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Consumption Of Electricity In Excess Of Connected/Contracted Load Constitutes “Unauthorized Use Of Electricity”.

Facts –

  1. The appellant Board is a corporation incorporated under the Companies Act, 1956 and is under the control of the Government of Kerala. It generates, transmits, and distributes electricity throughout the state of Kerala. All of the respondents in the current litigation are commercial/industrial consumers with LT (Law Tension) connections. At the time of the inspection conducted by the officials of the Appellant Board, it was determined that all consumers were using more electricity than the connected/contractual load. The issue is whether respondents (consumers) can be assessed at a rate equal to twice the applicable tariff, as required by Section 126(6) of the Act of 2003.
  2. The consumers petitioned the High Court of Kerala for an authoritative judgement on Section 126(6) of the Act 2003’s penalty. The Division Bench of the High Court took up the petitions for hearing on the basis of an order of reference made by a learned Single Judge of the High Court dated 17.08.2015 observing that an authoritative pronouncement on the quantification of penalty under Section 126(6) of the Act 2003 was necessary as daily many petitions were filed in the High Court challenging orders imposing penalty in criminal cases. The learned Single Judge of the High Court noted in an order of reference that cases falling under explanations (b)(i), (iii), and (v) to Section 126 of the Act 2003 may require a different yardstick because energy charges are not metered.
  3. As evident from paragraph 31(vi) above, the High Court was of the opinion that “unauthorised additional load” in the same premises and under the same tariff shall not be counted as “unauthorised use of electricity” except in the case of consumers billed based on the connected load. The High Court reached this decision in light of Regulation 153(15) of the Kerala Electricity Supply Code, 2014.
  4. Dissatisfied with the High Court’s judgment and order, the appellant board preferred consumer writ petitions for review. The reviews were also denied. Dissatisfied with the High Court’s main judgment and review orders, the appellant Board filed these appeals.

Arguments by Appellant –

  1. Senior Counsel for the appellant Board, R. Basant, argued vehemently that the High Court erred by relying on Regulation 153(15) of the Code 2014. He said the State Regulations were enacted under Sections 50 and 181 of the Act 2003. Mr. Basant’s principal argument is that, in drafting Regulation 153(15), the Kerala State Electricity Regulatory Commission (the “Commission”) may have infringed upon Section 126 of the 2003 Act, which is neither covered by Section 50 nor Section 181. In other words, the argument of the learned senior counsel is that if Section 50 and Section 181, respectively, of the Act are read closely, the two sections do not provide any authority for such clarifications/explanations.
  2. The learned Senior Counsel drew the Court’s attention to Regulation 153(15), which states that an unauthorised additional load in the same premises and under the same tariff shall not be considered “unauthorised use of electricity” except for consumers billed based on connected load. Senior Counsel argued that the regulation-making power cannot be used to create substantive rights not contemplated by the Act 2003.
  3. The learned Senior Counsel drew the Court’s attention to a decision in Executive Engineer, Southern Electricity Supply Company of Orissa Limited (Southco) and Others v. Sri Seetaram Rice Mill (2012) 2 SCC 108, in which the Court stated that cases of excess load consumption other than the connected load fall under Explanation (b)(iv) to Section 126 Act 2003.
  4. The learned Senior Counsel argued that Section 126 of the Act 2003 is a complete code because of Seetaram Rice Mill (supra). Section 126 of the Act 2003 prohibits the overconsumption of sanctioned/connected load. Consuming more than the sanctioned/connected load harms the entire system and the public. Senior Counsel argued that the High Court’s finding in para 31(vi) of the impugned judgment is erroneous and could cause the grid to collapse. He would argue that the appellant Board needs to plan so it can supply enough electricity to its customers. The Board knows how much electricity to supply to each consumer based on the connected/contracted load.
  5. Senior counsel argued that overdrawing excess electricity from the grid would result in a penalty to the Board when purchasing electricity from the Central grid. The connected load is based on the consumer’s connected devices.  Therefore, if the consumer agrees for a connected load of 10 KW and then connects many more devices resulting in the connected load becoming 20 KW, the same would amount to “unauthorised use of electricity” under Section 126(6) of the Act 2003 in accordance with this Court’s dictum in Seetaram Rice Mill (supra). According to Mr. Basant, the High Court’s finding that a use is unauthorised only if it necessitates system upgrading is perverse because it will end up penalizing only the last consumer responsible for disrupting the distribution system and not the collective lot of unauthorised users. Senior Counsel argued that the collapse of the system would be due to many consumers drawing electricity in excess of the connected load/contracted load, and that penalizing only the last consumer/customer for the collapse would be unworkable and would not deter consumers from drawing excess electricity. In such circumstances, Mr. Basant, the learned Senior Counsel, asks that his appeals be allowed and the impugned High Court judgment and order be set aside.

