2025 INSC 592

Civil Appeal Nos.8862-8868 of 2022 Page 1 of 24

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.8862 -8868 OF 2022

JAIPUR VIDYUT VITARAN NIGAM

LIMITED AND ORS. …APPELLANT(S)

VERSUS

RAJASTHAN TEXTILE MILLS

ASSOCIATION & ANR ETC. …RESPONDENT(S)

J U D G M E N T

ABHAY S. OKA, J.

FACTUAL ASPECT

1. These are the statutory appeals under Section 125 of

the Electricity Act, 2003 (for short, ‘the 2003 Act’) against

a common judgment delivered by the Appellate Tribunal

for Electricity (for short, ‘the APTEL’) in a group of appeals.

The issue involved in these appeals relates to the

determination of the Cross-Subsidy Surcharges (for short,

‘the CSS’) by the Rajasthan Electricity Regulatory

Commission (for short, ‘the State Commission’). The

determination was made under Section 42 (2) of the 2003

Civil Appeal Nos.8862-8868 of 2022 Page 2 of 24

Act. The present appellants were the respondents before

the APTEL. The respondents (appellants before the APTEL)

are the industries/industrial units located in various parts

of the State of Rajasthan, running their operations by

availing their supply of electricity from connectivity

through the State grid at EHT levels of 132/33/11 KV

voltage. These industrial units were granted open access

within the contract demand for drawing electricity through

such open access, including from power exchanges. These

industrial units (appellants before the APTEL) were

aggrieved by the determination of the CSS made applicable

from 1

st December 2016 by the order passed on 1

st

December 2016 by the State Commission. Being aggrieved

by the said order of the State Commission, the industrial

units preferred statutory appeals before the APTEL. By the

impugned judgment, the order of the State Commission

was set aside. However, the APTEL clarified that the State

Commission will be within its jurisdiction to undertake the

process of revisiting the subject of the CSS vis-à-vis

distribution licensees operating in the State of Rajasthan

as and when it takes up the exercise of tariff determination

in future in accordance with law.

2. The 2003 Act introduced the concept of open access,

enabling the consumers/end users to procure electricity

from sources other than the distribution licensees of the

area where the premises of such end use are situated.

Civil Appeal Nos.8862-8868 of 2022 Page 3 of 24

Earlier, electricity was generally procured only from

distribution licensees.

3. There was a significant amount of cross -

subsidisation of certain categories of consumers by other

categories of consumers. The consumers benefitting from

the subsidy include agricultural consumers, low -end

domestic consumers and public works. They are known as

subsidised consumers. The consumers paying for the

subsidy include industrial consumers, commercial

consumers, and high-end domestic consumers, and they

are known as subsidising consumers. Allowing open

access users to source electricity from sources other than

distribution licensees benefited such subsidising

consumers and would become a burden on the

distribution licensee. The reason is that such customers

stopped taking electricity from the distribution licensees,

thereby reducing the distribution licensees’ funds to

subsidise the subsidised consumers. The CSS is, in a

sense, compensation to the distribution licensees for being

deprived of the subsidisation prevalent in the retail supply

tariff. The CSS is a statutory charge payable by the

consumers who decide to source electricity through open

access from sources other than the distribution licensee of

the area.

Civil Appeal Nos.8862-8868 of 2022 Page 4 of 24

4. In exercise of the powers under Section 61 read with

Section 181 of the 2003 Act, the State Commission notified

the Rajasthan Electricity Regulatory Commission (Terms

and Conditions for Determination of Tariff) Regulations,

2014 (for short, ‘the Rajasthan Tariff Regulations, 2014’).

Regulation 89 thereof deals with the cross-subsidy.

Regulation 90 provides a formula for determining the CSS

payable by the consumer opting for open access.

