Petition No. 2 of 2003
Date of hearing: 21.01.2004
Date of order: 20.04.2004
IN THE MATTER OF: Fixation of the Tariff for sale of power to the Hotels, Motels & Restaurants/ Physical checking of connected load.
IN THE MATTER OF:
Punjab State Electricity Board
Govt. of Punjab
Present: Sh. R.S.Mann, Chairman
Sh. L.S. Deol, Member.
For the Petitioner (PSEB): Sh. B.D.Bansal, Director/Sales.
Sh. V.K.Shanan, Dy. Director/ Sales.
For the State Govt.: Sh. K.K.Garg, Addl. Advocate General.
Based on a decision of Government of Punjab in December 2002 to provide incentives to the Hotel Industry in Punjab, the Principal Secretary, Industries, Government of Punjab, asked the Punjab State Electricity board to charge electricity tariff from the Hotels at industrial rates instead of commercial rates and to refrain from physical checking of connected load of such Hotels where electronic meters had been installed by the PSEB.
2. In connection with the implementation of the above decision of the Government of Punjab, PSEB filed the present petition dated 20.01.2003 making the following prayers :-
(i) As a consequence of the implementation of the directive of the Govt. of Punjab in this matter, PSEB will suffer loss in the form of annual revenue receipts at the rate of Rs.1314/- per KW of connected load of Hotels for the year 2002-03 which may get increased/ decreased in accordance with the difference in tariff of NRS and industrial category in the subsequent years. This loss may be either borne by the State Govt. or it may be reflected in the ARR.
(ii) PSEB may be freed from the obligation to implement the direction of the Govt. requiring the Board to desist from physical checking of connected load of Hotels where electronic meters had been installed since meters installed for this category of consumers are not capable of fully measuring the demand in a manner required to recover full tariff from such consumers.
In the above petition, the Principal Secretary, Industries, Government of Punjab was made the respondent. PSEB filed a supplementary petition on 28.02.2003 in which Principal Secretary, Tourism & Cultural Affairs, Government of Punjab was made the second respondent. It was stated in this petition that the Principal Secretary, Department of Tourism & Cultural Affairs, Govt. of Punjab had intimated the PSEB that as a part of the policy of the Government to promote tourism in the State, it has been decided that all classified Hotels, Motels, Restaurants and other tourism related projects may be charged power tariff at par with industrial units and that all new classified Hotels, Motels, Restaurants etc. eligible for a rebate of 15% on power bills for 3 years from the date of commencement of business with a maximum ceiling of Rs.15 lacs will be recommended to the Commission. The Principal Secretary Tourism asked the PSEB to implement this part of the State’s policy. In addition to the prayers made in the earlier petition, the PSEB through the supplementary petition prayed, inter-alia, that as PSEB was unable to bear the loss likely to be caused by the 15% rebate in the electricity bills to be allowed to the tourism related units, this loss may be allowed to be compensated either through the ARR or the Govt. of Punjab may be required to provide the necessary subsidy to the PSEB.
PSEB provided some additional information which was required by the
Commission. A reply on behalf of the
Govt. has also been filed. The Govt. of Punjab issued directions to the
Commission through its Notification dated
4. In the reply filed by the Principal Secretary, Tourism, Govt. of Punjab, it has been stated that the State Government is greatly interested in encouraging creation and promotion of tourism related infrastructure and investment and as a part of this policy, the Govt. have decided to extend incentives with regard to power related matters. Once the Govt. have decided through its policy to treat tourism related units at par with industrial units, it is incumbent upon the PSEB to modify its tariff rates and other practices in accordance with the Govt. policy. The PSEB cannot take the plea of losses to be suffered on account of the change of power tariff. Further, the PSEB never raised any issue regarding losses suffered by it due to supply of power to industrial units. On the matter of physical checking of the connected load, it has been stated in the reply of the Govt. that the PSEB should treat the tourism related units at par with industrial units.
5. Sh. K.K.Garg, appearing on behalf of the Govt. of Punjab stated that Govt. has already issued directions to the Commission under Section 39 of the Electricity Regulatory Commissions Act, 1998, asking the Commission to comply with the relevant provisions of the Punjab Tourism Policy, 2003. Such directions are binding on the Commission as they have been issued in public interest. Sh. Garg also pointed out that similar directions have also been issued by the Government to the Board and as such the Commission may also direct the PSEB to modify its tariffs and other practices as required by the new Tourism Policy.
