A bench led by Justice MR Shah while upholding the Appellate Tribunal for Electricity’s March 2019 decision said that once it is held that the captive consumers/captive users are not liable to pay the additional surcharge leviable under Section 42(4) of the Electricity Act 2003, MERC has to refund the additional surcharge collected from the captive consumers like JSW.

In a major relief to captive consumers of electricity like the JSW group of companies, the Supreme Court on Friday held that a group of users of captive power plants are not liable to pay an additional surcharge of Rs 1.25 per unit, as directed by the Maharashtra Electricity Regulatory Commission (MERC).

A bench led by Justice MR Shah while upholding the Appellate Tribunal for Electricity’s March 2019 decision said that once it is held that the captive consumers/captive users are not liable to pay the additional surcharge leviable under Section 42(4) of the Electricity Act 2003, MERC has to refund the additional surcharge collected from the captive consumers like JSW.

However, it said that since “there shall be a huge liability on the Commission if it has to now refund the amount of additional surcharge recovered at a stretch, we direct that the additional surcharge already recovered from the captive consumers/captive users shall be adjusted in the future wheeling charges bills.”

The levy of an additional surcharge under sub-section (4) of Section 42 can be justified as compensatory in nature only where the state commission permits a consumer or class of consumers to receive a supply of electricity from a person other than the distribution licensee supplying of its area subject to payment of additional surcharge on the charges of wheeling as may be specified by the state commission to meet the fixed cost of such distribution licensee arising out of his obligation to supply. Ordinarily, a consumer or class of consumers receives electricity supply from the distribution licensee in its area of supply.

So far as captive consumers/captive users are concerned, no such permission of the state commission is required, thus no additional surcharge is payable by them, the SC said, adding that the captive consumers/captive users being a distinct and separate class by themselves have also to incur the expenditure and/or invest the money for constructing, maintaining or operating a captive generating plant and dedicated transmission lines.

“… in that case, it will be discriminatory and it can be said that unequals are treated equally,” the judgment stated.
The Commission in September 2018 had held that the additional surcharge leviable under Section 42(4) of the Electricity Act, 2003 does not apply to captive users to the extent of their self-consumption from such plants, but applies to all consumers who have availed open access to receive supply from sources other than the distribution licensee to which they are connected.

JSW Steel, JSW Energy, JSW Cement and other group companies had challenged MERC’s decision in the Aptel, saying that the Commission had ignored the concept of non-discriminatory open access in terms of the Act as well as National Electricity Policy which eliminates competition and provides a supply of power directly to the consumers through open access.

The tribunal also held that there cannot be any distinction between an individual captive consumer and group captive consumers or original captive consumers and converted captive consumers.