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Sai Bhaskar Iron Ltd. Vs. A.P. Electricity Regulatory Commission & Ors.
1. Delay condoned in filing SLPs.
3. The question involved in the present case is with respect to levy of fuel surcharge adjustment (in short 'FSA') which is collected from the consumers in addition to fixed tariff for consumption of power. The concept of FSA was brought in by the Andhra Pradesh Electricity Reform Act, 1998 (hereinafter referred to as 'the Act of 1998'). Earlier the Electricity Board used to collect fuel cost adjustment.
Under section 3(1) of the Act of 1998, Andhra Pradesh Electricity Regulatory Commission has been established bestowed with the power to grant licences and fix tariff for supply of power. Section 26(9) of the Act lays down that no tariff or part of tariff required to be determined under sub-section (6) of section 29 may be amended more frequently than once in any financial year ordinarily except in respect of any changes expressly permitted under the terms of any fuel surcharge formula prescribed by the regulations.
4. The Government of India enacted the Electricity Act, 2003 (hereinafter referred to as "the Act of 2003") to consider the laws of trading of power for the purpose of making it consumer-friendly and to create better environment for development of power industry, at the same time protecting the rights of the consumers. Section 62(3) of the Act of 2003 prohibits preference to any consumer of electricity but may differentiate according to the consumer's load factor and other aspects permissible under the aforesaid provision.
Section 62(4) of the Act of 2003 is pari materia to section 26(9) of the Act of 1998. By virtue of the power conferred under sections 9(2) and 54(2) of the Act of 1998, the A.P. Electricity Regulatory Commission (hereinafter referred to as "the Commission") has framed the Andhra Pradesh Electricity Regulatory Commission (Conduct of Business) Regulations, 1999 (hereinafter referred to as "the Regulations of 1999"). The Commission has framed Regulation No.8 dated 28.8.2000 called Andhra Pradesh Electricity Regulatory Commission (Conduct of Business) First Amendment Regulations, 2000.
By virtue of the aforesaid First Amendment Regulations, provisions contained in the chapter on tariff were incorporated by way of Regulation 45-A specifying expected revenue from charges and tariff proposals and under Regulation 45-B fuel surcharge adjustment formula was prescribed. Regulation 45C was also inserted providing for subsidies as the State Government may consider appropriate. Regulation 45-B was further amended by way of reforms called the Andhra Pradesh Electricity Regulatory Commission (Conduct of Business) Amendment Regulations, 1 of 2003. They came into force w.e.f. 1.4.2003. The amended Regulation 45-B provided a formula for working out the FSA. Condition No.1 also mentioned that FSA will be distributed among all categories of consumers that existed in the quarter.
However the consumption by the agricultural sector will be excluded till the Commission is satisfied that metering of agricultural consumption is complete, as may be notified from Tariff orders from time to time. As per section 61 of the Act of 2003, the Commission has to be guided by the aforesaid provisions. As the Central Government had not framed the national electricity policy or interim policy, as such Regulation No.9 of 2004 was notified by the A.P. Electricity Regulatory Commission.
The Commission made the transitory Regulations in exercise of the power conferred under section 181 read with section 61 of the Act of 2003 called the A.P. Electricity Regulatory Commission (Transitory Provisions for Determination of Tariff) Regulations, 2004 (in short "Regulations of 2004"). They came into force w.e.f. 10.6.2004. It was specified that the Regulations of 1999 as amended from time to time under the provisions of the Act of 1998 shall continue to apply as regulations under the Electricity Act, 2003 and remain in force till appropriate new regulations are notified by the Commission under the Electricity Act, 2003.
5. The Commission had also framed terms and conditions for determination of tariff for wheeling and retail sale of electricity called the Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Wheeling and Retail Sale of Electricity), Regulation, 2005. Aggregate Revenue Requirement (in short "ARR") was specified in Regulation 2(1)(2). Regulation 3(4) provided ARR to be the basis for the fixation of the tariff/charges for retail sale of electricity including surcharges. However Regulation 24(3) provided that nothing in the Regulation shall, expressly or by implication, bar the Commission from dealing with any matter or exercising any power under the Act for which no Regulations have been framed, and the Commission may deal with such matters, exercise such powers and discharge such functions in a manner it deems fit.
The orders of the Commission determining the FSA were questioned before the High Court. Writ petitions were filed before the High Court challenging the vires of section 26(2) of the Act of 1998, and the validity of Regulation 45-B of Regulations of 1999 as substituted in 2003. The Commission determined the FSA for all the eight quarters for the period from 2010 to March, 2012 vide order dated 20.9.2012 and vide order dated 2.11.2012 for the first quarter of financial year 2012-13.
The orders were also questioned in the writ petition. The Division Bench of the High Court vide order dated 24.2.2014 upheld the vires of the Regulations and on merits left the matter to be agitated in the alternative remedy of appeal. However, writ petitions which were filed were also disposed of in terms of order dated 24.2.2014 hence the special leave petitions have been filed in this Court.
6. It was submitted on behalf of the appellants that Regulation 45-B of the Regulations of 1999 is ultra vires the provisions contained in section 26(9) of the Act of 1998 and section 62(4) of the Act of 2003, insofar as it provides for inclusion of any variation other than that arising out of fuel costs alone. It was further submitted that only fuel cost had to be considered and no other charges other than transportation can be included.
The FSA formula in Regulation 45B provides for element other than variable cost of all purchases even beyond variation of fuel costs alone and the same transgresses the limits of FSA formula permitted under the Act. Since the provision of section 26(9) of the Act of 1998 and section 62 of the Act of 2003 provide for variation of tariff more than once in a financial year the exception provided is with respect to FSA. Fuel has to be given natural meaning.
In fact, the negative imperative of no variation of tariff more than once is being violated. Condition Nos.5, 10 and 11 of the formula are also ultra vires to the aforesaid provisions. It was also submitted that providing for exclusion of agricultural consumption till metering of agricultural services are complete as contained in Condition 1 of Regulation 45-B is bad in law and contrary to the mandate of section 55(1) of the Act of 2003; more so, after a lapse of 2 years' period. Time mandated under section 55(1) for metering the consumption has not been extended.
Mandate of compulsory metering has taken effect from 10.6.2005. Consequently, condition No.1 is repugnant to the aforesaid provision as such it was submitted that all sales of electricity including the agricultural consumption has to be considered in computing the factor 'Qi' in the FSA formula. Regulation 45B ceased to have effect on 10.6.2004 after one year from the date of coming into force of the Electricity Act, 2003 by virtue of the proviso to section 61 of the said Act. It was further submitted that on coming into force of Tariff Regulation 4 of 2005 modified under the Act of 2003, Regulations of 1999 containing Regulation 45-B ceased to have the effect.
The Regulations of 2003 were also attacked on the ground that there was no previous publication of the draft. Regulation 9 of 2004 made under the Reform Act with retrospective effect of 10.6.2004, the Commission has no power to make regulations with retrospective effect. Regulation 45B casts an additional burden without authority of law. Condition No.1 is contrary to the provision contained in sections 61 and 65 of the Act of 1998.
It was also submitted that it was the liability of the State Government to compensate the supplier of electricity affected by the grant of subsidy made to the agricultural sector. Condition No.1 is also contrary to sections 61 and 65 of the Act of 2003. Regulations of 2005 indicate that power purchase cost for each year stands included in the ARR and FSA over and above the purchase cost. It does not provide for adjustment in price on account of fluctuation in the cost of fuel. Formula for determining the FSA travels beyond that.
7. It was submitted on behalf of the Commission and the State Government that under section 85(3) of the Act of 2003, the Act of 1998 is saved, in the Schedule at serial No.3. Consequently, the provisions of the Act of 1998 which are not consistent with the provisions of the Act of 2003 shall continue to apply to the State of Andhra Pradesh. The saving provision in the Regulations of 2005 reflects that the Regulations of 1999 framed under the Act of 1998 are still in operation. Regulation 12.4 of Regulations of 2005 provides for levy of FSA. The fuel surcharge has not been defined under the Act of 1998 or the Act of 2003 or in the Regulations of 2005 framed there under.
The meaning and scope of fuel surcharge is given in Regulation 45-B of Regulations of 1999. The formula contains the components to form part of FSA and had been implemented for the last more than one decade. FSA has been determined as per the formula prescribed under Regulation 45-B. It is incorrect to submit that FSA should be confined to variation of fuel cost. Condition Nos.1, 5, 10 and 11 of Regulation 45-B have been notified in the Gazette, therefore, there is complete compliance of the provisions contained in section 55(1) of the Act of 2003.
The Commission is empowered to differentiate according to consumer's load factor or power factor etc. as provided in section 26(7) of the Act of 1998. Similar provisions are contained in section 62(3) of the Act of 2003. The Commission has power to frame the regulations under sections 26(9) and 54 of the Act of 1998 with respect to FSA and under section 62(4) of the Act of 2003. FSA is a related surcharge levied to meet the increased cost of generation and purchase of electricity. The vires of section 62(4) of the Act of 2003 have not been questioned and the challenge to the vires of the provisions of section 26(9) of the Act of 1998 has been given up. The orders passed by the Regulatory Commission are justified and writ petitions have been rightly dismissed by the High Court.
8. For appreciating the rival contentions, we deem it appropriate to take note of the various provisions of the Act of 1998 which have been enacted to establish and incorporate autonomous statutory Electricity Regulatory Commissions to balance the interest of all the stakeholders in the electricity industry and to promote healthy growth of power sector in the State. The State has been divested of its regulatory functions. Section 11 deals with the functions of the Commission.
(1) The holder of each licence granted under this Act shall observe the methodologies and procedures specified by the Commission from time to time in calculating the expected revenue from charges which it is permitted to recover pursuant to the terms of its licence and in designing tariffs to collect those revenues.
