Case Note & Summary
The Supreme Court dismissed two civil appeals concerning the apportionment of Foreign Exchange Rate Variation (FERV) in tariff determination for transmission companies. The appellant, Power Grid Corporation of India, challenged the judgment of the Appellate Tribunal for Electricity which had directed that FERV be apportioned only in respect of debt liability, not equity. The appellant argued that FERV, once added to capital cost, should be apportioned between debt and equity based on a normative debt-equity ratio of 50:50, as a matter of practice. The respondent, Tamil Nadu Generation and Distribution Co. Ltd., contended that no such practice existed and that the Electricity Regulatory Commissions Act, 1998 aimed to eliminate such practices. The Court examined the Tariff Regulations, 2001, particularly Regulations 1.3, 1.7, and 1.13(a). It found that Regulation 1.13(a) only provided a methodology for calculating FERV, not for its apportionment. The Court noted that no rule, regulation, statute, or precedent was cited to support the mandatory apportionment of FERV in a debt-equity ratio. Additionally, the Court observed that FERV could be recovered directly by utilities from beneficiaries without filing a petition, as per Regulations 1.3 and 1.7. The Court also considered the unfairness of varying FERV apportionment for the period 2001-2004, as it would burden current consumers who were not consumers during that period, citing U.P. Power Corpn. Ltd. v. NTPC Ltd. Consequently, the Court held that the issue did not involve a substantial question of law and dismissed both appeals with no order as to costs.
Headnote
A) Electricity Law - Tariff Determination - Foreign Exchange Rate Variation (FERV) - Apportionment between Debt and Equity - Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2001, Regulations 1.3, 1.7, 1.13(a) - The issue of apportionment of FERV after calculation and addition to capital cost was not a substantial question of law. No rule, regulation, statute or precedent required such apportionment. The appellant's practice of apportioning FERV in a 50:50 debt-equity ratio was unsupported by any legal provision. The Court held that FERV can be recovered directly by utilities from beneficiaries without filing a petition before the Commission, as per Regulations 1.3 and 1.7. (Paras 6-8) B) Electricity Law - Consumer Protection - Retrospective Tariff Variation - Unfair Burden on Consumers - The dispute pertained to tariff for 2001-2004. Any variation in FERV apportionment now would be passed on to current consumers who were not consumers during that period, causing unfairness. The Court relied on U.P. Power Corpn. Ltd. v. NTPC Ltd., (2009) 6 SCC 235 to decline interference. (Para 10)
Issue of Consideration
Whether Foreign Exchange Rate Variation (FERV) after being added to capital cost must be apportioned between debt and equity in a normative debt-equity ratio.
Final Decision
Both Civil Appeal No. 684 of 2007 and Civil Appeal No. 13452 of 2015 are dismissed. No order as to costs.
Law Points
- Foreign Exchange Rate Variation (FERV) apportionment
- Capital cost
- Debt-equity ratio
- Tariff Regulations
- 2001
- Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations
