Factum:
AEMIL received a transmission licence from the Maharashtra Electricity Regulatory Commission (MERC) in accordance with Sections 14 and 15 of the Electricity Act, 2003, for the construction of a 1000 MW High Voltage Direct Current (HVDC) link. The MERC’s order was contested by the TATA Power Company Limited Transmission (TPC-T) before the Appellate Tribunal for Electricity on the grounds that Tariff Based Competitive Bidding (TBCB) procedure hadn’t been followed prior to the licence being given to AEMIL. It was argued on behalf of TPC-T that the absence of this process pursuant to Section 63 of the Act was against the statutory mandate, as well as the public interest. However, the appeal was dismissed by the APTEL, and consequently, TPC-T appeared before the Supreme Court under Section 125 of the Act.
Applicable Act :
The Electricity Act, 2003
Issue(s) at hand:
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Whether the Electricity Act 2003 envisions the TBCB route under Section 63 as the dominant method to determine tariff;
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Whether the National Tariff Policy (NTP) framed under Section 3 of the Act is binding on the State Regulatory Commissions, given the observations made by this Court in Energy Watchdog v. Central Electricity Regulatory Commission;
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Whether the Regulatory Commissions have the power to prescribe the framework to determine tariff under the provisions of the Electricity Act 2003 and the regulations framed under it;
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Whether MERC was required to make the decision regarding the HVDC Project's tariff under Section 63 in light of the Government of Maharashtra's Resolution dated 04 January 2019 notifying the decision to allocate new intra-state transmission projects through the TBCB route and establishing an Empowered Committee; and
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Whether the decision of MSETCL to not refer the HVDC Project to the empowered committee for holding bidding through TBCB is in breach of the Government resolution.
Court Reasoning:
The Electricity Act of 2003 gives the States the necessary latitude to control intrastate transmission systems, with the appropriate state commissions having the authority to set and enforce tariffs. The Act attempts to give the Appropriate Commissions sole authority over the determination and regulation of tariff, removing the State Governments from this responsibility.
The Act doesn't provide a single dominant way to set tariffs. Following the completion of the bidding process, Section 63 takes effect. The Appropriate Commission is required to adopt the tariff in cases when it has already been decided through bidding. By exercising its authority under Section 62, the Appropriate Commission cannot object to a tariff that was decided through a competitive bidding process. Only if the bidding process was not transparent (undertaking a substantive review) or the mechanism outlined in the Central Government recommendations under Section 63 was not followed, may the Appropriate Commission refuse to adopt the tariff decided through the bidding process (undertaking a procedural review).
Sections 62 and 63 stipulate the modalities of tariff determination. The non-obstante clause in Section 63 cannot be interpreted to mean that Section 63 would take precedence over Section 62 at the stage of choosing the modality to determine tariff. The Appropriate State Commission notifies the guidelines for tariff determination, either through regulations under Section 181 of the Act or guidelines under Section 61 of the Act.
The criteria or procedures for selecting the modalities to determine tariff have not been established by MERC through regulations or guidelines. As a result, in accordance with Section 86(1)(a) of the Act, MERC shall exercise its general regulatory authorities to decide the rate.
When exercising its general regulatory authority under Section 86(1)(a), MERC must take the NTP 2016 into account, which must be a significant factor. As a result, even though NTP 2016 mandates that intra-state transmission projects that exceed the threshold limit be allocated through TBCB route, this is a relevant factor that needs to be taken into account. The threshold limit not having been notified by MERC, it was open to MERC to allot the HVDC project either under the RTM or the TBCB route.
HVDC was recognized as an ‘existing project’ and the court noted that a statutory appeal under Section 125 of the Act cannot interfere with the concurrent findings on a question of fact. Even if the HVDC Project were to be deemed a “new project” in accordance with the GoM's GR, the same having not been issued in accordance with Section 108 as a direction to the State Commission, MERC's decision cannot be contested for failing to comply with the same as MERC is an independent body with statutory authority to determine and regulate tariffs.
The HVDC project was recommended to the Empowered Committee by MSETCL in accordance with the GoM's GR, and the decision to not refer the project via the TBCB route was made in accordance with the Empowered Committee's instructions. The projects that will be pursued through the TBCB route under the GoM's GR will be chosen by the Empowered Committee.