2025 INSC 424
SUPREME COURT OF INDIA
(HON’BLE VIKRAM NATH, J. AND
PRASANNA B.VARALE, JJ.)
RAMAYANA ISPAT PVT.
LTD. AND ANR.
Appellant
VERSUS
STATE OF RAJASTHAN
& ORS.
Respondent
Civil Appeal No.7964 OF 2019 With
Civil Appeal No. 7966 Of 2019 And Civil Appeal No. 7965 Of 2019-Decided on
01-04-2025
Civil, Electricity
(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)
JUDGMENT
Vikram Nath, J. :- The present appeals challenge
two separate orders passed by the High Court of Rajasthan—one by the Jodhpur Bench
dated 29.08.2016 and the other by the Jaipur Bench dated 06.09.2016. The
appeals arise from challenges to the validity of the Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open Access) Regulations, 2016[Regulations of 2016.] framed by the
Rajasthan Electricity Regulatory Commission[RERC.]
in the exercise of its powers under Section 42 read with Section 181 of the
Electricity Act, 2003[Act of 2003.].
The primary grievance of the writ petitioners, appellants herein, before the
High Court, and now the appellants before this Court, relates to the
restrictions and conditions imposed by the Regulations of 2016 on the exercise
of open access for captive power plants[CPPs.]
and other large consumers of electricity.
2. The brief background of the
facts giving rise to the challenge before us are that the writ petitioners
before the High Court are engaged in industrial production and have substantial
power consumption requirements. The facts, as taken by the High Court from one
of the writ petitions filed by Hindustan Zinc Limited, respondent No.6 in Civil
Appeal No. 7966 of 2019, for convenience, are that Hindustan Zinc Limited is a
public limited company incorporated under the Companies Act, 1956, and is
engaged in the business of mining, smelting, and production of non-ferrous
metals, including lead and zinc. The company operates multiple units at
Chanderia, Dariba, and Zawar, which are supported by CPPs. In addition to
captive power generation, the company also has agreements with Ajmer Vidhyut
Vitran Nigam Limited (respondent No.3 in Civil Appeal No. 7964 of 2019,
respondent No.2 in Civil Appeal No. 7965 of 2019, and respondent No.3 in Civil
Appeal no. 7966 of 2019) for the supply of power to meet its contractual demand.
Under these agreements, Hindustan Zinc Limited is entitled to draw electricity
up to 70 MW from the distribution licensee at its Dariba Zinc Smelter Unit at
any time, as per its operational requirements.
3. Prior to the introduction of
the Regulations of 2016, the appellants were availing open access under the
Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open
Access) Regulations, 2004[Regulations of
2004.], which permitted them to draw power from both, their captive
generation and open access sources, without any reduction in the contracted
demand from the distribution
licensee. The open access facility under the Regulations of 2004 allowed the
appellants to schedule their power requirements on a day-ahead basis for each
15-minute block, with the flexibility to meet shortfalls through their
contracted demand from the distribution licensee.
4. RERC issued a draft of the
proposed Regulations of 2016 through a public notice dated 06.07.2015 and invited
comments and suggestions. Hindustan Zinc Limited, along with other
stakeholders, submitted detailed objections, highlighting that certain
provisions of the draft regulations were inconsistent with the objectives of
the Act of 2003 and the principle of promoting open access. The Commission
notified the Regulations of 2016 on 27.01.2016.
5. The key change introduced by
the Regulations of 2016 was the imposition of limitations on the simultaneous
drawal of power through open access and contracted demand from the distribution
licensee. Under the new regime, if a consumer opted to procure power through open
access, the contracted demand from the distribution licensee would be reduced by
the quantum of power scheduled through open access. Additionally, the
Regulations of 2016 imposed
penalties for over-drawal and under-drawal from the contracted demand.
6. The appellants before the
Jodhpur Bench of the High Court challenged several specific provisions of the
Regulations of 2016 on the ground that they were arbitrary, unreasonable, and
contrary to the statutory scheme of the Act of 2003. The primary contention was
that the Regulations of 2016 sought to undermine the statutory right of open
access guaranteed under Section 42 of the Act of 2003 by imposing unreasonable
restrictions on the simultaneous use of open access and contracted demand. The
appellants further contended that the imposition of penalties for variations in
drawal, even when caused by unforeseen breakdowns or operational exigencies,
was unjust and discriminatory. The appellants argued that the Regulations of
2016, by reducing the contracted demand by the quantum of power scheduled
through open access, effectively penalized consumers for exercising their
statutory right to open access. It was submitted that the statutory framework
under the Act of 2003 envisaged open access as a means to promote competition
and efficiency in the electricity market, and the Regulations of 2016 were
contrary to this objective.
7. The appellants before the
Jaipur Bench of the High Court were inter-state consumers, unlike the
appellants before the Jodhpur Bench, who were intra-state consumers drawing
power from their captive plants within the State of Raj as than. The challenge
before the Jaipur Bench specifically related to Regulations 26(6) and 26(7) of
the Regulations of 2016, which the appellants contended imposed restrictions on
inter-state open access, thereby exceeding the Commission's jurisdiction under
the Act of 2003. The appellants argued that the Regulations of 2016 amounted to
an extra-territorial application of the RERC's regulatory power, which was
beyond the statutory mandate conferred under the Act of 2003. It was contended
that the Act of 2003 empowered the State Commissions to regulate intra-state
open access but not inter-state open access, which falls within the
jurisdiction of the Central Electricity Regulatory Commission[CERC]. Therefore, the appellants contended that the impugned
regulations were ultra vires the Act of 2003 and liable to be struck down.
8. The Jodhpur Bench in the
judgment dated 29.08.2016 upheld the validity of the Regulations of 2016,
holding that the Commission was empowered to regulate open access to ensure
grid stability and efficient load distribution. The High Court observed that
the impugned regulations have been notified with the objective to ensure that
the consumers do not indulge in any gaming activities on the grid, and thus the
rationale behind the Regulations of 2016 is to further the objectives of the
Act of 2003 while ensuring that the interests of consumers as well as
distribution licensees are balanced. Further, rejecting the appellants' claim
that the regulations are violative of their rights protected under Part III of
the Constitution of India, the High Court observed that they had failed to
establish that the Regulations of 2016 violate their Fundamental Rights, or the
RERC lacked competence to frame these regulations or that they are manifestly
arbitrary or unreasonable; and thus merely because the Regulations of 2016 are
claimed to cause certain inconvenience or hardship to the appellants, they
cannot be held to be illegal or ultra vires the Act of 2003.
9. The Jaipur Bench also upheld
the validity of the Regulations of 2016 and dismissed the writ petition of the
appellants herein in C.A. 7964 of 2019 herein, holding that their challenge and
the issues in their petition before the High Court were squarely covered by the
judgment of the Jodhpur Bench.
10. The appellants in all the
three appeals before us are challenging the findings of the High Court on the
grounds that the Jodhpur Bench failed to appreciate that the Regulations of
2016 are discriminatory against the CPPs as they impose unreasonable and
excessive restrictions upon them for availing open access, contrary to the
objectives of the Act of 2003. Further, the appellants challenging the order of
the Jaipur Bench further contend that the Bench failed to consider that RERC
lacked jurisdiction to regulate inter-state open access, which falls within the
exclusive domain of the CERC under the Act of 2003.
11. The issues for consideration
before this Court are as follows:
i. Whether
the RERC has the jurisdiction to regulate inter-state open access under the Act
of 2003?
ii.
Whether the imposition of penalties for variations in drawal from contracted
demand amounts to an unreasonable restriction on the right to open access under
Section 42 of the Act of 2003?
iii.
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?
iv.
Whether Regulation 21 is arbitrary and discriminatory, thereby discouraging
captive power generation by creating unreasonable distinction between CPPs and
state distribution companies?
v.
Whether the appellants' right to open access is foreclosed by the Regulations
of 2016?
12. We have heard the learned
counsels for the parties at great length.
ARGUMENTS OF THE APPELLANTS
13. The appellants have raised a comprehensive
challenge to the validity of the Regulations of 2016. The challenge is primarily
directed against regulations concerning the levy of additional surcharge,
scheduling requirement, and penalties for deviations. In Civil Appeal No. 7964
of 2019, appellants have also contested the jurisdiction of the RERC to
regulate inter-state open access, arguing that such jurisdiction falls exclusively
within the domain of the CERC under the Act of 2003.
14. The appellants in Civil
Appeal No. 7964 of 2019 have contended that the RERC lacked jurisdiction to
regulate inter-state open access through Regulations of 2016. The appellants
submitted that under the scheme of the Act of 2003, the authority to regulate
inter-state open access lies exclusively with the CERC. It is the case of the
appellants challenging the jurisdiction of the RERC with respect to regulating
inter-state open access that the Regulation 26(7) essentially forecloses the
appellants from purchasing powers as it imposes conditions on inter-state open
access. The appellant argued that these conditions, such as requiring a 24-hour
scheduling period, advance intimation of power usage, and a minimum consumption
threshold of 75% of the scheduled quantum, exceed the jurisdiction of the State
Commission and infringe upon the powers vested in the CERC.
15. The appellants referred to
Section 2(36) of the Act of 2003, which defines "inter-state
transmission" as:
"(36)
" inter-State transmission system" includes -
(i) any
system for the conveyance of electricity by means of main transmission line
from the territory of one State to another State;
(ii)
the conveyance of electricity across the territory of an intervening State as
well as conveyance within the State which is incidental to such inter-State
transmission of electricity;
(iii)
the transmission of electricity within the territory of a State on a system
built, owned, operated, maintained or controlled by a Central Transmission
Utility."
In
light of the above definition, the appellants argued that merely because the
transmission lines in the state of Rajasthan are used to convey electricity it
does not cease to be an inter-state transaction as the usage of the said lines
is only incidental to the conveyance of electricity using inter-state open
access.
16. Appellants contended that
inter-state open access is a matter falling within the exclusive domain of the
CERC under Section 79(1)(c) of the Act of 2003. The Act of 2003 clearly
demarcates the jurisdiction between CERC and State Commissions. It was argued
that the power of the State Commission, RERC in this case, under Section
86(1)(c) is confined to regulating intra-state open access, and therefore, any
attempt to regulate inter-state open access by the RERC is ultra vires the Act
of 2003. The appellants highlighted that the petitioners in Civil Appeal No.
7965 of 2019 and Civil Appeal No. 7966 of 2019 are intra-state consumers of captive
power from their captive generating plants located within Rajasthan. However,
the appellants in Civil Appeal No. 7964 of 2019 are inter-state consumers,
purchasing power from sources located outside Rajasthan. Therefore, the
challenge to Regulation 26(7) by the appellants in Civil Appeal No. 7964 of
2019 is on a different footing, as it concerns the extra-territorial
application of the Regulations of 2016 to inter-state transactions, which is
beyond the legislative competence of the RERC.
17. The appellants while
referring to Section 79(1)(c) of the Act of 2003, submitted that it explicitly
provides that the CERC shall regulate the transmission of electricity and determine
tariffs for inter-state transmission of electricity. Section 2(36) of the Act
of 2003 defines "inter-state transmission" to mean the conveyance of
electricity from one state to another. Therefore, any open access transaction
involving the transmission of electricity across state boundaries would qualify
as an inter-state transaction, which falls exclusively within the regulatory
domain of the CERC. The appellants submitted that Section 86(1)(c) of the Act
of 2003 empowers the State Commissions to facilitate intra-state open access
only. The power to regulate intra-state open access does not include the
authority to regulate inter-state open access transactions. The regulatory
scheme under the Act of 2003 establishes a clear division of jurisdiction
between the CERC and the State Commissions, with the CERC having exclusive
authority over inter-state transactions and the State Commissions having
authority over intra-state transactions.
18. It was the argument of the
appellants that any surcharge or regulatory requirement imposed by the RERC on
such inter-state transactions is ultra vires the Act of 2003 and amounts to an
extra-territorial application of state law. The appellants further submitted
that the findings of the Jodhpur Bench of the High Court, which upheld the
validity of Regulations of 2016 with respect to intra-state consumers, cannot
be applied to inter-state consumers. The challenge before the Jaipur Bench of
the High Court concerned inter-state consumers, whose transactions are governed
by the regulatory framework established by the CERC, not the RERC, and thus
would not be covered by the judgment of the Jodhpur Bench.
19. Further, the appellants submitted
that the jurisdiction of the RERC is circumscribed by Section 86(1) (a) of the
Act of 2003, in terms of which the State Commission shall determine the tariff
for generation, supply, transmission and wheeling of electricity, wholesale,
bulk or retail "within the state". Thus, the RERC's powers with
respect to open access are only within the state and not beyond it. Whereas,
the CERC has been empowered under Section 79(1)(c) to regulate inter-state
transmission of electricity.
20. Appellants also made a
reference to Section 42 of the Act of 2003 which provides that the RERC in
exercise of its powers under this provision may impose cross subsidy surcharge;
wheeling charges; additional surcharge on wheeling, if any, to meet fixed cost
of the distribution licensee arising out of its obligation to supply. Thus, the
RERC is within its power to factor operational costs only. Reference was also
made to the definition of "open access" provided under Section 2(47),
which reads as follows:
"(47)
"open access" means the nondiscriminatory provision for the use of
transmission lines or distribution system or associated facilities with such
lines or system by any licensee or consumer or a person engaged in generation
in accordance with the regulations specified by the Appropriate
Commission."
21. Appellants thus submitted
that Section 42 of the Act of 2003 only refers to the State Commissions whereas
the definition of open access contained in Section 2(47) refers to the
Appropriate Commission which includes the CERC. Therefore, the power of the
State Commissions does not extend to regulating interstate open access
transactions which power has been conferred upon the Central Commission. A conjoint
reading of Sections 42 and 86(1)(a) of the Act of 2003 makes it clear that the
regulations of the State Commissions only apply within the state. In the case
of inter-state transmission of electricity, the governing regulation is the
CERC (Connectivity and General Network Access to the 'inter-state' Transmission
System) Regulations, 2022[CERC GNA
Regulations.]. All interstate transactions (including collective
transactions) on the power exchange are necessarily inter-state transactions
and governed by the CERC GNA Regulations. In the event of transmission of
interstate power from outside the state into Rajasthan, it is not the RERC
Regulations of 2016 which apply within the state but the CERC GNA Regulations.
22. The appellants relied upon
the decision of this Court in Energy Watchdog v. Central Electricity Regulatory
Commission[(2017) 14 SCC 80.],
wherein it was held that the authority to regulate inter-state transmission and
inter-state open access vests exclusively with the CERC. The appellants argued
that the ratio of this judgment squarely applies to the present case, rendering
the impugned regulation beyond the competence of the RERC. The appellants
relied upon the following findings of this Court in Energy Watchdog (Supra):
"...24.
The scheme that emerges from these sections is that whenever there is inter
State generation or supply of electricity, it is the Central involved, and
whenever there is intra-State generation or supply of electricity, the State
Government or the State Commission is involved. This is the precise scheme of
the entire Act, including Sections 79 and 86. It will be seen that Section
79(1) itself in clauses (c), (d) and (e) speaks of inter-State transmission and
inter-State operations. This is to be contrasted with Section 86 which deals
with functions of the State Commission which uses the expression "within
the State" in clauses (a), (b) and (d), and "intra-State" in
clause (c). This being the case, it is clear that the PPA, which deals with
generation and supply of electricity, will either have to be governed by the
State Commission or the Central Commission. The State Commission's jurisdiction
is only where generation and supply takes place within the State. On the other
hand, the moment generation and sale takes place in more than one State, the
Central Commission becomes the appropriate Commission under the Act. What is
important to remember is that if we were to accept the argument on behalf of
the appellant, and we were to hold in the Adani case that there is no composite
scheme for generation and sale, as argued by the appellant, it would be clear
that neither Commission would have jurisdiction, something which would lead to
absurdity. Since generation and sale of electricity is in more than one State
obviously Section 86 does not get attracted.
This
being the case, we are constrained to observe that the expression
"composite scheme" does not mean anything more than a scheme for
generation and sale of electricity in more than one State."
23. Thus, the appellants submitted
that by curtailing the purchase power on the exchange by imposing conditions on
inter-state open access transactions taking place outside the state of
Rajasthan, Regulation 26(7) is ex-facie contrary to the objectives of Act of
2003 and the National Tariff Policy, and thus RERC has encroached upon the
jurisdiction of the CERC in framing these arbitrary regulations. By imposing
these conditions in excess of its territorial jurisdiction, the RERC has
essentially banned the purchase of power under real time contracts, intraday
contracts, and contingency contracts and thereby ensured that industrial
consumers such as the appellants have no option but to purchase power from the
Distribution Licensee (Jaipur Vidyut Vitran Nigam), contrary to the objectives of
promoting competition such that consumers can avail quality and cheaper power
from different sources on the power exchange via the inter-state open access
mechanism. It was submitted that the impugned regulation, by interfering with
inter-state scheduling, exceeds the regulatory authority of the RERC and
violates the statutory framework established under the Act of 2003.
24. In Civil Appeal Nos. 7965 and
7966 of 2019, the challenge is to the vires of the regulation by the captive
generators supplying power within the state of Rajasthan. Appellants have challenged
the Regulations of 2016 on the grounds that the Regulations of 2016 are
discriminatory against the CPPs as they put illegal fetters upon them for
availing open access which is a statutory right of the such power generators
under Section 9 of the Act of 2003.