6. The representative of the PSEB stated that the Board is presently charging power tariff from tourism related units (Hotels, Motels and Restaurants etc.) at commercial rates, technically known as NRS rates which are higher than the highest rates charged from industrial consumers. If the tourism related units are charged industrial tariffs, the Board will suffer revenue losses which are presently calculated at approximately Rs.0.82 crore for the year 2002-03. Thus, if the Board is required to implement the Tourism Policy, it should somehow be reimbursed these losses. The representative of the Board also highlighted the fact that the nature of business operations of Hotels, Motels and restaurants is, in fact, commercial and not industrial and as such there was no real justification for recovering power tariffs from them at the rate charged from industrial consumers.
7. The Commission made a note of Section 65 of the
Electricity Act, 2003 which provides that, “If the State Government requires
the grant of any consumer or class of consumers in the tariff determined by the
State Commission under Section 62, the State Government shall, notwithstanding
any direction which mauy be given under Section 108,
pay, in advance and in such a manner as may be specified, the amount to
compensate the person affected by the grant of subsidy in the manner the State
Commission may direct, as a condition for the license or any other person
concerned to implement the subsidy provided for by the State Government.”. Section 65 goes on to add that “No such
direction of the State Government shall be operative if the payment is not made
in accordance with the provisions contained in this Section and the tariff
fixed by the State Commission shall be applicable from the date of issue of
orders by the Commission in this regard.”
Accordingly, the Commission decided to make a reference to the Chief
Secretary, Govt. of Punjab enquiring if the State Govt. was willing to provide
subsidy so as to compensate the PSEB for the loss to be suffered by the Board
in the event of tourism related units being charged power tariff at the rate
allowed for industrial consumers instead of rates charged from NRS
consumers. In response to this letter,
the Govt. of Punjab through Principal Secretary, Tourism & Cultural Affairs
8. The matter was considered by the Commission and
the Government was approached by Commission’s letter dated December 8, 2003
wherein it was stated that there are two related but different issues – whether
the Government wants to change the category of these consumers or merely fix a
different tariff for these consumers than the one ordinarily applicable to this
class. The Board in its presentation
made before the Commission has stated that the intention of the Government is
not to change the category of the consumers.
In any case, this cannot be easily done as the Board has its own
principles for categorizing the consumers based on nature and purpose of
consumption of electricity. Also, change of category of consumers will mean
that they will automatically be loaded with same encumbrances as other
industrial consumers including weekly off, load shedding, peak load exemption charges, peak load
hour restrictions etc. This, in fact, may greatly damage their interests. Thus,
obviously the case clearly and squarely falls in the second category i.e.
charging of tariff lower than ordinarily applicable to these
consumer without changing their category as such. This automatically attracts the provisions of
Section 65 of the Electricity Act, 2003 making it mandatory for the Government
to provide requisite subsidy to compensate the financial loss to the Board.
Incidentally, Section 65 clearly stipulates the payment of subsidy by the
Government notwithstanding any directions which may be given by the Government
under Section 108 of the Act. Also the Government itself, in its earlier
9. The Government vide its
10 The Commission, with reference to above views of
the Government, has considered the matter.
