V I D Y U T    O M B U D S M A N

Office of ANDHRA PRADESH ELECTRICITY REGULATORY COMMISSION

5th Floor, Singareni Bhavan, Red Hills,

Hyderabad

 

Dated: 13-12-2006

 

Present: S. Surya Prakasa Rao, Ombudsman

 

 

Appeal No 26 of 2006

        

                                                                                 

 

Between

 

M/s. L.I.D Jewellery (India) PVT. Ltd,

Gem and Jewellery Complex, VSEZ,

Duvvada,

Visakhapatnam – 530 046                                                                                                                         ...…..   Appellant

 

And

 

1. The Divisional Engineer/Operation/Zone-II/Visakhapatnam.

2. The Superintending Engineer/Operation/Visakhapatnam.

3. The Chief General Manager/RAC/Visakhapatnam.

4. The Chief General Manager/O&CS/Visakhapatnam                                                                           .…….   Respondents

 

 

This appeal dated. 25-09-2006 from M/s. L.I.D. Jewellery (India) Pvt. Ltd., (hereinafter called as appellant or consumer) against the order                 dated 24-08-2006 of the Forum for redressal of grievances of consumers (hereinafter called the Forum of CGRF) EPDCL, Visakhapatnam in C.G. No. 76 0f 2006 of Visakhapatnam District, coming up for consideration by the Ombudsman, and having stoodover till this day, the Ombudsman issues the following: -

 

ORDER

 

2.        The facts on record in this case are briefly narrated herein. The consumer has set up a Jewellery manufacturing unit in the Viskhapatnam Special Economic Zone (VSEZ) and started availing power supply, initially at Low Tension for a contracted load of 74 HP, which was released on 15-10-2001 under LT category III – Industrial, with service connection No. VSEZ-41.  Subsequently at a different location in the same VSEZ, the consumer availed HT supply at 11 kV for a contracted Maximum Demand of 950 kVA which was released on 31-01-2004 under HT category I – Industrial with service connection No. VSEZ-417. The power supply for the LT connection No. 41 was stopped on 10-08-2004.  Subsequently the respondent EPDCL has issued demand notice on 30-11-2004 for payment of Rs.7.93 lakhs towards back billing under the revised category for LT S.C.No.41 pursuant to an inspection made by DPE officials on13-08-2003.  Similarly, the classification of HT Service was also changed to HT category-II (a residual category) with effect from 16-12-2005 and a notice was issued for payment of Rs.19.23 lakhs on 24-01-2006 i.e. about after 2 years of release of service. The reason for the change of category is that the consumer is using the power taken from the EPDCL for air-conditioning and lighting purposes, while the power generated from his captive power plant is used for the production of Jewellery.  The total amount of back billing for both connections works out to Rs.27.16 lakhs. The representations to the concerned authorities of EPDCL, by consumer were not accepted.  However, as advised by respondent EPDCL, the appellant made an adhoc payment of Rs.2 lakhs, pending settlement of the dispute.  As the EPDCL has not settled the dispute, the consumer approached the Forum with a compliant on 13-04-2006.  The learned Forum after thorough examination of the issues concerned with this dispute, rejected the complaint in its Order dated  24-08-2006.  Hence the appeal.

 

3.        In the appeal the consumer did not make any specific pleadings or grounds of appeal but enclosed copies of various documents concerning this matter including the order dated 24-08-2006 of the Forum. The consumer sought justice in this regard. 

 

4.        As per clause 8(1)(c) and 11 of the Regulation No. 1 of 2004 of the Hon’ble APERC, the Ombudsman is required to endeavor to arrive at a settlement by mutual agreement between the parties.  Accordingly, by notice dated 29-09-2006 the parties herein were advised to endeavor to arrive at a mutually acceptable settlement by 23-10-2006 and if no settlement is reached, the respondents are required to file counter by 31-10-2006 and the appellant is required to file rejoinder if any by 10-11-2006.  As no settlement is reached, a notice was issued on 18-10-2006 informing that the parties will be heard in the office of SE/Operation/ Visakhapatnam on 15-11-2006.

 

5.        The respondent No. 2 filed the counter on behalf of the respondents on13-11-2006.  In this counter the respondents have made following prime contentions:

(i)        Based on the inspection of the DPE wing on 13-08-2003, a notice was served on the consumer for change of category as the power is being used for non-essential loads like lights, fans & air-conditioning.  

