Supreme Court Clarifies Powers of Electricity Regulatory Commissions: No Jurisdiction Solely on Public Interest, No Direct Oversight over Franchisees

Summary

In a recent decision that impacts the governance of electricity as well as the administrative framework supervising it, the supreme court ruled that Electricity Regulatory Commissions (ERCs) cannot take up matters on the basis of public interest unless specially provided under the Electricity Act, 2003. It also added that ERCs do not have direct regulatory jurisdiction over distribution franchisees—such franchisee oversight must be conducted solely through the licensed distribution companies.

Case Timeline

• DFA Execution: Torrent Power was appointed a distribution franchisee by a distribution licensee for Agra’s urban area.
• UPERC Petition: A third party filed a petition before the Uttar Pradesh Electricity Regulatory Commission (UPERC) alleging irregularities in the appointment.
• UPERC Ruling: UPERC held the petition maintainable and ordered an investigation.
• APTEL Appeal: The Appellate Tribunal for Electricity (APTEL) partly upheld UPERC’s jurisdiction.
• Supreme Court: Torrent Power challenged APTEL’s order. The apex court delivered its verdict on 15 July 2025.

Issues Raised

1. Can a State Electricity Regulatory Commission entertain a petition purely on the ground of public interest?
2. Do ERCs have jurisdiction to directly regulate or investigate the actions of a distribution franchisee?

Appellant’s Arguments (Torrent Power Ltd.)

• Public interest alone cannot form the basis for jurisdiction before ERCs.
• Cited MERC v. Reliance Energy Ltd., arguing that consumer grievance forums—not ERCs—are competent to handle such disputes.
• Contended that UPERC overstepped its powers by ordering an investigation without proper statutory basis.

Respondent’s Arguments

• The petition under Section 128 of the Electricity Act was maintainable as it involved the conduct of the licensee in transferring operations to a franchisee.
• Asserted that UPERC has regulatory oversight powers that indirectly extend to franchisee arrangements.
• Maintained that the investigation was justified in the interest of consumers.

Judgment

The Supreme Court allowed the appeal and set aside APTEL’s order. Key takeaways include:

• Public Interest Not a Standalone Ground: ERCs cannot entertain matters solely based on public interest unless such jurisdiction is expressly conferred by statute.
• Limited Scope Under Section 128: Investigations under Section 128 must meet the statutory threshold—violations of license terms or provisions of the Electricity Act. Mere allegations without material grounds are insufficient.
• No Direct Oversight over Franchisees: The Court clarified that ERCs do not have direct regulatory authority over franchisees. Oversight is only permissible via the licensed distribution company, adhering to the agency principle.

Analysis

This decision clearly delineates the limits regarding the jurisdiction of the Electricity Regulatory Commissions. It highlights the fact that quasi-judicial regulators cannot transcend the boundaries of legislated confines. The court’s emphasis on indirect-only supervision regarding franchisees helps untangle the convoluted regulatory framework of publicly-private partnered electric distribution systems.

This decision also resolves some ambiguity surrounding the investigations under Section 128, suggesting that such frameworks cannot be employed as a means to resolve consumer disputes that ERC does not have jurisdiction over.