MUHAMMAD KHALID MEHMOOD KHAN, J.---Through this single judgment, I propose to decide the Constitutional petitions detailed in Annex-A as in all petitions, the recovery of fuel adjustment charges have been challenged.
There are two types of petitioners before this Court, one set of petitioners is the Industrial Units, and other one is of the domestic Consumers of the electricity (hereinafter referred to as 'Energy'). The petitioners have challenged the recovery of Fuel adjustment charges ascertained by the National Electric Power Regulatory Authority (hereinafter referred to as the NEPRA) vide impugned notifications dated 23-8-2011 and issued subsequently of the past period and the amending proviso of section 31(4) of the NEPRA Act, 1997 being ultra vires to law and Constitution.
2. The NEPRA is an authority established under the National Electric Power Regulatory Authority Act No, XL of 1997 (hereinafter referred to as Act of 1997). The NEPRA has the authority to determine the tariff of Energy. The petitioners are the consumers of Lahore Electric Supply Company LESCO, Gujranwala Electric Supply Company GEPCO, and Faisalabad Electric Supply Company (FESCO).
3. A number of petitions were withdrawn by the respective petitioners on different dates stating that Islamabad High Court on 24-10-2012 has accepted their petitions, however the petitioners of petitions detailed in Annex-A argued their petitions on merits.
4. M/s Muhammad Anum Saleem, Ms. Mehnaz Sheraz, and Mian Umer Farooq, Advocates, learned counsel for petitioners submit that NEPRA is a regulatory body, established under the Act of 1997, the mandate of NEPRA is to determine the tariff of the Energy, but the said determination is subject to hearing of the consumers, NEPRA is bound to protect the rights and interest of the consumers as well. The NEPRA has no powers to re-determine, the tariff under the garb of fuel adjustment charges, the DISCOs have no powers to claim additional amount after recovery of the costs of consumed energy nor the NEPRA has the powers to direct the Distribution companies to recover the difference of re-determined tariff after four or five months subsequent to the already paid bills.
Learned Counsel contend that rules framed under section 31 of the Act of 1997 provides that the consumers have a right of hearing and even if the consumers are not attending the meetings scheduled for re-determination of tariff, the NEPRA is bound to examine and hold detailed inquiry about the data and other evidence relied upon by the DISCOs, claiming the payment of difference of fuel price from the consumers. The final decision of the NEPRA should be with cogent reasons, the majority of NEPRA members have no powers to bulldoze the valid objections and reasons of minority member. Learned counsel add that impugned determinations have been implemented with retrospective effect, which is against the fundamental right of the petitioners, after payment of the final bill of consumed energy, it become past and closed transaction and a vested right accrued in favour of the petitioners, after making the full payment of the costs of the consumed energy, it is the consumers legitimate expectation, that they will not be burdened with any additional amount. After the 18th amendment in the constitution of Islamic Republic of Pakistan, the electricity has become the provincial subject and a such the Federal Government has no power to issue the impugned notifications, the amending section 31(4) of the Act, 1997 is in violation of Article 18 of the Constitution.
5. Learned counsel on behalf of domestic consumer submit that, to provide the electricity is the basic duty of the state and the Federal Government, by imposing the fuel adjustment charges, have made it impossible for the poor consumers to utilize the basic utility the electricity, the respondents have burdened the domestic consumers with the line losses, theft, staff bonuses, excise duty, corruption of the employees and inefficiency of the Generating Units. Learned Counsel submit that right to life with dignity is the fundamental right of every citizen of Pakistan which could not be denied in any case, the fuel adjustment charges is a surcharge and is the extraction of money, hence is the violation of Articles 23 and 24 of the Constitution.
6. Learned counsel has relied on Watan Party and others v. Federation of Pakistan and others (PLD 2012 SC 292), Baz Muhammad Kakar and others v. Federation of Pakistan through. Ministry of Law and Justice and others (PLD 2012 SC 923), Qamaruddn v. Muhammad Sadiq and others (2001 CLC 848), ICC Textiles Limited through Authorized representative and 31 others v. WAPDA, WAPDA House, Lahore throug'i Chairman and 15 others (2009 CLC 1343), Muhammad Yasin v. Federation of Pakistan through Secretary, Establishment Division, Islamabad and others (PLD 2012 SC 132), Hall Corruption case (2011 PLC (C.S.) 1076), State of Karnataka and others v. Narasimhamurthy and others (AIR 1996 SC 90), Minir Hussain Bhatti, Advocate and others v. Federation of Pakistan and another (PLD 2011 SC 407), Rana Aamer Raza Ashfaq and another v. Dr.Minhaj Ahmad Khan and another (2012 SCMR 6), Government of Balochistan through Additional Chief Secretary v. Azizullah Memon and 16 others (PLO 1993 SC 341), Messrs Shaheen Cotton Mills, Lahore and another v.
Federation of Pakistan, Ministry of Commerce through Secretary and another (PLD 2011 Lahore 120), Ms. Shehla Zia and others v. WAPDA (PLD 1994 SC 693), Al-Jehad Trust through Habibul Wahab Al- Khairi, Advocate and 9 others v. Federation of Pakistan through Secretary, Ministry of Kashmir Affairs, Islambad and 3 others (1999 SCMR 1379), Samina Kanwal v. Director Punjab Forestry Research Institute, Faisalabad (2011 PLC (C.S.) 1553), Atta Ullah Khan Malik v. Federation of Pakistan through President of Pakistan and 3 others (PLD 2010 Lahore 605), Syed Zafar Ali Shah and others v.
General Pervez Musharraf, Chief Executive of Pakistan and others (2000 SCMR 1137), All Pakistan Newspapers Society and others v. Federation of Pakistan and others (PLD 2012 SC 1), Malik Nisar Ahmed v. Messrs Kohistan Goods Forwarding Agency and 4 others (2001 CLC 342) Muhammad Ibrahim Khan v. Secretary Ministry of Labour and others (1984 SCMR 1014), Hafiz Abdul Waheed v.
