{"id":337796,"date":"2024-12-23T16:00:04","date_gmt":"2024-12-23T10:30:04","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=337796"},"modified":"2025-01-14T10:08:23","modified_gmt":"2025-01-14T04:38:23","slug":"revenue-surplus-adjustment-before-re-organisation-subsequent-years-arr-post-re-organisation-s-131-electricity-act-aptel","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/12\/23\/revenue-surplus-adjustment-before-re-organisation-subsequent-years-arr-post-re-organisation-s-131-electricity-act-aptel\/","title":{"rendered":"Adjustment of revenue surplus prior to re-organisation from ARR of subsequent years post reorganisation not aligned with scheme of reforms under S.131 Electricity Act: APTEL"},"content":{"rendered":"
\n

Appellate Tribunal for Electricity:<\/span> In two review petitions filed by the South Bihar Power Distribution Co. Ltd. and North Bihar Power Distribution Co. Ltd. (‘Discoms\/ Distribution Companies’) seeking rectification and modification of the impugned judgment of this Tribunal,wherein it was held that the Bihar Electricity Regulatory Commission (‘State Commission’) had rightly adjusted the surplus of the past period of Bihar State Electricity Board (‘BSEB’) with the Annual Revenue Requirement (‘ARR’) of the subsequent years where the Discoms had taken over the electricity operations, two-member bench of Ramesh Ranganathan, Chairperson and Seema Gupta, Technical Member held that the adjustment of revenue surplus, which was not discernible from balance sheet considered for transfer of Assets and Liabilities, for the period prior to re-organisation from the ARR of subsequent years post reorganisation was not aligned with the scheme of reforms under Section 131<\/a> of the Electricity Act, 2003<\/a> (‘the Act’). Holding this, the Tribunal modified the impugned order and remanded the matter back to the State Commission for consideration to a certain extent.<\/p>\n

Background<\/h3>\n

The Discoms had filed petitions against order dated 08-03-2017, wherein the State Commission disallowed the claims of the Discoms regarding the issue of recovery of surplus of past period (FY 2015-16) and net prior period charges (FY 2014-15). Aggrieved by these disallowances, the Discoms filed two appeals, wherein vide the impugned judgment this Tribunal held that that the State Commission had rightly adjusted the surplus of the past period pertaining to erstwhile BSEB period, while making True up of the ARR in line with its Regulations. The Tribunal held that there was no force in the contentions of the Discoms, and that the companies have nothing to do with the revenue surplus of erstwhile BSEB period.<\/p>\n

Aggrieved by the impugned order, Discoms filed a civil appeal in the Supreme Court. The Supreme Court held that the issue was not comprehensively considered and decided by this Tribunal, and granted Discoms the liberty to move this Tribunal for rectification, modification, etc. Accordingly, the present review petitions were filed.<\/p>\n

Issue<\/h3>\n

Whether revenue surplus accrued in previous years i.e. up to 31-10-2012, prior to commencement of operations by the Discoms would be adjusted in their ARR of subsequent years.<\/p>\n

Analysis<\/h3>\n

The Tribunal noted that the Discoms had succeeded to the electricity distribution and retail supply functions of BSEB vide Bihar State Electricity Reform Transfer Scheme, 2012 (‘the Scheme’), enacted by a government notification (‘the notification’) under Sections 131<\/a> and 133<\/a> of the Act<\/a>.<\/p>\n

The Tribunal noted that though the effective date of the transfer as per the notification was 01-11-2012, the opening balance sheets in the notification were based on balance sheet of erstwhile BSEB dated 31-03-2011. Subsequently, PFC Consulting Limited (‘PFC’) was appointed for preparing opening balance sheet of the Discoms as on 01-11-2012, based on annual accounts of erstwhile BSEB as on 31-10-2012. A revised balance sheet was prepared for the period 01-11-2012 to 31-03-2013.<\/p>\n

The Tribunal noted that the assets and liabilities of the Discoms were based on the balance sheet of BSEB as on 01-04-2011. The distribution function and activities were carried out by the BSEB up to 30-10-2012 and from 01-11-2012, the Discoms began operation.<\/p>\n

The Tribunal further noted that while determining the tariff for the period FY 2012-13, the State Commission dealt with two different periods namely 01-04-2012 to 30-10-2012 (‘BSEB period’) and 01-11-2012 to 31-03-2013 (‘Discoms period’). In the True up for FY 2012- 13, the net revenue surplus amounted to Rs 801.51 Crore, which contained a revenue surplus of Rs 862.58 Crore for BSEB period and revenue gap of Rs 61.07 Crore for Discoms period. The said True up order also indicated a revenue surplus of Rs 298 Crore based on True up for last 6 FYs, to be carried forward.<\/p>\n

