoring the existing transmission license of TPC-T, which included the 2×110 kV lines as part of the transmission network. The Court noted that the Tribunal should have directed the Commission to adjudicate the application filed by TPC-T for amendment of the transmission license first. |
| Whether the erroneous submission of TPC-T regarding 110 kV HPCL feeders in the transmission licence No.1 exempt HPCL from payment of wheeling charges? | The Court did not directly address this issue but emphasized that until the transmission license is modified, the 2×110 kV lines remain part of the transmission network. The court held that the Tribunal could not have held that 2×110 kV lines should be included in the distribution system of TPC-D. |
Authorities
The Court considered the following authorities:
| Authority | Court | How it was Used |
|---|---|---|
| Orissa Power Transmission Corporation Limited vs. Orissa Electricity Regulatory Commission in Appeal No.30 of 2012 | Appellate Tribunal for Electricity | The Tribunal relied on this judgment to hold that the 110 kV HPCL feeders are an essential part of the TPC Distribution system. The Supreme Court, however, did not agree with this view. |
| Section 2 (72) of the Electricity Act, 2003 | Parliament of India | The Court referred to this section to define transmission lines. |
| Central Electricity Authority (Technical Standards for Construction of Electrical Plants and Electric Lines) Regulations, 2010 | Central Electricity Authority | The Court noted that these regulations demarcate distribution and transmission boundaries based on voltage levels. |
| Maharashtra Electricity Regulatory Commission (Transmission Open Access) Regulations, 2016 | Maharashtra Electricity Regulatory Commission | The Court noted that these regulations provide for demarcation between transmission and distribution based on voltage. |
| Maharashtra Electricity Regulatory Commission (Distribution Open Access) Regulations, 2016 | Maharashtra Electricity Regulatory Commission | The Court noted that these regulations provide for demarcation between transmission and distribution based on voltage. |
Judgment
| Submission | How the Court Treated It |
|---|---|
| HPCL’s argument that 110 kV lines are transmission lines | The Court agreed that the 110 kV lines were included in TPC-T’s transmission license and should be treated as such until the license is modified. |
| SWPGL’s argument that there is no bar on consumers being directly connected to transmission networks | The Court did not directly address this point but emphasized the importance of the existing transmission license and the pending amendment application. |
| TPC-D’s argument that 110 kV lines are part of their distribution network due to historical usage and capitalization | The Court rejected this argument, stating that the Tribunal erred in ignoring the existing transmission license and the pending amendment application. |
The Supreme Court held that the Appellate Tribunal was wrong in concluding that the 2×110 kV lines should be included in the distribution system of TPC-D. The Court emphasized that the Tribunal should have considered the existing transmission license of TPC-T, which included the 2×110 kV lines as part of the transmission network. The Court also noted that the Tribunal should have directed the Commission to adjudicate the application filed by TPC-T for amendment of the transmission license before deciding on the matter.
The Court stated that it is not open for TPC-T to contend that the 2×110 kV lines are part of the distribution system of TPC-D until the transmission license is modified. The Court relied on the CEA Regulations 2010, the Maharashtra Electricity Regulatory Commission (Transmission Open Access) Regulations, 2016, and the Maharashtra Electricity Regulatory Commission (Distribution Open Access) Regulations, 2016, which demarcate transmission and distribution boundaries based on voltage levels.
The Court stated:
“The Tribunal committed an error in ignoring the existing transmission licence of TPC-T before coming to a conclusion that 2×110 kV lines are part of the distribution network. The Tribunal ought to have directed the Commission to adjudicate the application filed by TPC-T for amendment of the transmission licence.”
“Till the transmission licence of TPC-T is not modified, the 2×110 kV lines form part of the transmission network of TPC-T. The Tribunal could not have held that 2×110 kV lines should be included in the distribution system of TPC-D.”
“The CEA Regulations 2010, the Maharashtra Electricity Regulatory Commission (Transmission Open Access) Regulations, 2016 and the Maharashtra Electricity Regulatory Commission (Distribution Open Access) Regulations, 2016 provide for demarcation between the transmission and distribution boundaries on the basis of voltage. The Tribunal erred in ignoring the said Regulations while holding that 2×110 kV lines are part of the distribution system.”