Mrs. Asma Jehangir and others (PLD 2004 SC 219), Muhammad Ali Shah and another v. Election Tribunal (Union Council No,49 Narhal) District Khanewal and 4 others (2004 CLC 1922), Muhammad Ramzan v. Trustees of Port of Karachi (1990 CLC 1086), Mst. Yasmin Zafar v. Muhammad Anwar Khan and others (PLD 1989 Lahore 38), The Secretary Auqaf Department, Government of Sindh, Karachi South and 3 others v. Syed Sher Ali Shah and 9 others (PLD 1999 Kar. 417).
7. Finally the learned Counsel contended that, the impugned determinations of NEPRA are violative of the specific provision of Act of 1997 and the Rules framed thereunder, these are in violation of principle of natural justice and the fundamental rights of the petitioners, hence are, liable to be struck down, further the impugned notifications are subject to judicial review and would fall within the sub specie commercial judicial review.
8. Learned counsel appearing on behalf of NEPRA submits that the NEPRA being the regulatory authority has the absolute powers to determine the electricity tariff. All concerned have been provided the opportunity of hearing in accordance with NEPRA Act and its Rules before passing the final order. The minority view was fully attended to by the majority members, the decision has been taken according to law. Learned counsel submits that NEPRA is not a Court of law and is, therefore, not required to adjudicate upon the matters according to the Code of Civil Procedure and to give judgments. NEPRA is a regulatory authority established for particular purposes, the impugned determinations available on record have been made after hearing the parties, examining the record and data submitted by the applicants. Lastly submits that an alternate remedy of review is available to the petitioners; hence these writ petitions are not maintainable.
9. Mr. Manuwar-us-Salam, Advocate learned counsel for respondent LESCO contends that the respondent being DISCO is only entitled to receive the distribution margin, and submits that fuel adjustment charges are payable to the National Transmission and Dispatch Company (NTDC) by the DISCO, The NTDC has to pay an amount to the generation companies as determined by NEPRA and forms the part of the price of energy payable by DISCOs to the NTDC.
Learned counsel submits that Petitioner Company has not filed the Board resolution conferring authority upon the signatory of the petition to file the petitions, a similar issue has already been adjudicated upon by this court, whereby the determinations of NEPRA and the modus operandi of fuel price adjustment has been up held by this court, The monthly price adjustment is in vogue since 2008 and the petitioners, are paying the same without any objection and as such the petitioners have been estopped to challenge, the charging of the fuel adjustment, the NEPRA while determining the fuel adjustment price, have invited objections from public at large but no one raised any objection, hence the petitioners are estopped to impugn the fuel adjustment price after its determination. The allegations of petitioners are based on factual controversy and as such the petition is not maintainable. Learned counsel submits that fuel adjustment price is pre agreed between the generators and the Federal Government as well between the consumer and supplier and as such it cannot be claimed that it is a past and closed transaction, The impugned notifications have been issued after final determination by the NEPRA and as such the impugned notifications are fully applicable and could not be said that these have been issued with retrospective effect. Learned counsel submits that no vested right is accrued in favour of petitioner, hence the petitioners claim for legitimate expectancy is devoid of any merit.
Leaned counsel submits that the fuel adjustment price is the part of tariff and is pre agreed between the parties concerned and per proviso of section 31(4) of the Act 1997, the NEPRA has to adjust the fuel adjustment price in the earlier settled tariff and .This exercise has been done after proper notice to all concerned, even otherwise no penal consequences has been provided in the said law, hence the provision is not mandatory but is directory.
Learned counsel submits that fuel adjustment charges could not be termed as surcharge, it is the pre agreed amount between the supplier and the consumer per agreement of supply of energy.
Lastly adds that revision of price ensures uniformity and accountability of price. Article 18 of the Constitution is subject to such qualifications as may be prescribed by law, Article 19 stipulates that regulations of any trade or 'profession can be made by the licensing authority. Learned counsel has explained the process of determination of tariff and the fixation of the base tariff.
Learned counsel has relied on M. Daud Khan and 20 others v. Government of West Pakistan and 2 others (PLD 1971 Lahore 462), The Chairman, Electricity WAPDA, Lahore and 2 others v. Ch. Muhammad Shaft, Advocate (PLD 1976 SC 254), Messrs Gadoon Textile Mills and 814 others v.
WAPDA and others (1997 SCMR 641), ICC Textiles Limited through Authorized Representative and 31 others v. WAPDA, WAPDA House, Lahore through Chairman and 15 others (2009 CLC 1343), Flying Board and Paper Products Ltd. And others v. Government of Pakistan through Secretary Cabinet Division and others (2010 SCMR 517), Messrs Noorani Steel Mills v. Federation of Pakistan (2010 YLR 2872), Sh. Saleem Ali v. Sh. Akhtar Ali and 7 others (PLD 2004 Lahore 404), The Chief Land Commissioner, Sindh and others v. Ghulam Hyder Shah and others (1988 SCMR 715), Province of East Pakistan v. Sharafatullah and 87 others (PLD 1970 SC 514), Messrs Burjor Ardshir Industries Limited v. Pakistan Industrial Credit and Investment Corporation (2003 CLD 1299), Dilawar Hussain and 6 others v. Province of Sindh through Secretary, Revenue Department, Karachi and 2 others (PLD 2003 Karachi 174), Board of Intermediate and Secondary Education v. Hafiz Ahmad Sufyan (PLD 2004 SC 25), Commissioner of Income Tax v. Shahnawaz Ltd. And others (1993 SCMR 73), Pt.
