Electricity Tariff: Kerala High Court Strikes Down Regulation Imposing KSEB Pension Liability On Consumers

The Kerala High Court has held that electricity tariff charged from consumers will not include the amount allocated to the Master Trust, pension fund of Kerala State Electricity Board employees.Single Bench of Justice Murali Purushothaman struck down Regulation 34 (iv) of the the Kerala State Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff) Regulations, 2021 (the Final Tariff Regulations). With this verdict, the electricity tariff shall be reduced by 17 paise per unit for the consumers. The KSEB Master Trust was formed for providing benefits, including staff pension to KSEB employees. It is funded through bonds.The Draft Tariff Regulation issued by the State Electricity Regulatory Commission stated that only interest payable on these bonds shall be approved for computation of Aggregate Revenue Requirement (ARR). However, the Final Tariff Regulations also included the principal repayment of bonds for computation of ARR. According to the Commission, the said provision was incorporated in the Final Tariff Regulations in view of the KSEB's huge unfunded liability to pay annual pension contribution. The High Court has struck down the provision as illegal to the extent that it differed from the draft Regulations, and did not fulfil the requirement of previous publication as contemplated under Section 181(3) of the Electricity Act, 2003 and the Electricity (Procedure for Previous Publication) Rules, 2005."When the draft regulations is published providing that only the payment of interest on the bonds issued to the Master Trust will be approved for computation of ARR and the amount of repayment of such bonds shall not be reckoned for computation of ARR, and when changes are made to the draft regulations providing that repayment of such bonds will be reckoned for computation of ARR, which proposal was not conceivable in the draft regulation, the Regulatory Commission ought to have followed the requirement of previous publication as contemplated under Section 181 (3) of the Electricity Act, 2003 and the Electricity (Procedure for Previous Publication) Rules, 2005. When changes are made to the draft regulations which are not incidental or ancillary to the draft regulations, but foreign to the draft, such changes should be notified/published for the information of persons likely to be affected and inviting their objections and suggestions thereto," Court said. The plea was filed by the Kerala High Tension and Extra High Tension Industrial Electricity Consumers' Association and two others challenging the hike in power tariff. The petitioners were aggrieved that the final Tariff Regulations were issued in total breach of the provisions contained in Section 181(3) of the Act which provides that all regulations made by the Regulatory Commission under the Act shall be subject to previous publication.The Court noted that apart from Section 181(3) of the Act, the Electricity (Procedure for Previous Publication) Rules 2005 also provides for publication of a draft of the regulation for the information of persons likely to be affected thereby. "...when the Act provides that all regulations made by the State Commission under the Act shall be subject to the condition of previous publication and the Rules provide for the procedure for previous publication and the procedure so prescribed contemplates publication of a draft of the regulation for the information of persons likely to be affected, publication of notice specifying the date on or after which the draft regulations will be taken into consideration, consideration of objections and suggestions, the regulation would be bad in law if the aforesaid procedures are not followed before the publication of final regulations," the Court observed. It thus held final tariff regulations that was notified without calling for any objection or suggestion of persons likely to be affected as impermissible and defeating the object of previous publication contemplated under the Electricity Act and Rules, and thereby declared Regulation 34 (iv) of the final regulations to the extent it does not conform to the draft regulation as illegal. "It will be open to the Regulatory Commission to specify the terms and conditions for the determination of tariff as regards repayment of principal amount on Master Trust Bonds after complying with the requirement of Section 181 (3) of the Electricity Act, 2003 and the Electricity (Procedure for Previous Publication) Rules, 2005 and in accordance with law," the Court added.On the Question of MaintainabilityIt is significant to note that pursuant to the issuance of Tariff Regulations 2021, the KSEB had filed a petition for tariff revision for the control period 2022-23 to 2026-27 before the Commission, which was allowed, increasing the retail supply tariff for 66 KV and 110 KV consumers. A review petition preferred by the petitioners against this was dismissed, leading to filing of an appeal before the Appellate Tribunal for...

Electricity Tariff: Kerala High Court Strikes Down Regulation Imposing KSEB Pension Liability On Consumers

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