AP Transco Entitled To Issue Revised Bills For Surplus Energy Supplied To Participating Industries: Telangana High Court

The Telangana High Court has upheld the right of Transmission Corporation of Andhra Pradesh Limited (A.P. Transco, now T.S. Transco) to issue revised bills and recover the same from participating industries in relation to surplus unused electricity, generated by Andhra Pradesh Gas Power Corporation (APGPCL).

“The learned Single Judge further erred in directing that the rates or prices have to be determined between A.P. Transco and APGPCL after notice to the participating industries. The learned Single Judge further erred in restraining the A.P. Transco from recovery of amount mentioned in the revised bills, subject to ultimate determination of price between A.P .Transco and APGPCL,” a Division Bench of Chief Justice Alok Aradhe and Justice T.Vinod Kumar said.

The Court was hearing intra-court appeals preferred by both AP Transco and various participating industries, challenging the order of Single Judge holding that A.P. Transco has right to levy tariffs for reallocation of unutilised surplus energy, but the same should be decided before-hand between the APGPCL and A.P. Transco based on fuel cost plus O&M charges plus depreciation but not exceeding the rate of energy as per HT category-I of A.P. Transco.

In the year 1988 due to severe power cuts imposed by the erstwhile Andhra Pradesh electricity board, A.P Transco/T.S. Transco and 6 other companies entered into a Memorandum of Understanding (MoU-I) to set up a natural gas based power generation station, namely Andhra Pradesh Gas Power corporation Limited (APGPCL).

Various medium and large scale industries wanted to join APGPCL. In 1997, a second MoU (MoU-II) was entered into between the interested industries and APGPCL for setting up additional capacity and sharing the electricity generated in proportion to paid-up shares.

A clause in the MoU-II stipulated that if for some reason a participating industry could not utilise all of the electricity, APGPCL should be informed 15 days prior to the end of the billing month, so that the unutilised energy could be reallocated amongst the other participating industry on pro-rata basis.

When the Andhra Pradesh Electricity Reforms Act was enacted in 1998, it mandated APGPCL to get licence for transmission and supply of electricity. This was upheld by the High Court and challenged before the Supreme Court by way of a SLP.

The Supreme Court held that since all participating industries were share holders in APGPCL, and were manufacturing energy for their own consumption, APGPCL would fall within the ambit of 'captive consumption' (self- generated and self- consumed) and would not require licence for transmission of electricity to the participating industries.

In 2003, the Reforms Act was substituted by the Electricity Act and with that the provisions relating to licensing under the Reforms Act also lapsed. A.P. Transco issued revised bills in relation to surplus energy consumed by the participating industries by way of demand notice, and the same was challenged before the single judge.

The single judge held that A.P. Transco had exclusive discretionary right over the surplus energy and can allot the unutilized power to other participating industries. The Court further held that A.P. Transco had the right to levy tariff in respect of surplus energy allotted to other participating industries, but however, held that since no price fixation agreement had been entered into, the price for such surplus energy had to be decided between A.P. Transco and APGPCL based on various variables after issuing notice (as per clause 17 a of MoU-I).

The Counsel on behalf of the participating industries stated that the single judge erred in relying on clause 17(a) of MoU-I and should have relied on clause 2.6 of MoU-Ii. As per clause 2.6 of the MoU-II, surplus energy, was to be reallocated between the participating industries and if any energy was leftover after reallocation, only then was it to be transferred to A.P. Transco.

Additionally that A.P. Transco is merely a bailiff holding onto the energy until transfer, and a bailiff is not legally entitled to revise bills. The participating industries also contended that bills had already been paid to APGPCL and only issue is with regards to revised bills.

A.P. Transco (as it was then) on the other hand contended that they were well within their right to issued tariffs. They stated that in the year 2004, APGPCL was informed that they do not have licence to allot surplus power and such right to allot and issue bills was solely with A.P. Transco. None the less bills were issued by APGPCL and hence had to be revised, it was contended.

The Court held that a joint reading clause 11 of MoU-I and clause 3.2 of MoU-II would make it obvious that surplus energy used by the participating industries would be billed as per A.P. Transco tariffs and that tariffs shall cover variable charge as well as fixed charge.

"It is pertinent to note that it is not the case of the participating industries that the revised bills have been issued by the A.P. Transco in violation of conditions of MoUs. Therefore, the A.P. Transco is well within its right to issue the revised bills under the MoU-I and MoU-II."

The Court further observed that audi alteram partem is one of the founding principles of natural justice, and since participating industries did not have opportunity to even file objections to the demand notice so as to afford opportunity of hearing, "Therefore, we answer the first issue in affirmative and hold that under MoU-I and MoU-II, A.P.Transco has authority to issue revised demands in respect of surplus energy supplied to participating industries."

The Court further held that all energy generated is shared proportionally amongst share holders, whether generated under MoU-I or MoU-II and "Therefore, the contention that learned Single Judge erred in applying clause 17(a) of MoU-I and ought to have applied clause 2.6 of MoU-II cannot be accepted."

The Court lastly held that since notices were already issued to the participating industries, they will have the chance to raise objections. After which, A.P. Transco shall consider the objections.

"....Needless to state that after decision on the objections preferred by the participating industries to the demand notices impugned in these appeals and the writ petition, A.P. Transco shall be entitled to recover the amount from the participating industries in accordance with law"

Case Title: M/S.SRJ POLY FILMS PRIVATE LTD vs. TRANSMISSION CORPORATION OF A.P.LTD & ORS. (AND BATCH)

Advocate. K.Gopal Choudary, Senior Counsel for appellant/participating industry in Writ Appeal No.2161 of 2004.

Advocate Prashanth VRN,counsel representing M/s.Indus Law Firm, for participating industries

Advocate R.Vinod Reddy, standing counsel for T.S.Transco

Advocate Venkat Challa, standing counsel for A.P.Transco

M.Karthik Pavan Kumar, counsel for APGCPL

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