The directions to the Commission have been issued by the State
11. There is no doubt that the Commission is to be guided by the directions issued by the Government under Section 108 of the Electricity Act 2003 in matters of policy involving public interest. But provisions of Section 108 of the Electricity Act are to be read along with provisions of Section 65 of the Act which clearly provide for payment of subsidy by the Government notwithstanding the directions issued by it under Section 108 of the Act. It is thus clear that Section 108 and Section 65 of the Act are not independent of each other and in fact provisions of Section 65 of the Act override the provisions of Section 108 of the Act. Any other construction of the law will strike at the very roots of fair and independent regulation of tarrifs by the Commission. The meaning of term ‘subsidy’ has not been rightly interpreted in the letter of the Government dated 24.12.2003. As per Section 65 of the Act, grant of subsidy is with reference to tariff as determined by the Commission and not with reference to any other yardstick or even cost of service. Thus, the inference of the Government that no subsidy is attracted and that there is no element of subsidy in the industrial tariff, is not correct. As the Government in this case is proposing tariff lower than the tariff determined by the Commission, question of provision of subsidy does get attracted. The Commission has determined the tariff of these Units under Non Residential Supply category at commercial rates, in view of the past practice being followed by the Board at the time of passing tariff order by the Commission when the directions of the Government seeking treatment of Hotel Industry at par with Industrial Units had not been issued. In the Tariff Order of the Commission for the year 2003-04, revenue gap of the Board for the year has been worked out taking the revenue earned from Hotels, Motels and Restaurants as per their present categorization of ‘NRS” and without taking into account other incentives relating to power tariff. Any change in category or tariff of these consumers or grant of other incentives will automatically result in revenue loss to the Board which logically has to be compensated to the Board. Tariff Order once passed by the Commission cannot be amended (except for allowing for adjustment under Fuel Cost Adjustment Formula) more than once during the year as per provisions of Section 62(4) of the Act. Also, the loss suffered by the Board on account of change in tariff or grant of incentives by the State Government cannot be loaded on to other consumers. However, in case Govt. of Punjab agrees to fully subsidize the loss suffered by the Board on this account, the Commission may be approached to pass on the incentives to the hotel industry and changing the tariff structure suitably.
12. For the same reasons as referred to in the preceding paras, the direction of the State Government to allow the rebate of 15% on power bills for 3 years to the newly set up tourism related units cannot be allowed to be implemented. The implementation of this direction entails a loss of revenue for the PSEB and the State Government is not agreeable to reimburse this loss through the payment of equivalent amount of subsidy.
13. In view of all above, especially requirement of the Act and the fact that the Government has not committed any subsidy for charging of tariff to Hotels, Motels and Restaurants at par with the Industrial Tariff, Hotels, Motels and Restaurants will continue to be charged as per tariff determined by the Commission.
14. The State Government had also directed the Board that no physical checking of connected load be carried out by it in respect of hotel units where electronic meters have been installed. The Board in its reply has stated that there is no other way to know exact connected load installed by the consumers over and above the sanctioned load except physical checking. Further, Electronic meters installed in NRS category which includes hotel units, do not have provision for measuring demand. Only meters installed on the premises of large supply, bulk supply and railway supply consumers have such a provision. Dispensing with physical checking of connected load can be done only in respect of consumers where demand is being measured. Even in such cases, physical checking will be required to keep a check on unauthorized load, to levy load surcharge, wherever found necessary and to regularize excess load in case of persistent excess load. Doing away with the physical checking of connected load will result in loss of revenue due to non-recovery of load surcharge. It is also not possible for the Board to install such costly meters in one go. In the end, it is concluded that physical checking in hotel units will need to be continued under the circumstances.
Department of Industries, Government of Punjab in its response dated
Department of Tourism and Cultural Affairs, Govt. of Punjab in its reply dated
17. The matter has been considered by the Commission. As already discussed above, hotel units cannot be categorized as industrial units. Therefore, the question of physical checking as is being done for industrial units does not arise. In any case, this would involve imposition of restrictions like weekly off, peak load hour restrictions, peak load exemption charges etc on them which would, in fact, put these units in a very disadvantageous position considering the nature of their business. However, the Commission, as a general and long term policy to be applied to all categories of consumers, is inclined to do away with the physical checking and till such goal can be achieved, the Commission is considering taking appropriate steps towards this overall goal. To this purpose, the Commission is already actively considering implementation of two part tariff and installation of electronic meters capable of measuring demand. As per directions of the Commission as contained in its Tariff Order 2002-03, all MS and LS consumers are to be installed with meters capable of measuring demand. The same measure may be considered for high end consumers in all categories including hotels. If the Government is also keen on this, the Board should definitely consider and prioritise action for installation of meters capable of measuring demand on all hotel units. The Board can also reconsider its position regarding physical checking on hotel units and come up with the proposals for minimal interference by their staff to avoid hindrance to the functioning of the hotel units, so that the same can be considered by the Commission during the processing of the Board’s ARR and Tariff Application for the year 2004-05.