V. S. Sirpurkar, J. - (1.) This judgment will dispose of the above three Civil Appeals which have been filed by three Appellants, namely, Tamil Nadu State Electricity Board, Uttar Pradesh Power Corporation Ltd. and Rajasthan Rajya Vidhyut Prasaran Nigam Ltd. The common question of law is involved in all the three appeals which relates to the interpretation of Regulation 2.7(d)(iv) of the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulation, 2001 (hereinafter called the "CERC Regulations, 2001"). These appeals are filed under Section 125 of The Electricity Act, 2003 (36 of 2003) and against the orders passed by the Appellate Tribunal allowing the appeals filed by the respondents therein. The following factual matrix would be necessary for the proper understanding of the controversy involved in these appeals.
(2.) Before the present Act came in the anvil, the Electricity Supply Act, 1948 was occupying the field and the Central Government norms for fixing tariff for the period 1.11.1992 to 31.10.1997 were notified under Section 43A of the said Act. The Legislature then brought in Electricity Regulatory Commissions Ordinance which was ultimately converted into an Act in the year 1998. Section 3 of the Act provides for the establishment and incorporation of Central Electricity Regulatory Commission (hereinafter called the "CERC" for short). Section 13 provides power to regulate the tariff of generating companies, owned and controlled by the Central Government, sub-section (b) thereof provides power to regulate the tariff of the other companies amongst the other powers which are to be found upto clauses (i) of that Section. Section 28 of the 1998 Act reads as under: "28. The Central Commission shall determine by regulations the terms and conditions for fixation of tariff under clauses (a), (b) and (c) of Section 13, and in doing so, shall be guided by the following namely: (a) the generating companies and transmission entities shall adopt such principles in order that they may earn an adequate return and at the same time that they do not exploit their dominant position in the generation, sale of electricity or in the inter-State transmission of electricity; (b) the factors which would encourage efficiency, economical use of the resources, good performance, optimum investments and other matters which the Central Commission considers appropriate; (c) national power plans formulated by the Central Government; and (d) such financial principles and their applications contained in Schedule VI to the Electricity (Supply) Act, 1948 as the Commission considers appropriate." A bare glance of the above-quoted Section suggests that the CERC would formulate regulations for providing terms and conditions for fixation of tariff under Clauses (a), (b) and (c) of Section 13. The power for making Regulations is to be found in Section 55 of the 1998 Act. Accordingly, the CERC has formulated Regulations which are called Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999. We are concerned herein with the Regulations called CERC Regulations, 2001 and more particularly, clause 2.7(d)(iv) thereof.
(3.) Before we take up the task of interpretation, we must state the facts which necessitate the interpretation of the above clause. In all these appeals we are concerned with the tariff for the period 1.4.2001 upto 31.3.2004. Clause 1.4 of the CERC Regulations, 2001 provides as under: "1.4 The generation tariff under these Regulations shall be determined station-wise and transmission tariff shall be determined line-wise, sub station-wise, as the case may be, and aggregated to regional tariff." Provided that a utility may file a petition for fixation of tariff in respect of the completed units/systems. Clause 1.11 provides: "For removal of doubts, it is clarified that the norms prescribed herein are the ceiling norms only and this shall not preclude the Generating Company and other beneficiaries from agreeing to improved norms." Chapter 2 relates to other power generating stations. Para 2.1 is a definition clause and the definition of "Operation and Maintenance Expenses" provides as under: "Operation and Maintenance Expenses" or "OandM Expenses" - In relation to a period means the expenditure incurred in operation and maintenance of the generating station including manpower, spares, consumables, insurance and overheads." Regulation 2.2 in the same Chapter provides as under: "2.2 The tariff for sale of electricity from Thermal Generating Stations (including Gas and Naphtha based stations) shall comprise of two parts, namely, the recovery of annual capacity (fixed) charges and Energy (variable) charges. The annual capacity (fixed) charges shall consist of interest on loan capital, depreciation, return on equity, advance against depreciation, operation and maintenance expenses, and interest on working capital. The Energy (Variable) charges shall cover fuel cost." (Emphasis Supplied) Then comes Regulation 2.7 which under sub-clause (d) provides for Operation and Maintenance expenses including insurance. We are not concerned with sub-clauses (i), (ii) and (iii) thereof. However, the relevant clause which has fallen for our consideration is clause (iv) which reads as under: "2.7 Payment of Capacity (Fixed) Charges: The Capacity Charges shall be computed on the following basis and its recovery shall be related to Availability. (a) ********** (b) ********** (c) ********** (d) Operation and Maintenance expenses including insurance: (i) ********** (ii) ********** (iii) ********** (iv) The escalation factor of 6 per cent per annum shall be used to revise the base figure of OandM expenses. A deviation of the escalation factor computed from the actual inflation data that lies within 20 per cent of the above notified escalation factor of 6 per cent (which works out to be 1.2 percentage points on either side of 6 per cent) shall be absorbed by the utilities/beneficiaries. In other words if the escalation factor computed from the observed data lies in the range of 4.8 to 7.2 per cent, this variation should be absorbed by the utilities. Any deviations beyond this limit shall be adjusted on the basis of the actual escalation factor arrived at by applying a weighted price index of CPI for industrial workers (CPI_IW) and an index of select components of WPI (WPIOM) as per formula given in note below clause (v) herein- below, for which the utility shall approach the Commission with a petition." ;