Calcutta High Court strikes down law allowing electricity companies to penalise consumers for excess usage

The Calcutta High Court recently struck down a West Bengal law allowing electricity companies to penalise consumers for using more power than the permitted limit [Metsil Exports Private Limited and Another v West Bengal Electricity Regulatory Commission and Others]. .Justice Sabyasachi Bhattacharya said that Regulation 4.4 of the West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2011 is arbitrary, against principles of natural justice and in violation of the Constitution of India. The Court noted that under the said provision, the licensee can, without attributing any reason whatsoever and without giving a reasonable notice, determine its own tariff by charging double the amount of electricity charges by reason of its own erroneous imposition of drawal limits.“Regulation 4.4, by its very fabric, is implicitly abusive of the Constitutional principle of equality and non-discrimination by the very arbitrariness involved therein, since there is nothing in the provision to prevent the licensee [electricity distributing companies] from imposing such drawal limits whimsically and at the drop of a hat, even without any justification or reason whatsoever, in the absence of any guideline or framework for working the same,” the Court said. .Regulation 4.4 says that if in a 15-minute time block, a consumer draws power more than the restricted limit set by the electricity company, then they will pay double the normal rate for the extra amount used. The Bench rejected the argument of the West Bengal Electricity Regulatory Commission (WBERC) that the regulation is designed to protect the power grid from stress and destabilisation.Justice Bhattacharya noted that the provision does not outright prohibit excess drawal at all but merely imposes a financial deterrent, which is left to the whims of the licensee.“Hence, in a given case, a consumer is entitled to overdraw electricity to an infinite extent, thereby jeopardizing the power grid or bringing it down altogether, but be purged of such guilt by merely paying additional charges. In the process, if the grid stability is affected and even if the entire grid supply collapses, affecting the entire range of consumers being supplied through it, there is nothing in Regulation 4.4 to prevent the consumer from doing so.”Pertinently, the Court said that its ruling will operate prospectively and shall not affect any bills which may have been raised for any billing period before the passing of the order. .The High Court passed the judgement on May 2 after a company named Metsil Exports Private Limited challenged the regulation and the levy imposed by the Damodar Valley Corporation (DVC) for overdrawal of electricity above the restricted drawal limit fixed by the DVC for a particular period.The DVC is a licensee of the WBERC and provides electricity in parts of West Bengal and Jharkhand. It was argued that under the guise of Regulation 4.4, the licensee has been conferred with ‘unfettered’ and ‘uncanalised’ discretion to impose restricted drawal limits at its whims. Metsil said that no guidelines for the exercise of such discretion has been provided in the regulations. .After considering the case, the High Court struck down the law but said the WBERC may frame appropriate, fresh regulations for curbing excess drawals, which might jeopardise the grid stability.However, it enumerated certain conditions which must be followed. This includes the mandate that at each instance of restriction of drawal, the licensee must give at least 24-hour notice to the consumer. "The tariff to be imposed has to be governed by specific guidelines proportionate to the damage, if any, caused to the grid, based on scientific principles, which may also be assessed subsequently before imposition of such excess penalty. While so assessing, the concerned consumer must be given a right of hearing by the licensee,” the Court added. It further said that WBERC might contemplate the formation of a separate body of experts for grid management or formulate regulations, including a cut-off limit, beyond which no consumer will be allowed to draw electricity. “However, it will be the incumbent duty of the licensee, at any given point of time during subsistence of a contract, to supply the contracted demand to the consumer, if necessary, by procuring electricity from other sources within the grid. The licensee, before entering into any power supply agreement, shall assess the grid parameters and capacity for the purpose of fixing contracted demand with consumers,” the Bench said. .Advocates Surajit Nath Mitra, Tanoy Chakraborty and Siddharth Shroff appeared for the petitioners. Senior Advocate Pratik Dhar and advocate Ritwik Pattanayak represented the WBERC. The DVC was represented by advocates Abhrotosh Majumdar, Prasun Mukherjee and Deepak Agarwal. .[Read Judgment]