VIDYUT OMBUDSMAN

5^th Floor, Singareni Bhavan, Red Hills, Hyderabad –500 004.

Dated: 19-07-2006

Present: S. Surya Prakasa Rao, Ombudsman

Appeal No 9 of 2006

Between

M/s. Saraswathi Binny Rice Mill

Pedda Thanda (Post)

Khammam Rural (Mandal)

Khammam District. … Appellant

and

1. Divisional Engineer / Operation / Khammam.

2. Assistant Divisional Engineer / Operation / Rural / East / Khammam

3. Assistant Accounts Officer / ERO / Town / Khammam

… Respondents

This appeal dated 15-05-2006 made by M/s Saraswathi Binny Rice Mill, Pedda Thanda, Khammam (Rural) represented by Sri.B.Pulla Rao, (hereinafter called the appellant) against the order dated 17-04-2006 of the Forum for redressal of grievances of consumers (hereinafter called CGRF or Forum) NPDCL, Warangal in C.G.No.29 of 2005 (Khammam Circle) coming up before the Ombudsman, and having stood over till this day, the Ombudsman issues the following.

O R D E R

2. The facts on record in this case are briefly narrated herein. M/s Saraswathi Binny Rice Mill, is availing LT supply under LT III(A) Normal category for a contracted load of 50 HP, with service connection No.1526. The consumer installed capacitors of required rating. Pursuant to the conditions stipulated in the Tariff order of the APERC to provide HT metering for the LT III(A) consumers having connected load of 50 HP to 75 HP, the HT metering was provided to this consumer in April 2002. The HT metering provided to the consumer was showing the monthly power factor for this service as very low and hence the licensee started levy of low power factor (LPF) surcharge. The surcharge was first levied in October, 2003 and later in 8 months up to May, 2005, totaling to about Rs.1.5 lakhs. The consumer protested for this levy, but paid a part of this surcharge after obtaining installments. He then filed a complaint before the Forum of NPDCL stating that he has installed capacitors of required ratings and hence LPF is not applicable. He sought withdrawal of the surcharge levied and also sought refund of the surcharge already paid by him. The Forum in its order dated 17-04-2006 ordered for levy of the surcharge @ 25% (instead of the scale of surcharge applicable for HT consumers which varies from 1% to 3% for each 0.01 fall from the specified factor of 0.90) every month from March, 2004 to November, 2005, which totalled to an amount of about Rs.86,000 as against Rs.1,50,000 levied by the Licensee for 9 months between 10/2003 to 5/2005. Aggrieved by the said order of the Forum, the appellant filed this appeal.

3. In his appeal, the appellant referred to two cases viz;

(i) The back billing assessment made for 14 months in respect of the meter defect noticed during the inspection of DE/DPE/Khammam on 24-12-2001 and requested to rectify the assessment by limiting it to 6 months as per Electricity Act.

(ii) The LPF surcharge levied by the respondents between October 2003 and May 2005 and requested for its withdrawal on the following grounds:

(a) Capacitors of required rating were installed and they are in working condition as certified by AAE/Operation/Rural/ Khammam in his letter dated 26-12-2006.

(b) LPF surcharge is not leviable if the consumer installed capacitors of required rating and when they are in working condition.

(c) The Forum levied surcharge with out considering the clarification issued by CMD/NPDCL. (He also enclosed a copy of Memo dated 01-12-2005 of NPDCL).

4. As required under clause 8(1)(C) of the Regulation No.1 of 2004, a notice was issued on 18-05-2006 to the parties herein to arrive at a mutually acceptable settlement by 05-06-2006. If no settlement is reached, the respondent was required to file the counter by 12-06-2006 and the appellant was required to file rejoinder by 18-06-2006. The respondents have not filed any counter. As no settlement was reached, a notice was issued on 24-06-2006 fixing the date for hearing the matter on 10-07-2006 in the office of the Ombudsman at Hyderabad. Subsequently by notice dated 07-07-2006, (faxed to the respondents and appellant through SE/Operation/Khammam) the hearing place was shifted to Khammam, in the office of SE/Operation/Khammam on the same day i.e. 10-07-2006. The appellant and respondents have attended the hearing conducted in the office of SE/Operation/Khammam on 10-07-2006.