(2) The Commission shall subject to the provisions of sub-section (3) be entitled to prescribe the terms and conditions for the determination of the licensee's revenue and tariffs by regulations duly published in the Official Gazette and in such other manner as the Commission considers appropriate.
(b) the factors which would encourage efficiency, economic use of the resources, good performance, optimum investments performance of licence conditions and other matters which the Commission considers appropriate keeping in view the salient objects and purposes of the provisions of this Act; and (c) the interest of the consumers.
(3) Where the Commission, departs from factors specified in the Sixth Schedule of the Electricity (Supply) Act, 1948 while determining the licensees' revenues and tariffs, it shall record the reasons therefor in writing.
(4) Any methodology or procedure specified by the Commission under sub- sections (1), (2), and (3) above shall be to ensure that the objectives and purposes of the Act are duly achieved.
(ii) propose a modification or an alternative calculation of the expected revenue from charges, which the licensee shall accept.
(6) Each holder of a supply licence shall publish in the daily newspaper having circulation in the area of supply and make available to the public on request the tariff or tariffs for the supply of electricity within its licensed area and such tariff or tariffs shall take effect only after seven days from the date of such publication.
(c) shall satisfy all other relevant provisions of this Act and the conditions of the relevant licence.
(8) The Commission also shall endeavour to fix tariff in such a manner that, as far as possible, similarly placed consumers in different areas pay similar tariff.
(9) No tariff or part of any tariff required by sub-section (6) may be amended more frequently than once in any financial year ordinarily except in respect of any changes expressly permitted under the terms of any fuel surcharge formula prescribed by regulations. At least three months before the proposed date for implementation of any tariff or an amendment to a tariff the licensee shall provide details of the proposed tariff or amendment to a tariff to the Commission, together with such further information as the Commission may require to determine whether the tariff or amended tariff would satisfy the provisions of sub-section (7).
If the Commission considers that the proposed tariff or amended tariff of a licensee does not satisfy any of the provisions of sub-section (7), it shall, within 60 days of receipt of all the information which it required, and after consultation with the Commission Advisory Committee and the licensee, notify the licensee that the proposed tariff or amended tariff is unacceptable to the Commission and it shall provide to the licensee an alternative tariff or amended tariff which shall be implemented by the licensee. The licensee shall not amend any tariff unless the amendment has been approved by the Commission.
(10) Notwithstanding anything contained in Sections 57-A and 57-B of the Electricity (Supply) Act, 1948, no Rating Committee shall be constituted after the date of this enactment and the Commission shall secure that licensees comply with the provisions of their licences regarding their charges for the sale of electricity (both wholesale and retail) and for the connection to and use of their assets or systems in accordance with the provisions of this Act.
(b) "tariff" means a schedule of standard prices or charges for specified services which are applicable to all such specified services provided to the type or types of customers specified in the tariff notification." Section 26(9) specifically allows changes in fuel surcharge which is to be prescribed as per the formula prescribed by the regulations.
9. The Commission has power under section 26 of the Act of 1998 to prescribe tariffs by Regulations duly published in the Official Gazette, inter alia, considering the interests of consumers. Licensee is obligated to furnish the information under section 26(5) as to its calculation for financial year of the expected aggregate revenue which it would recover. Under section 26(6) the holder of a supply licence shall publish in the daily newspaper tariff or tariffs for the supply of electricity in his licensed area.
As per the provision in section 26(8) the Commission shall endeavour to fix tariff in the manner as far as possible, similarly placed consumers in different areas pay similar tariff. Section 26(9) creates a negative mandate on amendment of tariff determined under section 26(6) which may not be amended more than once in a financial year except FSA. Section 39 provides for appeals against the orders of the Commission. Section 54 of the Act of 1998 deals with the power to make regulations. Under section 54(2)(g) the Commission has the power to fix the method and manner of determination of licensee's revenues and tariff fixation and the matters to be considered in such determination and fixation.
(1) Save as otherwise provided in this Act, the Indian Electricity Act, 1910 (9 of 1910), the Electricity (Supply) Act, 1948 (54 of 1948) and the Electricity Regulatory Commissions Act, 1998 (14 of 1998) are hereby repealed.
(e) all directives issued, before the commencement of this Act, by a State Government under the enactments specified in the Schedule shall continue to apply for the period for which such directions were issued by the State Government.
(3) The provisions of the enactments specified in the Schedule, not inconsistent with the provisions of this Act, shall apply to the States in which such enactments are applicable. (4) The Central Government may, as and when considered necessary, by notification, amend the Schedule. (5) Save as otherwise provided in sub-section (2), the mention of particular matters in that section, shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897), with regard to the effect of repeals.
1. The Orissa Electricity Reform Act, 1995 (Orissa Act No.2 of 1996).
2. The Haryana Electricity Reform Act, 1997 (Haryana Act No. 10 of 1998).
3. The Andhra Pradesh Electricity Reform Act, 1998 (Andhra Pradesh Act No. 30 of 1998).
4. The Uttar Pradesh Electricity Reform Act, 1999 (Uttar Pradesh Act No. 24 of 1999).
5. The Karnataka Electricity Reform Act, 1999 (Karnataka Act No. 25 of 1999).
6. The Rajasthan Electricity Reform Act, 1999 (Rajasthan Act No. 23 of 1999).
7. The Delhi Electricity Reforms Act, 2000 (Delhi Act No. 2 of 2001).
8. The Madhya Pradesh Vidyut Sudhar Adhiniyam, 2000 (Madhya Pradesh Act No. 4 of 2001).
9. The Gujarat Electricity Industry (Reorganisation and Regulation) Act, 2003 (Gujarat Act No. 24 of 2003)."
In the Schedule at item No.3, Act of 1998 is mentioned as such it has been saved from repeal. As specified and provided under section 185(3) of the Act of 2003, the provisions of the Act of 1998, which are not inconsistent with the provisions of the Act of 2003 are in vogue.
11. In the aforesaid backdrop, we proceed to take note of the Regulations of 1999 framed by the Commission under the provisions of sections 9 and 54 of the Act of 1998. The Regulations provide for provisions for conduct of the business. By virtue of the First Amendment Regulations, 2000, the Regulations of 1999 had been amended. Under the heading of tariffs, Regulation 45-B has been inserted providing for fuel surcharge adjustment formula.
Regulation 45-B had been substituted in 2003 which is extracted hereunder: "45-B: Unless otherwise agreed by the Commission, the amount eligible for recovery towards the Fuel Surcharge Adjustment (FSA) for the price and mix variations in the quantity of energy to be purchased as per the tariff order during a quarter '1' shall be determined as per the following formula, aggregated for the quarter '1'.
Where Pi is the difference in the Weighted Average Variable Cost in Rupees adjusted to four decimal points, of power purchase cost in quarter '1' for the power purchase quantity mentioned in the tariff order compared to the Weighted Average Variable Cost adopted in the tariff order.
Ei is the energy purchase as mentioned in the tariff order in K wh during the quarter to be submitted for each of the generating stations.
FCi difference in Rupees, of the actual total fixed charges of the generating stations from the base values adopted in the tariff order.
Qi is the actual energy sold to all categories in K wh in the quarter in DISCOM or RESCO, subject to condition No. 1, mentioned here under.
Z is the changes in the cost in Rupees as allowed by the Commission for a period extending in the past beyond the relevant quarter.
Ai adjustment in Rupees to account for the financial impact of demonstrated incidents of merit order violation on account of controllable factors or any other events the financial impact of which, in the Commission's view, should be given appropriate treatment.
(1) The FSA as worked out will be distributed among all categories of consumers that existed in the quarter. However the consumption by the agricultural sector will be excluded till the Commission is satisfied that metering of agricultural consumption is complete, as may be notified in the Tariff orders from time to time.
(2) The licensee shall provide the Commission with its calculation of each fuel surcharge adjustment required to be made pursuant to its tariff before it is implemented with such documentation and other information as it may require, for purpose of verifying the correctness of adjustments.
(3) FSA billed to retail categories to be made over to Bulk supplier by individual Distribution Companies and/or RESCOS as the case may be.
(4) APTRANSCO must file with the Commission all information (including sales data from the DISCOMS/RESCOs) required for calculation of the Fuel Surcharge Adjustment within 30 days of the end of the respective quarter failing which it will forfeit any future claims on this account for such quarter. DISCOMS/RESCOs should use actual consumption details of the relevant quarter when levying FSA.
(5) The licensee will report data from computing the total cost (split for fixed and variable) for each of the generation stations that has supplied power in the respective quarter for which fuel surcharge adjustment is being computed. The total amount eligible for recovery will be computed on an aggregate basis.
(6) Fuel cost data has to conform to the fuel costs to the allowed level and no other charges other than the transportation cost can be included in the fuel cost. Every statement has to be confirmed by the licensee to that effect. The costs arrived at will be compared to the fuel cost indexation which will be developed by the Commission in the future.
(7) Penalties are leviable for furnishing wrong data.
(8) The licensee shall publish the FSA approved by the Commission in one English and one Telugu daily newspaper with circulation in the area of supply, for general information of the consumers, and shall make available copies of the FSA order for the relevant quarter to the public on request, at a reasonable cost.
(9) The FSA shall be implemented after 7 days of such publication.
(10) The actual variable costs and Fixed costs computed for Central Generating Stations 9CGS) should exclude the effect of UI charges.
(11) The FSA will include not only fixed costs of two part tariff but also of single part tariff wherever applicable".
Provided that the terms and conditions for determination of tariff under the Electricity (Supply) Act, 1948 (54 of 1948), the Electricity Regulatory Commissions Act, 1998 (14 of 1998) and the enactments specified in the Schedule as they stood immediately before the appointed date, shall continue to apply for a period of one year or until the terms and conditions for tariff are specified under this section, whichever is earlier.
(4) No tariff or part of any tariff may ordinarily be amended, more frequently than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified.
(5) The Commission may require a licensee or a generating company to comply with such procedure as may be specified for calculating the expected revenues from the tariff and charges which he or it is permitted to recover.
(6) If any licensee or a generating company recovers a price or charge exceeding the tariff determined under this section, the excess amount shall be recoverable by the person who has paid such price or charge along with interest equivalent to the bank rate without prejudice to any other liability incurred by the licensee."
Section 62(1) provides for determination of tariff for supply of electricity by generating company to a distribution licensee, transmission of electricity, wheeling of electricity and for retail sale of electricity. Section 62(3) enables the Commission to differentiate according to consumer's load factor, power factor, voltage, total consumption of electricity, geographical position of any area, nature of supply and purpose for which supply is required.
At the same time, it is not to show undue preference to any consumer. Section 62(4) of the Act of 2003 is akin to section 26(7) of the Act of 1998 and permits change in fuel surcharge as per the specified formula. Section 55(1) of the Act of 2003 mandates that no licensee shall supply electricity after the expiry of two years from the appointed date, except through installation of a correct meter.
Under section 61 of the Electricity Act, while specifying the terms and conditions for the determination of tariff, the Commission has to be guided inter-alia by the Provisions of clauses (a) to (i) thereof. One of the provisions refers to the National Electricity Policy and tariff policy to be notified by the Central Government. As the Central Government has not framed the National Electricity Policy and tariff policy till date, the Commission has not finalized the aforementioned terms and conditions for the determination of tariff. The Commission is also in the process of finalizing various other Regulations under the Electricity Act, 2003.
(i) This Regulation may be called the A.P. Electricity Regulatory Commission (Transitory Provisions for Determination of Tariff) Regulation, 2004. This shall be deemed to have come into force on 10th June, 2004.
2. The existing Regulations notified by the Andhra Pradesh Electricity Regulatory Commission, including the A.P. Electricity Regulatory Commission (Conduct of Business) Regulation, 1999, incorporating the provisions relating to determination of tariff and terms and conditions and notified as Regulation No. 2 of 1999 and published in the A.P. Gazette No. 23 dt. 22- 07-99 and as amended from time to time as well as all other regulations notified by the Commission from time to time under the provisions of the Andhra Pradesh Electricity Reform Act, 1998, shall continue to apply as regulations under the Electricity Act, 2003 and remain in force till appropriate new Regulations are notified by the Commission under the Electricity Act, 2003.
2. "Aggregate Revenue Requirement: (ARR) means the revenue required to meet the costs pertaining to the licensed business, for a financial year, which would be permitted to be recovered through tariffs and charges by the Commission.
In accordance with the principles laid out in this Regulation, the Commission shall determine the Aggregate Revenue Requirement (ARR) for a) Distribution Business and b) Retail Supply Business. The ARR determined for Distribution Business will be the basis for the fixation of the wheeling tariff/charges. The ARR determined for Retail Supply Business will be the basis for the fixation of the Tariff/Charges for retail sale of electricity including surcharges."
"24. SAVING Nothing in this Regulation shall be deemed to limit or otherwise affect the power of the Commission to make such orders as may be necessary to meet the ends of justice or to prevent abuse of the process of the Commission. Nothing in this Regulation shall bar the Commission from adopting in conformity with the provisions of the Act, a procedure, at variance with any of the provisions of this Regulation, if the Commission, in view of the special circumstances of a matter or class of matters and for reasons to be recorded in writing, deems it necessary or expedient for dealing with such a matter or class of matters.
Nothing in this Regulation shall, expressly or by implication, bar the Commission from dealing with any matter or exercising any power under the Act for which no Regulations have been framed, and the Commission may deal with such matters, exercise such powers and discharge such functions in a manner it deems fit."
It is clearly provided in Regulation 24(3) that nothing in Regulations of 2005 shall, expressly or by implication, bar the Commission from dealing with any matter or exercising any power under the Act for which no Regulations have been framed.
"10. Since the question for consideration is whether the surcharge levied under the Surcharge Act can be held to be land revenue, it is necessary to examine the nature of the said levy. According to the Shorter Oxford English Dictionary the word 'surcharge' stands for an additional or extra charge or payment. In Bisra Lime Stone Co. Ltd. v. Orissa State Electricity Board (1976) 2 SCC 167 after referring to the said definition, this Court had observed: (SCR pp. 310-11 : SCC p. 170, para 11) "Surcharge is thus a superadded charge, a charge over and above the usual or current dues."
11. In that case the Orissa State Electricity Board had imposed a uniform surcharge of 10 per cent on the power tariff. It was argued that surcharge was unknown to the provisions of the Electricity (Supply) Act, 1948 and the Electricity Board had no power under the said Act to levy a surcharge. This Court negatived the said contention and in that context, after explaining the meaning of the expression 'surcharge', it was observed: (SCR p. 311 : SCC p. 170, para 11) "Although, therefore, in the present case it is in the form of a surcharge, it is in substance an addition to the stipulated rates of tariff.
The nomenclature, therefore, does not alter the position. Enhancement of the rates by way of surcharge is well within the power of the Board to fix or revise the rates of tariff under the provisions of the Act."
12. Similarly, in CIT v. K. Srinivasan (1972) 4 SCC 526 a question arose whether the term 'income tax' as employed in Section 2 of the Finance Act, 1964, would include surcharge and additional surcharge whenever provided. This Court while tracing the concept of surcharge in taxation laws of our country, has observed: (SCR p. 312 : SCC p. 528, para 5) "The power to increase federal tax by surcharge by the Federal legislature was recommended for the first time in the report of the committee on Indian Constitutional Reforms, Vol. I Part I. From para 141 of the proposals it appears that the word 'surcharge' was used compendiously for the special addition to taxes on income imposed in September 1931.
The Government of India Act, 1935, Part VII, contained provisions relating to finance, property, contracts and suits. Sections 137 and 138 in Chapter I headed 'finance' provided for levy and collection of certain succession duties, stamp duties, terminal tax, taxes on fares and freights, and taxes on income respectively. In the proviso to Section 137 the federal legislature was empowered to increase at any time any of the duties of taxes leviable under that section by a surcharge for federal purposes and the whole proceeds of any such surcharge were to form part of the revenue of the federation. Sub-section (3) of Section 138 which dealt with taxes on income related to imposition of a surcharge."
13. It was further observed at page 315 of the report: (SCR p. 315 : SCC p. 530, para 10) "The meaning of the word 'surcharge' as given in the Webster's New International Dictionary includes among others 'to charge (one) too much or in addition ...' also 'additional tax'. Thus the meaning of surcharge is to charge in addition or to subject to an additional or extra charge." 14. In C.V. Rajagopalachariar v. State of Madras AIR 1960 Mad 543: (1959) in the context of the Madras Land Revenue Surcharge Act, 1954 and the Madras Land Revenue (Additional Surcharge) Act, 1955, it has been laid down: [AIR p. 545, para (5)] "The word 'surcharge' implies an excess or additional burden or amount of money charged. Therefore, a surcharge of land revenue would also partake the character of land revenue and should be deemed to be an additional land revenue.
Although Section 4 of the two enactments referred to above only deems it to be recoverable as a land revenue it is manifest that the surcharge would be a part of the land revenue. The effect of the two Acts would be, therefore, to increase the land revenue payable by a landholder to the extent of the surcharge levied. If therefore, a surcharge levy has been made, the government would be enabled to collect a higher amount by way of land revenue from a ryotwari pattadar than what was warranted by the terms of the previous ryotwari settlement."
15. The said decision was approved by this Court in Vishwesha Thirtha Swamiar v. State of Mysore (1972) 3 SCC 246. In that case this Court was considering the question whether the Mysore State legislature was competent to enact the Mysore Land Revenue (Surcharge) Act, 1961. After examining the nature of the levy the Mysore High Court had held that the so-called land revenue surcharge was but an additional imposition of land revenue or a land tax and fell either within Entry 45 or Entry 49 of the State List. This Court agreeing with the view of the High Court held that the surcharge fell squarely within Entry 45 of the State List, namely, land revenue.
It was observed: (SCC pp. 249-50, paras 10 and 12) "The legislation is but an enhancement of the land revenue by imposition of surcharge and it cannot be called a tax on land revenue, as contended by the learned counsel for the appellant. It is a common practice among the Indian legislatures to impose surcharge on existing tax. Even Article 271 of the Constitution speaks of a surcharge for the purpose of the Union being levied by way of increase in the duties or taxes mentioned in Article 269 and Article 270 .... It seems to us that the Act clearly levies land revenue although it is by way of surcharge on the existing land revenue. If this is so, the fact that the surcharge was raised to 100 per cent of the land revenue on the wet and garden land and 75 per cent of the land revenue in respect of dry lands, subject to some minor exceptions, does not change the nature of the imposition."
16. From the aforesaid decisions, it is amply clear that the expression 'surcharge' in the context of taxation means an additional imposition which results in enhancement of the tax and the nature of the additional imposition is the same as the tax on which it is imposed as surcharge. A surcharge on land revenue is an enhancement of the land revenue to the extent of the imposition of surcharge. The nature of such imposition is the same viz., land revenue on which it is a surcharge."
16. In State of Orissa & Anr. v. Jayashree Chemicals & Ors. 2004 (13) SCC 594, this Court considered the provisions contained in section 2(g)(v) and section 3 of the Orissa Electricity (Duty) Act, 1961 and held that charge in section 2(g)(v) includes surcharge which amounts to charge on freight.
17. On due consideration of meaning of 'surcharge' in various decisions, in our opinion, nature of surcharge has to be considered as per intendment in which it has been used in the enactment. 'Surcharge' is basically over and above main levy and is in the form of additional charge. It may carry different contours as per provisions of an enactment and different methodology for its determination.