25. The appellant submitted that
Regulation 21 of the Regulations of 2016 is arbitrary and discriminatory
against CPPs. Section 9 of the Act of 2003 recognizes the right of industries
to set up captive generation plants and ensures non-discriminatory access to
transmission and distribution networks. However, Regulation 21 creates an
unreasonable distinction between captive generators and state distribution
companies[DISCOMs.], discouraging
captive power generation. The appellants contend that the pricing mechanism
imposed under Regulation 21 unfairly penalizes captive generators while
providing undue advantages to state DISCOMs. Under the regulation, any
under-injection by an open access consumer is settled at higher rates, whereas
over-injection is compensated at lower rates. Further, Regulation 21 also
provides that any energy injected by the power plant but not utilised by its
captive units is not paid for at all to the captive unit/drawer/buyer. Such a
pricing mechanism creates a disincentive for captive generators to sell their
surplus power through open access and effectively forces them to rely on state
utilities. The appellants further argued that the discriminatory treatment of
captive generators under Regulation 21 is inconsistent with the intent of the
Act of 2003, which promotes competition and self-sufficiency in power
generation. By creating an uneven playing field, the regulation hampers
industrial consumers' ability to optimize their power procurement strategies
and forces them into an unfair dependence on state utilities.
26. The appellants have
challenged Regulation 21 on the ground that by imposition of heavy penalty in
case of under-injection by CPPs as provided in Regulation 21 and at the same time
exemption of the State Generators and other generators supplying power to
DISCOMS on long term basis (by virtue of Regulation 5 and Regulation 6), the
Regulations of 2016 have created a discriminatory regime detrimental to the
interest of CPPs which is totally against the spirit of the proviso to Section
9(1) of the Act of 2003.
27. It is the argument of the appellants
that these regulations discourage open access by providing extremely stringent provisions
for normal and practically uncontrollable deviations from schedule and are
thereby creating artificial barriers on CPPs and consumers availing open access
by making the supply from open access non feasible and economically unviable by
forcing the captive generators and consumers to incur very steep payments as
well as enriching the DISCOMs at the expense of the open access consumers.
28. Appellants further highlighted
that the National Electricity Policy 2005[NEP
of 2005.] realises the enormous potential of CPPs and envisages encouraging
generation from such plants for the overall development of the power market in
the country. A conjoint reading of the provisions of the Act of 2003 and NEP of
2005 establishes that it is the explicit intention of the legislature that the
CPPs should be encouraged and developed as a source of decentralised power generators.
Therefore, any regulation putting CPPs at a position disadvantageous vis-a-vis other
generator in the matter of providing open access or regulating supply of power
from them is in violation of and ultra vires to the provisions of Act of 2003
and the NEP of 2005.
ARGUMENTS OF THE RESPONDENTS
29. The respondents, including the
RERC and the distribution licensees have strongly defended the validity of the
Regulations of 2016, contending that the same have been framed well within the
jurisdiction of the RERC as conferred under the Act of 2003 and are essential
for maintaining grid discipline, ensuring fair competition, and safeguarding
the financial viability of the electricity DISCOMs. Further, it has also been
vehemently submitted that open access cannot be absolutely free, untrammelled,
un-controlled or unrestricted. The submissions of all the respondents defending
the validity of the Regulations of 2016 have been reproduced below.
30. At the outset, it is
submitted that the regulation of electricity is an intricate and highly
specialized domain requiring expertise in technical, economic, and legal
considerations. The Act of 2003, entrusts regulatory commissions with the
responsibility of ensuring an efficient, reliable, and economically viable
electricity sector while balancing the interests of generators, consumers, and
DISCOMs. Electricity, being a form of energy that cannot be stored in its raw
form, necessitates continuous real-time management to maintain grid stability.
Any mismatch between demand and supply can lead to severe disruptions,
including grid failure, thereby causing widespread economic and social
ramifications. To prevent such contingencies, electricity regulatory
commissions, including RERC, are mandated to frame and enforce operating norms
that promote efficiency and discipline among participants in the electricity
sector. The primary objective of these norms is to ensure that the benefits
derived from improved operational efficiency are passed on to consumers while
simultaneously maintaining grid stability.
31. The respondents submitted
that RERC possesses regulatory authority over certain aspects of open access
transactions, even where electricity is procured from outside the state of
Rajasthan but delivered within Rajasthan. The jurisdiction of CERC is defined
under Section 79(1) of the Act of 2003 Act, granting it regulatory powers over
inter-state transmission of electricity. However, this does not preclude State
Commissions, including RERC, from exercising jurisdiction over intra-state
aspects of open access. Section 42(2) of the Act of 2003 specifically empowers State
Commissions to regulate intra-state open access, ensuring fair access to
transmission and distribution networks within the state. While the appellant
argues that only CERC has the power to regulate inter-state open access, this contention
is misplaced. RERC retains regulatory oversight over intra-state transactions,
even if the power originates from another state but is ultimately transmitted
within Rajasthan's intra-state grid. Thus, while CERC has jurisdiction over
inter-state transmission, RERC retains regulatory authority over the
intra-state aspects of open access transactions, even if the power source is
located outside the state but the power is delivered within the State through
the intra-state grid. This is in consonance with the framework of the Act of
2003, which provides for a clear demarcation of responsibilities between
central and state regulators without unduly restricting state regulatory
authority. Further, Section 42 of the Act of 2003 expressly empowers the State
Commissions to introduce and regulate open access within the state. Nowhere in
the parent Act has the legislature conferred the power to regulate open access
to the Central Government or CERC for consumers falling under the purview of
Section 42.
32. It is thus the submission of
the respondents that the appellant's assertion that only CERC has the power to
regulate inter-state open access is misleading. While CERC indeed has
jurisdiction over inter-state transmission under Section 79(1) of the Act of
2003, RERC retains regulatory authority over the intrastate aspects of open
access transactions, even if the power is sourced from outside the state.
Further, it has been contended that as rightly pointed out by the appellants,
Section 2(47) of the Act of 2003 defines open-access as non-discriminatory
access to transmission or distribution system; but this encompasses in its
ambit both, inter-state as well as intra-state transactions, without creating
any distinction between them for regulatory purposes. Therefore, it is a
natural consequence that State Commissions will retain the power to regulate
open access within their jurisdictions, even if it involves powers sourced from
another state. Hence, from the plain reading of Section 2(47) with Section 42
of the Act of 2003, it is clear that the statute treats open access uniformly,
regardless of the source and the legislature did not intend to create any
unnecessary distinction. Hence, the power to regulate open access, as per
Section 42, rests with the RERC, especially since the consumer, as defined
under Section 2(15) of the Act of 2003, is the one who consumes electricity via
the distribution licensee, which operates within the state. Section 2(15)
defines a "consumer" as any person who is supplied electricity by a
licensee or whose premises are connected to a distribution system. Since
distribution licensees operate within specific states, the regulation of open
access for consumers naturally falls within the jurisdiction of the respective
State Commission. Since open access transactions ultimately facilitate the
supply of electricity to consumers through the distribution network of a state
licensee, their regulation necessarily falls within the purview of the
concerned State Commission. This reinforces the position that State Commissions,
rather than CERC, have jurisdiction over open access transactions where power
is consumed within the state, irrespective of its source.
33. Section 181 of the Act of
2003 grants State Commissions the power to frame regulations to implement the
provisions of the Act of 2003. This includes the power to introduce and
regulate open access, determine applicable charges, and establish conditions
for access to intra-state transmission and distribution networks. The ability
of State Commissions to make rules regarding open access further affirms that
RERC, in the exercise of its statutory functions, can formulate regulations
governing open access transactions within Rajasthan. Moreover, Section 181 of
the Act of 2003 reinforces the independent authority of State Commissions by
specifying their role in electricity regulation at the state level. This
provision upholds the principle of decentralization in electricity governance
and affirms the legislative intent to vest regulatory control over intra-state
electricity transactions with State Commissions, including RERC. While, Section
181 of the Act of 2003 specifically grants the State Commissions the authority
to make regulations concerning the classes of consumers falling under Section
42 of the Act of 2003, Section 178 of the Act of 2003 grants the CERC broad
powers to make regulations on a wide range of subjects while intentionally
withholding powers related to Section 42 of the Act. In furtherance of this,
Section 79 of the Act of 2003, which outlines the functions of the CERC, does
not confer any responsibility upon the Central Commission regarding he
regulation of consumer classes. The absence of any such provision is evident of
the legislature's intent to not extend the CERC's role in regulating the supply
of power to end consumers from distribution licensee, either through
intra-state transmission or inter-state transmission. Therefore, inter-state
open access falls within the purview of the State Commissions, RERC herein, for
regulatory purposes.
