Energy, Infrastructure & Natural Resources law corner bulletin

Torrent Power Limited v. Uttar Pradesh Electricity Regulatory Authority Commission & Others |Judgment dated July 14, 2025 |Civil Appeal No. 23514 of 2017 (Link)

FACTS

Respondent No. 4 in the instant matter, an individual consumer, filed a petition before the Uttar Pradesh Electricity Regulatory Commission (UPERC): (i) challenging the execution of the distribution franchisee agreements (DFAs) between the Appellant and the distribution licensee, Respondent No. 3, alleging that the appointment of the franchisee without UPERC's prior approval amounted to a violation of Section 17 of the Electricity Act, 2003 (Electricity Act), (ii) demanding investigation into the conduct of the Appellant vis-à-vis its functions as a franchise of a distribution licensee under Section 128 of the Electricity Act. The Appellant raised preliminary objections regarding jurisdiction and maintainability, which the UPERC rejected on the grounds of public interest. UPERC clarified that the DFA did not amount to a transfer under Section 17 of the Electricity Act and observed that the franchisee model was intended to improve distribution efficiency and service quality, it ordered an investigation against the Appellant’s role as a distribution franchise under 7^th proviso of Section 14 of the Electricity Act.

Aggrieved by this, the Appellant filed an appeal before the Appellate Tribunal for Electricity (APTEL). APTEL dismissed the appeal and upheld the decision of the UPERC.

Aggrieved by the decision of the APTEL, the Appellant preferred an appeal to the Supreme Court.

CONTENTIONS

The Appellant contended that UPERC lacked jurisdiction to entertain the petition, arguing that consumer related grievances must be addressed through the redressal mechanism prescribed under Section 42(5) of the Electricity Act. The Appellant further challenged the initiation of investigation proceedings against itself under Section 128 of the Electricity Act.

OBSERVATIONS AND DECISION

The Court held that under the Electricity Act, adjudicatory jurisdiction of state electricity regulatory commissions (SERCs) is confined to disputes between licensees and generating companies under Section 86(1)(f), and individual grievances must be addressed through the consumer grievance redressal forum under Section 42 of the Electricity Act.

The Court held that UPERC failed to record the mandatory satisfaction under Section 128 before ordering an investigation, rendering the proceedings against the Appellant unsustainable and not maintainable under the Electricity Act.

It further held that franchisees are not independently regulated under the Act; they function as agents of licensees and remain outside the electricity regulatory commission’s direct jurisdiction.

Accordingly, the impugned order passed by the APTEL was set aside.

SERCs have no adjudicatory jurisdiction under Section 86(1)(f) of the Electricity Act, 2003 in matters involving individual consumer grievances, which must be addressed under Section 42 of the Electricity Act through the consumer grievance redressal mechanism.

Further, an investigation under Section 128 requires the prior recording of satisfaction by the appropriate commission; failure to do so renders such proceedings unsustainable in law.

Franchisees, being agents of licensees, are not independently regulated under the Electricity Act and fall outside the regulatory jurisdiction of the appropriate commission.

FACTS

Respondent - JSW Hydro Energy Limited developed and commissioned a 1045 MW hydroelectric power project in Himachal Pradesh pursuant to a grant and an implementation agreement with the appellant–State of Himachal Pradesh.

Under the implementation agreement, the respondent was obligated to provide 18% of net power generation free of cost to the State of Himachal Pradesh.

Upon commencement of its obligation to supply 18% free power, the respondent filed a writ petition before the Himachal Pradesh High Court seeking modification for the implementation agreement to align with the CERC (Terms and Conditions of Tariff) Regulations, 2019 (Tariff Regulations 2019), specifically Note 3 of Regulation 55, which caps free energy to the home State (FEHS) – in this case, the state of Himachal Pradesh – at 13% (or actual, whichever is less).

The High Court of Himachal Pradesh held that, in view of the Tariff Regulations 2019, the implementation agreement stood modified, limiting the respondent’s free power supply obligation to 13% of net generation.

CONTENTIONS

The Supreme Court observed that the core issue was whether Note 3 of Regulation 55 of the Tariff Regulations 2019 prohibited a generator from supplying free power beyond 13% and whether it invalidated the generator’s contractual obligation under the Implementation Agreement.

OBSERVATIONS AND DECISION

The Court emphasized that the supply of free power formed part of lawful consideration under the Agreement, akin to a royalty for using a public resource and was thus enforceable as a contractual obligation.

It clarified that Note 3 of Regulation 55 of the Tariff Regulations 2019 pertains only to tariff determination — that is, for calculating recoverable capacity and energy charges from beneficiaries, the regulator assumes FEHS as 13% or actual, whichever is less. This has no bearing on the contractual freedom of parties to agree to a higher percentage of free power supply. The Court further observed that the phrase “shall be taken as 13% or actual, whichever is less”, appearing in the Tariff Regulations 2019, merely limits the pass-through cost in tariff computation but does not prohibit or invalidate contractual terms exceeding 13%.

The Court thus held that the Tariff Regulations 2019 do not override the implementation agreement, and the respondent cannot rely on the Tariff Regulations 2019 to escape its binding contractual obligation.

Note 3 of Regulation 55 of Tariff Regulations 2019, governing tariff computation, does not override or invalidate independent contractual obligations regarding free power supply.

FACTS

The Central Electricity Regulatory Commission and the Delhi Electricity Regulatory Commission (collectively, Commissions) were issued show cause notices by the Directorate General of GST Intelligence (DGGI) alleging that the Commissions had failed to discharge their tax liability under the Central Goods and Services Tax Act, 2017 (CGST Act) and the Integrated Goods and Services Tax Act, 2017 (IGST Act).          

The tax demand primarily related to license fees and charges received by the Commissions in the discharge of their regulatory functions under the Electricity Act, 2003. The DGGI contended that while adjudicatory functions of the Commissions may be exempt from Goods and Service Tax (GST), regulatory functions such as issuing licences and collecting related fees constituted “supply of services” under Section 7 of the CGST Act and were therefore taxable.

The Commissions challenged the show cause notice before the Delhi High Court, asserting that the fees were collected in discharge of their statutory obligations, not in the course of business, and thus fell outside the scope of taxable supply under GST law.  

The Delhi High Court ruled in favour of the Commissions, holding that the discharge of regulatory functions by the Commissions under the Electricity Act, 2003 would not be liable to be construed as activities undertaken in the furtherance of business, and therefore not taxable under the CGST Act and IGST Act.    

Aggrieved by the decision of the Delhi High Court, the DGGI had preferred a special leave petition before the Supreme Court.

OBSERVATIONS AND DECISION

The Supreme Court dismissed the special leave petition filed by the DGGI against the Delhi High Court judgment, thereby upholding the Delhi High Court's decision that GST is not applicable on license fees collected by the Commissions.      

Regulatory functions discharged by electricity commissions under statutory mandate do not amount to “supply of services” under the GST regime, as such functions are not carried out in the course or furtherance of business, and hence are not taxable under CGST Act or IGST Act.

FACTS

Multiple power generators filed petitions under Section 86(1)(f) of the Electricity Act, 2003 before the Punjab State Electricity Regulatory Commission (PSERC), impleading the Punjab Energy Development Agency (PEDA), a nodal agency designated by the State Government. PEDA, had issued letters of intent, executed implementation agreements with generators, and collected performance bank guarantees, prior to the execution of power purchase agreements between generators and the Punjab State Power Corporation Limited i.e., the distribution licensee (PSPCL). 

The PSERC issued directions against PEDA, despite it being neither a generating company nor a licensee. 

CONTENTIONS

PEDA and PSPCL argued that PSERC lacked jurisdiction under Section 86(1)(f) to adjudicate disputes involving PEDA, as it is not a licensee or generating company. PEDA and PSPCL further submitted that PSERC, being a statutory authority, cannot assume powers not expressly conferred by the Electricity Act.

PSERC argued that effective adjudication of the dispute required PEDA to be a party, as its actions formed the foundation of the contractual chain. Contended that the term “dispute” in Section 86(1)(f) of the Electricity Act should be interpreted broadly, encompassing all entities engaged in activities integral to generation and procurement, including nodal agencies. Submitted that regulatory jurisdiction under Section 86(1)(b) of the Electricity Act extended to the entire procurement process, including PEDA’s role. 

