Karnataka High Court
Karnataka Power Transmission … vs M/S Shamanur Sugars Limited on 30 April, 2026
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WA No. 927 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF APRIL, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
WRIT APPEAL NO. 927 OF 2023 (GM-KEB)
BETWEEN:
1. KARNATAKA POWER TRANSMISSION
CORPORATION LIMITED
A COMPANY REGISTERED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
KAVERI BHAVAN
BENGALURU - 560 009
2. STATE LOAD DISPATCH CENTRE, KPTCL
HAVING ITS REGISTERED OFFICE AT
NO. 28, RACE COURSE ROAD
BENGALURU - 560 009
...APPELLANTS
Digitally (BY SRI S. SRIRANGA, SENIOR ADVOCATE FOR
signed by K SMT. SUMANA NAGANAND, ADVOCATE)
P SWETHA
Location: AND:
High Court
of Karnataka 1. M/S SHAMANUR SUGARS LIMITED
A COMPANY INCORPORATED UNDER
THE PROVISIONS OF COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
NO.374, 4TH MAIN, P.J. EXTENSION
DAVANGERE - 577 002
2. CENTRAL ELECTRICITY
REGULATORY COMMISSION
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WA No. 927 of 2023
3RD AND 4TH FLOOR
CHANDERLOK BUILDING
36, JANPATH, NEW DELHI - 110 001
...RESPONDENTS
(BY SRI SHRIDHAR PRABHU, ADVOCATE FOR R-1 &
SRI PRADEEP NAYAK, ADVOCATE FOR R-2)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT, 1961 PRAYING TO SET ASIDE THE
ORDER DATED 22/05/2023 PASSED BY THE LEARNED SINGLE
JUDGE IN W.P. NO.46495/2012 AND CONSEQUENTLY ALLOW THE
WRIT PETITION.
THIS WRIT APPEAL HAVING BEEN HEARD AND RESERVED
FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY,
JUDGMENT WAS PRONOUNCED AS UNDER:
CORAM: HON’BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE
and
HON’BLE MR. JUSTICE C.M. POONACHAC.A.V. JUDGMENT
(PER: HON’BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE)INTRODUCTION
1. The appellants have filed the present intra-court appeal
impugning a judgment dated 22.05.2023 [hereinafter ‘the
impugned order’] passed by the learned Single Judge of this
Court dismissing the writ petition filed by the appellants-
W.P.No.46495/2012 (GM-KEB).
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WA No. 927 of 2023
2. Appellant No.1 – Karnataka Power Transmission Corporation
Limited [hereinafter referred to as ‘KPTCL’], is a Government
Company and its shares are held by the State of Karnataka. It is
the State Transmission Utility as defined under Section 39 of the
Electricity Act, 2003 [hereinafter referred to as ‘the Act’]. KPTCL is
engaged in the business of transmission of electricity in the State of
Karnataka, and its functions are set out under Sections 39(2) and
40 of the Act. Appellant No. 2 – the State Load Despatch Centre
[hereinafter referred to as ‘SLDC’], constituted under Section 31 of
the Act. KPTCL operates the SLDC as per the first proviso to
Section 31(2) of the Act. The primary function of the SLDC is to
ensure integrated operation of the power system in the State of
Karnataka.
3. Respondent No.1, M/s.Shamanur Sugars Limited [hereinafter
‘SSL’], is a company incorporated under the provisions of the
Companies Act, 1956, having its registered office at Davangere,
Karnataka. SSL is a generating company and has established a
bagasse-based co-generation power plant with a capacity of 20
MWs. Respondent No.2 is the Central Electricity Regulatory
Commission [hereinafter referred to as ‘CERC’], constituted under
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WA No. 927 of 2023
Section 76 of the Act to discharge the functions enumerated under
Section 79 of the Act.
4. The appellants had filed the writ petition, from which the
present appeal arises, challenging an order dated 09.10.2012
(hereafter ‘the CERC’s order’) passed by the CERC in Petition No.
124/MP/2011. SSL had filed the said petition, inter alia, challenging
the amended condition, Clause (m) (hereafter referred to as ‘the
impugned condition’ or ‘the impugned clause’), inserted by the
SLDC in the Standing Clearance and No-Objection Certificate
[hereinafter referred to as ‘SC/NOC’] issued to SSL for inter-State
open access transmission. The CERC set aside the impugned
clause and directed the appellants to settle the dues of SSL from
January, 2010 onwards in accordance with Regulation 20 (5) of the
CERC (Open Access in Inter-State Transmission) Regulations,
2008 [hereinafter referred to as ‘the Open Access Regulations’].
The appellants, inter alia, contended that (i) the CERC lacks the
jurisdiction to pass the said order; (ii) the SLDC’s action in inserting
the said clause was statutory in nature and not administrative ; and
(iii) Regulation 8 of the Open Access Regulations is ultra vires the
provisions of the Act. The learned Single Judge dismissed the writ
petition by the impugned order. The learned Single Judge upheld
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WA No. 927 of 2023
the CERC’s order and further directed the State Government to
establish a separate independent entity to function as the SLDC.
5. Before considering the import of the reliefs sought by the
appellants in the writ petition and the challenge raised in the
present appeal, it is relevant to set out the factual context in which
the controversy involved in the writ petition and the present appeal
arises.
PREFATORY FACTS
6. SSL commissioned a 2,500 TCD sugar plant along with a 20
MW bagasse-based co-generation power plant, which commenced
commercial operations in September 1999. On 07.03.1998, SSL
entered into a Power Purchase Agreement [hereinafter referred to
as ‘the PPA’] with KPTCL for selling surplus power of 10 to 15
MWs to the State grid. The PPA was for a term of ten years.
7. The PPA came to an end in September 2009. Thereafter, SSL
was under no obligation to sell power to KPTCL or its successors.
SSL, after meeting its captive load, commenced selling its surplus
power on short-term open access through bilateral sales and the
Power Exchange to consumers outside Karnataka. Accordingly,
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SSL applied for SC/NOC from the SLDC as mandatorily required
for short-term open access under the Open Access Regulations.
8. The initial SC/NOC granted by the SLDC to SSL contained a
clause, Clause (m), which reads as follows:
“(m) Payment will not be made if power is supplied in
excess of 5% of the approved schedule by
KPTCL/ESCOMs.”
9. SSL states that the said initial Clause(m) was broadly in
consonance with the Open Access Regulations. It is further stated
that in consideration of the support provided to the grid from
September to December 2009, SSL received approximately
`11,00,000/- as UI charges from the appellants. However, SSL
contends that the calculation method was not shared with it.
Additionally, SSL states that it did not receive the UI charges from
January to March 2010.
10. In or about March 2010, SSL applied afresh for SC/NOC from
the SLDC for selling power through the Power Exchange. The
SC/NOC thereafter issued by the SLDC, with effect from
01.04.2010 contained the impugned clause, which reads as under:
“Clause (m) – for any excess generation, the rates
fixed by KERC for old plants only will be paid and not
as per UI rates. However, for shortfall in generation as
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WA No. 927 of 2023compared to the scheduled generation, the firm will
pay UI rates.”
11. On 21.02.2011 (It is incorrectly mentioned as 09.05.2011 in the
synopsis), SSL filed a petition, Petition No.124/MP/2011, before the
CERC under Section 79(1)(f) of the Act read with Regulation 26 of
the Open Access Regulations, inter alia, seeking the following
reliefs:
“(a) declare that clause (m) Introduced as the additional
condition in the standing clearance issued by the
Respondent No. 2 to the. Petitioner from 1ª April, 2010
(being Annexures B (colly)) are contrary to the CERC
(short term open access transmission) Regulation 2008
and the CERC (Unscheduled Interchange charges and
related matters) Regulations 2009; and
(b) direct the Respondent to compute the Ul charges for the
transactions made by the Petitioner from January, 2010 till
date and settle the same in terms of the CERC
(Unscheduled Interchange charges and related matters)
Regulations, 2009, as amended from time to time;
(c) direct the Respondent to give detailed energy accounts
and necessary supporting documents towards UI
settlements to the Petitioner for each settlement period.
(d) Pass such other or further orders as this Hon’ble
Commission may deem fit and proper in the facts and
circumstances of the case.”