5. In the absence of detailed grounds in the appeal and in the absence of counter by respondents, the Ombudsman has to depend on his own enquiry during the hearing and on the material collected in the course of hearing, apart from the detailed order of the Forum, a copy of which was filed by the appellant along with the appeal.

6. During the hearing on 10-07-2006 the appellant made the following submissions:

(i) Even when zero units are consumed, the LPF surcharge was levied.

(ii) Licensee levied the surcharge for 9 months only where as the Forum ordered for levy of surcharge for 20 months.

(iii) Even when all switches are kept off for full day, the HT meter is recording 40 to 50 units per day and thus he is paying five to six thousand rupees extra every month. This was brought to the notices of respondents and CMD also may times.

(iv) One unit of the capacitors was rectified after receipt of notice in February, 2004.

(v) No further notice was received on the condition of the capacitors.

During the hearing the appellant drew my attention to the MRT test report dated 10-11-2004 and wanted me to study this report before taking the decision. He also handed over a copy of the letter dated 26-12-2005 of the AAE/Operation/Khammmam(R) addressed to AAO/ERO/ Town-Khammam (Respondent No.3) where in the AAE has stated that the consumer installed 3 X 6 KVAR plus 1 X 5 KVAR capacitors which are in working condition. Responding to the locus-standi issue raised by the respondents, (please see para 7(e)) the appellant produced a letter 10-07-2006 signed by Smt.A.Saraswathi, proprietor, Saraswathi Binny Rice Mill, authorizing him to represent the Rice Mill in this case.

In view of the above the appellant asserted that the Licensee is not entitled to levy the LPF surcharge on the consumer.

7. (a) The DE/Operation/Khammam (respondent No.1) replied as follows on the questions put by me.

(i) Supply was released to this consumer on 11-03-1999.

(ii) Though HT metering was provided in April 2002, the power factor was not computed till September 2003. The LPF surcharge was levied in 10/2003 as per the formula since power factor was less than 0.9.

(iii) The surcharge was not levied in subsequent months till August 2004, as there was some doubt on the procedure to be followed.

(b) I have put a specific question to the Assistant Divisional Engineer/Operation/Rural(East)/Khammam (respondent No.2), to inform the basis on which the notice dated 15-02-2004 was issued and whether any inspection was done and if so to furnish a copy of the Inspection report. The ADE replied stating that there is no record of having done any inspection before issue of the notice in February 2004 and it appears that the notice was issued based on the power factor computed as per the HT meter readings of January 2004, which was 0.675. A copy of the notice dated 15-02-2004 issued to the consumer by the respondent No.2, is provided by the respondents during the hearing, along with other documents mentioned hereinafter.

(c) Referring to the contention of the appellant that he did not receive any further notice after the notice of February 2004, the DE/Operation/Khammam stated that the consumer was regularly informed of the low power factor at the time of monthly meter readings which are also noted in consumer’s register. The ADE/Operation/Rural-East/Khammam, asserted that no reply was received for the notice dated 15-02-2004 issued by him.

(d) The respondents have also stated that the appellant has no locus- standi in this case as the consumer is a proprietary firm owned by Smt.A.Saraswathi.

(e) I have drawn the attention of the respondents to the instructions issued by CMD/NPDCL in Memo dated 01-12-2005 and asked them to inform the action taken there on. The respondent No.1 stated that these instructions were implemented only prospectively. He further stated that inspection was conducted in specific cases which required inspection for implementation of these instructions.

In view of the above, the respondents pleaded that the consumer is liable to pay LPF surcharge. The respondents have furnished copies of the following documents on 10-07-2006.

(i) Copies of MRT Test Reports dated 02-02-2000, 09-06-2000, 24-02-2001, and 10-11-2004.

(ii) Copy of letter dated 26-12-2005 from AAE/Operation/ Khammam (R) addressed to AAO/ERO/Town, Khammam.

(iii) Copy of the LT application dated 05-06-1998 of the consumer along with its enclosure.

(iv) Copy of notice dated 15-02-2004 issued to consumer by ADE/Operation/Rural (East), Khammam.

(v) Copy of notice dated 29-09-2004 issued to the consumer by ADE/Operation/Rural (East), Khammam.