34. The respondents further
submitted that Regulation 26(7) of the Regulations of 2016, which mandates a
one-day advance scheduling requirement for 24-hour power procurement, serves a
legitimate regulatory purpose. This is a reasonable and necessary provision and
is only applicable in the case of 'short-term inter-state open access'. This requirement
ensures grid stability, facilitates proper load forecasting, and prevents
last-minute fluctuations that could destabilize the electricity network. The
advance scheduling requirement is neither arbitrary nor unreasonable but is in
line with best practices for efficient power system management.
35. The contention that this requirement
forecloses urgent procurement is misplaced. The regulations provide alternative
mechanisms, including short-term market purchases, that allow participants to address
urgent electricity shortages. Respondents submitted that the real-time market
and day-ahead market operated under the guidelines of the CERC still allow
purchase of power for urgent needs. However, the scheduling requirement is only
applicable to procurement through open access within the state of Rajasthan in
order to integrate the demanded power securely. Thus, such a requirement is a
rational measure to ensure that the grid operates in a stable and reliable
manner without the risk of sudden fluctuations, and thus is in no way ultra
vires the provisions of the Act of 2003 or against the objectives of open
access. The argument that the scheduling requirement creates an artificial
barrier to open access is completely misplaced, as the intention is to ensure a
stable and moderated open access, thereby protecting the reliability of the
grid. This in no way forecloses the access to urgent procurement, which is
available through other sources, but only ensures that open access consumers
follow grid discipline, which is imperative to prevent any imbalances.
Therefore, the imposition of a structured scheduling mechanism is necessary for
maintaining an efficient and stable grid.
36. It has been further submitted
by the respondents that the consistent under-utilization of contract demand by
such consumers can lead to financial losses for the distribution licensees.
This is because the fixed costs associated with maintaining the infrastructure
necessary to support higher demand must still be covered, irrespective of the actual
consumption levels. By allowing only consumers who demonstrate genuine demand
to access open access, the regulatory framework seeks to create a more
equitable and efficient system. This furthers the aim of the Act of 2003 while
ensuring transparency and accountability among consumers of open access.
37. The respondents contend that
the Regulations of 2016 do not arbitrarily foreclose the petitioner's right to
open access, which was previously available under the Regulations of 2004. The
Regulations of 2016 are an evolved framework aimed at aligning open access
policies with the current realities of electricity distribution and transmission.
The modifications introduced in the new regulations, including changes in
scheduling requirement, charges, and penalties, are intended to address
inefficiencies and ensure a level playing field for all stakeholders. These
changes are well within the regulatory domain of RERC and do not constitute an
unlawful revocation of rights granted under the previous framework.
38. The appellants argued that
its transactions qualify as 'collective transactions' under the CERC GNA
Regulations, thereby falling outside RERC's regulatory jurisdiction. The
respondents counter this argument by asserting that collective transactions, as
defined under the applicable regulations, pertain to centralized power
exchanges and structured market transactions. The appellants' transactions,
however, involve bilateral arrangements and open access usage within
Rajasthan's network. Therefore, they do not automatically fall under the
exclusive purview of CERC. The respondents submit that RERC's jurisdiction
remains intact concerning aspects of the transactions that involve intra-state transmission
and distribution.
39. The respondents next
submitted that Regulation 21 of the Regulations of 2016, which imposes
penalties for under-injection of power by captive power plants, is a necessary
regulatory measure designed to ensure grid discipline. The contention that
Regulation 21 is discriminatory against CPPs is unfounded, as the provision
applies equally to all entities responsible for power injection into the grid.
The rationale behind this regulation is to prevent deviation from scheduled
generation, which can disrupt grid stability. Captive generators, unlike state
generators under long-term power purchase agreements[PPAs.], have greater flexibility in their operations,
necessitating stricter scheduling norms to maintain system integrity. The
imposition of penalties is intended to discourage any kind of gaming or foul
play and ensure that all participants bear the cost of grid imbalances, as
deviation charges are necessary to discourage under-injection and over-drawal,
to ensure grid stability. The imposition of penalties for under-injection by
CPPs is an essential regulatory measure aimed at ensuring predictability in
electricity scheduling and preventing deviations that could jeopardize grid
stability. The respondents further emphasize that Regulation 21 does not
violate the rights of captive consumers under Section 9(1) of the Act of 2003.
The proviso to Section 9(1) merely recognizes the right of captive consumers to
establish and operate generation plants
for self-use. However, this right is not absolute and is subject to regulatory
oversight to ensure that the operation of CPPs does not disrupt grid stability
or create imbalances in electricity supply. The regulatory measures imposed
under the Regulations of 2016 are well within the powers conferred upon RERC
under the Act of 2003, and are consistent with the broader objectives of the
statute.
40. It is a settled principle of
law that courts should exercise judicial restraint when reviewing the validity
of regulations framed by expert regulatory bodies. The respondents argued that
this Court has consistently recognized that regulatory commissions are vested
with specialized knowledge and expertise, and their decisions should not be
lightly interfered with unless they are manifestly arbitrary, unreasonable, or
in direct contravention of statutory provisions. In Reliance Infrastructure v.
State of Maharashtra[(2019) 3 SCC 352,
Para 38.], this Court held that regulatory decisions should be accorded
deference unless it is demonstrated that they are wholly irrational, ultra
vires the parent statute, or violate Fundamental Rights. Similarly, in Hindustan Zinc v. RERC[(2015) 12 SCC 611, Para 32.], this Court reaffirmed the
well-established presumption of constitutionality that extends to subordinate
legislation, including regulations framed under statutory authority. The
respondents submitted that unless a regulation is shown to lack legislative
competence, be inconsistent with the provisions of the parent statute, exceed
the authority conferred upon the regulatory body, or be manifestly arbitrary
and unreasonable, it must be presumed to be valid. The burden lies on the party
challenging the regulation to establish its invalidity, and in the present
case, the appellant has failed to discharge this burden.
41. The respondents lastly
asserted that the Regulations of 2016 as a whole are justified, necessary, and
within the regulatory mandate of RERC. The evolution of open access regulations
is a dynamic process, requiring periodic modifications to address emerging
challenges in electricity distribution and transmission. The Regulations of 2016
aim to enhance grid reliability, ensure economic efficiency, and promote
non-discriminatory access to the power network. Further, regulatory measures
such as scheduling requirements, charges, and penalties are established to
prevent market manipulation, ensure fair competition, and protect consumer
interests. The respondents, therefore, submit that the appellants have failed
to establish any legal infirmity in the Regulations of 2016 warranting
interference by this Court. The respondents further submitted that the
Regulations of 2016 are framed in alignment with national policies and
regulatory precedents across various states. The objective of open access is to
promote competition and consumer choice while ensuring grid stability and
financial viability of distribution licensees. The levy of surcharges and
charges under the regulations serves this dual purpose. It is further argued
that the appellants' interpretation of the Act of 2003, disregards the
financial impact on state utilities and the broader policy intent. The
respondents emphasized that regulations framed by RERC are based on detailed
public consultations and impact assessments, taking into account the interests
of all stakeholders. The regulations are neither arbitrary nor excessive but are
necessary for ensuring an equitable and sustainable electricity sector.
ANALYSIS
42. Before delving into the
issues before us, the relevant provisions referred to are reproduced below:
42.1. THE ELECTRICITY ACT, 2003
"Section
2. Definitions: - In this Act, unless the context otherwise requires -
XXX xxx
xxx
(15)
"consumer" means any person who is supplied with electricity for his
own use by a licensee or the Government or by any other person engaged in the
business of supplying electricity to the public under this Act or any other law
for the time being in force and includes any person whose premises are for the
time being connected for the purpose of receiving electricity with the works of
a licensee, the Government or such other person, as the case may be;
XXX xxx
xxx
(17)
"distribution licensee" means a licensee authorised to operate and
maintain a distribution system for supplying electricity to the consumers in
his area of supply;
XXX xxx
xxx
(36)
"inter-State transmission system" includes
(i) any
system for the conveyance of electricity by means of main transmission line
from the territory of one State to another State;
(ii)
the conveyance of electricity across the territory of an intervening State as
well as conveyance within the State which is incidental to such inter-State
transmission of electricity;
(iii)
the transmission of electricity within the territory of a State on a system
built, owned, operated, maintained or controlled by a Central Transmission
Utility.
XXX xxx xxx
(47)
"open access" means the nondiscriminatory provision for the use of
transmission lines or distribution system or associated facilities with such
lines or system by any licensee or consumer or a person engaged in generation
in accordance with the regulations specified by the Appropriate Commission;
XXX xxx
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Section
9. Captive generation:
(1)
Notwithstanding anything contained in this Act, a person may construct,
maintain or operate a captive generating plant and dedicated transmission
lines:
Provided
that the supply of electricity from the captive generating plant through the
grid shall be regulated in the same manner as the generating station of a
generating company.
