Appeals challenge two separate orders passed by the High Court of Rajasthan one by the Jodhpur Bench and the other by the Jaipur Bench. The appeals arise from challenges to ...
2025 INSC 424 CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 1 of 83
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.7964 OF 2019
RAMAYANA ISPAT
PVT. LTD. AND ANR. …APPELLANTS
VERSUS
STATE OF RAJASTHAN
& ORS. …RESPONDENTS
WITH
CIVIL APPEAL NO. 7966 OF 2019
AND
CIVIL APPEAL NO. 7965 OF 2019
J U D G M E N T
VIKRAM NATH, J.
1. The present appeals challenge two separate orders
passed by the High Court of Rajasthan—one by the
Jodhpur Bench dated 29.08.2016 and the other by
the Jaipur Bench dated 06.09.2016. The appeals
arise from challenges to the validity of the Rajasthan
Electricity Regulatory Commission (Terms and
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 2 of 83
Conditions for Open Access) Regulations, 2016
1
framed by the Rajasthan Electricity Regulatory
Commission
2 in the exercise of its powers under
Section 42 read with Section 181 of the Electricity
Act, 2003
3. The primary grievance of the writ
petitioners, appellants herein, before the High Court,
and now the appellants before this Court, relates to
the restrictions and conditions imposed by the
Regulations of 2016 on the exercise of open access
for captive power plants
4 and other large consumers
of electricity.
2. The brief background of the facts giving rise to the
challenge before us are that the writ petitioners
before the High Court are engaged in industrial
production and have substantial power consumption
requirements. The facts, as taken by the High Court
from one of the writ petitions filed by Hindustan Zinc
Limited, respondent No.6 in Civil Appeal No. 7966 of
2019, for convenience, are that Hindustan Zinc
Limited is a public limited company incorporated
under the Companies Act, 1956, and is engaged in
1
Regulations of 2016.
2
RERC.
3
Act of 2003.
4
CPPs.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 3 of 83
the business of mining, smelting, and production of
non-ferrous metals, including lead and zinc. The
company operates multiple units at Chanderia,
Dariba, and Zawar, which are supported by CPPs. In
addition to captive power generation, the company
also has agreements with Ajmer Vidhyut Vitran
Nigam Limited (respondent No.3 in Civil Appeal No.
7964 of 2019, respondent No.2 in Civil Appeal No.
7965 of 2019, and respondent No.3 in Civil Appeal
no. 7966 of 2019) for the supply of power to meet its
contractual demand. Under these agreements,
Hindustan Zinc Limited is entitled to draw electricity
up to 70 MW from the distribution licensee at its
Dariba Zinc Smelter Unit at any time, as per its
operational requirements.
3. Prior to the introduction of the Regulations of 2016,
the appellants were availing open access under the
Rajasthan Electricity Regulatory Commission (Terms
and Conditions for Open Access) Regulations, 2004
5,
which permitted them to draw power from both, their
captive generation and open access sources, without
any reduction in the contracted demand from the
5
Regulations of 2004.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 4 of 83
distribution licensee. The open access facility under
the Regulations of 2004 allowed the appellants to
schedule their power requirements on a day-ahead
basis for each 15-minute block, with the flexibility to
meet shortfalls through their contracted demand
from the distribution licensee.
4. RERC issued a draft of the proposed Regulations of
2016 through a public notice dated 06.07.2015 and
invited comments and suggestions. Hindustan Zinc
Limited, along with other stakeholders, submitted
detailed objections, highlighting that certain
provisions of the draft regulations were inconsistent
with the objectives of the Act of 2003 and the
principle of promoting open access. The Commission
notified the Regulations of 2016 on 27.01.2016.
5. 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
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 5 of 83
Regulations of 2016 imposed penalties for over-
drawal and under -drawal from the contracted
demand.
6. The appellants before the Jodhpur Bench of the High
Court challenged several specific provisions of the
Regulations of 2016 on the ground that they were
arbitrary, unreasonable, and contrary to the
statutory scheme of the Act of 2003. The primary
contention was that the Regulations of 2016 sought
to undermine the statutory right of open access
guaranteed under Section 42 of the Act of 2003 by
imposing unreasonable restrictions on the
simultaneous use of open access and contracted
demand. The appellants further contended that the
imposition of penalties for variations in drawal, even
when caused by unforeseen breakdowns or
operational exigencies, was unjust and
discriminatory. The appellants argued that the
Regulations of 2016, by reducing the contracted
demand by the quantum of power scheduled through
open access, effectively penalized consumers for
exercising their statutory right to open access. It was
submitted that the statutory framework under the
Act of 2003 envisaged open access as a means to
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 6 of 83
promote competition and efficiency in the electricity
market, and the Regulations of 2016 were contrary to
this objective.
7. The appellants before the Jaipur Bench of the High
Court were inter-state consumers, unlike the
appellants before the Jodhpur Bench, who were
intra-state consumers drawing power from their
captive plants within the State of Rajasthan. The
challenge before the Jaipur Bench specifically related
to Regulations 26(6) and 26(7) of the Regulations of
2016, which the appellants contended imposed
restrictions on inter-state open access, thereby
exceeding the Commission's jurisdiction under the
Act of 2003. The appe llants argued that the
Regulations of 2016 amounted to an extra-territorial
application of the RERC's regulatory power, which
was beyond the statutory mandate conferred under
the Act of 2003. It was contended that the Act of 2003
empowered the State Commissions to regulate intra-
state open access but not inter-state open access,
which falls within the jurisdiction of the Central
Electricity Regulatory Commission
6. Therefore, the
6
CERC
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 7 of 83
appellants contended that the impugned regulations
were ultra vires the Act of 2003 and liable to be
struck down.
8. The Jodhpur Bench in the judgment dated
29.08.2016 upheld the validity of the Regulations of
2016, holding that the Commission was empowered
to regulate open access to ensure grid stability and
efficient load distribution. The High Court observed
that the impugned regulations have been notified
with the objective to ensure that the consumers do
not indulge in any gaming activities on the grid, and
thus the rationale behind the Regulations of 2016 is
to further the objectives of the Act of 2003 while
ensuring that the interests of consumers as well as
distribution licensees are balanced. Further,
rejecting the appellants’ claim that the regulations
are violative of their rights protected under Part III of
the Constitution of India, the High Court observed
that they had failed to establish that the Regulations
of 2016 violate their Fundamental Rights, or the
RERC lacked competence to frame these regulations
or that they are manifestly arbitrary or unreasonable;
and thus merely because the Regulations of 2016 are
claimed to cause certain inconvenience or hardship
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 8 of 83
to the appellants, they cannot be held to be illegal or
ultra vires the Act of 2003.
9. The Jaipur Bench also upheld the validity of the
Regulations of 2016 and dismissed the writ petition
of the appellants herein in C.A. 7964 of 2019 herein,
holding that their challenge and the issues in their
petition before the High Court were squarely covered
by the judgment of the Jodhpur Bench.
10. The appellants in all the three appeals before us are
challenging the findings of the High Court on the
grounds that the Jodhpur Bench failed to appreciate
that the Regulations of 2016 are discriminatory
against the CPPs as they impose unreasonable and
excessive restrictions upon them for availing open
access, contrary to the objectives of the Act of 2003.
Further, the appellants challenging the order of the
Jaipur Bench further contend that the Bench failed
to consider that RERC lacked jurisdiction to regulate
inter-state open access, which falls within the
exclusive domain of the CERC under the Act of 2003.
11. The issues for consideration before this Court are as
follows:
i. Whether the RERC has the jurisdiction to regulate
inter-state open access under the Act of 2003?
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 9 of 83
ii. Whether the imposition of penalties for variations
in drawal from contracted demand amounts to an
unreasonable restriction on the right to open
access under Section 42 of the Act of 2003?
iii. Whether Regulation 26(7) is ultra vires for
requiring an advance notice of 24 hours a day prior,
thereby preventing urgent procurement and
creating an artificial barrier to open access as
protected by the Act of 2003?
iv. Whether Regulation 21 is arbitrary and
discriminatory, thereby discouraging captive power
generation by creating unreasonable distinction
between CPPs and state distribution companies?
v. Whether the appellants’ right to open access is
foreclosed by the Regulations of 2016?
12. We have heard the learned counsels for the parties at
great length.
ARGUMENTS OF THE APPELLANTS
13. The appellants have raised a comprehensive
challenge to the validity of the Regulations of 2016.
The challenge is primarily directed against
regulations concerning the levy of additional
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 10 of 83
surcharge, scheduling requirement, and penalties for
deviations. In Civil Appeal No. 7964 of 2019,
appellants have also contested the jurisdiction of the
RERC to regulate inter-state open access, arguing
that such jurisdiction falls exclusively within the
domain of the CERC under the Act of 2003.
14. The appellants in Civil Appeal No. 7964 of 2019 have
contended that the RERC lacked jurisdiction to
regulate inter-state open access through Regulations
of 2016. 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. It is the case of the appellants challenging the
jurisdiction of the RERC with respect to regulating
inter-state open access that the Regulation 26(7)
essentially forecloses the appellants from purchasing
powers 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.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 11 of 83
15. The appellants referred to Section 2(36) of the Act of
2003, which defines "inter-state transmission" as:
“(36) “ inter-State transmission system”
includes –
(i) any system for the conveyance of
electricity by means of main
transmission line from the territory of
one State to another State;
(ii) the conveyance of electricity across
the territory of an intervening State as
well as conveyance within the State
which is incidental to such inter-State
transmission of electricity;
(iii) the transmission of electricity within
the territory of a State on a system
built, owned, operated, maintained or
controlled by a Central Transmission
Utility.”
In light of the above definition, the appellants
argued that merely because the transmission lines
in the state of Rajasthan are used to convey
electricity it does not cease to be an inter-state
transaction as the usage of the said lines is only
incidental to the conveyance of electricity using
inter-state open access.
16. Appellants contended that inter-state open access is
a matter falling within the exclusive domain of the
CERC under Section 79(1)(c) of the Act of 2003. The
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 12 of 83
Act of 2003 clearly demarcates the jurisdiction
between CERC and State Commissions. It was
argued that the power of the State Commission,
RERC in this case, under Section 86(1)(c) is confined
to regulating intra-state open access, and therefore,
any attempt to regulate inter-state open access by the
RERC is ultra vires the Act of 2003. The appellants
highlighted that the petitioners in Civil Appeal No.
7965 of 2019 and Civil Appeal No. 7966 of 2019 are
intra-state consumers of captive power from their
captive generating plants located within Rajasthan.
However, the appellants in Civil Appeal No. 7964 of
2019 are inter-state consumers, purchasing power
from sources located outside Rajasthan. Therefore,
the challenge to Regulation 26(7) by the appellants in
Civil Appeal No. 7964 of 2019 is on a different footing,
as it concerns the extra-territorial application of the
Regulations of 2016 to inter-state transactions,
which is beyond the legislative competence of the
RERC.
17. The appellants while referring to Section 79(1)(c) of
the Act of 2003, submitted that it explicitly provides
that the CERC shall regulate the transmission of
electricity and determine tariffs for inter-state
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 13 of 83
transmission of electricity. Section 2(36) of the Act of
2003 defines "inter-state transmission" to mean the
conveyance of electricity from one state to another.
Therefore, any open access transaction involving the
transmission of electricity across state boundaries
would qualify as an inter-state transaction, which
falls exclusively within the regulatory domain of the
CERC. The appellants submitted that Section 86(1)(c)
of the Act of 2003 empowers the State Commissions
to facilitate intra-state open access only. The power
to regulate intra-state open access does not include
the authority to regulate inter-state open access
transactions. The regulatory scheme under the Act of
2003 establishes a clear division of jurisdiction
between the CERC and the State Commissions, with
the CERC having exclusive authority over inter-state
transactions and the State Commissions having
authority over intra-state transactions.
18. It was the argument of the appellants that any
surcharge or regulatory requirement imposed by the
RERC on such inter-state transactions is ultra vires
the Act of 2003 and amounts to an extra-territorial
application of state law. The appellants further
submitted that the findings of the Jodhpur Bench of
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 14 of 83
the High Court, which upheld the validity of
Regulations of 2016 with respect to intra -state
consumers, cannot be applied to inter -state
consumers. The challenge before the Jaipur Bench of
the High Court concerned inter-state consumers,
whose transactions are governed by the regulatory
framework established by the CERC, not the RERC,
and thus would not be covered by the judgment of
the Jodhpur Bench.
19. Further, the appellants submitted that the
jurisdiction of the RERC is circumscribed by Section
86(1)(a) of the Act of 2003, in terms of which the State
Commission shall determine the tariff for generation,
supply, transmission and wheeling of electricity,
wholesale, bulk or retail “within the state”. Thus, the
RERC’s powers with respect to open access are only
within the state and not beyond it. Whereas, the
CERC has been empowered under Section 79(1)(c) to
regulate inter-state transmission of electricity.
20. Appellants also made a reference to Section 42 of the
Act of 2003 which provides that the RERC in exercise
of its powers under this provision may impose cross
subsidy surcharge; wheeling charges; additional
surcharge on wheeling, if any, to meet fixed cost of
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 15 of 83
the distribution licensee arising out of its obligation
to supply. Thus, the RERC is within its power to
factor operational costs only. Reference was also
made to the definition of “open access” provided
under Section 2(47), which reads as follows:
“(47) “open access” means the non -
discriminatory provision for the use of
transmission lines or distribution system or
associated facilities with such lines or
system by any licensee or consumer or a
person engaged in generation in accordance
with the regulations specified b y the
Appropriate Commission.”
21. Appellants thus submitted that Section 42 of the Act
of 2003 only refers to the State Commissions whereas
the definition of open access contained in Section
2(47) refers to the Appropriate Commission which
includes the CERC. Therefore, the power of the State
Commissions does not extend to regulating inter-
state open access transactions which power has been
conferred upon the Central Commission. A conjoint
reading of Sections 42 and 86(1)(a) of the Act of 2003
makes it clear that the regulations of the State
Commissions only apply within the state. In the case
of inter-state transmission of electricity, the
governing regulation is the CERC (Connectivity and
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 16 of 83
General Network Access to the 'inter -state'
Transmission System) Regulations, 2022
7. All inter-
state transactions (including collective transactions)
on the power exchange are necessarily inter-state
transactions and governed by the CERC GNA
Regulations. In the event of transmission of inter-
state power from outside the state into Rajasthan, it
is not the RERC Regulations of 2016 which apply
within the state but the CERC GNA Regulations.
22. The appellants relied upon the decision of this Court
in Energy Watchdog v. Central Electricity
Regulatory Commission
8
, wherein it was held that
the authority to regulate inter-state transmission and
inter-state open access vests exclusively with the
CERC. The appellants argued that the ratio of this
judgment squarely applies to the present case,
rendering the impugned reg ulation beyond the
competence of the RERC. The appellants relied upon
the following findings of this Court in Energy
Watchdog (Supra):
"...24. The scheme that emerges from these
sections is that whenever there is inter State
generation or supply of electricity, it is the
7
CERC GNA Regulations.
8
(2017) 14 SCC 80.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 17 of 83
Central involved, and whenever there is
intra-State generation or supply of
electricity, the State Government or the
State Commission is involved. This is the
precise scheme of the entire Act, including
Sections 79 and 86. It will be seen that
Section 79(1) itself in clauses (c), (d) and (e)
speaks of inter-State transmission and
inter-State operations. This is to be
contrasted with Section 86 which deals with
functions of the State Commission which
uses the expression "within the State" in
clauses (a), (b) and (d), and "intra-State" in
clause (c). This being the case, it is clear that
the PPA, which deals with generation and
supply of electricity, will either have to be
governed by the State Commission or the
Central Commission. The State
Commission's jurisdiction is only where
generation and supply takes place within
the State. On the other hand, the moment
generation and sale takes place in more
than one State, the Central Commission
becomes the appropriate Commission under
the Act. What is important to remember is
that if we were to accept the argument on
behalf of the appellant, and we were to hold
in the Adani case that there is no composite
scheme for generation and sale, as argued
by the appellant, it would be clear that
neither Commission would have
jurisdiction, something which would lead to
absurdity. Since generation and sale of
electricity is in more than one State
obviously Section 86 does not get attracted.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 18 of 83
This being the case, we are constrained to
observe that the expression "composite
scheme" does not mean anything more than
a scheme for generation and sale of
electricity in more than one State."
23. Thus, the appellants submitted that by curtailing the
purchase power on the exchange by imposing
conditions on inter-state open access transactions
taking place outside the state of Rajasthan,
Regulation 26(7) is ex-facie contrary to the objectives
of Act of 2003 and the National Tariff Policy, and thus
RERC has encroached upon the jurisdiction of the
CERC in framing these arbitrary regulations. By
imposing these conditions in excess of its territorial
jurisdiction, the RERC has essentially banned the
purchase of power under real time contracts,
intraday contracts, and contingency contracts and
thereby ensured that industrial consumers such as
the appellants have no option but to purchase power
from the Distribution Licensee (Jaipur Vidyut Vitran
Nigam), contrary to the objectives of promoting
competition such that consumers can avail quality
and cheaper power from different sources on the
power exchange via the inter-state open access
mechanism. It was submitted that the impugned
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 19 of 83
regulation, by interfering with inter-state scheduling,
exceeds the regulatory authority of the RERC and
violates the statutory framework established under
the Act of 2003.
24. In Civil Appeal Nos. 7965 and 7966 of 2019, the
challenge is to the vires of the regulation by the
captive generators supplying power within the state
of Rajasthan. Appellants have challenged the
Regulations of 2016 on the grounds that the
Regulations of 2016 are discriminatory against the
CPPs as they put illegal fetters upon them for availing
open access which is a statutory right of the such
power generators under Section 9 of the Act of 2003.
