Karnataka High Court Strikes Down Centre's Green Energy Open Access Rules, Says It Lacks Legislative Competence

The Karnataka High Court has struck down the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules 2022 framed by the Central Government for generation, purchase and consumption of green energy i.e., electrical energy from renewable sources of energy.

A single judge, Justice N S Sanjay Gowda observed that the Centre lacks power under Electricity, 2003 Act to frame the Green Energy Open Access (GEOA) Rules since the statute specifically conferred such power on the Karnataka Electricity Regulatory Commission (KERC).

“One of the reasons for this enactment, was that it was felt that the participation of the Government in determining the tariff was detrimental to the growth of electricity industry and had resulted in poor financial health of the Electricity Boards. It was therefore thought that it was essential that the Government exit from this exercise...

If the Parliament made a law [specifically conferring power on the Regulator to frame Regulations which governed every aspect of open access, it is inconceivable that the Central Government can side-step the requirement of the Parliament enacting a law in that regard and straight away proceed to frame the impugned Rules.”

Significantly, the Court also struck down the Karnataka Regulatory Commission (Terms and Conditions for Green Energy Open access) Regulations, 2022 which were framed by KERC under an obligation cast by the now invalidated Central Rules.

KERC has now been directed to frame appropriate Regulations afresh, if it so desires, in the matter of granting of open access to green energy generators and consumers.

The development comes in a batch of petitions filed by Companies engaged in the business of Hydro Power generation, who had entered into agreements for Wheeling and Banking with the transmission and distribution licensees.

The companies contended that the Central Government did not possess the power to frame the GEOA Rules and by framing the impugned Rules, it was argued that the Centre had basically "taken over" the statutory functions reserved exclusively to the KERC under Sections 42(2) and 181 of the Electricity Act.

It was alleged that the GEOA Rules made KERC "secondary and subservient" to the Centre, which was fundamentally violative of the statutory framework and the basic objective of the Electricity Act — which was to distance the Government from the functioning of the electricity sector.

Centre had opposed the petitions, stating that it had framed the GEOA Rules by virtue of Entry No.14 of the Union List and Entry 38 of the Concurrent List, in view of the fact that it had signed a treaty at an international convention to that effect. Further, the Centre claimed to draw Rule making power from Section 176(1) of the Electricity Act.

Findings:

At the outset, the High Court noted that the Rule making body (i.e. Centre) would have to function within the limits of the power granted to it under the statute and thus, the government cannot claim any inherent power to frame the Rules. “The Central Government cannot, in the guise of exercising its residual power under Section 176(2) of the Act, contend that it can frame rules to carry out the provisions of the Act,” it said.

The Court highlighted then even under the Electricity Policy, 2005 formulated by the Central Government, the responsibility and obligation to facilitate non-discriminatory open access is only on the Regulatory Commissions.

“It is the State Commission alone which is conferred with the responsibility of introducing open access, determining charges for wheeling and payment of surcharge, would, by itself, clearly indicate that no other entity apart from the State Commission can even attempt to get involved in the matters of distribution and, more importantly, providing open access,” Court held.

It reasoned that the main purpose of establishing a Regulatory Commission like KERC was to ensure that there is an "independent and impartial body" to deal with the charges that can be levied in the matter of open access. “The entire ambit of electricity supply is to be administered by the Regulatory Commission and the Government (either State or Central) has not been conferred with any power or responsibility to interfere or interject in this process,” it added.

In its 159-page verdict, the High Court also referred to the Karnataka Electricity Reforms Act, 1999 where under the State Government had the power to issue Policy Directives to the Commission. This power however, the Court said, was subject to the condition that the Directives would be consistent with the objectives sought to be achieved under the KER Act.

“Thus, the power of the State Government to control the functioning of the Regulators was minimised and subjected to the condition that the power to issue directions should not adversely affect the functions and powers of the KERC,” the Court clarified.

Accordingly, it allowed the petition and struck down the GEOA Rules.

To avoid any legal vacuum till fresh Regulations are framed by the KERC, the Court continued its interim order to ensure that the wheeling and banking facilities availed hitherto by the petitioners are facilitated.

It also suggested the KERC to examine the possibility of providing annual banking facility as sought by the generating companies. It said, “The KERC could ensure that the generators do not take advantage of the annual banking facility, by holding that the generators would be entitled to energy charges as was prevailing on the date of injection into the grid and not the charges that are prevailing on the date they seek to withdraw the energy from the grid. This would ensure that the green energy generators do not hedge their profits by taking advantage of the annual banking facility and entitle themselves to a higher energy charge during periods when the demand for electricity is high and, consequently, higher electricity prices would be prevailing in the market.”

Further, the Court clarified that until the directions issued above are complied with, the Karnataka government shall continue to collect the transmission charges in terms of the interim order dated 05.07.2024 i.e., 50% of the transmission charges that had been determined by the KERC in its order dated 08.06.2023.

Appearance: Senior Advocates Uday Holla, D.L.N. Rao and Advocate Sridhar Prabhu for Petitioners.

ASG Aravind Kamath for DSGI H Shanthi Bhushan for R-1.

AGA Hemalatha V for R2.

Senior Advocate Dhyan Chinnappa for Advocate Shahbaaz Hussain for FOR R-3, 4, 6 TO 10.

Advocate B N Prakash FOR R-5

Citation No: 2025 LiveLaw (Kar) 7

Case Title: Brindavan Hydropower Private Limited AND Union of India & Others

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