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WA No. 927 of 2023
RIVAL CONTENTIONS BEFORE CERC
12. The appellants contend that the said impugned condition was
imposed to regulate injection and drawal of power by SSL, having
regard to its history of drastic deviation from the approved
schedule, resulting in sharp increases and decreases in grid
frequency, in the interest of grid security and to curb ‘gaming’
activities. It is stated on behalf of the appellants that the generation
pattern of SSL prior to the insertion of the impugned clause, was
erratic and demonstrated gross negligence on SSL’s part in
following the approved schedule, thereby causing danger to the
grid. The appellants also state that generators with an installed
capacity of less than 25 MWs, such as SSL (with a capacity of 20
MWs), were not subject to the Regulations pertaining to
Availability-Based Tariff (ABT) and were not required to
compulsorily install SCADA (Supervisory Control and Data
Acquisition), making monitoring of their injections and drawals
through ABT impossible.
13. SSL, counters the said submissions and contends that the
impugned clause is contrary to Regulation 20(5) of the Open
Access Regulations and the CERC (Unscheduled Interchange
Charges and Related Matters) Regulations, 2009 (referred to as
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WA No. 927 of 2023
‘the UI Regulations’). SSL contends that SLDC cannot impose
conditions for determining tariffs and charges for power sold on
inter-State open access; nor can it impose restrictions on UI
charges receivable in the hands of the generator and link them to
the tariff determined by the KERC. SSL further contends that the
impugned clause is arbitrary, inasmuch as while the generator
would be required to pay at the prevailing UI rate for shortfall in
actual generation in relation to scheduled generation, it would
receive a lesser rate — being the KERC rate for old plants — for
over-injection, which was contrary to the symmetry envisaged by
14. As noted above, SSL filed the petition before CERC. SSL
contended that since its surplus power was being sold on inter-
State open access to consumers outside Karnataka, the dispute fell
within the jurisdiction of the CERC.
15. On being notified by the CERC about the said proceedings, the
appellants entered appearance and filed their Statement of
Objections dated 24.08.2011 before the CERC. It was the
appellants’ case that:
(a) the SLDC had been constituted under Section 31 of the
Act, with duties and functions enumerated in Section 32 of
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WA No. 927 of 2023
the Act, and its primary duty was to ensure integrated
operation of the power system in the State of Karnataka;
(b) Section 33 of the Act provides that the directions issued
by the SLDC are binding and are to be complied with by
every licensee, generating company, generating station,
sub-station and any other person connected to the grid;
(c) having regard to the history of SSL in deviating from the
approved schedule of injection and drawal of electricity, the
SLDC imposed the said condition to regulate injection and
drawal of power so as to ensure grid safety and security;
(d) SSL had the tendency of drastic deviation from the
approved schedule resulting in sharp increase and
decrease in grid frequency; and
(e) the power generation pattern which resulted in the
imposition of the additional condition was placed before the
CERC.
16. The appellants also filed a statement before the CERC,
wherein they further elaborated upon the pattern of deviations by
SSL. They contended that there was absolute negligence on the
part of SSL in not following the approved schedules, which resulted
in random over-drawal and injection of power, endangering grid
security. It was also pointed out that generators with a capacity of
less than 25 MW were not subject to the Regulations pertaining to
Availability-Based Tariff (ABT) and that SSL, being a co-generation
plant of 20 MW capacity, did not fall under the purview of
ABT/SCADA.
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WA No. 927 of 2023
17. SSL filed a rejoinder to the Statement of Objections before the
CERC, denying the allegations that it was not complying with the
schedule and endangering grid security. It was contended by SSL
that it had at all times tried to abide by the schedule approved by
the SLDC and that the appellants had failed to present any
sustainable reasoning for inserting the impugned condition or for
non-payment of UI charges. SSL further contended that the data
placed on record by the appellants was selective, covering only a
chosen few days, and was therefore not reliable for ascertaining its
conduct.
18. During the hearing on 20.12.2011, the CERC raised a query as
to whether the State of Karnataka had implemented Availability-
Based Tariff (ABT). The CERC further directed the appellants to file
an affidavit on oath indicating under which provision of the
Regulations the additional clause had been inserted and whether
the KERC had framed any such Regulations.
19. Pursuant to the aforesaid direction of the CERC, the appellants
filed an affidavit dated 05.01.2012, in which it was submitted that:
(i) the rationale behind inclusion of the impugned clause was to
regulate injection and drawal of power by generators so as to
effectively monitor the grid to ensure grid safety and security at all
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WA No. 927 of 2023
times; (ii) SSL had a tendency to deviate drastically from the
approved schedule resulting in sharp increase/decrease in the grid
frequency; (iii) the SLDC was entitled to give directions under
Section 33 of the Act for integrated grid operation and had taken
precautionary measures to ensure that generators having obtained
open access follow their schedule so as to ensure grid stability; (iv)
the generation pattern of SSL prior to and pursuant to insertion of
the impugned clause was annexed; and (v) as per the order of the
KERC dated 20.06.2006 and the Grid Code issued by the KERC,
all generators with installed capacity of 25 MW and above fall
under the purview of ABT, and generators having an installed
capacity less than 25 MWs are not required to compulsorily install
ABT/SCADA. It was further submitted that there were numerous
independent power producers within the State of Karnataka whose
gross exportable capacity exceeded 700 MW, and if all variations in
supply were not in keeping with schedules, it would have a
disastrous effect on the stability of the grid.
CERC’s ORDER
20. On 09.10.2012, the CERC passed the CERC’s order in Petition
No.124/MP/2011. The CERC, after considering the submissions of
the parties, noted that in terms of Regulation 20(5) of the Open
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Access Regulations, unless specified otherwise by the concerned
State Commission, the UI rate for an intra-State entity shall be
105% (for over-drawals or under-generation) and 95% (for under-
drawals or over-generation) of the UI rate at the periphery of the
regional entity. The CERC observed that there was no intra-State
ABT (Availability Based Tariff) in the State of Karnataka and that
the KERC had not prescribed any limit for over-drawals or under-
generation and under-drawals or over-generation by any intra-State
entity. The CERC, therefore, held that the SLDC was bound to
comply with the Open Access Regulations when issuing SC/NOC
for open access in inter-State transmission of electricity, and that
any deviation from Regulation 20(5) was a violation of the said
Regulations.
21. The CERC further observed that the impugned condition
(modified Clause (m) of the SC/NOC), which provided that any
excess generation would be paid at the rates fixed by KERC for old
plants only, had no basis and was arbitrary. The CERC noted that
while the SLDC would receive UI charges for over-injection by the
intra-State generators from the RLDC at the rate applicable to the
prevailing frequency, it would make payments to the generators at
the rates fixed by KERC for old plants, thereby making a profit on
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account of the provisions of the amended Clause (m). The CERC
also observed that the said provision was discriminatory, inasmuch
as while the generator would pay at the prevailing UI rate for a
shortfall in actual generation relative to scheduled generation, it
would receive a lower rate than the UI rate for over-injection.
22. The CERC held that it is a settled principle of law that statutory
regulations cannot be changed through administrative instructions
and that in case of conflict between statutory regulations and
administrative instructions, the former shall prevail. The CERC
accordingly set aside the impugned clause and directed the
appellants: (i) to align the SC/NOC for open access to inter-State
transmission with the provisions of the Open Access Regulations
and the UI Regulations framed by the CERC; and (ii) to settle the
dues of SSL from January 2010 onwards in accordance with
Regulation 20(5) of the Open Access Regulations, after sharing the
relevant injection and drawal data with SSL.
WRIT PETITION – W.P.No. 46495/2012
23. Aggrieved by the CERC’s order dated 09.10.2012, the
appellants filed W.P.No.46495/2012 (GM-KEB) before this Court
on 17.11.2012. The appellants contended that:
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WA No. 927 of 2023
(i) the CERC failed to appreciate that the action of the
SLDC in inserting the impugned clause was statutory in
nature under Sections 32 and 33 of the Act and not
administrative;
(ii) the CERC, being a statutory authority, could not sit in
appeal over the statutory functions of another statutory
authority, namely the SLDC, constituted under the very
same enactment;
(iii) in case of conflict between statutory action and
Regulations, the statutory action will prevail over the
Regulations; and
(iv) the appellants also contended that the CERC had no
jurisdiction to entertain the petition filed by SSL.
