Court’s Decision
The Delhi High Court allowed the writ petition and quashed the demand notices issued by the power distribution licensee to a power consumer for an amount exceeding ₹6.78 crores. The Court held that the arbitrary enhancement of charges without approval from the regulatory authority was not only illegal but amounted to unfair trade practice.
The Court held:
“Once the tariff is fixed by the Commission, the licensee cannot on its own impose any surcharge or additional demand without prior approval.”
Facts
The petitioner, a power consumer in Delhi, was being supplied electricity under a High Tension agreement by the respondent licensee. In the course of the commercial relationship, the licensee began issuing inflated bills on the ground that the consumer had failed to maintain the minimum power factor stipulated in the agreement. As a result, the consumer was billed hefty amounts as surcharge.
The licensee claimed that this surcharge was a penalty for deviation from the agreed power factor, allegedly in accordance with internal circulars and audit reports. A total demand of ₹6.78 crores was raised.
The consumer challenged these bills as arbitrary and contrary to the tariff orders passed by the Delhi Electricity Regulatory Commission (DERC), arguing that no such charge was permitted under the DERC Tariff Orders and Regulations.
Issues
- Whether the power supplier (distribution licensee) can unilaterally raise demand over and above the approved tariff without the regulatory commission’s prior approval?
- Whether power factor penalties not expressly approved in the DERC tariff orders can be enforced through billing?
- Whether the power supplier violated principles of natural justice and transparency in issuing the demand?
Petitioner’s Arguments
The petitioner submitted that the demands raised were wholly unsustainable under the Delhi Electricity Regulatory Commission (Supply Code and Performance Standards) Regulations and the Tariff Orders issued by DERC. It was argued that:
- The respondent had no authority to unilaterally levy a surcharge for power factor deviation, which was neither provided for in the supply agreement nor in the regulatory framework.
- The audit objections or internal memos relied on by the respondent had no legal force or statutory backing.
- The charges were levied without prior notice, hearing, or publication of a revised tariff — violating the principles of natural justice.
- As a regulated entity, the respondent could only recover charges approved by the DERC, and any other charge would amount to profiteering.
Respondent’s Arguments
The respondent distribution licensee contended that:
- The surcharge was levied due to the petitioner’s failure to maintain the required power factor, which caused additional losses and inefficiency in the distribution network.
- The action was supported by audit reports and internal assessments.
- The surcharge was not in violation of the tariff order, as it was based on a permissible interpretation of its provisions.
It was also claimed that the consumer was aware of the requirement and had been previously warned, and the demand was raised after internal scrutiny and financial assessment.
Analysis of the Law
The Delhi High Court analyzed the Electricity Act, 2003, and the relevant DERC Tariff Orders and Supply Code Regulations. It emphasized that:
- Tariffs can only be determined by the State Electricity Regulatory Commission (in this case, DERC).
- Section 62 of the Electricity Act mandates that all charges must be determined by the Commission, and licensees cannot unilaterally impose additional costs.
- The power factor surcharge, if not part of the approved tariff, cannot be introduced merely through circulars or audit reports.
- Even if some technical deviation exists, there must be a transparent mechanism backed by statutory authority before any penal billing is undertaken.
Precedent Analysis
- BSES Rajdhani Power Ltd. v. DERC, (2014) 11 SCC 246: The Supreme Court held that distribution licensees cannot raise bills or introduce charges without DERC’s approval.
- Pune Zilla Parishad v. Maharashtra State Electricity Distribution Co. Ltd., AIR 2017 SC 3181: The Supreme Court reiterated that electricity tariffs are within the exclusive domain of the regulatory commission.
- Tata Power Co. Ltd. v. Reliance Energy Ltd., (2009) 16 SCC 659: The Court stated that deviation from regulated tariffs amounts to an illegality and cannot be justified under business prudence.
These judgments reinforced that tariff regulation is not merely procedural but essential to ensure fair and transparent electricity supply.
Court’s Reasoning
Justice C. Hari Shankar held that:
“The entire demand is vitiated as the respondent attempted to enforce charges which were neither statutorily recognized nor sanctioned by the Commission.”
The Court noted that neither the agreement between the parties nor the applicable tariff orders authorized the respondent to levy the impugned charges. The reliance on audit objections and internal circulars was found to be legally irrelevant. Importantly, the Court emphasized that once a regulated tariff exists, no licensee can introduce supplementary conditions unilaterally.
The Court also observed that the demand notices lacked transparency, were raised without hearing the consumer, and failed to explain the calculation method in any meaningful manner.
Conclusion
The Court quashed the demand notices amounting to ₹6.78 crores raised by the distribution licensee and held them to be illegal and unenforceable. It directed the respondent to refrain from levying any such charges unless duly sanctioned by the DERC and communicated in accordance with law.
The writ petition was allowed, and the Court made it clear that any further charges must strictly adhere to regulatory norms.
Implications
- For Consumers: Offers relief against arbitrary charges and affirms consumer rights under the regulated tariff system.
- For Discoms: Reinforces that no charges can be levied beyond what is expressly authorized by the regulatory body.
- For Regulatory Governance: Strengthens the supremacy of electricity regulatory commissions in ensuring tariff discipline.
Case Law Referred
- BSES Rajdhani Power Ltd. v. DERC: Licensees cannot levy additional charges without DERC approval.
- Pune Zilla Parishad case: Electricity tariffs fall exclusively under regulatory purview.
- Tata Power case: Non-compliance with approved tariff amounts to illegality.
FAQs
Q1. Can a power company add charges to your electricity bill that are not in the tariff order?
No. Any such charge must be pre-approved by the State Electricity Regulatory Commission.
Q2. Is failure to maintain power factor punishable through surcharges?
Only if such penalties are part of the approved tariff or regulations. Internal guidelines or audits cannot substitute regulatory sanction.
Q3. What should a consumer do if charged arbitrarily by a distribution licensee?
File a representation with the licensee and, if unresolved, approach the regulatory commission or High Court under writ jurisdiction.