OBSERVATIONS AND DECISION

The Tribunal held that the PSERC’s power under Section 86(1)(f) of the Electricity Act must be interpreted in conjunction with Section 86(1)(b) of the Electricity Act, which grants it broad regulatory authority. It found that where a nodal agency like PEDA is directly involved in the power procurement process—executing implementation agreements and facilitating power purchase agreements—disputes become inherently tripartite. The Tribunal emphasized that implementation agreements and power purchase agreements are back-to-back contracts and cannot be adjudicated in isolation. Accordingly, it upheld the PSERC’s jurisdiction to issue directions against PEDA and ruled that PEDA was a necessary party to such proceedings.

When a nodal agency is integrally involved in power procurement through implementation agreements that are contractually linked to power purchase agreements, the SERC’s jurisdiction under Sections 86(1)(f) and 86(1)(b) of the Electricity Act extends to such agency, making it a necessary party to adjudication.

FACTS 

The NP Kunta transmission system was constructed by the Central Transmission Utility (PGCIL) for evacuation of power from the NP Kunta solar park, located entirely within the State of Andhra Pradesh. Although the solar power generated at the park was largely consumed within Andhra Pradesh, PGCIL sought tariff recovery through the inter-State point of connection (PoC) mechanism, treating the system as part of the inter-state transmission system (ISTS).

This classification was accepted by the CERC, relying on Section 2(36)(iii) of the Electricity Act, 2003, which states that any transmission system, even if it is located within a state, would qualify as ISTS if it is built, owned, operated, or maintained by the Central Transmission Utility. 

CONTENTIONS

TANGEDCO, the appellant, argued that the NP Kunta system did not facilitate inter-state transmission and should not be considered ISTS. It submitted that clause (iii) of Section 2(36) of the Electricity Act could not be read in isolation and must be harmonised with clauses (i) and (ii) of Section 2(36) of the Electricity Act, both of which require an inter-state element. It also contended that the system operated solely within Andhra Pradesh and functioned as a dedicated transmission line, the cost of which should not be pooled nationally.

CERC and PGCIL responded that Section 2(36)(iii) of the Electricity Act creates an independent ground for classifying a transmission system as ISTS and does not require Electricity Actual inter-state flow of electricity. They further argued that the system could not be a dedicated transmission line within the meaning of Section 2(16) of the Electricity Act, which permits such lines only when constructed by generating companies. The CERC and PGCIL argues that as PGCIL is the Central Transmission Utility, the provision was inapplicable.

OBSERVATIONS AND DECISION

The Appellate Tribunal for Electricity (APTEL) held that clause (iii) of Section 2(36) of the Electricity Act operates as a standalone provision, and any intra-state transmission system constructed by the Central Transmission Utility would be classified as ISTS, irrespective of whether it transmits electricity across State boundaries. It agreed with the CERC that the legal character of the system depended on who constructed it, not on the direction or usage of power flow.

The Tribunal further observed that since the NP Kunta system was not constructed by a generating company, it could not qualify as a dedicated transmission line under Section 2(16) of the Electricity Act. The Tribunal therefore upheld the CERC’s decision and confirmed that costs associated with the NP Kunta system could be recovered under the PoC mechanism. The appeal was accordingly dismissed.

Section 2(36)(iii) of the Electricity Act operates independently to classify a transmission system as ISTS solely based on its construction by the Central Transmission Utility, irrespective of actual inter-state power flow.

FACTS

The petitioner operated a wind energy project spread across multiple districts of Karnataka. The petitioner’s wind energy project was granted approval for a single evacuation scheme and a single interconnection point at the 220 kV Karnataka Power Transmission Corporation Limited’s (KPTCL) Bidnal substation. Subsequently, the petitioner applied to the National Open Access Registry (NOAR) for issuance of standing clearance for short-term open access. KPTCL, however, directed the petitioner to submit seven separate applications in NAOR corresponding to the seven project locations. 

CONTENTIONS

Aggrieved by the insistence of KPTCL to submit seven separate applications in NAOR corresponding to the seven project locations, the petitioner approached the Central Electricity Regulatory Commission (CERC) under Sections 79(1)(c) and 79(1)(f) of the Electricity Act, contending that the insistence on submitting seven separate applications, despite a single evacuation scheme and interconnection point, was contrary to regulatory provisions. 

