Electricity Act, 2003 | Supreme Court Upholds State Commissions’ Authority to Regulate Open Access Impacting Intra-State Grids
Kiran Raj
The Supreme Court Bench Division Bench comprising Justice Vikram Nath and Justice Prasanna B. Varale dismissed civil appeals challenging the validity of certain provisions in the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016. The Court upheld the decisions of the Rajasthan High Court, which had sustained the legality of Regulation 21 and sub-regulation (7) of Regulation 26. It held that the State Commission acted within its statutory powers under the Electricity Act, 2003. The Court found no basis to interfere and concluded that the appellants failed to establish any constitutional or statutory infirmity in the regulatory framework enacted for intra-state transmission and open access management.
The case concerned the Rajasthan Electricity Regulatory Commission (Terms and Conditions for Open Access) Regulations, 2016. The petitioners, who included captive power plant operators and industrial consumers, challenged Regulation 21, which imposed banking charges, and sub-regulation (7) of Regulation 26, which required certain consumers to apply for short-term open access only. They argued that these restrictions violated their statutory rights under Sections 9 and 42 of the Electricity Act, 2003.
The appellants submitted that captive generating plants have a statutory right to open access for carrying electricity to the point of use. They argued that imposing conditions such as exclusive categorisation under short-term open access or requiring compulsory scheduling through State Load Despatch Centres interfered with this right. They submitted that “a captive user cannot be compelled to apply for short-term open access.” Further, it was contended that banking charges lacked statutory backing and constituted an unreasonable financial burden on captive and open access consumers.
It was argued that the Electricity Act confers a centralised framework for regulating inter-State and intra-State open access, and that the RERC had acted beyond its jurisdiction by imposing operational restrictions and cost components not contemplated in the Act. The petitioners submitted that their rights under Part III of the Constitution were infringed and that the regulatory framework deviated from the purpose of encouraging non-discriminatory open access.
The respondents, including the State Commission, Load Despatch Centres, and the State, defended the legality of the regulations. They submitted that the State Commission had full authority under Sections 42(2), 86(1)(c), and 181 to make regulations for the facilitation of open access, subject to technical, commercial, and system-based requirements. It was stated that “banking arrangements and charges form part of the commercial architecture of power systems, and their regulation falls within the domain of the State Commission.”
It was further submitted that the classification of open access categories was not arbitrary but based on operational considerations. The respondents stated that “compliance with SLDC instructions ensures optimal dispatch and prevents grid disturbances,” and that limitations on drawal and scheduling were necessary for system stability. They also pointed out that the impugned regulations did not prohibit access but merely laid down conditions under which it could be granted.
The Rajasthan High Court, in two separate orders passed by its Jodhpur and Jaipur Benches, had upheld the validity of the regulations. It held that the Commission was well within its powers to regulate open access, that the classifications adopted were reasonable, and that the conditions imposed were in line with the object and purpose of the Electricity Act, 2003.
The Supreme Court examined the legislative and regulatory scheme under the Electricity Act, 2003. It recorded that the Act creates a federal structure with distinct responsibilities for Central and State Commissions. It noted that “the Electricity Act, 2003 creates a harmonious but distinct regulatory structure allocating responsibilities between the Central and State Commissions.”
On the right to open access, the Court held that the provision under Section 9(2) for captive use is subject to regulatory control and cannot be considered absolute. It stated that “open access consumers cannot be permitted to bypass the established mechanisms designed to maintain grid discipline and system integrity.”
The Court addressed the challenge to Regulation 21 and banking charges. It held that such charges, where reasonably fixed and transparently accounted for, form part of the commercial balance required for the functioning of the power sector. It observed that “the requirement for scheduling, imposition of penalties, and limits on drawal are not arbitrary but are measures falling within the regulatory ambit of the Commission to ensure grid stability and fair competition.”
With regard to Regulation 26(7), the Court held that captive users being routed through short-term access channels did not in itself create a ground for unconstitutionality. It stated, “the mere fact that different categories of users are subjected to differential regulatory treatment does not amount to discrimination where the classification is based on rational and objective criteria.”
The Court found no conflict between the State regulations and those framed by the Central Commission, stating that “there is no inconsistency between the State Regulations and the CERC framework as both operate in separate and defined spheres—inter-State and intra-State.”
The Court further examined the purpose and structure of delegated legislation under Section 181 and stated that “regulations framed under Section 181 of the Act of 2003 must operate within the four corners of the statute, but are presumed valid unless shown to be manifestly arbitrary or lacking legislative authority.”
The Supreme Court dismissed all appeals and upheld the 2016 Regulations in full. It held that the State Commission had acted within its legislative competence under the Electricity Act, 2003. The Court stated, “the statutory scheme under the Act of 2003 mandates that regulations framed by State Commissions must serve the larger public interest. The respondents have successfully established that the impugned regulations serve this purpose by ensuring equitable treatment of all market participants while safeguarding the integrity of the power grid.”
The Court recorded that “the RERC derives its authority from the Act of 2003, which vests in it the power to frame regulations governing open access, scheduling, and penalties. Section 86(1)(c) of the Act of 2003 specifically empowers State Commissions to facilitate intra-state transmission and wheeling of electricity.”
It further held that “the High Court also rightly pointed out that the appellants have failed to establish that the impugned regulations are in contravention of their rights protected under Part III or any other provision of the Constitution of India or that the regulations have been enacted without having the competence to do so or they are manifestly arbitrary or unreasonable.”
The Court concluded by stating, “the Jaipur Bench in its order dated 06.09.2016, which has been challenged before us in Civil Appeal No. 7964 of 2019, has rightly held that the issues before it, were squarely covered by the order of Jodhpur Bench.”
Advocates Representing the Parties
For the Appellants: Mr. Manu Seshadri, Advocate; Mr. Sahil Manganani, Advocate; Ms. Aakriti Gupta, Advocate; Mr. Siddhant Singh, Advocate; Mr. Nikunj Dayal, Advocate-on-Record; Mr. Kumar Mihir, Advocate-on-Record; Mr. Athul Joseph, Advocate; Mr. Gunjan Sharma, Advocate; Mr. Harshal Kumar, Advocate
For the Respondents: Dr. Rupesh Singh, Advocate; Mr. Guru Prasad Singh, Advocate; Mr. Satya Veer Singh, Advocate-on-Record; Mr. Zoheb Hossain, Advocate-on-Record; Mr. Milind Kumar, Advocate-on-Record; Ms. Pratibha Jain, Advocate-on-Record; Mr. Pallav Mongia, Advocate-on-Record
Case Title: Ramayana Ispat Pvt. Ltd. & Anr. v. State of Rajasthan & Ors.
Neutral Citation: 2025 INSC 424
Case Number: Civil Appeal No. 7964 of 2019 etc.
Bench: Justice Vikram Nath, Justice Prasanna B. Varale
[Read/Download order]
