Jurisdiction Of State Electricity Regulatory Commissions With Respect To Open Access: Analysis Of Supreme Court’s Judgment In Ramayana Ispat Case

Jurisdiction Of State Electricity Regulatory Commissions With Respect To Open Access: Analysis Of Supreme Court’s Judgment In Ramayana Ispat Case

The Electricity Act, 2003 (Act) provides a comprehensive statutory framework that empowers the Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERC/State Commissions) to regulate the power sector—with CERC exercising jurisdiction over inter-state matters and SERCs overseeing intra-state affairs. The present article explores the jurisdiction of State Commissions qua Open Access energy drawal, in light of recent judgment of the Hon’ble Supreme Court in the case of Ramayana Ispat Private Limited and Another vs. State of Rajasthan and Others¹.

Background Of The Case

In the exercise of its powers under Section 42, read with Section 181 of the Act, the Rajasthan Electricity Regulatory Commission (RERC) notified the Open Access Regulations, 2016². These regulations, inter alia, established a penal framework for captive generators whose actual consumption deviated from their contracted demand with the distribution licensees. Furthermore, the regulations mandated a 24-hour prior notice as a condition precedent for drawing energy through Open Access.

Aggrieved by these provisions, several significant industrial power consumers in Rajasthan challenged the validity of these Regulations before the Rajasthan High Court. Vide orders dated 29.08.2016³ and 06.09.2016⁴, the Jodhpur and Jaipur benches of the Rajasthan High Court dismissed the appeals and upheld the validity of 2016 Regulations holding that RERC was empowered to regulate open access to ensure grid stability and efficient load distribution. Further, the High Court observed that the said Regulations have been notified with the objective to ensure that the consumers do not indulge in any gaming activities on the grid, and thus the rationale behind the Regulations of 2016 is to further the objectives of the Act of 2003 while ensuring that the interests of consumers as well as distribution licensees are balanced.

Aggrieved by the High Court's rulings, the industrial producers preferred Civil Appeals before the Hon’ble Supreme Court, wherein the Appellants contend that the RERC lacks the jurisdiction to restrict power drawal via Open Access for transactions utilizing inter-state transmission systems (ISTS). Since the transmission is inter-state, regulatory oversight falls exclusively within the domain of the CERC under Section 79(1)(c) of the Act⁵, thereby rendering the RERC’s limitations ultra vires

Issues Identified-

The following issues were identified in the present appeal-

1. Whether RERC has jurisdiction to regulate inter-state open access under the 2003 Act?
2. Whether the imposition of penalties for variations in drawal from contracted demand amounts to an unreasonable restriction on the right to open access under Section 42 of the 2003 Act⁶?
3. Whether Regulation 26(7)⁷ is ultra vires for requiring an advance notice of 24 hours a day prior, thereby preventing urgent procurement and creating an artificial barrier to open access as protected by the 2003 Act?
4. Whether the Appellants’ right to open access is foreclosed by the 2016 Regulations?
   
   

Findings of The Hon’ble Supreme Court

The Hon’ble Supreme Court ruled in favour of the Respondents and upheld the validity of the Open Access Regulations. The Apex Court further held that the RERC had the jurisdiction to regulate inter-state open access, as the ultimate consumption of the power generated outside the state was taking place within the state of Rajasthan. The Hon’ble Supreme Court quoted Section 79(1)(c) of the Electricity Act and Section 42(2) of the Act to clarify that the State level commissions such as RERC can regulate consumption of the electricity within their own respective territories. The Apex Court noted that the source of power generation being outside the RERC’s jurisdiction is not relevant considering that the consumption is taking place within RERC’s jurisdiction and through the Rajasthan state grid.

The Supreme Court also upheld the validity of penalties imposed on big consumers for variations in drawal of energy from the contracted demand. These penalties are designed to discourage inconsistent drawing of power and disturbing the stability of grid. The apex court held that these penalties are not an arbitrary measure, rather they seek to protect grid stability by imposing reasonable restrictions on all Open Access consumers, so that they draw power from the grid in a responsible and consistent manner.

With reasoning along similar lines, the Supreme Court upheld the validity of 24-hour advance notice requirement mandated under Regulation 26(7) of the 2016 Regulations. The Court observed that this regulation, which requires 24-hour notice for availing inter-state open access for short term, is not ultra vires of the Electricity Act, but rather a reasonable requirement for ensuring grid stability and scheduling of power.  The apex court noted that for stakeholders who wish to draw power from open access, a day-worth of time was sufficient to prepare a schedule for power supply. These stakeholders will anyways have the option of drawing power from market if they do so require.

The Supreme Court clarified that the 2016 Regulations cannot be held to be discriminatory or arbitrary as they simply impose reasonable restrictions on consumers with the aim to ensure stability of grid, maintain fair distribution and pricing of power supplied to consumers on all levels and conserve the economic viability of the system, therefore complying with the legislative intent of the Electricity Act.

The present judgment has provided significant clarifications regarding the jurisdiction of State Commissions (such as the RERC in the present case). The decision has carefully justified the imposition of reasonable restrictions on consumers who try to draw power from Distribution Licensees and Open Access without any limitations and in accordance with their own financial benefit, consequently threatening the stability of the state grid.

The present judgment of the Supreme Court further cemented the distinction between the jurisdiction of CERC and SERCs such as the RERC in present case. It clarified that the CERC exercises authority over inter-state transmission, but such exercise of authority will not prevent the State Commissions from making laws for regulation of those aspects of inter-state transmission which affect the stability of grid within the state’s territory or the interests of the general consumers in the said state. The Court further relied upon Section 42(2) of the Electricity Act to establish the State Commission’s jurisdiction over ensuring fair access to power supply for general public.

The decision in this case clarifies that Electricity Act aims to establish balance between rights of consumers and operational requirements of the electricity market. The Supreme Court has upheld that validity of the 2016 Regulations and simultaneously held that these regulations merely aim to reduce demand fluctuations which will be detrimental to grid stability.

Conclusion-

The present judgment establishes the jurisdiction of State Commissions over intra-state Open Access, and further clarifies that intra-state Open Access is not just restricted to distribution of electricity originating from within the state territory, but rather extends to distribution of electricity which is generated outside of the state, but delivered and consumed within the said state territory.

Consequently, the State Commissions will now have jurisdiction over certain aspects of power generated outside of their territory, as long as such power is ultimately consumed within their own territorial jurisdiction. State Commissions are now, therefore, empowered to manage grid operations and protect the interests of local consumers regardless of the source of power generation.

This judgment therefore reinforces the legislative intent of Electricity Act as the guiding principle behind state level rules and regulations, and as such the 2016 Open Access Regulations which seek to balance the interests of industrial producers and the security of grid infrastructure will be considered in conformity with the legislative intent of Electricity Act and therefore, valid.

Footnotes

^{1 Ramayana Ispat Private Limited and Another vs. State of Rajasthan and Others (2025) 8 Supreme Court Cases 747}

^{2 RERC (Terms and Conditions for Open Access) Regulations 2016}

^{3 Hindustan Zinc Ltd. vs. Rajasthan ERC 2016 SCC OnLine Raj 5715}

^{4 Kiwi Alloys Ltd. vs. State of Rajasthan 2016 SCC OnLine Raj 9474}

^{5 Electricity Act 2003, Section 79(1)(c)}

^{6 Electricity Act 2003, Section 42}

^{7 RERC (Terms and Conditions for Open Access) Regulations 2016, Regulation 26(7)}

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