Street Lighting On Highways Not To Be Charged On Commercial Rates, APTEL Holds

The Appellate Tribunal for Electricity (APTEL) recently provided relief to Highway operators. The APTEL held fhat street lighting on highways would not be charged on commercial/non-resident rates, setting aside order of Maharashtra Electricity Regulatory Commission (MERC).

M/s Dilip Buildcon Ltd. (“DBL”) and National Highways Authority of India, Project Implementation Unit, Aurangabad (“NHAI-PIU, Aurangabad”) were successfully represented by a team comprising Mr. Saurav Agrawal, Mr. Harish Malik, Ms. Aakriti Dawar, Ms. Anshika Pandey and Mr. Shivam Chaudhary in an Appeal filed against Clause 7.22.10 of the Multi-Year Tariff Order dated 31.03.2023 passed by the Maharashtra Electricity Regulatory Commission (MERC) in Case No. 226 of 2022 before the Appellate Tribunal for Electricity (“APTEL”). The dispute pertained to the arbitrary categorization of street lighting on the national highway within the LT-II: Commercial/Non-Residential tariff category, instead of the LT-VI: Street Light tariff category.

FACTUAL BACKGROUND:

The Appellants had obtained 26 street light connections from the MSEDCL to install lighting on the Karodi-Telwadi stretch of NH-52 at various places such as service roads, village/town intersections, pedestrian under-passes, vehicular under-passes, etc., which were granted under the LT VI: Street Light tariff category by the MSEDCL. However, with efflux of time, not only did the MSEDCL recategorize all these connections to the LT-II: Commercial/Non-Residential tariff category, but on 31.03.2023, the MERC’s Tariff Order crystallized such classification vide Clause 7.22.10.

Clause 7.22.10 read as follows:

“7.22.10 The existing applicable tariff for Non-residential, Commercial and Business premises, including Shopping Malls and Showrooms. In order to have clarity on the applicability of Non-Residential or Commercial Tariff, the Commission approves inclusion of Exhibition Centers, Warehouses/Godowns, Resorts, Canteens/Cafeterias/Tea Shops, Logistics and Transportation services, Toll collection Plazas including lightings on Express/National/State Highways, Mobile Shoppes, Sports Club/facilities, Health Clubs/Facilities, Gymnasiums, Swimming Pools and Training Centers under this category.”

2) Submissions of Parties:

Appellants’ Submissions: Sri Saurav Aggarwal, representing the appellants, emphasized that MERC's classification violates the principle of stare decisis. Several state electricity regulatory commissions, such as in Punjab and Rajasthan, categorize street lighting on highways under public lighting categories rather than commercial categories. The appellants contend that only lighting at toll plazas should be classified as commercial, while general highway lighting should be under the street lighting category.
The appellants also raised contradictions in MERC's order. In Paragraph 7.22.4.2, the order classifies only highway lighting not covered under other categories as LT-II, but Paragraph 7.22.10 extends this categorization to all highway lighting without explanation. They further argued that MERC had accepted MSEDCL’s proposal without providing sufficient reasoning or justification for including highway lighting under the commercial tariff.

Respondent Submissions (MERC and MSEDCL): Ms. Pratiti Rungta, representing MERC, argued that the inclusion of highway lighting under LT-II is consistent with the commission's powers to classify consumers based on their use of electricity. The tariff classification in MERC’s 2023 order introduced toll collection plazas and highway lighting in the LT-II category, which the commission deemed appropriate. The respondents argued that the doctrine of stare decisis is not applicable here as other state commissions' rulings do not bind MERC, and they defended the order as being within their regulatory discretion.

GROUNDS OF APPEAL:

The Appellants had challenged the aforesaid Clause 7.22.10 inter alia  on the grounds that since the MSEDCL’s proposal was to only include those lightings lightings on express/national/state highways not included under any other category under the LT-II: Commercial/Non-Residential category, MERC has travelled beyond such proposal by including all such lightings, without providing any explanation for such overarching inclusion. The Appellants further contended that the inclusion of “lightings on express/state/national highways” in the same genus as “toll collection plazas” under the LT-II: Commercial/Non-Residential tariff category does not fulfill the principles of ejusdem generis, which says that general words that follow the specified words will be restricted to the same class of specified words. While further contending that such street lights serve no commercial purpose, the Appellants had also argued that the street Lights installed on the National Highway do not meet the any conditions stipulated for the LT-II: Commercial/Non-Residential tariff category, however, they do meet those conditions prescribed under LT-VI: Street Light tariff category under the Tariff Order dated 31.03.2023.

