TMI Blog1995 (4) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... greement with the appellant-Board whereunder the Board undertook to supply power upto but not exceeding a maximum demand of 7778 KVA/ 7000 KW . The agreement contains the following stipulations among others: (1) The consumer has perused a copy of the Orissa State Electricity Board (General Conditions of supply) Regulations, 1981, understood its contents and undertakes to observe and abide by all the terms and conditions stipulated therein including all future modifications thereto, to the extent they are applicable to him. The Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981 as modified from time to time shall be deemed to form part of this Agreement [Vide clause (2)] (Emphasis added). (2) The consumer shall pay to the Engineer for the power demand and electrical energy supplied under this Agreement in accordance with the tariff as mentioned below, subject to any revision that may be made by the Board from time to time. Large Industries (a) The monthly charges shall be:- Demand charges at ₹ 35.00 per KVA of maximum demand plus energy charges at the following rate on units metered less units billed separately under (c) and (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the water 90-91 (1/7/90 to 1. 2. 3. 4. 5. Large Industries 13. IPI STEEL Gundichapada 1.7.89 to 30.6.90 16.863 16.863 5. It is agreed by the parties that the effect of the above order is to reduce the supply by fifty per cent. The Electricity Board has explained how the said fifty per cent reduction is being implemented and operated, by producing before us a statement relating to the water year 1988-89. It would be appropriate to extract the said statement: M/S.IPI STEEL LTD: DHENKANAL 1. Contract Demand (C.D.) - 7778 KVA (Kilo-Volt-Amperes) 2. 80% of C.D. - 0.8 x 7778 KVA - 6222.4 KVA 3. 100% requirement of energy for the water year 1988-89 - 37.467 MU (Million Units) 4. % of level of allocation for the water year 1988-89requirement - 50% of the full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmits that the energy was made available to all the bulk consumers on the above basis, which fact, he says, is not disputed by the respondent nor any complaint is made by him that energy was not made available in the manner stated in the said tabular Statement. 7.At this stage, it would be appropriate to explain certain concepts relevant herein. The expression contract demand is defined in clause (viii) of Regulation 3 of the Regulations. The definition reads thus: (viii) Contract demand, means the maximum kilowatt (KW) or kilo-volt-ampere (KVA) as the case may be agreed to be supplied by the Board and contracted by the consumer. (In the case of the respondent the contract demand, as stated hereinabove, is 7778 KVA.) 8. The expression minimum charges is referred to and explained in clause 7(b) of the Agreement between the parties. The clause, extracted hereinabove, says that the monthly minimum charges shall be calculated at the above rates on a demand eighty per cent of contract demand and on units calculated at an average power factor of 0.9 and an average load factor of fifteen per cent on the said contract demand. (The reason for prescribing the minimum char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other particular amount of energy, it makes necessary arrangements therefor by laying the lines to the extent necessary and installing other requisite equipment. It is obvious that if a factory uses energy at a particular level/ load and for a particular period, it consumes a particular quantity of energy. The trivector meter records the highest level/ load at which the energy is drawn over any thirty- minute period in a month while the other meter records the total consumption of energy in units in the month. Let us take the case of the respondent to illustrate the point. The maximum demand in his case is upto but not exceeding 7778 KVA. That is his requirement. In the normal times, he is entitled to draw energy at that level/load. That is his maximum demand under the agreement. But he may not always do so. Say, in a given month, he draws energy at 6000 KVA level only, even then he has to pay the minimum charges as stipulated in the agreement. But if he draws and consumes energy exceeding eight per cent of the energy, he pays demand and energy charges for what he utilises. Now, let us notice how the trivector meter, i.e., the meter which records the maximum demand works; the met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the type of lines to be laid and the power of transformers and other equipment to be installed for the purpose. A factory having a maximum demand of say 1000 KVA and a factory having a maximum demand of 10,000 KVA require different type of lines and other equipment for providing supply to them. In the case of latter, lines have to be of a more load-bearing variety. Transformers have to be installed and of more capacity. Sometimes in the case of bulk consumers even a sub-station may have to be established exclusively for such factory/plant. Very often these industries are situated away from power stations and main transmission lines which means laying special power lines over considerable distances to give the supply connection. As a matter of fact, the significance of the maximum demand would be evident from the fact that the agreement between the Board and consumer (like the respondent) specifies only the maximum demand and not the total units allowed to be consumed. The agreement concerned herein prescribes the maximum demand at 7778 KVA but does not prescribe the total number of units of energy allowed to be consumed. This is for the reason, explains Sri Hegde, that the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the equitable distribution of energy it may by order provide for regulating the supply, distribution, consumption or use thereof. (2) Without prejudice to the generality of the powers conferred by subsection (1) an order made thereunder may direct the licensee not to comply, except with the permission of the State Government, with- (i)the provisions of any contract, agreement or requisition whether made before or after the commencement of the Indian Electricity (Amendment) Act, 1959 (32 of 1959), for the supply (other than the resumption of a supply) or an increase in the supply of any energy to any person, or (ii)any requisition for the resumption of supply of energy to a consumer after a period of six months, from the date of its discontinuance, or (iii)any requisition for the resumption of supply of energy made within six months of its discontinuance, where the requisitioning consumer was not himself the consumer of the supply at the time of its discontinuance. 