On Wednesday, a division bench of the Supreme Court comprised of Chief Justice of India DY Chandrachud, Justice AS Bopanna, and Justice JB Pardiwala directed all State Electricity Regulatory Commissions to frame regulations on the terms and conditions for tariff determination under Section 181 of the Electricity Act 2003 within three months.

The Court also directed that, in developing these tariff guidelines, the Commission adhere to the principles outlined in Section 61 of the Electricity Act of 2003, which also includes the National Electricity Policy and the National Tariff Policy. Where State Commissions have already drafted such regulations, they must be amended to include criteria for selecting the modalities to determine the tariff, if they do not already exist.

"Further, the regulations framed must be in consonance with the objectives of the Electricity Act 2003 which is to enhance the investment of private stakeholders in the electricity regulator sector so as to create a sustainable and effective system of tariff determination that is cost-efficient so that benefits percolate to the end consumer",

The Court observed that the Electricity Act of 2003 provides sufficient flexibility to regulate the intra-state transmission system, and that State Commissions have the authority to determine and regulate tariffs. The Electricity Act does not specify a single dominant method for determining tariffs.

The issue in this case was the allocation of funds for the High Voltage Direct Transmission (HVDC) project. The Court observed that the Electricity Act, the National Tariff Policy, and the Maharashtra GOM decision dated February 4, 2019 did not bind the MERC to award the HVDC project solely through tariff-based competitive bidding. As a result, the Court determined that the MERC's decision to allot the HVDC project was a reasonable exercise of its authority and dismissed Tata Power Transmission Company's appeal.

Case: The Tata Power Transmission Company Ltd. vs. Maharashtra Electricity Regulatory Commission

Citation: C.A. No. 1933/2022