Eram Parkash, v. Snu. Savitri Devi, (AIR 1958 Punjab 87), Syed Akhlaque Husain, Advocate's case (PLD 1965 (W.P.) Lahore 147), Mehran Advertiser and others v. Government of Punjab and others (PLD 2011 Lahore 61), Dilawar Hussain and 6 others v. The Province of Sindh through Secretary Revenue Department, Karachi and 2 others (PLD 1993 Karachi 578), Messrs Gold Trade Impex through Partner and another v. Appellate Tribunal of Customs, Excise and Sales Tax through Collector of Customs, and 2 others (2012 PTD 377) and Messrs Malah Rice Mlls, Jacobabad and others v.
Presiding Officer, Banking Tribunal, Larkana and others (1997 CLC 679).
10. Learned counsel for Federation Khwaja Ahmed Tariq Raheem Advocate adopts the arguments of learned counsel for respondent LESCO and also submits that Federation is providing energy to domestic consumers on subsidized rates and the life line for domestic consumers is 100 units per month. Learned Counsel submits that subject of electricity is Item No,4 of Part II of the Federal Legislative list and as such the Federal Government has the power to legislate on the subject of electricity, hence the NEPRA Act of 1997 and rules framed thereunder are valid enforceable law on the subject of electricity.
11. Mr. Muhammad Ali Advocate has adopted the arguments of learned counsel for the respondents and adds that all the procedure as prescribed by law and the standards required to be maintained have been followed, which determine the fuel adjustment charge, he referred the various provisions of Act of 1997 and the Rules framed thereunder to highlight the procedure as laid down and identified the standards required to be maintained and dilated upon for taking final decision.
12. I heard the parties at length and perused the record.
13. The bone of contention between the parties is the recovery and determination of Fuel Adjustment charges as per the impugned notifications dated 3-10-2011, 29-2-2012, 17-4-2012, 2-5- 2012, 3-5-2012, 15-8-2012 and 16-8-2012 and subsequent notifications issued by the Federal Government and NEPRA.
14. From the above said controversy the following questions have arisen which require resolution. a.Whether the fuel adjustment charges is surcharge? b.Whether the respondents have an authority to recover Fuel adjustment charges? c. Whether the NEPRA has the jurisdiction to determine the fuel adjustment charges? d.Whether the DISCOs are the beneficiary of fuel adjustment charges? e. Whether the fuel adjustment charges can be recovered with retrospective effect? f. Whether the Federal Government has the powers to legislate on the subject of energy?
15. For appreciating the contentions of the parties it has to be seen what is the nature of Fuel adjustment price and what is the mechanism to determine the said charges.
16. The structure of Generation and supply of electricity has three phases, The Generation Companies, generates the energy (hereinafter referred to as GENCOs), The GENECO transmits the electricity to National Transmission and Distribution Company (hereinafter referred to as NTDC) and NTDC pass on the energy to (DISCOs). The DISCO arranged the transfer of energy.
17. The electricity in the country is being generated in the following sources;
1. Hydel
2. Coal
3. HSD
4. RFO
5. Gas
6. Nuclear
7. Import Iran
8. Mixed
9. Wind
18. The Hydel electricity is 47.69% of the total generation of the country and share of HSD and RFO is 0.096% and 24.69% respectively, but the cost impact of thermal power is approximately 78% of the total generation.
19. The petitioners have advanced the following arguments; a. They have paid and adjusted the bill of the consumed energy of the current month, and subsequent enhancement .Being the Fuel adjustment charges is not payable, as on payment of final bill of the consumed energy of the respective month, the transaction between the parties came to end and it will be treated the past and closed transaction. b. The energy is the major component of their end product, they have sold their product by calculating the amount of energy consumed and the enhancement in tariff under the garb of Fuel adjustment charges, if they have to pay, they are bound to suffer loss to the extent of enhanced amount and ultimately their project will be closed and they will not be able to do business and it will create unemployment. c. The fuel adjustment charges is a surcharge and as such NEPRA has no authority in law to impose the surcharge.
20. For appreciating the arguments of learned counsel, the powers of the NEPRA have to be examined.
21. Under Section 31 (1) of the Act of 1997, the NEPRA determined the tariff which is defined as under; "31 Tariffs.--(1) As soon as may be, but not later than six months from the commencement of this Act, NEPRA shall determine and prescribe procedure and standards for determination, modification or revision of rates, charges and terms and conditions for generation of electric power, transmission, interconnection, distribution services and power sales to consumers by licensees and until such procedures and standards are prescribed, NEPRA shall determine, modify or revise such rates, charges and terms and conditions in accordance with the directions issued by the Federal Government.
(2) NEPRA while determining the standards referred to in subsection (1) shall protect consumers against; monopolistic and oligopolistic prices; a. Keep in view the research, development and capital investment programme costs of license; b. Encourage efficiency in licensees operations and quality of service;
(c) Encourage economic efficiency in the electric power industry;
(d) Keep in view the economic and social policy objectives of the Federal Government; and
(e) Determine tariffs so as to eliminate exploitation and minimize economic distortions.
(3) The procedures established under subsection (1) shall include:- a. Time frame for decisions by NEPRA on tariff applications; b. Opportunity for customers and other interested parties to participate meaningfully in the tariff approval process; and c. Protection for refund, if any, to customers while tariff decisions is pending."
22. Under sections 46 and 47 of the Act of 1997, the NEPRA has the powers to make rules and regulations respectively.
23. The bare reading of Section 31 of the Act 1997 shows that NEPRA has the power to determine, revise, renew and modify the tariff as per rules and guidelines framed under Section 46 of the Act, 1997.
"19. Tariff is defined in Rule 2(m) which is read as under: "Tariff" means the rates, charges, terms and conditions for generation of electric power, transmission, interconnection, distribution, services and sales of electric power to consumers by a licensee."
24. Guideline 16 provides time for deciding the application for determination, renew, revise or modify the tariff.
25. Sub-rules (1) and (3) of rule 17 provide the standards and guidelines for determining the Tariff which are read as under; "(1) NEPRA may, from time to time, set and issue standards and guidelines regarding the substances of contents of filing to provide assistance to persons seeking to file petition and communications. NEPRA may hold public hearings in accordance with these rules in the development of standards and guidelines. The persons filing the petitions and communications shall comply with any and all standards or guidelines issued by NEPRA.
