Electricity Tariff Dispute: Supreme Court Rules on Standby Charges Between Tata Power and Adani Electricity

The case of Tata Power Company Ltd. vs. Adani Electricity Mumbai Ltd. & Ors. revolves around a long-standing dispute over electricity tariff, standby charges, and the obligations of distribution licensees in Mumbai. The Supreme Court’s ruling clarifies the principles of tariff determination and the fair allocation of costs between competing electricity providers. The case primarily concerns the apportionment of standby charges between Tata Power Company (TPC) and Adani Electricity Mumbai Ltd. (formerly BSES/REL).

The case originated from Tata Power’s challenge to the allocation of standby charges, which were originally fixed by government orders and later modified by regulatory authorities. The Maharashtra Electricity Regulatory Commission (MERC) and the Appellate Tribunal for Electricity (APTEL) both ruled on the matter, leading to an appeal before the Supreme Court.

Background of the Case

Before 1985, Tata Power Company (TPC) was the sole electricity generator in Mumbai, supplying power to various distribution licensees, including BSES (later Reliance Energy, and now Adani Electricity Mumbai Ltd.). Since TPC’s own generation was insufficient to meet the entire demand, it procured additional electricity from the Maharashtra State Electricity Board (MSEB).

However, from 1985 onwards, TPC increased its generation capacity, reducing its reliance on MSEB. To compensate for the loss of revenue to MSEB, an agreement was reached between MSEB and TPC under which TPC would pay standby charges to MSEB for the standby facility. These charges allowed TPC to draw power from MSEB in case of emergencies.

Over time, the dispute arose when BSES/REL started its own generation at Dahanu and demanded its share of the standby facility. The issue escalated further when MERC and APTEL made rulings on the proper allocation of these charges.

Petitioner’s Arguments

Senior Advocate Shri Gopal Jain, representing Tata Power, argued:

• TPC had not recovered standby charges for the additional facility provided beyond the agreed 275 MVA.
• The standby charges should be shared equally (50:50) between TPC and BSES/REL, given that both benefitted from MSEB’s standby facility.
• The standby agreement between TPC and MSEB was independent, and the cost recovery should not be distorted by regulatory decisions.
• The previous orders from MERC and APTEL were incorrect in apportioning only 23% of the standby charges to BSES/REL while making TPC bear 77%.

Respondent’s Arguments

Senior Advocate Shri J.J. Bhatt, representing Adani Electricity (formerly BSES/REL), contended:

• The agreement between TPC and MSEB was independent of the agreement between TPC and BSES/REL.
• TPC had already recovered a large portion of the standby charges from its consumers through tariff adjustments.
• On approximately 90% of occasions, TPC provided standby power from its own generation and did not rely on MSEB.
• The demand for a 50:50 sharing ratio was unreasonable, as it ignored the reality of how standby power was actually utilized.

Supreme Court’s Analysis

The Supreme Court analyzed the history of standby charges and how they were factored into electricity tariffs. It examined past agreements, regulatory decisions, and the orders of MERC and APTEL.

The key legal observations made by the Court were:

• The allocation of standby charges should be based on actual utilization and benefit received by each entity.
• The previous rulings of MERC and APTEL correctly determined that BSES/REL should bear 23% of the charges, while TPC should bear 77%.
• The argument for a 50:50 sharing ratio was not justified given that TPC had greater reliance on MSEB’s standby facility.
• Past regulatory decisions were fair in ensuring that consumers were not unduly burdened by excessive standby charges.

Key Judicial Findings

The Supreme Court ruled:

• The findings of the MERC and APTEL were legally sound and did not warrant interference.
• BSES/REL should continue bearing 23% of standby charges, while TPC would bear 77%.
• The previously deposited amount and bank guarantee should be released as per the ruling.
• The claim that TPC had not recovered enough from consumers was not supported by the evidence.

Conclusion and Impact

The Supreme Court’s ruling reinforces the principles of fair cost allocation in electricity tariff disputes. It upholds the authority of regulatory bodies such as MERC and APTEL in ensuring balanced decisions that protect both service providers and consumers.

This judgment sets an important precedent for future disputes in the power sector, particularly in cases involving standby charges and distribution licensee obligations.

Petitioner Name: Tata Power Company Ltd..
Respondent Name: Adani Electricity Mumbai Ltd. & Ors..
Judgment By: Justice Arun Mishra, Justice S. Abdul Nazeer.
Place Of Incident: Mumbai.
Judgment Date: 02-05-2019.

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