Appeal No 12 of 2006

Between

M/s. Mallikarjuna Rice Mill

Prop. Pallerla Rajesh

S.C.No.691 / Cat-III

Godavarikhani

Karimnagar District. … Appellant

and

1. Divisional Engineer / Operation / Peddapally.

2. Assistant Divisional Engineer / Operation / Godavarikhani

3. Assistant Accounts Officer / ERO / Godavarikhani

… Respondents

This appeal dated 22-06-2006 from Sri.P.Rajesham, (hereinafter called the appellant or consumer) the proprietor of Mallikarjuna Rice Mill, Godavarikhani, Karimnagar District against the order dated 18-05-2006 of the Forum for redressal of grievances of consumers (hereinafter called the Forum or CGRF) NPDCL, Warangal in C.G.No.52/2005 (Karimnagar Circle), coming up before the Ombudsman and having stood over the matter till this day, the Ombudsman issues the following:

O R D E R

2. The facts on record in this case are briefly narrated here in. The appellant is availing power supply to his rice mill at Godavarikhani, Karimnagar District for a connected load of 74 HP from 31-10-2001, with S.C.No.GNR/691, under LT Ctegory III(A) Industrial Normal Category. This service was provided with metering on HT side of the DTR as per the conditions specified on the tariff order (HT metering to be provided for loads of 50 HP and above). In May 2003, the AAO/ERO Godavarikhani (Respondent No.3) issued bill, which includes Low Power Factor (LPF) surcharge amounting to Rs.43,178 for the months of December 2002 to March 2003. Subsequently also the LPF surcharge was continued to be levied every month when ever the power factor computed as the HT meter readings was below 0.9. Thus a total amount of Rs.60,150/- was levied as surcharge for the period from December 2002 to February 2004 i.e. for a period of 15 months. The consumer protested for the levy of surcharge and approached the local officers including DE/Operation/Peddapally (Respondent No.1) and SE/Operation/Karimnagar. As the issue was not resolved by the officials of Licensee, the consumer approached the Forum of NPDCL, at Warangal on 06-02-2006 with a complaint on LPF surcharge. The learned Forum enquired into the complaint and reduced the surcharge from Rs.60,150 to Rs.35,716 for the period from December 2002 to February 2004 vide its order dated18-05-2006. Not satisfied with the decision of the Forum, the consumer filed this appeal.

3. In his appeal dated 22-06-2006 the appellant made the following prime contentions:

(i) The surcharge of Rs.43,178 for the period of December 2002 to February 2003 was levied only in May 2003, along with the monthly bill of May 2003.

(ii) The 25 KVAR rating capacitors installed by him, are in working condition.

(iii) He does not know why surcharge is levied.

(iv) Concerned officials checked the capacitors after the consumer made representation and found that the capacitors are working.

(v) The rice mill became sick due to lack of work on account of drought conditions.

(vi) The CMD/NPDCL considered the sickness of industry and waived minimum charges but LPF surcharge was not waived.

(vii) The Forum did not clarify why surcharge is levied when capacitors are working and it did not consider his grievance on that account.

For all the above reasons, the appellant requested the Ombudsman to cancel the surcharge wrongly levied.

4. As required under clause 8(1)(C) of the Regulation No.1 of 2004 of the Hon’ble Commission, the Ombudsman, by notice dated 24-06-2006, requested the parties herein to endeavour to arrive at a mutually acceptable settlement by 14-07-2006. In the said notice it was informed that if no settlement is reached, the respondents are required to file the counter by 17-07-2006 and the appellant is required to file his rejoinder if any by 24-07-2006, and that the Ombudsman will hear the parties at Hyderabad on 31-07-2006.

5. As no settlement could be reached, the AAO/ERO/Godavarikhani (Respondent No.3) filed his written statement in his letter dated 11-07-2006. The other respondents have not filed any written statements. The consumer (appellant) did not file any rejoinder to the written statement of respondent No.3.

6. In his written statement dated 11-07-2006, the respondent No.3 made the following prime submissions:

(i) The Rice Mill was under disconnection from March 2004 and bills were stopped from July 2004.

(ii) On a representation of the consumer on the ground of sick industry, the CMD/NPDCL issued certain instructions in Memo dated 11-03-2006.