[Provided
further that no licence shall be required under this Act for supply of
electricity generated from a captive generating plant to any licencee in
accordance with the provisions of this Act and the rules and regulations made
thereunder and to any consumer subject to the regulations made under sub-
section (2) of section 42.]
(2)
Every person, who has constructed a captive generating plant and maintains and
operates such plant, shall have the right to open access for the purposes of
carrying electricity from his captive generating plant to the destination of
his use:
Provided
that such open access shall be subject to availability of adequate transmission
facility and such availability of transmission facility shall be determined by
the Central Transmission Utility or the State Transmission Utility, as the case
may be:
Provided
further that any dispute regarding the availability of transmission facility
shall be adjudicated upon by the Appropriate Commission.
XXX xxx
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Section
32. Functions of State Load Despatch Centres: -
(1) The
State Load Despatch Centre shall be the apex body to ensure integrated
operation of the power system in a State.
(2) The
State Load Despatch Centre shall -
(a) be
responsible for optimum scheduling and despatch of electricity within a State,
in accordance with the contracts entered into with the licensees or the
generating companies operating in that State;
(b) monitor
grid operations;
(c) keep
accounts of the quantity of electricity transmitted through the State grid;
(d) exercise
supervision and control over the intra-State transmission system; and
(e) be
responsible for carrying out real time operations for grid control and despatch
of electricity within the State through secure and economic operation of the
State grid in accordance with the Grid Standards and the State Grid Code.
(3) The
State Load Despatch Centre may levy and collect such fee and charges from the
generating companies and licensees engaged in intra-State transmission of
electricity as may be specified by the State Commission.
Section
33. Compliance of directions: -
(1) The
State Load Despatch Centre in a State may give such directions and exercise
such supervision and control as may be required for ensuring the integrated
grid operations and for achieving the maximum economy and efficiency in the
operation of power system in that State.
(2) Every
licensee, generating company, generating station, sub-station and any other
person connected with the operation of the power system shall comply with the
directions issued by the State Load Depatch Centre under sub-section (1).
(3) The
State Load Despatch Centre shall comply with the directions of the Regional
Load Despatch Centre.
(4) If
any dispute arises with reference to the quality of electricity or safe, secure
and integrated operation of the State grid or in relation to any direction given
under subsection (1), it shall be referred to the State Commission for
decision:
Provided
that pending the decision of the State Commission, the directions of the State
Load Despatch Centre shall be complied with by the licensee or generating
company.
(5) If
any licensee, generating company or any other person fails to comply with the
directions issued under sub-section(1), he shall be liable to a penalty not
exceeding rupees five lacs.
XXX xxx
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Section
42. Duties of distribution licensee and open access: -
(1) It
shall be the duty of a distribution licensee to develop and maintain an efficient,
coordinated and economical distribution system in his area of supply and to
supply electricity in accordance with the provisions contained in this Act.
(2) The
State Commission shall introduce open access in such phases and subject to such
conditions, (including the cross subsidies, and other operational constraints) as
may be specified within one year of the appointed date by it and in specifying
the extent of open access in successive phases and in determining the charges
for wheeling, it shall have due regard to all relevant factors including such
cross subsidies, and other operational constraints:
Provided
that [such open access shall be allowed on payment of a surcharge] in addition
to the charges for wheeling as may be determined by the State Commission:
Provided
further that such surcharge shall be utilised to meet the requirements of
current level of cross subsidy within the area of supply of the distribution
licensee:
Provided
also that such surcharge and cross subsidies shall be progressively reduced in
the manner as may be specified by the State Commission:
Provided
also that such surcharge shall not be leviable in case open access is provided
to a person who has established a captive generating plant for carrying the
electricity to the destination of his own use:
[Provided
also that the State Commission shall, not later than five years from the date
of commencement of the Electricity (Amendment) Act, 2003, by regulations,
provide such open access to all consumers who require a supply of electricity
where the maximum power to be made available at any time exceeds one megawatt.]
(3)
Where any person, whose premises are situated within the area of supply of a
distribution licensee, (not being a local authority engaged in the business of
distribution of electricity before the appointed date) requires a supply of
electricity from a generating company or any licensee other than such distribution
licensee, such person may, by notice, require the distribution licensee for
wheeling such electricity in accordance with regulations made by the State
Commission and the duties of the distribution licensee with respect to such
supply shall be of a common carrier providing non-discriminatory open access .
(4) Where
the State Commission permits a consumer or class of consumers to receive supply
of electricity from a person other than the distribution licensee of his area
of supply, such consumer shall be liable to pay an additional surcharge on the charges
of wheeling, as may be specified by the State Commission, to meet the fixed
cost of such distribution licensee arising out of his obligation to supply.
(5) Every
distribution licensee shall, within six months from the appointed date or date
of grant of licence, whichever is earlier, establish a forum for redressal of
grievances of the consumers in accordance with the guidelines as may be
specified by the State Commission.
(6) Any
consumer, who is aggrieved by non-redressal of his grievances under sub-section
(5), may make a representation for the redressal of his grievance to an
authority to be known as Ombudsman to be appointed or designated by the State
Commission.
(7) The
Ombudsman shall settle the grievance of the consumer within such time and in
such manner as may be specified by the State Commission.
(8) The
provisions of sub-sections (5), (6) and (7) shall be without prejudice to right
which the consumer may have apart from the rights conferred upon him by those
sub-sections.
XXX xxx
xxx
Section
79. Functions of Central Commission: -
(1) The Central Commission shall
discharge the following functions, namely:-
(a) to regulate
the tariff of generating companies owned or controlled by the Central
Government;
(b) to regulate
the tariff of generating companies other than those owned or controlled by the Central
Government specified in clause (a), if such generating companies enter into or
otherwise have a composite scheme for generation and sale of electricity in
more than one State;
(c) to
regulate the inter-State transmission of electricity;
(d) to determine
tariff for inter-State transmission of electricity;
(e) to
issue licenses to persons to function as transmission licensee and electricity
trader with respect to their inter-State operations;
(f) to
adjudicate upon disputes involving generating companies or transmission
licensee in regard to matters connected with clauses (a) to (d) above and to
refer any dispute for arbitration;
(g) to levy
fees for the purposes of this Act;
(h) to
specify Grid Code having regard to Grid Standards;
(i) to
specify and enforce the standards with respect to quality, continuity and
reliability of service by licensees;
(j) to
fix the trading margin in the inter-State trading of electricity, if
considered, necessary;
(k) to
discharge such other functions as may be assigned under this Act.
(2) The
Central Commission shall advise the Central Government on all or any of the
following matters, namely :-
(i) formulation
of National electricity Policy and tariff policy;
(ii)
promotion of competition, efficiency and economy in activities of the
electricity industry;
(iii)
promotion of investment in electricity industry;
(iv)
any other matter referred to the Central Commission by that Government.
(3) The
Central Commission shall ensure transparency while exercising its powers and
discharging its functions.
(4) In
discharge of its functions, the Central Commission shall be guided by the
National
Electricity
Policy, National Electricity Plan and tariff policy published under section 3.
XXX xxx
xxx
Section
86. Functions of State
Commission:
-
(1) The State Commission shall
discharge the following functions, namely: -
(a) determine
the tariff for generation, supply, transmission and wheeling of electricity,
wholesale, bulk or retail, as the case may be, within the State:
Provided
that where open access has been permitted to a category of consumers under
section 42, the State Commission shall determine only the wheeling charges and
surcharge thereon, if any, for the said category of consumers;
(b) regulate
electricity purchase and procurement process of distribution licensees including
the price at which electricity shall be procured from the generating companies
or licensees or from other sources through agreements for purchase of power for
distribution and supply within the State;
(c) facilitate
intra-State transmission and wheeling of electricity;
(d)
issue licences to persons seeking to act as transmission licensees, distribution
licensees and electricity traders with respect to their operations within the
State;
(e) promote
co-generation and generation of electricity from renewable sources of energy by
providing suitable measures for connectivity with the grid and sale of
electricity to any person, and also specify, for purchase of electricity from
such sources, a percentage of the total consumption of electricity in the area of
a distribution licensee;
(f) adjudicate
upon the disputes between the licensees, and generating companies and to refer
any dispute for arbitration;
(g) levy
fee for the purposes of this Act;
(h)
specify State Grid Code consistent with the Grid Code specified under clause
(h) of sub-section (1) of section 79;
(i)
specify or enforce standards with respect to quality, continuity and
reliability of service by licensees;
(j) fix
the trading margin in the intra-State trading of electricity, if considered,
necessary; and
(k)
discharge such other functions as may be assigned to it under this Act.
(2) The
State Commission shall advise the State Government on all or any of the
following matters, namely:-.