25. The appellant submitted that Regulation 21 of the
Regulations of 2016 is arbitrary and discriminatory
against CPPs. Section 9 of the Act of 2003 recognizes
the right of industries to set up captive generation
plants and ensures non-discriminatory access to
transmission and distribution networks. However,
Regulation 21 creates an unreasonable distinction
between captive generators and state distribution
companies
9, discouraging captive power generation.
9
DISCOMs.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 20 of 83
The appellants contend that the pricing mechanism
imposed under Regulation 21 unfairly penalizes
captive generators while providing undue advantages
to state DISCOMs. Under the regulation, any under-
injection by an open access consumer is settled at
higher rates, whereas over-injection is compensated
at lower rates. Further, Regulation 21 also provides
that any energy injected by the power plant but not
utilised by its captive units is not paid for at all to the
captive unit/drawer/buyer. Such a pricing
mechanism creates a disincentive for captive
generators to sell their surplus power through open
access and effectively forces them to rely on state
utilities. The appellants further argued that the
discriminatory treatment of captive generators under
Regulation 21 is inconsistent with the intent of the
Act of 2003, which promotes competition and self-
sufficiency in power generation. By creating an
uneven playing field, the regulation hampers
industrial consumers' ability to optimize their power
procurement strategies and forces them into an
unfair dependence on state utilities.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 21 of 83
26. The appellants have challenged Regulation 21 on the
ground that by imposition of heavy penalty in case of
under-injection by CPPs as provided in Regulation 21
and at the same time exemption of the State
Generators and other generators supplying power to
DISCOMS on long term basis (by virtue of Regulation
5 and Regulation 6), the Regulations of 2016 have
created a discriminatory regime detrimental to the
interest of CPPs which is totally against the spirit of
the proviso to Section 9(1) of the Act of 2003.
27. It is the argument of the appellants that these
regulations discourage open access by providing
extremely stringent provisions for normal and
practically uncontrollable deviations from schedule
and are thereby creating artificial barriers on CPPs
and consumers availing open access by making the
supply from open access non feasible and
economically unviable by forcing the captive
generators and consumers to incur very steep
payments as well as enriching the DISCOMs at the
expense of the open access consumers.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 22 of 83
28. Appellants further highlighted that the National
Electricity Policy 2005
10 realises the enormous
potential of CPPs and envisages encouraging
generation from such plants for the overall
development of the power market in the country. A
conjoint reading of the provisions of the Act of 2003
and NEP of 2005 establishes that it is the explicit
intention of the legislature that the CPPs should be
encouraged and developed as a source of
decentralised power generators. Therefore, any
regulation putting CPPs at a position
disadvantageous vis-a-vis other generator in the
matter of providing open access or regulating supply
of power from them is in violation of and ultra vires to
the provisions of Act of 2003 and the NEP of 2005.
ARGUMENTS OF THE RESPONDENTS
29. The respondents, including the RERC and the
distribution licensees have strongly defended the
validity of the Regulations of 2016, contending that
the same have been framed well within the
jurisdiction of the RERC as conferred under the Act
10
NEP of 2005.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 23 of 83
of 2003 and are essential for maintaining grid
discipline, ensuring fair competition, and
safeguarding the financial viability of the electricity
DISCOMs. Further, it has also been vehemently
submitted that open access cannot be absolutely
free, untrammelled, un-controlled or unrestricted.
The submissions of all the respondents defending the
validity of the Regulations of 2016 have been
reproduced below.
30. At the outset, it is submitted that the regulation of
electricity is an intricate and highly specialized
domain requiring expertise in technical, economic,
and legal considerations. The Act of 2003, entrusts
regulatory commissions with the responsibility of
ensuring an efficient, reliable, and economically
viable electricity sector while balancing the interests
of generators, consumers, and DISCOMs. Electricity,
being a form of energy that cannot be stored in its
raw form, necessitates continuous real -time
management to maintain grid stability. Any
mismatch between demand and supply can lead to
severe disruptions, including grid failure, thereby
causing widespread economic and social
ramifications. To prevent such contingencies,
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 24 of 83
electricity regulatory commissions, including RERC,
are mandated to frame and enforce operating norms
that promote efficiency and discipline among
participants in the electricity sector. The primary
objective of these norms is to ensure that the benefits
derived from improved operational efficiency are
passed on to consumers while simultaneously
maintaining grid stability.
31. The respondents submitted that RERC possesses
regulatory authority over certain aspects of open
access transactions, even where electricity is
procured from outside the state of Rajasthan but
delivered within Rajasthan. The jurisdiction of CERC
is defined under Section 79(1) of the Act of 2003 Act,
granting it regulatory powers over inter -state
transmission of electricity. However, this does not
preclude State Commissions, including RERC, from
exercising jurisdiction over intra-state aspects of
open access. Section 42(2) of the Act of 2003
specifically empowers State Commissions to regulate
intra-state open access, ensuring fair access to
transmission and distribution networks within the
state. While the appellant argues that only CERC has
the power to regulate inter-state open access, this
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 25 of 83
contention is misplaced. RERC retains regulatory
oversight over intra-state transactions, even if the
power originates from another state but is ultimately
transmitted within Rajasthan's intra-state grid.
Thus, while CERC has jurisdiction over inter-state
transmission, RERC retains regulatory authority over
the intra-state aspects of open access transactions,
even if the power source is located outside the state
but the power is delivered within the State through
the intra-state grid. This is in consonance with the
framework of the Act of 2003, which provides for a
clear demarcation of responsibilities between central
and state regulators without unduly restricting state
regulatory authority. Further, Section 42 of the Act of
2003 expressly empowers the State Commissions to
introduce and regulate open access within the state.
Nowhere in the parent Act has the legislature
conferred the power to regulate open access to the
Central Government or CERC for consumers falling
under the purview of Section 42.
32. It is thus the submission of the respondents that the
appellant's assertion that only CERC has the power
to regulate inter-state open access is misleading.
While CERC indeed has jurisdiction over inter-state
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 26 of 83
transmission under Section 79(1) of the Act of 2003,
RERC retains regulatory authority over the intra-
state aspects of open access transactions, even if the
power is sourced from outside the state. Further, it
has been contended that as rightly pointed out by the
appellants, Section 2(47) of the Act of 2003 defines
open-access as non -discriminatory access to
transmission or distribution system; but this
encompasses in its ambit both, inter-state as well as
intra-state transactions, without creating any
distinction between them for regulatory purposes.
Therefore, it is a natural consequence that State
Commissions will retain the power to regulate open
access within their jurisdictions, even if it involves
powers sourced from another state. Hence, from the
plain reading of Section 2(47) with Section 42 of the
Act of 2003, it is clear that the statute treats open
access uniformly, regardless of the source and the
legislature did not intend to create any unnecessary
distinction. Hence, the power to regulate open access,
as per Section 42, rests with the RERC, especially
since the consumer, as defined under Section 2(15)
of the Act of 2003, is the one who consumes
electricity via the distribution licensee, which
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 27 of 83
operates within the state. Section 2(15) defines a
"consumer" as any person who is supplied electricity
by a licensee or whose premises are connected to a
distribution system. Since distribution licensees
operate within specific states, the regulation of open
access for consumers naturally falls within the
jurisdiction of the respective State Commission.
Since open access transactions ultimately facilitate
the supply of electricity to consumers through the
distribution network of a state licensee, their
regulation necessarily falls within the purview of the
concerned State Commission. This reinforces the
position that State Commissions, rather than CERC,
have jurisdiction over open access transactions
where power is consumed within the state,
irrespective of its source.
33. Section 181 of the Act of 2003 grants State
Commissions the power to frame regulations to
implement the provisions of the Act of 2003. This
includes the power to introduce and regulate open
access, determine applicable charges, and establish
conditions for access to intra-state transmission and
distribution networks. The ability of State
Commissions to make rules regarding open access
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 28 of 83
further affirms that RERC, in the exercise of its
statutory functions, can formulate regulations
governing open access transactions within
Rajasthan. Moreover, Section 181 of the Act of 2003
reinforces the independent authority of State
Commissions by specifying their role in electricity
regulation at the state level. This provision upholds
the principle of decentralization in electricity
governance and affirms the legislative intent to vest
regulatory control over intra -state electricity
transactions with State Commissions, including
RERC. While, Section 181 of the Act of 2003
specifically grants the State Commissions the
authority to make regulations concerning the classes
of consumers falling under Section 42 of the Act of
2003, Section 178 of the Act of 2003 grants the CERC
broad powers to make regulations on a wide range of
subjects while intentionally withholding powers
related to Section 42 of the Act. In furtherance of this,
Section 79 of the Act of 2003, which outlines the
functions of the CERC, does not confer any
responsibility upon the Central Commission
regarding he regulation of consumer classes. The
absence of any such provision is evident of the
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 29 of 83
legislature’s intent to not extend the CERC's role in
regulating the supply of power to end consumers
from distribution licensee, either through intra-state
transmission or inter-state transmission. Therefore,
inter-state open access falls within the purview of the
State Commissions, RERC herein, for regulatory
purposes.