(iii) As per the instructions in the said Memo, out of the total dues of Rs.1,59,987, an amount of Rs.82,223 was withdrawn towards reliefs granted as sick industry and an amount of Rs.67,298 was kept in abeyance pending decision of the Forum on consumer’s complaint about LPF surcharge and the balance amount of Rs.10,366 was collected from the consumer on 23-04-2006.

(iv) Subsequently the Forum decided the LPF surcharge as Rs.35,716 and hence the consumer has to pay only Rs.35,716 (as against Rs.67,298 kept in abeyance).

(v) The consumer came to the ERO for settlement, but he is not agreeable to pay the amount, as per the order of the Forum.

7. As it was felt desirable to conduct the hearing at the place of the event so as to have better access to the records and also to be more convenient to the appellant/respondents, the venue for the hearing was changed to Godavarikhani and the same was informed to the parties by notice dated 19-07-2006. The hearing was conducted in the office of AAO/ERO/ Godavarikhani (Respondent No.3) on 31-07-2006. The Appellant as well as all the 3 respondents have attended the hearing.

8. During the hearing on 31-07-2006 the appellant Sri.P.Rajesham made the following oral submissions:

(a) He has not received any notice from the respondents about defect in the capacitors installed by him. The capacitors installed by him are working and no defect was noticed.

(b) As instructed by the respondent No.2, additional 10 KVAR capacitors were installed and connected in addition to the 25 KVAR capacitors already installed. Again another 10 KVAR capacitors were brought recently and kept in the premises as instructed by the respondents.

When I asked him to inform how he is able to assert that the capacitors were working and there is no defect, he could not give any definite answer. He believes that they are O.K. as no defect was pointed out by the respondents.

9. Sri.U.V.Chari AAO/ERO/Godavarikhani (Respondent No.3) provided the following information at the time of hearing on 31-07-2006.

· Date of release of supply 31-10-2001

· HT metering is provided at the time of release of supply as seen from the Test report at the time of release of supply to this service.

· Power factor data available from June 2002.

· Respondent No.3 issued notice on 31-03-2003 to pay Rs.40,891 towards LPF for the period from December 2002 to March 2003.

The AAO furnished a copy of the Test report dated 11-10-2001 on testing of HT meter installed for this LT service. The said report contains a remark that required number of capacitors may be connected before release of supply to the consumer load. The meter was tested on phantom load as the consumer was not ready with his load. This shows that the capacitors were not installed by the date of testing of meter on 11-10-2001. However as the supply was released on 31-10-2001, it could be presumed that the required capacitors would have been installed by that time as the LT supply would not have been released without capacitors as per clause 38.9 (b) of the Terms and conditions of supply (here in after called as TCS).

10. Sri.T.Venumadhav, ADE/Operation/Godavrikhani (Respondent No.2) has stated that the low power factor values computed as per the reading of HT metering were informed to the consumer at the time of taking the monthly meter readings. In response to my question whether any Test report is available in the records on testing of meter any time subsequent to the release of supply, the ADE has stated that the meter was again tested on 18-11-2002 by MRT and the same will be furnished separately. He also stated that notice on defect of capacitors was issued on 31-01-2006 as per inspection on 22-01-2006. When I requested for the record of test results, he said that the record was not kept. He expressed the opinion that the consumer is liable to pay LPF surcharge since the power factor is less than the specified level of 0.9.

11. In the background of the rival contentions and facts on record as detailed above, the point for consideration is

“Whether the LT III(A) – Industrial normal category consumer is liable to pay surcharge even after installing the capacitors of required ratings as per TCS and when no defect was established in the capacitors?

and

Whether the respondents are entitled to levy the LPF surcharge on LT III(A) Industrial normal category consumers on the basis of the power factor computed from the readings recorded in the HT metering provided for such consumers?”

12. POINT:

This matter is squarely covered by the matters earlier decided by the Ombudsman in Appeal No.7 of 2006 (M/s. Pranav Rice Mill, Adilabad District) and Appeal No. 9 of 2006 (M/s.Saraswathi Binni Rice Mill, Khammam District). The provisions of TCS/Tariff orders on the basis of which, the decisions in these cases are taken are indicated in the Annexure to this order. They are briefly mentioned here under:

(i) Part ‘D’ of the Tariff orders of 2002-03 and 2003-04 (which are relevant for the period for which the surcharge was levied) provides that if the capacitors already installed by LT consumers are found to be defective during inspection, such consumers shall attract penal provisions as per the TCS.

