The differences between the tariffs for Government aided educational institutions and Self aided educational institutions fixed by the Electricity Board in accordance of the Section 62(3) of Electricity Act, 2003 were the subject matter of the issue which was duly approved by the SC as just and reasonable fixation and in accordance with law.
Case – Kerala State Electricity Board Rep. By its Secretary & anr.
V/S
Principal Sir Syed Institute for technical studies & anr.
Case no.- Civil appeal no. 8350 OF 2009
Coram – Deepak Gupta,J. and Aniruddha Bose,J.
Brief facts
In this case the Kerala State Electricity Regulatory Commission (“Commission”) segregated Self-Financing Educational Institutions (SFEI) from Government run and Government Aided Private Educational Institutions and subjected the former to a higher category of tariff and notification to that effect was issued by the Commission on 26th November, 2007 whereas the tariff was to take effect from 1st December, 2007 onwards. SFEIs have been categorised under the head Low Tension VII(A) Commercial in that notification whereas the Government run or aided private educational institutions have been placed under Low Tension VI Non-Domestic tariff category. Following this several Writ petitions came to be filed by different SFEIs questioning legality of such segregation which in effect created a higher tariff regime for them. A learned Single Judge of the Kerala High Court (the First Court) found the tariff order to be valid but further in appeal by the SFEIs, the Division Bench of the High Court set aside the judgment of the First Court because the differentiation was not for any of the grounds specified in Section 62 (3) of the Electricity Act, 2003 (the provision under which the State Commission can determine the tariff.)
Key features
- Section 62 (3) of the Electricity Act, 2003 specifies-
Determination of tariff:-
(1) The Appropriate Commission shall determine the tariff in accordance with the provisions of this Act for –
(a) supply of electricity by a generating company to a distribution licensee:
Provided that the Appropriate Commission may, in case of shortage of supply of electricity, fix the minimum and maximum ceiling of tariff for sale or purchase of electricity in pursuance of an agreement, entered into between a generating company and a licensee or between licensees, for a period not exceeding one year to ensure reasonable prices of electricity;
(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the same area by two or more distribution licensees, the Appropriate Commission may, for promoting competition among distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity.
(2) The Appropriate Commission may require a licensee or a generating company to furnish separate details, as may be specified in respect of generation, transmission and distribution for determination of tariff.
(3) The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer’s load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required.”
(4) No tariff or part of any tariff may ordinarily be amended, more frequently than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified.
(5) The Commission may require a licensee or a generating company to comply with such procedures as may be specified for calculating the expected revenues from the tariff and charges which he or it is permitted to recover.
(6) If any licensee or a generating company recovers a price or charge exceeding the tariff determined under this section, the excess amount shall be recoverable by the person who has paid such price or charge along with interest equivalent to the bank rate without prejudice to any other liability incurred by the licensee.
- The purpose of the two categories of educational institutions can be gathered from the distinguishing features broadly under the following six heads:-
(i) different fee structure
(ii) different wage structure
(iii) employee welfare measures
(iv) larger social purpose the government run and aided institutional seek to achieve
(v) profit motive not present in the former category of institutions.
(vi) Facilities provided by the respective categories of institutions.
- As per sub-section (3) of Section 62 of the 2003 Act, there is a negative mandate of the legislature upon the Commission in this sub-section. While fixing tariff, the Commission cannot show undue preference to any consumer of electricity. The Commission, however, is vested with the power to prescribe differential rates according to the consumers’ load factor, power factor, voltage, total consumption of electricity during any specified period of time at which supply is required. So far as fixing different rates for these two categories of the educational institutions, these factors did not come into play. The other permissible differentiating factors are geographical position of any area, the nature of supply and the purpose for which the supply is required. As regards this set of differentiating factors, the tariff advantage for government run and aided educational institutions do not appear to be based on geographical position or nature of supply.
Issues
- Whether preference shown by the Commission to the State run and aided educational institutions in fixing tariff was justified having regard to the purpose for which supply was required.
- The reasonableness in clubbing the educational institutions, many of whom were run by not for profit organisations, with other entities whose object was ex-facie profit oriented.
- Whether the Commission, on being clothed with quasi-judicial character was required to disclose reasons for issuing the tariff notification, the legality of which is subject of dispute in these proceedings.
Judgment
- Neither capacity to pay be the determinant factor in electricity tariff fixing exercise nor the nature of service rendered by them be the sole determinant for the tariff-fixing exercise. Therefore SFEIs have been specifically included under the heading “commercial” and it is not a case where their character is being assessed inferentially, treating their activities as commercial in a general sense of the term.
- The Commission’s role as a quasi-judicial body or it having trappings of a Court would emerge only if it was called upon to adjudicate a dispute. No dispute had been generated by the writ petitioners on the basis of Commission’s proposal which would have required it to undertake some form of adjudicatory exercise. In such a situation, the exercise of fixing tariff has to be undertaken as a quasi-legislative act only, which ordinarily a tariff-fixing exercise is. Issue of the subject tariff notification unaccompanied by reason thus cannot be faulted for having breached the principles of natural justice. The duty to disclose reason would crystallise then only, in a situation where a particular tariff fixing proposal goes without any objection after its draft publication. In absence of any statutory provision to the contrary, once tariff proposal is published and goes unobjected to before the State Commission, the question of disclosure of reason for such fixation would not arise at the stage of finalisation of tariff.
- Thus, the Court held that no error was committed by them in fixing higher tariff for the Self-Financing Educational Institutions categorising them as commercial entities. No undue preference has been given to the State run and State aided institutions in the tariff notification. The fact that SFEIs have been clubbed together with several commercial service providers wholly unrelated to education becomes insignificant once we find that purpose of the SFEIs could be differentiated from the Government run and Government aided educational institutions.
Edited by Pragash Boopal
Approved & Published – Sakshi Raje
