ANDHRA PRADESH ELECTRICITY REGULATORY COMMISSION
Hyderabad
Sri Surinder Pal, Member
Sri. Radha Kishan, Member
R.P. (SR) No.42 of 2006
in
O.P. No. 2 of 2006
Central Power Distribution Company of A.P. Ltd., …….. Petitioner
and
Nil …….. Respondent
R.P. (SR) No.43 of 2006
in
O.P. No. 3 of 2006
Eastern Power Distribution Company of A.P. Ltd., …….. Petitioner
and
Nil …….. Respondent
in
O.P. No. 4 of 2006
Northern Power Distribution Company of A.P. Ltd., …….. Petitioner
and
Nil …….. Respondent
in
O.P. No. 5 of 2006
Southern Power Distribution Company of A.P. Ltd., …….. Petitioner
and
Nil …….. Respondent
These petitions coming on for hearing on 01.07.2006 in the presence of Sri P. Shiva Rao, Advocate, for the petitioners in all the four cases and having stood over for consideration to this day, the Commission delivered the following common:
All the four petitions are filed under Clause 49 of the Andhra Pradesh Electricity Regulatory Commission (Conduct of Business) Regulations, 1999 (for short ‘the Conduct of Business Regulations’), seeking reconsideration of certain observations and findings in the Commission’s Order dated 23rd March 2006, (hereinafter referred to as the ‘Tariff Order’) on Distribution Tariffs for the years 2006-07 to 2008-09 and Retail Supply Tariff for 2006-07 in O.P.Nos.2 to 5 of 2006.
2. As all the four petitions are filed on the same set of facts, with similar prayers, they are clubbed and decided by this common order. The following are the similar averments made in all the four petitions:
(a) In December 2005, the licensees filed applications in O.P. Nos 2 to 5 of 2006 for the determination of revenue requirement and tariff for the Distribution Business for the years 2006-07 to 2008-09 and for Retail Supply Business for FY 2006-07.
(b) After, due consultative process, the Commission passed a common order dated 23rd March 2006 in O.P. Nos. 2 to 5 of 2006.
(c) As there are deviations in principles or stands taken in previous Tariff Orders, the principles of economy or efficiency are violated or where there is a computational deviation in implementation of the stated principles, the licensees request the Commission to review the Tariff Order on the following points:
(i) Treatment of interest on Consumer Security Deposit(for short, ‘CSD’):
In its earlier Tariff Order for the year 2005-06, the Commission recognized that there is an ‘attendant cost’ to Delayed Payment Surcharge (for short, ‘DPS’) and that it should be netted off before considering DPS in the Non-Tariff Income. The argument put forward by the licensees in their ARR (annual revenue requirement) filings was under the same principle. However, the Tariff Order does not elaborate on the Commission’s view on the reasonableness of the licensee’s argument on interest on CSD claimed as expense to be considered as the ‘attendant cost’ of the arrears (which generate the DPS) and hence non-availability of CSD for further investment. Instead, the additional “interest income from CSD” is recognized as Non-Tariff Income. In addition to the above treatment, the additional interest income considered is much higher than the interest expense allowed in the Tariff Order and reason for such an assumption is not provided in the Tariff Order. In view of the above, the licensees submit that either the DPS be not considered as non-tariff income, or additional interest income expected to be generated from CSD be excluded from Non-Tariff Income.
(ii) Estimate of O & M expenses and working capital requirement :
The licensees submit that the methodology adopted in the Tariff Order is not in line with the requirements of a ‘norm’ based approach as laid down in the APERC (Terms and Conditions for Determination of Tariff for Wheeling and Retail Sale of Electricity) Regulation, 2005 (Regulation No.4 of 2005). Methodology of inflating the Employee Cost and A & G (Administration & General) expenses by 5% cannot be considered as a ‘norm-based’ approach. Further, the above approach will prevent the licensee from claiming any incentives on better performance, which is against the principle of Multi-Year Tariff filings as laid down in the Regulation 2005. The methodology adopted in the Tariff Order has resulted in inadequate and inconsistent estimates as explained in detail in the petitions.
(iii) Allowance for Capital Expenditure:
The capital expenditure allowed for each year of the control period shows significant deviation from the capital expenditure filed by the licensees. As the capital expenditure targets are set for a period of three years, the significant disallowance of capital expenditure and consequently the need for adopting the process for ‘correction’ after the investments are made, would result in avoidable delay in recovery of costs by the licensees in case of deviations, and are also likely to cause difficulty in raising funds for additional capital expenditure as the lenders are likely to be apprehensive about ability of the licensees to obtain the regulatory approval and hence recovering the return / cost of the projects. Keeping these in view, and the fact that the licensees have already been able to tie up most part of the funds requirement, the licensees urge the Commission to approve the capital expenditure proposed by them in the filings.