(ii) The levy of surcharge incase of LT consumers is governed by clause 38.9(a) of the TCS which requires issue of notice informing that the capacitors are defective and asking the consumer to rectify/replace such defective capacitors, with in one month.

(iii) LPF surcharge as per HT metering is leviable only on LT III(A) Industrial optional category consumers and not LT III(A) Industrial normal category consumers as per condition V(c) of Note under LT category III(A), in part B, of Annexure D of Tariff order of 2003-04, and as per condition VI under LT Category III(B)

In this case it is established beyond any doubt that no inspection was done to establish the defect in capacitors and no notice was issued on that basis before levy of surcharge during the period from December 2002 to February 2004. The notice dated 31-03-2003 issued by the respondent No.3 does not however mention about the defect in the capacitor nor an opportunity was given for rectification as required under the TCS. Regarding the authority to levy LPF surcharge on the basis of the power factor computed from the readings of HT metering, it is to be stated that the item (iii) above makes it clear that the LPF surcharge (as in the case of HT consumers) is leviable only for LT III(A) Industrial optional category consumers and not for LT III(A) Industrial normal category consumers. Hence the respondents have no authority to levy the LPF surcharge on LT III(A) Industrial normal category consumers during the period under consideration. Thus the point is proved in favour of consumer.

13. Before pronouncing the award it would be of some use if the rationale/logic in not reckoning the power factor obtained in HT metering for the purpose of levy of surcharge in these cases, is explained apart from the rule position stated above. In the case LT supply to any consumer, the DTR is the equipment of Licensee though it is exclusively installed for certain consumers including those for whom meter is provided on HT side of DTR. The reactive load of the DTR will influence the average power factor and its impact would be substantial in the case of Industries, which run only for a few hours in a day in the month. In fact it was established from the meter test reports in the Khammam case referred above, that the instantaneous power factor when the consumer was running the load was very near to 0.9, as against the average power factor computed for an entire month being around 0.5 or so. Thus the impact of licensee’s DTR is substantial in the cases where the Industry works only for few hours in a day. In this case no record is made available to establish the instantaneous power factor obtained during running of the consumer load vis-à-vis the monthly average power factor. The MRT test report dated 18-11-2002 promised to be furnished by the respondent No.2 has not yet been furnished. However for the period under consideration i.e. during 2002-03 and 2003-04 the TCS as well as Tariff conditions do not provide for levy of surcharge merely on the basis of HT meter readings in so far as LT III(A) normal category consumers are concerned.

14. It is also necessary to make an observation that the Licensee’s officials (respondent No.1 and 2) could have examined the problem in detail and would have suggested to connect capacitor of suitable rating directly before the main switch so that these capacitors will be in service irrespective of usage of load by the consumer, as rightly suggested by the DE/Operation/Adilabad in the Pranav Rice Mill case (in Appeal No.7 of 2006) referred above. Even now it is desirable that the respondents may suggest suitable modifications in the arrangement of capacitors of appropriate rating before main switch.

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

(i) The LPF surcharge levied during the period form December 2002 upto February 2004 shall be withdrawn, as it is not leviable.

(ii) The respondent No.3 shall serve a supplemental bill for the balance amount payable after revising the bills for the period as indicated in (i) above.

(iii) The consumer shall pay the balance amount due if any with in 15 days from the date of issue of such supplemental bill failing which the respondents shall be at liberty to take appropriate action as per the TCS.

15. The respondents are required to implement this award only after the appellant gives his consent for this award in terms of clause 12 of the Regulation No.1of 2004.

This order is signed on the 1^st day of September 2006.

VIDYUT OMBUDSMAN

1. P. Rajesham at the following address as requested by appellant.

H.No.1-1-287/20/1

Bapunagar, Municipal Market Street

Chikkadpalli

Hyderabad – 500 020

2. Divisional Engineer / Operation / Peddapally.

3. Assistant Divisional Engineer / Operation / Godavarikhani

4. Assistant Accounts Officer / ERO / Godavarikhani

Copy to

The Chairperson,

Forum for redressal of grievances of consumers,

NPDCL, Warangal.

The Secretary,

APERC, Hyderabad.

Annexure

The relevant provisions of TCS and the tariff conditions of Tariff order of the relevant period

Clause 38.9(a): “Power Factor of apparatus other than welding Transformer: Every L.T. consumer using induction motors shall instal L.T. shunt capacitors of specified rating as given below.

