Petition No. 925 of 2013 & 1030 of 2015
BEFORE
THE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION
LUCKNOW
PRESENT:
1. Hon’ble Sri Desh Deepak Verma, Chairman
2. Hon’ble Sri Suresh Kumar Agarwal, Member
IN THE MATTEROF: Against the demand letter 24.9.2013 and bills dated 1.11.2013 & 22.11.2013.
Approval of Agreement dated 13.7.2009 under section 86 (1) of the Electricity Act, 2003 read with Regulation 126 of the UPERC (Conduct of Business) Regulations, 2004
AND
IN THE MATTER OF
Hindalco Industries Ltd.
------Petitioner
AND
1. Uttar Pradesh Power Corporation Ltd.
2. Poorvanchal Vidyut Vitran Nigam Ltd.
------Respondent
The following were present:
1. Shri Ajit Kumar, AVP, Hindalco
2. Shri Utkarsh Raghubanshi, DGM, Hindalco
3. Shri I. J. Joshi, Jt. President, Hindalco
4. Shri R. P. Sharma, Jt. President, Hindalco
5. Shri Kamadev Raula, DGM, Hindalco
6. Shri R. P. Prasad, EE Commercial, UPPCL
7. Shri Lakshmi shankar, EE(D), EDD, Pipri
8. Shri Vijay Saluja, SE Commercial, UPPCL
9. Shri Amarjeet Singh Rakhra, Counsel, UPPCL
10. Shri Neeraj Kumar Singh, Accountant, EDD,Pipri
ORDER
(Date of Hearing 15.5.2017)
Background and Brief History
1. M/s Hindalco, the Petitioner, is a company producing Aluminum at Renukoot and having a captive thermal power generating capacity of 742 MW. It has also set up a co-generation plant of 78 MW capacity using fossil fuel exclusively for its captive use. The Petitioner has signed an Agreement with UPPCL/ PVVNL on 13.7.2009 for power supply by UPPCL/ PVVNL to Hindalco, and banking of energy and its withdrawal by Hindalco Industries Ltd ( “Hindalco”) dated 13.07.09 for the period 01.04.2009 to 31.03.2014.
2. The petitioner, Hindalco, has submitted that all the three parties to the Agreement dated 13.07.09 have acted in accordance with the mutually agreed terms of for more than 50 months i.e. till September 23, 2013. Hindalco was receiving power bills monthly from PuVVNL as per terms and conditions of the Agreement after adjustment of energy consumed by the Hindalco (including peak hours) against banked energy of the Hindalco and Hindalco was making payment regularly. The PuVVNL has raised monthly bills in accordance with the Agreement dated 13.07.09 and received/accepted the said payments without raising any objections whatsoever at any point of time.
3. The Petitioner has submitted that they received impugned bills dated 1.11.2013, 22.11.2013 and demand letter dated 24.9.2013 from UPPCL. The Petitioner has prayed to set aside these demand letter / bills on the ground that the demand raised is against their Agreement. It has also requested to restrain the UPPCL from enforcing or taking any coercive action against the petitioner. Therefore in these circumstances, the Petitioner had filed the petition No 925 of 2013 challenging the validity of the impugned demand dated 24.09.2013, 01.11.2013, 22.11.2013 and any such or similar demand raised subsequently.
4. The Petitioner has submitted that the dispute in this petition is confined only to the validity and legality of bills for the first time raised from September, 2013 for the period 01. 04. 2009 to August, 2013 and thereafter bills raised for subsequent periods till 31.03.2014. It has been submitted that there was no dispute whatsoever between the parties for the period prior to 01.04.2009 and also for the period after 31.03.2014.
5. Hindalco has submitted that the Agreement dated 13.05.2005 was already approved by the UPERC in its totality with no limitation of adjustment of power withdrawal during peak hours against banked energy, the Petitioner & the Respondents in continuation thereof, signed the Agreement in question on 13 July 2009 for a further period of 5 years from 01-04-2009 to 31-03-2014 specifically incorporating in Clause 22 thereof that the power banked can be withdrawn “at any point of time”. It is submitted that there was no substantial difference between the terms and conditions of the Agreement dated 13.05.05 and the Agreement dated 13.07.09.