24. On 05.04.2013, the appellants were permitted, by order of this
Court, to amend the Writ Petition so as to include an additional
prayer, being prayer 1(a), seeking a declaration that Regulation 8
of the CERC (Open Access in Inter-State Transmission)
Regulations, 2008 dated 25.01.2008 as ultra vires to the Act. The
specific contention raised in support of the said prayer was that the
said Regulation seeks to regulate the activities of the SLDC
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WA No. 927 of 2023
de hors Sections 31 to 33 of the Act, and that the powers vested in
the SLDC under Part V of the Act cannot be curtailed by the CERC
through the device of subordinate legislation.
25. In the Writ Petition, SSL filed its Preliminary Statement of
Objections, raising, inter alia, the following contentions: (i) the
appellants had submitted to the jurisdiction of the CERC during the
proceedings before it and had not challenged the CERC’s
jurisdiction at the initial stage; (ii) the appellants had an alternative
and efficacious remedy by way of an appeal to the Appellate
Tribunal for Electricity under Section 111 of the Act; (iii) a statutory
body cannot seek quashing of a statutory provision in a parent Act
or a subordinate legislation; and (iv) the CERC had rightly decided
the matter before it. SSL relied upon the decision of this Court in
Karnataka Power Transmission Corporation Limited v. R.K.
Powergen Private Limited1 and the decision of the Apex Court in
Uttar Pradesh Power Corporation Limited v. NTPC Ltd. and
Others2, in support of its contention regarding the availability of an
alternative remedy.
26. The CERC also filed its Statement of Objections. It was
contended on behalf of the CERC that: (i) the CERC has the
1
2006 (2) KarLJ 608
2
2011 (10) SCALE 499
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WA No. 927 of 2023
necessary powers to regulate all inter-State electricity transmission;
(ii) the Open Access Regulations were validly framed under
Section 178 of the Act and fall squarely within its scope; (iii) the
KERC would have jurisdiction only in respect of intra-State
transmission; (iv) when there is an inter-State element, the KERC,
which exercises jurisdiction within the State of Karnataka, cannot
have extra-territorial jurisdiction and it is for that reason that the
CERC is vested with jurisdiction over inter-State transmission of
power; and (v) the challenge to the vires of Regulation 8 of the
Open Access Regulations was untenable and devoid of merits.
IMPUGNED ORDER
27. The learned Single Judge noted the following eight points for
consideration:
(i) Whether the CERC would have the power to
regulate the transmission and distribution of power on
intra-State lines?
(ii) Whether the CERC would have the power to regulate
the transmission and distribution of power on inter-State
lines?
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WA No. 927 of 2023
(iii) Whether the disputes in the present matter could be
raised under Section 79(1)(f) of the Electricity Act?
(iv) Whether the SLDC can regulate inter-State electricity
transmission by exercising its statutory powers?
(v) Whether there is a conflict of interest between KPTCL
and SLDC?
(vi) Whether the order passed by the CERC in Petition No.
124/MP/2011 suffers from any illegality requiring interference
at the hands of this Court?
(vii) Whether the petitioners would have to be relegated to
an appeal before the Appellate Tribunal in lieu of Section 111
of the Electricity Act?
(viii) What order?
28. In regard to Points No. 1 and 2, the learned Single Judge
referred to Sections 79 and 86 of the Act and held that from a
comparison of the two provisions, it is clear that the jurisdiction of a
State Commission is limited to the transmission of electricity within
the State, that is, intra-State, whereas under Section 79 of the Act,
the powers of the Central Commission relate to inter-State
transmission, determination of tariff, and functioning of licensees.
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WA No. 927 of 2023
The learned Single Judge held that the KERC would have power to
regulate the transmission and distribution of power on all intra-
State lines, while the CERC would have power to regulate the
transmission and distribution of power on all inter-State lines, and
as a corollary, the KERC would not have power to regulate inter-
State transmission, which can only be regulated by the Central
Commission.
29. With respect of Point No. 3, the learned Single Judge observed
that the present dispute is one relating to inter-State transmission,
inasmuch as the power/electricity is produced in the State of
Karnataka and distributed outside the State of Karnataka. The
learned Single Judge held that the CERC would have the powers
under Section 79(1)(f) of the Act to adjudicate issues relating to
inter-State transmission and distribution of electricity. The learned
Single Judge further observed that the decisions relied upon by the
appellants — Indo Rama Synthetic Ltd.3, Kamachi Sponge &
Power Corporation Ltd.4, and Sal Steel5 — were all in matters
relating to intra-State transmission, wherein the regulation and/or
schedule formulated by the respective SLDC was within the State.
3
2011 SCC OnLine APTEL 77
4
Appeal No. 120/2016
5
2010 SCC OnLine Guj 3584
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WA No. 927 of 2023
None of those decisions related to inter-State transmission;
therefore, they would have no bearing on the present matter.
30. In respect of Point No. 4, the learned Single Judge, after
examining Sections 31, 32 and 33 of the Act, held that the
functions of the SLDC under Section 32 of the Act and the power to
issue directions as provided under Section 33 of the Act, are
restricted to intra-State transmission and do not extend to inter-
State transmission. The learned Single Judge concluded that the
SLDC cannot regulate inter-State electricity transmission by
exercising its statutory powers under the Act.
31. With respect to Point No. 5, the learned Single Judge observed
that in terms of Section 31 of the Act, a separate company is
required to be established by the State to operate the SLDC. The
learned Single Judge noted that despite the Act having come into
force in the year 2003 and twenty years having elapsed there from,
no action had been taken in that regard and the SLDC continued to
operate under the State Transmission Utility. The learned Single
Judge expressed the opinion that there is bound to be conflict
between the State Transmission Utility and the functioning of the
SLDC, and directed that the State establish a separate entity for
operating the SLDC so that it can function independent of the State
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WA No. 927 of 2023
Transmission Utility at the earliest, and at any rate within a period
of six weeks from the date of receipt of the impugned order. The
Registrar General was directed to forward a copy of the order to
the Chief Secretary, Government of Karnataka.
32. With respect to Point No. 6, the learned Single Judge held that
in view of the findings on the preceding points, the impugned
condition imposed by the SLDC was bad in law and not authorised.
The learned Single Judge observed that, since the dispute between
the parties relates to inter-State generation, transmission, and
distribution, the CERC, not the KERC, had the jurisdiction to decide
the dispute. The learned Single Judge held that since the CERC
had taken into consideration all the relevant aspects, there was no
infirmity in the CERC’s order.
33. With respect to Point No. 7, the learned Single Judge noted
that the matter had been pending since the year 2012, had been
taken up on merits, and all contentions which had been raised were
considered. The learned Single Judge held that relegation of the
petitioners (the appellants herein) to the Appellate Tribunal after a
period of eleven years would amount to a travesty of justice, and
accordingly declined to relegate the appellants to the statutory
appellate remedy.
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WA No. 927 of 2023
34. In view of the above, the learned Single Judge dismissed the
Writ Petition.
35. It is material to note that the impugned order does not contain
any finding with respect to the prayer seeking a declaration that
Regulation 8 of the Open Access Regulations is ultra vires the
provisions of the Act.
SUBMISSIONS
36. Sri S. Sriranga, the learned Senior Counsel appearing for the
appellants, contended that the CERC’s order was without
jurisdiction and contrary to the provisions of the Act. He contended
that the impugned condition was imposed by SLDC in exercise of
statutory powers and therefore, the same could not be set aside by
CERC, which is also another statutory body constituted under the
Act. He also contended that in case of a conflict between any
directions in exercise of statutory powers and the regulations, the
statutory action would prevail.
37. Next, he submitted that the CERC could not set aside an action
of another statutory authority under the Act. He further submitted
that the regulations made by the CERC were ultra vires the Act, as
they conflicted with the powers conferred on the SLDC under
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WA No. 927 of 2023
Sections 31 to 33 of the Act. He also submitted that SSL had
indulged in ‘gaming’, which would put the grid at risk. He contended
that SLDC is responsible for the optimal scheduling and dispatch of
electricity within a State and is required to monitor grid operations.
It exercises supervision and control over the intra-state
transmission system and is required to issue such directions as
may be required. He submitted that the impugned clause has been
imposed in exercise of such powers and thus, setting aside the
same would in effect run contrary to the provisions of the Act.