34. The respondents further submitted that Regulation
26(7) of the Regulations of 2016, which mandates a
one-day advance scheduling requirement for 24-hour
power procurement, serves a legitimate regulatory
purpose. This is a reasonable and necessary
provision and is only applicable in the case of 'short-
term inter-state open access'. This requirement
ensures grid stability, facilitates proper load
forecasting, and prevents last-minute fluctuations
that could destabilize the electricity network. The
advance scheduling requirement is neither arbitrary
nor unreasonable but is in line with best practices for
efficient power system management.
35. The contention that this requirement forecloses
urgent procurement is misplaced. The regulations
provide alternative mechanisms, including short-
term market purchases, that allow participants to
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 30 of 83
address urgent electricity shortages. Respondents
submitted that the real-time market and day-ahead
market operated under the guidelines of the CERC
still allow purchase of power for urgent needs.
However, the scheduling requirement is only
applicable to procurement through open access
within the state of Rajasthan in order to integrate the
demanded power securely. Thus, such a requirement
is a rational measure to ensure that the grid operates
in a stable and reliable manner without the risk of
sudden fluctuations, and thus is in no way ultra vires
the provisions of the Act of 2003 or against the
objectives of open access. The argument that the
scheduling requirement creates an artificial barrier to
open access is completely misplaced, as the intention
is to ensure a stable and moderated open access,
thereby protecting the reliability of the grid. This in
no way forecloses the access to urgent procurement,
which is available through other sources, but only
ensures that open access consumers follow grid
discipline, which is imperative to prevent any
imbalances. Therefore, the imposition of a structured
scheduling mechanism is necessary for maintaining
an efficient and stable grid.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 31 of 83
36. It has been further submitted by the respondents
that the consistent under-utilization of contract
demand by such consumers can lead to financial
losses for the distribution licensees. This is because
the fixed costs associated with maintaining the
infrastructure necessary to support higher demand
must still be covered, irrespective of the actual
consumption levels. By allowing only consumers who
demonstrate genuine demand to access open access,
the regulatory framework seeks to create a more
equitable and efficient system. This furthers the aim
of the Act of 2003 while ensuring transparency and
accountability among consumers of open access.
37. The respondents contend that the Regulations of
2016 do not arbitrarily foreclose the petitioner's right
to open access, which was previously available under
the Regulations of 2004. The Regulations of 2016 are
an evolved framework aimed at aligning open access
policies with the current realities of electricity
distribution and transmission. The modifications
introduced in the new regulations, including changes
in scheduling requirement, charges, and penalties,
are intended to address inefficiencies and ensure a
level playing field for all stakeholders. These changes
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 32 of 83
are well within the regulatory domain of RERC and
do not constitute an unlawful revocation of rights
granted under the previous framework.
38. The appellants argued that its transactions qualify as
'collective transactions' under the CERC GNA
Regulations, thereby falling outside RERC's
regulatory jurisdiction. The respondents counter this
argument by asserting that collective transactions, as
defined under the applicable regulations, pertain to
centralized power exchanges and structured market
transactions. The appellants' transactions, however,
involve bilateral arrangements and open access
usage within Rajasthan's network. Therefore, they do
not automatically fall under the exclusive purview of
CERC. The respondents submit that RERC's
jurisdiction remains intact concerning aspects of the
transactions that involve intra-state transmission
and distribution.
39. The respondents next submitted that Regulation 21
of the Regulations of 2016, which imposes penalties
for under-injection of power by captive power plants,
is a necessary regulatory measure designed to ensure
grid discipline. The contention that Regulation 21 is
discriminatory against CPPs is unfounded, as the
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 33 of 83
provision applies equally to all entities responsible for
power injection into the grid. The rationale behind
this regulation is to prevent deviation from scheduled
generation, which can disrupt grid stability. Captive
generators, unlike state generators under long-term
power purchase agreements
11, have greater flexibility
in their operations, necessitating stricter scheduling
norms to maintain system integrity. The imposition
of penalties is intended to discourage any kind of
gaming or foul play and ensure that all participants
bear the cost of grid imbalances, as deviation charges
are necessary to discourage under -injection and
over-drawal, to ensure grid stability. The imposition
of penalties for under-injection by CPPs is an
essential regulatory measure aimed at ensuring
predictability in electricity scheduling and preventing
deviations that could jeopardize grid stability. The
respondents further emphasize that Regulation 21
does not violate the rights of captive consumers
under Section 9(1) of the Act of 2003. The proviso to
Section 9(1) merely recognizes the right of captive
consumers to establish and operate generation
11
PPAs.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 34 of 83
plants for self-use. However, this right is not absolute
and is subject to regulatory oversight to ensure that
the operation of CPPs does not disrupt grid stability
or create imbalances in electricity supply. The
regulatory measures imposed under the Regulations
of 2016 are well within the powers conferred upon
RERC under the Act of 2003, and are consistent with
the broader objectives of the statute.
40. It is a settled principle of law that courts should
exercise judicial restraint when reviewing the validity
of regulations framed by expert regulatory bodies.
The respondents argued that this Court has
consistently recognized that regulatory commissions
are vested with specialized knowledge and expertise,
and their decisions should not be lightly interfered
with unless they are manifestly arbitrary,
unreasonable, or in direct contravention of statutory
provisions. In Reliance Infrastructure v. State of
Maharashtra
12
, this Court held that regulatory
decisions should be accorded deference unless it is
demonstrated that they are wholly irrational, ultra
vires the parent statute, or violate Fundamental
12
(2019) 3 SCC 352, Para 38.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 35 of 83
Rights. Similarly, in Hindustan Zinc v. RERC
13
, this
Court reaffirmed the well-established presumption of
constitutionality that extends to subordinate
legislation, including regulations framed under
statutory authority. The respondents submitted that
unless a regulation is shown to lack legislative
competence, be inconsistent with the provisions of
the parent statute, exceed the authority conferred
upon the regulatory body, or be manifestly arbitrary
and unreasonable, it must be presumed to be valid.
The burden lies on the party challenging the
regulation to establish its invalidity, and in the
present case, the appellant has failed to discharge
this burden.
41. The respondents lastly asserted that the Regulations
of 2016 as a whole are justified, necessary, and
within the regulatory mandate of RERC. The
evolution of open access regulations is a dynamic
process, requiring periodic modifications to address
emerging challenges in electricity distribution and
transmission. The Regulations of 2016 aim to
enhance grid reliability, ensure economic efficiency,
13
(2015) 12 SCC 611, Para 32.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 36 of 83
and promote non-discriminatory access to the power
network. Further, regulatory measures such as
scheduling requirements, charges, and penalties are
established to prevent market manipulation, ensure
fair competition, and protect consumer interests. The
respondents, therefore, submit that the appellants
have failed to establish any legal infirmity in the
Regulations of 2016 warranting interference by this
Court. The respondents further submitted that the
Regulations of 2016 are framed in alignment with
national policies and regulatory precedents across
various states. The objective of open access is to
promote competition and consumer choice while
ensuring grid stability and financial viability of
distribution licensees. The levy of surcharges and
charges under the regulations serves this dual
purpose. It is further argued that the appellants'
interpretation of the Act of 2003, disregards the
financial impact on state utilities and the broader
policy intent. The respondents emphasize d that
regulations framed by RERC are based on detailed
public consultations and impact assessments, taking
into account the interests of all stakeholders. The
regulations are neither arbitrary nor excessive but
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 37 of 83
are necessary for ensuring an equitable and
sustainable electricity sector.
ANALYSIS
42. Before delving into the issues before us, the relevant
provisions referred to are reproduced below:
42.1. THE ELECTRICITY ACT, 2003
“Section 2. Definitions: - In this Act, unless
the context otherwise requires –
xxx xxx xxx
(15) "consumer" means any person who is
supplied with electricity for his own use by a
licensee or the Government or by any other
person engaged in the business of supplying
electricity to the public under this Act or any
other law for the time being in force and
includes any person whose premises are for the
time being connected for the purpose of
receiving electricity with the works of a
licensee, the Government or such other
person, as the case may be;
xxx xxx xxx
(17) "distribution licensee" means a licensee
authorised to operate and maintain a
distribution system for supplying electricity to
the consumers in his area of supply;
xxx xxx xxx
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 38 of 83
(36) “inter-State transmission system” includes
-
(i) any system for the conveyance of electricity
by means of main transmission line from the
territory of one State to another State;
(ii) the conveyance of electricity across the
territory of an intervening State as well as
conveyance within the State which is
incidental to such inter-State transmission of
electricity;
(iii) the transmission of electricity within the
territory of a State on a system built, owned,
operated, maintained or controlled by a
Central Transmission Utility.
xxx xxx xxx
(47) “open access” means the non -
discriminatory provision for the use of
transmission lines or distribution system or
associated facilities with such lines or system
by any licensee or consumer or a person
engaged in generation in accordance with the
regulations specified by the Appropriate
Commission;
xxx xxx xxx
Section 9. Captive generation:
(1) Notwithstanding anything contained in this
Act, a person may construct, maintain or
operate a captive generating plant and
dedicated transmission lines:
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 39 of 83
Provided that the supply of electricity from the
captive generating plant through the grid shall
be regulated in the same manner as the
generating station of a generating company.