(iv) ROCE – Cost of Debt :
The Tariff Order assumes the Cost of Debt at a constant level of 9% p.a. The Tariff Order specifies that “The cost of debt is determined after considering the Licensees’ proposals, present cost of debt, prevailing market conditions and other relevant factors”. However, it is not clear from the Tariff Order, how these factors have been considered. The Tariff Order continued with the assumption of 9% cost of debt throughout the control period. This poses a significant risk on the licensees and may impair their capacity to service debts. Therefore, the licensees would like to submit that either the cost of debt be linked to a suitable index reflecting the market condition, or the cost of debt fixed taking into consideration at least the hardening interest rates.
(v) Pricing of Discom-to-Discom energy transfer:
The Tariff Order sets the principle for determining the price of Discom-to-Discom transfer of energy, which differs from that filed by the licensees for determination the cost of Discom-to-Discom energy transfer. The licensees had submitted in the filings that the transfer should be priced at variable cost only. The rationale behind such a pricing is that the fixed cost sharing should happen only when a licensee’s consumption is higher than the ‘total available energy’ allocated to it. In case this rule is not followed, the cost of Discom-to-Discom transfer (@ fixed plus variable cost) is likely to be higher for the ‘consuming’ licensee than the ‘variable’ cost of the station which is just above the marginal station in the Merit Order Dispatch. Therefore, the licensees submit that the Discom-to-Discom transfer should be priced at the ‘marginal variable cost’ of dispatched stations only and not at ‘fixed plus variable cost’.
(vi) Wheeling Charges – Allocation of distribution costs :
The licensees submit that distribution costs cannot be assumed to be driven by the asset base merely on account of being ‘fixed in nature’. The licensees request the Commission to revisit the methodology of allocating distribution costs across voltage-levels and consider the methodology indicated in their filings.
(vii) Wheeling charges – Applicability to consumers :
The Tariff Order specifies that in case wheeling of electricity is through the distribution system of more than one distribution licensee, the wheeling charges shall be payable to the distribution licensee of the area where the electricity is delivered. The licensees propose that in all such cases the distribution systems of other licensees are also used and hence they should also get a share of the wheeling charges towards compensation for usage of their system.
(d) For all the reasons mentioned above, the petitioners request the Commission to :
(i) Take the petitions on record along with the revised information provided therein;
(ii) Consider and approve the modifications requested by the licensees and reconsider, and / or modify the Tariff order as appropriate; and
(iii) Pass such order as the Commission may deem fit and proper in the facts and circumstances of the case.
3. Before admitting the petitions, notices were ordered to be issued to all the petitioners. On 01.07.2006, the Commission heard Sri P.Shiva Rao, the learned counsel for all the petitioners on the maintainability of the said review petitions, who submitted that
(a) the averments and reliefs in all the petitions are more or less the same with minor variations. He submitted the arguments in the review petition filed by the petitioner in R.P.(SR)No. 44 of 2006 and stated that the said arguments may be adopted in all other 3 cases.
(b) Though the petition was under Clause 49 of Conduct of Business Regulations, the scope of review available to the Commission is as mentioned in the Code of Civil Procedure as per Section 94 of the Electricity Act, 2003. A petition for review of its order can be entertained by the Commission for the following reasons:
(i) When there is a mistake committed by it, which is apparent on the face of record;
(ii) When there is an arithmetical mistake;
(iii) When it omitted to take certain material facts or took into consideration certain incorrect figures;
(iv) When a typographical error has crept into the Order; and
(v) for any other sufficient reason.
(c) The review petition filed by the petitioner falls under the reasons mentioned (i) and (v) above and the review petition may be considered under these two grounds.
(d) The issues under which the Commission is requested to consider the review petition against the Tariff Order are mentioned in para 5 of the petition. Issue No.1 deals with ‘Treatment of Interest on Consumer Security Deposit’, wherein the Commission recognized that if DPS is to be considered as an income, the corresponding ‘Carrying Cost’ for the funds blocked in arrears also needs to be considered. Even though, the said principle was followed by the licensee, it was disallowed.
(e) Issue No.2 deals with ‘Estimation of O&M Expenditure’. Regulation No.4 of 2005 requires determination of O&M expenses to be based on norms mentioned in the said Regulation. The licensee prepared tariff filings as per the clause 14.3 of this Regulation. But the Commission failed to take into consideration the norms mentioned therein, thereby giving a different finding. The Commission chose to de-link the O&M expense allowance (employee and A&G costs) from the underlying norms or cost drivers and thus O&M expenses as determined by the Commission in the Tariff Order are not in accordance with the provisions of the Regulation No.4 of 2005. Had the Commission adopted the norms prescribed by it in the said Regulation No.4 of 2005 for determination of O&M expenses, the figure under this head would have been 238 crores. Thus the review petition is maintainable on ground of ‘mistake apparent on the face of record’. So is the case with other issues mentioned in detail in the petition filed for review of the Tariff Order.
