The Telegraph
Since 1st March, 1999
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Court orders power rate cut
- Blow to HC as regulator is asked to review tariff

New Delhi, Oct. 3: Power bills in Calcutta will go down. The Supreme Court has ordered the West Bengal State Electricity Regulatory Commission (SERC) to reset power rates for CESC Ltd.

In June, CESC started charging its consumers a higher rate after it won a battle with consumer lobbies and the commission. The commission had fixed a rate of Rs 3.39 per unit and the high court raised it to Rs 3.97 after CESC challenged the directive. The Supreme Court, which handed down its ruling today, asked the commission to fix the rate at a level between these two.

The three-judge bench also said CESC should take steps to make its power generating plants “economically viable or close (them) down, if necessary”.

CESC’s official spokesperson refused to comment. “We cannot comment unless we get the copy of the Supreme Court order.”

The 101-page ruling said the commission had the right to insist on better efficiencies at CESC power plants. The complicated tariff formula factors in several aspects that include the level of transmission and distribution losses, and wage costs.

CESC had said that its transmission and distribution (T&D) loss was 22 per cent. The commission had fixed it at 16.8 per cent for 2000-01 and insisted that it be brought down to 14 per cent by 2004. Calcutta High Court had raised it to 22 per cent.

The T&D loss is the biggest factor in the tariff formula, accounting for Rs 132 crore of the Rs 300 crore the power utility was raising from its consumers after the tariff hike in May.

The judges also said CESC should consider a voluntary retirement scheme as a one-time good investment to “reduce the cost under the head employees cost”.

It directed the commission to “bear it in mind” while considering tariff revision for 2002-03. The commission had not granted the company’s request to introduce VRS.

The court shot down the practice of making overtime payments to CESC staff. “We agree with the findings of the consultants as also the commission that the amounts spent towards wages are highly disproportionate to the energy generated as also the amounts paid as overtime to the workmen is wholly unrealistic,” the ruling said.

The judges said: “We further direct the company that should there be any need for entering into a fresh settlement with the workmen, then any agreement which entitles the workmen to get overtime payment even when overtime work is unnecessary should be done away with.”

The court said that “if the state government chooses to subsidise the supply of energy to any particular class of consumers, the same can be done, provided, of course, the burden of loss suffered by the company is borne by the state government and not imposed on any other class of consumers”.

The state itself should subsidise the supply of power to a particular sector, if it chose to do so.

They said the Commission was not bound by the opinion of the auditors of the company. “There may be any number of instances where an account may be genuine and may not be questioned, yet the same may not reflect good performance of the company or may not be in the interest of the consumers. Therefore, there is an obligation on the commission to examine the accounts of the company,” the judges said.

“However, we hasten to add that the commission is bound to give due weightage to such accounts and should not differ from the same unless for good reasons permissible in the Electricity Regulation Act, 1998,” the judges said.

“The Supreme Court’s order will result in a loss of Rs 80 crore for CESC on account of T&D losses,” said members of the Bharat Chamber of Commerce, which had challenged the high court’s order before the Supreme Court.

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