18. In the backdrop of the aforesaid provisions, we now advert to the first submission whether Regulation 45-B is ultra vires to the provisions of section 26(9) of the Act of 1998 or sections 61 and 62(4) of the Act of 2003. Regulation 45-B deals with the determination of fuel surcharge. 'Fuel surcharge' has not been defined in the Act of 1998 or the Act of 2003.
The Commission has the power under section 26(2) to prescribe the terms and conditions for determination of the licensee's revenue and tariffs. Section 26(9) enables the Commission to vary fuel surcharge which is to be determined as per the formula prescribed by regulations.
Thus the Commission has been given the legislative power to prescribe the fuel surcharge formula by way of making regulation and to include such factors as it considers appropriate for determination of fuel surcharge. Under Section 61 of the Act of 2003 the Commission has the power to specify the terms and conditions for determination of tariff. It is pertinent to note that under the Act of 2003 Commission has adjudicatory, legislative as well as advisory powers. It has to consider under section 61(b) commercial principles in regard to the generation, transmission, distribution and supply of electricity.
Under section 61(d) the Commission has to frame the conditions with regard to safeguarding of consumers' interest and at the same time, recovery of the cost of electricity in a reasonable manner. Section 62(4) of the Act of 2003 provides that no tariff or part of any tariff creates an embargo on deviation of tariff frequently more than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified.
Section 62 does not deal with the matter to be provided in determination of fuel surcharge formula. The provisions of section 61 contain principles on which the Commission has to act, it cannot be said to be ultra vires. The fuel surcharge formula in Regulation 45-B is in consonance with the factors provided under sections 61 and 62 of the Act of 2003 and also the provisions contained in section 26 of the Act of 1998.
The fixation is as per law laid down by this Court and the statutory guidelines given under section 61 of the Act of 2003 are binding upon the Regulatory Commission and tariff has to be fixed in compliance thereof as held in PTC India Ltd. v. Central Electricity Regulatory Commission, through Secretary (2010) 4 SCC 603 and National Thermal Power Corporation Ltd. v. Madhya Pradesh State Electricity Board & Ors. (2011) 15 SCC 580.
"56. Sections 61 to 64 of the Electricity Act, 2003 place an obligation upon the appropriate Commission to determine the tariff in accordance with the provisions of this Act. An application for determination of tariff shall be made by the generating company under Section 64 and the tariff has to be determined by the appropriate Commission and it is also required to specify the terms and conditions for determination of the tariff as per the factors and the guidelines specified under Section 61 of the Act."
19. It is also true, as contended on behalf of the appellants that administrative instructions are binding in the absence of statutory guidelines and any breach thereof would be arbitrary as held in Dr. Amarjit Singh Ahluwalia v. The State of Punjab & Ors. (1975) 3 SCC 503 which decision has been followed in B.S. Minhas v. Indian Statistical Institute & Ors. (1983) 4 SCC 582. However, in our opinion, there is no violation of the provisions of section 61 of the Act of 2003 and we have found FSA regulations are in compliance of the statutory directives given in section 61.
20. In Rohtas Industries Ltd. & Ors. v. Chairman, Bihar State Electricity Board & Ors. 1984 (Supp) SCC 161, a question arose as to the validity of supplementary bills raised by the Bihar State Electricity Board for fuel surcharge. In exercise of the power conferred under section 49 of the Electricity Act, 1948 the Electricity Board from time to time issued notifications fixing tariffs and terms and conditions. Para 16.7 of the tariff Notification, 1978 provided that the consumers of specified category shall be liable to pay fuel surcharge at a rate to be determined every year in accordance with the formula set out in sub-para 2 of said paragraph 16.7. A dispute arose due to raising of the fuel surcharge.
"9. The next argument advanced on behalf of the appellants was that even if the Board is legally entitled to levy the fuel surcharge, that can only be for the purpose of recouping the amounts actually paid by the Board by way of "fuel surcharge" to the Damodar Valley Corporation and the U.P. State Electricity Board for the quantities of energy purchased by the Board from those sources and the extra cost that the Board had actually to incur on fuel consumed in those two generating stations at Patratu and Barauni. From the counter-affidavit filed on behalf of the Board, it is seen that in respect of the increase in the cost of production of electricity in the two generating stations of the Board, the fuel surcharge has taken into account only that part of the increase in cost which is relatable to the increased price of the coal and oil i.e. fuel alone.
The increase in expenditure referable to the enhancement in cost of the energy generated on other accounts such as wages, maintenance, etc. has not been taken into account in the fuel surcharge. Such increase in cost of production on account of those other factors has been offset by a revision of the basic general tariff by 16.5 per cent payable not only by the industries but by all classes except the agriculturist class. In respect of the energies purchased by the Board from outside sources, namely, the Damodar Valley Corporation and the U.P. State Electricity Board, the increase in cost per unit incurred by the Board has been included in the computation of the fuel surcharge.
We see no substance whatsoever in the contention advanced by the appellants that only such amounts, if any, as might have been paid by the Board to the D.V.C. and the U.P. State Electricity Board as and by way of fuel surcharge can go into the computation of the fuel surcharge levied by the Board under paragraph 16.7 of the 1979 tariff. Though the nomenclature given to the levy is "fuel surcharge" it is really a surcharge levied to meet the increased cost of generation and purchase of electricity and this is made absolutely clear in the formula given in para 16.7.2.
This is followed by detailed explanation as to what the different alphabets used in the numerator and denominator signify. The explanation given in respect of Cl is "increase in the average unit rate of purchase of energy from D.V.C. during the year for which the surcharge is to be calculated. The said increase to be calculated with respect to the base year 1977-78". C3 stands for "units purchased from D.V.C. during the year". Likewise, El and E3 have been explained as "Increase in the average unit rate of purchase of energy from Uttar Pradesh State Electricity Board during the year for which surcharge is to be calculated, the said increase to be calculated with respect to the base year 1977-78" and "units purchased from Uttar Pradesh State Electricity Board" respectively.
11. We see no force in the contention put forward on behalf of some of the appellants that the words "increase in the average unit rate of purchase of energy" used in Cl below paragraph 16.7.2 should be interpreted as taking their colour from the contents of paragraph 16.7.3. From a reading of these provisions it is abundantly clear that the entire increase in cost incurred in the purchase of energy from the D.V.C. and the U.P. State Electricity Board has to go into the computation of the surcharge leviable under paragraph 16.7. The contention to the contrary advanced by the appellants is therefore, only to be rejected. There is no ambiguity whatever in the words used in Cl so as to require us to take light from paragraph 16.7.3 for the purpose of understanding their scope and meaning.
18. Some of the appellants have endeavoured to persuade us to go into the minutest details of the mechanism of the tariff fixation effected by the Board in an endeavour to demonstrate in relation thereto that a factor here or a factor there which ought to have been taken into account has been ignored. We have declined to go into those factors which are really in the nature of matters of price fixation policy and the Court will be exceeding its jurisdiction if it is to embark upon a scrutiny of matters of this kind which are essentially in the domain of the executive to determine, subject, of course, to the constitutional limitations."
It was submitted on behalf of the appellants that the stand of the Bihar Electricity Board in Rohtas Industries (supra) particularly in para 9 of the report, where it had realized fuel surcharge on the basis of that part of the increase in cost which is relatable to increased price of coal and oil that is fuel alone but a close scrutiny of para 9 makes it clear that in respect of energy purchased by the Board from outside sources namely Damodar Valley Corporation and U.P.State Electricity Board, the increase in cost per unit incurred by the Board has been included in the computation of fuel surcharge and this Court has found no merits in the contention that such amount as might have been paid by the Board to the DVC and the U.P.State Electricity Board as and by way of fuel surcharge can go into the computation of fuel surcharge levied by the Board under the 1979 tariff. The law laid down is that the nomenclature given to the levy as fuel surcharge is really a surcharge levied to meet the increased cost of generation and purchase of electricity.
Thus the submission has no merit to sustain. This Court has clearly laid down that the increased cost of generation and purchase of electricity can be realized under the head of fuel surcharge.
Whereas, S1 = Average fuel surcharge per unit in paise applicable during the financial year. A1, B1, C1 = Units generated from PTPS, BTPS and MTPS respectively. D1, E1, F1, G1, H1= Units purchased from DVC, U.P. SEB, OSEB, NTPC, PGCIL and any other source respectively. A2, B2, C2 = Units sold, out of sent out from PTPS, BTPS and MTPS on which fuel surcharge is leviable. D2, E2, F2, G2, H2 = Units sold, out of purchased from DVC, U.P. SEB, OSEB, NTPC, PGCIL and any other source respectively during the year in which fuel surcharge is leviable. A3, B3, C3 = Increase in average cost of fuel surcharge in paise per unit computed for Board's generation at PTPS, BTPS and MTPS. D3, E3, F3, G3, H3 = Increase in average unit rate of purchase of energy from DVC, U.P. SEB, OSEB, NTPC, PGCIL and any other source respectively during the year for which the surcharge is to be calculated.
The said increase to be calculated with respect to the year 1992-1993 (after amendment, read 1991-1992). (In the above, PTPS stands for Patratu Thermal Power Station, BTPS for Barauni Thermal Power Station and MTPS for Muzaffarpur Thermal Power Station. They are Board's own generating stations. Likewise, DVC stands for Damodar Valley Corporation, U.P. SEB for Uttar Pradesh State Electricity Board, OSEB for Orissa State Electricity Board, NTPC for National Thermal Power Corporation and PGCIL for Power Grid Corporation of India Ltd. They are external sources of supply of electricity to the Board.)"
