RERC Has Jurisdiction Under Electricity Act Over Inter-State Transactions Even If Power Originates From Another State: Supreme Court
The Appeals before the Supreme Court arose from the challenge to the validity of the RERC Regulations, 2016 framed under Section 42 read with Section 181 of the Electricity Act.
Justice Vikram Nath, Justice Prasanna B. Varale, Supreme Court
The Supreme Court held that the Rajasthan Electricity Regulatory Commission (RERC) has jurisdiction under the Electricity Act, 2003 over the inter-State transactions even if the power originates from another State.
The Court held thus in Civil Appeals challenging two separate Orders of the Rajasthan High Court, one by the Jodhpur Bench and the other by the Jaipur Bench.
The two-Judge Bench comprising Justice Vikram Nath and Justice Prasanna B. Varale observed, “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.”
The Appeals before the Bench arose from the challenge to the validity of the RERC (Terms and Conditions for Open Access) Regulations, 2016 framed by the RERC in the exercise of its powers under Section 42 read with Section 181 of the Electricity Act.
AOR Nikunj Dayal represented the Appellants while AOR Satya Veer Singh represented the Respondents.
Facts of the Case
The primary grievance of the Appellants in this case, was related to the restrictions and conditions imposed by the 2016 Regulations on the exercise of open access for captive power plants (CPPs) and other large consumers of electricity. The Appellants were engaged in industrial production and had substantial power consumption requirements. Hindustan Zinc Limited was a company being engaged in the business of mining, smelting, and production of non-ferrous metals, including lead and zinc. In addition to captive power generation, the said company also had agreements with the Respondents for the supply of power to meet its contractual demand. Under these agreements, it was 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. Prior to the introduction of 2016 Regulations, the Appellants were availing open access under the RERC Regulations, 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 key change introduced by the 2016 Regulations was the imposition of limitations on the simultaneous drawal of power through open access and contracted demand from the distribution licensee. Additionally, it imposed penalties for over-drawal and under-drawal from the contracted demand. The Appellants challenged several provisions of 2016 Regulations before the Jodhpur Bench. The Appellants before the Jaipur Bench were inter-State consumers, unlike the Appellants before the Jodhpur Bench, who were drawing power from their captive plants within the Rajasthan State. The challenge before the Jaipur Bench was specifically related to Regulations 26(6) and 26(7), which the Appellants contended imposed restrictions on inter-State open access, thereby exceeding the RERC’s jurisdiction under the Electricity Act. The Jodhpur Bench upheld the validity of 2016 Regulations, holding that RERC was empowered to regulate open access to ensure grid stability and efficient load distribution. The Jaipur Bench also upheld the validity of 2016 Regulations, holding that the challenge and issues were squarely covered by the Jodhpur Bench’s Judgment. Being aggrieved, the Appellants approached the Apex Court.
Court’s Observations
The Supreme Court in view of the above facts, answered the following questions that arose for its consideration –
1. Whether the RERC had the jurisdiction to regulate inter-State open access under the Act of 2003?
The Court noted, “… 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.”
The Court said that the key determinant is not the source of power but its delivery, end-user, and consumption within Rajasthan's intra-State grid and that the 2003 Act provides a framework for demarcating responsibilities between Central Electricity Regulatory Commission (CERC) and State Commissions, ensuring that intra-State aspects of electricity regulation remain within the purview of State Commissions.
The Court, therefore, held that the 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.
2. 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?
The Court observed, “… 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.”
The Court held that the imposition of penalties for variations in drawal is a justifiable regulatory measure that aligns with the objectives of the 2003 Act and does not amount to an unreasonable restriction on open access.
“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”, it added.
3. 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?
The Court noted that 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”, it further explained.
Moreover, the Court said that the regulation does not create an insurmountable barrier to open access but rather seeks to bring order and predictability to its implementation.
“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”, it held.
4. Whether the Regulation 21 is arbitrary and discriminatory, thereby discouraging captive power generation by creating unreasonable distinction between captive generators and state distribution companies?
The Court remarked that there is no evidence to suggest that captive generators are being singled out or subjected to harsher conditions compared to other generators.
“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. … The distinction between captive power generators and state DISCOMs is not arbitrary but arises from the structural differences in their roles and obligations”, it also observed.
The Court said that 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.
“… 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”, it held.
Conclusion
The Court ruled that the 2016 Regulations consistent with the legislative intent of the 2003 Act, ensuring that open access is exercised in a manner that does not compromise system stability, fairness, or economic viability and, therefore, the regulatory framework does not foreclose open access but rather operationalizes it within reasonable constraints essential for sustaining the electricity sector.
“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”, it concluded.
Accordingly, the Apex Court dismissed the Appeals and upheld both Orders of the High Court.
Cause Title- Ramayana Ispat Pvt. Ltd. and Anr. v. State of Rajasthan & Ors. (Neutral Citation: 2025 INSC 424)
Appearance:
Appellants: AORs Nikunj Dayal, Kumar Mihir, Advocates Manu Seshadri, Sahil Manganani, Aakriti Gupta, Siddhant Singh, Athul Joseph, Gunjan Sharma, and Harshal Kumar.
Respondents: AORs Satya Veer Singh, Zoheb Hossain, Milind Kumar, Pratibha Jain, Pallav Mongia, Advocates Rupesh Singh, and Guru Prasad Singh.
