State Electricity Regulatory Commissions Empowered to Regulate Inter-State Power Affecting State Grids: Supreme Court

Summary:

The Supreme Court in the case of Ramayana Ispat Pvt. Ltd. & anr. vs. State of Rajasthan & Ors[1]. considered whether a State Electricity Regulatory Commission may impose conditions on open access for power procured from other states when that power enters and affects its own grid. The Court held that, although the Central Electricity Regulatory Commission has exclusive authority over inter‑state transmission under Section 79(1)(c) of the Electricity Act, 2003, State Commissions retain jurisdiction to regulate the intra‑state aspects of open access under Sections 42(2) and 42(3). It upheld the Rajasthan Open Access Regulations, 2016, which restricted the offsetting of power drawn under open access and contracted demand, and prescribed penalties for deviation.

Case Timeline:

Rajasthan Electricity Regulatory Commission had in the year 2016, promulgated the Open Acess Regualtion, wherein certain regulations were provided for quantum of open access drawal, which was to be separately accounted for and not reflected against Contract Demand, at each of the State Drawl Point and the penalties in case of over-drawal and under drawal, were to be prescribed. Challenges against these Regulations were rejected by the High Court of Rajasthan. The aggrieved people moved the Supreme Court.

Issue raised:

The sole issue was whether a State Commission may regulate open access for inter‑state electricity supply when such supply impacts the state’s grid network, or whether that regulatory power lies exclusively with the Central Commission.

Arguments:

The appellants argued that Section 79(1)(c) vests exclusive authority over inter‑state transmission and associated open access with the Central Commission. They contended that Regulation 26(7) of the 2016 Regulations effectively barred them from procuring power from other states by imposing a 24‑hour scheduling period, advance usage intimation, and a minimum consumption threshold of 75%. According to the appellants, these conditions exceeded the jurisdiction of a State Commission and infringed on the CERC’s exclusive powers.

The respondents maintained that Sections 42(2) and 42(3) expressly empower State Commissions to regulate open access within their territory to ensure non‑discriminatory access and to set conditions for the transmission and supply of electricity to consumers who choose generators other than the distribution licensee. They argued that once inter‑state power enters the Rajasthan grid, its distribution and related charges fall under the State Commission’s oversight, and the 2016 Regulations address only the intra‑state consequences of open access transactions.

Judgment:

The Supreme Court dismissed the appeal. It held that CERC’s jurisdiction over inter‑state transmission under Section 79(1)(c) does not oust a State Commission’s power to regulate intra‑state distribution and open access under Sections 42(2) and 42(3). The Court emphasized that the Rajasthan Regulations govern the impact of open access transactions on the state grid rather than inter‑state transmission itself. It concluded that the source of power is irrelevant; what matters is delivery and consumption within the state grid, which falls squarely within the State Commission’s remit.

Analysis:

The judgment clarifies the functional demarcation between central and state regulatory authorities. Inter‑state transmission remains under CERC’s exclusive domain, but the moment electricity enters a state’s distribution network, the State Commission may regulate scheduling, charges, and penalties to maintain network stability and equitable treatment of all consumers. By upholding the Rajasthan Regulations, the Court validated a regulatory framework that aligns statutory provisions with operational realities.

This interpretation upholds the Act’s decentralization principle, allowing State Commissions to tailor open access rules to local grid conditions and consumer interests. It also reinforces that open access comprises distinct transmission and distribution phases; CERC oversees the former, while SERCs govern the latter. Market participants must therefore comply with both sets of regulations in sequence.

The decision will guide future disputes over overlapping regulatory claims. It affirms that State Commissions need not defer entirely to the Central Commission when open access transactions affect their grids.

Conclusion:

State Commissions retain authority to regulate the intra‑state consequences of inter‑state open access transactions, ensuring grid discipline and consumer fairness once power enters the state network.

[1] Civil Appeal No.7964 of 2019.