14. It is obvious that an order made under Section 22-B is binding upon the Electricity Board and over- rides the con- tracts and agreements which the Board may have entered into with the consumers. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, the nature of the supply and purpose for which supply is required and any other relevant factors. (4) In fixing the tariff and terms and conditions for the supply of electricity, the Board shall not show undue preference to any person. 17. In exercise of the power conferred by Section 79 read with Section 49 of the Electricity (Supply) Act, the Orissa Board has framed Regulation 46. Before its amendment by Notification dated June 25 1987, Regulation 46 read as follows: Right of Board in case of break down in Board's supply system -- If at any time during the continuance of any agreement between the Board and consumer, due to reason mentioned in clause-40(d) and 43 above, the Board/Engineer shall be under no obligation to give supply of electrical energy as contracted during the period of such break down/ force measure situation continues. Such period of discontinuance/reduced supply shall not be added to the initial period of the agreement. Provided that during such period of discontinuance/reduced supply, the consumer shall not be liable to pay the minimum charges in accordance with the agreement, but shall only pay for the actual quantity of demand and/or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indeed it was fifty per cent. In accordance with the said proviso, therefore, the respondent was obliged to pay (i) the maximum demand charges as provided in the agreement and (ii) the actual energy consumption charges though he is relieved of the obligation to pay minimum charges. The maximum demand contracted by the respondent is upto but not exceeding 7778 KVA as mentioned hereinbefore. Now, if the respondent draws energy at full load, i.e., at 7778 KVA, his consumption of energy over the year would be twice the quota permitted to him during the year of restriction. Therefore, the respondent is obliged to - and should - draw energy at half the maximum/contracted demand, i.e., at 3889 KVA, if he wants to run his factory for the whole of the year of restriction. And since, he is relieved of the obligation to pay the minimum charges as per the agreement, he pays demand charges only on the basis of the actual maximum K.VA drawn by him plus the charges for the energy actually consumed by him. Secondly, the Board explains, there is an option available to such consumers. If their unit cannot work at a level/load less than the maximum demand/contract demand or if the consumer wishes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay the demand charges which charges are levied to cover investment installation and the standing charges to some extent and energy charges for the actual amount of energy consumed. The expression Demand charges would mean that the charge leviable for the readiness of the supplier to meet the demand of the consumer. Where, therefore, the supplier, namely, the State Electricity Board was not at all in a position to supply the energy as per the demand of the consumer it would be an unreasonable burden on the consumer if the supplier is permitted to raise the entire demand charges. The excessiveness of the. burden on the economy of the industry as well as on the consumer would be apparent from a small illustration. An industry needs 7000 KVA for running of its factory but because of the power restrictions issued by the State Government in exercise of power under section 22(b) of the Supply Act it cannot run the factory through out the month as that would exceed the quantum of energy which the industry could utilise. But to run its machinery if the industry in question on the first day of the month takes power than in the demand meter it would show 7000 KVA. Thereafter even if for nex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill No.705 dated 3.2.1989 is 2,56,200 K.W.H. and in terms of quantity of demand it is 478.3 K.V.A. but on the basis of maximum demand recorded in the trivector metre it is 683 KVA and, therefore, the petitioner has been made liable to pay the demand charge at the rate of 35 per KVA, thus amounting to ₹ 2,51,150/- ,though for 478.3 KVA he could have been charged on proportionate reduction basis only to the extent of 17,578. The aforesaid concrete illustration exhibits the arbitrariness and irrationality of the provisions in question. On examining the proviso to Regulation 46, we have not found any nexus for the same for which it has been introduced. If the nexus is the readiness of the supplier to supply power then how can the provision be sustained %-hen that readiness is not there. In the aforesaid facts and circum- stances, we are of the considered opinion that the proviso to Regulation 46 is unreasonable, arbitrary and unreal and the same cannot be sustained and we accordingly quash the same. 24. Apart from criticizing the above reasoning, Sri Hegde, learned counsel for the Board complains that the decision of the High Court is coloured by the extreme example taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel points out that this Court has also quoted with approval the decision of the Madras High Court in MG.Natesa Chettiar v. Madras State Electricity Board (1969 (1) Mad.LJ 69), where it was held that: the minimum fixed was only consideration for keeping the energy available to the consumer at his end; it was not a penalty for not consuming a stated quantity of energy but was a concession shown up to the amount fixed, energy at a specified rate could be consumed free, consumption beyond only had to be paid for. The statutory basis for the terms in the agreement providing for minimum annual charge was found in Section 22 of the Act and Section 48 of the Supply Act. Section 22 deals with obligation on licensee to supply energy. The proviso to the section says: No person shall be entitled to demand or to continue to receive, from a licensee a supply of energy for any premises having a separate supply unless he has agreed with the licensee to pay to him such minimum annual sum as will give