Captive Consumers Form A Separate Class, Not Liable To Pay Additional Surcharge U/s. 42(4) Of The Electricity Act – Supreme Court

The Court also held, "The captive consumers, who are a separate class by themselves are subjected to levy of additional surcharge under Section 42(4), in that case, it will be discriminatory and it can be said that unequals are treated equally."

Appeals were preferred by the Maharashtra Electricity Distribution Co. Ltd. (Distribution Licensee) – Appellant before the Apex Court assailing the judgment of the Appellate Tribunal for Electricity, Delhi which had allowed the appeal of the Captive Consumers - Respondents and held that they were not liable to pay an additional surcharge under Section 42(2) of the Act.

The Appellate Tribunal had set aside the order of the Maharashtra Electricity Regulatory Commission (State Commission) which had held that the Respondents-Captive Consumers were liable to pay an additional surcharge.

In this case, the State Commission had held that the additional surcharge shall be applicable to all consumers who had availed open access to receive electricity supply from sources other than the distribution licensee to which they were connected.

The issue which was dealt with by the Court was whether the captive consumers/captive users were liable to pay the additional surcharge leviable under Section 42(4) of the Electricity Act, 2003.

The Supreme Court made a reference to Section 9 related to "Captive Generation" and Section 42 related to "Duties of distribution licensees and open access," and in this context observed –

"The submission on behalf of the appellant that the captive generation under Section 9 is subject to the regulations as per first proviso to sub-section (1) of Section 9 and that even open access for the purpose of carrying electricity from his captive generating plant to the destination of his use shall be subject to availability of the adequate transmission facility determined by the Central Transmission Utility or the State Transmission Utility, as the case may be, sub-section (4) of Section 42 shall be applicable and such captive users are liable to pay the additional surcharge leviable under sub-section (4) of section 42, has no substance and has to be rejected outright."

• Logic behind levy of additional surcharge

The Court further opined, "There is a logic behind the levy of additional surcharge on the charges of wheeling in such a situation and/or eventuality, because the distribution licensee has already incurred the expenditure, entered into purchase agreements and has invested the money for supply of electricity to the consumers or class of consumers of the area of his supply for which the distribution license is issued."

"The levy of additional surcharge under sub-section (4) of Section 42 can be said to be justified and can be imposed and also can be said to be compensatory in nature," the Court held.

• Whether captive consumers liable to pay additional surcharge

Additionally, the Court observed, "So far as captive consumers/captive users are concerned, no such permission of the State Commission is required and by operation of law namely Section 9 captive generation and distribution to captive users is permitted. Therefore, so far as the captive consumers / captive users are concerned, they are not liable to pay the additional surcharge under Section 42(4) of the Act, 2003.

In this context, the Court further opined, "Captive consumers/captive users, they have also to incur the expenditure and/or invest the money for constructing, maintaining or operating a captive generating plant and dedicated transmission lines. Therefore, as such the Appellate Tribunal has rightly held that so far as the captive consumers/captive users are concerned, the additional surcharge under sub-section (4) of Section 42 of the Act, 2003 shall not be leviable."

The Court noted that such captive users are not subjected to pay additional surcharge leviable under Section 42(4) of the Act, 2003.

In the light of these observations, the Court dismissed the appeals with a direction that since the Respondent had already paid the additional surcharge to the Appellant subject to the interim order passed by the Apex Court, the amount had to be refunded. However, the Court further held that there would be a huge liability on the Appellant if they had to refund the amount of additional surcharge. Hence, it was directed that the amount be adjusted in the future wheeling charges bills.

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