5. The State Commission determined the tariff for the

Financial Year (FY) 2015-2016 by the tariff order dated

22

nd September 2016. On 20

th July 2016, the distribution

licensees approached the State Commission by a petition

praying for determination of the CSS under Section 42 (2)

read with Sections 39 and 40 of the 2003 Act. While

dealing with the said petition, the State Commission

identified the issues for its consideration, including the

issue as to whether distribution licensees were entitled to

claim the CSS, and if so entitled to, what the appropriate

formula for its determination is. The State Commission

noted that the distribution licensees had not applied for

fixation of tariff for the F.Y. 2016-2017, and the tariff

petition for F.Y. 2015-2016 had been decided by the

commission in September 2016 by holding that the tariff

will be in force till the next tariff order. The commission

observed that mere absence of tariff petition for F.Y. 2016-

2017 will not restrict or prevent the State Commission

Civil Appeal Nos.8862-8868 of 2022 Page 5 of 24

from determining the CSS for F.Y. 2015-2016 and apply

the same for F.Y. 2016-2017 till new tariff petition for F.Y.

2016-2017 is filed and the CSS is revised based on the

same. After hearing the respondents-consumers, the State

Commission, by order dated 1st December 2016,

determined the CSS payable entirely based on the tariff

determined for F.Y. 2015-2016 by order dated 22nd

September 2016. The State Commission proceeded to

compute the rate of the CSS, taking note of the formula

prescribed by Regulation 90 of the Rajasthan Tariff

Regulations, 2014, fixing the CSS rate to Rs.1.63 per unit

for 132 KV and above consumers, Rs.1.39 per unit for 33

KV consumers and Rs.0.83 per unit for 11 KV consumers

of the large industrial service open access consumers

category.

6. This order dated 1

st December 2016, passed by the

State Commission, was challenged by the respondents

herein by preferring an appeal before the APTEL, which

was allowed by the impugned judgment. In appeal, the

APTEL relied upon its own decision dated 28

th November

2014 in the case of Tata Power Company Limited v

Maharashtra Electricity Regulatory Commission &

Ors.

1 as well as judgment dated 2

nd December 2013 in the

case of Reliance Infrastructure Limited (R -infra) v

1 Appeal No. 107 of 2013 (before the Appellate Tribunal for Electricity)

Civil Appeal Nos.8862-8868 of 2022 Page 6 of 24

Maharashtra Electricity Regulatory Commission &

Ors

2. The APTEL held that the State Commission

completely brushed aside its decision in the case of Tata

Power Company Limited

1. The absence of a tariff petition

for F.Y. 2016-2017 could not have been ignored. The

APTEL relied upon its decision dated 18

th May 2015 in the

case of D.P. Chirania v Rajasthan Electricity

Regulatory Commission & Ors

3. It was held that the

State Commission should not have entertained the CSS

petition until the distribution licensees provided

authenticated and audited data, which was necessary not

only for tariff fixation but also for determining the CSS.

The APTEL further observed that the tariff petition for the

control period of 2016-2017 was filed along with a petition

for the subsequent control period of 2017-2018.

Ultimately, the APTEL held that the impugned order of the

State Commission resulted in a quantum jump in the rate

of the CSS, which was against the policy enumerated in

the 2003 Act, which requires the CSS rates to be

progressively reduced. It was held that, as the distribution

licensees have failed to explain the default in the timely

filing of the tariff petitions, it would be unfair to give them

the advantage of such a substantial increase in the CSS.

2 Appeal No. 178 of 2011 (before the Appellate Tribunal for Electricity);

2013 SCC OnLine APTEL 150

3 Appeal No. 16 of 2014 (before the Appellate Tribunal for Electricity);

2015 SCC OnLine APTEL 75

Civil Appeal Nos.8862-8868 of 2022 Page 7 of 24

The APTEL also observed that the tariff order dated 22

nd

September 2016 for F.Y. 2015-2016 had directed that it

shall continue to be in force till the next tariff order, which

was passed on 2

nd November 2017. The CSS rates were

part of the tariff regime put in place by the order dated 22

nd

September 2016. Therefore, the rates of the CSS should

not have been altered till 2

nd November 2017, when the

new tariff order was passed.