This Court has laid down that fuel surcharge has to be calculated strictly within the framework of the formula provided in tariff notification. This Court also laid down that fuel surcharge is undoubtedly a part of tariff but fixing rates of consumption charges or the guaranteed charges or the fixed charges or the delayed payment surcharge, and fixing rates of fuel surcharge do not stand on a par.
22. This Court in Pulak Enterprises (supra) has reaffirmed the decision in Rohtas Industries (supra) as to the factors which can be taken into consideration for determination of fuel surcharge. Since determination of fuel surcharge formula is not the function of the court. It is not defined in the Act, as such the Commission has specified in its wisdom formula for its calculation in Regulation 45B. It cannot be said to be ultra vires to the aforesaid provisions. We find no breach of the provisions of section 26 of the Act of 1998 and principles enumerated in section 61 and section 62 of the Act of 2003 or any other provisions of the Act of 2003.
The Regulations advance the mandate of the provisions of the Act. Reliance has been placed on the provisions which were in vogue in the year 2000 before the impugned provision was inserted in the year 2003 to contend that earlier provision was proper and legal. Question is not of choosing a better Regulation, but of power to frame it. In our opinion, as the Commission has the power to specify the fuel surcharge formula and considering nature of levy, could have taken into consideration the difference in total fixed cost, changes in adjustment as contemplated in the regulation inserted in the year 2003, the Commission has not at all transgressed its limits while carving out the formula.
23. The scope of interference in judicial review in such matters reserved for expert bodies is limited. The court cannot substitute its opinion.
"29. The significance of the question as to whether fixing the rate of fuel surcharge is a legislative function or a non-legislative function is that if the function is held to be legislative, in the absence of any provision in that regard the principles of natural justice would not be applicable and the scope of judicial review would also be limited to plea of discrimination i.e. violation of Article 14 of the Constitution of India. As a general proposition, the law on the point is settled.
30. In Prag Ice and Oil Mills v. Union of India (1978) 3 SCC 459 a seven- Judge Bench of this Court by majority observed: (SCC p. 490, para 52) "52. ... In the ultimate analysis, the mechanics of price fixation has necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of [persons], the processual basis of price fixation has to be accepted in the generality of cases as valid."
31. The legal position was reiterated in Rohtas Industries Ltd. v. Bihar SEB (1984) Supp. SCC 161 and Kerala SEB v. S.N. Govinda Prabhu & Bros. (1986) 4 SCC 198 wherein it was observed, " 'price fixation' is neither the forte nor the function of the court" (Kerala SEB case, SCC p. 214, para 10).
"37. We think that unless, by the terms of a particular statute, or order, price fixation is made a quasi-judicial function for specified purposes or cases, it is really legislative in character.... A legislative measure does not concern itself to the facts of an individual case.
It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class."
33. In Union of India v. Cynamide India Ltd. (1987) 2 SCC 720 this Court held that except in cases where it becomes necessary to fix the price separately in relation to individuals, price fixation is generally a legislative act, the performance of which does not require giving opportunity of hearing. Following passage from the judgment may usefully be noticed: (SCC pp. 734-35, para 5) "5. ... legislative action, plenary or subordinate, is not subject to rules of natural justice.
In the case of parliamentary legislation, the proposition is self-evident. In the case of subordinate legislation, it may happen that Parliament may itself provide for a notice and for a hearing - there are several instances of the legislature requiring the subordinate legislating authority to give public notice and a public hearing before say, for example, levying a municipal rate-in which case the substantial non-observance of the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation. ... But, where the legislature has not chosen to provide for any notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity." Reference may also be made to a Constitution Bench decision in Shri Sitaram Sugar Co. Ltd. v. Union of India (1990) 3 SCC 223.
34. In a sense, fixing rate of fuel surcharge under Clause 16.10 of the tariff notification is different from fixing the tariff under Section 49 of the Act. Fuel surcharge is undoubtedly a part of tariff. But fixing rates of consumption charges or the guaranteed charges or the fixed charges or the delayed payment surcharge, etc. and fixing rates of fuel surcharge do not stand on a par. Though rates of consumption charges, etc. are based on objective materials, there is enough scope for flexibility in fixing the rates. It also involves policy to fix different rates for different categories of consumers. Such is not the position with the fuel surcharge.
35. Clause 16.10.1 specifies the categories coming in the net of the levy and Clause 16.10.3 provides the formula. In simple words, the formula envisages addition of units generated or purchased and increased average cost of fuel and average unit rate of purchase rates and division of the total by the quotient is the average fuel surcharge per unit (expressed in terms of paise) described by denominator S1 in the formula. The whole exercise, it would appear, involves arithmetical accounting. There is no scope for exercise of any discretion or flexibility. This distinction, however, does not help the petitioners. It rather goes against them because if fixing rate of fuel surcharge is just an arithmetical exercise, giving opportunity of hearing would hardly serve any useful purpose."
24. In National Thermal Power Corporation Ltd. (supra), this Court has observed that price fixation is legislative in character. In PTC India Ltd. (supra) also, this Court has held that fixation of tariff like price fixation is legislative in character. The functions of the Commission have been held to be adjudicatory, advisory and legislative. The powers and functions enumerated under section 178 of the Act of 2003 confer wide powers upon the Commission to frame regulations which cannot be said to be ultra vires.
"11. We also agree with the High Court that the judicial review in a matter with regard to fixation of tariff has not to be as that of an Appellate Authority in exercise of its jurisdiction under Article 226 of the Constitution. All that the High Court has to be satisfied with is that the Commission has followed the proper procedure and unless it can be demonstrated that its decision is on the face of it arbitrary or illegal or contrary to the Act, the court will not interfere. Fixing a tariff and providing for cross-subsidy is essentially a matter of policy and normally a court would refrain from interfering with a policy decision unless the power exercised is arbitrary or ex facie bad in law."
27. A challenge has been made to Regulation 45-B submitting that it casts additional burden without authority of law inasmuch as the letter "Q" in the formula is subject to condition 1 and therefore excludes the consumption by agricultural sector and does not permit distribution of additional charge among all consumers for the actual energy sold to them. It makes all the consumers not only to pay for the energy consumed by them but also for the electricity consumed in the agricultural sector which is arbitrary and contrary to the scheme of the Act and in particular sections 61 and 62.
The submission cannot be accepted as differential treatment is permissible within the ken of the provisions of section 26. As provided in section 26(8) in case consumers are similarly placed same tariff has to be applied. Agriculturists and consumers like appellants cannot be said to be similarly placed. It is also provided in section 26(7) that the tariff implemented may differentiate according to the consumer's load factor or power factor, consumer's total consumption of energy during any specified period from the time at which supply is required or paying capacity of category of consumers and need for gross subsidization. Thus paying capacity inter alia is one of the factors which can be used for protective discrimination under discriminatory tariffs as provided in section 26(7)(a).
28. In Real Food Products Ltd. & Ors. v. A.P. State Electricity Board & Ors. 1995 (3) SCC 295, this Court considered the claim of discrimination of HT consumers with agriculturists to be untenable. Concessional tariff extended to agriculturists as a separate class was held not violative of Article 14.
"8. The expression "licensee" means a person licensed under Part II of the Indian Electricity Act, 1910, to supply energy or a person who has obtained licence under Section 28 of that Act to engage in the business of supplying energy - through definition in Section 2(6). Admittedly, the appellants before us are not licensees. They are consumers receiving high tension supply to their factories. For the purpose of tariff fixation, the Board has classified the consumers into 10 categories, viz. "domestic", "commercial (i)", "commercial (ii)", "street light", "irrigation", "light tension industrial" (small scale industrial upto 100 h.p.), "11 k.v. h.t.s.", "33 k.v. h.t.s.", "132 k.v. h.t.s." and "railway traction (25 k.v.)". It is seen from the materials on record for us that the industries between themselves consume nearly 65 per cent of the total quantity of energy supplied by the Board. Apparently with a view to encouraging the establishment of industries in the State, the general tariff rate applicable in respect of high tension supply to industries and factories has been fixed at rates which are much lower when compared to those applicable to other types of consumers.
While the general rate applicable for supply of high tension electric energy for industries of the class to which the appellants belong was 22 paise per unit, consumers belonging to "commercial" categories were charged at rates ranging between 48 paise to 58 paise per unit, "agricultural" consumers at 29 paise per unit, "low tension" consumers at 34 to 38 paise per unit and "domestic" consumers at rates ranging between 38 to 43 paise per unit.
Thus, in the fixation of the general tariff rate, a substantial concession has been shown in favour of industrial low tension and high tension consumers. The appellants have no case that any illegality was involved in treating the industrial consumers, as a separate class and granting them the benefit of a preferential treatment for the purpose of fixing the basic rate of levy for supply of electricity. The stand taken by the Board is that it was found absolutely necessary at the time of the revised tariff fixation effected in 1979 to augment its revenue by levying of the additional fuel surcharge in order to offset the heavy increase in expenditure and after taking into account all relevant facts and circumstances, it was decided to distribute that burden amongst the privileged class of consumers, namely those belonging to categories of low tension industrial service, high tension service, extra high tension service and railway traction service.
Even after taking into account the fuel surcharge so levied under 1979 tariff, the rates applicable to high tension consumers like the petitioners range between 40.31 paise and 58.80 paise per unit only, while the commercial (ii) consumer has to pay 71.33 paise per unit and even the domestic consumer has to pay 48 paise per unit. The position that obtains under the 1981 tariff which also has been challenged by some of the appellants is substantially similar. In our opinion, the Board was perfectly within its rights in deciding to restrict the levy of fuel surcharge to those categories of consumers who were enjoying the benefit of a concession in the general rate and in sparing smaller type of consumers such as the agricultural, irrigation and commercial consumers from being subjected to that burden, in view of the fact that they were already being subjected to a basic levy at substantially higher rates.
The true consequence of the action so taken by the Board is only to effect a reduction in the quantum of concession that was being enjoyed by the consumers belonging to the industrial and railway traction categories.
