One Nation, One Grid: Kerala High Court upholds constitutionality of Central Electricity Regulatory Commission Regulations 2020

The Kerala High Court on Wednesday rejected a challenge to the Central Electricity Regulatory Commission Regulations (Sharing of Inter-State Transmission Charges & Losses), 2020. (KSEB v. CERC).The Kerala State Electricity Board (KSEB) approached the High Court contending that the Regulations operated unfairly against electricity distribution licencees in the south zone. .A Single Judge Bench of Justice AK Jayasankaran Nambiar pronounced judgment in the matter on Wednesday, finding that there was no reason for the Court to interfere with the policy decidion of the CERC in this case. .In his introduction, Justice Nambiar humorously records his unfamiliarity in the realm of electricity transmission, which he describes as "the privileged domain of electrical engineers"..Every once in a while, an unsuspecting judge opens a case file, only to find himself dragged into an unfathomable ocean of technical gobbledygook.Justice AK Jayasankaran Nambiar.As explained in the judgment, the Sharing Regulation "essentially prescribes a formula for the sharing of yearly transmission charges and losses among the various users of the Inter-State Transmission System Network". .The network gains relevance where an electricity consumer and the power generating company are located in different States, the judgment enunciates..Forced to shoulder a heavy financial burden: KSEB.The KSEB, a power distribution licensee, primarily contended that the Regulations deviated from the criteria previously adopted in fixing rates and tariffs for inter-State distribution of electricity. .KSEB, while arguing that the new regulations operated against the Electricity Act, 2003 and the National Tariff Policy, also challenged the legislation as being discriminatory. .While transmission charges before the 2020 Regulations were based on the geographical location of the generating company, the Regulations now made the transmission charges dependent on their 'Long Term Access', it was submitted..The main thrust of the arguments was against the reduction of 'shared' charges based on the component of usage from around 80% down to 20%. .The bulk of the charges are based on 'contracted' capacity, and bear little relation to the geographical location of power generators on the power grid, the KSEB stated, as a result of which they were forced to bear higher charges..The non-acceptance of the recommendations of a taskforce under the Chairmanship of AS Bakshi of the CERC was also cited as an example of mala fides..The CERC's rebuttal.The Central Electricty Regulatory Commission (CERC) claimed that the charges were not tariffs, but a species of 'shared charges', and therefore the Tariff Policy would not apply..The changes to the policy were made considering the recommendations of a task force under the Chairmanship of AS Bakshi and a subsequent report by the IS Jha Committee. The Jha Committee Report faulted the system that was earlier in place and suggested changes to the manner in which transmission charges were calculated, it was stated..It was the Jha Committee Report that was ultimately accepted in full, the Commission submitted..The Report recommended "if some system or element had been planned keeping in view the entire grid, the tariff of the same had to be shared by all the (customers) of the grid and, likewise, if they were planned for the benefit of a particular region, the same had to be shared by the customers of the particular region.".What the Court held.The Court emphasized on the legal point that a court could not ordinarily interfere in policy decisions and decisions taken by an 'expert body' unless the "delegate is found to have traversed beyond the powers conferred on it under the parent statute"..If there was an extension of powers conferred, the Bench ruled that this court would be abdicating its powers if it does not strike down the impugned Regulation as ultra vires and illegal..The Bench found that there was nothing in the Electricity Act that mandated a specific mode for the fixing of charges. The variation in the mode of fixing charges did not by itself prove mala fides, the Judgment states.."There is nothing in either the 2003 Act, the 2010 regulations, or the 2020 regulations, that prescribes any particular ratio to be maintained between the utilization-based and contracted capacity based allocation of transmission charges. So long as there is a utilization-based component that is in-built into the formula for sharing of transmission charges, the utility criteria must be seen as having been considered" the Bench recorded..With respect to the specific contention that the charges under the new regulations were not based on geographical location, the Judge noted:."Although the petitioner may be drawing power from a particular nodal point in the network, it cannot forget that it is drawing power from the network and not from the generator who is situated in close proximity to it, geographically. On injection into the network, the injected power loses its origin-based identity and merges with the power carried by the Inter-State Transmission System.".On the question of whether the Bakshi Report ought to have been accepted, the Court observed that Committee reports are merely recommendatory in nature. Therefore, the Regulations could not be set aside on that ground. .The petitioner had not placed before the Court material to demonstrate that irrelevant material was considered or that crucial material was not examined, the Bench opined..Thus, the decision could not be interfered with on this aspect either, it was concluded..For these reasons, among others, the Court upheld the constitutionality of the Regulations..Senior Advocate Maninder Singh, Advocates G Harikumar and Akhil Suresh represented the KSEB, while Senior Advocate Nikhil Nayyar, Advocates Pritha Srikumar, Neha Mathen, Dhananjay Baijal, Vijay V. Paul and Abhiha Zaidi, along with Central Government Counsel Jaishankar V Nair appeared for the respondents..Read the judgment here: