Petition No. 449/MP/2014. Case: Malana Power Company Limited Vs Himachal Pradesh State Electricity Board Limited and Ors.. Central Electricity Regulatory Commission

Case NumberPetition No. 449/MP/2014
CounselFor Appellant: Seema Jain and Dushyant K. Mahant, Advocates and For Respondents: Anand K. Ganesan and Swapna Seshadri, Advocates
JudgesGireesh B. Pradhan, Chairperson, A.K. Singhal and A.S. Bakshi, Members
IssueElectricity Act, 2003 - Sections 131, 178, 2, 2(36), 2(36)(ii), 42, 86, 92; Indian Penal Code 1860, (IPC) - Sections 60, 61
Judgement DateMarch 10, 2017
CourtCentral Electricity Regulatory Commission


  1. The Petitioner in Petition No. 449/MP/2015 is Malana Power Company Ltd. (MPCL), a generating company which has constructed a Run of the River with Pondage Hydroelectric Power Project with an installed capacity of 86 MW (2 x 23MW) on Malana Nallah, a glacier fed tributary of Parbati River in Kullu District of Himachal Pradesh. MPCL entered into an Implementation Agreement dated 13.3.1997 with the State Government of Himachal Pradesh. In terms of clause 14.1 of the Implementation Agreement, MPCL was to provide the State Government a fixed percentage of free power and the remaining power generated from the project was to be supplied outside the State of Himachal Pradesh. Clause 16.8 of the Implementation Agreement provided that a separate agreement would be signed by MPCL for use of the transmission system specifying various modalities for the generation, evacuation of power, maintenance of the project, wheeling charges to be levied by either party for use of transmission system of the other party to evacuate power, modalities for supply of free power, metering and other miscellaneous related technical issues. Consequently, MPCL signed an agreement dated 3.3.1999 with the erstwhile Himachal Pradesh State Electricity Board, the predecessor of HPSEB Limited (HPSEBL), outlining the modalities of all the issues contained in clause 16.8 of the Implementation Agreement. The Agreement dated 3.3.1999 has been referred to in this order as Wheeling Agreement.

  2. As per the Wheeling Agreement, MPCL would transmit the entire energy generated at the project excluding auxiliary consumption and transmission losses through its own 132 kV double circuit transmission line upto the interconnection point (i.e. Bajaura sub-station of HPSEBL). HPSEBL would make arrangement for wheeling and/or transfer of transferable energy from the interconnection point to the inter-State point (i.e. 400 kV bus bar of 400 kV sub-station of PGCIL at Nalagarh). As per the Wheeling Agreement, Free Energy for each billing month from the project at the Interconnection Point shall be 15% of the deliverable energy for the first 12 years from the commercial operation date and 20% of the deliverable energy for the next 28 years. The remaining energy shall be equal to the difference of the injected energy and the free energy for the billing month. The transferable energy for the billing month would mean the energy quantum in kWh to be made available in a billing month in accordance with the Wheeling Agreement by HPSEBL to PGCIL on behalf of MPCL at the interstate point which shall be equal to 0.96 times the remaining energy for that billing month. The wheeling charges for transfer of the remaining energy from the inter-connection point to the interstate point shall be payable by MPCL to HPSEBL for the remaining energy at the following rates:

  3. The erstwhile HPSEBL was unbundled under the Himachal Pradesh Power Sector Reforms Transfer Scheme (the transfer scheme) formulated under Section 131 of the Electricity Act, 2003 which was notified by the State Government under Notification No. MPP-A (3)-1/2001-IV dated 10.6.2010. Under the transfer scheme, the functions of generation, distribution and trading of electricity were assigned to HPSEBL. The function of transmission of electricity within the State was vested in Himachal Pradesh Power Transmission Corporation (Pvt) Ltd. (HPPTCL) which was also to perform the statutory functions of the State Transmission Utility. The transfer scheme further provided that the functions of SLDC would be performed by an entity directly under the State Government. Himachal Pradesh State Load Despatch Society (Respondent No. 2) has been promoted by the State Government for performing the functions of SLDC. For the purpose of the present order, HPSEBL refers to the erstwhile Himachal Pradesh State Electricity Board also.

