Electricity Act, 2003 | State Commissions Retain Oversight Over Inter-State Power Supply Affecting Grids Within State : Supreme Court

In a key development under the Electricity Act, 2003 (Act of 2003), the Supreme Court observed that the State Electricity Regulatory Commission (“SERC”) can regulate open access even for inter-state power supply if it affects their grid.

The Court ruled that while the Central Electricity Regulatory Commission (CERC) holds jurisdiction over inter-state electricity transmission, this does not preclude State Electricity Regulatory Commissions (SERCs) from regulating inter-state power supply when such transactions affect the state grid. The judgment clarified that even when electricity is sourced from another state, the State Commission maintains regulatory oversight if the power supply has consequential impacts on the state's electricity network.

“Section 79(1)(c) of the Act of 2003, defines the regulatory authority of the CERC over inter-state transmission of electricity. However, this provision does not strip State Commissions, including RERC, of their jurisdiction over intra-state aspects of open access. Section 42(2) of the Act of 2003 expressly empowers State Commissions to regulate open access within their respective states, ensuring fair and non-discriminatory access to transmission and distribution networks within the state. Further, Section 42(3) of the Act of 2003 provides that whenever a consumer, with premises within the area of supply of a distribution licensee, requires supply of electricity from a generating company other than such distribution licensee, such transmission and supply shall be in accordance with the regulations made by the State Commission.”, the court observed.

The judgment delivered by the bench of Justices Vikram Nath and Prasanna B Varale dismissed the challenge to the validity of the Rajasthan Open Access Regulations, 2016 (“2016 Regulation”) framed by the State Government in the exercise of its powers under Section 42 read with Section 181 of the Electricity Act, 2003.

The key change introduced by the Regulations of 2016 was the imposition of limitations on the simultaneous drawal of power through open access and contracted demand from the distribution licensee. Under the new regime, if a consumer opted to procure power through open access, the contracted demand from the distribution licensee would be reduced by the quantum of power scheduled through open access. Additionally, the Regulations of 2016 imposed penalties for overdrawal and under-drawal from the contracted demand.

The Appellant challenged the validity of the Regulation contending that it imposed unreasonable restrictions on inter-state open access (electricity bought from other states), thereby exceeding its jurisdiction which was vested with the CERC.

Being aggrieved by the High Court's decision dismissing their pleas regarding the constitutional validity of the 2016 Regulations, the Appellants appealed to the Supreme Court.

Arguments

The appellants submitted that under the scheme of the Act of 2003, the authority to regulate inter-state open access lies exclusively with the CERC.

The appellant challenged the jurisdiction of the RERC with respect to regulating inter-state open access stating that the Regulation 26(7) of 2016 Regulation essentially forecloses the appellants from purchasing powers from other state as it imposes conditions on inter-state open access.

The appellant argued that these conditions, such as requiring a 24-hour scheduling period, advance intimation of power usage, and a minimum consumption threshold of 75% of the scheduled quantum, exceed the jurisdiction of the State Commission and infringe upon the powers vested in the CERC.

Per contra, the Respondents argued that Section 42 of the Electricity Act allows RERC to regulate open access within Rajasthan, even if power comes from outside. Moreover, the Inter-state power entering Rajasthan's grid falls under RERC's control for distribution and wheeling charges.

Issue

The question that appeared for the Court's consideration was whether the Rajasthan Electricity Regulatory Commission (“RERC”) can regulate inter-state open access (even though the electricity was bought from other states)?

Decision

Affirming the High Court's decision, the judgment penned by Justice Nath agreed with the Respondent's argument that Section 42 of the Electricity Act gives SERC (here RERC) power over intra-state distribution, even if power comes from outside.

The Court noted that though CERC controls the inter-state transmission, RERC has exclusive jurisdiction to control distribution within Rajasthan.

“While inter-state transmission falls within the domain of the CERC under Section 79(1)(c), the power of the State Commission to regulate intra-state transmission and distribution under Section 86(1)(c) is well established. Furthermore, the appellants' argument that the Regulations of 2016 have an extraterritorial effect is misplaced. The Regulations of 2016 do not seek to regulate inter-state transmission per se but rather ensures that transactions impacting the Rajasthan grid remain under the oversight of the State Commission.”, the court observed.

“The key determinant is not the source of power but its delivery, end-user, and consumption within Rajasthan's intra-state grid. The Act of 2003 provides a framework for demarcating responsibilities between CERC and State Commissions, ensuring that intrastate aspects of electricity regulation remain within the purview of State Commissions. The appellants' interpretation would render Section 42 redundant and contradict the legislative intent behind decentralizing regulatory authority to the State Commissions. Thus, the claim that only CERC has the authority to regulate inter-state open access cannot be accepted in light of the legislative intent behind the Act of 2003. Therefore, RERC retains jurisdiction over intra-state transactions even if the power originates from another state.”, the court added.

“The Act of 2003 envisions a structured and fair mechanism for open access while ensuring that market participants do not engage in practices detrimental to the larger consumer base. Moreover, under Section 42 of the Act of 2003, the State Commission has the mandate to regulate open access in distribution and specify the charges and conditions applicable. The respondents have demonstrated that these conditions are necessary for maintaining discipline in power scheduling and ensuring that open access consumers do not gain an unfair advantage over other consumers by evading scheduling norms or penalties.”, the Court further observed.

In light of the aforesaid, the Court dismissed the appeal holding that that RERC have the power to regulate inter-state open access because the transaction affects Rajasthan's grid network.

Case Title: RAMAYANA ISPAT PVT. LTD. AND ANR. VERSUS STATE OF RAJASTHAN & ORS.

Citation : 2025 LiveLaw (SC) 384

Click here to read/download the judgment

Appearance:

For Appellant(s) Mr. Manu Seshadri, Adv. Mr. Sahil Manganani, Adv. Ms. Aakriti Gupta, Adv. Mr. Siddhant Singh, Adv. Mr. Nikunj Dayal, AOR Mr. Kumar Mihir, AOR Mr. Athul Joseph, Adv. Mr. Gunjan Sharma, Adv.

For Respondent(s) Mr. Shiv Mangal Sharma, A.A.G. Mr. Milind Kumar, AOR Mr. Zoheb Hossain, AOR Dr. Rupesh Singh, Adv. Mr. Guru Prasad Singh, Adv. Mr. Anshul Suri, Adv. Mr. Satya Veer Singh, AOR 1 Ms. Pratibha Jain, AOR Ms. Christi Jain, Adv.(V.C.) Mr. Pallav Mongia, AOR Mr. Anubhav Mishra, Adv. Mr. Amritesh Krishna, Adv.