6. Hindalco has added that all of a sudden from 24.09.2013, the UPPCL/PuVVNL changed the basis of the bill and started raising it on a different basis on the pretext that CAG auditors have objected to the method of calculating the liability.
7. That admittedly, the impugned amount demanded was never shown as arrears of charges for electricity supplied in their book of account from April 2009. It is submitted that before 24.09.2013, the amount in question had never been shown in any bill or in any other document, sent or served on the petitioner as an amount recoverable from them as arrears of charges for electricity supplied. Therefore the impugned demand is hit by Section 56(2) of the Electricity Act, 2003 and the same does not exist in the eyes of law and hence is not payable at all.
8. Hindalco has also submitted that the Respondents either did not take any MRI reading during the period i.e. April, 2009 to Aug, 2013 or if the MRI reading was taken, no record was maintained for the purpose of raising bills. Therefore the Respondent did not have any data to raise the bill for withdrawal of electricity during peak hours. The petitioner prayed to set aside above mentioned demand letter / bills on the ground that the demand raised is against their Agreement. They also requested to restrain the UPPCL from enforcing or taking any coercive action against the petitioner.
9. Considering the prayer of the petitioner, vide order dated 24.2.2014, the Commission ordered UPPCL to restrain from any coercive action till the final orders of the Commission.
“The Petitioner has prayed to set aside above mentioned demand letter / bills on the ground that the demand raised is against their Agreement. It has also requested to restrain the UPPCL from enforcing or taking any coercive action against the petitioner.
Since UPPCL has not filed counter in this case, the Commission directed them to file detailed counter. The Commission also directed UPPCL to restrain from any coercive action till the final orders of the Commission.”
10. On 11.03.2014, the Respondent, UPPCL, filed the Counter affidavit in Petition No. 925 of 2013, against the Petition filed by the Petitioner which is as follows:
a. That the revised bills have been raised after the CAG Audit and in the light of concerns raised therein the CAG Audit has rightly pointed out that the previous bills raised upon the petitioner were not as per the CNCE Regulations 2005. As a result of the wrong billing, the department has suffered a loss of Rupees 9.15 Crore as the energy supplied during peak hours to Hindalco has not been billed, in, accordance with the provisions of CNCE Regulations 2005 and 2009.
b. That once the deficiency in the bills came to their knowledge, the bills were revised and peak hour energy charges were raised against the petitioner from April 2009 to August 2013 and the same totals to Rupees 40.77 Crore.
c. That the Electricity bills for the period of November 2011 to August 2013 were raised on actual basis and were based on MRI report. The bills for the period of April ,2009 to December 2010 and from January 2011 to October 2011 have been prepared on pro-rata basis, and the same are correct.
d. That it is incorrect to state that the department is unclear about the observations of the CAG and has raised the revised bill in an arbitrary manner and there is nothing arbitrary or illegal in Bill No. 904, dated 01.11.2013, Bill No. 4 dated 01.11.2013 & Bill No. 1204 dated 22.11.2013.
e. That the withdrawal of peak hours energy in not permissible as per CNCE Regulations and view of the provisions of Clause 3 of the Agreement, the act of the answering respondent does not in any way amount to unilateral alterations of the terms and conditions of the Agreement.
f. That the bill prepared by the Department is as per the CNCE Regulation and the objections of the petitioner against the same are incorrect and misleading.
11. On 12.05.2014, Petitioner filed rejoinder affidavit in reply to the counter affidavit filed by the respondent which is as follows:
a. That the conduct of the Respondent establishes that the Respondent was ad-idem with the petitioner that the Agreement dated 13.07.2009 did not provide for any limitation on withdrawal of power during peak hours and that till September, 23, 2013 the Respondent did not have any doubt whatsoever in respect of any of the terms of the AGREEMENT or in respect of interpretation of any clause thereof.
b. That it is submitted that the Respondent has clearly admitted herein that "the revised bills have been raised after the CAG Audit and in the light of the concerns raised therein...".
c. That the present Agreement dated 13.07.09 is not a new Agreement but is merely a renewal of the already approved Agreement dated 13.05.05. The said Agreement dated 13.05.05 was already approved by the UPERC and therefore that approval would ipso facto apply to the present Agreement because there is no substantial deviation in the present Agreement from the earlier one and hence was not required to be approved again from the UPERC.
