Appeal No.14 of 2007

Between

The Managing Director,

M/s Vijay Iron Foundry Private Limited,

Soni Business Complex, Room No.38, II Floor, Prasanthi Nagar,

I.E., Kukatpally,

Hyderabad-500 072 ... Appellant

and

1) Superintending engineer/Operation, Medak Circle, APCPDCL,

Sangareddy, Medak District.

2) Senior Accounts Officer/Operation, Medak Circle, APCPDCL,

Sangareddy, Medak District.

3) Divisional Engineer/Operation, Medak Circle, APCPDCL,

Sangareddy, Medak District.

4) Asst.Divisional Engineer/Operation, APCPDCL, Bollaram,

Medak District.

5) General Manager, Customer Services /APCPDCL, Corp.Office,

Hyderabad. ... Respondents

The representation (appeal) dated 23.04.2007 of the Appellant has come up for settlement before the Vidyut Ombudsman on 22.06.2007, 03.07.2007, 09.08.2007 and 23.08.2007 in the presence of the appellant and respondents and stood over for consideration till this day, the Vidyut Ombudsman passed/issued the following:

AWARD

Aggrieved by the Order dated 24.03.2007 of the Forum for Redressal of Consumer Grievances of Central Power Distribution Company of A.P.Limited (for short ‘Forum’), Hyderabad in C.G.No.87/2006-07/Medak Circle, the appellant herein submitted a representation (appeal) under clause 9(1) of APERC (Establishment of Forum and Vidyut Ombudsman for Redressal of Grievances of the Consumers) Regulation (for short ‘Regulation No.1/2004’) requesting the Vidyut Ombudsman to set aside the orders of the Forum dated 24.03.2007 and to advise the respondents to revise the bill for the consumption month of January, 2007 taking into consideration the actual number of hours of power supply for the purpose of MD charges and the load factor that is used to give incentive.

2. Facts relating to availing of power supply by the appellant are not in dispute and therefore there is no necessity to dwell into these details.

3. The specific issue under challenge before the Ombudsman relates to consumption of electricity by the appellant from the 11 KV sub-station at IDA, Bollaram of the respondents and calculation of load factor for the purpose of computation of the bill for the month of January, 2007. The averments made in the appeal are as follows:

(a) The respondents resorted to cut-off power supply for two hours from 25.12.2006 to 07.01.2007, both days inclusive, and for 12 hours on 10.01.2007 and 17.01.2007, totaling to 52 hours during the consumption of January, 2007.

(b) After taking readings on 19.01.2007 by the respondents, the appellant gave a representation on 23.01.2007 stating that unscheduled power cuts are likely to cause lot of inconvenience to industries, especially of those which are furnace oriented industries and result in heavy financial loss to industries. Further requested that bill may be raised taking into the actual no.of hours of power supply made available for the purpose of billing MD charges as well as for calculation of load factor. In short the appellant requested that billing should not be done assuming that the licensee made available power supply for all 24 hours per day and for all the days in the month, as doing so would be on wrong assumption. Detailed calculation comparing the billing with wrong assumption that power supply was never cut-off and with actual position of power availability, clearly indicates that the appellant would be subjected to a loss of Rs.7,54,252/- in the shape of excess billing.

(c) Inspite of such representation, the billing was done on wrong assumption of power supply being not cut-off and thus causing excess billing. Therefore, the appellant herein approached the Forum.

(d) The Forum after concluding the enquiry coming to a decision that there is no deficiency in regulating power supply by the respondents nor in its service. The reasons mentioned by the Forum in its order are not correct. The reasons given that the demand of the respondents for the month of January, 2007 is raised as per the tariff and terms & conditions of supply is mis-conceived and mis-leading. The respondent is not empowered therein to bill assuming that power supply was made available all through, even though it has been cutting off power supply at its convenience.

(e) The regulation of power supply by Load Despatch Centre is not relevant factor to be considered, as the appellant is not questioning cutting off power supply, but only challenging billing on wrong assumption with regard to supply of electricity.

