B. S. A. SWAMY, J. ( 1 ) THE A. P. Electricity Regulatory commission by its order dated 8th february, 2002 in O. P. No. 1 of 1999 directed the H. T. Consumers with Captive Power plants (CPP) running in parallel with A. P. TRANSCO s Grid to pay grid support charges at 50% of the prevailing Demand charges for H. T. Consumers on the difference between the total capacity of CPP in KVA and the Contracted Maximum demand (CMD) in KVA with the licensee and all other sources of supply. In case of cpps exporting firm power to A. P. TRANSCO, the capacity, which is dedicated to such export, will also be additionally subtracted from the CPP capacity. Questioning the said order of the commission, the H. T. Consumers with cpps running in parallel with the a. P. TRANSCO Grid (hereinafter referred as cpps ), who are the appellants herein, filed these appeals before this Court under section 39 of the Electricity Reform Act, 1998 (hereinafter referred as reforms Act ). Sri K. Gopal Choudary addressing the arguments in these batch of appeals raised various grounds. ( 2 ) BEFORE considering the various issue that arise for consideration, we should keep in mind that in the beginning of 1990s the government of India decided to give up the monopoly enjoyed by governmental organisations with regard to generation distribution and supply of electricity and decided to invite private investments in the electricity sector to meet the ever-increasing demand for power in the country and to bridge the gap between rapidly growing demand for electricity and supply in the context of paucity of resources at their command. As considerable time is likely to take place in establishing the power projects and the shortage of power is so acute, the secretary, Ministry of Power, Government of India addressed D. O. No. 6/1/tariff/ captive Power/95, dated 09-10-1995 to all the Chief Secretaries to encourage cogeneration plants in the country (ie) industries to establish their own CPPs by pooling up their resources, by offering some incentives. ( 3 ) FOLLOWING the directions given by the ministry of Power, the Government issued g. O. Ms. No. 150, Energy (Power-I) department, dated 15-11-1995 permitting the industrial consumers to install captive generation sets subject to the conditions specified therein. ( 3 ) FOLLOWING the directions given by the ministry of Power, the Government issued g. O. Ms. No. 150, Energy (Power-I) department, dated 15-11-1995 permitting the industrial consumers to install captive generation sets subject to the conditions specified therein. This G. O. seemed to have been issued approving the action of the then state Electricity Board under Section 44 of the Indian Electricity (Supply) Act, 1948. Subsequently the Ministry of Power in its resolution No. A-40/95-IPC-I, dated 6th november, 1996 requested all the State governments to accord high priority for setting up of CPPs by the industries in their states and also encourage absorption of the available surplus power to be generated in a captive power plant in the State grid at a remunerative tariff, with the combined objectives of promoting better utilisation of previous energy resources in the industrial activities and creation of additional power generation capacity in the system itself. ( 4 ) AS per para 2 of the resolution, a cogeneration facility was defined as one, which simultaneously produces two or more forms of useful energy such as electric power and steam, electric power and shaft (mechanical) power etc. Cogeneration facilities due to their ability to utilise the available energy in more than one form, use significantly less fuel input to produce electricity, steam, shaft power or other forms of energy than would be needed to produce them separately. Thus by achieving higher efficiency, cogeneration facilities can make a significant contribution to energy conservation. ( 5 ) AS per para 3 of the resolution, the objectives underlying the policy is to achieve dual higher efficiency in fuel use in the industry as well as the availability of surplus electricity to the State grid, by combining power and heat generation for industrial use. ( 6 ) UNDER para 4 of the resolution it was proposed that the industry having cogeneration potential would be allowed to develop a power generating facility without necessarily going through the competitive bidding process for projects of any size. ( 7 ) UNDER para 5 of the resolution, two basic cogeneration cycles have been identified as (1) topping cycle - any facility that uses fuel input for power generation and also utilises for useful heat for other industrial activities. ( 7 ) UNDER para 5 of the resolution, two basic cogeneration cycles have been identified as (1) topping cycle - any facility that uses fuel input for power generation and also utilises for useful heat for other industrial activities. In any facility with a supplementary firing facility, it would be required that the useful heat, to be utilised in the industrial activities, is more than the heat to be supplied to the system through the supplementary firing by at least 20% (2) bottoming Cycle - Any facility that uses waste industrial heat for power generation by supplementing heat from any fossil fuel. ( 8 ) PARA 7 deals with fixation of tariff in case the TRANSCO purchases the excess electricity generated from these CPPs. ( 9 ) PURSUANT to these orders, the appellants industries installed captive power plants in the range of 1 to 30 M. W. The Electricity Board then in existence extended number of commercial relaxations including reduction of contracted demand to lessen the burden of the H. T. Consumers under two part tariff system (ie) fixed tariff for the recorded demand and tariff for actual consumption of energy. ( 10 ) SINCE the functioning of the State electricity Boards was worsening year after year, the Central Government after holding deliberations with the Chief Ministers of the respective States decided to restructure the power sector and adopted Common minimum National Action Plan for Power (CMNAPP) mainly to improve the financial health of the State Electricity Boards and as per the recommendations of the administrative Staff College of India decided to establish independent Electricity regulatory Commissions both at the Central and the State Level by bringing in a fresh legislation. ( 11 ) UNDER Clause 10 of the Common minimum Action Plan for Power, the State governments will encourage co-generation/ captive power plants to facilitate evacuation of power from these plants to the grids, states shall formulate clear and transparent policies for purchase of power and wheeling charges which provide fair returns to the cogeneration/captive power plant owners. Captive power plants could also sell power to a group of industries as well as other categories of consumers in the said industrial zone or area. ( 12 ) NOW it is on record that while the parliament passed Electricity Regulatory commissions Act, 1998 and the State legislature passed Electricity Reforms Act simultaneously. Captive power plants could also sell power to a group of industries as well as other categories of consumers in the said industrial zone or area. ( 12 ) NOW it is on record that while the parliament passed Electricity Regulatory commissions Act, 1998 and the State legislature passed Electricity Reforms Act simultaneously. For brevity they are referred as central Act and state Act respectively. ( 13 ) THE Central Act contemplated establishment of Central Electricity regulatory Commission at the Central Level and the State Electricity Regulatory commission at the State Level duly specifying the functions of each of the commission under the Act. ( 14 ) UNDER Section 17 of the Central Act, the State Government may by notification in the Official Gazette establish for the purpose of that Act, a Commission for the State to be known as the Electricity Regulatory commission of that State. The powers of such Commission were specified under section 22 of that Act. Under the State Act an autonomous statutory Electricity Regulatory commission was established to balance the interest of all the stakeholders in the electricity industry and to promote healthy growth of the power sector in the State. The well-settled principle is that these commissions are expected to discharge their functions as specified in the concerned Act. Under the State Act, the Commission is entrusted with the function of regulating the electricity Industry and to improve the financial health of the A. P. TRANSCO by rationalising the tariff structure to be collected from various types of consumers. Accordingly, the State Commission was established on 01-04-1999. ( 15 ) FROM various orders passed by the commission after its establishment, it is seen that the Commission was under an impression that since it is a body constituted to regulate the electricity industry, its role is not only that of adjudicatory one but also pro-active one. It has gone to the extent of thinking that it is having legislative functions under the Act. In R. C. I. Power limited s case (Writ Petition No. 4770 of 2002 and the batch of appeals that were disposed of by this Court on 18th April, 2003) we held that the role of the commission under the provisions of the reforms Act is that of a Court under common Law and its powers are only adjudicatory in nature. ( 16 ) BE that as it may, the letter of the licensee (ie) A. P. TRANSCO dt. 23-09-1999 gives us an impression that the Commission directed the licensee to claim grid support charges from the Captive Power Plants running in parallel with A. P. TRANSCO grid. Pursuant to that letter, the licensee has written a letter to the Secretary to the commission that it proposes to levy grid support charges at the level of existing demand charges for H. T. Consumers on the difference of KVA rating of the Captive generation and Contracted Maximum demand (CMD) in KVA with the A. P. TRANSCO by contending that the demand charges at Rs. 165/kva/month do not really cover the full fixed charges per KVA of demand. It is useful to extract this letter. "transmission CORPORATION OF ANDHRA PRADESH LIMITED vidyut SOUDHA : HYDERABAD - 82 from: To: the Chief Engineer (Commercial), The Secretary, a. P. TRANSCO, Vidyut Soudha, A. P. Electricity Regulatory Commission, hyderabad-82 8-3-282/b/1, Road No. 1, banjara Hills, Hyderabad. LR. No. CE (Comml)/a2/captive Policy/d. No. 1160/99, Dt. 23-09-1999 sir, sub:- Captive Generation - Policy/procedure for issue of permissions - reg. Ref:- A. P. TRANSCO s Lr. No. CE (Comml)/captive Policy/1109/99, dt. 15-9-99. *** further to the reference cited, I am directed to inform you as follows on the matter of levy of "grid Support Charge for affording parallel operation of captive generating units with transco s Grid. 2. By availing the facility of parallel operation, the consumer is enjoying the following benefits: (a) The fluctuations in the load of consumer are instantaneously shared by the Grid, then reducing the strain on the Captive Generating unit and straining the transco s Grid. (b) The variation in the capacity of Captive Generating unit due to the non-functioning malfunctioning of different auxiliaries etc. , are reflected instantaneously to the Grid causing instantaneous strain on the TRANSCO system. (c) The consumer enjoys the benefit of totally uninterrupted and highly reliable power supply due to the parallel operation and with better voltage regulation. (d) In case of total stoppage of the generating plant for any reason, the Grid supply is automatically used to delay the switch off of the critical board, which would have otherwise been damaged due to failure of supply from generation. 