*SI.No.*	*Rating of individual* *motor*	*KVAR rating of L.T. Capacitors* *for various R.P.M. of the motors*
*SI.No.*	*Rating of individual* *motor*	*750* *RPM*	*1,000* *RPM*	*1,500* *RPM*	*3,000* *RPM*
1.	3 h.p.	1	1	1	1
2.	5 h.p.	2	2	2	2
3.	7.5 h.p.	3	3	3	3
4.	10 h.p.	4	4	4	3
5.	15 h.p.	6	5	5	4
6.	20	8	7	6	5
7.	25 h.p.	9	8	7	6
8.	30 h.p.	10	9	8	7
9.	40 h.p.	13	11	10	9
10.	50 h.p.	15	15	12	10

If the existing consumer fails to install capacitors of required rating within such time as may be fixed by the Board, such of those consumers as may be specified by the Board are liable to pay surcharges as may be fixed by the Board from time to time. If the capacitors already installed are found, during inspection, to be damaged or become defective or cease to function, the consumer shall be served with a notice to get the same replaced/rectified or corrected within 30 days of the inspection and intimate the fact of replacement/rectification to the concerned Section Officer, Operation, of the Board, who will inspect the capacitors again to verify their satisfactory performance. In the event of failure on the part of the consumer to comply with the above notice, the Board may levy a surcharge of 25% per month on the bill amount or as may be prescribed by the Board from time to time from the date from which the capacitor was defective or ceased to function till such time the capacitor is replaced/rectified or corrected., Provided further that such retrospective levy of surcharge shall be limited to one year from the date of inspection. The consumer aggrieved by the retrospective levy, may appeal to the concerned Superintending Engineer, Assessments, whose decision shall be final. The failure on the part of the consumer to comply with the above notice, shall be treated as violation of Terms and Conditions of Supply and Board reserves the right to terminate the contract and collect the balance initial period agreement.”

Clause 38.10(a): “Every consumer whose connected load includes welding transformer shall install L.T. shunt capacitors of the capacity mentioned in clause 38.10.1 and 38.10.2 for improving the power factor. If the existing consumers fail to install capacitors of required rating within such time as may be fixed by the Board such of these consumers as may be specified by Board, are liable to pay surcharge, as may be fixed by the Board from time to time.

If the capacitors already installed are found, during inspection to be damaged or become defective or cease to function, the consumer shall be served with a notice to get the same replaced/rectified or corrected within 30 days of the inspection and intimate the fact of replacement/rectification to the concerned Section Officer (Operation) of the Board, who will inspect the capacitors again to verify their satisfactory performance.

In the event of failure on the part of the consumer to comply with the above notice, the Board may levy a surcharge of 25% per month on the bill amount or as may be prescribed by the Board from time to time from the date from which the capacitor was defective or ceased to function till such time the capacitor is replaced/rectified or corrected. Provided further that such retrospective levy surcharge shall be limited to one year from the date of inspection. The consumer aggrieved by the retrospective levy, may appeal to the concerned Superintending Engineer/ Assessments, whose decision shall be final.

The failure on the part of the consumer to comply with the above notice, shall be treated as violation of Terms and Conditions of Supply and Board reserves the right to terminate the contract and collect the sum equivalent to the minimum charges for the balance initial period of agreement.”

Clause 23 of TCS

“23: Surcharges for lower power Factor: The power factor for the month shall be the ration of Kw hours to the Kilo-Volt Ampere-Hours supplied to the consumer during the month. The power factor shall be calculated upto two decimal places. The power factor of the consumer’s installation shall not be less than 0.90. If the power factor falls below 0.90 during any month, the consumer shall pay a surcharge as detailed below.

*SI.No.*	*Power factor* *Range*	*Surcharge*
1.	Below 0.90 & upto 0.85	1% of c.c. charges bill of that month for every fall of 0.01 of power factor from 0.9
2.	Below 0.85 & upto 0.80	1.5% - do - from 0.85
3.	Below 0.80 & upto 0.75	2% - do - from 0.80
4.	Below 0.75	3% - do - from 0.75

Should the power factor drop below 0.75 and so remain for a period of 2 consecutive moths, it must be brought to 0.90 within a period of 6 months by methods approved by the Board failing which without prejudice to the right of the Board to collect the surcharge and without prejudice to such other rights as have accrued to the Board or any other right of the Board, the supply to the consumer may be discontinued.”