SUBMISSIONS

7. The learned senior counsel appearing for the

appellants did not dispute the proposition that the tariff

determined for the earlier period would continue till the

new tariff is determined. He pointed out that by the order

dated 1

st December 2016, the State Commission

determined the CSS payable entirely based on the tariff

determined for F.Y. 2015-2016 under the order dated 22

nd

September 2016 by computing the same as provided in the

formula incorporated in Regulation 90. The learned senior

counsel submitted that the CSS is relevant when the

consumer of electricity in the area of the distribution

licensee decides to source a part or whole of his electricity

requirements from sources other than the distribution

licensee. But for such power sourcing from outside

sources, the said consumer would have contributed to the

cross-subsidisation prevalent in the retail tariff. Therefore,

Civil Appeal Nos.8862-8868 of 2022 Page 8 of 24

the CSS is the overriding consequential statutory

obligation on such consumers to pay to the distribution

licensee, which the 2003 Act considers necessary to

compensate the distribution licensee. He pointed out that

the CSS for the period from 1st December 2016 was based

on the current tariff being charged during the period. This

tariff was fixed by the State Commission by the tariff order

dated 22

nd September 2016. Learned senior counsel

pointed out that the State Commission passed the next

tariff order, including an order of the CSS applicable with

effect from 1

st November 2017, effectively maintaining both

at the same level as before.

8. If there is a delay in determination of the revenue

requirements of the distribution licensee concerning a

particular financial year for any reason, the tariff prevalent

as per the earlier tariff order will be the applicable tariff to

the consumers and consequentially the CSS payable by

the open access consumers will also be computed with

reference to such prevalent tariff. As and when a new tariff

is determined, the same applies prospectively, and the CSS

applicable will also consequently get revised. He submitted

that the respondents-consumers have not challenged the

findings recorded in the tariff order dated 22nd September

2016.

Civil Appeal Nos.8862-8868 of 2022 Page 9 of 24

9. The learned counsel submitted that the view of the

APTEL that the CSS should have been determined

simultaneously with the order dated 22

nd September 2016

was hyper-technical and erroneous. He again submitted

that the determination of the CSS by the order dated 1

st

December 2016 was based on the financials and the tariff

as determined by the State Commission in the tariff order

dated 22

nd September 2016 and not on any other basis. He

pointed out that the tariff order dated 22

nd September

2016 was effective from 1

st September 2016. He pointed

out that the distribution licensees did not have to pay the

higher CSS from 1

st September 2016 to 30

th November

2016.

10. The submission of learned senior counsel is that

there is no stipulation which prevents the increase of the

CSS in monetary terms. The only stipulation in the

Rajasthan Tariff Regulations, 2014 is that the extent of

cross-subsidy to any consumer category should be within

the range of +/- 20% of the average cost of supply. The

learned senior counsel distinguished the decision in the

case of Tata Power Company Limited

1 and Reliance

infrastructure Limited

2. He pointed out that in the case

of Tata Power Company Limited

1, the State

Commission, having access to the data and financials for

the relevant period, proceeded to determine the CSS based

on the prior date. Moreover, in the case of Reliance

Civil Appeal Nos.8862-8868 of 2022 Page 10 of 24

infrastructure Limited

2, the APTEL has unequivocally

stated that the CSS should be a derivative of the effective

tariff applicable for the relevant period. He submitted that

there are no adverse implications to the consumers by

reason of the determination of the CSS subsequently by

the order dated 1

st December 2016.

11. The learned counsel appearing for the respondents

supported the impugned judgment of the APTEL. By

relying upon the tariff order dated 22

nd September 2016, it

was contended that the rates of the CSS were part of the

tariff regime put in place by the previous order dated 22

nd

September 2016. Learned counsel invited our attention to

the decision of the APTEL in the case of Tata Power

Company Limited

1. The said decision categorically holds

that the CSS has to be determined by the State

Commission every year, along with the determination of

the tariff. Even in the case of Reliance Infrastructure

Limited

2, the APTEL held that the State Commission must

compute the CSS to meet the requirement of the current

level of cross-subsidy. The learned counsel submitted that

the decision of the APTEL in the case of D. P. Chirania

3

has been rightly applied. The learned counsel pointed out

that the rates of the CSS could have been revisited only on

2

nd November 2017, when the State Commission passed

the subsequent tariff order.