3. The consumer enjoys all the above facilities freely without any compensation. (d) In case of total stoppage of the generating plant for any reason, the Grid supply is automatically used to delay the switch off of the critical board, which would have otherwise been damaged due to failure of supply from generation. 3. The consumer enjoys all the above facilities freely without any compensation. The a. P. TRANSCO feels that the consumer should compensate the TRANSCO for the above facilities enjoyed by him due to parallel operation. 4. The A. P. TRANSCO proposes to levy the "grid Support Charges" at the time of existing demand charge for HT consumers i. e. Rs. 165. 00kva per month. This charge will be levied on the difference of KVA rating of the captive generation and the CMD in KVA with a. P. TRANSCO. Wherever the consumers have contracted for wheeling of power from other sources the capacity allocation during the month in KVA shall also be taken into account on par with CMD with A. P. TRANSCO for arriving at the difference. Faithfully, sd/- chief ENGINEER (COMMERCIAL)," ( 17 ) HAVING considered the objections filed by M/s. Navabharath Ferro Alloys limited and M/s. Confederation of Indian industry and the response of the licensee to the objections, passed final order on 08-02-2002 directing the H. T. Consumers with Captive Power Plants (CPP) running in parallel with A. P. TRANSCO Grid to pay grid support charges at 50% of the prevailing Demand Charges at Rs. 170. 00 per kva per month for H. T. Consumers on the difference between the total capacity of CPP in KVA and the Contracted Maximum demand (CMD) in KVA with the licensee and all other sources of supply. The issues that arise for consideration of this Court would be: 1. Under the State Act Whether The commission is Having Power to Levy Grid supply Charges: ( 18 ) IN R. C. I. Power Limited s case (W. P. No. 4770 of 2002 and batch) having traced the legislative background of the enactments wrhile dealing with the levy of wheeling charges for transmitting the power generated by the Generating Companies to their identified customers we held that the reforms Act - Central Electricity Regulatory commission Act, the Electricity Act, 1910 and Supply Act, 1948 are cognate legislations simultaneously operating in the same field. ( 19 ) UNDER Section 22 (l) (a) of the Central act, the State Commission constituted under that Act is empowered to determine the tariff for electricity, wholesale, bulk, grid or retail, as the case may be, in the manner provided in Section 29 of that Act. Under section 29 the Commissioner should take into consideration the factors which would encourage efficiency, economical use of the resources, good performance, optimum investments and other matters which the state Commission considers appropriate for the purpose of the Act apart from safeguarding the interest of the consumers and at the same time to see that the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy duly giving effect to the national power plans formulated by the central Government. ( 20 ) IN this case also the State Commission constituted under the Central Act is vested with the power to determine the Grid support Charges in the manner provided in section 29 of that Act. Having referred the case law, we held as hereunder:"in the light of the foregoing discussion, we hold that the Central enactment clearly speaks of determination of tariff for using transmission facilities by the State commission to be constituted under central Electricity Regulatory commission Act by providing necessary guidelines for fixation of charges for wheeling the energy generated by the Generating companies through the transmission lines of the licensee. A vague and a general provision in the Reforms Act without providing any guidelines has to give way to the specific provision made in the Central Act. Since there is no conflict at all between the provisions of the Central Act and the state Act, the State Act has to give way to the Central Act. Hence, we hold that the State Commission constituted under the Reforms Act has no power to levy charges for wheeling the energy generated by the Generating companies to their consumers. Accordingly, we answer this issue in favour of the petitioners. " ( 21 ) THE above reasoning applies to the facts of the case also mutatis mutandis. At least in that case under Section 15 (4) of the reforms Act, the Commission may require the licensee to enter into agreements on specified terms with other person for the use of any electric lines, electrical plant or plants and associated equipment operated by the licensee. At least in that case under Section 15 (4) of the reforms Act, the Commission may require the licensee to enter into agreements on specified terms with other person for the use of any electric lines, electrical plant or plants and associated equipment operated by the licensee. In this case even such a provision was also not there. Hence, we hold that the state Commission constituted under the reforms Act has no power to levy Grid support Charges. Accordingly, we answer this issue in favour of the appellants herein. 2. Whether the Commission is empowered to Pass the Impugned Order: ( 22 ) FROM the impugned order and the practice directions issued by the commission, it is seen that the impugned order was purported to have been given in exercise of its powers under Section 21 of the Reforms Act. Section 21 is extracted hereunder: "21. Restrictions on licensees and generating Companies: (1) No licensee or Generating company shall at any time, without the previous consent in writing of the Commission, acquire by purchase or otherwise the licence or the undertaking of, or associate himself with, so far as the business of generating, transmitting distribution or supply of energy is concerned, any other licensee or person generating, transmitting, supplying or intending to generate, transmit or supply electricity: provided that before granting the consent the Commission shall hear such person or authority as the commission shall consider appropriate. (2 ). . . . . . . . . . . . . . . (3) The provisions of Section 44 of the electricity (Supply) Act, 1948 shall apply except that the persons to whom the section applies shall be, required to obtain the sanctions and consents from the Commission, instead of such sanctions and consents to be obtained from the board as provided under that section. (4 ). . . . . . . . . . . . . ( 23 ) FROM the above, it is seen that the licensee as well as the Generating Company shall neither acquire nor purchase business of generating, transmitting, supplying or intending to generate, transmit or supply electricity from anyone without the previous consent of the Commission in writing. ( 24 ) IT is true that the Government while issuing G. O. Ms. ( 24 ) IT is true that the Government while issuing G. O. Ms. No. 150, dated 15-11-1995 permitting the industrial units to install captive generation sets treated them as generating companies and directed that they should obtain the consent of the A. P. State Electricity Board under Section 44 of the Indian Electricity (Supply) Act, 1948 and all the appellants having obtained consent from the then Electricity Board installed captive generation sets in their premises. ( 25 ) FROM the above, it is seen that the consent that is contemplated under Sec. 21 relates to the acquisition of the business generating, transmitting, distribution or supply of energy either from its associates or licensee or any other person involved in the business of generating, transmitting, supplying distribution of energy by a generating Company. Since the appellants before this Court have not acquired any business from any quarter, we are of the opinion that the Commission cannot levy grid Support Charges under this Section. The Commission cannot even take advantage of Section 21 (3) of the Act, since sanction and consent required under Supply act were already obtained by the appellants from the Electricity Board prior to the reforms Act came into force. Perhaps, the commission having received the proposal of the TRANSCO dated 23-9-1999 to acquire jurisdiction issued practice directions dated 08-10-1999 in exercise of the powers conferred on it by Section 21 and Section 54 of the Reforms Act. Clause-1 (a) the existing. captive power units installed by the industrial establishments, as standby units will be renewed as standby units only. ( 26 ) UNDER Clause l (b) the applications for grant of new or additional captive power generation by industrial establishments will be considered upto 10 KVA capacity generally. ( 27 ) UNDER Clause 1 (b) (ii) captive power may be permitted only in case of continuous process industries and frequency sensitive industries by limiting the capacity of captive power to the critical requirement of power for continuous process /frequency sensitivity. Similarly, hospitals and like institutions where uninterrupted supply of power is essential, captive power may be allowed to the extent of essentiality. In all the above cases, captive power generation will be permitted only for standby use. Under Clause l (b) (iii) the licensee will not provide parallel operation with their grid for new CPPs. Similarly, hospitals and like institutions where uninterrupted supply of power is essential, captive power may be allowed