The Supreme Court set aside the judgment of the Appellate Tribunal and remitted the matter back for fresh adjudication.
| Authority | How it was viewed by the Court |
|---|---|
| Orissa Power Transmission Corporation Limited vs. Orissa Electricity Regulatory Commission in Appeal No.30 of 2012* | The Court did not agree with the Tribunal’s reliance on this judgment. |
| Section 2 (72) of the Electricity Act, 2003* | The Court used this definition to establish the scope of transmission lines. |
| Central Electricity Authority (Technical Standards for Construction of Electrical Plants and Electric Lines) Regulations, 2010* | The Court relied on these regulations to demarcate between transmission and distribution lines based on voltage levels. |
| Maharashtra Electricity Regulatory Commission (Transmission Open Access) Regulations, 2016* | The Court used these regulations to demarcate between transmission and distribution lines based on voltage levels. |
| Maharashtra Electricity Regulatory Commission (Distribution Open Access) Regulations, 2016* | The Court used these regulations to demarcate between transmission and distribution lines based on voltage levels. |
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the existing transmission license of TPC-T, which included the 2×110 kV lines as part of the transmission network. The Court emphasized that until the license is modified, these lines should be treated as part of the transmission system. The Court also relied on the regulatory framework, particularly the CEA Regulations 2010, and the Maharashtra Electricity Regulatory Commission’s regulations, which demarcate transmission and distribution boundaries based on voltage levels. The Court found that the Tribunal had erred by ignoring these established norms and the existing license. The Court’s reasoning focused on procedural correctness, ensuring that the pending application for amendment of the transmission license is decided first before determining the nature of the 2×110 kV lines. The Court also emphasized the need for adherence to the existing regulatory framework and the importance of not ignoring the existing transmission license.
| Reason | Percentage |
|---|---|
| Existing Transmission License of TPC-T | 40% |
| Regulatory Framework (CEA Regulations & MSERC Regulations) | 30% |
| Procedural Correctness (Pending Amendment Application) | 20% |
| Tribunal’s Error in Ignoring Existing License | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
Key Takeaways
- The classification of electricity lines as either transmission or distribution is crucial for determining applicable charges.
- Regulatory frameworks, such as the CEA Regulations and state-level regulations, provide guidelines for this classification based on voltage levels.
- Existing licenses and pending applications for amendments must be given due consideration in disputes related to electricity supply.
- The Supreme Court emphasized the importance of procedural correctness, ensuring that the pending application for amendment of the transmission license is decided first before determining the nature of the 2×110 kV lines.
Directions
The Supreme Court directed the Commission to decide the application filed by TPC-T for amendment of the transmission license expeditiously, within two months from the date of resumption of work after the lockdown due to the Corona Virus. The Court further directed that any appeal filed against the decision of the Commission on the amendment application should be decided by the Tribunal within three months from the date of filing. After that, the Tribunal shall take up Appeal No.84 of 2018.
Development of Law
The ratio decidendi of this case is that the existing transmission license and the regulatory framework demarcating transmission and distribution lines based on voltage levels must be considered in disputes related to electricity supply. The Court emphasized that until the transmission license is modified, the 2×110 kV lines should be treated as part of the transmission network. This case clarifies that the existing licenses and pending applications for amendments must be given due consideration in disputes related to electricity supply.
Conclusion
The Supreme Court set aside the Appellate Tribunal’s judgment, remanding the case for fresh adjudication. The Court emphasized that the existing transmission license of TPC-T, which includes the 2×110 kV lines as part of the transmission network, must be respected until the license is modified. The Court also directed the Commission to decide on the amendment application filed by TPC-T expeditiously, underscoring the importance of procedural correctness and adherence to regulatory norms in determining wheeling charges.
Category
Parent Category: Electricity Laws
Child Category: Wheeling Charges
Child Category: Transmission and Distribution
Child Category: Electricity Act, 2003
Child Category: Section 2(72), Electricity Act, 2003
FAQ
Q: What are wheeling charges in the context of electricity supply?
A: Wheeling charges are fees paid for using the infrastructure of a power distribution company to transport electricity from one point to another.
Q: What was the main issue in the Sai Wardha Power Generation Ltd. vs. Tata Power Company Ltd. case?
A: The main issue was whether Tata Power Company Limited-Distribution (TPC-D) could levy wheeling charges on Hindustan Petroleum Corporation Limited (HPCL) for power supplied through 110 kV lines, which were also claimed to be part of the transmission network.
Q: What did the Supreme Court decide in this case?
A: The Supreme Court set aside the Appellate Tribunal’s judgment and remanded the case for fresh adjudication. The Court emphasized that the existing transmission license of TPC-T, which includes the 2×110 kV lines as part of the transmission network, must be respected until the license is modified.
Q: What is the significance of the transmission license in this case?
A: The transmission license is significant because it determines whether the 110 kV lines should be considered part of the transmission network or the distribution network. The Court held that until the license is modified, the 2×110 kV lines should be treated as part of the transmission network.
Q: What are the practical implications of this judgment?
A: This judgment highlights the importance of regulatory frameworks and existing licenses in determining wheeling charges. It also emphasizes the need for a clear demarcation between transmission and distribution networks to avoid disputes.