(f) Even otherwise, the review petition is maintainable on the ground that there exists ‘sufficient reason’ to entertain the same. In the case of Moran Mar Basselios Chatholicos and another v. Most Rev.Mar Poulose Athanasius and others, reported in AIR 1954 SC 526, the Hon’ble Supreme Court of India held that words “any other sufficient reason” must mean a reason sufficient on grounds, at least analogous to those specified in the rule. Similarly the Apex Court also held that misconception of the court has also to be taken as ground as analogous to an error on the face of the record.
(g) In the case of Amarjit Kaur v. Harbhajan Singh and another reported in (2003) 10 SCC 228, it was held that summary dismissal of a review petition is not justified. The court has to go into merits and if even after considering it on merits, the authority concerned comes to a conclusion that there exists no necessity to review its order, it can dismiss the review petition. In the case of Green View Tea Industries v. Collector, Golaghat, Assam, reported in AIR 2004 SC 1738, it was held that the meaning of “error apparent on the face of record” is difficult to define and cannot be put in straitjacket.
(h) Considering all the above, the counsel for the petitioners requested the Commission to admit all the four petitions and pass suitable orders.
4. The common point that arises for consideration is :
“whether the review petitions are maintainable”
5. The counsel for the petitioners has been at great pains to prove the maintainability of the petitions. Apart from reiterating the various averments point-wise, he cited a few precedents to drive home the point. Ordinarily, there will not be a review of the order at the instance of the parties or affected parties to the order, on the existing facts and contentions that have already been adverted to by the parties, either by way of written objections / suggestions and / or arguments at the time of hearing, when all those aspects have already been considered by the Commission at the time of passing of final order. Even if the contention of the counsel for the petitioners that ‘error apparent on the face of record’ is a good ground for review of an order, that it is difficult to define the meaning of the said term and that it cannot be put in straitjacket, is accepted, it is important to note here that an ‘error apparent on the face of record’ must be such an error which must strike one on mere looking at the record and would not require any long drawn-out process of reasoning on points where there may conceivably be more than one options. Further, rehearing a matter for detecting an error in the earlier decision and then correcting the same do not fall within the ambit of the review jurisdiction, as the review jurisdiction cannot be used as appellate jurisdiction. Thus, simply because it is difficult to define the term ‘error apparent on the face of record’, it does not mean that all the petitions to review an order are liable to be admitted.
6. Similarly, even if it is accepted that summary dismissal of a review petition is not justified as contended by the counsel for the petitioner, the Commission is of the view that it has necessarily to satisfy itself about the maintainability of the review petitions. In the case of Datla Chandraiah (died) by LR Vs. Kothalanka Durgavara Prasada Rao and others reported in 2004 (4) ALD 396, it was held that grounds touching merits of matter and those that do not come under the expression ‘error apparent on the face of record’ cannot form basis for review. The Tariff Order dated 23-03-2006 was passed by the Commission after consideration of all relevant facts and on appreciation of evidence, both documentary and oral. The Tariff Order was issued after a detailed public hearing, in the respective distribution area of each of petitioners with the petitioners also participating actively in the whole process. By their own admission, through these petitions, the petitioners are seeking reconsideration of certain observations and findings of the Commission in the said Tariff Order, for various reasons like treatment of some of the cost and revenue elements, etc. From the various averments made in the petitions and the arguments submitted by the counsel for doing so, it appears that the petitioners are dissatisfied with certain observations and findings of the Commission. In the case of Revenue Divisional Officer & others v. A.Aruna & others reported in (1998) 6 SCC 494, the Supreme Court while comparing Section 17-A of the A.P.Land Grabbing (Prohibition) Act, 1982 with Order 47, Rule 1of the Code of Civil Procedure, discussed the nature and scope of review jurisdiction and observed that the order sought to be reviewed must appear to have resulted in miscarriage of justice and not merely that it might have occasioned dissatisfaction to the parties before a court. In the case of Lily Thomas etc. Vs. Union of India and others reported in AIR 2000 SC 1650, it was held that the power of review can be exercised for correction of mistake, but not to substitute views. In our view, reconsideration of the observations and findings sought by the petitioners would amount to substituting one view with another and the same is not permitted under law. As mentioned above, the Tariff Order dated 23-03-2006 was passed on appreciation of a number of documents on record and also on consideration of oral evidence of a number of parties including the petitioners herein. We therefore do not agree with the counsel for the petitioners that there exists mistake apparent on the face of record in the said Tariff Order or that there exists any other sufficient reason for review of the said order, so as to necessitate this Commission to reconsider the said observations and findings in it.
7. For the reasons mentioned above, the Commission is of the view that the petitioners have failed to make out a case for the maintainability of the petitions. In the result, the petitions are not admitted as not maintainable.
The order is corrected and signed on this 29th day of July, 2006
Sd/R. RADHA KISHEN MEMBER |
Sd/SURINDER PAL MEMBER |
Sd/K. SWAMINATHAN CHAIRMAN |
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