Projects, Energy & Infrastructure Monthly Newsletter: March - April 2025

Ramayana ISPAT Pvt. Ltd. and Anr. Vs State of Rajasthan & Ors.

Supreme Court Judgment dated April 01, 2025 in Civil Appeal No. 7964 of 2019 [Batch]

Background facts

• In a Batch of Appeal(s) preferred by Ramayana ISPAT PVT. LTD and Anr. and Mani Mahesh Ispat Pvt. Ltd. [Batch Appeals], two separate orders dated 06.09.2016 and 29.08.2016 passed by the Jaipur and Jodhpur Bench of the High Court of Rajasthan, respectively, ("Impugned Orders") were challenged. The appeals arising from the aforesaid orders relates to the validity of the Rajasthan Open Access Regulations, 2016 ("2016 Regulations") framed by Rajasthan Electricity Regulatory Commission ("State Commission") in the exercise of its powers under Section 42 read with Section 181 of the Electricity Act, 2003.
• The primary grievance of the Writ Petitioners, before the High Court, and now the Appellant(s) before the Supreme Court, relates to the restrictions and conditions imposed by the 2016 Regulations on the exercise of open access for captive power plants and other large consumers of electricity. Prior to the introduction of the 2016 Regulations, the Appellant(s) were availing open access under the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2004 ("2004 Regulations") which permitted the Appellant(s) to draw power from both, the captive generation and open access sources without any reduction in the contract demand from the Distribution Licensee. As such, the open access facility.
• The Appellant(s) challenged the validity of the 2016 Regulations, pleading before the High Court that the 2016 Regulations framed by the State Commission imposed unreasonable restrictions on Inter-state Open Access, thereby exceeding jurisdiction conferred under the Act upon the State Commission which is otherwise vested with the Central Electricity Regulatory Commission ("CERC").
• The 2016 Regulations imposed limitations on the simultaneous drawl of power through open access and contracted demand from the Distribution Licensee. As per the new regulation, 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.
• Challenging the jurisdiction of the State Commission with respect to regulating Inter-state Open Access, the Appellant contended that the Regulation 26(7) of 2016 Regulations essentially forecloses the Appellants from purchasing powers from other state as it imposes conditions on Inter-state open access.
• The Appellant(s) argued that the conditions imposed by the 2016 Regulations, such as requiring a 24-hour scheduling period, advance intimation of power usage, and a minimum consumption threshold of 75% of the scheduled quantum, are beyond the ambit of the jurisdiction exercised by the State Commission and infringe upon the powers vested in the CERC.
• It was also contended by the Appellant(s) that Regulation 21, which governs aspects of scheduling, penalties, and compliance for captive power generators, creates an unreasonable distinction between captive generators and State DISCOMs, allegedly discouraging captive generation.
• To this the Respondent(s), including the State Commission and the Distribution Licensees submitted that Section 42 of the Electricity Act allows RERC to regulate open access within the State of Rajasthan, even if power comes from outside. It was further submitted that open access cannot be absolutely free, untrammelled, un -controlled or unrestricted.

Issues at Hand

• Whether the RERC had the jurisdiction to regulate inter -state open access under the Act of 2003?
• Whether the imposition of penalties for variations in drawl from contracted demand amounts to an unreasonable restriction on the right to open access under Section 42 of the Act of 2003?
• 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?
• Whether the Regulation 21 is arbitrary and discriminatory, thereby discouraging captive power generation by creating unreasonable distinction between captive generators and state distribution companies?
• Whether the appellants' right of open access is foreclosed by the Regulations of 2016?

Decision of the Court/Tribunal

• Supreme Court held that section 42(2) of the Electricity Act, 2003 (the Act) 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.
• Supreme Court further stated that 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.
• Dismissing the aforesaid appeal, Supreme Court observed that 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. And that the argument that the Regulations of 2016 have an extra -territorial effect is misplaced.
• 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.
• It was further observed that 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 Supreme Court also observed that 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 and that the penalties imposed are a deterrent mechanism to prevent strategic gaming of the system and to ensure that all stakeholders adhere to scheduling norms.
• 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 Supreme Court further observed that 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.
• The Supreme Court held that the distinction between captive power generators and State DISCOMs is not arbitrary but arises from the structural differences in their roles and obligations and that 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.
• 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 balance the interests of various stakeholders in the electricity sector.
• The Supreme Court further observed that 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 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 Supreme Court further held that the Act of 2003 envisages a balance between the rights of open access consumers and the operational concerns of the power sector. The 2016 Regulations, while imposing certain conditions, do not outright deny open access but ensure that its implementation is equitable and does not jeopardize grid discipline.
• The Supreme Court also upheld the Impugned Orders observing 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 enacted without having the competence to do so or they are manifestly arbitrary or unreasonable.
• Thus Supreme Court observed that 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.

Hindustan Petroleum Corporation Limited v. Tamil Nadu Electricity Regulatory Commission & Anr.