Arguments by respondent –

  1. The learned counsel for the respondent (consumers) vehemently argued that no error, let alone a legal error, could be said to have been committed by the High Court in holding that the overdrawal of electricity in the same premises and for the same purpose would not amount to unauthorised use of electricity under Section 126 of the Act 2003.
  2. Regulation 153 of the 2014 Code deals with unauthorised additional load estimation and regularization. The regulation defines the unauthorised additional load threshold. The licensee may regularize additional loads in Regulation 153(a) and (b) suo motu or on consumer request (4). Regulation 153(15) states that unauthorised additional load in the same premises and under the same tariff is not unauthorised electricity use, except for consumers billed based on connected load. Regulation 153(15) of the Code 2014 was amended by the Kerala Electricity Supply (Amendment) Code 2016, which took effect on 04.02.2016, by adding the words “except in the case of consumers billed on the basis of connected load.” Such an amendment was made when it was found that applying Regulation 153(15) to consumers who are charged on connected load basis would result in licensees incurring financial loss for the additional connected load to which they are entitled for connected load-based charges. The appellant Board wants to strike down Regulation as ultra vires, rendering this amendment nugatory.
  3. To understand the letter and spirit of the impugned judgment, note that at paragraph 26 the High Court noted that for domestic consumers, fixed charges are imposed at a specified rate regardless of connected load or actual energy consumption. Even if there is excess connected load in a domestic consumer’s premises, electricity charges do not change, so additional connected load would not result in financial loss to the licensee. Consumers would pay for actual energy used. Fixed charges are constant. The Code 2014 Regulations seek to contextualize the Act 2003 to local conditions, and a conjoint (purposeful) reading of the Act and Code is essential. Any other interpretation (including ultra vires) renders Code 2014 empty. The High Court’s reasoning does not replace Section 126 or Section 135, but only supplements them by reading the relevant Regulations of the Code 2014.
  4. Regulation 2(24) of the Code 2014 defines “connected load” in KW or KVA as the aggregate rated capacities of all energy-consuming devices or apparatus that can be used simultaneously in the consumer’s premises and are connected to the distribution licensee’s service line. Regulation 2(78) defines ‘unauthorised connected load’ as the connected load in excess of the contract connected load, and Regulation 2(79) defines ‘unauthorised use of electricity’ as Section 126 of the 2003 Act. Regulation 2(78) shows connected loads that exceed [Regulation 2 (24)]. Regulation 2(78) is illegal electricity use. Paragraph 5.18 of the impugned judgment analyzes this distinction. The High Court’s intra vires ruling was well within its authority. This Court has stressed that only the Legislature and its delegate can make decisions. The Court cannot intervene unless the challenged provision is I illegal, (ii) beyond the scope of regulation-making power, or (iii) inconsistent with the parent statute. The High Court correctly interpreted and applied the law in light of precedent.
  5. The appellant Board’s position that regularization is ultra vires contradicts its own Full Board decision. A Full Board of the KSEB decided on 27.07.2002 to modify Regulation 42(d) of the 1990 Conditions of Supply for unauthorised additional loads. In these circumstances, the respondent’s (consumers’) counsel asked that the appellant Board’s appeals be dismissed for lack of merit.