The Tribunal noted that the State Commission, in the True up order for FY 2013-14 had arrived at a consolidated revenue gap of Rs 307.67 Crore. Further, the revenue gap and revenue surplus as per True up order up to FY 2013-14 were accounted for in the Tariff order for FY 2015-16.<\/p>\n

The Tribunal also noted that the Discoms were aggrieved by the consideration of the revenue surplus of Rs 298 and Rs 862.58 Crore, along with carrying cost, in the Tariff order for FY 2014-15, which was subsequently made available for recovery in ARR for FY 2015-16 and adjusted in Tariff order for FY 2015-16.<\/p>\n

The Tribunal stated that the adjustment of past surplus was mainly on the basis that such a surplus is available to the Discoms for the past period and therefore they should be accountable for adjusting this surplus to the consumers in the ensuing years. However, in the present case, the Discoms had started the distribution functions and activities in their respective areas as separate legal entities only pursuant the Scheme. The Tribunal also noted that entire assets and liabilities were not transferred to the Discoms.<\/p>\n

The Tribunal rejected the contention of the State Commission that surplus of previous years had been included in the transfer of assets and liabilities as it was not evident from the balance sheet. The Tribunal noted that only assets and liabilities as per ‘Schedule C’ of the Scheme were transferred to the Discoms. Noting this the Tribunal opined that as per the Scheme, the Discoms could not be treated as successors in the interest of the BSEB in respect of any surplus found in the books of BSEB relating to the period prior to the re-organisation of State Electricity Boards into Discoms.<\/p>\n

The Tribunal held that the adjustment of revenue surplus for the period prior to re-organisation from the ARR of subsequent years post reorganisation was not prudent as it was not aligned with the scheme of reforms under Section 131<\/a> of the Act<\/a>.<\/p>\n

Thus, the Tribunal modified the impugned order of this Tribunal to the extent of the aforementioned discussion. The Tribunal also remanded the matter back to the State Commission to the limited extent that the revenue surplus of previous years i.e., prior to re-organisation was not to be adjusted from ARR of the Discoms for FY 2015-16.<\/p>\n

However, considering consumer interest, to avoid tariff shock, the Tribunal held that the State Commission may consider adjustment of such deductions made from ARR of FY 2015-16 in favour of Discoms along with applicable carrying cost spread over certain years in the ensuing tariff orders as permitted under National Tariff Policy, 2016.<\/p>\n

The Tribunal also stated that the Discoms should take up the matter with the Government for transfer of such revenue surplus to the Discoms, so that, upon receipt of the same, it may be passed onto the consumers by the State Commission.<\/p>\n

[North Bihar Power Distribution Company Ltd v. Bihar Electricity Regulatory Commission, 2024 SCC OnLine APTEL 128<\/a>, decided on 19-12-2024<\/span>]<\/p>\n

*Order authored by:Seema Gupta, Technical Member<\/span><\/strong><\/p>\n\n

Advocates who appeared in this case:<\/p>\n

For the petitioner:<\/span> Advocates Anushree Bardhan, Srishti Khindaria, Surbhi Kapoor, and Aneesh Bajaj<\/p>\n

For the respondent:<\/span> Advocate Ravi Kishore<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