(i)
promotion of competition, efficiency and economy in activities of the
electricity industry;
(ii)
promotion of investment in electricity industry;
(iii)
reorganization and restructuring of electricity industry in the State;
(iv)
matters concerning generation, transmission, distribution and trading of
electricity or any other matter referred to the State Commission by that Government.
(3) The
State Commission shall ensure transparency while exercising its powers and
discharging its functions.
(4) In
discharge of its functions, the State Commission shall be guided by the
National Electricity Policy, National Electricity Plan and tariff policy
published under section 3.
XXX xxx
xxx
Section
178. Powers of Central Commission to make regulations: -
(1) The
Central Commission may, by notification make regulations consistent with this
Act and the rules generally to carry out the provisions of this Act.
(2) In
particular and without prejudice to the generality of the power contained in sub-
section (1), such regulations may provide for all or any of following matters,
namely: -
(a)
period to be specified under the first proviso to section 14;
(b) the
form and the manner of the application under sub-section (1) of section 15;
(c) the
manner and particulars of notice under sub-section (2) of section 15;
(d) the
conditions of licence under section 16;
(e) the
manner and particulars of notice under clause (a) of sub- section (2) of
section 18;
(f) publication
of alterations or amendments to be made in the licence under clause (c) of
sub-section (2) of section 18;
(g) Grid
Code under sub-section (2) of section 28;
(h)
levy and collection of fees and charge from generating companies or
transmission utilities or licensees under sub-section (4) of section 28;
(i)
rates, charges and terms and conditions in respect of intervening transmission
facilities under proviso to section 36;
(j) payment
of the transmission charges and a surcharge under-sub- clause (ii) of clause
(d) of sub-section (2) of section 38;
(k)
reduction of surcharge and cross subsidies under second proviso to subclause
(ii) of clause (d) of sub-section (2) of section 38;
(l)
payment of transmission charges and a surcharge under sub-clause (ii) of
clause(c) of section 40;
(m)
reduction of surcharge and cross subsidies under the second proviso to
subclause (ii) of clause (c) of section 40;
(n)
proportion of revenues from other business to be utilised for reducing the
transmission and wheeling charges under proviso to section 41;
(0) duties
of electricity trader under subsection (2) of section 52;
(p)
standards of performance of a licensee or class of licensees under sub-section
(1) of section 57;
(q) the
period within which information to be furnished by the licensee under
sub-section (1) of section 59;
[(r)
the manner of reduction of cross subsidies under clause (g) of section 61;]
(s) the
terms and conditions for the determination of tariff under section 61;
(t)
details to be furnished by licensee or generating company under sub-section (2)
of section 62;
(u) the
procedures for calculating the expected revenue from tariff and charges under
sub-section (5) of section 62;
(v) the
manner of making an application before the Central Commission and the fee
payable there for under sub-section (1) of section 64;
(w) the
manner of publication of application under sub-section (2) of section 64;
(x)
issue of tariff order with modifications or conditions under sub-section (3) of
section 64;
(y) the
manner by which development of market in power including trading specified
under section 66;
(z) the
powers and duties of the Secretary of the Central Commission under sub-section
(1) of section 91;
(za)
the terms and conditions of service of the Secretary, officers and other
employees of Central Commission under sub-section (3) of section 91;
(zb)
the rules of procedure for transaction of business under sub- section (1) of
section 92;
(zc)
minimum information to be maintained by a licensee or the generating company
and the manner of such information to be maintained under sub-section (8) of
section 128;
(zd)
the manner of service and publication of notice under section 130;
(ze)
any other matter which is to be, or may be, specified by regulations.
(3) All
regulations made by the Central Commission under this Act shall be subject to
the conditions of previous publication.
XXX xxx
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Section
181. Powers of State Commissions to make regulations: -
(1) The
State Commissions may, by notification, make regulations consistent with this
Act and the rules generally to carry out the provisions of this Act.
(2) In
particular and without prejudice to the generality of the power contained in subsection
(1), such regulations may provide for all or any of the following matters,
namely: -
(a)
period to be specified under the first proviso of section 14;
(b) the
form and the manner of application under sub-section (1) of section 15;
(c) the
manner and particulars of application for licence to be published under
sub-section (2) of section 15;
(d) the
conditions of licence section 16;
(e) the
manner and particulars of notice under clause (a) of sub-section (2) of section
18;
(f) publication
of the alterations or amendments to be made in the licence under clause (c) of
sub-section (2) of section 18;
(g) levy
and collection of fees and charges from generating companies or licensees under
sub-section (3) of section 32;
(h) rates,
charges and the term and conditions in respect of intervening transmission
facilities under proviso to section 36;
(i)
payment of the transmission charges and a surcharge under sub-clause (ii) of
clause(d) of sub-section (2) of section 39;
(j)
reduction of surcharge and cross subsidies under second proviso to subclause
(ii) of clause (d) of sub-section (2) of section 39;
(k)
manner and utilisation of payment and surcharge under the fourth proviso to
sub-
clause(ii)
of clause (d) of sub-section (2) of section 39;
(l)
payment of the transmission charges and a surcharge under sub-clause(ii) of
clause (c) of section 40;
(m)
reduction of surcharge and cross subsidies under second proviso to subclause
(ii) of clause (c) of section 40;
(n) the
manner of payment of surcharge under the fourth proviso to sub-clause (ii) of
clause (c) of section 40;
(o)
proportion of revenues from other business to be utilised for reducing the
transmission and wheeling charges under proviso to section 41;
(p)
reduction of surcharge and cross-subsidies under the third proviso to
subsection (2) of section 42;
(q)
payment of additional charges on charges of wheeling under sub-section (4) of
section 42;
(r)
guidelines under sub-section (5) of section 42;
(s) the
time and manner for settlement of grievances under sub-section (7) of section 42;
(t) the
period to be specified by the State Commission for the purposes specified under
sub-section (1) of section 43;
(u)
methods and principles by which charges for electricity shall be fixed under
subsection (2) of section 45;
(v)
reasonable security payable to the distribution licensee under sub-section (1)
of section 47;
(w)
payment of interest on security under sub-section (4) of section 47;
(x)
electricity supply code under section 50;
(y) the
proportion of revenues from other business to be utilised for reducing wheeling
charges under proviso to section 51;
(z)
duties of electricity trader under subsection (2) of section 52;
(za)
standards of performance of a licensee or a class of licensees under
sub-section (1) of section 57;
(zb)
the period within which information to be furnished by the licensee under
subsection (1) of section 59;
[(zc)
the manner of reduction of cross-subsidies under clause (g) of section 61;]
(zd)
the terms and conditions for the determination of tariff under section 61;
(ze)
details to be furnished by licensee or generating company under sub-section (2)
of section 62;
(zf)
the methodologies and procedures for calculating the expected revenue from
tariff and charges under sub-section (5) of section 62;
(zg)
the manner of making an application before the State Commission and the fee
payable therefor under sub-section (1) of section 64;
(zh)
issue of tariff order with modifications or conditions under sub-section(3) of
section 64;
(zi)
the manner by which development of market in power including trading specified
under section 66;
(zj)
the powers and duties of the Secretary of the State Commission under
sub-section (1) of section 91;
(zk)
the terms and conditions of service of the secretary, officers and other
employees of the State Commission under sub-section (2) of section 91;
(zl)
rules of procedure for transaction of business under sub-section (1) of section
92;
(zm)
minimum information to be maintained by a licensee or the generating company
and the manner of such information to be maintained under sub-section (8) of
section 128;
(zn)
the manner of service and publication of notice under section 130;
(zo)
the form of preferring the appeal and the manner in which such form shall be
verified and the fee for preferring the appeal under sub-section (1) of section
127;
(zp)
any other matter which is to be, or may be, specified.
(3) All
regulations made by the State Commission under this Act shall be subject to the
condition of previous publication."
42.2. Rajasthan Electricity
Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016:
"xxx
xxx xxx
R.5.
Special Provisions for existing Distribution Licensees: The Distribution Licensees,
using intra-State transmission system and the distribution system in the State
under an existing agreement or arrangement on the date of coming into force of
the RERC (Terms and Conditions for Open Access) Regulations, 2004, shall be
entitled to continue to avail open access to such transmission and distribution
system on the same terms and conditions for the term of the existing agreement
or arrangement on payment of transmission charges and wheeling charges as may
be determined by the Commission.
R.6.
Provisions for existing consumers and generating companies: The existing
consumer or an existing generating company other than the licensees availing
open access under government policy or under agreements entered on the date of
coming into force of RERC (Terms and Conditions for Open Access) Regulations,
2004 may continue to avail open access on terms and conditions laid down under
these Regulations to the extent they are not covered by any policy directive by
the State Government to the Commission.
XXX xxx
xxx
R.21.
