Electricity Tariff: Kerala High Court Strikes Down Regulation Imposing KSEB Pension Liability On Consumers
The Kerala High Court has held that electricity tariff charged from consumers will not include the amount allocated to the Master Trust, pension fund of Kerala State Electricity Board employees.Single Bench of Justice Murali Purushothaman struck down Regulation 34 (iv) of the the Kerala State Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations,...
The Kerala High Court has held that electricity tariff charged from consumers will not include the amount allocated to the Master Trust, pension fund of Kerala State Electricity Board employees.
Single Bench of Justice Murali Purushothaman struck down Regulation 34 (iv) of the the Kerala State Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations, 2021 (the Final Tariff Regulations). With this verdict, the electricity tariff shall be reduced by 17 paise per unit for the consumers.
The KSEB Master Trust was formed for providing benefits, including staff pension to KSEB employees. It is funded through bonds.
The Draft Tariff Regulation issued by the State Electricity Regulatory Commission stated that only interest payable on these bonds shall be approved for computation of Aggregate Revenue Requirement (ARR). However, the Final Tariff Regulations also included the principal repayment of bonds for computation of ARR.
According to the Commission, the said provision was incorporated in the Final Tariff Regulations in view of the KSEB's huge unfunded liability to pay annual pension contribution.
The High Court has struck down the provision as illegal to the extent that it differed from the draft Regulations, and did not fulfil the requirement of previous publication as contemplated under Section 181(3) of the Electricity Act, 2003 and the Electricity (Procedure for Previous Publication) Rules, 2005.
"When the draft regulations is published providing that only the payment of interest on the bonds issued to the Master Trust will be approved for computation of ARR and the amount of repayment of such bonds shall not be reckoned for computation of ARR, and when changes are made to the draft regulations providing that repayment of such bonds will be reckoned for computation of ARR, which proposal was not conceivable in the draft regulation, the Regulatory Commission ought to have followed the requirement of previous publication as contemplated under Section 181 (3) of the Electricity Act, 2003 and the Electricity (Procedure for Previous Publication) Rules, 2005. When changes are made to the draft regulations which are not incidental or ancillary to the draft regulations, but foreign to the draft, such changes should be notified/published for the information of persons likely to be affected and inviting their objections and suggestions thereto," Court said.
The plea was filed by the Kerala High Tension and Extra High Tension Industrial Electricity Consumers' Association and two others challenging the hike in power tariff.
The petitioners were aggrieved that the final Tariff Regulations were issued in total breach of the provisions contained in Section 181(3) of the Act which provides that all regulations made by the Regulatory Commission under the Act shall be subject to previous publication.
The Court noted that apart from Section 181(3) of the Act, the Electricity (Procedure for Previous Publication) Rules 2005 also provides for publication of a draft of the regulation for the information of persons likely to be affected thereby.
"...when the Act provides that all regulations made by the State Commission under the Act shall be subject to the condition of previous publication and the Rules provide for the procedure for previous publication and the procedure so prescribed contemplates publication of a draft of the regulation for the information of persons likely to be affected, publication of notice specifying the date on or after which the draft regulations will be taken into consideration, consideration of objections and suggestions, the regulation would be bad in law if the aforesaid procedures are not followed before the publication of final regulations," the Court observed.
It thus held final tariff regulations that was notified without calling for any objection or suggestion of persons likely to be affected as impermissible and defeating the object of previous publication contemplated under the Electricity Act and Rules, and thereby declared Regulation 34 (iv) of the final regulations to the extent it does not conform to the draft regulation as illegal.
"It will be open to the Regulatory Commission to specify the terms and conditions for the determination of tariff as regards repayment of principal amount on Master Trust Bonds after complying with the requirement of Section 181 (3) of the Electricity Act, 2003 and the Electricity (Procedure for Previous Publication) Rules, 2005 and in accordance with law," the Court added.
On the Question of Maintainability
It is significant to note that pursuant to the issuance of Tariff Regulations 2021, the KSEB had filed a petition for tariff revision for the control period 2022-23 to 2026-27 before the Commission, which was allowed, increasing the retail supply tariff for 66 KV and 110 KV consumers. A review petition preferred by the petitioners against this was dismissed, leading to filing of an appeal before the Appellate Tribunal for Electricity (APTEL), which is currently pending.
During this time, the KSEB again submitted a tariff revision proposal for the same control period mentioned hereinabove and petitioners approached the High Court through the present plea. KSEB argued that the reliefs sought in the petition are already sub judice before APTEL.
The Court observed that while the petitioner could not invoke the writ jurisdiction to challenge the tariff order which is pending before the APTEL in appeal, the second relief sought for the declaration of the Tariff Regulation as illegal and ultra vires was maintainable to the limited extent of considering the vires and legality of the Regulations.
The Court relied upon a plethora of precedents such as Association of Industrial Electricity Users v State of Andhra Pradesh (2002), PTC India Ltd v. Central Electricity Regulatory Commission, thr. Secy (2010), Transmission Corporation of Andhra Pradesh Ltd. v Sai Renewable Power Pvt. Ltd. (2011), and Ninan K.C. v. Kerala State Electricity Board [2023 LiveLaw (SC) 453].
It thus observed that the Commission would have to satisfy the twin conditions, that the Regulations are consistent with the Electricity Act, 2003 and that they are made for carrying out the provisions of the Electricity Act.
The Court added that if the Commission had failed to follow statutorily prescribed procedure or to take into account factors mandated by the statute, the Court could exercise its jurisdiction and interfere in the same. The plea was thus held to be maintainable.
Counsel for the Petitioners: Senior Advocate Joseph Kodianthara, and Advocates Abraham Joseph Markos, Isaac Thomas, P.G. Chandapillai Abraham, Alexander Joseph Markos, Sharad Joseph Kodianthara, John Vithayathil, and Aibel Mathew Siby.
Counsel for the Respondents: Deputy Solicitor General S. Manu, Additional Advocate General Asok M. Cherian, Government Pleader T.S. Shyam Prasanth, Senior Advocates S. Sreekumar, Raju Joseph, and Ranjith Thampan, Standing Counsel for GCDA Advocate Vipin P. Varghese, and Advocates C. Joseph Antony, R.V. Sreejith, V.M. Krishnakumar, Adarsh Mathew, Merline Mathew, Celine John, Mehnaz P. Mohammed, Anirudh G. Kamath, and P.R. Reena
Citation: 2023 LiveLaw (Ker) 464
Case Title: Kerala High Tension and Extra High Tension Industrial Electricity Consumers' Association & Ors. v. Kerala State Electricity Regulatory Commission & Ors.
Case Number: WP(C) NO. 19205 OF 2023