Ruling that the National Tariff Policy (NTP) is not binding on the electricity regulatory commissions, the Supreme Court on Wednesday held that tariff determination falls within the exclusive domain of the state regulatory commissions, and directed them to frame pertinent regulations for determination of power tariff within a period of three months.

A bench, headed by Chief Justice of India Dhananjaya Y Chandrachud, noted that although the 2003 Electricity Act aimed at providing the states with sufficient flexibility to regulate the intrastate electricity system and simultaneously empower the regulatory commissions for determining tariffs, the commissions had not framed the relevant regulations.

“The determination of tariff and framing regulations for the determination of tariff fall within the exclusive domain of the appropriate commission…We direct all state regulatory commissions to frame regulations under Section 181 of the Act on the terms and conditions for determination of tariff within three months from the date of this judgment,” directed the bench, which also included justices AS Bopanna and JB Pardiwala.

The order came as the court dismissed the appeal of Tata Power Company Limited Transmission, challenging award of 7,000 crore Maharashtra Electricity Regulatory Commission transmission (MERC) contract to Adani Electricity Mumbai Infra Limited (AEMIL). The power company under Tata Group had challenged the awarding of the infrastructure project without a tariff-based competitive bidding.

The top court, in its judgment, held that MERC was at liberty to allot the project without a competitive bidding under its general regulatory powers since the state commission was yet to frame regulations or notify guidelines prescribing the criteria for choosing the modalities to determine tariff.

Besides, the bench noted that MERC cannot be bound by either the National Electricity Policy (NEP) or the NTP since “the determination and regulation of tariff falls within the exclusive domain of the regulatory commission”. The NEP and NTP can be one of the guiding factors for the commission while framing regulations and fixing tariff, it said.

While framing these guidelines on determination of tariff, the court said, the appropriate commission shall be guided by the principles prescribed in Section 61, which also includes the NEP and NTP.

Section 61 stipulates that the appropriate commission shall specify the terms and conditions for the determination of tariff. Section 181 lays down that the commission shall frame regulations consistent with the Act and the rules framed by the state government.

“The Commissions while being guided by the principles contained in Section 61 shall effectuate a balance that would create a sustainable model of electricity regulation in the States. The regulatory commission shall curate to the specific needs of the State while framing these regulations,” said the bench.

It added that the regulations framed must be in consonance with the objective of the 2003 Act, which is to enhance the investment of private stakeholders in the electricity regulatory sector so as to create a sustainable and effective system of tariff determination that is cost efficient so that such benefits percolate to the end consumers.

Tata Power was in the Supreme Court in appeal against an order of the Appellate Tribunal for Electricity (APTEL). The APTEL had on February 18 dismissed the plea of TPC-T against the grant of electricity transmission license to AEMIL by MERC in March 2021. The MERC had granted the transmission licence to AEMIL for setting up a 1000 MW high voltage direct current link between Kudus and Aarey station in Mumbai.

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