RAMAYANA ISPAT PVT. LTD. AND ANR. versus STATE OF RAJASTHAN & ORS. (31/03/2025) — Supreme Court headnote

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Summary

Captive power producers and large industrial consumers challenged the RERC (Terms and Conditions for Open Access) Regulations, 2016, which reduce contracted demand by the quantum scheduled through open access, penalise deviations in drawal and injection, require day-ahead 24-hour scheduling for short-term inter-state open access, and apply deviation pricing to captive generators. Affirming two Rajasthan High Court judgments, the Supreme Court held that the State Commission has jurisdiction under Sections 42, 86(1)(c) and 181 of the Electricity Act, 2003 over the intra-state aspects of open access even where power is sourced from another State, that open access under Sections 9 and 42 is not absolute and may be conditioned for grid discipline, and that the regulations are neither ultra vires, arbitrary nor discriminatory.

Issues

Whether the Rajasthan Electricity Regulatory Commission has jurisdiction under the Electricity Act, 2003 to regulate inter-state open access transactions, or whether such regulation lies exclusively with the Central Electricity Regulatory Commission under Section 79(1)(c).
Whether the imposition of penalties for variations in drawal from contracted demand is an unreasonable restriction on the right of open access under Section 42 of the Act.
Whether Regulation 26(7), requiring a day-ahead 24-hour schedule for short-term inter-state open access, is ultra vires for preventing urgent procurement and creating an artificial barrier to open access.
Whether Regulation 21 (unscheduled interchange pricing) is arbitrary and discriminatory against captive power plants as compared with State distribution companies.
Whether the Regulations of 2016 foreclose the appellants' statutory right to open access.

Provisions considered

Section 42(2), (3) and (4), Electricity Act, 2003Section 42(2) requires the State Commission to introduce open access subject to such conditions, including cross-subsidies and other operational constraints, as it specifies, and Section 42(3) makes wheeling for a consumer who sources supply from another generator subject to regulations of the State Commission. Read as expressly vesting regulation of open access for consumers within the State in the State Commission; the appellants' reading would render Section 42 redundant. Open access under Section 42 is non-discriminatory but not absolute, and is subject to conditions necessary for the grid. (¶¶ 42.1, 45, 47, 48, 49, 51, 57, 59, 63, 67)
Section 79(1)(c), Electricity Act, 2003Confers on the Central Commission the function of regulating inter-state transmission of electricity; this does not strip State Commissions of jurisdiction over the intra-state aspects of open access, and Section 79 says nothing about regulating end consumers or supply through distribution licensees. (¶¶ 42.1, 44, 45, 49)
Section 86(1)(a) and (c), Electricity Act, 2003The State Commission determines tariff within the State and facilitates intra-state transmission and wheeling; its power to regulate intra-state transmission and distribution under clause (c) is well established and is the source of authority for the Regulations, along with Sections 42 and 181. (¶¶ 42.1, 44, 67)
Section 181, Electricity Act, 2003Empowers State Commissions to make regulations consistent with the Act, including conditions for open access, charges and fair access to intra-state networks; the Regulations of 2016 were framed within the competence conferred by Section 181 read with Section 42. (¶¶ 1, 42.1, 49, 64, 67, 68)
Section 9, Electricity Act, 2003Recognises the right to construct and operate a captive generating plant and, under sub-section (2), a right to open access to carry captive electricity to the destination of use, but the proviso to sub-section (1) makes supply through the grid regulable in the same manner as a generating station, and the right does not exempt captive generators from open access regulations under Section 42 or from grid discipline. (¶¶ 24, 25, 42.1, 59, 60, 63)
Sections 2(15), 2(17), 2(36) and 2(47), Electricity Act, 2003'Open access' is non-discriminatory use of transmission or distribution systems in accordance with regulations of the Appropriate Commission and covers both inter- and intra-state transactions without distinction; since a 'consumer' is supplied by a 'distribution licensee' operating within a State, regulation of open access for consumers falls within the State Commission's jurisdiction. The appellants' reliance on the definition of inter-state transmission system did not alter this. (¶¶ 15, 20, 42.1, 48)
Sections 32 and 33, Electricity Act, 2003State Load Despatch Centres are responsible for scheduling, despatch and real-time grid control within the State and may issue binding directions; these provisions support safeguards against unregulated deviations, so penalties for drawal variations serve grid security. (¶¶ 42.1, 52)
Regulation 21, Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016Unscheduled interchange pricing: under-injection and over-drawal against the SLDC-approved schedule are settled at the higher of the CERC deviation rate or the temporary HT tariff, over-injection within limits is compensated at the lower rate, and under-drawal is not compensated. Held neither arbitrary nor discriminatory: it applies uniformly to all open access generators, and any differential treatment of captive generators vis-a-vis DISCOMs, which carry universal supply obligations, rests on a rational basis. (¶¶ 25, 26, 42.2, 59, 60, 61, 62)
Regulation 26(7), Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016For short-term inter-state open access including power-exchange purchases, the consumer must schedule for the full 24 hours, intimate block-wise maximum power before 10 AM of the preceding day, keep the schedule uniform for at least eight hours with a minimum of 75% of the day's maximum, and the schedule caps admissible drawal from the DISCOM. Upheld as a reasonable procedural safeguard that applies uniformly, gives licensees and load despatch centres time to adjust, deters speculative trading, and leaves urgent procurement through the real-time and day-ahead markets available. (¶¶ 14, 42.2, 56, 57, 58)
Regulations 26(3), 26(8), 5 and 6, Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016Regulation 26(3) restricts total drawal from all sources to the sanctioned contract demand (with provisos for captive supply and long-term open access) and 26(8) bills excess drawal as excess capacity under Regulation 21(v); Regulations 5 and 6 preserve existing arrangements of licensees and existing consumers. The appellants cited Regulations 5 and 6 as exempting State generators; the Court found no evidence that captive generators were singled out. (¶¶ 5, 26, 42.2, 59)
Seventh Schedule, List I Entry 23, List II Entry 59, List III Entry 38, Constitution of IndiaThe Court accepted the analogy that National Highways, a Union subject, are nonetheless subject to State tolls as they pass through States; likewise electricity (a concurrent subject) wheeled from outside and distributed within the State may be regulated by State regulations without any excess of jurisdiction. (¶ 46)

