Case Note & Summary
The matter arose from a challenge by the Orissa State Electricity Board to a judgment of the Orissa High Court, which had declared the proviso to Regulation 46 of the Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981 as unreasonable, arbitrary and illegal. The High Court had directed the Board to revise electricity bills issued to the respondent writ petitioner, M/s. IPI Steel Limited, on the basis of proportionate reduction taking into account actual consumption of energy. The respondent had a mini steel plant in Orissa and had entered into an agreement with the Board on August 16, 1984, for supply of power up to a maximum demand of 7778 KVA/7000 KW. The agreement incorporated the Board's regulations and provided for demand charges at Rs.35.00 per KVA of maximum demand plus energy charges, with monthly minimum charges calculated at 80% of contract demand at an average power factor of 0.9 and average load factor of 15%. During the period January 1989 to August 1990, an order under Section 22-B of the Indian Electricity Act, 1910 read with Section 78A of the Electricity (Supply) Act, 1948 was in force, directing the Board to reduce supply of energy so as to allow consumers to avail only the extent specified in the annexure. For the respondent, the allowed drawal was fixed at 16.863 million units for the water year 1989-90, which effectively reduced supply by fifty per cent. The Board explained that the consumer had options to utilize the reduced allocation: either draw maximum demand for six months, or reduce maximum demand to half for twelve months, or distribute the permitted maximum demand over nine months, subject to the overall ceiling. The Board contended that minimum charges were still payable because the Board must generate and keep energy ready to the extent of contract demand, and electricity once generated cannot be stored. The respondent had complained that the Board was not in a position to supply the full quantity stipulated in the agreement, but that plea was not considered for the relevant period. The Supreme Court examined the definitions of contract demand and maximum demand under the regulations and the Electricity (Supply) Act, 1948, and elaborated on the two-part tariff system comprising demand charges and consumption charges. It explained that for bulk consumers, a trivector meter records the highest level of load drawn over any thirty-minute period, while another meter records total consumption. The Court highlighted that the method of charging based on maximum demand is not arbitrary because factories normally operate at a broadly constant level, and the Board is justified in keeping capacity ready for the consumer. The provided excerpt of the judgment does not include the final operative order; the text ends during the Court's explanation of the rationale for demand charges. Therefore, the final decision on whether the proviso to Regulation 46 is valid and whether the consumer is liable for minimum charges during the reduced supply period is not explicitly stated in the supplied portion.
Headnote
A) Electricity Law - Contract Demand - Definition and Relevance - Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981, Regulation 3(viii) - Contract demand means the maximum KW or KVA agreed to be supplied by the Board and contracted by the consumer; in the present case, contract demand was 7778 KVA - The High Court had struck down the proviso to Regulation 46 as unreasonable, but the Supreme Court examined whether the consumer remained liable for minimum charges during reduced supply - Held that contract demand is the agreed maximum capacity and remains the basis for computation of minimum charges irrespective of actual drawal (Paras 7-8). B) Electricity Tariff - Monthly Minimum Charges - Justification and Calculation - Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981, Regulation 46; Agreement Clause 7(b) - Minimum charges are calculated at 80% of contract demand at an average power factor of 0.9 and average load factor of 15% - The Board argued that minimum charges are necessary because electricity generated cannot be stored and the Board must keep capacity ready for the consumer; even if the consumer does not draw energy, the Board incurs costs - The Court explained the rationale for demand charges, emphasizing that electricity cannot be stored and the Board expects the factory to operate normally (Paras 8, 11). C) Electricity Law - Maximum Demand - Definition and Measurement - Electricity (Supply) Act, 1948, Section 2(8); Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981, Regulation 3(xx) - Maximum demand means twice the largest number of kilowatt-hours or kilovolt-ampere-hours supplied and taken during any consecutive thirty minutes - The Court described the functioning of the trivector meter which records the highest load level over a 30-minute period and does not revert until manually reset - Held that this method is not arbitrary because factories normally operate at a broadly constant level, and the Board is entitled to plan capacity accordingly (Paras 9-11). D) Constitutional/Administrative Law - Reasonableness of Proviso to Regulation 46 - Supply Reduction Under Section 22B - Indian Electricity Act, 1910, Section 22-B; Electricity (Supply) Act, 1948, Section 78A - The High Court declared the proviso unreasonable and directed revision of bills based on actual consumption; the Board appealed - The Court examined the Government of Orissa order dated February 14, 1990 which directed 50% reduction in supply, and the tabular statement showing options available to the consumer for utilization of reduced allocation - The excerpt provided does not contain the final operative conclusion, but the Court was evaluating whether minimum charges remain payable during such reduction (Paras 2-6).
Issue of Consideration
Whether the proviso to Regulation 46 of the Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981, as substituted by Notification dated June 25, 1987, is unreasonable, arbitrary and illegal; and whether a consumer is liable to pay monthly minimum charges based on contract demand when supply is reduced under Section 22-B of the Indian Electricity Act, 1910 read with Section 78A of the Electricity (Supply) Act, 1948.
Final Decision
Not mentioned in provided excerpt; the judgment text ends mid-analysis while explaining the rationale for demand charges. The final operative order is not included in the supplied portion.
Law Points
- Monthly minimum charges are based on contract demand and payable irrespective of actual consumption
- electricity cannot be stored
- maximum demand recorded by trivector meter over 30-minute period
- two-part tariff comprises demand charges and consumption charges
- Section 22B order reducing supply does not alter contract demand
- contract demand defined as maximum KVA agreed