[Provided further that no licence shall be
required under this Act for supply of electricity
generated from a captive generating plant to
any licencee in accordance with the provisions
of this Act and the rules and regulations made
thereunder and to any consumer subject to the
regulations made under sub- section (2) of
section 42.]
(2) Every person, who has constructed a
captive generating plant and maintains and
operates such plant, shall have the right to
open access for the purposes of carrying
electricity from his captive generating plant to
the destination of his use:
Provided that such open access shall be
subject to availability of adequate transmission
facility and such availability of transmission
facility shall be determined by the Central
Transmission Utility or the State Transmission
Utility, as the case may be:
Provided further that any dispute regarding the
availability of transmission facility shall be
adjudicated upon by the Appropriate
Commission.
xxx xxx xxx
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 40 of 83
Section 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.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 41 of 83
Section 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
person connected with the operation of the
power system shall comply with the directions
issued by the State Load Depatch 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
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 42 of 83
issued under sub-section(1), he shall be liable
to a penalty not exceeding rupees five lacs.
xxx xxx xxx
Section 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:
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 43 of 83
Provided also that such surcharge and cross
subsidies shall be progressively reduced in the
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, 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 .
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 44 of 83
(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,
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.
xxx xxx xxx
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 45 of 83
Section 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 more than 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;
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 46 of 83
(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;
(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
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 47 of 83
Electricity Policy, National Electricity Plan and
tariff policy published under section 3.
xxx xxx xxx
Section 86. Functions of State
Commission: -
(1) The State Commission shall discharge the
following functions, namely: -
(a) determine the tariff for generation,
supply, transmission and wheeling of
electricity, wholesale, bulk or retail, as the
case may be, within the State:
Provided that where open access has been
permitted to a category of consumers under
section 42, the State Commission shall
determine only the wheeling charges and
surcharge thereon, if any, for the said
category of consumers;
(b) regulate electricity purchase and
procurement process of distribution
licensees including the price at which
electricity shall be procured from the
generating companies or licensees or from
other sources through agreements for
purchase of power for distribution and
supply within the State;
(c) facilitate intra-State transmission and
wheeling of electricity;
(d) issue licences to persons seeking to act as
transmission licensees, distribution
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 48 of 83
licensees and electricity traders with respect
to their operations within the State;
(e) promote co-generation and generation of
electricity from renewable sources of energy
by providing suitable measures for
connectivity with the grid and sale of
electricity to any person, and also specify, for
purchase of electricity from such sources, a
percentage of the total consumption of
electricity in the area of a distribution
licensee;
(f) adjudicate upon the disputes between the
licensees, and generating companies and to
refer any dispute for arbitration;
(g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with
the Grid Code specified under clause (h) of
sub-section (1) of section 79;
(i) specify or enforce standards with respect
to quality, continuity and reliability of service
by licensees;
(j) fix the trading margin in the intra-State
trading of electricity, if considered,
necessary; and
(k) discharge such other functions as may be
assigned to it under this Act.
(2) The State Commission shall advise the
State Government on all or any of the following
matters, namely:-.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 49 of 83
(i) promotion of competition, efficiency and
economy in activities of the electricity
industry;
(ii) promotion of investment in electricity
industry;
(iii) reorganization and restructuring of
electricity industry in the State;
(iv) matters concerning generation,
transmission, distribution and trading of
electricity or any other matter referred to the
State Commission by that Government.
(3) The State Commission shall ensure
transparency while exercising its powers and
discharging its functions.
(4) In discharge of its functions, the State
Commission shall be guided by the National
Electricity Policy, National Electricity Plan and
tariff policy published under section 3.
xxx xxx xxx
Section 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-
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 50 of 83
section (1), such regulations may provide for all
or any of following matters, namely: -
(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;
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 51 of 83
(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 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 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;
(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;]
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 52 of 83
(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
section 91;
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 53 of 83
(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;
(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.
xxx xxx xxx
Section 181. Powers of State Commissions
to make regulations: -
(1) The State Commissions 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 the following matters, namely: -
(a) period to be specified under the first
proviso of section 14;
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 54 of 83
(b) the form and the manner of application
under sub-section (1) of section 15;
(c) the manner and particulars of application
for licence to be published under sub-section
(2) of section 15;
(d) the conditions of licence section 16;
(e) the manner and particulars of notice
under clause(a) of sub-section (2) of section
18;
(f) publication of the alterations or
amendments to be made in the licence under
clause (c) of sub-section (2) of section 18;
(g) levy and collection of fees and charges
from generating companies or licensees
under sub-section (3) of section 32;
(h) rates, charges and the term and
conditions in respect of intervening
transmission facilities under proviso to
section 36;
(i) payment of the transmission charges and
a surcharge under sub-clause (ii) of clause(d)
of sub-section (2) of section 39;
(j) reduction of surcharge and cross
subsidies under second proviso to sub-
clause (ii) of clause (d) of sub-section (2) of
section 39;
(k) manner and utilisation of payment and
surcharge under the fourth proviso to sub-
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 55 of 83
clause(ii) of clause (d) of sub-section (2) of
section 39;
(l) payment of the transmission charges and
a surcharge under sub-clause(ii) of clause (c)
of section 40;
(m) reduction of surcharge and cross
subsidies under second proviso to sub-
clause (ii) of clause (c) of section 40;
(n) the manner of payment of surcharge
under the fourth proviso to sub-clause (ii) of
clause (c) of section 40;
(o) proportion of revenues from other
business to be utilised for reducing the
transmission and wheeling charges under
proviso to section 41;
(p) reduction of surcharge and cross -
subsidies under the third proviso to sub-
section (2) of section 42;
(q) payment of additional charges on charges
of wheeling under sub-section (4) of section
42;
(r) guidelines under sub-section (5) of section
42;
(s) the time and manner for settlement of
grievances under sub-section (7) of section
42;
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 56 of 83
(t) the period to be specified by the State
Commission for the purposes specified
under sub-section (1) of section 43;
(u) methods and principles by which charges
for electricity shall be fixed under sub-
section (2) of section 45;
(v) reasonable security payable to the
distribution licensee under sub-section (1) of
section 47;
(w) payment of interest on security under
sub-section (4) of section 47;
(x) electricity supply code under section 50;
(y) the proportion of revenues from other
business to be utilised for reducing wheeling
charges under proviso to section 51;
(z) duties of electricity trader under sub-
section (2) of section 52;
(za) standards of performance of a licensee or
a class of licensees under sub-section (1) of
section 57;
(zb) the period within which information to
be furnished by the licensee under sub-
section (1) of section 59;
[(zc) the manner of reduction of cross -
subsidies under clause (g) of section 61;]
(zd) the terms and conditions for the
determination of tariff under section 61;
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 57 of 83
(ze) details to be furnished by licensee or
generating company under sub-section (2) of
section 62;
(zf) the methodologies and procedures for
calculating the expected revenue from tariff
and charges under sub-section (5) of section
62;
(zg) the manner of making an application
before the State Commission and the fee
payable therefor under sub-section (1) of
section 64;
(zh) issue of tariff order with modifications or
conditions under sub-section(3) of section
64;
(zi) the manner by which development of
market in power including trading specified
under section 66;
(zj) the powers and duties of the Secretary of
the State Commission under sub-section (1)
of section 91;
(zk) the terms and conditions of service of the
secretary, officers and other employees of the
State Commission under sub-section (2) of
section 91;
(zl) rules of procedure for transaction of
business under sub-section (1) of section 92;
(zm) minimum information to be maintained
by a licensee or the generating company and
the manner of such information to be
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 58 of 83
maintained under sub-section (8) of section
128;
(zn) the manner of service and publication of
notice under section 130;
(zo) the form of preferring the appeal and the
manner in which such form shall be verified
and the fee for preferring the appeal under
sub-section (1) of section 127;
(zp) any other matter which is to be, or may
be, specified.
(3) All regulations made by the State
Commission under this Act shall be subject to
the condition of previous publication.”
42.2. Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Open
Access) Regulations, 2016:
“xxx xxx xxx
R.5. Special Provisions for existing
Distribution Licensees: The Distribution
Licensees, using intra-State transmission system
and the distribution system in the State under
an existing agreement or arrangement on the
date of coming into force of the RERC (Terms and
Conditions for Open Access) Regulations, 2004,
shall be entitled to continue to avail open access
to such transmission and distribution system on
the same terms and conditions for the term of the
existing agreement or arrangement on payment
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 59 of 83
of transmission charges and wheeling charges as
may be determined by the Commission.
R.6. Provisions for existing consumers and
generating companies: The existing consumer
or an existing generating company other than the
licensees availing open access under government
policy or under agreements entered on the date
of coming into force of RERC (Terms and
Conditions for Open Access) Regulations, 2004
may continue to avail open access on terms and
conditions laid down under these Regulations to
the extent they are not covered by any policy
directive by the State Government to the
Commission.
xxx xxx xxx
R.21. Unscheduled Interchange Pricing
The payment settlement for mismatch between
the schedule and the actual drawal/injection in
both intra-State and inter-State transactions by
customers connected to transmission/
distribution network of the State licensees shall
be governed by the pricing mechanism as
specified below:
(i) Any under-injection with respect to the
schedule approved by the SLDC by an open
access customer shall be settled at higher of
the applicable deviation rates as notified in
CERC Deviation Settlement Mechanism
Regulations 2014 amended from time to time
or energy charge at the rate of Temporary Tariff
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 60 of 83
applicable for HT (NDS) category as determined
by the Commission from time to time;
(ii) Any over-injection upto 5% in a time block
of 15 minutes and averaging upto 1% over a
day with respect to the schedule approved by
the SLDC by an open access customer shall be
compensated at the deviation charge rate at
frequency of 50 Hz. or applicable deviation
charge rate (as notified in CERC Deviation
Settlement Mechanism Regulations 2014
amended from time to time) whichever is less;
(iii) Any underdrawl with respect to the
schedule approved by the SLDC by an open
access consumer shall not be compensated
and this underdrawl shall be considered to be
attributable to the consumer;
(iv) Any over drawl with respect to the schedule
approved by the SLDC by an open access
customer who is not a consumer of
Distribution Licensee of his area of supply
shall be settled at higher of the applicable
deviation rates (as notified in CERC Deviation
Settlement Mechanism Regulations 2014
amended from time to time) or energy charge
at rate of Temporary Tariff applicable for HT
(NDS) category as determined by the
Commission from time to time;
(v) Any over drawl with respect to the schedule
approved by the SLDC, by an open access
customer who is also a consumer of
Distribution Licensee of his area of supply,
shall be considered as the drawal from Discom
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 61 of 83
and the open access consumer shall be
required to pay charges for the excess capacity
utilized computed in the manner specified in
regulation 26 for the entire month equal to the
same percentage of the fixed and energy
charges by which percentage the excess
demand has actually been availed during the
month on the rates specified in the tariff orders
in force. However, the excess capacity utilized
up to 5% of capacity allocation occurring to the
extent of two time blocks of 15 minutes each
during a month shall be exempted.
xxx xxx xxx
R.26. Compliance and Grid Discipline
(1) The open access customer shall abide by the
Indian Electricity Grid Code, the State Grid Code
and instructions given by State Transmission
Utility and State Load Dispatch Centre as
applicable from time to time.
(2) The open access customer shall also comply
with the requirements of the CEA (Technical
Standards for Connectivity to the Grid)
Regulations, 2007 as amended from time to time.
(3) The open access consumer shall restrict the
sum of his total drawal from all sources including
open access and Distribution Licensee up to the
total sanctioned contract demand with the
Distribution Licensee.
Provided that open access may be allowed over
and above the contract demand to a consumer
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 62 of 83
who sources power both by captive generation
and Discom to the extent of captive power supply
subject to availability of transmission and/or
distribution system as the case may be.
Provided further that long term open access may
be allowed over and above the contract demand
to the extent of sanctioned open access capacity.
(4) The consumer shall be levied fixed charge
based on the maximum demand recorded in the
ABT meter as per tariff applicable from time to
time.
Provided that if the open access is allowed over
and above the contract demand in terms of
proviso to sub regulation (3) above, the fixed
charges shall be levied based on the total demand
recorded in the ABT meter less open access
demand scheduled in terms of proviso of sub
regulation (3) above.
(5) The long term/ medium term open access
customer shall provide the injection schedule at
the generator end and drawal schedule at the
supply end to SLDC, RDPPC, supplier end
Distribution Licensee and to the consumer end
Distribution Licensee before 10.00 AM of the day
preceding the day of scheduling. The Injection
schedule shall have the open access consumer
and supplier identification. Where open access is
provided to more than one open access
consumer, supplier shall provide a break up of
injection schedule as applicable to each open
access consumer considering that the
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 63 of 83
adjustment of energy in such case shall be as per
Regulation 25.
(6) The short term open access customer shall
provide the injection/ drawal schedule for intra-
State transactions every day to the SLDC, RDPPC
and the Distribution Licensee before 10:00 AM of
the day preceding the day of drawal/injection as
per the open access capacity sanctioned.
(7) The power purchase under short term inter-
State open access including transactions
through power exchange shall be subject to the
following:
(i) The consumer shall schedule power from
open access for complete 24 hours of the day.
(ii) The consumer shall intimate in writing
the block wise maximum power to be
scheduled from inter-State open access each
day to the SLDC, RDPPC and Distribution
Licensee before 10:00AM of the day
preceding the day of drawal.
(iii) The schedule so given shall be uniform at
least for a period of eight hours and the
minimum schedule during the day shall at
any time not be less than 75% of the
maximum schedule of the day.
(iv) The schedule so given shall be used to
calculate the block wise maximum
admissible drawal from the Discom.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 64 of 83
(v) If actual schedule approved in inter-State
transactions is less, then the admissible
drawal shall be reduced to that extent.
(8) If the actual drawal in a block is higher than
the admissible drawal, then the percentage
excess drawal shall be calculated on the
admissible drawal and the highest percentage of
such excess drawal of all blocks during a month
shall be considered as excess capacity (demand)
utilized during that month and shall be billed as
per regulation 21(v).
(9) Annual maintenance outage, other
maintenance outage and forced outage shall be
subject to the provisions of the State Grid Code.
Intimation of the forced outage shall be sent to
SLDC and to the Distribution Licensees, within
30 minutes of the outage and shall incorporate
the estimated outage/rectification time.
Restoration of unit under outage shall be
conveyed to SLDC at least 30 minutes prior to its
synchronization with the State Grid.
(10) Wherever required, unity power factor shall
be considered for the purpose of unit conversion
from MVA/kVA to MW/kW or vice versa.”
43. Upon a judicious and careful consideration of the
rival submissions made by the parties and perusal of
the statutory provisions under the Act of 2003 and
the Regulations of 2016, we are of the view that the
contentions raised by the appellants, both inter-state
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 65 of 83
as well as intra-state captive generators, cannot be
agreed with in light of the objectives of the Act of 2003
which the Regulations of 2016 seek to achieve.
I. Whether the RERC had the jurisdiction to
regulate inter-state open access under the Act of
2003?
44. The primary contention of the appellants regarding
the jurisdiction of the RERC to regulate inter-state
open access is without any merit. The Act of 2003
establishes a clear distinction between the regulatory
functions of the CERC and State Commissions. 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.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 66 of 83
45. 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.
46. The respondents have, in their submissions, drawn a
relevant and appropriate parallel with the regulation
of National Highways in the country, which also run
across state borders. It has been rightly analogised
by the RERC that even though National Highway s
falls under Entry 23 of List I of the Seventh Schedule
of the Constitution of India and is a central subject,
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 67 of 83
nevertheless when it passes through the respective
states it is subject to tolls under the respective state
laws as per Entry 59 of List II of the Seventh
Schedule. Therefore, when ‘Electricity’ which is a
subject matter of Entry 38, List III is wheeled from
outside the state and distributed within the state, the
regulations governing such distribution within the
state cannot, by any stretch, be termed to be
suffering from any excess of jurisdiction.
47. 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 intra-
state 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
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 68 of 83
jurisdiction over intra-state transactions even if the
power originates from another state.
48. Further, Section 2(47) of the Act of 2003 defines open
access as non-discriminatory access to transmission
and distribution systems, encompassing both inter-
state and intra-state transactions. The respondents
argue that the statute does not differentiate between
them for regulatory purposes, meaning that State
Commissions naturally retain authority over open
access within their jurisdictions. This interpretation
aligns with Section 42, which explicitly grants State
Commissions the power to regulate open access for
consumers in their states. Additionally, Section 2(15)
of the Act of 2003 defines a “consumer” as any person
who receives electricity from a licensee or whose
premises are connected to a distribution system.
Since distribution licensees operate within state
boundaries, the regulation of open access for
consumers falls squarely within the State
Commission’s jurisdiction. Section 2(17) further
strengthens this position by defining a “distribution
licensee” as an entity authorized to distribute
electricity within a specific area, reinforcing the role
of State Commissions in regulating transactions that
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 69 of 83
ultimately facilitate electricity supply to consumers
within the state.
49. Section 181 of the Act of 2003 empowers State
Commissions to frame regulations necessary for
implementing the provisions of the Act of 2003. This
includes establishing conditions for open access,
determining charges, and ensuring fair access to
intra-state transmission and distribution networks.
By granting State Commissions the authority to
introduce and regulate open access, the legislature
has clearly vested regulatory oversight with RERC in
Rajasthan. The omission of any reference to CERC’s
jurisdiction over open access consumers in Section
42 of the Act further reinforces the respondents’
argument. Section 79, which delineates CERC’s
functions, does not extend its authority to the
regulation of end consumers or the supply of power
via distribution licensees. This omission is indicative
of the legislature’s intent to keep such matters under
State Commissions’ oversight, ensuring that
electricity consumers and distribution networks
within a state remain subject to state -level
regulation.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 70 of 83
50. Thus, the respondents’ argument is well-founded in
statutory provisions, legislative intent, and the
structural framework of the Act of 2003. RERC’s
authority to regulate intra-state aspects of open
access transactions, even when electricity is sourced
from another state, aligns with the Act’s objectives
and ensures effective regulatory oversight.
II. Whether the imposition of penalties for variations
in drawal from contracted demand amounts to an
unreasonable restriction on the right to open
access under Section 42 of the Act of 2003?
51. The imposition of penalties for variations in drawal
from contracted demand is a regulatory measure
designed to ensure grid stability and prevent
commercial gaming in the electricity market. The
respondents contend that such penalties are neither
arbitrary nor unreasonable but are a necessary
mechanism to maintain the reliability of the grid. The
Act of 2003 guarantees non -discriminatory open
access to consumers but does not exempt them from
complying with regulatory conditions essential for the
effective functioning of the electricity network.
Regulation of drawal variations is crucial for
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 71 of 83
balancing power supply and demand, particularly in
the context of the grid’s technical constraints and the
need to prevent unscheduled fluctuations that may
disrupt the system.
52. Further, the penalty mechanism is not an
unreasonable restriction but rather a measure to
ensure that consumers adhere to their contractual
obligations, preventing undue burden on the system
and other stakeholders. Uncontrolled variations can
lead to deviations that may cause frequency
imbalances, affecting overall grid security. Section 32
and Section 33 of the Act of 2003 empower SLDCs to
ensure the smooth operation of the power system,
which includes imposing necessary safeguards
against unregulated deviations. The penalties,
therefore, serve a larger public interest by deterring
erratic consumption patterns and aligning open
access with grid discipline.
53. Additionally, the regulations apply uniformly to all
open access consumers, ensuring that there is no
arbitrary targeting or discrimination. The principle of
open access is not absolute and must be exercised in
a manner that does not compromise the operational
integrity of the power sector. Therefore, the
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 72 of 83
imposition of penalties for variations in drawal is a
justifiable regulatory measure that aligns with the
objectives of the Act of 2003 and does not amount to
an unreasonable restriction on open access.
54. The electricity grid operates on principles of
frequency stability and demand-supply balance. Any
deviation from scheduled drawal or injection can lead
to grid instability, potentially affecting all consumers.
The impugned regulations, therefore, serve a critical
function in preventing such disruptions by enforcing
discipline among generators and consumers alike.
The penalties imposed are a deterrent mechanism to
prevent strategic gaming of the system and to ensure
that all stakeholders adhere to scheduling norms.
The State Commission’s role is to balance the rights
of individual market participants with the broader
objective of ensuring an efficient, reliable, and stable
power supply to all consumers in the State.
III. Whether Regulation 26(7) is ultra vires for
requiring an advance notice of 24 hours, thereby
preventing urgent procurement and creating an
artificial barrier to open access as protected by
the Act of 2003?
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 73 of 83
55. The Act of 2003 was enacted with the objective of
promoting competition, efficiency, and consumer
interest while ensuring the stability of the electricity
grid. The RERC's regulations align with these
objectives by:
i. Ensuring predictability and reliability in power
supply through scheduling norms,
ii. Preventing market distortions by imposing
penalties for deviations that can destabilize grid
operations, and
iii. Curtailing gaming practices where open access
consumers, particularly captive power
generators, might manipulate the grid to gain an
undue advantage.
56. Regulation 26(7), which mandates a 24-hour advance
notice for availing short-term inter-state open access,
serves a critical function in maintaining grid stability
and ensuring proper scheduling of power. The
respondents argue that this requirement is not ultra
vires but is in consonance with the broader
regulatory framework governing open access
transactions. The power system operates on a
structured scheduling mechanism, and unregulated
short-term access without prior notice could lead to
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 74 of 83
disruptions, frequency imbalances, and operational
inefficiencies. The Act of 2003 does not provide an
absolute right to open access but subjects it to
conditions necessary for the reliability and efficiency
of power distribution.
57. The requirement of prior notice is a reasonable
procedural safeguard that aligns with the objectives
of the Act of 2003, particularly those laid out in
Section 42, which envisages a structured approach
to open access. The 24-hour notice period ensures
that both transmission and distribution licensees, as
well as load despatch centres, have adequate time to
adjust their schedules and prevent system
disturbances. Moreover, it prevents misuse by
entities that may attempt to take advantage of real-
time price fluctuations, thereby engaging in
speculative trading rather than genuine demand -
based procurement. Further, the option of
purchasing power from the real-time market and
day-ahead market in need of urgent procurement is
always available, and is not prevented by the
impugned regulations.
58. Furthermore, the regulation does not create an
insurmountable barrier to open access but rather
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 75 of 83
seeks to bring order and predictability to its
implementation. The requirement is uniformly
applicable to all consumers, ensuring that no undue
advantage is given to any particular category.
Considering the technical and regulatory imperatives
involved, the 24-hour advance notice condition under
Regulation 26(7) cannot be considered ultra vires, as
it falls within the regulatory domain of the State
Commission to establish fair, transparent, and non-
disruptive mechanisms for open access.
IV. Whether the Regulation 21 is arbitrary and
discriminatory, thereby discouraging captive
power generation by creating unreasonable
distinction between captive generators and state
distribution companies?
59. The appellants’ argument that the regulations
unfairly burden CPPs is misplaced. The impugned
regulations apply uniformly to all power generators
availing open access, whether captive or non-captive.
Section 9 of the Act of 2003 recognizes the rights of
captive generators but does not exempt them from
compliance with open access regulations framed
under Section 42 of the Act of 2003. The regulatory
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 76 of 83
measures—such as scheduling, penalties for
deviations, and drawal limits—are imposed in
furtherance of the larger goal of grid discipline and
market stability. There is no evidence to suggest that
captive generators are being singled out or subjected
to harsher conditions compared to other generators.
60. Regulation 21, which governs aspects of scheduling,
penalties, and compliance for captive power
generators, has been challenged on the ground that
it creates an unreasonable distinction between
captive generators and state DISCOMs, allegedly
discouraging captive generation. However, the
respondents argue that the regulation is neither
arbitrary nor discriminatory but rather a necessary
framework to ensure that all power generators
operate under fair and transparent rules. The Act of
2003, through Sections 9 and 42, recognizes the
rights of captive power generators while also
subjecting them to regulatory oversight to prevent
system inefficiencies and inequitable advantages.
61. The distinction between captive power generators
and state DISCOMs is not arbitrary but arises from
the structural differences in their roles and
obligations. While captive generators primarily
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 77 of 83
generate electricity for self-consumption, distribution
companies serve a wider consumer base, requiring
them to adhere to broader regulatory commitments,
including universal supply obligations. As such,
differential treatment based on the nature of their
functions is legally justified and does not amount to
unfair discrimination. Moreover, Regulation 21 does
not impose undue restrictions on captive generators
but ensures that their operations align with grid
discipline, preventing any adverse impact on the
larger power ecosystem.
62. Additionally, the principle of non-discrimination
under the Act of 2003 does not mandate identical
treatment for all entities but rather requires a
rational basis for any differentiation. In this case, the
regulatory conditions imposed on captive generators
are aimed at ensuring a level playing field and
preventing misuse of open access provisions. The
regulatory framework ensures that captive
generators contribute fairly to system stability
without imposing additional burdens on distribution
licensees and other grid participants. Thus,
Regulation 21 is neither arbitrary nor discriminatory
but rather a necessary and proportionate measure to
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 78 of 83
balance the interests of various stakeholders in the
electricity sector.
V. Whether the appellants’ right of open access is
foreclosed by the Regulations of 2016?
63. The appellants argue that the Regulations of 2016
impose unreasonable restrictions on captive power
generators, effectively foreclosing their right to open
access as guaranteed under Section 9 of the Act of
2003. However, the respondents contend that the
Regulations of 2016 do not foreclose open access but
rather prescribe conditions necessary for its fair and
efficient implementation. Section 42 of the Act
provides for non-discriminatory open access but also
subjects it to regulations framed by the State
Commission to ensure grid security, operational
discipline, and non-disruptive power transactions.