(ii)       At the time of release of HT supply, the service was erroneously classified under HT category-I instead of HT category II.

(iii)      As per condition 35 of the Terms and Conditions of Supply, the reclassification is in order.

(iv)            If the consumer uses the EPDCL power for the total load, including that under captive plant, then the category will be restored to HT-I, duly providing separate meter for measuring the energy consumption for lights, fans and A/C under HT-I tariff.

 

6.        The parties were heard on 15-11-2006 in the office of SE/Operation/Visakhapatnam (Respondent No.2). The appellants are represented by Sri Katla Satyanarayana, AGM and Sri Challa Sreedhar Director.  The respondents are represented by Sri V. Samba Murthy, SE/Opn/ Visakhapatnam (respondents No.1) Sri S.Varahalu DE/Operation/Zone-II (respondent No.1) and Sri Prasada Rao, GM/RAC/EPDCL (respondent No.3).

 

7.        Sri. Challa Sreedhar, Director of the appellant company has narrated the importance of this industry and the quality of supply required for the sophisticated imported machinery used for the Diamond cutting / Jewellery manufacture.  Sri. Katla Satyanarayana, AGM of appellant company has stated that they had to go in for captive plant as the EPDCL could not provide required quality of supply.  They stated that presently they have DG sets of 3 X 1000 kVA capacity and one will be always a stand by set.  They have pleaded that air-conditioning is essential for the manufacturing process and hence it should be treated under industrial category only.  They cited the example of software industry where the power is mostly used for air-conditioning and lights / fans, but categorized as an Industrial category.  They strongly protested the back billing under revised category.

 

 

8.        Sri. V. Samba Murthy, SE(O), VSP (Respondent No.1) re-iterated the contents of the counter and stated that since the power is used for non-essential loads, the consumer should be classified under HT Category – II only.  On my enquiry during the hearing, Sri.S.Varahalu, DE(O)/Zone-II, VSP, (Respondent No.2) has stated that the LT service (No. 41) was inspected by DPE officials on 18-08-2003 and sent their report on 29-10-2004 stating that the service should be categorized under LT category II as the supply is being used for lights / fans / air conditioning and the manufacturing process is done with captive power.  Hence notice was issued on 30-11-2004 (i.e. after disconnection of supply on 10-08-2004 pursuant to release of separate HT supply).  The DE/O/Zone-II issued final order dated 24-08-2005. The appeal made by the consumer to SE/OVSP, (the appellate authority) was rejected in his order dated 08-02-2006. In respect of HT service No. 417 the inspection was done 16-12-2005, notice was issued by ADE/Operation on 03-01-2006 and back billing notice was issued on 24-01-2006.  The appeal of the consumer was rejected by the Respondent No.1 in his order dt. 04-04-2006.

9.        As the counter was filed by respondents only on 13-11-2006, the appellant was asked to file rejoinder if any with in a week for consideration by the Ombudsman.  They filed the rejoinder in their letter dated 26-11-2006 received on 01-12-2006.  While reiterating the earlier point, the appellant made the following requests in this rejoinder: -

 

(i)               To confirm HT category – I for air-conditioning load.

(ii)             Cancel the back billing amount for Rs. 27.16 lakhs.

(iii)           To adjust all consumption charges paid under category – II against future bills, which they are paying under protest.

(iv)          To allow concession in power tariff under category – I from Rs. 3.4 per unit to Rs.2.4 per unit like in other SEZs.

 

10.      In the background of the above rival contentions the point for consideration in this appeal is

“whether the fans, lights and air-conditioning load for which EPDCL power is used, is entitled for classification under Industrial category”

 

11.      The relevant issues concerning the point are discussed hereunder:

 

(a)      Permission for captive plants: In the captive power permissions issued by the erstwhile APSEB and later by APERC (after Reform Act came into force) there are two normal modes of captive usage.

 

(i)        Stand-by use when Licensee’s supply fails.

(ii)       Parallel operation with Licensee’s supply.

 

There is also a 3rd mode, which is called island mode operation where the consumer does not avail the supply of Licensee at all.  This mode is very rare.  This case falls in a 4th Category with island mode operation for a part of the load.