REASONS AND CONCLUSION
38. At the outset, we may now note the reliefs sought by the
appellants in the Writ Petition as also in the present appeal. In the
Writ Petition No. 46495 of 2012 (as amended), the appellants
sought the following reliefs:
“(a) Quash the order dated 09.10.2012 passed
by the 2nd Respondent (CERC) in Petition No.
124/MP/2011 (Annexure-E);
(b) Declare that Regulation 8 of the CERC
(Open Access in Inter-State Transmission)
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WA No. 927 of 2023
Regulations, 2008 dated 25.01.2008 is ultra vires of the
Act;
(c) Declare that the order dated 09.10.2012
passed by the 2nd Respondent in Petition No.
124/MP/2011 (Annexure-E) is without jurisdiction;
(d) Declare that the 2nd Respondent, in
exercise of powers under Section 79 of the Act, cannot
sit in appeal over the directions issued under Sections
31 and 32 of the said Act;
(e) Declare that the 2nd Respondent
constituted under the provisions of the Electricity Act,
2003 cannot decide or declare the veracity of the
decisions taken by another statutory authority i.e., the
2nd Petitioner (SLDC), which is also constituted under
the provisions of the Act”
39. In the present appeal (Writ Appeal No. 927 of 2023 filed on
07.08.2023), the appellants pray that this Court be pleased to set
aside the impugned order dated 22.05.2023 passed by the learned
Single Judge in W.P. No. 46495 of 2012.
40. The principal questions to be addressed are:
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WA No. 927 of 2023
(i) Whether Regulation 8 of the Open Access
Regulations is ultra vires the Act?
(ii) Whether the CERC’s order is without
jurisdiction?
(iii) Whether the impugned condition is valid?
STATUTORY FRAMEWORK
41. Before proceeding further, it is necessary to briefly note the
statutory framework governing the present dispute. The Act is a
comprehensive enactment relating to, inter alia, the generation,
transmission, distribution, trading and use of electricity.
42. In PTC India Limited v. Central Electricity Regulatory
Commission6, the Supreme Court had observed:
“17. The 2003 Act is enacted as an exhaustive
code on all matters concerning electricity. It provides
for “unbundling” of SEBs into separate utilities for
generation, transmission and distribution. It repeals
the Electricity Act, 1910; the Electricity (Supply) Act,
1948 and the Electricity Regulatory Commissions Act,
1998. The 2003 Act, in furtherance of the policy
envisaged under the Electricity Regulatory
Commissions Act, 1998 (the 1998 Act), mandated the
establishment of an independent and transparent
regulatory mechanism, and has entrusted wide-
ranging responsibilities with the Regulatory6
(2010) 4 SCC 603
– 26 –
WA No. 927 of 2023
Commissions. While the 1998 Act provided for
independent regulation in the area of tariff
determination; the 2003 Act has distanced the
Government from all forms of regulation, namely,
licensing, tariff regulation, specifying Grid Code,
facilitating competition through open access, etc.
18. Section 3 of the 2003 Act requires the Central
Government, in consultation with the State
Governments and the Authority, to prepare the
National Electricity Policy as well as tariff policy for
development of the power system based on optimum
utilisation of resources. The Central and the State
Governments are also vested with rule-making powers
under Sections 176 and 180 respectively, while the
“Authority” has been defined under Section 2(6) as the
regulation-making power under Section 177. On the
other hand, the Regulatory Commissions are vested
with the power to frame policy, in the form of
regulations, under various provisions of the 2003 Act.
However, the Regulatory Commissions are
empowered to frame policy, in the form of regulations,
as guided by the general policy framed by the Central
Government. They are to be guided by the National
Electricity Policy, the tariff policy as well as the
National Electricity Plan in terms of Sections 79(4) and
86(4) of the 2003 Act (see also Section 66).”
43. Part V of the Act deals with the transmission of electricity.
Whereas Sections 25 to 29 of the Act contain provisions
concerning inter-State transmission, Sections 30 to 33 relate to
intra-State transmission.
44. Section 31 of the Act provides for the constitution of State Load
Despatch Centres. In terms of Section 31(1) of the Act, the State
Government is required to establish a centre to be known as the
State Load Despatch Centre for the purposes of exercising the
– 27 –
WA No. 927 of 2023
powers and discharging the functions under Part V of the Act.
Section 31(2) of the Act provides that the SLDC shall be operated
by a Government company or any authority or corporation
established or constituted by or under any State Act, as may be
notified by the State Government, with a proviso that until such
notification is issued, the State Transmission Utility shall operate
the SLDC.
45. Section 32 of the Act enumerates the functions of the SLDC.
Section 32(1) of the Act, posits that the SLDC shall be the apex
body responsible for ensuring the integrated operation of the power
system in a State. Section 32(2) of the Act provides that the SLDC
shall, inter alia, 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, monitor grid operations, keep
accounts of the quantity of electricity transmitted through the State
grid, exercise supervision and control over the intra-State
transmission system, and 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.
– 28 –
WA No. 927 of 2023
46. Section 33 of the Act deals with compliance with the directions
issued by the SLDC. Section 33(1) of the Act provides that the
SLDC may give such directions and exercise such supervision and
control as may be required for ensuring integrated grid operations
and for achieving the maximum economy and efficiency in the
operation of the power system in that State. Section 33(2) of the
Act makes it obligatory upon every licensee, generating company,
generating station, sub-station and any other person connected
with the operation of the power system to comply with the
directions issued by the SLDC. Section 33(4) of the Act provides a
dispute resolution mechanism, stipulating that any dispute arising
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 sub-section (1), shall be referred to the State
Commission for decision, with the proviso that pending such
decision, the directions of the SLDC shall be complied with. Section
33(5) of the Act provides for a penalty not exceeding Rupees Five
Lakhs for non-compliance with the directions of the SLDC.
47. The CERC is constituted under Section 76 of the Act. Section
79 of the Act enumerates the functions of the CERC, which include,
inter alia: (a) regulating the tariff of generating companies owned or
– 29 –
WA No. 927 of 2023
controlled by the Central Government; (b) regulating the tariff of
generating companies, other than those covered under clause (a),
which enter into or otherwise have a composite scheme for
generation and sale of electricity in more than one State.; (c)
regulating the inter-State transmission of electricity; (d) determining
tariff for inter-State transmission of electricity; (e) issuing licences
to persons to function as transmission licensees and electricity
traders with respect to their inter-State operations; and (f)
adjudicating upon disputes involving generating companies or
transmission licensees in regard to matters connected with clauses
(a) to (d) above and referring any dispute for arbitration. Section
178 of the Act confers powers upon the CERC to make regulations
consistent with the Act and the rules, so as to carry out the
provisions of the Act.
48. The Karnataka Electricity Regulatory Commission [hereinafter
referred to as ‘KERC’] is the State Commission constituted under
Section 82 of the Act. The functions of the State Commission are
enumerated under Section 86 of the Act and include, inter alia,
determination of tariff for generation, supply, transmission and
wheeling of electricity within the State, regulation of electricity
purchase and procurement, facilitation of intra-State transmission
– 30 –
WA No. 927 of 2023
and wheeling of electricity, issuance of licences to persons with
respect to their operations within the State, and adjudication of
disputes between the licensees and generating companies. It is
pertinent to note that the jurisdiction of the State Commission under
Section 86 of the Act is confined to intra-State matters.
49. On 25.01.2008, the CERC notified the Open Access
Regulations7, framed in exercise of powers conferred upon it under
Section 178 of the Act. The said Regulations lay down the
procedure and terms and conditions for the grant of open access to
the inter-State transmission system. Regulation 8 of the Open
Access Regulations provides for the SLDC’s concurrence in
bilateral and collective transactions. In terms of Regulation 8(2), a
State utility or an intra-State entity proposing to participate in
trading through a power exchange is required to obtain a no-
objection or prior standing clearance from the SLDC. Regulation
8(3) of the Open Access Regulations sets out the procedure for
obtaining such concurrence or no-objection, including timelines for
the SLDC to process applications and grounds on which refusal
may be communicated.