(3) Tariffs shall be determined, modified or revised on the basis of and in accordance with the following standards, namely:
(i) tariffs should allow, licensees the recovery of any and all costs prudently incurred to meet the demonstrated needs of their customers, provided that, assessments of licensees, prudence may not be required where tariffs are set on other than cost-of services basis, such as formula-based tariffs that are designed to be in place for more than one year;
(ii) Tariffs should generally be calculated by including a depreciation charge and a Rate of Return on the capital investment of each licensee commensurate to that earned by other investments of comparable risk; b. Tariffs should allow licensees a Rate of Return which promotes continued reasonable investment in equipment and facilities for improved and efficient service; c. Tariffs should include a mechanism to allow licensees benefits from, and penalties for failure to achieve the efficiencies in the cost of providing the service and the quality of service; d. Tariffs should reflect marginal cost principles to the extent feasible, keeping in view the financial stability of the sector; e. NEPRA shall have a preference for competition rather than regulations and shall adopt policies and establish tariffs towards that end; f. The Tariff regime should clearly identify inter-class and inter-region subsidies and shall provide such subsidies transparently if found essential, with a view to minimizing if not eliminating them, keeping in view the need for an adequate transition period; g. Tariffs may be set below the level of cost providing the service to consumers of electric power, below the consumption levels determined for the purpose from time to time by NEPRA, as long as such tariffs are financially sustainable; h. Tariffs should, to the extent feasible reflect the full cost of service to consumer groups with similar service requirements; i. Tariffs should take into account Government subsidies or the need for adjustment to finance rural electrification in accordance with the policies of the Government; j. The application of the tariffs should allow reasonable transition periods for the adjustments of tariffs to meet the standards and other requirements pursuant to the Act, including the performance standards, industry standards and the uniform codes of conduct;
(k) Tariffs, should seek to provide stability and predictability for customers; and
(l) Tariffs should be comprehensible, free of misinterpretation and shall state explicitly each component thereof."
26. The conjunctive study of the provision of the Act, Rules and guidelines framed show that NEPRA has the power to determine the tariff its renewal, revision and modification. Under the NEPRA Act 1997 it is the duty of Authority while determining the tariff to protect the A interest of both the parties i.e, the consumers and the Generators. The rules referred to above will show that NEPRA while determining Tariff may take in to consideration the factors detailed in the rules and the factors which forms the part of tariff i.e, the rates, charges, terms and conditions for generation of electric power, transmission, interconnection, distribution, services and sales of electric power to consumers by a licensee. In generating the thermal power the fuel is the major component, meaning thereby the fuel is part of cost of energy in addition to the other components as to machinery, equipment, manpower and infrastructure.
27. The meaning of tariff as per OXFORD dictionary is "a tax to be paid on a particular class of importer or exporters. A list of charges made by a hotel, restaurant, etc."
Business dictionary "duty, rate, charge, account, itemized account list, list of items, quoted price, price list, scale of price, table of charges."
Wharton's Law Lexicon, "cartel of commerce, a book of rates."
28. The definition of tariff used in NEPRA Act, 1997 with reference to the present dispute thus means the final cost of energy offered to C consumer. The entire energy from all sources is parked in a common pool, every fuel based generating company has its own power purchase agreement with the federal government with agreed tariff, but the said tariff is agreed In the bases of tentative base price of the fuel called Reference fuel price. The said agreement provides that increase and decrease in the price of fuel will be adjustable in Reference fuel price. The reason for fixing the reference fuel price is that price of the fuel in International market fluctuates on day to day basis.
The consumer when enter into agreement with the DISCO for acquiring the energy connection he/she/it agrees with the DISCO that he/she/it will be responsible to pay the price/ cost/tariff of the energy. Under the NEPRA Act, the authority is responsible to fix, renew, revise or modify the tariff of the energy D after conducting inquiry and hearing the consumer the DISCOs, GENCO and NTDC.
29. The generators under an agreement with the Federal Government has agreed to sell energy on the terms that Federal Government (purchaser) will provide the fuel for producing the energy, and the seller (generator) will arrange the machinery, equipment, manpower and other necessary items required for producing the energy. To ascertain the price offered for sale is the duty and domain of NEPRA, in addition to already agreed tariff under PPA with the Federal Government, the Fuel required for generation is an imported item and its price fluctuate on day to day basis. After the receipt of actual purchase price of fuel the NEPRA on receipt of application revise the tariff.
NEPRA as per its mandate determine the actual price of energy after adding or reducing the actual fuel price in reference fuel costs, if the actual fuel cost is less than the reference cost, the NEPRA reduce the Reference Fuel cost of the respective month and provides credit to the customer and if the actual fuel cost more than the Reference fuel cost it adds the same. This means that the addition or reduction of fuel cost/price is agreed item between the generator and the Federal Government who is arranging the energy facility to its citizens. The above said facts will show that fuel adjustment charge is a price of energy and not the charge or additional charges.
30. As far as the argument of learned counsel for the petitioner that impugned notifications are retrospective in nature is concerned, the NEPRA determined the earlier tariff was the basis of reference fuel price and the fuel adjustment price is a pre agreed price of fuel, the NEPRA has added the difference fuel cost, the reference price of Fuel and as such it was in the knowledge of the consumer that they are paying the F price of energy arrived at on the basis of tentative fuel price and actual price will be payable on the receipt of actual invoice of the fuel, in fact it is the pre agreed liability of the consumer which is payable as and when finally determined thus in these circumstances no question of vested right and any legitimate expectancy arose, the vested right is that right which is complete in all respect and is not dependent on any contingency.
31. The petitioners have raised serious objections against the determination of tariff and pointed out that line losses have been added in the price of electricity to the extent of 12%, the generating units are producing the energy less than the dependable capacity but are receiving the fuel being pass through item on dependable capacity, the NEPRA has not attended to this aspect of the tariff and has burdened the consumers of the amounts of misappropriated fuel by the Generators.