Civil Appeal Nos.8862-8868 of 2022 Page 11 of 24

CONSIDERATION OF SUBMIS SIONS

12. In the light of these submissions, it is necessary to

refer to the provision of Section 42 of the 2003 Act, which

reads thus:

“42. Duties of distribution licensee and open

access.—(1) It shall be the duty of a distribution

licensee to develop and maintain an efficient,

co-ordinated and economical distribution

system in his area of supply and to supply

electricity in accordance with the provisions

contained in this Act.

(2) The State Commission shall introduce open

access in such phases and subject to such

conditions, (including the cross subsidies,

and other operational constraints) as may be

specified within one year of the appointed

date by it and in specifying the extent of

open access in successive phases and in

determining the charges for wheeling, it

shall have due regard to all relevant factors

including such cross-subsidies, and other

operational constraints:

Provided that [such open access shall be

allowed on payment of a surcharge] in

addition to the charges for wheeling as may

be determined by the State Commission:

Provided further that such surcharge shall be

utilised to meet the requirements of current

level of cross-subsidy within the area of supply

of the distribution licensee:

Provided also that such surcharge and cross-

subsidies shall be progressively reduced in the

Civil Appeal Nos.8862-8868 of 2022 Page 12 of 24

manner as may be specified by the State

Commission:

Provided also that such surcharge shall not be

leviable in case open access is provided to a

person who has established a captive

generating plant for carrying the electricity to

the destination of his own use:

[Provided also that the State Commission shall,

not later than five years from the date of

commencement of the Electricity (Amendment)

Act, 2003 (57 of 2003), by regulations, provide

such open access to all consumers who require

a supply of electricity where the maximum

power to be made available at any time exceeds

one megawatt.]

(3) Where any person, whose premises are

situated within the area of supply of a

distribution licensee, (not being a local

authority engaged in the business of

distribution of electricity before the appointed

date) requires a supply of electricity from a

generating company or any licensee other than

such distribution licensee, such person may,

by notice, require the distribution licensee for

wheeling such electricity in accordance with

regulations made by the State Commission and

the duties of the distribution licensee with

respect to such supply shall be of a common

carrier providing non-discriminatory open

access.

(4) Where the State Commission permits a

consumer or class of consumers to receive

supply of electricity from a person other than

the distribution licensee of his area of supply,

Civil Appeal Nos.8862-8868 of 2022 Page 13 of 24

such consumer shall be liable to pay an

additional surcharge on the charges of

wheeling, as may be specified by the State

Commission, to meet the fixed cost of such

distribution licensee arising out of his

obligation to supply.

(5) Every distribution licensee shall, within six

months from the appointed date or date of

grant of licence, whichever is earlier, establish

a forum for redressal of grievances of the

consumers in accordance with the guidelines

as may be specified by the State Commission.

(6) Any consumer, who is aggrieved by non -

redressal of his grievances under sub-section

5, may make a representation for the redressal

of his grievance to an authority to be known as

Ombudsman to be appointed or designated by

the State Commission.

(7) The Ombudsman shall settle the grievance

of the consumer within such time and in such

manner as may be specified by the State

Commission.

(8) The provisions of sub-sections (5), (6) and

(7) shall be without prejudice to right which the

consumer may have apart from the rights

conferred upon him by those sub-sections.”

(emphasis added)

13. In the present case, the appellants are the

distribution licensees. The duties of the distribution

licensees have been specified in Section 42. Sub-Section

(2) of Section 42 provides for the State Commission

introducing open access. The first proviso to Sub-Section

Civil Appeal Nos.8862-8868 of 2022 Page 14 of 24

(2) provides that such open access shall be allowed on

payment of a surcharge in addition to the charges for

wheeling as may be determined by the State Commission.

The said surcharge is the CSS. The second proviso to Sub-

Section (2) provides that the CSS shall be utilised to meet

the requirements of the current subsidy level within the

distribution licensee's supply area.