  4. MPCL project namely Malana HEPP was commissioned on 5.7.2001. According to MPCL, since the commissioning of the Malana HEPP, MPCL has been supplying the State's share of free power to the Government of Himachal Pradesh. Further, on payment of wheeling charges and losses in accordance with the agreement dated 3.3.1999, MPCL has been selling the remaining power outside the State through bilateral and collective transactions by availing the Short-Term Open Access in accordance with the extant regulations of the Commission. MPCL has submitted that in accordance with the Central Electricity Regulatory Commission (Open Access in Inter-State Transmission) Regulations, 2004 (the Open Access Regulations, 2004) notified on 30.1.2004, MPCL is treated as an embedded customer and the unscheduled open access charges for the inter-State transactions were being settled in accordance with the Regulation 21 of the said regulations. The Open Access Regulations, 2004 were repealed by the Central Electricity Regulatory Commission (Open Access in Inter-State Transmission) Regulations, 2008 (the Open Access Regulations, 2008) notified on 25.1.2008. MPCL has submitted that in terms of Regulation 2(h) of the Open Access Regulations, 2008, MPCL is an intrastate entity and the UI charges for intra-State entities are governed by Regulation 20 of the said regulations, particularly clause(5) thereof which provides that "unless specified otherwise by the concerned State Commission, UI rate for intra-State entity shall be 105% (for over-drawal and under-generation) and 95% (for under-drawal and over-generation) of UI rate at the periphery of the regional entity." MPCL has submitted that Clause (6) of Regulation 20 of Open Access Regulations, 2008 was substituted on 20.5.2009 which provided that "no charges, other than those specified under these Regulations shall be payable by any person granted short term open access under these regulations." MPCL has submitted that the Commission notified the Central Electricity Regulatory Commission (Unscheduled Interchange Charges and related matters Regulations, 2009 (UI Regulations) on 30.3.2009. In accordance with Regulation 4(ii), the UI Regulations are applicable to "sellers and buyers involved in transactions facilitated through short term open access or medium term open access or long term access in inter-State transmission of electricity". According to MPCL, (i) the deviations from schedules in course of its transactions through short term open access to inter-State transmission should be regulated in terms of Regulation 20 of Open Access Regulations, 2008 and UI Regulations, and (ii) no charges other than the charges stipulated in Open Access Regulations, 2008 should be levied on MPCL.

  5. MPCL has submitted that the HPSEBL vide letter dated 20.4.2009 informed MPCL about its decision to adopt a new method for calculating UI charges for over-drawl and levy of handling charges with effect from 1.4.2008. The said letter is extracted as under:

    "In this context, it is informed that subject matter was considered by WTMs of the Board in its 372nd meeting and following has been approved:

  6. The applicable charges for any drawal of power in real time operation by M/s. MPCL through its buyer(s) in excess of power scheduled/rescheduled, shall be paid for by M/s. MPCL to HPSEBL at a rate which is highest applicable rate at which M/s. MPCL is selling its power to its buyer(s) or UI rate(s) applicable for the said fifteen minutes time block(s) whichever is higher.

  7. In case of underdrawal on account of difference in energy scheduled and energy actually generated by MPCL, HPSEBL shall make the payments to M/s. MPCL as and when HPSEBL receives the amount for such under drawals from UI pool account of NRPC.

  8. The energy bills raised for the period 04/2008 to 10/2008 raised on M/s. MPCL may be revised on the aforesaid principle and all such transactions beyond 10/2008 shall also be governed by the same principles.

  9. HPSEBL shall levy a handling charges @ 3 paise per unit.

  10. The principle be applied uniformly to all IPPs.

    Accordingly, you are requested to convey the consent of M/s. MPCL and visit HPSEBL to reconcile the energy accounts from 01.04.08 to 31.03.09".

    According to MPCL, the revised rates of UI charges as per para 1 of the letter dated 20.4.2009 as quoted above is illegal as it is contrary to the provisions of the UI Regulations. MPCL is further stated to be aggrieved that the methodology adopted in case of over-drawls had not been made applicable to transactions of under-drawls. MPCL has submitted that levying of handling charges is illegal and unsustainable as Regulation 20(6) of Open Access Regulations, 2008 specifically prohibited State Utilities from charging any charges other than those permitted under the Open Access Regulations.

  11. MPCL has submitted that HPSEBL started issuing bills at UI rates and also demanded the handling charges from April 2008 onwards as per the letter dated 20.4.2009. MPCL has submitted that it had no option but to pay the UI charges at the rate approved by HPSEBL alongwith handling charges as MPCL was threatened with stoppage of scheduling of power from the Malana HEPP.

  12. MPCL has submitted that it desired to sell some of its power through the Energy Exchange and therefore, approached HPSEBL for NoC as required under the regulations of the Commission for collective transactions. In reply, MPCL received draft agreement through e-mail dated 19.4.2011 from HPSEBL which incorporated the provisions of the letter dated 20.4.2009 and also proposed to continue with the handling charges. MPCL has stated that on receipt of the draft agreement, it replied to Respondent No. 2 vide its letter dated 21.4.2011 that the treatment of power over-drawn and power under-drawn should be governed as per the UI Regulations. MPCL also protested against levy of handling charge. MPCL has submitted that in reply to the letter dated 21.4.2011, HPSEBL vide its letter dated 26.4.2011 informed that the terms and conditions incorporated in the draft agreement are the same as contained...

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