Learned counsel contends that under the NEPRA Rules the line losses could not be made the part of tariff and as such the same is liable to be deleted from the tariff.
32. The NEPRA has framed rules under Act of 1997 for determining the tariff, Rule 17(1), (3) provides the items and factors which could be included and should be considered for determining the tariff, admittedly the line losses is not the item which even required consideration in the determination of the tariff, but the NEPRA has allowed the inclusion of 12% line losses in the tariff. Learned counsel submits that in fact the line loss represent that loss which the fraudulent consumers are causing to the company with the active connivance of the employees of the DISCOs but the said ill-gotten amount is being recovered from the bona fide consumers. The NEPRA being the regulatory authority has failed to perform their duty according to its mandate. Learned Counsel for petitioner has referred the additional note of one of the member of the authority dated 5-10-2012 and submit that in spite of the pointation of the illegalities the NEPRA has not taken any action against the DISCOs and allowed transmission losses to DISCOs for adding the same in tariff.
33. The petitioners through the present petitions have only challenged the imposition/recovery of fuel adjustment price, as the petitioners have not challenged the item of transmission losses and less generation against the dependable capacity, the respondents thus have not replied the said allegation, hence the court is unable to resolve the said controversy in the present petition. Learned counsel for respondent LESCO however has argued that it is the purchaser company who is placing the order for generation of energy and only provides the fuel according to the order placed, so no question of supply of fuel on dependable capacity arose. As far as the line losses of 12% is concerned, 12% does not represent the line losses but it includes other expenses and cost as agreed between the generator and the Federal Government, however he is unable to controvert the fact of the theft of energy and excess billing.
34. One of the members of NEPRA vide his note dated 5-10-2012 has pointed out as under; "In my earlier descending note in the matter of Fuel Charges Adjustments for Ex-WAPDA Distribution Companies, for the month of August, 2011, I had disallowed fuel charges adjustments on account of, inter alia, serious inefficiencies prevailing in the Public Sector GENCOs. As per available information, these in-efficiencies still persist and GENCOs are still generating electricity at much higher cost, thereby burdening the end-consumers for no fault on their part. These inefficiencies in my view are contributing a lot to the miseries of the consumers and pushing the power sector into a quagmire.
These inefficiencies includes non-adherence to the merit order of the GENCOspower plants in time, non-carrying out of schedules maintenance, non-replacement of damaged parts in lime, operation of plants on higher auxiliary consumption at very low efficiency and heat rates and non- installation of fuel flow meters, non-carrying out of dependable capacity and heat rate tests, non- filing of a fresh tariff petition for generation tariff on the basis of test results, non-carrying out of an in-house study to find out the reasons for higher auxiliary consumptions, non-installation of Chromatographs meter at incoming source of the gas in power plants, non-verification of CV from a third party etc. Etc. In view of the matter, I-am of the considered view that non-signing of ESAs gives rise to speculation that the financial transactions between CPPA, GENCOs and DISCOs are being carried out in a disorderly manner and without any financial discipline. In my view, carrying out the business of sale/purchase without a formal written ESA, which determines the terms and conditions for sale/purchase of electricity between three different sets of companies having been registered under the Companies Ordinance, 1984, having different objectives and governed by different Board of Directors is a serious matter which could lead into grave complications and likely to result in some serious audit objections about misappropriation of public money and also will not stand the test of investigative scrutiny at -any forum or stage.
In a recent audit of CPPA; conducted by NEPRA, it has been observed that cost of energy provided by some Generation Companies is booked on estimated basis and no verification is being done at CPPA level regarding invoices raised by those companies. It was further observed by the audit team that the procedure used for processing of invoices is not thorough and diligent. The practice of not resorting to source document, i.e,, Tariff determination of NEPRA is common and not taken seriously. In the given situation, allowing fuel charges adjustments on unreliable information provided by CPPA would be unfair and unjustifiable. Hence it MUST be avoided.
In the light of what has been explained in the preceding paras, I do not find any justification to allow the proposed increase in the approved tariff on account of fuel charges adjustments. This would be entirely against the consumer interest, hence decline the request of CPPA. Additionally, inefficiencies and operational mismanagement within the government owned GENCOs/CPPA and DISCOs are burdening the consumers for no fault of theirs and have made these entities commercially unviable and not meeting the objectives for which these were created, therefore, some serious soul searching efforts and concrete steps are required to be taken by the Ministry of Water and Power, Government of Pakistan and the Board of Directors of these companies to make them commercially sound, efficient and independent in the best interest of both the Government of Pakistan and the consumers of electricity."
35. Under Section 31(2) of the Act of 1997 the NEPRA is bound to protect consumers against monopolistic and oligopolistic prices it is an admitted fact that electricity is the Monopoly product of WAPDA, the NEPRA is thus bound to examine minutely each and every component required and used for generation while ascertaining the tariff.
36. Under section 31(1) of the Act of 1997 while determining the Tariff the NEPRA shall have to examine the following facts; a.Protect consumers against monopolistic and oligopolistic prices. b.Keep in view the research, development and capital investment program cost of licensees. c. Encourage efficiency in licensees operations and quality of services. d.Encourage economic efficiency in the electric power industry. e. Keep in view the economic and social policy objectives of the federal government.
(f) Determine tariffs so as to eliminate exploitation and minimize economic distortion.
