APTEL Dismisses UPCL Appeal, Holds Long-Term and Mid-Term Open Access Consumers Exempt from Cross Subsidy Surcharge

Uttarakhand Power Corporation's attempt to levy cross subsidy surcharge on mid-term open access consumers fails as APTEL upholds the UERC's interpretation of Regulation 22 of the 2015 Open Access Regulations.

The Appellate Tribunal for Electricity (APTEL) has dismissed an appeal filed by Uttarakhand Power Corporation Limited (UPCL), a distribution licensee in Uttarakhand, against an order dated 12 April 2018 passed by the Uttarakhand Electricity Regulatory Commission (UERC). The Commission had held, in suo-moto proceedings, that long-term and mid-term open access consumers are not liable to pay cross subsidy surcharge under Regulation 22 of the UERC (Terms and Conditions of Intra State Open Access) Regulations, 2015. It had directed UPCL to refund amounts already recovered as cross subsidy surcharge to the three respondent consumers — M/s India Glycols Limited, M/s Hindustan National Glass Limited, and M/s Easter India Limited — by adjustment in three monthly bills starting May 2018. APTEL, in a judgment authored by Hon'ble Mr. Virender Bhat, Judicial Member, found no error in the Commission's order and dismissed the appeal.

The Dispute Before the Tribunal

UPCL, by a letter dated 29 January 2018, informed M/s India Glycols Limited that cross subsidy surcharge of Rs. 33,42,186 had not been levied on power purchased by it through Mid-Term Open Access (MTOA) and sought to recover the same. India Glycols replied on 31 January 2018, pointing to Regulation 22 of the UERC Open Access Regulations, 2015, which it said exempted mid-term open access consumers from such surcharge. UPCL did not accept this explanation.

India Glycols then sent a representation dated 2 February 2018 to the UERC. The Commission took up the matter suo-moto, issued notices to UPCL and the other two respondent consumers, heard all parties, and passed the impugned order on 12 April 2018 holding that no cross subsidy surcharge was payable by long-term or mid-term open access consumers. UPCL challenged that order before APTEL.

UPCL's Two-Pronged Challenge

UPCL raised two distinct objections before APTEL. First, it argued that India Glycols' representation to the Commission disclosed only a billing dispute and should have been directed to the Consumer Grievance Redressal Forum (CGRF), not the Commission. Second, on the merits, UPCL contended that the second proviso to Regulation 22 exempts from cross subsidy surcharge only those long-term or mid-term open access consumers who have also established a captive generation plant — not all such consumers. The word “such” appearing before “open access consumer” in the proviso, UPCL argued, tied the exemption to the captive generation condition.

Jurisdiction: Billing Dispute or Regulatory Question?

APTEL rejected UPCL's jurisdictional objection without hesitation. The Tribunal noted that India Glycols' representation had specifically invoked Regulation 22 of the UERC Open Access Regulations, 2015, to contest the legality of the surcharge. The dispute therefore involved the rights and liabilities of open access consumers and required interpretation of the open access regulations — a matter squarely within the Commission's domain, not the CGRF's.

APTEL drew on its own earlier judgment in Maharashtra State Electricity Distribution Company Ltd. v. Maharashtra State Electricity Regulatory Commission (Appeal No. 36 of 2011, decided 28 July 2011), where it had held that disputes relating to open access are to be dealt with only by the Commission, and that the CGRF established by a distribution licensee has no jurisdiction to entertain or decide a dispute where the statutory mandate to provide open access has been violated. The Tribunal also referred to its judgment in Uttar Gujarat Vij Company Ltd. v. Gujarat State Electricity Regulatory Commission & Ors. (Appeal No. 181 of 2010, decided 22 March 2011), which held that a consumer grievance redressal forum or ombudsman cannot give legal interpretation of a tariff determination order made by a Commission.

The Tribunal further cited the Supreme Court's observations in Maharashtra Electricity Regulatory Commission v. Reliance Energy Ltd. & Ors. (2007) 8 SCC 381, affirming the Commission's full power to supervise licensees and distribution companies to ensure compliance with its rules and regulations. APTEL concluded that disputes involving interpretation and clarification of regulations can only be adjudicated by the State Regulatory Commission, and the Commission was right to initiate suo-moto proceedings.

Reading Regulation 22: The Surcharge Exemption

The substantive question turned on the second proviso to Regulation 22(1) of the UERC Open Access Regulations, 2015. The main provision requires embedded open access consumers to pay cross subsidy surcharge determined by the Commission. The second proviso reads:

“Provided further that such surcharge shall not be levied on long term/medium term such open access consumer and a person who has established a captive generation plant for carrying the electricity to the destination of his own use.”

UPCL's case rested on the word “such” appearing before “open access consumer” in the proviso. It argued this word linked the exemption to the captive generation condition, so that only long-term or mid-term consumers who had also set up a captive plant would be exempt.

APTEL disagreed. The Tribunal read the proviso as creating two distinct classes of exempt consumers: (a) long-term and mid-term open access consumers, and (b) persons who have established a captive generation plant for carrying electricity to the destination of their own use. The disjunctive “and” between the two descriptions, the Tribunal held, was indicative of two separate categories, not a single composite condition.

On the word “such”, APTEL held it was superfluous and that removing it produced a grammatically coherent and workable proviso. The Tribunal observed that had the Commission intended to exempt only long-term or mid-term consumers who had established a captive plant, the proviso would have been worded differently — placing the captive generation condition as a qualifier on the long-term or mid-term consumer class, rather than listing it separately.

Structural Confirmation: No Formula for Long-Term or Mid-Term Consumers

APTEL found additional support for this reading in the structure of Regulation 22 itself. Sub-regulation (2) provides a formula for determining cross subsidy surcharge payable by short-term open access consumers. The regulation contains no corresponding formula for long-term or mid-term open access consumers. The Tribunal held this absence itself manifested that long-term and mid-term consumers were not intended to pay cross subsidy surcharge at all.

The Tribunal also noted that adopting UPCL's interpretation would produce an absurd result: short-term open access consumers with a captive generation plant would remain liable to pay cross subsidy surcharge, which would conflict with the third proviso to Section 42 of the Electricity Act, 2003, which exempts captive generation plants and their users from such surcharge.

Purposive Interpretation and the Commission's Own Intention

APTEL acknowledged that the proviso was not happily worded and was grammatically defective. It referred to the principle articulated by Lord Denning in Seaford Court Estates Ltd. v. Asher, as approved by the Supreme Court in Tirath Singh v. Bachittar Singh AIR 1978 SC 548, that a judge confronted with a defect in a statute must find the intention of its makers and give force and life to that intention, ironing out the creases without altering the material of which the Act is woven.

Applying this principle, APTEL noted that the Commission — as the maker of the regulation — had itself explained in the impugned order that its intention was never to levy cross subsidy surcharge on long-term or mid-term open access consumers. The Commission had stated that the rationale for the exemption was to promote open access, particularly given that UPCL was in continuous shortage of power. When confronted with the defect in the regulation during the suo-moto proceedings, the Commission had clarified its own intention. APTEL found this explanation lucid and consistent with the text of the regulation properly read.

Outcome

APTEL found no error or infirmity in the UERC's order dated 12 April 2018. The appeal was dismissed as devoid of merit. The direction to UPCL to refund the cross subsidy surcharge recovered from the three respondent consumers — M/s India Glycols Limited, M/s Hindustan National Glass Limited, and M/s Easter India Limited — as well as other concerned long-term and mid-term open access consumers, by adjustment in three monthly bills starting May 2018, accordingly stands.