7
CERC (Open Access in Inter-State Transmission) Regulations, 2008
– 31 –
WA No. 927 of 2023
50. Regulation 20 of the Open Access Regulations contains
provisions for Unscheduled Interchange (UI) Charges. In terms of
Regulation 20(4) of the Open Access Regulations, any mismatch
between the scheduled and the actual drawal at drawal points and
the scheduled and the actual injection at injection points for the
intra-State entities is to be determined by the concerned State
Load Despatch Centre and covered under the intra-State UI
accounting scheme. Regulation 20(5) of the Open Access
Regulations provides that unless specified otherwise by the
concerned State Commission, the UI rate for an intra-State entity
shall be 105% (for over-drawals or under-generation) and 95% (for
under-drawals or over-generation) of the UI rate at the periphery of
the regional entity. Regulation 20(6) stipulates that no charges,
other than those specified under the said Regulations, shall be
payable by any person granted short-term open access under the
said Regulations.
CERC
51. Part X of the Act provides for the constitution, powers and
functions of the Central Commission. Section 76 of the Act
provides for Constitution of the CERC.
– 32 –
WA No. 927 of 2023
52. Section 79 of the Act sets out the functions of CERC. It is
relevant to refer to the said section and the same is reproduced
below:
“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
morethan 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;
– 33 –
WA No. 927 of 2023
(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.”
53. Under Section 178 of the Act, CERC is also empowered to
make regulations consistent with the Act and Rules generally to
carry out the provisions of the Act. It is relevant to refer to Section
178 of the Act which is reproduced below:
“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:-
– 34 –
WA No. 927 of 2023
(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 1[***] of surcharge and cross
subsidies under second proviso to sub-clause (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 2[***] of surcharge and cross
subsidies under the second proviso to sub-clause (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;
(o) duties of electricity trader under sub-section (2)
of section 52;
– 35 –
WA No. 927 of 2023
(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 therefor
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 section91;
(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;
– 36 –
WA No. 927 of 2023
(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.”
54. In PTC India (supra), the Supreme Court has explained that
the Act contemplates three kinds of delegated legislation. First, is
Section 176 of the Act, which empowers Central Government to
make rules to carry out the provisions of the Act and the State
Governments are also empowered to make Rules under Section
170 of the Act. Second, is Section 177 of the Act by virtue of which
the Central Electricity Authority is empowered to make regulations
consistent with the Act and the Rules made thereunder. Third, is
the power of the CERC to make regulations in exercise of powers
under Section 178 of the Act. The State Electricity Regulatory
Commissions are also empowered to make regulations under
Section 181 of the Act.
55. The Supreme Court explained the role of the CERC as under:
“53. Applying the abovementioned tests to the scheme of
the 2003 Act, we find that under the Act, the Central
Commission is a decision-making as well as regulation-
making authority, simultaneously. Section 79 delineates
the functions of the Central Commission broadly into two
categories –mandatory functions and advisory functions.
– 37 –
WA No. 927 of 2023
Tariff regulation, licensing (including inter-State trading
licensing), adjudication upon disputes involving generating
companies or transmission licensees fall under the head
“mandatory functions” whereas advising the Central
Government on formulation of National Electricity Policy
and tariff policy would fall under the head “advisory
functions”. In this sense, the Central Commission is the
decision-making authority. Such decision-making under
Section 79(1) is not dependent upon making of regulations
under Section 178 by the Central Commission. Therefore,
functions of the Central Commission enumerated in
Section 79 are separate and distinct from functions of the
Central Commission under Section 178. The former are
administrative/adjudicatory functions whereas the latter are
legislative.
54. As stated above, the 2003 Act has been enacted in
furtherance of the policy envisaged under the Electricity
Regulatory Commissions Act, 1998 as it mandates
establishment of an independent and transparent
Regulatory Commission entrusted with wide-ranging
responsibilities and objectives inter alia including protection
of the consumers of electricity. Accordingly, the Central
Commission is set up under Section 76(1) to exercise the
powers conferred on, and in discharge of the functions
assigned to, it under the Act. On reading Sections 76(1)
and 79(1) one finds that the Central Commission is
empowered to take measures/steps in discharge of the
functions enumerated in Section 79(1) like to regulate the
tariff of generating companies, to regulate the inter-State
transmission of electricity, to determine tariff for inter-State
transmission of electricity, to issue licences, to adjudicate
upon disputes, to levy fees, to specify the Grid Code, to fix
the trading margin in inter-State trading of electricity, if
considered necessary, etc. These measures, which the
Central Commission is empowered to take, have got to be
in conformity with the regulations under Section 178,
wherever such regulations are applicable. Measures under
Section 79(1), therefore, have got to be in conformity with
the regulations under Section 178.”
– 38 –
WA No. 927 of 2023
56. It is apparent from the above that the CERC performs its
functions at four levels: administrative, legislative, advisory, and
adjudicatory.
57. Bearing the aforesaid in mind, we may proceed to examine the
import of the impugned condition; whether it is in conflict with the
regulations made by CERC; and whether the regulations in
question fall within the scope of functions of the CERC.
IMPUGNED CONDITION
58. As noted at the outset, the impugned condition, which is central
to the present dispute, provides that “for any excess generation,
the rates fixed by KERC for old plants only will be paid and not as
per UI rates. However, for shortfall in generation as compared to
the scheduled generation, the Firm will pay UI rates.” The import of
this impugned condition is that it substitutes the UI charges payable
to a generating entity for electricity, with rates fixed for old,
depreciated plants. The principal controversy centres on whether
the SLDC has jurisdiction to do so, given that SSL has used open
access for inter-state transmission of electricity and the CERC has
framed the Open Access Regulations and the UI Regulations.
– 39 –
WA No. 927 of 2023
UNSCHEDULED INTERCHANGE (UI) CHARGES
59. It is thus necessary to consider the nature of the UI charges
and the CERC’s jurisdiction to frame the regulations concerning UI
charges.
60. In Central Power Distribution Co. v. Central Electricity
Regulatory Commission8,the Supreme Court had explained the
Unscheduled Interchange as under:
“10. In addition to two charges, a third charge
contemplated in the ABT Scheme is for the
Unscheduled Interchange of power (UI charges).
UI charges are payable depending upon what is
deviated from the schedule and also subject to the
Grid conditions at that point of time. This element
was introduced to bring about the effective
discipline in the system. Under this system UI
charges will be payable, if:
(i) a generator generates more than the
schedule, thereby increasing the frequency;
(ii) a generator generates less than the
schedule, thereby decreasing the frequency;
(iii) a beneficiary overdraws power, thereby
decreasing the frequency;
(iv) a beneficiary underdraws power, thereby
increasing the frequency.”
11. It is thus clear from the above that UI charges
are a commercial mechanism to maintain Grid
discipline. UI charges penalise whosoever
8
(2007) 8 SCC 197
– 40 –
WA No. 927 of 2023
caused Grid indiscipline, whether generator
(NTPC) or distributor, is subject to payment of UI
charges who are not following the schedule. UI
charges are not payable if the appellants
maintain their drawal of electricity consistent
with the schedule given by themselves.
Therefore, there is no merit in the contention of the
appellants that UI charges are by way of penalty.”
[emphasis added]
61. The CERC has framed the UI regulations in exercise of the
powers conferred upon it under Section 178 of the Act.
62. The CERC, in the Statement of Reasons explaining the various
provisions of UI regulations 2009, has inter alia stated as follows:
“UI pricing is expected to serve the twin objectives
of specifying settlement rate for deviations from
schedules in normal operating range and ensuring
‘grid discipline’ on the one hand while ensuring
maximisation of generation at optimal cost for grid
participants on the other. Further, UI pricing
mechanism should discourage grid participants
from using UI mechanism as trading instrument.”
63. The UI Regulations were also amended to provide for
addressing the issue of ‘gaming’, which the learned senior counsel
appearing for the appellants had stated was the principal reason for
the SLDC insisting on imposing the impugned condition.
64. Regulation 2(ee) of the UI Regulations, which defines ‘gaming’
reads as under :
– 41 –
WA No. 927 of 2023
“(ee) ‘gaming’ in relation to these regulations, shall
mean an intentional mis-declaration of declared
capacity by any generating station or seller in
order to make an undue commercial gain through
Unscheduled Interchange charges.”
65. Regulation 6 of the UI Regulation that provides for addressing
the issue of gaming is set out below:
“6. Declaration, scheduling and elimination of
gamingThe provisions of the Grid Code and the Central
Electricity Regulatory Commission (Open Access
in inter-State Transmission) Regulations 2008, as
amended from time to time, shall be applicable for
declaration of capacity, scheduling and elimination
of gaming.
The generating station, as far as possible, shall
generate electricity as per the day-ahead
generation schedule finalised by the Regional
Load Despatch Centre in accordance with Grid
Code. Provided that the revision in generation
schedule on the day of operation shall be
permitted in accordance with the procedure
specified under the Grid Code.
“Provided that the revision in generation schedule
on the day of operation shall be permitted in
accordance with the procedure specified under the
Grid Code and Central Electricity Regulatory
Commission (Open Access in. inter-State
Transmission) Regulations; 2008, as the case may
be.
(5) In response to changes in grid frequency and
inflow fluctuations, the hydro generating stations
shall be free to deviate from the given schedule,
without causing grid constraint, and compensation
for the difference between the actual net energy
– 42 –
WA No. 927 of 2023
supplied and the scheduled energy (ex-bus) over
a day shall be made by the concerned Regional
Load Despatch Centre in the day-ahead schedule
for the 4th day
(day plus 3)
(6) The Commission may, either suo motu or on a
petition made by RLDC, initiate proceedings
against any generating company or seller on
charges of gaming and if required, may order an
inquiry in such manner as decided by the
Commission. When the charge of gaming is
established in the above inquiry, the Commission
may, without prejudice to any other action under
the Act or regulations thereunder, disallow any
Unscheduled Interchange charges received by
such generating company or the seller during the
period of such gaming.”
CERC’S JURISDICTION – UI REGULATIONS
66. The question whether the CERC has the power to frame the UI
regulations is no longer res integra.
67. In Central Power Distribution (supra), the Supreme Court
had explained that under Section 79 (1)(h) of the Act, the CERC
would have the power to specify the Grid Code and the various
sections “under the Electricity Act would clearly show beyond any
doubt the powers of Central Commission and jurisdiction in regard
to the Grid, the scheduling and dispatch”. The court had also held
– 43 –
WA No. 927 of 2023
that CERC was responsible for regulating the inter-State
transmission of electricity.
68. We may note that the Supreme Court had framed the following
questions for consideration:
“(A) Whether the application of availability-based
tariff (ABT) in relation to Unscheduled Interchange
(UI) charges, which otherwise is not a component
of tariff in terms of Regulation 15 of the Central
Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2004 and they
are liable to be held as beyond the jurisdiction of
the Central Electricity Regulatory Commission
(CERC)?
(B) As such the impugned order passed by the
Appellate Tribunal for Electricity has completely
ignored the fact that CERC order, which was
passed suo motu and ex parte, is non est and
without jurisdiction?
(C) Can the availability-based tariff as established
and provided in the order of CERC by its order
dated 4-1-2000 be implemented under the
provisions of the Electricity Act, 2003, particularly
when there is no provision under the statute that
allows CERC to levy Unscheduled Interchange
charges? and*** *** ***
(G) Whether in the present facts and
circumstances as regards the Simhadri SPTS
Thermal Station of National Thermal Power
Corporation (NTPC) which admittedly supplies
power to the State Grid and has no connection
with the management of the National Grid, can
CERC in such circumstances exercise, particularly
– 44 –
WA No. 927 of 2023
when matters relating to the State Grid fall within
the role and function of the State Electricity
Regulatory Commission?
69. The said questions were answered in the following terms:
“(A) 22.1. The application of availability-based
tariff and imposition of Unscheduled Interchange
(UI) charges are essential part of the functions of
the Central Commission under Section 79(1)(h) of
the Electricity Act, 2003 which reads “to specify
Grid Code having regard to the grid standards”,
and sub-section (2) of Section 28 read with
Section 178(2)(g) dealing with the Central
Commission’s powers to frame Grid Code. The
maintenance of Grid discipline envisaged under
the Grid Code is regulated by the mechanism of
ABT and UI charges. There is no basis for the
appellant to contend that unless something is a
part of tariff the Central Commission cannot
exercise powers and functions. ABT and UI
charges are commercial mechanism to control the
utilities in scheduling, dispatch and drawal and UI
charges are tariff or charges payable for
deviations. In the facts and circumstances
mentioned above the legal position is clear and
there is no ambiguity in respect of the jurisdiction
of the Central Commission.
(B) 22.2. The circumstances under which the
order of the Central Commission was made, the
previous orders passed by the Central
Commission and the fact that the order challenged
by the appellant was only an order fixing a
prospective date for implementation of ABT in the
case of generating station supplying to single
State and not an order deciding the right or
obligations. It is therefore not correct for the
appellants to say that the order was passed ex
parte or suo motu in violation of any principles of
– 45 –
WA No. 927 of 2023
natural justice or otherwise the order is bad or non
est. As mentioned above after the order of the
Central Commission was passed, the second
respondent and the State Load Dispatch Centre
(SLDC) in the State of Andhra Pradesh had
deliberated on the steps to be taken for
implementation. SLDC was acting on behalf of the
appellants. The appellants and SLDC did not raise
any objection or otherwise plead any difficulty in
the implementation of ABT and UI mechanism at
the relevant time. Even now, except for pleading
hypertechnicalities, the appellants have not shown
any legal prejudice they suffer on account of the
implementation of ABT for the Simhadri generating
station of NTPC. The question of law has been
raised mechanically without any factual bearing or
implication.
(C) 22.3. As already noticed, the Central
Commission has the power and function to evolve
commercial mechanism such as imposition of UI
charges to regulate and discipline. It is well settled
that a power to regulate includes within it the
power to enforce. (See Indu Bhushan
Bose v. Rama Sundari Debi [(1969) 2 SCC 289 :
AIR 1970 SC 228] , K. Ramanathan v. State of
T.N. [(1985) 2 SCC 116 : 1985 SCC (Cri) 162]
, V.S. Rice and Oil Mills v. State of A.P. [AIR 1964
SC 1781] and Deepak Theatre v. State of
Punjab [1992 Supp (1) SCC 684] .)(G) 22.4. In the facts and circumstances as
alluded, and as per the scheme of the Electricity
Act, 2003 mentioned above, the Central
Commission has the plenary power to regulate the
Grid, particularly in the context of the Grid being
integrated and connected across the region
comprising of more than one State. The State Grid
cannot be isolated and can be seen as
independent from the region.
– 46 –
WA No. 927 of 2023
70. The Open Access Regulations have been framed for regulating
access through the transmission system. The said regulations are
also intrinsically linked with the maintenance of the grid as well as
the object to facilitate trading in electricity. The Act mandates
CERC to specify regulations for transmission, pricing, as well as
the terms and conditions for regulating inter-State transmission.
71. It is apposite to refer to the following extract from the
Statement of Reasons of the Open Access Regulations:
“1. Non-discriminatory access over the
transmission system is a pre-requisite for power
trading, bilaterally and through energy exchanges,
on scheduled basis among utilities, permitted
consumers and generators located in the different
States or regions of the country. Not only does it
enable better utilization of available resources but
also facilitates the harnessing of untapped sources
of power including captive, co- generation and
merchant generating capacity. In a deficit
scenario, it is desirable to tap all the possible
sources of power.
2. In exercise of power conferred under Section
178 of the Electricity Act 2003 (the Act), the
Commission had notified the Central Electricity
Regulatory Commission (open Access in Inter-
State Transmission) Regulations, 2004 (the
regulations), which was operationalized with effect
from 6.5.2004. The open access in transmission
was introduced for the first time in the country.
This enabled the trading of electricity to be carried
out on scheduled basis in an orderly manner at a
reasonable transmission cost. The Regulations
– 47 –
WA No. 927 of 2023
were amended in February 2005, based on the
operational experience of the first order.
Subsequently, a minor amendment was carried
out in December, 2006 to prevent blocking of
transmission capacity.
3. The Commission had issued guidelines for
setting up of Power Exchange in February, 2007
and accordingly need had arisen to revamp open
access regulations in order to accommodate
collective transactions emanating from power
exchange as well as conventional bilateral trading.
Accordingly, new draft regulations on Open
Access in Inter-State transmission were published
on 18.12.2007 inviting comments from the
stakeholders.”
72. Section 42(2) of the Act mandates that the State Commission
introduce open access in phases.
73. In PTC India (supra), the Supreme Court had observed that:
“22. One of the most important features of the
2003 Act is the introduction of open access under
Section 42 of the Act. Under the open access
regime, distribution companies and eligible
consumers have the freedom to buy electricity
directly from generating companies or trading
licensees of their choice and correspondingly the
generating companies have the freedom to sell.”
