Electricity Wheeling Charges Dispute: Supreme Court Orders Fresh Consideration

The case of Sai Wardha Power Generation Limited vs. Tata Power Company Limited Distribution & Others revolves around the question of whether Tata Power Company Limited-Distribution (TPC-D) is entitled to levy wheeling charges for power supplied to Hindustan Petroleum Corporation Limited (HPCL) and for power sourced from Sai Wardha Power Generation Limited (SWPGL) through open access. The Maharashtra Electricity Regulatory Commission (MERC) had earlier ruled that TPC-D was not entitled to levy these charges, a decision that was later overturned by the Appellate Tribunal for Electricity (APTEL). The Supreme Court was called upon to decide the issue and ultimately remanded the matter back for fresh consideration.

Background of the Case

Tata Power Company (TPC) was granted an integrated license for the supply of electricity under the Indian Electricity Act, 1910. HPCL had been receiving electricity from TPC since 1955. In 2005, HPCL expanded its oil refining facility and required additional power of 70 MW on a 100% redundancy basis. This led to an agreement with TPC for 110 kV power supply to HPCL’s Chembur plant.

During regulatory restructuring, TPC’s assets were split into separate entities for generation, transmission, and distribution in 2006. HPCL, which had been paying wheeling charges since 2008, later contested these charges on the ground that the lines were part of the transmission system and not the distribution system. The MERC ruled in favor of HPCL, but the Appellate Tribunal reversed this decision, holding that HPCL was liable to pay wheeling charges.

Petitioner’s Arguments (Sai Wardha Power Generation Limited & HPCL)

• HPCL argued that the 110 kV Trombay-HPCL lines were part of the transmission system and not the distribution system, as per MERC’s own determinations.
• It contended that under the Central Electricity Authority (CEA) regulations, 110 kV lines qualify as transmission assets and should not attract wheeling charges.
• HPCL and SWPGL argued that since power purchase agreements and open access approvals were granted with the understanding that these were transmission lines, TPC-D had no right to levy wheeling charges.
• They pointed out that TPC-D had included these lines in its transmission assets when applying for licenses, contradicting its later claim that they were distribution assets.

Respondent’s Arguments (Tata Power Company Limited-Distribution)

• TPC-D maintained that the 110 kV lines were always part of the distribution system and the classification as transmission assets was an error.
• It argued that HPCL had been paying wheeling charges without objection for years and should not now be allowed to claim otherwise.
• TPC-D contended that the supply to HPCL had always been from its distribution network, and hence the levy of wheeling charges was justified.
• It also pointed out that no transmission charges had ever been demanded, reinforcing the fact that these were distribution lines.

Supreme Court’s Observations

The Supreme Court reviewed the regulatory history and legal provisions, making the following observations:

• The classification of 110 kV Trombay-HPCL lines as transmission or distribution assets is critical to determining the applicability of wheeling charges.
• While TPC-D’s assertion that these lines were always part of the distribution network is significant, its earlier classification of the lines as transmission assets creates ambiguity.
• The matter of whether 110 kV lines should be treated as transmission or distribution assets must be first resolved through appropriate regulatory procedures before deciding the issue of wheeling charges.

The Court stated, “Till the transmission license of TPC-T is not modified, the 2×110 kV lines form part of the transmission network of TPC-T. The Tribunal could not have held that these lines should be included in the distribution system of TPC-D.”

Final Judgment

The Supreme Court set aside the judgment of the Appellate Tribunal for Electricity and remanded the matter back for fresh consideration:

• The Maharashtra Electricity Regulatory Commission (MERC) must first decide the pending application for amendment of TPC-T’s transmission license.
• Until this decision is made, it cannot be conclusively determined whether the 110 kV lines belong to the transmission or distribution network.
• The Appellate Tribunal will then reconsider the issue of wheeling charges based on MERC’s findings.

Implications of the Judgment

The ruling clarifies important aspects of power distribution and transmission regulation:

• Regulatory classifications of transmission and distribution assets must be internally consistent and properly adjudicated before tariff disputes are resolved.
• Consumers and generators using open access must have clarity on the nature of the network they are accessing and the associated charges.
• Regulatory commissions must ensure that license amendments and asset classifications are completed before tariff disputes escalate.

The judgment reinforces the need for regulatory clarity in electricity transmission and distribution and ensures that consumers are not charged arbitrarily due to inconsistencies in classification.

Petitioner Name: Sai Wardha Power Generation Limited.
Respondent Name: Tata Power Company Limited Distribution & Others.
Judgment By: Justice L. Nageswara Rao, Justice Deepak Gupta.
Place Of Incident: Maharashtra.
Judgment Date: 03-04-2020.

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