Torrent Power Case: Supreme Court Clarifies Scope of Electricity Regulatory Commission Jurisdiction Under the Electricity Act, 2003

Introduction

In Torrent Power Ltd. v. U.P. Electricity Regulatory Commission & Ors[1]., the Supreme Court set clear boundaries for what electricity regulators (ERCs) can and cannot do.

The Court ruled that an ERC can’t take up a case just because it’s labeled a “public interest” issue. The regulator is only allowed to consider public interest for the specific jobs the law assigns it, like setting electricity prices or managing the main power companies.

The judgment establishes a critical distinction: regulatory authority is confined to the licensees. The Court affirmed that there is no direct oversight of franchisees, placing the responsibility for their conduct squarely on the licensee.

Summary

The Court clarified that electricity regulators get their power strictly from the law and cannot overstep their written authority. The concept of “public interest” is not a free pass; it can only be considered for the specific functions the Act allows. Investigations are limited to the main, licensed companies and require initial proof that rules were broken. As agents of these companies, franchisees cannot be directly regulated or investigated. Any oversight must be managed through the licensee that hired them. As a result, Torrent Power’s appeal was successful, and the lower court orders were cancelled.

Facts

The case started when a third party filed a complaint with the state electricity regulator (UPERC). The complaint was alleged that the agreement between Torrent Power, the local operator (franchisee), and DVVNL, the main power company (licensee) that the latter had handed over its utility work to Torrent Power without getting the regulator’s permission first, which was against the rules. UPERC agreed to take the case, calling it a matter of public interest, and launched an investigation into Torrent Power’s role, even forming a special committee to review its performance.

Torrent Power appealed to the Appellate Tribunal for Electricity (APTEL), which observed that ERCs cannot entertain public interest litigations but held the petition maintainable as it did not consider it to be a PIL. APTEL also held that ERCs have regulatory oversight over distribution licensees, including their arrangements with franchisees. Torrent Power then approached the Supreme Court.

Issues

The issues before the Court were:

1. Whether an individual can invoke the jurisdiction of a State ERC on the plea of public interest.
2. Whether ERCs have jurisdiction to review the functioning of a distribution licensee supplying electricity through a franchisee.

Analysis

Two important aspects of the authority of Electricity Regulatory Commissions (ERCs) are clarified by this court decision. First, the Court decided that the Electricity Act of 2003 gave ERCs certain, restricted powers. Their primary function is to serve as a tribunal for matters outlined in Sections 79 and 86 of the Act, which mainly address matters such as approving power purchases and establishing tariffs. However, their power does not extend to handling consumer disputes, even if the issue is a matter of “public interest.” The Court made it clear that a different set of forums, created under Section 42(5), are the only ones with the authority to resolve consumer complaints.

The Court also noted that a petition filed under Section 128, which allows an ERC to investigate a power company, can only happen if there’s clear evidence the company failed to follow its license terms or broke a law. Since the person who filed the petition in this case didn’t provide any such evidence, the investigation was not allowed.

Second, the Court clarified that ERCs have no direct authority over franchisees. Under the law, a franchisee is simply a company that a licensee hires to distribute electricity for them. The original licensee is the one who remains legally responsible for providing power to the area. Because of this, ERCs can only oversee franchisees indirectly by supervising the licensee’s actions. An investigation under Section 128 can only be directed at the licensee, not the franchisee. The Court concluded that the UPERC and APTEL (two regulatory bodies) cannot get involved in the day-to-day operations of a franchisee.

Judgment

The Court sided with the appeal, striking down the previous orders from both APTEL and UPERC. It made clear that electricity regulators (ERCs) can’t just step into a situation because they deem it a matter of “public interest”; they must have a specific legal reason to act.

The ruling establishes that formal investigations are reserved for the primary, licensed companies and require substantive proof of a breach. It places franchisees outside the direct jurisdiction of the regulator by defining them as the licensee’s agents. The establishment of an Expert Committee on the subject was unnecessary due to the licensee’s management of the indirect oversight principle.

Conclusion

This ruling provides clarification on the extent of the jurisdiction and powers of Electricity Regulatory Commissions (ERCs), ensuring that their actions remain within the legal boundaries established by the Electricity Act, 2003. The judgment reiterates that the ERC’s authority is finds its roots in the statute and that the same cannot be expanded on the general grounds of “public interest”. It further holds that jurisdiction must be expressly conferred by law and cannot be assumed.

[1] CIVIL APPEAL NO. 23514 OF 2017.