(f) It is not correct to state that the respondent has no authority over the tariff and terms & conditions of supply, the respondent by interpreting the number of hours as only the number of hours in a month irrespective of whether the respondent has made power supply available or not, as abused the principle for arriving at correct load factor. In a nutshell it is the contention of the appellant that billing of MD charges has to be made for the proportionate hours for which supply was made available and with regard to formula for load factor, the number of hours has to be correctly interpreting as the hours for which power was made available.

4. As the Ombudsman is required to endeavor to promote a settlement by mutual agreement, the Ombudsman convened a meeting on 07.06.2007. Accordingly, notices have been sent to the appellant as well as to the respondents to appear before the Ombudsman on the said date. On 07.06.2007 Sri Suresh Kumar Singhal, Managing Director of the Appellant Company, R-1, Junior Accounts Officer on behalf of R-2 and R-3 were present before the Ombudsman. As the dispute could not be settled by mutual agreement, the Ombudsman directed the respondents to file counter on or before 20.06.2007 to which date the appeal stood posted.

5. On 21.06.2007, R-1 submitted a copy of the para-wise replies forwarded by it to the appellant vide letter No.SE/OP/MDK/SAO/HT/D.No.247/2007 dated 20.06.2007, wherein it is stated that power crisis in the state during December, 2006 and January, 2007 due to utilisation of power by the farm sector and as there was no means to purchase power, the respondents resorted to load reliefs for a shorter period to stabilize the grid. The request of the appellant vide its representation dated 23.01.2007 referred to above was rejected vide letter dated 15.02.2007 for the reason of shortage of power supply, which is beyond the control of the respondents. The calculation of incentives was done by the respondents according to the guidelines framed by the Transmission Corporation of Andhra Pradesh Ltd. (APTRANSCO) vide Memo No.CE(Comml)/AAO/ TARIFF/D.No.329/07 dated 26.04.2001.

6. On 03.07.2007 the appellant herein submitted rejoinder dated 29.06.2007. Apart from giving para-wise remarks to replies filed by R-1, the contention of the appellant is that :

(a) the Load Factor of the service has to be arrived by taking the number of hours in the denominator as number of hours for which actual supply of electricity was made available by deducting the period of shut-offs resorted by the respondents. The dispute lies in wrong assumption of the item ‘number of hours’ and correct interpretation should be given to the said term so that it does not lead to wrong assessment of Load Factor.

(b) The M.D.Charges also should be claimed on proportionate basis to the number of hours for which power was supplied, compared to the total number of hours in the month. As power supply was cut-off for considerable period, in the month, it would be proper to limit the M.D.charges to the actual number of hours in the month. The period for which supply was not make available was 7% which involves considerable amount, compared to monthly bill of about 1.3 crores.

7. Copies of the HT agreement dated 29.04.2006 executed by the appellant in favour of the respondent company and Lr.No. SE / OP / MDK / SAO / HT / D.No. 3598 / 2007 dated 15.02.2007 addressed to the appellant demanding payment of Rs. 754927/- are filed.

8. In view of the above pleadings of the appellant, it is clear that the appellant is not questioning the inability of the respondents to supply power for all the 744 hours in a month to the former’s factory but only challenging the methodology being adopted by the latter for billing purpose. According to the appellant, respondents resorted to power cuts totalling to 52 hours during the consumption month of January, 2007 and the hours for which power supply was not provided to the appellant is to be deducted from the total hours in calculating the incentive. On close scrutiny, the principal contentions of the appellant are as mentioned in paragraph 6(a) and 6(b) and the same are examined in the light of the material placed before the Ombudsman.