Arguments by  Kerala state electricity regulatory commission (respondent no. 3) –

  1. The Commission, respondent No. 3 in SLP (C) No. 7886-7887 of 2018, proposes two types of billing: (a) Connected load-based billing – If additional/excess load is connected, it’s considered unauthorised use. Regulation 153(15), as amended 11.01.2016, states the same. (b) Contract demand-based billing – Connecting additional load will not be considered “unauthorised use” under Section 126 of the Act.
  2. Contract demand is the maximum demand the licensee agrees to supply the consumer. This indicates the maximum load a consumer can draw at any given time. At any given time, a consumer’s maximum demand may exceed the contract demand. Regulation 153(15) states that excess demand is not unauthorised electricity use. Regulation 101 of the 2014 Code describes what happens when maximum demand exceeds contract demand. If maximum demand exceeds contract demand in 3 billing periods during the previous fiscal year, the distribution licensee must notify the consumer. The current Tariff Order also states that when maximum demand exceeds contract demand, Fixed/Demand Charges will be collected at 150% of the applicable demand charges. Energy charges are based on actual usage.
  3. According to Regulation 153(12) of the Code 2014, if the infrastructure does not allow a consumer’s excess load to be regularized or the contract demand to be increased, the consumer must disconnect the load or limit their demand to the contract limit, or the electricity supply can be cut off. The Code 2014 and Tariff Order adequately address revenue loss and infrastructure constraints in cases of excess load/demand. Excess load/demand falls under Section 126 of the Act 2003 if it causes a change in purpose or tariff. No provision of the Code 2014 is challenged in this case.
  4. Seetaram Rice Mill was decided in the context of the Orissa Electricity Regulatory Commission Distribution (Conditions of Supply) Regulations, 2004 and the Standard Agreement Form for Supply of Electrical Energy by the Grid Corporation of Orissa Ltd. The judgement’s observations can’t be applied uniformly here.
  5. In Kerala, the Code 2014 specifically allows for excess load/demand within the same premises and under the same tariff, subject to Regulation 101 and Regulation 153, and penal demand charges at 1.5 times the regular rates for excess demand under the relevant Tariff Order. Kerala should not be forced to follow Orissa’s supply regulations. State Commissions consider each state’s generation, supply, and distribution capacities before drafting Supply Code regulations. In such circumstances, the Commission’s counsel asked that the Board’s appeals be dismissed for lack of merit.

Principle/ Ratio decidendi –

Principle/ Ratio decidendi –

1. In its appeal, KSEB cited a three-judge bench decision in Executive Engineer, Southern Electricity Supply Company of Orissa Limited (Southco) and Others v. Sri Seetaram Rice Mill (2012) 2 SCC 108, which held that excess load consumption other than the connected load falls under Explanation (b)(iv) to Section 126. The bench summarised the case’s principles –

  1. The provisions of Section 126 and Section 127 of the Act of 2003 constitute a Code. It specifies the method for calculating the amount a consumer would be required to pay for excessive electricity consumption and the procedure for conducting assessment. Section 126 of the Act of 2003 was enacted with the intent of imposing an implied restriction on such unauthorised electricity consumption.
  2. Section 126 of the Act 2003 provides safeguards against unscrupulous power abuse. Act 2003 Section 126 is self-explanatory. They cover 46 situations other than Section 135 of the Act 2003. The Court should adopt an interpretation that helps achieve legislative intent.
  3. Section 126 of the Act 2003 aims to stop electricity misuse and revenue loss. Overdrawing electricity harms the public by undermining the supply system’s efficiency, efficacy, and cause voltage fluctuations.
  4. Section 126 of the Act 2003 defines “unauthorised electricity use.” It’s a wider connotation and principle construed purposively, not contextually, with the Act 2003’s object and purpose in mind.

2. Court also reviewed the Punjab State Electricity Regulatory Commission (Forum and Ombudsman) Regulations, 2005 in Punjab State Electricity Board v. Vishwa Caliber Builders Private Limited (2010) 4 SCC 539. In the said case, the challenge was to the order passed by a Division Bench of the Punjab and Haryana High Court dismissing the writ petition filed by the appellant against the order of Ombudsman, Electricity, Punjab who reversed the decision of the Disputes Settlement Authority and directed refund of the amount recovered from the respondent therein towards Advance Consumption Deposit (ACD) service connection charges and load surcharge. In the above case, the 481.637 KW excess load was considered unauthorised electrical energy use

Judgment –

The High Court’s order in the review applications, specifically para 10(i), 10(ii), and 10(iii) reply, is set aside. All appeals are granted to the aforementioned extent. Paragraph 31(vi) of the impugned judgment, the High Court’s declaration, is set aside. Regulation 153(15) of the Code 2014 is declared invalid due to Section 126 of the Act 2003.

Written by Divya Anand

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