14. As far as the CSS is concerned, this Court in the case

of Sesa Sterlite Ltd. v. Orissa Electricity Regulatory

Commission & ors

4., has laid down the rationale and

purpose of levying the CSS. Paragraphs 25 to 29 of the said

decision read thus:

25. While open access in transmission implies

freedom to the licensee to procure power from

any source of his choice, open access in

distribution with which we are concerned here,

means freedom to the consumer to get supply

from any source of his choice. The provision of

open access to consumers, ensures right of the

consumer to get supply from a person other

than the distribution licensee of his area of

supply by using the distribution system of such

distribution licensee. Unlike in transmission,

open access in distribution has not been

allowed from the outset primarily because of

considerations of cross-subsidies. The law

provides that open access in distribution would

be allowed by the State Commissions in

phases. For this purpose, the State

4 (2014) 8 SCC 444

Civil Appeal Nos.8862-8868 of 2022 Page 15 of 24

Commissions are required to specify the

phases and conditions of introduction of open

access.

26. However open access can be allowed on

payment of a surcharge, to be determined by

the State Commission, to take care of the

requirements of current level of cross-subsidy

and the fixed cost arising out of the licensee's

obligation to supply. Consequent to the

enactment of the Electricity (Amendment) Act,

2003, it has been mandated that the State

Commission shall within five years necessarily

allow open access to consumers having

demand exceeding one megawatt.

(3) Cross-Subsidy Surcharge (CSS) —Its

rationale

27. The issue of open access surcharge is

very crucial and implementation of the

provision of open access depends on

judicious determination of surcharge by the

State Commissions. There are two aspects

to the concept of surcharge — one, the

cross-subsidy surcharge i.e. the surcharge

meant to take care of the requirements of

current levels of cross-subsidy, and the

other, the additional surcharge to meet the

fixed cost of the distribution licensee

arising out of his obligation to supply. The

presumption, normally is that generally the

bulk consumers would avail of open access,

who also pay at relatively higher rates. As

such, their exit would necessarily have

adverse effect on the finances of the

existing licensee, primarily on two counts —

one, on its ability to cross-subsidise the

Civil Appeal Nos.8862-8868 of 2022 Page 16 of 24

vulnerable sections of society and the other,

in terms of recovery of the fixed cost such

licensee might have incurred as part of his

obligation to supply electricity to that

consumer on demand (stranded costs). The

mechanism of surcharge is meant to

compensate the licensee for both these

aspects.

28. Through this provision of open access, the

law thus balances the right of the consumers

to procure power from a source of his choice

and the legitimate claims/interests of the

existing licensees. Apart from ensuring freedom

to the consumers, the provision of open access

is expected to encourage competition amongst

the suppliers and also to put pressure on the

existing utilities to improve their performance

in terms of quality and price of supply so as to

ensure that the consumers do not go out of

their fold to get supply from some other source.

29. With this open access policy, the consumer

is given a choice to take electricity from any

distribution licensee. However, at the same

time the Act makes provision of surcharge for

taking care of current level of cross-subsidy.

Thus, the State Electricity Regulatory

Commissions are authorised to frame open

access in distribution in phases with surcharge

for:

4. (vi)(a) current level of cross-subsidy to

be gradually phased out along with cross -

subsidies; and

(b) obligation to supply.”

(emphasis added)

Civil Appeal Nos.8862-8868 of 2022 Page 17 of 24

15. Section 61 of the 2003 Act provides for the Regulatory

Commission specifying the terms and conditions for

determining a tariff. Under Section 181 of the 2003 Act,

the State Commission is empowered to make regulations

to carry out the provisions of the Act. Accordingly, the

Rajasthan Tariff Regulations, 2014 have been framed.

Regulation 2(a)(60) defines tariff as the schedule of charges

for generation, transmission, wheeling and supply of

electricity together with terms and conditions for

application thereof. Under Regulation 2(a)(4), “Aggregate

Revenue Requirement” means the requirement of the

Licensee or Generating Company for recovery, through

tariffs, of allowable expenses and return on equity capital

pertaining to its Licensed/Regulated Business, in

accordance with these Regulations. Regulation 11 provides

for filing a petition for approval of the aggregate revenue

requirement and the determination of the tariff. The

procedure to be followed by the Commission for

determining the tariff is in Part II of the regulations.

Regulations 89 and 90 dealing with the CSS are relevant

for our purposes, which read thus:

“89. Cross subsidy

(1) The average cost of supply and

realization from a category of

consumer shall form the basis of

estimating the extent of cross subsidy

for that consumer category.

Civil Appeal Nos.8862-8868 of 2022 Page 18 of 24

(2) The Commission shall endeavour to

determine the tariff in such a manner

that it progressively reflects the average

cost of supply and the extent of cross

subsidy to any consumer category is

within maximum range of +/- 20% of

average cost of supply:

Provided that consumers below poverty

line who consume below specified level

say 50 units per month may receive

special support through cross-subsidy.

Tariff for such designated group of

consumers shall be at least 50% of the

average cost of supply.

90. Cross-subsidy Surcharge

The surcharge payable by consumers

opting for open access on the network

of the distribution licensee or

transmission licensee will be

determined by the Commission as per

the following Formula:

S = T – [C/(1 – (L/100)) + D]

Where,

S is the surcharge

T is the Tariff payable by the relevant

category of consumers;

C is the weighted average cost of power

purchase of top 5% at margin excluding

liquid fuel source and renewable energy

sources

D is the wheeling charge

L is the system losses of distribution

licensee for the applicable voltage level,

as a percentage:

Civil Appeal Nos.8862-8868 of 2022 Page 19 of 24

Provided that if S is computed to be

negative as per above Formula, S shall

be considered as Zero.”

(emphasis added)

Regulation 90 contains a formula for the determination of

the CSS, which is based on the tariff payable by the

relevant category of consumers. Thus, the CSS has to be

determined based on the prevailing tariff rates. Neither in

the provisions of the 2003 Act nor under the provisions of

the Rajasthan Tariff Regulations, 2014, is there a provision

which makes the determination of the CSS simultaneously

with the determination of the tariff mandatory.

16. Now, we turn to the order dated 22

nd September 2016

passed by the State Commission. By the said order, the

tariff was fixed with effect from 1

st September 2016, which

was to remain in force till the next tariff order of the

Commission. The appellants filed an application/petition

before the State Commission to determine the CSS. The

prayer in the said petition was for the determination of the

CSS payable by open access customers to the distribution

licensees in accordance with the provisions of the 2003

Act, the National Tariff Policy, 2016 and the Rajasthan

Tariff Regulations, 2014. The petition was filed on 20

th July

2016. The petition was decided by order dated 1

st

December 2016. The following three issues were

considered by the Commission, which are as follows:

Civil Appeal Nos.8862-8868 of 2022 Page 20 of 24

(i) Whether Petitioners in law are entitled to

claim Cross Subsidy Surcharge under

the provisions of Electricity Act, 2003?

(ii) If yes, whether the same shall be

determined on the basis of formula

specified in the RERC (Terms and

Conditions for Determination of Tariff)

Regulations, 2014 or formula provided in

new National Tariff Policy, 2016 and

based on the values approved in the

Tariff order dated 22.09.2016 which is in

force?

(iii) What is the Cross Subsidy Surcharge

payable by Open access consumers?

17. The Commission answered the first issue by holding

that the appellants (distribution licensees) were entitled to

the CSS as may be determined by the Commission. The

Commission held that in view of the decision of this Court

in the case of Sesa Sterlite Ltd.

4,

no one can dispute the

legal entitlement of the present appellants to the CSS. On

the second issue, the State Commission specifically held

that determination of the CSS will have to be made as per

the formula provided under Regulation 90 of the Rajasthan

Tariff Regulations, 2014, based on values approved in the

F.Y. 2015-2016 tariff order. While dealing with the third

issue, the commission specifically observed that the

computation of the CSS will have to be made as provided

in Regulation 90 based on the values approved in the

current tariff order dated 22

nd September 2016. It must be

Civil Appeal Nos.8862-8868 of 2022 Page 21 of 24

noted here that there was no challenge to the order dated

22

nd September 2016 fixing the tariff for F.Y. 2015-2016.