The restrictions imposed by the Regulations of 2016
are thus regulatory safeguards rather than
prohibitive barriers.
64. A careful analysis of the Regulations of 2016
indicates that they primarily aim at maintaining the
reliability of the electricity grid, ensuring fair pricing,
and preventing speculative misuse of open access
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 79 of 83
provisions. The requirement of advance notice for
short-term open access, penalties for deviations from
contracted demand, and specific conditions for
captive power generators are all designed to create a
structured and predictable electricity market. These
provisions do not prevent eligible consumers from
availing open access but instead ensure that they do
so within a framework that safeguards the interests
of all stakeholders, including distribution licensees
and other consumers. Moreover, Section 181 of the
Act of 2003 empowers State Commissions to frame
regulations necessary for implementing statutory
provisions, thereby validating the regulatory
measures introduced by RERC.
65. Furthermore, the Act of 2003, envisages a balance
between the rights of open access consumers and the
operational concerns of the power sector. The
Regulations of 2016, while imposing certain
conditions, do not outright deny open access but
ensure that its implementation is equitable and does
not jeopardize grid discipline. Open access remains
available to consumers who comply with regulatory
prerequisites, including scheduling obligations and
financial commitments. Thus, the appellants’
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 80 of 83
assertion that their right to open access is foreclosed
is misplaced. The Regulations of 2016 are consistent
with the legislative intent of the Act of 2003, ensuring
that open access is exercised in a manner that does
not compromise system stability, fairn ess, or
economic viability. Therefore, the regulatory
framework does not foreclose open access but rather
operationalizes it within reasonable constraints
essential for sustaining the electricity sector.
CONCLUSION
66. The statutory scheme under the Act of 2003
mandates that regulations framed by State
Commissions must serve the larger public interest.
The respondents have successfully established that
the impugned regulations serve this purpose by
ensuring equitable treatment of all market
participants while safeguarding the integrity of the
power grid.
67. The RERC derives its authority from the Act of 2003,
which vests in it the power to frame regulations
governing open access, scheduling, and penalties.
Section 86(1)(c) of the Act of 2003 specifically
empowers State Commissions to facilitate intra-state
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 81 of 83
transmission and wheeling of electricity.
Furthermore, Section 181 empowers the Commission
to make regulations consistent with the Act of 2003
and its objectives. The impugned regulations have
been framed in exercise of these statutory powers.
The requirement for scheduling, imposition of
penalties, and limits on drawal are not arbitrary but
are measures falling within the regulatory ambit of
the Commission to ensure grid stability and fair
competition. 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.
68. The Jodhpur Bench in common order dated
29.08.2016, which has been challenged before us in
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 82 of 83
Civil Appeals No. 7965 of 2019 and 7966 of 2019, has
rightly upheld the validity of the Regulations of 2016
holding that any inconvenience caused or even some
hardship faced by the captive power generators shall
not make the regulations illegal. The High Court also
rightly pointed out that the appellants have failed to
establish that the impugned regulations are in
contravention of their rights protected under Part-III
or any other provision of the Constitution of India or
that the regulations have been ena cted without
having the competence to do so or they are manifestly
arbitrary or unreasonable. It has been rightly held by
the High Court that the Regulations of 2016 are in
consonance with the objects of the Act of 2003 and
have been framed as per the competence available
under Section 181 read with Section 42 of the Act of
2003.
69. The Jaipur Bench in its order dated 06.09.2016,
which has been challenged before us in Civil Appeal
No. 7964 of 2019, has rightly held that the issues
before it, were squarely covered by the order of
Jodhpur Bench.
CIVIL APPEAL NO.7964/2019 ETC. ETC. Page 83 of 83
70. In light of the above discussion, the appeals are
dismissed, and the orders of the High Court are
upheld.
……………………………………J.
(VIKRAM NATH)
……………………………………J.
(PRASANNA B.VARALE)
NEW DELHI
APRIL 01, 2025
In a significant ruling, the Supreme Court of India has affirmed the validity of the **Rajasthan Electricity Regulatory Commission (RERC)**'s **Open Access Regulations 2016**, dismissing a series of appeals that challenged their scope and enforceability. This landmark decision reinforces the regulatory powers of State Commissions in managing electricity distribution and ensuring grid stability, even for inter-state transactions affecting the local grid. This judgment is now thoroughly documented and accessible on CaseOn, providing a comprehensive resource for legal professionals and students.
The core of the appeals stemmed from objections raised by captive power plant operators and other large electricity consumers against the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016. These regulations introduced new conditions and restrictions on open access, particularly regarding the simultaneous drawal of power from open access sources and contracted demand from distribution licensees, as well as penalties for deviations in power drawal. The appellants argued that these measures were arbitrary, discriminatory, and exceeded the RERC's statutory powers.
The challenges were primarily brought before the High Court of Rajasthan (Jodhpur and Jaipur Benches), which both upheld the validity of the regulations, leading to the appeals before the Supreme Court.
The Supreme Court crystallized the following key questions for determination:
The case hinged on the interpretation of various provisions of the Electricity Act, 2003, and the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016:
The Supreme Court meticulously addressed each issue, aligning with the High Court's findings and the respondents' arguments.
The Court rejected the appellants' claim that RERC lacked jurisdiction over inter-state open access affecting the Rajasthan grid. It clarified that while the Central Electricity Regulatory Commission (CERC) regulates inter-state transmission (Section 79(1)(c)), the State Commissions, including RERC, retain authority over *intra-state aspects* of open access (Section 42(2), 42(3)) even when the power originates outside the state but is delivered within its intra-state grid. The definition of "open access" in Section 2(47) does not distinguish between inter-state and intra-state transactions for regulatory purposes within the state. The Court drew an analogy to National Highways, which, despite being a central subject, are subject to state laws for tolls when passing through states. Section 181 further empowers State Commissions to frame regulations consistent with the Act's provisions, and Section 79 does not extend CERC's authority to end consumers or supply via distribution licensees within a state.
The Court found the imposition of penalties for drawal variations to be a justifiable regulatory measure, essential for maintaining grid stability and preventing commercial opportunism. It emphasized that the right to open access under the Act of 2003 is not absolute and must adhere to regulatory conditions necessary for grid functioning. Sections 32 and 33 empower State Load Despatch Centres (SLDCs) to ensure smooth operations and impose safeguards against unregulated deviations. These penalties, the Court reasoned, deter erratic consumption patterns and enforce grid discipline, serving a larger public interest.
Legal professionals analyzing these specific rulings often find value in CaseOn.in's 2-minute audio briefs, which distill complex judgments into easily digestible summaries, helping them grasp the nuances of electricity regulations efficiently.
The Supreme Court upheld Regulation 26(7), ruling that the 24-hour advance notice for short-term inter-state open access was not ultra vires. It recognized this as a critical function for maintaining grid stability, facilitating load forecasting, and preventing last-minute fluctuations. The Court noted that this requirement is consistent with best practices for efficient power system management. It clarified that the regulation does not prevent urgent procurement, as alternative mechanisms like real-time and day-ahead markets are available, but rather ensures grid discipline and order in open access implementation.
Regarding Regulation 21, which sets unscheduled interchange pricing, the Court determined it was neither arbitrary nor discriminatory against captive power plants (CPPs). It highlighted that the regulation applies uniformly to all power generators availing open access. While Section 9 recognizes the right of CPPs, this right is not absolute and is subject to regulatory oversight under Section 42. The Court reasoned that the distinction between CPPs and state distribution companies (DISCOMs) is based on their structural differences and obligations (self-consumption vs. universal supply). This regulation ensures a level playing field and prevents system inefficiencies, aligning CPP operations with overall grid discipline.
Finally, the Court concluded that the Regulations of 2016 do not foreclose the appellants' right to open access. Instead, they prescribe necessary conditions for its fair and efficient implementation. The Court reiterated that Section 42 allows for non-discriminatory open access but also subjects it to regulations framed by the State Commission to ensure grid security and operational discipline. The imposed restrictions are considered regulatory safeguards, not prohibitive barriers, aimed at maintaining reliability, ensuring fair pricing, and preventing speculative misuse of open access.
The Supreme Court, therefore, dismissed all appeals, affirming the orders of both the Jodhpur and Jaipur Benches of the High Court of Rajasthan. The judgment underscores that the **Rajasthan Electricity Regulatory Commission (RERC)** and its **Open Access Regulations 2016** are well within their statutory mandate, serving the larger public interest by ensuring grid stability, fair competition, and the financial viability of distribution licensees. The Court found that the regulations were framed in exercise of valid statutory powers and are neither arbitrary nor unreasonable, but are necessary measures for a structured and disciplined electricity market.
This Supreme Court judgment is crucial for several reasons:
Disclaimer: All information provided in this article is for informational purposes only and does not constitute legal advice. Readers should consult with a qualified legal professional for advice pertaining to their specific circumstances.
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