74. The functions of the CERC include the function to regulate the
inter-state transmission as well as determining the tariff for such
inter-state transmission. Apart, from regulating the grid, the CERC
is also empowered to make regulations for levy and collection of
– 48 –
WA No. 927 of 2023
fees and charges from generating companies, transmission utilities
or licensees and also make regulations regarding transmission.
75. In terms of Section 178(1) of the Act, the CERC has the power
to make regulations consistent with the Act and the Rules to carry
out the provisions of the Act. Since, the CERC has plenary power
in respect of the Grid, we are unable to accept that the framing of
the Open Access Regulations is beyond the powers of delegated
legislation vested with the CERC.
76. We consider it apposite to refer to the observations made by
the Supreme Court in Central Power (supra)
“18. Under Section 79(1)(h) the Central
Commission has the power to specify Grid Code.
It also provides that the function of the State
Commission to specify State Grid Code under
Section 86(1)(h) should be consistent with the Grid
Code specified by the Central Commission and
therefore the power of the State Commission is
subservient to the power of the Central
Commission. Section 2(32) defines Grid as
interconnected transmission lines. The expression
used interconnected has a significant meaning.
Sub-section (1) of Section 28 deals with the
function of RLDC (Regional Load Dispatch Centre)
to ensure integrated operation of the power
system in the region concerned. The term power
system is of wide import. It is not confined to inter-
State transmission lines but extends to even
supply lines, distribution, main service lines, etc.
However, sub-section (3) of Section 28 deals with
duties of RLDC using the expression “within the
region” or “in the region”. Obviously it includes
both “inter-State” and “intra-State” lines and is not
– 49 –
WA No. 927 of 2023
restricted to inter-State lines. Section 29 of the Act
empowers RLDC to give directions and exercise
such supervision and control to any person for
ensuring stability of Grid operation. It also provides
that the State Load Dispatch Centre shall duly
enforce such directions. Sub-section (3) of Section
33 of the Act provides that the State Load
Dispatch Centre shall comply with the directions of
RLDC.
19. A fascicule reading of the above provisions
would clearly show that the scheme of the
Electricity Act is that RLDC is required to follow
the principles, guidelines and methodologies
specified by the Central Commission and all
persons including the distribution licensees like the
appellants herein are required to follow the
directions of RLDC. RLDC can enforce such
directions through SLDC. In turn SLDC is required
to follow the directions of RLDC.”
77. The CERC has the necessary powers to issue orders and
frame regulations for the purposes of open access, which is facet
of transmissions through the grid. The CERC is empowered to
make the Grid Code and set out the guidelines and methodologies
in respect of wheeling and optimum scheduling and dispatch of
electricity. The Regional Load Dispatch Centres (RLDCs) are
required to comply with these guidelines and methodologies. The
RLDCs exercise supervision and control over inter-State
transmission system, and the SLDCs exercise control over intra-
State transmission system. However, SLDCs are required to
comply with the directions of RLDCs, which, as stated earlier are to
comply with the guidelines and methodologies specified by CERC.
– 50 –
WA No. 927 of 2023
78. The appellants’ grievance in this regard is in respect of
Regulation 8 of the Open Access Regulations. The same is set out
below:
“8. (1) Wherever the proposed bilateral transaction
has a State utility or an intra-State entity as a
buyer or a seller, concurrence of the State Load
Despatch Centre shall be obtained in advance and
submitted along with the application to the nodal
agency. The concurrence of the State Load
Despatch Centre shall be in such form as may be
provided in the detailed procedure.
(2) When a State utility or an intra-State entity
proposes to participate in trading through a power
exchange, it shall obtain a “no objection” or a prior
standing clearance from the State Load Despatch
Centre in such form as may be prescribed in the
detailed procedure, specifying the MW up to which
the entity may submit a buy or sell bid in a power
exchange.
(3) 9[(a) For obtaining concurrence or ‘no
objection’ or prior standing clearance an
application shall be made before the State Load
Despatch Centre who shall, acknowledge receipt
of the application, either by e-mail or fax, or any
other usually recognised mode of communication,
within twenty four hours from the time of receipt of
the application:
Provided that where the application has been
submitted in person, the acknowledgement shall
be provided at the time of submission of the
application.
9
Substituted vide Central Electricity Regulatory Commission (Open Access in inter-
State Transmission) (Amendment) Regulations 2009, published in the Gazette of India
(Extraordinary) Part III, Section 4 (No. 86) on 29.5.2009
– 51 –
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(b) While processing the application for
concurrence or ‘no objection’ or prior standing
clearance, as the case may be, the State Load
Despatch Centre shall verify the following, namely-
(i) existence of infrastructure necessary for time-
block-wise energy metering and accounting in
accordance with the provisions of the Grid Code in
force, and
(ii) availability of surplus transmission capacity in
the State network.
(c) Where existence of necessary infrastructure
and availability of surplus transmission capacity in
the State network has been established, the State
Load Despatch Centre shall convey its
concurrence or ‘no objection’ or prior standing
clearance, as the case may be, to the applicant by
e-mail or fax, in addition to any other usually
recognised mode of communication, within three
(3) working days of receipt of the application:
Provided that when short-term open access has
been applied for the first time by any person, the
buyer or the seller, the State Load Despatch
Centre shall convey to the applicant such
concurrence or ‘no objection’ or prior standing
clearance, as the case may be, within seven (7)
working days of receipt of the application by e-mail
or fax, in addition to any other usually recognised
mode of communication.]
10
[(3A) In case the State Load Despatch Centre
finds that the application for concurrence or ‘no
objection or prior standing clearance, as the case
may be, is incomplete or defective in any respect,
it shall communicate the deficiency or defect to the10
Inserted vide Central Electricity Regulatory Commission (Open Access in inter-State
Transmission) (Amendment) Regulations 2009, published in the Gazette of India
(Extraordinary) Part III, Section 4 (No.86) on 29.05.2009.
– 52 –
WA No. 927 of 2023
applicant by e-mail or fax, in addition to any other
usually recognised mode of communication, within
two (2) working days of receipt of the application:
Provided that in cases where the State Load
Despatch Centre has communicated any
deficiency or defect in the application, the date of
receipt of application shall be the date on which
the application has been received duly completed,
after removing the deficiency or rectifying the
defects, as the case may be.
11
(4) [In case the application has been found to
be in order but the State Load Despatch Centre
refuses to give concurrence or ‘no objection’ or
prior standing clearance as the case may be, on
the grounds of non-existence of necessary
infrastructure or unavailability of surplus
transmission capacity in the State network, such
refusal shall be communicated to the applicant by
e-mail or fax, in addition to any other usually
recognized mode of communication, within the
period of three (3) working days or seven (7)
working days, as the case may be, from the date
of receipt of the application, specified under clause
(3), along with reasons for such refusal:
Provided that where the State Load Despatch
Centre has not communicated any deficiency or
defect in the application within two (2) days from
the date of receipt of application or refusal or
concurrence or ‘no objection’ or prior standing
clearance, as the case may be, within the
specified period of three (3) working days or seven
(7) working days, as applicable, from the date of
11
Substituted vide Central Electricity Regulatory Commission (Open Access
in inter-State Transmission) (Amendment) Regulations 2009, published in the
Gazette of India (Extraordinary) Part III, Section 4 (No.86) on 29.5.2009.
– 53 –
WA No. 927 of 2023
receipt of the application, concurrence or ‘no
objection’ or prior standing clearance, as the case
may be, shall be deemed to have been granted:
Provided further that where concurrence or ‘no
objection’ or prior standing clearance, as the case
may be, is deemed to have been granted by the
State Load Despatch Centre, the applicant while
making application 12shall submit to the nodal
agency an affidavit (in the format provided in the
detailed procedure), duly notarised, declaring that-
(a) the State Load Despatch Centre has
failed to convey any deficiency or defect in
the application or its refusal or concurrence
or ‘no objection’ or prior standing clearance,
as the case may be, within the specified
time,
(b) necessary infrastructure for time-block-
wise energy metering and accounting in
accordance with the provisions of the Grid
Code in force, is in place; and enclosing
with the affidavit –
(i) a copy of the complete application after
removal of deficiency or rectification of
defects, if any communicated, made to the
State Load Despatch Centre for seeking
concurrence or ‘no objection’ or prior
standing clearance, as the case may be,
and
(ii) a copy of the acknowledgement, if any,
given by the State Load Despatch Centre,
or any other evidence in support of delivery
12
Omitted vide Corrigendum dated 10.6.2009 to Central Electricity Regulatory
Commission (Open Access in inter-State Transmission) (Amendment)
Regulations 2009, published in the Gazette of India (Extraordinary) Part III,
Section 4 (No. 86) on 29.5.2009.