Relevant Provisions of Tariff Orders

“Note: Conditions under LT Category III(B), Part B, LT Tariffs of Tariff order (2002-03)

(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(vi) The Low Power Factor (LPF) surcharge is applicable as in the case of HT consumers for LT Category III(A), optional & III(B)

Note: under LT category III(A), part B, LT Tariffs of Tariff order (2003-04)

(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(v)

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) For loads 50HP to 75HP the metering will be provided on HT side of the Distribution Transformer.

(c) The Low Power Factor (LPF) surcharge is applicable as in the case of HT consumers for LT Category III (A) Industrial – Optional demand tariff category.”

Clause (6) of GENERAL CONDITIONS OF H.T. SUPPLY under part A HT Tariffs of the Tariff Order (2003-04, 2004-05)

“(6) SURCHARGE FOR LOW POWER FACTOR

The power factor for the month shall be the ratio of Kilo-Watt hours to the Kilo-Volt-Ampere Hours supplied to the consumer during the month. The power factor shall be calculated upto two decimal places. The power factor of the consumer’s installation shall not be less than 0.90. If the power factor falls below 0.90 during any month, the consumer shall pay a surcharge as detailed below:

*S.No.*	*Power Factor Range*	*Surcharge*
1.	Below 0.90 & upto 0.85	1% of C.C. charges bill of that month for every 0.01 fall in Power Factor from 0.90
2.	Below 0.85 & upto 0.80	1.5% of C.C. charges bill of that month for every 0.01 fall in Power Factor from 0.85
3.	Below 0.80 & upto 0.75	2% of C.C. charges bill of that month for every 0.01 fall in Power Factor form 0.80
4.	Below 0.75	3% of C.C. charges bill of that month for every 0.01 fall in Power Factor from 0.75

Should the power factor drop below 0.75 and so remain for a period of 2 consecutive moths it must be brought upto 0.90 within a period of 6 months by methods approved by the Licensee failing which, without prejudice to the right of the Licensee to collect surcharge and without prejudice to such other rights as having accrued to the Licensee or any other right of the Licensee, the supply to the consumer may be discontinued.”

Part ‘D’ of Annexure D of the Tariff Order (2002-03).

PART ‘D’

“POWER FACTOR APPARATUS

1. FOR H.T. AGRICULTURAL CONSUMERS

Every H.T. Agricultural Consumer using induction motors shall install L.T. Shunt capacitors of specified rating as given below:

Table of rating of capacitors

2. FOR L.T. CONSUMERS

Every L.T. Consumer using induction motors and welding transformers shall install L.T. Shunt Capacitors of specified rating as given below:

(a) Motors

Table of rating of capacitors

(b) Welding transformers

Table of rating of capacitors

NOTE

1. If any such consumer fails to install the capacitors at all or fails to install the capacitors of required rating or the capacitors already installed are found during inspection to be damaged or become defective or ceased to function, the consumer shall attract penal provisions as per conditions of supply.

2. Low Power factor surcharge is not applicable for the consumers under the flat rate tariff. Instead, these consumers are required to install L.T.Shunt Capacitors of specified rating as indicated in these Tariffs annexed, failing which they are liable to pay capacitor surcharge at the rates indicated in Part-‘D’. In case the L.T.Shunt Capacitors of specified rating are not installed within one month period from date of notice after detection, without prejudice to right of the Licensee to collect surcharge and without prejudice to such other rights having accrued to the Licensee or any other right of the Licensee, the supply to the consumer may be discontinued. The consumer attracts the penal provision as per the conditions of supply.

3. In case the rated capacity of the welding transformer falls in between the steps of the stipulated ratings, the capacitors suitable for the next higher step shall be installed by the consumer.

4. The failure on the part of the consumer to comply with the above requirement shall be treated as violation of terms and conditions of the supply and the Licensee can terminate the contract and collect the sum equivalent to the minimum charges for the balance initial period of agreement.”

Part ‘D’ of Annexure D of the Tariff Order (2003-04).

PART ‘D’

“POWER FACTOR APPARATUS

1. FOR H.T. AGRICULTURAL CONSUMERS

Every H.T. Agricultural Consumer using induction motors shall install L.T. Shunt capacitors of specified rating as given below: