Damodar Valley Corporation and West Bengal State Electricity Distribution Company Limited

COMPETITION COMMISSION OF INDIA Case No. 13 of 2025

In Re:

Damodar Valley Corporation DVC Tower, Commercial Department, $1^{\text{st}}$ Floor, Opposite TATA Communications, VIP Road Kolkata – 700054 Informant

And

West Bengal State Electricity Distribution Company Limited Vidyut Bhawan ($5^{\text{th}}$ Floor, ‘B’ Block) Salt Lake City, Block- DJ, Sector-II, Kolkata – 700091 Opposite Party

CORAM

Ms. Ravneet Kaur Chairperson

Ms. Sweta Kakkad Member

Mr. Deepak Anurag Member

Order under Section 26(2) of the Competition Act, 2002

Facts and Allegations in brief, as per the Information

1. The present Information has been filed under Section 19(1)(a) of the Competition Act, 2002 (the ‘Act’) by Damodar Valley Corporation (‘DVC’/‘Informant’), alleging contravention of the provisions of Sections 3 and 4 of the Act by West Bengal State Electricity Distribution Company Ltd. (‘WBSEDCL’/‘OP’).

2. The Informant is a statutory body established under the Damodar Valley Corporation Act, 1948 and engaged in the generation, transmission and distribution of electricity in the DVC Command Area in the State of West Bengal. The Informant operates and undertakes the business of distribution of power specifically to the industrial consumers ranging from 11 kilovolts (‘kV’) industries, 33 kV industries, 132 kV industries, 132 kV traction and 220 kV industries in the DVC Command Area. The total Command Area of DVC encompasses approximately 24,235 square kilometres across the States of West Bengal and Jharkhand, of which an area of approximately 6,266.70 square kilometres falls within the territorial jurisdiction of the State of West Bengal.

3. As per the Information, the OP is a licensed electricity distribution utility operating in West Bengal. It serves as a nodal agency for the Government of West Bengal (‘GoWB’) in implementing rural electrification initiative, aimed at providing access to electricity for all rural households across the State.

4. The Informant has stated that the operational area of the OP extends across the entire State of West Bengal, excluding those areas that fall within the exclusive operational jurisdiction of other licensed electricity distribution entities such as Calcutta Electric Supply Corporation (‘CESC’).

5. It has been stated that following a restructuring by the GoWB, the OP took over the electricity distribution business of Durgapur Projects Limited (‘DPL’), as per the order dated 31.12.2018 of the West Bengal Electricity Regulatory Commission (‘WBERC’), with effect from 01.01.2019.

6. Thereafter, the OP, vide order dated 08.11.2019, sought approval from the WBERC to apply competitive tariffs for industrial and traction consumers within the erstwhile DPL area. The WBERC directed the OP to charge any tariff to any class of consumers in the area of erstwhile DPL within the maximum ceiling tariff as mentioned in the WBERC order dated 31.12.2018. The relevant extract of the WBERC order is reproduced below:

"ORDER In view of the above observations, the Commission directs that- a) WBSEDCL may, at its option, charge any tariff to any class of consumers in the area of erstwhile DPL within the maximum ceiling tariff as mentioned in the order dated 31. 12.2018 of the Commission; and b) Any loss suffered by WBSEDCL by charging any lesser tariff shall not be passed on to other consumers of WBSEDCL."

7. It is stated that DPL supplied power of approximately 1,410 million units (‘MU’) up to 31.12.2018, to its consumer base comprising 98 consumers at voltage levels of 11 kV, 33 kV, and 132 kV. It is to be noted that DPL did not supply electricity to consumers belonging to 220 kV.

8. It has been alleged that following the re-organisation, the OP, extrapolated the operation of the WBERC order beyond its intended scope by issuing two notifications dated 16.11.2019 and 28.02.2023. It has been stated that vide the said notifications, the OP not only effected charging competitive tariff rates within the DPL area, overlapping with a part of the DVC Command Area but also to:

• a. Industrial consumers of 220 kV categories to which DPL had no prior service history;
• b. Industrial and Cold Storage consumers at 11 kV and Industrial consumers at 220 kV and above in the DVC Command Area (except erstwhile DPL area); and
• c. Industrial consumers at 132 kV and 33 kV and traction consumers at 132 kV and 33 kV and traction consumers in the DVC Command Area where multiple licensees were functioning at rates even below its average cost of supply (‘ACoS’).

9. The Informant also stated that the ACoS for the OP, as approved by the WBERC ranges from 698.22 paise/kWh to 712.10 paise/kWh, yet the OP has been charging tariffs below its cost in the DVC Command Area. It has been alleged that the OP engaged in predatory pricing by offering electricity at rates below its cost of supply in the DVC Command Area, with the deliberate intention of attracting the Informant's consumers and eliminating competition, resulting in significant migration of consumers from Informant to the OP.

10. As per the Information, in terms of the definition contained in Regulation 1.2.1 (xxx) of the West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2011 (hereinafter referred to as the ‘Tariff Regulations’), each control period after the third control period is normally for a period of five ensuing years or such other period of number of ensuing years as may be decided by the WBERC from time to time. Accordingly, each distribution licensee submits a petition for the determination of tariff for the supply/distribution of electricity to the WBERC and the WBERC issues one tariff order for each distribution licensee on a regular basis which is then implemented by respective distribution licensees.

11. For such determination of tariff, the Regulations provide a Multi-Year Tariff (‘MYT’) Framework whereby the WBERC undertakes determination of Aggregate Revenue Requirement (‘ARR’) and Expected Revenue from Charges (‘ERC’). The ARR, as defined in Regulation 1.1.1 (vii) of the Tariff Regulations, means “the requirement of funds for activities related to the business of electricity of a licensee or a generating company, as the case may be, for recovery of allowable expenses, allocations, return on equity and other permitted allowances, for any specific period as a part of revenue recoverable through tariff in accordance with these regulations.”

12. The MYT Framework provides for the determination of tariffs on the basis of calculation of the ARR and ERC of each ensuing year of the control period and determination of tariff for the first ensuing year and amendment of the tariff in the second and onward ensuing year after due permitted adjustment with the ARR of the ensuing year as determined in the first ensuing year.

13. Every distribution licensee in the State of West Bengal, during the control period for any ensuing year or base year, may make an application to the WBERC for an Annual Performance Review (‘APR’) of annual fixed charges, fixed cost, incentives and effects of gain sharing on several parameters for adjustments to ensuing year's ARR. APR orders thus provide a comparative analysis of the actuals versus the assumptions (though taken on the basis of past data and expected increase in costs) applied in the tariff orders on various heads. In the APR, the WBERC undertakes a review of different elements of fixed charges to ascertain the amount to be approved/disapproved to a particular licensee against each head of elements vis-à-vis the amount allowed under the respective tariff order.

14. WBERC also redetermines the ARR by carrying out detailed examination and adjustments of the fixed and variable costs incurred by the OP and specifies the treatment of variation between the projected and actual expenditure of such fixed charge elements. As per the Informant, the analysis of the APR orders of 2019-20, 2020-21, 2021-22 and 2022-23 reveals a consistent pattern where the OP’s actual costs are significantly higher than the actual revenue realised by the OP in the relevant years. It is submitted that despite recurring financial challenges, the OP has continued to distribute electricity at prices not only lower than the determined tariff but also lower than its cost of supply in the DVC Command Area excluding the erstwhile DPL Area.

15. The Informant has taken ARR determined in WBERC’s APR order of 2022-23 i.e., INR 27,26,980.27 and Return on Equity (‘RoE’) i.e., INR 40,876.52 to determine the cost of supply [$\text{COS} = \text{ARR}-\text{RoE}$] i.e., INR 26,86,103.75. The Informant then arrived at the ACoS by dividing the cost of supply by the total amount of energy sold by the OP, as follows: