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Synopsis

The Supreme Court on April 1, 2025 said that the statutory scheme under the Electricity Act of 2003 mandates that regulations framed by State Commissions must serve the larger public interest, as it upheld validity of the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016 framed by the Rajasthan Electricity Regulatory Commission.   

A bench of Justices Vikram Nath and Prasanna B Varale noted the regulations in question served this purpose by ensuring equitable treatment of all market participants while safeguarding the integrity of the power grid. 

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 transmission and wheeling of electricity, it said. 

Furthermore, the court pointed out that 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," it said. 

The court also pointed out that 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. 

Dealing with appeals filed by Ramayana Ispat Pvt Ltd and others concerning validity of the regulations, the bench found the respondents, state government and others had demonstrated that these conditions were necessary for maintaining discipline in power scheduling and ensuring that open access consumers did not gain an unfair advantage over other consumers by evading scheduling norms or penalties.      

The primary grievance of appellants was related to the restrictions and conditions imposed by the Regulations of 2016 on the exercise of open access for captive power plants and other large consumers of electricity.  

The court, however, said, a careful analysis of the Regulations of 2016 indicated that they primarily aimed at maintaining the reliability of the electricity grid, ensuring fair pricing, and preventing speculative misuse of open access 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, the court said.   

"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, fairness, 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," the court said.  

The court also held appellants’ argument that the regulations unfairly burden captive power plants was misplaced.  

The bench said the Rajasthan High Court's Jodhpur bench judgment, challenged before it, had rightly upheld the validity of the Regulations of 2016, holding that any inconvenience caused or even some hardship faced by the captive power generators would not make the regulations illegal.

The court opined that the high court also rightly pointed out that the appellants had failed to establish that the impugned regulations were in contravention of their rights protected under Part-III or any other provision of the Constitution or that the regulations had been enacted without having the competence to do so or they were 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, it said.

Case Title: Ramayana Ispat Pvt Ltd And Anr Vs State of Rajasthan & Ors