to the extent of essentiality. In all the above cases, captive power generation will be permitted only for standby use. Under Clause l (b) (iii) the licensee will not provide parallel operation with their grid for new CPPs. ( 28 ) CLAUSE-2 deals with the filing of application and processing thereof. ( 29 ) CLAUSE-3 deals with special provisions in case of power plants of capacity 5000 kva and above running in synchronism with grid. Under sub-clause (i) in addition to the requirements to be specified by the applicant, he must furnish the status of ownership to establish that the CPP and the industrial unit consuming the generated electricity are under the same ownership with required documentation in support. Sub-clause (ii) the applicant should certify that the generating capacity proposed to be installed is not in excess of his requirement. Sub-clause (iii) detailed Project Report shall be submitted along with the application. Sub-clause (iv) In case of parallel operation, the applicant s power station must comply with the Licensee s Grid Code. All the requirements of Grid Code shall be construed as a part of the conditions of the commission s consent under Section 21 (3) of the APERC Act, 1998 and any violation may entail disconnection of the applicant s installation from the Licensee s system. The generator (s) of the applicant shall be synchronized to the A. P. TRANSCO s Grid after it is/they are, inspected and certified by the authorised engineer of A. P. TRANSCO on payment of prescribed fee. Recurring charges, if any, as prescribed by the Licensee for keeping the Unit (s) in parallel operation are to be paid to the licensee. Under sub-clause (v) the commission having taken note of inadvertent frequency and voltage variations in the licensee s system from the specified standards directed the applicant to make suitable provision in his installation for isolation to ensure that no harm/damage is suffered by him in such an event. Under para 5 it is observed that consent granted under Section 21 (3) of the Reforms Act read with Section 44 of the Indian Electricity (Supply) Act, 1948 does not constitute any exemption from the requirement to have a licence to supply electricity to any consumers/customers. Under para 5 it is observed that consent granted under Section 21 (3) of the Reforms Act read with Section 44 of the Indian Electricity (Supply) Act, 1948 does not constitute any exemption from the requirement to have a licence to supply electricity to any consumers/customers. On this condition we are not expressing any opinion since the issue is pending consideration before the supreme Court. ( 30 ) SUBSEQUENTLY, public notice was given on 05-11-1999 inviting objections from the interested persons on or before 30-11-1999 on the proposal of the licensee to collect grid support charges at Rs. 165. 00 per kva per month on the difference of KVA rating (i. e.) the difference between contracted Maximum Demand with the a. P. TRANSCO and H. T. Consumers having Captive Power Plants (CPP) running in parallel with A. P. TRANSCO Grid. The notification also stated that the Commission proposed to hear the representatives in person against the above proposal on 05-12-1999 at 10. 30 a. m. in its premises. Responding to the notification, most of the appellants herein filed their objections in writing. After hearing the objections on 08-12-1999 the Commission issued notice calling for the objections on the draft order dated 22-01-2001 on or before 05-02-2001 (i. e.) more than one year after hearing the objections. Again after receipt of the objections, the Commission issued practice directions dated 20-02-2001 2nd time in partial relaxation of the earlier directions issued on 08-10-1999 and subsequent amendments issued from time to time under section 21 (3) read with Section 54 of the reforms Act making a provision for collection of Grid Support Charges. ( 31 ) REGULATION l (a) (ii): the existing captive power units, which were permitted to operate in parallel with Grid will be renewed with the same facility, subject to payment of Grid Support Charges (GSC) as may be decided by the Commission and notified by the licensee, consistent with the orders passed by the Commission. They shall also comply with special practice directions. ( 32 ) THE other regulations in pari materia the same as that of old directions. ( 33 ) THEREAFTER once again the commission issued notice inviting objections on the draft order dt. 22-01-2001 from the interested persons in pubic and the pubic hearing was fixed in the Court Hall of aperc, Hyderabad at 11. ( 32 ) THE other regulations in pari materia the same as that of old directions. ( 33 ) THEREAFTER once again the commission issued notice inviting objections on the draft order dt. 22-01-2001 from the interested persons in pubic and the pubic hearing was fixed in the Court Hall of aperc, Hyderabad at 11. 00 a. m. on 15-03-2001 and final order was passed on 08-02-2002. ( 34 ) THE above discussion leads to an irresistible conclusion that Section 2 of the reforms Act on which the Commission placed reliance has no application to the issue under consideration. It is only on a suggestion or a direction given by the commission in its letter dated 15-09-1999, which has not seen the light of the day the licensee came up with this application and thereafter to acquire jurisdiction the commission went on issuing practice directions without looking into the provisions of the Act. ( 35 ) SINCE we have already held that the functions of the Commission under the reforms Act are only adjudicatory one and akin to Civil Court under common law, the action of the Commission in directing the licensee to send proposals to levy Grid support Charges will lead to the irresistible conclusion that the Commission with a view to reimburse the losses incurred by the licensee pre-determined the issue and went on issuing the practice directions to acquire jurisdiction over the issue and ultimately stuck to its view. Hence, the impugned order is vitiated by malice in law. 3. Non-consultation with the State government and Commission advisory committee: ( 36 ) UNDER the Reforms Act, the State government was divested of its regulatory functions enjoyed by it till then and the commission was entrusted with those functions. It is expected to take measures conducive to the development and management of the Electricity Industry in an efficient, economic and competitive manner. It is expected to take measures conducive to the development and management of the Electricity Industry in an efficient, economic and competitive manner. ( 37 ) SECTION 12 and Proviso to Sec. 56 (2) of the Act, makes it abundantly clear that the power of the State Government to issue policy directions on matters concerning electricity trade in the State for over all planning and co-ordination including determination of structure of the tariff was very much retained and it is expected to co-ordinate and deal with the Central government and the Central Electricity authority, which are expected to take policy decisions at the National Level and in that taken series of decisions like inviting private enterprises to establish generating companies to bridge the gap between the rapidly growing demand for electricity and supply. As far as CPPs are concerned, the State Governments are directed to encourage Co-Generation Plants with the duel objective of higher efficiency in the fuel use in the industry as well as the availability of the surplus electricity to the State Grid by combining the power and heat generation for industrial use. ( 38 ) FROM the above it is seen that levy of grid Support Charges is a policy matter not only in the realm of the State Government, but it relates to the whole of the country. Hence, the State Government has to take a policy decision with regard to levy of Grid support Charges in consultation with the central Government and the Central electricity Authority and the Commission on its own cannot levy Grid Support charges. ( 39 ) LIKEWISE under Section 32, an advisory Committee has to be constituted to advise the Commission on major questions of policy relating to the electricity industry in the State. Though regulations were framed for establishment of the Commission advisory Committee balancing various interests, groups enumerated in Regulation-2, it is not known whether any Advisory committee was constituted or not. At any rate, the action of the Commission in not consulting the State Government and the advisory Committee suffers from serious infirmity since collection of Grid Support charges from the H. T. Consumers with captive Power Plants (CPP) running in parallel with A. P. TRANSCO Grid was thought of for the first time in 2002 though these plants are functioning from 1995 onwards pursuant to the orders issued by the Government in G. O. Ms. No. 150, dated 15-11-1995 in conformity with the D. O. letter of Secretary, Ministry of Power. 4. Whether the Impugned Order falls under Section 26 of the Reforms Act: ( 40 ) UNDER Section 26 of the Reforms Act every licensee has to submit to the commission in a format, at least, three months before the ensuing financial years, full details to its calculation for that financial year of the expected aggregate revenue from the charges which it believes, it is permitted to recover pursuant to the terms of its licence. ( 41 ) AS per Explanation (b) to the above section, "tariff" means a schedule of standard price or charges for specified services which are applicable to all such specified services provided to the type or types of consumers specified in the Tariff notification. ( 42 ) THE Counsel for the Appellants strenuously contended that since it is the only taxing section under the Reforms Act the procedure prescribed for fixation of tariff has to be followed and since the same is. not observed, the impugned order of the commission is vitiated. To put it aptly, the case of the Appellants is that the financial principles and their applications provided in the VI Schedule to the Electricity supply Act, 1948 r/w Section 57 and 57-A of the said Act was not followed by the Commission while fixing the tariff. Likewise, the procedure prescribed under section 26 (9) of the Reforms Act was not followed (i. e.) within 60 days of receipt of the proposals the Commission should pass orders either approving the proposal submitted by the licensee as it is or suggesting alternative tariff or amending tariff after consultation with the commission s Advisory Committee. In the instant case, that the letter of the licensee is dated 23-09-1999, the draft order was issued on 22-01-2001 and again the Commission has taken another year to issue the impugned order on 08-02-2002, as per the details given in the preamble of this case. ( 43 ) IN RCI Power Limited we have taken the view that Section 26 of the Reforms Act mainly deals with the tariff to be collected for the supply of electricity to the end consumers and the word "tariff" used in explanation (b), relates to the charges for specified services provided to various types of customers specified in the Tariff notification. Admittedly, the industrial units with captive power plants cannot be treated as customers. Assuming that the charges for the specified services have to be shown in the tariff proposals by the licensee, the tariff consists of revenue derived from its principal business and income from other sources. Grid charges can be termed as non- tariff income, different from the income of the licensee on its principal business i. e. , transmission, distribution and supply of electricity. Hence, we hold that the procedure prescribed under Section 26 (9) of the Reforms Act need not be followed. But at the same time the Commission has to consult its Advisory Committee, since it is a major policy as required under Section 32 r/w Regulation-1 dated 17-06-1999. Accordingly, we hold this issue against the appellants. 