Determination Of Cross-Subsidy Surcharges Not Necessarily A Part Of Tariff Determination Process: Supreme Court
The Supreme Court noted that as per Regulation 90 of the Rajasthan Tariff Regulations, 2014, the tariff payable by the relevant category of consumers is the basis for the CSS.
Justice Abhay S Oka & Justice Augustine George Masih, Supreme Court
The Supreme Court held that the determination of Cross-Subsidy Surcharges (CSS) is not necessarily a part of the tariff determination process.
The Court held thus in Civil Appeals under Section 125 of the Electricity Act, 2003 against the common Judgment of the Appellate Tribunal for Electricity (APTEL).
The two-Judge Bench comprising Justice Abhay S. Oka and Justice Augustine George Masih observed, “We find no basis for the opinion expressed by the APTEL that determination of the CSS should coincide with the tariff determination. … Thus, the determination of CSS is not necessarily a part of the tariff determination process. The CSS can be determined along with the tariff. But, it can be determined separately in accordance with Regulation 90 based on the prevailing rate of tariff.”
The Bench noted that as per Regulation 90 of the Rajasthan Tariff Regulations, 2014, the tariff payable by the relevant category of consumers is the basis for the CSS.
Senior Advocate M.G. Ramachandran represented the Appellants while AOR Jesal Wahi represented the Respondents.
Brief Facts
The issue involved in this case was related to the determination of the CSS by the Rajasthan Electricity Regulatory Commission (State Commission). The determination was made under Section 42 (2) of the 2003 Act. The Appellants were the Respondents before the APTEL and the Respondents were the industries/industrial units located in various parts of the Rajasthan State, running their operations by availing their supply of electricity from connectivity through the State grid at EHT levels of 132/33/11 KV voltage. These industrial units were granted open access within the contract demand for drawing electricity through such open access, including from power exchanges.
The Respondents were aggrieved by the determination of the CSS made applicable from December 1, 2016 by the State Commission. They preferred statutory Appeals before the APTEL, which set aside the Order of the State Commission. However, the APTEL clarified that the State Commission will be within its jurisdiction to undertake the process of revisiting the subject of the CSS vis-à-vis distribution licensees operating in the State as and when it takes up the exercise of tariff determination in future in accordance with law. This was challenged before the Apex Court.
Reasoning
The Supreme Court in the above context of the case, said, “Regulation 90 contains a formula for the determination of the CSS, which is based on the tariff payable by the relevant category of consumers. Thus, the CSS has to be determined based on the prevailing tariff rates. Neither in the provisions of the 2003 Act nor under the provisions of the Rajasthan Tariff Regulations, 2014, is there a provision which makes the determination of the CSS simultaneously with the determination of the tariff mandatory.”
The Court was of the view that the APTEL committed an error by holding that the determination of the tariff and the determination of the CSS should always coincide.
“While determining rates of the CSS with effect from 1st December 2016, the commission relied upon the tariff fixed in terms of the order dated 22nd September 2016, which was the prevailing tariff as of 1st December 2016. The CSS is in the nature of compensation qua the tariff, which the distribution licensees would have received from the open access consumers but for their availing power from other sources”, it further noted.
The Court emphasised that the CSS must be based on the applicable retail tariff recoverable during the relevant period which is precisely provided in Regulation 90.
“In fact, by the further order dated 2nd November 2017 passed by the State Commission, the determination of the CSS has been made along with the determination of the tariff. Thus, the determination made by order dated 1st December 2016 remained in force until 2nd November 2017. The effect of the determination of the CSS from 1st December 2016 is that the respondents-consumers were not charged the CSS as per the order from 22nd September 2016 till 1st December 2016”, it also observed.
The Court said that the Petition for the determination of the CSS was filed when the Petition for fixing the F.Y. 2015-2016 tariff was pending.
The Court concluded that when the CSS was determined based on the prevailing rates of tariff, the APTEL ought not to have found fault with the Commission's determination of rates of the CSS.
Accordingly, the Apex Court allowed the Appeals and set aside the APTEL’s Judgment.
Cause Title- Jaipur Vidyut Vitaran Nigam Limited and Ors. v. Rajasthan Textile Mills Association & Anr. Etc. (Neutral Citation: 2025 INSC 592)
Appearance:
Appellants: Senior Advocate M.G. Ramachandran, AOR Nikunj Dayal, Advocates Poorva Saigal, Shubham Arya, Pallavi Saigal, Reeha Singh, Aneesh Bajaj, and Pramod Dayal.
Respondents: AORs Jesal Wahi, Ishaan George, Amit Verma, Shantanu Sagar, Advocates Anand Ganesan, Swapna Sesadri, Vanita Bhargava, Ajay Bhargava, Nanadita Chauhan, and Tijal Thakur.
