NEW DELHI: The Supreme Court on Wednesday directed the States power regulatory commissions to frame regulations for determination of tariff within three months in compliance with the National Electricity Policy and the National Tarrif Policy, to effectuate a balance for creating a sustainable model of electricity norms.
The apex court passed the order while dismissing an appeal filed by the Tata Power Company Ltd against the Maharashtra power regulator’s decision to award a Rs 7,000-crore transmission contract on a nomination basis to Adani Electricity in March last year.
Dealing with the provisions of the Electricity Act 2003, the top court pointed out the law was enacted with the objective of providing the States with sufficient flexibility to regulate the intra-state electricity system and simultaneously provided the regulatory commissions with the power to determine tariffs.
"Though the Government, both at the Centre and in the States, have framed statutory policies and guidelines regulating the electricity sector, we have noticed that the Regulatory Commissions have not framed the necessary regulations to put into effect the principles prescribed under the Act," a bench of Chief Justice D Y Chandrachud, A S Bopanna and J B Pardiwala said.
The court also declared that the Electricity Act 2003 provided the States sufficient flexibility to regulate the intra-state transmission systems, allowing the State Commissions the power to determine and regulate tariff, insulating the state governments from the process.
The bench also asked the state regulatory commissions to frame regulations under Section 181 of the Act for determination of tariff within three months. The Commissions having already framed tariff regulations are supposed to amend them to include provisions on the criteria for choosing the modalities to determine the tariff, it added.
The top court said that the Commissions shall “effectuate a balance that would create a sustainable model of electricity regulation in the states” which must be in consonance with the objective of the Electricity Act.
"This is to enhance the investment of private stakeholders so as to create a sustainable and effective system of tariff determination that is cost efficient so that such benefits percolate to the end consumers," the bench said.
Tata Power challenged the Maharashtra Electricity Regulatory Commission's (MERC) decision on how the transmission license for such a large infrastructure project to build a 1,000-mw high-voltage direct current (HVDC) link between 400 KV Kudus and 220 KV Aarey EHV station could be awarded without following the process of Tariff Based Competitive Bidding (TBCB) route and by “excluding other developers.”
In its decision, the court upheld the Appellate Tribunal for Electricity's February 18 order that ruled that MERC’s decision to chose RTM (regulate tariff mode) route under Section 62 of the Electricity Act 2003 to award the transmission contract cannot be termed as "incorrect, perverse or inappropriate."
The court also said the 2003 Act or the policy framework, particularly National Tariff Policy 2016, along with the Maharashtra government’s resolution (GR) of January 4, 2019, did not make it binding upon MERC to allot the HVDC project only through the TBCB route.