9. It is not the case of the appellant that the respondents have sufficient power at its disposal and did not supply power to the appellant compelling the appellant not to achieve the maximum consumption and thereby foregoing incentive to the full extent. Therefore, it is not necessary to discuss the explanation offered by R-1 in his letter dated 20.06.2007 with regard to load reliefs resorted to by the respondents. Eventhough it is stated by the appellant in its representation dated 23.01.2007 that unscheduled power interruptions are likely to cause lot of inconvenience to industries, especially of those which are furnace oriented resulting in heavy loss, in view of categorical assertion of the appellant in its letter dated 15.03.2007 that the appellant has no grievance against cutting of supply nor claiming compensation for such cut-off in supply of power, the Forum below also rightly confined itself to the amount billed for energy. In other words the issue revolves around whether the appellant should be billed for actual number of hours of supply or for total number of hours in a month.

10. Thus the short point that arises for consideration relates to calculation of incentive. While the appellant contends that the period for which power supply was provided to it alone has to be taken into consideration for arriving at load factor and consequently for computation of incentive, it is the contention of the respondents that “calculation of incentives was done according to the guidelines and therefore, the appellant is liable to pay short paid amount of about Rs.7.5 lakhs for the consumption month of January, 2007. The purpose of giving incentive is to encourage the consumer to consume maximum energy whenever abundant power is available. In case of shortage of power, power shut downs in power supply are inevitable, to maintain grid stability. Keeping in view of such interruptions in power supply, 50% load factor is fixed as the eligibility criteria to avail H.T. incentive and it is aimed at encouraging industrial sales. A consumer is required to consume maximum possible energy and achieve 50% load factor to get eligibility for incentive during the period of supply of power which is made available, notwithstanding the power shut downs to maintain grid stability.

11. It may be observed that there is no compulsion on a consumer to consume electricity supplied by the licensee to the maximum extent. But if a consumer avails electricity to the maximum extent allocated to it during supply hours, with all interruptions, it can still achieve threshold load factor of 50% or 70% and consequently avail corresponding incentive. There is no obligation on the part of licensee to provide supply to an extent that a consumer will get eligibility or qualify to avail incentive. The purpose of incentive is to encourage a consumer to consume maximum energy whenever power is available abundantly as mentioned supra. During power shortage, a licensee may not be in a position to provide continuous power supply such that a consumer gets eligibility to avail incentive. Sometimes in public interest, licensees may be required to resort to load shedding to avoid grid collapse, etc. In such instances, a consumer is required to co-operate with the licensee in the larger public interest and it cannot claim incentive on the premise of non-supply or short supply of electricity by the licensee.

12. According to the New Oxford Advanced Learner’s Dictionary, the word ‘incentive’ means doing something that encourages one to do something. For example, tax incentives are given to encourage savings. The Law Lexicon defines the word ‘incentive’ as ‘something that arouses feeling or incites to action’. Thus it is clear that a consumer cannot claim incentive as a matter of right. As mentioned supra, in order to encourage consumers to consume maximum energy whenever abundant power is available, it is the practice of the licensees to give incentives depending upon achieving certain percentages of load factor.

13. In view of the above, the contention of the appellant that load factor has to be arrived by taking into consideration the number of hours for which supply of electricity was actually made available is not tenable and is rejected. Moreover, in this case it is noticed that the Forum below observed that the appellant has not fully utilised the power made available to it to the full extent in order to have the benefit of incentive.

14. With regard to the MD charges, it is not the contention of the appellant that it is not liable to pay the same. But it is the contention of the appellant that the demand charges are to be levied based on the actual power supply hours. The demand charges are meant to recover fixed cost, based on the contracted capacity (demand). MD charges are fixed charges incurred by the respondents for creating facility for supply of electricity. The contention that MD charges should be levied on the basis of number of hours for which supply was made available by the respondents is also not tenable. For reasons mentioned above, the respondents may be required to cut off power supply, but the respondents cannot be directed to limit MD charges to the actual number of hours for which supply was made in a month to the appellant. Therefore, the respondents cannot be directed to calculate the demand charges based on actual supply hours.

15. For all the reasons stated above, there is no merit in the appeal and it is dismissed.

This award is corrected and signed this 31^st day of August, 2007.

Vidyut Ombudsman