(vi) Copy of Memo dated 21-01-2004 of CMD/NPDCL.

The respondent No.3 furnished the readings of KWh, Energy charges, PF, LPF surcharge etc. in his letter dated 11-07-2006. This data however does not contain the readings of KVAh, which are used for computing the power factor.

(b) A detailed study of these provisions reveal that in the case of LT III(A)-Industrial Optional demand tariff category only, the Licensee can levy Low Power Factor (LPF) surcharge as in the case of HT consumers, and in the case of others , i.e., L.T. III(A) Industrial Normal category, the Licensee has to establish that the capacitors are defective and are not functioning properly and then issue notice for its rectification with in a month and to confirm the same. If the consumer does not comply with the notice, the surcharge can be levied even retrospectively. Though HT metering is provided for LT III(A)-Industrial Normal category consumers with contracted load of 50 HP and above, it was not intended to be used for the levy surcharge based on the power factor computed form these readings as can be clearly under stood form the provisions of condition v(b) and v(c) under LT III(A) Industrial, in part B, LT tariffs, in Annexure ‘D’ of the Tariff order (2003-04, 2004-05 and 2005-06), which stipulate that the Low Power Factor (LPF) surcharge is applicable as in the case of HT consumers for LT category III(A) Industrial optional demand tariff category. It is clear from this condition that LPF surcharge based on the low power factor recorded in HT metering, can not be applied for LT III(A) Industrial-Normal category consumers. Thus the procedure specified in clause 38.9(a) of TCS should be followed for these consumers. In this case the respondents have not even inspected the service before issue of notice dated 15-02-2004 and merely relied on the low power factor recorded in the HT meter to conclude that the capacitors are defective. This procedure is not supported by any of the provisions, more so by clause 38.9(a) of TCS. Hence the notice issued in February, 2004 is not in accordance with the provisions of clause 38.9(a) of the TCS.

(c) The respondents have stated before the Forum that the LPF surcharge was levied as per the instructions of the CMD NPDCL in Memo dated 21-01-2004, a copy of which is provided along with other documents at the time of hearing on 10-07-2006. The clarifications issued in the said Memo do not appear to be in line with the tariff conditions and the TCS discussed above. The fact that different instructions have been subsequently issued by the CMD NPDCL in Memo dated 01-12-2005 proves this point. In the Memo dated 01-12-2005, the CMD/NPDCL issued instructions stating, inter alia, that if the consumer had installed required rating capacitors, no surcharge need be levied even if the power factor falls below 0.9 based on the readings of the Trivector meter, if available. It was also stated there in that this was also discussed with the APERC on 29-11-2005. The respondents have however implemented these instructions prospectively from December 2005 onwards but not retrospectively.

(d) During the hearing on 10-07-2006, in response to my question, the appellant stated that the capacitors were connected after the main switch. This means that when the Rice Mill is not working the capacitors will also be switched off. As, the metering is located on the HT side of the Distribution Transformer (DTR) the reactive power drawn by the DTR during the idle period would influence the monthly average power factor in the absence of compensation from the capacitors of the consumer which will be in off position when the mill is not working. More over rural industries would not work continuously through out the day in a month. Further, it is to be noted that the DTR is installed and maintained by the Licensee for LT consumers. In such case, whether the consumer should compensate the Licensee for the impact of the reactive load imposed by Licensee’s equipment is a moot question.

(e) Thus in the absence of specific enabling provision by the competent authority to levy surcharge based on the power factor recorded in the HT metering provided for LT consumers, I am of the view that the Licensee can not levy the surcharge. Perhaps it is necessary to consider the impact of Licensees equipment (DTR) while prescribing such enabling provision, if any.

(f) In the case of this service, the power factor computed from the HT readings as furnished in letter dated 11-07-2006 of respondent No.3 have been far below 0.5 for most of the months while the power factor (instantaneous) observed during the testing of the consumer load by MRT Engineers on different dates stood between 0.8 and 0.9 as follows:

Date of Test	Power factor observed
02-02-2000	0.895
09-06-2000	0.797
24-02-2001	0.836

The test report dated 10-11-2004 referred to by the appellant during hearing on 10-07-2006 showed the (instantaneous) power factor as follows:

R phase	: 0.860
Y phase	: 0.863
B phase	: 0.881

In view of the above, it is reasonable to infer that the reactive load of DTR during non-working of the mill would have substantially influenced the average monthly power factor computed from the readings in the HT metering, for which in all fairness, the consumer should not be penalised.