A classification which is legally valid and permissible for the grant of a concession in the basic rates will equally hold good for the purpose of a subsequent scheme of distribution of the burden in the form of fuel surcharge. In this context, it is also relevant to remember that the levy of surcharge was necessitated by reason of the extra expenditure which the Board had to incur in the generation of electricity in the two power stations run by the Board and in the purchase of power from the two outside sources, namely, the D.V.C. and the U.P. State Electricity Board and 65 per cent of the total quantity of energy supplied by the Board is consumed by the industrial and railway traction consumers.
A classification of these bulk consumers has a rational nexus with the object and purposes of the levy of surcharge. Having regard to all these facts and circumstances, we find no substance in the contention advanced by some of the appellants that the imposition of fuel surcharge under paragraph 16.7 of the 1979 tariff is arbitrary and violative of Article 14 of the Constitution."
"26. It is, therefore, obvious that mere generation of surplus by the Board as a result of adjusting its tariffs when the quantum of surplus has not been specified by the State Government after the 1978 amendment of Section 59 of the Supply Act, cannot invite any criticism unless it is further shown that the surplus generated as a result of the adjustment of tariffs by the Board has resulted in the Board acting as a private trader shedding off its public utility character. In other words, if the profit is made not merely for the sake of profit, but for the purpose of better discharge of its obligations by the Board, it cannot be said that the public enterprise has acted beyond its authority.
The Board in the present case has shown that the surplus resulting from upward revision of tariffs applicable to the HT consumers made in the present case, was for the purpose of better discharge of its other obligations under the Supply Act and in effect, it has merely resulted in a gradual withdrawal of the concessional tariffs provided earlier to the power intensive consumers which do not in its opinion require continuance of the concessional tariffs any longer.
In fact, no material has been placed before us to indicate that this assertion of the Board is incorrect or there is any reasonable basis to hold that the upward revision of tariffs applicable to HT consumers is merely with a desire to earn more profits like a private trader and not to generate surplus for utilisation of the funds to discharge other obligations of the Board towards more needy consumers, such as agriculturists, or to meet the needs of expansion of the supply to deserving areas. The argument with reference to statistics that the upward revision of tariffs for the HT consumers results in earning amounts in excess of the cost of generation does not, therefore, merit a more detailed consideration.
27. It was also contended on behalf of the appellants that the generation of electricity by the Andhra Pradesh Electricity Board is both thermal as well as hydro, the quantity from each source being nearly equal and the entire electricity generated is fed into a common grid, from which it is supplied to all categories of consumers. On this basis, it was argued that the rise in the fuel cost which led to the fuel cost adjustment applicable only to the HT consumers was unreasonable and discriminatory since the burden of rise in fuel cost was placed only on the HT consumers. In our opinion, this argument has no merit.
The HT consumers, including the power intensive consumers, are known power guzzlers and in power intensive industries, electricity is really a raw material. This category of consumers, therefore, forms a distinct class separate from other consumers like LT consumers who are much smaller consumers. There is also a rational nexus of this classification with the object sought to be achieved. Moreover, the power intensive consumers have been enjoying the benefit of a concessional tariff for quite some time, which too is a relevant factor to justify this classification.
Placing the burden of fuel cost adjustment on these power guzzlers, who had the benefit of concessional tariff for quite some time and have also a better capacity to pay, cannot, therefore, be faulted since the consumption in the power intensive industries accounts for a large quantity." The decision in Hindustan Zinc Ltd. (supra) has been followed in Pulak Enterprises (supra).
31. This Court in Association of Industrial Electricity Users v. State of A.P. & Ors. 2002 (3) SCC 711 has considered and upheld the levy of different tariffs.
"10. We are also unable to agree with the learned counsel for the appellants that the Act does not envisage classification of consumers according to the purpose for which electricity is used. Sub-section (9) of Section 26 does state that the tariff which is fixed shall not show undue preference to any consumer of electricity but then the said sub-section itself permits differentiation according to the consumer's load factor or power factor, consumer's total consumption of energy during the specified period, time at which the supply is required or paying capacity of category of consumers and the need for cross-subsidisation or such tariff as is just and reasonable and be such as to promote economic efficiency in the supply and consumption of electricity and the tariff may also be such as to satisfy all other relevant provisions of the Act and the conditions of the relevant licence.
This section has to be read along with Section 11 which sets out the functions of the Commission and, inter alia, provides that amongst the functions is the power to regulate the tariff and charges payable keeping in view both the interest of the consumer as well as the consideration that the supply and distribution cannot be maintained unless the charges for electricity supplied are adequately levied and duly collected. Depending upon the various factors stipulated in Section 26(7), categorisation between industrial and non-industrial, agricultural or domestic consumers can certainly take place. This is precisely what has been done in the present cases.
The High Court has at length considered all aspects of the cases and has examined in detail the exercise which was undertaken by the Commission in fixing the tariff and, in our opinion, the view expressed by the High Court calls for no interference." In view of the aforesaid discussion, the submission with respect to favourable treatment and discrimination vis a vis the agricultural sector is hereby repelled.
32. It was also submitted on behalf of the appellant that Regulation 45B that letter 'Z' in the formula for which the Commission to apply the change in cost of rupee for a period beyond the period of supply of electricity to the consumers without any time limit, the submission in this regard is baseless and cannot be accepted. As a matter of fact the fuel surcharge is determined as per the formula which takes into account the change in cost of rupee for a period extending in the past beyond the relevant quarter. There is nothing bad in it as there is change in the cost of rupees which can be allowed by the Commission for realization of fuel surcharge as and when it is determined. It is a method of determining the actual value to be paid in rupees and cannot be said to be illegal or arbitrary at all. It is in consonance with business norms.
33. It was also submitted that letter 'A' in the formula is vague and unrealistic so as to permit the Commission to impose additional burden unrelated to escalation of fuel cost under the guise of FSA. The submission is too tenuous to be accepted and proceeds on assumption that only escalation in fuel cost can be levied even the financial year impact of demonstrated incidents of merit order violations on account of controllable factors and any other event which had the financial impact can be given appropriate treatment and can also form part of FSA as laid down by this Court in Rohtas Industries (supra) and Pulak Enterprises (supra).
34. Coming to the submission that as metering is mandated on completion of two years, as such agricultural aspect cannot be included on lapse of said period. Section 55 of the Act of 2003 deals with the use of meters and it is provided that no licensee shall supply electricity after expiry of two years from the appointed date except through installation of a correct meter in accordance with the regulations. The said Commission may also extend the period up to two years for a class or class of persons as may be specified in the notification. The provision made in condition No.1 of Regulation 45-B cannot be said to be repugnant to section 55(1) as it deals with the licensee's obligation to supply electricity after two years only on the basis of metered supply.
It has not been achieved so far. However, electricity is being consumed and the authorities are not able to do the complete metering of agricultural services. In our opinion, in the prevailing conditions, in particular plight of agricultural sector and purpose of enactment, it is open to the Commission to make such a wholesome provision carved out in condition No.1. Thus there is no violation of the provisions contained in section 55(1) of the Act of 2003.
The consequence of section 55 of the Act of 2003 cannot be that if metering is not achieved within two years the consumption in agricultural sector cannot be provided within the purview of FSA formula. Thus condition 1 did not cease to have effect after 10.6.2005 as submitted on behalf of the appellants.
If the State Government requires the grant of any subsidy to any consumer or class of consumers in the tariff determined by the State Commission under section 62, the State Government shall, notwithstanding any direction which may be given under section 108, pay, in advance and in such manner as may be specified, the amount to compensate the person affected by the grant of subsidy in the manner the State Commission may direct, as a condition for the licence or any other person concerned to implement the subsidy provided for by the State Government: Provided that no such direction of the State Government shall be operative if the payment is not made in accordance with the provisions contained in this section and the tariff fixed by the State Commission shall be applicable from the date of issue of orders by the Commission in this regard."
36. Considering the condition of farmers which is pathetic and they are unable to face the burden, it is rightly pointed out on behalf of the Commission that the State Government had given them certain concessions in the form of subsidy. However the Commission had excluded them from meeting the fuel surcharge adjustment charges.
Provision of section 65 relating to subsidy by the State Government is not at all attracted. The matter involved in the present cases is not of subsidy but determination of fuel surcharge formula. Thus, the submission based upon the violation of the provision of section 65 is wholly unwarranted and is liable to be rejected as subsidy has not been included in the determination of fuel surcharge. It cannot be invalidated on the ground of violation of provisions contained in section 65 of the Act of 2003.
37. Next submission raised on behalf of the appellants is that the Regulations of 1999 as amended in 2003 being the tariff regulation under the Act of 1998, ceased to have effect on 10.6.2004 after one year from the date of coming into force of the said Act, by reason of proviso to section 61 of the Act of 2003. The submission raised is untenable for various reasons. First is that regulations have been framed with effect from 10.6.2004. The proviso to section 61 of the Act of 2003 makes it clear that the terms and conditions for determination of tariff and the enactment specified in the Schedule as they stood before the appointed date, shall continue to apply for a period of one year or until the terms and conditions for tariff are specified under section 61, whichever is earlier.
Thus, the tariff regulations framed under the Act of 1998 would remain in force for maximum period of one year and the regulations had been framed with effect from 10.6.2004 and the Transitory Regulations have been enacted vide Regulations of 2004 by the Commission. Regulation 2 of said Regulations of 2004 clearly provides that Regulations of 1999 as amended from time to time under the Act of 1998 shall apply as regulation under the Electricity Act, 2003 and shall remain in force or till new regulations are notified by the Commission under the Act of 2003.
