Equal Appraisal of Regulated Tariff Mechanism and Tariff-Based Competitive Bidding in Transmission License Granting: MERC v Tata Power

Introduction

The case of Tata Power Company Limited - Transmission [Through Its Head (Corporate Legal)] vs. Maharashtra Electricity Regulatory Commission addresses pivotal issues regarding the methodology for granting transmission licenses under the Electricity Act, 2003. The appellant, Tata Power Company Limited - Transmission (TPC-T), contested the grant of a Transmission License to Adani Electricity Mumbai Infra Limited (AEMIL) by the Maharashtra Electricity Regulatory Commission (MERC), asserting that the process bypassed the Tariff-Based Competitive Bidding (TBCB) route, which was deemed the dominant and more transparent mechanism.

Summary of the Judgment

The Appellate Tribunal for Electricity upheld MERC's decision to grant the Transmission License to AEMIL under the Regulated Tariff Mechanism (RTM), pursuant to Section 62 of the Electricity Act, 2003. The Tribunal found that both Section 62 (RTM) and Section 63 (TBCB) are parallel and alternative mechanisms for tariff determination, without one being inherently superior to the other. The decision emphasized that regulatory commissions retain the discretion to choose the appropriate route based on the specific circumstances and requirements of each case, aligning with the overarching principles of promoting competition, efficiency, and consumer interests as mandated by the Act.

Analysis

Precedents Cited

The Tribunal referenced several key Supreme Court judgments to elucidate the legal framework governing competitive bidding and regulated tariff mechanisms. Notably:

• Haji T.M. Hassan Rawther v. Kerala Financial Corporation – Emphasized that while public auction and competitive bidding are preferred for transparency, they are not absolute mandates and exceptions can be justified under specific circumstances.
• Natural Resources Allocation, In Re: Special Reference No.1 of 2012 – Clarified that competitive bidding is an economic choice and not a constitutional requirement, allowing for flexibility based on policy decisions.
• BSES Rajdhani Power Ltd. v. Delhi Electricity Regulatory Commission – Highlighted that regulatory commissions have the authority to choose between Section 62 and Section 63 routes based on the merits of each case.
• PTC India Limited v. CERC – Reinforced that the Electricity Act provides exhaustive provisions for transmission licensing, distancing regulatory responsibilities from direct governmental control.

Legal Reasoning

The Tribunal meticulously examined the statutory provisions of the Electricity Act, 2003, focusing on Sections 61, 62, and 63, and the Tariff Policy guidelines. It concluded that:

• Sections 62 and 63 function as parallel and alternative routes for tariff determination, each serving distinct purposes but both aiming to fulfill the Act's objectives.
• Regulatory Commissions possess inherent discretion to select the appropriate mechanism based on factors like project urgency, cost-effectiveness, and technical feasibility.
• The Tariff Policy, including the GoM GR dated 04.01.2019, does not override the statutory provisions but serves as a guideline to influence decision-making processes.
• Historical context and project-specific circumstances, such as delays and technological considerations, justified MERC's choice of the RTM route over TBCB in this instance.

Impact

This judgment has significant implications for the power sector, particularly in how transmission licenses are granted. It reinforces the principle that regulatory bodies retain the authority to determine the most suitable tariff determination mechanism on a case-by-case basis, ensuring flexibility and responsiveness to diverse project requirements. Moreover, it underscores the importance of balancing competition with practical considerations like project viability and timely execution, ultimately safeguarding consumer interests and promoting industry efficiency.

Complex Concepts Simplified

Regulated Tariff Mechanism (RTM)

Under Section 62 of the Electricity Act, RTM involves the Regulatory Commission determining the tariff based on comprehensive cost analysis. This method ensures that the costs incurred by transmission licensees are recovered in a fair and regulated manner, promoting transparency and protecting consumer interests.

Tariff-Based Competitive Bidding (TBCB)

Section 63 facilitates a competitive bidding process where multiple bidders submit proposals to provide transmission services. The Regulatory Commission adopts the bid-discovered tariff, ensuring that the selection is based on a transparent and competitive process, potentially leading to cost savings and enhanced efficiency.

Empowered Committee (EC)

Established by the Government of Maharashtra through Resolution dated 04.01.2019, the EC is tasked with overseeing the implementation of the TBCB process for intra-State transmission projects. Its role includes project selection, bid evaluation, and ensuring adherence to competitive bidding guidelines.

Five-Year Plan

The State Transmission Utility (STU), Maharashtra State Electricity Transmission Company Limited (MSETCL), formulates five-year plans outlining planned transmission projects. Inclusion in these plans signifies priority and governmental endorsement for project execution.

Conclusion