5. Whether the reasons given by the commission in levying grid charges are sustainable in law: ( 44 ) BEFORE going into the merits of the order, we would like to consider how the captive power plants installed by the HT industrial units are running in parallel with the A. P. TRANSCO Grid. The drawing herein gives the picture how the system operates. ( 45 ) FROM the above it is seen that the national Grid (A), the State Grid (B) (A. P. TRANSCO) and the Regional Grids (C) (Discoms) are inter-connected through sub stations and they transmit the electricity through 132 KV feeder lines. From the discoms Grid- (C) power is being supplied to the industry and before the electricity is stepped down to 11 KV through the transformer, circuit breaker, is provided at the point of commencement of supply by discoms to the industry. The energy drawn from Discoms after stepping down to 11 KV is connected by means of the feeder lines to synchronization Bus- (D) in the consumer premises. Likewise, before the power generated by the captive power plant is connected to Synchro-Bus (D) through its feeder line, a circuit breaker is provided. The power drawn from both the sources is pooled at Synchro-Bus and through the transformers provided in the consumer premises, the power is further stepped down to 415 Volts and fed to the machinery operates in the industry. The power drawn from both the sources is pooled at Synchro-Bus and through the transformers provided in the consumer premises, the power is further stepped down to 415 Volts and fed to the machinery operates in the industry. If any industrial unit is selling excess power generated by it at 11 KV it should be fed into grid through export feeder line- (E) after stepping up the power to 132 KV through transformers provided in the industrial premises as shown. It is not in dispute that as and when some problems develop in the captive power plants, there is a likelihood of drawing more power from the licensee s grid. To prevent or minimise such an eventuality (i. e.) that no excess power is drawn by the industry, a circuit breaker was provided at the commencement of supply and it automatically trips off as and when the system tries to take extra power over and above the Contracted Maximum Demand (hereinafter referred as cmd ) and the machinery in the industry goes off. Such a situation is known to be a fault condition in the industry. ( 46 ) SINCE overloads if any are only for a fraction of the system design fault current and persist only for a fraction of the system design fault current duration, a system which is designed to handle the fault current will need nothing further to handle overloads. In other words, where the system is designed to handle fault current system, no further system design to handle the overloads is required. ( 47 ) THE Grid Code of the licensee was approved by the Commission on 26-05-2001. Section 3 relates to Connection Code. ( 48 ) CLAUSE 3. 2. 6 of the Grid Code speaks of Connection Point. Under Clause 3,2,6,1, generator may be of Voltage 400/220/132 kv or as agreed with the A. P. TRANSCO, unless specifically agreed with the A. P. TRANSCO. The Connection point shall be the first takeoff tower from the Power station switchyard, which is the boundary between GENCO and A. P. TRANSCO. Under Clause 3. 2. 6. 2, all 33/11 KV lines and below shall be under the jurisdiction of the discoms and all lines and network above 33 kv shall be under jurisdiction of the A. P. TRANSCO. Under Clause 3. 2. 6. 2, all 33/11 KV lines and below shall be under the jurisdiction of the discoms and all lines and network above 33 kv shall be under jurisdiction of the A. P. TRANSCO. The Connection Point shall be the first takeoff of 33 or 11 KV feeder, which is the boundary between A. P. TRANSCO and Discom. Alternatively, the outgoing terminals of the Line Isolator of the 33 KV or 11 KV Feeder. The Tariff Metering Point shall be between the LV Breaker of the power transformer and the LV bus isolator. All equipment beyond the boundary shall be maintained by Discoms. All HT services including EHT services such as 132 KV. and 220 KV shall be with Discoms as per geographical jurisdiction. Clause 3. 2. 6. 3, deals with Captive Power plants and bulk Power Consumers. Voltage may be 220/132/33 KV or as agreed with the a. P. TRANSCO. Sub-stations are owned by cpps and Bulk Power Consumers. The connection Point shall be the feeder gantry in their premises. Clause 3. 5, deals with connected Plant Restrictions. Clause 3. 5. 1, deals with general principle. Users connected to the Grid can produce power disturbances, which propagate to the power system. If these disturbances are severe, the power system and other Users on the system will be adversely affected. To ensure system integrity and fairness to all users restrictions and controls have to be placed on users of the system. ( 49 ) FROM this it is seen that the commission as well as the licensee, having recognised that power disturbances occur in the system now and then and if they are severe, not only the power system, but also the other users on the system will also be adversely be affected. Hence, under the Grid code the Commission prescribed certain user restrictions and control. Clause 3. 5. 2, deals with internal safety of the machinery and personnel working on the premises. Under Clause 3. 5. 3, the user system must be designed with proper basic insulation level. Insulation of all components in service must have adequate dielectric strength for the system operating voltages at all times. Clause 3. 5. 4, specifies that the facilities provided to user system connected to Grid must comply with clearance limits published in the Indian Electricity Rules as well as the National Electrical Safety Code. Clause 3. 5. Insulation of all components in service must have adequate dielectric strength for the system operating voltages at all times. Clause 3. 5. 4, specifies that the facilities provided to user system connected to Grid must comply with clearance limits published in the Indian Electricity Rules as well as the National Electrical Safety Code. Clause 3. 5. 5, deals with Earthing of all components of the user system and the inter connection arrangements shall be as per the standards and shall be properly maintained. Clause 3. 5. 6, specifies that personnel of all entities shall be adequately trained in the correct operating techniques and safety precautions, keeping in mind cross- boundary connections. Under Clause 3. 5. 7, the starting current of motors in the user s systems shall be less then 6 times of the full- load current unless special exemption is granted and the appropriate methods of motor starting shall be adopted. Two or more motors shall not be started simultaneously or within 5 minutes if the resulting voltage dip at the substation bus exceeds 5%. Clause 3. 7 deals with protection requirements and co-ordination. Clause 3. 7. 1, deals with general principles no item of electrical equipment shall be allowed to remain connected to the transmission System unless it is covered by appropriate protection aimed at reliability, selectivity, speed, discrimination and sensitivity. Guidelines mentioned in protection manuals of CBI and P shall be kept in view. All the users shall co-operate to ensure correct and appropriate settings of protection to achieve effective, discriminatory removal of faulted equipment within the target clearance times specified in this Section. The A. P. TRANSCO shall be responsible for arranging periodical meetings among all users to discuss co-ordination of protection. A. P. TRANSCO shall investigate any maloperation, non-operation or delayed operation of protection or other unsatisfactory protection performances. Users shall take prompt action to correct any protection malfunction or issue as discussed and agreed to in these periodical meetings. A. P. TRANSCO shall determine the relay settings of all Transmission lines and communicate to Generating stations and discoms. A. P. TRANSCO shall determine relay settings at all EHT Sub-Stations upto the LV side of the power Transformers, relay settings at Generating Stations shall be determined by the generating station authority. A. P. TRANSCO shall determine the relay settings of all Transmission lines and communicate to Generating stations and discoms. A. P. TRANSCO shall determine relay settings at all EHT Sub-Stations upto the LV side of the power Transformers, relay settings at Generating Stations shall be determined by the generating station authority. The settings of some relays including relays of EHT Feeders emanating from generating station switchyard, which require co-operation with A. P. TRANSCO shall be determined in consultation with a. P. TRANSCO. The data required by A. P. TRANSCO in respect of equipment in generating Station for calculating fault level shall be promptly furnished by the generating Station in the format prescribed by A. P. TRANSCO. Concerned Discoms shall finalise the settings of all the protections for the 33 KV and 11 KV feeders emanating from A. P. TRANSCO s Sub- stations for satisfactory functioning in consultation with A. P. TRANSCO and the final authority for protection co-ordination and determination of relay settings rests with the Southern Regional Electricity board, constituted by a resolution of the central Region Government for a specified for facilitating the integrated operation of the power system of that region under the electricity (Supply) Act, 1948. ( 50 ) FROM the above it is seen that the setting of all the protections finalised by discoms for 33 KV and 11 KV feeders emanated from A. P. TRANSCO Sub- stations and relay settings of all transmission lines determined by A. P. TRANSCO for calculating the fault level have to receive the approval of SREB. ( 51 ) CLAUSE 3. 