In this case, the Hon’ble Commission having been convinced of the need for captive plant for the manufacturing process permitted the same, subject to using Licensee’s supply for non-essential loads. In the normal course, such non essential loads have to be treated under the residual category (HT category-II) as can be understood from the tariff rate fixed for lights and fans consumption in excess of 10% of total consumption under HT category-I which is abstracted hereunder:

Category

Energy Rate

Paise/unit

Rate for Lights & Fans in Excess of 10%

HT Category – I

132KV-280

  33KV-310

   11KV-330

440 Ps/Unit

 

HT Category – II

132KV-365

             33KV-390

   11KV-440

 

 

It may be seen from the above that the energy tariff for Lights & Fans in excess of the specified limit is charged the rate of 440 Per/Unit applicable for energy used for Non-Industrial category (HT Category – II at 11 kV).  It follows without saying that when the total load is of that nature, it eventually gets classified under the Non-Industrial category. 

 

(b)      Case of air-conditioning as essential facility: The main point of the appellant is that the air-conditioning is mandatory for the manufacturing process.  But it can tolerate a lesser quality of supply.  Hence they opted for EPDCL supply though it is essential for production.

 

There is no provision in the tariff order of the Hon’ble Commission to treat “air conditioning” as an industrial activity.  However it is possible to take such a view if air conditioning is used for “preservation” as the word preservation is mentioned under industrial category.  The “preservation” meant in the Industrial category is not relevant in this case as there is no activity of preservation in the Jewellery industry.  Further I am unable to accept the philosophy of mandatory requirement of air conditioning for Jewellery manufacture.  In such case manufacture and air conditioning should go together even in the source of electricity supply.

 

 

 

(c)      Offer of respondents for Ht category-I

During the course of hearing I referred to the offer of respondents in their counter and asked the representatives of the appellant to respond whether they can use the EPDCL power for total load, with parallel operation of the captive plant, so that outages if any, in EPDCL supply as well as the requirement of quality of supply can be taken care of, except frequency which depends on the system condition of entire Southern Region comprising of four southern states. The appellants / have certain reservations and constraints on this suggestion.

 

12.      In view of the position stated above it is to be stated that the air conditioning as a separate activity under industrial category is not envisaged in the existing tariff classification and hence the contention of the appellant cannot be accepted.

 

13.      Demand notice for back billing

(a)      LT supply (S.C. No.41)

At the outset the notice issued for the LT service (No.41) after it was totally disconnected / dismantled is not maintainable. The inspection was done on 18-08-1983. Back billing notice was issued on 30-11-2004 i.e. 3½ months after disconnecting the LT supply on 10th August 2004. It is not legally tenable to claim arrears after the contract is terminated. Thus the EPDCL has no authority to issue a demand notice after the supply was stopped and after agreement is deemed to have been terminated.

The notice issued by EPDCL to the consumer for payment of Rs.7.93 lakhs towards back billing against S.C.No.41 is liable to be set aside.

 

(b)      HT Supply (SC.No.417)

           The Hon’ble Commission approved revised General Terms & Conditions of Supply (GTCS), which are effective from 10th January 2006. The clause 3.4 of the said GTCS specifies the procedure for re-classification of consumer category as follows:

(i)               A notice is to be issued to the consumer informing the proposed re-classification.

(ii)              After considering the objections filed if any by the consumer, the Licensee may alter the classification and revise the bills suitably, if necessary even with retrospective effect.

(iii)            The period of re-trospective effect is limited to 3 months in case of Domestic Agricultural categories and 6 months in case of other categories.

 

In this case, the notice for back billing was issued on 24-01-2006 and the process of appeal were adhered to and the order on the appeal was issued by respondent No.2 on 04-04-2006. Hence the provisions of the clause 3.4 of GTCS shall be applicable in this case. Accordingly the back billing is to be limited to 6 months i.e. back billing can be done for this service from the billing month of July 2005 onwards only.

 

14.      Concluding the above discussion, I decide the following award in this appeal.

(i)        The demand notice issued by respondents to the appellant for payment of Rs.7.93 lakhs towards back billing against the LT Service No.VSEZ-41 is set aside.

(ii)       The demand notice issued by the ADE/Operation/Gajuwaka in his letter dated 24-01-2006 for payment of Rs.19,22,753 is set aside and a revised notice shall be issued limiting the amount for a period of 6 months i.e. from the billing month of July 2005 to December 2005.

(iii)      The amount of Rs.2 lakhs paid by the appellant as an adhoc payment shall be adjusted against the amount payable as per item (ii) above.

 

           Thus the appeal is partly allowed with the above directions.   

 

 

This order is signed by me on 13th day of December 2006

 

 

VIDYUT OMBUDSMAN