Appellate Tribunal for Electricity's (APTEL) Judgment dated March 24, 2025 in Appeal No. 149 of 2018

Background facts

• The Appellant, Hindustan Petroleum Corporation Limited (HPCL), a government - owned entity under the Ministry of Petroleum and Natural Gas, operates an LPG bottling plant at Kappalur, Madurai, Tamil Nadu.
• The plant had previously been categorized under HT I (Industrial) tariff category by the Tamil Nadu Electricity Regulatory Commission (TNERC). However, vide tariff order dated August 11, 2017, TNERC re -categorized the plant under HT III (Commercial), grouping it with establishments like malls, multiplexes, and hotels. HPCL challenged this reclassification, arguing that its operations qualify as an industrial activity as per the Factories Act, 1948.

Issues at hand

• Whether HPCL's LPG bottling plant qualifies as an "industrial activity" for purposes of electricity tariff categorization.
• Whether TNERC's re-categorization from HT I (Industrial) to HT III (Commercial) is arbitrary, discriminatory, or lacks legal basis.

Decision of the Court/Tribunal

APTEL upheld TNERC's decision to classify LPG bottling plants under HT III (Commercial). In this regard, the following key observations were made by APTEL:

• The Tribunal held that HPCL's bottling activities do not qualify as manufacturing. Bottling involves transferring finished LPG from bulk containers into cylinders without altering its essential nature or composition, thereby lacking transformation required for "manufacture".
• Citing the Supreme Court's decisions in Delhi Cloth Mills, Servo-Med Industries, and Satnam Overseas, APTEL emphasized that processing or repackaging without altering the essential character of a product does not amount to manufacturing.
• It was also noted that categorization of consumers lies within the discretion of State Electricity Commissions under Section 62(3) of the Electricity Act, 2003.
• The Tribunal rejected HPCL's reliance on prior TNERC orders (2008) and categorization in other states, noting that doctrine of stare decisis does not preclude recategorization where a re-evaluation is supported by judicial reasoning and statutory interpretation.
• Lastly, the Tribunal found that TNERC had appropriately relied on the 2016 APTEL judgment (APL No. 265 of 2014) which held LPG bottling to be commercial in nature.

Nuclear Power Corporation of India Ltd. v. Central Electricity Regulatory Commission & Gujarat Urja Vikas Nigam Ltd.

Appellate Tribunal for Electricity (APTEL), Judgment dated March 27, 2025 in Appeal No. 134 of 2024.

Background facts

• Nuclear Power Corporation of India Ltd. (NPCIL), a centrally-owned generating company, supplies electricity to Gujarat Urja Vikas Nigam Ltd. (GUVNL), a distribution licensee, under two Power Purchase Agreements (PPAs) dated September 22, 2005 and December 16, 2008. These PPAs govern the sale of electricity from NPCIL's nuclear power stations—Kakrapar Atomic Power Station (KAPS) and Tarapur Atomic Power Station (TAPS)—and stipulate that tariffs shall be determined by the Department of Atomic Energy (DAE), Government of India, under the Atomic Energy Act, 1962.
• A dispute arose when GUVNL alleged that NPCIL was over-recovering income tax, particularly Minimum Alternate Tax (MAT), for the financial years 2011–12 to 2021–22 by charging tax rates in excess of those actually paid. GUVNL contended that NPCIL's recovery of the tax component under Clauses 7.5.2 and 7.5.3 of the PPAs constituted double recovery, since DAE's tariff notifications post-2012 already incorporated a post-tax Return on Equity (ROE) inclusive of applicable taxes.
• GUVNL filed Petition No. 98/MP/2023 before the Central Electricity Regulatory Commission (CERC), seeking a refund of INR 119.95 crore and future compliance with the DAE's tariff notifications. In its interim order dated January 13, 2024, CERC held that it had jurisdiction under Sections 79(1)(a) and 79(1)(f) of the Electricity Act, 2003, to adjudicate the matter. This interim order was challenged by NPCIL before the Appellate Tribunal for Electricity (APTEL), asserting that the dispute was governed exclusively by the Atomic Energy Act, 1962, and did not fall within the CERC's jurisdiction.

Issues at hand

• Whether the CERC has jurisdiction under Sections 79(1)(a) and 79(1)(f) of the Electricity Act, 2003 to adjudicate disputes relating to tariffs issued by the Department of Atomic Energy for nuclear power stations.

Decision of the Court/Tribunal

APTEL set aside the interim order of CERC, holding that:

• NPCIL, though a government-owned entity, is an independent legal entity registered under the Companies Act and does not fall within the exemption under Section 184 of the Electricity Act, which is limited to ministries and departments of the Central Government.
• Section 22 of the Atomic Energy Act, 1962 overrides the Electricity Act in matters of tariff fixation for nuclear power, as it contains a non-obstante clause and empowers the Central Government to fix tariffs and regulate supply from atomic power stations.
• There is no inconsistency between the Atomic Energy Act and the Electricity Act that would justify CERC exercising concurrent jurisdiction.
• The role of CERC under Section 79(1)(a) pertains to generating stations owned or controlled by the Central Government, but in this context, the authority to fix tariffs lies exclusively with the DAE under the Atomic Energy Act.
• Consequently, CERC does not have jurisdiction under Section 79(1)(f) to adjudicate disputes regarding tariff computation for nuclear power when such tariffs are statutorily fixed by another competent authority (i.e., DAE).
• APTEL directed that the dispute should instead be resolved through the mechanisms prescribed in the PPAs (i.e., arbitration or civil remedies).

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