7. 2, speaks of fault clearance times. The maximum fault clearance times for faults based on stability consideration on any user s system directly connected to the transmission system, or any faults on the transmission system itself, are as follows. Target Clearance Times Voltage Class Total Relay Operation Time +breaker Opening Time 400kv 100 msec (milli seconds) 220kv 160 msec 132kv 160 msec ( 52 ) THE above times shall apply after carrier inter trip and auto reclosure features are commissioned in the A. P. TRANSCO system. ( 53 ) CLAUSE 3. 7. 3, speaks of protection requirements to be taken by generating units. Clause 3. 7. 3. 1 speaks of generator requirements. ( 53 ) CLAUSE 3. 7. 3, speaks of protection requirements to be taken by generating units. Clause 3. 7. 3. 1 speaks of generator requirements. All Generating units and associated electrical equipment of the generating Units connected to the transmission System shall be protected by adequate protection so that the transmission System does not suffer due to any disturbance originating from any generating Unit. The minimum protection requirements of Alternators and Generator transformers at Generating Stations were specified in this clause. ( 54 ) IN the end it is stated that in this sub-section only those protections, which have direct impact on the Grid are prescribed. Other protections of the Alternator and transformers and the various protections for the Turbine, Boiler and Auxiliary machines are considered as the internal issues of the Generators and hence not dealt here. ( 55 ) CHAPTER VII of the Indian Electricity rules, 1956 deals with the electrical supply lines, system and operates for high and extra high voltages. ( 56 ) RULE 64-A deals with the additional provisions to be made for use of energy on high and extra high voltage. Rule 64-A (l) speaks of Inter-locks-Suitable inter-locks shall be provided in the following cases:- (a) Isolators and the controlling circuit breakers shall be inter-locked so that the isolators cannot be operated unless the corresponding breaker is in open position. (b) Isolators and the corresponding earthing switches shall be inter-locked so that no earthing switch can be closed under and until the corresponding isolator is in open position; (c) Where two more supplies are not intended to be operated in parallel, the respective circuit breakers or linked switches controlling the supplies shall be inter-locked to prevent possibility of any inadvertent paralleling or feedback; ( 57 ) UNDER Rule 64-A (2) All systems and circuits shall be so protected as to automatically disconnect the supply under abnormal conditions, including over current protection to disconnect the supply automatically if the rated current of the equipment, cable or supply line is exceeded for a time which the equipment, cable or supply line is not designed to withstand. ( 58 ) IN the case of Nav Bharat Ferro Alloys ltd. ( 58 ) IN the case of Nav Bharat Ferro Alloys ltd. Appellants in C. M. A. No. 1181 of 2002, the Commission in O. P. No. 73 of 2000 dated 31-01-2001 while giving consent for renewing permission for operation of 1 x 62500 KVA TG set for parallel operation and 1 x 250 + 1 x 125 KVA DG sets for stand by use, subject to the following conditions: ii. Conditions applicable for parallel operation. (i ). . . . . . . . . (ii) The company shall provide a reverse power relay. (iii) Facility for isolation of either of the two systems viz. , A. P. TRANSCO s supply as well as Company s sets in the event of fault either in the A. P. TRANSCO s system or Company s installation, so that sudden load transfer is avoided. (iv) The Company should provide under-frequency relays based on the principle of the rate of change of frequency detectors to ensure isolation of Company s generation system in the event of sudden trip-out of supply from A. P. TRANSCO s system to avoid any adverse effect on Company s sets, which are much smaller in capacity as compared to the A. P. TRANSCO s installed generating system. ( 59 ) TO sum up the safety arrangements that are to be taken by the HT consumers with captive power plants running in parallel with A. P. TRANSCO s Grid to withstand the maximum fault currents that may occur are: (1) Both the systems i. e. , the Grid and as well as the CPP should be properly isolated to avoid sudden load transfer, in the event of any fault occurring in either of the systems. (2) The Company should provide reverse power relay, to prevent flow of power from CPP to Grid in case licensee s load is tripped off or the CPP generates excess power which cannot be consumed. (3) Likewise, the Company should provide under/over frequency levels to ensure isolation of CPP in the event of sudden trip out of Grid supply from A. P. TRANSCO, to avoid any adverse affect to company s CPP. (4) Interlock should be provided, so that whenever the CPP trips, to prevent load transfer on the other supply system that is being operated in parallel. ( 60 ) UNDER Clause 38. (4) Interlock should be provided, so that whenever the CPP trips, to prevent load transfer on the other supply system that is being operated in parallel. ( 60 ) UNDER Clause 38. 8 of the revised terms and Conditions of Supply of electricity, the motor shall be provided with control gear so that the maximum current demand of the consumer s installations does not in any case exceed the limit given in the Nature of Supply Size of installation Limit of Maximum of Current demand Single Phase Upto and including 1 BHP 6 x full load current. Three Phase Upto and including 3 BHP and 6 x full load current upto and including 15 BHP. 2 x full load current Above 15 BHP and upto and 1 x full load current including 100 BHP. Above 100 BHP 1 1 / 4 x full load current ( 61 ) THE intending consumers are advised to consult the Board before ordering their motors as in some cases depending upon the location and conditions of working, it may be practicable to relax the condition limiting starting current. ( 62 ) NEXTLY, under the Grid Code the A. P. TRANSCO is made responsible not only to conduct periodical meetings with the users to discuss co-ordination and protection, but also to investigate in to the causes for mal-operation, non-operation or delayed operation or protection or other unsatisfactor protections performances. Apart from that the protection, co-ordination and determination of relay settings have to be approved finally by sreb. ( 63 ) EVEN after taking so many precautionary measures, it is not in dispute that the system may trip off for a variety of reasons. Now under the impugned order, the Commission approves the proposal of the licensee to levy Grid Support Charges from the Captive Power Plants. ( 64 ) AFTER extracting the contentions of the respective parties and after considering the expert opinion from Mr. Now under the impugned order, the Commission approves the proposal of the licensee to levy Grid Support Charges from the Captive Power Plants. ( 64 ) AFTER extracting the contentions of the respective parties and after considering the expert opinion from Mr. K. Balarama Reddy, former Chairman of the erstwhile A. P. State electricity Board and also having referred to the orders of the Karnataka Regulatory commission framed the following issues: (a) Whether the Grid support is a valuable service rendered by A. P. TRANSCO and the person availing such services including the objectors derive benefits from such support; (b) If the answer to issue (a) is yes , what should be the fair charges which A. P. TRANSCO is entitled to recover for such support; ( 65 ) THE Commission having noted the fact that the licensee is not unwilling to continue the facility of parallel operation but are only asking for compensation for the service rendered came to the conclusion that the Commission notes that despite the derating of the CMD, the Grid transformer and the nearby network equipment have to meet the enhanced fault duty on the network on account of the presence of the cpp in the network. The Commission also came to the conclusion that the industrial units with CPPs run in parallel with Grid derives the following benefits: (i) The Grid provides the required fault level in the industrial plant for starting large motors in the industry, and also provides the initial active and reactive components of starting current. Without Grid Support, there will be dip in voltage, resulting in tripping of other motors in the industry on low voltage, dip in frequency and fluctuation in power output of cpps. (ii) Whenever there is a large load throw-off or incidence in the industry, Grid initially absorbs the shock and minimizes the chance of tripping of CPPs. (iii) The high fault level offered by the grid acts as a supporting system for successful operation of CPPs in the industry in terms of electrical performance. (iv) Grid also helps in stabilising fluctuating loads like those in steel mills and are furnaces. ( 66 ) WE feel that none of the reasons are based on any statistical data or supported by expert opinion. On the other hand, the opinion of Mr. (iv) Grid also helps in stabilising fluctuating loads like those in steel mills and are furnaces. ( 66 ) WE feel that none of the reasons are based on any statistical data or supported by expert opinion. On the other hand, the opinion of Mr. K. Balaramreddy, who is not only a technocrat, but also the former chairman of the Electricity Board, is otherwise. But the Commission brushed aside the opinion of the former Chairman of the Board by observing that if the transient load is occasional, the Grid system might be able to tolerate such load and if the overload to persist for a considerable period of time even without the consumer exceeding the cmd may cause substantial damages to the licensee s equipment (reducing its overall life) not noticeable immediately. All these assumptions and presumptions of the commission remained as statements only not based on any statistical data or any legal provision. Ultimately the Commission agreed with the proposal of the licensee that the consumer can avail instantaneous demand in excess of the CMD without paying extra charges as long as such demand is without the 15 or 30 minute integration period under the existing metering arrangements and jumped at the above conclusions. Ground No. 1: The Grid provides the required fault level in the industrial plant for starting large motors in the industry, and also provides the initial active and reactive components of starting current. Without Grid support, there will be dip in voltage, resulting in tripping of other motors in the industry on low voltage, dip in frequency and fluctuation in power output of CPPs. ( 67 ) THE Commission jumped at the conclusion brushing aside the objections raised by the industrial units and also without looking into the Grid Code as well as the revised terms and conditions of supply and Rule 64 (a) (ii) of the Indian electricity Rules, which were referred supra, though the licensee did not place any statistical data or evidence to show that the fluctuations in the load of the consumer due to system fault in the CPPs is being shared by the Grid and they are causing substantial damage to the licensee's equipment. On the other hand, Clause 3. On the other hand, Clause 3. 