Summary
A hydro-power generator bound by an Implementation Agreement to supply the State 12% free power for twelve years and 18% thereafter obtained a High Court writ directing the State to align the agreement with Note 3 of Regulation 55 of the CERC Tariff Regulations, 2019, which takes free energy to the home State as 13% or actual, whichever is less. The Court held that Note 3 governs only how much free power is passed through in tariff determination and does not prohibit supply beyond 13% or override the Implementation Agreement; that the CERC's unappealed order of 17.03.2022 had only held the PPA and power sale agreements overridden; and that interpretation of tariff regulations lies in the CERC's exclusive domain, so the writ petition was not maintainable.
Issues
- Whether the CERC (Terms and Conditions of Tariff) Regulations, 2019, in particular Note 3 of Regulation 55, bar the generating company from supplying free power to the State beyond 13% and override the Implementation Agreement.
- Whether the generating company could invoke the High Court's writ jurisdiction to have the Implementation Agreement aligned with the CERC Regulations, 2019 and the CERC's order dated 17.03.2022.
Provisions considered
- Regulation 55(2) and Note 3; Regulation 44(1), (4) and (5), CERC (Terms and Conditions of Tariff) Regulations, 2019Note 3 defines free energy to home State as 13% or actual, whichever is less, for determining saleable capacity on which beneficiaries share capacity and energy charges, and Regulation 44 uses the same figure in the energy charge formula; the cap exists to compute tariff and payments by beneficiaries where the actual free-power obligation exceeds 13%, and neither its language nor context prohibits supply above 13% or overrides the contract. (¶¶ 3.10, 17, 18, 19, 20)
- Section 178, Electricity Act, 2003A regulation made by the CERC under this section overrides existing contracts between regulated entities to the extent the regulation operates (PTC India v. CERC); the question was whether Note 3 operates on the free-power obligation at all, which the Court answered in the negative. (¶¶ 15, 31)
- Sections 61 and 79(1)(b), Electricity Act, 2003Tariff determination for generating companies with a composite scheme in more than one State is the CERC's function, to be guided by commercial principles, competition, consumer interest and cost recovery; because this expert function is entrusted to the regulator, constitutional courts should not interpret tariff regulations or substitute their own determination. (¶¶ 28, 30, 31, 32, 38)
- Sections 7, 8 and 10(2), Electricity Act, 2003Generation is de-licensed, hydro schemes require the Central Electricity Authority's concurrence, and a generating company may supply electricity to licensees under the Act; the Court noted that generators have freedom to contract for sale of power, subject to tariff regulation, and cautioned against reintroducing licensing by the back door. (¶¶ 11, 12, 13, 14)
- Section 111, Electricity Act, 2003The generating company did not appeal the CERC's order dated 17.03.2022 to the Appellate Tribunal for Electricity, so the findings in that order, including that only the PPA and PSAs stood overridden, became final and binding on it. (¶¶ 24, 40)
- Section 14, third proviso (deemed licensee), Electricity Act, 2003Whether the State is a deemed licensee was left undecided, but the generating company's contradictory stance of calling the State a regulated entity while never seeking relief against it before the CERC meant it could not approbate and reprobate. (¶¶ 36, 37)
- Article 226, Constitution of IndiaA writ petition is not the appropriate remedy where the Electricity Act, a complete code, provides an efficacious statutory forum; the High Court should not have entertained the petition by interpreting the CERC Regulations, 2019. (¶¶ 34, 38, 40)
Held
- A regulation made by the CERC under Section 178 overrides existing contracts between regulated entities, and contractual terms must be aligned with it insofar as the regulation operates; the crux was therefore whether Note 3 of Regulation 55 prohibits supply of free power beyond 13%. (¶ 15)
- The obligation to supply free power is a form of royalty or consideration to the State for use of river water, a public resource, and for the State's obligations under the Implementation Agreement such as acquiring land, granting permissions and executing leases. (¶ 16)
- Note 3 of Regulation 55, read with Regulation 44, is relevant to the calculation of saleable capacity, billing and payments by beneficiaries; its purpose is to have tariff determined by taking free energy to the home State as 13% whenever the actual figure is higher. The words 'shall be taken as 13% or actual, whichever is less' show that the Regulations contemplate obligations above 13% and merely limit the portion passed through in tariff, so the cap does not override the contractual obligation. (¶¶ 17, 18, 19)
- Since the Regulation does not prohibit supply beyond 13%, the generating company cannot rely on it to wriggle out of its contract; regulatory commissions, APTEL and courts must enforce contractual undertakings and not read regulations so as to permit their circumvention. This interpretation balances the regulator's social-justice obligation of restraining tariff through a limited pass-through with the generator's freedom of business choice, and serves the public interest in the State's free power. (¶¶ 20, 21)
- Before the CERC the company had sought relaxation of the cap, not modification of the Implementation Agreement; the CERC's order of 17.03.2022 rejected relaxation and held only the PPA and PSAs overridden to the extent inconsistent, so that only 13% free power is a pass-through for tariff and recovery from beneficiaries. It did not hold the Implementation Agreement overridden, and as the order was not appealed under Section 111 its findings are final and binding on the company. (¶¶ 22, 23, 24, 39)
- Tariff determination, including the making and interpretation of tariff regulations, is entrusted to an expert statutory regulator, and constitutional courts should neither assume these functions nor fragment the regulator's jurisdiction by creating parallel forums; where the Electricity Act provides an efficacious remedy, recourse to Article 226 is not justified absent manifest unreasonableness or arbitrariness (Jaipur Vidyut Vitran Nigam v. MB Power). (¶¶ 32, 33, 34)
- The High Court should not have entered the domain of interpreting the tariff regulations, which falls within the exclusive domain of the CERC with a statutory appeal to the APTEL and then to this Court; the writ petition was therefore not maintainable, and the High Court also erred in relying on the CERC's order, which did not restrain supply beyond 13% or prejudice the State's contractual rights, to modify the Implementation Agreement. (¶¶ 38, 39, 40)
- The question whether the State is a deemed licensee was not decided, but the company's contradictory positions, asserting that the State is a regulated entity subject to the CERC's jurisdiction while never seeking relief against the State before the CERC and instead filing a writ, meant it could not be allowed to approbate and reprobate. (¶¶ 36, 37)
Result
Appeal allowed; judgment of the High Court of Himachal Pradesh dated 28.05.2024 in CWP No. 7667 of 2023 set aside; CERC Regulations, 2019 held not to prohibit supply of free power beyond 13% and the Implementation Agreement held not overridden; pending applications disposed of; no order as to costs.