The State of Himachal Pradesh & Anr. vs JSW Hydro Energy Limited & Ors.

3 nor the context in which it appears in the CERC Regulations, 2019 supports respondent no. 1’s contention that the legal effect of this cap is to override its contractual obligations with the appellantState – On the other hand, use of the term “shall be taken as 13% or actual, whichever is less” shows that the Regulations cover a situation where the obligation to supply free power is higher than 13%, and in such an eventuality, allow only a certain portion of free supply to be considered for tariff determination and payments by beneficiaries for the saleable capacity – Once the Regulation does not prohibit the supply of free power beyond 13%, respondent no. 1 cannot rely on it to wriggle out of its contractual obligations – The Regulatory Commissions, APTEL, and the Courts must enforce these contractual obligations and ensure that their interpretation of regulations does not allow the party to circumvent and breach its contractual undertakings when the same is not intended by the regulation itself. [Paras 19, 20]

2. This Court holds that CERC Regulations, 2019 do not prohibit respondent no. 1 from supplying free power beyond 13% to the appellant-State, and the Implementation Agreement does not stand overridden by the operation of these Regulations – Further, a writ petition before the High Court for aligning the Implementation Agreement with the CERC Regulations, 2019 and the CERC’s order dated 17.03.2022 is not maintainable – Once respondent no.1’s prayer for relief was rejected by the CERC and it specifically held only the PPA and PSAs to stand overridden, which finding was not further appealed, it would not be open for respondent no. 1 to seek modification of the Implementation Agreement by way of a writ petition before the High Court. [Para 40] Electricity Act, 2003 – Writ Jurisdiction of High Court – Whether the writ petition before the High Court for aligning the Implementation Agreement with the CERC Regulations, 2019 and the CERC’s order dated 17.03.2022 is maintainable: Held: Under the Electricity Act, the statutory regulator has been entrusted with discharging the function of tariff determination, including making regulations for the purpose and interpreting the same – Constitutional courts must enable the regulator to comprehensively regulate all aspects of the sector such that remedies are not fragmented and certain issues are not left outside the regulator’s domain – The regulator has the expertise, specialisation, and institutional memory to conduct such an interpretative exercise to further the objective of the regulatory regime and systematically lay down legal principles – In this light, the High Court should not have entered into the domain of interpreting these Regulations which deal with tariff determination, as the same falls within the exclusive domain of the CERC – The Electricity Act itself provides the appellate mechanisms by establishing a specialised and permanent tribunal, namely the APTEL, and an appeal before this Court, against the CERC’s orders – In view of the existence of a statutory regulatory forum, the High Court should not have entertained the writ petition by interpreting the CERC Regulations, 2019 – Therefore, a writ petition before the High Court for aligning the Implementation Agreement with the CERC Regulations, 2019 and the CERC’s order dated 17.03.2022 is not maintainable. [Paras 38, 40]

Electricity Act, 2003 – A complete and comprehensive code: Held: The Electricity Act, 2003 is a complete and comprehensive code for regulating the generation, transmission, distribution, trading and use of electricity – One of the core features of the Act is that it unbundles the functions of electricity generation, transmission, and distribution that were erstwhile performed by State Electricity Boards into separate utilities, and provides for their regulation through independent Regulatory Commissions. [Para 7] Electricity Act, 2003 – Electricity Regulatory Commissions Act, 1998 – Need for an independent and transparent regulatory mechanism:

Held: The need for an independent and transparent regulatory mechanism was felt due to the regulatory failures under the erstwhile legal regime, wherein SEBs constituted by the State Governments were entrusted with regulation – It was experienced that various problems plagued the power sector, including lack of rational retail tariffs, high level of cross-subsidies, poor planning and operation, inadequate capacity, neglect of consumer interest, and limited involvement of the private sector’s skills and resources – It is in this context that the Electricity Regulatory Commissions Act, 1998 was enacted to reform the governance of the sector by establishing an independent and transparent regulatory mechanism – Thereafter, the Electricity Act, 2003 was enacted as a comprehensive legislation for regulating the sector and it replaced the Electricity Act, 1910, Electricity Supply Act, 1948 and the 1998 Act [Para 8] Electricity Act, 2003 – Regulation of Electricity Generation Under the Electricity Act – Discussed. [Paras 11 to 14] Electricity Act, 2003 – CERC Regulations, 2019 – Interpretation of – Discussed. [Para 15]