Supreme Court Upholds CERC’s Authority to Award Compensation Under Section 79 of the Electricity Act

Summary:

The Supreme Court in the case of Power Grid Corporation of India Limited v. Madhya Pradesh Power Transmission Company Limited & Ors[1]. upheld the Central Electricity Regulatory Commission’s authority under Section 79 of the Electricity Act, 2003, to award compensation for delays in inter‑state transmission projects. The bench of Justices J.B. Pardiwala and R. Mahadevan ruled that CERC’s power is regulatory and extends to issuing case‑specific orders in the absence of general regulations under Section 178. The dispute arose from delay by Madhya Pradesh Power Transmission Company Limited (MPPTCL) in completing downstream intra‑state transmission works, which prevented Power Grid Corporation of India Limited (PGCIL) from operationalizing the inter‑state transmission line at the Indore substation.

Case Timeline:

On 21 January 2020, CERC issued an order imposing liability on MPPTCL to compensate PGCIL for revenue loss due to delay in completion of intra‑state transmission works. On 27 January 2020, CERC issued a supplementary order clarifying the calculation of compensation. MPPTCL filed a writ petition in the High Court of Madhya Pradesh challenging CERC’s orders on jurisdictional grounds. The High Court admitted the writ petition, stayed CERC’s orders, and directed further hearing on jurisdictional issue. PGCIL filed a Special Leave Petition in the Supreme Court against the High Court order.

Issue raised:

The core issue was whether CERC could exercise its regulatory powers under Section 79(1) of the Electricity Act, 2003, to award compensation for delay in inter‑state transmission works in the absence of a regulation framed under Section 178. MPPTCL contended that CERC’s power under Section 79 is limited to rule‑making and general regulation and does not extend to case‑specific orders imposing compensation where no regulation exists.

Arguments:

PGCIL submitted that Section 79(1) vests CERC with broad powers to issue regulations and orders necessary for achieving the objects of the Electricity Act, 2003. PGCIL relied on Airports Economic Regulatory Authority of India v. Delhi International Airport Ltd. to demonstrate that regulatory bodies may issue case‑specific orders to fill gaps where general regulations are not yet in place. PGCIL cited Energy Watchdog v. CERC to show that the absence of regulations under Section 178 does not tie CERC’s hands when a regulatory lacuna arises. PGCIL argued that CERC’s orders of January 2020 were valid exercises of its regulatory power and that CERC had followed the Tariff Regulations to calculate compensation.

MPPTCL argued that CERC’s power of regulation under Section 79 is distinct from adjudicatory power and that it cannot create a regulation by way of order in a specific dispute. MPPTCL relied on the proposition that a regulation must be framed through the process prescribed in Section 178 and that orders cannot substitute for regulations. MPPTCL submitted that CERC’s imposition of liability in the absence of a regulation under Section 178 amounted to exceeding its jurisdiction. MPPTCL noted that the 2014 Tariff Regulations do not provide for payment of transmission charges by the party responsible for delay and that CERC should have awaited framing of a regulation.

Judgment:

The Supreme Court allowed the appeal and set aside the High Court order. The Court ruled that under Section 79(1), CERC has the authority to promulgate regulations and orders to execute and implement its functions under the Act. The Court dismissed such submission by placing reliance on the AERA decision that the regulatory power of CERC is not confined only to rule making under Section 178. The Court determined that if there was no rule on a point, CERC can exercise power under Section 79 (1) to make such orders as may be appropriate having due regard to the facts and circumstances of the case coming before it. The Court found that CERC’s orders of January 2020 were a valid exercise of power and that CERC had not exceeded its jurisdiction. The appeal was allowed and CERC’s orders were restored.

Analysis:

The ruling has also clarified the powers of the regulator under Section 79 of the Electricity Act 2003. It clarifies that, as part of the regulatory powers, orders can be made on a case‑by‑case basis where a regulation has not been made under Section 178. The ruling is consistent with precedents that allow regulators to fill gaps where the rulebook is not precise. In justifying this construction, the Court explained that “it is not unusual, in regulatory programs, to clothe an agency with a certain amount of discretion to make things work” AERA and Energy Watchdog. The judgment deals with the relation between rule-making and adjudication by the differentiation of functions in Sections 79 and 178.

It highlights that framing of regulations may not always precede regulatory action where urgent or specific issues arise. The decision may influence future disputes on regulatory authority in the energy sector. It reinforces CERC’s ability to manage inter‑state transmission projects by providing remedies for delays. The judgment promotes certainty for project developers by upholding compensation mechanisms where institutional gaps exist. The ruling also signals that High Courts should exercise caution in admitting writ petitions that challenge regulator orders on jurisdictional grounds when the statutory scheme envisages direct remedy under the statute.

Conclusion:

The judgment confirms that CERC may use its power under Section 79(1) to address gaps in the regulatory framework by issuing case‑specific orders where no regulation under Section 178 exists. The ruling restores CERC’s orders and ensures that delays in inter‑state transmission projects can attract compensation through direct regulatory action.

[1] Civil Appeal No. 6847 of 2025.