(g) The learned Forum in its order dated 17-04-2006 took the view that the Licensee is entitled to levy LPF surcharge @ 25% for failure to rectify the capacitors pursuant to the one month notice issued in this regard by the Licensee. In coming to this conclusion the learned Forum appears to have taken it for granted that the LPF is attributable to defect in the capacitors as contended by the respondents. But the Terms & conditions of supply or the Tariff conditions do not provide for any such assumption and more over the impact or DTR during non-working period of the Mill, is not taken into account. Unless the defect is established by conducting necessary tests (as per ISS) to check its output (KVAR), I am of the view that the low power factor cannot be attributed merely to non-functioning of capacitors. Hence I am unable agree with the view of the learned Forum in this regard. The order of the learned Forum is therefore liable to be set aside.

10. Concluding the above discussion, I decide the following award in this appeal

(a) The surcharge levied on the consumer towards the low power factor from October, 2003 on wards upto November, 2005 shall be withdrawn for the following reasons:

(i) The consumer provided the LT capacitors of required rating as per the TCS and Tariff order and their defect is not established by the respondents.

(ii) There is no specific provision in the Tariff orders of the Commission for the year 2003-04 to 2005-06 imposing the liability for payment of low power factor surcharge on LT III(A) Industrial-Normal category consumers based on the power factor computed as per the trivector metering provided on HT side of the DTR for such consumers.

(b) The amount paid, if any, by the consumer towards the LPF surcharge for the period between October, 2003 and November, 2005 shall be refunded by adjustment in future CC bills.

(c) Such adjustment shall convence form the month in which the appellant gives acceptance letter for this award in terms of clause 12 of the Regulation No.1 of 2004.

11. Before parting with this case, I would like to request the respondent No.1 to examine whether the consumer be advised to install the 5 KVAR capacitors before the main switch so that this capacitor bank would always be connected to the LT Bus of the DTR and would compensate for the inductive load of the DTR even during the non-working period of the Mill. Such suggestion was made by the DE/Operation/Adilabad in the case of Pranav Rice Industry referred in para 9(a) above.

This order is signed on the 19^th day of July, 2006.

VIDYUT OMBUDSMAN

1. M/s. Saraswathi Binny Rice Mill

Pedda Thanda (Post)

Khammam Rural (Mandal)

Khammam District.

2. Divisional Engineer / Operation / Khammam.

3. Assistant Divisional Engineer / Operation / Rural / East / Khammam

4. Assistant Accounts Officer / ERO / Town / Khammam

Copy to

The Chairperson,

Forum for redressal of grievances of consumers,

NPDCL, Warangal.

The Secretary, APERC,

Hyderabad.

Annexure - I

The relevant provisions of TCS and the tariff conditions of Tariff order of the relevant period

Clause 38.9(a): “Power Factor of apparatus other than welding Transformer: Every L.T. consumer using induction motors shall instal L.T. shunt capacitors of specified rating as given below.

*SI.No.*	*Rating of individual* *motor*	*KVAR rating of L.T. Capacitors* *for various R.P.M. of the motors*
*SI.No.*	*Rating of individual* *motor*	*750* *RPM*	*1,000* *RPM*	*1,500* *RPM*	*3,000* *RPM*
1.	3 h.p.	1	1	1	1
2.	5 h.p.	2	2	2	2
3.	7.5 h.p.	3	3	3	3
4.	10 h.p.	4	4	4	3
5.	15 h.p.	6	5	5	4
6.	20	8	7	6	5
7.	25 h.p.	9	8	7	6
8.	30 h.p.	10	9	8	7
9.	40 h.p.	13	11	10	9
10.	50 h.p.	15	15	12	10