FINDINGS OF THE APTEL IN JUDGMENT DATED 09.09.2024:

The APTEL observed that the entire stretch of the National Highway would not constitute premises where commercial activity is carried on and thus, street Lights on national highways, which are provided for safety purposes and to prevent accidents, do not consume electricity for commercial purposes such as cooling, cooking, washing, etc., which are the requirements enlisted under the LT-II: Commercial/Non-Residential tariff category.

As far as the requirements of the LT-VI: Street Light tariff category goes, the APTEL held that the requirement of lighting being free of charge under the LT-VI: Street Light category is only applicable to public gardens and such other places open to general public free of charge, however, no such requirement is laid down for lighting on public streets/thoroughfares to be free of charge for it to fall under LT-VI: Street Light category.

The tribunal highlighted inconsistencies within MERC’s 2023 order itself. Specifically, while paragraph 7.22.4.2 categorized lighting that doesn’t fall under other categories as commercial, paragraph 7.22.10 extended this classification to all highway lighting without any detailed reasoning. This unexplained broadening of the scope led to MERC extending the commercial tariff beyond what was initially proposed by MSEDCL

APTEL found that MERC's decision to include all highway lighting under the LT-II commercial category, alongside toll collection plazas, was unjustified. The tribunal emphasized that lighting on highways (except at toll collection plazas or areas with commercial activity) should be classified under the streetlight category (LT VI), as it serves a public utility function for safety purposes, not commercial consumption .

APTEL reinforced the principle of stare decisis, emphasizing that regulatory certainty and consistency should be maintained unless there are compelling reasons to change an established position. It noted that MERC's 2023 order deviated from prior judgments, including a Bombay High Court ruling that clarified street lighting on highways should not be categorized as commercial . TWhile discarding the submission of MERC that the entry at Clause 7.22.10 under the LT-II: Commercial/Non-Residential category in the Tariff Order was with a view of removing the basis of the Bombay High Court judgment (supra), the APTEL held that a regulatory orders does not have a statutory sanction and cannot be equated to a legislation to remove the basis of judicial pronouncements of superior courts.

Lastly, the APTEL held that the use of national highway at the service roads and village intersections is free of cost and for the safety of people using such roads. Therefore, these street lighting cannot be said to have been installed for any commercial purpose. The tribunal clarified that highway lighting primarily serves public safety by preventing accidents and ensuring visibility at intersections, road over bridges, and village junctions. As such, it is not a commercial service and should not be classified under the LT-II commercial category unless directly associated with toll collection or other commercial activities .

MERC failed to provide adequate reasoning for categorizing all highway lighting under LT-II, especially when no such relief was sought by MSEDCL. The tribunal criticized MERC for going beyond MSEDCL’s initial proposal without offering justification. It was pointed out that the approved tariff schedule only mentioned "Toll Collection Plazas," and the addition of highway lighting was not part of the original proposal .Having rendered the aforesaid observations, the APTEL held that the MSEDCL was not justified in treating street lighting on the national highway other than those in and around the toll collection plazas and in places where commercial activities are carried on as falling under the LT-II: Commercial/Non-Residential tariff category and such lighting on national highways would continue to be governed under the LT-VI: Street Light category.

In its final ruling, APTEL concluded that MSEDCL was unjustified in treating general street lighting on highways as commercial. The tribunal ruled that street lighting in and around toll plazas could be classified as commercial (LT-II), but the rest of the highway lighting should remain under the streetlight category (LT VI). It directed that MERC’s classification be limited to toll collection areas .By way of the present judgment, the APTEL has taken a significant step to address the importance of classification of consumers into distinct Tariff Categories to be based on the purpose for which supply of electricity is used by such a consumer. This judgment also puts emphasis on the aspect that collection of toll is merely compensatory in nature and is not meant to be a profit generation exercise and would act as a binding precent on matters involving similar issues.

Appearances:

Appellants: Mr. Saurav Agrawal, Adv., Mr. Harish Malik, Adv., Ms. Aakriti Dawar, Adv., Ms. Anshika Pandey Adv., and Mr. Shivam Chaudhary, Adv.

Respondent No. 1: Pratiti Rungta, Adv.

Respondent No. 2: Shashwat Kumar, Adv., Rahul Chouhan, Adv., Shikha Sood, Adv., Raghav Kapoor, Adv.