OBSERVATIONS AND DECISION

The CERC observed that the primary issue in the matter pertained to the denial of standing clearance by KPTCL for use of the intra-state transmission network for facilitating inter-state open access. Referring to the judgment of the APTEL in UPPCL v. UPERC & Others (Appeal Nos. 231/2015 and 251/2015), the CERC noted that where disputes arise in connection with the non-issuance of no objection certificates by the state load despatch centres for use of intra-state transmission systems — even when used in conjunction with inter-state transmission systems — such matters fall within the jurisdiction of the concerned SERC, and not the CERC.

Accordingly, the CERC held that the grant of standing clearance to the petitioner for use of the intra-state transmission system of KPTCL is an issue squarely governed by Section 86 of the Electricity Act. The CERC accordingly rejected the petitioner’s reliance on Section 79(1)(c) and Section 79(1)(f), for claiming jurisdiction of the CERC.

Disputes relating to denial of open access clearance by state utilities for intra-state transmission falls within the jurisdiction of the respective SERC under Section 86 of the Electricity Act, even when such transmission is in conjunction with inter-state transmission.

FACTS

The petitioner filed a petition under Section 63 of the Electricity Act, seeking adoption of tariff for a 300 MW ISTS-connected wind-solar hybrid power project located in the Madhya Pradesh, with power to be supplied to consumers in West Bengal. 

The petitioner submitted that the bidding process was conducted pursuant to the ‘Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Wind Solar Hybrid Projects’ (Hybrid Guidelines) issued by the Ministry of Power on August 21, 2023, and the petitioner had obtained approval for a deviation from Clause 6.2.4 of the Hybrid Guidelines from the Government of West Bengal.

CONTENTIONS

The petitioner argued that the bidding process was transparent and in substantial compliance with the Hybrid Guidelines and thus warranted tariff adoption under Section 63 of the Electricity Act. It contended that the deviation had been approved by the Government of West Bengal, and therefore the process should be treated as valid. 

OBSERVATIONS AND DECISION

The CERC observed that since the project was located in Madhya Pradesh and the power was being supplied to consumers in West Bengal, the transaction was inter-State in nature. Accordingly, any deviation from the bidding guidelines issued by the Central Government required the approval of the Central Government, and not of any State Government.

Referring to the Supreme Court’s judgment in Energy Watchdog v. CERC ((2017) 14 SCC 80), it confirmed that the Central Government and the Central Commission are the appropriate authorities for inter-state transactions.

The petition was rejected for non-compliance with Section 63, owing to lack of proper approval for deviation from the Central Government.

In Inter-State power procurement, any deviation from Central Government bidding guidelines requires approval of the Central Government. State Government approval is insufficient, and non-compliance renders the bidding process invalid under Section 63 of the Electricity Act.

FACTS

The CERC, by its order in petition no. 1/SM/2024, directed Grid-India to implement a shadow pilot for market coupling across three key segments: (a) coupling of the Real-Time Market (RTM) of the power exchanges, (b) coupling of RTM with Security Constrained Economic Dispatch (SCED), and (c) coupling of the Day-Ahead Market (DAM) of the power exchanges.

Grid-India was subsequently also tasked with submitting a feedback report on the operational experience of running a shadow pilot for a period of four months, which it did on June 30, 2025. 

OBSERVATIONS AND DECISION

Basis the review of the feedback report submitted by Grid-India, the CERC noted that while the technical feasibility of market coupling had been established, a cautious and phased approach was warranted due to operational concerns. Accordingly, it directed the following:

1. Market coupling of the DAM segment across exchanges will be implemented in a round-robin manner starting January 2026;
2. Further coupling of RTM and RTM-SCED will be considered separately after addressing identified challenges;
3. A shadow pilot for the Term Ahead Market (TAM), including contingency contracts, will be undertaken, followed by a three-month pilot run and submission of a feedback report by Grid-India; and
4. A consultative process will be initiated to finalise the implementation framework for DAM coupling and necessary amendments to the Power Market Regulations, 2021.