The core issue revolves around the validity of the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016. These regulations, enacted under the Electricity Act, 2003, impose restrictionsand conditions on open access for captive power plants and large electricity consumers. The appellants, including both intra-state and inter-state consumers, argued that the regulations were arbitrary, discriminatory, and exceeded the Commission’s jurisdiction, particularly regarding inter-state power transactions and penalties for drawing variations. The court ultimately upheld the High Court’s decisions, affirming the State Commission’s authority to regulate these aspects to ensure grid stability and efficient load management.
(A) Electricity Act, 2003, Section 79(1)(c), 86(1)(c) – Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016 – Electricity Regulatory Commission – Jurisdiction – Whether the RERC has the jurisdiction to regulate inter-state open access under the Act of 2003? – The Act of 2003 establishes a clear distinction between the regulatory functions of the CERC and State Commissions – While inter-state transmission falls within the domain of the CERC under Section 79(1)(c), the power of the State Commission to regulate intra-state transmission and distribution under Section 86(1)(c) is well established – The key determinant is not the source of power but its delivery, end-user, and consumption within Rajasthan’s intra-state grid – The Act of 2003 provides a framework for demarcating responsibilities between CERC and State Commissions, ensuring that intra-state aspects of electricity regulation remain within the purview of State Commissions – Thus, the claim that only CERC has the authority to regulate inter-state open access cannot be accepted in light of the legislative intent behind the Act of 2003 – Therefore, RERC retains jurisdiction over intra-state transactions even if the power originates from another state – RERC’s authority to regulate intra-state aspects of open access transactions, even when electricity is sourced from another state, aligns with the Act’s objectives and ensures effective regulatory oversight.
(Para 44 to 50)
(B) Electricity Act, 2003, Section 42, 32, 33 – Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016 – Electricity Regulatory Commission – Penalty – Whether the imposition of penalties for variations in drawl from contracted demand amounts to an unreasonable restriction on the right to open access under Section 42 of the Act of 2003? – the penalty mechanism is not an unreasonable restriction but rather a measure to ensure that consumers adhere to their contractual obligations, preventing undue burden on the system and other stakeholders. Uncontrolled variations can lead to deviations that may cause frequency imbalances, affecting overall grid security. Section 32 and Section 33 of the Act of 2003 empower SLDCs to ensure the smooth operation of the power system, which includes imposing necessary safeguards against unregulated deviations – The penalties, therefore, serve a larger public interest by deterring erratic consumption patterns and aligning open access with grid discipline – The electricity grid operates on principles of frequency stability and demand-supply balance – Any deviation from scheduled drawal or injection can lead to grid instability, potentially affecting all consumers – The impugned regulations, therefore, serve a critical function in preventing such disruptions by enforcing discipline among generators and consumers alike – The penalties imposed are a deterrent mechanism to prevent strategic gaming of the system and to ensure that all stakeholders adhere to scheduling norms.
(Para 51 to 54)
(C) Electricity Act, 2003, Section 42 – Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016, Regulation 26(7) – Electricity Regulatory Commission – Regulation ultra Vires – Whether Regulation 26(7) is ultra vires for requiring an advance notice of 24 hours a day prior, thereby preventing urgent procurement and creating an artificial barrier to open access as protected by the Act of 2003? – Held that requirement of prior notice is a reasonable procedural safeguard that aligns with the objectives of the Act of 2003, particularly those laid out in Section 42, which envisages a structured approach to open access – The 24-hour notice period ensures that both transmission and distribution licensees, as well as load despatch centres, have adequate time to adjust their schedules and prevent system disturbances – Moreover, it prevents misuse by entities that may attempt to take advantage of real-time price fluctuations, thereby engaging in speculative trading rather than genuine demand-based procurement – Further, the option of purchasing power from the real-time market and day-ahead market in need of urgent procurement is always available, and is not prevented by the impugned regulations – Furthermore, the regulation does not create an insurmountable barrier to open access but rather seeks to bring order and predictability to its implementation. The requirement is uniformly applicable to all consumers, ensuring that no undue advantage is given to any particular category – Considering the technical and regulatory imperatives involved, the 24-hour advance notice condition under Regulation 26(7) cannot be considered ultra vires, as it falls within the regulatory domain of the State Commission to establish fair, transparent, and non-disruptive mechanisms for open access.
(Para 55 to 58)
(D) Electricity Act, 2003, Section 9, 42 – Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016, Regulation 21 – Electricity Regulatory Commission – Regulation arbitrary and discriminatory – Whether Regulation 21 is arbitrary and discriminatory, thereby discouraging captive power generation by creating unreasonable distinction between CPPs and state distribution companies? – Impugned regulations apply uniformly to all power generators availing open access, whether captive or non-captive – Section 9 of the Act of 2003 recognizes the rights of captive generators but does not exempt them from compliance with open access regulations framed under Section 42 of the Act of 2003 – The regulatory measures—such as scheduling, penalties for deviations, and drawal limits—are imposed in furtherance of the larger goal of grid discipline and market stability – There is no evidence to suggest that captive generators are being singled out or subjected to harsher conditions compared to other generators – Regulation 21 does not impose undue restrictions on captive generators but ensures that their operations align with grid discipline, preventing any adverse impact on the larger power ecosystem – Held that Regulation 21 is neither arbitrary nor discriminatory but rather a necessary and proportionate measure to balance the interests of various stakeholders in the electricity sector.
(Para 59 to 62)
(E) Electricity Act, 2003, Section 9, 42 – Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016 – Electricity Regulatory Commission – Right to open access – Whether the appellants’ right to open access is foreclosed by the Regulations of 2016? – Held that Act of 2003, envisages a balance between the rights of open access consumers and the operational concerns of the power sector – The Regulations of 2016, while imposing certain conditions, do not outright deny open access but ensure that its implementation is equitable and does not jeopardize grid discipline – Open access remains available to consumers who comply with regulatory prerequisites, including scheduling obligations and financial commitments – Thus, the appellants’ assertion that their right to open access is foreclosed is misplaced – The Regulations of 2016 are consistent with the legislative intent of the Act of 2003, ensuring that open access is exercised in a manner that does not compromise system stability, fairness, or economic viability – Therefore, the regulatory framework does not foreclose open access but rather operationalizes it within reasonable constraints essential for sustaining the electricity sector.
(Para 63 to 65)
Ramayana Ispat Pvt. Ltd. And Anr. V. State Of Rajasthan & Ors.
Supreme Court: 2025 INSC 424: (DoJ 01-04-2025)