37. The honourable Supreme Court of Pakistan has examined the role and responsibility of the Regulatory Authority OGRA in Muhammad Yasin v. Federation of Pakistan (PLD 2012 SC 132) honourable Supreme Court of Pakistan held as under: "14: It needs to be understood that in our present context, the economic life of the nation and its citizens, is inextricably linked with the proper functioning of regulatory bodies such as OGRA. To fully appreciate this, we may take stock .Of some recent developments, which have deepened the connection between the proper 'effective and efficientfunctioning of regulatory bodies and the fundamental rights of citizens. In the past, particularly during the 1970's, direct State ownership and management of business enterprises was a policy objective of the Government. More recently, however, such State involvement has receded through privatization of many State owned enterprises and through entrustment of activities (which hitherto were undertaken by the State) to companies initially owned by the State but slated for disinvestment through privatization. The most relevant example of this, in the context of the present case is the creation of the Oil and Gas Development Company Ltd. It has been incorporated under the Companies Ordinance 1984, pursuant to the Oil and Gas Development Corporation (Reorganization) Ordinance 2001. In view of this increasing trend towards privatization, regulation has emerged as perhaps the single most important function of the State in the sphere of macroeconomics.
15. Here we may note that it figs within the domain of the Executive to determine policy and for the Legislature to enact laws to implemnent such policy as long as such policy or legislation is not violative of the'Constitution and The rights guaranteed thereunder. In line with the recognized constitutional principle of tracheotomy of powers, therefore, it is not for this Court to go into the merits or demerits of such Government policy. However, once the legislature entrusts regulators such as OGRA with State power, making them responsible for the governance Of critical sectors of the national economy, then it should be clear that regulators incur important constitutional and legal obligations to the people of Pakistan. The Ordinance makes this connection obvious when it declares that it is meant to "protect the public interest", to "respect individual rights" and to "provide effective and efficient regulation". Therefore, on the basis of the Ordinance, the public can demand that regulators be diligent while protecting the public interest and that their functionaries meet the standards and eligibility criteria prescribed for them by law. Also, once the Legislature has laid down qualifications which senior regulatory functionaries must have the public is entitled to invoke the jurisdiction of Courts to ensure adherence to the law. This is the larger historical context in which the Legislature has enacted a series of laws to govern the most important Federal regulatory agencies impacting the life of the people of Pakistan. This context helps the Court in interpreting relevant statutes such as the Ordinance.
16. ..
17. In addition to its regulatory domain, there is the simple fact that OGRA, like any other public sector body, is kept afloat by taxes and fees, the incidence of which falls on the meager resources of Pakistan's toiling millions. With the ratio of direct taxes to Government taxation revenues being abysmally low, the lowest in the sub-Continent, the Government has increasingly resorted to regressive indirect taxes. These taxes encroach on the already inadequate disposable incomes of the poorest segments of society. When, for instance, poor parents in a small town spend their savings travelling to a nearby town, or to buy a pair of shoes for their toddler or to put bangles on the dainty arms of their little girl on a chand raat, even they are not spared. A contribution is automatically and compulsorily exacted from them and passed on to the State exchequer by levies such as Sales Tax etc. It needs to be realized that it is contributions like these, together with fees collected by OGRA in a fiduciary capacity in the name of the people of Pakistan, which pay for the salaries, up-keep and running of OGRA. Therefore, if taxes or fees are spent in violation of law it would amount to breach of Articles 3, 4 and 5(2) of the Constitution, and would also constitute denial of the citizensfundamental rights guaranteed by Articles 9, 14, 18, 23 and 24. These rights would also be adversely affected if inter alia, the Chairman or other members of OGRA are appointed though they are not eligible..
18. Similarly,. It is the ordinary citizens who will be the worst affected if, on, account of the incompetence or lack of integrity of appointees, OGRA fails to fully exercise its powers to "protect the public interest" or to "effectively and efficiently" regulate the Oil and Gas sector. Thus, for instance, incompetent or dishonest practices for granting licenses of regulated activities can result in illegal benefits to a select coterie of licensees at the cost of the ordinary citizen. It will be seen that while enumerating the powers and functions of OGRA, the Ordinance has specifically directed that it will, amongst other things, "safeguard the public interest ... In relation to regulated activities" [section 6 (2)1 and more specifically OGRA is commanded to "protect the interests of stakeholders including the consumers". Section 7 (1) of the Ordinance stipulates, inter alia, that OGRA 'shall determine or approve tariff for regulated activities .....OGRA also has a major role assigned to it under section 8 of the Ordinance, in the matter of fixing prices of natural gas for retail consumers.
19.
20.
21. The object of adverting to the aforesaid figures is to demonstrate that fixation of tariff and prices for retail consumers is part of the regulatory function of OGRA and has a direct connection with the economic well-being of the people of Pakistan. Any increase in consumer prices, which results from lack of competence or integrity or because of inefficient regulation Would result in depriving the citizens of their fundamental rights guaranteed by Articles 9, 14, 18, 23 and 24 of the Constitution because the scales would impermissibly stand tilted against the citizens and in favour of those engaged in regulated activities. It is, therefore, beyond doubt that, as the institution which is mandated to regulate the oil and gas trade and to determine tariffs and fix prices for consumers, OGRA's effective functioning has a direct nexus with securing the fundamental rights of the people of Pakistan.
22.
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25. At the end of this part of our opinion, we can now summaries our three-step rationale for maintaining the present petition. Firstly, when understood correctly, a number of Articles of the Constitution make it clear that it is not silent about the economic life of the nation and the concomitant fundamental rights of its citizens; secondly, we are clear that there is an ever-greater nexus between the proper and independent functioning of regulatory bodies and the economic life of the nation and its citizens and that this nexus is fully recognized by the Legislature in its use of language employed by the Ordinance in the provisions referred to above; and finally, there can be no doubt that regulatory bodies can function competently and independently only once their autonomy is ensured through enforcement of the legal checks upon appointments to important positions therein. When these three points are fully appreciated, it becomes clear that the validity of the process of appointment of the Chairman, OGRA is indeed a matter of public importance which has a direct linkage with the fundamental rights of the people of Pakistan, and thus warrants the exercise of jurisdiction by this Court under Article 184(3) supra. It is possible, however, that if similar cases arise in future, the High Courts may be in a position to decide the same by applying the principles of law enunciated in this judgment, in terms of Article 189 of the Constitution."
38. In Baz Muhammad Khan v. Federation of Pakistan (PLD 2010 SC 923) Per Khilji Arif Hussain J. Held as under: "3. Every modern democratic Constitution are entrusted public welfare functions to the Government established by it, wherein the Government becomes the trustee of the people who are beneficiaries. Thus, in every modern democratic State, the Government is the trustee that cannot act or exercise powers against the interest of its beneficiaries (people)."
39. The NEPRA being the regulatory authority thus prima facie has not performed their legal duties and has failed to consider the most important facts as pointed by Mr. Shauket Ali Kundi the member of authority, the alleged inefficiency and deficiency are so visible that even an ordinary prudent man who has no technical knowledge is believing it true but the Technical experts of the authority has not bothered to even consider the above alleged illegality of facts and law.
40. The argument of Learned Counsel of the Industrial Units that they have been deprived to do their legitimate business is concerned, this argument of Learned Counsel is devoid of any merit, as the Industrial Unit is adding the cost of energy on its products and in this way they are recovering the said cost from the end consumer, it is the end consumer who is the sufferer. It is an established principle of law that Government can impose reasonable restrictions. For regulating the trade and business but even in this case the Government has not imposed any restriction, the Industrial Units are purchasing the energy and is debiting the same to the end consumer, the argument that the Industrial Unit has received the bill of Fuel adjustment price after payment of the final energy bill and have sold the end product so the additional amount is their loss has no force, the Industrial Unit calculate its profit after the close of financial year and the impugned additional amount will be adjustable in the yearly profit, the maximum effect of the fuel adjustment charges is that ratio of projected profit of the petitioners may not be achieved fractionally but in this case the ultimate loser is the Federal Government as the they will get less Income tax on gross profit.
41. However this argument has a force to the extent of individual consumer. Every citizen of Pakistan is enjoying the right of life with dignity under Articles 9 and 14 of the Constitution of Islamic Republic of Pakistan. Pakistan is-a Islamic State and Holy Quran says about the right of Basic needs; "And in their wealth the seeker and the deprived has due share "(al-Dhrriyat 51:" Give the Kinsman his due, and the needy and the wayfarer, and do not dissipate your wealth extravagantly (Bani Isrial 17126).
42. Now it has to be seen whether the right to get electricity with reference to Articles 9 and 14 is the basic need and is a right of life and if it is a right of life than the life line declared by the respondent for domestic consumers fulfill the minimum requirement of domestic consumer or not?
43. Right to Life has been dilated upon by the honourable Supreme Court of Pakistan in Ms. Shehla Zia and others. v. WAPDA (PLD 1994 SC 693).
"47. Article 9 of the Constitution provides that no person shall be deprived of life or liberty save in accordance with law. The word 'lifeis very significant as it covers all facts of human existence. The word 'lifehas not been defined in the Constitution but it does not mean nor can it be restricted only to the vegetative or animal life or mere existence from conception to death. Life includes all such amenities and facilities which a person born in a free country, is entitled to enjoy with dignity, legally and constitutionally. The word 'lifein the Constitution has not been used in a limited manner.
A wide meaning should be given to enable a man not only to sustain life but to enjoy it. Under our Constitution, Article 14 provides that the dignity of man and subject to law the privacy of home shall be inviolable. The fundamental right to preserve and protect the dignity of man under Article 14 is unparalleled and could be found only in few Constitutions of the world. The Constitution guarantees dignity of man and also right to 'lifeunder Article 9 and if both are read together, question will, arise whether a person can be said to have dignity of man if his right to life is below bare necessity like without proper food, clothing, shelter, education, health care, clean atmosphere and unpolluted environment. Such questions will arise for consideration which can be dilated upon in more detail in a proper proceeding involving such specific questions."
44. The Hon'ble Supreme Court again examined Article 9 of the Constitution in Arshad Mehmood and others v. Government of Punjab through Secretary, Transport Civil Secretariat, Lahore and others (PLD 2005 SC 193) and held as under: "Word 'lifeused in Art.9 of the Constitution includes all tuch amenities and facilities which a person born in a free .Country is entitle& to enjoy with dignity, legally and constitutionally, Word 'lifein the Constitution has not been used in a limited manner; a wide meaning should be given to enable a man not only to sustain life but to enjoy it."
45. Again the word life has been examined in Dr.Mobashir Hassan and others v. Federation of Pakistan and others (PLD 2010 SC 265), Bank of Punjab and another v. Haris Steel Industries (Pvt.)
Ltd. And others (PLD 2010 SC 1109) and Watan Party and another v. Federation of Pakistan and others (PLD 2011 SC 997), Alleged Corruption in Rental Power Plants etc. Case (2012 SCMR 773).
46. The Hon'ble Supreme Court of Pakistan examined the right of life with reference to electricity 2012 SCMR 773, Alleged Corruption in Rental Power Plants etc. And opined as under; "15. It is to be clarified that the Government of the day under Article 29 read with Article 2A of the Constitution is bound to formulate policies for the promotion of social and economic well being of the people, which includes provision of facilities to the citizens for work and adequate livelihood with -a reasonable rest and leisure, etc. Energy/electricity is essentially one of the significant facilities required by the citizens for manifold purposes, namely, uplifting of their social and economic status. Non-supply of electricity to the citizen regularly, is tantamount to depriving them of one of the essentials of the life including the security of economic activities, which are relatable to their fundamental rights protected under Articles 9 and 14 of the Constitution. In the cases, of Bank of Punjab v. Haris Steel Industries (PLD 2010 SC 1109), Liaqat Hussain v. The Federation of Pakistan (Constitution Petition No,50/2011). In Re: Human Rights Case regarding fast food chain in F- 9 Park (PLD 2010 SC 759), In Re: SMC No,13 of 2009 (Case regarding Multi-Professional Housing Schemes) (PLD 2011 SC 619) and Shehla Zia v. WAPDA (PLD 1994 SC 693), Article 9 has been interpreted and its scope has been enlarged to each and every aspect of human life. Therefore, whenever a ,policy is framed with reference to uplifting the socio-economic conditions of the citizens, object should be to ensure enforcement of their fundamental rights."
47. From authoritative dictates of the Hon'ble Supreme Court of Pakistan it is an established fact that right to electricity is a fundamental j right, hence it has to be seen whether the state is providing or safeguarding the right of electricity of the citizens or not. There are two type of domestic consumers of electricity, one are those who can afford the electricity at any price but the other is who are not in position to even pay the claimed subsidized rates, Learned counsel for Federation submits that State is providing electricity to the extent of life line users (100 Units) on subsidized rates and, has filed the details of consumption on 100, 200 and 350 Units per month as under; Working of Electrical appliances which may be used within 100 Units (Domestic Consumer)
Appliances Unit Load (W att) No. of appliances Total connected load Energy Saver 20 4 80 Fan 80 2 160 TV 100 1 100 Washing Machine 350 1 350 Total Load 690 Watt or 0.69 KWh.
Working of Electrical appliances which may be used within 200 Units (Domestic Consumer)
Appliances Unit Load (W att) No. of appliances Total connected load Energy Saver 20 4 80 Fan 80 2 160 TV 100 1 100 Washing Machine 350 1 350 Iron 750 1 750 Total Load 1440 Watt or 1.4 KWh.
Working of Electrical appliances which may be used within 300 Units (Domestic Consumer)
Appliances Unit Load (W att) No. of appliances Total connected load Energy Saver 20 4 80 Fan 80 2 160 TV 100 1 100 Washing Machine 350 1 350 Iron 750 1 750 Air Cooler 120 1 120 Total Load 2040 Watt or 2.04 KWh.
48. The above said details will show that 350 Units hardly fulfill the requirements of a family whose earning is only Rs,10,000/- or less than Rs,15,000/- per month and if they are burdened with fuel adjustment price it will become impossible for them to have the basic necessity of life, hence they are entitled to get the energy at subsidized rates. The Federal Government no doubt is providing energy on subsidized rate to life line consumers but simultaneously recovering the said subsidy in the shape of sales tax, T.V. Charges, Nelum Jhelum surcharge, over billing etc., hence on one hand the respondent No,1 is providing subsidized energy but simultaneously are taking back by adding taxes. The bills issued to the consumers shows that even on mosques, church and other religious institutions are made liable to pay the charges of that equipment which is not in their use.
49. Learned counsel for respondent No,2 has made the statement at the preliminary hearing of connected W.P. No,23097/2011 when on 22-12-2011 the restraining order was modified on his statement that respondents will not debit the fuel adjustment price to the domestic users of 350 Units per month and this court confirmed the restraining order to the extent of 350 Units Per month but now learned counsel shown respondents inability to continue with the said concession, however, if this court will suggest in its advisory jurisdiction to Federal Government for allowing concession to users of 350 Units, the Federal Government is ready to consider the same. As the right to get the electricity is the fundamental right of every citizen of Pakistan. Pakistan is democratic Islamic state and a truly Islamic state is therefore is a truly welfare state who is guardian and protector of its citizens in need, hence in the above circumstances it is declared that the respondents are not entitled to recover Fuel adjustment of 350 Units per month and this court confirmed the restraining order to the extent of 350 Units Per month but now learned counsel shown respondents inability to continue with the said concession, however, if this court will suggest in its advisory jurisdiction to Federal Government for allowing concession to users of 350 Units, the Federal Government is ready to consider the same. As the right to get the electricity is the fundamental right of every citizen of Pakistan. Pakistan is democratic Islamic state and a truly Islamic state is therefore is a truly welfare state who is guardian and protector of its citizens in need, hence in the above circumstances it is declared that the respondents are not entitled to recover Fuel adjustment charges from the domestic users of 350 Units per months.
50. As it is established that NEPRA is enjoying the powers to determine the final tariff on receipt of final invoice of fuel consumed; hence the argument that impugned notification is in violation of NEPRA Act 1997 is answered in negative.
51. However after examining the determinations placed on record it is prima facie established that NEPRA has not properly attended to the alleged illegalities pointed out by one of member of NEPRA and has permitted the respondents to recover the cost of stolen energy, which is stolen either with the active connivance of the employees of the respondents or due to the inefficiency of respondents employees, the continuous dissenting notes of one of the member of authority require attention, specially the note dated 5-10-2012. As for consideration of the above alleged illegalities and mal practices the recording of evidence and examination of the record is necessary this Court in its constitutional jurisdiction is unable to hold factual inquiry and to record evidence and as such the matter in dispute is remitted to NEPRA for probing the same and to pass a reasoned order/ determination on the issues detailed and discussed above.
52. In view of the facts it is therefore declared as under: a. The respondents are entitled to recover the fuel adjustment price from the Industrial Units as per impugned notifications. b. The domestic consumers who are utilizing the electricity more than 350 Units are liable to pay the Fuel adjustment price. c. The domestic consumers who are consuming 350 Units or less per month are not liable to pay the fuel adjustment price and the respondents are bound to refund the already recovered fuel adjustment charges to them or may adjust the refundable amount in future monthly bills. d. The NEPRA if after re-examining the issue remitted to it, if come to the conclusion that the Generators have wrongly claimed the fuel adjustment costs and other expenses, the NEPRA will recover the said amount from its beneficiaries may be the Generators or the Federal Government and will refund the said amount to the consumers by way of adjustment in their monthly bills.
(e) The NEPRA will also determine the transmission losses after holding detail probe and in case it is proved that line loss represent the price of stolen energy, the NEPRA will direct the Federal Government to refund the said amount to the consumer by way of adjustment in the monthly bills and will also take appropriate legal action against the culprits in accordance with law.
(f) The NEPRA will decide issues as detailed above within three months from the day of announcement of the judgment in accordance with law.
60. The petitions are allowed in the above said terms.