him a reasonable return on the capital expenditure, and will cover other standing charges incurred by him in order to meet the possible maximum demand for those premises, the sum payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... says, the respondent cannot be al- lowed to wriggle out of the terms of the agreement by resorting to Article 226 of the Constitution. lie submits further that during the period of restricted supply, the capital charges remain the same though there may be some reduction in the running charges, that even during the period of restricted supply, loans have to be repaid with interest, the plants, the stations, the transmission lines and all other equipment have to be maintained in good shape and depreciation etc. provided for. The staff recruited, the learned counsel submits, cannot be reduced as soon as an order under Section 22-B is made and reemployed when the restriction ceases. He submits that if the respondent had installed a generating station or unit of his own for the purpose of supplying the energy required by his steel mill, he would have been faced with the very same problems as are faced by the Board. 27. On the other hand, the learned counsel for the respondent-writ petitioner submits that if the Board is allowed to Insist upon its pound of flesh and to enforce the agreement and Regulation 46 as it stand, it would be highly unjust and inequitable to the consumers like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the disability of the Board to give full supply to the appellant-consumer because of the Government Order under Section 22-B must be treated as a circumstance disabling the consumer from consuming the electricity as per the contract and, therefore, entitled to the benefit of clause (4)(f). 29. So far as the decision in M/ s.Dhanawat Rice and Oil Mills is concerned, it does not appear to be a case where a power cut was imposed under Section 22-B. The decision entirely turned upon the language of clauses (1), (4) and (13) of the Agreement between the parties. Clause (13) provided that where the consumer is prevented from receiving or using the electrical energy either in whole or in part due to strike, riots, fire, floods, explosions, act of God or any other cause reasonably beyond the control or if the Board is prevented from supplying or is unable to supply such electrical energy owing to any or all the causes mentioned above, then the demand charge and guaranteed energy charge set out in the Schedule to the Agreement shall be reduced in proportion to the ability of the consumer to take or the Board to supply such power; the decision of the Chief Engineer of the Board in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consumer to arrange his affairs in such manner as he thinks fit provided he does not go beyond the quota (restricted quota) prescribed for him. Now, Regulation 46 says that during the period an order under Section 22-B is in operation and the hours of restriction exceed 150 hours in a month, the consumer is relieved of the obligation to pay the minimum charges, i.e., the obligation to pay eighty per cent of the charges even if he avails of and consumes less power. The consumer governed by the two- part tariff is, however, obliged under the said regulation to pay on the basis of actual energy consumption and the 'maximum demand' as provided in the agreement . Now, what does this mean in practice? If the consumer avails of energy at half the maximum demand/contract demand, he will pay demand charges only for that. In other words, if the respondent had drawn energy at 3889 KVA, he would pay demand charges only for 3889 KVA plus the charges for the actual number of units consumed by him. Similarly, had the respondent availed of the energy at, say 3000 KVA he would have been liable to pay demand charges only on that basis plus the energy charges, and if he had availed of en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the manner explained hereinbefore. In such a situation, the consumer would certainly be entitled to the relief in an equitable manner, just as he would have been entitled to re- lief in normal times. In other words, what would happen if during normal times such a thing happens? Same would be the situation during the period of cut. There is in effect no distinction between both situations except that during periods of restricted supply, the availability of energy is reduced vis-a-vis the contracted supply. Now, it is not the case of the respondent that in any month electricity energy was available for the first day of the month or on any par- ticular day or days and not for the whole month. So far as the period January to March, 1989 is concerned, the situation in that month was a special one. It is explained by the Board that on January 5, 1989 there was a system disturbance on account of the failure of a 220/132 KV auto- transformer at TTPS Talcher on account of which the industries like the respondent were not allowed to draw en- ergy even in accordance with the cut and restriction imposed by the Government of Orissa and the Orissa Electricity Board. It is explained that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. 34. We must, therefore, say that no arbitrariness or unreasonableness is involved in Regulation 46 or its proviso. It only provides for collecting demand charges for the actual maximum demand availed by such consumers during the period of restricted supply. The consumer cannot le- gitimately complain of this course nor can it characterise it as confiscatory. We must also say that none of the decisions relied upon by the learned counsel for the re- spondent lays down any principle which can be said to suggest that such a rule is arbitrary and unreasonable. Once we understand the system of two-part levy and the rationale behind it, as also the compulsions arising from an order under Section 22-B of the Electricity Act, 1910, there would be no room or ground for impugning the validity of Regulation 46 of its proviso. Difficulties are no doubt there difficulties of the consumer and difficulties of the Board. They are essentially the problems of shortages, perhaps endemic to a developing economy. As rightly emphasised by Sri Hegde, the respondent would have faced the same problems if he had installed his own plant for generating electricity to meet his needs. While the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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