The State Commission accordingly computed and

determined the CSS rates. The Commission clarified that

the CSS shall be levied and collected from the date of the

order, i.e., 1

st December 2016. The commission also

directed that the order will remain in force till the CSS is

re-determined by the Commission.

18. This order has been upset by the APTEL by the

impugned judgment. In paragraph 18 of the impugned

judgment, the APTEL observed that the information

relating to the previous period could not be conceivably

reflected in the current state of affairs. It was further

observed that the tariff for F.Y. 2016-2017 and 2017-2018

was fixed by the order dated 2

nd November 2017. The

APTEL further observed that it is not clear why the exercise

of the determination of the CSS could not coincide with the

tariff determination. Further, in paragraph 19, the APTEL

observed that the determination of the CSS could not have

been done without examining the requirements of the

current level of cross-subsidy. There is one more reason

assigned by the APTEL. It was held that the tariff order

dated 22

nd September 2016 for the F.Y. 2015 -2016

declared that it shall continue to be in force till the next

tariff order, which was made only on 2

nd November 2017.

Civil Appeal Nos.8862-8868 of 2022 Page 22 of 24

19. We find no basis for the opinion expressed by the

APTEL that determination of the CSS should coincide with

the tariff determination. In the Rajasthan Tariff

Regulations, 2014, under Regulation 2(a)(60), tariff has

been defined as under:

“(60) “Tariff” means the schedule of

charges for generation, transmission,

wheeling and supply of electricity

together with terms and conditions for

application thereof;”

Thus, the determination of CSS is not necessarily a part of

the tariff determination process. The CSS can be

determined along with the tariff. But, it can be determined

separately in accordance with Regulation 90 based on the

prevailing rate of tariff. In fact, as per Regulation 90, the

tariff payable by the relevant category of consumers is the

basis for the CSS. Therefore, the APTEL committed an

error by holding that the determination of the tariff and

the determination of the CSS should always coincide.

While determining rates of the CSS with effect from 1st

December 2016, the commission relied upon the tariff

fixed in terms of the order dated 22nd September 2016,

which was the prevailing tariff as of 1

st December 2016.

The CSS is in the nature of compensation qua the tariff,

which the distribution licensees would have received from

the open access consumers but for their availing power

from other sources. Hence, the CSS must be based on the

Civil Appeal Nos.8862-8868 of 2022 Page 23 of 24

applicable retail tariff recoverable during the relevant

period. That is precisely provided in Regulation 90. The

State Commission determined the CSS based on the data

and financials provided in the order dated 22

nd September

2016. As provided in the said order dated 22

nd September

2016, the same was to be in force until there was a fresh

tariff determination. The order dated 22

nd September 2016

continued to be in force till 2

nd November 2017. Moreover,

the perusal of the order dated 22

nd September 2016 shows

that the determination of the CSS was not undertaken

while doing the exercise of tariff determination. In fact, by

the further order dated 2

nd November 2017 passed by the

State Commission, the determination of the CSS has been

made along with the determination of the tariff. Thus, the

determination made by order dated 1

st December 2016

remained in force until 2

nd November 2017. The effect of

the determination of the CSS from 1st December 2016 is

that the respondents-consumers were not charged the

CSS as per the order from 22

nd September 2016 till 1

st

December 2016. We may also note that the petition for the

determination of the CSS was filed when the petition for

fixing the F.Y. 2015-2016 tariff was pending.

20. When the CSS was determined based on the

prevailing rates of tariff, the APTEL ought not to have

found fault with the Commission's determination of rates

of the CSS.

Civil Appeal Nos.8862-8868 of 2022 Page 24 of 24

21. In the circumstances, we find that the view taken by

the APTEL is erroneous. Therefore, the impugned

judgment of the APTEL cannot be sustained, and the same

is accordingly set aside. Accordingly, the order dated 1

st

December 2016 passed by the State Commission is

restored. Needless to add that the order dated 1

st

December 2016 was to remain in force only till 2

nd

November 2017.

22. Appeals are allowed on the above terms.

……………………..J.

(Abhay S. Oka)

……………………..J.

(Augustine George Masih)

New Delhi;

April 29, 2025