“As per transfer scheme issued under Section 131 of Electricity Act 2003, the Distribution companies cannot be treated as successors in the interest of the Bihar State Electricity Boards in respect of any surplus found in the books of BSEB relating to the period prior to re-organisation.”<\/p>\n","protected":false},"author":67011,"featured_media":337806,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[76759,76762,46635,76760,76761,76772,57084,76766,30594,76770,76765,76768,76769,76763,76771,76764,72734,76767],"class_list":["post-337796","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-adjustment-of-revenue-surplus","tag-annual-revenue-requirement","tag-aptel","tag-bihar-electricity-regulatory-commission","tag-bihar-state-electricity-board","tag-bihar-state-electricity-reform-transfer-scheme","tag-discoms","tag-distribution-companies","tag-electricity","tag-electricity-sector","tag-north-bihar-power-distribution-co-ltd","tag-power-reforms","tag-reorganization-scheme","tag-revenue-surplus","tag-section-131-of-the-electricity-act","tag-south-bihar-power-distribution-co-ltd","tag-state-electricity-board","tag-true-up"],"yoast_head":"\nAPTEL 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Gauba (Officiating Chairperson) and Sandesh Kumar Sharma (Technical Member) decided on an appeal which was filed by Solar Power Project Developer (\u201cSPD\u201d) assailing order passed by respondent Bihar Electricity Regulatory Commission (\u201cthe State Commission\u201d) disallowing the benefit of increase in the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/Electricity1.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/Electricity1.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/Electricity1.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/Electricity1.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/Electricity1.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":6635,"url":"https:\/\/www.scconline.com\/blog\/post\/2015\/05\/28\/maharashtra-state-electricity-distribution-co-ltd-directed-to-pay-dues-of-rs-2-300-crore-to-the-ratnagiri-gas-and-power-pvt-ltd\/","url_meta":{"origin":337796,"position":1},"title":"Maharashtra State Electricity Distribution Co. Ltd. directed to pay dues of Rs 2,300 crore to the Ratnagiri Gas and Power Pvt. Ltd.","author":"Sucheta","date":"May 28, 2015","format":false,"excerpt":"Appellate Tribunal for Electricity (APTEL):\u00a0While upholding the order of Central Electricity Regulatory Commission vide which Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) was directed to pay the capacity charges and energy charges as per terms and conditions of the Power Purchase Agreement, APTEL asked MSEDCL to pay dues of Rs\u2026","rel":"","context":"In "Tribunals\/Commissions\/Regulatory Bodies"","block_context":{"text":"Tribunals\/Commissions\/Regulatory Bodies","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/tribunals_commissions_regulatorybodies\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2015\/10\/scc-blog_Page_9.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2015\/10\/scc-blog_Page_9.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2015\/10\/scc-blog_Page_9.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2015\/10\/scc-blog_Page_9.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2015\/10\/scc-blog_Page_9.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":290463,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/04\/24\/power-distribution-companies-have-to-pay-change-in-law-compensation-for-all-additional-charges-levied-by-state-instrumentalities-to-power-generators-legal-research-legal-news-updat\/","url_meta":{"origin":337796,"position":2},"title":"Supreme Court explains what qualifies as \u2018Change in Law\u2019; directs DISCOMS to compensate Power Generators for all additional charges levied by State instrumentalities","author":"Apoorva","date":"April 24, 2023","format":false,"excerpt":"Supreme Court has requested the Union of India along with Ministry of Power to evolve a mechanism so as to ensure timely payment by the DISCOMS to the Generating Companies, which would avoid huge carrying cost to be passed over to the end consumers.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"change in law","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/04\/change-in-law.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/04\/change-in-law.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/04\/change-in-law.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/04\/change-in-law.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":21331,"url":"https:\/\/www.scconline.com\/blog\/post\/2015\/10\/16\/cci-denied-to-scan-fixation-of-electricity-tariffs-and-open-access-charges-case-against-discoms-closed\/","url_meta":{"origin":337796,"position":3},"title":"CCI denied to scan fixation of Electricity Tariffs and open access charges, case against Discoms closed","author":"Sucheta","date":"October 16, 2015","format":false,"excerpt":"Competition Commission of India (CCI): \u00a0CCI maintaining distance from the jurisdiction of electricity sector regulators State Electricity Regulatory Commissions (SERCs) denied to examine fixation of electricity tariffs under the provisions of S. 4 of the Competition Act, 2002. The informant association alleged abuse of dominance position by Tata Power Delhi,\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/10\/Competition-Commission.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/10\/Competition-Commission.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/10\/Competition-Commission.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/10\/Competition-Commission.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/10\/Competition-Commission.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":286691,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/03\/10\/explained-why-supreme-court-dismissed-appeal-filed-by-msedcl-and-passed-an-order-in-favour-of-adani-power-legal-news-legal-research-updates-change-in-law\/","url_meta":{"origin":337796,"position":4},"title":"Explained| Why Supreme Court dismissed MSEDCL’s appeal against compensation to Adani Power and GMR Warora Energy due to \u2018Change in Law\u2019?","author":"Editor","date":"March 10, 2023","format":false,"excerpt":"The Supreme Court upheld the judgement passed by the APTEL after observing that the generating companies were entitled to compensation so as to restore them to the same economic position, if the Change in Law had not occurred.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Adani","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/03\/MicrosoftTeams-image-699.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/03\/MicrosoftTeams-image-699.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/03\/MicrosoftTeams-image-699.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/03\/MicrosoftTeams-image-699.png?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":25231,"url":"https:\/\/www.scconline.com\/blog\/post\/2015\/11\/04\/cag-cannot-conduct-audit-of-power-distribution-companies\/","url_meta":{"origin":337796,"position":5},"title":"CAG cannot conduct audit of power distribution companies","author":"Sucheta","date":"November 4, 2015","format":false,"excerpt":"Delhi High Court: The Court quashed the order of Delhi Government to get the accounts of three private power distribution companies audited by the Comptroller and Auditor General (CAG). While holding that the CAG had the constitutional authority to audit the power distribution companies, or DISCOMs, the court said the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/337796","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67011"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=337796"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/337796\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/337806"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=337796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=337796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=337796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}