If the existing consumer fails to install capacitors of required rating within such time as may be fixed by the Board, such of those consumers as may be specified by the Board are liable to pay surcharges as may be fixed by the Board from time to time. If the capacitors already installed are found, during inspection, to be damaged or become defective or cease to function, the consumer shall be served with a notice to get the same replaced/rectified or corrected within 30 days of the inspection and intimate the fact of replacement/rectification to the concerned Section Officer, Operation, of the Board, who will inspect the capacitors again to verify their satisfactory performance. In the event of failure on the part of the consumer to comply with the above notice, the Board may levy a surcharge of 25% per month on the bill amount or as may be prescribed by the Board from time to time from the date from which the capacitor was defective or ceased to function till such time the capacitor is replaced/rectified or corrected., Provided further that such retrospective levy of surcharge shall be limited to one year from the date of inspection. The consumer aggrieved by the retrospective levy, may appeal to the concerned Superintending Engineer, Assessments, whose decision shall be final. The failure on the part of the consumer to comply with the above notice, shall be treated as violation of Terms and Conditions of Supply and Board reserves the right to terminate the contract and collect the balance initial period agreement.”

Clause 38.10(a): “Every consumer whose connected load includes welding transformer shall install L.T. shunt capacitors of the capacity mentioned in clause 38.10.1 and 38.10.2 for improving the power factor. If the existing consumers fail to install capacitors of required rating within such time as may be fixed by the Board such of these consumers as may be specified by Board, are liable to pay surcharge, as may be fixed by the Board from time to time.

If the capacitors already installed are found, during inspection to be damaged or become defective or cease to function, the consumer shall be served with a notice to get the same replaced/rectified or corrected within 30 days of the inspection and intimate the fact of replacement/rectification to the concerned Section Officer (Operation) of the Board, who will inspect the capacitors again to verify their satisfactory performance.

In the event of failure on the part of the consumer to comply with the above notice, the Board may levy a surcharge of 25% per month on the bill amount or as may be prescribed by the Board from time to time from the date from which the capacitor was defective or ceased to function till such time the capacitor is replaced/rectified or corrected. Provided further that such retrospective levy surcharge shall be limited to one year from the date of inspection. The consumer aggrieved by the retrospective levy, may appeal to the concerned Superintending Engineer/ Assessments, whose decision shall be final.

The failure on the part of the consumer to comply with the above notice, shall be treated as violation of Terms and Conditions of Supply and Board reserves the right to terminate the contract and collect the sum equivalent to the minimum charges for the balance initial period of agreement.”

Clause 23 of TCS

“23: Surcharges for lower power Factor: The power factor for the month shall be the ration of Kw hours to the Kilo-Volt Ampere-Hours supplied to the consumer during the month. The power factor shall be calculated upto two decimal places. The power factor of the consumer’s installation shall not be less than 0.90. If the power factor falls below 0.90 during any month, the consumer shall pay a surcharge as detailed below.

*SI.No.*	*Power factor* *Range*	*Surcharge*
1.	Below 0.90 & upto 0.85	1% of c.c. charges bill of that month for every fall of 0.01 of power factor from 0.9
2.	Below 0.85 & upto 0.80	1.5% - do - from 0.85
3.	Below 0.80 & upto 0.75	2% - do - from 0.80
4.	Below 0.75	3% - do - from 0.75

Should the power factor drop below 0.75 and so remain for a period of 2 consecutive moths, it must be brought to 0.90 within a period of 6 months by methods approved by the Board failing which without prejudice to the right of the Board to collect the surcharge and without prejudice to such other rights as have accrued to the Board or any other right of the Board, the supply to the consumer may be discontinued.”

Annexure – II

Relevant Provisions of Tariff Orders

“Note: under LT category III(A), part B, LT Tariffs of Tariff order (2003-04, 2004-05 and 2005-06)

(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(v)

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) For loads 50HP to 75HP the metering will be provided on HT side of the Distribution Transformer.

(c) The Low Power Factor (LPF) surcharge is applicable as in the case of HT consumers for LT Category III (A) Industrial – Optional demand tariff category.”