Even if earlier Regulations of 1999 came to an end on 10.6.2004 and if it is further assumed without deciding that the Commission had no authority to enact retrospectively, in our opinion, it could have adopted the Regulations of 1999 as amended, framed under the Act of 1998 shall continue, to apply for future. Considering the period in question involved in the matter, it cannot be said to be Regulations of 1999, as amended, are inoperative as they have been adopted vide Regulation No.9/2004. With respect to the fuel surcharge adjustment no provision has been made in the regulations framed in the year 2005.
On facts also, the Regulation 45-B was implemented subsequently and had been again amended in the year 2013. It has operated for more than a decade for determination of FSA.
39. Submission raised that the FSA can be realized in terms of the Regulations of 2005 cannot be accepted for the simple reason that the Regulations of 2005 do not deal with FSA and there is a saving clause as provided in Regulation 24. Moreover, the Act of 1998 had not been repealed and there was re-adoption of the Regulations of 1999 in the year 2004. It is also factually incorrect submission that FSA had been realized under the Regulations of 2005 after framing of the said regulations. In fact FSA had been determined as rightly contended on behalf of the Commission under Regulation 45-B as amended in 2003 for more than a decade. A challenge had been raised for the first time after 10 years. It is obvious that the parties clearly understood Regulation 45-B is in vogue and in fact it legally prevailed and rightly followed.
40. It was also submitted that Regulation 6(4) of Regulations of 2005 provides that ARR shall contain power purchase cost for each year of the controlled period. It is clear from ARR as defined in Regulations of 2005 and FSA that they do not run counter to each other but are supplementary. The Regulations of 2005 do not deal with determination of fuel surcharge. Regulation 45-B cannot be said to be invalid for the aforesaid reason.
41. There is a saving clause contained in Regulation 24 of Regulations of 2005. Regulation 12.4 provides that the distribution licensee shall be entitled to recover or refund as the case may be the charges on account of fuel surcharge adjustment as approved by the Commission from time to time suo motu or based on the filing made by the institution company as the Commission may deem fit. The provisions of the Act provided that the formula has to be specified by the Commission for FSA and this has been specified only in Regulation 45-B which has been adopted in the year 2004 for continuance by the Commission. The Commission had adopted the said regulations and the same continues to be in operation.
42. In our opinion, the challenge made by the appellants is unworthy of acceptance. Fuel surcharge is really a surcharge levied to meet increased cost of generation and purchase of electricity and the scope cannot be circumscribed by its nomenclature. Thus the formula in Regulation 45B and the FSA determined by the Commission would take into consideration various factors which result in the increased cost of generation and purchase of electricity.
43. The appeals are found to be devoid of merits and are hereby dismissed. The appellants are directed to make the deposit along with interest; if no other rate is prescribed at the rate of 8 per cent per annum, and other charges for delay, as may be permissible to recover within a period of one month from today. In addition, the respondents are at liberty to take coercive steps to recover the amount.
Sai Bhaskar Iron Ltd. Vs. A.P. Elect. Regul. Commission & Ors.
HEARD BY HON'BLE V. GOPALA GOWDA AND HON'BLE ARUN MISHRA, JJ.
Mr. C. S. N. Mohan Rao,Adv.
Mr. Y. Raja Gopala Rao,Adv.
Mr. M. Ram Babu, Adv.
Mr. N. Eswara Rao, Adv.
for M/s. M. Rambabu & Co.
for M/s. Mclm & Co.
Hon'ble Mr. Justice Arun Mishra pronounced the judgment of the Bench comprising Hon'ble Mr. Justice V. Gopala Gowda and His Lordship.
Delay, if any, in filing substitution application/s is also condoned. Substitution applications are allowed.
For the reasons recorded in the reportable judgment, which is placed on the file, the appeals are dismissed. The appellants are directed to make the deposit along with interest; if no other rate is prescribed at the rate of 8 per cent per annum, and other charges for delay, as may be permissible to recover within a period of one month from today. In addition, the respondents are at liberty to take coercive steps to recover the amount.

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What laws govern access to meetings?
Montana’s 1972 Constitution has two key right-to-know sections that are the strongest in the nation in guaranteeing citizens’ right to inspect public records and attend meetings of government agencies at all levels of state and local government.
Article II, Section 8. Right of Participation. The public has the right to expect government agencies to afford such reasonable opportunity for citizen participation in the operation of the agencies prior to the final decision as may be provided by law.
Article II, Section 9. Right to Know. No person shall be deprived of the right to examine documents or to observe the deliberations of all public bodies or agencies of the state government and its subdivisions, except in cases where the demand of individual privacy clearly exceeds the merits of public disclosure.
Title 2, Chapter 3 of Montana Code Annotated (MCA) further defines access to meetings in Montana. §2-3-201 declares the Legislature’s intent that “public boards, commissions, councils and other public agencies in this state exist to aid in the conduct of the peoples’ business.” It further declares that provisions of this part of the law “shall be liberally construed” in favor of openness. §2-3-202 defines a meeting as the convening of a quorum of a public agency to hear, discuss or act upon a matter over which the agency has control or advisory power.
§2-3-203 says all meetings of governmental bodies of the state, political subdivisions or organizations supported in whole or in part by public funds shall be open to the public, including committees and subcommittees. The presiding officer may close a meeting for discussion of a matter involving individual privacy, but only if the officer determines that the demand of individual privacy clearly exceeds the merits of public disclosure. The right to individual privacy may be waived by the individual about whom the discussion pertains.
Meetings may be closed to discuss litigation strategy when an open meeting would have a detrimental effect on the position of the public agency. Meetings may not be closed to discuss litigation in which the only parties are public bodies.
The public must also be provided the opportunity to comment on any item even if the item is not on the public meeting agenda. §2-3-103 MCA (1)(a).
What is a “quorum” of a public body?
A quorum of a public body is the minimal number of members of the body committee or organization, usually a majority, who must be present for valid transaction of business. For a three-member body, two members meeting for the purpose of discussing any public business is subject to the open-meeting/right-to-participate laws.
Do open-meetings/right-to-participate requirements apply to informal gatherings of a quorum of the members?
Yes. Two of three members of a body riding together in a motor vehicle to a meeting, going out for coffee or lunch to discuss any public business are activities that are covered by open-meetings/right-to-participate laws regardless of the formality of the setting.
For what reasons can a meeting of a governmental body be closed to the public?
Legally, a meeting holder starts with the notion that ALL meetings are presumed to be open and meetings can only be closed when the body discusses matters involving individual privacy and then only if the presiding officer determines that the demand of individual privacy clearly exceeds the merits of public disclosure. The burden is on the person seeking a closed meeting to overcome the presumption of openness.
Public bodies may also close a meeting to discuss litigation strategy, but only when: 1) litigation actually exists (not just threatened); 2) an open discussion will negatively affect the litigating position of the body; and 3) the litigant is a private-nongovernmental party. A body may not close a meeting when the parties in litigation are both governmental entities.
What must the officer do to close a meeting?
Meeting closures are at the discretion of the presiding officer. Before closing a meeting, the presiding officer must explain in open session the reasons for closing the meeting and must also explain generally each item the body intends to discuss in private before closing the meeting.
The presiding officer must also determine that privacy interests clearly outweigh public disclosure before the meeting can be closed. The right of privacy encompasses delicate matters such as medical or family issues or matters in which an employee’s performance will be criticized (excluding employees vested with public trust, as discussed supra). The Supreme Court has made it clear that there is no blanket exemption from the right to know for discussion of personnel matters or records. Missoula County Public Schools v. Bitterroot Star, 378 Mont. 451, 345 P.3d 1035.
An entity may not close a meeting to discuss personnel matters, then move on to other business while in closed session.
Individuals may waive their rights to privacy and allow meetings to remain open, even when personnel matters are being discussed. A public entity may assert the right of privacy on behalf of an individual, but it is always prudent to consult the individual in advance of the meeting to see whether they wish to waive the right.
Can a public body vote on issues during closed meetings?
No. A board can discuss a private issue in a closed meeting, but the vote should be taken during an open session.
Can governmental bodies meet by telephone or other electronic means?
The state Supreme Court has ruled that a telephone conference with a quorum is subject to the Open Meeting Act. Board of Trustees, Huntley Project School District No. 24 v. Board of County Commissioners, 186 Mont. 148, 606 P.2d 1069 (1980).
Therefore, all laws governing public access to such meetings would apply, and meetings could be closed only for the exceptions noted. The body may also communicate during a meeting by email or text message, but the email or message must be displayed to the audience while it is occurring. Otherwise, private emailing and texting about an issue being discussed during a meeting violates the open meetings laws.
Must public agencies post their agendas?
Montana’s Open Meetings law does not expressly require public agencies to post their agendas. However, recent rulings combined with other Montana statutes clearly indicate that agencies should post agendas.
A sweeping 1998 Montana Attorney General’s opinion held that county commissioners cannot comply with the state’s open-meetings law by saying they may meet anytime during their regular work week. The ruling said commissions must specify particular meeting dates and times in advance to let citizens know when a quorum will meet to discuss or act on any issue of significant public interest. That’s so the public has an opportunity to participate in the decision making. And the agenda should be sufficiently detailed to alert the public as to the topic of discussion.
Can the public body discuss matters that are not on the agenda?
No. The right to observe decision-making activities of a public body is conditioned on the public having advanced notice of the topic of the discussion. That’s the purpose of the agenda. When a body discusses matters which were not on the agenda, both the right to observe and the right to participate are violated.
Can a public body meet without giving public notice?
No. In Board of Trustees Huntley Project, supra, the Montana Supreme Court ruled that “(w)ithout public notice, an open meeting is open in theory only, not in practice.” Further, the Public Participation Act requires agencies to develop procedures to “ensure adequate notice” before a final decision and to assist public participation in its decision-making before the decision is made (§2-3-103 MCA).