Unscheduled Interchange Pricing
The
payment settlement for mismatch between the schedule and the actual
drawal/injection in both intra-State and inter-State transactions by customers
connected to transmission/ distribution network of the State licensees shall be
governed by the pricing mechanism as specified below:
(i) Any
under-injection with respect to the schedule approved by the SLDC by an open
access customer shall be settled at higher of the applicable deviation rates as
notified in CERC Deviation Settlement Mechanism Regulations 2014 amended from
time to time or energy charge at the rate of Temporary Tariff applicable for HT
(NDS) category as determined by the Commission from time to time;
(ii)
Any over-injection upto 5% in a time block of 15 minutes and averaging upto 1%
over a day with respect to the schedule approved by the SLDC by an open access
customer shall be compensated at the deviation charge rate at frequency of 50
Hz. or applicable deviation charge rate (as notified in CERC Deviation
Settlement Mechanism Regulations 2014 amended from time to time) whichever is
less;
(iii)
Any underdrawl with respect to the schedule approved by the SLDC by an open
access consumer shall not be compensated and this underdrawl shall be considered
to be attributable to the consumer;
(iv)
Any over drawl with respect to the schedule approved by the SLDC by an open
access customer who is not a consumer of Distribution Licensee of his area of
supply shall be settled at higher of the applicable deviation rates (as
notified in CERC Deviation Settlement Mechanism Regulations 2014 amended from
time to time) or energy charge at rate of Temporary Tariff applicable for HT
(NDS) category as determined by the Commission from time to time;
(v) Any
over drawl with respect to the schedule approved by the SLDC, by an open access
customer who is also a consumer of Distribution Licensee of his area of supply,
shall be considered as the drawal from Discom and the open access consumer
shall be required to pay charges for the excess capacity utilized computed in
the manner specified in regulation 26 for the entire month equal to the same
percentage of the fixed and energy charges by which percentage the excess
demand has actually been availed during the month on the rates specified in the
tariff orders in force. However, the excess capacity utilized up to 5% of
capacity allocation occurring to the extent of two time blocks of 15 minutes
each during a month shall be exempted.
XXX xxx
xxx
R.26.
Compliance and Grid Discipline
(1) The
open access customer shall abide by the Indian Electricity Grid Code, the State
Grid Code and instructions given by State Transmission Utility and State Load Dispatch
Centre as applicable from time to time.
(2) The
open access customer shall also comply with the requirements of the CEA (Technical
Standards for Connectivity to the Grid) Regulations, 2007 as amended from time
to time.
(3) The
open access consumer shall restrict the sum of his total drawal from all
sources including open access and Distribution Licensee up to the total sanctioned
contract demand with the Distribution Licensee.
Provided
that open access may be allowed over and above the contract demand to a
consumer who sources power both by captive generation and Discom to the extent
of captive power supply subject to availability of transmission and/or
distribution system as the case may be.
Provided
further that long term open access may be allowed over and above the contract
demand to the extent of sanctioned open access capacity.
(4) The
consumer shall be levied fixed charge based on the maximum demand recorded in
the ABT meter as per tariff applicable from time to time.
Provided
that if the open access is allowed over and above the contract demand in terms
of proviso to sub regulation (3) above, the fixed charges shall be levied based
on the total demand recorded in the ABT meter less open access demand scheduled
in terms of proviso of sub regulation (3) above.
(5) The
long term/ medium term open access customer shall provide the injection
schedule at the generator end and drawal schedule at the supply end to SLDC, RDPPC,
supplier end Distribution Licensee and to the consumer end Distribution
Licensee before 10.00 AM of the day preceding the day of scheduling. The
Injection schedule shall have the open access consumer and supplier
identification. Where open access is provided to more than one open access
consumer, supplier shall provide a break up of injection schedule as applicable
to each open access consumer considering that the adjustment of energy in such
case shall be as per Regulation 25.
(6) The
short term open access customer shall provide the injection/ drawal schedule
for intraState transactions every day to the SLDC, RDPPC and the Distribution
Licensee before 10:00 AM of the day preceding the day of drawal/injection as
per the open access capacity sanctioned.
(7) The
power purchase under short term inter-State open access including transactions
through power exchange shall be subject to the following:
(i) The
consumer shall schedule power from open access for complete 24 hours of the
day.
(ii)
The consumer shall intimate in writing the block wise maximum power to be
scheduled from inter-State open access each day to the SLDC, RDPPC and
Distribution Licensee before 10:00AM of the day preceding the day of drawal.
(iii)
The schedule so given shall be uniform at least for a period of eight hours and
the minimum schedule during the day shall at any time not be less than 75% of
the maximum schedule of the day.
(iv)
The schedule so given shall be used to calculate the block wise maximum
admissible drawal from the Discom.
(v) If
actual schedule approved in inter-State transactions is less, then the
admissible drawal shall be reduced to that extent.
(8) If
the actual drawal in a block is higher than the admissible drawal, then the percentage
excess drawal shall be calculated on the admissible drawal and the highest
percentage of such excess drawal of all blocks during a month shall be
considered as excess capacity (demand) utilized during that month and shall be
billed as per regulation 21 (v).
(9) Annual
maintenance outage, other maintenance outage and forced outage shall be subject
to the provisions of the State Grid Code. Intimation of the forced outage shall
be sent to SLDC and to the Distribution Licensees, within 30 minutes of the
outage and shall incorporate the estimated outage/rectification time.
Restoration of unit under outage shall be conveyed to SLDC at least 30 minutes
prior to its synchronization with the State Grid.
(10) Wherever
required, unity power factor shall be considered for the purpose of unit
conversion from MVA/kVA to MW/kW or vice versa."
43. Upon a judicious and careful
consideration of the rival submissions made by the parties and perusal of the
statutory provisions under the Act of 2003 and the Regulations of 2016, we are
of the view that the contentions raised by the appellants, both inter-state as
well as intra-state captive generators, cannot be agreed with in light of the
objectives of the Act of 2003 which the Regulations of 2016 seek to achieve.
I. Whether the RERC had the
jurisdiction to regulate inter-state open access under the Act of 2003?
44. The primary contention of the
appellants regarding the jurisdiction of the RERC to regulate inter-state open
access is without any merit. 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.
Furthermore, the appellants' argument that the Regulations of 2016 have an
extraterritorial effect is misplaced. The Regulations of 2016 do not seek to
regulate inter-state transmission per se but rather ensures that transactions
impacting the Rajasthan grid remain under the oversight of the State
Commission.
45. Section 79(1)(c) of the Act of
2003, defines the regulatory authority of the CERC over inter-state
transmission of electricity. However, this provision does not strip State
Commissions, including RERC, of their jurisdiction over intra-state aspects of
open access. Section 42(2) of the Act of 2003 expressly empowers State Commissions
to regulate open access within their respective states, ensuring fair and
non-discriminatory access to transmission and distribution networks within the state.
Further, Section 42(3) of the Act of 2003 provides that whenever a consumer,
with premises within the area of supply of a distribution licensee, requires
supply of electricity from a generating company other than such distribution
licensee, such transmission and supply shall be in accordance with the
regulations made by the State Commission.
46. The respondents have, in
their submissions, drawn a relevant and appropriate parallel with the
regulation of National Highways in the country, which also run across state
borders. It has been rightly analogised by the RERC that even though National
Highways falls under Entry 23 of List I of the Seventh Schedule of the
Constitution of India and is a central subject, nevertheless when it passes
through the respective states it is subject to tolls under the respective state
laws as per Entry 59 of List II of the Seventh Schedule. Therefore, when
'Electricity' which is a subject matter of Entry 38, List III is wheeled from
outside the state and distributed within the state, the regulations governing
such distribution within the state cannot, by any stretch, be termed to be
suffering from any excess of jurisdiction.
47. 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. The appellants' interpretation would render Section 42
redundant and contradict the legislative intent behind decentralizing
regulatory authority to the 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.
48. Further, Section 2(47) of the
Act of 2003 defines open access as non-discriminatory access to transmission
and distribution systems, encompassing both interstate and intra-state
transactions. The respondents argue that the statute does not differentiate
between them for regulatory purposes, meaning that State Commissions naturally
retain authority over open access within their jurisdictions. This
interpretation aligns with Section 42, which explicitly grants State
Commissions the power to regulate open access for consumers in their states.
Additionally, Section 2(15) of the Act of 2003 defines a "consumer"
as any person who receives electricity from a licensee or whose premises are
connected to a distribution system. Since distribution licensees operate within
state boundaries, the regulation of open access for consumers falls squarely
within the State Commission's jurisdiction. Section 2(17) further strengthens
this position by defining a "distribution licensee" as an entity
authorized to distribute electricity within a specific area, reinforcing the
role of State Commissions in regulating transactions that ultimately facilitate
electricity supply to consumers within the state.
49. Section 181 of the Act of
2003 empowers State Commissions to frame regulations necessary for implementing
the provisions of the Act of 2003. This includes establishing conditions for
open access, determining charges, and ensuring fair access to intra-state
transmission and distribution networks. By granting State Commissions the
authority to introduce and regulate open access, the legislature has clearly
vested regulatory oversight with RERC in Rajasthan. The omission of any
reference to CERC's jurisdiction over open access consumers in Section 42 of
the Act further reinforces the respondents' argument. Section 79, which
delineates CERC's functions, does not extend its authority to the regulation of
end consumers or the supply of power via distribution licensees. This omission
is indicative of the legislature's intent to keep such matters under State
Commissions' oversight, ensuring that electricity consumers and distribution
networks within a state remain subject to state-level regulation.
50. Thus, the respondents'
argument is well-founded in statutory provisions, legislative intent, and the
structural framework of the Act of 2003. 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.
II. Whether the imposition of
penalties for variations in drawal from contracted demand amounts to an
unreasonable restriction on the right to open access under Section 42 of the
Act of 2003?
51. The imposition of penalties
for variations in drawal from contracted demand is a regulatory measure
designed to ensure grid stability and prevent commercial gaming in the
electricity market. The respondents contend that such penalties are neither
arbitrary nor unreasonable but are a necessary mechanism to maintain the
reliability of the grid. The Act of 2003 guarantees non-discriminatory open
access to consumers but does not exempt them from complying with regulatory
conditions essential for the effective functioning of the electricity network.
Regulation of drawal variations is crucial for balancing power supply and
demand, particularly in the context of the grid's technical constraints and the
need to prevent unscheduled fluctuations that may disrupt the system.
52. Further, 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.
53. Additionally, the regulations
apply uniformly to all open access consumers, ensuring that there is no
arbitrary targeting or discrimination. The principle of open access is not
absolute and must be exercised in a manner that does not compromise the
operational integrity of the power sector. Therefore, the imposition of
penalties for variations in drawal is a justifiable regulatory measure that
aligns with the objectives of the Act of 2003 and does not amount to an
unreasonable restriction on open access.
54. 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. The State Commission's role is to balance the
rights of individual market participants with the broader objective of ensuring
an efficient, reliable, and stable power supply to all consumers in the State.
III. Whether Regulation 26(7) is
ultra vires for requiring an advance notice of 24 hours, thereby preventing
urgent procurement and creating an artificial barrier to open access as
protected by the Act of 2003?
55. The Act of 2003 was enacted
with the objective of promoting competition, efficiency, and consumer interest
while ensuring the stability of the electricity grid. The RERC's regulations align
with these objectives by:
i.
Ensuring predictability and reliability in power supply through scheduling
norms,
ii.
Preventing market distortions by imposing penalties for deviations that can
destabilize grid operations, and
iii.
Curtailing gaming practices where open access consumers, particularly captive
power generators, might manipulate the grid to gain an undue advantage.
56. Regulation 26(7), which
mandates a 24-hour advance notice for availing short-term inter-state open
access, serves a critical function in maintaining grid stability and ensuring proper
scheduling of power. The respondents argue that this requirement is not ultra
vires but is in consonance with the broader regulatory framework governing open
access transactions. The power system operates on a structured scheduling
mechanism, and unregulated short-term access without prior notice could lead to
disruptions, frequency imbalances, and operational inefficiencies. The Act of
2003 does not provide an absolute right to open access but subjects it to
conditions necessary for the reliability and efficiency of power distribution.
57. The 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 realtime 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.
58. 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.
IV. Whether the Regulation 21 is
arbitrary and discriminatory, thereby discouraging captive power generation by
creating unreasonable distinction between captive generators and state
distribution companies?
59. The appellants' argument that
the regulations unfairly burden CPPs is misplaced. The 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.
60. Regulation 21, which governs
aspects of scheduling, penalties, and compliance for captive power generators,
has been challenged on the ground that it creates an unreasonable distinction between
captive generators and state DISCOMs, allegedly discouraging captive generation.
However, the respondents argue that the regulation is neither arbitrary nor
discriminatory but rather a necessary framework to ensure that all power generators
operate under fair and transparent rules. The Act of 2003, through Sections 9
and 42, recognizes the rights of captive power generators while also subjecting
them to regulatory oversight to prevent system inefficiencies and inequitable
advantages.
61. The distinction between
captive power generators and state DISCOMs is not arbitrary but arises from the
structural differences in their roles and obligations. While captive generators
primarily generate electricity for self-consumption, distribution companies
serve a wider consumer base, requiring them to adhere to broader regulatory
commitments, including universal supply obligations. As such, differential
treatment based on the nature of their functions is legally justified and does
not amount to unfair discrimination. Moreover, 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.
62. Additionally, the principle
of non-discrimination under the Act of 2003 does not mandate identical
treatment for all entities but rather requires a rational basis for any
differentiation. In this case, the regulatory conditions imposed on captive
generators are aimed at ensuring a level playing field and preventing misuse of
open access provisions. The regulatory framework ensures that captive
generators contribute fairly to system stability without imposing additional
burdens on distribution licensees and other grid participants. Thus, 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.
V. Whether the appellants' right
of open access is foreclosed by the Regulations of 2016?
63. The appellants argue that the
Regulations of 2016 impose unreasonable restrictions on captive power
generators, effectively foreclosing their right to open access as guaranteed
under Section 9 of the Act of 2003. However, the respondents contend that the
Regulations of 2016 do not foreclose open access but rather prescribe
conditions necessary for its fair and efficient implementation. Section 42 of the
Act provides for non-discriminatory open access but also subjects it to regulations
framed by the State Commission to ensure grid security, operational discipline,
and non-disruptive power transactions. The restrictions imposed by the
Regulations of 2016 are thus regulatory safeguards rather than prohibitive
barriers.
64. A careful analysis of the Regulations
of 2016 indicates that they primarily aim at maintaining the reliability of the
electricity grid, ensuring fair pricing, and preventing speculative misuse of
open access provisions. The requirement of advance notice for short-term open
access, penalties for deviations from contracted demand, and specific
conditions for captive power generators are all designed to create a structured
and predictable electricity market. These provisions do not prevent eligible
consumers from availing open access but instead ensure that they do so within a
framework that safeguards the interests of all stakeholders, including distribution
licensees and other consumers. Moreover, Section 181 of the Act of 2003
empowers State Commissions to frame regulations necessary for implementing
statutory provisions, thereby validating the regulatory measures introduced by
RERC.
65. Furthermore, the 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.
CONCLUSION
66. The statutory scheme under the
Act of 2003 mandates that regulations framed by State Commissions must serve
the larger public interest. The respondents have successfully established that
the impugned regulations serve this purpose by ensuring equitable treatment of all
market participants while safeguarding the integrity of the power grid.
67. The RERC derives its
authority from the Act of 2003, which vests in it the power to frame
regulations governing open access, scheduling, and penalties. Section 86(1)(c) of
the Act of 2003 specifically empowers State Commissions to facilitate
intra-state transmission and wheeling of electricity. Furthermore, Section 181
empowers the Commission to make regulations consistent with the Act of 2003 and
its objectives. The impugned regulations have been framed in exercise of these
statutory powers. The requirement for scheduling, imposition of penalties, and
limits on drawal are not arbitrary but are measures falling within the
regulatory ambit of the Commission to ensure grid stability and fair
competition. The Act of 2003 envisions a structured and fair mechanism for open
access while ensuring that market participants do not engage in practices
detrimental to the larger consumer base. Moreover, under Section 42 of the Act
of 2003, the State Commission has the mandate to regulate open access in
distribution and specify the charges and conditions applicable. The respondents
have demonstrated that these conditions are necessary for maintaining
discipline in power scheduling and ensuring that open access consumers do not
gain an unfair advantage over other consumers by evading scheduling norms or
penalties.
68. The Jodhpur Bench in common order
dated 29.08.2016, which has been challenged before us in Civil Appeals No. 7965
of 2019 and 7966 of 2019, has rightly upheld the validity of the Regulations of
2016 holding that any inconvenience caused or even some hardship faced by the
captive power generators shall not make the regulations illegal. The High Court
also rightly pointed out that the appellants have failed to establish that the
impugned regulations are in contravention of their rights protected under
Part-III or any other provision of the Constitution of India or that the
regulations have been enacted without having the competence to do so or they
are manifestly arbitrary or unreasonable. It has been rightly held by the High
Court that the Regulations of 2016 are in consonance with the objects of the
Act of 2003 and have been framed as per the competence available under Section
181 read with Section 42 of the Act of 2003.
69. The Jaipur Bench in its order
dated 06.09.2016, which has been challenged before us in Civil Appeal No. 7964
of 2019, has rightly held that the issues before it, were squarely covered by
the order of Jodhpur Bench.
70. In light of the above
discussion, the appeals are dismissed, and the orders of the High Court are
upheld.
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