Clause (6) of GENERAL CONDITIONS OF H.T. SUPPLY under part A HT Tariffs of the Tariff Order (2003-04, 2004-05 and 2005-06)

“(6) SURCHARGE FOR LOW POWER FACTOR

The power factor for the month shall be the ratio of Kilo-Watt hours to the Kilo-Volt-Ampere Hours supplied to the consumer during the month. The power factor shall be calculated upto two decimal places. The power factor of the consumer’s installation shall not be less than 0.90. If the power factor falls below 0.90 during any month, the consumer shall pay a surcharge as detailed below:

S.No.	Power Factor Range	Surcharge
1.	Below 0.90 & upto 0.85	1% of C.C. charges bill of that month for every 0.01 fall in Power Factor from 0.90
2.	Below 0.85 & upto 0.80	1.5% of C.C. charges bill of that month for every 0.01 fall in Power Factor from 0.85
3.	Below 0.80 & upto 0.75	2% of C.C. charges bill of that month for every 0.01 fall in Power Factor form 0.80
4.	Below 0.75	3% of C.C. charges bill of that month for every 0.01 fall in Power Factor from 0.75

Should the power factor drop below 0.75 and so remain for a period of 2 consecutive moths it must be brought upto 0.90 within a period of 6 months by methods approved by the Licensee failing which, without prejudice to the right of the Licensee to collect surcharge and without prejudice to such other rights as having accrued to the Licensee or any other right of the Licensee, the supply to the consumer may be discontinued.”

Part ‘D’ of Annexure D of the Tariff Order (2003-04 and 2004-05).

PART ‘D’

“POWER FACTOR APPARATUS

1. FOR H.T. AGRICULTURAL CONSUMERS

Every H.T. Agricultural Consumer using induction motors shall install L.T. Shunt capacitors of specified rating as given below:

Table of rating of capacitors

2. FOR L.T. CONSUMERS

Every L.T. Consumer using induction motors and welding transformers shall install L.T. Shunt Capacitors of specified rating as given below:

(a) Motors

Table of rating of capacitors

(b) Welding transformers

Table of rating of capacitors

NOTE

1. If any consumer fails to install the capacitors at all or fails to install the capacitors of required rating or the capacitors already installed are found during inspection to be damaged or become defective or ceased to function, such consumer shall attract penal provisions as per General Terms and conditions of supply notified by the licensee from time to time.

2. Low Power factor surcharge is to be levied for the consumers falling under LT III (A) Industrial (Optional) and LT III (B) Industrial Optional categories as applicable to HT consumers.

3. In case the rated capacity of the induction motor or welding transformer falls in between the steps of the stipulated ratings, the capacitors suitable for the next higher step shall be installed by the consumer.

4. The failure on the part of the consumer to comply with the above requirement shall be treated as violation of terms and conditions of the supply and the Licensee can terminate the contract and collect the sum equivalent to the minimum charges for the balance initial period of agreement.”

Part ‘D’ of Annexure D of the Tariff Order (2005-06).

PART ‘D’

POWER FACTOR APPARATUS and Capacitor Surcharge

1. FOR H.T. AGRICULTURAL CONSUMERS

Every H.T. Agricultural Consumer using induction motors shall install L.T. Shunt capacitors of specified rating as given below:

Table of rating of L.T. capacitors

2. FOR L.T. CONSUMERS

Every L.T. Consumer using induction motors and welding transformers shall install L.T. Shunt Capacitors of specified rating as given below:

(a) Motors

Table of rating of L.T. capacitors

(b) Welding transformers

Table of rating of capacitors

NOTE

1. New connections under HT Cat IV(A),(B), LT Cat III(A),(B), LT Category IV and LT Category V shall not be given unless the capacitors of required ratings are installed.

2. If during inspection, no capacitor is found, or the capacitors already installed are found to be damaged or having defect or ceased to function, such consumer shall be liable to pay surcharge @ 25% of the monthly bill amount, as per the terms and conditions of supply notified by the licensee.

3. Low Power factor surcharge is to be levied for the consumers falling under LT III(A) Industrial (Optional) and LT III(B) Industrial Optional categories as applicable to HT consumers.

4. In case the rated capacity of the induction motor or welding transformer falls in between the steps of the stipulated ratings, the capacitors suitable for the next higher step shall be installed by the consumer.

5. The failure on the part of the consumer to comply with the above requirement, shall be treated as violation of terms and conditions of the supply and the Licensee can terminate the contract and collect the sum equivalent to the minimum charges for the balance initial period of agreement, apart from disconnection of supply as provided in the Terms and Conditions of Supply.