Public notice must be given even for meetings that legitimately can be closed to the public. In Seliski v. Rosebud County et. al., Rosebud County Case No. DV 94-13 (1995), District Judge Joe Hegel found that a county commission’s practice of conducting meetings on regular business days from 8 a.m. to 5 p.m. without notice of when particular matters would be discussed, was “really no notice at all” and violated the Public Participation in Government Act, §2-3-101, et seq., MCA.
The public should be given an adequate agenda of subjects to be discussed by the governmental agency, sufficiently in advance to allow members of the public to decide to attend and/or give input on significant decisions.
Can public agencies close meetings to discuss collective bargaining strategy?
No. The Supreme Court threw out that exception to the Open Meetings Act in 1992. Great Falls Tribune v. Great Falls Public Schools, supra. In 1993, the Legislature amended §2-3-203 MCA to remove the exception.
What types of “public agencies” fall under the Open Meeting Act?
§2-3-203 MCA requires that the meetings of public agencies and certain associations of public agencies must be open to the public. These include public or governmental bodies, boards, bureaus, commissions, agencies of the state or any political subdivision of the state or organizations or agencies supported in whole or in part by public funds or expending public funds.
Further, any committee or subcommittee appointed by a public body ... for the purpose of conducting business which is within the jurisdiction of that agency is subject to the requirements of the Open Meetings Act. This would apply to sub-committees of the whole, as well as to “work sessions” sometimes held by some entities not necessarily made up of members of the constituent body.
In 2002 a Supreme Court decision found that a committee, or advisory board, made up of several school principals, a school board trustee, two teachers and four member of the public formed to discuss school-closure options was subject to open-meeting laws. Bryan v. Yellowstone County Elementary School Dist. No. 2, 312 Mont. 257, 60 P.3d 381 (2002). However, in Boulder Monitor v. Jefferson High School District, 373 Mont. 212, 316 P.3d 848 (2014) the Court held that attendance as an observer by one of the members of the public body did not convert the sub-committee into a quorum of the body for purposes of providing notice that would otherwise have been required of the body.
What kind of meetings are subject to the open meetings laws?
The Montana Supreme Court ruled in a suit brought by The Associated Press and 13 other news organizations in 2004, that the meetings of an informal committee of public university officials must be open to the public under the Montana Constitution and open meetings laws. Commissioner of Higher Education Richard Crofts held meetings with high-ranking university employees, including presidents and chancellors, to seek input on such policies as student tuition and fees. In 2002, one of these meetings was canceled by Crofts after an AP reporter came to cover the meeting and wouldn’t leave.
The Supreme Court said the policy committee was a public body and its deliberations should have been open, even if it did not produce a result or action, take votes or keep minutes. “In this case, while the Policy Committee was not formally created by a government entity to accomplish a specific purpose, … it was organized to serve a public purpose.’’ The court said that factors to be considered in determining whether such a committee is subject to open meeting laws include, but are not limited to whether the meetings are paid for with public funds, whether committee members are public employees acting in their official capacity, frequency of meetings, whether the committee deliberates or just gathers facts, whether the meetings concern policy matters rather than ministerial or administrative functions, whether the committee members have executive authority, and the result of the meetings. Associated Press v. Crofts, 321 Mont., 89 P.3d 971(2004).
A 2002 decision found that a committee, or advisory board, made up of several school principals, a school board trustee, two teachers and four members of the public formed to discuss school-closure options was subject to open-meeting laws. Bryan v. Yellowstone County Elementary School Dist. No. 2, 312 Mont. 257, 60 P.3d 381 (2002). The meetings of associations composed of public or governmental bodies that regulate the rights, duties or privileges of any individual must be open to the public.
What type of personal information can be properly discussed in a closed meeting?
This private, personal information is generally limited to family problems, health problems, drug and alcohol problems (see 42 Mont. AG. Op. 119 (1988), and information relating to marriage to procreation, contraception, family relationships, and child rearing. Flesh v. Mineral and Missoula Counties, 241 Mont. 158, 786. P.2d.2d 4 (1990).
Hiring interviews may also involve private information which justifies closing a meeting. Disciplinary matters may be closed depending upon the class of employee and the nature of the charges.
Can meetings of public agencies and public bodies be closed to discuss job reviews?
The Court has ruled that the public’s right to know is not absolute; an individual’s right to privacy must be weighed against it. In Missoulian v. Board of Regents, 207 Mont. 513, 675 P.2nd. 962 (1984), the court ruled that closure of university presidents’ job-performance evaluation meetings was necessary to protect individual privacy of university presidents and other university personnel. Some government officials, including a city manager, have chosen to allow the public to view their job reviews. However, if the employee is a supervisory-level employee and the review concerns illegal or improper acts, the employee does not have an expectation of privacy in that discussion and the meeting may not be closed.
Can a governmental body close proceedings during a hiring process?
Governmental bodies, such as school boards hiring superintendents, can close proceedings to the public in order to protect the privacy of the candidates if those candidates have a reasonable expectation of privacy. Missoulian v. Board of Regents, supra. Governmental bodies have chosen to keep candidate searches open by asking candidates whether they mind public interviews, thereby eliminating the expectation of privacy. If the candidates were not told beforehand that the proceedings were to be open, a governmental body could justifiably close a meeting. Nevertheless, an argument can be made that the hiring process should be open if the body is looking to fill a position that is important to the community. For example, if a local governmental body is considering an appointment to fill a vacant elective seat, the entire process should be open.
Should a meeting to discuss the discipline/termination of a city employee be closed for privacy if the employee wants it open?
Can a meeting be closed to discuss an employee grievance or disciplinary matter?
If the employee is a supervisory-level employee, handles public money or is otherwise in a position of public trust, and the allegations concern a violation of that trust, the meeting must be open.
If the grievance involves some matter unrelated to performance issues, such as a dispute over pay or benefits, there is no basis for closing the meeting.
What are the remedies if a meeting was illegally closed?
A decision made in an improperly closed meeting may be voided by an action brought in district court within 30 days of the decision (§2-3-213 MCA) and a successful plaintiff can be awarded attorney fees (§2-3-221). Any person who asserts a claim that a governmental action has deprived them of statutory and constitutional rights to observe a meeting has standing to pursue a legal claim. Schoof v. Nesbit, 373 Mont. 226, 316 P.3d 831 (2014).
The Court in Schoof reversed a prior decision restricting right-to-know suits only to plaintiffs who could show an actual injury caused by the closed meeting. A claimant need not be a resident of the particular jurisdiction to bring a lawsuit. Claimants only need to show their rights to observe a meeting or examine a document were violated by the agency. Shockley v. Cascade County, 376 Mont. 493, 336 P.3d 375 (2014).
Can pictures or recordings be taken in open meetings?
Yes. Under §2-3-211 MCA, “accredited press representatives may not be excluded from any open meeting ... and may not be prohibited from taking photographs, televising, or recording such meetings.” The Montana Attorney General has also ruled that the legislative intent of the law would be furthered by allowing the public to mechanically record open meetings. 38 Op. Att’y Gen. No. 8 (1979).
Does passing notes, emailing, texting or whispering among members of governmental bodies violate the Open Meetings Act?
Yes. Although there are no court cases or sections of statute that support these attempts at secrecy, the constitutional right is to observe deliberations. If the deliberations consist in part of the passing of notes or the exchanging of emails, text messages or whispered comments, the public is being deprived of its constitutional right to observe the deliberations of the public body and to have access to public documents. This is little different than if the board met behind closed doors.
Can a person bringing suit for violation of the right to participate under Article II, Section 8 of the Constitution recover attorney fees?
Are agencies required to keep and provide access to minutes of their proceedings?
Yes. According to §2-3-212 MCA, appropriate minutes of all open meetings shall be kept and shall be available for inspection by the public. Minutes must include the date, time and place of the meeting; a list of the individual members of the public body, agency or organization in attendance; the substance of all matters proposed, discussed or decided; and, at the request of any member, a record by individual members of any votes taken.
County commission minutes should be published within 21 days after adjournment of the session, or within 30 days for certain financial information (§7-5-2123(2)). Nevertheless, minutes should be available upon request, even if they are in draft form and have not been approved by the governmental body. The statutory provisions governing access to documents include “public information” which is “prepared, owned, used or retained by any public agency relating to the transaction of official business, regardless of form.” §2-6-1002(11), and Article II, Section 9 of the Montana Constitution do not make a distinction between draft documents and approved or “official” documents. Both must be provided to the public. County commissions are required to keep a “minute book” (§7-5-2129).
Finally, under §2-3-212(4), a public body is required to keep minutes of closed meetings. These minutes are to be kept confidential, but may be disclosed upon court order.
Do emails communicated to a quorum of a public body constitute a “meeting” and, therefore, subject to notice and observation by the public?
Are committee meetings of the Montana Legislature open to the public and the news media?
Yes. According to Article V, Section 10, subsection 3 of the state Constitution, “The sessions of the Legislature and of the committee of the whole, all committee meetings, and all hearings shall be open to the public.” This includes when committees are taking votes.
Are political caucuses of the Montana Legislature open to the news media and public?
Yes. In 1995, The Associated Press and 21 other news organizations in Montana sued to end the practice of closed-door caucuses, arguing that they are part of the legislative process where important public-policy issues are discussed by legislators. State District Judge Thomas Honzel ruled later that year that organizational party caucuses, held before the start of the legislative session, should be subject to the state open meetings law.
Honzel also ruled, however, that the news media had no legal basis for suing to get access to party caucuses during legislative sessions. The news media appealed this decision to the Montana Supreme Court, which ordered Honzel to reconsider the issue. Honzel ruled in 1998 that the caucuses during legislative sessions are to discuss public business, so they too are subject to the open meetings law. The Legislature did not appeal and the caucuses have been open since the 1999 session.
Telecommunication company required to disclose if receiving federal funds.

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