5 of the Grid Code recognised that the users connected to the grid can produce power disturbances and if these disturbances are severe, the power system of the licensee as well as other users on the system will be adversely affected. To minimise the power disturbances, several precautionary steps have been taken including isolation of both the systems (i. e.) transco supply as well as Company's installation to avoid sudden load transfer in the event of fault in either of the systems. Apart from that Company should also provide reverse power supply to prevent flow of power from CPPs to Grid in case load is tripped of or the CPP generates excess power, which would be consumed and under frequency detectors to ensure isolation of Company's generation system in the event of sudden trip-out of supply of the licensee to avoid any adverse effect on company's installations. Likewise, under section 64-A (2) of Indian Electricity Rules, 1956, all systems and circuits shall be so protected as to automatically disconnect the supply under abnormal conditions. The inter-locks provided to lock circuit breakers or linked switches to prevent the possibility of any inadvertent paralleling or feedback when two or more supplies are not intended to be operated in parallel. ( 68 ) THE case of the Commission is not that these CPPs are not complying with these conditions but the Grid is proving the required fault level in the industrial plant for starting large motors in the industry and also provides the initial active and reactive components of starting current. Without grid Support, there will be dip in voltage, resulting in tripping of other motors in the industry on low voltage, dip in frequency and fluctuation in power output of CPPs. The Commission reached such a conclusion without looking into Grid Code and the revised terms and conditions of supply. ( 69 ) UNDER Clause 3. 5. 7, of the Grid Code, the electricity required to start the motors shall be 1/6th of the full-load current and if the voltage dip at the substation bus exceeds 5% two or more motors shall not be operated simultaneously or within five minutes. In clause 38. ( 69 ) UNDER Clause 3. 5. 7, of the Grid Code, the electricity required to start the motors shall be 1/6th of the full-load current and if the voltage dip at the substation bus exceeds 5% two or more motors shall not be operated simultaneously or within five minutes. In clause 38. 8 of the revised terms and conditions of supply of electricity, the licensee having noticed fluctuations that takes place in the supply of the electricity at the time of starting motors directed that control gear has to be provided to the motor, so that the maximum current demand of the consumers installation does not exceed the limit given in the schedule. ( 70 ) WE are really astonished to know that how starting of large motors results in dip in voltage etc. , more so, when the Grid Code specifies that the voltage dip at the nearest sub-station bus should not exceed 5% of its capacity. It is not the case of either the transco or the Commission that any appellant industry violated Clause 38. 8 of the Revised terms and conditions of supply or Clause 3. 7. 5, of the Grid Code. If there are any instances of that nature, the proper course for the Commission and the licensee would be to enforce those clauses, but not seeking an unwarranted and justified charge generalised for all cases. ( 71 ) THE issue can be viewed from other angle also. The trip of is taking place at the discom Grid level, which is connected to grid (B), which in its turn connected to the national Grid (A ). If we extend the same analogy the licensee (ie) TRANSCO has to pay Grid Support Charges to the National grid for the ultimate transmission of the entire over load it was forced shed due to system fault of all the CPPs in the State. When the TRANSCO is not paying any Grid support Charges to the National Power Grid corporation it is not known under what justification the Commission can permit the licensee to collect Grid Support Charges. Hence, we do not find any justification on the conclusions reached by the Commission. ( 72 ). Further, it is not the case of either the licensee or the Commission that the transient load on the Grid system is occurring at the time of starting of the motors. Hence, we do not find any justification on the conclusions reached by the Commission. ( 72 ). Further, it is not the case of either the licensee or the Commission that the transient load on the Grid system is occurring at the time of starting of the motors. The specific case of the licensee is that as and when there is a system failure in the Captive Power Plants, the industry is taking the required power load over and above CMD from the Grid operated by the licensee and the same is not being recorded till the integrating time of 15 or 30 minutes as the case may be is completed. ( 73 ) THIS very fact proves that the commission was passing orders indiscriminately without knowing what it is doing. It started on the presumption that as and when the CPP trips off, the industry is taking power load over and above the CMD from the Grid. But, now, in the order, it states that if the motors are started without the Grid support, there will be dip in voltage, resulting in tripping of other motors in the industry, so on and so forth. ( 74 ) BE that as it may, to prevent or minimise the drawal of excess power over and above CMD, a Circuit Breaker was provided at the commencement of the apply and it automatically trips off when the unit is likely to take electricity over and above the CMD. As per Clause 3. 7. 2, of the grid Code, the maximum time that takes for tripping of the system will be100 msec for 400 KV feeder lines and 160 msec for 220 KV and 132 KV. Without referring to this particular provision, the Commission jumps at the conclusion that the consumer is availing instantaneous demand in excess of cmd without paying extra charges as along as such demand is within 15 or 30 minutes integration period under existing metre arrangements. Again such a conclusion was arrived at without noticing how the system operates and how many times the power was tripped of in the Unit, since the consumer has to pay for the maximum demand recorded even in one integration period for whole of the month apart from paying the penalty. Again such a conclusion was arrived at without noticing how the system operates and how many times the power was tripped of in the Unit, since the consumer has to pay for the maximum demand recorded even in one integration period for whole of the month apart from paying the penalty. ( 75 ) THE fallacy in the reasoning given by the Commission can be seen from a judgment of the Supreme Court in Orissa state Electricity Board v. M/s. IPI Stell Ltd. wherein the Supreme Court had an occasion to consider what "maximum demand" means, and held as follows:"10. It is necessary to elaborate what does the expression "maximum demand" mean and signify? In the case of bulk consumers and large scale consumers, the Electricity Board all over the country generally adopt a two-part levy system, One part is called 'the maximum demand charges' and the other part 'consumption charges'. Every such consumer is provided with two metres. One is called the 'trivector metre' and the other is the normal metre which records the total quantity of energy consumer over a given period - which is ordinarily a month. The metre which records the total consumption required no explanation or elaboration since we are all aware of it. It is the other meter which requires some explanation. Now ever large scale consumer knows the amount of energy required by him and requests for it from the Board. If the board agrees to supply that or any other particular amount of enquiry, it makes necessary arrangements therefore by laying the lines to the extent necessary and installing other requisite equipment. It is obvious that if a factory uses energy at a particular level/load and for a particular period, it consumes a particular quantity of energy. The trivector meter records the highest level/load at which the energy is drawn over any thirty minute period in a month while the other meter records the total consumption of energy units in the month. Let us take the case of the respondent to illustrate the point. The maximum demand in his case is up to but not exceeding 7778 KVA. That is his requirement. In the normal times, he is entitled to draw energy at that level/load. That is his maximum demand under the agreement. But he may not always do so. Let us take the case of the respondent to illustrate the point. The maximum demand in his case is up to but not exceeding 7778 KVA. That is his requirement. In the normal times, he is entitled to draw energy at that level/load. That is his maximum demand under the agreement. But he may not always do so. Say, in a given month, he draws energy at 6000 KVA level only, even, then he has to pay the minimum charges as stipulated in the agreement. But if he draws and consumes energy exceeding eight per cent of the