Held

The Act of 2003 distinguishes the functions of the Central and State Commissions: inter-state transmission falls to the CERC under Section 79(1)(c), while intra-state transmission and distribution fall to the State Commission under Section 86(1)(c). The Regulations of 2016 do not regulate inter-state transmission as such but ensure that transactions affecting the Rajasthan grid remain under State oversight. The key determinant is not the source of the power but its delivery, end-user and consumption within the State's intra-state grid; the RERC therefore retains jurisdiction over intra-state aspects of open access transactions even where the electricity originates in another State, and the plea of extra-territorial operation is misplaced. (¶¶ 44, 45, 46, 47, 48, 49, 50)
Penalties for variations in drawal from contracted demand are a regulatory measure to secure grid stability and prevent commercial gaming. The Act guarantees non-discriminatory open access but does not exempt consumers from conditions essential to the functioning of the network; uncontrolled deviations cause frequency imbalances, Sections 32 and 33 empower load despatch centres to guard against them, and the regulations apply uniformly to all open access consumers. The principle of open access is not absolute and the penalties are not an unreasonable restriction. (¶¶ 51, 52, 53, 54)
The 24-hour advance notice for short-term inter-state open access under Regulation 26(7) is a reasonable procedural safeguard consistent with the structured approach to open access in Section 42: it gives licensees and load despatch centres time to adjust schedules, prevents speculative trading on real-time price fluctuations rather than demand-based procurement, applies uniformly, and does not bar urgent procurement, which remains available through the real-time and day-ahead markets. It is within the State Commission's regulatory domain and not ultra vires. (¶¶ 55, 56, 57, 58)
Regulation 21 is neither arbitrary nor discriminatory. The regulations apply uniformly to all generators availing open access; Section 9 recognises captive generation but does not exempt captive plants from open access regulations under Section 42; and the distinction between captive generators (who generate for self-consumption) and DISCOMs (who serve a wide consumer base with universal supply obligations) arises from structural differences in their roles. Non-discrimination under the Act requires a rational basis for differentiation, not identical treatment of all entities. (¶¶ 59, 60, 61, 62)
The Regulations of 2016 do not foreclose the right to open access but prescribe conditions (advance scheduling, deviation penalties, conditions for captive generators) for its fair, predictable and non-disruptive implementation; open access remains available to consumers who meet the scheduling and financial prerequisites, which is consistent with the legislative intent of the Act. (¶¶ 63, 64, 65)
Regulations framed by a State Commission must serve the larger public interest; the respondents established that the impugned regulations do so by ensuring equitable treatment of market participants and safeguarding grid integrity. Inconvenience or hardship to captive generators does not render the regulations illegal, and the appellants failed to show infringement of Part III rights, lack of competence, or manifest arbitrariness. (¶¶ 66, 67, 68)

Result

All three appeals dismissed. The Jodhpur Bench judgment dated 29.08.2016 and the Jaipur Bench judgment dated 06.09.2016 of the Rajasthan High Court upholding the validity of the RERC (Terms and Conditions for Open Access) Regulations, 2016 are affirmed.