– 54 –
WA No. 927 of 2023
of the application to the State Load
Despatch Centre.]”
79. A conjoint reading of the powers of CERC under Section 79
and 178 of the Act with the scheme of Sections 28(2) and 33(3) of
the Act clearly indicates that CERC has the jurisdiction to frame
Regulation 8 of the Open Access Regulations, which is intended to
provide for the methodology, discipline, and other attendant
matters relating to the use of the transmission system.
80. In view of the above, the question whether Regulation 8 of the
Open Access Regulation is ultra vires the Act is answered in the
negative.
81. The next aspect to consider is whether the Open Access
Regulations are in conflict with the exclusive powers conferred on
SLDC.
82. We may now examine the functions and powers of SLDC.
Section 31 of the Act provides for establishment of SLDC. Section
32 of the Act provides for the functions of SLDC and Section 33 of
the Act contains provisions regarding compliance with the
directions issued by the SLDC. Sections 32 and 33 of the Act are
relevant and are set out below:
– 55 –
WA No. 927 of 2023
“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.
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
– 56 –
WA No. 927 of 2023
person connected with the operation of the power
system shall comply with the directions issued by
the State Load Despatch 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 sub-section (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.”
83. In terms of Section 32(2) of the Act, SLDC is, inter alia,
responsible for optimum scheduling and despatch of electricity
within a State. It is required to monitor the grid operations and
exercise supervision and control over intra-state transmission
systems. In terms of Section 32(3) of the Act, the SLDC is also
empowered to levy fees from generating companies and licensees
engaged in intra-state transmission of electricity. Under Section 33
of the Act, the SLDC is also empowered to give directions and
exercise supervision and control as may be required for ensuring
– 57 –
WA No. 927 of 2023
the integrated grid operations and for achieving maximum economy
and efficiency in the operation of power systems in the State.
84. We may at this stage also refer to Regulation 20 of the Open
Access Regulations, which has not been challenged. The same is
set out below:
“20. (1) All transactions for State utilities and for
intra-State entities scheduled by the nodal agency
under these regulations, shall be accounted for
and included in the respective day-ahead net
interchange schedules of the concerned regional
entity issued by the Regional Load Despatch
Centre.
(2) Based on net metering on the periphery of
each regional entity, composite UI accounts shall
be issued for each regional entity on a weekly
cycle and transaction-wise UI accounting, and UI
accounting for intra-State entities shall not be
carried out at the regional level.
(3) The State utility designated for the purpose of
collection / disbursement of UI charges from/to
intra-State entities shall be responsible for timely
payment of the State’s composite dues to the
regional UI pool account.
(4) Any mismatch between the scheduled and the
actual drawal at drawal points and scheduled and
the actual injection at injection points for the intra-
State entities shall be determined by the
concerned State Load Despatch Centre and
covered in the intra-State UI accounting scheme.
(5) Unless specified otherwise by the concerned
State Commission, UI rate for intra-State entity
shall be 105% (for over-drawals or under
generation) and 95% (for under-drawals or over
generation) of UI rate at the periphery of regional
entity.
– 58 –
WA No. 927 of 2023
(6) 13[No charges, other than those specified under
these regulations shall be payable by any person
granted short-term open access under these
regulations.]
85. Regulation 20(5) of the Open Access Regulations is relevant,
as it expressly sets out the UI charges payable in case of over-
supply of electricity. The impugned condition imposed by SLDC is
in conflict with this clause.
86. The dispute is regarding the impugned condition inserted in
SC/NOC issued by the SLDC. A plain reading of the said clause
indicates that the same seeks to substitute the charges payable for
excess generation for UI rates. The SLDC does not have power to
fix any tariffs or charges for inter-state transmission of electricity.
As noted above, in terms of Sections 31 and 32 of the Act, the
SLDC can levy and collect fees and charges engaged in relation to
intra-state transmission of electricity. However, the SLDC cannot
determine the rates of electricity. Thus, we find no infirmity with the
view of the learned Single Judge that the SLDC had exceeded its
jurisdiction in substituting the UI rates for inter-state transmission
by CERC with the rate fixed for old plants.
13
Substituted vide Central Electricity Regulatory Commission (Open Access in inter-
State Transmission). (Amendment) Regulations 2009, published in the Gazette of India
(Extraordinary) Part III, Section 86) on 29.5.2009. Section 4 (No.86) on 29.5.2009.
– 59 –
WA No. 927 of 2023
87. We pointedly asked the learned counsel for the appellants as
to what were those rates which would be applicable in the present
case. He responded that the same would have to be assessed on
the basis of the value of the generating plants. Although, the SLDC
is charged with the function of monitoring the grid operations, it is
also to keep accounts of quantity of electricity transmitted through
the grid. Its functions are necessarily aligned with the Regional
Load Despatch Centre, which in turn is required to follow the
principles and guidelines set out by the CERC.
88. The contention that the SLDC has imposed the impugned
condition not in exercise of its administrative powers but, in
exercise of its statutory powers, and the same could not be
overridden by the regulations, is without merit. First of all, the
impugned condition was not in conformity with the powers vested
with the SLDC. Secondly, the regulations framed by the CERC, are
subordinate legislation. Thus, unless the regulations are set aside
as beyond CERC’s competence or as manifestly arbitrary, they
must be complied with, including by the concerned authorities.
89. In the present case, the impugned condition is in conflict with
the UI Regulations read with the Open Access Regulations. As
noted above, the jurisdiction of the CERC to frame UI regulations
– 60 –
WA No. 927 of 2023
has been upheld by the Supreme Court and the said question is no
longer res integra. In view of the above, the impugned condition
cannot be sustained, and the CERC’s order setting aside the
impugned condition has been rightly upheld by the learned Single
Judge. The question whether the impugned clause is valid is
answered in the negative.
90. The last question to be addressed is whether the CERC has
the jurisdiction to adjudicate the subject disputes. In terms of
Section 79(1)(f) of the Act, the CERC is also required to adjudicate
the disputes involving generating companies in regard to matters
connecting with clauses (a) to (d) of Section 79(1) of the Act. Under
clause (c), the CERC is charged with the function of regulating the
interstate transmission of electricity. Thus, disputes involving
generating companies or transmission licensees and relating to the
inter-state transmission of electricity would fall within the jurisdiction
of CERC. In the present case, the dispute relates to substituting the
UI rate fixed for inter-state transmission of electricity inter alia as a
measure to address “gaming” as contended on behalf of the
appellants. These are covered under the UI Regulations and the
Open Access Regulations.
– 61 –
WA No. 927 of 2023
91. It is also relevant to refer to Regulation 26 of the Open Access
Regulations, which sets out the redressal mechanism. The said
Regulation, as in force prior to 29.05.2009, read as under:
“26. Unless the dispute involves the State Load
Despatch Centre and the intra-State entities of the
concerned State and falls within the jurisdiction of the
State Commission, all disputes arising under these
regulations shall be decided by the Commission based
on an application made by the person aggrieved.”
92. The said Regulation was amended with effect from 29.05.2009.
Post the amendment, the aforesaid regulation was substituted to
read as follows:
“26. All disputes arising under these regulations shall
be decided by the Commission based on an
application made by the person aggrieved.”
93. It is material to note that by virtue of the pre-amendment
Regulation 26 of the Open Access Regulations, adjudication of
disputes arising under the said Regulations involving the State
Load Despatch Centre and intra-State entities of the concerned
State, which fall within the jurisdiction of the State Commission,
were excluded from the jurisdiction of the CERC and were required
to be adjudicated by the respective State Commissions. However,
SSL’s petition before the CERC was filed on 21.02.2011, which
was after the Open Access Regulations were amended on
– 62 –
WA No. 927 of 2023
29.05.2009. Therefore, Regulation 26, was in force post-
amendment, and was applicable.
94. In view of the above, the question whether CERC’s order is
without jurisdiction, is answered in the negative.
95. In view of the above, the present appeal is dismissed.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(C.M. POONACHA)
JUDGE
KPS.
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