energy, he pays demand and energy charges for what he utilises. Now, let us notice how the trivector meter, i. e. , the meter which records the maximum demand works; the meter is so designed that it only records the maximum load/level at which energy is drawn over any thirty-minute period in a month. It only goes forward but never goes back until it is put back manually. To be more precise, suppose the respondent has drawn energy at 7770 KVA for a thirty-minute period on the first day of the month, the meter will record that figure and will stay there even if the respondent consumes at 7000 KVA level during the rest of the month. " ( 76 ) FROM this it is seen that normally the meter readings will be taken once in a month and trivector meter provided in the industrial premises will read the demand consumed in the integration period of 30 minutes for 4000 KVA and less and for 15 minutes for over and above 4000 KVA. Hence, if the consumer do not exceed the cmd in the integration period, the meter record the highest of the actual demand. Once, the consumer draws more energy than the CMD, then also the trivector designed for that purpose will record the same. When once the reading goes up, it will not come down unless it is manually reset. If a consumer draws energy in excess of the cmd in one integration period of 30 or 15 minutes, he is bound to pay demand charges at that rate for the whole of the month apart from penal charges. This is evident from the tariff order for 2002-2003. It is useful to extract General Conditions of H. T. Supply of the Tariff Order, 2002-2003. This is evident from the tariff order for 2002-2003. It is useful to extract General Conditions of H. T. Supply of the Tariff Order, 2002-2003. (1) A. Voltage of Supply: The voltage at which supply has to be availed by; (2) Maximum Demand: the maximum demand of supply of electricity to a consumer during a month shall be twice the largest number if Kilo-Volt-Ampere Hours (JVAH) delivered at the point of supply to the consumer during any consecutive 30 minutes in the month. However, for the consumers having contracted demand above 4000 KVA the maximum demand shall be four times the largest number of Kilo-Volt- ampere-Hours (KVAH) delivered at the point of supply to the consumer during any consecutive 15 minutes in the month. (3) Billing Demand: the billing demand shall be the maximum demand recorded during the month or 80% of the contracted demand whichever is higher. (4) Monthly Minimum Charges every consumer whether he consumes energy or not shall pay monthly minimum charges calculated on the billing demand plus energy charges specified for each category in this part to cover the cost of a part of the fixed charges of the Licensee. ( 77 ) FROM the above it is seen that the consumer has to pay at the maximum demand recorded in the integration period during that month or 80% of the CMD, whichever is higher. In other words, if the power drawn by the consumer is less then 80% of the CMD he has to pay for 80% of the cmd. Apart from this, under condition-7, the consumer has to pay penal charges at double the normal charges. 7. ADDITIONAL CHARGES FOR maximum DEMAND IN EXCESS OF the CONTRACTED DEMAND: if in any month the recorded maximum demand of the consumer exceeds his contracted demand (with licensee), that portion of the demand in excess of the contracted demand will be hilled at twice the normal charges. ( 78 ) IT is not the case of the Commission that when the system trips off the electricity consumed in the period is not being recorded in the meter. When the time for tripping off is fixed in the Grid Code itself, which is a fraction of a second, it is not known how the Commission can jump at the conclusion that the consumer is availing the energy over and above the CMD without paying the extra charges. When the time for tripping off is fixed in the Grid Code itself, which is a fraction of a second, it is not known how the Commission can jump at the conclusion that the consumer is availing the energy over and above the CMD without paying the extra charges. For arguments sake, even if we presume that the industry has drawn electricity over and above the cmd for a fraction of a second at the time of trip off, we should not forget the fact that in an integration period, if the consumer exceeds the CMD, he is not only paying at that rate for the entire month, but also paying a penalty (ie) twice the charges. Without looking into all these factors and without reference to their own Grid Code, the Commission, jumped at this illogical and irrational conclusion. Ground No. 2: Whenever there is a large load throw-off or incidence in the industry, Grid initially absorbs the shock and minimizes the chance of tripping of cpps. ( 79 ) FIRSTLY, we are rather surprised to see how CPPs trip of will be minimised or prevented by supplying electricity through the licensee's system over and above the contracted Maximum Demand (CMD ). The specific case of the appellants is that as and when some system fault occurs in cpp, the circuit breaker at the point of commencement of supply trips of in a fraction of second and thereafter the entire machinery in the industry stops functioning due to non-supply of energy from the feeder line of the licensee. But the Commission observed that CPPs trip off are being minimised by supply of electricity from the grid load over and above the Contracted maximum Demand, which is absolutely incorrect and no basis was given for such a conclusion. In fact, the counsel appearing either for the Commission or for the licensee never addressed arguments in the manner in which the Commission understood the case. Their case is that the Grid is absorbing additional load in the time gap between cpps fault is detected and the circuit breaker trips of. In fact, the counsel appearing either for the Commission or for the licensee never addressed arguments in the manner in which the Commission understood the case. Their case is that the Grid is absorbing additional load in the time gap between cpps fault is detected and the circuit breaker trips of. ( 80 ) COMING to large load throw-off or incidence in the industry, from the order relating to wheeling charges in O. P. No. 510 of 2001, dated 24-03-2002 it is seen that the electricity generated in a year comes around 41,954 million units and in the entire State the industries that are operating with captive Power Plants running in parallel with TRANSCO Grid are around 31 in the state. The capacity of all these plants is less than 30 MW. No statistical data is provided with regard to the number of trip offs that have taken place in each industry in a particular year. No survey was even conducted to find out whether the trip off is taking place in all the industries at one and at the same time or at different times on whether trip of is occasional and at random or it is a regular phenomena in these plants and to what extent the Grid absorbed the over load due to system faults in these industries whose number constitute a microscopic minority of the end consumers. Likewise, the finding recorded by the commission that the consumer is availing instantaneous demand in excess of the CMD without paying extra charges as long as such demand is within the 15 or 30 minute integration period under the existing metering arrangements runs counter to clause 3. 7. 2, of the Grid Code relating to fault clearance times, which is obviously less than a fraction of the second. That apart, the commission itself in its order admitted that it is true that the load and the stress incident on the system due to a captive power plant is negligible compared to the combined capacity of the Southern Grid. But the commission tries to justify its action by observing that the various deficiencies to which the Grid is being subjected to, like poor voltages, frequent Grid collapses and high line losses etc. are directly attributable to the system losses occurring in these industries, which according to us is a bitter pill to swallow. But the commission tries to justify its action by observing that the various deficiencies to which the Grid is being subjected to, like poor voltages, frequent Grid collapses and high line losses etc. are directly attributable to the system losses occurring in these industries, which according to us is a bitter pill to swallow. It is also observed that the grid system is like a big container into which milk from various sources is poured. If someone doesn't put milk but prefers to pour water into it, it may not matter much but if every one seeks to pour water in it, it will lead to an unacceptable dilution of quality. We do not find neither any rationale nor reason in this observation, since we are not in doubt that if any system faults occurs in any industry, it is only a random one but not a regular feature. Further, even as per grid Code approved by the Commission, the relay operation and circuit breaker operation takes place in a fraction of second. The other observation that the services rendered by the licensee to the CPP cannot be looked in isolation, but as part of the overall system in the integrated Grid. We are again surprised to see how the Commission can hold that the industries with Captive power Plants responsible for all the ills in the licensee's organisation and make them to pay through their nose, which will be ultimately transferred to the poor consumer. The Commission failed to note that the electricity supply connection obtained by a consumer under terms and conditions of supply not only recognised fluctuations and variations in demand, but they were permitted within the limits specified in the contracted maximum demand itself Hence, we do not find any justification for this conclusion also arrived at by the commission. The other two alleged benefits due to inter-connection with the Grid do not convey any meaning since the Grid never acted as a supporting system for successful operation of the CPPs in the industry. From the arguments advanced before us by both the counsel as and when some fault occurs in the Captive Power system of an industry, there is a possibility of throwing excess energy from the licensee's Grid till the circuit breaker is activated and the power supply from the licensee's system is tripped of. From the arguments advanced before us by both the counsel as and when some fault occurs in the Captive Power system of an industry, there is a possibility of throwing excess energy from the licensee's Grid till the circuit breaker is activated