JSA Successfully Represents West Bengal State Electricity Distribution Company Limited And India Power Corporation Limited Before The Appellate Tribunal For Electricity Clarifying Their Status As Distribution Licensees And Non Applicability Of Retail Tariff Upon Them

The Appellate Tribunal for Electricity, by its recent judgment in Damodar Valley Corporation vs. West Bengal Electricity Regulatory Commission and Ors.¹, has dismissed the appeals filed by Damodar Valley Corporation (“DVC”) and upheld the Orders dated March 1, 2019 passed by the Ld. West Bengal Electricity Regulatory Commission (“WBERC”) (“Impugned Orders”). In the Impugned Orders, it was held that sale of power by DVC to West Bengal State Electricity Distribution Company Limited (“WBSEDCL”) and India Power Corporation Limited (“IPCL”) cannot be treated as sale of power by a generating company to a consumer. Further, the retail tariff determined by WBERC based on the tariff petitions filed by DVC was not determined for WBSEDCL and IPCL and accordingly, such tariff cannot be charged upon them.

By this judgment, it was held that DVC cannot take advantage of the arrangements between the parties that existed prior to the Electricity Act 2003 (“Electricity Act”) coming into force. Since WBSEDCL and IPCL are distribution licensees and not consumers in West Bengal under the Electricity Act, they are not liable to pay the higher retail tariff determined by the WBERC for DVC’s consumers.  

Brief facts

1. On June 6, 2003, the Electricity Act came into force, bringing a paradigm shift by unbundling the power sector, establishing independent regulatory commissions, and providing for tariff determination by such commissions.
2. Despite the aforesaid paradigm shift, the parties i.e., DVC, WBSEDCL and IPCL continued to follow the earlier practice/arrangement whereby WBSEDCL and IPCL were supplied power on radial mode by DVC charging consumer tariff.
3. The dispute arose between the parties when DVC continued to raise bills upon WBSEDCL and IPCL at the higher retail tariff (determined through tariff orders dated March 4, 2015 and May 25, 2015) whereas the distribution licensees, relying on the power purchase cost approved by the WBERC, calculated their liability to pay tariff at the bulk supply rate.
4. Subsequently, WBSEDCL and IPCL approached the WBERC by way of Case Nos. OA-273/18-19 and 272/18-19 praying inter alia for a direction to DVC to not impose retail tariff determined for the consumers of DVC, on bulk supply of power to WBSEDCL and IPCL at different radial off-take points.
5. The Impugned Orders disposed of the above petitions and held that the sale of power by DVC to WBSEDCL and IPCL cannot be treated as sale of power by a generating company to a consumer. It was further held that the retail tariff determined by the WBERC based on the tariff petitions filed by DVC was not determined for WBSEDCL and IPCL and that tariff cannot be charged upon them.
6. DVC had challenged the Impugned Orders by way of an appeal inter alia contending that:
   1. the WBERC has incorrectly held that the retail tariff determined for DVC was not determined by the distribution licensees including WBSEDCL and IPCL. This is despite the fact that DVC’s Tariff Petitions for Financial Year (“FY”) 2009-14 and FY 2014-17 expressly include sales to WBSEDCL in radial/consumer mode;
   2. the Impugned Orders disregard the WBERC’s own prior findings in tariff proceedings initiated in respect of WBSEDCL and IPCL. In these proceedings, it had expressly treated DVC’s radial supply as a component of power purchase cost of WBSEDCL and IPCL, thereby recognising it as a legitimate and regulated category; and
   3. WBSEDCL and IPCL ought to be treated at par with High Tension (“HT”) consumers of DVC as they are also being supplied power at 33 (thirty-three) kV.

Issues

1. Whether statutory distribution licensees i.e., WBSEDCL and IPCL, should be classified as a ‘consumer’ under Section 2(15) of the Electricity Act, solely based on the technical mode of power supply by DVC, i.e., radial mode?
2. Whether the retail tariff determined specifically for end consumers be applied to distribution licensees?

Findings and analysis

1. The fundamental distinction between a ‘consumer’ and a ‘distribution licensee’ is that the former obtains supply of electricity for his own use whereas the latter procures electricity for supply to the consumers in its area of supply.
2. It is undisputed that:
   1. DVC, WBSEDCL and IPCL are deemed distribution licensees in terms of the 4^th and 5^th Provisos to Section 14 of the Electricity Act; and
   2. WBSEDCL and IPCL maintain their own distribution networks for undertaking distribution of electricity to their respective consumers, which they obtain from DVC on radial mode.
3. DVC’s contention that WBSEDCL and IPCL ought to be treated at par with HT consumers of DVC as they are also being supplied power at 33 (thirty-three) kV, is erroneous and misleading.
4. The voltage level at which power is being supplied or the mode of power supply (radial mode) cannot override the status of the 2 (two) entities as distribution licensees which has been recognised statutorily.
5. WBSEDCL and IPCL’s submission that drawl of power by them on radial mode from DVC does not change the statutory status of distribution licensee under the Electricity Act is correct. Therefore, they are not liable to pay retail supply tariff applicable strictly to consumers who consume power for their own use.
6. There is no embargo upon DVC supplying power to WBSEDCL and IPCL on radial mode. The radial distribution system is a power distribution network wherein power flows in one direction from the source with no alternate supply path being available, and the same cannot change the status of the distribution licensees from licensee to a consumer.
7. The power purchase agreements between DVC and WBSEDCL/IPCL were executed in the pre-2003 era when DVC exercised monopoly in supply of electricity and billed them at retail tariff.
8. This arrangement continued even after passing of the Electricity Act i.e., till 2015 when tariff orders dated March 4, 2015 and May 25, 2015 were passed by the WBERC. Therefore, DVC cannot take advantage of the arrangement between the parties as the transactions have to now be governed strictly in terms of the Electricity Act.
9. The distribution licensees i.e., WBSEDCL and IPCL cannot be classified as consumers in terms of Section 2(15) of the Electricity Act, solely based on the technical mode of supply of power to them by DVC i.e., radial mode. The ‘retail tariff’ determined specifically for end consumers cannot be applied to them. Accordingly, there is no error or infirmity in the Impugned Order of the WBERC and the same has been affirmed.
10. Consequently, DVC’s appeals have been dismissed.

Conclusion

1. The Hon’ble Tribunal has:
   1. clarified the distinction between a ‘consumer’ and a ‘distribution licensee’ in terms of the Electricity Act;
   2. affirmed WBSEDCL and IPCL’s status of being distribution licensees and not consumers; and
   3. affirmed that the mode of supply of power (i.e., radial mode) by DVC to WBSEDCL and IPCL does not change the status of the distribution licensees in terms of the Electricity Act.
2. Consequentially, it has been held that DVC cannot take advantage of the arrangement between the parties that had commenced prior to the Electricity Act coming into force. As WBSEDCL and IPCL are not consumers in West Bengal, but are distribution licensees in terms of the Electricity Act, they cannot be held liable to pay the retail tariff which has been determined by the WBERC for DVC’s consumers.

Footnote

1. Decided on April 27, 2026. 

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