- (1.) These appeals are directed against judgment dated 30.9.2003 of the Division Bench of the Madras High Court whereby the appeals filed by the Appellants under Section 27 of the Electricity Regulatory Commissions Act, 1998 (for short, 'the Act') against the determination of tariff by Tamil Nadu Electricity Regulatory Commission (for short. 'the Commission') were dismissed. Tamil Nadu Electricity Board (for short, 'the Board') submitted a petition under Regulation 7 of the Tamil Nadu Electricity Regulatory Commission Tariff Regulations, 2002 (for short, 'the Regulations') for revision of tariff w.e.f. 1.12.2002. The Commission issued public notice and invited objections/ suggestions from various stakeholders. The Appellants and other consumers filed objections against the proposed hike in tariff. After conducting public hearing, the Commission passed detailed order dated 15.3.2003, the relevant portions of which are extracted below: 7.4 Average Cost of Supply The Commission has designed ARR formats such that data regarding the voltage-level cost of supply is maintained by the TNEB. With the eventual aim of linking the tariffs to the voltage-level cost of supply, if not the category-wise cost to serve. The consumers will appreciate that the cost of supply at higher voltages will be lower than that at lower voltages, on account of the downstream distribution costs and the higher level of T & D losses at lower voltages. If the tariffs are determined in relation to the voltage level cost of supply, then the tariffs for the IT consumers will have to be increased substantially. Moreover, the level of cross-subsidy with respect to the average cost of supply is itself high. The Commission would also like to have more data and a more detailed analysis of the voltage level costs before arriving at the voltage level cost of supply. The Commission is of the view that the tariffs should gradually approach the average cost of supply, and the Commission would attempt to eliminate the cross-subsidy in a period of five years. The Commission is of the view that considering the data availability, the average cost of supply method is the most suitable methodology for the present. The average cost of supply in FY03 and FY04 has been computed as shown in the Table below: (Table omitted) 7.5 Cross-subsidy Reduction The Commission is committed to gradually reduce the cross-subsidies in the State over a five-year period, by increasing the tariffs applicable to the subsidised categories, viz. Agriculture, domestic, Lift Irrigation Societies, power looms and Cottage industries, and reducing the tariffs applicable to the subsidising categories, viz. HT and IT industrial consumers, Railway Traction, HT and LT Commercial category, etc. However, the magnitude of the tariff revision required and the level of cross-subsidy is such that the Commission has been compelled to increase the tariffs for the subsidising categories also, in order to avoid tariff shock for the subsidised categories. The Commission has endeavoured to minimise the tariff increase for the subsidising categories while undertaking higher tariff increases for the subsidised categories. The category-wise sales and revenue from approved tariffs have been summarized in Annexure A. The category-wise increase in average realisation is shown in the Table below: Table: Increase in Average Realisation Note: i) Average realisation includes fixed charges and energy charges ii) Average realisation numbers rounded of the nearest 2 decimals iii) *-Flat rate tariff in Rs. /Month ** - Flat rate Tariff in Rs. /HP/Month The above table shows that the Commission has attempted to increase the tariffs for the subsidised categories to a higher extent than that for subsidising categories. 7.7 Tariff for erstwhile free supply categories 7.7.1 General This aspect is very sensitive and has aroused a lot of opinions, both, for and against, during the public hearings and there have also been several objections in this context. In subsequent sections, the Commission has discussed the tariff for the agricultural category and the hut service connections, in detail. 7.7.2 Agricultural Tariff The TNEB has proposed a flat rate tariff of Rs. 600 per HP per year for unmetered agricultural connections and 50 paise/kWh for metered agricultural connections. A comparison of the prevailing agricultural tariffs in selected states where SERC's have issued Tariff Orders, is given in the following table:. (Table omitted) XXX XXX XXX The Commission appreciates that the small fanner will be unable to pay substantial tariffs immediately, and the tariff increase has to be gradual. It should also be borne in mind that the supply availability to agriculture is restrictive as compared to other categories. Moreover the voltage profile for agricultural supply is also said to be poor to most of the services. Water table in many of the places in Tamil Nadu has gone down considerably and more energy is required to pump water. It is pertinent to note that, of the 29 districts in the State, all districts except Chennai are declared by the Government as drought hit. Under these extreme circumstances, the Commission is constrained not to concede the request of TNEB to charge the agricultural consumers at the rate of Rs. 600/HP/Annum. Considering all the above, the Commission has decided to introduce tariff for agriculture at the rate of Rs. 250 per HP per annum, for unmetered services or 20 paise per unit for metered services. In order to incentives the consumers to opt for metered services the monthly minimum charge for metered services has been fixed at Rs. 25, The billing cycle for agricultural consumers shall be half yearly, and the first bill will be raised at the end of September 2003. 7.7.3 Hut Service Connections As stated earlier, the ERC Act provisions effectively does not permit free supply of electricity to any consumer category, and if the State Government wishes to subsidise these consumers, then it has to compensate the TNEB for the corresponding revenue loss. Moreover, the TNEB has itself stated that there have been instances of misuse/excess use of electricity from such free hut service connections. The Commission has hence accepted the TNEB's proposed tariffs of Rs. 10 per connection per month. If the consumption of the hut service connections is found to exceed the normative levels, then meters will be installed and domestic tariffs will be applicable as per the slab rates applicable for the domestic category.
(2.) Paragraph 6.2.2 of the Tariff Order, which speaks of State Government subsidy is also extracted below: 6.2.2 State Government Subsidy The Section 29(5) of the ERC Act, 1998 states, "If the State Government requires the grant of subsidy to any consumer or class of consumers in the tariff determined by the SERC under this section, the State Government shall compensate the utility in the manner directed by the SERC". In its Tariff Petition, the TNEB has stated that the Government of Tamil Nadu (GOTN) has committed a revenue subsidy of Rs. 250 crore for FY03, by creating a provision in the State Budget for FY03, and not indicated any subsidy commitment for FY04, due to its own financial situation. However, in the Petition, the TNEB has assumed GoTN subsidy of Rs. 250 crore for both years, i.e. FY03 and FY04. The TNEB has further clarified that the GoTN revenue subsidy is being given specifically to compensate the TMEB for the subsidized supply of electricity to agricultural consumers. Government of Tamil Nadu in their written submission which has been reproduced in earlier sections have stated that the present financial status docs not permit them to provide any subsidy in FY04. The Commission has taken note of the submissions in this regard by TNEB and GoTN and determined the tariff accordingly.
(3.) The Appellants challenged the order of the Commission by filing appeals under Section 27 of the Act. They pleaded that the burden of subsidy given to some classes of consumers could not have been transferred to them and it was for the State Government to compensate the Board. They relied upon the judgment of this Court in West Bengal Electricity Regulatory Commission v. C.E.S.C. Limited, 2002 8 SCC 715 and claimed that the burden of subsidy cannot be loaded on other consumers.;