and the power supply from the licensee's system is tripped of. Nowhere the Commission has adverted the contention of the licensees that the circuit breaker comes into play in a fraction of second and if any excess power is drawn from the licensee's Grid, it is only nominal and such fluctuations are not only recognised but also approved by the Grid code itself. In fact, to minimise such fluctuations, the industries were directed to take several precautionary and preventive measures and for the Grid Code never contemplated levying charges for the fluctuations, more so, unnoticed and unmeasured. In fact, having received the application from the licensee on 23-09-1999, the Commission issued practice directions on 08-10-1999 relating to grant of approval for installation, renewal of permission of. Captive Power Plants including those running in parallel with the licensee's Grid. In this nowhere it is stated that these applicants have to pay Grid Support charges. What all it says is that the applicant's power station must comply the licensee's Grid Code. It is not the case of the commission that any of the appellants herein violated the Grid Code of the licensee. After issuance of draft order on 22-01-2001 and having called for the objections and having realised the mistake committed by it, the Commission issued the modified practice directions on 20-2-2001 in modification of the earlier directions that are holding the field till then. It is only in these practice directions under clause l (a) (ii) it is observed that the Captive Power Units, which were permitted to operate in parallel with Grid will be renewed with the same facility, subject to payment of Grid support Charges as may be decided by the commission and notified by the licensee. Nearly one year thereafter, the impugned order was issued. All these actions can be termed as a camouflage to give effect to the predetermined decision of the Commission even before the licensee came up with the proposal. Nearly one year thereafter, the impugned order was issued. All these actions can be termed as a camouflage to give effect to the predetermined decision of the Commission even before the licensee came up with the proposal. In fact, we have already held that it is at the instigation of the Commission, the licensee simply filed a letter not even in the prescribed format with necessary particulars as required under the Regulations and the commission strived hard to give effect to its predetermined decision. 6. Whether Levy of the Grid Charges is reasonable and Arbitrary: ( 81 ) AS per condition No. 2. 12 of the revised terms and conditions of supply of electricity 'maximum demand' means twice the largest number of Kilo volt ampere hours (KVAh) delivered at the point of supply to the consumer during the consecutive 30 minutes or 15 minutes as the case may be during the month. Condition. No. 2. 13 contracted demand' means the demand specified in the Agreement. Condition No. 2. 14 - 'connected load' means the aggregate of the manufacturer's rating of all apparatus including portable apparatus on the consumer's premises, which is supplied with energy at the same rate under Condition No. 2. 15 - 'contracted load' means the connected load, which the consumer requires and is so specified in the agreement, or in the sanction accorded for the service. It is not in dispute that a consumer has to pay demand charges on the contracted Maximum Demand (CMD) in kva apart from paying the charges for the consumption of the actual consumption of the electricity. In other words, while the charges for the Contracted Maximum demand is fixed, the consumer has to pay for the electricity consumed separately as per the two-part tariff payable by H. T. Consumers. After installation of Captive power Plants all the appellants' industries got reduced the maximum demand with the consent of the Board itself. Now the commission is asking these units to pay at 50% of the prevailing demand charge on the difference between total capacity of the CPP and Contracted Maximum Demand (CMD) in KVA from the licensee and all other sources. The effect of this order can be explained as hereunder: Illustrations of Application of Charges as Determined in Impugned Order: 1. Assume Operating Load as 30 MVA 2. The effect of this order can be explained as hereunder: Illustrations of Application of Charges as Determined in Impugned Order: 1. Assume Operating Load as 30 MVA 2. ILLUSTRATION 1 Assume CPP Capacity 30 MVA Assume CMD and all sources from Grid Supply 10 MVA Difference to be charges 20 MVA 3. ILLUSTRATION 2 Assume CPP Capacity 20 MVA Assume CMD and all sources from Grid Supply 20 MVA Difference to be charges Nil 4. ILLUSTRATIONS Assume CPP Capacity 10 MVA Assume CMD and all sources from Grid Supply 30 MVA Difference to be charges Nil 5. Assuming, without admitting, that the reasoning adopted in the impugned Order is correct, it cannot be said that there is no load transfer and other possibilities with regard to illustrations 2 and 3. The order is therefore irrational and makes an improper classification and impermissible discrimination. 6. If load is the reason, then the CPP capacity cannot be relevant. Mere excess capacity of CPP cannot be the basis of the charge; particularly on the reasons given in the order. 7. If increase in CPP capacity is made in illustrations 2 and 3 or otherwise to enhance the CPP's capacity to take any fluctuations or starting current instead of from the grid, the effect of the order is to further enhance the charge, not reduce it. 8. The above also illustrates that the charge is, in effect, a charge on the capacity of the cpp designed and calculated to mulct CPP capacity and discourage it. The intention to force the industry to increase CMD is manifest. This is an improper purpose and monopoly abuse. ( 82 ) THE irrationality in the levy of Grid Support Charges is explained with reference to some of the appellant Units hereunder: CALCULATION OF GRID SUPPORT CHARGES 1. M/s. Nava Bharat Ferro Alloys Ltd. CMD with A. P. TRANSCO 5000 KVA APGPCL 978 KVA Power supplied to TRANSCO 31230 KVA Others 20000 KVA Total 57208 KVA-1 Captive Capacity . . . 62500 KVA-2 Difference (2) - (l) 62500-57208 KVA 5292 KVA Grid Support Charges @ 50% of Demand Charges i. e. Rs. 195/-2/kva per month. . Rs. 97. 5/month Grid Support Charges Rs. 5292 x 97. 5 . . . 5,15,970/- per month 2. M/s. India Cement: CMD with A. P. TRANSCO 13000 KVA . . . 62500 KVA-2 Difference (2) - (l) 62500-57208 KVA 5292 KVA Grid Support Charges @ 50% of Demand Charges i. e. Rs. 195/-2/kva per month. . Rs. 97. 5/month Grid Support Charges Rs. 5292 x 97. 5 . . . 5,15,970/- per month 2. M/s. India Cement: CMD with A. P. TRANSCO 13000 KVA . Captive Capacity 38170 KVA Difference 38170-13000 KVA 25170 KVA Grid Support Charges @ 50% of Demand Charges i. e. Rs. 195/2/kva/month Rs. 97. 5/kva/ month Grid Support charges 97. 5 x 25170 Rs. 24,54,075/-month 3. M/s. Vishnu Cement: CMD with A. P. TRANSCO 5000 KVA APGPCL 5086 KVA Total 10086 KVA-1 Captive Capacity 23000 KVA-2 Difference (2) (1) 23000-10086 12914 KVA Grid Support Charges @ 50% of Demand Charges i. e. Rs. 195/2/kva month Rs. 97. 5/kva/month. Grid Support Charges Rs. 97. 5 x12914 1259115/month 4. M/s. Rastriya Ispat Nizam Ltd. : CMD with A. P. TRANSCO 150000 KVA Supplied to A. P. TRANSCO . . . 70000 KVA Total 220000 KVA-1 Captive Capacity 300000 KVA-2 Difference (2)- (l) 300000-220000 80000 KVA Grid Support Charges @ 50% of Demand Charges i. e. Rs. 195/2/kva month Rs. 97. 5/kva/month. Grid Support Charges Rs. 97. 5 x80000 Rs. 78,00,000/month 5. M/s. Ballapur Industries Ltd. : CMD with A. P. TRANSCO 4000 KVA Captive Capacity 15050 KVA Difference 15050-4000 11050 KVA Grid Support Charges @ 50% of Demand Charges i. e. Rs. 195/2/kva/month Rs. 97. 5/kva/month Grid Support charges Rs. 11050x97. 5 Rs. 10,77,375 /month ( 83 ) FROM the above it is seen that the commission is asking the industries to pay grid Support Charges in lakhs of rupees by contending that the Grid is absorbing the excess load over and above the maximum demand as and when the Captive Power plant is tripped of without there being any statistical data, on undetermined and unmeasured quantity of electricity said to have been made available by the licensee. Further, we do not really understand how the capacity of CPP is relevant and can be a basis for in arriving at the conclusion that the CPP is availing instantaneous load, unquantified and unmeasured in excess of cmd within the integration period. It is not also their case that the entire industry runs to its full capacity through out, at any rate at least at the time of trip of. It is not also their case that the entire industry runs to its full capacity through out, at any rate at least at the time of trip of. If at all the commission is having such a power, the superior Courts in the country repeatedly held that uncanalised, unbridled or arbitrary exercise of power is ante-thesis to the rule of law. Hence, we hold that the order of the commission is vitiated by malice in law and arbitrary exercise of the alleged power vested in it. ( 84 ) AT the same time, we are not for a moment holding that at the time of tripping of the system in the consumer's premises that no extra load is being taken from the grid and in the event if the Commission is conferred with such a power under the reforms Act, the same has to be exercised reasonably, objectively duly keeping the social objective of ensuring a fair deal to the consumer, if possible, by framing the regulations for quantification of the extra load the Grid is taking in the event of any fault occurring in the Captive Power System industry, but not at the whims and fancies of either the licensee or the Commission. ( 85 ) WE feel that it is not necessary to express any opinion on other issues raised by the appellants for the present and keep them open, so that the CPPs may raise them, if necessity arises. ( 86 ) IN the result, viewed from any angle, the order of the Commission in O. P. No. 1 of 1999, dated 8th February, 2002 cannot be sustained in law, since it suffers from serious infirmities noted above. Accordingly, the impugned order of the Commission is set aside and the appeals are allowed. But in the circumstances, no order as to costs. ( 87 ) BEFORE parting with the case, we feel that it is appropriate to place on record the assistance rendered by Mr. Gopal choudhary in knowing the meanings of the technical words with which we are not very familiar for rendering this judgment.