d. That when this Agreement was entered into on 13.07.09, the Regulations, 2005 were in force.
e. That the learned Auditor of CAG proceeded to examine the facts of the case in the light of the CNCE Regulations, 2009/Regulations, 2005 in the erroneous manner and hence reached on erroneous conclusions. It is submitted that the Respondent did not explain properly to the CAG Auditors the aforesaid facts which resulted in the adverse observations by the CAG.
f. That it is reiterated that the Respondent No.2 went on arbitrarily revising the amount of bills for the period January' 2011 to Sept'2011, October'2011 to August'2013 and also raised the bills for the period from April'2009 to December'2010 in utter disregard to the terms and conditions of the Agreement by unilaterally overriding/amendment the specific stipulations retrospectively regarding banking of electricity in the said Agreement.
g. That the Agreement dated 13.05.2005 was approved by the UPERC vide order dated 31.03.2006 wherein exactly the same provision regarding “no limitation on withdrawal of banked energy during peak hours”.
12. Vide order 16.2.2015, the Commission observed as follows:
“It was enquired by the Commission that whether there was any other dispute resolution mechanism such as arbitration as agreed between the parties? The Commission directed UPPCL/Discoms to file a detailed counter having their submission on the issues of maintainability and arbitration with a copy to Hindalco who would file detailed rejoinder subsequently.”
13. On 1.6.2015, the Counsel on behalf of Respondent No.2 (PVVNL), submitted its objections on the maintainability of the Petition which is as follows:
i) That the rights and obligations between Hindalco and the licensee, with regard to supply of electrical energy to Hindalco, banking of energy supplied by the Hindalco to the licensee and withdrawal of banked energy by Hindalco and matters related therewith are covered by terms and conditions of the Agreement executed between the parties in July 2009 and earlier in May 2005.
ii) That Clause 23 of the Agreement entered into the parties clearly specifies that in case of dispute between the parties, where the parties fail to mutually settle the dispute, the same shall be settled by Arbitration.
iii) That in view of the aforesaid Arbitration Clause which relates to all matters relating to rights/claims or liabilities under the Agreement or otherwise in relation to or arising out of Agreement, it is most humbly submitted that the Uttar Pradesh Electricity Regulatory Commission's jurisdictions to have and adjudicate the aforesaid petition is ousted.
iv) That even otherwise in terms of the provisions of Section 86 (1) (f) of the Electricity Act 2003, it is one of the duties of the State Commission to refer any dispute for Arbitration in cases relating to the licensee and generating companies.
v) That the Arbitration Act is a Special Act codified with the object "to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto."
vi) That in view of the forgoing facts it is most humbly prayed that the Hon'ble Commission may be pleased to refer the matter to the Arbitration keeping in view the procedure agreed to between the parties in the Arbitration Clause of the Power Purchase Agreement.
14. That the Counsel for the Petitioner on 15.6.2015 filed the reply to the objection on maintainability filed by Respondent NO. 2 which is as follows:
i) It is submitted that the contention of the Respondent No. 2 that the Hon’ble Commission does not have jurisdiction to adjudicate upon the disputes raised by the Petitioner herein is entirely misconceived. The said contention is contrary to the express provisions of the Electricity Act, 2003. It is well settled by a catena of decisions of the Hon'ble Supreme Court that the Electricity Act, 2003 is a Complete Code in itself and the Act overrides even an arbitration provision contained in the contract.
ii) It is submitted that the issues raised in the aforesaid petition relate to and have bearing on the regulatory power of this Hon'ble Commission. The entire process of power procurement including the price at which the power is to be procured by the parties is subject to the regulatory jurisdiction of the State Commission.
iii) In addition to the above regulatory power, Section 86(1)(f) vests in the State Commission the exclusive power to adjudicate upon the dispute between the Licensees and the Generating Companies.
iv) The plain reading of the above provision would clearly show that the State Commission has jurisdiction to entertain disputes between the licensees and generating companies. Thus the scope of jurisdiction under Section 86(1)(f) is very wide as it covers all disputes between the licensees and generating companies which relate to regulatory jurisdiction of the State Commission.
v) Further the genesis of the dispute in the present case is not only the illegal bills but the conduct of the Respondents, a public authority acting contrary to the provisions of the Electricity Act, 2003 and the Regulations made by this Hon'ble Commission.